The Importance of Marketing (Edexcel IGCSE Business)
Revision Note
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 |
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Price |
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Quality |
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Choice |
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Convenience |
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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
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
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 |
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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
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
[1 mark]
Step 2: Multiply the outcome by 100 and express as a percentage
[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
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
Step 2 - Divide the outcome by 2021's sales
[1 mark]
Step 3 - Multiply the outcome by 100 to find the percentage growth rate
[1 mark]
Examiner Tips and Tricks
Unless otherwise stated, always give your answer to two decimal places.
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