Business GCSE topic 1.2 - Spotting a business opportunity

Factors affecting spotting a business opportunity

Customer needs
Market research
Segmentation
The competitive environment

Customer needs

Providing the right product, of right quality, at right price, at right time, in the right place

Factors affecting customer needs

Quality
Price
Competition/Choice
Convenience

Quality

Customers expect their product/service to be of the quality they expect to be. For example, having a cheaper product with a reasonable quality will satisfy customers.

Price

Customers expect to pay a reasonable price for a product/service depending on its quality/convenience/popularity/timing of the product

Competition/Choice

Customers expect to have a variety of choices for their possible purchase including different brands/quality/varieties of the same product

Convenience

Having different options on how to buy a product would make it convenient on buying a product from a business. For example, ordering groceries online instead of shopping.
This improves customer satisfaction.
Opening hours and location are factors affected by customer needs

Stakeholders

Individual/group who have an interest in the business.
eg, customers

Market research

Process of gaining information about customers/competitions/trends through research

What market research focuses on

How big the market is
Growth of the market
Competitors
Demographics of the market (Eg, social class/gender/age)

Purpose of market research

To gather information on the market. This enables the business to make informed decisions reducing risk of failure. Therefore, businesses will produce products/services that should satisfy customers based on previous research.

Uses of market research

Customers/Target market
Promotion
Identifying a gap in the market
Demand

Researching Customers/Target market

What group of people would most likely be interested in the product and buy it.

Researching Promotion

How customers find your product (eg through social media posts)

Researching a gap in the market

Finding competitors and using them as a source of your research.

Researching demand

How customer needs change and factors affecting change in demand (eg technological changes like CDs to Netflix)

Disadvantage of market research

May not be accurate as only sample from market is collected where the research is based leading to ineffective data collected therefore the business would not gain customers that are interested to their product.

Types of market research

Primary
Secondary

Primary research

Data collected first hand for a specific purpose by the business.

Examples of primary research

Observations
Surveys/Questionnaires
Interviews
Focus groups

Evaluation of observations

Observe consumer habits and how they view one product to another. Examples are watching what they buy.
Advantages: Extremely effective in retail markets
Disadvantages: Expensive and time consuming

Evaluations of Surveys/Questionnaires

Process of getting market data through surveys/questionnaires and analysing the results
Advantages: Relatively cost effective and could produce good quality data, if sample size is enough.
Disadvantages: Reply rates are often very low especially for telephone and postal methods.

Evaluations of interviews

Interviewing the customer mostly face to face, but also by phone.
Advantages: Good way to get detailed insights/personal views from an individual.
Disadvantages: Costly in terms of time and may be unrepresentative as only small numbers will be undertaken.

Evaluations of focus groups

Groups of customers that are brought together to discuss a product.
Advantages: Good way of getting detailed info about customer preferences therefore giving detailed info.
Disadvantages: Only small amounts of data are collected so may not have been representative of other viewpoints accurately

Secondary research

Second hand research (research that already exists)

Examples of secondary research

Customer reviews
Competitor websites
Government information
Newspapers

Customer reviews

Internet provides data from customers who gave ratings and feedback about a particular product.

Competitor websites

Vital information on marketing activities of competitors including their products/prices/promotional activities. This could include ratings of products.

Government information

Provides detailed insights on economy and industry sectors. Also, population data published by government based on the census.

Newspapers

They provide local/national/international data up to date and also provide case studies of other businessees

Advantages of secondary research

Research is widely available therefore quick research
Cheaper than primary research
Saves time and provides good overview of target market

Disadvantages of secondary reesearch

Research may have been created for a different purpose so may not be what the business is looking for
Data may be out of date
Competitors may use the same information as it is available everywhere

Approaches to market research

Quantitative Data
Qualitative Data

Qualitative data

Research based on giving opinions such as who/what/where/when/why

Examples of qualitative data

Focus groups
Interviews

Advantage/Disadvantage of qualitative data

Advantage - Detailed evaluations given by the customer
Disadvantage - Findings are not statistically valid which makes it hard to draw conclusions

Quantitative Data

Based on larger samples which is measured through data and quantity questions.

Examples of Quantitative Data

Surveys

Advantage/Disadvantage of Quantitative Data

Advantage - Removes biases from research and makes findings more accurate
Disadvantage - Less insights on thoughts/opinions of customer

Advantages of market research through social media

Very quick.

Links to promotional use of social media which may form part of the firm's overall marketing plan

Can engage with consumer reviews

Provides insights into the market which business competes through social media of competitors

Disadvantages of market research through social media

Social media may become too negative which may affect the business negatively

Staff needs to be trained in the process increasing costs and time consumption

Monitoring of social media can become time consuming which detracts from other important roles in firm.

Reliability of Data

Decisions of business is based on market research so it's essential that it is reliable.

Factors on why data may not be reliable

Bias
Out of date
Inaccurate

Bias

Market research involves sample taking. Some samples may contain bias through time/location/types of people
chosen.

Out of date

Research will be out of date once collected. Especially secondary research can be out of date and not representative leading to incorrect decisions being made

Inaccurate

Questions or answers may not be accurate. If question isn't clear then answers wouldn't be useful.
Quantitative data only has numerical data so majority of people would have different opinions and views
Qualitative data gives opinions but it may not cover areas needed and respondents may not criticise it.

Market Segmentation

Concentrating on certain groups of customers by segmenting them into their common characteristics/preferences to gain advantage over competitors meaning the business can develop expertise and reputation when targeting that group.

Benefits of market segmentation

Better matching of customer needs
More effective promotion
Gaining a higher share of the market

Better matching of customer needs

Their needs differ, so creating products for each of their segment provides them with a better opportunity to buy products that meet their needs increasing sales revenue

More effective promotion

Through segmenting markets, target customers can be reached more often and at lower cost, as less waste in promotion used

Gain a higher share in the market

Businesses can often become market leader through careful segmentation and targeting

Demographic factors of segmentation

Gender
Age
Location
Social class
Income
Lifestyle

Disadvantages of segmentation

Lack of info and data - Some research may be out of date or inaccurate
Customer segments can be hard to reach, once identified - Finding the right way to reach target customers with the correct marketing message may be difficult to inform.
All marketing objectives - Some small business may target multiple segments so they need to expand their geographical area or type of customer

Market mapping

Once identifying a segment, business would position the product to meet its needs of target customers.

Also used to identify a gap in the market and competitors

Uses of market mapping

Identifying key features of competitors. Spotting gap in their works. Focus/Improve on features to make your products stand out
Can help business to make decisions on placements of products. Can make sure products are of better quality/unique to gain more sales

Market map illustrations for products

Shows range of positions a product can take into a market based on two dimensions that are important to customers

Examples of the "dimensions"

Low vs High quality
Low vs High price

Competitive environment

Business operates in a market where there are business producing similar products/services

Factors contributing to competitive environment

Price
Quality
Location
Product range
or (No competition)

Situations when there's no competition

When business is only seller of a particular product
When business develops a unique product

Impact on business when there's no/low competition

Market would go to that business bringing revenue from sales.
Business can charge higher prices as they're the only business that sells that certain product.
Quality may suffer as lack of competitors can make the business "lazy"

Impacts on business competing on price

Lower prices mean lower revenue and possibly lower profits.
Businesses would have to lower costs (eg, making staff redundant)
Businesses start a price war.

Impacts on business competing on quality

Costs may increase to improve quality of product.
Profits are lowered as a result of costs increasing assuming if revenue isn't increased.
May be risky as some customers care about price over quality

Impact on businesses competing on location

Businesses would find the most convenient location for their customers.
Being able to offer free parking (eg supermarkets)

Impact on businesses competing on product range

Businesses try to make their product different so they charge more or gain customer loyalty.
Businesses try to have a wide range (variety) of the same product to cater the specific needs of customers (eg flavours of fanta)