theme 1 (in paper 1 & 3)

Question 1

what is a mass market?

Answer 1

the market for goods that are produced in large quantities.

Question 2

what is a niche market?

Answer 2

a small, specialized market for a particular product or service.

Question 3

what are the key characteristics of a mass market?

Answer 3

• Customers form the majority in the market.
• Customer needs and wants are more “general” & less “specific”.
• Associated with higher production output and capacity (economies of scale)
• Success usually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands.

Question 4

what are the key characteristics of a niche market?

Answer 4

• Less competition – the firm is a “big fish in a small pond”.
• Clear focus - target particular customers (often easier to find and reach too).
• Builds up specialist skill and knowledge = market expertise.
• Can often charge a higher price – customers are prepared to pay for expertise.
• Profit margins often higher.
• Customers tend to be more loyal.

Question 5

how can you calculate market size?

Answer 5

Market size measures the total sales generated by selling a product on a market. It is measured by dividing sales by market share. This value is then multiplied by 100.

Question 6

how can you calculate market share?

Answer 6

Market share refers to the proportion of a market that a business controls in order to satisfy customer needs.
Market share can be calculated by sales of one product divided by total market sales of that product multiplied by 100.

Question 7

what is a dynamic market?

Answer 7

A dynamic market is one that is in a rapidly changing business environment.

Question 8

what factors do u need to consider when looking at a dynamic market?

Answer 8

Online retailing

How markets change

Innovation and market growth

Adapting to change

Question 9

what are the advantages of online retailing?

Answer 9

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 compared to bricks and mortar retailers

Businesses can collect data by tracking consumer behaviour which helps with primary market research

Consumers can receive offers that they are more likely to benefit from

Consumers can shop at a time that suits them

Question 10

what are the disadvantages of online retailing?

Answer 10

There may be high costs for website development, maintenance, and promotion

Online retailing is dominated by larger businesses that are more well-known

High levels of competition mean that it will be expensive to make a website stand out

There is a lack of personal contact with customers

Consumers may find it difficult to get the desired level of customer service

Consumers may find it difficult to return unwanted products

Online purchasing opens consumers up to credit card fraud

Question 11

what leads to changes in the market?

Answer 11

Changing consumer tastes and preferences e.g. consumers desiring electric vehicles in place of traditional petrol/diesel.

Changing demographics e.g many developed countries have an increasingly older population who have different wants and needs to previous markets.

The amount of competition e.g. international trade means larger market sizes but also more competition between an increasing number of firms.

Competition can be direct i.e. the sale of similar products or indirect e.g. airlines compete with each other but also with other forms of transport such as trains.

Changing legislation e.g. laws around environmental standards create new markets.

Question 12

what is product innovation?

Answer 12

Product innovation involves the adaptation or improvement of existing products e.g. improved video cameras on laptops.

Question 13

what is market growth?

Answer 13

Market growth is the measurement of the change in the entire market, expressed as a percentage of the original size.

The businesses market share does not necessarily increase automatically as the entire market continues to grow.

Question 14

what causes a market to grow?

Answer 14

Increasing population sizes can increase demand in certain markets.

Increasing incomes can increase demand in certain markets.

Changing tastes and preferences can cause the market to grow e.g. the growth in the electric car market.

Question 15

how can business adapt to change?

Answer 15

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 as to gain the first mover advantage.

Question 16

how does competition affect the market?

Answer 16

Competition can be direct or indirect:

Direct competition occurs when the business is targeting customers with the same product as a competitor.
Indirect competition occurs when firms sell different products but compete with each other for the customers disposable income e.g. cinema and theatre companies are in indirect competition.

Competition results in many benefits for the customer, such as:
- Businesses offer lower prices.
- Businesses produce better quality products.
- Businesses provide better customer service.

However, the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices.

Question 17

what is the difference between uncertainty and risk?

Answer 17

Risk is the potential threat to business success.
Risks can be from inside the business (internal) or from outside the business (external).
Risks can be measured and prepared for using risk management.

Uncertainty is when outcomes are difficult to predict.

Question 18

what is product orientation?

Answer 18

A product orientation is an approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer.
The emphasis will be on creating a product first and then finding a market.
The business has a belief that the product is superior i.e. it will sell itself.
One problem with being too product orientated is that over time your business may move further.

Question 19

what is market orientation?

Answer 19

Market orientation is an approach to marketing that focuses on the needs of consumers and uses this information to design products that meet customer needs.
- Consumers are at the center of marketing decisions.
- Products will be developed which respond to consumer needs.

The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable .

Question 20

what are the benefits of market research?

Answer 20

• reduces the risk when launching new products or entering new markets.
• Anticipates future needs and wants of consumers.
• helps understand consumer behaviour.
• identifies potential consumer demand.
• identifies how much consumers are prepared to pay.
• identifies competitors and gauge their potential strengths and weaknesses.

Question 21

how does ICT help support market research?

Answer 21

Company websites
Websites allow businesses to collect primary data more cheaply e.g. tracking consumer searches and analyzing customer reviews as well as collecting secondary data about rivals e.g. prices and special offers. Pop-ups
Databases
These can be used to store large amounts of customer information. Databases are also effective in collating customer e-mail addresses so that targeted customers can be surveyed later via e-mail.
Social networking
Focuses on gathering information about consumers via online social channels such as Twitter and Facebook.

Question 22

what is market segmentation?

Answer 22

Market segmentation is the process in which a single market is divided into sub markets or ‘segments’.
Each segment represents a slightly different set of consumer characteristics.

Question 23

what are the advantages of market segmentation?

Answer 23

• May increase loyalty if the consumer feels that their needs are being met which can lead to repeat purchases.
• Less expensive and wasteful than marketing products at wide market segments.
• Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely.
• Recognizes that consumers are not all identical - consumer groups do not all share the same tastes and preferences.

Question 24

what are the disadvantages of market segmentation?

Answer 24

• Not everyone within a segment will behave in the same way.
• May be difficult to identify a segment and consumers can belong to multiple segments at the same time.
• Segmentation requires more detailed market research which can prove costly (but beneficial) to the business.
• A segment may be identified but it may be too small and unprofitable to cater for.

Question 25

what is market positioning?

Answer 25

Market positioning refers to the process a business goes through when launching a new product or service.
The business decides where they want to position the product in the market with regard to price, quality, branding, and customer perception.

Question 26

what is market mapping?

Answer 26

Market mapping is a tool for identifying the position of a product within a market.
A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products.
Only two criteria can be chosen e.g. price and quality, age and income, etc.

Question 27

what are the benefits of market mapping?

Answer 27

• Market gaps can be identified which may enable a business to come up with ideas for new products.
• Comparisons can be made between a business’ products and those of its rivals.
• Market maps are simple to construct and offer a visual illustration of the position of a product in the market.

Question 28

what are the limitations to market mapping?

Answer 28

• A gap in the market may exist because it is not profitable to fill.
• Mapping a market may require primary research which can be expensive.
  -Only two criteria can be chosen which may prove too simplistic.
  -Markets are often dynamic and a market map only provides insight at a specific point in time.

Question 29

what may give business competitive advantage?

Answer 29

• Quality
• Delivery times
• Low Price
• Reliability
  -Ethical stance
  -Design

Question 30

what is the purpose of product differentiation?

Answer 30

• Product differentiation is an attempt by a business to distinguish its products from those of competitors.
• Successful product differentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices.

Question 31

how can business add value to products/services?

Answer 31

Marketing and branding
Building brand identification and customer loyalty to the brand allows the firm to charge a higher price for its products.
Functions and features
Adding unique features allows the firm to charge a higher price for its products thus increasing the added value.
Customer service
Businesses that ensure they have a good reputation for customer service can charge a higher price.
Customization
Allowing customers to design or create their products allows the firm to charge a higher price.
Packaging

Question 32

what factors affect demand?

Answer 32

• Change in the price of substitutes.
• Change in the price of complementary goods.
• Change in consumer incomes,
• Fashions, tastes & preferences.
• Advertising & branding.
• Demographics (population)
• Seasonality
• External shocks (unforseen events like covid)

Question 33

what is demand?

Answer 33

• the amount of a good that consumers are willing and able to buy at a given price.

Question 34

what is a complimentary good?

Answer 34

• a good bought alongside an item
• has a negative correlation

Question 35

what is a subsitute good?

Answer 35

• change in price will cause consumers to switch to an alternative.
• an alternative good.