The word or term market connotes different meanings to different person depending on the background of the person. The word market has a number of meanings which have been acquired over the years. Sometimes “market” refers to the relationship between the demand and supply of a particular product. At times “market” is used to mean the act of selling something.
However, to the layman, the word market mean a physical place were buyers and sellers exchange goods and services. Traditionally, towns and villages have market arena or squares where seller brought their goods and buyers buy from *’ them. Also towns and villages have specific days for the operation of their markets. The market place is the principle venue for commercial exchange. Typically, a traditional market is held once in every four or eight days.
To the economist market is seen in a different perspective. The economist describe a market as consisting of all the buyers and sellers who transact over some goods or services. Also by a market economist mean any organization whereby buyers and sellers of goods are kept in close touch with each other.
To the marketer, a market is the set of all actual and potential buyers of a product or service. It therefore, implies that the market for a product consist not only of actual or present buyers but also of potential buyers. The marketer also describes a market to mean “people with needs to satisfy, the money to * spend and the willingness to spend it”.
The essential of a market are:
(a). The existence of the commodity which is dealt with;
(b). The existence of buyers and sellers;
(c). A place, be it a certain region, a country or the entire world.
Types of Market
Market has been classified into two broad categories, namely, industrial markets and consumers markets.
The Industrial Market
The industrial market differs to a great extent from the consumer market. An industrial market consist of “all business units and organizations that purchase goods and services for production, resale or use other than personal consumption”. Thus by definition industrial marketing refers to “all those activities concerned with the purchase, sale and service in industrial markets between organization buyers and sellers.
It might be useful to define industrial products as those product that are sold to industrial businesses, institution or government buyers to be incorporated into their own products, resold or used by them within their own businesses.
But does this really make such products distinctive? Clearly it does not because in many instances the same physical product can be classified as either an industrial or a consumer good. An example of this is the electronic calculator. If it were sold to a business firm it would be classified as an industrial good; if it were sold to a student it would be considered to be a consumer good. The same model of motor car is sold both as a representative’s car to a business firm and as a family saloon.
The industrial market consists of several groups; the producers market, the reseller market or middlemen; the government market; and the institutional market.
The Producer Market: These are business organisations which buy or purchase goods and services to engage in extractive, manufacturing, assembly or constructive activities. These goods and services are used in producing further wealth or facilitating the operations of other firms. These producers may be farmers buying fertilizers, builders buying cements etc.
The Reseller Market: These consist of intermediaries such as wholesalers and retailers who buy finished goods and resell them to make a profit. Other than minor alterations, resellers do not change the physical characteristics of the products they handle. Resellers are involved in the purchase and sale of all categories of industrial products except for a few lines which the industrial producers might decide to sell direct to users.
When making purchase decisions, resellers consider several factors:
(i). They evaluate the level of demand for a product to determine what quantity and at what price the product can be sold,
(ii). They assess the amount of space required to handle a product,
(iii). They also consider the ease of placing orders and the availability of technical assistance and training programmes for producer.
Government Markets: Federal, state and local governments make up government markets. At each level of government they buy industrial products or services for carrying out the main function of government. However, in Nigeria, the federal government has more power and resources followed by the states and then the local governments. Government buys different types of products ranging from capital goods to consumers goods and services.
Government objective in buying is not profit making but rather to improve the welfare of the populace. Government buying procedures can be classified into open bid system and the negotiated contract.
Institutional Markets: These are organizations that seek achieve goals other than normal business goals such as profit, market share or return on investment. Members of the institutional markets include churches, hospitals, clubs, charitable organizations, political parties, private schools etc.
Characteristics of Industrial Market
The major characteristics of the industrial market have been identified as follows:
1. High Concentration: The market for industrial products is highly concentrated in the hands of a few companies. This high concentration gives rise to more direct channels of distribution and involves a large sum of money. Industrial buyers tend to concentrate highly in cities like Port Harcourt, Lagos, Onitsha, Kano etc,
2. Geographical Location: Unlike the consumer market, which can be found anywhere, industrial market is located on a specific area. They are only found where there are buyers or some other business firms.
3. Rational Buying Behaviour: In the industrial market the buyers are more rational and are influenced by some factors. Since an industrial buyer is buying for his organization he ensures that the purchases he made benefits his organization. The factors that are considered by an industrial buyer include, the choice of his supplier, product quality, frequency of supply, delivery reliability and other criteria.
4. The Market is more easily readily identified: Producers of industrial products in most cases know who the users are. They make little effort to locate the organisations, which are likely to need their products. This however, gives the industrial market the following advantages:
i. Less strenuous marketing effort; and
ii. Promotional effort can be more easily targeted at the required place
5. Reciprocity: Some firm maintain a policy of reciprocity. They will not only buy from companies that do not purchase their own products. Reciprocity is an understanding between two producers who buy from each other stipulated products.
6. Leasing: Many industrial buyers find that leasing equipment in industrial market is better than buying. They prefer leasing to buying because of the complexity and costs involved in acquiring these equipment. It is also said that rented equipment is often serviced by the dealer, thereby relieving the user of this problem.
7. Increased Formality: The need to account to some higher authority, coupled with the tendency towards greater rationality means that decisions relating to industrial purchases are more formal. This means that pre-purchase evaluation and analysis are more formalized and possibly documented. So also are decisions and communication between the industrial buyer and the industrial market. Formality helps to ensure that decisions arrived at are in pursuit of the economic purchase objective of the organization.
8. Individual Customer’s Orders Significant: In industrial market individual orders or the qualities purchased by a single buyer are quit often very large. As a result, the contribution of a single buyer to the total sales revenue of a producer or seller industrial products is very significant.
9. Derived Demand: The demand for industrial goods and services is dependent upon, or derived from, the demand for consumer products which the industrial items play a part in making. For instance, there would be an increase in demand for various farm input if there is demand for food items or products.
10. Technical in Nature: Most industrial products are technically more complex than consumer products. For this reason there is always need to supply technical assistance and advice. In some cases maintenance engineers are used to install and service the product. For example, the computers is certainly more complex and technical than most items bought by final users.
11. After Sales Services Needed: The necessity of selling and the provision of after sales services are some of the conditions attached to industrial products. Though some consumer goods may require after sales services, it is more prominent in industrial products
12. Professional Buying: This is a unique characteristic of industrial market. Buying in industrial market is handled by trained professionals who are trained in the arts of purchasing. That is the reason why we have purchasing officers or buyers in many companies whose duty is to negotiate buying on behalf of their firms.
Classification Of Industrial Products
Industrial goods can be subdivided into five categories: installations, accessory equipment, component parts and materials, raw materials, and industrial supplies. The classification system for industrial goods is based on products uses rather than on consumer buying patterns, in contrast to the basis of buying habits.
The speciality goods of the industrial market are called installations. Included in this classification are such major capital items as factory building, heavy machinery, computers, airplanes for airlines and locomotives.
Since installations are relatively long-lived and involved large sum of money, their purchase represent a major decision for a firm. Price is almost never the deciding factor in the purchase of installations. The purchasing firm is interested in the product’s efficiency and performance.
These are capital items that are typically less expensive and shorter-lived than installations such as typewriters, adding machines, cash registers and word processors. Accessory equipment does not become part of the finished product. However, accessory equipment help in the production operations.
Component Parts and Materials
Component parts and materials are also known as fabricating materials and parts. Component parts and materials are finished industrial goods that actually become part of the final product. They have already been processed to some extent unlike raw materials. They have to undergo further processing. Examples are flour, undergo further processing before the finished product is produced, yam being woven, cement etc. (component materials). Component parts will be assembled with no further change in form. Examples are tyres, spark plugs and fan belts in an automobile.
Farm products such as cattle, cotton, eggs, pigs, soybeans, wheat, fruits and vegetables, and natural products such as coal, copper, iron ore, lumber, crude petroleum constitute raw materials. They are .similar to component parts and materials in that they actually become a part of the final product and have not being processed.
If installations represent the “specialty goods” of the industrial market, operating supplies are the “convenience goods”. Supplies are regularly purchased items that are necessary in the firms daily operation, short-lived and low priced, and are not part of the final product. ‘
Supplies are sometimes called MRO items, because they can be divided into three categories:
Maintenance items, such as brooms, floor cleaning compounds, light bulbs, paint and nails,
Repair items, such as nuts and bolts used in repairing equipment,
Operating supplies, such as fuel, lubricating, oil, coal and office stationery.
The Consumer Market
The consumer market consists of individuals who buy either for their own or for their families personal use or consumption. Kotler (1984) describe the consumer market as all individuals or households that buy or acquire goods and services for personal or family consumption.
To understand the nature and working of the consumer market the concept is often discussed under various headings; what Kotler (1980) referred to as the six O’s.
i. Occupants of the market
ii. Objects bought in the market
iii. Organisation of buying in the market
iv. Occasions when the market buys
v. Objectives of the market
vi. Operations of buying in the market
Occupants of the Market: The occupants of the consumer market are all households and individuals who buy or acquire goods and services for personal consumption. These individuals can be classified on the basis of age, income, education, taste, occupation, etc.
Objects Bought in the Market: Different types of goods and services exist in the market. These goods and services are classified as:
* Durable Goods: These are products which are consumed over a long period. Durable goods can be tangible products such as television sets or motor vehicles. Durable products can also be intangible.
* Non-durable Goods: These are the opposites of durable products. They are goods or services which are short lived or consumed after one or a few uses. Examples of nondurable goods are food, soap, meat, detergents, etc; examples of non-durable services include a taxi ride and a laundry service.
The other classifications are based on consumer buying habits. Under this classification, consumer goods are grouped into: Convenience goods, shopping goods, and specialty goods.
Organisation of Buying in the Market: This involves determining who the customers or the decision makers for the purchase of this goods and services are for food items women usually take decisions ,while men and women may take joint decision on household property.
Occasions When the Market Buy: Consumer purchases is dependent upon the consumption rate of the product. It could be seasonal holidays, time element and economic factors.
Objectives of the Market: the motives or objectives why consumers buy goods and services would be to satisfy different needs such as physiological, social, psychological and even spiritual. Consumers are not only rational buyers. They may also be influenced by emotional motives.
Operations of Buying in the Market: The consumer purchases or buying may be affected by the buyer’s characteristics such as culture, social, beliefs, reference groups, family, roles and status, perception, attitudes etc.
Classification of Consumer Goods: Consumer goods as defined by American marketing association are “goods destined for use by the ultimate consumer or the household and in such form that they can be used without commercial processing”. Consumer goods have been divided into classes:
Convenience Goods: the consumer goods which a customer usually purchases frequently and want immediately and with minimum efforts are called convenience goods. This category includes a wide range of household products of low unit value like cigarettes, newspapers, drugs, milks, bread, butter, eggs, beers, chewing gum, magazines etc. these goods are non-durable in nature, i.e. are consumed rather rapidly.
Convenience goods are usually sold by brand name and are low priced. They fall into three sub-categories: staples, e items, and emergency items.
Staples are goods, which are bought often and routinely without much thought. Examples include bread, milk, gasoline, f<XKl find drug items used regularly in every household.
Impulse goods are goods, which are bought quickly as purchase because of a strongly felt need. True goods are items that the customers decide to buy on light. They arc put where they will be seen and brought near front doors, near check and counters, or on display shelves in front of the stores.
Emergency goods are goods which are purchased only when the need is great. Little shopping is done. The customer needs the product immediately. Price is not important, examples are ambulance- services, umbrellas or raincoats during rainy seasons.
Shopping Goods: Shopping goods are products for which consumers usually wish to compare quality, price, style and color In several stores before purchasing. Shopping products last and are consumed over a long period of time. They are more complex than convenience goods. They are purchased less frequently and are of high unit value. The purchaser of shopping goods lack complete information prior to the shopping trip and gathers information. The consumer of shopping products is willing to spend considerable time and effort, even money in hope of making the “best” buy. Examples of shopping goods include furniture, automobile, television sets, houses, refrigerators, washing machines, cameras, clothing, jewelry and shoes.
Specialty Goods: specialty goods are those products for which consumers have a strong brand preference, and are willing to expend special time and effort in purchasing them. Specialty goods possess some unique characteristics that cause the buyer to price those particular brand, for these products, the buyer has complete information prior to the shopping trip is unwillingly to accept substitutes. These goods are comparatively of higher unit value infrequently purchased. Brand loyalty influences to a great extent the buying motive of customers.
Unsought Goods: these are goods that potential customers do not yet want or know what they can buy. Therefore, they don’t search for them at all. In fact, consumers probably would not buy these goods if they saw them unless promotions show their value.
There two types of unsought goods; new unsought goods, and regular unsought.
New unsought goods are products offering really new ideas that potential customers do not know about yet. Informative promotion can help convince consumers to accept or even seek out the products ending their unsought status.
Regularly unsought goods are products like grave stone, life insurance, encyclopedias. There may be need but the potential customers are not motivated to satisfy it. For this kind of product, promotion is very important.