1.1 Meeting consumer needs Flashcards
What is a mass market?
The market that is aimed at the general population e.g regular toothpaste
What are the characteristics of mass markets?
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
What are the benefits of mass marketing?
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
What are are the cons of mass marketing?
Lots of competition
High volume production not flexible to demand changes
Same products need to be differentiated through marketing which can be expensive
What is a niche market?
A small segment of a larger market that addresses a specialist need e.g sensodyne toothpaste for sensitive teeth.
What are the characteristics of a niche market?
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
What are the benefits of niche marketing?
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
What are the cons of niche marketing?
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
What is the market size/ the formula?
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
What is a dynamic market?
One that is subject to rapid/continuous change e.g shoes
What is online retailing?
Selling products online so consumers can purchase at any time e.g Argos, Next
What are the pros of online retailing?
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
What are the cons of online retailing?
Can be risky as competitors can be aware of owners activity/prices
Have more competition
Issues with sending stuff back may put customers off
How can markets change?
PESTLE
Political Economic Social Technological Legal Environmental
What is innovation?
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.
How do firms adapt to change?
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
How does competition affect the market?
Increased competition can lead businesses too…
Drive down costs
Maintain competitive prices
Develop innovative products/services
Maintain high-quality products/services
What is the difference between risk and uncertainty?
Risk is when the potential outcomes of a decision are known whereas uncertainty is when none of the outcomes are known in advance.
What is product orientation?
When the product is the most important factor when providing products to the market
What is market orientation?
When the consumer is the most important factor when providing products to the market
What is primary research?
New research conducted for a particular purpose
What are types of primary research?
Surveys
Interview
Focus groups
Loyalty cards
What are the advantages of primary research?
Addresses the specific issues the business is interested in
Data is up to date
Can help us understand customer psychology
What are the disadvantages of primary research?
Expensive
Risk of bias from questionnaire/interviewer
May need to compare with other information to understand the meaning of findings
What is secondary research?
Uses pre-existing data that has been gathered for another purpose
Types of secondary research:
Internet
Trade press
Government statistics
Past internal sales figures
What are the advantages of secondary research?
Often free
Provides a good market overview
Usually based on large-scale reliably produced research
What are the disadvantages of secondary research?
Information may be out of date
Not tailored to suit your particular needs
Can be expensive to buy published research reports on markets
What is quantitative research?
Factual, numerate data that aims to be statistically representative of the whole market.
What is qualitative research?
Contains opinion and is designed to give insight into why customers behave the way they do.
What are the limitations to market research?
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
How can ICT support market research?
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
What is market segmentation?
Discovering useful ways to split up a market into different groups of consumers who share similar characteristics, wants and needs.
What are the benefits of market segmentation?
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
What is market positioning?
Deciding exactly what image you are trying to create for your product, relative to it’s rivals
What is market mapping?
Identifying a gap in the market
How can a product/service gain competitive advantage?
Lowest cost producer e.g Ryanair
Find a sustainable point of differentiation e.g KFC
What is product differentiation?
Attempting to make a product seem different in the minds of consumers to any other rival in the market
Examples of actual product differentiation:
Design
Different functions
Taste
Performance
Examples of perceived product differentiation:
Branding
Advertising
Sponsorship
Celebrity endorsement
What are the purposes of product differentiation?
Insulating the product from the actions of competitors
Allowing prices to be increased without a major fall in demand or sales
What is added value?
The difference between the cost of bought-in goods and services and the selling price of a product.
How can a business add value?
Via design, production or marketing
What are the benefits of adding value?
Charge a higher price (increase profit)
Customer loyalty
Protection against competitors offering lower prices
