1.1 - Meeting Customer Needs Flashcards
Mass market
Large market that targets a broad audience with generic products or services, rather than catering to specific customer needs or preferences
Niche market
Small, specialised segment of a larger market that targets a specific group of consumers with unique needs or preferences
Homogeneous
Products or markets that are uniform and identical in nature, with little to no differentiation
Advantages of operating in a mass market
- Economies of scale, higher production volumes lead to lower unit costs, improving profitability
- Large customer base, more potential customers mean greater sales and revenue opportunities
- Easier marketing, standardized products simplify advertising and promotional strategies
Disadvantages of operating in a mass market
- High competition, many businesses compete, making it harder to stand out
- Less flexibility, harder to adapt quickly to changing consumer preferences
- Lower profit margins, prices are often competitive, reducing potential profit per unit
Advantages of operating in a niche market
- Higher profit margins, customers are often willing to pay premium prices for specialized products
- Less competition, fewer businesses operate in the niche, reducing direct competition
- Customer loyalty, stronger relationships with customers due to tailored products/services
Disadvantages of operating in a niche market
- Limited customer base, fewer potential customers can restrict growth opportunities
- Higher costs, lower production volumes mean fewer economies of scale, leading to higher unit costs
- Market vulnerability, changes in consumer preferences or market conditions can have a significant impact
Market size
The total sales revenue or total number of potential customers within a specific market over a given period. It is usually measured in terms of value or volume
Formula for market share
(Sales of X / Total sales in whole market) * 100
Dynamic market
Market that is constantly changing due to factors like consumer preferences, technology, competition, and external influences
Advantages of online retailing
- Lower costs, no need for physical stores, reducing rent and operational expenses
- Wider customer reach, can sell to customers globally, expanding the potential market
- 24/7 availability, customers can shop anytime, increasing sales opportunities
Disadvantages of online retailing
- High competition, the online market is highly competitive, making it harder to stand out
- Technical problems, website crashes, payment failures, or cybersecurity issues can disrupt sales
- Lack of personal interaction, customers cannot physically see or test products before purchase
Risk
Possibility a business will have lower than anticipated profits or experience a loss rather than a profit
Risks of becoming an entrepreneur
- Financial risk, personal savings or loans may be lost if the business fails
- Uncertain income, no guaranteed salary, especially in the early stages
- Workload and stress, long hours and high pressure can impact well-being
Uncertainty
When businesses are unable to predict external shocks or future events
Product orientation
Business approach where a company focuses on developing high-quality products based on its expertise and innovation, rather than prioritizing customer needs or market demand
Market orientation
Business approach where a company focuses on identifying and meeting customer needs and preferences through market research and analysis. This strategy ensures products or services are designed based on consumer demand rather than just the company’s expertise
Primary market research
Process of collecting new, first-hand data directly from sources such as surveys, interviews, focus groups, and observations
Advantages of primary market research
- Specific to business needs, data is tailored to the company’s exact requirements
- Up-to-date and relevant, information is current and directly applicable
- Better accuracy, first-hand data is more reliable than secondary sources
Disadvantages of primary market research
- Time-consuming, collecting, analyzing, and interpreting data can take a long time
- Expensive, conducting surveys, interviews, and focus groups can be costly
- Potential bias, responses may be influenced by question design or researcher expectations
Secondary market research
Process of collecting and analyzing existing data that has already been gathered by other sources, such as government reports, industry studies, market analysis, and online databases
Advantages of secondary market research
- Cost-effective, it is cheaper than primary research since the data is already available
- Time-saving, data can be accessed quickly without the need for new data collection
- Wide range of sources, information is available from government reports, industry studies, and online databases
Disadvantages of secondary market research
- May be outdated, data might not be current or relevant to present market conditions
- Not specific to business needs, information is general and may not fully address a company’s specific questions
- Competitors have access, since the data is publicly available, competitors can use the same information
Quantitative research
Research that focuses on gathering numerical data and analyzing it using statistical methods. It aims to quantify variables and generalize results from a larger sample population. Common methods include surveys, experiments, and data analysis of measurable factors like sales, ratings, or demographic information
Qualitative research
Research that focuses on understanding opinions, motivations, and behaviors through non-numerical data. It explores deeper insights into customer attitudes and experiences using methods like interviews, focus groups, and open-ended surveys
Limitations of market research
- Human behaviour
- Bias
- Sample size
Market segmentation
Process of dividing a broader market into smaller groups of consumers with similar characteristics, needs, or behaviors. This allows businesses to target specific customer segments more effectively
Types of market segmentation
- Demographic segmentation
- Geographic segmentation
- Psychographic segmentation
- Behavioral segmentation
Demographic segmentation
Dividing the market based on factors like age, gender, income, education, or occupation
Geographic segmentation
Segmenting customers based on location, such as country, region, city or climate
Psychographic segmentation
Grouping consumers based on lifestyle, personality, values, or interests
Behavioral segmentation
Categorising customers based on their purchasing behavior, brand loyalty, usage rate, or response to a product
Benefits of market segmentation
- Increased customer satisfaction, tailored products and services lead to higher customer satisfaction and loyalty
- Better targeting, allows businesses to focus on specific customer needs, improving marketing effectiveness
- Efficient use of resources, marketing budgets are spent more effectively by focusing on the most relevant audience
Market positioning
Process of establishing a brand, product, or service in a specific way within the minds of consumers relative to competitors. It involves creating a unique value proposition and differentiating the product based on factors like price, quality, features, or target audience
Market mapping
Visual tool used to analyze how products or brands are positioned in the market based on key attributes, such as price and quality. It helps businesses identify gaps in the market, understand competitor positioning, and make strategic decisions about differentiation and targeting
Competitive advantage
Unique strengths or factors that allow a business to outperform its competitors. This can be achieved through cost leadership (offering lower prices), differentiation (offering unique products or services), or focus strategies (targeting a specific niche market)
Product differentiation
Process of making a product or service stand out from competitors by emphasising unique features, design, branding, quality, or customer experience. It helps businesses attract specific target markets, reduce price competition, and build brand loyalty
Added value
Increase in worth a business creates for a product or service by enhancing its features, quality, branding, or customer experience
