1.2 Spotting a business opportunity

Choice

Giving customers options and increasing the chance that the product will be perfect for the tastes/habits of one type of customer.

Customer needs

The products or services people need to make life comfortable

Convenience

Making life easier for customers, e.g having a great location

Identifying customers

Finding out who they are: their age, gender, incomes, where they live and what they want.

Quality

To a customer quality means getting what they want, or perhaps even better than expected - some companies use the term 'customer delight'.

Understanding customers

Learning why customers do what they do, making it easier to see how to make a product that better suits them.

Focus group

A group discussion among people selected from the target market. It draws upon psychology to provide qualitative insights into customer attitudes.

Primary research

Research conducted first-hand tailored to a company's specific needs, for example, a quantitative sales estimate for a brand new chocolate bar.

Qualitative data

In-depth research into a small group of potential or actual customers - to provide insight into why customers buy what they buy.

Quantitative data

Results from research among a large enough sample of people to provide statistically reliable results, for example a survey of 500 15-24 year-olds.

Secondary research

When a company taps into research that has already been carried out for general purposes, for example, using a document like 'Trends in the UK market for chocolate.

What is the purpose of market research?

• To identify and understand customer needs

• To identify gaps in the market

• To reduce risk

• To inform business decisions

How does market research reduce risk?

• reduces the chance of the market not accepting the new product

• tells businesses if the demand exists but if it is not worth the costs of development and launching

What are the main methods of primary market research?

• online survey

• questionnaire

• focus group

• observation

What are the main methods of secondary market research?

• internet

• market reports

• government reports

Give the negatives of qualitative data.

• time consuming as hard to interpret

• generally more expensive

• small sample size

• leading questions

Give the negatives of quantitative data.

• does not provide reasons for choice so business does not know if the customers do not like it or if if something were added they would

• can be expensive if bought

• small sample size

• leading questions

Name the five different market segments.

• Location

• Age

• Lifestyle

• Demographics (e.g. gender, race, ethnicity)

• Income

What is a market map? What are they used for?

Measuring where existing brands sit on a two-factor grid, for example young/old compared with high price/low price. It attempts to identify a gap in the market.

Define competition.

Companies operating in your market or market sector.

Define location.

The extent to which consumers identify with the place where they were born or grew up.

Define lifestyle.

Grouping people by common characteristics in how they live, from their participation in sports and leisure to their views on the environment, taste in music.

Define gap in the market.

An area on a market map where few or no existing brands operate, implying a business opportunity to fill an unmet consumer need.

Define demographics.

The study of statistical differences that exist within a population, both now and in the future. E.g. gender, race, religion.

What are the strengths and weaknesses of competitors based on?

• price

• quality

• product range (gap in this makes room for copycats)

• location

• customer service

What are the positive effects of competition on businesses?

• offer better products and services

• lower prices

• have new, innovative products/services

What are the negative effects of competition on businesses?

• cut staff, bad for employment

• cut costs, worse quality

• adopt unethical practices

What are the effects of competition on business decisions?

They become more risky, and businesses take short-term action.