1.1 - Meeting Customer Needs Flashcards
Market
The groups of individuals and organisations that make up the pool of actual and potential customers
Dynamic markets
Always changing. Must be aware of market trends and evolving customer requirements.
Market size
The total value of a market in terms of money spent (value) or number of products (volume)
Market growth
The % change in the size of a market compared to the previous year
Market share
The % of the market held by one company/product
Mass market
The market that is aimed at the general population
Niche market
Subset of the main market and addresses a specialist need
Pros and cons of mass market
+/ - 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
Niche market pros and cons
+/ - 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)
Why do markets change
- Economic growth
- Nature of the product
- Changes in taste and fashion
- Social changes
- Changes in technology
- Amount of competiton
What do businesses mainly use to compete with?
- Price
- Product range
- Customer service
Offensive marketing plans
-Try and increase sales and develop new markets
- Invest in innovation
- Aquire other businesses
- Move into related markets
Defensive marketing plans
- React to competition and try to maintain their market share
- Cost cutting
- Rationalisation of products by cutting unsuccessful products
- Capacity reduction
Product innovation
The development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products
Pros and cons of innovation
+/ - 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’
Pros and cons of online retailing
+/ - 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- Stock is easily withdrawn/updated to keep up with dynamic market changes in tastes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
Risks in business
- 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
Rewards in business
- Increased sales
- Profits and growth
- Return on investment for owners
- Increased share price
- Customer loyalty and brand recognition
Business plans
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
Calculated risk
Refers to situations where the business as an idea about the potential outcomes and the chances of them occuring
Uncertainty
Happens when a business doesn’t know what is likely to happen in the future and can not measure and predict outcomes
Market oriented approach
Decisions made based around information about customer needs and wants rather than what the business thinks is right for the customer.
Product oriented approach
Means the business develops products based on what it is good at making or doing, rather than what a customer wants.
Primary research
New research carried out to answer specific issues or questions.
Questionnaires, interviews, observation, loyalty cards, focus groups, test marketing
Secondary research
Makes use of information previously researched for other purposes and publicly available
annual reports, internal data, government sources, trade journals, market research companies
Big data
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
weakness of big data
- 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
Sampling
Involves selecting a way to ask information from representative group of customers
- quicker and less expensive
Problems of sampling
- Careful sample selection is needed to ensure results are representative
- Bias may be introduced to make results inaccurate
- Margin of error always
Types of bias in research
- 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)
Market segment and examples
A group of consumers that have a similar set of characteristics
E.g. age, gender, income, lifestyle, religion, education level
4 main market segmentation methods
- Geographic
- Demographic
- Behabioural
- Psychographic
Benefits of segmentation
- Better matching of customer needs
- Enhanced profits for business
- Retain more customers
- Target marketing communications
Market mapping
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
Pros and cons of market segmentation
+/ - 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
Pros and cons of market mapping
+/ - 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
Purpose of market mapping
- 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
