chapter 10 - marketing, competition and the customer

Question 1

what are the roles of marketing (5)

Answer 1

• Identifying customer needs – what kind of products or services, prices customers are willing to pay, where and how they want to buy products and services.
• Satisfy customer needs – so that goods and services can be sold profitably. Customers want the right product, in the right place at the right price.
• Maintain customer loyalty – by building customer relationship, 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. this will be identified by maintaining close customer relationships.
• Build customer relationships to gain information about customers – by building a long-term relationship with them so that their changing needs can be understood.
• Anticipate changes in customer needs – by identifying new trends in customer demand or gaps in the market, and the business can produce goods or services that are currently available.

Question 2

why does consumer/customer’s spending pattern change? (4)

Answer 2

• Customer tastes and fashions change – fashions may change for clothes and so consumers may want different styles of clothes.
• Changes in technology – new products mean old versions/alternatives do not have high sales anymore.
• Change in income – if an economy has high unemployment, then many consumers will buy cheaper products.
• Aging population – the age structure of the population in many countries is changing to a greater percentage of older people. This has changed the type of products which are increasing in demand, such as anti-ageing face creams for women.

Question 3

why have some markets become more competitive (3)

Answer 3

• Globalization of markets has meant that products are increasingly sold all over the world.
• Transportation improvements have meant that it is easier and cheaper to transport products from one part of the world to another.
• Internet/ex-commerce has meant that consumers can search for products and buy from overseas markets. Increased consumer information about products and the different international businesses that produce them makes a market more competitive.

Question 4

how can businesses respond to changing spending patterns and increased competition (4)

Answer 4

• Maintain good customer relationships
• Keep improving its existing products
• Bring out new products to keep customers’ interest
• Keep costs low to maintain competitiveness.

Question 5

advantages of mass market (4)

Answer 5

 Total sales in those markets are very high
 The business can benefit from economies of scale
 Risks can be spread (the business will sell several different variations of products to the market).
 Opportunities for growth of the business due to large potential scales.

Question 6

disadvantages of mass market (3)

Answer 6

 High levels of competition between businesses selling similar products
 High costs of advertising and promotion
 Standardized products or services are produced and so may not meet the specific needs of all customers or potential customers, therefore leading to lost sales.

Question 7

advantages of niche market (2)

Answer 7

 Small businesses may be able to sell successfully in niche markets as larger businesses may not have identified them. This will reduce competition from the larger business in niche markets.
 The needs of consumers can be more closely focused on. This may lead to high levels of consumer loyalty and good customer relations.

Question 8

disadvantages of niche market (2)

Answer 8

 Niche markets are usually relatively small and therefore have limited sales potential. It is likely that only small businesses can operate profitably in these markets.
 Often businesses in a niche market will specialize in just one product. If the product is no longer in demand the business will fail as the business has not spread its risks.

Question 9

what is the importance of changing customer needs

Answer 9

• If businesses fail to respond to customer needs, then they are likely to fail.

Question 10

how can segmenting a market help the business (3)

Answer 10

• Make marketing expenditure cost effective by producing a product which closely meets the needs of these customers and targeting its marketing efforts only on this segment.
• Enjoy higher sales and profits for the business, because of cost-effective marketing.
• Identify a market segment which is not having its needs fully met, and therefore offers opportunities to increase sales.

Question 11

most common ways a market can be segmented (6)

Answer 11

• By socio-economic group – income groups can be defined by grouping people’s jobs according to how much they are paid.
• By age – the products bought by people in different age groups will not be the same.
• By region/location – in different regions of a country, people might buy different products.
• By gender – some products are bought only by women or men.
• By the use of the product.
• By lifestyle.

Question 12

how can a business use market segmentation (2)

Answer 12

• 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.

Question 13

what are the factors a business will consider before choosing an appropriate method of segmentation? (3)

Answer 13

• Detailed analysis of the market and the “size” of each potential segment in terms of consumers and likely sales.
• Company image and brand image – a “high-tech” business with an excellent reputation for innovation will not want to produce low-priced goods for low-income consumers.
• Cost of entering each segment.