1.1- Meeting Customer Needs Flashcards
What is a mass market?
This is the market that is aimed at the general population (e.g regular toothpaste).
What is a niche market?
This is a subset of the main market and addresses a specialist need (e.g toothpaste for sensitive teeth).
What is the definition of homogeneous?
Adjective of the same kind, alike. For example, similar products that compete in a market (e.g different brands of yogurt).
What are 3 advantages of operating in a mass market?
- Very straight forward as everyone is equally targeted.
- Large volume of scales means high revenues.
- High revenues can be pumped into research and development.
What are 3 disadvantages to operating in a mass market?
- Lots of competition.
- Homogenous products need to be differentiated thorough marketing which can be expensive.
- High volume production may not be flexible enough to keep up with changes in demand
What are 3 advantages to operating in a niche market?
- Charge premium price.
- Easier to target customers.
- Less competition.
What are 2 disadvantages to operating in a niche market?
- Very risky as demand may not be constant.
- Higher unit costs so no economies of scale.
What are the 2 ways that a market can be measured?
- Volume of sales (e.g 91million burgers sold each year).
- Value, the total amount spent by customers (e.g the UK burger bar market is estimated to be worth 3.28billion in 2016).
What is the formula to work out a business’s market share?
Market share= (Sales of x/total sales in the whole market) X 100
What is a dynamic market?
A dynamic market is a market that is subject to rapid or continuous change.
What are advantages of online retailing?
- Shops are open 24 hours of the day.
- Orders can be taken automatically without he need for staff.
Shop can reach international markets easily
Low overheads, no need for a shop premises
Flexible – owner can be anywhere in world
Opportunities for fast growth
What are disadvantages of online retailing?
- Issues with sending goods back May out customers off.
- Owners need IT skills or the money to pay someone who does.
Issues with online security worries put off older customers and those
not keen to share their bank details
Very competitive market, hard to drive traffic to sites
Problems with fraud / spam / viruses
What is business risk?
Business risk is the possibility a business will have lower than anticipated profits or experience a loss rather than a profit.
What is Uncertainty?
Uncertainty is when a business are unable to predict external shocks or future events.
What does it mean for a business to be product orientated?
A business is product orientated when it only looks at the product it the production process when deciding what to make next (inward looking).
How will market research help a business?
- Understand consumer behaviour
- Quantify potential consumer demand for a product (forecasting sales).
- Understand how much consumers will pay for a product.
- Identify potential competitors.
-Reduce risk
-Help a business to become market orientated
What is primary market research?
- Collecting data first hand.
- This means new data is collected for the benefit of the business.
- This data will be specific to the needs of the business.
E.g observation, interviews, surveys, focus groups
How can a competitive market benefit the consumer
More competition means a business needs to be very efficient
- More competition means the business needs to listen to consumer needs and wants and constantly strive to meet those needs rather than being product orientated
- More competition means a business must be less wasteful
What are 2 risks a business owners take when starting a business
Lack of job security
Financial risk
When is product orientation appropriate
There is little competition in the market, the business can make what suits its production capacity
When there is limited consumer knowledge e.g. dental fixtures, braces etc.
When there is low disposable income of consumers, when funds are limited customers will buy what is available
What is market orientation
The consumer is the most important factor when providing products for the market, the business has a sensitivity to customers requirements
• A market orientated business will focus on the needs of the consumer e.g. the customer can choose the colour of their new car
What is secondary research
Secondary research is gathering data which already exists
What is market segments
• A market segment is an identifiable group of individuals or part of a market where consumers share one or more characteristics or needs
What is market mapping
Market mapping is the process of finding the variables which differentiate brands in a market and then plotting them on a map – to identify a gap in the market
What are ways that a business can achieve competitive advantage
Price
Added value
Innovation
Reliability
Quality
Reputation
Advertising
Branding
Convenience
Customer service
Methods of differentiation
Through reputation (hair salon, restaurant)
• Through customer service or after sales service (Marks and Spencer)
• Through value for money (ASDA, Lidl, Aldi, Primark)
• Through product features (Cars, mobile phones)
What is added value
Added value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service
How can a business add value
Design
Production – achieving quality and efficiency adds value.
Marketing – creating an image that makes the product more desirable, a brand differentiation advantage
Benefits of adding value
The more value that is added, the higher the price that can be charged, which means higher profit margins
- Protection against competitors offering lower prices which means competitive advantage
- Customer loyalty which means repeat business
