4.2 The market
- Syllabus
- 2026
- Topic
- 4.2
- Level
- —
Learning objectives
4.2.1Importance of marketingUnderstand how marketing satisfies customer needs, builds relationships and loyalty, and uses market or product orientation, market-share calculation and analysis, and niche or mass marketing.4.2.2Responding to changes in the marketResponding to changes in the market:• changing customer needs• changing customer/consumer spending patterns• increased competition.4.2.3Market segmentationHow businesses use market segmentation to target customers:• identifying market segments:- location- demographics- lifestyle- income- age.
Use marketing to create and keep customer value
Marketing identifies and satisfies customer needs profitably. A business uses what it learns to shape an offer, communicate value and build a relationship that encourages satisfaction, recommendation and repeat purchase.
| Approach | Starting point | Main strength | Main risk |
|---|---|---|---|
| market orientation | researched customer needs and market evidence | offer is designed around demand, reducing mismatch risk | research can be costly, imperfect or quickly outdated |
| product orientation | the business's product idea, technical skill or innovation | can create a distinctive offer customers had not requested | features may not match enough customers' priorities |
Reliable quality, service, communication and suitable loyalty rewards can build trust and repeat purchase. Loyalty can lower the effort of winning each future sale and produce recommendations, but customers stay only while the total offer remains competitive; a scheme alone does not create genuine loyalty.
marketshare(%)=businesssales/totalmarketsales×100
If Business 2 earns £150,000 in a £1,200,000 market, its market share is £150,000 ÷ £1,200,000 × 100 = 12.5%. Compare the same sales measure, market definition, place and period. A rising share means the business is gaining relative to the defined market; it does not prove profit has risen.
| Strategy | Market | Benefit | Limitation |
|---|---|---|---|
| niche marketing | a small specialised segment | close fit, differentiation and potentially less direct competition | smaller demand and dependence on one segment |
| mass marketing | a broad market with a common offer | high sales potential and scale | intense competition and less precise fit for individual needs |
Marketing is wider than promotion: it connects research, product, price, place, promotion and relationships. Neither market orientation, product orientation, niche nor mass marketing is always best; judge fit with capabilities, competition, demand and objectives.
Respond when customers, spending or competition changes
Markets change when what customers value changes, when their ability or willingness to spend changes, or when competitors alter the available choices. A business must detect the change, identify its effect and adapt the relevant part of its offer.
| Change | Likely effect | Possible response | Decision check |
|---|---|---|---|
| customer needs change | existing features or service become less attractive | research needs; modify quality, design, service or promotion | whether the change is lasting and important to the target segment |
| consumer spending rises | demand may grow, especially for discretionary/premium offers | add capacity, range or premium options | whether capacity and finance can expand without weakening quality |
| consumer spending falls | customers may trade down, postpone or reduce purchases | offer value options, adjust price/pack size and control costs | effect on margin, brand position and price sensitivity |
| competition increases | customers gain alternatives; price, sales or share may be pressured | differentiate, improve service/quality, promote, innovate or reduce cost | competitor strength, customer response and sustainability of the response |
Make the reasoning contextual: new low-cost rivals enter → price-sensitive customers can switch → sales and market share may fall → the business could create a value offer or strengthen differentiation. The response succeeds only if customers notice and value it enough to cover its cost.
Use current market research, sales patterns, feedback, competitor actions and market-share trends to distinguish a temporary fluctuation from a structural change. Test changes where possible and monitor the result rather than assuming the first response worked.
Responding does not mean copying every competitor or changing every element of the marketing mix. A response can damage margin, quality or brand identity; speed matters, but so do evidence, resources, objectives and the likely duration of the change.
Segment the market before choosing a target
Market segmentation divides a broad market into groups whose members share relevant characteristics or needs. The business can then choose target segment(s) and adapt its offer and communication more precisely.
| Segmentation base | Example distinction | How it can change targeting |
|---|---|---|
| location | country, climate, city, neighbourhood or distance | distribution, language, local promotion or product suitability |
| demographics | population characteristics such as family status, occupation or education | message, product features and media selection |
| lifestyle | interests, activities, values or way of living | positioning and benefits emphasised |
| income | purchasing power or income band | price level, quality tier, finance and pack size |
| age | children, teenagers, adults or older consumers | design, communication channel, safety and product use |
Use segmentation as a chain: define the market → identify meaningful groups with evidence → compare their size, growth, needs, accessibility, competition and likely profitability → choose target segment(s) → adapt the marketing mix → monitor response.
A clear target can reduce wasted promotion, improve product–customer fit and support loyalty or differentiation. For example, segmenting toys by age can guide safety, complexity, design and communication; income segmentation can guide price tiers and product bundles.
Segments can overlap and change. Broad labels may hide important differences within a group, while very narrow segments may be too small to serve profitably. Collection and use of personal data must also be appropriate and reliable.
Segmentation describes groups; targeting chooses which group(s) to serve, and positioning shapes how the offer is perceived. Demographics is broader than age alone, while lifestyle describes patterns and values rather than simply income or location.