spotting a business opportunity

Question 1

customer needs

Answer 1

entrepreneurs need to spot a business opportunity and this is often achieved by understanding customer needs. they can use market research to achieve this.

Question 2

the 4 needs that have to be considered

Answer 2

PRICE
lower the price= more customers attracted= sales and revenue can be increased. researching customer opinion on price is vital as in some cases a customer would be willing to pay a higher price often depending on brand, image and quality.
QUALITY
customers identify quality as fitness for purpose, and opinions are based on their expectations. quality is based on whether it meets your expectations.
CHOICE
a business with a wide range of products or brands would satisfy a larger variety or customers
CONVENIENCE
convenience includes having items available in as many outlets as possible. delivery is also convenient

Question 3

why is it important to identify and understand customers and their needs? 1.2.1

Answer 3

customers base decisions on -family needs
-financial needs
-emotional needs
-brand loyalty
>if price is above what customers can afford, the business would not generate enough sales to survive
>if you stop selling a brand, customer loyalty may go elsewhere

Question 4

market research 1.2.2

Answer 4

finding out about the market and potential customers, who they are and what they want. 2 types -primary & secondary

Question 5

market research is used to…

Answer 5

> identify and understand customer needs
identify gaps in the market
reduce risk
inform business decision

Question 6

primary research is …

Answer 6

gathering information for the first time e.g. questionnaires to survey potential customers

Question 7

secondary research is…

Answer 7

using data that already exists e.g. report published by someone else

Question 8

reasons for conducting market research

Answer 8

> market opportunities-if their is a trend, their may be new opportunities e.g. home shopping
market size-measure value of sales £££
market growth-rate market is increasing
market share-what % of total market sales does one business have
market segments-differing groups within a larger market e.g. age, gender, income
competitor research-know other businesses strengths and weaknesses so you can be better
customer needs-find their exact needs so you can develop the right product at the right price

Question 9

secondary market research ( + and - )

Answer 9

+ quick and cheap- newspapers, magazines, reports
+ gives info on large sections of the population
- done by someone else, not exactly what you want
- could be out of date as some markets change rapidly

Question 10

primary market research can be gathered in 3 ways

Answer 10

observing-watching people
experimenting- try out new advertising
surveying-interviewing potential customers

Question 11

primary market research ( + and - )

Answer 11

+ you can adapt it to meet the exact needs of a business

- time consuming

Question 12

methods of gathering primary data

Answer 12

> telephone survey +cheap and fast -waste of time for some
questionnaires +relatively quick -response is usually poor
customer feedback + understand customer needs -only relies on existing customers
focus groups +give their own views - small so doesn’t reflect the market
internet research +get feedback through your website

Question 13

problems of start up research

Answer 13

> can be time consuming and expensive

>lack of money so they do limited research

Question 14

qualitative data

Answer 14

asking customers questions so they can say why they do/don’t like a product or service
+ understand customers needs and wants
- small group of people= biased, expensive to do with large numbers

Question 15

quantitative data

Answer 15

based on opinions of questionnaires and of large numbers of people. they are often yes/no answers.
+ accurate
- can be expensive

Question 16

using social media to collect market research data

Answer 16

> they can communicate with their target audience and monitor feedback
they can monitor competitors via facebook pages
trends can be monitored
using social media can save time

Question 17

validity of market research data

Answer 17

depends on how good the research is and if it can be trusted

Question 18

reliability of market research data

Answer 18

depends on how representative the results are of the wider sample e.g. asking a young person about info in old peoples service

Question 19

market segmentation is… 1.2.3

Answer 19

dividing a market into smaller categories by grouping customers with particular needs or interests

Question 20

market segmentation can be split by… 1.2.3

Answer 20

> location e.g. target a particular area (wealthy area)
demographics e.g. split by sex, family type, single?
lifestyle e.g. how people live their lives
income e.g. different cars sold to different income group
age e.g. needs and wants change as we get older

Question 21

market mapping is used to….1.2.3

Answer 21

it is a diagram that identify gaps in the market along with competitors, and maps the products that they sell against two of their features e.g. high/low price/quality.

the maps are based on opinion, however it can vary between people.

Question 22

the competitive environment 1.2.4

Answer 22

important to understand competitors + and -
there can be direct and indirect competitors
>direct- selling same type of product/service
>indirect- not selling same item but are still competition

Question 23

strengths and weaknesses of other competitors are based on… 1.2.4

Answer 23

• price
• quality
• location
• product range
• customer service

Question 24

SWOT analysis 1.2.4

Answer 24

SWOT analysis can be carried out where you look at your strengths, weaknesses, opportunities and threats. you can also do this on your key competitors.