1. Understanding Markets and Customers

Question 1

Calculate Sales Growth

Answer 1

If sales grow by 20%

X * 1.20

Question 2

Market Share

Answer 2

A business which has x% market share is responsible for providing x% of which ever product/service they provide

Question 3

Market Growth

Answer 3

Market growth describes when an industry grows in terms of either volume or value.

Question 4

Demand

Answer 4

Market research into customers’ demands is important for a business to identify wants and needs of a customer to improve the product, spot market opportunities and stay competitive.

Question 5

Competition

Answer 5

Market research into competitors can help a business understand the major threats in the market and then prepare the business to deal with these threats.

Question 6

Target Market

Answer 6

Market research into a business’ target market will give the business insights into their customers’ wants and needs and how they are changing over time.

Question 7

Qualitative Research

Answer 7

Collects information about opinions and views rather than things that can be quantified.

Question 8

Quantitative Research

Answer 8

Collects factual information on things that can be quantified and recorded easily.

Question 9

Market Mapping

Answer 9

Businesses can use market mapping to identify a gap in the market by looking at what competitors offer.

Competitors’ products are mapped against their price and quality.

Question 10

Sampling

Answer 10

Sampling occurs when a business selects a sample of the population to save collecting data from everybody in that population.

Question 11

Advantages of Sampling

Answer 11

Sampling reduces costs as a business can choose a cross-section of the population instead of collecting data from everybody.

Question 12

Disadvantages of Sampling

Answer 12

Sampling may not accurately reflect the full target market if the sample is not chosen properly.

Question 13

Technology

Answer 13

Technology can be used to analyse market research data by creating graphs and charts which can be used by managers and leaders.

Question 14

Price Elasticity of Demand

Answer 14

Price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price.

Question 15

Calculate Price Elasticity of Demand

Answer 15

PED = (% change in quantity demanded)÷ (% change in price)

Question 16

Price Elasticity of Demand Coefficients

Answer 16

The price elasticity of demand coefficient is usually negative as an increase in price will result in a decrease in quantity demanded and a decrease in price will result in an increase in quantity demanded.

The bigger the coefficient, the greater the responsiveness to quantity demanded to a change in price

Question 17

Price Elasticity of Demand Greater than 1

Answer 17

If the price elasticity of demand is greater than -1 (whether positive or negative) then this is described as price elastic. This means that a change in price will lead to a change in quantity demanded which is greater than the change in price.

Question 18

Price Elasticity of Demand Lower than 1

Answer 18

If the price elasticity of demand is less than -1 (whether positive or negative) then this is described as price inelastic. This means that a change in price will lead to a change in quantity demanded which is less than the change in price.

Question 19

Using Price Elasticity of Demand as Data

Answer 19

Marketing managers can use price elasticity of demand and income elasticity of demand to forecast and predict the impact of changes in price and income on the quantity of the business’ goods demanded by consumers.

Using elasticity of demand allows marketing managers to act, such as advertising, to target customers if they think quantity demanded is likely to decrease.

Question 20

Income Elasticity of Demand

Answer 20

(YED) measures the responsiveness of quantity demanded to a change in consumer income.

Question 21

YED Formula

Answer 21

YED = (% change in quantity demanded) ÷ (% change in income)

Question 22

YED Coefficients

Answer 22

The larger the YED coefficient the greater the responsiveness of quantity demanded to a change in income.

If the coefficient is positive:
income ↑ = increase demand ↑
income ↓ = increase demand ↓

If the coefficient is negative:
income ↑ = increase demand ↓
income ↓ = increase demand ↑

Question 23

Interpret YED Coefficients

Answer 23

If the income elasticity of demand = >1 then it is inelastic.

If the income elasticity of demand = <1 then it is elastic.

Question 24

Inelastic YED

Answer 24

A change in income will lead to a change in quantity demanded which is less than the change in income.

Question 25

Elastic YED

Answer 25

A change in income will lead to a change in quantity demanded which is greater than the change in income.