1.1 Meeting customer needs

• Market positioning is understanding where a business, brand or product should be positioned within a market in relation to customer perceptions and the positioning of other rival competitors.
• A market map can be useful for businesses as it allows them to identify a gap in the market so that they can target that specific area to enter the market.
• Limitations of Market Mapping

  ·       Very two dimensional

  ·       Can be expensive for businesses to obtain the information for a market map - this especially applies to small start-up businesses with little finance

  ·       Difference between perceptions of customers and businesses (subjective).

  ·       May show a gap because no one wants that type of product
• Competitive advantage – a set of unique features of a company and its products that are perceived by customers as being superior to the competition which enables the business to perform better than its rival in the market. Similar to USP.
• Adding value – Difference between the price of the finished product/service and the cost of the inputs involved in making it. Ways of adding value
• Ethical considerations

  • Higher customer satisfaction
• Distribution channel

  • Access to larger markets for lower costs
• Building a brand

  • Better customer satisfaction
• Reputation of good customer service

  • Strengthens brand and attracts more customers
• Offering convenience

  • Higher customer satisfaction as customers can buy and use product immediately
• Variety


  • Appealing to multiple demographics
  • Increased brand strength and establishment
• Economies of scale

  • Lower cost per unit
  • Lower price with same profit margin
  • Price competitive
• Product differentiation – Attempts to identify and communicate the unique benefits or qualities of a product compared to competitors

  +      Makes product unique from competitors -> Higher customer satisfaction and better brand loyalty -> Increased market share

  +      Ensures business remain relevant and don’t stagnate -> Maintains customer loyalty. Can also be used to extend product lifecycle

  -      Costly to innovate products. May require in depth research -> Time lag 

  -      Modifications or innovations may not be significant enough to stimulate sales -> Opportunity cost
• Pros of effective market positioning

  • Establishes position in eyes of a customer
  • Distinguishes business from competition if on either end of spectrum or filling a gap in the market
  • Attracts more customers to the business
  • Increases customer retention from offered characteristic (E.G High quality)
  • Increased brand loyalty
  • Able to raise prices to maximise revenue due to inelastic PeD
• Pros of effective market positioning

  • Emphasises competitive advantage of the business relative to competition
  • Customers able to compare business' product to competition
  • Increased customer retention and brand loyalty if business is considered superior
  • Able to raise prices with price inelastic demand
  • Improved profit margins to reinvest and maintain position in the market
• Cons of effective market positioning

  • Dependent on other factors of the business (E.G Product quality, customer service)
  • Cost of carrying out process
  • Outweighs benefits if business is already established in its given market position
  • Opportunity cost
• Market – Where buyers and sellers interact.
• Mass market – An unsegmented market in which products are offered to every customer through mass retailers or independent stores and promoted through mass media.

  +      Cheaper goods so attract larger audience.

  +      Economies of scale, due to mass production lowering average cost per unit.

  +      High sales figures.

  -      Standard quality.

  -      Lack of customer loyalty due to many suppliers.

  -      No USPs, so hard to stand out.
• Niche market – The subset of the market in which specialist products are offered to small group of customers.

  +      Specific, so businesses can charge higher prices -> Brand loyalty with inelastic PED

  +      Unique and high quality.

  +      Less competition.

  -      Higher costs due to specifications.

  -      Small range of customers, forces business to constantly innovate and improve to retain customers.
• Dynamic market – A market that is constantly and quickly changing.

  • Examples of changes: Technological advancements, consumer preferences in a market, marketing techniques, product differentiation

  • Competition encourages dynamism, as businesses don’t want to stagnate and lose market share in a market where there is an abundance of suppliers.
• Risk – When the potential outcomes of a decision are known
• Uncertainty – None of the outcomes are known in advance
• Market research – Gathering information about consumers' needs and preferences.
• Purpose of research:

  ·       Identify customer needs and make products accordingly -> Higher customer satisfaction and brand loyalty

  ·       Reduce risk of business failure and prevent wastage of resources
• Qualitative data – Data that observes non-numerical values. More opinions and subjectivity

  Methods of gathering qualitative data: Questionnaire, survey, interviews.
• Quantitative data – Data that observes numerical values. More objective

  Methods of gathering quantitative data: Questionnaire, census, technology.
• Primary research – Research conducted by the entrepreneur themselves with the aim of finding new data.

  Examples of primary research: Questionnaires, surveys, focus groups, observation.
• Secondary research – Research found via external sources using existing data.

  Examples of secondary research: Internet (websites), graphs and charts (databases), old surveys and questionnaires.
• Data may be outdated/inaccurate

  Misunderstanding of customer preferences and market prices
• Cost of conducting primary research

  Requires extensive work and funding to carry out with large scale project
• Sample size may not be reflective of entire population/market


  Product/marketing strategy only appeals to limited group of people within mass market
• Data may be subjective

  Polarising issues with regards to preferences among customers
• How to avoid bias:

  ·       Larger sample size