Marketing, Competition and the Customer
This chapter explains how businesses identify customer wants, respond to changing needs and competition, choose between mass and niche markets, and use segmentation to target customers more effectively.
Topic 1: Marketing and Customers
Marketing begins with understanding customer wants and satisfying them profitably.
1. Marketing
A customer is a person, business or organisation that buys goods or services from a business.
2. Main Roles of Marketing
The most important roles are:
1. Identify customer needs
Find out what products customers want, what prices they are willing to pay, where they want to buy, and what services they expect.
2. Satisfy customer needs
Provide the right product, at the right price and in the right place.
3. Maintain customer loyalty
Encourage existing customers to continue buying from the business.
4. Build customer relationships
Keep close contact with customers to understand their changing needs.
5. Anticipate changes in customer needs
Identify new trends and possible gaps in the market before competitors do.
3. Customer Loyalty and Customer Relationships
Customer loyalty
Customer loyalty occurs when existing customers continue to buy products from the same business.
Customer relationships
Customer relationships involve communicating with customers to encourage them to remain loyal to the business and its products.
4. Benefits of Successful Marketing
Successful marketing may help a business to:
- Increase sales revenue and profit
- Increase or maintain market share
- Improve the image of the business or its products
- Enter new markets
- Develop new or improved products
Topic 2: Market Share and Changing Customer Needs
Businesses need to measure their position in the market and react when customer spending patterns change.
5. Market Share
How a business may try to increase market share
- Improving products
- Attracting customers from competitors
- Entering new markets
- Introducing new products
6. Why Consumer Spending Patterns Change
Businesses must understand why customers change what they buy.
Three important reasons
1. Changes in tastes and fashions
Consumers may want different products as fashions and preferences change.
2. Changes in technology
New technology can make existing products less popular.
For example, newer mobile devices reduced demand for some traditional desktop computers.
3. Changes in income
When incomes are lower, consumers may choose cheaper products. When incomes rise, demand for more expensive products may increase.
7. Importance of Changing Customer Needs
Businesses that fail to respond to changing customer needs may lose:
- Customers
- Sales
- Market share
Topic 3: Competition and Business Response
Markets can become more competitive, so businesses need to protect customers, sales and market share.
8. Why Markets Have Become More Competitive
Three major reasons are:
1. Globalisation
Products are increasingly sold across many countries.
2. Better transport
Goods can be transported more easily and cheaply between countries.
3. Internet and e-commerce
Consumers can compare products and buy from businesses located in other countries.
9. How Businesses Can Respond to Increased Competition
Businesses may:
1. Maintain good customer relationships
This helps the business understand changing customer needs and maintain loyalty.
2. Improve existing products
Better quality or features can make products different from competitors' products.
3. Introduce new products
This helps maintain customers' interest and may increase market share.
4. Keep costs low
Lower costs can help the business keep its prices competitive.
Topic 4: Markets, Mass Markets and Niche Markets
Businesses must understand the size and type of market they are serving.
10. What Is a Market?
How market size can be measured
- The number of products sold
- The value of sales
Markets can be divided into:
11. Mass Market
A mass market is a market where there is a very large number of sales of a product.
Products are designed to appeal to a large number of consumers.
Examples in the book include:
- Soap
- Washing powder
- Aspirin
Advantages
- High potential sales because there are many customers.
- Businesses may gain economies of scale.
- Greater opportunities for business growth.
Disadvantages
- High competition between businesses.
- Advertising and promotion may be expensive.
- Standardised products may not satisfy the specific needs of every customer.
12. Niche Market
A niche market is a small, usually specialised segment of a much larger market.
Examples include:
- Expensive designer clothing
- Luxury watches
- Specialised foods for particular groups of consumers
Advantages
- There may be less competition, especially from large businesses.
- The business can focus closely on the specific needs of customers.
- This may create strong customer loyalty.
Disadvantages
- The market is small, so potential sales are limited.
- If demand for the specialised product falls, the business may face serious problems.
13. Mass Market vs Niche Market
| Mass Market | Niche Market |
|---|---|
| Very large number of customers | Small specialised group |
| Large potential sales | Limited potential sales |
| Usually high competition | Often less competition |
| Products appeal to many consumers | Products designed for specific needs |
Topic 5: Market Segmentation
Segmentation helps businesses target groups of consumers more accurately.
14. Market Segmentation
Each group is called a market segment.
For example, the market for clothing could contain separate products aimed at:
- Children
- Teenagers
- Adults
15. Why Businesses Segment Markets
Segmentation can help a business:
1. Meet customer needs more closely
Products can be designed specifically for particular groups.
2. Make marketing more effective
Advertising and promotion can be aimed directly at customers most likely to buy.
3. Increase sales and profits
Better targeting can increase the success of marketing.
4. Identify gaps in the market
A business may discover a group of customers whose needs are not currently being satisfied.
16. Ways of Segmenting a Market
Students should know the main methods.
By Age
Different age groups buy different products.
Example: toys for children; different clothing for younger and older consumers.
By Income / Socio-economic Group
Consumers with different incomes can afford different products.
Example: low-priced cars compared with luxury cars.
By Region or Location
Consumers in different areas may have different needs.
Example: waterproof clothing may sell more in rainy regions.
By Gender
Some products are mainly targeted towards men or women.
By Use of Product
The same product may be marketed differently depending on how it is used.
Example: cars for business use compared with cars for personal use.
By Lifestyle
Consumers with different lifestyles may spend their income differently.
17. Choosing the Appropriate Method of Segmentation
Different businesses will use different methods.
Examples
- A gym may segment mainly by lifestyle
- A health and beauty business may use gender
- A jewellery business may segment by income
The method chosen depends on:
- The type of product
- The size and likely sales of each segment
- The business and brand image
- The cost of targeting the segment
Topic 6: Key Definitions and Examination Checklist
Use this final topic for quick revision before attempting past-paper questions.
Key Definitions
| Term | Meaning |
|---|---|
| Marketing | Identifying customer wants and satisfying them profitably |
| Customer | Person, business or organisation that buys goods or services |
| Consumer | Person who buys goods or services for personal use |
| Customer loyalty | Customers repeatedly buying from the same business |
| Customer relationship | Communication with customers to encourage loyalty |
| Market share | Percentage of total market sales held by one business or brand |
| Mass market | Market with a very large number of product sales |
| Niche market | Small, specialised part of a larger market |
| Market segment | Identifiable group of consumers with similar characteristics or preferences |
What Students Must Know for the Examination
Students should be able to:
- Explain the main roles of marketing.
- Explain the importance of customer loyalty and customer relationships.
- Explain why customer spending patterns change.
- Explain why markets have become more competitive.
- Explain how businesses can respond to changing customer needs and competition.
- Distinguish between mass and niche markets.
- Explain key advantages and disadvantages of mass and niche marketing.
- Define market segmentation.
- Explain why businesses segment markets.
- Identify the main ways of segmenting a market.
- Recommend an appropriate method of segmentation for a particular business.