Marketing and people

Business theme 1 flashcards

Market

Any place that buyers and sellers come together to exchange goods or services

Niche market

A smaller part of a large (mass) market

Mass market

A large market of customers which is undifferentiated and that sells products and services to suit a large number of consumer

Features of a mass market

• Customers needs and wants are general and less specific

• Products appeal to a wide range of customers

• Mass media is used to advertise the product

• Products are widely available through a range of markets

Advantages of operating in a mass market

• Able to purchase goods and materials in bulk

• Dealing with higher volumes of sales which make it easier to afford larger advertising and marketing campaigns

Disadvantages of operating in a mass market

• Competition is likely to be fierce as businesses are attracted to potentially high sales levels

• Without a USP, it can be difficult to survive

Features of a niche market

• Less competition in a specific market= higher survival rates

• Able to set own prices due to no competition over price = more profit

• If specific to customers needs and wants, there will be more people willing to pay more money for it

• Promotional activities will be targeted at just a small subsection of the whole market

Advantages of operating in a niche market

• Less competition

• Can charge at higher price

• Customers tend to be more loyal

• Product's can be tailored to meet customer needs

Disadvantages of operating in a niche market

• Fewer customers as it is a smaller part of the larger market

• Hard to persuade retailers to stock the products 

• Vulnerable to market changes - all "eggs in one basket" 

What might happen if a business goes from a niche market to a mass market?

• Forced to lower prices as there is more competition

• More promotion will be needed

• Increasing capital, labour, land so that there is a larger volume of the product to sell, but a newly mass market product may not have the means to do this

• Increased competition

Dynamic market

Markets which are constantly changing. The environment is dynamic, it can grow, change and decline very quickly.

Reasons for dynamic markets constantly changing

• Social trends and fashions

• Changes in technology

• Competitiveness

• Rising/Falling incomes

• Arrival of a superior product offered by competition

• External shocks

Competition

Where rival businesses in the same market try to win customers from each other

Price

The value at which a product or service is offered to customers

Risks

Factors that are not expected but can be quantified, such as the risk of your factory being flooded

Uncertainty

Being unsure of the factors influencing sales and therefore being unable to predict what will happen to the business in terms of its profits or growth. Can be reduced by market research

Market research

The gathering and analysis of research from customers - their attitudes, behaviour and wants - in relation to a product or service

Marketing

The way a company interacts with current and potential customers. Gathering information from and sending out messages to customers.

Product orientation

Where a business focuses primarlily on creating and developing a high-quality good or service - but perhaps ignoring customer preferences and priorities.

Market orientation

Where a business chooses to design a product or service to meet the requirements of customer preferences/desires. Market research is critical to the success of a market-orientated business

Advantages of market orientation

• Close fit with customer expectations

• Greater responsiveness to changes in customer needs

Disadvantages of market orientation

• Regular changes in the appearance of function or a product (to meet changing tastes) may leave customers confused about what the brand really stands for

• May struggle to keep up with product-orientated businesses that invest heavily in new product features and advanced technologies

Advantages of product orientation

• Allows the business to focus on product quality and innovation and spend most of its efforts and money on doing this

Disadvantages of product orientation

• By putting customer priorities at the back of the list, the product might be admired but not sell very well

Sampling

Gathering of data from a set of respondents, the results of which should be representative of the population

Primary research

Data gathered first hand that is specifically designed and obtained for a specific business

Examples of primary research methods

Focus groups, observation, face-to-face surveys and online surveys

Secondary research

Involves using data collected by someone else that has not been designed specifically for the business requiring the information

Examples of secondary research methods

Published market research reports, Google, ONS (official statistics), media reports, competitor materials

Sample size

Amount of data collected by the business from customers or potential customers

Bias

Where the findings do not give a true reflection of the views of the target audience on the product or service

Demographic trends

Statistics showing how things are changing within the population, such as age, marital status, place of birth and household income

Advantages of primary research

• Gathers up-to-date customer views about the product

• Questions can be tailored to meet the individual needs of the business

Disadvantages of primary research

• Can be difficult to collect the data

• Time-consuming

• Expensive

• Questions may be worded so as to bias the answers in a particular direction

Qualitative data

Research based on views and opinion

Advantages of qualitative data

• Essential for important new product development and launches

• Focused on understanding customer needs, wants, expectations = very useful insights for a business

• Can highlight issues that needs addressing

Disadvantages of qualitative data

• Expensive to collect and analyse it requires specialist research skills

• Based around opinions this is always a risk that the sample is not representative

Quantitative data

Research based on numerical data

Advantages of quantitative data

• Data relatively easy to analyse

• Numerical data provides insights into relevant trends

• Can be compared with data from other sources

Disadvantages of quantitative data

• Focuses on data rather than explaining why things happen

• Doesn't explain the reasons behind numerical trends

• May lack reliability if sample size and method is not valid

Market segmentation

The process of dividing a market into smaller sections which contain customers with similar needs and wants

Ways to segment a market

Demographics, location, age, gender, lifestyle, income, ethnicity

Benefits of market segmentation

• Focuses resources on parts of a market where a business can succeed

• Better matching of customer needs

• Helps to make the marketing mix more effective

Drawbacks of market segmentation

• Markets are increasingly dynamic and so too are the segments

• Data about each market segment is not always available, up-to-date or reliable

Benefits of sampling

• Even a relatively small sample (if representative) can provide useful research insights

• Using sampling before making marketing decisions can reduce risks and costs

• Flexible and relatively quick

Drawbacks of sampling

• Sample could be unrepresentative of population - leading to incorrect conclusions

• Risk of bias in research questions

• Less useful in market segments where customer tastes and preferences are changing frequently

Random sampling

Sample is selected for study from a population where each individual is chosen entirely by chance and has an equal chance of being neglected

Benefit of random sampling

NOT biased because everyone has an equal chance of being chosen

Drawback of random sampling

Assumes all consumers equally important so it is less useful if the product is targeted at a specific segment of the market

Quota sampling

The population is first segmented into subgroups before a judgement is made in selecting respondents that are representative of that subgroup

Benefit of quota sampling

The business is only asking people who it knows the product is aimed at so you are not wasting your time or money asking people who would not buy your product

Drawback of quota sampling

If the business is not very clear on their target market they may not ask potential customers and as a result may not provide products or services to suit those customers needs

Stratified sampling

The population is first segmented into subgroups before respondents are randomly selected from within that subgroup

Benefit of stratified sampliing

Ensures a high degree of representativeness of all the layers in the population

Drawback of stratified sampling

Time consuming and tedious

Market positioning

The place a product occupies in customer minds relative to competing products

Market map

Used to place products in a range of positions in the market based on two significant qualities that customers feel are important when looking for the best product in contrast with other products in the market

Product differentiation

Where product has a value proposition that is sustainably different from the competition

Effective differentiation allows a business to

• Compete effectively

• Protect and build a brand

• Add more value

Requirements of a product for effective product differentiation

• Capable of delivering what is important to customers

• Distinctive

• Not easily copied by competitors

• Affordable for target customers

• Profitable

USP

Something that sets a product apart from its competitors in the eyes of customers both new and existing

Demand curve

The quantity that customers are willing and able to buy at a given price in a given period of time

Demand

The willingness and/or ability of consumers to purchase goods at a given price

Causes of Changes in Demand

• Price- fall in price → increase in demand (depends on the PED of the product)

• Incomes- incomes rise → increase in demand (depends on the YED)

• Fashion, tastes and preferences

• Advertising and branding

• External shocks

• Seasonality