1.1 - Meeting customer needs Flashcards
What is a market?
A place where a business exchanges their product or service to buyers
What is the mass market? Give an example
A market for products and services that are aimed at a larger section of the whole market. For example, Apple Watch.
What is the niche market? Give an example
A market for goods and services that are aimed at a small section of the whole market. For example, luxury items such as Rolex.
What are some characteristics of the mass market?
- customers form the majority
- needs and wants are more ‘general’
- it is associated with higher production output.
What are some benefits of operating in a mass market?
- wider potential customer base = high sales volume = higher revenue.
- lower risk - resources are focused on one large market
- larger scale production = economies of scale & lower average unit costs
- market research costs are low.
What are some drawbacks of operating in a mass market?
- lots of competition
- may need to differentiate product which can be expensive
- not flexible to demand changes due to high volume production.
What are some benefits of operating in a niche market?
- less competition
- builds up specialist skills and knowledge
- can often charge higher prices = higher profit margin
- creates customer loyalty
- flexible
What are some drawbacks of operating in a niche market?
- lack of economies of scale as higher unit costs
- risk of over dependence on a single product or market, limited opportunities
- likely to attract competition IF successful
- risky as demand may not be constant
How can market size be measured?
Can be measured through either:
- sales volume
- value (total amount spent by customers)
Market size formula
Number of target users x predicted sales
Market share formula?
Sales of x / total sales in whole market (x 100)
What is a brand? Give examples
The creation of an identity that distinguishes that firm and its products from others. For example, shapes, symbols, colours, logos
What are the benefits of building a brand?
- Brand value - brand name adds value to the product, less money to be spent on advertising.
- Brand extension - Customers familiar with or loyal to the brand are more likely to be willing to try new products.
- Brand personality - brand takes on a persona of its own, more recognisable.
What are some examples of brand personalities?
- Durable e.g. Dyson
- Luxurious e.g. Rolls Royce
- Sporty e.g. Nike
- Value for money e.g. Aldi
- Exciting e.g. Lego
What are the pros of online retailing?
- shop is open round the clock
- no need for staff
- low overheads, no need for shop premises
- shop can reach international markets easily = fast growth
- flexible, owner can be anywhere in the world.
What are the cons of online retailing?
- most customers will browse rather than purchase
- owners need IT skills
- competitors will be aware of owners business model, prices and activity
- competitive market
- customers may be put off by returning process or worries about scams.
What is product innovation?
The process of creating a new product or improving an existing one to meet customer needs.
What is process innovation?
The improvement of existing production process or addition of new processes to address challenges within the production chain.
What are the benefits of product innovation?
- added value = better quality
- higher prices and profits
- can build customer loyalty
- enhanced reputation
- increased market share
What are the benefits of process innovation?
- reduced costs = higher profits
- improved quality
- more responsive to customer service
- greater flexibility
What is market growth?
An increase in demand/ sales for a particular product or service.
How may competition affect the market?
- More competition means a business will have to be more efficient
- Also means the business needs to listen to customer needs and wants = find a gap in the market.
- Means a business must differentiate their product
- May lead to price wars
- Homogeneous markets means businesses must compete on non-price factors e.g. more promotions
What is risk?
The possibility that things will go wrong. E.g. Risk in making in making business investments
What is uncertainty?
The unpredictable and uncontrollable events that affect a business. E.g. uncertainty about the sales success for a new product
What is product orientation?
Business develops products based on what it is good at doing.
What is market orientation ?
Business responds to customers needs and wants and designs products accordingly.
What are the benefits of market research?
- helps with decision making - reduces risk/cost of making poor decisions
- to develop a marketing plan based on data gathered on the 4p’s
- to react and prepare for changes in the market
- to become market orientated - meet customer needs
What are the drawbacks of market research?
- can be expensive as you may have to employ a researcher.
- can be time consuming
- may be not be reliable
What is primary research?
Data collected first hand for a specific research purpose.
What is secondary research?
Data that already exists and has been collected for a different purpose.
What are some examples of primary research methods?
- Questionares/ surveys - can be used to measure customer satisfaction which tells the firm where to improve
- Observation - firm may observe buyer behaviour e.g. if they buy in groups or alone
- Consumer panels - group of experts selected by agency who answer questions about a good/ service
What are some examples of secondary research methods?
- Annual reports - includes info as a balance sheet and profit and loss statements which gives investors a good idea about financial health of a business
- Specialist organisations publications - E.g. mintel reports who constantly asses change in culture, economy and society. Are expensive.
What are the benefits and drawbacks of primary research?
- more detailed insights into customer views
- kept private - not publicly available
- time consuming and costly to obtain
- risk of survey bias
- sampling may not be representative
What are the benefits and drawbacks of secondary research?
- free and easy to obtain
- quick
- competition can access it
- can quickly become out of date
- not tailored to business needs
What is quantitative research?
Research that uses mathematical analysis, data and stats
What is qualitative research?
Research based on opinions, attitudes, beliefs and intentions.
What are the benefits and drawbacks of quantitative research?
- data is relative easy to analyse
- provides insights to relevant trends
- focuses on data rather than explaining why things happen
What are the benefits and drawbacks of qualitative research?
- essential for important new product development and launches
- focused on understanding customer needs, wants, expectations
- expensive to collect and analyse
- based around opinions - risk of unrepresentative data
What is market segmentation?
The process of dividing the market into groups of customers with similar characteristics
What is demographic segmentation?
The method of splitting customers into sub-groups based on factors like gender, age, income and social class.
What is geographic segmentation?
Different customers may have different needs depending on where they live. Geographical segmentation can be influenced by climate, culture, population etc
What is psychographic segmentation?
The method of dividing customers into sub-groups based on shared psychological factors such as likes and dislikes, values, interests and attitudes.
What is behavioural segmentation?
The method of splitting customers into sub-groups based behavioural patterns such as usage rate, loyalty and desired benefits.
What are the benefits of market segmentation?
- able to understand characteristics and needs of customers
- can identify a target market to specialise in
- can chose promotional strategies to their target market = cost effective
What are drawbacks of market segmentation?
- business needs to stay up to date with needs of customers in the market segment.
What are the benefits of market mapping?
- helps spot gaps in the market
- used for analysing components
- encourages use of market research
What are the drawbacks of market mapping?
- a gap in the market does not mean there is a demand for that specific thing
- no guarantee of revenue/ success
How may a business add value to a product or service?
Note: Big Dogs Upset Queens Cats
- branding
- design
- USP
- quality
- convenience
