1.1 Meeting Customer Needs

Question 1

What is a market?

Answer 1

Where buyers and sellers come together to trade goods

Question 2

What is the difference between risk and uncertainty?

Answer 2

Risk is predictable/can be planned for whereas uncertainty can’t be planned for or predicted

Question 3

What are 4 things marketing involves?

Answer 3

Understanding customer needs
Understanding the dynamics of the market
Developing successful products
Promoting the business and its products

Question 4

6 characteristics of a mass market?

Answer 4

Target a large population of the market with a generic product
Large scale production and investment in capacity
High sales revenue
Lots of competition
Promotion involves mass market techniques
Competitive pricing

Question 5

7 characteristics of a niche market?

Answer 5

Target a small population of the market with a specialised product
Small scale production
Low volumes but high profit margins
Few competitors but limited number of potential customers
Direct marketing
Business will have to compete on quality and customisation in order to succeed
Promotion through specialist mediums

Question 6

Markets can change over time, a business needs to understand the nature of this and adapt in order to remain competitive. What are 5 factors that contribute to this change?

Answer 6

Innovation 
Economic growth
Demographic changes 
Changes in legislation 
Social changes

Question 7

What is market size?

Answer 7

The size of a market can be measured by value (the total amount consumers spent on the product) or volume (total quantity sold by businesses)

Question 8

What is market share?

Answer 8

The proportion of a particular market held by a business. It can be used as a measure of success

Question 9

How is market share calculated?

Answer 9

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

Question 10

What are 4 ways a business can adapt in a dynamic market?

Answer 10

Being flexible in the way they operate
Carry out market research to have a better understanding of their customers
Investment in new technology, people and products
Continuous improvement- ongoing desire to be better at what they do

Question 11

What does high competition mean for businesses?

Answer 11

Incentive to innovate and get better
Focus to improve efficiencies
Competitive pricing

Question 12

What does high competition mean for customers?

Answer 12

Lots of choice
Good value for money
Exciting new product development

Question 13

What does low competition mean for businesses?

Answer 13

Can dominate the market
Can afford inefficiencies
Set high prices
Little incentive to increase

Question 14

What does low competition mean for customers?

Answer 14

Limited choice
High prices
Poor service

Question 15

Why is market research conducted?

Answer 15

Find out potential customers
Find out what customers want
Find out how big the market is/if it’s growing
Find out who competitors are
Find out how much customers are willing to pay
Find out it there is a gap/opportunity in the market

Question 16

Primary research is collected first hand, what are the advantages of it?

Answer 16

Specific to the businesses needs
More up to date and reliable
Better for two way communication and follow up questions
Often better if you want to collect qualitative data

Question 17

What are disadvantages of primary research?

Answer 17

More time consuming thus costly

Difficult to conduct a large sample size

Question 18

What are examples of primary research?

Answer 18

Questionnaires 
Consumer panels
Interviews
Focus groups 
Customer observations

Question 19

Secondary research is research that already exists conducted by another organisation , what are the advantages of it?

Answer 19

Easily accessible
Good starting point
Fast and less time consuming
Better if you want quantitative data

Question 20

What are disadvantages of secondary research?

Answer 20

Some data can be free but detailed reports can be expensive to purchase
Not always up to date
Not always tailored to businesses needs

Question 21

What are examples of secondary research?

Answer 21

Reports
Competitors
Websites
Government statistics
Newspaper articles

Question 22

What is the difference between product and market orientation?

Answer 22

Product- focused on product efficiencies, the product itself, product features, profit margins
Usually used if there is little competition or information available to customers
Market- focused on customer needs, understanding customers and develop products that meet their needs, customer attitudes, characteristics and how the product is used (most successful businesses tend to be thus as businesses can only succeed if they meet the needs of customers better than their rivals)

Question 23

What are limitations of market research?

Answer 23

Often biased
A small sample limited the reliability of the research
Causality can be hard to identify
Collecting it is very time consuming

Question 24

What are 7 uses of market research?

Answer 24

Product development 
Budgeting 
Production forecast 
Sales forecasting
Developing marketing activities eg. promotional campaigns 
Workforce forecast 
Cash flow forecasting

Question 25

Sampling involves selecting a representative group of people from target population what are the advantages and disadvantages?

Answer 25

+ it’s quicker and easier than trying to collect research from everyone which is often impossible
+ the bigger the sample size the more representative it will be
- If the sample size isn’t representative of the market then the research will always be limited

Question 26

Explain what is meant by a correlation?

Answer 26

Helps a business understand the relationship between two factors, especially ones that determine demand so that they can manipulate these to achieve greater sales
But it doesn’t establish a cause thus just because there is a strong correlation it doesn’t mean that one variable leads to another

Question 27

How can ICT and technology be used in market research?

Answer 27

ICT- collect data through websites, social media/networking, analysing information in databases
Technology- makes collecting data faster and more specific to individual customers, process data more effectively so trends, patterns and correlations can be uncovered to help make marketing decisions eg.loyalty cards=collect data on customers

Question 28

Market segmentation is the process of dividing customers within a market into distinguishable groups based on their characteristics and needs to allow positioning of the business and customer targeting to take place, what does it allow businesses to do?

Answer 28

Differentiate itself from competitors
Develop and build a brand
Identify and satisfy the needs of a specific group of customers
Reach it’s customers with relevant marketing activities eg.advertising
Focus the business activities
Build loyalty towards its brand and products

Question 29

What is market mapping?

Answer 29

A technique used to understand how products/businesses are viewed relative to competitors based on two relevant characteristics

Question 30

What are the advantages and disadvantages of market maps?

Answer 30

+ It helps businesses decide whether to set up in a market, is there a gap/opportunity?
+ It’s a useful process for comparing similarities and differences between businesses-market positioning
+ It helps businesses gain a better understanding of its competition
+ Helps gain an understanding of customer perceptions
- only considers two main variables yet markets and customer perceptions are often very complex

Question 31

3 factors a business may consider when positioning a product or the business?

Answer 31

1) attributes of a product, features/quality
2) origin of the product/business, its heritage
3) classification of the product or business eg. 5 star hotel

Question 32

Explain head to head competition?

Answer 32

Doesn’t always have to be a gap in the market
Can target the same customers as other businesses if there is enough demand in the market or if they meet customer needs better than competitors

Question 33

Explain differentiation and it’s link to USP?

Answer 33

Process of making a product different from competitors products so they don’t have to compete head on
Develop unique brand characteristics, create unique product features, provide a unique/better customer experience, offer a price that undercuts the competition, build good relationship with customers
A USP is something that sets a business apart and makes it distinguishable from any other business

Question 34

How can a sustainable competitive advantage be achieved?

Answer 34

Innovation- create new unique processes and products
Architecture- relationships within a business that create synergy and understanding between suppliers, customers and employees
Reputation- brand values are hard to replicate and take years to develop

Question 35

What are 7 ways of adding value?

Answer 35

Good customer service
Packaging
Speed of service and response time to customers
Frequent buyer offers, rewards for repeat purchase
Customisation
Better design/features
Develop a strong brand through promotion

Question 36

Explain the relationship of adding value to profit?

Answer 36

The more value a business can add the higher the price and the greater the profit margin
The challenge is doing this without too many additional costs