Business Theme 1

the market

The market: What is a target market?

The set of customers sharing common needs and wants that a business decides to target

The market: what is a mass market

targets the whole market- focuses on common wants and needs

The market: what is a niche market

business focuses on small segments/ niches

The market: Advantages of a mass market

• more potential customers so more sales

• large scale production means lower unit costs

• straight forward mass marketing

• consistent quality

The market: Advantages of a niche market

• Charge high prices for premium products

• less competition

• easy to target customers

• small scale production is easy to adapt for changes in demand

The market: disadvantages of a mass market

• more competitors

• homogenous products need more advertising to differentiate them which is expensive

• high volume production makes it hard to keep up with changing demand

• not targeted to specific needs

The market: disadvantages of a niche market

• lower volume of sales

• risky as demand is not constant

• higher unit costs

• less customers

What is market size?

The total of all sales within an industry

How can market size be measured (2 ways)

Volume of sales (quantity)

Value of sales (monetary amount)

What is market share and give formula

portion of market controlled by company

sales of x/total sales of whole market x 100

What is market growth

percentage change in the volume of products/services and economic activity over time

what is dynamic market

a market that is subject to rapid or continuous change

explain market orientation

company that makes products that meets customer demands, carries out lots of market research

explain product orientation

company that focuses on a unique product or service, prioritises high quality products at a fair price

what is market research

gathering and analysing data relevant to the market process

examples of primary research:

• questionnaires

• observation

• customer interviews

• test marketing

• focus groups

examples of secondary research:

• government sources

• trade publications

• market reports

• internet sources

• newspapers/magazines/TV/radio

what is a questionnaire

a set of questions to gather information

what is test marketing

trailing a product or service for a short of time

what is a trade publications

a magazine or journal written for people in a specific country

what is market segmentation

dividing the market into parts that reflect different consumer needs and wants

what are the 4 segments when dividing the market

1. demographic- characteristics

2. geographic- location

3. psychographic- type of person a consumer is

4. behavioural- how consumers respond and act

benefits of market segmentation

• focus on key market areas

• growth opportunities

• new product development

• more effective marketing

drawbacks of segmenting the market

• imprecise data

• limited research

• market dynamics

• over segmentation

what is market mapping

the process of plotting competitors on a graph

what are direct vs indirect competitors

direct= competitor selling the same products- eg: costa and starbucks

indirect= competitor that can take customers away- eg: costa and bubble tea

what is a competitive advantage

an advantage a business has over its competitors allowing it to generate a larger turnover for the industry

what is ‘adding value’

the difference between the price that is charge to the customer and the cost of inputs required to create the product or service

what is differentiation

where the product is different from the competition in some way

what is demand

the amount of a good or service that consumers are willing and able to buy at a given price