The concept of transactions leads to the concept of a market. A market is the set of actual and potential buyers of a product. To understand the nature of a market, imagine a primitive economy consisting of only four people: a fisherman, a hunter, a potter, and a farmer. Below image shows the three different ways in which these traders could meet their needs.
In the first case, self-sufficiency, they gather the needed goods for themselves. Thus, the hunter spends most of the time hunting, but also must take time to fish, make pottery, and farm to obtain the other goods. The hunter is thereby less efficient at hunting, and the same is true of the other traders.
In the second case, decentralized exchange, each person sees the other three as potential “buyers” who make up a market. Thus, the hunter may make separate trips to trade meat for the goods of the fisherman, the potter, and the farmer.
In the third case, centralized exchange, a new person called a merchant appears and locates in a central area called a marketplace. Each trader brings goods to the merchant and trades for other needed goods. Thus, rather than transacting with the other providers, the hunter transacts with one “market” to obtain all the needed goods. Merchants and central marketplaces greatly reduce the total number of transactions needed to accomplish a given volume of exchange.
As the number of persons and transactions increases in a society, the number of merchants and marketplaces also increases. In advanced societies, markets need not be physical locations where buyers and sellers interact. With modern communications and transportation, a merchant easily can advertise a product on late evening television, take orders from thousands of customers over the phone, and mail the goods to the buyers on the following day without having had any physical contact with them.
A market can grow up around a product, a service, or anything else of value. For example, a labor market consists of people who are willing to offer their work in return for wages or products. In fact, various institutions, such as employment agencies and job-counseling firms, will grow up around a labor market to help it function better. The money market is another important market that emerges to meet the needs of people so that they can borrow, lend, save, and protect money. The donor market has emerged to meet the financial needs of nonprofit organizations.
The concept of markets finally brings us full circle to the concept of marketing. Marketing means working with markets to bring about exchanges for the purpose of satisfying human needs and wants. Thus, we return to our definition of marketing as a process by which individuals and groups obtain what they need and want by creating and exchanging products and value with others.
Exchange processes involve work. Sellers must search for buyers, identify their needs, design good products, promote them, store and deliver these products, and set prices for them. Activities such as product development, research, communication, distribution, pricing, and service are core marketing activities.
Although we normally think of marketing as being carried on by sellers, buyers also carry on marketing activities. Consumers do “ marketing” when they search for the goods they need at prices they can afford. Company purchasing agents do “marketing” when they track down sellers and bargain for good terms. A seller’s market is one in which sellers have more power and buyers must be the more active “marketers.” In a buyer’s market, buyers have more power and sellers have to be more active “marketers.”
During the early 1950s, the supply of goods began to grow faster than the demand for them. Today, most markets have become buyer’s markets, and marketing has become identified with sellers trying to find buyers. Therefore, this blog examines the marketing problems of sellers in a buyer’s market.