Understanding markets and customers notes Flashcards
Why do managers undertake market research
Managers will want as much information as possible in order to reduce the risk when making decisions, to do this they undertake market research.
How can market research be used by managers?
Analyse the existing position of the business
Decide on possible objectives
Identify possible actions that could be taken
Decide what would be the best action and how they can be implemented
Assess how effective marketing decisions have been
One of the purposes of market research is to understand customers in more detail - what would they be looking to find out?
Who buys - may not be the consumer
What they are buying - may not be obvious, things may be bought as presents
When are they buying - seasonal? When do they begin thinking about buying
Why are they buying - gift, reward themselves etc
Who do they ask for information before buying - travel agent?
Where are they buying - online, in store?
What is elasticity?
Whenever a change in one variable (such as a good’s price) causes a change to occur in a second variable (such as the quantity of the good that households are prepared to demand), an elasticity can be calculated.
The elasticity measures proportionate responsiveness of the second variable to the changes in the first variable.
Price elasticity of demand formula
Price elasticity of demand = %age change in qd / %age change in price
If a 5% increase in price was to cause households to reduce their demand by more than 5%, demand would be?
If a 5% increase in price was to cause households to reduce their demand by more than 5%, demand would be elastic.
If a 5% increase in price was to cause households to reduce their demand by less than 5%, demand would be?
If a 5% increase in price was to cause households to reduce their demand by less than 5%, demand would be inelastic.
What affects the price elasticity of demand?
Time How expensive it currently is Who is paying - company Branding of a product USP Patent or trademark Expensive or difficult to switch to another supplier Amount of available substitutes
Income elasticity of demand formula?
Income elasticity of demand = %age change in qd / %age change in income
What does this mean?
demand YED > 1
demand YED < 1
For an inferior good if you have an increase in income then demand decreases and vice versa.
Elastic demand YED > 1
Inelastic demand YED < 1
Developments in technology have allowed businesses to do what?
Developments in technology are enabling businesses to gather more data on customers and to analyse this data more quickly and effectively.
What is big data?
The ability to combine data from a variety of sources is known as big data.
Why is market research important?
Marketing research provides the information to help make decisions regarding what to produce, the price to charge and where to distribute.
Sales forecasting is a common use of market research and can influence other areas of a business such as:
HR - what are the staffing requirements
Finance - estimate future inflows and profits
Operations - expected level of sales and produce to match
Marketing research can go wrong when:
There changes in markets
The way information is gathered
Lack of information from not spending enough
