Unit 1 – Investigating Small Business

 Understand that customers needs are central to starting a business.  Understand who to collect and interpret primary and secondary market research in the context of starting a new business.  Understand the difference between qualitative and quantitative research data.  Understand the value of market knowledge through direct customer contact.

 Customer Needs – the wants and desires of the buyers of a product or the customers of a service.  Market research – researching customers, competitors and market trends – using primary & secondary sources  Survey, Questionnaire, focus group – ways of collecting data  Respondents – those who provide the data

NeedsWants  Food and water  Shelter  Bed,  Clothes  Oxygen  Love/friends  Money  Things to survive  Xbox,  Money  New BMX  Laptops,  Mobile  Things you would like

Reasonable Price Good Quality Good customer service Convenient location Good Range of goods

 Market research – “The process of gathering, analyzing and interpreting information about a market, about a product or service to be offered for sale in that market, and about the past, present and potential customers for the product or service; research into the characteristics, spending habits, location and needs of your business's target market, the industry as a whole, and the particular competitors you face”.

 Information on market trends and competitor intelligence  Understanding market trends is important if your business is to make the most of its opportunities and remain competitive. You also need to understand your competitors and be aware of what they are doing in order to predict their next moves and exploit any weaknesses.

Market research should try to get answers on:-  Demand for your product or service - is it growing or shrinking?  What are the current general economic and market trends?  How customer requirements and buying behaviour could change in the future.  What new products are in your competitors' pipeline - could they make yours look outdated?  How competitors are changing - what are their plans?  What do competitors offer and what prices do they charge?  How do your competitors advertise and promote themselves?  Is there any forthcoming legislation which could affect your market?

 There are two types of market research:-  Primary Research and  Secondary Research Task Identify what each one of these is and what methods are involved, explain the different methods. Task Identify what each one of these is and what methods are involved, explain the different methods.

 information that comes directly from the source--that is, potential customers. You can compile this information yourself or hire someone else to gather it for you via surveys, focus groups and other methods.  Surveys  Questionnaires  Focus groups  Interviews and  Observations

 using your own resources, first decide how you'll question your targeted group: by direct mail, telephone, or personal interviews. If you choose a direct-mail questionnaire, the following guidelines will increase your response rate:  Questions that are short and to the point;  A questionnaire that is addressed to specific individuals and is of interest to the respondent;  A questionnaire of no more than two pages;  A professionally-prepared cover letter that adequately explains why you're doing this questionnaire;  A postage-paid, self-addressed envelope to return the questionnaire in. Postage-paid envelopes are available from the post office;  An incentive, such as "10 percent off your next purchase," to complete the questionnaire.

 Market research that's already compiled and organised for you. Examples of secondary information include reports and studies by government agencies, trade associations or other businesses within your industry.  Secondary research is sometimes called ‘Desk research’ as you can do it at a desk!

 Secondary research uses outside information assembled by government agencies, industry and trade associations, Unions, media sources, and so on. It's usually published in pamphlets, newsletters, trade publications, magazines, and newspapers.  There sources include YELL.COM, Internet, Local newspaper, Library (market reports)

 Complete question sheets on Business and Understanding Customer needs (overtoyou ex1 wk1  Due date :- Monday  Answer in full sentences, proper grammar and punctuation.

 What is Market Research?  Why do businesses do market research?  Can you remember the two different types?  Name 2 types of each and explain each one.

 Data that has been collected can be split into 2 types:-  Qualitative Data – information about opinions, judgements and attitudes. Eg finding what customers think  Quantitative Data – Data that can be interpreted in a numeric way. Eg finding out how many customers bought a certain product.

 Design a questionnaire to collect data about whether and what people in the school have used internet shopping for.  Don’t forget to collect quantitative and qualitative data!  Open and closed questions

 Researchers have to be careful of bias when collecting data – how questions are worded can be misleading,  People may give untypical answers or lie,

 In market research the data can be interpreted or analysed to find out what it all means.  Data about prices, ages of customers and products bought can be compared, quantitative data.  Data about opinions on customer service, store cleanliness can also be compared, qualitative data.

 Companies like Tesco, Debenhams and Asda are highly successful retailers because they understand their customers. They have complex computer systems that analyse what customers are buying, these customers are vital to keeping the business going.  Direct customer contact helps organisations to understand how the market is working and how it is changing.

Complete the worksheet – 1 See Moodle₂ for answers. Add link

 Understand that customers tend to buy through habit and preference.  Understand how to analyse these customer buying habits and trends.  Understand how businesses can identify market segments.  Understand how businesses can map their market to set out the key features of the market.  Understand how businesses can use this information to identify and target gaps in the market

 Market Segment – part of a market that contains a group of buyers similar buying habits such as age or income.  Price Sensitive – when the price is very important in the decision about whether to buy or not.  Market map (also Perceptual or positioning map) – shows the range of possible positions for two features of a product, such as low to high price and low to high quality  Gap in the market – a place where no business is serving the customer needs

 Ruby Jacobs was only 21 when she decided to set up her own business. After studying Food and Catering at University she decided to open a cafe. She had found a possible location for a cafe, just off the high street of a local parade of shops in her local area of London.  What did she do to analyse her customers?

Before deciding to lease (rent) the premises for the cafe she needed to find out:-  Who the potential customers may be,  What sort of products they would like to buy,  What sort of price they would be prepared to pay,  When they would want to use the services of the cafe,  How many times they would use the cafe and  If she could identify any buying habits in her potential customers

 An identifiable group of individuals, families, businesses, or organisations, sharing one or more characteristics or needs in an otherwise homogeneous (identical) market.  Market segments generally respond in a predictable manner to a marketing or promotion offer.  Market segments may be:- age, gender, income, area, ethnicity, religious group, socio-economic group (working, upper, or lower class)

 Market mapping is a diagram that shows the range of your business and other competitors businesses against two features of the product or service you are offering.  Market mapping lets you identify where the product or service is best placed in the market to suit potential customer needs.

 Once an entrepreneur has identified an appropriate segment of the market to target, the challenge is to position the product so that it meets the needs and wants of the target customers. The market map illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customers. Examples of those dimensions might be:  High price v low price  Basic quality v High quality  Low volume v high volume  Necessity v luxury  Light v heavy  Simple v complex  Lo-tech v high-tech  Young v Old

Another explanation

 One way is to identify where there are “gaps in the market” – where there are customer needs that are not being met. For example, in the chocolate bar market, Divine Chocolate (a social enterprise) successfully spotted that some consumers were prepared to pay a premium price for very high quality chocolate made from Fairtrade cocoa. Green & Black’s exploited the opportunity to sell premium chocolate made from organic ingredients. Both these brands successfully moved into the high quality / high price quadrant (see above) before too many competitors beat them to it.Divine Chocolate  The trick with a market map is to ensure that market research confirms whether or not there is actually any demand for a possible “gap in the market”. There may be very good reasons why consumers do not want to buy a product that might, potentially, fill a gap.

 A GAP in the market occurs when no business is meeting the needs of the customers for a particular product.  New businesses can be very successful if the spot a gap in the market and fill it well,  Some new businesses are not successful because their products are too close to that of their competitors.

 Test Yourself  Over to you.  Is it possible to identify the market segment for ‘your business’?  Is it possible to produce a market map for ‘your business’?