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business a level > topic 3- understanding markets > Flashcards

topic 3- understanding markets Flashcards

1
Q

what is the definition of market research

A
  • MR gathers info about consumers, competitors and distributors within a firms target market
  • it is a way of identifying consumer’s buying habits and attitudes to current and future products
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2
Q

what is market research a way of finding about customers

A

-it is a way of identifying consumer’s buying habits and attitudes to current and future products

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3
Q

what is one of the biggest cause of business failure

A

-failure to understand the market (consumers)

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4
Q

why do businesses need accurate up-to-date information (4)

A
  • changes in technology- enabling new products and new production processes
  • changes in consumer tastes
  • changes in the product ranges of competitors
  • changes in economic conditions
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5
Q

what is the purpose of marketing research (3)

A
  • gain a more detailed understanding of consumer’s needs
  • reduce the risk of product/business failure
  • forecast future trends
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6
Q

what 2 things do new businesses need to consider

A
  • market size

- market share

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7
Q

what is secondary research

A

-collecting and analysing data that already exists

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8
Q

where can secondary research come from

A
  • outside sources of info

- past data from the business e.g. financial records

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9
Q

give 5 examples of external secondary research methods

A
  • commercial market research organisations
  • the government
  • competitors
  • trade publications
  • the media/ internet
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10
Q

what are the pros of secondary research (3)

A
  • often obtained without cost (or can be cheap if you have to pay)
  • can gain a good overview of a market
  • usually based on actual figures
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11
Q

what are the cons of secondary research (3)

A
  • data can be outdated
  • data may not be tailored to the businesses needs
  • can be expensive to buy reports of info
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12
Q

what is primary research

A

the process of gathering first hand, new data directly from people within your target market

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13
Q

what does market mapping illustrate

A

it illustrates the range of ‘positions’ that a product can take in a market based on 2 dimensions that are important to customers e.g. price and quality

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14
Q

when prices go up, to what extent will sales fall? (what does it depend on)

A

it depends on elasticity of demand

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15
Q

what is elasticity

A

a measurement of the extent to which buyers and sellers respond to any particular change in market conditions

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16
Q

how can we measure price elasticity of demand (PED)

A

the responsiveness of the quality demanded to a change in the price of a product (how much demand changes due to price change)

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17
Q

if demand falls by 20%, how do we write this in terms of PED

A

for each 1% increase in price, demand falls by -2%

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18
Q

what is the PED formula

A

% change in the price

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19
Q

in the PED formula what must the top bit of the fraction always be

A

negative if demand falls

or positive if demand goes up

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20
Q

a supermarket increases the price by 10%, the demand falls by 5% what is the PED?

A

(demand falls) -5
—– = -0.5
10
a 1% increase in price leads to a -0.5% fall in demand

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21
Q

what is the definition of price elasticity

A

a change in price results in a greater proportional change in demand

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22
Q

numerically how do we know if something is price elastic

A

if the number is greater (less than) than -1 e.g -2, -3

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23
Q

numerically how we do know if something is price inelastic

A

is any result is between 0 and -1 e.g. -0.1, -0.5

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24
Q

what does price inelasticity

A

a change in price results in a less than proportional change in demand

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25
Q

price elastic- demand changes ….

A

a lot

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26
Q

price inelastic- demand changes ….

A

not a lot- the change in demand will be smaller than the change in price

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27
Q

what factors determine the elasticity of a product (3)

A

1) the degree of product differentiation- the extent to which customers view the product as being different
2) the availability of substitutes
3) branding and brand loyalty

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28
Q

what happens when a product has many close substitutes

A

it tends to be price elastic

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29
Q

what happens when a product doesn’t have many substitutes

A

it tends to be price inelastic (people will deffos still buy your product especially if you are a monopoly)

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30
Q

the stronger the brand …

A

the lower the price elasticity- a little change in demand

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31
Q

what can data on PED be used for (2)

A

1) sales forecasting- allows the business to see how many products to sell etc
2) pricing strategy- allows to see how price may affect revenue

32
Q

other than price what else can influence demand

A

household income

33
Q

what is the formula for income elasticity of demand (YED)

A

% in income

34
Q

if income goes up and demand goes up would the number be positive or negative

A

positive

35
Q

if income goes up and demand goes down, would the number be positive or negative

A

negative

36
Q

income elastic is called a …. good

A

a normal good

37
Q

income elastic is a …. number

A

positive number

38
Q

when do you know that a product is income ELASTIC

A

if the number is more than 1

39
Q

if demand increases a lot in proportion to a change in income (price elastic) what type of good is it considered as

A

a luxury or superior good

40
Q

as incomes go up and demand goes DOWN, what is the god considered as

A

an inferior good

41
Q

what do luxury or superior goods have a YED of (number)

A

a positive number greater than 1.5

42
Q

what number does an inferior good have to have

A

a negative number

43
Q

what number does a normal good have

A

a positive number between 0.1 and 1.5

44
Q

what is negative about PED and YED (2)2

A
  • price and income elasticitites change over time- so consumer buying habits may change or competitors may change
  • data may not be realistic
45
Q

strong brands have ….

A

low price elasticity- as they have established strong consumer relationships

46
Q

what is good about PED and YED (2)

A
  • allows businesses to see what products would be sold well and not sold well
  • allows you to make a target product for a specific market
47
Q

what is market segmentation

A

-finding ways to divide a market up to identify untapped opportunities- offers possibility of new target markets and new positioning within the market

48
Q

what does segmentation allow

A

offers possibility of new target markets and new positioning within the market

49
Q

what is the benefit of segmentation

A

-increased customer satisfaction- willing to pay a higher price

50
Q

what is the benefit of segmentation for small businesses

A

-it offers a valuable strategy for breaking into a market e.g. looking a what section of the market is successful or where there is a gap in the market

51
Q

what is the benefit of segmentation for a large business

A

-possibly add one niche product to a product portfolio already dominated by the mass market

52
Q

What are the 4 methods of segmentation

A
  • demographic segmentation
  • geographic
  • income
  • behavioural
53
Q

What are the 5 influences on the marketing mix

A
  • it depends on the type of market a firm is operating in
  • sold online or face to face?
  • a product targeted at consumers or other businesses
  • the stage of the life cycle of the product or service
  • what current market research reveals
54
Q

What are the 7 parts to the marketing mix

A
  • price
  • product
  • promotion
  • place

-people, process, physical environment

55
Q

What is niche marketing

A

where a business targets a smaller segment of a larger market, where customers have specific needs and wants

56
Q

What is mass marketing

A

Where a business sells into the largest part of the market, where there are many similar products offered by competitors

57
Q

The key features of a mass market (3)

A
  • customers needs and wants are more general and less specific
  • associated with higher production output and capacity and potential for economies of scale
  • success usually associated with low-cost operation or market leading brands
58
Q

Advantages of targeting a niche market (6)

A
  • less competition “a big fish in a small pond”
  • clear focus- target particular customers
  • builds up specialist skill and knowledge
  • can often charge a higher price
  • profit margins are often higher
  • customers tend to be more loyal
59
Q

Disadvantages of targeting a niche (4)

A
  • lack of economies of scale
  • risk of over dependence on a single product or market
  • likely to attract competition of successful
  • vulnerable to market changes
60
Q

Advantages of positioning maps(3)

A
  • helps spot gaps in the market
  • useful for analysing competitors
  • encourages use of market research
61
Q

Disadvantages of positioning maps (3)

A
  • just because there is a “gap” it doesn’t mean there is demand
  • not a guarantee of success
  • how reliable is the market research?
62
Q

Price elastic- value of PED

A

More than 1

63
Q

Price inelastic- value of PED

A

Less than 1

64
Q

What does price elastic mean

A

Change in demand is more than the change in price

65
Q

What does price inelastic mean

A

Change in demand is less than the change in price

66
Q

Limitations of using elasticities (4)

A
  • difficult to get reliable data on how demand changes in relation to price
  • other factors affect demand e.g. consumer tastes
  • many markets subject to rapid technological change-make previous data less reliable
  • competitors will react- pricing decisions can’t be taken into isolation
67
Q

What income elasticity do inferior goods have

A

Inferior good have an INCOME ELASTICITY of LESS than 1 (price inelastic)

68
Q

What are the 5 parts to the product life cycle (PLC)

A
  • development
  • introduction
  • growth
  • maturity
  • decline
69
Q

What is the PLC used for (3)

A
  • forecast future sales trends
  • helps with market targeting and positioning
  • help analyse and manage the product portfolio
70
Q

Key points of the DEVELOPMENT stage in the PLC (4)

A
  • often complex and time-consuming
  • cost of development rises as product approaches launch
  • may not be successful
  • can be a long lead time before sales are achieved
71
Q

Key points of the INTRO stage in the PLC (5)

A
  • likely to be a low level of sales- penetration pricing may help build customer demand
  • low capacity utilisation and high unit costs
  • usually negative cash flow
  • distributors may be reluctant to take an u proven product
  • heavy promotion to make consumers aware of product
72
Q

Key points of the GROWTH stage in the PLC (5)

A
  • fast growing sales, helped with wider distribution
  • rise in capacity utilisation- should lower unit costs
  • product gains market acceptance
  • cash flow may become positive
  • the market grows, profits rise but attracts the entry of new competitors
73
Q

Key points of the MATURITY stage in the PLC (5)

A
  • slower sales growth as rivals enter market
  • high level of capacity utilisation
  • high profits for those with high market share
  • cash flow should be strongly positive
  • profits and prices fall
74
Q

Key points of the DECLINE stage in the PLC (5)

A
  • falling sales
  • market saturation and/ or competition
  • decline in profits and weaker cash flows
  • more competitors leave the market
  • decline in capacity utilisation- switch capacity to alternative products
75
Q

What is the boston matrix

A

It categorises the products

business a level (13 decks)

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