Understanding Markets

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  • Created by: amy
  • Created on: 16-05-13 19:23

Key Terms

  • THE MARKET- A place where buyers and sellers meet
  • PHYSICAL MARKET- A physical location for the coming together of buyers and sellers e.g. shop premises
  • NON-PHYSICAL MARKET- the transaction of goods/services via electronic means such as the internet
  • DEMAND- the amount of a product/service that consumers are willing and able to buy at a given price
  • DEMOGRAPHICS- those features of a market relating to the population and their characteristics e.g. age
  • MARKET SEGMENTATION- the breaking down of customers into groups which share common characteristics e.g. sex, age, location
  • MARKET SHARE- the percentage of the total sales of a market that is held by an individual product/business
  • MARKET SIZE- a measure of the total market in terms of either its value/volume of sales
  • MARKET GROWTH- the percentage change in sales (volume/value) over a period of time
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Local & national markets

Local Markets

  • closer to consumer therefore more convenient
  • commoly used for personal services such as hairdressing/plumbing
  • allows small local businesses to get to know their customers better

National Markets

  • when a firm sells their goods/services across most of the country
  • can be a more difficult market for small businesses to break into
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non-physical/physical markets

physical markets

  • more traditional
  • higher costs associated with running a shop
  • allows for personal service and for tangible products

non-physical markets

  • rapidly growing sector of the market.. Cheap to set up!
  • allows local firms to sell to a national and even global market
  • challenges of payment security, lack of personal service and intangibility of products
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factors which influence demand for a product

Price of other goods

  • substitudes- alternative product to your own. e.g. pepsi is a close alternative for coke...if pepsi lowered the price of their product then demand for coke would likely fall and vice-versa.
  • complements- products that go alongside another product...e.g. curry and rice. if the price of curry was to rise, then the demand for rice would fall even though its price had remained the same.

Competitors actions

  • competitors might launch a new product or spend more money on advertising which could mean a fall in demand for your product
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Factors which influence Demand for a product


  • higher prices generally mean lower demand

Tastes and Fashions

  • must make sure that their market research is kept fresh as consumer trends can change quickly leaving you with little or no demand

Consumer Wealth

  • if you are selling luxury products and the income levels of your customer basse suddenly drops how do you respond? and vice versa...


  • a new law could limit demand for your product e.g. banning smoking
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factors which influence demand for a product


  • some goods are influenced by the time of the year... E.g. ice creams & theme parks

market segmentation

  • allows firms to understand their customers better which should help increase sales but only if segmentation has been done correctly!

demographic segmentation

  • this considers the social and economic characteristics of individuals and households
  • Age- many products/services are directly targeted at a specific age group
  • Gender- certain proucts are aimed at particular genders
  • Social Class- decided upon according to the occupation of the main income earner within the household. Based upon this marketers can estimate your likely purchasing habits.
  • Residential Status- 'ACORN' is used to segment customers according to their housing. the postcode is used to help decide upon things such as what paper you read etc.
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factors which influence demand for a product

Geographical segmentation

  • big differencces in spending patterns, social activities and personal disposable income depending on where you live

Advantages of Market Segmentation

  • businesses can identify new market segments andd use this to increase their market share
  • less profitable market segments can be avoided
  • identify the most effective means of marketing your product to different market segments so as to make the best use of limited funds


Problems of Market Segmentation

  • you might ingore those potential customers who do not fit into a clear market segment
  • market tastes and fashions are constantly changing
  • it is not always easy to place customers into clear catergories
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Market Mapping

  • uses segmentation to look at the features that distinguish different products/businesses
  • a firm can identify gaps in the market and identify where their own products/services are located by plotting points on a market map
  • therefore, the business can target their marketing more effectively...

Market Size

a measure of the total volume or value or sales within a market

  • Formula=        number of units sold x price = market size
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Market Growth

this is measured in percentage terms of any increase in the size of the market

Formula=        Change in Market Size       

                         Original Market Share          x 100





Market Share

this is the proportion of a market that is held by an individual product/business

  • Formula=    Sales of one product or firm

                              Total Market Sales                           x 100

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9 revision cards which cover the main definitions, segmentation and factors affecting demand. Quite wordy but could be used as notes or for abridging for your own revision purposes.

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