8. Marketing (A Level)
A section of Business Studies, 9609
Listing 10 of 31 questions
Clean and Tidy (CT) CT is an employee-owned business that specialises in cleaning homes. The homes are cleaned during the day whilst the homeowners are at work. There are nine employees, each of whom owns an equal share of the business. CT cleans 50–60 homes each week. Most customers have been using CT for many years. There has been no sales growth for the past 12 months and the profit margin is decreasing. CT has tried to increase revenue by lowering the price of its services (see Table 2). Table 2: Sales data Price per hour Weekly sales (number of homes cleaned) $8 $6 CT promotes its cleaning services using above the line promotion methods. New customers contact the business through its website or by telephone. In a recent meeting of all the owner-employees, someone suggested the business move into the industrial market for cleaning. This would include cleaning offices and factories during the night. The marketing mix for CT would need to be changed significantly to attract customers in the industrial market. Define the term ‘profit margin’ (line 5). Briefly explain the term ‘above the line promotion’ (line 12). Refer to Table 2. Calculate the price elasticity of demand for a change in price from $8 to $6 per hour. Explain one way in which CT could make use of price elasticity of demand calculations. Analyse one advantage and one disadvantage to CT of being an employee-owned business. Discuss how CT’s marketing mix might need to change to target customers in the industrial market.
9609_m17_qp_22
THEORY
2017
Paper 2, Variant 2
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Joe’s Smoothies (JS) Joe graduated with a Business degree. He then spent a year travelling around Asia. He discovered a local drink. This was a fruit smoothie, with added nuts and seeds for protein, that many people drank instead of a meal. When he returned home to country Y he found no suppliers of this type of product. Joe is considering setting up a small café producing smoothies to supply this potential new market segment. It would be called ‘Joe’s Smoothies’. This would be possible with a low level of start up capital. This is important as he has no savings. He created a business plan with estimated costs (Table 2.1) and estimated demand and average selling price (Table 2.2). This data was based on a sole trader business in one location. Looking at the data, Joe thought that the business would be low risk and had the potential for national expansion. Table 2.1: Estimated cost information ($) Spring Summer Autumn Winter Capital Investment 2 000 Fixed costs 10 000 10 000 10 000 10 000 Average variable cost 2.50 2.00 2.50 3.00 Table 2.2: Estimated demand and average selling price (with no market research) Spring Summer Autumn Winter Demand (units sold) Average selling price $3.50 $6.00 $3.50 $2.50 Before opening Joe’s Smoothies, Joe approached a business adviser who asked him about his market research. Joe had not done any. The business adviser suggested it would be a good idea to do some primary market research to collect information about his target market and potential demand. Define the term ‘market segment’ (lines 5–6). Explain the term ‘start up capital’ (lines 6–7). Refer to Table 2.1 and Table 2.2. Calculate the break-even level of sales for JS in the summer. Explain two factors which may influence the demand for Joe’s product. Analyse two methods of primary market research that Joe could use. Discuss sources of finance Joe could use to start up his business.
9609_m20_qp_22
THEORY
2020
Paper 2, Variant 2
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Clifford’s Supermarkets (CS) CS owns 28 supermarkets which sell food and non-food products. Each CS supermarket has a large product portfolio with over 10 000 different products. CS uses a number of different promotion methods and pricing strategies. The most effective of these is when CS temporarily reduces the price of a product. Each week 20 different products are selected and their prices reduced. Table 1 shows the sales data from a recent price reduction on bottled water from $0.90 to $0.63. Table 1: Sales data for bottled water Sales in week before price reduction 20 000 bottles Sales in week of price reduction 40 000 bottles CS has had poor cash flow for the past year and its profit margins are falling. The owners have decided to close one supermarket. They have short-listed two of the least profitable supermarkets and must decide which to close (see Table 2). Table 2: Data to help decide which supermarket to close Supermarket A Supermarket B Sales revenue (2017) $2 000 000 $1 500 000 Rent (2017) $400 000 $250 000 Local unemployment (2017) High Low Local population 150 000 80 000 Number of years supermarket has been open Profit/(Loss) ($20 000) ($10 000) ($5000) $5000 $3000 $2000 Define the term ‘cash flow’ (line 10). Briefly explain the term ‘product portfolio’ (line 2). Using Table 1 and any other relevant data, calculate the price elasticity of demand for bottled water when the price was reduced. Explain how your answer to 1could be used by CS. Using Table 2 and any other data, recommend which supermarket CS should close. Justify your recommendation. Analyse how the closure of the supermarket that you have recommended in your answer to 1could affect two stakeholders of CS.
9609_s18_qp_21
THEORY
2018
Paper 2, Variant 1
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Too Tasty (TT) TT is a brand of vegetable chips owned by a large public limited company. The vegetables are thinly sliced, cooked, flavoured and then packaged in the TT factory. The factory uses flow production with a different variety of vegetable chips made each day. The factory runs for 24 hours a day, 5 days a week. TT’s varieties and some market data is shown in Table 2.1. Table 2.1: Varieties and market data of TT’s vegetable chips Variety Annual sales (million units) Estimated price elasticity of demand Beetroot –0.9 Parsnip –0.8 Potato –1.1 Carrot –1.5 All the varieties are sold at a price of $1 per unit. TT branded products have a high profit margin. The owners of the TT brand would like to develop a new variety to expand the product portfolio. This new variety would be targeted at parents as a lunchtime snack for their children. The Marketing Director has been told to do some market research into potential new varieties of chips. A large supermarket group would like to start a joint venture with TT. The supermarket wants to buy TT’s vegetable chips, but branded with the supermarket packaging. If the directors of TT agree, this is expected to increase TT’s annual sales by 25% and improve the cash flow of the business. However, the joint venture would mean TT’s profit margin for supermarket branded chips would be lower than TT’s branded chips. The manager at the factory where TT’s vegetable chips are produced also has other concerns about the joint venture. Define the term ‘cash flow’ (line 21). Explain the term ‘brand’ (line 1). Refer to Table 2.1. Calculate the effect of a price increase to $1.10 on the level of sales of the carrot variety of chips. Explain one way in which the price elasticity of demand figures may be useful to TT. Analyse one method of primary market research and one source of secondary market research that the Marketing Director could use to help develop a new variety of vegetable chip. Evaluate concerns that the factory manager might have about the joint venture between TT and the supermarket group.
9609_s19_qp_22
THEORY
2019
Paper 2, Variant 2
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UFilters (UF) UF is a public limited company selling to an industrial market. It manufactures air conditioning units. UF produces two sizes of air conditioning units, medium and large. Most of its air conditioning units are sold for use in warehouses and computer server rooms. The units are expensive compared to competitors but UF believes its units are of a higher quality. Market research suggests that there is a growing demand for small air conditioning units to be placed in offices. To produce a new size of unit would require spending $180 000 to purchase new machinery. UF relies on customer recommendations for new orders. However, some customers have been dissatisfied with the service received. UF has received several complaints, including: • engineers turning up late or not at all • poor communication from UF • little choice in the size of units supplied • appointment times are not always convenient and can be difficult to change. Sylvie, the Marketing Director of UF, is concerned about the sales data (Table 1.1) as sales have fallen 10% on the previous year. Table 1.1: Selected sales data for UF, 2019 Unit size Price ($) Unit sales Medium Large Sylvie is considering two options to increase sales (see Table 1.2). Table 1.2: Options to increase sales Option 1 Reduce the price of the units by 10% • Competitors’ prices are 8% lower on average. • The estimated price elasticity of demand is –0.8. Option 2 Implement a performance related pay scheme (PRP) • Sales staff are currently paid a monthly salary. • To introduce a PRP scheme the monthly salary would be reduced by 10%. • Targets would be set and if sales staff met the targets then they would receive PRP increasing their monthly salary by 15%. Define the term ‘industrial market’ (line 1). Explain the term ‘price elasticity of demand’ (line 24). Refer to Table 1.1. Calculate the total revenue received by UF in 2019. Explain one source of finance available to UF for purchasing new machinery. Recommend which of the two options in Table 1.2 UF should choose to increase sales. Justify your recommendation. Analyse two ways, other than the two options in Table 1.2, UF can improve customer relations.
9609_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Child Play (CP) Su is a sole trader who started a business called CP which operates a play area for children. The play area is inside a building and includes toys and other play equipment. Customers book on CP’s website for each hour that they would like to use the play area. CP is two kilometres away from the nearest city which has a large population. Su does not pay for any promotion and she relies on recommendations and reviews from previous customers. Su currently charges a price of $10 an hour for a group of up to 5 children. Only one group can book CP for each hour. Demand is greater than supply so Su may increase the price to $15 per hour. She has completed some market research to see if this is a good idea. Her findings are in Table 1.1. Table 1.1: Market research about prices for CP Price Quantity demanded per day $10 $15 Su is also thinking about expanding the business by opening a café targeted at parents with children. The café would be located at the entrance to CP’s play area. There are many other cafés in the city centre two kilometres away. Su believes that product differentiation is essential for the profitability of the café. Su plans to use CP’s working capital as the source of finance to open the new café. The café will need to earn revenue quickly, so she plans to open it in four weeks. She will need quick and low‑cost promotion methods if the café is to succeed. Define the term ‘supply’ (line 7). Explain the term ‘product differentiation’ (line 17). Calculate the price elasticity of demand if Su increases the price from $10 to $15 an hour. Explain one way in which the size of CP can be measured. Analyse one advantage and one disadvantage to Su of using working capital as a source of finance for the new café. Evaluate appropriate promotion methods that Su could use for the new café.
9609_s22_qp_23
THEORY
2022
Paper 2, Variant 3
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Questions Discovered
31