1.2 Spotting a Business Opportunity Flashcards
All 41 cards in this deck
What are the four customer needs in the Edexcel specification?
Price, quality, choice and convenience.
What does 'convenience' mean as a customer need?
How easy it is for the customer to buy and use the product — e.g. opening hours, location or online ordering.
What does 'choice' mean as a customer need?
Customers want a range of products, designs, sizes or options to pick from.
What does 'quality' mean as a customer need?
The product works well, lasts and meets the standard customers expect for the price paid.
Why does a business need to identify what price customers are willing to pay?
So it can set a price customers feel offers value for money but that still allows the business to make a profit.
Why is identifying and understanding customer needs important to a business?
It generates sales and supports business survival.
True or false? Profit is an example of a customer need.
False. Profit is a business aim; the customer needs are price, quality, choice and convenience.
What are the four purposes of market research?
To identify and understand customer needs, to identify gaps in the market, to reduce risk and to inform business decisions.
How does market research reduce risk for a business or its investors?
It gives evidence of demand before money is invested, reducing the chance of the business failing and money invested being lost.
What is primary research?
e.g. a café asking its customers to fill in a questionnaireNew data collected first-hand by the business for its own purpose — the café's questionnaire answers are its own original data.
What is secondary research?
Data that already exists and was collected by someone else — e.g. the internet, market reports and government reports.
True or false? A focus group is a way of collecting secondary market research.
False. A focus group is a primary research method; the internet and market reports are secondary.
What is a focus group?
A small group of customers led in a discussion about a product or idea, giving detailed qualitative views.
What is observation as a primary research method?
Watching and recording how customers behave — e.g. counting footfall or seeing which products shoppers pick up.
What is the difference between a survey and a questionnaire?
A survey is the process of asking a sample of people for their views; a questionnaire is the written or online set of questions used to do it.
Give one advantage to a small business of using the internet for secondary research.
It is a fast and convenient way to discover data, e.g. population figures.
Give one drawback of using the internet for secondary research.
It gives general data, not focused information, so the owner cannot tell whether there is enough demand for their particular product or service.
What is a market report as a source of secondary research?
A published study of a market's size, trends and main competitors that a business can buy or access.
Give one advantage of using government reports as secondary research.
They are usually free and based on large official samples (e.g. census data), so the data is reliable.
What is the difference between quantitative and qualitative market research data?
Quantitative data is numerical (e.g. 70% of people buy weekly); qualitative data is customers' opinions and reasons, which are not numbers.
How can social media be used to collect market research data?
Customers' comments, likes, shares and replies to online polls reveal their opinions and preferences at very low cost.
Which three things affect the reliability of market research data?
Sample size, bias in the sample or questions, and how old the data is.
True or false? A survey of 10 people is as reliable as a survey of 1000 people.
False. A larger sample is more representative, so the results are more reliable.
What is market segmentation?
Dividing a market into groups of customers who share similar characteristics or needs.
Name the five ways of segmenting a market given in the specification.
Location, demographics, lifestyle, income and age.
What does segmenting a market by 'demographics' mean?
Grouping customers by measurable population characteristics such as gender, family size, religion or ethnicity.
What does segmenting a market by 'lifestyle' mean?
Grouping customers by how they live — their interests, habits and values, e.g. vegans or regular gym-goers.
True or false? Profit is a way of segmenting a market.
False. Income is a way of segmenting a market; profit and cost are not.
What is market mapping?
Plotting businesses or products on a diagram with two features as axes, e.g. price and quality, to show where each one sits.
True or false? A market map shows how many customers there are in a market.
False. A market map is used to spot a gap in the market and show where competitors are positioned.
What are the steps to use a market map to find a gap in the market?
e.g. mapping the coffee shops in a town- Choose two features as axes: price (low–high) and quality (low–high).
- Plot each competitor: the town's coffee shops.
- Look for an empty area: e.g. no high-quality, low-price shop = a possible gap.
What is a target market?
The particular segment of customers a business aims its product at.
Which five factors are used to judge the strengths and weaknesses of competitors?
Price, quality, location, product range and customer service.
How can a competitor's lower prices affect a small business's decisions?
The business may have to cut its own price or add value and differentiate its product to keep customers.
Why is high quality a strength for a competitor?
It attracts customers and allows the competitor to charge a higher price, so customers may choose them instead.
Why can location be a strength for a competitor?
A site with high footfall or close to its customers attracts passing trade that rivals further away lose.
What does 'product range' mean when comparing competitors?
The variety of different products a business sells — a wider range offers customers more choice.
Why is good customer service a competitive strength?
It builds a positive brand image and customer loyalty, leading to repeat purchases and recommendations.
Give two decisions a small business might change because of strong competition.
Its prices and the quality or range of its products (also its promotion, customer service or location).
True or false? Competition only has negative effects on a small business.
False. Competition can push a business to innovate and bring new ideas to market ahead of rivals, giving it a competitive advantage.
What are the steps to calculate a percentage change in market research figures?
e.g. weekly sales rise from 200 to 250
- Find the change:
- Divide by the original figure:
- Multiply by 100: a 25% increase