3-MARKET-POSITIONING.pdf

Edexcel International A Level Business 131 Meeting customer needs 3 MARKET POSITIONING Revisionstation  Unit 1 Retrieval Challenge Matrix 1 point 2 points 3 points Define the term ‘market Compare product Explain how market...

Edexcel International A Level Business 131 Meeting customer needs 3 MARKET POSITIONING Revisionstation  Unit 1 Retrieval Challenge Matrix 1 point 2 points 3 points Define the term ‘market Compare product Explain how market segmentation’ orientation with market research can be used to orientation anticipate customers’ needs and wants What does ‘online Compare risk and Explain how dynamic retailing’ mean? uncertainty in business markets change What is ‘bias’ in market Compare primary and Explain limitations of research? secondary market market research research From the specification a) Product and market orientation. b) Market mapping. c) Market segmentation. d) Competitive advantage of a product or service. e) The purpose of product differentiation. f) Adding value to products/services. Starter Brand extension challenge: 2 minutes can you invent some flavour variations without using the Internet? Did you come up with any of these flavour variations? Hellman’s Website HERE Product and market orientation Definition: Product orientation A business is product orientated when it only looks at the product or the production process when deciding what to make next This means the business is inward looking – sounds familiar? When is product orientation appropriate? Product orientation is appropriate when; There is little competition in the market, the business can make what suits its production capacity When there is limited consumer knowledge e.g. dental fixtures, braces etc. When there is low disposable income of consumers, when funds are limited customers will buy what is available More product orientation examples Apple create iPhones and iPads and create innovative products, but they create and make what they can, not what consumers want This is because consumers may not know what they want from technology that has not yet been invented! Also consumers may want what is not yet possible e.g. a battery which charges to 100% in 5 iPad Pro minutes Product orientation - Gillette Gillette makes a range of razors that they are able to make, not that are specific to customer needs Customers have limited knowledge of razors and razor technology Do customers demand a pivot head? Definition: Market orientated Market orientation is a business philosophy where the focus is on identifying customer needs or wants and meeting them. When a company has a market orientation approach, it focuses on designing and selling goods and services that satisfy customer needs in order to be profitable. Market orientation – example Audi cars The consumer is the most important factor when providing products for the market, the business has a sensitivity to customers requirements A market orientated business will focus on the needs of the Try the Audi website, customers can consumer e.g. the customer can choose the colour of their new choose a car model and add all the car, it doesn’t have to be black details like exterior and interior until anymore customers can order exactly the car that they want. Link to try that is HERE Market orientation example ASDA ASDA – Chosen by you range Each Chosen By You product was tested by a minimum of 50 consumers in a single location The Chosen By You range is made up of more than 3,500 own brand food products, 500 of which are entirely new and another 1,000 of which have been reformulated. Together they account for between £8-9bn worth of annual sales – so not only is this the most significant food development at Asda – it is the single largest own label re-launch ever in UK retailing history. On the spot What is a characteristic of product-oriented businesses? A) They adapt quickly to changing market demands. B) They prioritize consumer feedback over production capabilities. C) They rely heavily on market research to guide product development. D) They focus primarily on the product or production process. On the spot In which scenario is product orientation considered suitable? A) When disposable income levels are high among consumers. B) When there is intense competition in the market. C) When the market lacks consumer knowledge and competition. D) When consumer preferences are well-researched and understood. On the spot Which of the following is NOT an example of product orientation? A) A business creating products based solely on production capacity. B) A company producing dental braces without customer input. C) A manufacturer focused on producing what's feasible without market demand. D) An electronics firm innovating based on customer suggestions. On the spot What is a potential drawback of product orientation? A) Difficulty scaling production due to overemphasis on consumer feedback. B) Excessive reliance on competing businesses for market trends. C) Inability to meet the actual needs or desires of consumers. D) Limited innovation opportunities within production processes. On the spot How does market orientation differ from product orientation? A) Market orientation is associated with lower consumer engagement. B) Market orientation focuses exclusively on production capabilities. C) Market orientation seeks to understand and respond to customer needs. D) Market orientation disregards competition in product planning. Market mapping Definition: Market Mapping Market mapping is the process of finding the variables which differentiate brands in a market and then plotting them on a map – to identify a gap in the market Market mapping example A market map plots existing brands or companies on two axes, variables are chosen depending on the industry Examples of variables: Premium Modern ------- traditional Mass ----------- niche Functional -----luxury Functional Luxury High Quality ---low quality Luxury ---------- economy Premium --------budget Budget Suggested activity: Create a market map Create a market map for these clothes shops (add others that you know) George (at ASDA) Dorothy Perkins Peacocks JD Sports Sports Direct Marks & Spencer Next H&M Topshop Matalan Primark Debenhams Superdry Dior Suggested answer to activity High Price Dior Debenhams Marks and Spencer's Next Dorothy Perkins Top Shop Low Quality High Quality George Matalan Peacocks Possible gap in the market Sports Direct here Primark Low Price Uses of market mapping Market mapping could be used to identify a The North gap in the market Face has moved away It could also be used by a start-up to identify from the traditional which products to produce or which services to mountaineer provide – so they can be market orientated image to a (not product orientated) younger market It could also be used by a traditional brand to reposition itself in the market e.g. The North Face On the spot What is the primary purpose of market mapping? A) To compare the prices of competing products B) To identify gaps in the market based on differentiating variables C) To measure market share of brands D) To create a branding strategy for a specific product On the spot Which of the following is NOT a suggested use of market mapping? A) To identify products or services for a start-up B) To reposition a traditional brand in the market C) To analyze customer perceptions of a brand D) To determine high and low price points for brands  Which of the following variables would NOT typically be used in market mapping for clothing brands? A) Functional Use B) Brand Age C) Target Demographic D) Fashion Trendiness Market segmentation Definition: Market segments A market segment is an identifiable group of individuals or part of a market where consumers share one or more characteristics or needs Segmentation by location A business may decide to sell its product in just one country, one region (like the Midlands), or in an even smaller area A business may target its product at rural rather than urban areas A business may target its products depending if the market area is hot (Lanzarote) or cold (Norway) Do you think these products are aimed at hot or cold countries? Segmentation by location Which location segment are these products aimed at? Market segment - demographics Statistical data relating to the population and particular groups within it For example market segmentation helps book publishers target customers as we won’t all read the same books (not everyone wants to read Harry Potter) Segmentation by lifestyle Customers can be grouped according to the way they lead their lives and the attitudes they share For example, young professionals may drive a sports car because of the image they want to project Parents might want the same things, but have to provide for their children, which is a large extra cost. They will need a family car to suit their lifestyle How businesses segment by lifestyle A business may decide to segment the market according to lifestyle This may be a combination of; values attitudes, perceptions, beliefs This may also include hobbies and interests This may also include family situation (living on own or living with five kids) Can you explain how the two travel websites (on the right) show different lifestyle segmentation? Segmentation by lifestyle - discussion Look at these 4 holidays – can you describe the type of lifestyle segment that they are aimed at? Segmentation by Income The population can be segmented according to annual salary (e.g. £15,000, £30,000 etc.) or type of job and social class The population can also be divided into; low income, middle income and high income Establishing a group's disposable income is important so that products can be targeted to the relevant income group What is disposable income, can you explain the term?  Segmentation by income - discussion Can you explain which income group these products are aimed at? Segmentation by Age Market segmentation could be on age groups; 0-10 11-16 17-19 20-25 26-35 36-50 51+ Each age group will have different needs and wants in terms of products and services and the business can develop a targeted marketing strategy to appeal to that age group Segmentation by age - discussion Can you explain which age group segment are these four products are aimed at? Segmentation by age - discussion Can you explain? Kellogg’s product portfolio of cereals, why does the business produce so many? Segmentation by gender Many products are aimed at either men or women A business may produce or adapt its products to ensure they can be marketed effectively For example these razors made originally for men now adapted for women Notice the use of blue and pink in packaging so customers know which one to choose On the spot What is the primary purpose of market mapping? A) To assess the financial performance of a company. B) To determine the minimum viable product for start-ups. C) To develop a new product for testing. D) To identify a gap in the market On the spot Which of the following variables is NOT typically used in market mapping? A) Luxury vs. Economy B) High Quality vs. Low Quality C) Brand Lifetime vs. Market Demand D) Modern vs. Traditional On the spot By using market mapping, a start-up aims to achieve which of the following? A) Focus solely on product-oriented strategies. B) Increase their market share irrespective of consumer needs. C) Set prices based purely on competitor pricing. D) Identify which products or services to produce based on market orientation. On the spot What is a primary characteristic of a market segment? A) It limits businesses to urban areas only. B) It identifies a group of individuals sharing common characteristics. C) It consists only of individuals with high income. D) It represents the entire population of a country. On the spot How does segmentation by income commonly categorize individuals? Choices A) Into low income, middle income, and high income groups. B) By lifestyle choices and personal interests. C) Based on geographic location and demographics. D) According to age and gender preferences. On the spot What does disposable income refer to in market segmentation? A) The income made from investments and assets. B) The total income before taxes are deducted. C) Income that can be spent or saved after taxes and essential expenses. D) Income solely available to high-income earners. On the spot Segmentation by demographics can involve classification based on what factors? A) Psychological profiles and lifestyle choices. B) Statistical data relating to age, gender, and population characteristics. C) Personal motivations and consumer behavior. D) Preferences regarding product design and features. On the spot Which aspect is NOT typically considered in lifestyle segmentation? A) Hobbies and interests. B) Family situation. C) Annual salary. D) Values and attitudes. Competitive advantage of a product or service Definition: Competitive advantage An advantage a business has over its competitors, allowing it to generate larger than average revenue for the industry, either in low cost leadership or on price leadership The concept was first thought of by Michael Porter in his book called “Competitive Advantage” which was published in the 1980’s The main idea is that a business can win by being cheaper or by being different Ways a business can achieve competitive advantage introduction There are lots of ways that a business can achieve competitive advantage. The nine main ways that you exam board would like you to be able to discuss are: 1. Price leadership 2. Added value 3. Innovation 4. Reliability 5. Quality 6. Advertising 7. Branding 8. Convenience 9. Customer service Competitive advantage through price leadership Some businesses choose to use a very low cost model and compete on price This can be found in many industries including retail and the holiday market How do these types of businesses keep their costs low enough to compete on price? Competitive advantage through added value Added value can be achieved through processes Birds Eye takes cod and (other fish) and adds value to produce a range of oven-to- table fish based products What 3 industrial processes do you think are applied to the raw fish to produce the product at the bottom? Competitive advantage through innovation “Like everyone we get frustrated by products that don’t work properly. As design engineers we do something about it. We’re all about invention and improvement.” James Dyson Innovation means developing an invention so it is ready to sell In 1978 James Dyson created 5127 prototypes and took 5 years to create the first bagless vacuum cleaner What other products does Dyson produce, and how are they innovative? Competitive advantage through reliability For some products, reliability is the most important selling feature. It means that a product will keep doing what it was designed to do without letting down the customer. For example a vacuum cleaner that turns on every time and sucks up dirt from floors and carpets Skoda Kodiaq has been voted the most reliable car. Why is reliability important in the car What was the least reliable car? market? HERE  Competitive advantage through quality Some companies achieve competitive advantage over other companies operating in the same market by having the best possible quality products High quality does not always mean luxury High quality could mean the customer service attached to the product or company Can you name 3 products (or brands) that you associate with quality?  Competitive advantage through reputation Some companies achieve competitive Which company on this list is a UK business? advantage in their industry by building a reputation over the years Customers must trust the brand and the quality of the products The best example is The LEGO Group which is a privately held, family-owned company with headquarters in Denmark Founded in 1932 by Ole Kirk Kristiansen, and based on the iconic LEGO® brick, it is one of the world's leading manufacturers of play materials Competitive advantage through advertising Some companies achieve competitive advantage through the success of their advertising campaigns Often the American football Super Bowl half term adverts are some of the most popular of the year Released to coincide with the US Super Bowl, this spot for Amazon 2021, as Michael B Jordan becomes a “beautiful vessel” to house Is it the timing or the content of this Amazon’s virtual assistant. advert that gives Amazon competitive advantage? Competitive advantage through branding Some companies seek to be the best in their industry by the use of very strong branding. Superdry is an exciting contemporary brand which focuses on high-quality products They are characterised by quality fabrics, authentic vintage washes, unique detailing, world leading hand-drawn graphics and tailored fits with diverse styling Such distinctiveness has gained the brand exclusive appeal as well as an international celebrity following Competitive advantage through convenience Some companies seek to be the very best in the industry by offering convenience to the shopper. This means offering stores in places that are easy for customers to walk to (on hosing estates). It can also mean convenient products such as ready meals. Tesco is the fourth largest retailer in the world measured by revenues and the second largest measured by profits. The chain was founded by Jack Cohen in 1919. The brand first appeared after Cohen bought a shipment of tea from T.E. Stockwell and he used those initials and added the first two letters of his own surname.  Competitive advantage through customer service Customer service can provide a business with competitive advantage Consumers want a business to get things right first time and dealing with their complaints faster and more efficiently. Amazon has been voted best company for customer service and their mission statement states: “to be earth’s most customer-centric company.” The purpose of product differentiation Product differentiation Where a product is different from the competition in some way Consumers must be able to perceive this difference and may be willing to pay a premium price for the product Look at the headphones, why are customers prepared to pay £299.99 for one type of Soundlab headphones RRP Beats by Dr Dre – RRP £299 headphones when they could buy £19.99 HERE HERE a pair of headphones for £6? Methods of differentiation Through reputation (hair salon, restaurant) Through customer service or after sales service (Marks and Spencer) Through value for money (ASDA, Lidl, Aldi, Primark) Through product features (Cars, mobile phones) Adding value to products/services Definition: Added value Added value is the amount by which the monetary value of an product or service increased at each stage of its production This can be achieved through the product itself or the way that consumers perceive the product How can a business add value? Design – develop new technology/design features to make their product unique (differentiation advantage) Production – achieving quality and efficiency adds value. Quality will ensure a higher price can be charged (differentiation advantage) Efficiency helps cut costs of the input (cost advantage) Marketing – creating an image that makes the product more desirable, a brand differentiation advantage Suggested activity: Adding value How many ways can you think of adding value to this potato? Potato products Benefits of adding value 1. The more value that is added, the higher the price that can be charged, which means higher profit margins 2. Protection against competitors offering lower prices which means competitive advantage 3. Customer loyalty which means Radley have added repeat business value to leather, these bags cost £300 Plenary Quiz Identify a way that you could add value to these raw materials to turn them into marketable products. The first one is done for you as an example: Lumber, wood > Books 1. Clay> 2. Fish> 3. Potatoes> 4. Chicken> 5. Flour> Plenary Quiz Answers Identify a way that you could add value to these raw materials to turn them into marketable products. The first one is done for you as an example: Lumber, wood > Books 1. Clay> pots, mugs, pottery, plates 2. Fish> fish fingers, fish cakes 3. Potatoes> crisps, chips, smiley faces 4. Chicken> chicken nuggets, chicken skewers 5. Flour>bread, cakes, pies, pastries Key terms Market mapping; The process of finding the variables which differentiate brands in a market and then plotting them on a map – to identify a gap in the market Competitive advantage; An advantage a business has over its competitors, allowing it to generate larger than average turnover for the industry Differentiation; This is the extent to which consumers perceive one product as being different from the others in the market, highly differentiated products have no substitutes Adding value; The process by which a business adds to the price that a consumer is willing to pay for a product e.g. frying potatoes to make chips