1.1 Meeting Customer Needs Knowledge Check

State two benefits of mass marketing

Economies of scale > lower units costs > scope to lower price or increase margin

Large revenue > ability to invest in strong branding > powerful brands reduce the risk of launching new products

State two disadvantages of targeting a mass market

High levels of competition > attracted by size of the market > need to invest e.g. in branding to differentiate > needed to build loyalty/act as entry barrier /limited ability to raise prices

High investment costs > to operate on a large scale need large capacity e.g. flow line > financing/ROI?

State two benefits of niche marketing

Product closely tailored > reduces PED > can charge a premium > increased margin

Low levels of competition > customers more loyal > less pressure, e.g. to spend on promotion > helps minimise costs

State two disadvantages/risks of operating in a niche market

Low sales volume > cannot benefit from economies of scale > high unit costs > limiting margin

Risk > reliant on a small market > change (e.g. in consumer trends) > sales could quickly fall below breakeven

Why is branding more important in mass markets than niche markets?

Mass markets have more competitors

Products tend to be very similar

How can a mass marketer benefit from purchasing economies of scale?

Produce large volumes > buy huge quantities of inputs > increases power over suppliers> able to get bulk-buying discounts > reduced VC per unit

How can a mass marketer benefit from marketing economies of scale?

Produce large volumes > pay for promotion, e.g. sponsorship to build the brand > spread cost over a large output > reduced marketing cost per unit

Give three factors that can make a market dynamic

Technological change
Changes in consumer behaviour / preferences
High intensity of rivalry - when markets are very competitive, firms will be innovating etc to stay ahead of the competition
External business environment (PESTLE)
Change in market size

State three benefits experienced by consumers as a result of increased competition in the market

Lower prices
Better quality
More innovation

What are the 5 forces affecting competition in a market according to Michael Porter?

Intensity of rivalry among existing competitors >

- The number of rival firms and their relative market share.

- The extent of product differentiation.

Threat of new entrants - depends on barriers to entry

Threat of substitutes

Power of customers

Power of suppliers

Give two ways a business might adapt to increased competition

Changing their marketing mix e.g:

- Improving their product via innovation, better customer service etc

- Reducing price (but - risk starting a price war)

- Promoting more (probably highly focused on strengthening their brand to differentiate)

- Distributing their product/service more widely.

Controlling costs to maintain profitability/afford price decreases e.g.

- Negotiating harder with suppliers

- Increasing efficiency of operations

What are two main routes to competitive advantage?

Lowest cost or Differentiation

State two reasons why the market research may give misleading results

Small sample size
Poorly constructed sample
Poorly written/leading questions

List three ways that ICT can help with market research

websites gathering information
social media gathering information
databases > data mining

State two uses/limitations of market mapping

To identify gaps in a market

To improve branding > by understanding how a product is perceived relative to rivals

Gap does not guarantee demand

Maps are simplistic - two dimensional

State two ways a business can add value to a product

Examples include:
USP
Strong branding
Effective customer service
Convenience
Ethical behaviour/Sustainability

How is risk different from uncertainty in business?

Risk is the chance that something can go wrong that can be predicted (e.g. based on past data). E.g. the website being hacked. Managers can assess the size of the risk/chance of it occurring and decide what to do.

Uncertainty is when managers can't reasonably assess the chance of a problem happening, e.g. a unexpected political changes. These are much harder to manage.

State two advantages of product innovation

Source of competitive advantage > unique features > reduced intensity of rivalry / threat of substitutes.

Higher profit margins > little direct competition > reduced price elasticity of demand > scope to increase price > payback investment costs quickly

State two disadvantages of product innovation

High research & development costs > risky as many new products fail

Risk of imitation products

State two advantages of process innovation

Cost minimisation - Can support a cost focus/leadership strategy

Improved product/service quality - Can support a differentiation strategy

State two benefits of online retailing

Increased revenue > wider geographical reach /

customers can shop 24-7 / website can collect data on customers and use this to target them with personalised ads.

Lower costs > warehousing is cheaper than stores

State 4 methods of market segmentation

demographics (age, gender, income)

psychographics (lifestyle, interests, values)

geographic (region, country)

behavioural (purchasing habits, brand loyalty)

State two benefits of market segmentation

Better understanding of customer needs > can increase consumer loyalty, reducing the competitive threat / perhaps increasing entry barriers,

Scope to price discriminate (charge different prices to different segments, maximising overall revenue)

State two risks/drawbacks of market segmentation

Risk associated with targeting one-two small segments

Higher costs associated with market segmentation, e.g:

- Market research

- Product differentiation

- Promotion

- Possible loss of economies of scale

State two benefits of primary market research

Specific & targeted > focused on research objectives and up-to-date > good decision making > reducing the risk of failure.

Competitive advantage > Findings will only be available to the business that did the research > exclusive insights > USP > premium price.

State two risks/downsides of primary market research

Risk of bias > primary research is costly > businesses may choose small sample > risks of bias > poor decision-making

Time lags > designing research tools / carrying out research is time consuming > may delay actions > rivals that use secondary research may be quicker to market

Give three examples of primary market research tools

Surveys

Focus Groups

Consumer panels

Observation

Test marketing

Online Analytics

Give three sources of secondary market research

Government Publications, e.g. ONS data o

Industry Reports e.g. Mintel

Trade Publications

Commercial databases like Statista

Social Media Data

Online Customer Reviews

Competitor Websites

Past sales

Loyalty card databases

State two benefits of secondary market research

Often cheap or free and available instantly

Large sample/wide scope of research e.g. using reports that are based on very large data sets / collected over long time periods

State two drawbacks/risks of secondary market research

Not tailored

May be out-of-date, therefore not actually valid.

Competitors can also see the data!

Detailed market intelligence reports (e.g. from Mintel) are expensive