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- Stock is easily withdrawn/updated to keep up with dynamic market changes in tastes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
