3.3 - Understanding Markets (Research) & Customers Flashcards
What is a market and what is marketing?
People willing to sell - a place where buyers and sellers meet
The process of identifying, anticipating and satisfying customer needs profitably
What are some typical marketing objectives?
Increasing: Sales volume and sales value Market size Market and sales growth Market share Brand loyalty
What are the 4 different types of market?
1 - local market (close to where customers are)
2 - national market
3 - physical market (buyer and sellers)
4 - digital market (online)
Key factors about digital markets
1 - they are fiercely competitive (easier for customers to compare prices)
2 - they do not rely on a physical location (more efficient- don’t have to pay costs/rent)
3 - the market is quite cheap and easy to enter (new firms can enter at anytime)
4 - they provide a “long tail” of competitive, profitable small businesses
What is demand in a market?
The desire of consumers to buy a product or service when backed up by the ability to pay
What are the 5 factors that determine the demand for a product or service?
1 Price
- price up, quantity in demand down
- price down, quantity in demand up
2 Incomes
- lower demand for cheaper, non branded goods
- normal goods-demand increases as income increases
- inferior goods-demand falls if incomes increase
- luxury goods-demand can increase even faster than incomes increase
3 Actions of competitors
- competitors could lower their prices
4 Firms own marketing activities
5 Seasonal/external factors
- eg/ healthcare
How can you measure the size of markets?
1 Looking at market size and trends
- measurement of all of the sales of all companies in a market place
- can be measured by volume or by value
- average price price = volume/value
2 Market share
- proportion of the total market held by one company or product
- how much is each shop selling of the product
- can be measured by volume but is more often looked at by value
What are the advantages of having the top selling brand?
The brand leader gets the higher distribution level
Brand leader is often able to offer lower discount terms to retailers meaning higher revenues and profit margins per unit sold
What is market size (volume)?
The quantity of goods and services produced in a particular market over a period of time
What is market size (value)?
The total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time
What is sales volume?
The quantity of good abs services produced by a particular business over a period of time by
How is market growth % in one year calculated?
Market growth (%) in year X = (change in the size of market between year Y and year X / size of market in year Y) x100
How is sales growth calculated?
Sales growth (%) in year X = (change in sales of product or business between year Y and year X / sales of product or business in year Y) x100
How is market share calculated?
Market share (%) = (sales of one product OR brand OR business / total sales in the market) x100
What is market research? What is the value of it?
Gathers information about consumers, competitors and distributors within a firms target market, identifying consumers buying habits and attitudes to current and future products
VALUE OF MARKET RESEARCH
Single biggest cause of business failure is failure to understand the market
Why do businesses need accurate and up to date information?
It’s a dynamic environment
Changes in technology
- enabling new products and new production processes (eg/ BLOCKBUSTER failed to keep up and closed)
Changes in consumer tastes
- meaning demand for some products will decline whilst others still grow more popular (eg/holiday types)
Changes in product ranges of competitors
- introduction of new rival products or challenges in pricing policies can greatly influence demand
Changes in economic conditions
- improvement or worsening of economic climate will have impact on incomes on national or regional level, different products affected differently
Why are marketing objectives set and what should effective marketing objectives be?
To steer direction of business, coordinate business activity, be a motivational target (has to be achievable) and increases probability of success (decision making is more effective)
TO BE EFFECTIVE THEY SHOULD BE SMART S - specific M - measurable A - achievable R - realistic T - time frame
What are the 5 internal influences on marketing objectives and decisions?
1 CORPORATE OBJECTIVES-should not conflict with businesses main aims
2 FINANCE-financial position of business affects scale of marketing activities
3 HUMAN RESOURCES-quality and capacity of the workforce, if motivated and well-trained can deliver market-leading customer service and productivity creating competitive marketing advantage
4 OPERATIONAL ISSUES-efficiency and productivity enables business to compete with cost and quality, effective capacity management determines if revenue objectives are achieved
5 - BUSINESS CULTURE-a marketing-orientated business is constantly looking for ways to meet customer needs, production-orientated culture may result in management setting unrealistic or irrelevant marketing objectives
What are the 5 external influences on marketing objectives and decisions?
1 ECONOMIC ENVIRONMENT-determines demand eg/ a recession or exchange rates concerned with international marketing
2 COMPETITOR ACTIONS-take account of likely / possible competitor response
3 MARKET DYNAMICS- market size, growth and segmentation
4 TECHNOLOGICAL CHANGE- shortening product life cycles and creating great opportunities for innovation
5 SOCIAL AND POLITICAL CHANGE-changes to legislation may create or prevent marketing opportunities as well as change in the structure and attitudes of society
What are the purposes of marketing research and what are the methods used?
Gain a more detailed understanding of consumer needs
Reduce risk of product/business failure - accurate and up to date information on the market helps businesses make informed decisions
Forecast future trends - firms can then adjust product portfolios and levels of output in order to remain successful
METHODS
1 Primary Research
- observation, postal and online surveys, focus groups etc
2 Secondary research
- internal data-own records, past sales figures
- secondary data-internet, government, competitors
What are the pros and cons of primary and secondary methods of market research?
PRIMARY
+ gives insight into people’s opinions and thoughts
- can be expensive if done by market research companies
SECONDARY \+ often obtained without cost \+ usually based on actual sales figures or research on large samples - data may not be updated regularly - no tailored to your own needs
What are the 3 aspects to quantitative research?
1 SAMPLING-ensure they’re typical of whole population
- two main concerns are sample size and method
- commonly used: quota sampling (involves selecting interviewee in proportion to consumer profile within target market-gain opinions)
2 WRITING A QUESTIONNAIRE that’s unbiased and meets research objectives
3 ASSESSING VALIDITY of results
Explain the pros and cons of a large sample size and what concept is used to measure the accuracy of the sample?
+ becomes more accurate
- expensive and time consuming
Confidence levels
- indicate how sure you are that the value for the population lies within the confidence interval (range of values that you’re fairly sure the value for the population will lie within)
- also used to show uncertainty in predicting other figures
What is Big Data? Why is becoming increasingly important to businesses?
The process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that can be used in decision making (structured-transactions unstructured-social networking)
It streams so fast and so much data normal computers aren’t sufficient to handle it so large companies are investing in ways of analysing data to draw useful correlations
