Prelim Knowledge Flashcards
What are the 3 main sectors of industry?
Primary
Secondary
Tertiary
Describe the primary sector of industry
The primary sector is concerned with the extraction of existing raw materials or natural resources from the land. Any business which grows or extracts materials from the land is classed as a primary sector business.
Name some common examples of businesses in the primary sector of industry.
Farming
Mining
Fishing
Oil production
Describe the secondary sector of industry
The secondary sector is concerned with manufacturing. This means taking raw resources from the primary sector and creating new products with those resources.
Name some common examples of businesses in the secondary sector of industry.
Car manufacturers, food production or building companies.
Describe the tertiary sector of industry
The tertiary sector is concerned with providing a service, these are activities done by people or businesses for customers.
Name some common examples of businesses in the tertiary sector of industry
Hairdressers
Banks
Supermarkets
Cinemas
What are the 3 sectors of economy
The 3 sectors of economy are the private sector, public sector and third sector.
Within each sector there are different types of businesses with different objectives and aims.
Describe the private sector of economy
Private sector organisations, such as a local newsagent or large supermarket chain are owned and controlled by private individuals. Their primary aims are to survive and make a profit.
What type of organisations would be found in the private sector of economy
Sole traders
Partnerships
Private limited companies
Describe the public sector of economy
Public sector organisations are owned and controlled by the government. They aim to provide a service to the public and are funded by taxes. Public sector organisations function in areas such as health, education, housing and social work.
What type of organisations would be found in the public sector of economy
national government
local government
Describe the third sector of economy
Third sector organisations are set up to help a cause or provide a service to members. They aim to raise money and increase awareness for good causes. Examples of third sector organisations would be Oxfam, The Big Issue or a local youth club.
What types of organisations would be found in the third sector of economy?
charities
voluntary organisations
social enterprises
Describe a sole trader
A sole trader is a business owned by one person. They are usually small in size. Hairdressers, butchers, and electricians often operate as sole traders.
How are sole traders financed?
Sole traders rely on their own savings,
bank loans or loans from friends and family to finance their business.
What are the advantages of a sole trader business?
Easy to set up - Has less rules and regulations than other types of organisation.
Sole traders retain all profit for themselves
Sole traders make all the decisions by themself - they run the business as they see fit.
What are the disadvantages of a sole trader business?
It can be difficult to raise finance - banks are unlikely to give this type of business a large loan as it can be seen as risky.
Unlimited liability - A sole trader is liable for the organisation’s debts, personal assets such as cars or property are at risk to pay off the debt of the business.
Heavy workload - Sole traders have to shoulder the full burden of responsibility for their business, to keep labour costs low many will choose to do most the work themselves
Describe a partnership business.
Partnerships can have a minimum of 2 and a maximum of 20 partners.
Lawyers, estate agents, doctor and dental practises often operate as partnerships.
A partnership is a business set up by the deed of partnership document.
What is the deed of partnership document?
The deed of partnership document sets out the terms of the partnership. For example it states how much money each partner invested in the partnership and what role each partner will have in the partnership.
What is a sleeping partner?
A partner who invests but is not involved in the day-to-day running of a partnership is called a sleeping partner.
What are the advantages of a partnership business?
More equity available to finance the business compared to a sole trader - Banks are more likely to lend money to an organisation that has many partners
Different partners can bring different skills -a partnership running a garage might have some partners who are excellent mechanics while other partners may have excellent sales skills.
Workload is shared.
What are the disadvantages of a partnership business?
Unlimited liability - All partners have the worry of being liable for any business debt the partnership has.
Profit is shared between the partners - an individual in the partnership may make less than a sole trader.
Partners may not always agree on decisions for the business
Describe a private limited company (LTD)
A private limited company is more complex than a partnership or sole trader. In law, a private limited company is separate from the people who own it. Its finances are separate from their personal finances
The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.
A limited company is private when its shares are not available to the public by being bought and sold on the stock exchange.
A private limited company is controlled by a board of directors. This is a group appointed by the shareholders who oversee the running of the business.
How is profit split in a private limited company?
The profits of the business are divided between shareholders through a process known as dividends. A certain amount of profit is paid for every share that is owned in the business. The more shares that an individual has in the business, the larger the portion of the profits they will receive.
What are the advantages of a private limited company
Owner can retain control - An individual must be formally invited to buy shares.
Easier to raise money -More money can be raised by selling shares
Limited liability - limited companies have their own legal identity, their owners are not personally liable for the firm’s debts. meaning an investor only loses the initial stake if a company goes bust.
What are the disadvantages of a private limited company
Must be registered with the Registrar of Companies
The legal set up costs are expensive. Limited companies must use documents called Memorandum of Association and Articles of Association.
Because profits are only shared with shareholders it is harder to motivate and control workers who do not hold shares.
What are the benefits to a business of having good customer service?
Customer loyalty
Improved reputation
Employee satisfaction
What is customer service
Customer service is the service a consumer receives before, during and after they have purchased a good or a service.
Describe customer loyalty as a benefit of good customer service
If customers receive a good quality service they will be more likely to return. This will lead to increased sales and profits. It would also mean that customers do not take their business to competitors.
This also makes it easier to advertise new products as customers are already loyal to the brand
Describe improved reputation as a benefit of good customer service
Good customer service will improve a company’s reputation. Customers who have received a good service will be more likely to recommend the company to family and friends.
This can also attract new customers and increase a business’s market share which allows higher prices to be charged.
Describe employee satisfaction as a benefit of good customer service
Customers who are satisfied are less likely to complain. Having fewer complaints to deal with contributes to a business having a more motivated work force.
a good reputation and a low level of customer complaints means the business is more likely to attract a higher callibre workforce.
What are some of the consequences of poor customer service?
decrease in profits
bad reputation
loss of market share
loss of competitive edge
low staff morale
Name some of the ways a business can keep its customers satisfied
market research
staff training
after-sales service
customer care strategy
customer complaints procedures
quality products
Describe market research as a method of maximising customer satisfaction
Effective market research will allow a business to find out the needs and wants of its customers. This means that the product or service can be tailored to these needs, leading to greater customer satisfaction.
Describe staff training as a method of maximising customer satisfaction
Well trained staff will be knowledgeable about the business and will be able to deliver a higher standard of customer care.
Describe after sale service as a method of maximising customer satisfaction
This is the service provided by the company after a purchase has been made. This service includes returns and refunds, guidelines on how to achieve the best from the product or service and product maintenance.
Describe customer care strategy as a method of maximising customer satisfaction
This lets the customer know what level of service to expect and how complaints will be handled.
Describe customer complaint procedures as a method of maximising customer satisfaction
These include instructions on how employees should handle complaints such as the length of time it should take, who should deal with a complaint and how it should be processed. It is important to keep customers informed on the progress of the complaint.
If a customer complaint is handled effectively, the customer will be more likely to return to the business.
Describe the sale of quality products as a method of maximising customer satisfaction.
It is important that a company has good quality assurance procedures in place to ensure no faulty or low quality products or services are given to customers. A high quality product will ensure that a customer is satisfied.
What is a stakeholder?
A person or group with a key interest in an organisation.
Stakeholders want a business to do well because they will benefit from its success in some way. They can use their influence to change the fortunes of a business.
Name 3 internal stakeholders
Owners/shareholders
Managers
Employees
Name 5 external stake holders
Customers
bank
Government
Suppliers
Local community
Describe owners/shareholders (as stakeholders)
Owners and shareholders are the same. Shareholders are part-owners in the business.
Some owners appoint managers to run their businesses and to make profits for them. Other owners like to get involved in the day-to-day running of the firm. This can sometimes lead to disagreements between owners and managers.
Why do owners have an interest in the business doing well?
make a profit
receive high dividends ( A profit paid to shareholders)
How can owners influence a business?
investing or withdrawing equity into the business
changing management (at AGM)
Describe managers (as stakeholders)
Managers are entrusted by owners with the day-to-day running of their businesses. Managers have to motivate employees to be productive and to offer excellent customer service. Managers also have to report to the owners.
Managers live by their results. Poorly performing managers do not last long in post.
Why do managers have an interest in a business doing well?
Managers have an interest in a business doing well so that they:
get promoted
win bonuses
have job security
How can managers influence how a business operates
Managers can influence how a business operates by:
hiring and firing
creating company policies
making day-to-day decisions and long term decisions
Describe employees (as stakeholders)
Employees are often the front line of the business. They are the people who make the product or provide the service to the customers.
Employees have a massive effect on the outcome of the business.
Why do employees have an interest in the business doing well?
Employees have an interest in a business doing well so that they:
want job security
higher pay
improved working conditions
How can employees influence how a business operates?
Employees can influence how a business operates by:
increasing or decreasing productivity
providing good or bad customer service
in extreme cases, withdrawing their labour and going on strike
Describe customers (as stakeholders)
Customers are the people who purchase the product or use the service. They are the stakeholders who decide whether the business will be a success or not.
Customers will show loyalty to a business they like. However if a firm does not satisfy customers’ needs continuously, the customers will simply take their business elsewhere. This will have disastrous results for the business.
Why do customers have an interest in the business doing well?
Because they:
want quality products and services
want low prices
want value for money
How can customers influence how a business operates?
Customers can influence how a business operates by:
can decide whether or not to purchase the product or use the service
can affect organisation’s reputation by
word of mouth
Describe banks (as stakeholders)
Banks are organisations that lend finance to other organisations. They offer loans and mortgages, which are paid back in full, and with interest
.
Why are banks interested in a business doing well?
Banks have an interest in a business doing well so that they:
ensure the organisation can pay their loans in full and on time
How can banks influence how a business operates
Banks can influence how a business operates by:
permitting or denying loan requests
changing interest rates on loans offered
changing repayment lengths
Describe government (as a stakeholder)
Government is formed by politicians who run the country for the benefit of the population.
Governments try to encourage firms to invest and create jobs. The laws they introduce can sometimes help and sometimes hinder firms from doing this. This is because governments need to take into account the employment rights of employees as well as the development opportunities of business.
Why does the government have an interest in a business doing well?
Governments have an interest in a business doing well because they:
want firms to pay corporation tax
want firms to create jobs and wealth for the population
want firms to provide goods and services for the population
How can a government influence how a business operates
Governments can influence how a business operates by:
raising or lowering corporation tax
introducing or repealing laws that affect businesses
offering grants to incentivise firms to locate to depressed areas
Describe suppliers (as stakeholders)
Suppliers build their reputation on the quality of the goods or materials they provide. If the quality is good, delivered on time and in the quantity required suppliers will win repeat orders and secure future business.
Supplier - A business which provides other organisations with raw materials or goods.
Why do suppliers have an interest in a business doing well?
Suppliers have an interest in a business doing well because they:
want regular orders from their customers (the other businesses)
want prompt payment
How can suppliers influence how a business operates?
Suppliers can influence how a business operates by:
raising or lowering prices of goods
changing credit terms (The length of time a firm has to pay a supplier.)
changing delivery times
increasing or decreasing the quality of their goods/materials
Describe the local community (as a stakeholder)
The local community is made up of the people who live in the area where the business is located. Though not necessarily customers of the business they are all neighbours to the business.
They are concerned with the local environment, infrastructure and the impact the business has on jobs and prosperity on the local area.
Why do local communities have an interest in the business doing well?
Local communities have an interest in a business doing well because they:
want firms to bring jobs to the area
want good, safe environment to live in
want good transport and communication links
How can the local community influence how a business operates
Local communities can influence how a business operates by:
protesting and petitioning if unhappy at an organisation’s conduct
What are the 4ps?
Product
Price
Place
Promotion
Describe Product (4ps)
Product is the most important ‘P’ of the marketing mix. All products go through a life cycle of development, introduction, growth, maturity and decline. Branding is used to make a product stand out from its rivals.
What is a product?
A product is a good or a service that is sold to customers or other businesses. Customers buy a product to meet a need.
What are the stages of product development
In order:
Idea generation
Development
Prototypes and testing
Modifications
Patents and copyrights
Launch to market
Describe the idea generation stage of product development
Research and Development departments try to innovative and design products that are new or better than existing ones.
Describe the development stage of product development
Businesses aim to have an innovation in their new product that they can point to as a USP.
A good example of a product developed with a highly marketable USP was the first bagless vacuum cleaner.
USP - Unique selling point
Describe the prototypes and testing stage of product development
Prototypes are made and then undergo tests to ensure the product is safe, reliable, fit for purpose and one that customers can and will use.
Describe the modifications stage of product development
After seeing the prototype or early versions in use, alterations can be made to improve the product.
Describe the patents and copyrights stage of product development
Some products are registered for
patents to protect the design from imitation by competitors.
Describe the “launch to market” stage of product development
the product is put into production and a marketing and advertising campaign is launched to introduce and sell the product to customers.
Describe the product life cycle
All products go through distinct phases or stages. Together these are known as the
product life cycle
The number of sales and the length of a product life cycle might be different for different products but all products share a general pattern of growth and decline. This cycle can be shown on a graph of sales over time.
Many businesses record and track sales information like this to help them know when to adjust costs and price, to boost sales and to extend the life of the product.
Describe the development stage of the product life cycle
Product is not on the market yet. Research and development and testing take place. Prototypes are built and modified before a product is ready for launch. No sales are made. Development costs will need to be recovered later.
Describe the introduction stage of the product life cycle
Product is launched on the market. Advertising costs will be high in order for the product to get noticed
Describe the growth stage of the product life cycle
Sales begin to rise. Advertising costs are still high. A profit may be made, if all research and development and advertising costs have been recouped.
Describe the maturity stage of the product life cycle
Sales are at their peak. Advertising can be reduced as product is now well known.
Describe the decline stage of the product life cycle
Sales begin to fall.
Name and describe atleast 4 methods of extending product life cycle
Change product– New and improved versions of the product can be released… version 2.0 and then version 3.0.
Change price– Price can be lowered to allow new customers to buy it.
Change place– Products can be sold in different countries or territories to gain more sales.
Change promotion– Different advertising or sales promotion techniques can prolong the life of the product, giving it a new image.
Change packaging– The style of the packaging may be changed to give the appearance of a new and improved product.
Change usage– Existing customers can be encouraged to buy more of the product or to use it in a different way. For example breakfast cereals used advertising to show consumers eating cereal at different times of the day.
Change name– If a product has suffered from bad publicity and sales are falling, a tried and tested technique is to simply change the name of the product.
(It is unlikely all of the above will be needed but try to memorise as many as possible)
Describe branding
A business will brand its products so that those products have a strong identity. This makes the product more recognisable to customers and making it stand out from competitors.
Well known products often have memorable
branding.
Branding uses and promotes logos, slogans and unique design. The image of the brand is all important and this image is created through advertising. Brands cost a lot of money to build up.
What are the advantages of good branding?
Customer loyalty
Good image
Premium pricing
Can add to family of products
What are the disadvantages of branding?
High advertising costs
One mistake can tarnish brand reputation
Loyalty can be fickle
Describe price (4ps)
Price is an element of the marketing mix. Price is crucial to a product’s success as it must be appropriate for targeted customers.
What must be considered when a business is setting the price for a product (or service)
competition – Should a business follow the lead of its competitors when it comes to pricing or adopt its own pricing strategy?
quality – Does the product reflect its price?
image – In what ways will the price of a product affect a customer’s perception of it?
production cost – How will the cost of making the product be reflected in the price?
profit per unit – How much money should a business try to make compared to the cost of each individual product?
What are the 3 main long term practice strategies?
high/premium price
market/competitive price
low/value price
Describe the high/premium price strategy
Businesses that use a high price strategy deliberately have their price higher than rivals. This is to signal luxury or quality. They may not rely on a large number of sales but they will usually have a high
profit margin on each sale.
Describe the market/competetive pricing strategy
This long term pricing strategy relies on setting your price at the same level as competitors and rivals. The business will then compete on other factors such as convenience, customer services or after sales service.
Describe the low /value-price pricing strategy
This long term pricing strategy is set below the market price in order to attract customers.
Customers will often look for the product that is cheapest as a way of saving money. They will only do this if they see the product as value for money.
Low prices can be associated with poor quality, even if this is not always the case. This might put some customers off buying a product.
What are the short term pricing strategies
penetration pricing
promotional pricing
demand-orientated pricing
destroyer pricing
market skimming pricing
Describe the penetration pricing strategy
Penetration pricing is used to enter a new market. The price will be set lower than competitors to gain market share. Once a product becomes established the price will increase to be more like the market price.
Describe the promotional pricing strategy
This short term pricing strategy is when prices are reduced for a period of time. This is often used to attract a lot of media interest or to help clear old or obsolete stock, for example during January sales
Describe the Demand-orientated pricing strategy
This short term pricing strategy is used when demand for a product or service may change due to changes in consumer demand. This means that you may pay different prices for the same product or service at different times of day or at different times of year.
Describe the destroyer pricing strategy
Destroyer pricing is used to eliminate competition. It involves a business setting a very low price in order to attract customers away from competitors, who will struggle to match the low price and may go bust. Usually only large businesses can use this strategy as they can withstand the losses for a longer period than small businesses can. Destroyer pricing is illegal in the UK.
Describe the market skimming strategy
A new product is launched at a high price. At this early stage those people who “must have it” will buy the product despite its price. In this way a business is said to “skim the cream” from the top of the market.
Once the sales start to slow, the business will begin to lower the price so that more customers can afford their product. This short term pricing strategy can only work when there are little or no competitors in the market.
Describe place (4ps)
Where a product is sold is crucial to the success of a business. Key decisions have to be made in order to achieve the best place for the business.
What factors should be considered when deciding on a location for a business
type of business
availability of resources
availability of labour
footfall
competitors and exclusivity
finances
infrastructure
distribution
government legislation and planning
permission
Describe how the type of business may effect where a business should be located
Businesses in the primary sector of industry are concerned with extracting raw materials or natural resources. They have to be near these resources.
Businesses in the secondary sector are involved in manufacturing. They need to find a location that balances their access to the raw materials they use with the markets they send their products to.
Businesses in the tertiary sector need to be in a location where customers can access the services they provide.
Describe how the availability of resources may affect where a business needs to be located
Businesses must ensure that they have sufficient access to the resources they need. In some cases there will be a necessity to locate at very specific sites.
In other cases they will need reliable suppliers nearby who can deliver raw materials, goods for assembly, or even finished goods for retail.
Businesses will also need premises to operate from or sell to customers from.
Describe how the availability of labour may affect where a business has to be located
Businesses will need to ensure they have sufficient and suitably trained people nearby to employ. So being located near adequate sized population centres can be essential.
Describe how footfall may affect where a business has to be located
Businesses have to think about what is called passing trade. This is simply the number of people who pass by your shop or business on their way to work or some other activity.
It is also called footfall and ideally if you are located somewhere near a large population or near a sports stadium, a train station, or other popular shops, then your footfall will be high. The chance that people will come in and purchase something they saw in the window display increases if the footfall is good.
Describe how finances may affect where a business has to be located
The amount of money a business has access to will have an impact on the
location of that business.
For example, it is generally more expensive to rent or buy a location for a restaurant in the middle of a busy high street than it would be to rent or buy a location in a quiet suburb.
Describe how competitors may affect where a business has to be located
When there are many competitors in and around the same location offering the same products it can make it more difficult to attract customers and to make a profit.
Sometimes, however, it is good to locate near competitors. For example, food courts have rival businesses competing for customers but these businesses also benefit from attracting large numbers of customers who like the variety of the different foods on sale.
Describe how exclusivity may affect where a business has to be located
If a business can locate somewhere with few or even no competitors, then this gives them exclusivity and they can charge higher prices than normal. Airports, motorway services and train stations are all good examples of this. The price of fuel and food at a motorway service station is often higher than in towns and suburbs.
Describe how infrastructure may affect where a business has to be located.
Having the right access to good communications, utilities, and transport links is what is meant by having a location with good business infrastructure.
Having excellent internet access is an important requirement for any modern business. Reliable water and electricity supply is essential to all business locations.
What are the 4 main methods of distribution
Road
Rail
Air
Sea
What are the advantages and disadvantages of transferring products by road
Advantages:
One of the cheapest methods of transporting
Door-to-door delivery
Disadvantages:
Large products difficult to transport
What are the advantages and disadvantages of transffering products by rail
Advantages:
Can transport large volume of goods
Disadvantages:
Stations not always close to businesses or customers
What are the advantages and disadvantages of transferring products by air
Advantages:
Quickest way to transport goods to worldwide destinations
Disadvantages:
Very expensive
Large items cannot be transported by air
What are the advantages and disadvantages of transferring products by sea
Advantages:
Can transport large volumes in container ships
Disadvantages:
Very slow and time consuming
Describe how government legistlation and planning permission may affect where a business has to be located
Government will influence and on some occasions determine where a business is to be located. This may be for reasons of public health or general concerns for health and safety.
For example, nuclear power stations are located in remote areas away from areas of dense population. Factories that have industrial waste will often be located in industrial estates or out of town sites away from residential areas.
Planning permission has to be agreed and granted before a business can build on or extend a site. If the development of a site has an impact on a greenfield site it might not get the go ahead.
Describe promotion (4ps)
Promotion is one of the Ps of the marketing mix (along with Product, Price and Place). It is concerned with making customers aware of a product or service.
What are the two main methods for businesses to make customers aware
advertising
sales promotion
What is advertising?
Advertising is a paid communication that informs potential customers of a product or service.
Adverts can be different in terms of:
geographical reach
effectiveness
cost
medium
What are the 2 main types of advertising?
traditional advertising
digital advertising
Describe traditional advertising
Traditional advertising uses media and formats that have been around for a long time:
tv
radio
cinema
newspapers/magazines
billboards
What are the advantages and disadvantages of using TV for advertising
Advantages:
Can reach wide geographical audience
Demonstrations can be shown
The best advertising campaigns can be memorable
Disadvantages:
Very expensive
Viewers may not watch when adverts come on
What are the advantages and disadvantages of advertising using radio
Advantages:
Can reach a wide geographical audience
Cheaper to advertise than on TV
Disadvantages:
Only sound, no products or demonstrations can be shown
Listeners can ‘tune out’ during the adverts
Whata are the advantages and disadvantages of cinema advertising?
Advantages:
A captive audience
Adverts can be matched to audiences that represent market segments
Disadvantages:
Limited audience
What are the advantages and disadvantages of using newspapers/magazines to advertise?
Advantages:
Can target market segments through choice of newspaper or special interest magazines
Readers often keep magazines for reference and will see adverts many times
Disadvantages:
Adverts can be expensive
No demonstrations can be made
Easy to ignore and turn the page
What are the advantages and disadvantages of using billboard advertising
Advantages:
Usually in busy locations
Can be cheaper than other forms of advertising
Potential customers will see the advert repeatedly over a long period
Can promote business in a specific geographical area
Disadvantages:
May be ignored by passers-by
Can only include limited information
No demonstration can be made
Only reaches a specific geographical area
Describe digital advertising
Developments in computers, smartphones and connectiviity have led to specific forms of advertising related to digital media:
online advertising
in-app advertising
email advertising
sms/text advertising
What are the advantages and disadvantages of using online advertising?
Advantages:
relatively cheap
can reach a global audience
can be targeted to specific websites or an individual’s browsing interests
demonstrations can be given using other media such as video
Disadvantages:
high competition, need a good ranking in search engines to be effective
technical problems may occur
products cannot be handled before purchase
What are the advantages and disadvantages of in-app advertising?
Advantages:
products can be targeted at specific customer groups
customers don’t have to be online to see ads
Disadvantages:
limited to smart phone or tablet owners
customers may be irritated by ads which interrupt game play or other activity
What are the advantages and disavantages of email advertising?
Advantages:
emails can reach a wide audience
a relatively cheap method of promotion
same email can be sent to many recipients
good for the environment as no paper needed
attachments can be added
Disadvantages:
email may be treated as spam and not reach customer’s inbox
email can be easily deleted or ignored without reading
worry about viruses in attachments can put people off opening email
What are the advantages and disadvantages of using sms/text to advertise?
Advantages:
relatively inexpensive method of promotion
text delivered instantly
same text can be sent to many recipients
Disadvantages:
must have the customer’s mobile number
frequent texting can irritate customers
can only include a very limited amount of information
Describe sales promotion
Sales promotion is used to encourage customers to buy more of a product or to increase sales.
There are a wide range of promotions that a business can use to promote its products and services:
Name some common types of sales promotion
Special offers - Discount, Bogof
Point of sale displays
Loyalty cards
Free samples
Free gifts
Describe special offers
Special offers are short-term pricing strategies that businesses, especially shops, will adopt to encourage customers to buy from them.
Describe discounts (special offer)
By offering products at a reduced price for a set period of time, a business can offer customers better value, for example 20% off the price of a brand of washing-up liquid. This can encourage customers to buy more or to buy from them rather than a rival company.
Describe BOGOF (special offer)
Buy One, Get One Free (BOGOF) is a commonly used special offer. This deal is used to offer customers extra value and may encourage them to buy more or to choose one business or product over another.
Describe point of sale displays
Point of sale displays are to be found at the checkout, for example at supermarkets. The point of sale display is most commonly designed to attract the customer to products that are new, for example the latest DVDs, books or video games.
Describe loyalty cards
Loyalty cards can encourage a customer to keep coming back to the same business. Most commonly, loyalty cards operate on a points-based system. The more that a customer spends in a shop, the more points are added to their loyalty card. These points can then be converted into some sort of reward, for example a discount on other products.
Describe free samples
Many food companies will offer
free samples as a way to let potential customers test a product. For example, supermarket shoppers will be given the chance to taste a new snack. The idea is that people will try the product and hopefully like it, encouraging them to buy.
Describe free gifts (sales promotion)
Often a business will encourage customers to buy by offering a free gift with its product. For example, fast food companies give away toys with children’s meals, or some products include tokens in their packaging which have to be cut out and posted off in order to claim the free gift.
What is e-commerce
A business might sell their goods and services via the internet; this is known as e-commerce.
What is market research?
Market research is defined as Gathering data and information about consumer needs and preferences.
It provides information about:
the market itself (size and make-up – i.e. age, gender, income, tastes)
customer feedback
promotional methods
sales data
competitors
effect of price on market
What are the 2 main types of market research?
Field research / Primary research
Desk research / Secondary research
What is field research?
Field research is information that is first-hand information. It has been collected by the business for a specific purpose.
What are common methods of collecting field research?
face-to-face interview
postal survey
focus group
hall test
telephone interview
online survey
observation
What are the advantages and disadvantages of field research?
Advantages:
Only firm that collects data has access to it
Collected for a specific purpose
Disadvantages:
Expensive to collect
Time consuming
What is desk research?
Desk research is information that is second hand. It has already been collected by someone else.
What are some common methods of collecting field research?
sales figures
newspapers
websites
government publications e.g. social trends
commercial publications e.g. Keynote and Mintel reports
What are the advantages and disadvantages of desk research?
Advantages:
Saves time
Relatively inexpensive
Widely available
Disadvantages:
Not specifically gathered for the business
May be out of date
May contain bias
What are the “main” methods of market research?
face-to-face interview
postal survey
focus group
hall test
telephone interview
online survey
observation
