The Market

Basic Notions

The term market comes from the Latin “Mercatus”- trade and also where the trading activities are carried on.

The two terms trading and marketing together with commerce, have been used interchangeably. It was trading or commerce that business consisted in ancient times.

The Concept of market may be viewed in three ways:

1. Market is a locus or a place- It is where (anywhere) sellers and buyers meet. The essence is in their interaction, whether they are face to face or not.

2. Market is a community of people-it is all the actual and potential customers, sharing a particular need, engaged or willing to be engaged in the exchange process, anywhere where the exchange process takes place.

3. Marketing is a set of economic forces-known specifically as the market forces or the market environment. It is made up of all those factors and forces surrounding the market institutions or market transactions in so far as they influence the marketing function. These factors and forces are found in the internal and external environments of marketing institutions which, together with the activities that connect them to their markets, constitute the market system. They include the marketing intermediaries, suppliers, competitors and pressure groups, together with a host of political, economic, sociocultural, technological and geo-ecological forces.

The market is created by men and forces, by businessmen and the market environment in a process of interaction that on one hand creates unlimited human wants, and on the other hand provides and manages limited resources. Consumer demands are not only unlimited but changeable. While business can generally predict and direct these demands, the task of catching up with them is not easy to pursue. The oft-repeated problems of what to produce, how to produce, how much to produce and for whom to produce are basic challenges which the marketing system is persistently confronted with.

Types of Market

There are different characteristics and behaviour of different markets, significantly different in some, closely similar in others. The following are some traditional classifications;

A. According to degree of competition1. Purely competitive market

This is characterized by:a) A large number of buyers and sellers engaged in the purchase

and sale of a homogenous commodityb) No discrimination in the transaction of the commodities in

terms of special deals or special pricesc) Mobility of resourcesd) A high information among buyers and sellers thereby have a

perfect knowledge of market prices and quality2. Monopolistic market

This exists when there is only a single seller or a syndicated group banded together for the purpose of monopoly. It can be:

a) Product monopoly-as in the case of a product which is the only one of its kind in the market

b) Production monopoly-as when a firm enjoys an exclusive manufacturing process for a product

c) Patent monopoly-when a product is sold under the protection of a patent or copyright

d) Differentiation monopoly/monopolistic competition-where many buyers and sellers transact over a range of prices rather than on a single market price. The differentiation in price may be offered on the basis of quality, features or style, and the approaches may be through branding, advertising and personal selling.

3. Oligopolistic marketThis is where there are a few sellers of homogenous or heterogeneous products who are highly sensitive to each other’s pricing and marketing strategies. Oligopoly implies that not everybody, and not even many, can go into that kind of market. Only a few(that is what oligopoly means) can venture into it because of high barriers to entry due to patents, high capital requirements, technological know-how, control over raw materials, to name a few.

B. According to marketing power1. Seller’s market- this is where sellers have more power, and the buyers have to

be more active marketers2. Buyer’s market-this is where the buyers have more power, and the sellers

have to be more active marketersC. According to area served

1. Demographic market- is one which is characterized by certain sectoral or ethnic classifications ex: black market

2. Geographic market-is a market classification according to place ex: Asian Market

D. According to commodity offered1. Need market- where the focus is on the type of need to be satisfied like health,

safety2. Product market-where the focus is on the product like food market

E. According to the size of the target market1. Mass market- generally consists of all consumers whose common needs are

addressed by the businessmen.2. Segment market- addresses a sector of the mass market whose constituents

seek similar benefits from a product or service and thus requires specific types of marketing approaches.

Competition

The Market Players

Within the broad field of the business game is the highly charged battle in the market arena where the specific marketing game is being played.

Major market players

Set of sellers Customers

Sellers can either be the producer himself who chooses to distribute his product, or is a middleman who effects the sale. In either case, he interfaces with the other market players, seeking survival through the services he offers. He brings profit to sustain his company’s survival: a market share to boot through the sales he makes and the final victory in the satisfied customer he creates.

As a middleman, the seller contributes to the manipulation of prices in the market, although his influence depends on the type of seller he is and where he is in the price manipulation continuum. At one extreme is the state of no control and at the other is the state of full control. At the no-control extreme are sellers who, both in purchasing their

commodities and in selling them are solely dependent on the going market prices and are not in a position to control prices. This generally happens among farmers in the agricultural sector and in other areas of pure competition. At the other extreme are the monopolistic manipulators who, being the dominant suppliers- if not only ones-of their commodities, have full control of price levels. In a free enterprise economy, the government provides the rules of the game in an effort to avoid either extreme and thereby regulate the determination of prices.

The competition game

Among sellers themselves, a more specific game of competition is being played where a seller matches wits and skills with other sellers, vying for dominance of the market where the prize which caps the victory is customer. Sellers are competitors to one another. Each is a reference company to which all other sellers relate as competitors, and each has the objective of doing better than the others.

Competition results when there are more products than what the consumer can buy and when funds are limited which the customer can spend. Under a democratic setting, it becomes very keen under the following conditions:

1. When there is a very large number of producers making the same goods. This is the result of the democratic principle that allows anyone to engage in economic undertakings. The large supply of goods competes for the customer’s limited funds.

2. When the consumers and the producers are both well informed. All producers know what the consumer’s preferences are and compete for persuasion of consumers who know what they want but cannot easily decide among so many undifferentiated products.

3. When there is no differentiation between products. The range within which consumers would make a choice becomes so broad that customer decisions are difficult to make.

4. When there is no collusion or any special arrangement among buyers and sellers. The game is played with fairness under conditions where all factors are almost equal. Every advantage is pitted against every other advantage. It is a battle of protagonists among whom no one is openly more fit than any other.

The absence of these conditions is not conducive to competition and tends to lead to monopolies.

The customer in the competition game

The customer is either a final consumer who buys for personal or institutional use, or is a producer who buys for purposes of further production, or is a middleman who buys for purposes of exchange. In all cases, the customer or buyer seeks ownership or title to a desired commodity which he acquires through purchase. Like the seller, the buyer may or may not enjoy the power to control prices, again depending on where he is in the price-manipulation continuum. In a highly competitive market, the buyer has much elbow room for choosing his seller. But in a monopolistic market, he is at the mercy of the merchant.

Within the market system, the customers constitute an efficient cause of business. Together with the businessmen as a human efficient cause, he is part of the business movers. Without him, business will not move. He is the target market either as a business customer or as an individual customer whose bottom line (profitability for the business customer and human needs satisfaction for the individual customer) dictates what products are to be produced and how they are to be marketed.

He dictates the mode of the game; how it should be played to get his final preference. What his preferences are, will send the competing companies mapping out their plans and designs called the marketing mix, pitting product against product, strategies against strategies. In this sense, the customer is both the goal and umpire.

The customer is the prize the marketer wins as he competes with other marketers for customer satisfaction and the consequent profitability. However, the customer is not merely a prize. He is himself a player in the marketing game. He is also vying for his own prize in the form of the advantages he stands to gain from the products he purchases. In this sense, customers are also competitors to one another, competing for scarce resources and commodities offered for sale and for the attention and services of sellers.

As an element of the market, competition is the direct consequence of the free enterprise economy which allows anyone to engage in economic activities and vie against everyone for a position of superiority in the market. Superiority is in terms of a leading market share, domination in product advantage and excellence in customer satisfaction that ultimately determines sustained profitability. The objective is to have better products, better service and better prices as the expected consequences of the contest among businessmen for the customer’s money.

Types of competition

Two general types of competition in terms of approaches used:

1. Price competition- is where one seller sells at lower prices than those of the competitors for the same kind and quality of commodities.

Advantage:Price reduction

Disadvantage:It can lead to monopoly

2. Non- price competition- Quality Availability

This is accomplished by: by selling the same products as those of the competitors in

the same area by going to another area ahead of other competitors

This form of competition tends to spread the distribution of goods over a wider area and may prove beneficial to consumers who, otherwise, would not be reached by the product.

Utility

Benefits of Competition

1. It tends to lower the prices of and to increase the demands for commodities enabling a greater number of consumers to enjoy their ownership or their use. How prices can be reduced is a matter of management strategies and efficiency.

2. Competition tends to improve product quality, utility and availability which are factors that attract the attention of consumers and turn them into willing buyers. In the process, the consumers benefit because they get quality products at affordable or at fair prices.

The New Face of Marketing

Marketing has gone a long way in history in its development as a process and in the development of its strategies and practices. Changes in family composition, in community profiles, and in almost all aspects of national and global demographics and environmental- supra- and infrastructures have contributed to the shaping and reshaping of the marketing concept.

Historically, major management practices were adapted from the military experiences of World War 1&2. Concepts like strategic planning, tactical planning, line of command, still sound military in discipline. Strategy, for example, is best understood as war on a map. The general staff at headquarters plans its war on a map and the field commander wages the war on the battlefield as dictated by plan on the map.

The strategy at the highest levels of government is referred to as the national or grand strategy; the strategy at the highest level of the corporation is referred to as the corporate strategy. The national strategy is formulated to coordinate and direct all available resources to the political objective of the war; the corporate strategy of the corporation is formulated to coordinate and direct all corporate resources towards achieving the corporate business objectives.

Business did not only have its own share of the lessons of history, but also had its own experiences in developing these lessons into concepts which were formalized into bodies of principles. For example, the fifties and the sixties saw the age of the market massification, the mass market being the strategy of the times. The seventies brought in the age of market segmentation, demassifying the market into specific target markets together with the introduction of product specification and diversification into line extensions. From then on, the market became more and more segmentized into micros and minis with their corresponding micro-marketing and mini-marketing concepts and practices. With the aid of the emerging electronic tools and technologies, the customer evolved as the focus of marketing attention; marketers invented database marketing, niche marketing and similar concepts, which means that now the new breed of marketers know their customers better- by name, profile, address, profession, lifestyle- and are thus better able to serve them according to their needs and interests. The market continues to be an elusive one in the face of the continuously shifting allegiances, an ever multiplying, every intensifying trend towards customization and micro-marketing.

Marketers generally understand marketing on its practical level at the time they are the players in the marketing game, adapting product concepts from the products current in the market and employing strategies from those that are being employed by existing players. Any effort to surpass others in the game is called competition. But customer-focused marketers go beyond adaptive competition. They innovate. They have changed or redirected the course of the marketing concept development: the revolutionary impact of the new technologies on both the marketplace and on marketing strategies and practices; the direction of the market focus; the application of advertising, of distribution.

The shift of organizations from product-centeredness to market and customer-centeredness had its impact on product concepts and development. Monolithic products, for example, have turned variety; the more products one can go to the market with, the more customers he can attract. Line extensions have offered different customers with a wide variety of different products according to their specific needs. There are tradeoffs in the process. It is expensive to introduce a new product and push it through to the end. Then there is the inevitability of products proliferating beyond necessity or even beyond rationality due to wasteful duplication.

The Marketing Objective

The marketing objective may be summed up in the following.

1. As in production, the direct object of marketing is the product which directly receives the marketing act or that of the exchange process. It is what is marketed. The customer is the indirect object, or the recipient of the product.

2. The objective of marketing is the same as that of production on the level of ultimate and general ends, and are complementary to those of production on the level of immediate ends. Both have the general objective of making goods and services available to the customer. Both likewise have the same and common ultimate end of satisfying human needs. In their immediate objectives, however, production creates a product, while marketing creates a customer.

3. Marketing addresses the consumer’s needs by bringing the available goods to him. But since the goods cannot be brought to the customer unless there is first a customer, then the task of marketing is to create the customer by presenting to him a product that promises to satisfy his felt needs. The immediate objective is to create a customer, and the ultimate objective is to satisfy human needs.

Every individual is a consumer, and every consumer has the customer in him, either actual or potential. To actualize the potential in a consumer is to create a customer. That is what marketing is for.

Based on history

1950’s-1960’s ------------- mass market strategy

1970’s ------------- market segmentation strategy

- the introduction of product specification, diversification into line extensions, customer focused marketing, database marketing, niche marketing