3.2. Market research
A subsection of Business Studies, 9609, through 3. Marketing (AS Level)
Listing 10 of 21 questions
Planet Internet (PPI is a public limited company. It is an internet service provider. The business provides fast internet connections to households within country X. Customers pay an average of $10 per month for the service. More than 80% of the households in the country can access PI’s services. The business offers new customers 3 free months of internet service, if they sign a contract for a minimum of 12 months. Very few of PI’s customers switch to a competitor’s service after the minimum 12 month contract has finished. The internet service market is very competitive. PI has an objective to become the largest internet service provider in country X. The Marketing Director, Alisha, believes that if PI is going to achieve its objective then the company needs new customers. She thinks that the key to gaining more new customers is to focus on promotion. Alisha has prepared some secondary market research comparing PI with its main competitors in country X (See Table 2.1). Some of the directors are disappointed with the financial performance of PI compared to its competitors. Table 2.1: Research about the internet service providers in country X, 2018 Planet Internet (PTotally Broadband (TB) W Solutions (WS) Market share 31% 32% 15% Value of market share $12.4bn $12.8bn $6bn Gross profit margin 74% 70% 70% Net profit margin 8% 12% 16% Working capital ($45 000) $300 000 $0 Current ratio 0.9:1 3:1 1:1 Define the term ‘objective’ (line 8). Explain the term ‘secondary market research’ (line 12). Refer to Table 2.1. Calculate the total value of the internet service market in country X. Explain one suitable way, other than market share, to measure the size of PI. Analyse one above the line promotional method and one below the line promotional method which PI could use to gain new customers. Refer to Table 2.1. Evaluate the financial performance of PI compared to its competitors.
9609_s19_qp_21
THEORY
2019
Paper 2, Variant 1
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Security Alarms (SA) SA was set up 20 years ago as a partnership. It had one shop that sold car alarms. It had an objective to become the market leader within the car alarm retail market. SA is now a large public limited company. It produces and retails a large range of security alarms which are sold in consumer markets. Most of the revenue is from sales of alarms to protect homes. SA’s current objective is to maximise shareholder value. SA is developing a new service that it wants to sell to the industrial market. The service will offer the following features. • SA will install a new telephone line to work with the alarm. • If the alarm is started then employees at the SA call centre will contact the police. Customers will pay an annual fee to use this new service. Forecast financial information about the new service is shown in Table 2. Table 2: Forecast financial data for the new service Break-even level of customers for first year Forecast revenue for the first year $2.5m Annual fee to be paid by the customer $500 Calvin, the Marketing Director, is planning to carry out detailed market research in the next two months. After the results of this research and the financial data have been analysed, a decision will be made by the Board of Directors about whether to launch the new service. Define the term ‘revenue’ (line 14). Briefly explain the term ‘consumer markets’ (line 4). Refer to Table 2. Calculate the forecast margin of safety for the new service. Explain one limitation to SA of using break-even analysis. Analyse two possible reasons why SA’s objectives have changed over time. Discuss suitable market research methods that SA could use before deciding whether to launch the new service.
9609_s17_qp_21
THEORY
2017
Paper 2, Variant 1
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Delivery To You (DTY) DTY is a public limited company in the tertiary sector. DTY delivers packages for businesses in country A. DTY’s main customers are large online retail businesses. These businesses pay DTY to deliver products to customers who have purchased them online. DTY has recently published its income statement for 2017 (see Table 1). Table 1: Extract from DTY’s income statement for 2017 $m Revenue Cost of sales Gross profit Expenses, interest and tax The Board of Directors decided that retained earnings should be at a high level of 80% of profit for the year. The Board of Directors is keen to expand the business by delivering packages within a new country. This planned expansion will require 10 delivery drivers. To aid the recruitment process, the human resource manager has created a person specification (see Table 2). Table 2: Person specification for a delivery driver Characteristic Essential Desirable Qualifications Driving licence A-Level or high school standard Physical Good eyesight Fit enough to lift heavy packages None Experience None Experience of dealing with customers/consumers Personal qualities Confident Good communicator Friendly There are a number of factors that will determine the country chosen for the expansion. The Board of Directors has asked the marketing manager to carry out some primary and secondary market research so that it is able to make a good decision. Define the term ‘tertiary sector’ (line 1). Briefly explain the term ‘human resource manager’ (line 15). Calculate the retained earnings for DTY in 2017. Explain two possible effects of DTY’s Board of Directors’ decision to have a high level of retained earnings. Analyse two methods of recruitment that DTY could use for the new delivery drivers. Discuss methods of market research that DTY could use to help the directors decide which country to expand into.
9609_s18_qp_23
THEORY
2018
Paper 2, Variant 3
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Online Travel (OT) OT is a private limited company in country X that sells international holidays on the internet. All of OT’s current range of holidays are to sunny places with beaches. Customers can search and purchase the holidays through the OT website. Each employee at OT has a contract of employment. OT employees work in three main areas of the business: • technical specialists who keep the website updated. The specialists work in shifts so that the website can be updated 24 hours a day, 7 days a week. • customer service employees who chat online and on the telephone to customers who need extra help to purchase their holiday. • operations employees who negotiate with the suppliers of holidays and carry out quality checks. In recent years demand for beach holidays has fallen, particularly among younger consumers. Due to this fall in demand, OT has made the decision to make 20% of the workforce redundant. The Marketing manager has carried out some market research to identify new markets OT might decide to enter (See Fig. 1). Fig. 1: Market research data Primary research: A quota sample, based on age (in years) Number of respondents who would prefer each type of holiday. Age 16–30 31–40 40+ Skiing holidays Safari holidays Cruise holidays Secondary research: Characteristics of each age group in country X 10 000 20 000 30 000 40 000 $ Average annual salary 16–30 31–40 Age Age 40+ Average number of holidays taken each year 16–30 31–40 40+ The Board of Directors has decided to target the 16–30 age group with low-priced skiing holidays. There is a limited budget for the marketing of these holidays. OT will need to rely on the internet to develop the marketing mix. Define the term ‘private limited company’ (line 1). Briefly explain the term ‘contract of employment’ (line 4). Refer to Fig. 1. Identify the age group with the highest average income. Refer to Fig. 1. Calculate the percentage of the whole sample who would prefer skiing holidays. Explain one possible disadvantage to OT of using secondary market research. The redundancies at OT will affect the employees. Analyse the effect on two stakeholders, other than employees, of the decision to make 20% of employees redundant. Recommend how OT can use the internet in the marketing mix for holidays aimed at the new target market. Justify your recommendation.
9609_s18_qp_22
THEORY
2018
Paper 2, Variant 2
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The Shop (TS) Thomas worked for 30 years as a manager of a factory. Although he was very good at his job he was recently made redundant. Thomas always wanted to open a shop. He thinks he has the qualities an entrepreneur is likely to need for success. He has undertaken some primary market research to identify possible opportunities in city X where he lives (see ). bakery shop 20% clothes shop 5% sandwich shop 25% electronics shop 10% butcher shop 10% coffee shop 15% grocery shop 15% Question: What type of shop do you think would be most successful on Main Street? Percentage of respondents for each type of shop, based on a sample of 160 shoppers on Main Street in city X between 12:00 and 14:00 on Friday 20 December 2019. : Market research Thomas now needs to make a decision about which type of shop to open. He has used the data in and some secondary market research to identify two options. Option 1: Coffee shop The coffee shop would provide hot drinks that customers could take away and drink elsewhere. It would also sell some bakery items, such as biscuits and doughnuts. There are four other shops selling takeaway hot drinks and bakery items in the city, as well as five cafés. Thomas thinks that the profit margin would be 6% to 8%. Option 2: Sandwich shop The sandwich shop would make sandwiches using job production. Customers can choose from a range of sandwich fillings, as well as cold drinks and snacks. There is only one competitor in the city. It is a well-known international franchise that spends a lot of money on promotion. Thomas thinks that the profit margin would be 10% to 15%. Define the term ‘redundant’ (line 2). Explain the term ‘primary market research’ (line 4). Refer to . Calculate the number of respondents who think a coffee shop would be most successful on Main Street. Explain two limitations of the sampling used by Thomas. Analyse two qualities that Thomas will need to be a successful entrepreneur. Recommend which of the two options Thomas should choose for his new shop. Justify your recommendation.
9609_s20_qp_22
THEORY
2020
Paper 2, Variant 2
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Questions Discovered
21