1.2 spotting a business opportunity

Question 1

Understanding customer needs

Answer 1

A business needs to have an effective understanding of the needs and wants of customers in its target market segment.
Price
Quality
convenience
choice

Question 2

customer needs - Quality

Answer 2

Customers will want the product/service to be of the quality that they require and expect.
This is not necessarily high quality, as customers may be happy with a cheaper product of a reasonable quality.

Question 3

customer needs - price

Answer 3

Customers will expect to pay a reasonable price for goods or services. Price can vary depending on quality, timing, delivery arrangements and the popularity of the item.
E.g. train ticket prices can change according to different circumstances, in this instance – the time of day!

Question 4

customer needs - convenience

Answer 4

The growth of online shopping and home delivery highlights how customer needs have changed in recent years.

Most successful retailers will now have websites and e-sales options that are more convenient and increasingly expected by customers.

Retail store opening hours and locations are also factors that are affected by customer needs.

Question 5

market research

Answer 5

The purpose of market research is to gather information.
This will enable the business to be informed in its decisions and so reduce the risk of failure.

Question 6

Useful insights provided by effective market research

Answer 6

Market – e.g. size, structure, trends
Competition – e.g. who, market share, USP
Customers – e.g. who, needs, wants, expectations
Market segments – e.g. existing or new segments offering opportunities

Question 7

Primary research

Answer 7

Primary research
Data collected first-hand for a specific research purpose
e.g. surveys & questionaires, focus groups, obsevation

Question 8

Secondary research

Answer 8

Data that already exists that has been collected for a different purpose
e.g. government information, competitor websites, customer reviews, trade assosciation & trade press for specific industries, newspapers, market research reports

Question 9

Primary research - pros

Answer 9

Directly focused to research objectives
Kept private – not publicly available
More detailed insights – particularly into customer views

Question 10

Secondary research - pros

Answer 10

Often free and easy to obtain
Good source of market insights

Question 11

Primary research - cons

Answer 11

Time-consuming and costly to obtain
Risk of survey bias
Sampling may not be representative of the whole population

Question 12

Secondary research - cons

Answer 12

Can quickly become out of date
Not tailored to business needs
Specialist reports are often quite expensive

Question 13

Quantitative data

Answer 13

Data that is normally numerical.
Main methods of obtaining quantitative data are the various forms of survey – i.e. telephone, postal, face-to-face and online.

Question 14

Qualitative data

Answer 14

Based on opinions, attitudes
and beliefs.
Focus groups and interviews are common methods used to collect qualitative data.

Question 15

Benefits of using social media to collect data

Answer 15

-Quick - Using Facebook and Twitter, reactions to new products will be live in minutes, providing instant feedback
-Easy to set up surveys and polls
-Provides an insight into the market in which the business is competing
-Free tools available that allow businesses to collect social media statistics

Question 16

disadvantages of using social media to collect data?

Answer 16

-Feedback provided through social media comments may not be representative of actual opinions.
-Danger of social media becoming too negative
-Need for staff training involved in this process, which will increase costs and be time-consuming.
-For a small business, the monitoring of social media can again become very time-consuming, which can detract from other important roles in the firm.

Question 17

Importance and reliability of market research data - bias

Answer 17

Market research involves taking samples. Samples may involve some bias either through the time, location or type of people chosen. Smaller samples are more likely to be biased, but large samples are expensive and time-consuming to conduct.

Question 18

Importance and reliability of market research data - out of date

Answer 18

Any research will be out of date once it has been collected. But some, especially secondary data, can be very out of date and not a reliable representation of the current situation facing a business. This can result in incorrect decisions being made.

Question 19

Importance and reliability of market research data - Inaccurate

Answer 19

Either the question or the answers can result in inaccuracies. If the question is not clear, then the answers given will be of little use.

Question 20

market segmentation

Answer 20

Market segmentation involves dividing a market into parts that reflect different customer needs and wants.

Question 21

Main categories of market segmentation

Answer 21

Location/geographic
Demographics - age, gender, family lifestyle, religion, nationality, ethnicity etc.
Income

Question 22

Benefits of effective market segmentation

Answer 22

Better matching of product to specific customer needs
Helps with new product development – focused on needs of customers in the segment
Allows a business to grow its share in a market or to effectively target fast-growing segments
Helps make the marketing mix more effective e.g. better targeting of promotion

Question 23

Potential drawbacks of market segmentation

Answer 23

Segmentation is an imprecise science – data is not always available, up-to-date or reliable
Just because a business can identify a specific market segment, it does not mean it can successfully reach the customers in it!
Markets are increasingly dynamic and fast-moving; so too are the segments found within a market

Question 24

marketing mix

Answer 24

How a business combines its product and its price, and uses promotion and the place of sale in order to be successful - 4Ps of marketing: product, price, promotion, place

Question 25

impact of consumer trends on marketing - price

Answer 25

Price – technology has decreased prices through reduced costs of production. It has also increased competition through e-commerce and international competition. This competition has been increased through price comparison sites.

Question 26

Impact of Digital technology on marketing mix - product

Answer 26

Product – digital technology has led to a whole range of products, such as smartphones, tablets, and smart TVs, being developed. Technology has increased product quality and allowed new customer experiences, for example 3D films.

Question 27

Impact of Digital technology on marketing mix - promotion

Answer 27

Promotion – advertising now makes significant use of websites, social media and increasingly is personalised at the individual user. Customer databases allow targeted promotions and can be linked to purchases made.

Question 28

Impact of Digital technology on marketing mix - place

Answer 28

Place – e-commerce allows customers to access many products from anywhere in the world. Shopping online is a 24/7 experience. This has led to declines in physical retail outlets for many goods and services.

Question 29

Effects of weak competition

Answer 29

Customers have no alternatives to buy, if they wish to purchase this product.
The business can charge higher prices and make good profits.
Profits may be reinvested into the business to make it more efficient or more can be distributed to the owners.

Question 30

Benefits of competition

Answer 30

Encourages a business to make its product different or better than its competitors
Businesses will focus on one area of the market and their market strengths
Research will take place to improve their product and reduce costs
Improved customer service to retain existing customers
Can look at what competitors do well and improve their own product