1.1 Meeting customer needs Flashcards
Define Niche Market
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
Define Mass Marketing
Where a business sells into the largest part of the market where there are many similar products offered by competitors
Name key features of a mass market?
-Products aimed at broad segments with similar characteristics
-Production on large scale, lower average costs, economies of scale
-Lower prices for consumers but lower profit margins
Benefits of mass marketing?
-Wider potential customer base
-lower risk - resources focused on one large market
-Economies of scale leading to high profits
-Market research costs relatively low
Advantages of targeting a Niche Market?
-Less competition
-Target particular customers
-Builds up specialist skill and knowledge
-Can often charge higher prices, higher margins
-Customers tend to be more loyal
Drawbacks of targeting a Niche Market?
-Lack economies of scale
-Risk of over dependance on a single product or market
-Likely to attract competition if successful
Are Niche products price elastic or price inelastic?
Price inelastic - because niche products are fulfilling a particular specialist demand we find demand tends to be more price inelastic
What is market size measured in?
Sales volume (number of products sold) and Sales value
What can market growth be calculated using?
Calculated using either value ( market sales) or volume (units sold)
What does Market Share explain?
Proportion of total sales of a product compared to market as a whole
What is the formula for market share?
Market share= Sales of company or product / Total sales of the market X100
Define Dynamic Market
A market that is subject to rapid and continuous change
What are the 4 areas to consider when examining dynamic markets
-Online retailing
-How markets change
-Innovation & market growth
-Adapting to change
Define Product innovation?
Adapting or improving existing products
Define process innovation?
Finding more efficient ways of producing existing products, or delivering existing services
Benefits of product innovation:
-First mover advantage: higher prices and profitability
-Added value, opportunity to build customer loyalty
-Enhances reputation, increases market share
Benefis of Process Innovation:
-Reduced costs
-Improved quality
-Higher profits
Ways competition affects the Market?
Directly: When businesses sell similar products
Indirectly: When firms sell different products but compete for customers disposable income
Define risk
The potential threat to businesses success can be measured and prepared for using risk management
Define uncertainty
The unpredictable and uncontrollable events that affect business
Define Product Orientation
Focuses on characteristics of the product rather than needs of customer, creating a product first then finding a market. Risk that overtime product might not be what market are looking for.
Define Marketing Orientation
Focus on needs of customers and designs product accordingly. Benefit from increased demand, profits and a valued brand image.
Define Primary Research
Direct information from consumers information that’s new and collected firsthand eg surveys, interviews, focus groups
Define Secondary Research
Data that already exists and has been collected eg governments reports, competitor websites.
Benefits of Primary Research:
-Directly focused on the business
-More detailed insights, particularly into customer view
Drawbacks of Primary research
-Time consuming
-Risk of survey bias and sample not being representative
Benefits of Secondary Research
-Easy to obtain and quick to collect
-Lower costs of collection
Drawbacks of Secondary Research
-Can quickly become out of date
-Not tailored to business needs/ lacks relevance
-Specialist reports often quite expensive
Define Quantitative research
Numerical data
Define Qualitative research
Based on opinions, attitudes and beliefs
Benefits of Qualitative research
-Provides useful insights for a business
-Can highlight issues that need addressing
-Effective for testing elements of marketing mix
Drawbacks of Qualitative research
-Expensive to collect and analyse
-Based around opinion
-Risk of sample not bing representative
Benefits of Quantitative research
-Data easy to analyse
-Numerical data provides insights into relevant trends
-Can be compared with data from other sources
Drawbacks of Quantitative research
-Focuses on data rather than explaining why things happen
-May lack reliability
Uses of social media in Market Research
-Source of both primary and secondary research
-Software quickly highlights what customers are saying about product/brand
-Surveys easy to set up and analyse
Drawback of social media in Market Research
-Doesn’t give the complete picture that you need to further your product or service
-Not everyone uses social media, unrepresentative
Benefits of IT to support Market Research
-Quick and automated
-Huge data sets can be analyse, reduce need for sampling
-Social networking
-Company websites
Define Market Segmentation
Process of dividing a market based on consumer characteristics eg age, gender, income, location
4 main categories of Market Segmenting
- Geographic
- Demographic
- Psychographic
- Behavioral
Geographic segmentation
Customer location, region, Urban/Rural, classification
Demographic segmentation
Age, Gender, Occupation, Socio-economic group
Bevavioural segmentation
Rate of usage, Loyalty status, readiness to purchase
Psychographic segmentation
Personality, lifestyles, attitudes, class
Benefits of effective market segmentation
-Recognises not all consumers are identical
-Products altered to meet different needs of groups
-Less expensive and wasteful
-May increase loyalty if needs are being met leading to recreate purchases
Drawbacks of Market segmentation
-Difficult to identify a segment
-Requires more detailed market research
-Segment may be small & unprofitable
Dynamic Markets: Advantages of online retailing
-Access to more customers
-Longer trading hours
-Lower costs
Dynamic Markets: Disadvantages of online retailing
-High costs of website development
-Online retailing dominated by large businesses
-High levels of competition
-Lack of personal contact with customers
-Hard to get desired level of customer service.
How does competition benefit customers?
-Lower prices
-Better quality products and customer service
What does an absence of competition do to businesses?
Reduces incentives for businesses to innovate, be efficient or offer lower prices.
Define Market positioning
How customers percieve a business and how businesses want custromers to percieve them.
Define Market mapping
A tool for identifying the position of a product within a market against two axes eg price and quality
What does it mean if there is no space left on market map?
Indicates market is saturated, high competition & low profits
Benefits of market mapping
-Allows gaps in market to be identified
-Comparisons can be made between rivals and products
-Simple to construct, visual illustration
Drawbacks of market mapping
-Gap may exist because its not profitable to fill
-Markets often dynamic and a map only provides insights at a specific point in time.
Define Competitive advantage
Features of a business the are perceived as superior to rivals by customers. Need to be distinctive (Different from competitors) and defensible (Prevent rials form copying)
Examples of competitive advantages
-Quality/reliability
-Delivery times
-Ethical stance
-Low prices
-Design
Define differentiation
The process of attempting to distinguish products from competitors
What does strong/successful differentiation help firms do?
Helps develop a competitive advantage & USP, increase demand, brand loyalty and allow firms to charge higher prices.
Define Adding Value
Difference between price that’s charged to the customer and the cost of inputs required to create the product
Methods of adding value
-Marketing & branding
-Functions & features
-Customer service
-Customisation
-Packaging
