From the specificationa) Mass markets and niche markets: characteristics market size and market share brands b) Dynamic markets: online retailing how markets change innovation and market growth adapting to change c) How competition affects the market d) The difference between risk and uncertainty Lesson ObjectivesTo be able to compare the difference between a mass and niche marketTo be able to discuss the characteristics of mass and niche marketsTo be able to discuss dynamic marketsTo be able to identify how competition affects the marketTo be able to explain the difference between risk and uncertainty
To be able to answer sample exam questions based on the topic area
StarterWhat were the last pair of shoes that you bought? Had all your other shoes worn out?
The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!4Mass v niche marketsDefinition of mass markets and niche marketsMass market this is the market that is aimed at the general population e.g. regular toothpaste
Niche market this is a subset of the main market and addresses a specialist need e.g. Sensodyne toothpaste for sensitive teeth
6ActivityImagine this circle is the entire market for watches. How would it divide up with the different brands? How many brands can you think of?The market would not divide into 4 quarters, much more segmented into style, function, cost, etc. Swatch, Rotary, Omega, Tissot, Tag Heuer, Ice, see how many your group can come up with. Discussion now of which is a mass market watch and which is for a niche. Hopefully they will identify a Rolex as being a niche watch. 7Mass market characteristicsA product is sold to all consumers in the same way. For example coca cola one advert for everyone.
Which other products are mass marketed?
Mass market pros and consProsLarge scale production means economies of scale and lower average unit costsMass marketing is straightforward as everyone is equally targetedLarge volume of sales means high revenues High revenues can be pumped into R&DConsLots of competitionHomogenous products need to be differentiated thorough marketing which can be expensiveHigh volume production not flexible to demand changesNiche market characteristicsThis is a subset of the main market and caters to a particular segment of the market e.g. Rolex
Who is this product aimed at?
Are you planning to spend 22,000 on a watch?
Will everyone buy one?Niche market pros and consProsCharge premium priceEasier to target customers Small scale production can be flexible and follow trendsLess competition than in the mass marketsConsVery risky as demand may not be constantHigher unit costs so no economies of scaleExample: Tokyo old camerasNiche marketsThese can be profitable markets to be in, often prices charged are higher as consumers in that niche are willing to pay for exactly the right product.The profits can often signal more competitors to enter the marketBusinesses in niche markets often have a small range of products which make them more risky venturesThere can be a problem of the lack of economies of scale as not enough products are sold for the business to be viableAdditionally the market for some more expensive items may be very limited
Market SizeMarket size can be measured through:Volume of sales, or physical quantity of products soldValue, total amount spent by customers e.g. 30billion in UK spend a year on fast food and takeaways.McDonalds 33% value of sales (Mass market)
13Market ShareMarket share example calculations
** This question is NOT taken from any sample papers its simply there for the students to practice their calculations. This is consumer spend in a 12 week period and figures are (000s). 15Mass market brandsBranding is very important in mass marketing to instil loyalty in customers. Who likes Burger King and who likes McDonalds? Essentially the products are homogenous (all the same) so they differentiate on branding.Kellogg's corn flakesHeinz KetchupAre there any other brands you insist on?
The illusion of choice 10 big companies manufacture most of the mass market brands
Bigger on the main screen17Niche market brandsMany niche markets in the car market, mainly at the top end. Customers are looking for a very special car that will turn heads, attract attention, give the owner kudos and also have a very fast engine. How many can you name?
Homework1.9 Workbook Revision Questions do them all.The book is on the shared drive!
Dynamic marketsStarterIdentify two advantages of niche marketing over mass marketing. (4 marks).The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!21
Definition of dynamic marketDynamic market one that is subject to rapid or continuous changes e.g. shoes
Dynamic markets - Online retailingOnline retailing is a dynamic market because it is constantly changing, developing, expanding and offering customers new products and new ways to shop. Amazon founded 1994Ebay founded 1995Etsy founded 2005Some online retailers are just on the Internet. Some (like Argos, Next, Evans, BHS, Debenhams) were retail stores first and then developed websitesWhat will happen in the next 10 years?
A dynamic market is not always good news for the online retailer: Boo.comwas a UK Internet company launched in 1999, after spending 100 million venture capital it went bust in 2000 after just 18 months of tradingWhy Boo.com went bust: video (12 mins)
Pros and cons of online retailingProsCons25Pros and cons of online retailingProsShop is open round the clockOrders can be taken automatically without the need for staffShop can reach international markets easilyLow overheads, no need for a shop premisesStock can be easily withdrawn or updated to keep up with dynamic market changes in tastesEasy to set up (ebay)Flexible owner can be anywhere in worldOpportunities for fast growthCons71% of customers still prefer to browse online then purchase from a shop*Issues with sending goods back may put customers offIssues with online security worries put off older customers not keen to share their bank detailsVery competitive market, hard to drive traffic to sitesOwners need IT skillsProblems with fraud / spam / virusesCompetitors can be aware of owners business model, prices, activity
* Source Mail online article: http://www.dailymail.co.uk/femail/article-3031720/No-wonder-moans-Infographic-reveals-women-10-steps-FORTY-HOURS-making-purchase-shopping.html26Revision Video
Dynamic markets how markets changeWas there always a market for these products?
Dynamic markets Innovation and market growth
If you wish to do more with this the article is here to print out: http://news.sky.com/story/1456929/amazon-dash-button-how-does-it-all-work29Market growthWith dynamic markets, comes constantly changing consumer tastes and preferences.Products not used widely 20 years ago:InternetMobile PhonesPC computers for home useComputer games / games consolesTechnology is a massive growth market, consider how many of these items are in most UK households nowFor example the increase migrants in UK has increased the need for speciality meats such as Kosher and Halal. These are growth markets. Dynamic market which do you prefer?As tastes in fashion change rapidly so products are made to satisfy these new needs. Businesses need to be one step ahead of the competition (this is why fashion shows are important as they predict trends for the following year).
How competition affects the market StarterOutline one advantage of online retailing. (2 marks)Outline one disadvantage of online retailing. (2 marks)The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!33Peer AssessmentIn your own words, explain the meaning of the term marketing. (3)Why do you think most firms decide to review their marketing strategy at fairly regular intervals? (3)What is meant by the term target market? (2)Outline 2 reasons why it is important for firms to be able to identify their target market. (4)Outline the possible marketing objective for:A) Man U B) Easyjet C)TopshopExplain how market segmentation has helped companies such as BskyB to improve their profitability.Explain how online advertising might help a business to focus its advertising spending on its target market
The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!34Think Pair ShareIs competition good or bad for:the marketthe businessthe government and economy.
Include WHY and both sides of the Argument!The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!35Competition and the marketVery competitive markets benefit the consumer in a number of ways: More competition means a business needs to be very efficient More competition means the business needs to listen to consumer needs and wants and constantly strive to meet those needs rather than being product orientatedMore competition means a business must be less wastefulMore competition means a business must produce a good quality product or serviceMore competition in homogenous markets means that businesses must complete on non-price factors, meaning lots of exciting promotions to persuade consumers to switch supplier or product
With so much competition comparison websites have become essential to help customers navigate the promotional dealsThe difference between risk and uncertainty
Frank Knight 1921: Risk Uncertainty and profitRisk:When the potential outcomes of a decision are known. Knowing these odds forms the basis of all games that are played. E.g card games, dice rolls, lottery, etcUncertaintyNone of the outcomes are known in advance, found in complex systems such as a countrys economyKnight suggests that real opportunity for profit is found in uncertaintyHe suggests that to have a great idea, you should have lots of ideas, innovation is taking advantage of uncertainty
388 Mark Questions
The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!398 Mark QuestionsAssess disadvantages of online retailing for a company such as Boo.Com (8 marks).
The idea is that students say no they have lots of shoes, they list the shoes that they have and realise because of changing fashions and tastes they have to keep buying shoes. Take in a couple of old pairs from a charity shop or show up in crocs!40GlossaryDynamic market; a market that is constantly changing to suit customers needs and wantsMarket share; the % of a market that a business, product or service hasMarket size; measured by volume of sales or value Niche market; a subset of a normal market that caters for specific consumer needs and wantsMass market; products or services that are sold or advertised to everyone at the same time in the same way HomeworkWe will have a key term test next class. Study the key terms from the glossary.Research one business news story for next class.Data Response 2 Page 7