Cambridge IGCSE0450

Marketing, competition and the customer

Business Studies 0450 Chapter Notes

What this chapter covers

Marketing, competition and the customer - The role of marketingMarketing, competition and the customer - Market changesMarketing, competition and the customer - Concepts of niche marketing and mass marketingMarketing, competition and the customer - How and why market segmentation is undertaken

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1. Identifying customer needs

Marketing begins by finding out what customers want. A business that does not identify customer needs risks making a product that does not sell.

Market research finds this information. Knowing what its customers need helps a business develop suitable products and judge how much customers are willing to pay.

Say how the information helps the business. ‘It will ensure success’ is too vague to earn a mark.

Examiner insight

“Better responses were able to explain how being able to identify customer needs could help a business develop suitable products.” “Others made comments about how market research data would ‘ensure success’ or ‘satisfy customers’ which were too vague to be credited as candidates needed to explain why or how this would happen.”

Worked example 14 marks

Zola's Smoothies is a small juice bar in a university town. The owner, Zola, asks 200 students which flavours they would like and how much they would pay for a smoothie. Outline two reasons why identifying customer needs is important to Zola's Smoothies.

1
Knowledge: it helps the business develop suitable products. [1]
2
Application: Zola can add the flavours that most of the 200 students ask for. [1]
3
Knowledge: it helps the business judge how much customers are willing to pay. [1]
4
Application: Zola can price a smoothie at the amount the students say they would pay. [1]

2. Satisfying customer needs

Once a need is known, the business must meet it. This means the right product at a price that satisfies customers.

A product that meets customer needs is more likely to sell. Satisfied customers also spread the word to others, and this word-of-mouth advertising increases sales.

Give the benefit to the business, not to the customer. Make each point a different one.

Examiner insight

“Weaker responses offered repetition of the question and often resulted in overlapping answers between the three parts of the question.” “These answers were often well applied by referring to the cars meeting customer needs but only stronger candidates gained both application marks.”

Worked example 14 marks

Hartley Cars builds cars made to each customer's exact requirements. Most new buyers hear about Hartley Cars from family and friends. Outline two benefits to Hartley Cars of satisfying customer needs.

1
Knowledge: it encourages brand loyalty. [1]
2
Application: a buyer whose car matches their exact requirements orders the next car from Hartley Cars. [1]
3
Knowledge: it leads to word-of-mouth advertising. [1]
4
Application: satisfied buyers recommend Hartley Cars to family and friends, which is how most new buyers hear of it. [1]

3. Maintaining customer loyalty

Customer loyalty means customers choose the business over a competitor and buy from it many times. A customer who only visits is not loyal.

Ways to maintain loyalty include loyalty schemes and good customer service. Show how the way works: say what makes the customer come back.

An advantage of loyalty is not that it ‘retains customers’. That only explains the phrase. Loyal customers give free word-of-mouth advertising, and the business may be able to charge a higher price.

Examiner insight

“A common error was to repeat the word ‘loyalty’ without explaining what this involved.” “Such answers explained the phrase customer loyalty rather than explaining why it would be an advantage and gained no credit.”

Worked example 16 marks

Tamsin runs Pebble & Pine, a small gift shop. Her loyalty card gives a free gift after ten purchases. Another gift shop in the town sells similar gifts at lower prices. Explain two advantages to Pebble & Pine of having loyal customers.

1
Knowledge: loyal customers give free word-of-mouth advertising. [1]
2
Application: shoppers tell their friends about the free gift after ten purchases. [1]
3
Analysis: new customers come without Tamsin paying for advertising, so sales increase further. [1]
4
Knowledge: the business may be able to charge a higher price than competitors. [1]
5
Application: a shopper collecting stamps still buys at Pebble & Pine when the other gift shop is cheaper. [1]
6
Analysis: Tamsin does not have to cut her prices to match, so she keeps her profit on each gift. [1]

4. Building customer relationships

A business builds customer relationships through good customer service. Training staff can give a better quality of service.

Two reasons to do it are a better reputation and increased sales. Good relationships can improve brand image, which attracts new customers or increases customer loyalty.

Do not stop at ‘it builds customer relationships’. Follow the chain to its effect on the business.

Examiner insight

“Stronger responses were able to explain how building customer relationships could help improve brand image which could attract new customers or increase customer loyalty.” “Instead of analysis, many just repeated that it would build customer relationships.”

Worked example 16 marks

Brightside Dental is a dental clinic. Its receptionists greet every patient by name and phone patients after treatment. Do you think building customer relationships is the best way for a business to increase sales? Justify your answer.

1
Knowledge: building customer relationships can improve brand image. [1]
2
Analysis: a better image attracts new customers, so the number of sales rises. [1]
3
Knowledge: it depends on good customer service, which needs trained staff. [1]
4
Analysis: training adds to costs before any extra sales arrive, so the gain comes slowly. [1]
5
Evaluation: decision: yes, it is the best way for a business whose customers buy many times. [1]
6
Evaluation: reason: each customer kept is worth many future sales, which outweighs the slow start. A business that needs sales at once would need another way. [1]

5. The four roles applied to a business

The role of marketing has four parts: identify customer needs, satisfy them, maintain customer loyalty and build customer relationships. Identifying needs comes first, because the other roles are based on it.

Listing the marketing mix (the 4Ps) does not answer a question on the role of marketing. Name a role, then link it to the business in the question.

Read the command. ‘Why is this role important?’ asks for the benefit to the business. It does not ask how to carry the role out.

Examiner insight

“Weaker answers tended to simply deal with the ‘marketing mix/4Ps’ and did not actually suggest how the element was concerned with marketing or linked to meeting customer needs.” “A small minority of candidates did not answer the question as they explained how the three roles could be achieved rather than why they were important, for example, providing a description of primary research methods to identify customers’ needs.”

Worked example 18 marks

Oriel Bakes is a family bakery. It surveys its customers and bakes the loaves they ask for. Regular buyers get a free loaf, and Oriel Bakes phones each customer after a large order to check it was right. Explain four roles of marketing for Oriel Bakes.

1
Knowledge: to identify customer needs. [1]
2
Application: the survey tells Oriel Bakes which loaves its customers want. [1]
3
Knowledge: to satisfy customer needs. [1]
4
Application: it bakes the loaves customers asked for, so its bread sells. [1]
5
Knowledge: to maintain customer loyalty. [1]
6
Application: the free loaf gives regular buyers a reason to keep buying from Oriel Bakes. [1]
7
Knowledge: to build customer relationships. [1]
8
Application: phoning after a large order tells the customer that Oriel Bakes cares the order was right. [1]

Recap

Identify customer needs: the business can develop suitable products at a price customers will pay.
Satisfy customer needs: the product sells, and satisfied customers spread the word.
Maintain customer loyalty: customers choose the business over a competitor and buy many times.
Build customer relationships: a better brand image attracts new customers or increases loyalty.
Never repeat the term. Say what loyalty or a relationship leads to for the business.
Answer why a role is important, not how to carry it out, and link it to the business.

6. Why spending patterns change

Customers' spending patterns change when their incomes, their tastes or the prices they see change.

In a recession incomes fall and there is lower consumer spending. Products that are not a basic need, such as sports equipment, sell less. Higher interest rates and higher income tax also reduce spending. A rise in incomes can lift spending, but the answer must say why: customers can now afford more.

Changes in tastes and fashion move spending from one product to another. If competitors cut their prices, a business that does not match them is likely to lose customers and revenue.

Examiner insight

“The increase in consumer incomes was assumed to lead to an increase in sales but it was not always made clear why this might happen.” “There were a significant number of candidates who incorrectly thought that in a recession inflation would rise and with it the price of raw materials and products.”

Worked example 14 marks

Kofi's Games sells board games and jigsaws in a small town. A recession has reduced the incomes of local families. Teenagers in the town now prefer video games. Outline two reasons why customers' spending at Kofi's Games may fall.

1
Knowledge: a recession leads to lower consumer spending. [1]
2
Application: jigsaws are not a basic need, so families with lower incomes stop buying them first. [1]
3
Knowledge: a change in tastes and fashion moves spending to other products. [1]
4
Application: teenagers who now prefer video games no longer spend their money on Kofi's board games. [1]

7. Why changing customer needs matter

Customers' needs change over time. A business that identifies customer needs can develop suitable products to meet them. Market research is how it finds out.

Marketing also helps a business maintain customer loyalty and anticipate changes in customer needs. If customer needs are not met, the product will not sell.

Develop the point. Say how meeting the need leads to sales, not only that customers are satisfied.

Examiner insight

Worked example 14 marks

Lagos Lunchbox sells ready-made lunches to office workers. Its customers now ask for healthier meals, and a rival has started to sell salads. Outline two reasons why it is important for Lagos Lunchbox to respond to its customers' changing needs.

1
Knowledge: a business that identifies customer needs can develop suitable products. [1]
2
Application: a healthier menu gives the office workers the meals they now ask for. [1]
3
Knowledge: meeting changing needs helps a business maintain customer loyalty. [1]
4
Application: if the lunches stay the same, customers can move to the rival that sells salads. [1]

8. Why markets become more competitive

Some markets now have more businesses selling in them than before. Give reasons about the businesses that sell. Factors affecting demand are not reasons.

Globalisation brings increased competition from imported goods: businesses in other countries now sell in the home market. Multinational companies set up in a country and compete with local businesses for customers. Government support for the start-up of new businesses also increases competition.

For an existing business the result can be fewer sales. A threat must be explained: say what the competition does to this business.

Examiner insight

“Better answers were then able to develop points by explaining how more jobs could lower unemployment and increased competition could mean fewer sales for local businesses.” “Candidates for example who identified increased competition as a threat could not explain the potential of this on WLT.”

Worked example 14 marks

Hana's Handmade Soaps sells soap to shoppers in one town. Several overseas firms have started to export cheap soap into the country. The government now gives grants to people who start a business, and three new soap makers have opened in the town. Outline two reasons why the market for soap has become more competitive.

1
Knowledge: imported goods bring increased competition. [1]
2
Application: cheap soap from the overseas firms is now on sale in Hana's country. [1]
3
Knowledge: government support for the start-up of new businesses increases competition. [1]
4
Application: the grants have helped three new soap makers to open in Hana's town. [1]

9. Responding to changing spending patterns

A business responds by changing what it sells or how it sells it. It can develop new products to keep up with changing tastes. This also helps with spreading risk, because the business no longer depends on one product.

It can use market research to find out what customers now need. If competitors cut prices, it may have to reduce its own. Loyal customers may keep buying even if it does not, so revenue may hold up.

Each response needs its benefit explained. The benefit of attracting customers is increased revenue.

Examiner insight

“Weaker answers identified benefits but instead of development repeated the knowledge point. For example, attracting new customers and increasing sales are the same point.” “The decrease in competitors’ prices was the best answered of the three changes as candidates recognised that RW was likely to lose customers and revenue if it did not also reduce its prices but that if it had loyal customers then revenue may be maintained.”

Worked example 16 marks

Sunrise Cycles sells bicycles in a town where more people now cycle to work and electric bicycles have become fashionable. Explain two ways Sunrise Cycles could respond to this change in spending patterns.

1
Knowledge: develop new products to keep up with changing tastes. [1]
2
Application: stock a range of electric bicycles, which are now fashionable. [1]
3
Analysis: customers who want an electric model buy it from Sunrise, so its revenue rises. [1]
4
Knowledge: carry out market research to find out what customers need. [1]
5
Application: ask people who cycle to work what they want from a bicycle. [1]
6
Analysis: Sunrise then stocks what these customers will buy, so fewer bicycles stay unsold. [1]

10. Responding to increased competition

Mark schemes credit these ways to respond: decrease prices (competitive pricing), increase advertising, sales promotion such as BOGOF, developing new products, and improving quality, branding or customer service. A business can also sell in new markets or locations, or take over a competitor.

Analysis explains how each way works. Lower prices make products more affordable. Advertising or a takeover helps the business remain competitive.

Answer the question set. Ways to respond are not ways to increase sales, and they are not the impact of competition on the business.

Examiner insight

“To gain analysis, candidates needed to explain how each method would work. For example, lower prices might result in the products being more affordable.” “A small number of candidates misread the question and so focused on ways to increase sales or tried to explain the impact of increased competition on the business.”

Worked example 14 marks

MCL is a wholesaler which sells fruit and vegetables. Most of MCL’s customers are small retail businesses. MCL’s owner, George, is aware that the market has become more competitive. He wants to know how a business can respond to an increase in competition. Identify four ways a business could respond to an increase in competition.

1
Knowledge: decrease prices / competitive pricing. [1]
2
Knowledge: increase advertising, for example on social media or television. [1]
3
Knowledge: increase sales promotion, for example BOGOF or free gifts. [1]
4
Knowledge: add or develop new products or services. [1]

11. Choosing the best response

Evaluation needs a supported decision. Judge each response against the business: its products, its customers and its markets.

A business that relies on one product for most of its sales may do better to develop new products or enter new markets. Lower costs can allow lower prices, which helps a business remain competitive despite more competition.

A decision alone is not evaluation, and nor is a summary of earlier points. Give the decision, then the reason for it.

Examiner insight

“Only the best answers offered a supported decision. Some candidates did attempt to make a judgement but were not able to offer sufficient reasons to back up the statement made.” “Where attempted, candidates tended to either repeat earlier points or identified new knowledge rather than providing a supported reason for the decision made.”

Worked example 16 marks

Zuri's Pizza Place sells pizza to students. Two new pizza shops have opened nearby and student incomes are falling. Zuri can cut her prices or start a loyalty card. Do you think cutting prices is the better response? Justify your answer.

1
Knowledge: decreasing prices is a way to respond to increased competition. [1]
2
Knowledge: a loyalty card is a sales promotion that helps to maintain customer loyalty. [1]
3
Analysis: lower prices make Zuri's pizzas more affordable for students with less money, so fewer of them move to the two new shops. [1]
4
Analysis: a loyalty card gives regular customers a reason to return, but each pizza still costs the same today. [1]
5
Evaluation: decision: cutting prices is the better response for Zuri. [1]
6
Evaluation: reason: falling incomes make price the main reason students choose a shop. It works only if the extra sales make up for earning less on each pizza. [1]

Recap

Spending patterns change with incomes (recession, interest rates, income tax), tastes and fashion, and competitors' prices.
A business that identifies customer needs can develop suitable products and maintain customer loyalty.
Markets become more competitive through imported goods, multinational companies and new businesses. Factors affecting demand are not reasons.
Responses to competition: decrease prices, increase advertising, sales promotion, new products, quality, new markets, takeover.
Explain how each response works. Use a different point of application and of analysis each time.
Evaluation is a decision with a reason that fits this business, not a summary.

12. What a niche market is

A niche market is a small segment of a larger market. The business aims its product at one specific group of customers, such as kite flyers within the wider toy market.

The word 'small' describes the segment, not the whole market. A niche product is not always a luxury or an expensive one.

Niche marketing is a way of marketing: the business directs its marketing at that one segment and its specific customers.

Examiner insight

“A common error was to describe the niche market as a small market rather than as part of a larger market.” “There were vague statements about the size of the market or assumptions made about the product such as it must be high-quality or have a high price.”

Worked example 12 marks

Kestrel Kites makes hand-built kites for competitive kite flyers. Only two other firms make kites like these. Define the term 'niche market'.

1
Knowledge: a niche market is a small segment [1] of a larger market [1]. [2]

13. What a mass market is

A mass market is a market with a large number of sales of a single product. The business sells the same standard product to a very large number of customers.

It does not mean lots of products or many sellers. It is not the same as mass production, which describes how a product is made.

Examiner insight

“Only the stronger candidates recognised that this referred to the sales of a single product.” “A common error was to confuse the term with mass production.”

Worked example 12 marks

Brightway makes one brand of toothpaste. It is sold in supermarkets and chemists in every town in the country. Define the term 'mass market'.

1
Knowledge: a mass market has a large number of sales [1] of a single product [1]. [2]

14. Benefits of niche marketing

Niche marketing means less competition, because few rivals serve a small segment. A business can often charge higher prices as customers have fewer places to buy.

Products made for a specific group meet customers' needs and wants better. This can build customer loyalty. Use a different fact about the business for each benefit.

Examiner insight

“Correct answers recognised a niche market would have less competition, and higher prices were possible.” “Better candidates could explain that niche markets often better met the needs and wants of customers as the products were produced for this specific smaller market.”

Worked example 14 marks

Kestrel Kites makes hand-built kites for competitive kite flyers. Only two other firms make kites like these. Outline two benefits to Kestrel Kites of niche marketing.

1
Knowledge: niche marketing means less competition [1]. [1]
2
Application: only two other firms make hand-built competition kites [1]. [1]
3
Knowledge: higher prices can be charged [1]. [1]
4
Application: competitive flyers will pay more for a kite built by hand [1]. [1]

15. Limitations of niche marketing

The main limitation is the limited size of the market. A small segment means few customers, so sales and revenue are limited and growth is hard.

A small output also means lack of economies of scale: each unit costs more to make. Higher prices do not guarantee higher profit.

A business in a niche market often stays small, because demand in its market is limited.

Examiner insight

“The most successful answers explained the benefits of possible higher prices and problems of lack of economies of scale.” “There was a common misconception that a niche market would allow for higher revenue or greater profit. This is not necessarily the case.”

Worked example 16 marks

Kestrel Kites makes hand-built kites for competitive kite flyers. Only two other firms make kites like these. Explain two limitations to Kestrel Kites of niche marketing.

1
Knowledge: the size of the market is limited [1]. [1]
2
Application: only competitive kite flyers buy Kestrel's kites [1]. [1]
3
Analysis: sales and revenue are limited, so the business is hard to grow [1]. [1]
4
Knowledge: there is a lack of economies of scale [1]. [1]
5
Application: Kestrel builds each kite by hand [1]. [1]
6
Analysis: each kite costs more to make, so the profit margin is lower [1]. [1]

16. Benefits and limitations of mass marketing

A mass market gives access to a large potential customer base, which can lead to high sales and revenue. It also brings high competition. Many rivals sell to the same customers, so the business may need to lower prices or spend more on advertising to stand out.

Give two different points. The same point worded twice is credited once.

Examiner insight

“Stronger responses were able to explain how higher potential sales or high competition could lead to additional revenue or lower prices respectively.” “A common error was to repeat the same instead of identifying two separate advantages.”

Worked example 16 marks

Pelham Pens sells one standard ballpoint pen to supermarkets and newsagents across the country. Three other firms sell similar pens in the same shops. Explain one advantage and one disadvantage to Pelham Pens of selling in a mass market.

1
Knowledge: a mass market gives a large customer base [1]. [1]
2
Application: supermarkets and newsagents across the country reach many buyers [1]. [1]
3
Analysis: more pens are sold, so revenue is higher [1]. [1]
4
Knowledge: a mass market has high competition [1]. [1]
5
Application: three other firms sell similar pens in the same shops [1]. [1]
6
Analysis: Pelham must spend more on advertising to stand out, which raises its costs [1]. [1]

17. Choosing between niche and mass

A decision question asks which approach suits this business. Explain a benefit and a limitation of the approach in the question, then choose.

A justified decision says why one approach is better for this business, and why the other is weaker. A summary of earlier points earns no evaluation mark.

Examiner insight

“Weaker responses tended to offer mirror arguments which could only be rewarded once.” “Instead of evaluation, most repeated points already made.”

Worked example 16 marks

Kestrel Kites makes hand-built kites for competitive kite flyers. Only two other firms make kites like these. The owner is thinking of selling cheap plastic kites in supermarkets, where big toy firms already sell them. Do you think Kestrel Kites should move from niche marketing to mass marketing? Justify your answer.

1
Knowledge: a mass market gives a large customer base [1]. [1]
2
Analysis: supermarkets reach many families, so sales and revenue could rise [1]. [1]
3
Knowledge: a mass market has high competition [1]. [1]
4
Analysis: big toy firms would force prices down, so Kestrel's profit margin is small [1]. [1]
5
Evaluation: stay niche, because its flyers pay high prices and it has only two rivals [1]. [1]
6
Evaluation: the move is weaker: high sales at a low price may not bring more profit [1]. [1]

Recap

Niche market = a small segment of a larger market. Mass market = a large number of sales of a single product, not mass production.
Niche: less competition, higher prices, loyal customers. But a small market limits sales and there is a lack of economies of scale.
Mass: large customer base and high sales. But high competition means more advertising or lower prices.
A decision needs a choice, a reason for it, and a reason why the other option is weaker.

18. How markets can be segmented

Market segmentation means dividing the market into groups of customers who share similar characteristics. Each group is a segment.

A business can segment by age, socio-economic grouping, location or gender. Each method sorts customers by a different feature.

In a definition, do not repeat the words market and segment. Say what is divided and what the customers in a group share. When asked for a way to segment, name a method, not a type of market.

Examiner insight

“These answers either understood that market segmentation involved dividing the market or recognised that it involved grouping customers together based on having similar characteristics.” “A common mistake was to identify types of markets, namely mass or niche, instead of stating ways a market can be segmented.”

Worked example 14 marks

Lumi Sportswear sells running clothes in three cities. Some of its customers are students and others are retired. Outline two ways Lumi Sportswear could segment its market.

1
Knowledge: by age [1]. [1]
2
Application: Lumi could put its student runners in one group and its retired runners in another [1]. [1]
3
Knowledge: by location [1]. [1]
4
Application: Lumi could group its customers by which of the three cities they live in [1]. [1]

19. Benefits of segmentation to a business

Segmentation lets a business aim at a target group instead of everyone. It can design goods that meet the needs of that group and target its marketing more effectively.

It can also help the business identify gaps in the market. If there is a lack of competition within the segment, the business can charge a higher price, which means a higher profit margin.

Each benefit needs a reason that leads to a result. A second benefit must be a different point, not the first one reworded.

Examiner insight

“Better answers had a developed focus which was based on a clear understanding of segmentation, such as a business can charge a higher price due to a lack of competition within the segment which means a higher profit margin.” “Better answers explained how being able to ‘identify gaps in market’ and ‘knowing what to produce’ might help a clothing retailer.”

Worked example 16 marks

Dara runs Mirth Toys, which makes toys for children aged 3 to 6 only. She advertises in a magazine for parents. Explain two benefits to Mirth Toys of segmenting its market.

1
Knowledge: segmentation lets a business design goods for the needs of a specific group [1]. [1]
2
Application: Mirth Toys makes toys only for children aged 3 to 6 [1]. [1]
3
Analysis: the toys suit that age, so more parents buy them and sales rise [1]. [1]
4
Knowledge: segmentation lets a business target its marketing more effectively [1]. [1]
5
Application: Dara advertises in a magazine for parents [1]. [1]
6
Analysis: she does not pay to reach people with no young children, so advertising costs are lower [1]. [1]

20. Do not confuse segmentation with other ideas

Segmentation is not market research. Identifying customer needs is research. Segmentation is dividing the market up into smaller targeted segments.

It is also not the same as a mass or niche market. Those are types of market. Age, location and gender are ways to segment one.

So a benefit of segmentation is about what the smaller segment lets the business do. A definition of segmentation is not a benefit.

Examiner insight

“A common mistake was to confuse market segmentation with stages of the product life cycle or identifying types of markets including mass and niche.” “Some simply defined what segmentation was. Others repeated the same benefit for both points.”

Worked example 14 marks

Orla runs Hollis Bikes. It sells racing bikes to adults and small bikes to children. Outline two benefits to Hollis Bikes of segmenting its market.

1
Knowledge: it can target its marketing more effectively [1]. [1]
2
Application: Orla can advertise the racing bikes to adults only [1]. [1]
3
Knowledge: it can sell goods that meet the needs of a specific group [1]. [1]
4
Application: the small bikes are the right size for children [1]. [1]

End-of-chapter exercise

Test yourself on the whole chapter. Work through these before moving on.

Rosa owns a hair salon. Most of her clients book again every month. Define ‘customer loyalty’.2 marks
Pixel Point is a phone shop. It asks its customers which features they want, then stocks phones with longer battery life. Identify the two roles of marketing that Pixel Point is carrying out.2 marks
Kiran Foods plans a new range of spicy sauces. It asks 500 shoppers which flavours they like and what they would pay for a bottle. Outline two reasons why identifying customer needs is important to Kiran Foods.4 marks
Velo Cycles repairs bicycles. A second repair shop has opened in the same street. Outline two ways Velo Cycles could maintain customer loyalty.4 marks
Haven Hotel trains its staff to remember guests' names and to answer every complaint within one hour. Outline two reasons why building customer relationships is important to Haven Hotel.4 marks
Dunmore Garden Centre notices that customers are asking for peat-free compost, so it starts to stock it. Explain two benefits to Dunmore Garden Centre of satisfying customer needs.6 marks
Corvo Coffee sells coffee beans online. 60% of its orders come from customers who have bought before. A rival has just cut its prices. Explain two advantages to Corvo Coffee of having loyal customers.6 marks
Asha is about to open a shop selling school uniforms. She has very little money to spend before the shop opens. Do you think identifying customer needs is the most important role of marketing for a new business? Justify your answer.6 marks
Ferro Fixings makes steel bolts for 12 factories. Its largest customer buys 25% of its output. Ferro's sales manager now visits each factory twice a year, and Ferro has opened a telephone helpline. Explain two reasons why building customer relationships is important to Ferro Fixings.8 marks
Sable Freight collects parcels from 40 small online shops and delivers them. A survey that Sable has just completed found that 28 of the shops want evening collections, which Sable does not offer. Three shops moved to a rival last year. Consider these three roles of marketing: identifying customer needs, satisfying customer needs and maintaining customer loyalty. Which role is the most important to Sable Freight now? Justify your answer.12 marks
Riva's Travel sells holidays. Identify two reasons why customers' spending on a business's products may change.2 marks
Peak Print prints leaflets for local businesses. Its owner says the market has become more competitive. Identify two ways a business could respond to an increase in competition.2 marks
Brew and Bean is a café near a university. More of its customers now ask for vegan snacks, which a café across the road already sells. Outline two reasons why it is important for Brew and Bean to respond to this change in customer needs.4 marks
Tavi owns the only bakery in her town. This year two new bakeries opened with the help of a government grant, and a multinational supermarket opened a store selling bread. Outline two reasons why the market for bread in the town has become more competitive.4 marks
Bella's Boutique sells fashionable clothes. The incomes of local families are rising. A rival boutique in the same street has cut its prices. Explain two reasons why customers' spending at Bella's Boutique may change.6 marks
Techwear sells ordinary watches. Its customers now prefer smart watches, and Techwear has many ordinary watches left unsold. Explain two ways Techwear could respond to this change in spending patterns.6 marks
Greenfield Garden Centre is a family business that grows its own plants and has a small café. A large chain has opened next to it and sells imported plants at lower prices. Explain two ways Greenfield could respond to this increase in competition.6 marks
Mina's Music Shop sells instruments. A new online seller offers the same guitars at lower prices and has taken some of her customers. Mina can increase her advertising or give a free lesson with every guitar. Do you think the free lesson is the better response? Justify your answer.6 marks
Loomhouse weaves cloth. Its only customers are 12 clothing factories, which make fashion shirts and school uniforms. Loomhouse makes one product: printed cloth for fashion shirts. In a recession families are buying fewer fashion shirts. A new importer has also started to sell printed cloth to the factories at lower prices. Explain two ways Loomhouse could respond to these changes.8 marks
Orbit Toys makes wooden toys and sells them in its own shop. Each toy costs £9 to make and sells for £15. Wooden toys are 90% of Orbit's sales. Imported plastic toys are now on sale nearby for £8, and a recession has reduced parents' incomes. Orbit has three options: A, cut the price of its wooden toys to £8; B, develop a range of card games that cost £3 each to make and sell for £6; C, increase its advertising. Which option should Orbit choose? Justify your decision.12 marks
Hollin Hats makes tweed caps for a small group of golfers. Define the term 'niche market'.2 marks
Dunmore Drinks sells one brand of cola in shops across the country. Define the term 'mass market'.2 marks
Identify two benefits of niche marketing to a business that makes saddles for show-jumping riders.2 marks
Ferris Fly-Fishing ties fishing flies by hand for expert anglers. Only one other firm in the country makes flies like these. Outline two benefits to Ferris Fly-Fishing of niche marketing.4 marks
Marlow Mugs sells one plain white mug in supermarkets across the country. Four other firms sell similar mugs. Outline one advantage and one disadvantage to Marlow Mugs of selling in a mass market.4 marks
Rowan Rugs weaves rugs by hand for a few interior designers. Its owner says, 'A niche market always means higher profit.' Explain why this is not necessarily true.4 marks
Lumo Lamps sells one basic desk lamp in every large store in the country. Rival firms sell similar lamps in the same stores. Explain one advantage and one disadvantage to Lumo Lamps of selling in a mass market.6 marks
Aria Archery makes bows for a small group of competition archers. Only one other firm in the country makes bows like these. Explain one advantage and one disadvantage to Aria Archery of niche marketing.6 marks
Tarn Tents sews lightweight tents for mountain climbers. It sells 400 tents a year at textdollar600 each. A chain of stores offers to buy 20 000 standard family tents a year at textdollar45 each. Three large brands already sell family tents in the chain's stores. Explain one advantage and one disadvantage to Tarn Tents of moving from niche marketing to mass marketing.8 marks
Saffron & Co makes spice blends for professional chefs. It sells 6 000 jars a year at textdollar12 each, and no other local firm supplies chefs. A supermarket chain offers to buy 90 000 jars a year of one standard spice mix at textdollar2 each. Four big brands already sell spice mixes in its stores. Saffron & Co cannot do both. Consider the benefits and limitations of staying with niche marketing and of entering the mass market. Which should the owner, Dev, choose? Justify your decision.12 marks
Define market segmentation.2 marks
A shoe shop wants to segment its market. Identify two ways a market can be segmented.2 marks
A shampoo maker segments its market. State two benefits to a business of market segmentation.2 marks
Norte Ski sells ski jackets for adults and for children. It has shops in mountain towns and one shop in a large city. Outline two ways Norte Ski could segment its market.4 marks
Pia opens Kidzone, a clothes shop for children aged 1 to 5 only. She hands out leaflets at the nursery next door. Outline two benefits to Kidzone of segmenting its market.4 marks
Kuma Coffee is a chain of coffee shops. Its shops in office districts sell mostly to workers aged 30 to 50. Its shops near beaches sell mostly to teenagers. Explain two ways Kuma Coffee could segment its market.6 marks
Fenn Fitness runs a gym. All of its classes are fast and hard. Fenn has found that many women aged 40 to 60 in its town do not use any gym. Explain two benefits to Fenn Fitness of segmenting its market.6 marks
Ravi owns Aurum, which makes luxury watches for high-income customers. Only one other firm in the country sells watches at such a high price. Aurum advertises in a magazine read by company directors. Explain two benefits to Aurum of segmenting its market.8 marks
Petra runs Marlow Mowers. It sells large ride-on lawn mowers. Its buyers are men and women of all ages. Nearly all of them live in villages, where gardens are large. Petra's marketing manager wants to segment the market by age. Do you think age is the best method of segmentation for Marlow Mowers to use? Justify your answer.6 marks
Arden Oats makes one breakfast cereal and sells it across the whole country. Its sales are falling. Its records show three facts. People aged over 55 buy 70% of its boxes. Sales per person are the same in every region. Half of its buyers are men and half are women. Consider segmenting by age, by location and by gender. Recommend which method Arden Oats should use. Justify your answer.12 marks

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1. Identifying customer needs#

2. Satisfying customer needs#

3. Maintaining customer loyalty#

4. Building customer relationships#

5. The four roles applied to a business#

6. Why spending patterns change#

7. Why changing customer needs matter#

8. Why markets become more competitive#

9. Responding to changing spending patterns#

10. Responding to increased competition#

11. Choosing the best response#

12. What a niche market is#

13. What a mass market is#

14. Benefits of niche marketing#

15. Limitations of niche marketing#

16. Benefits and limitations of mass marketing#

17. Choosing between niche and mass#

18. How markets can be segmented#

19. Benefits of segmentation to a business#

20. Do not confuse segmentation with other ideas#

21. Recommend and justify a method#

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Chapter at a Glance

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Related chapters

1. Identifying customer needs

2. Satisfying customer needs

3. Maintaining customer loyalty

4. Building customer relationships

5. The four roles applied to a business

6. Why spending patterns change

7. Why changing customer needs matter

8. Why markets become more competitive

9. Responding to changing spending patterns

10. Responding to increased competition

11. Choosing the best response

12. What a niche market is

13. What a mass market is

14. Benefits of niche marketing

15. Limitations of niche marketing

16. Benefits and limitations of mass marketing

17. Choosing between niche and mass

18. How markets can be segmented

19. Benefits of segmentation to a business

20. Do not confuse segmentation with other ideas

21. Recommend and justify a method