The Price Mechanism Discussion point pg 54 – tablet computers Consider the following points What attracts businesses to this market? What attracts consumers to make a purchase, and which tablet to choose?

The Price Mechanism Is an economic model that helps to explain the allocation of resources between different possible uses. We have already looked at scarcity and opportunity cost as well as consumer sovereignty, all of these link to this. Price Mechanism functions Signalling – prices give signals to producers and consumers Rationing – only those willing and able to pay the price get the products Incentives – profitability motivates firms, value for money motivates consumers

Mass Markets Some products are used by most people and are bought and sold in large quantities, quite often these products are homogenous (uniform, almost identical), e.g. sugar, milk, bananas. These items are sold in mass markets. Competition in mass markets tends to be done using price, so firms are always looking for ways to reduce costs and prices.

Niche Markets Are smaller and tend to work differently. They are specialised segments of the larger market.

Segmentation http://www.youtube.com/watch?v=llJNwdV-G88

Competitive Advantage Market Segments Characteristics of products/customers are subdivided into market segments Product: Price, speed, safety, size, appearance Customer: Age, gender, location, social class, income, behaviour (spending habits), psychological

Market Mapping Diagram that shows the range of possible positions for 2 features of a product. It is also known as Market Positioning, as you are positioning your product/business against competitors

Market Mapping www.businessstudiesonline.co.uk/GcseBusiness/Activities/Module3/WhatIsMarketing /MarketMappingDragDrop/frame.htm

Market Mapping Progress Arrow

Homework Task Investigate two markets that are segmented Draw market mapping diagrams to show how the market is segmented - think carefully about how you label the axis

Understanding the consumer If firms are to be competitive, they must understand their customers – it is essential they collect market research to help them do this Primary research will collect data first hand Surveys Focus groups Observations Experiments, test marketing Secondary research will look at data already collected Reports Internet Government data

Quantitative or Qualitative? Quantitative data looks at numerical data, factual statistics Qualitative research looks at opinions and feelings

How to gain a competitive advantage competitive advantage means having an edge over the rivals List all the ways in which a business could seek to gain a competitive advantage over its rival

How to gain a competitive advantage Compare your list with those in figure 13.3 on page 69.

How to gain a competitive advantage Exam style questions pg 72, Q2, 3 & 4