1.1 Meeting Customer Needs

What is a Market?

Any place where buyers and sellers meet e.g. amazon.co.uk or a shopping mall

• different markets have varying characteristics and are affected differently by changea

What is the aim of markering?

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

• Needs = essential, e.g. shelter or food

• Wants = desires which are non-essential, e.g. nike trainers

Wants are considered to be essential.

True or False?

False

Needs such as food or shelter are essential, wants are desires that are non-essential

What is market research?

Process of systematically gathering data from consumers to influence business decisions

• to help identify products and services to respond to needs and wants of consumers

What is a Mass Market?

Products aimed at broad market segments and production is usually on a large scale, e.g. Kellogg’s Corn Flakes is a cereal aimed at mass market

• Market segments = groups of customers who share similar characteristics e.g. age, lifestyle, etc

• Mass Marketing = when businesses sell their products to most of the available market

What is Market Segments?

Groups of customers who share similar characteristics e.g. age, lifestyle, etc

What is a niche market?

Products aimed at a subset of the larger market with production usually on a small scale, e.g. gluten free products

• Niche marketing = when businesses identify and satisfy demands of a small group of consumers within the wider market

Characteristics of Mass Markets

• Products are less unique; aimed at broad market segements

• Low average costs; large scale production (economies of scale)

• Low prices lead to greater affordability and higher sales volume

• Low prices lead to lower profit margins e.g. primark

Characteristics of Niche Markets

• Products are more specialised; aimed at narrow market segements

• High average costs; small scale production; doesn’t benefit from economies of scale (the fall in average costs as output increases)

• High prices makes products less affordable; lower sales volumes

• High prices sllow for higher profit margins e.g. Louis Vuitton

Market Size

The size of the market can be measured through sales volume (quantity of products sold) or sales revenue (total revenue e.g. price x quantity sold)

• Sales Volume = number of products sold e.g. the physical number of units sold

• Sales revenue = price x quantity sold e.g, the financial value of the units sold

Market Share

Proportion of the total sales of a product/service a business controls compared to the market as a whole, e.g. Tesco has 26% of UK grocery market

State the formula for calculating market share

Market Share = Sales of a business / total sales in the market x 100

What is a brand?

A brand is a name, image , or logo which helps one product/service stand out from its competitors

What are ways brands affect the business?

• Branding is one of the key ways to achieve product differentiation (distinguishing a product from its competitors products in the market)

• Brands add value, makes it more desireable - therefore you can increase the price (consumers are willing to pay more)

What is the purpose of branding?

Branding is one of the key ways to achieve product differentiation (distinguishing a product from its competitors products in the market)

A dynamic market is one that is subject to rapid or continuous changes

True or False?

True

A dynamic market is one that is subject to rapid or continuous changes

What is meant by the term Primary Research?

The process of gathering first-hand information directly from consumers in the target market

What is meant by the term Market Segementation?

The process when a single market is divided into sub-markets containing consimers with similar characteristics

What is Product Orientation?

It is an approach to marketing that focuses on the characteristics of the product rather than consumer needs

What is meant by the term Secondary Research?

Secondary research involbes the collection, compilation, and analysis of data that already exists

Primary research is cheaper and quicker than secondary research

True or False?

False

Primary research is usually more expensive and time-consuming than secondary research

State how researcher bias can affect survey findings

Researchers may guide respondents to answer in a certain way

What is the purpose of Market Segmentation?

Market Segmentation allows firms to precisely target different groups of consumers

Primary market research may include purchasing market reports from specialist companies or accessing government statistics

True or False

False

Secondary research may include purchasing market reports from specialist companies or accessing government statistics

Define the term Market Orientation

It is an approach to marketing that focusses on needs of consumers and uses this info to design products to meet those needs

What is meant by the term Test Marketing/

Free samples are provided to consumers in the target market for a limited period to gauge their respose to the product

All consumers in a market segment behave the same way

True or False

False

Not everyone within a segment will behave in the same way; they simply share similar characteristics

Define the term Market Positioning?

Market Positioning refers to product launch decisions such as price, quality, branding and customer perception, which position the product in relation to its competitors

What is a Market Map?

A market map is a two-dimensional diagram that shows the attribute or characteristics of a product compared to those of rivals

A market map can show more than 2 criteria

True or False?

False

Only two criteria can be chosen for a market map e.g. Price and Quality

What is meant by the term Market Saturation?

Market Saturation exists where most customers who want to buy a product have already done so

Define the term Competitive Advantage

Competitive Advantage refers to the features of a business and its products that are percieved as superior to its rivals by customers

What is meant by the term Product differentiation?

Product differentiation is an attempt by a business to distinguish its products from those of its competitors

Give two examples of sources of Competitive Advantage

• Quality

• Delivery times

• Low price

• Reliability

• Ethical stance

Define the term Added Value

Added value is the difference between the selling price and the cost of the inputs required to create the product or service

Adding Value raises costs for a business

True or False?

True

Adding value raises costs, but it is worth it if the increase in selling price outweighs the higher costs associated with this method