1.2 Spotting a Business Opportunity Flashcards
What is a Market?
Place: goods are traded between customers and suppliers
Product: a specific type (ie oil market)
Group of people: potential customers (ie age 18-25 market)
What are competitors?
Different businesses that sell the same products in the same market, competing with each other over sales to customers
How does competition affect business decisions?
Forces businesses to make decisions that make them stand out, persuading customers to buy from them rather than competitors.
Change
- Price, Quality, Place, Product, Customer Service
How does changing Price affect a business?
- Charge lower prices, achieve competitive advantage in market, more customers attracted to business, more sales
- Make less profit per product sold, (higher numbers needed to break even)
How does changing Customer Service affect a business?
- Offering customer service attracts customers + willing to pay more for a product. Gives company Competitor advantage. Business trains staff in good customer service, better reputation for high quality service
- Paying for training is expensive
How does changing Quality affect a business?
- More satisfied customers, business is more competitive with higher prices (competitor advantage), higher sales per product
- spend more money to develop high quality products/promoting the products, expensive for the firm
How does changing Product Range affect a business?
-Large range attracts more customers (better selection in one place, convenience)
- Develop new products, fill any gaps in the market, lack of competition, makes business appear more innovative, more attractive to customers
- developing products takes research, time and money
How does changing Place (location) affect a business?
- Convenient location, more customers able to buy from place, no inconvenience of travel or wait
- Open stores in specific locations or sell online, offer max convenience
Why do businesses carry out Market Research?
- find out about the market and their performance: overall market size, their market share
- understand customers: market segmentation, needs and customer satisfaction
What is Market Size?
Number of individuals within the market which are potential buyers and sellers of products
- can also mean the total value of products in the market
What are Customer Needs and how does it help a business to meet them?
- Type of product, quality, price, convenience, choice
- help business make products better suited to customer needs, increase sales, ensure business survival
What is Market Share?
The proportion of total sales within the market that is controlled by the business
In what ways does Market research help improve businesses?
Make informed decisions: decide what products to sell, where to sell, promotion methods, price
Spot gap in the Market: develop products to meet customer needs before competitors. Develop new product, sell existing product in new place, price or promotion method
Reduces Risks: avoids business selling in the wrong location, unwanted products or high prices products. Reduce costly mistakes
What is a gap in the market?
When a group of customers have a need that isn’t being met by a good or service
What is Primary research?
Getting information from customers or potential customers
- usually involve asking customers of their opinions
What are different types of primary research?
Questionnaires, Surveys
Focus groups
Observation (observing what people do and say, rather than asking them)
What are the advantages and disadvantages of sampling?
- Large samples are the most accurate
- Save costs by researching over telephone or internet (easy for small businesses) can reach larger group
- Large samples are the most expensive-> small businesses may have to use small samples, keep costs down
- Have to ask sample of people, cannot ask everyone
- People may not answer every survey sent to them online, can be less effective
What are the advantages and disadvantages of Primary research?
- Up to date, relevant, specific to a business or target market
- observation= cheap, accurate
- questionnaire= cheap, sample large area
- focus group= faster than surveying individuals
- expensive, time consuming
- observation= lack of opinion, can’t find out why customers feel what they feel
- questionnaire= lack of response
= focus group= quieter people lack being heard, can be biased (scared of expressing opinion)
What is Secondary Research?
allows access to wide range of data
- useful for looking at whole market, analysing past trends
What are types of Secondary Research?
- magazine research reports, government reports
- newspaper and magazine articles
- internet
What are the advantages and disadvantages of Secondary research?
- used by small businesses, cheaper than primary, easily found data, instantly available data
- not always relevant, not specific to needs or products, can be out of date
How can Social Media be useful for Market Research?
- people create profiles on sites like Facebook and Instagram, posting things they enjoy
- Businesses can collect this information, use it for market research (ie see what is trending or increasing in popularity)
What is Qualitative information?
about the feelings and opinions of people
What is Quantitative information?
anything that can be measured as or reduced to a number
What is reliable market research data?
the results can be repeated by another researcher
- the more reliable the data is, the more useful it is to a business
What is good market research?
research that uses both qualitative and quantitative data
What is Market segmentation?
Splitting people in a market into different groups
ie into demographics (age, income)
or
Location (cultural food in other areas)
Lifestyle (activities, walking, running)
Why is market segmentation helpful to a business?
- allow a business to identify target markets
- can create a targeted marketing strategy, as effective as possible
How does market mapping help a business?
- understand location within market + market key features
- analyse competitors selling similar products + customer perception
AND - gaps in the market
- if they find a potential gap in the market, can use market research to confirm demand for the identified product
- if there is a demand, there is a gap-> business can focus on creating product to fill gap, give the competitor advantage, increase sales
