Mass and Niche Markets

• a market refers to all the buyers and sellers who trade a particular type of product in a particular place

• in a typical market, there is a mass market and several smaller niche segments

• products in a mass market are aimed at a large group of buyers, with wide appeal and is useful to a variety of buyers

• products in a niche market are aimed at a specific group of buyers, required to meet specific needs for people

• businesses in mass markets sell to more consumers, so sale volumes in mass markets is higher, meaning mass markets are more likely to benefit from economies of scale

• mass market products can also be cheaper to produce

• new or small businesses find it hard to succeed in a mass market because businesses need a large capital to meet the sales volume

• businesses in a niche market can be more risky as they sell to fewer and a more narrow range of customers, meaning they could quickly lose sales if there is a change in the market

• usually there is much less competition in niche markets meaning prices are often higher

Market Size and Market Share

• market size is the total value of sales in a market over a specific period of time, or the total number of consumers in a market

• market share is the total proportion of total market that the business holds

• market share is calculated by dividing their sales in a certain time period by the total sales in the total market

• mass markets have a large market size than niche markets

• there are usually many more businesses in a mass market than a niche market

• each business in a mass market is likely to have a smaller market share than each business in a niche market

Brand Distinction

• branding creates a clear and obvious logo, name or statement associated with the brand

• it helps to differentiate a business’ product from that of its competitors

• branding encourages people to buy a product, affecting that business’ market share

• in mass markets, there a more businesses selling similar products, meaning there is more competition than in niche markets

• businesses in mass markets focus more on branding

• in niche markets, consumers are more likely to be worried if the product meets their particular requirements, as opposed to its branding

Dynamic Markets

• most markets are dynamic, meaning they change and evolve rapidly

• markets can change due to: change in consumer preference, innovation, the ways that customers want to shop, competitors and changes in legislation

• businesses need to adapt to changes in the market in order to be successful and maintain their market share

• firms may need to change existing products, create new products or change how they market products in order to keep up with competition and changing customer preference

Online Retailing

• online retailing is selling products via the internet

• the growth of online retailing has had a negative impact on the growth of traditional retailers

• many high street retailers have been forced to close down completely, and some have had to start selling products online as well

• benefits of online retailing are: a business’ costs are lower, customers can order at any time and customers can easily compare prices between different firms

• drawbacks of online retailing are: businesses can face more competition, customers can’t see the product before they buy it and businesses must make sure that customer’s personal details are protected

Direct and Indirect Competition

• in a competitive market, products are sold to the same group of customers by maiming competing businesses

• direct competition is when two or more businesses sell similar products that appeal to the same group of customers

• indirect competition is when two or more businesses sell different products that appeal to the same group of customers

The Effect of Competition

• influences that competition has on the business’ decision regarding marketing mix are: quality of the product, promotion of the product, price of the product and where the product is sold

Nature of Ownership

• many competitive mass markets are dominated by a few national or global businesses

• new or smaller businesses struggle to survive in these competitive markets as they haven’t got the budgets needed to stand out from their competitors

• these smaller or new businesses may need investors in order to help raise funds, meaning there is more incentive for companies in a competitive market to become limited companies

• sometimes big and established companies need to change the nature of their ownership in order to gain more market share

• a new firm can find it easier to succeed in a competitive market by operating as a franchise

• a franchise is an agreement that allows a business to use the idea, name and reputation of an established business

Risks and Uncertainties in the Market Place

• when taking a risk in business, the probability of different outcomes is often known

• before making a decision, businesses can evaluate the probability of a negative outcome, and then work out how to minimise the risk of this happening

• they can make a conscious decision about whether or not to take a risk- meaning that risks are controllable

• uncertainties are unexpected events- they are often deemed as possible but it is very difficult to predict when or if they will ever happen

• uncertainties are often things that can’t be controlled and they often effect the market, rather than just a single business

Product and Market Orientation

• if a business is product orientated, then when making production or marketing decisions, it focuses most on the design, quality and performance of the product

• product orientated businesses use advancements in technology to develop new products or functions that they think companies may like

• they often make new and innovative products, and then put them on the market in the hope that customers will buy them

• market orientation is when businesses focus most heavily on making products that meet customer preference

• they invest a lot in market research to find out what customers want and are willing to buy

• a market orientated business is considered more modern and successful than a product orientated business

• market orientated businesses often charge higher prices

• market orientated businesses are often seen as lower risk as they use customer data to tailor produce products

Effective Market Research

• market research is the collection and analysis of market information

• market research includes: looking at the market as a whole, looking at competitors in the market and looking at their products

• reasons why effective market research is useful are: the ability to find out what customers need and want, anticipate what needs and wants will be in the future, allows businesses to predict how much demand there’ll be for their products, allows businesses to learn more about how consumers behave, and allows them to calculate how much consumers are willing to pay for particular products

• market research helps businesses make informed decisions about market operations, helping to reduce risk

Quantitative or Qualitative Market Research

• quantitative research requires numerical statistics, often using multiple choice questionnaires to gain these statistics using closed questions and predetermined answer options

• qualitative research involves opinions of consumers, often use open questions with no fixed multiple choice responses

• quantitative research analysis is quicker and easier as data can be statistically analysed

• qualitative research analysis is more informative as responses are more flexible

Primary and Secondary Market Research

• primary data involves new data recently collected, whereas secondary data involves data which was collected previously

• primary data collection methods include: questionnaires, surveys, observations, interviews and focus groups

• businesses do test marketing (launching a product in one region) in order to gauge customer response

• sampling can be used to make predictions on the whole market based on a sample

• primary data is used to see what consumers think about a new product or advert

• primary data is specific for the purpose that it is needed for, making it great for niche markets

• primary data is exclusive for the business that researched it, meaning competitors can’t benefit from it

• primary data is labour intensive, expensive and slow

• secondary data involves data from government publications, reliable data websites, trade magazines and market reports

• secondary data is easier, faster and cheaper to get on hold of than primary data

• secondary data collected for a different reason may be unsuitable, have errors or be out of date

• secondary data is often used to gain an initial understanding of a market

Representative Samples

• when primary research is done, samples of people are used rather than the whole market

• the sample needs to represent the market: meaning it needs to have similar proportions in things such as age, gender or income: a more representative sample will give clearer results

• a big sample has a better chance of being representative than a smaller sample

• the size of a sample may depend on how many people a firm can afford to ask: so if the money available is limited, the chance of data being accurate is limited

• whether a firm prioritises cost or accuracy depends on: the type of market, the size of the business and the business context

• a new business launching a product in a niche market may prioritise accuracy over cost so it can have more research about what customers want

• a business launching a product in a competitive market may prioritise cost over accuracy, because less research is needed as it is obvious that the product is in demand

Market Research to Avoid Bias

• to increase the accuracy of market research, researchers have to be careful to avoid bias

• questionnaires, surveys and interviews should avoid biased questions which lead the respondent to give a particular answer

• both interviewers and respondents can cause bias: interviewer bias can be caused by the personality of the interviewer and respondent bias can be giving fake answers because they feel that their actual opinion is not socially acceptable

Technology and Market Research

• many firms now use ICT to help them with market research

• using technology makes market research easier, cheaper and quicker, it can also be used to get a lot more information and reach a wider sample of consumers

• websites, social networking and databases are examples of ICT that firms can use

Websites for Market Research

• a business can use its own website for market research, perhaps by using it as a platform to conduct short surveys or by analysing the activities of people using the site

• businesses can analyse what times of day or year the site is most used, what visitors are clicking on in the website and how likely it is that consumers will buy products via the site

• businesses can look at competitor websites to gather information about new products or prices

• a business can read reviews about their products to gauge customer opinion, however customers are more likely to only leave a review if they have had a bad experience with the product, meaning reviews are not always representative of what all consumers think

Social Networking and Market Research

• social networking is the use of internet based platforms to make connections with people

• businesses could connect with customers through well known social media sites or even more niche social media sites to connect with customers who have specific interests

• firms can post content on social media sites and monitor the response that they get, allowing them to find out what people are saying about their products

• firms can pay social networking sites to post survey questions about products on consumer feeds

• social networking sites can be used to track current trends

• a limitation of using social networking is that not all consumers have the same social networks and so the research could produce very different results depending on what site you are on

Business Databases

• businesses can collect their own data to form a data base about their products and consumers

• an example of this is when supermarkets give out loyalty cards, allowing supermarkets to form a database of customer names and addresses

• firms can use external databases as a form of secondary research: the databases are usually accessible online with a fee and can provide information about trends, businesses and consumers in a particular market

• these databases are quick and cheap and data is mostly quantitative, giving little information about consumer opinion

Segmenting the Market

• segmentation means dividing a market into groups of buyers and consumers in each segment share one or more characteristic, such as age, gender or income

• market research helps a firm to segment a market by revealing more about the types of consumers in a market

• each segment of consumers has different wants and needs and so requires a different marketing mix

• segmenting a market allows businesses to target their marketing towards specific groups of buyers

• segmentation can also help to identify segments of a market whose needs and wants aren’t being met

Ways to Segment a Market

• demographic segments: segmenting based on age, gender or socio-economic class

• geographic segments: segmenting based on neighbourhood, city, country or region

• income segments: segmenting based on how high your income is

• behavioural segments: segmenting based on amount of use, lifestyle or hobbies

Market Mapping

• a market map shows extremes for two measures that are important to customers

• it is laid out as a matrix and the products or brands are placed on it according to where they are judged to lie between the two extremes

• measures on a marketing map may include price, customer appeal or quality

Market Map Analysis

• market maps can reveal gaps in the market, which can be spotted and filled by new or existing businesses

• market research will be needed to find out if there is a demand for the gap in the market

• market maps can show a business who it’s closest competitors are and so then they can plan the best market strategy to draw consumers away from them

• if product sales are declining, businesses may use a market map to see how customers view their product and then try to reposition it on the map

• market maps can show the features provided by the most popular brands, which can indicate the benefits considered most desirable by the target market

• market maps can show how much customers expect to pay, helping with pricing strategy

• market mapping can oversimplify things as it doesn’t always take external factors into account, such as location

• the position of products or brands on market maps is usually a matter of opinion, and so can be biased

Increasing Sales and Profits

• to achieve a competitive advantage over competitors, a firm may decide to: lower costs, innovate new products, advertise and market more, product differentiation, improve product quality, improve customer service and improve convenience

Adding Value

• adding value means increasing the difference between the cost of making the product and the price that the customer pays

• added value = price product is sold for - cost of making product

• added value can be achieved by increasing selling price or by reducing the cost to make the product

• strategies can improve branding and customer service in order to encourage customers to pay more, in turn increasing the value of a product