The Market Again Flashcards
Niche Marketing
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
Mass marketing
Where a business sells into the largest part of the market, where there are many similar products offered by competitors
Key Features of a Mass Market
Customers form the majority in the market
• Customer needs and wants are more “general” & less “specific”
• Associated with higher production output and capacity + potential for economies of scale
• Success usually associated with low-cost (highly efficient) operation or market leading brands
The Aim of Mass Marketing
- Create products with universal appeal
- Aim for leadership of the largest market segment
- Build strong brands that are associated with the underlying product
- Exploit economies of scale to earn high profits
Benefits of Successful Mass Marketing
Widest potential customer base
Lower risk - resources focused on one large market Low unit costs from economies of scale
Market research costs relatively low
Targeting a niche market segment advantages
Less competition - a “big fish in a small pond”.
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 targeting a niche market
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 the potential sales for a firm (the “size of the prize”)
• Usually measured in terms of both volume (units) and value (sales)
• Size of individual segments within the overall market can also be measured.
Market Growth
- A key indicator for existing and potential market entrants
* Growth rate can be calculated using either value (e.g. market sales) or volume (units sold)
Market share
- Explains how the 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 +/- changes
Dynamic Markets
All markets are dynamic – they all change!
• But the pace and nature of change varies considerably by market
• Key sources of change:
– Customer tastes and preferences
– Impact of technology on what customers buy and how they buy
– Impact of new market entrants
Some Examples of Highly Dynamic Markets
Film Industry • Disrupted by online streaming • E.g. Netflix Taxi Services • Disrupted by mobile apps • E.g. Uber Camera Market • Disrupted by sophisticated smartphones • E.g. Go Pro, iPhone
Dynamic Markets – the Role of Innovation
Innovation is about putting a new idea or approach into action. Innovation is commonly described as ‘the commercially successful exploitation of ideas’
Product innovation
– Launching new or improved products (or services) on to the market
Process innovation
– Finding better or more efficient ways of producing existing products, or delivering existing services
Benefits of Product Innovation
- ‘First mover advantage’ – which can include some of the following;
- Higher prices and profitability
- Addedvalue
- Opportunitytobuildearlycustomer loyalty
- Enhanced reputation as an innovative company
- Public Relations – e.g. news coverage
- Increased market share
Benefits of Process Innovation
- Reduced costs
- Improved quality
- More responsive customer service
- Greater flexibility
- Higher profits
Many Ways Competition Affects the Market- Battle for Market Share
- A constant battle to gain or protect share
* Threat of new market entrants always there
Many Ways Competition Affects the Market- Pricing
- Price wars a regular feature of intense competition
* Stronger competitors often set the market price
Many Ways Competition Affects the Market- Battle for Competitive Advantage
- Product differentiation is a key part of competition
* Can advantages be sustained?
Competitive Advantage
- The ability of a business to add more value for its customers than its rivals and attain a position of relative advantage
- A situation where a business has an advantage over its competitors by being able to offer better value, quality and/or service
RISK
The possibility that things will go wrong
Risk can be assessed managed – e.g. through contingency planning. Examples
Risk in making business investments
Managed through investment appraisal
Risk of a product breaching health & safety regulations
Uncertainty
The unpredictable and uncontrollable events that affect business. E.g. Uncertainty about the sales success for a new product launch Unpredictable effects of launching a price war against the competition
