The

 Market  
Theme  1:  Sec*on  1.1  Mee*ng  Customer  Needs  
 Key elements to this topic

•  Niche and mass marketing

•  Market size
•  Market share
•  Dynamic markets
•  How competition affects markets
•  Risk and uncertainty
 Niche  and  Mass  Marke.ng  

Niche  Marke-ng  
•  Where  a  business  targets  a  smaller  segment  of  a  
larger  market,  where  customers  have  specific  
needs  and  wants  

Mass  Marke-ng  
•  Where  a  business  sells  into  the  largest  part  of  
the  market,  where  there  are  many  similar  
products  offered  by  compe-tors  
 Key  Features  of  a  Mass  Market  

•  Customers  form  the  majority  in  the  market  

•  Customer  needs  and  wants  are  more  
“general”  &  less  “specific”  
•  Associated  with  higher  produc.on  output  
and  capacity  +  poten.al  for  economies  of  
scale  
•  Success  usually  associated  with  low-­‐cost  
(highly  efficient)  opera.on  or  market  leading  
brands  
 The  Aim  of  Mass  Marke.ng  

•  Create  products  with  universal  appeal  

•  Aim  for  leadership  of  the  largest  market  
segment  
•  Build  strong  brands  that  are  associated  
with  the  underlying  product  
•  Exploit  economies  of  scale  to  earn  high  
profits  
Examples  of  Ubiquitous  Mass  Market  
Products  and  Brands  
 Benefits  of  Successful  Mass  Marke.ng  

Widest  poten.al  customer  base  

Lower  risk  -­‐    resources  focused  on  one  large  market  

Low  unit  costs  from  economies  of  scale  

Market  research  costs  rela.vely  low  

 Why  Target  a  Niche  Market  Segment?  

Advantages   Drawbacks  
Less competition - a “big fish in a Lack of economies of scale
small pond” Risk of over dependence on a
Clear focus - target particular single product or market
customers Likely to attract competition if
Builds up specialist skill and successful
knowledge Vulnerable to market changes –
Can often charge a higher price all “eggs in one basket”
Profit margins often higher
Customers tend to be more loyal
Examples  of  Segmented  (Differen.ated)  
Marke.ng:  Unilever’s  Product  PorYolio  
 Example  of  Concentrated  (Niche)    
Whole  Foods  Market  &  the  Organic  Niche  
 Market  Size  

•  Indicates  the  poten.al  sales  for  a  firm  

(the  “size  of  the  prize”)  
•  Usually  measured  in  terms  of  both  
volume  (units)  and  value  (sales)  
•  Size  of  individual  segments  within  the  
overall  market  can  also  be  measured  
•  Not  normally  a  marke.ng  objec.ve  –  
since  a  firm  cannot  influence  it  
 Market  Size  Example:  
Global  Luxury  Car  Market  =  $351  Euros  in  2014  
Examples  of  Calcula.ng  Market  Size:    
Using  Index  Numbers  

Index  Number  
Year   Market  Size  (£)  
(2012  =  100)  
2012   5,000,000   100  

2013   ?   105  

2014   ?   112  

2015   ?   125  
Examples  of  Calcula.ng  Market  Size:    
Using  Index  Numbers:  Solu.on  

Index  Number  
Year   Market  Size  (£)  
(2012  =  100)  
2012   5,000,000   100  

2013   5,250,000   105  

2014   5,600,000   112  

2015   6,250,000   125  

 Market  Growth  

•  A  key  indicator  for  exis.ng  and  

poten.al  market  entrants  
•  Growth  rate  can  be  calculated  using  
either  value  (e.g.  market  sales)  or  
volume  (units  sold)  
Examples  of  Calcula.ng  Market  Growth:    
Using  Volume  Sold  -­‐  Solu.on  

Change   Growth  Rate  (%)  

Units  Sold  
Year   (Units)   [B]/[A  from  
[A]  
[B]   previous  year]  x  100  
2012   1,000,000   -­‐   -­‐  

2013   1,100,000  

2014   1,350,000  

2015   1,475,000  
Examples  of  Calcula.ng  Market  Growth:    
Using  Volume  Sold  -­‐  Solu.on  

Change   Growth  Rate  (%)  

Units  Sold  
Year   (Units)   [B]/[A  from  
[A]  
[B]   previous  year]  x  100  
2012   1,000,000   -­‐   -­‐  

2013   1,100,000   100,000   10.0%  

2014   1,350,000   250,000   22.7%  

2015   1,475,000   125,000   9.3%  

 Example  of  Market  Growth:  
Retail  Sales  of  Frozen  Pizza  in  UK  
 Market  Share  

•  Explains  how  the  overall  market  is  split  

between  the  exis.ng  compe.tors  
•  Tends  to  be  calculated  based  on  market  
value,  but  volume  can  also  be  used  
•  Good  indicator  of  compe..ve  
advantage  
•  Key  is  to  look  for  significant  +/-­‐  changes  
 Example  of  Calcula.ng  Market  Share  
Using  Market  Value  

Sales  in     Cumula-ve   Market  Share  

Business  
2015  (£)   Market  Sales  (£)   (%)  in  2015  
A   250,000  

B   400,000  

C   900,000  

D   175,000  

E   275,000  
 Example  of  Calcula.ng  Market  Share  
Using  Market  Value:  Solu.on  

Sales  in     Cumula-ve   Market  Share  

Business  
2015  (£)   Market  Sales  (£)   (%)  in  2015  
A   250,000   250,000   12.5%  

B   400,000   650,000   20.0%  

C   900,000   1,550,000   45.0%  

D   175,000   1,725,000   8.75%  

E   275,000   2,000,000   13.75%  

 Example  of  Market  Shares:  
UK  Retail  Grocery  Market:  2013-­‐2015  
 Example  of  Market  Shares:  
Banks  in  the  UK  (Market  Share  by  Accounts)  
 Dynamic  Markets  

•  All  markets  are  dynamic  –  they  all  

change!  
•  But  the  pace  and  nature  of  change  
varies  considerably  by  market  
•  Key  sources  of  change:  
– Customer tastes and preferences
– Impact of technology on what customers
buy and how they buy
– Impact of new market entrants
Some  Examples  of  Highly  Dynamic  Markets  

Film  Industry   Taxi  Services   Camera  Market  

• Disrupted  by   • Disrupted  by   • Disrupted  by  
online  streaming   mobile  apps   sophis.cated  
• E.g.  NeYlix   • E.g.  Uber   smartphones  
• E.g.  Go  Pro,  
iPhone  
Dynamic  Markets  –  Growth  of  Online  Retailing  

E-­‐commerce  share  of  retail  sales  revenue  in  the  United  

Kingdom  (UK)  from  2011  to  2018  
 Example  of  Dynamic  Markets:    
Growth  of  Online  Fashion  Sales  in  the  UK  
Percentage  growth  of  online  spend  for  the  fashion  sector  in  
the  United  Kingdom  (UK)  from  2007  to  2017  
 Example  of  Dynamic  Markets:    
ASOS  &  the  Online  Fashion  Market  
Dynamic  Markets  –  the  Role  of  Innova.on  

Innova-on  is  about  puXng  a  new  

idea  or  approach  into  ac-on.  
Innova-on  is  commonly  described  
as  'the  commercially  successful  
exploita-on  of  ideas'  
The  Difference  between  Inven.on  &  Innova.on  

Inven-on   Innova-on  
Prac.cal  applica.on  of  new  
Formula.on  of  new  ideas  for  
inven.ons  into  marketable  
products  or  processes    
products  or  services  
 Types  of  Innova.on  

•  Product  innova.on  
– Launching  new  or  improved  products  (or  
services)  on  to  the  market  
•  Process  innova.on  
– Finding  beter  or  more  efficient  ways  of  
producing  exis.ng  products,  or  delivering  
exis.ng  services  
 Benefits  of  Product  Innova.on  
•  ‘First  mover  advantage’  –  which  can  
include  some  of  the  following;    
•  Higher  prices  and  profitability    
•  Added  value    
•  Opportunity  to  build  early  customer  
loyalty    
•  Enhanced  reputa.on  as  an  innova.ve  
company    
•  Public  Rela.ons  –  e.g.  news  coverage    
•  Increased  market  share    
 Benefits  of  Process  Innova.on  

•  Reduced  costs    
•  Improved  quality    
•  More  responsive  
customer  service    
•  Greater  flexibility  
•  Higher  profits  
 Many  Ways  Compe..on  Affects  the  Market  

Batle  for  
Batle  for  Market  
Pricing   Compe..ve  
Share  
Advantage  
•  A  constant  batle  to   •  Price  wars  a  regular   •  Product  
gain  or  protect   feature  of  intense   differen.a.on  is  a  
share   compe..on   key  part  of  
•  Threat  of  new   •  Stronger   compe..on  
market  entrants   compe.tors  owen   •  Can  advantages  be  
always  there   set  the  market   sustained?  
price  
 Compe..ve  Advantage  

•  The  ability  of  a  business  to  add  more  

value  for  its  customers  than  its  rivals  
and  atain  a  posi.on  of  rela.ve  
advantage  
•  A  situa.on  where  a  business  has  an  
advantage  over  its  compe.tors  by  being  
able  to  offer  beter  value,  quality  and/
or  service  
 Risk  and  Uncertainty  

RISK   UNCERTAINTY  
The  possibility  that  things  will  go   The  unpredictable  and  
wrong   uncontrollable  events  that  affect  
Risk  can  be  assessed  managed  –   business  
e.g.  through  con.ngency  planning  
Examples   Examples  
Risk  in  making  business   Uncertainty  about  the  sales  
investments   success  for  a  new  product  launch  
Managed  through  investment   Unpredictable  effects  of  
appraisal   launching  a  price  war  against  the  
Risk  of  a  product  breaching  health   compe..on  
&  safety  regula.ons