Spotting A Business Opportunity Flashcards
Identifying and understanding customer needs
A market is any place where buyers and sellers can meet.
Businesses thrive when they are able to meet customer needs and wants.
Needs are considered essential, e.g. shelter or food.
Wants are desires which are non-essential, even if consumers consider them to be essential, e.g. Nike trainers
Aim of marketing
The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants in a way that makes the business money (profit).
Market research
The process of evaluating the viability of a new product or service through research conducted directly with potential customers.
4 main customer needs
Price - This is the amount of money a customer is willing to pay for a product/service.
Customers often have a budget in mind and want to find the best value for their money.
Understanding this helps the business price its products competitively and offer promotions that appeal to their target market.
Choice - Customers often have a wide range of preferences and want to be able to choose from a variety of products or services.
Understanding this helps businesses to offer a range of options that cater to different customer preferences.
This can increase customer satisfaction and loyalty, as customers are more likely to find a product that meets their specific needs.
Quality - Quality refers to the standard of excellence that a customer expects from a product/service.
Customers want products that are reliable, durable, and meet their expectations.
Understanding this helps businesses create products that meet the desired standards, which can lead to customer loyalty and positive word-of-mouth advertising.
Convenience - Customers value convenience because they want products that are easy to access and use.
This includes factors such as location, online ordering, and fast delivery.
Understanding this helps businesses create a customer experience that is both efficient and enjoyable.
By providing a convenient shopping experience, businesses can build customer loyalty and increase repeat sales.
Understanding customers lead to greater sales
Customer needs - tailored products or services to meet needs. This increases the likelihood that a customer makes a purchase which generated revenue.
Relationship building - can lead to repeat business as customers are more likely to return to a business that understands and values them.
Targeted marketing campaigns speak directly to their customers and can increase the effectiveness of marketing efforts leading to more sales.
Understanding customer needs helps ensure business survival
Competing - if businesses fail to meet the needs of their customers, they risk losing them to competitors.
Changing preferences - customer preferences can change quickly, business that fail to keep up with these changes risk becoming obsolete.
Building reputation - building a positive reputation leads to repeated business and positive referrals which keeps a business going.
Purpose of market research
Market research is the objective collection, compilation and analysis of information about a market.
Effective market research will help the business:
To reduce risk when launching new products or entering new markets.
To identify and understand the future needs and wants of customers.
To identify potential gaps in the market which can be exploited to increase the sales volume.
To identify competitors and gauge their potential strengths and weaknesses.
Primary research
Primary research is the process of gathering information directly from consumers in the target market using field research methods such as surveys and interviews.
This research gathers information which is new and does not already exist in any format.
The most commonly used methods of primary market research include the use of surveys, interviews based on questionnaires, observation, focus groups and test marketing.
Secondary research
Secondary research involves the collection, compilation and analysis of data which already exists.
Typical methods include:
Using the internet.
Purchasing market reports from specialist companies such as Mintel.
Accessing government research which provides useful information e.g The Office for National Statistics (ONS).
Quantitative data
Quantitative data is based on numbers and could include financial reports (e.g. sales, costs), market data (e.g. markets share) or summaries of data gained from primary research (e.g. on a scale of 1-10 rate our customer service).
Qualitative data
Qualitative data gathers descriptions or explanations based on conversations, discussions, impressions, and emotional feelings and is usually gathered through primary research.
Limitations of qualitative data
The sample size used to gather data may be too small and unrepresentative of all of the customers leading to unreliable results.
Bias may mean that researchers can guide respondents to answer questions in a particular way.
Respondents in focus groups may be influenced by the responses of others, or not provide accurate information.
A business may need to hire a specialist market research agency to help gather primary data and the process can be expensive and time-consuming.
Limitations of quantitative data
Information has been collected for other purposes and so may lack relevance or may not be factually correct.
Can be expensive to purchase market specific secondary data from specialist companies such as MINTEL.
Numerical data may be out-of-date, especially in dynamic markets.
Data analysis and interpretation is a skill and individuals within the business may draw incorrect conclusions which are then used to guide business strategy.
Looking at a small amount of data and then extrapolating the results can provide wrong assumptions from which strategic decisions are made.
Numerical data may provide insights, but does not provide the reasons for the insights e.g. data may reveal sales volumes are falling, but not the reason for the decline.
Advantages and disadvantages of primary research
Advantages
Directly focused to research objectives.
Kept private - not publicly available
More detailed insights - particularly into customer views.
Disadvantages
Time consuming and costly to obtain.
Risk of survey bias.
Sampling may not be representative of the whole population.
Advantages and disadvantages of secondary research
Advantages
often free and easy to obtain
good source of market insight
quick to use and access
disadvantages
can quickly become out of date
not tailored to business needs
specialist reports are often quite expensive