Year 10 IGCSE Business TCHS

CHAPTER 10: MARKETING, COMPETITION AND THE CUSTOMER

Worksheet 1
Name: Assigned on: Due Date:

Learning Outcome: At the end of the lesson you should be able to explain –
 The role of marketing – identifying and satisfying customer needs, maintaining
customer loyalty and building customer relationships
 Market changes – why customer spending patterns change and the importance of
changing customer needs; why some markets have become more competitive
 How business can respond to changing customer needs and increased competition
 The concepts of niche marketing and mass marketing – their benefits and
limitations
 Market segmentation – how markets can be segmented; potential benefits of
segmentation
 How to recommend and justify an appropriate method of segmentation in given
circumstances

Explain the key terms you need to know:

Marketing is identifying customer wants and satisfying them profitably
Marketing

A customer is a person, business or other organisation which buys goods or

Customer services from a business.

Customer loyalty is when existing customers continually buy products

Customer loyalty from the same business.

Customer relationships is communicating with customers to encourage

Customer them to become loyal to the business and its products
relationships

Market share is the percentage of total market sales held by one brand or
Market share business.
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A consumer buys goods or services for personal use — not to re-sell.

Consumer

Mass market is where there is a very large number of sales of a product.

Mass market

A niche market is a small, usually specialised, segment of a much larger

Niche market market.

Market segment is an identifiable sub-group of a whole market in which

Market segment consumers have similar characteristics or preferences.

1. Name the different sections within marketing department and mention their responsibilities.
 Sales

 Distribution

 Market Research

 Promotion

2. Explain in brief the role of marketing

 Identify customer needs – finding out what kind of products or services customers want, the
prices they are willing to pay, where and how they want to buy these goods or services, and what
aftersales services they might want.
 Satisfy customer needs – so that goods and services can be sold profitably. Customers want the
right product, in the right place and at the right price. Failure to meet these needs, or doing it less
well than competitors, will lead to the business facing the risk of closure.
 Maintain customer loyalty – by building customer relationships. Keeping close links with
customers and finding out if products or services are continuing to meet their needs will help to
ensure the success of the business. If customers change their expectations of what they want from
a good or service then the business should respond to meet these new needs. This will be
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identified by maintaining close customer relationships. It is very important to keep existing

customers and not just concentrate on attracting new ones. It is much cheaper for a business to try
to keep existing customers

 Build customer relationships – to gain information about customers — by building a long-term

relationship with them so that their changing needs can be understood. This is one of the most
important roles of the Marketing department in today’s globally competitive world. Building a
relationship with customers means that market research information can be used to understand
why customers buy products and how they use them. This makes for more effective marketing.
 Anticipate changes in customer needs – Anticipate changes in customer needs — by identifying
new trends in customer demand or gaps in the market so that businesses can produce goods or
services which are not currently available.
3. How do businesses benefit from marketing?
 raise customer awareness of a product or service of the business e increase revenue and
profitability
 increase or maintain market share
 maintain or improve the image of products or a business
 target a new market or market segment
 enter new markets at home or abroad
 develop new products or improve existing products.

4. Why do customer’s spending patterns change?

 Consumer tastes Change
 Fashions Change
 Changes in Technology
 Changes in Incomes
 Ageing populations
 Changes in Region
5. Why do some markets become more competitive?
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 Globalisation
 Transportation Improvements
 Internet
 E-Commerce
6. How can businesses respond to changing spending patterns and increased competition?

Key point Explanation

1. Maintain good customer this has a key role in continuing to meet customer needs and it
relationships also provides market research information about customers.
Marketing departments which become experts on customer
needs will respond to these needs as and when they change and
will maintain customer loyalty. It is often cheaper to keep
existing customers than gain new ones.
2. Keep improving its existing this is especially true if its competitors improve their products.
product By making the goods or services it sells very different from
those produced by competitors the business will become well
known for differentiated products.
3. Bring out new products to in the company rather than its competitors — this will help the
keep customers’ interest business to maintain, or even increase, its market share.

4. Keep costs low to maintain as this should help keep prices low.
competitiveness

7. Explain the advantages and disadvantages of mass marketing

Advantages Disadvantages
1. total sales in these markets are very high high levels of competition between businesses
selling similar products
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2. the business can benefit from economies high costs of advertising and promotion
of scale
3. risks can be spread, as often the business standardized products or services are produced
will sell several different variations of and so may not meet the specific needs of all
products to the mass market, and if one customers or potential customers, therefore
variety of the product fails then the other leading to lost sales.
products may still sell well

4. opportunities for growth of the business due

to large potential sales.

8. Explain the advantages and disadvantages of niche marketing

Advantages Disadvantages
1. Small businesses may be able to sell Niche markets are usually relatively small and
successfully in niche markets as larger therefore have limited sales potential. This
businesses may not have identified them
but concentrated on the mass markets means it is likely that only small businesses can
instead. This will reduce competition operate profitably in these markets. If the
from the larger businesses in niche
business wants to grow it will need to look
markets.
outside the niche market to develop products for
mass markets.
2. The needs of consumers can be more Often businesses in a niche market will
closely focused on, and therefore targeted, specialise in just one product. This means that if
by businesses in a niche market. This may the product is no longer in demand the business
lead to high levels of consumer loyalty and will fail as the business has not spread its risks.
good customer relations. Producing several products rather than just one
product means that if one fails there are other
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products which are still in demand and the

business carries on trading.

9. Explain the following ways of segmenting the market

Title Explanation
Income groups can be defined bygrouping people’s jobs according
1. By socio- to how much they are paid. For example, managers are usually paid
economic group
more than office workers. Office employees are usually paid more
than production workers. Unemployed people will obviously be the
lowest income group. This often means that products are priced
differently to target certain income groups.
The products bought by people in different age groups will not be the
2. By age same. Young people buy different clothes to elderly people. The toys
bought for babies will vary from those bought for older children
In different regions of a country people might buy different products. If a
3. By region or product is exported, then it may need to be changed slightly (for
location example, a different name or different packaging) in order to appeal
to the tastes of people in other countries
Some products are bought only by women or only by men. For example, a
4. By gender shaving razor would normally be bought by a man, whereas a perfume
would normally be bought by a woman
For example, cars can be used by consumers for domestic use or for
5. By use of the business use. The advertising media and promotion methods used
product will differ. Cars for business use may be advertised by
sending brochures out to businesses, whereas cars for domestic use may be
advertised on television. These cars may be the same models, but they will
be marketed in a different way
For example, a single person earning the same income as a married person
with three children will spend that income differently, buying different
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6. By lifestyle products. Businesses can ‘aim’ their products at people who enjoy different
lifestyles.

10. Name the factors to be considered before choosing an appropriate method of segmentation
(i) detailed analysis of the market and the ‘size’ of each potential segment in terms of consumers
and likely sales
(ii) company image and brand image — a ‘high-tech’ business with an excellent reputation for
innovation will not want to produce lowpriced goods for low-income consumers
(iii) cost of entering each segment, for example, with a specially designed product and advertising
campaign
11. Discuss the potential benefits of segmentation to a business

Advantages
1. Businesses can use market segmentation to sell more products. They do this by making
different brands of a product and then aiming each brand at a different market segment. As
can be seen in the example of soap in the case study below, a business could produce
various brands of soap to satisfy most of the market segments.
2. By finding out the different segments in a market, a business can sometimes identify a
segment whose needs are not being met meaning there is a gap in the market. It can then
produce a suitable product to meet these customers’ needs and again increase sales
3. A marketing manager would take all these factors into account when deciding which
segments might buy new products or improved products. Therefore, once the segments have
been identified, this will influence how the products are packaged and advertised. It will
also affect the choice of shops the products are sold in, in order to get maximum sales.