Types of Market I – SS1 Marketing Lesson Note (Second Term)

A market is a collection of current and future individuals or organisations who buy or sell products.

Behavioural objectives

By the end of the lesson, students should be able to:

1. define a market;
2. name and describe the four types of market;
3. explain who a consumer is;
4. state the four groups of characteristics of the consumer market and give an example of each.

What is a market?

A market is any place or situation where two or more people meet to exchange goods, services or information.

• Buyers and sellers: a market is simply a combination of these two groups.
• Seller: the party who gives goods or services to the buyer in exchange for money.
• Buyer: the party who pays money to receive the goods or services.
• Transaction: the exchange between the seller and the buyer.
• Competition: there must be more than one buyer and more than one seller for a market to be competitive.

Where do buyers and sellers meet?

• Physical place: buyers and sellers meet face to face, for example in a shop or an open-air market.
• Distance: they meet across miles with the help of telecommunications, increasingly the Internet.

Why must a seller know the market?

• Competitors: a seller needs to know if the market is busy with many businesses selling the same product.
• Few competitors: some markets have very few sellers of the product.
• Success: the type of market a business operates in has a big influence on the success of its product.

Who is a consumer?

A consumer is an individual who buys products or services for personal use, not for manufacture or resale.

• Decision maker: a consumer decides whether or not to buy an item at the store.
• Influence: a consumer can be influenced by marketing and advertisements.
• Example: a person who buys a toy, a shirt or a drink is making that decision as a consumer.

What are the types of market?

There are four types of market: the consumer market, the government market, the reseller market and the industrial market.

Consumer market

• Meaning: individuals and families who buy goods and services for personal consumption.
• Example: a family buying food, clothes or school bags for its own use.

Government market

• Meaning: local, state and federal governments that buy goods and services.
• Purpose: to support their internal operations and to provide essential services for citizens.
• Example: a state government buying textbooks for its public schools.

Reseller market

• Meaning: distributors, dealers, wholesalers and retailers.
• Purpose: they buy raw materials and finished goods to sell the product at a profit.
• Example: a retailer buying cartons of noodles from a wholesaler to sell in her shop.

Industrial market

• Meaning: individuals or organisations that buy products for direct use in making other products.
• Other purpose: they also buy products for the daily operations of the organisation.
• Example: a bakery buying flour and sugar to make bread.

How do the four markets compare?

What are the characteristics of the consumer market?

The characteristics of the consumer market are the demographic, psychographic, behavioural and geographic traits that set one group of consumers apart from another.

• Why they differ: consumers are not alike in their tastes, preferences and buying habits.
• Market segmentation: the process of separating and identifying key customer groups.
• Use: marketers use these traits to define and target groups of consumers.

What are demographic characteristics?

Demographic characteristics are facts about a consumer’s personal background.

• Examples: gender, age, ethnic background, income, occupation, education, household size, religion, generation, nationality and social class.
• Ranges: most categories are defined by a range, such as age groups 18 to 24, 25 to 34, 35 to 54 and 55 and above.
• Targeting: companies aim advertising at these groups, for example a new phone aimed at 18 to 24-year-olds within a chosen income range.

What are psychographic characteristics?

Psychographic characteristics are the interests, activities, opinions, values and attitudes of consumers.

• Interests: many magazines are geared towards a consumer’s interest. Prenatal magazines target expectant mothers who want to learn about caring for a baby.
• Activities: these include martial arts or basket weaving.
• Opinions and attitudes: they can be specific or general. A focus group helps a company understand them and tailor its advertising.
• Values: how a group feels about social issues. This is of interest to non-profit and charitable organisations.

What are behavioural characteristics?

Behavioural characteristics describe how consumers use and relate to a product.

• Usage rate: how often consumers visit a store or use a product.
• Brand loyalty: whether consumers usually buy only one company’s brand. Such consumers are brand loyalists.
• User status: how long a person has been a customer.
• Benefits sought: what consumers want from the product.
• Heavy, medium and light users: marketing departments separate these groups so they can target each with advertising.

What are geographic characteristics?

Geographic characteristics are based on where consumers live.

• Market size: a small retailer may find opportunities in a small market that larger competitors ignore.
• Region: consumers in different regions of the country have different tastes in food and style.
• Population density: crowded and sparsely populated areas need different selling methods.
• Climate: companies selling beachwear sell more in warmer climates.

Summary table of consumer characteristics

Evaluation

1. Define a market.
2. Name the four types of market.
3. Who is a consumer?
4. List the four groups of characteristics of the consumer market.
5. Give two examples of demographic characteristics.

Assignment

Explain the difference between the reseller market and the industrial market, and give one example of each.