Spotting A Business Opportunity Flashcards

1
Q

Identifying and understanding customer needs

A

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

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2
Q

Aim of marketing

A

The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants in a way that makes the business money (profit).

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3
Q

Market research

A

The process of evaluating the viability of a new product or service through research conducted directly with potential customers.

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4
Q

4 main customer needs

A

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.

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5
Q

Understanding customers lead to greater sales

A

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.

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6
Q

Understanding customer needs helps ensure business survival

A

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.

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7
Q

Purpose of market research

A

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.

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8
Q

Primary research

A

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.

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9
Q

Secondary research

A

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).

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10
Q

Quantitative data

A

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).

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11
Q

Qualitative data

A

Qualitative data gathers descriptions or explanations based on conversations, discussions, impressions, and emotional feelings and is usually gathered through primary research.

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12
Q

Limitations of qualitative data

A

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.

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13
Q

Limitations of quantitative data

A

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.

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14
Q

Advantages and disadvantages of primary research

A

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.

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15
Q

Advantages and disadvantages of secondary research

A

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

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16
Q

Market segmentation

A

Market segmentation is the process in which a single market is divided into sub markets or ‘segments’

Each segment represents a slightly different set of consumer characteristics
Firms often segment their markets according to factors such as geographical location, demographics, behaviour and lifestyle, age or gender.

17
Q

Advantages of market segmentation

A

Recognises that consumers are not all identical; consumer groups do not all share the same tastes and preferences.
Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely.
Less expensive and wasteful than marketing products at wide market segments.
May increase loyalty if the consumer feels that their needs are being met, which can lead to repeat purchases.

18
Q

Disadvantages of market segmentation

A

Not everyone within a segment will behave in the same way.
It may be difficult to identify a segment and consumers can belong to multiple segments at the same time.
Segmentation requires more detailed market research, which can prove costly but beneficial to the business.
A segment may be identified but it may be too small and unprofitable to cater for.

19
Q

Market mapping

A

Market mapping is a tool for identifying the position of a product within a market.

A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products.
Only two criteria can be chosen, e.g. price (high/low) and quality (high/low), age (young/old) and income (high/low), etc.

20
Q

Market mapping analysis

A

If there were no spaces left on the market map, it indicates that the market is saturated.
This means that there are no opportunities to exploit a market niche in the market.
Competition is likely to be high and profits low.

21
Q

Usefulness of market maps

A

Market gaps can be identified, which may enable a business to come up with ideas for new products.

Comparisons can be made between a business’s products and those of its rivals - where are the business’ products positioned about its rivals?

Market maps are simple to construct and offer a visual illustration of a products position in the market.

22
Q

Limitations of market mapping

A

A gap in the market may exist because it is not profitable to fill.

Mapping a market may require primary research, which can be expensive.

Only two criteria can be chosen, which may prove too simplistic.

Markets are often dynamic and a market map only provides insight at a specific point in time.

23
Q

Competition

A

Competition occurs when at least two businesses are providing goods/services to the same target market.
The more businesses in the market, the more intense the competition.

24
Q

Direct and indirect competition

A

Competition can be direct or indirect

Direct competition occurs when the business is targeting customers with exactly the same product as a competitor.
Indirect competition occurs when firms sell different products but compete with each other for the customers disposable income.

25
Q

How can competition impact the customers

A

Businesses offer lower prices.
Businesses produce better quality products.
Businesses provide better customer service.

However, the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices

26
Q

Assessing the competition (Price)

A

strengths - Competitors who offer lower prices than their rivals can gain a competitive advantage by attracting price-sensitive customers who are looking for the best deal.
They can also gain economies of scale by producing and selling their products at a lower cost, which can lead to higher profits.

Weaknesses - Competitors who rely solely on lower prices may struggle to maintain their profitability if customers do not perceive the quality of their products to be adequate.
They may also struggle to differentiate themselves from other low-priced competitors in the market.

27
Q

Assessing the competition (quality)

A

Strengths - Competitors who offer high-quality products can differentiate themselves from rivals and establish a strong brand.
They can also command higher prices which can lead to greater profitability.

Weaknesses - Competitors who focus solely on quality may struggle to compete with lower-priced rivals if customers do not focus on the higher quality.

28
Q

Assessing the competition (location)

A

Strengths - Competitors who have easily accessible locations can gain a competitive advantage over rivals who are located further away from customers

Weaknesses - Competitors who rely solely on their location may struggle to compete with other businesses in the same location

29
Q

Assessing the competition (Range of products)

A

Strengths - Competitors who offer a wide range of products can attract a broader customer base and increase customer loyalty by meeting a variety of customer needs

Weaknesses - Competitors who have a large product range may struggle to manage the complexity of their business and maintain consistent quality across all their products

30
Q

Assessing the competition (Customer service)

A

Strengths - Competitors who provide excellent customer service can differentiate themselves from rivals and establish a loyal customer base
They can also generate positive word-of-mouth recommendations

Weaknesses - Competitors who rely solely on customer service may struggle to compete with lower-priced rivals if customers do not recognise the additional costs of offering good customer service