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Customer Needs
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| Question | Answer |
|---|---|
| Market Positioning | Where a product is placed in the market relative to its competitors |
| Influences on Market Positioning | Internal constraints e.g. budgets Internal strengths e.g. creativity and innovation Market conditions e.g. degree of competition External environment e.g. state of the economy |
| Market Map | A market map is a diagrammatic technique that enables businesses to display the perceptions of customers. It compares different variables regarding products and consumers. It can be used to identify what segment of the market is underprovided for. |
| Factor inputs | 4 factors of production: Land; Labour, Capital and Enterprise. |
| Added Value | This is achieved when a business increases the worth of its factor inputs by creating new output. Its the value of the finished good or service over and above the cost of achieving it |
| Unique Selling Point | Must differentiate one product from another. The feature of a product that can be focused on in order to differentiate it from all competition. A USP could be a lower price, a smaller version of the product or offering extra functions |
| Competitive advantage | A feature of a business that allows it to perform more successfully than others in the market e.g. Same quality of product at a lower price |
| Michael Porter’s generic strategy | States that a firm can enjoy a competitive advantage if it is either: Lowest cost or Highest differentiated. Porter’s premise is to be one thing or the other and not stuck in the middle. |
| Michael Porter’s generic strategy - Low Cost | Porter states that a strategy of low cost can be successful in either a mass or niche market. He refers to this as cost leadership, Cost leadership means being able to offer your product or service at the lowest cost possible |
| Michael Porter’s generic strategy - Differentiation | Porter states that a strategy of differentiation can be successful in either a mass or niche market He refers to this as differentiation, in the mass market, and focussed differentiation, in a niche market |
| Product differentiation | A unique feature that makes a product stand out from other products in the marketplace. Firms try to make their product different to the competition by adapting the actual product in some way. |
| Market | Any place that buyers and sellers will come together to exchange goods or services. There will normally be an exchange of money at a set price. Today, markets take numerous forms e.g. local, national, physical or electronic. |
| Mass Markets | A product is targeted at a wide range of people The market is not segmented i.e. the characteristics of types of customers are not an important factor Products appeal to a wide range of customers Products are widely available through a range of markets |
| Niche Markets | Identifying small, currently unsatisfied, gaps in the market The target market is well defined with distinct characteristics Promotional activities will be targeted at just a small subsection of the whole market Can often charge higher prices |
| Market size | This is the total value or volume of sales in the market. |
| Market Size Formula | Number of units sold x price |
| Market share | The proportion of total market sales that a firm has |
| Market Share Formula | Sales of one firm/Total market sales x 100 |
| Brand | A product produced by one business using a specific name |
| Branding | Branding involves the creation of an identity for the business that distinguishes that firm and its products from other firms. Branding can add value to a product allowing firms to charge higher prices also leads to brand loyalty |
| Brand extension | Adding new product ranges to a recognised brand name. Consumers familiar/loyal to the brand are more likely to be willing to try new products e.g. customers happy with the service provided by Virgin Media might be more willing to join Virgin Active |
| Benefits of building a brand | Help build loyalty and repeat business as well as adding value allowing businesses to charge higher prices. Other benefits include brand extension. |
| Dynamic Market | One that is subject to rapid or continuous changes e.g. shoes. Online retailing is a dynamic market it is consistently changing, expanding and developing. |
| Online Retailing | The process of buying and selling goods and services over the internet |
| Market Growth | Change in size of market / original size x 100 |
| Risk | The outcome of an action taken or not taken, in a situation which may result in loss or gain. Risk can be measured and quantified. It is the possibility that a business will have a lower than expected profit or a loss. |
| Uncertainty | The absence of certainty or something which is not known. When a business is unable to predict external shocks. Uncertainty cannot be measured in quantitative terms through past models. |
| Innovation | When a new idea or invention is launched onto the market normally with a view to financial gains |
| How a business protects itself from uncertainty | If a business is worried about fluctuating interest rates then they could switch their loan to a FIXED rate so loan repayments stay the same. A DJ could take out insurance in case their equipment catches fire. |
| Benefits of online retailing | 1. Offers greater convenience to the consumer 2. Can shop 24/7 3. Breaks down geographical barriers 4. Lower overhead costs 5. Access to a wider market |
| Market segmentation | Involves the division of larger markets into small clearly identifiable sections. Segmentation happens in most markets e.g. in the toothpaste market there are toothpastes for smokers, small children and people with sensitive teeth. |
| Market segment | Identifiable group with similar needs and wants. |
| Demographic segmentation | Identifies subgroups of the population based on their demographic profile or characteristics e.g. age, gender and ethnicity. |
| Geographic segmentation | Defines market categories based on where people live e.g. regions, cities or neighbourhoods. |
| Income segmentation | Identifies subgroups of the market based on their levels of income and profession. Newspapers segment in terms of socioeconomic groups. |
| Behavioural segmentation | Characterises subgroups based on the behavioural patterns of the consumer rather than their characteristics. For example' frequency of purchase e.g. heavy user or light user |
| Random Sampling | Each member of the population has an equal chance of being included. Its appropriate when researching a large market and bias cannot be introduced |
| Stratified Random Sampling | Separates the population into segments e.g. income groups.A sample is then taken from that segment |
| Quota Sampling | Occurs when the interviewers select people within the population who meet set criteria e.g. 300 males aged between 24 –26. The interviewers can choose whoever they want provided they meet the criteria set |
| Market research | The systematic and objective collection, analysis and evaluation of information relating to markets and marketing |
| Primary research | Involves gathering information for the first time. Examples include; Surveys and questionnaires e.g. Postal, Telephone, Face to face and On-line. In depth interviews and Focus groups |
| Secondary research | Research that has already been undertaken by another organisation and therefore already exists. Examples include; national and Local Government e.g. Office for National Statistics,Academic organisations e.g. universities and Newspapers |
| Quantitative research | The gathering of statistical data to inform the company about people’s behaviour but does not identify the reasons |
| Qualitative research | The gathering of non-statistical information that gives a company in depth insight into the reasons for human behaviour |
| Problems of Market Research | 1.Past data and trends may not be a fair indication of the future 2.Accuracy of research findings 3.Financial costs 4. Questionnaire bias and Respondent bias e.g. exaggerating or not telling truth |
| Product orientation | inward-looking approach to new product development where the focus is on what products can be made and the production process. This means the business focuses on the production process and the product itself hopes it will fit with what the customer wants |
| Market orientation | Outward looking approach to new product development were the key focus is on what products the consumer wants. Apple is market orientated and sees its customer to be king and develops all its phones based on customers' specification. |
| Websites (Market Research) | 1.Invite feedback through blogs 2. Can be used to monitor the number, frequency and timings of visitors 3. Online polls and surveys 4. Cookies |
| Social Networking (Market Research) | 1.Reviews 2.Blogs 3. Likes/dislikes 4. Viral marketing 5. Customer feedback |
Created by:
durquhart1