👋 Welcome to the World of Marketing: Identifying and Understanding Customers!
Hey future Business leaders! This chapter is super important because it answers a simple but vital question: Who are we selling to?
If a business doesn't know who its customers are, what they like, or why they buy things, it's like shooting an arrow in the dark. Understanding customers is the foundation of the entire marketing section!
Let's dive in and learn how successful businesses truly connect with the people who keep them running.
1. The Customer Basics: Needs vs. Wants
Before a business can sell anything, it must figure out if the product is solving a Need or satisfying a Want.
a) What is a Need?
A Need is something essential for survival or basic daily life. Humans need these things, and the business focuses on providing the basic function.
- Key Concept: Basic requirement.
- Example: Food, water, shelter, clothing, transport (getting from A to B).
b) What is a Want?
A Want is something consumers desire but can live without. Wants are often influenced by culture, fashion, and advertising. Businesses make their money by turning basic needs into desirable wants!
- Key Concept: Something desired but not essential.
- Example: A gourmet steak dinner (instead of basic food), a sports car (instead of a bus ticket), the latest designer phone.
💡 Quick Analogy: You need a drink of water (to survive). You want a \$5 bubble tea (it’s nice, but not essential!).
🔑 Key Takeaway: Businesses must identify the core need they are meeting, then package it in a way that satisfies specific customer wants.
2. Why Market Research is Essential
How do businesses figure out what people need or want? They use Market Research.
Market Research is the process of gathering, recording, and analysing data about customers, competitors, and the market itself. It’s the business version of investigative journalism!
The Importance of Market Research:
- It helps reduce risk (e.g., stopping a business from launching a product nobody wants).
- It identifies new opportunities (e.g., finding out customers want an eco-friendly version of a product).
- It allows businesses to understand competitors (what they charge and what they offer).
- It helps in making important decisions about the Marketing Mix (Price, Product, Place, Promotion).
⚠️ Common Mistake: Thinking market research is only done when launching a new product. Successful businesses do it all the time to keep up with changing trends!
3. The Two Main Types of Market Research
Don't worry if this seems tricky at first; we can group all research into two simple categories.
a) Primary Research (Field Research)
Primary Research (or Field Research) is information collected first-hand for a specific purpose. You gather this information yourself.
🧠 Memory Aid: P for Personal – you collect it personally!
Methods of Primary Research:
- Surveys/Questionnaires: Asking people a set of fixed questions (online, by post, or in person).
- Interviews: Talking directly to individuals to gather deep opinions.
- Focus Groups: Bringing together a small group of target customers to discuss the product or service.
- Observation: Watching how consumers behave (e.g., seeing which cereals they pick up in a supermarket).
Advantages of Primary Research:
- It is specific to your business and product needs.
- It is up-to-date and current.
Disadvantages of Primary Research:
- It is often expensive to conduct (time and cost).
- It takes a long time to plan and gather results.
b) Secondary Research (Desk Research)
Secondary Research (or Desk Research) is information that already exists and has been collected by someone else. You find this information from existing sources.
🧠 Memory Aid: S for Stored – the data is already stored somewhere!
Sources of Secondary Research:
- Internet/Published Reports: Government statistics, market reports (e.g., how many people use social media).
- Newspapers/Magazines: Articles about economic trends or consumer behaviour.
- Internal Data: The company’s own past sales records, customer loyalty scheme data, or complaints logs.
Advantages of Secondary Research:
- It is quick and easy to access (often just a click away).
- It is relatively cheap or even free.
Disadvantages of Secondary Research:
- It may be out-of-date.
- It might not be specific to the exact product you are researching.
- Primary = You do it, specific, expensive.
- Secondary = Already done, quick, cheap, possibly out-of-date.
4. Handling the Data: Quantitative vs. Qualitative
Once you have collected the data (whether Primary or Secondary), it falls into two types:
a) Quantitative Data
Quantitative Data deals with numbers and can be statistically analysed. It answers questions like "How many?" or "How often?".
🧠 Memory Aid: Quantitative = Quantity (Numbers!)
- Example: 80% of customers prefer the blue packaging. (A figure).
- Example: Sales increased by 15% last quarter. (A percentage).
b) Qualitative Data
Qualitative Data deals with opinions, reasons, and feelings. It answers questions like "Why?" or "How do you feel?".
🧠 Memory Aid: Qualitative = Quality (Description and depth!)
- Example: "I feel the product is too complicated to use." (An opinion).
- Example: "The packaging makes me feel like the brand is trustworthy." (A reason).
Did you know? Focus groups and interviews are excellent ways to get Qualitative data, while surveys with 'yes/no' or rating scales are perfect for Quantitative data.
5. Understanding the Market: Segmentation
No business can target absolutely everyone. Think about Apple – they don’t try to sell an iPhone to a baby, or usually, to someone who wants a very cheap basic phone. They focus on specific groups.
Market Segmentation is the process of dividing the entire market into smaller groups (segments) of consumers who have similar characteristics and needs.
By segmenting the market, businesses can design products and marketing messages that are much more effective because they speak directly to the target group.
Common Ways to Segment a Market:
Businesses use different categories to group people:
- Geographic Segmentation: Grouping customers based on where they live (e.g., country, city, rural vs. urban). Example: Selling heavy winter coats primarily in cold regions.
- Demographic Segmentation: Grouping customers based on measurable characteristics (e.g., age, gender, income, education, family size). Example: Toy companies target demographics like "Parents of children aged 5-8" and "Income bracket X".
- Psychographic Segmentation: Grouping customers based on their lifestyle, interests, opinions, and values. This is about *who they are* internally. Example: Targeting customers who value environmental sustainability with eco-friendly products.
The benefit? Once a segment is chosen (e.g., "young, high-income professionals who care about the environment"), the business can tailor its product, price, and advertising message perfectly.
🔑 Key Takeaway: Identifying customers moves from knowing what they need, to finding out information about them (research), to finally grouping them into manageable segments.
🎉 Chapter Summary and Review
You have learned the foundations of customer identification!
- Needs are essential; Wants are desired.
- Market Research reduces risk and finds opportunities.
- Primary research is collected by you (specific, costly).
- Secondary research is already stored (cheap, quick, possibly old).
- Quantitative data deals with numbers; Qualitative data deals with opinions.
- Market Segmentation divides customers into groups (geographic, demographic, psychographic) so marketing is more focused.
Keep these terms clear in your mind, and you'll ace the Marketing section!