1.1 Meeting customer needs

mass markets:

where products are aimed at a large group of buyers. the product has a large appeal and is useful to a variety of people, not just small market segments. in this market there are many similar products offered by competitors

Niche markets

a small, specialised segment of a larger market. Products are aimed at a specific group of consumers and are tailored to meet their specific needs or preferences.

Market size

The overall size ( value or volume) or demand for a specific market. It can also be measured by the total value of sales or total number of consumers in the market

Market share

The proportion of the market size held by each competitor in a market. it’s calculated by dividing a business’s sales in a certain time period by total sales in the total market. usually shown as a percentage

Market growth

The percentage rate of growth in market size over a period

Dynamic market

A market that is subject to continual and rapid change

• changing tastes and preferences

• changes in technology

• changing environment - new competitors

• changes in legislation

• changes to economic environment

Online retailing

Selling products via the internet

• BENEFITS:
  - lower cost for business (no need for a physical shop, or to hire as many staff). TMT business can lower the cost or keep the same and make more profit
  - customers can order from any where at any time - convenient for customers and increases sales opportunity
  - customers can easily compare prices between firms and the lowest one

• DRAWBACKS:
  - firms face more competition as customers can easily shop around. company’s combat this by making shopping experience better e.g. saving payment and delivery details so it’s easy to repeat purchases
  - some customers prefer to see the product in person. business can tackle this with free returns
  - issue of protection from cyber criminals and avoiding fraudulent transactions. maintaining security is expensive but can cost the firm’s reputation

Direct competion

when two businesses sell similar products that appeal to the same group of customers

• e.g. tesco and asda sell similar food

Indirect competition

When two or more businesses sell products that are different, but they are competing for the same customers

• e.g. india and italian takeaway sells different food but compete for the same customers

Risk

The possibility/chance that something will/could go wrong. the probabilities of different outcomes are often known and business can think about how they can minimises the chance of the risk - this means they are controllable

Uncertainties

Unpredictable and unexpected events - things the firm knows could happen but is difficult to predict if or when they will happen, or what their outcome will be. they are external things that businesses can’t control - they are uncontrollable

What is market research

It involves the gathering and analysis of research to help support the implementation of marketing strategy

Product orientation

Business develops products while focusing heavily on design, quality and performance of products, rather than what consumers actually want

Market orientation

when a business focuses heavily on selling products that match customer preferences. businesses respond to customer needs and wants and design products accordingly

Primary market research

data collected first hand for a specific research purpose

Secondary market Research

Data that already exists and has been collected for a different purpose

way of collecting primary market research

• focus groups

• observation

• surveys

• interviews

• test marketing

• experiments

ways of collecting secondary market research

• published market research reports

• google

• official statistics

• media reports

• competitors materials

Benefits and drawbacks of primary market research

• BENEFITS:
  - directly focuses on research objectives
  - kept private - not public
  - more detailed insights - particularly into customer views

• DRAWBACKS:
  - time-consuming and costly
  - risk of survey bias
  - sampling may not be representative

Benefits and drawbacks of secondary market research

• BENEFITS:
  - often free and easy to obtain
  - good source of market insights
  - quick to access and use

• DRAWBACKS:
  - can quickly become out of date
  - not tailored to business needs
  - specialist reports are often expensive

Quantitative data

• produces numerical statistics - facts and figures

• based on larger samples is more statistically valid

• questions such as ‘how many”, ‘how often” - closed questions which can be statistically analysed

• common methods are survey and forms

Qualitative data

• based on opinions, attitudes, beliefs and intentions of consumers and doesn’t produce numerical results.

• answers questions like ‘why’, ‘would’ or ‘how’

• aims to understand why customers behave in certain ways or why/how the may respond to a new product

• questions are open

• and allow for more informative responses.

• common methods are focus groups and interviews

benefits and drawbacks of quantitative research

• BENEFITS:
  - data is easy to analyse
  - numerical data provides insights into relevant trends
  - can be compared with data from other sources e.g. competitors, history

• DRAWBACKS:
  - focuses on data rather than explaining why things happen
  - doesn’t explain reasons behind trends
  - may lack reliability if sample size and method is not valid

benefits and drawbacks of qualitative research

• BENEFITS:
  - essential for product development and launches
  - focuses on understanding customer needs, wants, and expectations
  - can highlight issues e.g. why customer don’t buy
  - effective way of testing the marketing mix

• DRAWBACKS:
  - expensive to collect and analyse
  based around opinions - sample may not be representative

Sampling in market research

involves gathering data from a sample of respondents, the results of which should be representative of the population (e.g. target market) as a whole

benefits and drawbacks of sampling

• BENEFITS:
  - even a relatively small sample size can provide useful research insights - as long as representative
  - using sampling before decision making can reduce risk and costs
  - sampling is flexible and relatively quick

• DRAWBACKS:
  - if sample is unrepresentative, conclusions may be incorrect
  - risk of bias in research questions
  - less useful in market segments when customer tastes and preferences are changing frequently

IT to support market research - websites

• use own website to gather data:
  - conduct surveys
  - analyse activities of people using the site e.g. time of day/year, who uses the websites, how likely is it that they will buy

• can look at competitor websites to gather information

• can read reviews about their products from thier site and others e.g. amazon. however have to be cautious as people often leave reviews if they’re unhappy - may be representative

• however data gathered from own website may not be that useful. e.g. doesn’t say why customers did’nt buy something

IT to support market research - social networking

• use of internet-based platforms to make connections with people, through well know platform e.g. instagram, or more niche sites specific to product

• firms can post content and monitor the responses they get, allows them to find out people’s thoughts on their products and competitors - quick cheap way to carry out market research

• Platforms can be used to track current trends e.g. the use of hashtags

• limitation: not all consumers use the same networks so market research may produce different results depending on the site used

IT to support market research - databases

• businesses can collect their own data to form a database about their products and consumers e.g. loyalty cards which give customers money back, allow business to to get information such as name, address and preferences

• firms can also use other databases as a source of secondary research. They are usually accessed online for a fee and can provide information about the trends, businesses and consumers in a particular market. they are quick and cheap, but mostly quantitative so don’t give that much info on consumer opinions

Market segmentation

• dividing a market into groups of buyers.

• helps a firm to segment a market by revealing more about the types of consumers in the market

• each segment of consumers has different wants and needs, and so requires a different marketing mic

• allows a business to target their marketing towards specific groups

• helps to identify segments of a market whose needs and wants aren’t being met

Types of market segmentation

• demographic
  - age
  - gender
  - socio-cultural status
  - culture

• Geographic
  - regions
  - cities

• income
  - higher
  - lower

• behavioural
  - usage frequency
  - brand loyalty
  - lifestyle

market map

• shows extremes for two measures that are important to customers e.g. low price vs high price, low quality vs high quality, necessity vs luxury.

• it’s laid out as a matrix and the products/brands and positioned on it according to where they are judge to lie between the extremes

Advantages and disadvantages of market/positioning maps

• Advantages
  - helps identify gaps in the market
  - useful for analysing competitors - it can show the closest competition, and help plan the best marketing strategy as a result
  - encourages the use of market research
  - if the sales of a product are declining, the business can use a market map to see how consumers view them, and help reposition themselves. they show the features that are most popular and valued by the target market
  - can show how much consumers expect to pay

• Disadvantages
  -can simplify things too much - just because there’s a gap doesn’t mean there is demand
  - not a guarantee of success
  - the positions of brands are usually a matter of opinion, and may be biased.

market positioning and competitive advantage

• lower costs:
  - charge a lower price and generate more sales
  - keep the cost the same and make more profit

• Product innovation:
  - aim to be the first in the market to introduce new functions for existing customers, or create a new unique product all together
  - helps to increase sales

• advertising and marketing:
  - makes it more attractive, builds a stronger brand image

• product differentiation:
  - brand distinguishes their products form competitors, creating a USP

• reliability and quality:
  - some customer may pay more for better quality

• good customer service:
  - makes repeat purchases more likely

• convenience
  - a quicker and easier buying experience will attract more customer

Product differentiation

arises when customers perceive a distinct difference between one product and alternatives provided by competitors.

the purpose of product differentiation

• compete effectively
  - a source of competitive advantage
  - ideally hard to copy

• protect and build a brand
  - build intangible value
  - strengthen customer loyalty

• add more value
  - strong differentiation should allow a higher price
  higher profit margins

added value =

price product is sold for - cost of making product

adding value

the process of adding value to the cost of inputs into and through the transformation process