3.2 - understanding markets and customers

• Market

  A place where people buy and sell things (whether virtually or physically)
• Different types of markets


  • Electronics market
  • Cosmetics market
• Businesses try to get ahead of competitors


  Analysing the markets that affect them
• Understanding the market


  • Before a company can try to sell their product, they need to understand the market they're operating in
• Identifying the market


  1. Work out if they're working in a local, national or international market

  2. Whether they're selling things online or physically

  3. Who their target audience is
• Ways a market can be classified


  • Geography (local, national, international)
  • Nature of the product (e.g. agricultural, technological)
  • Seasonality (seasonal or year-round)
  • Development level (new, growing, saturated)
  • Product destination (trade, private consumers)
• Market analysis


  1. Looking at sales growth, market growth, market share and market mapping

  2. Decide how to market their products
• Business-to-business (B2B)


  Firms that sell to other companies
• Business-to-consumer (B2C)


  Firms that sell to consumers
• Market size and growth


  • Businesses need to know if the market is growing (demand is increasing) or shrinking (demand is decreasing)
• If market growth is negative


  The market is shrinking
• In a growing market


  Several firms can grow easily
• In a shrinking market


  Competition can be heavy-there are fewer customers to go around
• Firms can

  1. Diversify

  2. Get out of the market altogether
• Market share


  The percentage of sales in a market that is made by one firm, or by one brand
• Letting your market share go down is not good- it means that competitors are gaining an advantage over you
• Sales growth analysis


  • The marketing department will continuously monitor the company's sales growth in certain markets to see where it is gaining sales and where it is losing sales
• If sales growth is positive


  The company is gaining sales
• If sales growth is negative


  The company is losing sales
• Marketing department combines analysis


  To see if they are meeting objectives
• Sales growth doesn't have to be yearly-it can be measured over any time period
• Market Mapping


  Compares two features of products or brands
• Market map


  • Shows extremes for two measures that are important to customers
  • Laid out as a matrix
  • Products or brands positioned according to where they are judged to lie between each pair of extremes
• A business spots a gap in the market


  It can try to fill it with a new product or brand, knowing that there won't be any close competitors
• A business identifies its closest competitors


  It can then plan the best marketing strategy to persuade customers away from them
• A product's sales are declining


  The company might use a market map to find out how customers view their product and then try to reposition it on the map
• Market maps show the features provided by the most popular brands


  This can indicate the benefits considered most desirable by the target market
• Market maps show how much customers expect to pay


  This can help a company with its pricing strategy
• Market mapping can simplify things too much
• The positions of products and brands on a market map is usually a matter of opinion, and may be biased
• Market research


  The collection and analysis of market information such as customer likes and dislikes
• Importance of market research


  • Helps prevent disastrous errors before launching a new product
• Three main reasons for market research


  • Helps businesses spot opportunities
  • Helps them decide what to do next
  • Helps them see if their plans are working
• Market research can be expensive and bad market research can lead to disastrous business decisions
• Businesses need to plan carefully to make sure they get the maximum benefit from market research
• Quantitative research


  Produces numerical statistics-facts and figures
• Qualitative research


  Looks into the feelings and motivations of consumers
• Closed questions make analysis easier, but sometimes open questions give more informative data
• Primary market research


  Where a business gathers new data (or employs someone to do it on their behalf)
• Secondary market research


  Done by analysing data that's already available