What is a Market – Definition and Different Types of Markets

An exchange takes place in a market. A market comprises a group of buyers and sellers, who can interact with each other to buy and sell goods and services. They can interact with each other with or without physical contact. The transaction can be conducted over the phone or on the internet.

The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself. ~~ Peter Drucker

Sellers communicate their offering, price, and availability to prospective buyers. The buyer purchases these offerings by paying money to the seller. The seller also seeks feedback about the goods and services sold to the buyer to determine his satisfaction level.

Different Types of Markets

At the macro level, are found the resource markets. Raw material markets, labor markets, and money markets are such markets. Markets can be classified into various types depending on the nature of purchasing and consumption, geographical coverage, the magnitude of selling, or time period.

Markets on the Basis of Purchase and Consumption

This is the division on the basis of the type of user and the nature of products purchased.

Products can be defined as either business (industrial) or consumer products depending on the buyer’s intentions. The main distinction between the two types of products is their intended use. Business products are used to manufacture other goods or services, to facilitate an organization’s operations, or to resell to other customers. Consumer products are bought to satisfy an individual’s personal wants.

Markets on the Basis of Products in Trade

Basic Goods Market

Goods such as steel, cement, and chemicals are very basic for the industrial and infrastructural development of a country. These goods are called basic goods. The growth and development of the basic goods market depend upon the development of the consumer goods market. Since basic goods derive demand from the demand of goods of the consumer market, the demand for these goods is said to be derived from the demand.

Intermediary Goods Market

Machines, machine tools, equipment, components, and spares constitute the intermediaries gods the market. For instance, a car manufacturer purchases tires, gears, engines, upholstery, etc. from his suppliers, who comprise the intermediary market.

Consumer Goods Markets

Consumer products can be classified according to how much effort is normally expended to buy them.

Convenience Product

Convenience goods are inexpensive products that require little shopping effort. Customers do not shop extensively for such a product. Customers buy convenience products regularly without much planning. Customers are aware of the brand names of popular convenience products. These products are very intensively distributed. Soft drinks, chocolates, deodorants are common convenience products. These products are also called fast-moving consumer goods (FMCG).

Shopping Product

Shopping goods are more expensive than convenience products and are found in fewer retail stores. Customers buy these products only after comparing several brands or stores on style, features, price, and benefits. Customers expend time and effort to select the right product for themselves. Some shopping products like televisions and refrigerators are basically similar and customers buy the lowest priced brand that has the desired features and benefits.

Some other convenience products, like clothing, furniture, housing, and educational institutes are different because the prices, quality, and features vary from one brand to the other. Customers find it difficult to compare such products on objective criteria and the decision to buy one particular brand is very personal and is based on individual assessment of the merits of the brand. These are also called durable goods.

Specialty Product

Specialty products are those for which customers have strong brand preferences and are very fussy. They will travel long distances to locate their favorite brand or outlet. They rarely accept substitutes. Designer watches, Rolls Royce cars, restaurants, etc. are typical specialty products.

Companies marketing specialty products use selective, status conscious advertising to maintain the product’s exclusive image. Distribution is limited to one or a very few outlets in a geographic region. Brand names are very important selection criteria for specialty products.

Unsought Product

Unsought products are unknown to the potential customers or they are known products that customers do not actively seek. New products come under this category till customers come to know about them through advertising or personal selling.

Unsought products are needed by customers but they do not like to think about them and do not want to spend money on them. Such products, like insurance, require aggressive personal selling and persuasive advertising. Customers will not initiate the purchase of such items and the companies must reach them directly through salespersons or direct mail.

Markets on the Basis of Magnitude of Selling

Wholesale and retail markets vary in the quantum of goods sold. Wholesaler markets are fewer in number and sell in large quantities. The goods are sold to retailers or other intermediaries in the distribution chain. Retail markets are large in number, and usually sell to end consumers who buy lesser quantities, often single units of product.

Markets on the Basis of Geographical Coverage

Markets can be classified on the basis of geographical coverage – local markets (in a city or town), regional market (in o state or a few states), national market (in a country), or international markets (more than one country).

Market on the Basis of Time Period

Markets can be short-term markets (money markets), weekly markets (a village fair), and long-term seasonal markets (markets for agricultural markets).