Meeting Customer Needs (Edexcel 9BS0 1.1)
Topic 1.1 covers how businesses identify and satisfy customer needs: mass and niche markets, market share, dynamic markets, risk and uncertainty, and market positioning. Examiners love it because it opens almost every Paper 1 case study and rewards students who can apply market data quickly.
Mass markets, niche markets and market share
A mass market involves selling standard products to very large numbers of customers. Tesco held roughly 28% of UK grocery spending in 2025 (Kantar), serving almost every household, which brings high revenue and economies of scale but also intense price competition. A niche market targets a smaller segment with specific needs. Gymshark began in 2012 selling gym wear to a narrow community of fitness fans and grew to revenue of around £600m by its 2024 financial year, showing how niche positioning can support premium prices and loyal customers before a brand widens its reach.
Two calculations appear regularly in Paper 1:
- Market size = total sales in the market, by value (£) or volume (units).
- Market share = (firm sales ÷ total market sales) × 100.
Worked example: a chain with sales of £360m in a market worth £4.5bn has a market share of 360 ÷ 4,500 × 100 = 8%. Always state whether you are using value or volume, because the two can give different answers.
Dynamic markets, risk and uncertainty
Markets are dynamic: they change in size, tastes and technology. Online retail is the classic example. ASOS saw revenue fall from around £4bn in 2022 to about £2.9bn in 2024 as shoppers returned to physical stores and low-price rivals such as Shein took share, forcing ASOS to cut stock levels and reduce costs. Businesses adapt to dynamic markets by developing new products, entering new segments, and building flexibility into staffing and production.
Edexcel expects a clear distinction between risk and uncertainty. Risk is measurable: a business can estimate the probability of an outcome, such as the failure rate of new product launches, and can insure against some risks. Uncertainty cannot be quantified, because the event is unforeseeable — the pandemic and the 2022 energy price shock are good examples. Entrepreneurs cannot remove uncertainty, but contingency planning, low fixed costs and retained profit all improve a firm's ability to survive it.
Market positioning and competitive advantage
Market positioning is where consumers place a brand relative to rivals, usually shown on a market map with axes such as price and perceived quality. Aldi positions itself as low price with acceptable quality, and that position proved so threatening that Tesco launched its Aldi Price Match campaign in 2020 and has run it ever since. Greggs occupies a value food-on-the-go position, which supported sales of more than £2bn in 2024.
Ways to build a competitive advantage from positioning include:
- Product differentiation — real or perceived differences, from recipe to branding.
- Adding value — raising the gap between selling price and bought-in costs, for example through convenience or design.
- A clear USP — a feature rivals cannot easily copy.
A gap on the market map may signal an opportunity, but examiners reward students who ask whether the gap exists because there is no profitable demand there.
Key terms
Practice questions
Explain one advantage to a business such as Gymshark of starting in a niche market. [4 marks]
Model answer guidance: Identify a benefit such as meeting specific customer needs closely, then develop the chain of reasoning: a focused product range builds loyalty among fitness customers, loyalty allows premium pricing, and premium pricing raises margins despite low volumes. Apply it to Gymshark's early community of gym-goers. Two linked strands of analysis with application earn full marks.
Explain one difference between risk and uncertainty for an entrepreneur. [4 marks]
Model answer guidance: State the distinction: risk can be quantified and planned for, whereas uncertainty cannot. Develop with an example — an entrepreneur can estimate the risk of a product failing using market research, but cannot predict an event such as a sudden energy price shock. Link to a consequence, such as holding contingency funds for uncertainty.
Discuss the benefits to a supermarket of using a market map when repositioning its own-label ranges. [8 marks]
Model answer guidance: Explain that a market map shows the supermarket where rivals sit on price and quality and reveals gaps, using Tesco's response to Aldi as context. Analyse two benefits: identifying an underserved position and informing the marketing mix. Balance with a counterpoint — maps rely on subjective perceptions and a gap may reflect absent demand. Finish with a short judgement.
Assess whether a strong market position is enough to protect a retailer operating in a dynamic online market. [10 marks]
Model answer guidance: Argue for: a clear position such as ASOS's fashion-led offer builds loyalty and brand recognition, which slows customer loss. Argue against: dynamic markets shift quickly — Shein's low prices eroded ASOS sales despite its established position — so flexibility, cost control and continuous product development matter as much. Conclude with a justified judgement that position must be defended by adaptation, not relied upon.
Assess the likely value to Tesco of competing with discounters through price-matching rather than differentiation. [12 marks]
Model answer guidance: For price-matching: it directly tackles the reason customers switch to Aldi, protects the 28% share, and uses Tesco's scale to absorb thinner margins. Against: matching prices squeezes profit on matched lines and concedes that Aldi sets the agenda, whereas differentiation through Clubcard, range and convenience adds value discounters cannot copy. A strong answer weighs both, notes Tesco actually does both at once, and makes a conclusion that depends on customer segment and margin impact.
Examiner tips
- When a case study gives market data, calculate market share or growth without being asked — quantitative application lifts you into the top level of the mark scheme.
- Never write that a gap on a market map is automatically an opportunity; question whether profitable demand exists in that gap.
- Define risk and uncertainty separately — candidates who treat them as synonyms cap their own marks on this topic.
In The Business School simulation your students make these exact decisions in a live market against rival firms — every choice mapped to the specification. Free teacher demo, no installs, students join with a PIN.