Business Topic 1.1 Meeting Customer Needs

Define market segmentation

Process where a business divides a market into groups based on specific characteristics.

Define product orientation

A marketing strategy that focuses on the quality and features of the product itself, often prioritizing product innovation over customer needs or market demand.

Define secondary research

Collection and analysis of data that already exists.

What is the effect of researcher bias

Get people to answer in a certain way.

Purpose of market segmentation

To allow the business to directly target specific consumer groups.

Define market orientation

A marketing approach focusing on the needs of the customer and tailoring a product towards this.

Define test marketing

Free samples are provided to the business’ target market to test the response to it.

Define market positioning

The product launch decisions such as price, quality, branding and customer perception which puts the product in a position comparable to others in the same market.

Define market map

2 dimensional diagram which allows a business to compare its products’ characteristics to rivals.

Define market saturation

When most customers who want to, have bought a product in a market.

Define competitive advantage

Features of a business or its products that customer perceive as far better than competitors.

Define product differentiation

When businesses’ try to make their goods or services stand out from others in the market.

Possible sources of competitive advantage

• Quality

• Price

• Convenience

• Ethical stance

• Reliability

Define added value

The difference between the selling price and the cost of inputs to create the product/service.

Define market

A place where buyers and sellers meet to exchange goods or services.

Define niche market

Where products are aimed at a small subsection of a market

What is the aim of marketing

To help identify, anticipate and satisfy consumer needs and wants profitably.

Define market research

Gathering data from consumers to aid business decisions

Characteristics of a mass market:

• Less unique products as aimed at broad market segments

• Low average costs due large scale production  economies of scale

• Low prices lead to greater affordability and higher sales volumes

• Low prices lead to lower profit margins

Characteristics of a niche market

• Products are more unique- aimed at narrow market segments

• High average costs due to small scale production- no economies of scale

• High prices = lower sales volumes

• High prices can allow businesses to earn higher profit margin

Define dynamic market

A market that is subject to rapid or continuous change

Define market growth

The measurement of the change in the entire market, expressed as a percentage of the original size

Define competition

Occurs when at least two businesses are providing goods/services to the same target market. More businesses = more competition.

Difference between indirect and direct competition

Direct competition is with the same product but indirect competition is a different product competing for the disposable income of the consumer.

Difference between risk and uncertainty

Risks can be calculated and prepared for whereas uncertainty can’t as its out of the blue.

• Risk is a potential threat to business success

• Uncertainty is when outcomes are difficult to predict

How does market research help a business?

• To reduce risk when launching new products or entering new markets

• Anticipate future needs and wants of consumers

• To understand consumer behaviour

• To identify how much consumers are prepared to pay

• To identify competitors and gauge their potential strengths and weaknesses

What are the methods of primary market research?

• Surveys

• Observation

• Interviews

• Test marketing

• Focus groups

Examples of ICT to support market research:

Company websites- tracking searches, reviews and rivals websites (secondary).

Social networks- Can track opinions on things and run quick polls/surveys

Databases- Store customer info

Strengths of market segmentation

• Recognizes not all consumers are identical

• Can increase loyalty as targeted consumers feel needs are being met

• Reduces cost and waste compared to whole market

• Help alter products/marketing

Limitations of market segmentations

• Not everyone behaves the same

• Difficult to find segments- people can belong to multiple

• Identified segments may be too small and unprofitable

• Requires more detail = higher costs

Usefulness of market mapping

• Market gaps can be identified

• Comparisons can be made between a business’ products and those of its rivals - where are the business’ products positioned about its rivals?

• Market maps are simple to construct and offer a visual illustration of the position of a product in the market

Limitations of market mapping

• A gap can not be profitable to fill

• Mapping a market may require primary research which can be expensive

• Only two criteria can be chosen which may prove too simplistic

• Markets are often dynamic and a market map only provides insight at a specific point in time

Methods of adding value

• Marketing and branding

• Functions and features

• Packaging

• Design

• Product differentiation

• Customization

• Customer service

• Convenience