anticipating changes in customer needs

1 Understanding Business Activity (Syllabus 1.1‑1.5)

Objective

Explain why businesses exist, differentiate needs from wants, classify enterprises, measure size, set objectives and identify key stakeholders.

Key Concepts

• Purpose of business – to satisfy human needs and wants profitably.
• Needs vs. wants – needs are essential for survival; wants are shaped by culture, income and personal preferences.
• Types of enterprises
  • Private (sole trader, partnership, limited company)
  • Public sector (government‑run services)
  • Non‑profit (charities, NGOs)
• Measuring size – turnover, profit, number of employees, market share.
• Business objectives – profit maximisation, growth, market share, survival, corporate social responsibility.
• Stakeholders – owners, employees, customers, suppliers, community, government.

Quick‑Check Table (AO mapping)

2 People in Business (Syllabus 2.1‑2.4)

Objective

Identify how motivation, management functions, leadership styles, recruitment, training and communication affect organisational performance.

Motivation & Management Functions

• Motivation theories – Maslow’s hierarchy, Herzberg’s two‑factor, McGregor’s Theory X/Y.
• Management functions – Planning, Organising, Leading, Controlling (POLC).

Leadership Styles

• Autocratic, Democratic, Laissez‑faire, Transformational, Transactional.

Recruitment & Training

• Recruitment steps – job analysis, advertising, short‑listing, interview, selection.
• Training methods – on‑the‑job, off‑the‑job, e‑learning, apprenticeship.

Communication & Legal Controls

• Formal vs. informal channels, feedback loops, digital communication tools.
• Legal controls – health & safety, employment law, data protection (GDPR), equal opportunities.

Case‑Study Vignette (AO 3/AO 4 practice)

“Sunny Boutique” – a small clothing retailer

1. Identifies a need for a sales assistant with strong social‑media skills.
2. Uses a structured interview based on competency questions.
3. Provides a two‑week induction plus weekly product‑knowledge workshops.
4. Monitors performance through sales data and customer feedback forms.
5. Evaluates the recruitment process: high staff turnover reduced by 30 % after introducing a mentorship scheme.

Quick‑Check Table (AO mapping)

3 Marketing (Syllabus 3.1‑3.4)

3.1 The Role of Marketing – Anticipating Changes in Customer Needs (3.1.1)

Objective

Understand how businesses can identify, satisfy, retain and build relationships with customers by anticipating future changes in their needs.

Full Definition (Syllabus 3.1.1)

• Identify the needs and wants of target customers.
• Satisfy those needs through appropriate products or services.
• Retain customers by delivering value and encouraging repeat purchase.
• Build relationships that generate loyalty and positive word‑of‑mouth.

Why Anticipating Customer Needs Is Important

• Develops products/services that meet future demand.
• Reduces risk of losing market share to competitors.
• Supports more effective pricing, promotion and distribution decisions.
• Enables proactive strategic planning.

Key Factors Influencing Changes (PESTLE)

Steps to Anticipate Changes

1. Gather market intelligence
   • Primary research – surveys, focus groups, interviews, observation.
   • Secondary research – industry reports, government statistics, competitor literature.
2. Identify emerging trends
   • Analyse patterns in technology, lifestyle and economic data.
   • Use PESTLE analysis to structure findings.
3. Analyse customer behaviour
   • Track purchase histories, online activity and feedback.
   • Segment customers to detect shifting preferences within groups.
4. Forecast future needs
   • Qualitative – expert panels, Delphi method.
   • Quantitative – trend extrapolation, e.g. ΔC = Cfuture – Ccurrent to estimate change in demand.
5. Develop responsive strategies
   • Adjust product design, pricing, promotion and distribution.
   • Plan rapid prototyping, pilot launches or limited‑edition trials.
6. Monitor and review
   • Collect post‑launch feedback and sales data.
   • Update forecasts and refine strategies as new information emerges.

Practical Example

Scenario: A soft‑drink manufacturer notices a growing health‑conscious trend among teenagers.

1. Market intelligence – surveys and social‑media monitoring reveal demand for low‑sugar, natural‑flavour drinks.
2. Trend identification – health and wellness identified as a dominant socio‑cultural factor.
3. Customer behaviour analysis – teenage segment shows decreasing purchase of high‑sugar sodas.
4. Forecast – projected 15 % annual growth in the “zero‑sugar” segment.
5. Strategy – develop a “Zero‑Sugar” line, price competitively, promote via Instagram influencers, place in health‑focused retail outlets.
6. Monitor – track sales, online sentiment and adjust flavour mix after six months.

This proactive approach captures a new market segment before competitors react.

Suggested Diagram

3.2 Market Research (Syllabus 3.2)

Primary Research

• Methods: questionnaires, interviews, focus groups, observation, experiments.
• Sampling – random, stratified, convenience; sample size influences reliability.

Secondary Research

• Sources: company records, trade magazines, government publications, online databases.
• Useful for background information, trend analysis and benchmarking.

Ensuring Accuracy & Validity

• Clear, unbiased questions.
• Representative sample of the target market.
• Up‑to‑date data from reputable sources.

3.3 The Marketing Mix (4 Ps) & Technology (Syllabus 3.3)

3.4 Marketing Strategy (Syllabus 3.4)

Developing a Marketing Strategy

1. Analyse market research (PESTLE, segmentation, competitor review).
2. Set clear marketing objectives (e.g., increase market share by 5 % in 12 months).
3. Choose a positioning statement that differentiates the offering.
4. Decide on the appropriate mix of the 4 Ps.
5. Consider legal & ethical controls (misleading advertising, product safety, data protection).
6. Plan implementation, budgeting and monitoring arrangements.

Legal & Ethical Controls Checklist (AO 4)

• Advertising – must be truthful, not misleading, and comply with the CAP Code.
• Product safety – comply with relevant health & safety legislation.
• Labelling – accurate ingredient lists, nutritional information, country of origin.
• Data protection – adhere to GDPR when collecting and storing customer data.
• Environmental claims – evidence required for “green” or “sustainable” statements.

Example – “Eco‑Wear” Clothing Brand

• Market research shows rising demand for sustainable fashion among 18‑30 year‑olds.
• Objective: achieve 8 % market share in the UK sustainable‑clothing market within 2 years.
• Positioning: “Stylish, affordable, 100 % recycled fibres.”
• Product – recycled polyester, transparent supply chain.
• Price – mid‑range, with occasional “green‑day” discounts.
• Place – online store plus pop‑up shops in university cities.
• Promotion – influencer partnerships, eco‑certification badges, Instagram reels.
• Legal controls – accurate fibre‑content labelling, GDPR‑compliant newsletter sign‑ups.

4 Operations Management (Syllabus 4.1‑4.4)

4.1 Production Methods

4.2 Cost Classification & Break‑Even Analysis

• Fixed costs – do not vary with output (rent, salaries).
• Variable costs – change with output (raw materials, hourly wages).
• Total cost (TC) = Fixed cost (FC) + Variable cost (VC)

Break‑Even Formula

Break‑Even Volume = FC ÷ (Price per unit – Variable cost per unit)

Worked Example

A bakery sells cupcakes at £2 each. Fixed costs = £5 000 per month, variable cost per cupcake = £0.80.

Break‑Even Volume = 5 000 ÷ (2 – 0.80) = 5 000 ÷ 1.20 ≈ 4 167 cupcakes per month.

4.3 Quality Management

• Quality control (QC) – checking output against standards (inspections, testing).
• Quality assurance (QA) – processes that prevent defects (training, standard operating procedures).
• Continuous improvement approaches: Lean (waste reduction) and Kaizen (small, ongoing improvements).

4.4 Location Decisions

5 Financial Information & Decisions (Syllabus 5.1‑5.5)

5.1 Sources of Finance

5.2 Cash‑Flow Forecast (Simple Template)

Positive net cash flow each month indicates good liquidity; a negative figure signals the need for short‑term finance.

5.3 Income Statement & Balance Sheet (Key Components)

• Income Statement – revenue, cost of sales, gross profit, operating expenses, operating profit, interest, tax, net profit.
• Balance Sheet – assets (current & non‑current), liabilities (current & non‑current), shareholders’ equity.

5.4 Ratio Analysis (Interpretation)

5.5 Financial Decision‑Making Prompts

• Should the business invest in new equipment? (Analyse break‑even, cash‑flow and ROI.)
• Is it better to raise finance through a bank loan or issuing shares? (Compare cost of capital, control, risk.)
• How will a price increase affect profit margin and demand? (Use price elasticity and contribution analysis.)

Exam Practice Question (Marketing – Anticipating Customer Needs)

Question: Explain how a company can use market research to anticipate a change in customer needs and give one example of a business that successfully did this.

Suggested answer structure (AO1‑AO3):

1. Define market research and its purpose (identify, satisfy, retain, build relationships).
2. Outline the steps:
   • Choose appropriate primary/secondary methods and a representative sample.
   • Collect data and analyse trends using PESTLE.
   • Segment customers to spot shifts in preferences.
   • Use qualitative (Delphi) or quantitative (trend extrapolation) techniques to forecast future demand.
3. Explain how the findings influence the 4 Ps – e.g., redesigning the product, adjusting price, selecting new distribution channels, and targeting promotion.
4. Provide a real‑world example:
   • Apple’s launch of the iPhone after research showed growing demand for mobile internet and touch‑screen devices.
   • Or the soft‑drink “Zero‑Sugar” line described earlier.

Include evaluation (AO4) by discussing the risks of inaccurate forecasts and the importance of continuous monitoring.