1.1.1 The Market Flashcards
What is a market?
A market exists where buyers and sellers meet in order to exchange goods or services.
Definition of ‘niche market’
A subset of the main market which addresses a specialist need.
Definition of ‘mass market’
The market which is aimed at the general population.
Definition of homogenous
Of the same kind; alike
Characteristics of mass marketing
- All products are sold to consumers in the same way.
- Many products can be sold on a global scale with language tweaks.
Advantages of operating in a mass market
- Large scale production means economies of scale and lower average unit costs.
- Straightforward as everyone is equally targeted.
- Large volume of sales means high revenues (income).
- High revenues can be pumped into research and development.
Disadvantages of operating in a mass market
- Lots of competition.
- Homogenous products need differentiated marketing which can be expensive.
- High volume production may not be flexible enough to keep up with changes in demand.
Why is branding important in mass marketing?
To ensure loyalty in customers.
In mass marketing the products are homogenous, so they differentiate in branding (cornflakes, ketchup).
Advantages of niche market
- Able to charge premium price.
- Easier to target customers.
- Small scale production can be flexible and follow trends.
- Less competition.
Disadvantages of niche market
- Risky as demand is not constant.
- Higher unit costs so no economies of scale.
How does operating in a niche market affect profitability?
- Charged prices are higher as the consumers in that niche are willing to pay for exactly the right product.
- The profits signal more competitors to enter the market.
- Businesses have a small range of product which make them more risky ventures.
- Lack of economies of scale as not enough products are sold for business to be viable (workable).
- Market for expensive items may be limited.
What is market size and how do you calculate it?
The total of all the sales of the producers in that market.
Sales of x / Total X 100
What is market share?
The proportion (%) of a market that is taken by a business, product, or brand.
Definition of dynamic market
Subject to rapid or continuous changes of trends
What is online retailing?
- It’s a dynamic market as it’s constantly changing, developing, expanding and offering customers new products and ways to shop.
