Marketing has a role in finding out customer’s needs and wants to satisfy them profitably. However, in order to achieve even better understanding of Marketing, we, as business managers, need to look at another important term which is a market.
There are two different meanings of the word ‘market’ in Marketing.
Firstly, a market is a place where sellers and buyers trade – buy and sell products; exchange something for money. Secondly, a market is a group of customers with similar characteristics who are current customers and potential customers of the business.
A market exists where there is demand for a particular product such as business books, flowers, computer laptops or TAXI services, and where there is willingness from businesses to produce and supply these products.
Now, let’s take a deeper look at two meanings of a market in details.
No. 1: Market as a place where buyers and sellers trade
A market is an offline or online place which allows trade between two or more parties including individual people, businesses and governments. The sellers and buyers will come together to sell and buy products. Suppliers and customers will meet on the market to engage in exchanging goods, services, knowledge and information.
Therefore, markets exist mainly to facilitate trading activities between those who share a want or need, and are motivated enough to enter into a voluntary monetary transaction to satisfy that want or need by paying a certain amount of money.
For example, the weekly meat, fruit and vegetable market is a place where buyers and sellers trade food. Other markets include supermarkets, hypermarkets, artwork auctions, the stock exchanges, second-hand car dealerships, etc.
Nowadays, thanks to the widespread use of the Internet, many markets exist in the electronic forms such as the stock market, E-Commerce platforms such as eBay.com or Amazon.com. These markets have no physical place in the sense of a specific geographical location.
No. 2: Market as a group of customers
A market is also a group of customers who are interested in buying a product. These people are motivated to buy the good or service provided by the seller, are allowed by law to make that purchase and have enough financial resources to do so.
The business will serve those potential customers, who are the target market for the firm, to satisfy their needs and wants.
For example, the market for a product is the total population of the US interested in the product such as red sports cars. Or, the wealthy Chinese customers in Shanghai who play golf hence wish to buy expensive golfing equipment.
There are several questions that the business should ask regarding this group of customers such as: How many of them? Is the number of potential customers increasing or decreasing? Who are they in terms of gender, age, income? What are their buying patterns? Who are the decision makers in the family? How are people going to use the product?
Additional considerations about markets
Structures of markets. Different markets are categorized based on the level of competitiveness allowed from the most competitive (1) to the least competitive (4):
- Perfect Competition. Many companies in an industry produce identical products.
- Imperfect Competition. Many companies in an industry produce similar but differentiated products.
- Oligopoly. There is only a small number of companies operating, but many buyers.
- Monopoly. There is only a single seller, but many buyers.
Types of markets. The markets are categorized based on the types of customers such as:
- Consumer Markets. These are markets that cater for private individuals such as the general public. Consumer markets are products sold to the final consumer, e.g. clothes, food, computer games, bicycles, perfumes, cars, etc.
- Industrial Markets. These are markets that cater for business organizations and companies. Industrial markets are products sold to other businesses for use in the production process, e.g. machines, equipment, tools, etc.
- State Markets. These are markets that cater for the state. State markets are products sold to the government as per government orders, e.g. military equipment, office furniture and equipment for governmental buildings, mobile phones and computers with security features, etc.
Features of markets. The markets are categorized based on the characteristics of the market in which their businesses operate, including:
- Location.
- Size.
- Customer base.
- Growth.
- Market share.
- Special characteristics.
- Barriers to entry.
- Competition.
Distinct market sizes. The markets are categorized based on the size. Markets are usually measured using Sales Revenue and differ in their size. Some markets are large while other markets are small. The two extremes of market sizes include:
- Mass markets. A market consisting of a very large number of customers for a standard product.
- Niche markets. A comparatively small market for a special expensive product.
Market segments. Finally, Marketing Manager will consider how and why businesses divide the whole market into smaller parts, or segments, to better understand those specific groups of customers. A market segment means a small part of the market. Some businesses need to identify a particular section of the market known that has specific product needs. Markets are frequently segmented according to different customer characteristics such as gender, age, income, region, etc.
To sum things up, in business management, a market is a place which allows buyers and sellers to meet together for the purpose of trading products. A market exists mainly to facilitate exchange between sellers and buyers who are motivated to enter into a monetary transaction to fulfill their needs and wants.
