Markets

Question 1

Define customer.

Answer 1

Someone who wants to buy a product from a business.

Question 2

Define consumer.

Answer 2

Someone who uses goods and services produced by businesses.

Question 3

Define market.

Answer 3

A place where buyers and sellers meet trade goods and services with each other.

Question 4

Define competition.

Answer 4

Where two or more sellers of similar goods or services act independently to persuade buyers to choose their product.

Question 5

What has revolutionised competition?

Answer 5

The rise of the internet and easy comparison of prices and services have revolutionised competition

Question 6

What are the different types of markets?

Answer 6

1) Local market.

2) Global market.

3) Seasonal market.

4) Mass market.

5) Niche market.

6) Trade market.

7) Consumer markets.

Question 7

What is a local market?

Answer 7

Where customers only travel a short distance to purchase goods or services from sellers. They are easy to access but are usually small.

Question 8

What is a global market?

Answer 8

Where goods and services are offered for sale by businesses across different countries. With increasing use of the internet physical borders to buying and selling products are becoming less important.

Question 9

What is a seasonal market?

Answer 9

A market where sales are concentrated in particular part of the year rather than being spread throughout the year.

Question 10

What is a mass market?

Answer 10

Refers to a large market of customers which is undifferentiated and that sells products and services to suit a large number of people.

Question 11

What is a niche market?

Answer 11

A niche market is the smaller section of a larger market on which a product or service is focused. It is aimed at satisfying specific market needs by creating a carefully tailored product.

Question 12

What is a trade market?

Answer 12

Where a business is selling to another business rather than to an ordinary house holder. Branding tends to be unimportant as businesses want to buy high quality products for good prices. This type of market is known as business to business or B2B.

Question 13

What is a consumer market?

Answer 13

Selling a product to the general public. Branding is heavily focused on and the buying process is very short and is more focused on emotional issues.

Question 14

What are the advantages of operating is a mass market scale?

Answer 14

1) Being able to purchase goods and materials in bulk ( economies of scale). Dealing with high sales volumes makes it easier to afford large advertising and marketing campaigns.

2) Untargeted marketing can be used such as in national newspapers and on national television.

Question 15

What are the disadvantages of operating in a mass market?

Answer 15

1) Competitions is likely to be fierce as businesses are attracted to potentially high sales levels. To stand out from the crowd a unique selling point is hugely helpful.

2) A large scale of goods need to be produced and this is expensive to set up.

3) If demand suddenly falls there will be a lot of product waste.

Question 16

What is an advantage of operating in a niche market?

Answer 16

There is less competition from other businesses and products can be tailored to meet customers needs.

Question 17

What are the disadvantages of operating in a niche market?

Answer 17

1) The smaller part of the larger market there are the fewer potential customers, therefore it may be difficult to persuade retailers to stock the products.

2) Cannot benefit from economies of scale.

3) Harder to raise finance as they are seen as high risk businesses.

4) Does not allow the spreading of risks.

Question 18

What is the difference between niche markets and mass markets?

Answer 18

1) A niche market is small, but focused on one specific type of customer.

2) A mass market product may have a lower price than a niche market product.

3) Identifying a new niche market is a classic way in which new small firms can find a profitable niche for themselves.

Question 19

What is market analysis?

Answer 19

The process of gathering information about anything that has or will affect conditions in the market in which a business operates.

Question 20

What is market data?

Answer 20

Information collected by a business from different sources.

Question 21

What can market data help businesses to understand?

Answer 21

1) Market size.

2) Market share.

3) Market trends.

Question 22

What is market size?

Answer 22

The total value or quantity of demand in a specific market or period of time.

Question 23

What is market share?

Answer 23

The proportion of sales a business or product has achieved expressed as a percentage in a period of time.

Question 24

What is market trends?

Answer 24

Taking a series of market data over a period of time to try to predict what will happen in the future.

Question 25

How can a business use market data to understand market size, share and trends?

Answer 25

Business can use market data to analyse and predict future trends to inform important decisions such as whether to make more products or introduce new ones.

Question 26

Define market segmentation.

Answer 26

Dividing a market into a smaller set of customers who have similar needs and interests.

Question 27

How do you calculate market share?

Answer 27

(Sales of business / total sales in a market) x 100

Question 28

Why is it important to have a high market share?

Answer 28

1) Helps businesses to meet objectives e.g. survival, growth profit maximisation. 2) Increases businesses overall profitability. 3) Able to benefit from economies of scale. 4) Edge over competitors. 5) Attract new shareholders. 6) Investment into research. 7) Can become the new brand leader.

Question 29

What are advantages of global markets?

Answer 29

1) Higher earnings: likely to be higher earnings, if margins in overseas markets exceed those at home. 2) Spread of risks: By moving into new markets risks are now spread. 3) Economies of scale: This move into global markets is likely to lead to increased economies of scale. 4) Survival: Some businesses need to be global to survive. 5) Saturation of the home market: The business may have the finance to expand, but be unable to do so because of competition so they take advantage of entering a new market.

Question 30

What are methods of segmentation?

Answer 30

1) Demographic: - Gender -Age - Socio economic groups/ social class 2) Geographical: - Region of the country 3) Psychographic: - Behavioural segmentation - Personality and life style - Cultural - religion/ ethnic grouping - Political voting preferences

Question 31

Why is segmentation important?

Answer 31

1) It allows a business to decide which segments it wants to focus on in terms of product or service. 2) Marketing can be more effectively focused on a specific set of customers. 3) The business can become more cost effective and efficient. 4) Customers are more likely to be able to buy products or services that meet their specific needs potentially at a lower cost.

Question 32

What are the benefits of segmentation to the customer?

Answer 32

1) Can receive products closer to their expectations. 2) Can help them stick to their desired principles. 3) Can fit better with their budgets and lifestyle. 4) Because marketing is targeted the consumer is aware of new features of products.

Question 33

What are the benefits of segmentation to the firms?

Answer 33

1) Greater knowledge about customers so that its products suit their needs. 2) Can target their advertising more precisely therefore maximising its effects- avoids wasteful marketing. 3) Can increase customer loyalty because customers appreciate that their needs are being met. 4) Higher profits - can develop premium segments in which customers accept higher prices.

Question 34

What is a disadvantage of segmentation?

Answer 34

Producing a number of products to suit different tastes is expensive and can make it difficult for any of their products to make a profit.

Question 35

What is psychographic segmentation?

Answer 35

The process of dividing a market into segments based on consumer personality traits, values, interests, lifestyles and opinions. It focuses on psychological aspects of consumer behaviour.

Question 36

What are the key limitations of psychographic segmentation?

Answer 36

1) Its difficult in measurement: Psychographic traits like values, life style, attitudes and personalities are often abstract and harder to quantify compared to more concrete segmentation factors such as demographics. This makes it challenging to gather reliable and consistent data as people’s behaviours and attitudes can change over time or in different contexts. Psychographic segmentation often requires extensive research, surveys or qualitative analysis, which can be time-consuming and costly for companies. 2) Its subjectivity: can lead to imprecise targeting as the lines between psychographic groups maybe be blurred; marketing campaigns could be less effective if they don’t fully resonate with the intended audience.

Question 37

What is behavioural segmentation?

Answer 37

Behavioural segmentation divides a market based on consumer behaviours such as their purchasing habits, brand loyalty, usage frequency, or interaction with products. It focuses on how customers act rather than who they are (demographics) or how they think ( psychographics).

Question 38

What is the key limitation of behavioural segmentation?

Answer 38

It’s short term focused and lack of depth understanding motivations. Whilst it identifies consumer behaviours, it doesn’t always explain the underlying reason or psychological drivers behind those behaviours. This can lead to marketing strategies that address symptoms…