Introduction to Marketing Concepts
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Questions and Answers

What is the primary focus of social sciences compared to pure sciences?

  • Social sciences rely on absolute rules while pure sciences do not.
  • Social sciences are focused on human behavior while pure sciences are based on laws. (correct)
  • Pure sciences study human behavior while social sciences study physical laws.
  • Pure sciences are less scientific than social sciences.

    • Which component is NOT part of the marketing process?

  • Reviewing marketing objectives
  • Gathering market feedback
  • Establishing a marketing objective
  • Developing a random pricing strategy (correct)

    • What defines a saturated market?

  • A market where most customers already own the product. (correct)
  • A market with significant growth potential.
  • A market where new entrants easily gain market share.
  • A market with high competition and low profit potential.

    • What advantage does a mass market provide to firms?

    <p>Exploitation of economies of scale.</p> Signup and view all the answers

    What is the first step in the marketing process?

    <p>Establish a marketing objective</p> Signup and view all the answers

    What does market saturation refer to?

    <p>The degree of unsatisfied demand within a marketplace.</p> Signup and view all the answers

    Which of the following is NOT a feature of mass marketing?

    <p>Focusing on niche target markets.</p> Signup and view all the answers

    What is an example of a mass market product?

    <p>Generic everyday items like milk or toothpaste.</p> Signup and view all the answers

    What defines a profit margin in business?

    <p>The difference between the selling price and the total cost of production.</p> Signup and view all the answers

    Which of the following is NOT a potential disadvantage of high profit margins?

    <p>The risk of lower quality materials being used.</p> Signup and view all the answers

    What is a definition of competitive advantage?

    <p>A strategy to maintain market dominance for an extended period.</p> Signup and view all the answers

    Which company exemplifies being the lowest cost supplier?

    <p>Aldi in the UK grocery market.</p> Signup and view all the answers

    What does it mean for a firm to be highly differentiated?

    <p>To provide a unique product that stands out in the market.</p> Signup and view all the answers

    What is a primary risk associated with high selling prices?

    <p>Loss of potential customers if prices are perceived as too high.</p> Signup and view all the answers

    Which of the following is an example of a firm with a highly differentiated status?

    <p>Porsche in the sports car market.</p> Signup and view all the answers

    What is a significant limitation consumers face regarding the pricing of differentiated products?

    <p>Their willingness to pay may decrease as prices rise.</p> Signup and view all the answers

    What is one advantage of market segmentation?

    <p>Increased sales through tailored products</p> Signup and view all the answers

    Which of the following is a disadvantage of market segmentation?

    <p>Higher research costs</p> Signup and view all the answers

    How does market mapping assist businesses?

    <p>It identifies gaps in the market</p> Signup and view all the answers

    What is meant by 'actual differentiation'?

    <p>The product has unique functional features</p> Signup and view all the answers

    Which is a characteristic of psychological differentiation?

    <p>Based on consumer perceptions</p> Signup and view all the answers

    What might a firm conclude from analyzing a market map?

    <p>The current market is competitive with many firms clustered</p> Signup and view all the answers

    What is a potential downside of market segmentation?

    <p>It may lead to smaller volume sales</p> Signup and view all the answers

    What role does market positioning play in a firm's strategy?

    <p>It defines the firm's offer in relation to competitors</p> Signup and view all the answers

    Which factor is NOT typically used in market mapping?

    <p>Brand history</p> Signup and view all the answers

    What does premium pricing allow a business to achieve?

    <p>Higher perceived value</p> Signup and view all the answers

    What could be a reason competitors choose not to enter a market gap identified through mapping?

    <p>The gap has no potential for demand</p> Signup and view all the answers

    What is a challenge posed by product differentiation?

    <p>Maintaining a unique selling proposition</p> Signup and view all the answers

    What is market positioning primarily concerned with?

    <p>Establishing the competitive advantage of a product</p> Signup and view all the answers

    How can segmentation potentially lead to increased sales?

    <p>Through understanding specific market needs</p> Signup and view all the answers

    What is a key disadvantage of a product-focused approach to market innovation?

    <p>It may lead to wasted investments in R&amp;D if there is no market.</p> Signup and view all the answers

    Which of the following accurately describes market orientation?

    <p>Creating products based on consumer preferences and needs.</p> Signup and view all the answers

    What is a common disadvantage of market research?

    <p>It can be time-consuming and costly to conduct.</p> Signup and view all the answers

    What best characterizes quantitative primary market research?

    <p>It relies on a large sample to provide statistical data.</p> Signup and view all the answers

    What significant advantage does qualitative primary market research provide?

    <p>It delves deeply into consumer attitudes and behaviors.</p> Signup and view all the answers

    Which method is NOT considered a source of primary research?

    <p>Industry reports.</p> Signup and view all the answers

    What does sampling bias refer to in market research?

    <p>A sample that does not represent the overall population.</p> Signup and view all the answers

    How can a business ensure its primary research is tailored to its specific needs?

    <p>By designing custom questions that target specific insights.</p> Signup and view all the answers

    One drawback of qualitative primary market research is that it can be:

    <p>Difficult to analyze due to varied individual responses.</p> Signup and view all the answers

    What is a potential outcome of focusing on market orientation?

    <p>Customer loyalty and satisfaction can increase.</p> Signup and view all the answers

    Which of the following is a limitation of quantitative research?

    <p>It can be expensive and time-consuming to gather.</p> Signup and view all the answers

    What defines primary market research?

    <p>It is firsthand data collected directly from consumers.</p> Signup and view all the answers

    What could be a consequence of a product line regularly disappearing from shelves?

    <p>Consumers might become confused by constant changes.</p> Signup and view all the answers

    Which type of primary research focuses on consumer behavior through direct interaction?

    <p>Qualitative research.</p> Signup and view all the answers

    What is the primary difference between market size by value and market size by volume?

    <p>Market size by value focuses on the monetary value of sales.</p> Signup and view all the answers

    What formula is used to calculate market share?

    <p>Market share = Business sales / Market sales X 100</p> Signup and view all the answers

    What does market growth indicate?

    <p>The overall value change in sales over time.</p> Signup and view all the answers

    Which factor does NOT contribute to market dynamics?

    <p>Changes in competition levels.</p> Signup and view all the answers

    How does affluence influence market dynamics?

    <p>Increased income leads to higher spending on hospitality and leisure.</p> Signup and view all the answers

    What characteristic does a dynamic market possess?

    <p>Rapid changes in growth, decline, and innovation.</p> Signup and view all the answers

    What is a key challenge faced in dynamic markets?

    <p>Forecasting sales accurately.</p> Signup and view all the answers

    Which statement correctly describes competition in markets?

    <p>It promotes innovation among incumbent firms.</p> Signup and view all the answers

    What does risk in a market context refer to?

    <p>Factors that can be quantified and assessed.</p> Signup and view all the answers

    Which of the following best describes uncertainty in business?

    <p>Inability to accurately forecast market conditions.</p> Signup and view all the answers

    Which of the following is TRUE about product orientation?

    <p>It emphasizes creating high-quality goods regardless of consumer demand.</p> Signup and view all the answers

    Who benefits most from responding to changes in demand patterns?

    <p>Businesses that adapt to social changes in preferences.</p> Signup and view all the answers

    What is a significant advantage of being product orientated?

    <p>It allows for deeper innovation and development.</p> Signup and view all the answers

    What primarily drives the rapid sales increases in technology markets?

    <p>Continuous innovation and product launches.</p> Signup and view all the answers

    What is one key benefit of economies of scale for large firms in marketing?

    <p>They can advertise multiple products in a single campaign.</p> Signup and view all the answers

    Which characteristic is typical of mass market firms?

    <p>They serve a large group of repeat consumers regularly.</p> Signup and view all the answers

    What does a Unique Selling Proposition (USP) help achieve in a mass market?

    <p>It differentiates a product from competitors.</p> Signup and view all the answers

    What is a significant disadvantage for niche market firms compared to mass market firms?

    <p>Their products are often turned away by retailers.</p> Signup and view all the answers

    How do niche markets benefit from less competition?

    <p>They often focus on unique customer preferences.</p> Signup and view all the answers

    Why do consumers in a mass market tend to be sensitive to price changes?

    <p>There are many competing products available.</p> Signup and view all the answers

    Why is it difficult for niche market firms to adapt to changes in consumer preferences?

    <p>They usually have limited product lines.</p> Signup and view all the answers

    What impact does a smaller customer base have on niche market firms' costs?

    <p>It increases their average cost of production.</p> Signup and view all the answers

    Which factor is NOT typically a characteristic of mass market products?

    <p>Highly differentiated product offerings.</p> Signup and view all the answers

    Which of the following best defines a gap in the market?

    <p>A consumer need that is not currently being met.</p> Signup and view all the answers

    What is a drawback of less competition in niche markets?

    <p>Higher prices due to lack of economies of scale.</p> Signup and view all the answers

    How do niche firms typically reduce their advertising costs?

    <p>By relying on local promotions and word-of-mouth.</p> Signup and view all the answers

    What is a significant reason mass market products are unable to be tailored to individual customer needs?

    <p>Mass production techniques limit customization.</p> Signup and view all the answers

    What is the main focus of market segmentation?

    <p>To identify small groups of similar consumer characteristics.</p> Signup and view all the answers

    What is a potential consequence of using outdated primary market research data?

    <p>Decisions may not reflect current consumer preferences.</p> Signup and view all the answers

    Which of the following describes secondary market research?

    <p>Data that is pre-published and used for analysis.</p> Signup and view all the answers

    What is one advantage of using secondary market research?

    <p>It is often free and easily accessible.</p> Signup and view all the answers

    Which of the following is NOT a benefit of using social media for market research?

    <p>Accurate representation of consumer views.</p> Signup and view all the answers

    What is the primary goal of market segmentation?

    <p>To identify customer groups with distinct characteristics.</p> Signup and view all the answers

    Which aspect is NOT typically analyzed using big data?

    <p>Employee productivity metrics.</p> Signup and view all the answers

    Why is it important for firms to update their market research frequently?

    <p>Consumer tastes and preferences evolve rapidly.</p> Signup and view all the answers

    What does retail audit involve?

    <p>Assessing a business's own sales figures.</p> Signup and view all the answers

    Which of the following is a disadvantage of secondary market research?

    <p>It may become outdated quickly.</p> Signup and view all the answers

    What is the role of market reports in secondary market research?

    <p>They provide detailed analysis of industry trends.</p> Signup and view all the answers

    Which factor is NOT a method of market segmentation?

    <p>Website traffic</p> Signup and view all the answers

    What is the main objective of conducting market research?

    <p>To understand and anticipate customer wants.</p> Signup and view all the answers

    What is typically considered a common challenge in primary market research?

    <p>It takes a significant amount of time to collect data.</p> Signup and view all the answers

    What does the term 'analytics' refer to in the context of market research?

    <p>Interpreting and making decisions based on existing data.</p> Signup and view all the answers

    Study Notes

    Introduction to marketing

    Defn: Marketing is the process of targeting the right product at the right target market (people to sell to) using the right combination of price, promotion and place. (Find the right audience, figuring how best to reach the audience by promotion and figuring out the best price to sell it at.)

    The process of marketing

    1. Establish a marketing objective (the goal)- sets out what the marketing department is trying to achieve. E.g. achieve sales of £1 million by the end of the year. Or to make £½ million profit by the end of the year.

    2. Gather, research and analyse the market (how many competitors, is it a profitable market to enter or are you unlikely to make sales, and how many big firms are already in that market).

    3. Devise and implement a marketing strategy - (a plan).

    4. Review. Did you achieve your objective?

    5. The cycle repeats itself

    This tells us it is a very scientific process. You have to research, analyse and map out a plan. Everything is backed up by evidence.

    Defn: Market saturation - refers to the degree of unsatisfied demand in a marketplace.

    Defn: Saturated market - one in which most customers who want the product already have it.

    Defn: Unsaturated market - one in which there is significant growth potential.

    Mass Markets / Marketing

    Defn: Mass Market - a large market of customers where products are undifferentiated (this means that all products sold in a mass market are broadly similar to each other). The business sells products and services to suit a large number of consumers e.g. milk, toothpaste, mobile phones, food. (huge number of people who are buying the product). All products will be roughly the same; there won't be much difference between each brand.

    Advantages:

    • You can exploit purchasing EOS (economies of scale) - A firm that serves the mass market will typically be a large firm that serves thousands/millions of customers. As a result, firms can bulk buy their stock. Suppliers will typically give a ‘bulk buying discount’ for bulk orders of stock. This lowers a firm's costs of production.

    • Marketing EOS (economies of scale) - Adverts impose a single one-off cost to a business. Large firms will typically have multiple product lines. E.g.: boots - even though only one avert has to be paid for, the whole product range is advertised. This brings down the average cost of marketing. (To advertise it costs the same for small and large firms but if you are large you can advertise multiple products in one advert but if you are small you will be able to advertise fewer products so the average cost will be higher.)

    • Stable demand patterns - Forecasting scales are relatively simple in a mass market This is because the same large group of consumers typically ‘repurchase’ every week/month (e.g. toothpaste). This means that sale patterns for mass market firms are relatively stable which gives the mass market firms (e.g. Colgate) certainty. (You know roughly what your sales will be every week/month. Customers have a very regular purchasing behaviour.)

    • High sales/profit - Sales and profit will typically be high in a mass market. This is because thousands/millions of consumers will be served. This makes operation in a mass market an attractive option for many businesses. (You can make lots of money.)

    Disadvantages:

    • Not responsive to individual customer needs - Products can not be tailored to suit specific customer tastes or requirements. For those customers who want a personalised product/service, they won’t be served by mass market producers. (e.g. if you went to Colgate and asked for gold toothpaste you would be turned away - can’t tailor the product to suit an individual customer preference as they are mass produced ). Nike has managed to do this (tailor the product) and serve a mass market by offering customised shoes.

    • High competition - As the profit potential in the mass market is enormous, many firms are attracted into the marketplace. This means that mass markets are usually highly competitive markets to operate in. (There are many firms due to the amount of money to be made.) This makes working in a mass market more complicated.

    • USP (unique selling point / proposition) Required - This is particularly important in mass markets given the large range of similar / competing products in the marketplace. The UPS helps the product to stand out and hence attract customers (e.g. Bounty with coconut). 

    Defn: A USP is a feature of a product that distinguishes it from all other competing products in a marketplace. 

    Niche Markets / Marketing

    Defn: A smaller section of a larger market (e.g. almond milk, specialist golf shop (its mass market is sports equipment), Luxury sports car e.g. Ferrari). A small num of people will want to buy from a niche market.

    It is very common for niche market firms to offer something not available in the mass market.

    Advantages

    • Less competition - Large firms are not attracted into niche markets as there is not enough profit in niche markets to enable large firms to consider entry worthwhile. Niche firms therefore face much less competition than they do in mass markets.

    • More tailored products - Niche firms can tailor their products to suit specific customers tastes or requirements e.g. a specialist cake decorating business. This enables niche market firms to attract enough customers to produce healthy sales and profits.

    • Lower advertising costs - Niche firms tend to have a relatively small customer base that is often concentrated in the local area. This means that they do not need expensive nationwide promotions (e.g. TV adverts). This lowers their advertising costs and hence their overall costs of production.

    Disadvantages

    • Higher price - Niche market firms cannot benefit from economies of scale such as ‘purchasing EOS’. This is because niche market firms typically have relatively small numbers of customers. This means that for a niche market firm, average costs of production will be higher and this implies higher prices will need to be charged in order to make a profit.

    • Difficult to get retailers to stock the product (about niche manufacturers)- e.g. a firm that makes handmade leather wallets (manufacturer) - a niche producer (manufacturer) may find it difficult to get retail stores like Selfridges to stock its product. This is because Selfridges will be concerned that they aren’t able to sell many units of the niche product. They would rather stock a well- known mass market product that will earn them much more money. A retailer is less likely to want to stock a niche product from a manufacturer as they may be concerned that they aren't able to sell as many units due to it having a smaller potential customer market meaning that it possibly won't earn the retailer as much money as a mass market product might.

    • Vulnerable to market change  - Niche firms will typically only have one or two product lines available for sale. If customer tastes and preferences alter e.g. customers no longer want to buy ‘model making kits’, a niche producer will have no other products to fall back on. This makes survival more difficult for firms that operate in a niche market.

    Defn: Segmentation - A market is broken up into small sections that contain buyers who share similar characteristics. 

    Consumers in niche markets are going to be insensitive to prices (price inelastic). Because if you are looking for something specific, there may be a few firms that offer that product so if one raises prices customers may still be willing to pay it as you can’t easily find it elsewhere.

    Consumers in a mass market are very sensitive to changes in the price (price elastic) because there are lots of competing products that are all very similar and when one product cuts their prices all the consumers will choose the cheapest.

    Defn: Gap in the market - More room for people to come and sell things. It is a need or want that people have that currently isn't being met by existing products or services.

    Market size VS market share 

    Defn: Market size - The value or volume of sales generated in an industry in the course of a year.

    There are two different ways to measure the size of a market (not asked to calculate):

    1. Market size by value - This is a measure of the value of the sales generated in a market over a year. E.g. £53 bn (billion) of sales generated in 2023.

    2. Market size by volume - This is a measure of the quantity of goods sold in a market over a year. E.g. 300,000 cars were sold in 2023.

    Value is the money generated and volume is the amount of product sold.

    Defn: Market share - The percentage of sales in a market that is accounted for by one firm or brand. E.g. Tesla holds a global market share of 63%. This means that out of all car sales globally, Tesla has accounted for 63% of the total sales. (Will be asked to calculate)

    Market share (in %) = Business sales / market sales X 100  (You express it in a percentage)

    Defn: Market growth - The percentage change in the value of sales generated in a market from one year to the next. E.g. the clothing market grew by 6% between 2022 and 2023 (this means that the total value of sales have increased by 6%)

    Market growth =

    Sales revenue = price per unit sold X quantity sold

    Market size by volume = market size by value / average selling price

    Market size by value = market size by volume X selling price

    Dynamic Markets

    Defn: A dynamic market is a market that is constantly changing - it can grow, change and decline very quickly. E.g. social media. You don't know what is going to happen. E.g. social media. 

    Defn: Affluence refers to how much income an average family has to spend.

    Technology markets are always dynamic.

    The causes of dynamic market activity

    1. Online retailing - ASOS? - The emergence of e-commerce means consumers can purchase goods and services from their homes, rather than visiting physical stores. For firms that have offered consumers an online shopping experience, businesses such as ASOS have experienced rapid increases in their sales.

    NB: An e-commerce business is one that trades online rather than just through physical stores.

    1. Changes in affluence - eating out? - Affluence refers to how much income an Affluence refers to how much income an average family has to spend. As households get more affluent over time certain businesses benefit from this. E.g. businesses that specialise in hospitality and leisure. These businesses have seen rapid increases in their sales.

    2. Innovation and market growth - electric cars? - Technology markets are innovative markets. I.e. There are always new products being launched to replace older technologies. It can cause a rapid increase in some firms' sales and a rapid decrease in others creating a dynamic market. E.g. Apple’s iPhone 16 launch got hold of the ‘latest technology, firms such as Apple observed very rapid increases in their sales, creating a dynamic market

    3. Adapting to change - vegan cuisine? - Society’s tastes and preferences change over time. E.g consumers have moved away from eating excessive amounts of meat, towards buying plant-based alternatives. E.g. vegan burgers. Those firms that have responded to this social change in demand patterns have seen very rapid increases in their sales. If a firm responds to a change (a trend - changed preferences) in demand then their sales may rapidly increase.

    Problems with dynamic markets

    • Difficult to forecast sales - why? - Sales are not consistent and predictable in a dynamic market. E.g. Whilst electric car sales are growing steadily, the rise has not been as rapid as electric vehicle manufacturers were anticipating. Hence, making sales predictions is complex in markets that are constantly changing. It is difficult to forecast sales as the market is constantly changing.

    • Difficult to anticipate changing consumer patterns - Consumer demand patterns change rapidly as new fashions and trends emerge. It is not possible for firms to predict what the new ‘must have’ item will be and therefore firms need to be very flexible and adaptable to be able to respond quickly to changing consumer demand patterns. 

    Competition, Risk and Uncertainty 

    Why does Competition prevent complacency? 

    Defn: Competition refers to the number of firms that operate in a market.

    Defn: Incumbent firms - firms that already exist within a market.

    Competition prevents incumbent firms from becoming complacent. Firms that do not innovate or do not respond to changing customer tastes and preferences will be forced out of a market by competition that is more responsive to customer tastes. Hence, competition is viewed as positive from the consumer perspective.

    Defn: Risk - Risks are factors that are not expected but can be quantified.

    Defn: Quantified - To put a mathematical / numerical value on something.

    Why are risks Quantifiable? 

    It is possible to assess the probability of a risk event occurring. Eg. If a business has been flooded every year for the past 5 years, it is possible to assess the mathematical probability of another flood occurring this year. I.e. an 85% probability of it happening again.

    Defn: Uncertainty - Being unsure about the factors that influence sales/costs and therefore unable to predict profit and growth - Coronavirus?

    Why are uncertainties not Quantifiable? 

    No business in the UK could have foreseen a global pandemic in 2019. Hence, it would have been impossible to assess the mathematical probability of a nationwide lockdown before the actual event.

    If no business can foresee an event then it is impossible to assess its mathematical probability to happen.

    Product Vs. Market orientation

    Product Orientation 

    Defn: Product Orientated - Where a business focuses on creating and developing a high quality good or service but perhaps ignores consumer preferences and priorities. Eg. Huawei’s triple fold phone or the ‘Metaverse’. It focuses on the product's design, performance and quality.

    Advantages 

    • Enables a business to focus on innovation and R&D (Research and Development).

    • Works particularly well in technology driven markets. Eg. Virtual reality/Mobile phones/Games consoles/TVs. Enables the creation of new ‘dynamic markets’.

    • Is the only viable approach when a product doesn’t currently exist in the marketplace.

    • As they are solely focused on the product then it will allow the firm to get better at creating it which may allow you to increase the scale of the business and exploit economies of scale.

    Disadvantages

    • There may not be a market to sell the new product too (In which case the firm has wasted millions of pounds on R&D).

    • If the product does not succeed then the firm cannot recoup the money spent on R&D.

    • If a competitor is trying to design the same product and one gets there first that one is then the main firm and the other is less popular. Eg. Virgin Galactic.

    Defn: Recoup - To get back something. Eg. Recoup the money lost.

    Defn: R&D (Research and Development) - The development of new technologies or new product innovations.

    Market orientation

    Defn: market orientation - where a business chooses to design a product or service to meet the requirements of customer preferences. It focuses on what the consumers want. They identify and meet the needs of the customers which are often changing.

    Advantages

    • Customer expectations are met because the products that are produced come from research that indicates what customers actually want to buy.

    • Product lines are regularly updated to reflect changing customer tastes and preferences.

    • By focusing on consumers, if needs are met customer loyalty and satisfaction may be built.

    Disadvantages

    • Can be time consuming and expensive to conduct regular market research to identify the latest wants and needs of the market.

    • No new innovations come from this approach as consumers can only demand what they know about already.

    • It can be confusing for the consumer because product lines will regularly disappear from the shelves as consumer tastes change.

    Market Research

    Information is gathered on customers; their attitudes, behaviour and wants in relation to a product or service.

    There are 2 types of market research. Primary and secondary market research.

    Primary market research

    Defn: Primary research - this is first hand research (going up to and asking someone or looking and watching) on the attitudes and buying intentions of actual or potential customers.

    NB: primary research is also known as field research.

    Quantitative VS qualitative:

    There are 2 forms that primary research data can take.

    Quantitative primary market research

    Defn: Quantitative primary market research - the uses of pre set questions amongst a sample size that is large enough to provide statistically valid data. E.g. questionnaires/ surveys where a numerical result can be obtained. You can always put a numerical result to the research outcome. e.g. 56% of people said they would buy it.

    The questions have to be presented to get a numerical result.

    Advantages 

    • A statistically valid result can be obtained that allows a business to make a marketing decision based on scientific research.

    • Easier to computer analyse. It can do all the analysis for you.

    Disadvantages

    • The gathering of quantitative research is time consuming and expensive (NB: particularly if a market research agency is used).

    • Doesn’t reveal consumer psychology. I.e. why a consumer feels a certain way about a product.

    • Doesn’t provide in depth responses. 

    Qualitative Primary market research

    Defn: Qualitative primary market research - this is indepth research into the attitudes and buying behaviour of actual and potential customers. (NB: typically conducted through a focus group. I.e. a small group of respondents and a psychologist.)

    Advantages

    • Enables a business to gain an in-depth understanding of a consumer's attitude to a product.

    • Enables the use of open ended and follow up questions. (why…)

    Disadvantages 

    • It is only conducted amongst a small group of respondents and hence the sample size of each focus group session will be small.

    • Need to employ a psychologist to conduct the focus group session which costs money.

    • Difficult to analyse the results quickly as the results are not yes or no and no two answers will be the same they need to be analysed.

    • It has to be done in person as follow up questions may be required.

    Sources of primary research

    • Observation - watch how many customers go into a shop and how many leave with the shop's bag. This indicates what percentage of customers who enter the shop are likely to actually spend money in the shop.

    • Online survey - e.g. Instagram: a survey box will appear when a user scrolls through the social media site.

    • Face to face interview.

    • Focus groups - these are discussion groups that are led by a psychologist. They tend to be small groups of actual or potential customers. The psychologist aims to discuss the attitudes and motivations that underpin a customer's buying behaviour. )This kind of research is not surface level; it is indepth research).

    • Questionnaires.

    Advantages 

    • Up to date - this means that firms can assess the current tastes and preferences of consumers and then modify their product line accordingly.

    • Tailor made - primary research can be tailored to suit the specific requirements of the firm that is conducting that research. As a result, the information gathered is perfectly suited to the needs of the business that carried out the research. You can find out the exact thing they want to know.

    • Competitors have no access to the primary research that has been collected.

    Disadvantages

    defn: population - everyone who is a potential customer of the firm.

    Defn: sample - a small group of consumers, whose views are thought to represent the population's views as a whole.

    • Sample size - a business will not be able to research the entire population. Therefore, the business needs to create a sample. If the sample size is too small, the views expressed by the sample group will not represent the overall population views. This means that any decision made based on research from the sample will be inaccurate.

    • Sampling bias - the composition of the sample must reflect the composition of the population as a whole. E.g if a firm's population is equally composed of men and women, the sample should be 50% male respondents and 50% female respondents. Otherwise, the sample would be biased and any marketing decisions made based on that sample would not truly reflect the wants of the population.

    • Primary market research goes out of date quickly. This means:

    1. any marketing decision made on the back of old data, will not be the best possible decision.

    2. Market research needs to be updated regularly. This is because consumer tastes and preferences change rapidly.

    • Time consuming and expensive - as primary market research is first hand, it takes a long time to collect it. If a market agency is used to conduct the research, it can also be very expensive.

    Secondary market research

    Defn: Secondary market research - data that already exists (pre-published data) and has to be collected for a purpose.

    Sources of secondary research

    • Market reports (market intelligence reports) - a detailed analysis done by a private company into the main trends that are present in an industry.  They are printed and digital. E.g. sales growth in the industry, technological changes, the number of large firms in the industry, and changes in consumer demand. A private company created this report. They go to the industry and analyse what is happening. E.g. MINTEL.

    • Trade and industry associations reports - these are produced by the industry themselves, and identify the principal changes that have occurred in the sector. E.g. common problems that are affecting the industry, or current trends.

    • Census data - records the ‘demography’ of an area - i.e. the composition of people who live in a particular area e.g. Gender/age profile/occupations/religion/race etc…

    • Newspapers e.d. The Financial Times - analyses industries and firm performance.

    • Books - competitors' financial accounts available for free on the internet.

    Examples of secondary market research

    • Sales transactions - by looking back at one’s previous sales history, a firm can establish a trend. I.e. Are sales improving or deteriorating? On the back of this analysis, firms can then decide on an appropriate marketing strategy to boost sales performance.

    • Big data - Big data refers to vast quantities of information that firms seek to analyse to better understand their customers' needs and wants and therefore target goods and services at customers that perfectly meet their needs. Big data may include customer databases or customer transactions. It is a vast collection of data about you/customers.

    • Analytics - it involves analysing data already collected by others. This involves the collection, analysis and interpretation of data to make informed decisions. Data used is often collected by websites, apps, social media platforms or other sources. It is already available but it is being used for business purposes.

    Advantages

    • Often free and easy to obtain.

    • Good source of market insights.

    • Quick access and use.

    Disadvantages

    • Can quickly become out of date.

    • Not always tailored to specific research needs.

    • Specialist reports are often quite expensive.

    • May be biased so a firm using secondary data should be mindful of where that data has come from and who has produced it.

    Why do firms conduct market research

    • Identify and anticipate customer wants - if businesses can anticipate that there is a gap in the market that needs filling through conducting market research, they can produce a product that precisely matches consumer wants and hence generate high levels of sales.

    • Quantify likely demand - research helps a business understand the ‘strength of demand’ for a product. This then tells a business whether there is enough demand to justify proceeding with the product or not.

    • Gain insight into consumer behaviour - this will be done with qualitative research. Understanding the in-depth reasons why a consumer would choose one product over another, will help a business produce a product that precisely matches consumers' tastes and preferences.

    Market research and ICT

    Firms can use websites to conduct market research.

    • Websites - it is common for businesses to use ‘pop-up’ surveys on their websites. Once the survey has been programmed to appear, this is a very cheap way for businesses to collect primary market data. 

      • Issues - Not everyone shops online as the elderly aren't as tech savvy. Not everyone has access to the internet. Not everyone stops to fill out the survey so views are not accurately represented.

      • Benefits - cheap once set up.

    • Social media - e.g. Tik TikTok online surveys appear when users log into TikTok and scroll through videos. This is a cheap way for a firm to gather research. A computer can analyse the results as well.

    • Databases (Tesco’s Clubcard) - e.g. enables Tesco to gather information on each customer’s buying behaviour. From this, tescos can target special offers to its customers that are perfectly tailored to each specific customer.

    Defn: retail audits - where a business analyses its own figures to establish which product lines are selling well and which are not.

    Market segmentation

    Defn: Market segmentation - it is the process of dividing a market into smaller sets of customers (segments a section of the broken down market with customers who share characteristics) that have similar needs and interests (magazines).

    Defn: Market segment - A small set of customers that have similar needs and wants.

    The objective of market segmentation is to identify whether each market segment was fully catered for and thereby identify any gaps in the market.

    Segmenting the market shows you exactly what specific types of people want.

    Methods of segmenting a market 

    • Gender - e.g. are the women fully catered for and have everything they could want?

    • Age

    • Ethnicity

    • Religion

    • Geographical area

    • Socio-economic groupings - socio-economic grouping is done via analysing the occupation of the head of the household. 

      • There are 5 different socio-economic groups: A - professional careers (e.g. hospital consultant / surgeon / judge/ CEO (chief executive officers) of a major corporation/higher managerial position). B - intermediate managerial / professional (e.g. barrister, deputy head). C1 - junior managerial (e.g. department head / supervisor / clerical worker (office-based OR white-collar worker (work in an office))). C2 - skilled manual worker (e.g. plumber / electrician / gas engineer) - blue collar workers. D - semi skilled and unskilled (trainee plumber / warehouse worker). E - unemployed.

    E.g. the market for magazines

    • Analyse whether women have all their magazine needs met. I.e is there a gap in the market? If there is, a firm will plug the gap with a new type of magazine.

    • Analyse whether men have all their magazine needs met. If there is a gap, a firm will plug the gap with a new type of magazine.

    Advantages for market segmentation 

    • Tailored products - through segmenting a market, a firm can gain a very clear idea of where the gaps are in each market segment. Once a gap has been identified in a particular segment, a business can produce a highly tailored product to exactly match the need that has been identified by the market segment.

    • Increased sales - as the product is so highly tailored to suit a specific market segment e.g. teenage girls, the firm should be able to sell a large quantity of products. This is because the product exactly matches the needs of the market segment.

    Disadvantages of market segmentation

    • Smaller volume sales (difficult to generate profit) - as the product produced will not be targeted at the whole, mass market, there is a restriction on the value of sales that can be made by producing a segmented product. Producing a mass market product would (in theory) make the firm more money.

    • Expensive - the process of segmentation is not cheap. As the market has to be divided into specific segments, each of which then has to be investigated, it will cost a firm a lot of money to complete the research.

    Market positioning

    Defn: Market positioning - where your product stands in relation to others offering similar products or services in the marketplace.

    Once the firm has decided to launch a new product, it needs to decide where it should be placed in the market: we use a ‘market mapping’ process to identify gaps in the market.

    Defn: Market mapping - Helps to identify market positioning. It involves creating a diagram that identifies all the products in the market using 2 key features.

    Creating a market map

    E.g. launching a new clothing store.

    1. Choose 2 criteria to split the market by. It can be quality, image, price

    2. List competitors and the place where they are positioned based on the criteria you picked (e.g. Versace is very premium and a highly aspirational (it is highly sought after) image).

    Firms use market mapping to identify gaps in the market where there is very little competition. A market map is drawn to identify ‘gaps’ in the market. A firm will typically look to position itself where few other firms are currently located.

    Most firms will establish themselves along the line shown. The reason for this is that trying to sell top quality clothing for a budget price will be unprofitable. Similarly, trying to sell low image clothing for a premium price will attract few customers.

    Advantages of Market mapping

    • This enables a firm to spot gaps in the market, i.e. positions in the market that other firms have not yet occupied.

    • It enables the nature of competition in a market. E.g. How many firms currently compete in the industry? Are all the competitors currently clustered around the same market position, or has each targeted a different market position? It might be that through the market mapping process, the firm decides that the market is already too competitive to make it profitable to enter.

    Disadvantages of market mapping

    • Identifying that a gap exists in the market, does not mean that demand exists in the gap. There may be a very good reason why competitors have decided not to set up in the ‘gap’.

    • Is the market mapping model too simplified? A market map only uses 2 criteria as the basis of the analysis. In reality, there may be many different facets (parts) of a market product (e.g. price, image, quality, function, durability) that are important to consumers when making a purchasing decision. Is the market mapping too simplistic a tool?

    Product Differentiation

    Defn: Product Differentiation - the actual or perceived features of a product that a business uses to convince its customers to buy its product instead of those of competitors in the market.

    There are two types of product differentiation:

    Defn: Actual differentiation - this is when there is an actual or real difference between the firm's product and other competing products in the marketplace. E.g. Rolex (the materials are the best, better than any other watch company)

    Defn: Psychological differentiation - this is when there is no real difference between the business’ product in terms of function or quality, but consumers perceive the product to be superior to all other products available in the marketplace. This is achieved through clever marketing.

    Firms would want to differentiate as a product that is either actual or psychologically differentiated then consumers are more likely to buy from their brand than the competitors.

    Advantages

    • Higher value added - value added = selling price per unit - the cost of materials bought in. When a firm successfully differentiates itself from the competition, it enables the firm to set a high selling price. This allows the firm to gain a high value added on each unit sold, which in turn helps boost the business’ profit.

    • Premium pricing possible - Defn: premium pricing - when a business sets a high selling price in a deliberate attempt to exude an image of luxury / superiority / quality e.g.Louis Vuitton bags are premium priced.

    • High profit margins - the ability for successfully differentiated firms to set very high selling prices on the bach of real or psychological differentiation, enabling their firms to command high profit margins on each unit sold. Firms with high profit margins are those that can comfortably cover their costs. Defn: profit margins - the profit margin is the difference between the selling price of the good and the average cost of production.

    Disadvantages

    • Are consumers prepared to pay the price? - there is a limit to how high a firm can force the selling price of a good. There will always come a point where consumers will decide that the product is too expensive and stop purchasing it.

    • Costs may be higher - even though high selling prices can be charged for a successfully differentiated product it’s important to remember that a quality item will use quality raw materials and components that are expensive. This squeezes the value added that is possible. E.g. selling price per unit (high price) - the cost of materials bought in (high cost) (if differentiation is real).

    Competitive advantage (Likely to come up)

    Defn: Competitive advantage - A way to keep competitors at arm’s length over a sustained period.

    There are 2 sources of competitive advantage.

    1. Be the lowest cost supplier - the lowest cost supplier is the firm that can produce goods most cheaply in a market. This then translates into the lowest selling prices in an industry that competitors cannot match. An example would be Aldi which is the lowest cost supplier in the UK’s grocery market. No other supermarket can compete with Aldi’s low prices, which gives Aldi a long term competitive advantage over Lidl, Tesco, Sainsbury’s etc.

    2. Be highly differentiated - This source of competitive advantage comes from the fact that the firm has achieved a level of differentiation that other firms in the industry have not managed to achieve. (The differentiation could be ‘real’ or psychological. This enables a firm to command a premium price and get repeat custom, as customers believe they are buying from ‘the best’.) E.g. Porsche has achieved the most highly differentiated status in the sports car market. They serve the niche market and command extremely high prices. However, their customers are extremely loyal as they believe in the superiority of Porsche.

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    This quiz explores the fundamental concepts of marketing and its differentiation as a social science. It covers key definitions, objectives, and the processes involved in effectively marketing products to the right audience. Test your understanding of how marketing functions in today's business environment.

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