Theme 1 Flashcards
What is a Niche Market?
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants.
What is a Mass Market?
Where a business sells into the largest part of the market, where there are many similar products offered by competitors.
What are the key features of a Mass Market?
- Customers form the majority in the market
- Customers 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
What are the aims 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 products
- Exploit economies of scale to earn high profits
What are the 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
What are the advantages of a nice market segment?
- 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
What are the disadvantages of a nice market segment?
- 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”
What is 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
- Not normally a marketing objective- since a firm cannot influence it
What is 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)
What is 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 indicators of competitive advantage
- Key is to look for significant +/- changes
What is a dynamic market?
- All markets are dynamic- they all change!
- But the pace and nature of change varies considerably by market
- Key sources of change:
- Customers tastes and preferences
- Impact of technology on what customers buy and how they buy
- Impact of new market entrants
What is the role of innovation in dynamic markets?
Innovation is about putting a new idea or approach into action. Innovation is commonly described as ‘the commercially successful exploitation of ideas.’
What are the two types of innovation?
Product innovation- launching new or improved products (or services) on the market.
Process innovation- finding better or more efficient ways of producing existing products, or delivering existing services.
What are the benefits of process innovation?
Reduced costs
Improved quality
More responsive customer service
Greater flexibility
Higher profits
What is 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.
Why is market research important for a business?
Market research is important because customers differ in terms of …
- the benefits they want
- amount they are able to or willing to pay
- Media (e.g. television, newspapers, websites and magazines) they see
- Quantities they buy
- Time and place that they buy
What are insights provided by effective market research?
- Dimensions of the market (size, structure, growth, trends etc.)
- Competitor advantage (market share, positioning, USPs)
- Needs, wants and expectations of customers (& how these are changing)
- Market segments- existing and potential opportunities for new segments
What is product and market orientation?
Product orientation: Business develops products based on what it is good at doing.
Marketing orientation: Business responds to customer needs and wants- designs products accordingly.
Why is market orientation important to marketing success?
Markets are much more dynamic
Customers are becoming more demanding
Barriers to market entry getting lower
What are the two key categories of market research?
Primary research- data collected first-hand for a specific research purpose.
Secondary research- data that already and which has been collected for a different purpose.
What are the benefits of primary research?
- Directly focused to research objectives
- Kept private- not publicly available
- More detailed insights- particularly into customer views
What are the drawbacks of primary research?
- Time-consuming and costly to obtain
- Risk of survey bias
- Sampling may not be representative of
What are the benefits of secondary research?
- Often free and easy to obtain
- Good source of market insights
- Quick to access and use
What are the drawbacks of secondary research?
- Can quickly become out of date
- Not tailored to business needs
- Specialist reports often quite expensive
What are the main sources of secondary data?
Google, Government departments, Trade associations, Trade press & magazines, Competitor websites & marketing materials, Market research reports
What are the main sources of primary data?
Observation
Postal surveys
Telephone interviews
Online surveys
Focus groups
Face-to-face survey
Test marketing
Experiments
What is the quantitative data?
- Concerned with data and addresses questions such as “how many?” , “how often?” , “who?” , “when?” and “where?”
- Based on larger samples and is, therefore, more statistically valid
- The main methods of obtaining quantitative data are the various forms of survey- i.e. telephone, postal, face-to-face and online
What are the strengths of quantitative data?
- Data relatively easy to analyse
- Numerical data provides insights into relevant trends
- Can be compared with data from other sources
What are the weaknesses of quantitative data?
- Focuses on data rather than explaining why things happen
- Doesn’t explain the reasons behind numerical trends
- May lack reliability if sample size and method is not valid
What is qualitative data?
- Based on opinions, attitudes, beliefs and intentions
- Answers questions such as “why?” “Would?” or “how?”
- Aims to understand why customers behave in a certain way or how they may respond to a new product or service
- Focus groups and interviews are common methods used to collect qualitative data
What are the strengths of qualitative data?
- Essential for important new product development and launches
- Focused on understanding customer needs, wants, expectations= very useful insights for a business
- Can highlight issues that needs addressing- e.g. why customers don’t buy
- Effective way of testing elements of the marketing mix- e.g. new branding, promotional campaigns
What are the weaknesses of qualitative data?
- Expensive to collect and analyse- requires specialist research skills
- Based around opinions- always a risk that the sample is not representative
What is sampling in market research?
Sampling involves the gathering of data from a sample of respondents, the results of which should be representative of the population (e.g. target market) as a whole.
What are the benefits of sampling in market research?
- Even a relatively small sample size (if representative) can provide useful research insights
- Using sampling before making marketing decisions can reduce risk and costs
- Sampling. is flexible and relatively quick
What are the drawbacks of sampling in market research?
- Biggest risk= sample is unrepresentative of population- leading to incorrect conclusions
- Risk of bias in research questions
- Less useful in market segments where customer tastes & preferences are changing frequently
How does the growing use of IT support market research?
- The capabilities of modern IT has transformed market research
- Now relatively easy to learn about consumer preferences and buying habits by mining massive sets of quantitative data
- Complex algorithms can uncover patterns and correlations that enables more effective marketing
How does data mining support market research?
How does social media support market research?
How is market positioning conducted?
What is market positioning?
What is the marketing (positioning) map?
What is the marketing (positioning) map?
What are the advantages of a market map?
What are the advantages of a market map?
What are the disadvantages of a market map?
What is positioning & competitive advantage?
What are possible positioning strategies?
What is product differentiation?
What are the requirements for effective product differentiation?
What is the transformation process?
What is meant by “Adding Value”?
What is the formula for adding value?
What are ways to add value?
How does a business benefit from adding value?
What is demand?
What is the basic law of demand?
The basic law of demand is that demand varies inversely with price- lower prices make products more affordable for consumers.
What is the basic law of demand?
The basic law of demand is that demand varies inversely with price- lower prices make products more affordable for consumers.
What is the Simple Demand Curve?
A line on a graph illustrating how the demand for a good changes with price.
What causes changes in demand?
What is the income effect of a price change?
What is the substitution effect of a price change?
What is Supply?
What is the Basic Law of Supply?
