Spotting a Business Opportunity

Question 1

Customer Needs: Price

Answer 1

-Customers will be influenced by price, especially low ones. Normally, lowering prices increases sales.

-The price that customers are willing to pay will depend on the value they place on the product. This value can change depending on circumstances.

-Often customers will place value on higher quality or more exclusive products.

Question 2

Customer Needs: Quality

Answer 2

-Customers assess quality as a product’s suitability or ‘fitness for purpose’.

-Quality is not only based on the price paid but also expectations and whether a product meets these.

-Quality also depends on customer service. A business should ensure the process of buying also meets customer expectations.

Question 3

Customer Needs: Choice

Answer 3

-Customers want choice as tastes and needs vary between different people.

-Choice also helps customers make buying decisions. A business can also sell a range of products to represent very distinct options.

-This product differentiation helps customers to choose which product is most suitable for them.

Question 4

Customer Needs: Convenience

Answer 4

-Customers want products that are available to them where and when they want them.

-Customers usually have a preference for convenient products as they are easier to purchase.

Question 5

Impact of Meeting Customer Needs

Answer 5

-Meeting customer needs will ensure that customers are happy with the product they have bought.

-This is likely to encourage repeat custom and generate customer loyalty, leading to increased sales.

-Satisfied customers are also more likely to recommend a product to others.

Question 6

Impact of Not Meeting Customer Needs

Answer 6

-An idea is likely to fail if a business does not understand and provide what customers actually want.

-The idea will not generate sales because customers will not buy a product that does not meet their needs.

In turn, the product might be withdrawn and the business may fail completely.

Question 7

Market Research

Answer 7

-Market research is used to gather information about influences on a business’ success.

-Market research provides a business with accurate information which can be used to make informed decisions.

-Informed decisions reduce risks. This can save the business time and money as they will see if the decision is likely to be a success so can avoid costly mistakes.

Question 8

Purpose of Market Research: Understand Markets

Answer 8

-An entrepreneur can research a market to see if there is a gap.

-They may also research if their business idea is viable before starting and investing.

-A business may use it to see if they are performing well and analyse their overall market share.

Question 9

Purpose of Market Research: Understanding Customers

Answer 9

-Market research can also give a business an understanding of their customers.

-Businesses can identify who their customers are and their customers’ needs.

-By identifying these needs, businesses will be able to make products that meet these needs. This will increase their sales and help to ensure survival.

Question 10

Primary Research

Answer 10

-Primary research often involves asking customers for their opinions.

-It is useful for finding out new information and getting customers’ views.

-To get the most accurate data from primary research, a business needs large samples .

Question 11

Advantages of Primary Research

Answer 11

-Information is up to date and relevant

-Information is specific to the business and can be specific to the target market

-Provides detailed information

-Can gather a mix of qualitative and quantitative data

Question 12

Disadvantages of Primary Research

Answer 12

-Time consuming

-Expensive

-Sometimes difficult to collect

Question 13

Primary Research: Questionnaires

Answer 13

-Questionnaires are a set of questions with choice answers.

-They need to be carefully planned in order to provide useful feedback.

-A business using one needs to have clear objectives that the questionnaire will help them achieve as this will help them identify what information they need to obtain.

Question 14

Advantages and Disadvantages of Questionnaires

Answer 14

Advantages:
-Questionnaires are cheap
-Can be used to sample a large geographic area

Disadvantages:
-It is likely that not many people will respond.

Question 15

Primary Research: Focus Groups

Answer 15

-A focus group is a group of customers brought together to talk about a new product idea. They are sometimes held online.

-More than one focus group should be held as only one may not accurately represent the opinions of the wider population.

-Questions should be the same for all groups and asked in way that does not prompt a certain response to make sure there there is no bias and so answers can be compared.

Question 16

Advantages of Focus Groups

Answer 16

-Faster than surveying several people individually

-Online groups can make the sample more representative

-Moderator interacts with people so follow up questions can be asked allowing for more detail.

Question 17

Disadvantages of Focus Groups

Answer 17

-May be hard to persuade people to take part

-Costs money if people aren’t willing to do it for free

-Views of small numbers are not the views of everyone

Question 18

Primary Research: Surveys

Answer 18

-Surveys provide businesses with long detailed responses with a lot of explanation. These help the business to identify trends and find out opinions to improve.

-The interviewer should be skilled in building a positive relationship with the interviewee and make them feel that they can be honest with the interviewer.

-Surveys can be held face to face or online. In person can be expensive but online surveys save money and time as a lot of people can be easily interviewed.

Question 19

Advantages of Surveys

Answer 19

-Can collect qualitative and quantitative data

-Often have a high rate of response

-Very detailed answers give a clear idea of where to improve

Question 20

Disadvantages of Surveys

Answer 20

-In person surveys can be expensive

-Rely on self-reported data which can be affected by bias

Question 21

Primary Research: Observations

Answer 21

-Observations means watching how customers behave naturally when they do not think they are being watched.

-They can be carried out in person or using appropriate technology such as CCTV or webcams

-Research ethics are important in observations as the business must respect the people they are studying as they do not know they are being watched.

Question 22

Advantages of Observations

Answer 22

-Cheap

-Data gathered is accurate and free of bias

Question 23

Disadvantages of Observations

Answer 23

-Time consuming

-Can be inconclusive as they do not provide a definite answer or clues to wider attitudes

-Doesn’t allow customers to give opinions so the business knows what the customer is doing but not why

Question 24

Secondary Research

Answer 24

-Secondary research allows access to a wide range of data- not just the views of a sample. The data already exists and was collected by someone else.

-It is useful for looking at the whole market and analysing past trends to predict the future.

Question 25

Advantages of Secondary Research

Answer 25

-Quick and easy to gather

-Can provide industry specific information

-Often easy to analyse

Question 26

Disadvantages of Secondary Research

Answer 26

-Not specific to the business

-Can be out of date

-May be biased or inaccurate

Question 27

Secondary Research: The Internet

Answer 27

Internet research includes data taken from competitors’ websites, newspaper articles and social media.

This provides a business with an overview of information relating to its industry and the types of products and services other businesses offer.

Question 28

Secondary Research: Market and Government Reports

Answer 28

-Market reports are industry specific. They may give specific information about an industry as a whole. This could help a business decide which customers to target.

-Government reports may consist of general information that is not usually industry specific but can still be useful for a business.

-A business may use this information to decide what level of pay to offer employees, who its target market will be, what kinds of products to develop or where to expand.

Question 29

Advantages and Disadvantages of Qualitative Data

Answer 29

Advantages:
-Gives more detailed information
-Businesses can understand why customers act in a certain way
-Easier for businesses to learn from their customers to improve

Disadvantages:
-Tricky to analyse as it is hard to compare people’s opinions
-Time consuming and costly to gather

Question 30

Advantages and Disadvantages of Quantitative Data

Answer 30

Advantages:
-Simple and quick to analyse
-Can be analysed in a way that gives easy to understand results

Disadvantages;
-Lacks specific opinions
-Difficult for a business to see exactly what customers think

Question 31

The Role of Social Media in Market Research

Answer 31

-Social media is cheap and can reach a wide range of customers. It is also a faster way of gathering data.

-Businesses can talk directly with customers making answers more likely to be accurate and honest.

-A business can easily track current trends and how consumers interact with the firm’s online content.

-Social media provide the most up to date information making data gathered better informed.

Question 32

Market Segmentation

Answer 32

-Market segmentation is the process of dividing a target market into smaller categories by grouping together consumers with a particular need or interest.

-A business can split a market by location, demographics, behaviour, lifestyle, income and age.

Question 33

The Benefit of Market Segmentation

Answer 33

-By dividing customers into different groups, a business can ensure it meets the needs of the different segments.

-The business may want to focus on a particular segment.

-In turn it can design its marketing to target the chosen segment.

Question 34

How a Business Can Use Market Segmentation

Answer 34

Location- Open stores in a certain area,
Adapt products to fit a local culture

Age- Design products differently to attract groups

Income- Have a range of prices on similar products

Gender- Focus advertising,
Design products differently to attract groups

Question 35

Market Mapping

Answer 35

-Market mapping is the process of creating a diagram that identifies products in a market and maps them against two features.

-A market map can identify competition and gaps in the market. It also shows how consumers perceive the competition and the business.

Question 36

Using a Market Map

Answer 36

-Even if a market map suggests there is a gap in the market, it does not mean that there is demand for a product to fill it.

-As a result, a business needs to conduct market research to confirm if there is demand. If so, the business can focus on creating a product with features needed to fill the gap.

-This will help the business be different from the competition and so increase its sales.

-Market mapping is an attractive technique to use because it looks simple and straightforward. However, they are subjective so based on opinion, rather than fact.

Question 37

Impact of Competition: Price

Answer 37

-Customers will often want to pay less for a given product.

-If all the products in a market are the same, them price becomes one of the most important factors affecting which product customers will buy.

-Therefore, firms may decide to charge lower prices than they would like to stop customers from buying elsewhere.

-However, this will mean that a firm may not make much profit per product sold.

Question 38

Impact of Competition: Customer Service

Answer 38

-Offering customer service can attract customers and may mean that customers will be willing to pay more money for a product.

-(Having a reputation for poor customer service might put customers off).

-To stand out from the competition, a business might decide to train its staff in good customer service.

-They might provide extra services (such as user training) when the customer buys the product.

Question 39

Impact of Competition: Quality

Answer 39

-Offering better quality products may mean that customers are more satisfied.

-This may mean that the business will be more competitive, even if its products are more expensive.

-In order to convince customers that their products are better than their rivals’ businesses might decide to spend more money developing high quality products or on promotional material that emphasises quality.

-However, this will be costly for the firm. It may also be risky if consumers care more about price.

Question 40

Impact of Competition: Product Range

Answer 40

-Having a large range of products may make a business more attractive to customers as they have more choice or products that the competition doesn’t.

-A business may also try to fill a gap in the market by developing new products.

-There won’t be any competition for the new products and the firm may appear more innovative than its competitors and so be more attractive to customers.

Question 41

Impact of Competition: Location and Convenience

Answer 41

-Customer may be more likely to bur from a business if it sells products in a convenient place as they won’t have the inconvenience of travelling or waiting for the product.

-Therefore, the business may decide to open stores in particular locations or to sell items online in order to offer the greatest convenience to customers as possible.

-Businesses may locate near competition to catch footfall or be in an area where they know there are consumers who are after a similar product.

-However, out of town stores can offer lots of parking and a larger size store.

Question 42

Impact of Competition on Decision Making

Answer 42

A business will need to change the way they work to compete in the dynamic business environment by:

-Make their brand stand out

-Be customer orientated

-Build customer loyalty

-Differentiate the product

-Add value to the product

Question 43

Importance of Understanding the Competition’s Strengths and Weaknesses

Answer 43

-If a business is to successfully compete, it needs to know the strengths and weaknesses of its competitors.

-Knowing the competition’s strengths allows a business to improve its own performance. It can also identify threats posed by the competition.

-Knowing the competition’s weaknesses allows a business to outperform its rivals on their weak points.

-A business can also identify opportunities to take advantage of its rivals’ weaknesses.