Marketing and Operations

Question 1

Compare penetration pricing with skimming pricing. 2

Answer 1

Penetration whereas the product is introduced at a low price whereas price skimming the price is high.
Penetration the price is increased later whereas skimming the price is lowered.
both are short term pricing strategies
both are used when introducing new products to the market.

Question 2

Compare field research with desk research. 3

Answer 2

Field research gathering new information whereas Desk information already exists.
Field can be expensive whereas desk is cheap.
Both are forms of market research

Question 3

Discuss the advantages and disadvantages of using market skimming as a pricing strategy. 3

Answer 3

Advantages
exclusivity value as people will want to be first to own product
people will pay high price for the privilege
the business can build a high-quality image
target high income segment market
Disadvantages
could lose out on sales if product is priced too high
loss in status when you eventually lower the price of the product
customers that purchased the product early at a high price may become dissatisfied as the price is later lowered

Question 4

Explain the advantages to an organisation of having a varied product portfolio. 4

Answer 4

Spreads the risk if one product fails - because there are others to rely on
Maximise sales - because you are attracting different market segments
Because they have several products this means it is easier to introduce new products Consumers see a variety of products with the same brand – so brand recognition is high
Increased market share - as they are able to meet the needs of a number of different market segments
A business can plan when to introduce new products - as they can see when old products start to go into decline

Question 5

Describe the pricing strategies which could be used by a retailer. 8

Answer 5

Any pricing strategy 1 mark per description
Skimming, Loss Leader, Penetration, Destroyer, Promotional, Cost-Plus, High price, low price

Question 6

Discuss the methods of market research. 5

Answer 6

Focus Groups
Detailed feedback can be given to the organisation.
Personal Interviews
Interviews allow the organisation to directly gain the views of customers.
Telephone Survey
 Telephone surveys mean instant feedback can be given.
Postal Survey
 Postal survey can be sent out to all customers (wide geographical area).
 Can target customers in selected areas.

Question 7

Describe the role of public relations (PR) in an organisation. 3

Answer 7

 Building awareness/creating a positive image for an organisation.
 Generating press releases.
 Organising press conferences/managing bad press.
 Organising sponsorship.
 Promoting CSR.
 Donating to charity.

Question 8

Explain the benefits to an organisation of using loss leaders as a pricing tactic. 2

Answer 8

Brings customers into the shop to buy the products − and then customers may be enticed to buy other full priced items.
 Can be used in advertising campaigns to attract customers to come into the organisation − therefore increasing the number of customers.
 It can create customer loyalty − as customer may be more likely to stay with the organisation rather than going to its competitors.
 Customers may purchase the loss leader priced items in bulk − which can increase sales.

Question 9

Discuss the use of just in time (JIT) production. 5

Answer 9

Less storage may lower rent/premises costs.
 Finance is not tied up in inventory.
o So can be better used elsewhere.
o Improved cash flow.
 Reduced waste as less inventory is stored.
o Reduced risk from perishables going ‘out of date’.
o Reduced risk from fashion changes.
 Reduced theft as inventory is easier to monitor.
 Dependent on reliable suppliers.
o If inventory does not arrive then production will halt.
 Increased number of deliveries required eg increased administration costs.
o May lose out on economies of scale/buying in bulk.

Question 10

Describe the advantages of centralised warehousing. 3

Answer 10

Cheaper for a supplier to deliver to one location.
 Bulk purchasing allows for discounts.
 Reduces costly duplication of administration/storage facilities.
 Items can be found quicker as they are in one place.
 Specialist staff may be used.
 Improved security.
 Theft is reduced.

Question 11

Distinguish between labour-intensive production and capital-intensive
production. 3

Answer 11

Labour Intensive production has to come to a halt if staff are ill or absent whereas Capital Intensive machines can work 24/7.
Labour Intensive individual customer requirements can be met whereas Capital Intensive production can be standardised/products are mass produced
Labour Intensive mistakes can be made Capital Intensive less mistakes better quality

Question 12

Justify the use of benchmarking as a quality measure 2

Answer 12

-ensures product is as good as the market leader/competitor
* saves time on developing own method
* helps to identify how improvements can be made

Question 13

Describe the factors to be considered when deciding on a method of production. 3

Answer 13

skills of the workforce
* the quantity of the product that needs to be made
* the required quality of the product
* initial set up costs involved
* the resources available to the business
* if each product needs to be identical (standardised)/needs to be unique

Question 14

Describe the advantages and disadvantages of using computer-aided design
(CAD). 2

Answer 14

Advantages of CAD
* more accurate design process
o meaning less wastage
* faster than hand drawing designs
* images can be seen in 3D
Disadvantages of CAD
* the software is expensive to purchase
o expensive to upgrade/maintain
* takes time to train staff to use the software
o can be costly to train staff

Question 15

Describe the benefits of using computerised inventory control. 4

Answer 15

Can be linked to tills through EPOS
* order the inventory automatically when it reaches the re-order level
* allow for accurate/constant monitoring of inventory levels
reduces theft