1.1 Meeting customer needs

Niche Market

A small segment of a larger market where customers have specific needs

Mass Market-

An unsegmented market aimed at the main market

Advantages and disadvantages of niche marketing

Ads- Scope to charge premium prices and meet customer needs, Less competition increasing customer loyalty.

Dis- Hard to grow sales- no Economies of scales, Mass market competition requires a perfect marketing mix

Advantages and disadvantages of Mass marketing

Ads- Economies of scale- high sales volume, very high for potential revenue

Dis- High investment costs and start up costs, high levels of competition

Branding definition

Used to differentiate a product/ service away from rivals

Why is branding important in a mass and niche market?

Mass- lots of competitors, creates advertisement

niche- Building connections, increase barrier to entry for competitors- not very useful though

Economies of scale

Falling unit costs experienced by a business as it increases in size.

Purchasing economies -

falling unit costs that a growing business can achieve when it buys raw materials or other inputs in larger quantities, allowing bulk-buying discounts.

Technical economies -

falling unit costs that a growing business can achieve by investing in more efficient machinery and equipment and spreading this cost over a larger output.

Marketing economies -

falling unit costs that a growing business can achieve as output increases, e.g. by spreading the cost of promotion campaigns over a larger output.

 

Managerial economies -

falling unit costs that a growing business can achieve by employing specialist, more efficient managers, and spreading the cost over a larger output.

Internal economies of scale

 As a business grows and increases its output its total costs will increase. But sometimes business find that at the same time, unit costs (the cost of making one product or providing one service) actually fall.

Why do economies of scale matter?

Lowering cost per unit is very important, Lowering prices make it more attractive for consumers if they are price sensitive.

Market size equations

Value= selling price x number of units sold

Market share eqaution

(Sales of a business/total market sales) x100

Market growth

(Change/ original) x100

Market size

the potential sales volume/ revenue and helps businesses decide on the best strategy

Market share

Indicates how the overall market is split between the existing competitors.

Typically measured by value, although can also be measured by volume.

Market growth

Measures the rate of change in market size which might be rising, declining or stable.

Can be calculated using either value or volume.

Dynamic market -

A market that is subject to rapid/continuous change.

Innovation  -

Putting new ideas/designs into action.

Product innovation -

The  creation and development of new or improved products or services

Process innovation -

The implementation of new methods, techniques, or practices that improve the efficiency, effectiveness, and productivity of business operations.

Some markets are static/stable

This means they change little from year-to-year, or change only slowly/gradually.

What are the key drivers of a changing market?

• Technological advancements

• Consumer behaviour preferences

• Intensity of rival

• External business environment (PESTLE)

• change in market size

Businesses can adapt to change better if they

• market research

• encourage intrapreneurship

• quick decision making

• flexible workforce

• Continuous improvement

Ads and dis for product innovation

Ads- Source of competitive advantage, higher profit margins

Dis- Imitated products, research and development costs

Ads and dis of Process innovation

Ads- cost minimisation, improved product/service and quality

Dis- Large upfront investment, disruptions to operations

Online retailing -

selling via the internet, e.g. via a website or app (e-commerce or m-commerce).

Pros and cons of online retailing

Pros- Increased revenue, lower costs

Cons- Prefer personalised service, large upfront costs

Competition -

rivalry among sellers, where sellers try to increase sales, profit and/or market share.

Direct competition -

between rivals that sell similar goods, e.g. Papa Johns & Domino's

Indirect competition - 

between firms that sell substitute goods, e.g. KFC & Domino's

Competitiveness -

the ability of a business to outperform rivals and achieve sustainable competitive advantage

Competitive advantage -

features of a business and/or its products that enables it to generate more sales or to be more profitable than its rivals.

Factors when assessing competition

• intensity of rivals

• threat of new entrants

• Threat of substitutes

• power of customers

• power of suppliers

How does competition affect the market?

Changing their marketing mix, controlling costs to maintain profitability

Risk -

when the probabilities of different outcomes are known or can be estimated.

Uncertainty -

when the probabilities of different outcomes are not known or cannot be reliably estimated

Common business risks

• Issues with cyber security

• supply-chains shocks

• employee related risks

Market orientation - 

where businesses design and develop products based on understanding and meeting customer needs and preferences.

Product orientation -

designing and developing products based on the business's capabilities and expertise rather than specific customer needs or market demands.

Characteristics of a Product-Oriented Approach:

• Assumption of customer demand: businesses often assume that if they create a superior product, customers will automatically want and buy it. The focus is on the belief that customers will recognise the value of the product's features and benefits.

• Limited customer input: Customer feedback and market research is given less priority compared to the company's technical vision. The company may believe that it knows what customers want better than customers themselves.

• Product-centric marketing: Marketing efforts are centred around highlighting the features and technical capabilities of the product rather than customer needs.

Pros and cons for product orientated approach

Pros- more likely to have development of highly innovative new products

Cons- High risk of failure

Market orientation pros and cons

Pros- New product development is less risky> meeting customer needs

Cons- high costs of market research and will there be an opportunity cost involved

Primary market research -

collecting data first-hand for a specific purpose (sometimes called field research).

Secondary market research -

using data that already exists and was collected for a different purpose (sometimes called desk research).

Sampling -

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

Primary research methods include

Surveys, Focus groups, consumer panels, observation, test marketing and online analytics

Pros and cons for primary research methods

Pros- Specific and targeted, Competitive advantage

Cons- Risk of bias, time lags

Secondary research inludes

Government publications, Industry reports, trade publications, commercial data bases, social media, competitors websites, past sales, online reviews

Pros and cons of secondary research

Pros- often cheap and free, large sample- wide scope of research

Cons- Retailed market intelligence reports, not tailored to the manager specific market

Sampling

The gathering of data from a set of respondents in the hope that it will reflect the whole sample/ group,

The main risk is bias or that the sample is too small, but its cost efficient and takes less time

Quantitative research -

produces numerical statistics. It usually involves asking closed questions, e.g. via a survey.

Qualitative research

involves collecting opinions. It usually involves asking open questions, e.g. in a focus group.

Pros and cons of quantative research

Pros- Reliable, comparability

cons- quality of the research, lacks depth/ insight

Pros and cons of qualitative data

pros- in depth insights and adaptable

Cons- Sample sizes are small and skilled market researcher

ICT- how do businesses use it>

Information and Communication Technology (ICT) in various ways to conduct market research effectively and efficiently. ICT offers tools and technologies that streamline data collection and analysis, providing businesses with valuable insights into consumer behaviour, market trends, etc.

ICT is used by-

Social media, databases, data mining and websites

Market segmentation -

the division of a market into customer groups, each of which has similar characteristics, preferences or behaviours. Common groupings include age, gender, income, hobbies/interests, location, ethnic origin/culture, occupation and lifestyle.

Price discrimination -

charging different prices to different market segments based on their willingness to pay.

Market positioning –

efforts to influence customer perception of a brand or product relative to the perception of competing brands or products.

The market can be segmented into 4 sections

demographics, psychographics, geographics and behavioural

Targeting

Targeting is the process of selecting one or more specific segments to focus on and directing marketing efforts accordingly.

Positioning

Positioning refers to how a company wants its products or services to be perceived by the target market in comparison to rival products or services.

Pros and cons of market segmentation

Pros- Better understanding of customer needs, managers can be differentiated and there’s scope to price discriminate

Cons- risk associated with targeting small segments and there could be high costs- market research ect.

Market mapping -

the process of analysing competition in a market using two key variables that consumers consider when deciding which product to buy, (e.g price and quality) and plotting it on a diagram.

Pros and cons of market mapping

Pros- identifies gaps in the market, improves branding

Cons- Doesn’t guarantee demand where there’s a gap, market maps are very simplistic and might not be accurate.

Adding value -

Activities that allow a business to raise the price beyond the total cost of the inputs required to create the product/service. It might be achieved through improving the product/service itself or improving the way consumers perceive the product/service.

Added value calculation

Added value = Price - unit cost

USP (Unique Selling Point)

- a factor that differentiates a product from its competitors.

Product differentiation -

where a business distinguishes its products/services from rivals. E.g. via a USP or really effective branding.

Competitive advantage

- features of a business and/or its products that enables it to generate more sales or to be more profitable than its rivals.

Corporate strategy –

the medium to long-term plan that a business has chosen to follow in order to achieve its corporate objectives.

Differentiation strategy - ­

where a business sets out to provide unique benefits that customers value.  E.g. via superior product features/performance customer service, reliability, branding, innovation etc. 

Cost leadership strategy

- ­where a business sets out to be the lowest cost producer, for a given level of quality. These businesses focus on improving operational efficiency (e.g. efficient design and production methods, workforce, low overheads, greater economies of scale).

Michael porters strategies- explain

Differentiation strategy

Businesses that pursue a differentiation strategy try to provide products with unique benefits that customers value

Low-cost strategy

Businesses that pursue a low-cost strategy set out to be the lowest cost producer in their market, for a given level of quality.

Getting "stuck in the middle".

This is where a business is neither low-cost nor effectively differentiated. Porter argued that this approach is likely to lead to poor profitability, as unit costs are likely to be relatively high, but without the ability to charge a premium.

Product design mix

Function, aesthetic, economic

Methods of sampling

Quota sampling non-random, stratified sampling equals random, convenient sampling equals non-random but chosen quickly

Five. Stages of the product life cycle.

Development, introduction, growth, maturity, decline

Advantages and disadvantages of advertising

Advantages, wide coverage, control of message, useful for building brand awareness

Disadvantages, often, expensive, impersonal, one-way communication

Advantages and disadvantages of sale promotion

Advantages, helps to achieve a quick boost of sales, encourages customer to try new products

Disadvantages, the damage, brand image, sales affect may only be short-term, customers may come to expect/anticipate further promotion

Personal, selling advantages and disadvantages

Advantages, persuasive impact, messages, customised, potential for development

Disadvantages, high cost, labour intensive, can only reach a limited number of customers

Direct marketing advantages and disadvantages

Advantages, focus, limited resources on targeting promotion, can make personalised marketing, relatively easy to measure responses

Disadvantages, response rates vary, negative image, e.g. junk mail, databases, expensive to maintain

Factors influencing, promotional decisions and strategies

Target market/market, positioning, stage in plc, nature of the product, competition, marketing, objectives, external influences