1.3: Markets, consumers and competition Flashcards
What is market research?
Any activity that gives a business information about its product or service, its customers, its competitors or the market it operates in.
Why do businesses need market research?
To identify whats happening in the market now
To predict what might happen in the market in the future
To explore new possibilities in the market.
What does market research do?
Gives information that can be used to make better informed decisions about the business and its future
Allows businesses to understand consumer behaviour + make them more responsive to customer’s needs - leading to market orientation
Helps give a business a competitive advantage - improve products
Reduce risks of start-ups
Helps keep established businesses up with market trends.
What is primary research?
Gathering information first hand
Eg: focus groups, questionnaires and direct interviews
What is secondary research?
Finding and using information that has been gathered already
What do start-ups use market research for?
Small, local market
Gaps in market
What do established businesses use market research for?
Researching the market for a new product
Advantages of primary research
Can be designed specifically to suit the purpose of the business
Information up to date and directly relevant
Information gathered not available to competitors.
Disadvantages of primary research
Can be expensive to collect
Can take a long time
Can give misleading information
Advantages of secondary research
Can be doen very quickly
Can be much cheaper than primary research
Disadvantages of secondary research
May not be exactly specific to researcher’s needs
Can be dated
May not be accurate
What is quantitative research?
Based on numerical data
What is qualitative research?
Based on consumer’s attitudes and opinions
What is sampling?
Would be practically impossible to interview everybody so a smaller sample of the market is selected to represent it
Describe random sampling
A group of people selected so as to be representative of the population as a whole
Describe quota sampling
Selecting evenly from particular groups within the population
Describe stratified samples
Draw on specific groups that may be identified with particular market segments.
Advantages of random sampling
Can be effective and accurate
Disadvantages of random sampling
Hard to be genuinely random
Needs large sample sizes to be free from bias
Can be expensive
Advantages of stratified sampling
Targets the market effectively
Disadvantages of stratified sampling
May be hard to identify appropriate strata
More complex to organise and analyse results
Advantages of quota sampling
Cheap and effective of sampling
Disadvantages of quota sampling
Need to be careful in drawing up quotas to avoid bias.
What is market segmentation?
Dividing the market into groups of consumers with similar characteristics
eNABLES PRODUCTS AND SERVIces to be more effectively produced and targeted for a particular market segment.
Advantages of segmentation
More precisely a segment can be identified and provided for, more likely it id that a sale will be made
Reduces direct competition
Premium price may be charged if market segments get exactly what they want
Encouraged the development of brand loyalty
Disadvantages of segmentation
Can be expensive to research and identify different segments
More costly to develop and market different products for different segments rather than just one standardised product
Targeting one particular segment may mean ignoring others
Even if segments are identified, reaching them may be difficult
Market positioning
Shows how consumers view individual products or brands, in relation to competing producys
May involve variations in price or qualtiy or other aspects of interest to the consumer
Market mapping
Use of a grid showing two features, such as price and quantity or consumer age.
Helps to position products in relation to each other
Advantages of market mapping
Enables a business to spot gaps in the market
Can help a business to differentiate its product from the competition.
Disadvantages of market mapping
Can be hard to categorise some products and services
Identifying a gap does not mean there is a need for a product to fill it
What is competitive advantage?
Any feature of a business that enables it to compete effectively with rival products
Product differentiation
May be used to achieve an advantage
What does cutting costs allow a business to do?
Allow a business to compete on price and still make a profit
How can cutting costs be achieved?
Improvements in staff training
Improving relationships with suppliers
Striving for greater efficiency in the use of resources
How may a business add value to it’s products?
Introduce completely new products or re-design existing ones
Target product reliability or customer service with appropriate staff training
Produce a consistently reliable branded product that will sell for more than an anonymous basic one would
Product differentiation
Occurs when each business creates a distinctive product.
May involve giving it unique features in order to attract customers
May also involve changing perceptions as to the function of the product
Branding important
Pricing strategy
The way in which a business decides upon the price of its product
Output levels linked to price
High prices=if output is relatively low
What do price and output depend on?
Competition of business
Competitive advantage product has + product differentiation
Economic growth
Dynamic markets
Markets that are changing all the time
Examples of dynamic markets
High tech products
Dynamism of market changign
Changing demand
Change in fashions leads to rising demand for some products and falling demand for others
Advertising change taste and fashions
Rising incomes increase demand, high end productsS
Stable markets
One in which the pace of change is slow
Market share and size are fairly constant with little variation in price
Market orientation
Creating products and services to fits the wants and needs of the customer.
Business adapts its products and innovates in order to compete successfully with rival suppliers
How can market orientation improve a firm’s prospects?
Market research may provide vital information about a market a business had previously ignored
Business may develop competitive advantage
Brand loyalty=business can charge a higher price for its products and services
