The Importance of Marketing (Edexcel IGCSE Business)

• A market is any place where buyers and sellers can meet to conclude a transaction, e.g. amazon.co.uk or a shopping mall
  
  
• The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants profitably
  • Needs are considered to be essential, e.g. shelter or food
  • Wants are desires which are non-essential, even if consumers consider them to be essential e.g Nike trainers
    

Identifying & Understanding Customer Needs

• Marketing helps a business identify and understand the needs and wants of its customers
  • It involves finding out about the
    • Variety and quality of goods and services that customers want
    • Prices they are willing to pay
    • Promotional techniques that may persuade them to make repeated purchases
    • Convenience factors, including where and how they want to purchase products
    • After-sales services they anticipate
      
      

• Businesses that successfully identify and then satisfy customer needs 
  • Compete more effectively than rival businesses 
  • Keep up to date with changing tastes and preferences
  • Attract positive word-of-mouth recommendations and build the brand
    
    

The Benefits of Identifying & Understanding Customers Needs

Keeping Customer Loyalty

• Customer loyalty is when existing customers buy products from the same business over and over again
• • Customer loyalty leads to repeat purchases and a rise in market share. 
  • It is much cheaper for a business to try to keep existing customers (for example, with loyalty cards) than trying to gain new customers, as this can involve expensive advertising campaigns
     

Building Customer Relationships

• Building customer relationships involves communicating with customers to encourage them to become loyal to the business and its products
  
  
• Good relationships are maintained by
  • Developing close ties with customers and finding out if products/services are continuing to meet their needs 
    • E.g. Using surveys to discover if preferences are changing
  • Using technology to gather important information about customers
     

• Having strong relationships with customers means a business can respond appropriately when
  expectations of what they want from a good or service change

• Market orientation focuses on the needs of consumers and uses this information to design products that meet customer needs 
  • • Consumers are at the centre of marketing decisions
    • Products which respond to consumer needs are developed
    • The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable 
      • E.g. Universities often develop new courses based on the feedback they receive from students and employers
        
        

Diagram: Tools of Market Orientation

Market orientation aims to develop products to meet consumer needs identified during the market research process

• Product orientation focuses on the characteristics of the product rather than the needs of the consumer
  • The emphasis is on creating a product first and then finding a market
  • The business has a belief that the product is superior i.e. it will sell itself
    • E.g. Gillette's razors can be classed as a product oriented business as the business focuses on the quality of its products and regular innovations aim to increase sales
      
      
  • One problem with being too product orientated is that over time a business moves further and further away from what the market is looking for, thus increasing the risk of business failure

Diagram: Tools of Product Orientation

A product orientation is used by inventors who research, test and produce a product well before market research has taken place
 

Niche Markets

• In niche markets, products are aimed at a subset of the larger market e.g. gluten free bread and cakes
  • Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market
  • Production usually happens on a small scale
    
    
• Profitable niche markets rarely remain small for long; their potential attracts competition, which increases sales volumes
  • The market for energy drinks is a good example of this - originally targeted at sports-enthusiasts, it is now one of the largest soft drinks segments in the world
    
    

Mass Markets

• In mass markets, products are aimed at broad  market segments e.g Kellogg's Corn Flakes is an example of a breakfast cereal aimed at the mass market
  
  • Market segments are groups of consumers who share similar characteristics e.g. age, lifestyle, etc.
  • Mass marketing occurs when businesses sell their products to most of the available market 
  • Production usually happens on a large scale
     

Characteristics of  Niche Markets & Mass Markets

Market Share

• Market share is the percentage of the total market revenue that a single business or brand has
  • e.g. Tesco had a 27% share of the UK grocery market in 2022
      
• Market share can be calculated using the formula
  
  

• An increase in market share can indicate that a business has made effective use of marketing strategies to increase sales and gain customers from competitors

Market Growth

• Market growth is the increase in the overall size, value or volume of a market over a period of time, usually expressed as a percentage
  
  
• Market growth provides an incentive for businesses looking to expand, increase sales and generate higher revenue
  • Businesses are often attracted to the potential of growing markets - and they can become increasingly competitive quite rapidly
     
• Market growth is calculated using the formula
   

• If the growth rate is positive, the market is getting bigger (expanding)
• If the growth rate is negative, the market is getting smaller (contracting)