Markets

Question 1

Markets

Answer 1

A meeting place between buyers and sellers
where goods and services are exchanged, usually
for money.

Question 2

Market share

Answer 2

this measures the sales of a business relative to the market size

Question 3

What is the equation for calculating market share

Answer 3

Sales of a business
———————————— x100
total sales in the market

Question 4

importance of having a high market share

Answer 4

• Helps business to meet business objectives,
  e.g. survival, growth, profit maximisation,
  increased market share.
• Increases businesses overall profitability. Link
  between market share and profitability.
• Able to benefit from economies of scale.
• Can become the brand leader.
• Edge over competitors.
• Attract new shareholders.
• Investment into research.

Question 5

Global markets

Answer 5

Global marketing is all about selling
goods or services to overseas markets. Different
marketing strategies are implemented, based on
the region or country the company is marketing
to.

Question 6

advantages of global markets

Answer 6

Higher earnings – likely to be higher
earnings, if margins in overseas markets
exceed those at home.
Spread risks – by moving into new markets
risks are now spread.
Economies of scale – this move into
global markets is likely to lead to increased
economies of scale.
Survival – some businesses need to be global
to survive.
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 7

Seasonal markets

Answer 7

Many markets have large seasonable variations.
Classic examples are ice cream (during the presummer period), fireworks and diet plans (in
January)

Question 8

Trade (B2B) markets

Answer 8

• Trade marketing is the marketing role that
  focuses on selling and supplying to distributors,
  retailers, wholesalers, and other supply chain
  businesses instead of the consumer.
• Objective of trade marketing is to increase
  demand for products/services supplied within
  the supply chain.
• Trade marketing is not an alternative to brand
  and consumer marketing, but rather acts as
  a support to traditional consumer-focused
  marketing strategies.

Question 9

mass marketing

Answer 9

Mass marketing involves a business
aiming products at a whole market, rather than
particular parts of them, for example, tomato
ketchup, tea bags, ITV, Vauxhall Astra, washing
powder.

Question 10

Disadvantages of mass markets

Answer 10

A business must be able to produce goods on
a large scale – this is expensive to set up.
If demand should fall, the business will be left
with unused resources.
Products need to be heavily differentiated
from the competition as can be very fierce, as
Coca Cola and Pepsi Cola clearly show.

Question 11

Advantages of mass markets

Answer 11

A company can produce large numbers of
relatively standardised products – the cost
per unit should be low so can benefit from
economies of scale.
Untargeted marketing can be used, such
as in national newspapers and on national
television.
Low-cost operations, heavy promotion,
widespread distribution and the development
of market-leading brands are key features.

Question 12

Niche Marketing

Answer 12

A niche market is a specialized market segment where you cater
for the demand for products/services that are not currently being supplied by
the main suppliers. It is essentially a narrowly defined market segment.

Question 13

Niche Marketing

Answer 13

Businesses can charge higher prices/premium prices that customers are
prepared to pay. Therefore, profit margins may be larger.
Able to sell to markets that have been overlooked or ignored by other
businesses – can avoid competition, at least in the short run. The great
advantage of being the sole supplier in your target market.
By targeting specific market segments a business can focus on needs of
their customers in these segments, thereby is providing a better product
or service – can get ‘closer’ to the customers.
Promotion costs can be kept lower as the business can focus on a
specific target group, unlike other forms of promotion which tends to aim
at a broader segment of the population.
In a recession, niche markets may have characteristics which enable them
to weather difficult trading conditions.

Question 14

Disadvantages of niche markets

Answer 14

Businesses that successfully exploit a niche market often attract
competition.
By their nature, niche markets are small and are often unable to sustain
two or more competing businesses.
Cannot benefit from economies of scale.
Large businesses joining the market may benefit from economies of scale
which small businesses are unable to achieve.
Does not allow the spreading of risks – are often over-reliant on one
product and so are vulnerable to changes in taste, fashion, economic
downturn.
As they have a small number of customers, they tend to face bigger and
more frequent swings in consumer spending. Rapid growth in sales can
often be followed by rapid decline in sales. Can be volatile.
High prices charged in current economic climate could lead to switching
purchases.
Hard to expand.
Smaller market/limited profit.
Harder to raise finance – by the very nature of a niche market they are
considered a high-risk business

Question 15

Market segmentation

Answer 15

Market segmentation is breaking down a market into sub-groups that share similar characteristics.
* Identifying and targeting of groups of people with similar needs and developing products or services for
each of them

Question 16

Methods of Market Segmentation

Answer 16

DEMOGRAPHIC
gender
age
GEOGRAPHICAL
religions of the country
PSYCHOGRAPHIC
personality and emotionally based behavior
personality and lifestyle
culture, religion/ethic grouping
polotical voting preferences

Question 17

what are the rules of market segmentation

Answer 17

Segments must be recognisable.
* Must be different enough from other
segments to make producing for that segment
worthwhile.
* Segments must have critical mass. This means
that they must be big enough or produce
enough sales value to make the production of
products or services targeted at the segment
worthwhile.
* Segments have to be targetable. Having their
own identity means that they can be promoted
to, and have marketing directed towards them.

Question 18

BENEFITS TO THE CUSTOMER OF
MARKET SEGMENTATION

Answer 18

• receive a product that is closer to their
  expectations
• can help them stick to their desired principles
• can fit better with their budgets and lifestyle
• can be superior to the competition
• can make them feel that they are getting value
  for money
• because marketing is targeted – the consumer
  is aware of new features of products.

Question 19

BENEFITS TO FIRM OF
MARKET SEGMENTATION

Answer 19

Businesses would hope to gain greater
knowledge about its customers so that it
can vary its products to suit their needs – the
information will allow businesses to sell more
products and make more profit.
* Can identify requirements/match the needs
of different groups more precisely – therefore
allowing them to meet needs of different
segments more effectively than the competition.
* Can target their advertising to specific groups,
thereby maximising its effect – avoids wasteful
marketing activities that are not targeted.
* To develop profiles of the different markets.
* Can increase brand loyalty because customers
appreciate that their needs are being met.
* Higher profits – can develop premium segments
in which customers accept higher prices.
* Supports the development of niche markets.
* Prevents products being promoted to the wrong
people, which would waste resources and
possibly lead to losses.
* Can adjust the product to consumer
preferences – thus maximising potential of
market share.