Edexcel A-level Business (9BS0) · 1.1 Meeting customer needs
Mini-Lesson
Meeting customer needs
This mini-lesson covers the whole of Edexcel 1.1 Meeting customer needs: 1.1.1 the market (mass and niche markets, market size and share, brands, dynamic markets, competition, risk versus uncertainty), 1.1.2 market research (orientation, primary and secondary data, sampling and bias, ICT, segmentation) and 1.1.3 market positioning (market mapping, competitive advantage, differentiation, added value).
Work through each screen, answer the questions as you go (multiple choice, calculations and sorting tasks) and collect ⭐ stars. Press Start when you are ready.
1.1.1 · The market
Mass markets and niche markets
A market is anywhere buyers and sellers exchange goods and services. Edexcel wants you to distinguish two strategic positions:
Mass market: a standardised product aimed at the whole (or most of the) market. High volume, low unit price, low margins, heavy price competition, but large potential economies of scale. Example: a supermarket own-label cola.
Niche market: a small, specific segment within a larger market. Low volume, but the product is differentiated, so the firm can charge a premium price and earn high margins. Example: a gluten-free craft bakery.
Evaluation: niches are not automatically safer. They are vulnerable if a mass-market giant enters and copies the idea, and they have limited scope for growth. Mass markets are lower-risk in volume terms but the firm must compete on cost. The right answer depends on the firm's resources, its brand and the barriers to entry.
1.1.1 · The market
Market size, market share and brands
Two quantities you must be able to calculate:
market size = volume × average priceMarket size can be measured by volume (units sold) or by value (total revenue in the market).
market share (%) = (firm's sales ÷ total market sales) × 100Use value or volume — but be consistent for both figures.
A brand is the identity that makes a product recognisable and distinct. Strong brands add value, allow premium pricing and reduce price elasticity of demand — customers are less willing to switch away when the price rises.
Calculate
Your turn — market share
1Wildwood Coffee sells £4.5m of coffee a year. The total UK speciality-coffee market is worth £60m. Calculate Wildwood's market share, as a percentage.
%
Hint: (4.5 ÷ 60) × 100.
Calculate
Your turn — market size by value
2In a market, 250,000 units are sold each year at an average price of £18. Calculate the market size by value, in £m.
£m
Hint: 250,000 × £18 = £4,500,000, then convert to £m.
Quick check
Interpreting market share
?Wildwood's sales grow from £4.5m to £5.4m, but the whole market grows from £60m to £90m. Which statement is correct?
1.1.1 · The market
Dynamic markets, competition, risk and uncertainty
Markets are dynamic — they change continuously. Edexcel highlights online retailing, innovation and market growth, and the need to adapt to change (new distribution channels, new customer expectations, new entrants).
More competition tends to push prices down, raise quality and choice, squeeze margins and force differentiation or cost leadership.
risk ≠ uncertaintyRisk can be quantified: you can attach a probability and often insure or hedge against it. Uncertainty cannot: the outcomes themselves are unknown (a pandemic, a disruptive technology, a sudden political shift).
Exam application: a firm can plan for the risk that a product launch fails (assign probabilities, use a decision tree). It cannot plan a probability for the uncertainty of a rival inventing a technology that makes the whole product category obsolete — it can only build flexibility and scenario plans.
Quick check
Risk or uncertainty?
?A clothing retailer knows that, on past data, 8% of online orders are returned. It also faces the possibility that an as-yet-unknown technology changes how people shop entirely. Which is correct?
1.1.2 · Market research
Product orientation, market orientation and research data
Product orientation: the firm starts with the product it can make well and then looks for buyers (common in R&D-led or luxury markets). Market orientation: the firm starts with customer needs found through research, then designs the product.
Primary (field) research: collected first-hand for this purpose — surveys, focus groups, observation, test marketing. Up to date and specific, but expensive and slow.
Secondary (desk) research: already exists — ONS data, competitor accounts, trade press, internal sales records. Cheap and fast, but not tailored and may be out of date.
Quantitative data answers how many / how much (numbers). Qualitative data answers why (opinions, motivations).
Limitations: a small sample size raises sampling error; a badly chosen sample causes bias (asking only existing customers hides why non-customers stay away); questions can lead respondents; and people do not always do what they say they will do.
Match it
Classify the research
Tap a research activity on the left, then the correct classification on the right.
Research activity
Type of data
1.1.2 · Market research
ICT and market segmentation
ICT in research: websites and analytics (click-through, dwell time, abandoned baskets), social networking (sentiment, listening, cheap panels) and databases (loyalty-card data linking who buys what, when, at what price). Big data lets firms anticipate needs rather than just record them.
Segmentation splits the market into groups with similar characteristics: demographic (age, gender, income, life stage), geographic, psychographic (values, lifestyle, attitudes) and behavioural (usage rate, loyalty, benefit sought).
Segmentation lets a firm target a group precisely, tailor the mix to it, and avoid wasting promotional spend on people who will never buy.
Quick check
Sampling and bias
?A gym surveys 40 people leaving its own premises at 7am on a Tuesday and concludes that customers want more early-morning classes. What is the strongest criticism?
1.1.3 · Market positioning
Market mapping and competitive advantage
A market map (positioning map) plots brands against two variables customers care about — for example price (low to high) against quality or age of target market.
A gap on the map is only an opportunity if there is a gap in the market AND a market in the gap — enough customers willing to pay.
Competitive advantage is a sustainable reason for customers to choose you: lower cost (so you can undercut) or genuine differentiation (so you can charge more).
Quick check
Reading a market map
?A market map shows an empty space at 'high quality, low price'. What is the best evaluation of this gap?
1.1.3 · Market positioning
Product differentiation and adding value
Product differentiation makes the offer distinct in the customer's mind — design, quality, USPs, service, brand image, packaging, ethics. Its purpose is to reduce the customer's willingness to substitute, i.e. to make demand less price elastic, so the firm can protect price and margin.
added value = selling price − cost of bought-in inputsValue is added by branding, convenience, speed, service, packaging, customisation and ethical sourcing — not just by physically changing the product.
Chain of reasoning to use in the exam: differentiation → weaker substitutes → more inelastic demand → the firm can raise price without a proportionate fall in demand → total revenue and contribution rise → higher profit, provided the cost of differentiating is less than the extra revenue it generates.
Calculate
Your turn — market growth
3The speciality-coffee market grows from £48m to £60m in a year. Calculate the percentage growth in market size.
%
Hint: ((60 − 48) ÷ 48) × 100.
Sort it
Mass, niche or both?
Tap a card, then tap the market strategy it best describes. Some features are true of both.
🔁 Both
🏭 Mass market
💎 Niche market
Quick check
Adding value
?A coffee shop buys beans, milk and a cup for 45p and sells a latte for £3.20. Which of the following is the best example of adding value rather than simply raising price?
Recap
The big ideas to know
Mass vs niche: standardised, high volume, low margin vs specialised, low volume, premium price