The Market 1.1 Flashcards
What is a market
Any place where buyers and seller can meet
Eg. Amazon or a shopping mall
. Different markets have different characteristics and are affected differently by changes
Aim of a marketing
The aim of a marketing is to help identify, anticipate and satisfy consumer needs and wants profitably
. Needs are considered to be essential eg shelter or food
. Wants are desires which are non essential eg Nike trainers
Mass markets
In mass markets, products are aimed at broad market segments
. Market segments are groups of consumers who share similar characteristics eg lifestyle age etc
. Mass marketing occurs when businesses sell their products to most available market aiming to create products with universal appeal and aim for leadership of largest market segment
. Associated with higher production output and capacity + potential for economies of scale (these are advantages you gain from producing large quantities, such as when buying goods in large quantities -> cheaper)
. success usually associated with low-cost (highly efficient) operation or market leading brands
Niche markets
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
.eg. Dove, radox, lynx, whole foods (organic food)
Characteristics of mass markets
. Products are less unique as they are aimed at broad market segment
. Low average costs due to large scale production -> economies of scale
. Low prices lead to greater affordability and higher sales volume
. Low prices lead to lower profit margins
Eg of mass markets: primark
Characteristics of niche markets
. Products are more specialised and unwise as they are aimed at narrow market segments
. High average costs due to small scale production
- they do not benefit from economies of scale
. High prices make products less affordable and lead to lower sales volume
. High prices can allow business to earn higher profit margin
Eg: Louis Vuitton
Advantages of niche market
. Less competition
. Clear focus - target particular customers
. Builds up specialist skill and knowledge
. Can often charge a higher price
. Profit margins often higher
. Customers tend to be more loyal
Disadvantages of niche marketing
. Lack of economies of scale
. Risk of over dependence on a single product or market
. Likely to attract competition if successful
. Vulnerable to market changes - all “eggs in one basket“
Market size
. Indicates potential sales for a firm (the “size of paper”)
. Usually measured in terms of both volume (units) and value (sales)
. Size of individual segments within the overall market can also be measured
. Not normally a marketing objective - since a firm cannot influence
Market growth
. Key indicator for existing and potential market entrants
. Growth rate can be calculated using either value (eg market sales) or volume (units sold)
Examples of calculating market growth. Using Volume sold - solution
(Example on book)
Market share
. Explains how overall market is split between the existing competitors
. Tends to be calculated based on market value, but volume can also be used
. Good indicator of competitive advantage
. Key is to look for significant negative and positive changes
What is a share
A piece of something
Market sale formula
business sales divided by total market sales x 100
Brands
. A brand is a name, image or logo which helps one product/service stand out from its competitors
. Branding is one of the key ways in which business achieve product differentiation
. They are unique and protected by law
. Brands add value, often making products more desirable to consumers, adding value increases price that customer is willing to pay
How do brands influence the position of business within its market
. Businesses operating in mass markets use branding to stand out from competition
. Business operating in mass markets use branding to communicate their offering to small, well defined group of consumers
. Strong brands are more likely o be able to charge higher prices for their products than weaker brands
. The perceived quality of a strong brand is better than that of weaker brands
Dyanamice markets
. A market that is subject to rapid or continuous change
. Many markets are becoming more competitive and change is inevitable
-> example: mobile phones
. Businesses with monopoly power (a large business which dominates the market) might not face the same dynamic pressures as businesses in more competitive markets
Key sources of change in dynamic markets
. Customer tastes and preferences
. Impact of technology on what customers buy and how they buy
. Impact of new market entrants
Examples of highly dynamic markets
. Film industry (disrupted by online streaming eg. Netflix)
. Taxi services (distrusted by mobile apps)
. Camera market (disrupted by sophisticated smartphones)
Four things to consider when examining dynamic markets
. Online retailing
. How markets change
. Innovation and market growth
. Adapting to change
Online retailing
Involves selling products via the internet
Advantages of online retailing
. Provides business access to more consumers, including internationally
. Enables longer trading hours as the business is open 24/7
. Cheaper to run as it lowers fixed and variable costs
. Businesses can collect data by tracking consumer behaviour which helps with primary market research
. Consumer can receive offers they are more likely to benefit from
. Consumers can shop at a time that suits them
Disadvantages of online retailing
. There may be high costs for website development, maintenance and promotion
. It’s dominated by largest businesses that are more well known
. High levels of competition mean that it will be expensive to make a website stand out
. Lack of personal contact with customers
. Consumers may find it difficult to get desired level of customer service
. Online purchasing opens consumers up to credit card fraud
How markets change
The following changes causes markets to be dynamic
. Changing consumer tastes and preferences
. Changing demographics (eg many countries that have and older population)
. The amount of competition
-> competition can be direct (sale of similar products) or indirect (eg airlines compete with each other but also with trains9
. Changing legislation (laws)
Innovation and market growth: product and process innovation
Product innovation: the adaptation or improvement of existing products
Process innovation: adaptation of improvement of existing processes
Innovation and market growth: market growth
Market growth is the measurement of the change in the entire market, expressed as a percentage of the original size
-> the business market share does not necessarily increase automatically as the entire market continues to grow
. Market growth can be cause by:
- increasing population sizes (can increase demand in certain markets)
- increasing incomes
- changing tastes and preferences can cause the market to grow
Benefits of product innovation
‘first mover advantage’ (first to release a product) which include:
. higher prices
. added value
. opportunity to build early customer loyalty
. enhanced reputation - more trusting
. public relations - news coverage, promotion is huge
. increased market share
Benefits of process innovation
. reduced costs
. improved quality
. more responsive customer service
. greater flexibility
. higher profits
Adapting to change
Strategies to apta to change:
. Create flexible business structures, especially in terms of operations and people management
. Meet customer needs, by carrying out market research and communicating with customers
. Invest in staff training, new products and processes
. Innovate so gain the first mover advantage
How competition affects the market
Competition occurs when at leats two businesses are providing goods to the same target market
. The more business -> more competition
. Indirect and direct competition
Competition results in benefits for customer
. Businesses offer lower prices
. Businesses produce better quality products
. Businesses provide better customer service
However, absence of competition reduces incentives for business to innovate, be efficient or offer customers lower prices
Risk VS uncertainty: risk
Potential threat to business success, risk can be internal or external
Examples:
. Technical failures
. Cyber security threats
. Loss of key staff
. Currency fluctuations for firms trading internationally
Risk VS uncertainty: uncertainty
When outcomes are difficult to predicts
Examples:
. Businesses continue to face uncertainty after Britains exit from European Union
. Will the economy fog into recession?
. Will energy prices continue to rise?
. What will happen to interest rates?
. How will rivals react to new product launch?
