1.1 Meeting consumer needs

Question 1

What is a mass market?

Answer 1

The market that is aimed at the general population e.g regular toothpaste

Question 2

What are the characteristics of mass markets?

Answer 2

Generic products which are broadly similar in form/function

Huge markets in which large firms can operate successfully even though their market share may be low

Huge brands can develop with their name/logo representing a key point of differentiation

Question 3

What are the benefits of mass marketing?

Answer 3

Huge potential number of customers

Higher production levels allow economies of scale meaning lower production costs

Can use mass media advertising

Large volumes of scale meaning high revenues

Question 4

What are are the cons of mass marketing?

Answer 4

Lots of competition

High volume production not flexible to demand changes

Same products need to be differentiated through marketing which can be expensive

Question 5

What is a niche market?

Answer 5

A small segment of a larger market that addresses a specialist need e.g sensodyne toothpaste for sensitive teeth.

Question 6

What are the characteristics of a niche market?

Answer 6

Specialist products/services are required

Smaller markets mean successful firms may achieve higher shares of their niche than their mass market firms

Differentiation is more likely to be achieved through product features/functions

Question 7

What are the benefits of niche marketing?

Answer 7

Meeting consumer needs more precisely allows higher prices to be charged

Higher profit margins

Easier to enter for firms with limited financial resources

Less competition than in mass markets

Can be flexible/follow trends

Question 8

What are the cons of niche marketing?

Answer 8

Risky as demand may not be constant

Consumers may not be willing to buy at a premium price

Higher unit cost so no economies of scale

Question 9

What is the market size/ the formula?

Answer 9

The % of a market that is taken by a business, product or brand

(Sales of x divided by total sales in whole market) x by 100

Question 10

What is a dynamic market?

Answer 10

One that is subject to rapid/continuous change e.g shoes

Question 11

What is online retailing?

Answer 11

Selling products online so consumers can purchase at any time e.g Argos, Next

Question 12

What are the pros of online retailing?

Answer 12

Don’t need workers

Shop can reach international markets easily (flexible)

Opportunities for fast growth

Shop is open around the clock

Easy to set up

Question 13

What are the cons of online retailing?

Answer 13

Can be risky as competitors can be aware of owners activity/prices

Have more competition

Issues with sending stuff back may put customers off

Question 14

How can markets change?

Answer 14

PESTLE

Political
Economic
Social
Technological
Legal
Environmental

Question 15

What is innovation?

Answer 15

A major cause of change within markets.

This means that firms need to offer features that rivals don’t in order to stay in the market.

Question 16

How do firms adapt to change?

Answer 16

Identify subtle changes in what consumers are looking for to better suit their needs.

Change earlier than rivals to offer a major source of competitive advantage

Question 17

How does competition affect the market?

Answer 17

Increased competition can lead businesses too…

Drive down costs
Maintain competitive prices
Develop innovative products/services
Maintain high-quality products/services

Question 18

What is the difference between risk and uncertainty?

Answer 18

Risk is when the potential outcomes of a decision are known whereas uncertainty is when none of the outcomes are known in advance.

Question 19

What is product orientation?

Answer 19

When the product is the most important factor when providing products to the market

Question 20

What is market orientation?

Answer 20

When the consumer is the most important factor when providing products to the market

Question 21

What is primary research?

Answer 21

New research conducted for a particular purpose

Question 22

What are types of primary research?

Answer 22

Surveys
Interview
Focus groups
Loyalty cards

Question 23

What are the advantages of primary research?

Answer 23

Addresses the specific issues the business is interested in

Data is up to date

Can help us understand customer psychology

Question 24

What are the disadvantages of primary research?

Answer 24

Expensive

Risk of bias from questionnaire/interviewer

May need to compare with other information to understand the meaning of findings

Question 25

What is secondary research?

Answer 25

Uses pre-existing data that has been gathered for another purpose

Question 26

Types of secondary research:

Answer 26

Internet
Trade press
Government statistics
Past internal sales figures

Question 27

What are the advantages of secondary research?

Answer 27

Often free

Provides a good market overview

Usually based on large-scale reliably produced research

Question 28

What are the disadvantages of secondary research?

Answer 28

Information may be out of date

Not tailored to suit your particular needs

Can be expensive to buy published research reports on markets

Question 29

What is quantitative research?

Answer 29

Factual, numerate data that aims to be statistically representative of the whole market.

Question 30

What is qualitative research?

Answer 30

Contains opinion and is designed to give insight into why customers behave the way they do.

Question 31

What are the limitations to market research?

Answer 31

Sample size may be too small meaning that it doesn’t reflect the whole market

Sample bias may mean that the findings are over/under representing the views of the total population being researched

Question 32

How can ICT support market research?

Answer 32

Company websites - gather data on visitors to the website which can provide info about online shoppers interests

Social media - offer info on consumer attitudes to a product or service which allows relationship building between business and consumer

Database technology- identifies patterns that can help explain how customers actually behave e.g loyalty cards

Question 33

What is market segmentation?

Answer 33

Discovering useful ways to split up a market into different groups of consumers who share similar characteristics, wants and needs.

Question 34

What are the benefits of market segmentation?

Answer 34

Products/services can be designed to suit specific customers

Meeting customers’ needs precisely allows a higher price to be charged

Promotional activity is easier to target

Question 35

What is market positioning?

Answer 35

Deciding exactly what image you are trying to create for your product, relative to it’s rivals

Question 36

What is market mapping?

Answer 36

Identifying a gap in the market

Question 37

How can a product/service gain competitive advantage?

Answer 37

Lowest cost producer e.g Ryanair

Find a sustainable point of differentiation e.g KFC

Question 38

What is product differentiation?

Answer 38

Attempting to make a product seem different in the minds of consumers to any other rival in the market

Question 39

Examples of actual product differentiation:

Answer 39

Design
Different functions
Taste
Performance

Question 40

Examples of perceived product differentiation:

Answer 40

Branding
Advertising
Sponsorship
Celebrity endorsement

Question 41

What are the purposes of product differentiation?

Answer 41

Insulating the product from the actions of competitors

Allowing prices to be increased without a major fall in demand or sales

Question 42

What is added value?

Answer 42

The difference between the cost of bought-in goods and services and the selling price of a product.

Question 43

How can a business add value?

Answer 43

Via design, production or marketing

Question 44

What are the benefits of adding value?

Answer 44

Charge a higher price (increase profit)

Customer loyalty

Protection against competitors offering lower prices