Customer needs are the benefits customers look for when buying. Important needs include price, quality, choice and convenience; customers may prioritise them differently.
Price affects affordability and perceived value. A lower price may attract budget-conscious customers, but a price that does not cover costs threatens survival.
Quality means meeting expectations. For a café, reliable food and friendly service may matter more than expensive decoration; expectations vary between market segments.
Choice allows customers to select an offer that fits their preferences. More choice can increase sales but also increase stock, training and waste costs.
Convenience includes location, opening hours, delivery, ease of payment and ease of ordering. Making a service easier to use can distinguish it from competitors.
Understanding needs helps the business design its product and marketing mix, generate sales and encourage repeat purchases. Sales support survival only if costs and cash are also managed.
Customers' needs can conflict. A very broad product range may reduce convenience if ordering becomes slow; a premium product may not fit a low-income target market.
Use evidence to decide which need matters most to the specific customer group, rather than assuming every customer wants the cheapest option.
1.2.2 · Market research
Market research gathers and analyses information about customers and markets. It can identify needs and gaps, reduce uncertainty and inform decisions about price, product, promotion and place.
Primary research collects new information for the business's own purpose. A survey or questionnaire can ask potential customers about preferences and likely spending.
A focus group discusses ideas in depth, giving qualitative explanations. It is small, may be costly and can be influenced by a dominant participant or the moderator.
Observation records actual behaviour, such as which display customers approach. It avoids relying entirely on stated intentions but does not necessarily explain why people behave that way.
Secondary research uses existing information: internet sources, market reports and government reports. It can be quicker and cheaper, but may be outdated or too broad for a local decision.
Quantitative data are numerical, such as the number selecting a price. Qualitative data describe reasons, opinions or experiences. Use both to understand the pattern and its possible causes.
Social media polls, comments and interactions provide quick feedback, but followers may not represent the intended market. Public comments and online surveys can attract unusually positive or negative responses.
Reliable research uses a suitable sample, clear neutral questions, current information and a consistent method. A large sample can still be biased if everyone is drawn from the same narrow group.
Avoid leading questions such as “Would you buy our excellent coffee?” State realistic prices and avoid assuming an intention to buy guarantees a purchase.
Worked example: 36 of 120 respondents prefer a delivery option. Percentage = 36120 × 100 = 30%. This describes the sample; it does not prove 30% of all local residents will buy.
1.2.3 · Market segmentation
Market segmentation divides a market into groups with similar characteristics or needs. A business can target a group rather than trying to satisfy everyone equally.
Segments can be based on location, demographics, age, income or lifestyle. These characteristics can overlap: local students with limited income may form one target segment.
Targeting helps focus research and spending. A cycling service aimed at commuters may prioritise quick repairs and early opening rather than leisure accessories.
Segmentation does not mean everyone in a group behaves identically. Check actual needs and avoid assumptions based only on age or income.
A market map plots competitors against two relevant characteristics, such as price and perceived quality. It helps visualise positioning and possible gaps. An illustrative market map
A gap is an area with few competitors, but it may exist because demand is too low or costs are too high. Further research is needed before treating a gap as an opportunity.
Maps depend on the chosen axes and the accuracy of the data. A price/quality map may miss convenience, customer service or a competitor's online offer.
Choosing a segment influences the whole marketing mix: a premium service needs suitable quality, price, promotion and distribution, not merely a premium label.
1.2.4 · The competitive environment
Competitors offer alternatives that customers can choose. Direct competitors sell similar products; other alternatives can also compete for customers' time and money.
Compare competitors' strengths and weaknesses in price, quality, location, product range and customer service. A strength in one area can coexist with a weakness in another.
A low-price competitor may put pressure on prices. Matching it can increase sales but reduce profit per sale, especially for a small business with higher unit costs.
Differentiation gives customers a reason to choose the business, such as specialist knowledge, reliable service or convenient delivery. It may allow the business to avoid competing only on price.
Competition can encourage better quality and innovation. It can also increase promotional costs and reduce an individual business's market share.
Monitor changes in competitors' opening hours, offers and reviews, then assess which response fits the business's resources and target market.
Fictional case: a stationery shop faces a cheaper online competitor. Same-day collection might attract customers who need items immediately, although holding enough stock ties up cash.
Analyse both demand and cost. A recommendation to offer collection is stronger when it explains which customers benefit, how sales may change and why the business can afford the stock.
Test yourself
40 questions · Random sets of 10. Type numerical answers without currency or percentage symbols unless instructed. These quick checks support revision; practise extended explanations and justified judgements too.
Mr Kidman's Classroom