What Is a Market Reference Point? - Definition & Examples Video

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: What Is a Portfolio Matrix in Marketing? - Definition & Model

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:00 What Is a Market…
  • 0:45 Examples of Market…
  • 1:54 Practicality
  • 3:15 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Michael Cozad

Michael is a financial planner and has a master's degree in financial services.

Explore the concept of a market reference point. This lesson will define a market reference point and give practical examples of how the term is used.

What Is a Market Reference Point?

Perhaps you are familiar with a reference point. You have possibly heard the phrase 'as a point of reference…' A market reference point is similar to a reference point, but the term is often used as an indicator that orients you generally in the field of business.

Think if you were asking for the location of the nearest grocery store at a gas station. After asking, the clerk responds: 'You'll find the nearest grocery store two miles south. As a point of reference, you should see a widget factory on the right side of the road just prior to reaching the grocery store.' This is very similar to how a market reference point is used, except that instead of directions, other items - mainly compensation - are used as the indicator.

Examples of Market Reference Points

Market reference points are typically used in comparing and analyzing compensation. This can also be known as benchmarking. Benchmarking is a standard of excellence, achievement, etc., against which similar things must be measured or judged.

One college, for example, states that a market reference point represents the salary level of someone who has complete mastery of the subject matter. Each position then has a salary range based on its market reference point. A minimum is typically 80% of the market reference point and a maximum is typically 120% of the market reference point.

For example, the market reference point for Position Z may be $100,000.

Minimum of salary range = $100,000 x 80% = $80,000

Maximum of salary range = $100,000 x 120% = $120,000

The salary range for Position Z is then $80,000 to $120,000.


Market reference points are typically derived from salary surveys. Numerous salary reporting websites exist, such as,,, and, to name a few.

From a potential employee's standpoint, it should be remembered when negotiating that salary is just one piece of the puzzle. Numerous other benefits can typically be negotiated as well, including paid time off and relocation costs.

It is important to keep in mind whether you are the employer or the potential employee that salary ranges should take into consideration geographic location when determining the market reference point.

To unlock this lesson you must be a Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use

Become a member and start learning now.
Become a Member  Back
What teachers are saying about
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account