AQA Business Studies for AS

Transcription

1 Effective marketing 25 Chapter Quick questions 1 What is meant by marketing? It is a mutually beneficial exchange process between a firm and its customers. 2 Why is marketing a dynamic process? Because customers needs and wants are changing all the time, as are the competition, the technology, the ways of delivering the product and many other factors that change the marketing process. 3 Marketing should be a mutually beneficial process. What does this mean? Both the customer and firm should benefit; for example, the firm might make a profit, while the customer feels she/he has had excellent value for money as a result of the transaction. 4 What is meant by niche marketing? This occurs when a firm targets a small segment of the market rather than the mass market. 5 State two reasons why a start-up business might undertake niche marketing. It means it can focus on a small part of the market; this might be more manageable and realistic if it has only limited resources. Also, by concentrating on a small segment, it may be able to understand and meet these needs more realistically than targeting the mass market. The owners and managers may have an interest only in a specific section of the market; they may not be interested in the market as a whole. 6 State one problem of niche marketing. A firm operating in a niche market is vulnerable to a few customers switching away if the market is small to begin with and it loses some customers this can have a major effect on its overall sales. Also, it is vulnerable if larger firms enter the market and start to take sales away. 7 Identify one way in which marketing actions can affect other business functions. may affect the level of sales, and this affects how much needs to be produced may affect what has to be produced, which may affect human resource requirements (e.g. recruitment and training plans)

2 Effective marketing 25 Chapter 8 Identify one way in which other business functions can affect marketing actions. A lack of capacity may mean there is no pressure to increase demand, whereas if the firm is operating well below capacity there is likely to be major pressure to boost sales. A lack of skills and staff may mean a particular service cannot be offered. Particular strengths (e.g. the quality of staff customer service) may be turned into a selling point for the business. Analysis and evaluation questions (Refer to questions on page 189 of text.) 1a Analyse the ways in which the market for hotels may be segmented. business vs tourist demands people wanting to visit cities vs those wanting a country break overnight stays vs long stays cheap, bargain breaks vs luxury hotels 1b Discuss the possible benefits of segmentation for Takako s business. Segmentation involves identifying groups of similar needs and wants. Having done this the firm can decide which segment(s) to target; by targeting it can focus on these requirements and not waste money on marketing activities that are irrelevant and illdefined. However, the firm needs to decide how much to segment; the more it does, the smaller the segments might be is it worth targeting these segments? Is there enough profit to made? Also, the more segments targeted the more hotels and marketing need to be adjusted this becomes more complex to manage. Targeting new segments may be a way of growing further; should this be done under the same brand name or not? Judgement could discuss the relative significance of the benefits in the context of the business and its situation. 2a Analyse the possible benefits to GoodRead of becoming more market oriented. A market-oriented business bases its decisions on the needs and wants of its customers.

3 Effective marketing 25 Chapter This should mean that it: will understand what people are most likely to buy from this sort of shop and what will influence them to buy, e.g. customer service, advice on what to read, good knowledge of the books may be able to respond better to market trends, and therefore develop the right marketing mix and improve competitiveness may provide a better-quality service (e.g. better range of books) for customers than the competition because it understands them better 2b Discuss the advantages and disadvantages of adopting a niche marketing strategy for GoodRead. But: a niche marketing approach focuses on a small segment of the market may identify a small segment of the market that bigger chains are not so interested in, e.g. specialist books, collectors books may identify a specialist service it can provide but others cannot, which might give it a competitive advantage it may become dependent on relatively few customers, therefore this is high risk the danger is if the niche becomes successful then the larger chains will imitate the approach Judgement may draw conclusions about the relative importance of advantages and disadvantages for this type of business.

4 Effective marketing 25 Chapter Assessment: case study questions (Refer to case study on page 189 of text.) (30 marks; 40 minutes) What are the key features of a niche market? (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to small segment of a market with similar needs and wants often larger firms may not be interested in the segment because the market is too small to generate a suitable return for them 2 Effective marketing involves understanding your customer needs. Analyse how Just Lamps might ensure it meets its customer requirements. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s). talk to them survey them ask the sales force to feed back

5 Effective marketing 25 Chapter read about industry trends talk to the manufacturers 3 Discuss the possible advantages and disadvantages to Just Lamps of pursuing a niche-marketing approach. (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response. could target a very small market effectively; may be more focused but overall sales and profits may be low; may be vulnerable to relatively small changes in the market

6 Designing an effective marketing mix 26 Chapter Quick questions 1 What is meant by the marketing mix? all the factors that combine to influence a customer s decision whether to buy a product or not 2 What is meant by promotional activities in marketing? activities relating to communication about the product 3 What factors might affect the selection of the right marketing mix? the nature of the product, e.g. whether it is an industrial or consumer product the resources available, e.g. the funds available to finance marketing 4 What is meant by an integrated marketing mix? This means that the different elements of the marketing mix complement each other. They combine to provide excellent value. 5 State one product that is distributed very widely and one that is only available in a few select places. milk, newspapers and chewing gum are widely distributed; they are convenience items Bentleys, Ferraris and Jaguars are more likely to be available in relatively few selected places 6 State one high-price brand of a product and a low-price brand in the same market. Swatch watches and Rolex watches Primark T-shirts and D&G T-shirts Clarks shoes and Jimmy Choo shoes 7 State one type of product that is advertised on television a great deal and another that is not advertised on television very much, if at all. advertised on TV cars, shampoos, detergents, supermarkets not advertised on TV photocopier paper, socks, pillows, biros

7 Designing an effective marketing mix 26 Chapter 8 State one product where you might think for several weeks and do lots of research before buying. State one product that you tend to buy quickly and without much thought. would think for a long time choosing a university, house, new car would not think for long packet of crisps, mints, magazine Analysis and evaluation questions 1 The Whole Tooth is a private dental practice in an exclusive part of London. Fresh is a business that produces bottled water. 1a Analyse the key elements of a successful marketing mix for The Whole Tooth. The marketing mix is the combination of factors that influence a customer s decision to buy. In this case the elements of a successful mix might include: good word-of-mouth recommendation; this means the service has to be good and patients treated well has to be seen as value for money; may be expensive but could still be seen as good value if the treatment is seen as effective product; has to offer the services required, e.g. may involve cosmetic dental surgery, and the ability to book easily and quickly 1b To what extent is the marketing mix of the two businesses likely to be similar? Both can be analysed in terms of the marketing mix (e.g. product, price, place and promotion). In both cases, the elements of the mix need to complement each other. However, the elements of the mix and their relative importance will vary, e.g. distribution will be far more widespread for the bottled water, and spending on mainstream advertising is likely to be higher for bottled water. 2 You may have started or be about to start looking for a university for a degree course.

8 Designing an effective marketing mix 26 Chapter 2a Analyse the factors that might influence your choice of university. course entry requirements location accommodation literature and open day 2b Discuss the marketing actions a university might take to attract more students. produce a DVD improve open days develop new courses increase promotion and develop better links with schools invest in research to move up the league tables Judgement will be shown by considering the most important actions for this type of service. The actions to be taken will depend on factors such as who is choosing, what makes them choose and what other universities are doing.

9 Designing an effective marketing mix 26 Chapter Assessment: case study questions (Refer to case study on page 194 of text.) (30 marks; 40 minutes) a What do you think of Bouf as a brand name? Do you think that it helps the business? (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to Unusual, so may be memorable or is it too difficult to remember? What does it convey about the site and the business? Does it sound interesting? Does it reinforce the brand s values? The customer may be the best judge of this; sometimes, what do not seem like good names (Virgin? Apple?) catch on once the quality of the product and its marketing shine through. b If you were a marketing consultant to Bouf, analyse the factors that might influence the prices you set. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s).

10 Designing an effective marketing mix 26 Chapter perceived quality of the products and the brand how unique its offerings are the perceived quality of the service, e.g. customer service, delivery times, refund policy the price elasticity of demand incomes of your target group the rest of the marketing mix and the overall positioning of the products in the market c To what extent is the choice of products offered by Bouf sufficient to guarantee the success of the business? (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response. may attract customers and build word-of-mouth awareness; may get media coverage may be distinctive and differentiate the website from others may represent excellent value for money

11 Designing an effective marketing mix 26 Chapter But will depend on: prices delivery (e.g. reliability and speed) whether people are aware of the business and its website competitors IT and design (e.g. quality of the website) Judgement might question the use of the word guarantee, might weigh up the different elements of the mix and their importance for this sort of business, and might consider other factors apart from the mix that might affect success.

12 Using the marketing mix product 27 Chapter Quick questions 1 What are the stages of the product life cycle? typically described as development, introduction, growth, maturity and decline 2 What is meant by an extension strategy? activities undertaken to prolong the maturity stage of the product life cycle and prevent decline 3 What is meant by product portfolio analysis? a process of analysing the position of all a firm s products; in the case of the Boston Matrix this examines products in terms of market share and market growth 4 What is meant by a cash cow? a product with a high share of a low-growth market 5 What is a dog product? a product with a low market share of a low-growth market 6 What is meant by a Unique Selling Point? a feature of a product that differentiates it from the competition, e.g. what it is made of, how it is produced, how quickly it is delivered 7 Give an example of how a firm might change its marketing actions at different stages of the product life cycle. may enter the market with a high price (price skimming) and then reduce the price over time to target different segments promotion may begin by making people aware of the product but, over time, change towards persuasive promotion 8 What is meant by a balanced product portfolio? This means there is an appropriate mix of products in terms of cash cows, stars and question marks. The cash cows can be milked to finance the protection of the question marks and the continued growth of the stars.

13 Using the marketing mix product 27 Chapter Analysis and evaluation questions 1 According to Zak Zefferelli, a highly successful record producer: The key to being a successful act is to have a good USP. The key to a successful music label is to have a balanced portfolio of groups and individual performers. 1a Analyse the benefits to an act of having a good USP. may make it more noticeable may generate more publicity and more media coverage may make the band stand out from rivals may make the band more memorable and help build a following; may make people more willing to try the next album 1b Discuss the possible advantages to a record label of having a balanced portfolio. If the record label has a balanced portfolio this means it has a suitable combination of acts; the cash cows can provide the finance to protect and develop the question marks. The more established acts will fund the development of newer acts and hopefully turn them into stars. The label must decide what to do with the dogs either get rid of them or try to revive them (Duran Duran? Take That?). Judgement could discuss the importance of balance compared to, say, having too many cash cows or too many stars. Could emphasise the need to use different elements of the portfolio to help the business as a whole. 2 When we launch a new product there is always a worry it will not take off, says the marketing manager of a well-known perfume business. 2a Analyse the relationship between cash flow and the stages of the product life cycle for a perfume product. In the development stage the firm will be paying to test the product but not receiving any income; cash flow will be negative. In the introductory phase the firm will be paying relatively high sums to promote the product and help it to get known, but sales are relatively low; cash flow is still likely to be negative. Over time it is hoped that sales will increase and the spending on promotion per item will fall; this should improve cash flow. As sales increase over time cash flow should become positive.

14 Using the marketing mix product 27 Chapter 2b Discuss the actions a perfume business might take if sales of one of its brands are falling. may focus on developing another brand to replace it may advertise more may pay a celebrity to adopt and promote it may revamp the packaging may look at the pricing, distribution and promotional activities to increase sales Judgement may focus on the key steps that might be taken and/or the most likely steps for this type of product. Assessment: case study questions (Refer to case study on pages of text.) (30 marks; 40 minutes) 1 Explain two possible reasons for the success of Barbie. (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to ongoing, effective marketing activities; the marketing mix has been used skilfully to keep sales high continually adjusting and developing to meet customer needs extension strategies used throughout her career

15 Using the marketing mix product 27 Chapter 2 Analyse the extension strategies used to maintain the sales of Barbie. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s). new models, designs, activities, friends, accessories; aimed at getting existing buyers to buy more, getting non-buyers of dolls to start buying and getting buyers of other dolls to switch to Barbie aimed at new markets, e.g. new regions of the world; aimed at new segments by linking to films and TV series such as Star Trek new prices and offers used brand promoted heavily via links with films and merchandising

16 Using the marketing mix product 27 Chapter 3 Discuss whether the recent loss of market share to Bratz means that sales of Barbie are doomed. (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response. market share measures the sale of product compared to the total sales in the market Sales are not doomed because: Barbie can fight back, e.g. by changes to the marketing mix Bratz may enter the decline phase in years to come; it is not guaranteed success loss of market share does not mean that sales are necessarily falling; it depends what is happening to sales overall Barbie could have a lower share of a much larger market; sales of Barbie could still be increasing It depends: on what is actually happening to sales whether the success of Bratz is short-lived how Barbie executives react, e.g. can they develop an effective marketing response?

17 Using the marketing mix pricing 28 Chapter Quick questions 1 Price is one element of the marketing mix. State three others. product, promotion and distribution make up the other elements of the 4Ps 2 Why might changes in costs affect the price of a product? Because, to make a profit, the price must cover the unit cost; this means if the unit cost increases the firm will need to put the price up as well if it intends to make a profit. 3 State two factors apart from cost that might affect the price of a product. level of demand. price elasticity of demand number and quality of substitutes 4 What is meant by a price penetration strategy? entering a market with a low price to gain market share this works well if demand is price elastic 5 When would a price skimming strategy be appropriate? when a firm enters a market with a high initial price this works well when demand is price inelastic 6 What is meant by a loss leader? selling some items at a low price to attract customers into the store where it is hoped they will spend money on other items 7 What is meant by psychological pricing? charging prices to affect customers perceptions, e.g. discounting to a sale price so customers think something is a bargain, charging 299 rather than 300 to create the impression of a bargain, charging a high price to suggest high quality 8 Why must the price of a product fit with the rest of the marketing mix? Because the marketing mix is integrated, e.g. an exclusive, niche heavily branded product would usually be expensive; a mass-market, basic item is likely to be cheaper. A high-priced basic commodity is unlikely to sell; a low-priced exclusive item may lead some customers to question its true value.

18 Using the marketing mix pricing 28 Chapter Analysis and evaluation questions (Refer to questions on pages of text.) 1a Analyse the factors that are likely to determine the price set by John for this new product. perceived value; do customers understand what it does and why it is better than other electric toothbrushes? costs of production and marketing; he will want to cover these prices of similar products; how similar do customers think alternatives are and how important is the price in their buying decision what is the price elasticity of demand? pricing strategy, e.g. skimming vs penetration 1b To what extent will the price determine the success of this new product? will influence the likely sales success may depend on the price set and the price elasticity of demand price is just one element of the marketing mix; it is the combined effect that really matters e.g. he needs to make sure the product is known about, that it is available in suitable locations and that it does have an understandable advantage over the competition Judgement may come in the form of the likely relative importance of price in this situation. If the product was indeed significantly better than anything else on the market and this was appreciated by customers then price may not be the key buying factor. 2a Analyse the pricing tactics that Eve might use in an existing store to try to boost sales. Pricing tactics may include: loss leaders (selling some items at a loss in order to generate more sales overall); psychological pricing (e.g. pricing at rather than 30 to make something look like a bargain). 2b Discuss the case for and against Eve using penetration pricing when opening a new store in an area. low price may generate high sales depending on the price elasticity of demand; would want demand to be price elastic

19 Using the marketing mix pricing 28 Chapter However, it depends on: whether demand is actually price elastic whether costs can be covered at low prices the impact of low prices on the brand and customer expectations, e.g. if the business starts with low prices will it be difficult to raise them later? the reaction of competitors Assessment: case study questions (Refer to case study on page 211) (30 marks; 40 minutes) 1 Explain two possible segments within the greetings cards market. (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to segment based on the usage occasion, e.g. Easter, birthdays, Christmas segment based on the buyer, e.g. female/male, age range segment based on type of card, e.g. humour, floral, modern, traditional

20 Using the marketing mix pricing 28 Chapter 2 Analyse the factors that might determine the price that Dean sets for his firm s greetings cards. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s). perceived quality of the design costs this will depend on how the cards are produced, e.g. by hand versus mass production, but to make a profit the price must cover the unit costs the price elasticity of demand the positioning of the business and its range of cards pricing strategy, e.g. skimming vs penetration

21 Using the marketing mix pricing 28 Chapter 3 To what extent is the price a key element of the marketing of greetings cards? (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response. depends on how unique the cards are perceived to be do they have any Unique Selling Proposition, is the brand well known? Success will also depend on the other elements of the marketing mix. For example: is the distribution effective? are they easily available? is the store design appealing? are they displayed effectively? are the cards known about? is the design of the cards effective/appealing? Success will depend on the combination of the different elements of the marketing mix. Judgement may refer to the relative importance of the price for this type of product.

22 Understanding and using the price elasticity of demand 29 Chapter Quick questions 1 What is meant by the price elasticity of demand? measures the sensitivity of demand to price changes (everything else such as income unchanged); demand may be price elastic or price inelastic 2 Why would managers want to know the price elasticity of demand for their products? it helps managers decide what to do with the price if demand is price elastic then they can lower price to increase revenue; if demand is price inelastic they can increase price to increase revenue 3 If demand is price elastic, would a price fall or a price increase lead to an increase in revenue? If demand is price elastic, a price fall will increase revenue. Although the price per unit is lower, the increase in the quantity demanded is so great that the overall revenue rises. 4 State two factors that influence the price elasticity of demand for a product. the availability of substitutes (the more substitutes, the more price elastic demand is likely to be) the amount of money spent on a product (the less spent on a product, the more price inelastic demand is likely to be) how easy it is to compare the price with that of other products (the easier it is to compare, the more price elastic demand is likely to be) brand loyalty (the more loyal customers are, the less price elastic demand is likely to be) 5 If the price elasticity of demand is 2, what would the effect on demand be if a business cut price by 10 per cent. A price cut would lead to an increase in quantity demanded of 2 10% 20% 6 Over time is demand for a product likely to get more or less price elastic? Why? Over time demand for a product is likely to get more price elastic because customers can find more substitute products; they have time to look around and find better deals.

23 Understanding and using the price elasticity of demand 29 Chapter 7 Price is one factor affecting demand. State two others. incomes the marketing effort customer tastes number of customers in the market 8 If the price elasticity of demand is 0.8, would a price increase lead to a fall or increase in revenue? The value of the price elasticity (ignoring the sign) is less than 1. This means demand is price inelastic, so an increase in price would increase revenue. Although the quantity demanded falls, the higher price more than compensates for this and total revenue increases. Analysis and evaluation questions (Refer to questions on pages of text.) 1a Analyse the likely effects of a price increase by Bob on the firm s sales and revenue. An increase in price should increase revenue if demand is price inelastic. This is because, although sales fall, the fall in sales will be less than the increase in price (in percentage terms). Although fewer units are sold, this fall is outweighed by the higher price, so overall revenue increases. (If demand turned out to be price elastic, revenue would fall due to the fact that the fall in the quantity demanded would be greater than the increase in price in percentage terms.) 1b Discuss the factors that might make demand for Bob s business price inelastic. Price inelastic demand means that the percentage change in quantity demanded is less than the percentage change in price. Demand might be price inelastic: if there was good customer service so that customers insist on using this business if there were specialist skills or USPs, such as fast response time, that make customers less sensitive to price Often plumbers are called out in an emergency when customers are desperate to get something fixed and so demand is price insensitive. Good answers might discuss the relative importance of factors and/or influences for this particular type of service.

24 Understanding and using the price elasticity of demand 29 Chapter 2a Analyse the other factors that might influence demand for ice creams. the weather concerns over obesity the price the flavours the promotion 2b Discuss the value of the concept of the price elasticity of demand to a manager such as Megan when setting the price of a product. But: The price elasticity of demand measures the sensitivity of demand to a change in price. This helps decide whether to put the price up or down. To increase revenue, a firm should reduce price if demand is price elastic and increase price if demand is price inelastic. the problem is knowing the value of the price elasticity in advance; may know what it has been in the past but cannot be sure of what it will be in the future also, other factors may change at the same time as the price, e.g. the weather, competitors prices and incomes, in which case the price elasticity result (which assumes only the price changes) may give a misleading impression of what will happen

25 Understanding and using the price elasticity of demand 29 Chapter Assessment: case study questions (Refer to case study on page 218 of text.) (30 marks; 40 minutes) 1 Outline two elements of the marketing mix of the Virgin Galactic Spaceliner other than the price. (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to the product itself, i.e. the flight, the whole experience (e.g. the training, the way you are treated, the feelings whilst in flight and the sense of satisfaction); how fast and far it goes, what you do on board, how many others are there, how long you fly for the promotion. How you communicate about the Spaceliner and the service offered? To what extent you rely on public relations (e.g. stories given to the newspapers) or advertise? If so this is likely to be very targeted advertising given the target audience and cost. 2 Analyse the ways in which Sir Richard Branson might have estimated demand for the Virgin Spaceliner. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s).

26 Understanding and using the price elasticity of demand 29 Chapter taken a sample and based his forecast on this, i.e. primary market research (it would have to be primary as this service has not been offered before) guessed! He could simply have had a hunch that demand would be there at a given price; limited number of seats available, likely to get a lot of publicity and very unique product, so might have felt confident that demand would be there may already have had people wanting to reserve spaces and have been able to take a view based on this 3 Discuss whether the demand for the Virgin Spaceliner is likely to be price inelastic or price elastic. (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response. the price elasticity of demand measures the sensitivity of demand to a change in price demand is likely to be price inelastic; the company will target high income earners who are likely to be insensitive to price (although tickets might seem expensive they would not necessarily be a high percentage of a millionaire s income) lack of substitutes so demand will be price inelastic the limited number of places means that there will be prestige associated with getting a seat, so this should make demand price inelastic; in fact, the high price may be part of the appeal because it enhances its exclusiveness Judgement could come in the form of a clear statement of whether demand is likely to be price elastic or inelastic, supported by analysis.

27 Using the marketing mix place 30 Chapter Quick questions 1 What is meant by a distribution channel? the transfer of ownership from the producer to the customer 2 What is meant by a one-level distribution channel? This means that there is one intermediary between the producer and the customer, e.g. the ownership of the product moves from the producer to the retailer and then the customer. 3 Explain two factors that might influence a firm s choice of distribution channel. the degree of coverage required; to reach more people more intermediaries may be required the importance of keeping control over the final price and promotion; if a high level of control is needed then fewer intermediaries will be used 4 What is meant by the term wholesaler? A wholesaler buys in bulk from producers and sells on in smaller quantities to retailers. A wholesaler is an intermediary in the distribution process. 5 In what ways does the choice of distribution channel relate to the rest of the marketing mix? It must fit with the rest of the mix, e.g. an exclusive product may need to be distributed through a limited number of designer outlets; a high-priced product should not be distributed through scruffy outlets. Mass-market products would tend to have more intermediaries in order to achieve wide market coverage. 6 What is the difference between an industrial and a consumer product? An industrial product is one that is sold direct to other producers. A consumer product is sold to customers rather than other firms. 7 In what way can the choice of distribution channel affect the competitiveness of a business? may affect the availability of the product may affect the costs and therefore the final price may affect how and where it is available, how it is displayed and described may gain a USP by being distributed via particular intermediaries (e.g. Harrods)

28 Using the marketing mix place 30 Chapter 8 How has the internet influenced the choice of distribution channel by firms? Many have started to offer their products directly rather than (or as well as) through intermediaries. This has transformed some industries, such as travel agencies and music. Analysis and evaluation questions (Refer to questions on page 224 of text.) 1a Analyse the ways in which the relationship between Pulsar and the chain stores might affect the company s sales. It may affect: how the products are displayed (and where they are displayed relative to the competition) the extent to which the stores charge the price recommended by Pulsar how well the staff in-store know the products and what they say about them (e.g. relative to the competition) the extent to which they are promoted in store relative to other products. 1b Discuss the factors that Tracey Trafford should consider before switching to online sales only. extent to which customers will buy this type of product online do they need to see and touch it before buying, do they need to speak to someone before buying (e.g. to get advice)? what competitors are doing are they still selling through stores, in which case will Pulsar lose market awareness? impact on the final price (and the impact of this on demand depends on the price elasticity of demand) the quality of the website and the rankings of the website on search engines the reaction of the stores, e.g. how will they react if some sales now come direct from the company via the website? Depends on: willingness to take a risk cost savings and expected benefits

29 Using the marketing mix place 30 Chapter 2a Analyse the benefits to O2toU of using wholesalers. enables it to reach more retailers via wholesalers; it could gain wider market coverage more cheaply than trying to distribute directly to retailers; this cuts costs and may enable it to offer a better deal At the moment distribution is very limited so wider availability is important for growth: retailers may be more willing to deal with wholesalers than with a business direct because they can buy smaller quantities from a range of producers 2b Distribution is probably the most important part of our marketing mix. To what extent do you agree with Julius view? people will not travel far to buy a product like this, so distribution is important; essentially this is a convenience good people will go shopping and buy from what is there; they will not travel far just to buy a brand of water However, it is also important that: the product tastes good the brand is well known and liked the brand has strong and popular image and values the price reflects the brand s values and positioning Success therefore depends on an integrated marketing mix, although widespread distribution is an important element.

30 Using the marketing mix place 30 Chapter Assessment: case study questions (Refer to case study on page 224 of text.) (30 marks; 40 minutes) 1 Outline two other sources of finance that Robert and Jason might have used to start their business. (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to could have organised a bank loan could have formed a company and sold shares could have approached venture capital business 2 Analyse the factors Robert Williams and Jason Tavaria might have considered before opening their shop in Liverpool. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s). likely sales likely set-up and running costs

31 Using the marketing mix place 30 Chapter impact on sales via other channels via ebay, mail order and internet; will the shop complement these distribution channels or take sales away from them? the impact on their time and energy! 3 Discuss the factors that Robert and Jason might have to consider before opening more shops. (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response. costs and finance needed do they have the funds? location where is the best place to put them? whether the overall market is big enough; customers shopping habits; are more shops needed or can sales grow through the internet? whether they can control, or want to control, a bigger business what rate to grow at need to be careful not to grow too fast as this can cause financial and management problems personal objectives and ambitions how big do they want the business to get? Judgement could come by discussing the most important factor(s) in this situation.

32 Using the marketing mix promotional mix 31Chapter Quick questions 1 What is meant by the promotional mix? the range of methods used by a business to communicate about its products 2 What is meant by a brand? this is something such as a name, design or logo that identifies a product in the eyes of the customer and differentiates it from the competition 3 What is the value of building a brand? may build customer loyalty and enable the firm to charge more; may be able to extend the brand to other products; may enable more acceptance of other products with the brand name on them, so leading to faster sales growth 4 What is meant by public relations? activities (usually not paid for) to communicate with different publics such as getting publicity stories about or reviews of the product 5 What is one advantage of using a sales force rather than advertising? direct face-to-face communication, e.g. with retailers; may be easier to explain the product, its proposition and developments than via adverts; if the product proposition is complex or the investment required in the product is high it may be better to use a sales force than rely on advertising 6 Explain what is meant by sales promotion. promotional offers, e.g. a discount, two for the price of one 7 Explain how the promotional mix might be affected by the nature of the product. some products (e.g. perfume) may be sensitive to advertising; others may rely more on a sales force (e.g. complex computer business software) some products (e.g. sofas, pizzas) may be responsive to promotional offers; others may rely more on word of mouth or publicity (e.g. accountants, dentists, plastic surgeons)

33 Using the marketing mix promotional mix 31Chapter 8 Explain the ways in which you might promote a new book. public relations events, e.g. signings by the author, interviews by the author on television or radio advertisements in appropriate magazines or newspapers Analysis and evaluation questions (Refer to questions on page 231 of text.) 1a Analyse the possible benefits of promotion to James and Carol. make customers aware that the range is open make customers aware of the offer, e.g. the price make customers aware of the opening times and any special offers in some cases, make them aware of what a golf range is and how it works 1b Discuss the best ways for James and Carol of promoting their new business. They may use local newspapers, local radio, golf clubs and magazines. The best way to promote the business depends on their target audience and budget. 2a Examine the ways in which having an established brand might benefit Boxwood Books. a brand is a name, logo, design or some feature that helps identify a product By having an established brand it: makes teachers more willing to consider and try new publications by the publisher may enable the business to charge more because teachers are willing to pay more if they trust the quality may make it easier to get to meet teachers with new offerings because they believe in your products makes promotion more effective because people recognise the brand and read the advert or literature; this can help save costs

34 Using the marketing mix promotional mix 31Chapter 2b Discuss the possible advantages to Boxwood Books of using a sales team compared to other forms of promotion. can explain about the books face to face can answer questions directly can get feedback on the products directly, which can help with future developments; this is a good form of market research may be more expensive but could be more effective than advertising Depends on: the target audience; may be appropriate to rely on the sales force if the company sells direct through schools, but would probably need more advertising if you were selling through retailers Assessment: case study questions (Refer to case study on pages of text.) (30 marks; 40 minutes) 1 Explain what is meant by Really Useful Box being a customer driven organisation. (6 marks) Level 3 Good understanding of subject. Limited understanding of subject. Candidate applies knowledge to scenario effectively. 3 Good attempt to apply knowledge to Candidate makes limited attempt to apply knowledge to This means it makes decisions based on what the customers want; it listens to their feedback and tries to meet their needs successfully (as opposed to being product driven, where it develops products and hopes customers will like them).

35 Using the marketing mix promotional mix 31Chapter 2 Analyse the possible benefits of having a patent to the Really Useful Box company. (9 marks) Analysis Two relevant points or good definition or some combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. Single relevant point or limited understanding of relevant term. Attempt to apply knowledge to Limited analysis some attempt to develop argument(s). a patent provides legal protection for its product invention protects the company s designs and prevents other businesses imitating its products; this should help it to keep its profits rather than lose them to new entrants enables it to charge a fee if it licenses other businesses to produce its products; this can generate more profits from the product apart from direct sales 3 Discuss the key elements of a successful promotional strategy for Really Useful Box. (15 marks) Analysis Evaluation 5 marks Level 3 Two or more relevant arguments and shows good understanding of relevant term. 5 marks Excellent judgement in conclusion. Two relevant points or good definition or equivalent combination. Knowledge applied effectively to 4 Good analysis developing argument(s) fully. 4 Some judgement shown in response. One relevant point or limited attempt at definition. Attempt to apply knowledge to Limited analysis of argument, looking at one side only. Limited judgement shown in response.

36 Using the marketing mix promotional mix 31Chapter needs to be cost effective needs to reach target audience needs to communicate the key messages appropriately, so needs to think of the right media channels Good answers need to consider the type of product and what would be appropriate for this type of distribution and buyer. Judgement would occur in determining the key elements what would and would not work? What is most important for this type of product?

37 Marketing and competitiveness 32 Chapter Quick questions 1 How might the number of firms in an industry affect a company s behaviour? More firms may provide more choice for customers; this means that all the firms need to be more competitive, offering better value for money. There may be more downward pressure on prices, so firms may need to find ways of reducing costs to enable price cuts. Firms may look for ways of innovating in order to differentiate themselves. 2 Why is it important to consider the likelihood of other firms entering the market? With more firms likely to enter, existing organisations may need to make sure that they are offering good value for money. Existing firms will need to stay ahead of the competition to make entering the market less attractive. May put pressure on firms to innovate and/or increase efficiency. 3 What are barriers to entry? These are factors that prevent or make it more difficult for other firms to enter the market (e.g. a special licence may be needed, it may be expensive to enter the market because of the advertising needed, high levels of technical skill may be required). The greater the barriers to entry the safer existing firms are from other businesses entering the market (in the short term at least). 4 Why might the power of suppliers influence the success of a business? If suppliers are very powerful they can push up prices and may not be very flexible; this can make it more difficult for the business to succeed. The business may find its profit margins squeezed by the suppliers; it may find it cannot deliver the quality it would like due to difficulties getting the supplies as and when it wants. 5 Why might the power of buyers influence the success of a business? If the buyer is very powerful it can push prices down and insist on changes being made to the product and service. This can make it more difficult for the firm supplying. If a firm relies on a few customers (buyers) it will have to ensure they receive excellent value for money; this may mean providing additional services and/or lower prices; this may reduce the profits of the business in order to keep the contracts.