1.1 - Meeting Customer Needs

Question 1

Market

Answer 1

The groups of individuals and organisations that make up the pool of actual and potential customers

Question 2

Dynamic markets

Answer 2

Always changing. Must be aware of market trends and evolving customer requirements.

Question 3

Market size

Answer 3

The total value of a market in terms of money spent (value) or number of products (volume)

Question 4

Market growth

Answer 4

The % change in the size of a market compared to the previous year

Question 5

Market share

Answer 5

The % of the market held by one company/product

Question 6

Mass market

Answer 6

The market that is aimed at the general population

Question 7

Niche market

Answer 7

Subset of the main market and addresses a specialist need

Question 8

Pros and cons of mass market

Answer 8

+/ - Large scale production - economies of scale & lower average unit costs
- Straightforward marketing as everyones equally targeted
- Large volume of sales means high revenue

-/ - Lots of competition
- High marketing costs to create brand image
- High volume of production not flexible to demand changes

Question 9

Niche market pros and cons

Answer 9

+/ - Charge premium prices
- Easier to target customers
- Small scale production can be flexible and follow trends
- Less competition

-/ - Risky as demand may not be constant
- Higher unit costs (no economies of scale)

Question 10

Why do markets change

Answer 10

• Economic growth
• Nature of the product
• Changes in taste and fashion
• Social changes
• Changes in technology
• Amount of competiton

Question 11

What do businesses mainly use to compete with?

Answer 11

• Price
• Product range
• Customer service

Question 12

Offensive marketing plans

Answer 12

-Try and increase sales and develop new markets
- Invest in innovation
- Aquire other businesses
- Move into related markets

Question 13

Defensive marketing plans

Answer 13

• React to competition and try to maintain their market share
• Cost cutting
• Rationalisation of products by cutting unsuccessful products
• Capacity reduction

Question 14

Product innovation

Answer 14

The development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products

Question 15

Pros and cons of innovation

Answer 15

+/ - Gain competitive advantage
- Adding value so higher prices can be charged
- Brand switching

-/ - High cost of R&D
- High risk of failure
- Disruption caused to the way the business operates
- Impact on sales of existing products which may be ‘cannibalised’

Question 16

Pros and cons of online retailing

Answer 16

+/ - Open 24/7
- Reaches international markets easily
- Low overheads
- Stock is easily withdrawn/updated to keep up with dynamic market changes in tastes
- Flexible (can be anywhere in the world)
- Opportunities for fast growth

-/ - High number of returns
- Issues with online security
- Very competitive market
- Owners need IT skills
- Competitors can be aware of owners business model, prices, activity

Question 17

Risks in business

Answer 17

• Insufficient demand due to poor market research or competitors
• Poor execution due to poor management and lack of financial control
• External shocks due to economic due to economic factors or tech changes

Question 18

Rewards in business

Answer 18

• Increased sales
• Profits and growth
• Return on investment for owners
• Increased share price
• Customer loyalty and brand recognition

Question 19

Business plans

Answer 19

Formal statement of;
- set of business goals
- reasons why they are attainable
- risks and rewards the business expects
- marketing and financial plans
- production and staffing plans

Question 19

Calculated risk

Answer 19

Refers to situations where the business as an idea about the potential outcomes and the chances of them occuring

Question 20

Uncertainty

Answer 20

Happens when a business doesn’t know what is likely to happen in the future and can not measure and predict outcomes

Question 21

Market oriented approach

Answer 21

Decisions made based around information about customer needs and wants rather than what the business thinks is right for the customer.

Question 22

Product oriented approach

Answer 22

Means the business develops products based on what it is good at making or doing, rather than what a customer wants.

Question 22

Primary research

Answer 22

New research carried out to answer specific issues or questions.
Questionnaires, interviews, observation, loyalty cards, focus groups, test marketing

Question 22

Secondary research

Answer 22

Makes use of information previously researched for other purposes and publicly available
annual reports, internal data, government sources, trade journals, market research companies

Question 23

Big data

Answer 23

Process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that can be used in decision-making

Question 23

weakness of big data

Answer 23

• Data is unstructured and difficult to analyse
• Data is usually recent and so doesn’t show long term trends
• Consumers concerned about privacy and may resent the data collected about them
• Loss and theft of data can damage business

Question 24

Sampling

Answer 24

Involves selecting a way to ask information from representative group of customers
- quicker and less expensive

Question 25

Problems of sampling

Answer 25

• Careful sample selection is needed to ensure results are representative
• Bias may be introduced to make results inaccurate
• Margin of error always

Question 26

Types of bias in research

Answer 26

• Friendliness bias (tending to agree and be positive about the ideas presented in the research)
• Social desirability bias (answering question in a way that you think is socially acceptable)
• Confirmation bias (when the research interprets results to confirm the belief the held by filtering out negative information)
• Leading questions (suggest the answer that the survey is looking for)

Question 27

Market segment and examples

Answer 27

A group of consumers that have a similar set of characteristics

E.g. age, gender, income, lifestyle, religion, education level

Question 28

4 main market segmentation methods

Answer 28

• Geographic
• Demographic
• Behabioural
• Psychographic

Question 29

Benefits of segmentation

Answer 29

• Better matching of customer needs
• Enhanced profits for business
• Retain more customers
• Target marketing communications

Question 30

Market mapping

Answer 30

A grid that measures two different aspects of the brands or businesses within a market
Used to identify the marketing strategy of competitors in a market

Question 31

Pros and cons of market segmentation

Answer 31

+/ - Can design and create goods specifically aimed at a precise customer
- Prices and profits will be higher by adding value for specific customers
- Firms can target different segments with different products

-/ - R&D and production costs might be high
- Promotional costs high as different advertisements and promotions might be needed for different segments

Question 32

Pros and cons of market mapping

Answer 32

+/ - Helps spot gaps in the market
- Allows forms to analyse their competitors
- Suggests ways to create brand images and marketing techniques

-/ - No guarantee of success if positioned in the wrong place
- Requires market research to find out customer opinions on each product
- Needs careful selection of the dimensions/criteria used on the map

Question 33

Purpose of market mapping

Answer 33

• Shows how a market is segmented
• Identify gaps in the market
• Show where a sector is overcrowded
• Stop the producer from becoming over-reliant on one sector