Topics 1-8 (Markets) Flashcards
Advantages of Mass Markets
- Large Scale Production means lower average cost
- Straight-forward
- Large sales volume
- Brand Loyalty
Disadvantages of Mass Markets
- Lots of competiton
- Homogenous products need to stand out
- High volume output isn’t flexible if demand changes
Advantages of Niche Markets
- Can charge a premium price
- Easier to target customers
- Small scale production, less benefit from EoS
- Less competition
Disadvantages of Niche Markets
- Risky as demand may not be constant
- Higher unit costs
What is a dynamic market?
Dynamic markets change over time. Companies must adapt as markets shrink, grow, emerge or dissapear. Fixed markets, e.g. Baked Beans, do not change much.
Reasons for market growth
- Economic growth
- Innovation
- Social Changes
- Legislation Changes
- Demographic Changes
5 main ways in adapting to change
- Flexibility
- Market Research
- Investment
- Continuous Improvement
- Develop a niche
One advantage of being market oriented?
These businesses can respond quicker to changes in the market, and they can be better at beating competition.
Factors affecting if a business is product or market oriented
- Nature of the product
- Policy decisions
- Degree of Competition
What are the benefits to a company of using market research?
- Helps reduce the risk of failure
- Identify customer needs and wants
- Finds out likely demand
- Reduces waste
- Provides insight on consumer behaviour
Methods of Primary Market Research
- Questionairres
- Postal Surveys
- Telephone Interveiws
- Focus Groups
- Observation
- Test Marketing
Methods of Secondary Market Research
Internal:
- Sales figures
- Annual Reports
- Stock Movements
External:
- Information from competitiors
- Government publications
- Retail audits
What is test marketing?
Test marketing involves selling a new product in a restricted geographical area to test it before national launch. It reduces the risk of failure of failure.
The limitations of Market Research
- 90% of all products fail
- Market Research is not always accurate
- Launching products is extremely risky
- Humans do not always react in the same way
- EXPENSIVE
What is market segmentation?
Where markets are divided into different segments. Some companies focus on one specific segment, for example, luxury cars are targeted at wealthy customers.
Types of Segmentation
Geographic
Demographic
Psychographic
Behaviorial
Benefits of market segmentation
- Allows customer needs to be met
- Increases revenue
- Avoids waste
Limitations of market maps
- They are 2D
- Expensive to obtain
- Customer perception may be different to reality
Ways to improve market positioning
- USP
- Benefits offered by the product
- Attributes of the product
- Origin of the product
Ways to add value
- Bundling
- Customer services
- Speed of response
- Packaging
- Frequent buy offers
- Customizations
What is economies of scale?
Economies of scale is where businesses can achieve a lower cost per unit, by having a larger output. This is because resources become cheaper at mass.
What is demand?
Demand is the amount of a product that consumers are willing and able to purchase at any given price.
Factors leading to a change in demand
- Prices of substitutes
- Prices of compliments
- Changes in comsumer income
- Fashions and preferences
- Advertising and branding
What factors make up demography?
Age, Gender & Geographical
What is supply?
Supply is the amount of a product which suppliers will offer to the market at a given price.
Factors leading to a change in supply
- Price
When prices rise suppliers are willing to supply more as it has more change to make profit. - Changes in cost of production
What is the equilibrium price?
It is also known as the market clearing price. This is because it is the price where the amount supplied is all bought up by consumers.
What is price elasticity of demand?
Price elasticity of demand is the responsiveness of demand to a change in price.
What are the values of PED?
0 means perfectly inelastic
Less than 1 means inelastic
More than 1 means elastic
+- DOES NOT MATTER
Factors affecting PED?
Think how each one affects PED…
- Time
- Competition
- Branding
- Proportion of income spent
YED Values
Normal goods will be positive
Inferior goods are negative
What is income elasticity of demand?
Income elasticity of demand is the responsiveness of demand to a change in income.
What are inferior goods?
Inferior goods are products which, when income rises, the demand for these products falls. An example of this would be products from ALDI or LIDL.
