1.1-Meeting customer needs

What is a niche market?

A smaller segment of a larger market, where customers have specific needs and wants

What is a mass market?

The largest part of a market, where there are many similar products sold by competitors

Does a niche or mass market have less competition?

Niche

Which can charge higher prices and have higher profit margins; niche or mass market?

Niche

Which customers are more loyal; niche or mass market and why?

Niche because the business builds up specialist skill and knowledge which gives them a clear focus to target particular customers

Define market size

The total volume or value of sales in a market

Define market growth

The percentage rate of growth in market size

How is market growth calculated?

(current market size - original market size) / (original market size) x 100

Define market share

The proportion of market size held by each competitor in a market

How is market share calculated?

Sales for one business / total market sales x 100

What is a dynamic market?

A market that is changing rapidly

What are the 4 key sources of change in a dynamic market?

Impact of technology on what and how customers buy Customer tastes and preferences Innovation and market growth Changes in legislation

What is competition?

The rivalry that exists between businesses in a market

How does competition affect businesses?

Forces them to lower prices, improving quality and customer service and product differentiation

How are customers benefited from competition?

Lots of choice as many businesses sell similar products

How does competition affect the market?

Battle for market share, price wars and battle for competitive advantage

What is competitive advantage?

Ability of a business to add more value for its customers than its rivals

What will happen if businesses don't adapt to change?

Likely to lose market share or collapse

How can businesses adapt to change?

Become more flexible, carry out market research, invest in new product development and develop a niche

Why should businesses carry out market research?

To be aware of changing customer needs or tastes

What will investing in new product development do to sales?

Boost sales

Define risk

Possibility that things will go wrong

Give an example of a risk

Investing in a new product

Define uncertainty

Unpredictable and uncontrollable events that affect a business

Give examples of uncertainty

New technology, change in consumer tastes and recession

Which is taking actions where the outcomes are unknown; risk or uncertainty?

Risk

Which are external influences that are hard to predict; risk or uncertainty?

Uncertainty

Explain the difference between product and market orientation

Product orientation is based on what the business is good at whereas market orientation responds to customer needs and wants

Why is market orientation linked to success?

Markets are more dynamic Customers are becoming more demanding Barriers to market entry are lower

Explain the difference between primary (field) and secondary (desk) research

Primary research is data collected first-hand for a specific research purpose whereas secondary is already existing data collected for a different purpose

Examples of primary research

Observations, surveys and experiments

Examples of secondary research

Google, ONS, media reports

Benefits of primary research

Detailed insights focused to research objectives Kept private Up-to-date

Drawbacks of primary research

Time-consuming and costly Risk of survey bias Sampling may not be representative

Benefits of secondary research

Free Easy and quick to access Good source of market insights

Drawbacks of secondary research

Becomes out of date Not tailored to business needs Expensive Could be biased

Define market research

The process of collecting and analysing data to inform marketing decisions

What is sampling?

Choosing a proportion of the whole population as representative of the population for market research

Explain the difference between a mass and niche market

Mass markets target their products to a wide range of consumers whereas niche markets have a small segment of a large market

Define market segmentation

Splitting market into subgroups of consumers with similar characteristics or needs

What are examples of market segments?

Age, gender, location, income

Why is market segmentation used?

To help businesses identify different types of consumers and different wants and needs

What is research concerned with data?

Quantitative data

What is research based on opinions, beliefs and intentions?

Qualitative research

What are the forms of collecting quantitative research?

Surveys - online, postal, telephone, face-to-face

What are the forms of collecting qualitative research?

Focus groups and interviews

Benefits of quantitative research

Easy to analyse Can be compared to other data Provides insights into trends

Drawbacks of quantitative research

Doesn't explain trends May lack reliability if sample size and method is not valid

Drawbacks of qualitative research

Expensive to collect and analyse - requires specialist research skills Difficult to analyse - subjective information Risk of unrepresentative sample

Benefits of qualitative research

Highlights issues Focuses on customer needs, wants and expectations Essential for new product development and launching

Benefits of sampling

Flexible and quick Even a small representative sample can provide useful research insights Using sampling before making marketing decisions can reduce risks and costs

Drawbacks of sampling

Sampling can be unrepresentative Risk of bias in questions Less useful in market segments where customer tastes and preferences change frequently

What is the biggest risk in research and why?

Sample not being representative of population which leads to inaccurate results

Why is IT good for market research?

Data mining is quick and automated so huge sets of data can be analysed without sampling Social media can quickly highlight what customers are saying

What are the 4 segmentation methods and explain each one

Demographic - age, gender, income, ethnicity, social class, religion Geographic - where you live Psycho-graphic - attitudes, opinions and lifestyles Behavioural - how often purchases are made

What is market positioning?

The view customers have about the quality, value for money and image of a product compared to those of competitors

What is product differentiation?

When customers perceive a distinct difference between your product and alternatives provided by competitors

What difference do customer perceive in product differentiation?

Quality, performance, aesthetic and price

What does effective product differentiation allow a business to do?

Compete effectively Protect and build a brand Add value

What is a USP?

Unique selling point, sets a product apart from its competitors in the eyes of customers

Will a highly differentiated product be price elastic or inelastic and what does this mean?

Inelastic, demand is less sensitive to the price of the product

Why are price inelastic products good for a business?

Allow the business to charge a high price

Advantages of positioning maps

Spots gaps in the market Useful for analysing competitors Encourages market research

Disadvantages of positioning maps

Gap doesn't equal demand Not a guarantee of success

What is market mapping?

Process of positioning competition within a market by plotting key variables

What variables are commonly used in market positioning?

Quality and price

What is competitive advantage?

An advantage that enables a business to perform better than rivals in the market

What is adding value?

Taking resource inputs and transforming them into goods and services (transformation process)

How is added value calculated?

Price of product - cost of making product

Benefits of market segmentation

Most and least profitable customers can be identified Advertising can be targeted at specific market segments Least profitable markets can be avoided Easier to identify new products

Advantages of mass markets

More customers Economies of scale Can build strong market presence

Advantages of niche markets

Less competition Customer loyalty - specific market and expertise Higher profit margins

Disadvantages of mass markets

High levels of competition Lower profit margins

Disadvantages of niche markets

No economies of scale Vulnerability because of undiverse product portfolio

What does market research provide insights into?

Dimensions of market (size, structure, growth) Competitor strategies (market share, positioning) Needs, wants and expectations of customers Market segments

Is qualitative or quantitative data used to identify and anticipate customer needs and wants?

Qualitative

Is qualitative or quantitative data used to find out the likely demand for a product?

Quantitative

Is qualitative or quantitative data used to provide an insight into consumer behaviour?

Both

How can businesses add value?

USP Branding Quality Design Convenience