Business | Meeting customer needs

Welcome to Meeting Customer Needs!

Hi there! We are diving into the exciting world of Marketing. Don't worry if this seems tricky at first; we’ll break everything down. This chapter is the foundation of all business success because, ultimately, if a business doesn't meet a customer's needs, it won't sell anything!

We will learn how businesses figure out what you and I want, how they measure the market they operate in, and how they use research to gain an edge over competitors.

1. The Role of Marketing: Identifying and Anticipating Needs

In simple terms, marketing is the process of getting the right product to the right customer at the right price and time.

The core role of marketing is twofold:

A. Identifying Customer Needs

This means finding out what customers currently want, often by spotting a gap in the market or a problem that needs solving.

• Example: Customers need a faster, easier way to pay. Solution: Contactless payment (Apple Pay, credit cards).

B. Anticipating Customer Needs

This is much harder! It means predicting what customers will want in the future, often before they even know they want it. Businesses that are good at this become market leaders.

• Example: Few people explicitly asked for smartphones before 2007, but market leaders anticipated the need for mobile computing and internet access in one device.

Key Takeaway: Marketing isn't just advertising; it’s the vital link between the customer and the business, ensuring products are relevant today and tomorrow.

2. Understanding the Market Structure: Mass vs. Niche

Before selling, a business must decide which market structure it wants to operate within.

A. Mass Market

A mass market targets a very large number of consumers with a standardised product.

• Characteristics: High sales volume, low profit margins (per item), high competition, standardized products (like petrol or basic soft drinks).
• Example: Coca-Cola, standard household cleaning products, basic supermarkets.

B. Niche Market

A niche market targets a small, specific segment of a larger market with specialised products.

• Characteristics: Lower sales volume, higher profit margins (per item), less competition (initially), highly specialised products.
• Example: High-end organic vegan bakeries, specialized equipment for deep-sea divers, luxury watch repair.

Did you know? Even mass market companies often use niche strategies within their portfolio. For example, Ford (Mass Market) might launch a limited-edition electric sports model (Niche Market).

3. Measuring the Market: Size, Share, and Growth

Businesses need numbers to assess whether a market is worth entering and how well they are doing against competitors. We use three key measures:

A. Market Size

This is the total volume or value of sales for all companies within that market over a specific period.

• Value: Measured in monetary terms (\$). (e.g., The total value of coffee sold in the UK last year was \$4 billion).
• Volume: Measured in units sold. (e.g., 20 million pairs of running shoes were sold in Europe).

B. Market Share

Market share is the percentage of total market sales held by one specific business.

It shows how competitive a business is. A high market share often gives a company power (a 'price setter').

The Formula:

\( \text{Market Share} (\%) = \frac{\text{Sales of Specific Business}}{\text{Total Market Sales}} \times 100 \)

• Example: If the total smartphone market sold 100 million units, and Samsung sold 25 million, Samsung’s market share is 25%.

C. Market Growth

Market growth measures the percentage increase or decrease in the size of the market over a specific time period. High growth indicates an attractive, expanding market.

The Formula:

\( \text{Market Growth} (\%) = \frac{\text{Change in Market Size}}{\text{Original Market Size}} \times 100 \)

Where Change in Market Size = (Market Size This Year - Market Size Last Year)

4. Market Segmentation: Dividing the Pie

Even in a mass market, customers are not all the same. Market segmentation is the process of dividing a broad consumer market into sub-groups (segments) of consumers who have similar needs, wants, and characteristics.

A business chooses a specific segment (its target market) and tailors its products and marketing mix to appeal directly to them.

Memory Aid: The 4 Key Bases of Segmentation (D.G.P.B.)

A. Demographic Segmentation (The ‘Who’)

Dividing the market based on measurable characteristics of the population.

• Variables: Age, Gender, Income, Family Status, Ethnicity, Education.
• Example: Products targeted specifically at ‘Gen Z’ (age) or luxury services targeted at high-income earners (income).

B. Geographic Segmentation (The ‘Where’)

Dividing the market based on location.

• Variables: Region, Country, Urban/Rural area, Climate.
• Example: Selling snow shovels only in northern climates; tailoring menus in different countries (McDonald’s offers McRice in some Asian countries).

C. Psychographic Segmentation (The ‘Why’)

Dividing the market based on lifestyle, personality, values, and attitudes.

• Variables: Hobbies, Interests, Opinions, Social Class.
• Example: Advertising for a Tesla targets individuals who value environmental sustainability and high technology (lifestyle/values).

D. Behavioural Segmentation (The ‘How Often’)

Dividing the market based on how customers use or respond to a product.

• Variables: Usage rate (heavy/light users), Loyalty (loyal vs. switchers), Benefit sought (e.g., convenience, quality, cost).
• Example: Airlines offering 'Frequent Flyer' programmes to reward and retain loyal customers (loyalty/usage rate).

Key Takeaway: Effective segmentation allows businesses to save money by focusing their marketing efforts exactly where they will be most effective, leading to higher customer satisfaction.

5. Market Research: Finding Out What Customers Want

To identify needs, businesses conduct market research—the systematic process of gathering, recording, and analysing data about customers, competitors, and the market.

We primarily differentiate research by its source:

A. Primary Research (Field Research)

This involves collecting new data that does not yet exist. It is gathered directly from the source for a specific business purpose.

• Methods: Surveys (questionnaires), Interviews, Focus Groups, Observation.
• Advantages: Data is current, relevant, and specific to the business's exact needs.
• Disadvantages: Expensive, time-consuming, and potentially biased (if questions are leading).

Analogy: Primary research is like baking a cake from scratch—you control every ingredient (data point).

B. Secondary Research (Desk Research)

This involves collecting and analysing data that already exists and was gathered for another purpose.

• Sources: Government publications, trade journals, market reports, company accounts, internet articles.
• Advantages: Cheap, quick, and can provide a wide understanding of the general market size/trends.
• Disadvantages: May be out of date, may not be specific to the business's needs, and competitors have access to the same information.

Analogy: Secondary research is like buying a pre-made cake mix—it’s fast and cheap, but you can’t change the core recipe.

6. Types of Data and Limitations of Research

Once data is collected (either primary or secondary), it falls into two categories:

A. Quantitative Data

Quantitative data involves numerical and statistical facts. It focuses on how many, how often, and how much.

• Goal: Statistical analysis and drawing general conclusions.
• Example: "70% of respondents prefer our new packaging," or "Our sales volume increased by 5%."

B. Qualitative Data

Qualitative data involves gathering non-numerical information, focusing on opinions, feelings, and reasons (the 'why').

• Goal: Understanding customer motivation and depth of feeling.
• Example: Notes from a focus group explaining "why" a customer disliked the packaging design, or interview transcripts discussing "feelings" about a brand.

C. Limitations of Market Research

Even the best research has flaws. Businesses must be aware of these limitations:

• Cost: High-quality primary research (especially detailed surveys and focus groups) is expensive and small businesses often cannot afford it.
• Reliability and Validity: Research may be unreliable (unstable results) or invalid (doesn't measure what it’s supposed to). Respondents might lie, or interviewers might be biased.
• Time Lag: Research takes time. By the time the data is analysed, the market situation or customer trends may have already changed.
• Bias: Questionnaires can be poorly worded, leading participants to certain answers. Focus group participants can be influenced by others.

Key Takeaway: Market research reduces risk, but it does not eliminate it. Businesses must use good judgement alongside the data.

Chapter Summary Review

• Meeting customer needs requires identifying current needs and anticipating future needs.
• Markets can be Mass (high volume, low margin) or Niche (low volume, high margin).
• Market success is measured using Market Size, Market Share, and Market Growth.
• Market Segmentation (DGPB) helps businesses focus their limited resources.
• Primary research is new data (expensive, specific). Secondary research is existing data (cheap, general).
• Quantitative data is about numbers; Qualitative data is about feelings and reasons.