T1.1 Meeting Customer needs

Question 1

Define ‘market’

Answer 1

A market is any place where buyers and sellers meet to exchange goods or services

Question 2

What is meant by the term ‘market share’?

Answer 2

Market share is the proportion of the total market sales a business or brand controls

Question 3

Define the term ‘mass market’

Answer 3

A mass market is where products are aimed at broad market segements

Question 4

Define the term ‘brand’

Answer 4

A brand is a name, image or logo that helps one product stand out from its competitors

Question 5

Formula of market share

Answer 5

Market share = Sales of a business/ Total sales in the market x 100

Question 6

Define the term ‘niche market’

Answer 6

A niche market is one in which the products are aimed at a small subset of consumers in the market

Question 7

Define dynamic market

Answer 7

A dynamic market is one that is subject to rapid or continuous changes

Question 8

What is meant by the term ‘primary research’?

Answer 8

Primary research is the process of gathering first-hand information directly from consumers in the target market

Question 9

Define market segmentation

Answer 9

Market segmentation is the process by which a single market is divided into sub-markets containing consumers with similar characteristics

Question 10

Define the term product orientation

Answer 10

Product orientation is an approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer

Question 11

What is meant by the term secondary research?

Answer 11

Secondary research involves the collection compilation, and analysis of data that already exists

Question 12

Define market orientation

Answer 12

Market orientation is an approach to marketing that focuses on the needs of consumers and uses this information to design products that meet those needs

Question 13

What is meant by the term test marketing?

Answer 13

Free samples are provided to consumers in the target market for a limited period to gauge their response to the product

Question 14

Define market positioning

Answer 14

Market positioning refers to product launch decisions such as price, quality, branding and customer perception, which position the product in relation to its competitiors

Question 15

Define market saturation

Answer 15

Market saturation where most customers who want to buy a product have already done so

Question 16

Define the term ‘competitive advantage’

Answer 16

Competitive advantage refers to the features of a business and its products that are perceived as superior to those its rivals by customers

Question 17

Define product differentiation

Answer 17

Product differentiation is an attempt by a business to distinguish its products from those of its competitors

important point: Successful product differentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices

Question 18

Give 2 examples of sources of competitive advantages

Answer 18

1. Quality
2. Low price

Question 19

Define the term ‘Added value’

Answer 19

Added value is the difference between the selling price and the cost of inputs required to create the product or service

Question 20

Characteristics of mass markets

Answer 20

• Products are less unique as they are aimed at broad market segments
• Low AC due to large scale production EoS
• Lower prices leads to greater affordability

Question 21

Characteristics of Niche Markets

Answer 21

• Products are more specialised and unique as they are aimed at narrow market segments
• High average costs due to small scale production
  —->They do not benefit from economies of scale
• High prices can allow businesses to earn higher profit margin

Question 22

Define Market research

Answer 22

Market research is the objective collection, compilation and analysis of information about a market

Question 23

Advantages of Primary Market Research

Answer 23

• Information gathering is focused on the needs of the business and will not be available to its rivals
• The business can get in-depth information from respondents, for example, reasons behind certain behaviour
• Primary market research is more up-to-date and can be used to ask specific questions, so will be more relevant

Question 24

Disadvantages of Primary Market Research

Answer 24

• The sample size may be too small and unrepresentative of all of the customers leading to unreliable results
• Bias may mean that researchers can guide respondents to answer questions in a particular way
  —–>Similarly, respondents may be influenced by the responses of others, or not provide accurate information
• A business may need to hire a specialist market research agency to help and the process can be expensive and time-consuming

Question 25

Advantages of Secondary Market Research

Answer 25

- Information is already available and so is quicker to collect than primary research, thereby saving time - Information is often free (e.g. government websites and internet sources such as Statista) and is cheaper to collect, leading to lower costs compared to primary research - Suitable for a small business that lacks a large marketing budget and/or expertise

Question 26

Disadvantages of Secondary Market Research

Answer 26

- Information has been collected for other purposes and so may lack relevance or may not be factually correct, e.g. Wikipedia - Can be expensive to purchase market specific secondary data from specialist companies, e.g. MINTEL reports - Information may be out-of-date, especially in dynamic markets

Question 27

Advantages of Market Segmentation

Answer 27

- Recognises that consumers are not all identical - Consumer groups do not all share the same tastes and preferences - Less expensive and wasteful than marketing products at wide market segments - May increase loyalty if the consumer feels that their needs are being met, which can lead to repeat purchases

Question 28

Disadvantages of Market Segmentation

Answer 28

- Not everyone within a segment will behave in the same way - It may be difficult to identify a segment and consumers can belong to multiple segments at the same time - Segmentation requires more detailed market research, which can prove costly - but beneficial - to the business - A segment may be identified but it may be too small and unprofitable to cater for

Question 29

Define Market mapping

Answer 29

Market mapping is a tool for identifying the position of a product within a market

Question 30

The Usefulness of Market Mapping

Answer 30

- Market gaps can be identified which may enable a business to come up with ideas for new products - Comparisons can be made between a business’ products and those of its rivals - where are the business’ products positioned about its rivals? - Market maps are simple to construct and offer a visual illustration of the position of a product in the market

Question 31

Limitations of Market Mapping

Answer 31

- A gap in the market may exist because it is not profitable to fill - Mapping a market may require primary research which can be expensive - Only two criteria can be chosen which may prove too simplistic - Markets are often dynamic and a market map only provides insight at a specific point in time

Question 32

Define Competitive advantage

Answer 32

Competitive advantage refers to the features of a business and its products that are perceived as superior to its rivals by customers

Question 33

Sources of competitive advantage

Answer 33

1. Quality 2. Design 3. Ethical Stance 4. Price 5. Reliability 6. Brand Image & reputation 7. Customer service 8. Delivery times

Question 34

Ways a firm can gain competitive advantage

Answer 34

1. Innovation, reputation (branding) 2. Building strong relationships with stakeholders 3. Adding value - Is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service. 4. Differentiation - The process of distinguishing a product or service from competitors products in the market 5. Market segmentation 6. Price leadership

Question 35

Methods of Adding Value

Answer 35

1. Product differentiation 2. Marketing & Branding 3. Function & features 4. Packaging 5. Customisation 6. Customer service 7. Convenience 8. Design IMPORTANT NOTE: It's important to understand that adding value adds raises costs, but it is worth it if the increase in selling price outweighs the costs associated with the method