2.1.4 How the digital economy affects markets & firms

Question 1

2 strategies of Market information in the digital economy:

Answer 1

1. Price comparison sites
2. Viral marketing and social media

Question 2

What is Price comparison sites

Answer 2

Have helped to increase the quantity of knowledge consumers have about a good or service.

Question 3

Advantage of Price comparison sites

Answer 3

This has helped to reduce some of the asymmetry of information between consumers and suppliers.

Question 4

Example of Price comparison sites

Answer 4

Consumers can make comparisons on an independent website between suppliers of insurance policies, so they know exactly what else is available on the market and whether they are getting the best deal or not.

Question 5

What is Viral marketing and social media

Answer 5

This is a method of marketing where firms cause viewers of a promotion to share it with friends.

Question 6

Advantages of Viral marketing and social media

Answer 6

1. This creates a campaign for the firm which might end up going viral via email, social media or text.
2. This can also serve as a way to get feedback from customers for what a firm should do next in terms of improving their products.

Question 7

Examples of Viral marketing and social media

Answer 7

1. Firms can use platforms such as Facebook and Twitter to promote their products, increase awareness of their brand and increase sales.
2. Other platforms, such as Linkedin can be used as a way of creating contacts around the world.

Question 8

Supply- side: (there’s 2)

Answer 8

1. Micromarketing
2. Online retailing and online distribution

Question 9

What is Micromarketing

Answer 9

This is where advertising is focussed on a small group of consumers.

Question 10

Examples of Micromarketing

Answer 10

1. Users of social media are likely to have been in the target audience of micromarketing.
2. It includes special offers and voucher codes, which are aimed towards individuals.

Question 11

What is Online retailing and online distribution

Answer 11

Large online stores such as Amazon, Asos and eBay are good examples of online retailing.

Question 12

What does online retailing becoming so widespread mean

Answer 12

There has been an increase in demand for staff with digital skills.

This could cause a problem for some firms, since there could be a skills shortage, and it could be expensive for businesses to train staff.

Question 13

Demand- side:

Answer 13

Satisfying consumers with:
1. the long tail

2. wider geographical markets

Question 14

What does the long tail mean

Answer 14

1. Suggests that consumers get a wider choice with online retailing.
2. Describes how firms sell a large number of niche products, which satisfy individual consumer’s needs, but only a small quantity of each product. E.g Apple/ Amazon

Question 15

What does a wider geographical markets mean

Answer 15

1. Online retailing grants firms the potential to access the worldwide market, and it gives consumers the potential to choose from the worldwide market.
2. Businesses are not restricted by the physical space available in a shop or the costs involved with a shop