The market

Market

• only medium in which buyers and sellers interact and agree to trade, at a price
• relies on:
  • how consumers behave (==demand==ing the product)
  • how firms behave (==supply==ing the product)

Types of markets:

• ==Mass market:==
  • creating products that have universal appeal
  • sold through many channels
  • big market so can reduce costs (economies of scale)

advantages:

• cheap, affordable
• universal appeals
• lots of customers
• less likely to be affected by economic factors

disadvantages:

• a lot of competition
• start-up costs are very expensive

→ lower unit cost

→ higher profit margins (usually at the expense of quality of product)

→ high advertising costs (in comparison to niche) in order to differentiate from competition

→ more competition

• ==Niche market:==
  • creating products that target a very small segment of a much larger product
  • sold in specialist shops/on the internet
  • often sold in lower volumes
  • often higher prices for consumers

advantages:

• high selling price
• not a lot of competition
• market segmentation
• brand loyalty

disadvantages:

• expensive
• smaller market

→ avoids competition (but still has the ability to turn into a mass market if the market becomes popular - turns to mass)

--- if the market turns to mass this is very problematic because competitors can invest less in R+D since the niche original has already found what works. They can then lower prices in order to attract more sales (economies of scale). The niche original may have to lower prices in order to compete with the competitors, but because they have a smaller profit margin, this method is unsustainable. If they attempt to lower costs this may represent a reduction in quality to consumers and lose their existing customers.

BUT the low quality of competitor products can bring consumers back to the original product.

BUT consumers may be loyal to the original product.

BUT having the original may be seen as a status symbol attracting higher levels of purchase (luxury product - attract high earners).

Market size:

• dependent on the ‘value’ or ‘volume’ of items sold

• calculated by total sales of business - can fluctuate

• ==market share== - a firm’s sales as a % of the overall market

  ==market size== = units sold x selling price

  ==market size== = revenue / market share

  ==firm sales revenue== = units sold x selling price

  ==firm sales revenue== = market size x market share

  ==percentage change== = difference / original value

Dynamic markets:

• markets that are constantly changing
• markets change because of:
  • ==size==, grow or shrink affected by PLC
  • ==nature==, product providing, consumer perceptions and trends
  • {{==new==, develop with technology{{
• static markets are ones where the pace of change is slow
  • main causes of market change are:
  • ==technology==
    • digital economy
    • process innovation: using new tech to improve production methods, thereby reducing costs and make it economic to produce and sell a product
    • product innovation: new tech makes it possible to create completely new products/markets:
    • virtual reality, electric cars, mobile phones, Bluetooth, space race, digital cameras
  • ==innovation==
  • ==competition==
  • ==social trends==
• since dynamic markets are constantly changing, they are constantly creating ==risk== and ==uncertainty==.
  • risk - possibility of something wrong but is quantifiable
  • uncertainty - unpredictable and uncontrollable likelihood of something going wrong
• managing risk and uncertainty:
  • research why new businesses go bust within 3 years
  • start with own savings / investors
  • research your customer market, plan to meet their needs

Marketing:

• a management process responsible for identifying, anticipating and satisfying customer needs, profitably,
• the department tasked with targeting the right product at the right target market.

The marketing process:

→ set ==market objectives==

→ identify marketing opportunities

→ developing marketing strategies

→ plan your tactics for the year

→ implement monitor and review

→ repeat to set market objectives

Marketing objectives:

• goals that the marketing department need to achieve in order to fulfil corporate objectives - they must be ==SMART==
  • maintaining / increasing market shares
  • developing new products (innovation)
  • meeting the needs of customers
  • entering a new market/market positioning
  • gaining an advantage over competitors
  • achieve cost efficiency

Competition:

• firms who want the same customers and may take yours
• if there is no competition, the market might not evolve

Adapting to change - strategies firms can take

offensive - proactively creating change

+ ability to become market leaders, lag time for competitors to realise and keep up with company allows for initial sales

-- competitors don’t have to invest as much into R+D as product already shown it will sell well, can lower their prices to attract more sales

defensive - being reactive; reacting to changes identified

+ less R+D, can invest finance into differentiating themselves/bettering the product

-- the lag time may already establish brand loyalty between consumers and product depending on how quick the company reacts

develop a niche (USP)

continuous improvement + investment + market research (R+D)

flexibility (usually reaches a broader customer base

• reaching more = higher profits
• if done well, more customer loyalty (consumers spread word of brand) (cycle)

Competitive advantage

• design - differentiation
• quality - premium price (elastic vs inelastic)
• promotion - personalise advertisement (target demographic reached)
• customer service - exceed and deliver encouraging sales (customer satisfaction = loyalty)
  • packaging (aesthetics + function
  • frequent buyers + customisation (boosts reputation)
• ethical stance - segmentation (attractive when aligns with social trends)
• differentiation - gain competitive edge
• flexible pricing - create perceived high quality, allowing premium pricing
• recognition - more appealing, higher sales revenue and less advertising needed (brand awareness - rep.)
• product range - each market (broader customer base)
• brand development - USP, overcome competitor
• adding value - ability to charge higher price
• bundling - attracts customers (more for their money)

competitive advantage may be achieved using any factor which will help the business to succeed against competitors

methods:

• increased sales
• higher market share → less competition → no need to lower prices so much (price control) AND have the ability to keep the best workers
• increased profit margins
• increased customer loyalty → no need to spend as much on ads AND constant source of revenue