1.1 - Meeting Customer Needs Flashcards
(29 cards)
Market
Any medium in which buyers and sellers interact and agree to trade at a price. There are four types:
- Local market
- National market
- Primary market
- Electronic market
Mass marketing
A firm will try to accommodate as much of the market as possible. Fast moving consumer goods, like crisps and Coca-Cola are sold in mass markets.
Mass marketing is characterised by:
- Low prices
- A wide range of sales outlets and wide availability
- Extensive promotion
- High turnover (sales volume)
Mass marketing benefits and drawbacks
Benefits:
- Greater number of customers in this market - national/ global market
- Businesses can produce large quantities at a lower unit cost by exploiting economies of scale - may result in higher sales and higher profits
Drawbacks:
- Firms face tough competition for sales
- Large capital investment needed
- Products often standardised (makes it difficult to tailor products to cater for all needs)
Economies of scale
The reductions in average unit costs enjoyed by a business as output increases
Niche marketing
This is where firms concentrate on selling to a small segment of the market. E.g., Hotel Chocolat specialise in the luxury chocolate niche. Complete opposite of mass marketing
Niche marketing benefits and drawbacks
Benefits:
- Small firms can often survive by supplying niche markets - may therefore avoid competition (with big firms).
- It is a lot easier to focus on the needs of the consumer in this market - there aren’t as many needs to cater for.
- If there’s no competition, could also charge higher prices.
Drawbacks:
- Little or no benefit from economies of scale.
- Limited potential for sales growth and large profits.
- If a niche business is successful it may face competition from bigger firms.
Brand
A feature of a business or product that is recognised by customers and distinguishes it from competitors. Brands can take a number of forms:
- Images.
- Colour.
- Logo.
- Shape.
- Symbols.
- Celebrity endorsement.
Dynamic market
A market that is subject to rapid and fundamental (large/ significant) change over a short period of time.
Stable market
One in which the pace of change is slow, market size and market share are fairly constant with little variation in price. Innovation is rare and may just consist of minor changes to existing products.
Online retailing (/e-commerce) - check
The process of buying and selling goods and services over the internet. It’s grown significantly in recent years with many businesses adopting an omnichannel retail approach. This is when a business uses and combines a wide range of distribution channels, including digital and physical stores.
Innovation - check
Bringing in a new idea and using it to:
- Create a new product or improve an older one OR
- find new cheaper or better ways of making a product and bringing it to market (improve production process).
(Can have innovation in your production process).
Market size
Can be measured by volume of sales (i.e., the number of items sold) OR the value of the sales of a product (i.e., total revenue).
Market growth - check
% change in sales (volume or value over a period of time).
Formula: ((new - OG)/ OG mkt size) x 100
(Minus figure = mkt decreasing, positive number = mkt increasing).
Market share - check
% or proportion of the total sales of a product or service achieved by a firm/ specific brand/ product.
(Good measure of success as it compares sales to those of competitors)
Formula: (sales of 1 product or brand or company/ total sales in the market) x 100
Product orientation - check
Key focus is on production process and product itself.
Business puts most its efforts into developing and making products which it believes consumers want and which will sell.
Most common with technologically advanced products where consumer doesn’t have technical knowledge or insight to realise that this product could exist or that they would want it.
Market orientation
An outward looking approach to new product development where the key focus is on the market.
A market oriented company will continually identify, review and analyse consumers’ needs, in order to adapt or produce products to meet these needs.
Reduces, but does not eliminate the risk of new product development.
Market research
Collection, analysis and collation of data which enables businesses to identify what customers want and need in order to inform their marketing strategy.
Primary research
This involves collecting data first hand: information which didn’t exist before the research began. In other words, it has to be collected by the researcher i.e., a business itself or a marketing agency (a company that specialise in carrying out market research).
Secondary research
The use of information that has already been collected for a different purpose (by someone else usually, often called desk research)
Quantitative research
This is research based larger samples and is, therefore, more statistically valid. Quantitative research is concerned with data and addresses questions such as “how many?”, “who?”, “when?”, etc.
Results generally in numerical form.
Methods: surveys, observation.
Qualitative research
Based on opinions, attitudes, beliefs and intentions. This kind of research deals with questions such as, “why?”, “would?”, or “how?”.
Aims to understand why customers behave in a certain way or how they respond to a new product. Given that these opinions are often obtained from small numbers of people; the findings are not necessarily statistically valid. However, such data can highlight potential issues which can be explored in quantitative research.
Common methods: focus groups and interviews.
Often revealing and useful, but it is costly and time consuming to collect, especially for small/ start-up businesses.
Sampling
“A sample is a smaller group of people who must represent a proportion of a total market when carrying out market research” i.e., we cannot survey 65 + million in the UK, so need a representative sample.
Market segmentation
“Markets can be divided into different sections or segments. Each segment is made up of consumers that have similar needs/ wants. Businesses recognise this and target particular market segments with their products” e.g., clothing industry: men/ women or high fashion/ budget.
Segmentation benefits and drawbacks
Benefits:
- Advertising can be targeted at specific market segments so that advertising spend is more effective.
- The most profitable and least profitable customers can be identified.
- Least profitable markets can be avoided.
- It becomes easier to identify new products.
Drawbacks:
- Can be an imprecise science - data about each market is not always available, up to date or reliable, e.g., census data only updated every 10 years
- Just because you identify a segment, doesn’t mean it is profitable or that you can reach it.
- Markets are increasingly dynamic and fast changing so too are the segments ((can be) analysis for first drawback).
- Group of consumers may be alienated.
- Market size may be considerable smaller.
- Segmentation can be expensive in terms of market research and research and development.
