meeting customer needs - advantages, dissadvantages and processes

Question 1

What is the 5 steps of the process of marketing?

Answer 1

1) establish a marketing objective. It sets out what the marketing department is trying to achieve (e.g. £1 million proffit by end of the year)

2) Gather, research and analyse the market. (how many competators, is it a profitable market, how likely are you to make sales and how many big firms are already in that market)

3) Devise and implement a marketing strategy (plan)

4) Review (did you achieve your obective?)

5) Cycle repeats

Question 2

What are the three dissadvantages of niche markets?

Answer 2

1) higher price - cant exploit EOS as niche firms typically have relatively small numbers of cutomers so the average costs of produciton will be higher which implies higher prices will need ot be charged to make a profit.

2) Difficult to get retailers to stock the product (FOR NICHE MANUFACTURERS) - a niche producer (manufacturor) may find it hard to get retailers to stock the product as there are fewer potential customers so less money. they would rather stock a well-known mass market product that will earn much more.

3) Vunerable to market change - Niche firms typically only have 1 or 2 product lines available for sale so if customer tastes and preferences alter, a niche producer will have no other products to fall back on making survival more difficult.

Question 3

what are the 3 advantages to niche markets?

Answer 3

1) less competition - large firms are not attracted as there is not enough profit for it to be considered worthwile.

2) More tailored products - niche firms can tailor products to suit specific customer tastes or requirements enabling niche market firms to attract enough customers to produce healthy sales and profits.

3) Lower advertising costs - niche firms tend to have relatively small cutomer mases often concentrated in the locsal area so epencive nation wide promotion is not needed lowering advertaising costs (and price of production).

Question 4

What are the 5 dissadvantages of mass marketing

Answer 4

1) Not responsive to individual customer needs - Products can not be tailored to suit specific customer taste or requirement. For those customers who want a personalised product/service, they won’t be served by mass market producers.

2) High competition - As the profit potential is enormous, many firms are attracted into the marketplace. So mass markets are usually highly competitive markets to operate in. (There are many firms due to the amount of money to be made.) making working in a mass market more complicated.

3) USP (unique selling point / proposition) Required - particularly important in mass markets given the large range of similar / competing products in the marketplace. It helps the product to stand out and attract customers.

4) Can br very expensive.

5) May be diffuclut to target groups of very different consumers with a single campaign.

Question 5

What are the 6 advantages to mass markets

Answer 5

1) You can exploit purchasing EOS (economies of scale) - A firm that serves the mass market will typically be a large firm that serves thousands/millions of customers. As a result, firms can bulk buy their stock. Suppliers will typically give a ‘bulk buying discount’ lowering a firm’s costs of production.

2) Marketing EOS (economies of scale) - Adverts impose a single one-off cost to a business. Large firms will typically have multiple product lines. E.g: boots - even though only one avert has to be paid for, the whole product range is advertised. This brings down the average cost of marketing. (more in notes).

3) Stable demand patterns - Forecasting scales is relatively simple in a mass market because the same large group of consumers typically ‘repurchase’ every week/month. Scale patterns for mass market firms are relatively stable which gives the mass market firms (e.g. colgate) certainty. (You know roughly what your sales will be every week/month.)

4) High sales/profit - Sales and profit will typically be high in a mass market. This is because thousands/millions of consumers will be served. This makes operation in a mass market an attractive option for many businesses.

5) High number of potenital customers and therefore a large potential market.

6) May increase brand awareness of the product or servic and thus attract consumers who were mot previously aware of the product.

Question 6

what are the four causes of a dynamic market

Answer 6

1) Online retailing - ASOS? - The emergence of e-commerce has meant that consumers can purchase goods and services from their homes, rather than visiting physical stores. For firms that have offered consumers an online shopping experience, businesses such as ASOS have experienced rapid increase in their sales.

2) Changes in affluence - eating out? - As households get more affluent over time certain businesses benefit from this (like leasure and hospitality).

3) Innovation and market growth - electric cars? - Technology markets are innovative markets. I.e. There are always new products being launched to replace older technologies it can cause a rapid increase in some firms’ sales and a rapid decrease in others creating a dynamic market.

4) Adapting to change - vegan cuisine? - Society’s tastes and preferences change over time. If a firm responds to a change (a trend - changed preferences) in demand then their sales may rapidly increase.

Question 7

what are two problems with dynamic markets

Answer 7

1) Difficult to forecast sales - why? - Sales are not consistent and predictable in a dynamic market. It is difficult to forecast sales as the market is constantly changing.

2) Difficult to anticipate changing consumer patterns - Consumer demand patterns change rapidly as new fashions and trends emerge. It is not possible for firms to predict what the new ‘must have’ item will be so firms need to be very flexible and adaptable to be able to respond quickly .

Question 8

advantages of prodcut orientation

Answer 8

Enables a business to focus on innovation and R&D (Research and Development).

Works particularly well in technology driven markets. Eg. Virtual reality/Mobile phones/Games consoles/TVs. Enables the creation of new ‘dynamic markets’.

Is the only viable approach when a product doesn’t currently exist in the marketplace.

As they are solely focused on the product then it will allow the firm to get better at creating it which may allow you to increase the scale of the business and exploit economies of scale.

Question 9

disadvantages of product orientation

Answer 9

There may not be a market to sell the new product too (In which case the firm has wasted millions of pounds on R&D).

If the product does not succeed then the firm cannot recoup the money spent on R&D.

If a competitor is trying to design the same product and one gets there first that one is then the main firm and the other is less popular. Eg. Virgin Galactic.

Question 10

advantages of market orientation

Answer 10

Customer expectations are met because the products that are produced come from research that indicates what customers actually want to buy.

Product lines are regularly updated to reflect changing customer tastes and preferences.

By focusing on consumers, if needs are met customer loyalty and satisfaction may be built.

Question 11

disadvantages of market orientation

Answer 11

Can be time consuming and expensive to conduct regular market research to identify the latest wants and needs of the market.

No new innovations come from this approach as consumers can only demand what they know about already.

It can be confusing for the consumer because product lines will regularly disappear from the shelves as consumer tastes change.

Question 12

advatages of quantitatuve primary research

Answer 12

A statistically valid result can be obtained that allows a business to make a marketing decision based on scientific research.

Easier to computer analyse. It can do all the analysis for you.

Question 13

disadveges of quantitative

Answer 13

The gathering of quantitative research is time consuming and expensive (NB: particularly if a market research agency is used).

Doesn’t reveal consumer psychology. I.e. why a consumer feels a certain way about a product.

Doesn’t provide in depth responses.

Question 14

advatages of qualitative primary market research

Answer 14

Enables a business to gain an in-depth understanding of a consumer’s attitude to a product.

Enables the use of open ended and follow up questions.

Question 15

disadvantges of qualitative primary market research

Answer 15

It is only conducted amongst a small group of respondents and hence the sample size of each focus group session will be small.

Need to employ a psychologist to conduct the focus group session which costs money.

Difficult to analyse the results quickly as the results are not yes or no and no two answers will be the same they need to be analysed.

It has to be done in person as follow up questions may be required.

Question 16

advantages of primary market research

Answer 16

Up to date - this means that firms are able to assess current tastes and preferences of consumers and then modify their product line accordingly.

Tailor made - primary research can be tailored to suit the specific requirements of the firm who is conducting that research. As a result, the information gathered is perfectly suited to the needs of the business that carried out the research. You can find out the exact thing they want to know.

Competitors have no access to the primary research that has been collected.

Question 17

disadvantages of primary market research

Answer 17

Sample size - a business will not be able to research the entire population . Therefore, the business needs to create a sample. If the sample size is too small, the views expressed by the sample group will not represent the overall population views. This means that any decision made based on research from the sample will be inaccurate.

Sampling bias - the composition of the sample must reflect the composition of the population as a whole. E.g if a firm’s population is equally composed of men and women, the sample should be 50% male respondents and 50% female respondents. Otherwise, the sample would be biassed and any marketing decisions made on the basis of that sample would not truly reflect the wants of the population.

Primary market research goes out of date quickly. This means:

1) any marketing decision made on the back of old data, will not be the best possible decision.

2) Market research needs to be updated on a regular basis. This is because consumer tastes and preferences change rapidly.

Time consuming and expensive - as primary market research is first hand, it takes a long time to collect it. If a market agency is used to conduct the research, it can also be very expensive.

Question 18

advantages of secondary market reasearch

Answer 18

Often free and easy to obtain.

Good source of market insights.

Quick access and use.

Question 19

disadvantges of secondary market research

Answer 19

Can quickly become out of date.

Not always tailored to specific research needs.

Specialist reports are often quite expensive.

May be biassed and so a firm using secondary data should be mindful of where that data has come from and who has produced it.

Question 20

what are the benefits and issues of using websites in market research

Answer 20

issues - Not everyone shops online as elderly aren’t as tech savvy. Not everyone has access to the internet. Not everyone stops to fill out the survey so views are not accurately represented.

Benefits - cheap once set up.

Question 21

advantages for market segmentation

Answer 21

Tailored products - a firm can gain a very clear idea of where the gaps are in each market segment. Once a gap has been identified in a particular segment, a business can produce a highly tailored product to exactly match the need that has been identified by the market segment.

Increased sales - the product exactly matches the needs of the market segment.

Question 22

disadvanyages of market segmentation

Answer 22

Smaller volume sales (difficult to generate profit) - as the product produced will not be targeted at the whole, mass market, there is a restriction on the value of sales that can be made by producing a segmented product. Producing a mass market product would (in theory) make the firm more money.

Expensive - the process of segmentation is not cheap. As the market has to be divided up into specific segments, each of which then has to be investigated, it will cost a firm a lot of money to complete the research.

Question 23

advantages of market mapping

Answer 23

This enables a firm to spot gaps in the market.

It enables the nature of competition in a market. - Might be that through the market mapping process, the firm decides that the market is already too competitive to make it profitable to enter.

Question 24

disdavantages to market mapping

Answer 24

Identifying that a gap exists in the market, does not mean that demand exists in the gap. There may be a very good reason why competitors have decided not to set up in the ‘gap’.

Is the market mapping model too simplified? - A market map only uses 2 criteria as the basis of the analysis. In reality, there may be many different facets (parts) of a market product (e.g. price, image, quality, function, durability) that are important to consumers when making a purchasing decision. Is the market mapping too simplistic a tool?

Question 25

advantages of product differentation

Answer 25

Higher value added - value added = selling price per unit - cost of materials bought in. When a firm successfully differentiates itself from the competition, it enables the firm to set a high selling price. This allows the firm to gain a high value added on each unit sold, which in turn helps boost the business’ profit.

Premium pricing possible - Defn: premium pricing - when a business sets a high selling price in a deliberate attempt to exude an image of luxury / superiority / quality e.g.Louis vuitton bags are premium priced.

High profit margins - the ability for successfully differentiated firms to set very high selling prices on the bach of real or psychological differentiation, enables their firms to command high profit margins on each unit sold. Firms with high profit margins are those that can comfortably cover their costs. Defn: profit margins - the profit margin is the difference between the selling price of the good and the average cost of production.

Question 26

disadvantages to prodcut differentation

Answer 26

Are consumers prepared to pay the price? - there is a limit to how high a firm can force the selling price of a good. There will always come a point where consumers will decide that the product is too expensive and stop purchasing it.

Costs may be higher - even though high selling prices can be charged for a successfully differentiated product it’s important to remember that a quality item will use quality raw materials and components that are expensive. This squeezes the value added that is possible. E.g. selling price per unit (high price) - cost of materials bought in (high cost) (if differentiation is real).