1.1- Meeting Customer Needs Flashcards
What is a mass market?
This is the market that is aimed at the general population e.g. regular toothpaste
What is a niche market?
This is a subset of the main market and addresses a specialist need e.g. Sensodyne toothpaste for sensitive teeth
What does homogenous mean?
Adjective of the same kind; alike. For example similar products that compete in a market e.g. different brands of yoghurt
What are the advantages of operating in a mass market?
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)
What are the disadvantages of operating in a mass market?
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
What are the advantages for operating in a niche market?
Charge premium price
Easier to target customers
Small scale production can be flexible and follow trends
Less competition than in the mass markets
What are the disadvantages of operating in a niche market?
Very risky as demand may not be constant
Higher unit costs so no economies of scale
What is the meaning of market size?
The size of the market is the TOTAL of all the sales of all the producers in that market
What are the two ways market share can be measured?
- Volume of sales, or quantity of products sold e.g. 91 million burgers sold every year
- Value, total amount spent by customers e.g. The UK burger bar market is estimated to be worth £3.28billion in 2016
What is the formula for market share?
Sales of x/total sales in whole market X 100
What is a dynamic market?
A dynamic market is one that is subject to rapid or continuous changes
What are the advantages of online retailing?
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Stock can be easily withdrawn or updated to keep up with dynamic market changes in tastes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
What are the disadvantages of online retailing?
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
What are the benefits of a competitive market to a consumer?
- More competition means a business needs to be very efficient
- 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
- More competition means a business must be less wasteful
- Customers benefit of competitive pricing
What does business risk mean?
Business risk is the possibility a business will have lower than anticipated profits or experience a loss rather than taking a profit
What is business risk influenced by?
Raw material costs, competition, the overall economic climate and government laws e.g. minimum wage
What is the meaning of uncertainty in business terms?
Uncertainty is when businesses are unable to predict external shocks or future events
How might a business protect itself from uncertainty?
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)
What is product orientation?
A business is product orientated when it only looks at the product or the production process when deciding what to make next
When is product orientation appropriate?
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
What is market orientation?
The consumer is the most important factor when providing products for the market, the business has a sensitivity to customers requirements
What is primary market research?
Primary research is collecting data first hand
What are examples of primary research methods?
Questionnaires (surveys)
Observations
Customer interviews
Test marketing
Focus groups
What is secondary research?
Secondary research is gathering data which already exists
What are some examples of secondary research methods?
Government sources
Trade publications
Market reports
Internet sources
Newspapers/ Magazines/ TV/ Radio
What is meant by qualitatively research?
Seeks to gather and explore feelings and thoughts about a product from consumers
How is qualitative research gathered?
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)
What is meant by sampling?
Sampling is the process of choosing the right people to be part of the research
What is meant by bias in terms of market research?
Bias is when research findings cannot be trusted because of the way the research has been carried out
How can the use of websites support market research
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
How can the use of social media support market research?
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
What is meant by market segments?
A market segment is an identifiable group of individuals or part of a market where consumers share one or more characteristics or needs
What are some examples of market segmentation?
Location
Demographics
Lifestyle
Income
Age
Gender
What is meant by market mapping?
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
What are some examples of variables in market mapping?
Examples of variables:
Modern ——- traditional
Mass ———– niche
Functional —–luxury
High Quality —low quality
Luxury ———- economy
Premium ——–budget
What are the uses of market mapping?
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
What does competitive advantage mean?
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
What are some ways a business can achieve competitive advantage?
Price
Added value
Innovation
Reliability
Quality
Reputation
Advertising
Branding
Convenience
Customer service
What is product differentiation?
Where a product is different from the competition in some way
What are some methods of differentiation?
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)
What is meant by added value?
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
What are ways a business can add value?
Design, production and marketing
What are the benefits of adding value?
- The more value that is added, the higher the price that can be charged, which means higher profit margins
- Protection against competitors offering lower prices which means competitive advantage
- Customer loyalty which means repeat business
