and over again from a new visitor. Instead, media buyers have had to rely on more primi-
tive tools, like reports about what competitors are spending and where.
Sources: AI Urbansky. "Escape To The Net," Promo, February 2000. pp. 21-22; Heather Green, "Gelling Too Personal." Busi·
ness Week e.biz, February 7,2000. p. EBI4; "You 've got Spam: ' .'\merican Dem og raphics, September 1999. p. 22; Christine LeBeau, "Cracking the Niche," American Demographics, June 2000 , pp. 38-39.
INTRODUCTION
Knowing your market accurately and completely is a prerequisite for successful market-
ing. This task is made even more difficult for companies trying to advertise on the Web.
Yet, as noted earlier, this trend toward using the Internet will continue. Three important con-
cepts related to the topic of markets are presented in this chapter: defining the nature of
markets, identifying the types of markets, and a discussion of product differentiation and
market segmentation.
DEFINING THE MARKET
The market can be viewed from many different perspectives and, consequently, is impos-
sible to define precisely. In order to provide some clarity, we provide a basic definition of
a market: A group of potential buyers with needs and wants and the purchasing power to
satisfy them. Rather than attempting to cut through the many specialized uses of the term, it is more meaningful to describe several broad characteristics and use this somewhat ambigu-ous framework as the foundation for a general definition.
The Market Is People
Since exchange involves two or more people, it is natural to think of the market as people,
individuals, or groups. Clearly, without the existence of people to buy and consume goods,
services, and ideas, there would be little reason for marketing. Yet this perspective must be
refined further if it is to be useful.
People constitute markets only if they have overt or latent wants and needs. That is,
individuals must currently recognize their need or desire for an existing or future product,
or have a potential need or desire for an existing or future product. While the former condition is quite straightforward, the latter situation is a bit more confusing, in that it forces the marketer to develop new products that satisfy unmet needs. Potential future customers
must be identified and understood.
When speaking of markets as people, we are not concerned exclusively with indi-
vidual ultimate consumers. Although individuals and members of households do
the most important and largest category of markets, business establishments and other organ-
ized behavior systems also represent valid markets. People, individually or in groups, busi-
nesses, and i.nstihltions create markets .
However, people or organizations must meet certain basic criteria in order to repre-
sent a valid market:
1. There must be a true :lced a n d / o r want f o r the product, service, or idea; this need
may be recognized unrecognized, or latent.
2. The person/organization must have the ability to pay for the product via means
acceptable to the marketer.
DEFINING THE MARKET
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3. The person/organization must be willing to buy the product.
4. The person/organization must have the authority to buy the product.
5. The total number of people/organizations meeting the previous criteria must be
large enough to be profitable for the marketer.
All five criteria must be met for an aggregate group of people or organizations to equate
to a market. Failure to achieve even one of the criteria may negate the viability of a mar-
ket. An interesting example is the pharmaceutical industry. There are several serious human
diseases that remain uncured only because they have not been contracted by a large enough
number of people to warrant the necessary research. The excessive research costs required
to develop these drugs necessitates that companies are assured a certain level of profitability.
Even though the first four criteria may be met, a small potential customer base means no
viable market exists.
The M arket Is a Place
Thinking of the market as a place- "the marketplace"- is a common practice of the gen-
eral public. Such locations do exist as geographical areas within which trading occurs. In
this context, we can think of world markets, international markets, American markets, regions,
states, cities, and parts of cities. A shapping center, a block, a portion of a block, and even
the site of a single retail store can be called a market.
While not as pervasive as the "people" component of the market, the "place" description of a market is important too. Since goods must be delivered to and customers attracted
toward particular places where
are made, this identification of markets is use-
ful for marketing decision-making purposes.
such as product features, price, loca-
tion of facilities, routing salespeople, and promotional design are all affected by the geographic market. Even in the case of unmeasurable fields, such as religion, a marketplace might be
Yankee Stadium, where Billy Graham is holding a revival. Finally, a market may be some-
where other than a geographical region, such as a catalogue or ad that allows you to place
an order without the assistance of a marketing intermediary or an 800 number.
The Market Is an Economic Entity
In most cases, a market is characterized by a dynamic system of economic forces. The four
most salient economic forces are supply, demand; competition, and government interven-
tion. The terms buyer's market and seller's market
different conditions of bargaining
strength. We also use terms such
monopoly, oligopoly, and pure competition to reflect
the competitive situation in a particular market. Finally, the extent of personal freedom and
government control produces free market systems, socialistic systems, and other systems
of trade and commerce. I
Again, placing these labels on markets allows the marketer to design strategies that
match a particular economic situation. We know, for instance, that in a buyer's market, there
is an abundance of product, prices are usually low, and customers dictate the terms of sale.
U.S . firms find that they must make tremendous strategy adjus tments when they sell their
products in Third World markets. The interaction of these economic factors is what creates
a market.
There is always the pressure of competition as new firms enter and old ones exit. Adver-
tising and selling pressure, price and counterprice, claim and counterclaim, service and extra
service are all weapons of competitive pressure Lhat marketers use to achieve and protect
market positions. Market composition is constantly changing.
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