Module 1- Generating Ideas-Part 2

What is a market?

Businesses sell to customers in markets. A market is any place where buyers and sellers meet to trade products - this can be a high street shop or a website.

Any business in a marketplace is likely to be in competition with other firms offering similar products. Successful products are the ones which meet customer needs better than rival offerings.

EXAMPLE- PayPal dominate the online payments market because they meet customer needs for convenience and security better than their rivals.

Market Research

Marketing is about responding to consumers' needs. It is important to find out what these needs are before launching a new product.

A business conducts market research to help identify gaps in the market and business opportunities.Markets are dynamic. This means that they are always changing. A business must be aware of market trends and evolving customer requirements caused by new fashions or changing economic conditions.

There is far more to marketing than selling or advertising. Put simply, marketing is about identifying and satisfying customer needs.

The first step is to gather information about customers needs, competitors and market trends. An entrepreneur can use the results of market research to produce competitive products.

This is especially important if a business is entering a very competitive market where there may be a monopoly (when one firm has 25% or more of the market)

EXAMPLE- Google have 90% of search engine traffic.

Some businesses opt out of field research and rely instead on the know-how and instincts of the entrepreneur to ‘guess’ customer requirements. They do this because market research costs time and money.

We encourage all young people to do some form of market research even if it is very basic e.g. asking their peers and/or teachers if they would buy their product.

There are a number of different ways of conducting market research. We encourage young people to use a variety of market research techniques but some may be more appropriate for particular programmes e.g. in Business Battle there is time for young people to trial their products in a marketplace.

There are two main methods of collecting information:

Primary Research

Primary research (field research) involves gathering new data that has not been collected before.

Secondary Research

Secondary research (desk research) involves gathering existing data that has already been produced. It is not designed specifically for the study in question, but is nevertheless relevant.

The primary and the secondary research will provide the business with much data relating to its markets and its consumers. This data can then be used to describe the current situation in the marketplace, to try to predict what will happen in the future in the marketplace, and to explain the trends that have occurred.

Quantitative Data

Factual information is called quantitative data. The data is numerical and can be analysed graphically and statistically.

Higher ability young people on MyBnk enterprise programmes may consider how they are going to select the sample of people for their market research questionnaires. They could do random sampling (choosing respondents from a telephone directory), quota sampling (grouping by certain characteristics e.g. age or gender), cluster sampling (grouping into geographical groups) and stratified sampling (dividing into samples based on wider population).

Qualitative Data

Information collected about opinions and views is called qualitative data. It is usually conducted through group discussions (often called focus groups) in order to discover the rationale behind consumers' purchases. This is the way in which most MyBnk enterprise groups conduct market research albeit in an informal manner through talking to other students, parents, teachers and youth workers .

Most markets contain different groups of customers who share similar characteristics and buying habits. These collections of similar buyers make up distinct market segments.

Breaking down a market into submarkets can lead to a business opportunity and potential for increased revenue profitability.

This involves breaking the market down into distinct groups of consumers who have similar characteristics, so as to offer each group a product which best meets their needs. The main ways of segmenting a market are:

By consumer characteristics: this involves investigating their attitudes, hobbies, interests, and lifestyles.

By demographics: their age, sex, income, type of house, and socio-economic group.

By location: the region of the country, urban -v- rural, etc.

EXAMPLE- An excellent use of market segmentation was in the creation of Diet Coke and Coke Zero. They are essentially the same product but targeted at completely different customers. See the two different adverts to see how segmenting a market can inform a business approach.

Another tool used to help identify a business opportunity is a market map. A market map is a diagram that identifies all the products in the market using two key features.

The diagram above shows how four local cafés are competing in terms of price and quality.

The red circle identifies a gap in the market. There is a business opportunity for a new café offering standard quality products at standard prices.

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