1.1.1 The Market Flashcards
What is a Market?
Any place that buyers and sellers will come together to exchange goods and services.
Note: There will normally be an exchange of money at a set price.
What is a Mass Market?
A market with a large number of customers, which is not segmented into groups based on customer needs or interests
What is a Niche Market?
A smaller market that has customers, and is segmented into groups based on customers’ specific needs or requirements
What are some characteristics of Mass Market?
- Businesses in mass markets sell to more consumers than those in niche markets, so sales volume in mass markets is higher than in niche markets
- Businesses is mass markets are more likely to benefit from economies of scale,
- Mass markets have a larger market size than niche markets
What are some advantages of Mass Market?
- Large scale production means economics of scale and lower average unit costs
- Mass marketing is straightforward as everyone is equally targeted
- Large volume of sales means high revenues
- Less need for marketing research as the entire market is targeted –> creates brand awareness
- Using mass marketing indicates the business is focused on a high volume of sales. Creating the ability to generate economies of scale
- Smaller the product range –> increase operational efficiency –> lower cost per unit –> increase profit margins
What are some disadvantages of a Mass Market?
- Lots of competition
- Avoided segments –> less able to meet every customer need –> less added value –> lower prices –> lower profit margin per product –> large market indicates high level of competition
- Mass marketing –> suits mass production –> therefore requires finance to implement. The mass market itself is very expensive
- Less attractive to customers
- High volume production not flexible to demand changes
What are some characteristics of a Niche Market?
- Businesses in a niche market can be more risky than businesses in mass markets as they sell to a smaller number and a narrower range of customers –> if there is a change in the market that affects what customers want to buy, they could quickly lose sales and struggle to survive
- Usually there’s a lot of less competition in niche markets than in mass markets –> this, coupled with the fact that niche markets sell specialised products –> this means that businesses in niche markets can usually charge higher prices than those in mass markets.
What are some advantages of a Niche Market?
- Charge a premium price
- Easier to target customers
- Small scale production can be flexible and follow trends
- Less competition than in mass market
- Better meet customer needs –> leads to higher levels of customer satisfaction –> build brand loyalty
- Brand loyalty –> ability to raise prices –> higher profit margins
- Niche markets suggests small production volume –> less ability for big businesses to exploit economies of scale –> may allow small businesses to better compete
What are some disadvantages of a Niche Market?
- Limited opportunity for growth
- High production costs
- Very risky as demand may change
- Reliant on specific niche –> if it is a fashion or taste –> high risk strategy
- Inability to obtain economies of scale means higher costs –> higher prices = lower demand or maintain prices = lower profit margins
What is Market Size?
The Toal value of sales in a market over a certain time period.
Note: It could also be measured by the total number of consumers in that market
What is the Market Size Equation?
Market Size = Number of units sold x Price
What is Market Share?
The proportion of total market sales a particular business has
Market Share Equation
Market share = Total sales by the business / Total sales of the market x 100
What is a Brand?
A clear and obvious logo, name or statement that customers can instantly recognise as being related to a certain product or business.
What does Branding do?
Branding creates a clear and obvious logo, name or statement that customers can instantly recognise.
It helps consumers to differentiate a business’s product from its competitors.
Branding can encourage consumers to buy products and therefore affect the market share a business has.
In mass markets there are more businesses selling similar products than in niche markets, so there is more competition in mass markets. This means businesses in mass markets might focus more heavily on strong branding than businesses in niche markets.
Branding –> adds value –> charge higher prices –> brand loyalty
