The Importance of Marketing (Edexcel IGCSE Business)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

An Introduction to Marketing

  • A market is any place where buyers and sellers can meet to conclude a transaction, e.g. amazon.co.uk or a shopping mall

  • The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants profitably

    • Needs are considered to be essential, e.g. shelter or food

    • Wants are desires which are non-essential, even if consumers consider them to be essential e.g Nike trainers

Why Marketing is Important

Identifying & Understanding Customer Needs

  • Marketing helps a business identify and understand the needs and wants of its customers

    • It involves finding out about the

      • Variety and quality of goods and services that customers want

      • Prices they are willing to pay

      • Promotional techniques that may persuade them to make repeated purchases

      • Convenience factors, including where and how they want to purchase products

      • After-sales services they anticipate

  • Businesses that successfully identify and then satisfy customer needs 

    • Compete more effectively than rival businesses 

    • Keep up to date with changing tastes and preferences

    • Attract positive word-of-mouth recommendations and build the brand

The Benefits of Identifying & Understanding Customers Needs

Need

Explanation

Benefits to the Business

Price

  • The amount of money a customer is willing to pay for a product
     

  • Customers often have a budget and want to find the best value for their money

  • Understanding this helps the business set competitive prices and offer appealing promotions to their target market

Quality

  • Quality refers to the standard of excellence that a customer expects from a product
     

  • Customers want reliable, durable products that meet their expectations and good quality after-sales service

  • Understanding this helps businesses create products that meet the desired standards, which can lead to customer loyalty and positive word-of-mouth advertising

Choice

  • Customers have a wide range of preferences and want the choice of a variety of products 

  • Varied features, such as sizes, colours and styles, are required by different customers

  • Understanding this helps businesses offer a range of product options that cater to different preferences

  • This increases customer satisfaction as customers purchase products that meet their specific needs

Convenience

  • Customers value convenience because they want products that are easy to access and use
     

  • This includes factors such as location, online ordering, fast delivery and a variety of ways to pay for products

  • Understanding this helps businesses to create a customer experience that is both efficient and enjoyable
     

  • Providing a convenient shopping experience builds customer loyalty and increases repeat sales

Keeping Customer Loyalty

  • Customer loyalty is when existing customers buy products from the same business over and over again

  • Customer loyalty leads to repeat purchases and a rise in market share

  • It is much cheaper for a business to try to keep existing customers (for example, with loyalty cards) than trying to gain new customers, as this can involve expensive advertising campaigns
     

Building Customer Relationships

  • Building customer relationships involves communicating with customers to encourage them to become loyal to the business and its products

  • Good relationships are maintained by

    • Developing close ties with customers and finding out if products/services are continuing to meet their needs 

      • E.g. Using surveys to discover if preferences are changing

    • Using technology to gather important information about customers
       

  • Having strong relationships with customers means a business can respond appropriately when
    expectations of what they want from a good or service change

Market Orientation Versus Product Orientation

  • Market orientation focuses on the needs of consumers and uses this information to design products that meet customer needs 

    • Consumers are at the centre of marketing decisions

    • Products which respond to consumer needs are developed

    • The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable 

      • E.g. Universities often develop new courses based on the feedback they receive from students and employers

Diagram: Tools of Market Orientation

1-1-2-market-orientation

Market orientation aims to develop products to meet consumer needs identified during the market research process

  • Product orientation focuses on the characteristics of the product rather than the needs of the consumer

    • The emphasis is on creating a product first and then finding a market

    • The business has a belief that the product is superior i.e. it will sell itself

      • E.g. Gillette's razors can be classed as a product oriented business as the business focuses on the quality of its products and regular innovations aim to increase sales

    • One problem with being too product orientated is that over time a business moves further and further away from what the market is looking for, thus increasing the risk of business failure

  

Diagram: Tools of Product Orientation

1-1-1---dynamic-markets-1

A product orientation is used by inventors who research, test and produce a product well before market research has taken place
 

Niche Markets & Mass Markets

Niche Markets

  • In niche markets, products are aimed at a subset of the larger market e.g. gluten free bread and cakes

    • Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market

    • Production usually happens on a small scale

  • Profitable niche markets rarely remain small for long; their potential attracts competition, which increases sales volumes

    • The market for energy drinks is a good example of this - originally targeted at sports-enthusiasts, it is now one of the largest soft drinks segments in the world

Mass Markets

  • In mass markets, products are aimed at broad  market segments e.g Kellogg's Corn Flakes is an example of a breakfast cereal aimed at the mass market

    • Market segments are groups of consumers who share similar characteristics e.g. age, lifestyle, etc.

    • Mass marketing occurs when businesses sell their products to most of the available market 

    • Production usually happens on a large scale
       

Characteristics of  Niche Markets & Mass Markets

Niche Markets

Mass Markets

  • Products are specialised and unique as they are aimed at narrow market segments
     

  • High average costs due to small scale production

    • They do not benefit from economies of scale
        

  • High prices make products less affordable and lead to lower sales volumes
     

  • High prices can allow businesses to earn higher profit margin
     

  • Louis Vuitton is an example of a fashion company that aims its products at a niche market

  • Products are less unique as they are aimed at broad market segments
     

  • Low average costs due large scale production  economies of scale
     

  • Low prices lead to greater affordability and higher sales volumes
     

  • Low prices lead to lower profit margins
     

  • Primark is an example of a clothing company that focuses its product on the mass market

Market Share & Market Growth

Market Share

  • Market share is the percentage of the total market revenue that a single business or brand has

    • e.g. Tesco had a 27% share of the UK grocery market in 2022
        

  • Market share can be calculated using the formula

fraction numerator Sales space of space straight a space business space open parentheses volume space or space value close parentheses over denominator Market space size space space stretchy left parenthesis volume space or space value stretchy right parenthesis end fraction space cross times space 100 

  • An increase in market share can indicate that a business has made effective use of marketing strategies to increase sales and gain customers from competitors

Worked Example

In 2022 the UK coffee shop/cafe market was worth £4.6bn. Sales of Starbucks Coffee were £328m in 2022.

Using the data calculate, to 2 decimal places, the market share of Starbucks Coffee in the coffee shop/café market. You are advised to show your workings.

[2 marks]

 

Step 1: Divide Starbucks' sales by the market size

              equals fraction numerator space £ 328 straight m over denominator £ 4.6 bn end fraction space

equals space 0.0713       
[1 mark]
 

 

Step 2: Multiply the outcome by 100 and express as a percentage

equals space 0.0713 space cross times space 100

equals space 7.13 percent sign            [1 mark]

              

Examiner Tips and Tricks

By showing your working-out, even if you do not get the right answer you will still be able to gain some marks.

Market Growth

  • Market growth is the increase in the overall size, value or volume of a market over a period of time, usually expressed as a percentage

  • Market growth provides an incentive for businesses looking to expand, increase sales and generate higher revenue

    • Businesses are often attracted to the potential of growing markets - and they can become increasingly competitive quite rapidly
       

  • Market growth is calculated using the formula
     

begin mathsize 14px style Market space growth space equals space fraction numerator This space year apostrophe straight s space market space sales space minus space Last space year apostrophe straight s space market space sales over denominator Last space year apostrophe straight s space market space sales end fraction space straight x space 100 end style
  

  • If the growth rate is positive, the market is getting bigger (expanding)

  • If the growth rate is negative, the market is getting smaller (contracting)

Worked Example

In 2021 worldwide sales of plug-in hybrid vehicles was 1.94 million units. By 2022 sales had increased to 2.84 million units.

Calculate the rate of market growth in the plug-in hybrid vehicles market.

[2 marks]

Step 1 - Deduct 2021's sales from 2022's sales

equals 2.84 space million space minus space 1.94 space million space

equals space 0.90 space million

Step 2 - Divide the outcome by 2021's sales

begin mathsize 16px style fraction numerator 0.90 space million over denominator 1.94 space million end fraction space equals space 0.4639 end style        [1 mark]
 

Step 3 - Multiply the outcome by 100 to find the percentage growth rate

begin mathsize 16px style 0.4639 space cross times space 100 space equals space 46.39 percent sign end style       [1 mark]

Examiner Tips and Tricks

Unless otherwise stated, always give your answer to two decimal places.

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Lisa Eades

Author: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.