1.2 - Spotting a Business Opportunity

Question 1

What can a market be?

Answer 1

A market can be a place, a product or a group of people

Question 2

What does market market mean [in terms of a place]?

Answer 2

+A place where goods are traded between customers and suppliers.

+A village market square seems different from an internet shopping website - but they’re both examples of markets.

Question 3

What does market mean in [terms of product]?

Answer 3

+Trade in a particular type of product - (eg. the oil market)

Question 4

What does market mean [in terms of customers]?

Answer 4

The potential customers for a product - (eg. the eg 16-25 market).

Question 5

What are competitors?

Answer 5

+Competitors are the different businesses that sell the same products in the same market.

+They compete with each other over sales to customers

Question 6

What does competition affect?

Answer 6

How businesses make decisions

Question 7

What do most businesses face?

Answer 7

Competitition

Question 8

How can businesses stand out in a competitive environment?

Answer 8

Businesses will need to make decisions that will persuade customers to buy from them, rather than their competitors.

Question 9

What might businesses look at when making decisions about tackling competitors?

Answer 9

+They might look at the strengths and weaknesses of its competitors in the following areas:

• Price
• Customer service
• Quality
• Product range
• Location

Question 10

Why might businesses look at price when businesses face competition?

Answer 10

+Customers will often want to pay less for a given product - If all the products in the market are the same, then price becomes one of the most important factors affecting which products customers will buy.

+Therefore firms may decide to charge lower prices than they would like, to stop customers from buying elsewhere.

+However, this will mean that a firm may not make much profit per product sold.

Question 11

Why might businesses look at customer service when facing competition?

Answer 11

+Offering customer service can attract customers and may mean that customers will be willing to pay more money for a product [and having a reputation for poor customer service might put customers off].

+So to stand out from the competition, a business might decide to train its staff in good customer service, or provide extra servics [such as user training] when the customer buys the product.

Question 12

Why might businesses look at quality when facing competition?

Answer 12

+Offering better quality products may mean that customers are more satisfied - this may mean that the business will be more competitive, even if its products are more expensive.

+In order to convince customers that their products are better than their rivals’, businesses may decide to spend money on developing high quality products or on promotional material that emphasises quality.

+However, this will be costly for the firm

Question 13

Why my business is look at product range when facing competition?

Answer 13

+Having a large range of products may make a business more attractive to customers.

+E.g. A greengrocers may be able to compete with a convenience store if it sells more types of fruit and vegetables, since customers will have a better selection in one place.

+A business may also try to fill any gap in the market [supply a previously unmet customer need] by developing new products - they’re won’t be any competition for the new products and the firm may appear more innovative than its competitors and so be atractive to more customers.

Question 14

Why might a business look at location when facing competition?

Answer 14

+Customers may be more likely to buy from a business if it sells products in a convenient place as they won’t have the inconvenience of travelling or waiting for the product.

+Therefore businesses may decide to open stores in particular locations or to sell items online in order to offer the greatest convenience to customers as possible.

Question 15

What does market research involve?

Answer 15

+Market research involves finding out what customers want.

+It’s useful for businesses to understand markets as they can be more successful when selling to them.

Question 16

What do businesses sometimes carry out?

Answer 16

+Businesses sometimes carry out market research in order to find out about the market and how they’re performing in it.

+Eg. they might want to know the overall market size and the businesses’ market share.

Question 17

What is the market size?

Answer 17

+The market size is the number of individuals (including companies) within the market which are potential buyers or sellers of products.

+It can also mean the total value of products in the market.

Question 18

What is the market share of a business?

Answer 18

+The market share of a business is the proportion of total sales within the market that is controlled by the business.

Question 19

What is also important for businesses?

Answer 19

+As well as understanding the business’s place in the market it’s also important for the business to carry out market research into its customers.

Question 20

Why is market research used?

Answer 20

Market research is used to understand customers.

Question 21

What do all businesses need their customers to do?

Answer 21

+All businesses need their customers to buy their products, otherwise they won’t survive

Question 22

What is one purpose of market research?

Answer 22

+One purpose of research is to identify who the businesses customers are - They can use market segmentation to help them do this.

+Market research can then be used to give businesses an understanding of their customers - e.g. What their needs are and how to satisfy them.

+Customers’ needs may include things like: the type of product, the quality of the product, the price, the convenience of where it is sold and how much choice they have of a range of products [e.g. different colours of sizes].

+By understanding customers’ needs, businesses will be better able to make products that meet these needs - This will increase their sales and help ensure the business’s survival.

Question 23

What does market research help improve?

Answer 23

Using market research to understand customers and their needs help businesses to:

• Make informed decisions
• Spot a gap in the market
• Reduce risks

Question 24

How can market research help a business make informed decisions?

Answer 24

Market research provides useful information to businesses to help them decide things like:

• What products to sell
• Where to sell them and how to promote them
• What price to sell them for

Question 25

How can market research help a business spot a gap in the market?

Answer 25

+Sometimes a group of customers will have a need that isn’t being met - this is a gap in the market; a business will want to develop a new way to meet the customers’ needs before its competitors do.

+This might mean developing a new product - Or it might mean selling an existing product in a new place or at a new price, or promoting it in a new way to convince customers that they need it.

Question 26

How can market research help a business reduce risks?

Answer 26

+If a business sells a product that customers don’t want what tries to sell products at a price that’s too high or in the wrong location, it could end up losing a lot of money.

+Using market research to make informed decisions will help the business to avoid this and therefore help to reduce the risk of making costly mistakes.

Question 27

What is primary research?

Answer 27

+Doing your own Donkey work

Question 28

What does primary research involve?

Answer 28

+Primary research involves getting information from customers or potential customers.

+Most forms of primary research involve asking customers for their opinions - Eg. questionnaires [documents with questions that are given to people], surveys [collecting information from people, eg. directly over the phone or using questionnaires] and focus groups [where a small group of people discuss their attitudes towards a product].

Question 29

What does observation involve?

Answer 29

+Observation involves observing what people do or say, instead of asking them.

+It is a type of primary research

Question 30

What is primary research useful for?

Answer 30

+Primary research is useful for finding new information, and getting customers’ views.

Question 31

What is the downside of primary research?

Answer 31

+A business can’t ask every potential customer for their views - usually just a sample of people.

Question 32

What are the most accurate forms of collecting data?

Answer 32

+Large samples are the most accurate but also the most expensive - Small businesses may have to compromise here and use small sample groups to keep their costs down.

+Businesses can also save on costs by carrying out research over the telephone or internet rather than in person - this is especially useful for small businesses.

Question 33

What does Primary research provide?

Answer 33

+Data that’s up to date, relevant and specific to the needs of your business - the research can also be specific to the target market.

+But on the downside, it’s expensive, and can be time consuming.

Question 34

What are the different advantages and disadvantages of primary research?

Answer 34

+Eg. observations are really cheap and give accurate information, but also don’t allow customers to give opinions - so the business will know what customers are doing, but not necessarily the reasons why.

+Questionnairs are cheap and can be used to sample a large geographic area, but it’s likely that many people won’t respond.

+Phone surveys have a much higher rate of response but they can be more expensive - Focus groups are faster than surveying several people individually, but may mean that quieter individuals do not get their opinion heard.

Question 35

What is Secondary Research?

Answer 35

Looking at other people’s work

Question 36

What does secondary research allow?

Answer 36

+Secondary research allows access to a wide range of data - not just the views of their sample groups.

+It’s useful for looking at the whole market,and analysing past trends to predict the future.

+It involves looking at things like market research reports, government reports, and articles in newspapers and magazines and on the internet.

Question 37

Who is secondary research often used by?

Answer 37

+It’s often used by small businesses as it’s cheaper than primary research, and the data is easily found and instantly availible.

Question 38

What are the disadvantages of secondary research?

Answer 38

+Disadvantages of secondary research are that it’s not always relevant to your needs, it’s not specifically about your products, and it’s often out of date.

Question 39

What can social media be used for?

Answer 39

+Market research

Question 40

What is Social Media?

Answer 40

Social media includes websites such as Facebook® and Twitter.

+These sort of sites allow people to create profiles of themselves on the internet - this includes putting the things that they enjoy.

Question 41

What can Market research data be used for?

Answer 41

+Market research data can be used tp see if a business has any problems or how it might improve.

+It’s important to collect the right kind of data, though, and to have data that’s reliable.

Question 42

What can data be?

Answer 42

Quantitative or Qualitative

+Suppose you want to do some market research about chocolate pizza - You can find two kinds of information

Question 43

What is quantitative information?

Answer 43

+Quantitative information is anything you can measure or reduce to a number - Asking “How many chocolate pizzas will you buy each week?” will give a quantitative answer.

Question 44

What is qualitative information?

Answer 44

+Qualitative information is all about people’s feelings and opinions - Asking “What do you think of chocolate pizzas?” will give a qualitative answer.

+Qualitative data is tricky to analyse because it’s hard to compare two people’s opinions.

+However, allowing customers to voice their opinions is likely to give a greater depth of information.

Question 45

What will good market research encompass?

Answer 45

+Good market research will use both qualitative and quantitative types of information.

Question 46

What does all market research data need to be?

Answer 46

+All market research data needs to be reliable - this means that its results can be repeated by another researcher.

+Reliable market research represents the people that the business is interested in accurately - The more reliable the data is, the more useful it is for a business.

Question 47

What can you use the results of market research for?

Answer 47

+You can use the results of market research to inform decisions a business should make - such as ideas about the products it sells, how it promotes itself, its pricing or the place it sells its products - these things are all part of the marketing mix.

Question 48

What can segmenting a market do?

Answer 48

+Segmenting a market can help a business to figure out who exactly they are most interested in selling to.

+They can also use market research data to create a market map so that they can really zone in on what other products are out there, and what they need to do to increase sales.

Question 49

How markets segmented?

Answer 49

As well as knowing market size and shares, it can be useful to know how a market is segmented.

Markets are segmented into different groups of people.

Question 50

What is segmentation?

Answer 50

+Segmentation is when people within a market are divided into different groups.

+Knowing the different market segments can allow businesses to identify their target market - this is the specific group of people that a product is aimed at.

+They can then create a marketing strategy aimed at their target market [a targeted marketing strategy] to make sure that their marketing is as effective as possible.

Question 51

How can a market be segmented?

Answer 51

+A market can be segmented by its demographics - These are identifiable characteristics that people within one population might have. Eg:

• Age - for example the teenage market, or “grey power” [the over-55s].
• Income - how much different people earn will affect what they are willing to buy.

Question 52

What are other ways to segment a market?

Answer 52

+Other ways include:

• Location - try selling stottie cakes outside the North East, or jellied eels outside London.
• Lifestyle - whether or not people enjoy certain activities, eg. walking, cycling or reading.

Question 53

Why do businesses map the market?

Answer 53

+Businesses map the market to find information

+Mapping the market helps a business understand its location within the market, and the market’s key features - Market maps are often in the form of a diagram.

Question 54

What information can the business find out through market maps?

Answer 54

+A business can use a market map to find out the following bits of information:

• Competitors selling similar products - and how customers perceive them.
• Any gaps in the market

Question 55

What do market maps show?

Answer 55

+Market maps like the one on the right show two variables - in this case, price and quality, but they could be almost anything.

+The map allows a business to see how customers perceive key features of its competitors’ products - eg. their pricing and quality strategies.

+They can also easily see if there is any part of the map with no products - ie. a potential gap in the market.

Question 56

What happens once a business has spotted a potential gap in the market using a market map?

Answer 56

+Once they have spotted a potential gap in the market, the business will need to use market research to confirm whether or not there is demand for the type of product which they have identified.

+If they identify that there is demand for this type of product, then there is a gap in the market - so the business can focus on creating products with the features needed to fill the gap; This will help the business to be different from the competition and so increase its sales.