Is there a market for the business idea? Unit 1 Edexcel Economics and Business AS Level

Is there a market for the business idea? Unit 1Edexcel Economics and Business AS Level Sarah Hilton for revisionstation

From the spec • Please note: the website www.keynote.co.uk suggested in the spec is a subscription service and so is not used here

Learning Objectives • To be able to discuss the following terms with confidence; market size, market niche, market segmentation analysis • To be able to answer past paper questions based on the topics

Starter • What kind of watch do you wear? • Do you wear the same watch as: • 1) the person next to you • 2) your parent • 3) me? • Why do you think that is?

Market size • Size of the market can be measured in a variety of ways: • Number of customers (perhaps per year, per month) a restaurant will look at number of “covers” a night • % of market share in terms of volume for example a business may look at amount sold, 3,000 units sold this month • £££ market size in terms of turnover or potential turnover.

Market niche vs mass market • Niche market is a small segment of the population who have a similar set of wants, needs and characteristics. • Example: Walking boots • Mass market is a product that is advertised to and aimed at EVERYONE • Example: Toothpaste, cinema / films etc

Market Niche characteristics • A small market with unique characteristics • Tend to demand higher prices – more unique products – attracts a niche demographic • Fewer consumers / better quality For example sky diving equipment – only needed by a small market therefore niche Products – which attract high prices for the specialist equipment

Market segmentation • Are you… • Male • Female • Are you • 17-19 years old • Older • Younger There are some products which are gender specific – can you think of some There are some products that are age specific – any thoughts?

Segmentation • Classification of consumers or customers into categories • Age • Lifestyle • Gender • Location • Demographic • Political viewpoint • Ethnic origin • Culture • Lifestage (e.g. parent of toddler /retired) • Interests / hobbies • Socio-economic

Glossary – how’s your vocab? • Market mapping… • Niche marketing… • Adding value… • Market sampling… • Market segment… • Risk-taking… • Non-ethical… • Press escape key to view answers

Sample question 1 In April 2006, The Daily Telegraph reported that ‘Polish food shops and restaurants are continuing to open up and thrive on Britain’s high streets’. This trend continued to 2009. The establishment of Polish food shops and restaurants in Britain is evidence of A market mapping B niche marketing C adding value D market sampling [4]

Answer question 1 Correct answer is B – niche marketing - Definition of niche marketing (1) - Because the Polish population of UK will be relatively small (1) - Who have different tastes in food and other products (1) - Market mapping and market sampling are techniques to support product positioning (1) - Adding value is providing a product or service with an increment to provide customers with more for their money (1) Any acceptable answer which shows selective knowledge/application and/or development NB up to 2 marks out of 3 may be gained for part (b) if part (a) is incorrect. Maximum 2 marks for explaining why distracters are incorrect.

Sample question 2 B&Q and Jewson serve different segments of the market for building and decorating products. Which of the following is not a market segment for the above businesses? A Do It Yourself (DIY) enthusiasts B Self-employed electricians C Homebase stores D Private sector landlords [4]

Answer question 2 Correct answer is C Homebase stores - Market segmentation is how you classify people within a market according to age, gender, lifestyle, etc (1 mark) - Market segments share same characteristics, e.g. same age bracket (1 mark) - DIY enthusiasts, landlords and electricians will probably get supplies from B&Q/Jewson because of a regular need (1 mark) - but Homebase stores is a retailer/distribution channel/competitor of DIY products, not a type of buyer (1 mark)

Sample question 3 Sue Russell decided that she would leave her job at Denby Potteries (UK) Ltd in order to set up her own business. Which of the following is the most likely explanation for Sue’s decision to set up her own business? A To develop a niche market B To reduce risk-taking C For non-ethical reasons D To work independently [4]

Answer question 3 Correct answer d – to work independently - Defines niche market or non-ethical (1 mark) - Risk taking is naturally increased because she will be running her own business (1 mark) and no longer have the security of employment (1 mark) - Denby Potteries Ltd is a private sector business (1 mark) and so is unlikely to be too concerned with social and environmental benefits (1 mark) - Denby may already provide products for a niche market (1 mark) but Sue could not be in a position to actually develop the market (1 mark) - This decision might enable Sue to earn more money (1 mark) than she received as a salary when employed (1 mark) - Other reasons for selling in business, e.g. something new, make more money (1 mark)

Sample question 4 In December 2009, it was reported that Ferrero chocolates, imported from Italy, are available only in niche shops in India. Which of the following is not true about niche markets? A Prices tend to be high B Supply tends to be low C The number of consumers tends to be low D Effective demand tends to be high [4]

Answer question 4 Correct answer is D Effective demand tends to be high 3(b) - Niche markets are small markets with distinctive specialist requirements (1 mark) - Therefore there will be fewer consumers (1 mark) - Prices tend to be high because the products being sold are either specialist or distinctive quality (1 mark)

Revision Video

Is there a market for the business idea? Unit 1 Edexcel Economics and Business AS Level