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Business Theme 1 > 1.1 Meeting customer needs > Flashcards

1.1 Meeting customer needs Flashcards

1
Q

What are common markets?

A

• Consumer goods markets
• Service markets
• Housing markets
• Financial markets

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2
Q

What does marketing involve?

A

• Identifying the needs & wants of consumers
• Designing products that meet these needs
• Understanding the threats from competitors
• Charging the right price

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3
Q

What is the focus of a mass market?

A

To provide products that meet the needs needs of a large proportion of the market

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4
Q

What are the products like in a mass market?

A

They are sold to all consumers and are marketed in a similar way

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5
Q

What are the customers like in a mass market?

A

There is a large number of customers

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6
Q

What are examples of a mass market?

A

• Crisps
• Breakfast cereals
• Computer software
• Coca-Cola

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7
Q

What are benefits of a mass market?

A

+ Can produce large quantities at a lower unit cost by exploiting economies of scale
+ Resulting in higher sales and higher profits

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8
Q

What are drawbacks of a mass market?

A
  • High investment is required
  • High competition leads to higher sales and expenditure on marketing
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9
Q

What is a niche market?

A

A small market segment that is untouched by larger businesses

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10
Q

What are the customers like in a niche market?

A

Selling to a smaller consumer group who may have specific needs

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11
Q

What are products like in a niche market?

A

They meet a specialist demand and are usually quite expensive

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12
Q

What are examples of a niche market?

A

• Vegan shoes
• Left-handed stores

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13
Q

What are benefits of a niche market?

A

+ Little or no competition means premium prices can be charged
+ Focus on the specific needs of customer

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14
Q

What are drawbacks of a niche market?

A
  • Market may be small
  • If market becomes mainstream then larger companies may be attracted causing further completion
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15
Q

What is market size?

A

It can be estimated or calculated by the total sales of all businesses in the market

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16
Q

How is market size estimated?

A

Value: the total amount spent by customers buying products
Volume: the physical quantity of products which are produced and sold

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17
Q

What is market share?

A

The proportion of a particular market that is held by a business, product or brand

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18
Q

How is market share calculated?

A

(Sales of a business / Total sales in the market) x 100

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19
Q

Why do businesses use brand names?

A

They try to establish themselves in a market by giving their products a brand name. Branding is particularly important in mass markets where lots of products are competing for a share of the market.

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20
Q

Why do businesses use branding?

A

• To differentiate the product from rivals
• Create customer loyalty
• Help product recognition
• Develop an image

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21
Q

What is a dynamic market?

A

Markets which change over time - they can grow, shrink, disappear etc. A failure to adapt in a dynamic market can lead to the collapse of a business.

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22
Q

What is an example of a dynamic market?

A

There is no longer a market for cassettes, most people buy DVDs or download music from the internet

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23
Q

How is online retailing used?

A

There are e-commerce giants like Amazon, however many retailers have at least some online services or presence. Growth in online retailing is rapid and expected to continue into the future.

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24
Q

What are benefits of online retailing

A

+ Sales costs are much lower, allowing lower prices
+ Can target those who do not like or cannot manage psychical shopping
+ Easier to gather personal info so customers can be targeted specifically
+ Global customer base

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25
Q

What are drawbacks of online retailing?

A
  • Detrimental impact on High Street
  • Some struggle to access online marketplace
  • Technical issues may occur
  • Initial costs and specialism
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26
Q

How can the size of markets change?

A

Some markets remain stable over time but the majority are likely to grow due to lots of factors that increase demand

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27
Q

How can the nature of markets change?

A

Many markets are in a state of flux or constant change. Products constantly need updating, modifying and relaunching as firms increase the range of products they offer.

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28
Q

How can new markets change?

A

New markets develop and emerging economies are a large source of this along with other developing nations. They appear when new products are launched.

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29
Q

Why do markets grow?

A

• Economic growth
• Innovation
• Social changes
• Changes in legislation
• Demographic changes

30
Q

What helps businesses adapt to market changes?

A

• Flexibility eg working practices, machinery & equipment, pricing and staff
• Market research eg customer needs or tastes
• Investment eg developing new products, new version and training
• Continuous improvement eg efficiency and customer service
• Develop a niche eg to allow loyal customers to be served profitably

31
Q

What is competition?

A

The rivalry that exists between businesses in a market. It would be rare for a business to operate in a market where there was absolutely no competition.

32
Q

What are the two types of competition?

A

Direct competition means businesses sell a similar product to same consumers (Dairymilk & Galaxy)
Indirect competition means businesses sell a different product that meets the same needs of the same consumers (chocolate & popcorn)

33
Q

How does competition affect businesses?

A

Competition puts businesses under some pressure. It means that they have to encourage customers to buy their products in preference to those of rivals.

34
Q

How do businesses attract customers?

A

• Lowering prices
• Making their products appear different to those of rivals
• Offering better quality products
• Using more powerful or attractive advertising or promotions
• Offering extras

35
Q

What are limitations of methods businesses use to attract customers?

A

All of these methods cost money and reduce profits that are made but are necessary to survive. To avoid this, they may decide to purchase a rival or create barriers to entry to prevent others entering the market.

36
Q

How does competition affect consumers?

A

Consumers benefit hugely from competition as it creates more choice, higher quality and lower prices. Without competition, consumers may be exploited as prices can be increased to restrict choice.

37
Q

What is product orientation?

A

Their focus is on production process and product. Contact with customer is largely during or after the sale. As competition increases, importance of consumers’ needs grows.

38
Q

What are examples of product orientated products?

A

• New technology
• Pharmaceuticals
• Water supply

39
Q

What is market orientation?

A

Continually identifying, reviewing and analysing customer needs through research. It is required to produce a product, at the right price, in the right place and it must promote it.

40
Q

What are examples of market orientated products?

A

• iPhone
• Clothing stores
• Supermarkets

41
Q

What advantages do market orientated businesses have over product orientated ones?

A

• Respond quickly to market changes
• Stronger position to meet challenge of new competition
• More able to anticipate market change
• More confident that new product launches will be successful

42
Q

How to tell whether a business is market or product orientated?

A

• The nature of product
• Policy decisions
• The views of those in control
• The nature and size of market
• The degree of competition

43
Q

What is market research?

A

It involves gathering, presenting and analysing information about the marketing and consumption of goods

44
Q

What is market research uses for?

A

• Identify & anticipate customer needs and wants
• Quantify the likely demand for a product
• Provide an insight into consumer behaviour

45
Q

What is primary research? What are methods of it?

A

Information which did not exist before the the research began, usually gathered by asking consumers questions. A method of it is questionnaires.

46
Q

What are advantages & disadvantages of primary research?

A

+ Up to date
+ Tailored to specific needs of business
- Time consuming
- Expensive

47
Q

What is secondary research? What are methods of it?

A

Information which already exists in some form. Methods of it are internal data (from records within the business) or external data (from sources outside the business).

48
Q

What are advantages & disadvantages of secondary research?

A

+ Available immediately
+ Free/very cheap
- Could be out of date
- May not be accurate or reliable

49
Q

What is qualitative research? What are methods of it?

A

It involves the collection of data about attitudes, beliefs and intentions. Common methods are focus groups and interviews.

50
Q

What are advantages & disadvantages of qualitative research?

A

+ High level of detail
- Difficult & time consuming to analyse
- Open to interpretation & bias

51
Q

What is quantitative research? What are methods of it?

A

It involves the collection of data that can be measured. Common methods are surveys and government publications.

52
Q

What are advantages & disadvantages of quantitative research?

A

+ Easy to analyse
+ More objective
- Lack of detail

53
Q

What are limitations of market research?

A

It isn’t always dependable, this could be due to poor research but not always. The reasons why market research is not always reliable include human behaviour (responses change daily), sampling & bias (sample does not reflect population) and knowing what questions to ask (use of careful wording).

54
Q

What are three ways that ICT supports market research?

A

Company websites provide online surveys and review systems which are cheap to administer and available 24/7. Social networking is a cost-effecting and in depth understanding of emerging trends, it has a wide reach and allows communication with customers. Databases are electronic filing systems which compile info about consumers, eg name, ages, income etc. however the storage of data is subject to the data protection act.

55
Q

What is market segmentation? What is the use of it?

A

Markets can be divided into different sections, each segment is made up of consumers that have similar needs. Businesses recognise this and target particular market segments with their products.

56
Q

What are the 4 types of segmentation?

A

Demographic
Geographic
Psychographic
Behavioural

57
Q

What is demographic segmentation?

A

This divides markets according to age, gender, income, social class, ethnicity or religion of the population. For example, luxury watchmakers target products at very high-income groups.

58
Q

What is geographic segmentation?

A

Different groups are likely to have different needs depending on where they live. For example, groups living in hot climates will have different needs to groups living in cold climates.

59
Q

What is psychographic segmentation?

A

This groups customers according to their attitudes, opinions and lifestyles. For example, travel companies target holidays at families with younger children.

60
Q

What is behavioural segmentation?

A

Segments markets according to how consumers relate to a product, this is done in 3 ways: usage rate, loyalty and time & date of consumption. For example, Tesco provides a club card for regular customers.

61
Q

What are benefits of market segmentation?

A

+ Producing different products for segments increases revenue
+ More loyal customers
+ Avoid wasting resources on promotion
+ Market a wider range of goods to different consumer groups

62
Q

What is market positioning?

A

It is concerned with the perceptions consumers have about products. To simplify the choice from a vast array of products, consumers categorise them according to factors like quality, status and value for money.

63
Q

How do businesses position their products?

A

• The benefits offered by the product: some cars emphasise safety, while others on style
• The USP: shampoos that claim to remove dandruff
• The attributes of the product: ‘M&Ms melt in your mouth, not hand’
• The origin of the product: cheeses named based on where they’re produced
• The classification of the product: ‘I can’t believe it’s not butter’ positions margarine against butter

64
Q

What is market repositioning?

A

This usually involves changing their target market, the features of the product or the image of the product that distinguishes from those of rivals

65
Q

What is market mapping?

A

When the results of market research is displayed on perceptual maps. These maps use any two opposite attributes such as cost or quality.

66
Q

What are limitations of market maps?

A

• Two dimensional, meaning that only two product attributes can be analysed on the same map
• The info needed to plot the maps can be expensive to obtain
• May be a difference between customers’ perception of benefits and actual benefits

67
Q

What is a competitive advantage?

A

A set of unique features of a company and its products that are perceived by customers as superior to the competition. A business is more likely to be successful if it has a competitive advantage in the marketplace.

68
Q

How does a business develop a competitive advantage?

A

• Product design
• Product quality
• Promotion
• Customer service
• Delivery times
• Economies of scale
• Flexibility
• Ethical stance
• Focus on a particular market segment

69
Q

What is the purpose of product differentiation?

A

• Flexible pricing: demonstrating clear differences between products allows charging higher prices
• Recognition: consumers find a product more appealing if it stands out from others
• Extend product range: businesses serve more than one market segment
• Brand development: differentiating a product over time often leads to a strong brand
• Overcome competition: attracting new customers and win larger market shares

70
Q

What does adding value mean?

A

The business provides ‘extra’ features for the customer that go beyond their standard expectations

71
Q

How do businesses add value to their products and services?

A

• Bundling: putting together benefits & services
• Customer service
• Speed of response to customers
• Packaging: attractive wrapping makes products appealing
• Frequent buyer offers: rewards for repeat purchases
• Customisation: embedding logos

72
Q

Why do businesses add value to products?

A

• Allows business to charge a higher price
• To differentiate a product and gain a competitive edge
• Helps a business protect itself from competitors charging lower prices
• Closer focus on its target market segment by meeting needs of customers more effectively

Business Theme 1 (6 decks)

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