1.1.2 The Market

The Market 

Key Definitions

Market: A place where sellers meet to sell goods and/or services to buyers either face-to-face or online.

Mass Market: A market type that sells to the general population by creating products that have universal appeal such as general toothpaste. 

Niche Market: A market type that sells to a smaller segment of the larger market, usually creating products for specific needs, such as sensitive toothpaste. 

Market Share: The portion of the market controlled by a particular brand or company. Market leaders are those who have the highest market share.

Dynamic Market: A market that is constantly changing and developing over time. A major example of this is the gaming market and the games console industry. 

Risk: A quantified threat to a business's ability to produce profit, coming from the possibility that they will not produce enough profits or that they will face a loss. 

Uncertainty: A situation in which the results of decisions are unknown and are often based on estimates or guesses. 

Mass Market

The mass market is the place where goods and services are created with the intent to appeal to everyone, with either one product or a range of products designed with the intent to appeal to a wide range of consumers.  This is done with the thought that "everyone should be able to be a consumer for this product". For example, Coca Cola is a brand on the mass market, as it has a large consumer appeal due to the wide range of products including Coke Light, Coke Zero, Caffeine Free Coke and so on. The ultimate aim for those operating on the mass market is to create a 'generic brand'- meaning that the brand is so known for their products that the brand name becomes the 'product category'- such as Coca Cola and the Post-It Note. 

The Mass Market Cycle

1. Mass Marketing

The company creates a product or product range with intentions to appeal to everyone, not a specific consumer market.

2. High Sales

The range of products, paired with the suitable promotion method, leads to higher sales and therefore higher revenue and profit.

3. Mass Production
Products designed to appeal to the mass market will often be produced in mass, giving the company access to economies of scale which push down production costs. 

4. Lower Costs and Higher Profits 
These come from the high sales revenue and economies of scale from mass production, which allows the mass market cycle to continue. 

Niche Markets

A niche market is the place where goods and services designed for a more specific smaller segment of the market are sold. This involves identifying a gap in the market and creating a product specifically for that gap, such as Sensodyne does with their brand of sensitive toothpaste. Products on a niche market are usually more specialized in order to meet the needs of their market. Competition on a niche market it relatively lower than it would be on a mass market, meaning that businesses operating on these markets are often freer when it comes to pricing their products. 

As niche market products are more specialized businesses in the niche market often do not get the economies of scale a mass market would get. Small businesses often do not survive in the niche market as their operating costs are very high, and the profit they make is not enough to break even with their costs so they develop cash flow problems. This is often due to the fact that as they are more specialized so they cannot get the economies of scale those on the mass market do.

The Niche Market Logic Chain

1. Identify the market niche

2. Design a product that suits the niche

3. Be aware of how tastes change in the market

4. Work on ways to help the niche grow 

Market Size

A business with a large market share may worry that boosting their sales may bring an investigation from the competition and Markets Authority. This means that the best way for them to achieve growth would be to encourage growth in the market sector as a whole. In this situation the business may choose to sponsor research into, for example, the health benefits of their product. Drinks company Ocean Spray may research the health benefits of the cranberry in order to boost the market sales. 

Market Share 

The market share of the brand is massively important to a business. External factors control a lot of the market size, such as the weather and/or the state of the economy, however market share is largely controlled by the sales of the business, and the successes and failures of the marketing department within the business. 

When a business sets a market share-based objective they would need to be cautiously optimistic about it in order to make the objective realistic. For example, Snickers aimed to push their market share from 2.5% of the £3.6 billion UK chocolate market to 3% within the next 2 years, and this is an ambitious but realistic objective, 

Brands

Effective branding is a key aspect to establishing the business on the market. A brand is a way of giving a business a memorable image, such as the way "PlayStation" has become a brand image for Sony. Branding is also a key method for achieving product differentiation, which can help the business increase their market share. 

Dynamic Markets

Dynamic markets are highly competitive and subject to frequent changes. The most commonly known dynamic market is the games console market, dominated by rivalry  between Sony's PlayStation and Microsoft's Xbox. 

4 Key Factors to Consider in a Dynamic Market

1. Online Retailing

This method of distribution is dynamic and quite often unpredictable. The growth of online retailing has been dynamic as  

2. How the Market Changes

All types of market change over time, which is often linked to how social trends and customer needs change. 

3. Innovation and Market Growth

Innovation means to bring a new idea to life, such as the launch of a new product or service. It can help a business gain market share and it can also help boost market growth. 

4. Adapting to Change 

As consumer tastes and social trends change, so does the market, making the flexibility of the company essential. 

How Does Competition Affect the Market?

Competition is a key factor in most markets, as is the potential competition. In 2006 Wrigley had a 94% share of the chewing gum market in the UK, however once Cadbury launched their Trident gum sales for Wrigley dropped massively. However, by 2014 Wrigley's had recovered a 92% market share and Trident's sales had slumped. From this you can see the importance of potential competition as well as actual competition. 

Competition is also essential for businesses as it can impact how they price their goods and services- keeping them from getting lazy and complacent about their services. An example is shown in the Virgin West Coast train operator in the UK- they are the only company to offer this service so they are free to price however much they want to because they are not limited by competitor pricing. A standard open return ticket costs £321, which is about the same as a return flight to New York.

Most companies have competition as normality, making it harder for them to charge premium prices due to the fact that if the consumer thinks the price is too high they can just go to a competitor and lose sales revenue. Thanks to this, companies are encouraged to use more innovation and creativity when it comes to their products and services. This benefits the consumer as they get better quality, more reliable goods and a higher range of choice. 

The Difference between Risk and Uncertainty

Risk is a quantified figure, but uncertainty is not. It is important for a business to assess both the risk and uncertainty in a situation in order to prepare plans for the future, as both are a part of a business's life. In a business risks are assessed and where possible quantified in order to help managers make the best possible decisions for their business. Whenever a decision is made factors causing uncertainty will then affect whether the decision is successful or not.