CHAPTER 2 MARKETS MARKETS Definition of Markets Consumer

CHAPTER 2 MARKETS

MARKETS • Definition of Markets • Consumer Market Segments • Gray Markets

DEFINITION OF MARKETS • Buyers • Ability to Buy • Willingness to Buy

BUYERS • Consumer Markets • Business Markets

CHARACTERISTICS OF MARKETS Consumer Business Many buyers Few buyers Smaller purchases Larger purchases Direct demand Derived demand Geographically Dispersed Geographically concentrated

DERIVED DEMAND EXAMPLES § Intel § U. S. Steel § Component parts

ABILITY TO BUY § Income § Credit/Debit § Bartering

CONSUMER INCOME • Gross Income – Total income before any deductions • Disposable Income – Total income minus taxes • Discretionary Income – Total income minus taxes and basic needs

U. S. RETAIL SALES BY PAYMENT Store Payment 1995 2010 Cash 60% 20% Checks 30% 0% Credit/Debit Cards 10% 100% 80% 100%

AVERAGE CREDIT CARD DEBT (per U. S. Household) 1996 $5, 900 2001 $8, 2008 $10, 600 2014 ?

CREDIT/DEBIT PROBLEM • Student Loans • NINJA Loans • Overdraft Fees

NINJA MORTGAGE LOANS IN CALIFORNIA • No income • No job • No assets

PREPAID DEBIT CARDS 2009 29 Billion 2014 90 Billion

BARTERING Negotiated exchange of products and services for other products or services instead of cash or credit

BARTERING EXAMPLES • Radio ads for Astros tickets • Bartering on E-bay • Showrooming Bartering

ULTIMATE BARTERING BY CALIFORNIA TEEN Started with a cell phone Ended with a Porsche automobile

WILLINGNESS TO BUY • Consumer Spending • U. S. Beverage Market • U. S. Favorite Sport

CONSUMER SPENDING Category Examples Durable Goods Furniture, TV Nondurable Goods Food, Beer Services Travel, Education

U. S. BEVERAGE MARKET Beverage 1960 2000 Milk 34% 13% Beer 14% 20% Soft Drinks 11% 36%

U. S. FAVORITE SPORT Time Pro Football Pro Baseball 1985 24% 23% 2010 30% 16%

CONSUMER MARKET SEGMENTS • Geographic • Demographic • Lifestyle • Cultural/Racial

GEOGRAPHIC MARKET SEGMENTS • Cities • Rural Areas • Suburbs

DEMOGRAPHIC MARKET SEGMENTS • Age • Income • Sex • Education

LIFESTYLE MARKET SEGMENTS • Harley-Davidson Motorcycles for Women • Tattoos • Condos for singles

CULTURAL/RACIAL MARKET SEGMENTS • African American • Hispanic • Asian • Gay

AFRICAN AMERICAN ENTREPRENEURS • George Foreman • Beyonce Knowles • Jay-Z • Oprah Winfrey

Hispanic Rice Users Cuban Puerto Rican Mexican White Rice Mexican Rice Black Beans Pinto Beans Crackers None Tortillas

GROWTH OF IMMIGRANT ENTREPRENEURS IN HOUSTON • Inexpensive real estate • No zoning regulations • Relatively low labor costs • Affordable housing

GRAY MARKETS Buying in low-price markets and selling in high-price markets (concept of arbitrage)

GRAY MARKET EXAMPLES • Wine • Prescription Drugs • College Textbooks