3.2 Understanding Markets + Customers Flashcards

1
Q

What are the 6 roles of market research

A
  • competitor analysis
    -identifying trends in the market
    -pricing strategies
  • meeting consumer needs
    -ideas for new product development
    -customer feedback
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2
Q

Pros of primary market research

A

Specific to business
Reliable
Exclusive

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3
Q

Cons of primary market research

A

Time consuming
Expensive

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4
Q

Examples of primary research

A

Surveys , questionnaires , observations , focus groups , test marketing

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5
Q

Pros of secondary market research

A

Free or cheap
Quick and easy

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6
Q

Cons of secondary market research

A

Nor specific to business
Outfits be invalid or out of date
Not exclusive

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7
Q

Examples of secondary market research

A

Reports by industry publications , newspapers , internet , government , market research reports

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8
Q

What is sampling

A

Choosing a small group of people who are representative of the target population (the customers you are targeting)

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9
Q

What are the 3 methods of sampling

A

Random, stratified, quota

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10
Q

What is a confidence level

A

The probability that certain data is correct

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11
Q

What is a confidence interval

A

The range of outcomes for a given probability

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12
Q

What are confidence intervals typically used for

A

Market research, quality management, risk management, budgeting and forecasting

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13
Q

Factors that affect sales

A

Seasons, income levels , unemployment levels, changing social trends, actions of competitors, change in legislation , change of government

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14
Q

What is extrapolation

A

Using trends emerging from historical data to forecast the future

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15
Q

Pros of extrapolation

A

Useful method to predict future so can anticipate business activity
More effective when there are more years of data and the correlation is strong

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16
Q

Cons of extrapolation

A

Cannot be fully accurate down to PESTLE

17
Q

What is the value in Tech gathering data

A

Provides faster communication
Relies on the business having the right data in the first place
Enables targeted sales messages
Make forecasting easier

18
Q

What is elasticity of demand

A

The responsiveness of demand to a change in price or income

19
Q

What does price elasticity of demand (PED) measure?

A

How significantly demand changes when price changes.

20
Q

What does income elasticity of demand measure?

A

How significantly demand changes when income changes.

21
Q

What types of goods are highly affected by price changes?

A
  • Low income retail
  • Branded goods
  • Luxury items
22
Q

What types of goods are not significantly affected by price changes?

A
  • Gas/Fuel
  • Electricity
  • Alcohol
  • Tobacco
23
Q

Why is knowing price sensitivity important?

A

It enables anticipation of how customers will react to a change in price.

24
Q

How is price elasticity of demand calculated?

A

(PED) = % change in quantity demanded / % change in price

25
Q

What does it mean if a products PED is greater than 1

A

The product is price elastic
Change in price significantly affects demand

26
Q

What does it mean if a products has a PED of less than 1

A

The product is price inelastic
A change in price does not significantly affect demand

27
Q

What are the factors affecting Price Elasticity of Demand (PED)?

A
  • Strength of brand
  • Brand loyalty
  • Whether product is a necessity
  • Availability of reasonable substitutes
  • Competition from similar products

These factors help determine how sensitive the demand for a product is to changes in price.

28
Q

What does Income Elasticity of Demand (YED) measure?

A

The responsiveness of demand to a change in income.

YED is calculated as the percentage change in demand divided by the percentage change in income.

29
Q

What is the YED value range for normal goods?

A

Between 0 and +1.

Normal goods see an increase in demand as income rises, but the increase is proportionately less than the increase in income.

30
Q

What characterizes luxury goods in terms of YED?

A

YED is greater than +1.

Luxury goods experience a more than proportionate increase in demand as income rises.

31
Q

What are inferior goods characterized by in terms of YED?

A

Negative YED (less than 0).

An increase in income leads to a decrease in demand for inferior goods as consumers opt for better alternatives.

32
Q

What is the value of Price Elasticity of Demand (PED) for inelastic demand?

A

Less than 1.

Inelastic demand indicates that quantity demanded does not change significantly with price changes.

33
Q

What happens to demand for normal goods as income rises?

A

Demand rises as income rises.

This relationship helps identify the nature of products in terms of consumer behavior and income changes.