3.1 Marketing, competition and the customer

3.1.1 The role of marketing:

• Identifying customer needs
• Satisfying customer needs
• Maintaining customer loyalty
• Building customer relationships

3.1.2 Market changes:

• Why customer/consumer spending patterns may change
• The importance of changing customer needs
• Why some markets have become more competitive
• How businesses can respond to changing spending patterns and increased competition

3.1.3 Concepts of niche marketing and mass marketing:

• Benefits and limitations of both approaches to marketing

3.1.4 How and why market segmentation is undertaken:

• How markets can be segmented, e.g. according to age, socio-economic grouping, location, gender
• Potential benefits of segmentation to business
• Recommend and justify an appropriate method of segmentation in given circumstances

‌Definitions of marketing

“The all-embracing function that links the business with customer needs and wants in order to get the right product to the right place at the right time”
“The achievement of corporate goals through meeting and exceeding customer needs better than the competition”

‌The role of marketing

• ‌Identify and satisfy consumer needs
• Keep customers loyal
• Gather information about customers
• Recognise how customer’s needs are changing

‌Note: Marketing is perhaps the most important activity in a business because it has a direct effect on profitability and sales. Larger businesses will dedicate specific staff and departments for the purpose of marketing.

It is important to realise that marketing cannot be carried out in isolation from the rest of the business. For example:

The marketing section of a business needs to work closely with operations, research and development, finance and human resources to check their plans are possible.

You can watch this lesson in video format here:

‌Marketing goals

• ‌Develop products that meet customer needs and wants
• Promoting product to customers
• Increase sales
• Target a new market
• Build brand awareness.
• Grow market share.
• Improve stakeholder relations.
• Enhance customer relationships.

‌Market changes

‌Why do consumer spending patterns change?

• ‌Consumer taste and fashion change
• New technology being developed
• Changes in consumer income
• Ageing population

‌Firms need to always know what their consumers want (and they will need to undertake lots of research and development to do so) in order to stay ahead of competitors and stay profitable. If a business don’t produce and sell what customers want, then customers will buy competitors’ products and the firm will fail to survive.

‌Why some markets have become more competitive?

‌Globalisation

Products are being sold in markets all over the world, so there are more competitors in the market.

Improvement in transportation infrastructures

Better transport systems means that it is easier and cheaper to distribute and sell products everywhere.

‌Most online shops in UK offer order before midnight and get the product the following day.

Internet/E-Commerce

Customers can now buy products over the internet from anywhere in the world, making the market more competitive.

‌Ebay, Amazon and Allibaba

You can watch this lesson in video format here:

‌How can businesses respond to increased competition?

• ‌Develop and maintain customer loyalty – Look after your existing customers
• Keep improving their product(s) and develop new ones that meet consumer needs and wants
• Keep costs low to remain competitive
• Make their products better than their
• Step up your marketing – Improve your market positioning statement. Make more effort to tell people who you are, what you sell and why they should buy from you.
• Expand your offer

‌Mass marketing 

‌Aimed at the whole market- Mass marketing is the advertising or promotion of a product, good or service to a wide variety of audiences with the expectation of appealing to as many as possible.

Advantages

• High sales and demands (higher number of consumers) which may lead to high profits
• Benefit from economies of scale
• cheaper per person and can reach a wider audience

Disadvantages of mass marketing

• Higher competition
• Product is aimed at the whole market so specific customer needs are not met

‌Niche Marketing

‌Where a business targets a smaller segment of a larger market, where customers have specific needs and wants

Advantages

• Small businesses can avoid competition from larger businesses
• Product meets specific consumer needs
• Less competition
• Clear focus – target particular customers – often easier to find and reach too
• Builds up specialist skill and knowledge
• Customers tend to be more loyal

Disadvantages

• Smaller number of consumer so growth is difficult
• Risks are not spread so if demand for the specialised product falls, the business will likely fail unless they develop more products
• Likely to attract competition if successful
• Vulnerable to market changes

‌Market Segmentation

‌A market segment is an identifiable sub-group of a larger market in which consumers have similar characteristics and preferences

‌Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics.

‌Ways businesses can segment a market:

• Gender
• Age
• Income
• Location
• Lifestyle
• Use of the product (e.g. for personal use, business use)

‌Market Segmentation

‌Advantages

• Business can concentrate on specific needs of a particular type of consumer
• Marketing becomes more effective (e.g. advertising) as targeting the right audience
• Meets the business needs.
• The above leads to higher sales and profitability
• Increases awareness to the right audience
• The marketer can spot and compare marketing opportunities
• Management can identify new profitable segments which deserve special attention

Disadvantages

• Business may only focus on one segment which is very
• Segmentation increases costs
• Promotion and distribution expenditures increase when separate programme are used for different market segments