3.3 - Understanding Markets (Research) & Customers

Question 1

What is a market and what is marketing?

Answer 1

People willing to sell - a place where buyers and sellers meet

The process of identifying, anticipating and satisfying customer needs profitably

Question 2

What are some typical marketing objectives?

Answer 2

Increasing:
Sales volume and sales value 
Market size 
Market and sales growth 
Market share 
Brand loyalty

Question 3

What are the 4 different types of market?

Answer 3

1 - local market (close to where customers are)

2 - national market

3 - physical market (buyer and sellers)

4 - digital market (online)

Question 4

Key factors about digital markets

Answer 4

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

Question 5

What is demand in a market?

Answer 5

The desire of consumers to buy a product or service when backed up by the ability to pay

Question 6

What are the 5 factors that determine the demand for a product or service?

Answer 6

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

Question 7

How can you measure the size of markets?

Answer 7

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

Question 8

What are the advantages of having the top selling brand?

Answer 8

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

Question 9

What is market size (volume)?

Answer 9

The quantity of goods and services produced in a particular market over a period of time

Question 10

What is market size (value)?

Answer 10

The total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time

Question 11

What is sales volume?

Answer 11

The quantity of good abs services produced by a particular business over a period of time by

Question 12

How is market growth % in one year calculated?

Answer 12

Market growth (%) in year X = (change in the size of market between year Y and year X / size of market in year Y) x100

Question 13

How is sales growth calculated?

Answer 13

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

Question 14

How is market share calculated?

Answer 14

Market share (%) = (sales of one product OR brand OR business / total sales in the market) x100

Question 15

What is market research? What is the value of it?

Answer 15

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

Question 16

Why do businesses need accurate and up to date information?

Answer 16

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

Question 17

Why are marketing objectives set and what should effective marketing objectives be?

Answer 17

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

Question 18

What are the 5 internal influences on marketing objectives and decisions?

Answer 18

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

Question 19

What are the 5 external influences on marketing objectives and decisions?

Answer 19

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

Question 20

What are the purposes of marketing research and what are the methods used?

Answer 20

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

Question 21

What are the pros and cons of primary and secondary methods of market research?

Answer 21

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

Question 22

What are the 3 aspects to quantitative research?

Answer 22

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

Question 23

Explain the pros and cons of a large sample size and what concept is used to measure the accuracy of the sample?

Answer 23

+ 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

Question 24

What is Big Data? Why is becoming increasingly important to businesses?

Answer 24

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

Question 25

Once data is collected from market research a number of tools can be used to analyse the findings, explain one

Answer 25

Market mapping

Carried out in 2 stages:

• identify key features that characterise consumers within a market eg/high price vs low price
• place every brand on grid which reveals where competition is concentrated and highlights gaps in market

Question 26

Accurate up to date information obtained by marketing research can be of enormous value to gain a competitive edge, however there’s a number of reasons why these potential benefits may not be realised, why?

(evaluate market research)

Answer 26

1 BUDGETARY CONTRAINTS

• expensive to gather and process data
• may lack expertise and funds for specialist market research agencies to gather data for them so forced to rely on secondary sources

2 TIME CONSTRAINTS
- forced to balance the need to build up as detailed a picture as possible regarding customer needs against desire to make decisions asap to maintain or improve market position

3 RELIABILTY OF DATA
- efforts to ensure data is accurate, representative and interviewers are objective add to costs
+ such costs are necessary if poor decisions and expensive mistakes avoided

4 LEGAL AND ETHICAL CONSTRAINTS
- Data Protection act has a number of implications for researchers collecting and holding personal data eg/must be kept secure, used for only lawful purposes, participants fully informed of data uses-organisations must behave ethically

Question 27

What is meant by extrapolation?

Answer 27

Projecting a trend forward to make a forecast of what will happen in the future-mainly used in sales (crucial because its at heart of marketing and planning)

+ market research enables businesses to track what happened to sales in past and to continue trend into future

+ may be valid to forecast sales assuming conditions don’t change-business works on the assumption what has happened will continue

• in many markets there may be disruptive change that alters market conditions significantly and makes extrapolation of limited value