The Dynamic Nature of Markets (Cambridge (CIE) IGCSE Business)

Changing Customer Needs & Spending Patterns

• Markets and marketing strategies are constantly changing as a direct result of the changing wants/needs of customers, which affect their spending patterns

  • There are many different reasons for changes in customer spending habits and patterns

• Businesses that conduct ongoing market research are able to identify and interpret the changes that are happening in markets

Diagram: reasons for changes in spending patterns

Changes in tastes and fashions

• Trends in some markets can change very quickly

  • E.g. Wide-leg jeans are now more fashionable with Gen-Z customers than 'skinny' jeans worn by Millennials

Change in disposable incomes

• High unemployment or inflation may lead to customers to buy cheaper products, e.g own brand breakfast cereal

Demographic changes

• Populations in most developed countries are becoming older

• Demand for products that meet their needs has driven many market changes

  • E.g. Sales of specialist travel insurance for mature holidaymakers has increased

Global influences

• The arrival of well-known international brands can change demand and purchasing patterns in a market

• Increased travel, support from celebrities and extensive promotional activity drive demand

  • E.g. American fast food chains now dominate the market for fast food across Europe

Changes in technology

• New technology makes old technology less desirable or obsolete

  • E.g. Products such as smart speakers are replacing sales of radios

Increasing Competition in Markets

• 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

• Competition results in many benefits for the customer, such as

  • Lower prices

  • Better-quality products

  • Better customer service

• However, the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices

• Some markets have become more competitive in recent years as a result of

  • Globalisation 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 and e-commerce have 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 the market much more competitive

Responding to Changing Spending Patterns and Increased Competition

• Whenever there are changes to spending patterns or competition a business will need to take action to maintain its market position

Steps a Business can take to Remain Competitive