spotting a business opportunity Flashcards
customer needs
entrepreneurs need to spot a business opportunity and this is often achieved by understanding customer needs. they can use market research to achieve this.
the 4 needs that have to be considered
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
why is it important to identify and understand customers and their needs? 1.2.1
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
market research 1.2.2
finding out about the market and potential customers, who they are and what they want. 2 types -primary & secondary
market research is used to…
> identify and understand customer needs
identify gaps in the market
reduce risk
inform business decision
primary research is …
gathering information for the first time e.g. questionnaires to survey potential customers
secondary research is…
using data that already exists e.g. report published by someone else
reasons for conducting market research
> 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
secondary market research ( + and - )
+ 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- could be out of date as some markets change rapidly
primary market research can be gathered in 3 ways
observing-watching people
experimenting- try out new advertising
surveying-interviewing potential customers
primary market research ( + and - )
+ you can adapt it to meet the exact needs of a business
- time consuming
methods of gathering primary data
> 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
problems of start up research
> can be time consuming and expensive
>lack of money so they do limited research
qualitative data
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
quantitative data
based on opinions of questionnaires and of large numbers of people. they are often yes/no answers.
+ accurate
- can be expensive
using social media to collect market research data
> 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
validity of market research data
depends on how good the research is and if it can be trusted
reliability of market research data
depends on how representative the results are of the wider sample e.g. asking a young person about info in old peoples service
market segmentation is… 1.2.3
dividing a market into smaller categories by grouping customers with particular needs or interests
market segmentation can be split by… 1.2.3
> 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
market mapping is used to….1.2.3
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.
the competitive environment 1.2.4
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
strengths and weaknesses of other competitors are based on… 1.2.4
- price
- quality
- location
- product range
- customer service
SWOT analysis 1.2.4
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.
