The Market (Edexcel IGCSE Business): Flashcards
Exam code: 4BS1
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Define marketing.
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Define marketing.
The aim of marketing is to identify, anticipate and satisfy consumer needs and wants profitably.
What is the difference between a customer 'need' and a 'want'?
A need is essential (e.g. food, shelter); a want is a non-essential desire (e.g. Nike trainers).
Give two things marketing helps a business find out about its customers.
The variety/quality they want, the price they'll pay, effective promotion, and where/how they want to buy (any two).
Define customer loyalty.
Customer loyalty is when existing customers buy from the same business over and over again.
Why is keeping existing customers cheaper than gaining new ones?
Gaining new customers needs expensive advertising, whereas loyal customers can be kept more cheaply (e.g. with loyalty cards).
Define market orientation.
Market orientation focuses on the needs of consumers, using that information to design products that meet those needs.
Define product orientation.
Product orientation focuses on the product itself rather than consumer needs — creating a product first, then finding a market.
True or False?
A business that is too product-orientated risks moving away from what the market wants.
True.
Over time it can move further from what the market is looking for, increasing the risk of failure.
Define a niche market.
A niche market is a small subset of a larger market whose specific demands a business satisfies (e.g. gluten-free bread).
Define a mass market.
A mass market aims products at broad market segments and most of the available market (e.g. Kellogg's Corn Flakes).
Why can niche market products often charge high prices?
Small-scale production means high average costs (no economies of scale), but specialised, unique products let firms charge high prices and earn higher margins.
Mass market products have low average costs because large-scale production benefits from economies of .
Mass market products have low average costs because large-scale production benefits from economies of scale.
What is the formula for market share?
Market share = (sales of the business ÷ market size) × 100.
Starbucks' sales were £328m in a £4.6bn market. What is its market share?
(£328m ÷ £4,600m) × 100 = 7.13%.
What is the formula for market growth?
Market growth = ((this year's sales − last year's sales) ÷ last year's sales) × 100.
Market sales rose from 1.94m to 2.84m units. What is the market growth rate?
((2.84 − 1.94) ÷ 1.94) × 100 = 46.39%.
True or False?
A negative market growth rate means the market is expanding.
False.
A negative rate means the market is contracting (getting smaller); a positive rate means it is expanding.
Market share measures the of total market revenue that one business or brand holds.
Market share measures the percentage of total market revenue that one business or brand holds.
Name three reasons customer spending patterns change.
Changes in tastes and fashions, disposable incomes, demographics, global influences, and technology (any three).
How can a fall in disposable income affect spending?
High unemployment or inflation may lead customers to buy cheaper products (e.g. own-brand cereal).
Give an example of technology changing spending patterns.
New technology makes old technology obsolete — e.g. smart speakers replacing radios.
True or False?
If a business fails to respond to changing customer needs, it is likely to fail.
True.
Markets change constantly, so a business that does not respond to changing needs is likely to fail.
As populations in developed countries become , demand for products such as specialist travel insurance rises.
As populations in developed countries become older, demand for products such as specialist travel insurance rises.
Define competition (in a market).
Competition occurs when at least two businesses provide goods or services to the same target market.
Give two benefits of competition for customers.
Lower prices, better-quality products, and better customer service.
Why have many markets become more competitive in recent years?
Globalisation, cheaper transport, the internet and e-commerce, and more consumer information.
True or False?
A lack of competition gives businesses a strong incentive to innovate and cut prices.
False.
The absence of competition reduces incentives to innovate, be efficient or lower prices.
Name two steps a business can take to stay competitive.
New product development, strong customer focus, improving products, and minimising costs (any two).
How can minimising costs help a business stay competitive?
Lower costs can be passed on as lower prices, and extra retained profit can fund promotion or expansion.
Developing new and innovative products encourages customer and attracts new customers.
Developing new and innovative products encourages customer loyalty and attracts new customers.
True or False?
Competition only exists when there are many businesses in a market.
False.
Competition exists with at least two businesses; the more there are, the more intense it becomes.
Give an example of a global influence changing a market.
The arrival of international brands — e.g. American fast-food chains now dominating fast food across Europe.
Define market segmentation.
Market segmentation is dividing a single market into groups, each with distinct customer preferences.
Why do businesses use market segmentation?
To target marketing at the customers most likely to buy — an efficient use of budget that closely meets customer needs.
How can segmentation increase customer loyalty?
When customers feel their needs are met, they are more likely to be loyal and to recommend the brand.
Name three ways a market can be segmented.
Location, demographics, lifestyle, income, and age (any three).
Give an example of segmenting a market by location.
City-dwellers may buy small electric cars, while rural customers prefer larger, all-terrain vehicles.
How might a market be segmented by demographics?
By gender, the age of the population, or ethnicity/religion — e.g. clothing and food targeted at specific groups.
Give one advantage of market segmentation.
Marketing can be targeted precisely at different groups, which is less wasteful and can increase loyalty.
Give one disadvantage of market segmentation.
A segment may be hard to identify or too small to be profitable, and it needs costly, detailed market research.
True or False?
Every consumer belongs to only one market segment.
False.
Consumers can belong to multiple segments at the same time, which makes segments hard to identify.
Name two factors a business considers when choosing a method of segmentation.
Brand image, the cost of entry into the segment, and market analysis data.
Why must a chosen segment align with a business's brand image?
Appealing to the wrong segment can harm the image — e.g. a luxury retailer targeting a budget market.
True or False?
The best method of segmentation is the same for every business.
False.
The method depends on the nature of the business — e.g. a bespoke watchmaker segments by income.
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