1.3: Markets, consumers and competition

Question 1

What is market research?

Answer 1

Any activity that gives a business information about its product or service, its customers, its competitors or the market it operates in.

Question 2

Why do businesses need market research?

Answer 2

To identify whats happening in the market now
To predict what might happen in the market in the future
To explore new possibilities in the market.

Question 3

What does market research do?

Answer 3

Gives information that can be used to make better informed decisions about the business and its future

Allows businesses to understand consumer behaviour + make them more responsive to customer’s needs - leading to market orientation

Helps give a business a competitive advantage - improve products

Reduce risks of start-ups

Helps keep established businesses up with market trends.

Question 4

What is primary research?

Answer 4

Gathering information first hand
Eg: focus groups, questionnaires and direct interviews

Question 5

What is secondary research?

Answer 5

Finding and using information that has been gathered already

Question 6

What do start-ups use market research for?

Answer 6

Small, local market
Gaps in market

Question 7

What do established businesses use market research for?

Answer 7

Researching the market for a new product

Question 8

Advantages of primary research

Answer 8

Can be designed specifically to suit the purpose of the business
Information up to date and directly relevant
Information gathered not available to competitors.

Question 9

Disadvantages of primary research

Answer 9

Can be expensive to collect
Can take a long time
Can give misleading information

Question 10

Advantages of secondary research

Answer 10

Can be doen very quickly
Can be much cheaper than primary research

Question 11

Disadvantages of secondary research

Answer 11

May not be exactly specific to researcher’s needs
Can be dated
May not be accurate

Question 12

What is quantitative research?

Answer 12

Based on numerical data

Question 13

What is qualitative research?

Answer 13

Based on consumer’s attitudes and opinions

Question 14

What is sampling?

Answer 14

Would be practically impossible to interview everybody so a smaller sample of the market is selected to represent it

Question 15

Describe random sampling

Answer 15

A group of people selected so as to be representative of the population as a whole

Question 16

Describe quota sampling

Answer 16

Selecting evenly from particular groups within the population

Question 17

Describe stratified samples

Answer 17

Draw on specific groups that may be identified with particular market segments.

Question 18

Advantages of random sampling

Answer 18

Can be effective and accurate

Question 19

Disadvantages of random sampling

Answer 19

Hard to be genuinely random
Needs large sample sizes to be free from bias
Can be expensive

Question 20

Advantages of stratified sampling

Answer 20

Targets the market effectively

Question 21

Disadvantages of stratified sampling

Answer 21

May be hard to identify appropriate strata
More complex to organise and analyse results

Question 22

Advantages of quota sampling

Answer 22

Cheap and effective of sampling

Question 23

Disadvantages of quota sampling

Answer 23

Need to be careful in drawing up quotas to avoid bias.

Question 24

What is market segmentation?

Answer 24

Dividing the market into groups of consumers with similar characteristics
eNABLES PRODUCTS AND SERVIces to be more effectively produced and targeted for a particular market segment.

Question 25

Advantages of segmentation

Answer 25

More precisely a segment can be identified and provided for, more likely it id that a sale will be made Reduces direct competition Premium price may be charged if market segments get exactly what they want Encouraged the development of brand loyalty

Question 26

Disadvantages of segmentation

Answer 26

Can be expensive to research and identify different segments More costly to develop and market different products for different segments rather than just one standardised product Targeting one particular segment may mean ignoring others Even if segments are identified, reaching them may be difficult

Question 27

Market positioning

Answer 27

Shows how consumers view individual products or brands, in relation to competing producys May involve variations in price or qualtiy or other aspects of interest to the consumer

Question 28

Market mapping

Answer 28

Use of a grid showing two features, such as price and quantity or consumer age. Helps to position products in relation to each other

Question 29

Advantages of market mapping

Answer 29

Enables a business to spot gaps in the market Can help a business to differentiate its product from the competition.

Question 30

Disadvantages of market mapping

Answer 30

Can be hard to categorise some products and services Identifying a gap does not mean there is a need for a product to fill it

Question 31

What is competitive advantage?

Answer 31

Any feature of a business that enables it to compete effectively with rival products

Question 32

Product differentiation

Answer 32

May be used to achieve an advantage

Question 33

What does cutting costs allow a business to do?

Answer 33

Allow a business to compete on price and still make a profit

Question 34

How can cutting costs be achieved?

Answer 34

Improvements in staff training Improving relationships with suppliers Striving for greater efficiency in the use of resources

Question 35

How may a business add value to it's products?

Answer 35

Introduce completely new products or re-design existing ones Target product reliability or customer service with appropriate staff training Produce a consistently reliable branded product that will sell for more than an anonymous basic one would

Question 36

Product differentiation

Answer 36

Occurs when each business creates a distinctive product. May involve giving it unique features in order to attract customers May also involve changing perceptions as to the function of the product Branding important

Question 37

Pricing strategy

Answer 37

The way in which a business decides upon the price of its product Output levels linked to price High prices=if output is relatively low

Question 38

What do price and output depend on?

Answer 38

Competition of business Competitive advantage product has + product differentiation Economic growth

Question 39

Dynamic markets

Answer 39

Markets that are changing all the time

Question 40

Examples of dynamic markets

Answer 40

High tech products

Question 41

Dynamism of market changign

Answer 41

Changing demand Change in fashions leads to rising demand for some products and falling demand for others Advertising change taste and fashions Rising incomes increase demand, high end productsS

Question 42

Stable markets

Answer 42

One in which the pace of change is slow Market share and size are fairly constant with little variation in price

Question 43

Market orientation

Answer 43

Creating products and services to fits the wants and needs of the customer. Business adapts its products and innovates in order to compete successfully with rival suppliers

Question 44

How can market orientation improve a firm's prospects?

Answer 44

Market research may provide vital information about a market a business had previously ignored Business may develop competitive advantage Brand loyalty=business can charge a higher price for its products and services