3.2 Understanding markets and customers Flashcards
Market growth
When an industry grows in terms of either volume or value
Sales growth
When a business increases its sales in terms of volume or value
Market share
The proportion of a market that a business controls in order to satisfy customer needs
Market share calculation
(sales of on product) / (total market sales) X 100
What information does market research gather
- Demand
- Competition
- Target market
Demand
- Insights into customer’s wants and needs to help improve a product, spot market opportunities and stay competitive
- spot opportunities for growth and potential threats from new products/technology
Competition
- Can help to understand major threats in the market and then be prepared to deal with these threats
Target market
Insights into customer’s wants and needs and how they are changing over time
What does market mapping measure
Price vs Quality
Methods of market research
- Sampling
- Technology
Sampling
When a business selects a sample of the population to save collecting data from everybody in that population
Advantage of sampling
Reduces costs - chooses a cross-section of the population instead of collecting data from everybody
Disadvantage of sampling
May not accurately reflect the full target market if the sample is not chosen properly
Technology in market research
Used to analyse market research data by completing calculations and creating graphs and charts which can be used by managers and leaders
How to calculate PED
% change in quantity demanded / % change in price
What is the co-efficient
a value / number
What elasticity is penetration pricing likely to have
Elastic
What elasticity is price skimming likely to have
Inelastic
What does PED measure
The responsiveness of demand after a change in price
What does it actually mean?
For every 1% change of price, demand is going to change by the co-efficient value
Co-efficient GREATER than 1 means a product is…
Price Elastic
When a product is price elastic it means…
% change in quantity demanded is GREATER THAN the % change in price
Co-efficient LESS than 1 means a product is…
Price inelastic
When a product is price inelastic it means…
the % change in quantity demanded is less than the % change in price
When the price elasticity is exactly 1, it means…
the % change in quantity demanded = the % change in price
Impact on profit & sales revenue if a product/service is price ELASTIC
Decrease in price = Increase in sales revenue
WHEREAS
Increase in price = Decrease in sales revenue
Impact on profit & sales revenue if a product/service is price INELASTIC
Decrease in price = decrease sales revenue
WHEREAS
Increase in price = Increase in sales revenue
What does YED measure
The responsiveness of quantity demanded to a change in consumer income
Formula for YED
(% change in quantity demanded) / (% change in income)
Co-efficient is positive for YED
An increase in income will increase demand and a fall in income will decrease demand
e.g luxury items
Co-efficient is negative for YED
An increase in income will decrease demand and a fall in income will increase demand
e.g changing from Sainsburys to Aldi products
YED less than 1
Inelastic - the change in income will lead to a change quantity demanded which is less than the change in income
YED more than 1
Elastic - the change in income will lead to a change in quantity demanded which is greater than the change in income
