1.1 Meeting customer needs

• Market


  A place where buyers and sellers come together to exchange goods or services, normally involving an exchange of money at a set price
• Niche marketing


  A smaller part of a large market, with products tailored to specific customer needs
• Mass marketing


  A large market of customers which is undifferentiated and that sells products and services to suit a large number of consumers
• Mass market


  • Customers form the majority in the market with a large number of potential customers to attract
  • Customers needs and wants are "general" and less "specific"
  • Associated with higher production output (makes products in large numbers) and capacity and potential for economies of scale
  • Success usually associated with low-cost (highly efficient) operation or market leading brands
  • Products appeal to a wide range of customers
  • Products are widely available through a range of markets
  • Mass media is used to advertise the product
• Mass market


  • Selling of milk in supermarkets
• Niche markets


  • Less competition in a specific marker = Higher survival rates
  • Able to set own prices due to no competition over price = more profit
  • If specific to customers needs and wants, there will be more people willing to pay more money for it
  • Promotional activities will be targeted at just a small subsection of the whole market
  • Can often charge higher prices
• Niche market


  • Specialised milk such as filtered milk
• Going from a niche to a mass market

  1. Forced to lower prices as some stores feel their customers would not pay the expensive prices when there may be close competition offering a similar product for much less

  2. More promotion will be needed so it does not get lost in the sea of other promotional products, meaning more money spent on promotion

  3. Increasing capital, labour, land so that there is a larger volume of the product to sell, but a newly mass market product may not have the means to do this

  4. Competition. Other brands are going to start to re-create the product if it is doing well and sell it for a cheaper price to drive you out of the mass market
• Dynamic markets


  Markets which are constantly changing. The environment is dynamic, for example buyers may choose to buy less of one product and more of another. It can grow, change and decline very quickly
• Stable markets


  Markets which change little over time. For example, the market for Kelloggs cornflakes has changed very little, although there are far more competing products than there were when they were invented in 1894. Market size and market share do not change much and there is little innovation
• Other markets are far more dynamic, subject to rapid and continuous changes
• All businesses must adapt to the changing nature of their markets
• Reasons for dynamic markets constantly changing

  • Social trends
  • Changes in technology
  • Competitiveness
  • Trends
  • Consumer tastes
  • Fashion
  • Rising/Falling incomes
  • Arrival of a superior product offered by competition
  • External shocks
• Businesses have to adapt their marketing in response to these changes... If they do not keep up, they may lose competitiveness! Ultimately falling sales will cause business to exit in the market
• New businesses emerge when new technologies or design techniques make it possible to invent new products or cheaper substitutes
• Sellers respond to buyer's changing needs by improving existing products and services or introducing new ones. For example, demographic factors can cause needs to change
• Sellers also respond to other sellers' changes in order to stay competitive
• Some businesses expand by diversifying their product ranges to meet needs in new or different markets
• A dynamic market can make it difficult for a business to forecast sales of its products due to rapid change and/or rapid growth. For example, customer demand is likely to be unpredictable in a dynamic market as customers' wants and needs evolve more quickly
• Competition


  Occurs when at least two businesses are providing goods/services to the same target market
• The more businesses in the market

  The more intense the competition
• Types of competition


  • Direct competition
  • Indirect competition
• Direct competition


  Businesses are targeting customers with the same product as a competitor
• Indirect competition


  Firms sell different products but compete with each other for the customers disposable income
• Indirect competition


  • Cinema and theatre companies
• Benefits of competition for customers

  • Businesses offer lower prices
  • Businesses produce better quality products
  • Businesses provide better customer service
• Absence of competition


  Reduces incentives for businesses to innovate, be efficient or offer consumers lower prices