Meeting Customer Needs
Unit 1: Marketing and People
Meeting Customer Needs
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A mass market is the largest part of a market, served by a standardised product aimed at the widest possible range of customers — scale bought at the price of customisation.
A mass market is the broadest segment of a market. The product is standardised: one recipe, one design, one specification sold to everyone, with the marketing varied rather than the product. Soft drinks, mobile handsets and washing powder are sold this way.
The characteristic that follows is volume. Selling millions of identical units lets a firm buy inputs in bulk, run machinery continuously and spread its design and advertising costs over a huge output, so the average cost per unit falls. That is what lets a mass-market firm compete on price.
The trade-off is real. A mass-market firm cannot easily charge a premium, because a customer who dislikes the price can switch to a near-identical rival, and it must keep spending on advertising simply to hold the share it has.
Real Example: Coca-Cola sells a standardised drink across most countries in the world, varying the advertising rather than the recipe. The scale is what lets it negotiate hard with bottlers and spread one advertising campaign over an enormous output.
Exam Matters: A Define (2 marks, WBS11 Appendix 6) on "mass market" needs both halves — the widest range of customers, and a standardised product. Naming a firm is application, and belongs in a 4-mark Explain rather than a definition.
A niche market is a small, clearly defined part of a larger market whose particular needs the standardised mass-market product does not meet.
A niche market is a small segment inside a larger one, defined by a need the mass-market product leaves unsatisfied. Left-handed tools, prayer-friendly travel, professional-grade cookware and cars built to order are all niches within much larger markets.
Its characteristics are the mirror image of the mass market. Output is low, the product is specialised, distribution is narrow, and because the customer values the specialisation and has few alternatives, the firm can charge a premium price and earn a wide margin on each unit.
Size is the constraint. A niche caps total revenue however well the firm serves it, and a business that has designed everything around one group has little to fall back on if that group shrinks or a larger rival decides the niche is worth entering after all.
Real Example: Rolex makes a small number of watches a year against the tens of millions a mass-market electronics firm ships, and sells them at prices no mass-market brand could ask. Scarcity and specialisation, not volume, are what the customer is paying for.
Exam Matters: Mass and niche are almost always examined as a comparison. Name the characteristic and its consequence in the same sentence — "standardised, so unit costs fall" against "specialised, so a premium can be charged" — rather than listing features of each in turn.
Market size says whether a market is worth entering, market share says whether a firm is winning inside it, and market growth says whether the whole market is expanding.
Market size is the total sales in a market over a period, measured either by volume (units sold) or by value (sales revenue). It answers one question: is this market large enough to be worth serving?
Market share is the proportion of that total held by one firm or product, as a percentage. Market growth is the percentage change in market size between two periods. Both are calculations the paper can ask for (QS2, WBS11 Appendix 7).
Read the two together. A rising share in a growing market is the strongest position there is, because the firm is taking a bigger slice of a bigger cake. A rising share of a shrinking market may simply mean the firm is the last one left.
Real Example: Streaming services report subscriber numbers every quarter for exactly this reason: investors want to know whether a company is growing faster than the market it sits in, which share alone cannot tell them.
Exam Matters: A Calculate (4 marks, WBS11 Appendix 6) expects the formula, the substitution and the answer with its unit — a percentage sign, not a bare 15. Then use the number: Calculate is a quantitative skill (QS2, WBS11 Appendix 7), and the question after it always asks what the figure means.
A brand is what a name promises in the customer's mind. Kept consistently it becomes loyalty, and loyalty is what lets a firm charge more than an identical rival.
Branding is the process of building a distinctive name, design and reputation so that customers can tell one product from another and know what to expect from it. In a mass market, where the products themselves are close to identical, the brand is often the only thing separating them.
Brand loyalty is the result: a customer who buys the same brand repeatedly without re-examining the alternatives each time. Three things follow from it, and each one is a chain an answer can develop.
A strong brand also makes a market harder to enter. A new firm with an equally good product must spend heavily, for years, to persuade customers to try something whose name means nothing to them — which is why branding is listed as a characteristic of mass markets rather than a piece of decoration.
Real Example: Sportswear firms sponsor athletes and teams for decades rather than advertising the shoes themselves. What is being bought is the association; the shoe is close enough to a rival's that the association is the difference.
Exam Matters: Branding connects to adding value and to competitive advantage later in this topic. An answer that says "the brand is strong" has asserted; an answer that says "the brand makes demand less price-sensitive, so the firm can raise price without losing volume" has analysed.
A dynamic market changes rapidly and continuously, and online retailing is the clearest cause of it: the shop between producer and customer disappears.
A dynamic market is one in which conditions change rapidly and continuously — consumer tastes, technology, the number of rivals, the rules firms operate under. Most markets are dynamic to some degree; the question in an exam answer is always how a named market is changing, not whether it is.
Online retailing — selling directly to customers over the internet rather than through a shop — has changed markets in four ways that a chain of reasoning can follow.
How markets change is therefore not random: technology alters costs and reach, that alters who can enter, and that forces the firms already there to respond on price, product or service.
Real Example: Mobile money and online marketplaces let small producers in East Africa and South Asia sell beyond their own town for the first time, reaching customers who previously had no way to find them and no way to pay at a distance.
Exam Matters: Name the change, then follow it to a decision. "Online retailing grew" is context; "it cut entry costs, so three rivals appeared, so Zuri had to justify its price" is the chain an Analyse (6 marks, WBS11 Appendix 6) wants.
Innovation grows a market by bringing in customers it did not previously have; adapting to change is what decides which of the existing firms is still there afterwards.
Innovation is a new or improved product, or a new way of producing or delivering one. It drives market growth in two distinct ways, and an answer is stronger for separating them.
Adapting to change is the other half. A firm can change its product, its market, its route to customers, or nothing. Doing nothing is a decision too, and it is the one that ends businesses: the pattern is rarely that a firm could not see the change, but that it saw it and defended the sales it already had.
Real Example: Video rental chains and film studios both saw streaming coming. Those that treated it as a new route to customers grew; those that treated it as a threat to existing revenue defended that revenue and lost the market.
Exam Matters: A question about a market that has grown usually wants the mechanism. Say whether growth came from new customers entering the market or from existing customers buying more, and use the market-growth percentage to anchor it.
The level of competition in a market decides how much freedom a firm has over its price, and therefore how much it must compete on everything else.
Competition exists where two or more firms sell to the same customers. How intense it is depends on three things: how many rivals there are, how similar their products are, and how easily a new firm can enter.
Where competition is intense, a firm has little room on price: raise it and customers move to a near-identical substitute. So it competes on the things price cannot be competed on — quality, service, design, brand and speed of delivery. Where competition is weak, the firm has room on price, and less pressure to improve anything.
What keeps competition weak is how hard it is to enter: the capital needed to start, an established brand, an exclusive supply agreement, a patent, a licence. Today's level of competition is temporary; tomorrow's is decided by how easily the next firm can arrive. You will meet these called barriers to entry, the term the Economics papers use.
Real Example: When low-fare airlines entered European and South-East Asian routes, established carriers did not only cut fares; they unbundled meals and baggage so that the headline price could fall while the total charge did not. Competition changed the product, not just the price.
Exam Matters: Answer for both sides when a question asks about the effect of competition. A response covering only the firm, or only the customer, has answered half of it.
Risk is not knowing which outcome will happen out of a set you can list and put odds on; uncertainty is not being able to list the outcomes at all.
Risk describes a situation where the possible outcomes are known and a probability can be attached to each. A firm launching a product knows it may succeed or fail, and market research, past launches and sales data let it estimate the chances. Because risk can be quantified, it can be planned for: insured against, hedged, or priced into the decision.
Uncertainty describes a situation where the outcomes themselves cannot be listed, so no probability can be attached. A new technology that makes the product obsolete, a sudden change in the law, a disease outbreak: these are not unlikely events with known odds, they are events nobody had on the list.
Entrepreneurs accept both in exchange for profit, the reward for bearing them. An answer that calls everything a risk has claimed everything can be planned for, which is the assumption that makes a plan fragile.
Real Example: A café chain can forecast the ordinary variation in daily footfall from its own sales history and staff to it. What it could not forecast was city centres emptying for months at a time: the same business faced both a quantifiable risk and an unlistable uncertainty.
Exam Matters: When a case study lists things that might go wrong, sort them before writing. Say which are quantifiable risks and which are genuine uncertainties, and why, rather than treating the whole list as one category.
The split is about who collected the data and why: primary data is gathered by this firm for this question, secondary data was gathered by somebody else for a different one.
Primary data is collected first-hand, by or for the business, to answer the question it actually has. Secondary data already exists: somebody else collected it, for their own purpose, and the business is reusing it. The methods themselves come later — the distinction is about origin, not about how the data was gathered.
In practice a business uses both, in that order: secondary data first, to size the market for almost nothing, then primary research on the question it cannot answer — whether these customers will buy this product at this price.
That sequence is also the answer to "which is better". Neither is, in general: the judgement is about which question the business is actually facing.
Real Example: A firm entering a new country usually starts with published trade and population data, which costs nothing, and only commissions its own survey once it has narrowed the decision to one or two segments worth the expense.
Exam Matters: A question naming a small firm with little money is asking you to weigh cost against fit. Say which data the decision needs before naming a method: an expensive method answering the wrong question is not a recommendation.
Quantitative data tells a firm how many and how much; qualitative data tells it why. The two answer different questions, and either alone leaves a decision half-made.
Quantitative data is numerical: it can be counted, averaged, compared and put on a chart. Sales figures, market share, the percentage of shoppers who say they would buy — all quantitative. Its strength is that it measures, so a firm can size an opportunity and track whether a decision worked.
Qualitative data is non-numerical: opinions, motivations, reactions, the words customers use about a product. Its strength is that it explains, so a firm learns why a number is what it is.
The two cut across primary and secondary. A firm's own till data is primary and quantitative; its own focus group is primary and qualitative; a published market report is secondary and quantitative; a magazine review is secondary and qualitative. Exam items often test exactly that pairing, so read both dimensions of the stem before answering.
Real Example: A streaming service can see exactly which songs listeners skip, which is quantitative and precise. It still runs listening sessions to learn why a track gets skipped, because the skip count cannot distinguish boredom from a bad recommendation.
Exam Matters: A stem that gives a percentage or a count is describing quantitative data; a stem about attitudes, opinions or reasons is describing qualitative data. Check the origin separately: who collected it decides primary or secondary, independently of whether it is numbers or words.
Research identifies and anticipates customer needs and wants, and gains insight into consumer behaviour. Only the first of those is about today.
The specification lists what research is for, and the three uses are genuinely different jobs. The first is to identify and anticipate customer needs and wants: to find out what customers require now, and what they are likely to require next.
Identifying is present tense — asking, observing and measuring what is wanted today. Anticipating is forward-looking: reading the direction of a trend, so the product is ready when the demand arrives rather than a year afterwards. A firm that only identifies is always launching into a market that has already moved.
The third use is to gain insight into consumer behaviour — understanding not what customers buy but how they decide: what they compare, what they will not compromise on, what makes them switch. This is where qualitative work earns its cost, and it is what turns a list of preferences into a reason.
Real Example: Supermarkets reposition stock after watching how shoppers actually move through a store, rather than asking them what route they take. What people do and what they report doing are different, which is why observation exists as a method.
Exam Matters: A question asking how research helps a specific business is asking which of the three uses matters here. A start-up usually needs identification; an established firm in a dynamic market usually needs anticipation. Name the use, then say why this firm needs that one.
Quantifying likely demand turns an opinion about a market into a number the business can plan production and cash flow around — and into a figure that can be shown to be wrong.
The second use of research is to quantify likely demand: to estimate how many units will sell, at what price, in a given period. The firm needs the number to decide how much to make, how much stock to hold, and whether the revenue covers the cost.
The method is a proportion scaled up to a population. Worked for Zuri Juice:
Then treat the answer as a ceiling, not a forecast. People overstate what they will buy when nothing is at stake; a sample of 600 carries a margin of error; the 18% was measured at one price only; and the market moves before production starts. It is the best estimate available, and still an estimate.
Real Example: New food and drink products fail at a high rate despite testing well before launch. The gap between what people say in a survey and what they put in a basket is the commonest reason a demand figure turns out too high.
Exam Matters: Show the scaling in two steps — proportion to population, then units by price — with the unit on each. Then add one line on why the figure over-estimates: Discuss and Assess both require an assessment of competing factors (WBS11 Appendix 6), and that line is the assessment.
Surveys count, focus groups explain, interviews go deep, and a product trial replaces all three with a record of what people actually did.
The specification names four methods of primary research, each answering a different kind of question.
A product trial (or test marketing) is the only method recording behaviour rather than intention. Customers pay real money, so the firm sees the repeat-purchase rate rather than the stated one, and can change price or packaging before a national launch. It is slow, and it warns rivals.
Choosing is a question of budget, time and what is being decided: a price needs a number, a reaction needs words, a launch decision needs a trial.
Real Example: Fast-food chains sell a new item in selected cities before deciding on a wider launch, and decide on measured repeat purchases there rather than on what testers said about the recipe.
Exam Matters: A recommendation names the method and the constraint it fits. "Use a survey" is a choice; "use a survey, because the decision needs a percentage that can be scaled and the budget will not cover interviews" is a recommendation.
The four secondary sources trade currency, cost and credibility differently, so the question about each is the same: who collected this, when, and why?
The specification names four sources of secondary data. All are cheap and immediate; they differ in how far they can be trusted and how current they are.
Two questions settle the value of any of them. Who collected it, and why? A source with an interest in the answer needs corroborating. When? In a dynamic market a two-year-old figure describes a market that no longer exists.
A firm's own transaction records are primary data even though they sit in a database: the database is where data lives, and primary or secondary is about who put it there.
Real Example: Trade statistics published by national statistics offices are free and cover whole economies, and firms use them to size an export market before spending anything on research of their own.
Exam Matters: When a stem names a source, say what it is good for and what it cannot show, in that order. A rival's website gives prices and range, not sales volumes; a report gives market size, not this week's reaction to a product.
A sample stands in for a population, so how it is chosen decides whether the result describes the market or only the people who were asked.
Sampling is selecting a small group from a population — everyone the firm is interested in — because asking all of them is impossible. The specification names three methods, and the difference between two of them is easy to miss.
Stratified and quota both divide the population into subgroups and both aim at proportionate numbers. The discriminator is what happens inside each subgroup: stratified selects at random, quota takes whoever is to hand. That one difference is what makes the first representative and the second quick.
Sample size and bias decide what the result is worth. A larger sample narrows the margin of error and costs more. Bias is separate: a sample drawn from one area or age group misrepresents the population however large it is.
Real Example: Opinion polls that recruit through one channel only — a phone list, a single social platform, shoppers in one district — have a long record of missing the result however many people they reach.
Exam Matters: Link the method to the constraint in the case. A firm with a customer database can sample randomly; a firm stopping people in a street is running a quota sample whatever it calls it.
Orientation is about where a business starts: a product-oriented firm starts from what it can make, a market-oriented firm starts from what customers have told it they want.
A product-oriented business begins with its own capability — an engineering strength, a recipe, a design — makes the best version it can, and then finds customers for it. A market-oriented business begins with research, establishes what customers want, and designs to that.
Most firms are somewhere between the two, and the judgement in an answer is about degree and context, not about which is correct. A firm with deep technical capability in a fast-moving consumer market needs both: the research to know which problem to solve, and the capability to solve it in a way rivals cannot copy.
Real Example: Firms that build industrial machinery are usually product-oriented — the buyer cannot specify a process that has not been invented. Firms that sell packaged food are usually market-oriented, because the customer knows exactly what they want and will say so.
Exam Matters: When a case describes a firm that invents, do not label it "wrong for not researching". Say what its orientation costs it and what it buys, and make the judgement conditional on the market it sells into.
A market map plots rivals on two variables customers choose by. A gap is a position nobody occupies: a question about demand, not yet an answer.
Market mapping (also called perceptual mapping) plots the products in a market on two axes, each a variable customers choose by: price against quality, traditional against modern. Each rival becomes a point, and the shape of the market becomes visible.
The map does two jobs: it shows where a firm sits relative to its rivals, and it shows gaps — positions no product occupies.
Now the limits, because this is where answers are won and lost. A gap means no competitor, not customers waiting: it may be empty because nobody wants it, or because it cannot be made at that price. Testing it is what quantifying likely demand is for. A map also shows two variables at a time, and plots perceptions, which change.
Real Example: Carmakers chart their own ranges against rivals precisely so that two of their own models are not sold into the same square. A map is as useful for avoiding an overlap inside a range as for finding a space outside it.
Exam Matters: A Construct (4 marks, WBS11 Appendix 6) asks for an accurately labelled diagram: both axes with the variable and its direction, every competitor plotted and named, the gap marked. Commentary written beside the diagram is not part of what Construct asks for.
Segmentation divides a market into groups whose members want the same thing, so that a product and a message can be aimed at one group instead of averaged across all of them.
Market segmentation is dividing a broad market into smaller groups of customers who share needs, characteristics or behaviour. The purpose is aim: a product designed for the average of a whole market often suits nobody in it particularly well.
Segmentation earns its cost when the segments are measurable (the firm can size them), reachable (there is a way to advertise to them), different from each other in what they want, and large enough to be served profitably. A segment failing any of those four is a description rather than a market.
It has limits. Over-segmenting produces groups too small to serve at a profit and a product range too complex to run. And segmentation is only as good as the research behind it: badly defined segments produce precisely aimed products aimed at the wrong people.
Real Example: Large hotel groups run separate brands for business travellers, families and budget-conscious younger guests rather than one chain for everybody. The buildings, the prices and the advertising differ because the three groups want different things from the same night's sleep.
Exam Matters: Pick one base and justify it against the case, rather than listing all four. The mark is for the reasoning that connects the base to this firm's product and this firm's customers.
A competitive advantage is a reason customers choose this firm over its rivals, and it is worth having only for as long as rivals cannot copy it.
Competitive advantage is whatever makes a customer choose one firm over another. It comes from one of two places: lower costs, which allow a lower price at the same margin, or differentiation, which allows a higher price because the product offers something rivals do not.
The word that carries the marks is sustainable. An advantage a rival can copy next month is a head start, not an advantage. What makes one durable is that copying it is slow, expensive or impossible.
Advantages also decay. Markets change, patents expire, rivals invest, and the thing customers valued stops being scarce. A firm holding one has to keep spending on it — which is why competitive advantage appears in evaluation questions as a judgement about how long, rather than whether.
Real Example: The largest online retailers combine scale, a delivery network built over many years and the convenience of stored payment details. Any one of the three could be matched by a determined rival; all three at once is what has proved hard.
Exam Matters: Name the source of the advantage and say why a rival cannot copy it quickly. "Good customer service" is an assertion; "service from staff trained over two years, which a new entrant cannot assemble quickly" is the analysis.
Differentiation exists to break the comparison: a product customers cannot line up against a rival on price alone is a product whose price the firm partly controls.
Product differentiation is making a product distinguishable from its rivals — in design, features, quality, service, packaging or brand. The specification asks for its purpose, and the purpose is precise: to make the product less substitutable.
Where two products are identical, the only question a customer asks is which is cheaper, and the firms are forced into a price war neither wins. Differentiation replaces that question with a different one — which of these do I prefer — and a customer who prefers one will pay more for it.
Two conditions decide whether it works: customers must see the difference, and must value it enough to pay for it. Differentiation meeting neither is cost added to the product and nothing added to the price.
Real Example: Bottled-water brands sell a product that is chemically almost identical between them. What differs is the bottle, the source story and the brand, which is enough to sustain very different prices on a shelf where the products sit side by side.
Exam Matters: Connect differentiation to price. An answer that stops at "it makes the product stand out" has described; an answer that continues "so demand is less price-sensitive and the firm can hold its price when a rival cuts" has analysed, which is what an Analyse (6 marks, WBS11 Appendix 6) requires.
Value added is the difference between what a business pays for its inputs and what the customer pays for the finished product — and it is where profit comes from.
Adding value is raising the worth of a product to the customer above the cost of the bought-in materials and components used to make it. Value added is that difference, and it is measured, not asserted.
That $0.75 is not profit. It has to cover wages, rent, energy, distribution and marketing first; profit is what remains of it. But no business earns a profit without adding value, which is why the concept sits under positioning rather than accounting.
Each method costs something, so adding value pays only when the rise in what the customer will pay exceeds the cost of causing it.
Real Example: A coffee shop buys beans, water and a cup for a fraction of what it charges for the drink. The difference is bought by the roasting, the service, the seating and the location — and it pays for all of them before any of it becomes profit.
Exam Matters: A Calculate (4 marks, WBS11 Appendix 6) on value added is selling price minus the cost of bought-in materials, per unit — not price minus total costs, which is profit. State the unit: $0.75 per bottle.
A mass market is the largest part of a market, served by a standardised product aimed at the widest possible range of customers — scale bought at the price of customisation.
A niche market is a small, clearly defined part of a larger market whose particular needs the standardised mass-market product does not meet.