Paper 1- Theme 1.1- Meeting customer needs (& branding) Flashcards
Define Dynamic market
Market that is constantly changing
- business respond to changing customer needs by improving existing p/s or introducing new ones
Positives of online retailing (for business and consumer)
- breaks geographical barriers
- more price transparency for customers (can get cheaper price)
- business can access more & wider markets
- business don’t pay for rent
Negatives of online retailing (for business and consumer)
- more competitors
- distribution, delivery and storage costs
- customers more vulnerable to fraud
- not all customers can access/ use online retail
Factors causing markets to change
- changes in consumer tastes and trends
- government intervention - legislation changes way the market operates
- increasing digital economy
How competition affects market
- pricing of products
- buying power of customer (if competition is high)
- selling power of business (if competition is low)
- ability for new firms to enter market
define risk
How to mitigate it
probability that things will not go as planned
- diversify
- take calculated risks
- look for higher returns on risky decisions (made more worthwhile)
Define uncertainty
How to mitigate it
when business are unable to predict external shocks or future events
diversify
contingency plans in place
buffer stock and cash
become agile in decision making and action taking
Market growth formula
New market size - old market size
—————————————————— x 100
original market size
define product innovation and process innovation
product innovation- new technologies are used to create new products
process innovation - new technologies are used to improve production methods, to reduce costs but maintain or improve quality
Ways businesses can react/adapt to change
offensive - try to increase sales or develop new markets (first mover advantage)
defensive- react to what competition does and maintain market share
mixture of both
Define a brand
A product or service produced by a firm that uses a unique name, design or symbol, in order to differentiate it from competition
identified through: logo, name, shape, colour
What is branding
the process of creating a unique name, design or symbol for a product or service, in order to differentiate it from competition
What is competitive advantage
a feature of a business that allows it to perform more successfully than others in a market
Benefits of a business building a brand
- create customer loyalty- repeat purchases
- brand adds value - can charge higher prices (less advertising spend when established)
- brand extension- adding products to a recognised brand name means loyal or familiar customers or more likely to try it
- brand personality- take on a persona with human characteristics (more relatable for customer)
- reduced price elasticity of demand- demand stays consistent
Disadvantages of Branding
- high costs associated with initial promotion of brand and also maintaining of brand
- single bad event can affect all brand’s products
List the types of brands
Product brand Service brand Corporate brand Umbrella brand Own label brand - retail outlet assign branding to a range of products (essential Waitrose) Global brand -operates worldwide
Define an umbrella brand
- a brand is assigned to more than one product
e. g. Mondelez produces Cadbury’s dairy milk and Cadbury’s oreo
Define a corporate brand
brand the promotes the name of their corporate entity
e.g. Nestle promote all their products with their name - Nestle Cheerios
Ways to build a brand
- advertising- creates familiarity with brand through repetition, encourages new customers to try product
- establish USP- how a business differentiates from competition, creates brand loyalty as customers return for your niche
- sponsorship- can establish brand in mainstream sport and media, can create a personality
- social media use - humanising the brand and can connect with consumers, heavily increase brand awareness (50% of world pop on social media)
how social trends are reflected in changes in branding and promotion
- viral marketing - strategy that encourages people to pass on messages about a product electronically to to others
- social media - enable content to be shared and created
- emotional branding - using emotions of a consumer to build a brand
- aim to develop emotional relationship with consumer and brand (brand loyalty)
define market research
collection and analysis of data to gain a better understanding of the target market-(tastes and trends)
One benefit of primary that is a negative of secondary research
Primary research isn’t available to your rivals
uses of market research
- quantify likely demand levels
- understand needs and wants so product can be tailored
- insight into trends of consumer behaviour
drawback of market research
- can hinder innovation
e. g. Ford said that if he asked his consumers they would’ve wanted a faster horse not a car
how does technology support market research
websites (cookies and polls)
social networks (likes, customer feedback, reviews)
databases (discovering patterns in trends in large dataset AKA data mining)
common characteristics that split the market
demographic - social characteristics (age, gender, personality)
geographical- (where they live)
income levels - and their job roles
behavioural - reasons, frequency and method of purchase
why is market segmentation useful
- targeted advertising
- focus on most profitable markets
- understand needs of wants of each subgroup of consumer so can identify new products
What is market segmentation
when a business splits the market into subgroups of consumers with common characteristics
Define market mapping
-used by businesses to position their brand against different variables (price, quaking) to compare their product to their competitors
purpose of product differentiation
- to prevent direct competition
* enable business to increase price
how products can be differentiated
• actual product differentiation
- unique function, design, performance
• psychological factors
- consumers ‘consume’ brand and product due to persuasive advertising (endorsements and sponsorships)
define adding value to a product
- increasing the gap between cost of supplies and the price a product is sold at by creating an attractive image or quality product
define market orientation
-outward looking approach to new product development where key focus is consumer needs and wants
- adapt based on consumer needs
- informed by market research
pros and cons of market orientation
pro- more likely to produce a product customer will want to buy
-reduces but not eliminate the risk of product development
con- hard for dynamic markets
- costly and time consuming
- may move away from distinctive capabilities, as focused on fulfilling market
- research may not guarantee success
define product orientation
inward looking approach to product development where focus is the business’s key strengths and what products can be made with there firm’s production process
- informed by R&D
- product of higher quality
pros and cons of product orientation
pros- more money spent on improving product, not on understanding market (add value)
- first mover advantage from new R&D breakthroughs
cons- products may have a lack of demand (no market for it)
define product differentiation
the actual or perceived differences of a product or service that convince customers to buy it over substitutes
