3.3.2 Understanding markets and customers

Question 1

Primary research

Answer 1

-Data collected first hand for specific research purpose
-Collected through focus groups, surveys and questionnaires

Question 2

Primary research advantages

Answer 2

-Gives a real customer view (accuracy)
-Relevant to the business
-Competitive advantage
-Kept private (not publicly available)

Question 3

Primary research disadvantages

Answer 3

-not fully representative of everyone
-time consuming
-costly
-risk of survey bias

Question 4

Secondary research

Answer 4

-Data that already exists and which has been collected for a different purpose
-Collected through google, Government departments, trade associations

Question 5

Secondary research advantages

Answer 5

-Access for all
-Quick to obtain
-Possible cheaper option

Question 6

Secondary research disadvantages

Answer 6

-Unreliable
-Vague (not specific to your business)
-Specialist reports often quite expensive

Question 7

Market mapping

Answer 7

Used to help identify gaps in the market (an opportunity where no business operates in that area/no product in that area)

Question 8

Extrapolation

Answer 8

Uses trends established from historical data to forecast the future

Question 9

Extrapolation advanatges

Answer 9

-Gives a clear projection
-Makes sense to use past data
-Not much data required
-Simple

Question 10

Extrapolation disadvantages

Answer 10

-Might not be accurate/unreliable (its a prediction)
-No consideration of charge
-Only works for older business

Question 11

Sampling

Answer 11

Gathering of data from a sample of respondents, the results of which should be representative of the population as a whole

Question 12

Random sampling

Answer 12

Each individual is chosen entirely by chance and has an equal chance of being selected

Question 13

Quota sampling

Answer 13

Segmented into subgroups before a judgement is made in selecting respondents that are representative of that subgroup

Question 14

Stratified sampling

Answer 14

Segmented into subgroups before respondents are randomly selected

Question 15

Quantitative

Answer 15

-Concerned with data
-Based on larger samples
-Collected through surveys

Question 16

Quantitative benefits

Answer 16

-More accurate
-More reliable/trustworthy
-Easier to analyse/trend
-Quicker to collect

Question 17

Quantitative drawbacks

Answer 17

-Might not apply to everyone
-Accuracy
-Less informative
-Doesn’t explain why

Question 18

Qualitative

Answer 18

-Based on opinion
-Why? Would? or How?
-Aims to understand why customers behave in a certain way

Question 19

Qualitative benefits

Answer 19

-More specific
-Gathering of opinions
-More informative

Question 20

Qualitative drawbacks

Answer 20

-Not collecting as much data (small amount for the market)
-Time consuming
-Harder to make trends/analyse

Question 21

The value of sampling depends on…

Answer 21

-Sample technique used
-How the sample was carried out
-Size of the sample

Question 22

Size of the sample depends on…

Answer 22

-Budget available
-Importance of accuracy
-Degree of confidence in results

Question 23

P.E.D

Answer 23

-Price Elasticity of demand
-Measures the extent to which the quantity of a product demanded is affected by a change in price

Question 24

Elasticity

Answer 24

Measures the responsiveness of demand to a change in a relevant variable (such as price or income)

Question 25

Price Elastic

Answer 25

-More than 1
-Change in demand is more than the change in price
-Very responsive

Question 26

Price inelastic

Answer 26

-Less than 1
-Change in demand is less than the change in price

Question 27

Factors influencing P.E.D

Answer 27

-Brand loyalty
-Necessity (more demand for the more necessary products)
-Habit (demanded and consumed as a matter of habit)
-Availability of substitutes
-Time (price change tend to have less impact on demand than over longer periods)

Question 28

Income elasticity of demand

Answer 28

Measures the extent to which the quantity of a product demanded is affected by a change in income

Question 29

Normal products

Answer 29

-A rise in consumer income will result in a rise in demand
-A fall in consumer income will result in a fall in demand

Question 30

Luxury products

Answer 30

-Income elasticity is more than 1
-As income grows, more people spend their money on luxuries
-e.g Designer products, cars, holidays

Question 31

Necessities/inferior products

Answer 31

-Income elasticity is more than 1
-As income grows, less people spend their money on necessities
-e.g staple groceries (i.e milk), own label goods