3.2 Understanding markets and customers

Question 1

Market growth

Answer 1

When an industry grows in terms of either volume or value

Question 2

Sales growth

Answer 2

When a business increases its sales in terms of volume or value

Question 3

Market share

Answer 3

The proportion of a market that a business controls in order to satisfy customer needs

Question 4

Market share calculation

Answer 4

(sales of on product) / (total market sales) X 100

Question 5

What information does market research gather

Answer 5

• Demand
• Competition
• Target market

Question 6

Demand

Answer 6

• Insights into customer’s wants and needs to help improve a product, spot market opportunities and stay competitive
• spot opportunities for growth and potential threats from new products/technology

Question 7

Competition

Answer 7

• Can help to understand major threats in the market and then be prepared to deal with these threats

Question 8

Target market

Answer 8

Insights into customer’s wants and needs and how they are changing over time

Question 9

What does market mapping measure

Answer 9

Price vs Quality

Question 10

Methods of market research

Answer 10

• Sampling
• Technology

Question 11

Sampling

Answer 11

When a business selects a sample of the population to save collecting data from everybody in that population

Question 12

Advantage of sampling

Answer 12

Reduces costs - chooses a cross-section of the population instead of collecting data from everybody

Question 13

Disadvantage of sampling

Answer 13

May not accurately reflect the full target market if the sample is not chosen properly

Question 14

Technology in market research

Answer 14

Used to analyse market research data by completing calculations and creating graphs and charts which can be used by managers and leaders

Question 15

How to calculate PED

Answer 15

% change in quantity demanded / % change in price

Question 16

What is the co-efficient

Answer 16

a value / number

Question 17

What elasticity is penetration pricing likely to have

Answer 17

Elastic

Question 18

What elasticity is price skimming likely to have

Answer 18

Inelastic

Question 19

What does PED measure

Answer 19

The responsiveness of demand after a change in price

Question 20

What does it actually mean?

Answer 20

For every 1% change of price, demand is going to change by the co-efficient value

Question 21

Co-efficient GREATER than 1 means a product is…

Answer 21

Price Elastic

Question 22

When a product is price elastic it means…

Answer 22

% change in quantity demanded is GREATER THAN the % change in price

Question 23

Co-efficient LESS than 1 means a product is…

Answer 23

Price inelastic

Question 24

When a product is price inelastic it means…

Answer 24

the % change in quantity demanded is less than the % change in price

Question 25

When the price elasticity is exactly 1, it means...

Answer 25

the % change in quantity demanded = the % change in price

Question 26

Impact on profit & sales revenue if a product/service is price ELASTIC

Answer 26

Decrease in price = Increase in sales revenue WHEREAS Increase in price = Decrease in sales revenue

Question 27

Impact on profit & sales revenue if a product/service is price INELASTIC

Answer 27

Decrease in price = decrease sales revenue WHEREAS Increase in price = Increase in sales revenue

Question 28

What does YED measure

Answer 28

The responsiveness of quantity demanded to a change in consumer income

Question 29

Formula for YED

Answer 29

(% change in quantity demanded) / (% change in income)

Question 30

Co-efficient is positive for YED

Answer 30

An increase in income will increase demand and a fall in income will decrease demand e.g luxury items

Question 31

Co-efficient is negative for YED

Answer 31

An increase in income will decrease demand and a fall in income will increase demand e.g changing from Sainsburys to Aldi products

Question 32

YED less than 1

Answer 32

Inelastic - the change in income will lead to a change quantity demanded which is less than the change in income

Question 33

YED more than 1

Answer 33

Elastic - the change in income will lead to a change in quantity demanded which is greater than the change in income