1.2 spotting a business opportunity Flashcards
Understanding customer needs
A business needs to have an effective understanding of the needs and wants of customers in its target market segment.
Price
Quality
convenience
choice
customer needs - Quality
Customers will want the product/service to be of the quality that they require and expect.
This is not necessarily high quality, as customers may be happy with a cheaper product of a reasonable quality.
customer needs - price
Customers will expect to pay a reasonable price for goods or services. Price can vary depending on quality, timing, delivery arrangements and the popularity of the item.
E.g. train ticket prices can change according to different circumstances, in this instance – the time of day!
customer needs - convenience
The growth of online shopping and home delivery highlights how customer needs have changed in recent years.
Most successful retailers will now have websites and e-sales options that are more convenient and increasingly expected by customers.
Retail store opening hours and locations are also factors that are affected by customer needs.
market research
The purpose of market research is to gather information.
This will enable the business to be informed in its decisions and so reduce the risk of failure.
Useful insights provided by effective market research
Market – e.g. size, structure, trends
Competition – e.g. who, market share, USP
Customers – e.g. who, needs, wants, expectations
Market segments – e.g. existing or new segments offering opportunities
Primary research
Primary research
Data collected first-hand for a specific research purpose
e.g. surveys & questionaires, focus groups, obsevation
Secondary research
Data that already exists that has been collected for a different purpose
e.g. government information, competitor websites, customer reviews, trade assosciation & trade press for specific industries, newspapers, market research reports
Primary research - pros
Directly focused to research objectives
Kept private – not publicly available
More detailed insights – particularly into customer views
Secondary research - pros
Often free and easy to obtain
Good source of market insights
Primary research - cons
Time-consuming and costly to obtain
Risk of survey bias
Sampling may not be representative of the whole population
Secondary research - cons
Can quickly become out of date
Not tailored to business needs
Specialist reports are often quite expensive
Quantitative data
Data that is normally numerical.
Main methods of obtaining quantitative data are the various forms of survey – i.e. telephone, postal, face-to-face and online.
Qualitative data
Based on opinions, attitudes
and beliefs.
Focus groups and interviews are common methods used to collect qualitative data.
Benefits of using social media to collect data
-Quick - Using Facebook and Twitter, reactions to new products will be live in minutes, providing instant feedback
-Easy to set up surveys and polls
-Provides an insight into the market in which the business is competing
-Free tools available that allow businesses to collect social media statistics
disadvantages of using social media to collect data?
-Feedback provided through social media comments may not be representative of actual opinions.
-Danger of social media becoming too negative
-Need for staff training involved in this process, which will increase costs and be time-consuming.
-For a small business, the monitoring of social media can again become very time-consuming, which can detract from other important roles in the firm.
Importance and reliability of market research data - bias
Market research involves taking samples. Samples may involve some bias either through the time, location or type of people chosen. Smaller samples are more likely to be biased, but large samples are expensive and time-consuming to conduct.
Importance and reliability of market research data - out of date
Any research will be out of date once it has been collected. But some, especially secondary data, can be very out of date and not a reliable representation of the current situation facing a business. This can result in incorrect decisions being made.
Importance and reliability of market research data - Inaccurate
Either the question or the answers can result in inaccuracies. If the question is not clear, then the answers given will be of little use.
market segmentation
Market segmentation involves dividing a market into parts that reflect different customer needs and wants.
Main categories of market segmentation
Location/geographic
Demographics - age, gender, family lifestyle, religion, nationality, ethnicity etc.
Income
Benefits of effective market segmentation
Better matching of product to specific customer needs
Helps with new product development – focused on needs of customers in the segment
Allows a business to grow its share in a market or to effectively target fast-growing segments
Helps make the marketing mix more effective e.g. better targeting of promotion
Potential drawbacks of market segmentation
Segmentation is an imprecise science – data is not always available, up-to-date or reliable
Just because a business can identify a specific market segment, it does not mean it can successfully reach the customers in it!
Markets are increasingly dynamic and fast-moving; so too are the segments found within a market
marketing mix
How a business combines its product and its price, and uses promotion and the place of sale in order to be successful - 4Ps of marketing: product, price, promotion, place
