Understanding Market Changes

Why consumer spending patterns may change

Why consumer spending patterns may change

• Markets and marketing strategies are constantly changing as a direct result of the changing wants and needs of customers, which affect their spending patterns

• Businesses that conduct ongoing market research are able to identify and interpret the changes that are happening in markets

Reasons for changes in spending patterns

1. Changes in tastes and fashions

   • Trends in some markets can change very quickly

     • For example, wide-leg jeans are now more fashionable with Gen-Z customers than 'skinny' jeans worn by millennials

2. Change in disposable incomes

   • High unemployment or inflation may lead to customers to buy cheaper products, e.g own brand breakfast cereal

3. Demographic changes

   • Populations in most developed countries are becoming older

   • Demand for products that meet their needs has driven many market changes

     • For example, sales of specialist travel insurance for mature holidaymakers has increased

4. Global influences

   • The arrival of well-known international brands can change demand and purchasing patterns in a market

   • Increased travel, support from celebrities and extensive promotional activity drive demand

     • For example, American fast food chains now dominate the market for fast food across Europe

5. Changes in technology

   • New technology makes old technology less desirable or obsolete

     • For example, products such as smart speakers are replacing sales of radios

Why some markets are becoming more competitive

Why some markets are becoming more competitive

• Competition occurs when at least two businesses are providing goods or services to the same target market

  • The more businesses in the market, the more intense the competition

• Competition results in many benefits for the customer, such as

  • Lower prices

  • Better-quality products

  • Better customer service

Reasons for increased competition

Responding to changing spending patterns and increased competition

Responding to changing spending patterns and increased competition

• Whenever there are changes to spending patterns or competition, a business will need to take action to maintain its market position

Steps a business can take to remain competitive

1. New product development

   • Creating new or improved products helps a business stay competitive, attract new customers and build brand loyalty

   • For example, Apple responded to changes in how people listened to music by moving from iPods to digital downloads through the Apple Music app

2. Customer focus

   • Providing excellent customer service encourages loyalty, improves customer satisfaction and increases the chance of repeat sales

3. Improve products

   • Regularly improving products helps a business match or outperform competitors and maintain its market share

     • For example, Google continues to develop services like Google Meet to stand out from other tech and search engine companies

4. Minimise costs

   • Reducing costs can allow a business to offer lower prices or increase profit margins

   • Higher retained profit can be reinvested into promotion or expansion, helping the business grow and reach more customers

Market share

Market share

• Market share is the proportion of the total sales of a product or service compared to the market as a whole

  • e.g. Carrefour has 20.2% of the French grocery market

• Market share is calculated using the formula

$\mathrm{Market} \mathrm{share} = \frac{\mathrm{Sales} \mathrm{of} \mathrm{a} \mathrm{business} \mathrm{in} \mathrm{a} \mathrm{time} \mathrm{period}}{\mathrm{Total} \mathrm{market} \mathrm{sales} \mathrm{in} \mathrm{a} \mathrm{time} \mathrm{period}} \times 100$