1.1- Meeting Customer Needs

Question 1

What is a mass market?

Answer 1

This is the market that is aimed at the general population e.g. regular toothpaste

Question 2

What is a niche market?

Answer 2

This is a subset of the main market and addresses a specialist need e.g. Sensodyne toothpaste for sensitive teeth

Question 3

What does homogenous mean?

Answer 3

Adjective of the same kind; alike. For example similar products that compete in a market e.g. different brands of yoghurt

Question 4

What are the advantages of operating in a mass market?

Answer 4

Large scale production means economies of scale and lower average unit costs

Mass marketing is straightforward as everyone is equally targeted

Large volume of sales means high revenues

High revenues can be pumped into research and development (R&D)

Question 5

What are the disadvantages of operating in a mass market?

Answer 5

Lots of competition in mass markets

Homogenous products need to be differentiated thorough marketing which can be expensive

High volume production may not flexible enough to keep up with changes in demand

Question 6

What are the advantages for operating in a niche market?

Answer 6

Charge premium price

Easier to target customers

Small scale production can be flexible and follow trends

Less competition than in the mass markets

Question 7

What are the disadvantages of operating in a niche market?

Answer 7

Very risky as demand may not be constant

Higher unit costs so no economies of scale

Question 8

What is the meaning of market size?

Answer 8

The size of the market is the TOTAL of all the sales of all the producers in that market

Question 9

What are the two ways market share can be measured?

Answer 9

1. Volume of sales, or quantity of products sold e.g. 91 million burgers sold every year
2. Value, total amount spent by customers e.g. The UK burger bar market is estimated to be worth £3.28billion in 2016

Question 10

What is the formula for market share?

Answer 10

Sales of x/total sales in whole market X 100

Question 11

What is a dynamic market?

Answer 11

A dynamic market is one that is subject to rapid or continuous changes

Question 12

What are the advantages of online retailing?

Answer 12

Shops are open round the clock so they don’t miss critical times when customers can shop e.g. evenings

Orders can be taken automatically without the need for staff

Shop can reach international markets easily

Low overheads, no need for a shop premises

Stock can be easily withdrawn or updated to keep up with dynamic market changes in tastes

Easy to set up (eBay)

Flexible – owner can be anywhere in world

Opportunities for fast growth

Question 13

What are the disadvantages of online retailing?

Answer 13

Issues with sending goods back may put customers off

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

Owners need IT skills

Problems with fraud / spam / viruses

Competitors can be aware of owners business model, prices, activity

Question 14

What are the benefits of a competitive market to a consumer?

Answer 14

1. More competition means a business needs to be very efficient
2. 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
3. More competition means a business must be less wasteful
4. Customers benefit of competitive pricing

Question 15

What does business risk mean?

Answer 15

Business risk is the possibility a business will have lower than anticipated profits or experience a loss rather than taking a profit

Question 16

What is business risk influenced by?

Answer 16

Raw material costs, competition, the overall economic climate and government laws e.g. minimum wage

Question 17

What is the meaning of uncertainty in business terms?

Answer 17

Uncertainty is when businesses are unable to predict external shocks or future events

Question 18

How might a business protect itself from uncertainty?

Answer 18

A business may worry about fluctuating interest rates and so may take out a long term loan at a FIXED rate of interest, then it will know exactly how much loan interest will be a month, making it easier to budget and plan.

A simple way is to take out insurance against risk, for example a DJ may have public liability insurance in case anything goes wrong with their equipment (like it catching fire)

Question 19

What is product orientation?

Answer 19

A business is product orientated when it only looks at the product or the production process when deciding what to make next

Question 20

When is product orientation appropriate?

Answer 20

Product orientation is appropriate when;

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

Question 21

What is market orientation?

Answer 21

The consumer is the most important factor when providing products for the market, the business has a sensitivity to customers requirements

Question 22

What is primary market research?

Answer 22

Primary research is collecting data first hand

Question 23

What are examples of primary research methods?

Answer 23

Questionnaires (surveys)
Observations
Customer interviews
Test marketing
Focus groups

Question 24

What is secondary research?

Answer 24

Secondary research is gathering data which already exists

Question 25

What are some examples of secondary research methods?

Answer 25

Government sources
Trade publications
Market reports
Internet sources
Newspapers/ Magazines/ TV/ Radio

Question 26

What is meant by qualitatively research?

Answer 26

Seeks to gather and explore feelings and thoughts about a product from consumers

Question 27

How is qualitative research gathered?

Answer 27

Information gathered by;

Focus group discussions

Interview with consumers on what they “think” about the product or service

Observations of buyer behaviour (e.g. only family groups bought the squash)

Question 28

What is meant by sampling?

Answer 28

Sampling is the process of choosing the right people to be part of the research

Question 29

What is meant by bias in terms of market research?

Answer 29

Bias is when research findings cannot be trusted because of the way the research has been carried out

Question 30

How can the use of websites support market research

Answer 30

Pop-ups on websites can be used to ask customers about products they have bought or may buy

These may also be used to gather e-mail addresses so that targeted customers can be surveyed later via e-mail

Question 31

How can the use of social media support market research?

Answer 31

Twitter can be used to support marketing research – by searching for trending hashtags to see emerging trends

It can also search a business name or a brand name to find out quantitative information about customer perceptions

Question 32

What is meant by market segments?

Answer 32

A market segment is an identifiable group of individuals or part of a market where consumers share one or more characteristics or needs

Question 33

What are some examples of market segmentation?

Answer 33

Location
Demographics
Lifestyle
Income
Age
Gender

Question 34

What is meant by market mapping?

Answer 34

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

Question 35

What are some examples of variables in market mapping?

Answer 35

Examples of variables:
Modern ——- traditional
Mass ———– niche
Functional —–luxury
High Quality —low quality
Luxury ———- economy
Premium ——–budget

Question 36

What are the uses of market mapping?

Answer 36

Market mapping could be used to identify a gap in the market

It could also be used by a start-up to identify which products to produce or which services to provide – so they are market orientated (not product orientated)

It could also be used by a traditional brand to reposition itself in the market

Question 37

What does competitive advantage mean?

Answer 37

An advantage a business has over its competitors, allowing it to generate larger than average turnover for the industry, either in low cost leadership or on price leadership

Question 38

What are some ways a business can achieve competitive advantage?

Answer 38

Price
Added value
Innovation
Reliability
Quality
Reputation
Advertising
Branding
Convenience
Customer service

Question 39

What is product differentiation?

Answer 39

Where a product is different from the competition in some way

Question 40

What are some methods of differentiation?

Answer 40

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)

Question 41

What is meant by added value?

Answer 41

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

Question 42

What are ways a business can add value?

Answer 42

Design, production and marketing

Question 43

What are the benefits of adding value?

Answer 43

1. The more value that is added, the higher the price that can be charged, which means higher profit margins
2. Protection against competitors offering lower prices which means competitive advantage
3. Customer loyalty which means repeat business