PPQ marketing

Question 1

Describe what is meant by market share. (1) S 1a

Answer 1

Market share is an organisation’s percentage of the overall sales in a particular market.

Question 2

Compare the use of random sampling and quota sampling when carrying out market research. (2) 2015 2c

Answer 2

Random sampling is when respondents are picked randomly whereas quota is picked from a group of people with specific characteristics

Random uses pre-selected respondents who must be interviewed whereas Quota allows researcher to find respondents who fit the characteristics required

Random is expensive to carry out because specific respondents must be interviewed and contacted until they are available whereas Quota is less expensive as the interviewer simply needs to find suitable respondents

Random sampling reduces biased results because of method of selection of respondents but bias can occur with quota sampling as the interviewer decides who to question

Question 3

Describe the ways Ryanair could measure the success of its decision to improve customer satisfaction (4) 2017 1f

Answer 3

Conduct field research
Gather feedback from staff
Compare passenger figures
Compare revenue figures
Compare profit figures
Compare using ratio analysis
Review the number of complaints
Compare share price
Compare market share
Evaluate external media and journalism reports, such as the Which? website, TripAdvisor etc

Question 4

Discuss the methods of market research. (5) 2018 4a

Answer 4

Discuss the methods of market research. (5) 2018 4a
Focus Groups
Detailed feedback can be given to the organisation.
Participants are more likely to give better feedback as they have agreed to take part.
Qualitative information can be difficult to analyse.

Personal Interviews
Interviews allow the organisation to directly gain the views of customers.
Can clarify any questions to aid understanding.
It can be time consuming to carry out the interview.
Respondents may lie to get through the interview quickly.

Telephone Survey
Telephone surveys mean instant feedback can be given.
Sometimes gains a hostile response from the person being called.

Postal Survey
Postal survey can be sent out to all customers (wide geographical area).
Can target customers in selected areas.
Customers can compete the survey at a time that suits them.
Low response rate as often viewed as ‘junk mail’.
Cannot ask for clarification.

Hall Test
Relatively inexpensive to carry out.
Feedback can be gathered instantly.
As customer is giving feedback directly, they may not want to give a negative response.

Observation
Can provide accurate quantitative information.
Customers will act naturally as they do not know they are getting watched.
There is no direct contact with customers to ask about their actions.

Test Marketing
Once feedback is received changes can be made to the product prior to launch.
Not representative of the wider market as only a small area gets to test the product.

Social Networking Websites
Can gather large amounts of information quickly.
Can only gather information from those who use social media.
Comments are ‘public’ so anyone can read reviews including competitors.

Internet
Customers can be surveyed across a wide geographical area
Software enables easy analysis of the results
Access to the internet must be available

Consumer audit
Customer trends can be identified
Customers are paid so this can be an expensive method

EPOS
Gathers information about consumer behaviour eg what is bought, how they react to changes in price or promotions
Promotions can be tailored to the individual customer
Expensive to set up
If money-off vouchers are offered, it may lower profits

Newspapers
Easily accessible as the information already exists
May be biased
Has been gathered for an alternative purpose

Question 5

Compare field research with desk research

Answer 5

field research = gathering new information, appropriate to what is being researched.
May take time to prepare, carry out and research.

Desk research = analysing information that already exists, may not be specific to information wanted / may involve filtering out information that is not appropriate.
Less time to gather

Question 6

Describe the benefits of maintaining a product portfolio. (4) S 4a

Answer 6

Allows organisation to spread risk (1 mark). If one product’s sales decline, another product’s sales could be growing (1 development mark).
The opportunity for increased sales/profits from selling different products (1 mark) due to customers having a number of products to buy from one brand (1 development mark).
Seasonal fluctuations can be evened out (1 mark) — the company may not struggle as much if they have products that are popular at certain times of year (1 development mark).
They can meet the needs of different market segments.
Newer products at growth stage can replace those at the decline stage of the product life cycle.
Reference to analysis of Boston Matrix — resources can be allocated from poorer performing products (‘dogs’) to income-generating products (‘stars’ or ‘cash cows’).

Question 7

Describe the advantages to Google of having a varied product portfolio as shown in Exhibit 2. (5) 2015 1b

Answer 7

Allows organisation to spread risk over different markets
Can meet the needs of different market segments
‘Cash cows’ can fund other, riskier, ventures
‘Stars’ can allow a business to be a market leader
‘Problem Child’ products give businesses opportunity to invest
‘Dogs’ should be divested
Increased profits can arise from selling different products
Newer products can replace those at the end of the life cycle
A range of products increases brand awareness
Easier to launch new products with large existing portfolio

Question 8

Compare the use of penetration pricing with skimming pricing. (3) S 4b

Answer 8

Penetration pricing is used in a highly competitive market, whereas skimming pricing is used in a market with little or no competition.

Penetration pricing means that the product will be introduced at a low price, whereas skimming pricing means that the product is introduced at a high price.

With penetration pricing the price will be increased once the product has been established, whereas with skimming pricing the price is decreased as competition enters the market.

Penetration pricing is used to entice consumers to switch from other brands, whereas skimming pricing is used when the product is new or unique.
Both penetration and skimming pricing are short-term pricing strategies.

Both penetration and skimming pricing are used when introducing new products to the market.

Question 9

Describe 2 suitable pricing strategies for Mackie’s luxury ice cream produce.

Answer 9

Premium Pricing
A high price is set
Can give an impression of quality/exclusive image

Competitive Pricing
Price is set similar to competitors
Requires effective promotion/advertising

Market Skimming
Price is initially set high but will lower over time
Customers may want to try the product when it is introduced

High profit margins during the introduction stage help recover costs
Over time the price decreases
Effective for new product launches with few competitors

Penetration Pricing
May be used to launch ice cream into a new market
A low price is initially set
With more sales over time the price will increase

Promotional Pricing
Vouchers/offers/discounts are used to encourage customers to buy
Price may be lowered for a period of time
Used to quickly sell stock and aid cash flow
Loss Leader…

Destroyer Pricing…

Psychological pricing…

Cost-plus Pricing…

Question 10

Describe into the pipeline promotions that an organisation could use. (3) S 4c

Answer 10

These are promotions that a manufacturer gives to the wholesaler or retailer that sells their products (definition).
Dealer loaders are one example of ‘into the pipeline promotion’: this involves the wholesaler/retailer receiving an extra amount free, eg five boxes for the price of four.
The manufacturer may also provide the wholesaler/retailer with staff training.
The manufacturer may provide the wholesaler/retailer with point of-sale displays.
The manufacturer could allow sale-or-return.

Question 11

Describe the sales promotions which could be used when launching a new product. (4)

Answer 11

Free samples to try
Free entry to competitions
Demonstrations of products - let customers see/try new product before buying
Credit facilities allow customers to buy and pay back over a period of time
Free gift with purchase of the new product
BOGOF – buy new product, get another item free
Free delivery with purchase
Offering discounts/promotional pricing

Question 12

Discuss the “out of the pipeline” methods of promotion identified in the case study. (4) 2016 1aii

Answer 12

Special offers/Save £1/Discount
Price can be lowered for a period of time
Useful promotion method for shifting stock
Encourages new customers to purchase
Retain loyal customers
Can lower potential profit margin
Customers feel they are getting value for money

Competitions
Customers have a chance of winning through purchasing a product
May incur additional marketing costs
Can gather marking details from customers eg e-mail, phone number etc
Encourages repeat custom to increase the chance of winning

Question 13

Describe the methods Ryanair’s public relations department may use to improve the company’s image (5) 2017 1d

Answer 13

Write a press release
Hold a press conference
Host an open day
Sponsor an event
Use of celebrity endorsement
Partner with charities/social enterprises to support their cause
Allow staff paid days to volunteer at the charity
Donations to charities
Promote ethical operations eg change to bio-fuel over crude oil jet fuel
Give away free goods/merchandise in the flight eg complimentary drinks
Employ a Public Relations (PR) Manager
Rebrand an improved image for Ryanair
Manage the social media forums ie handle complaints effectively

Question 14

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

Answer 14

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 15

Discuss the factors an organisation might consider before selecting a channel of distribution. (4)

Answer 15

Type of Product – suitable transportation/storage for type of product; product durability eg electrical, frozen food, flowers, liquid, livestock
Finance available – if finance is limited this may affect the choice of channel selected
Image of Product – channel should reflect the quality of the product eg high quality distributed through exclusive, up-market retailers
Legal restrictions – some products can only be sold in certain ways/places eg cigarettes/alcohol/medicines
Where the product is in its life cycle – as it progresses through growth to maturity it needs to be more available to the market
Distribution capability of the organisation – do they have transport or does it need to be outsourced
Technical products – if highly technical it may need to be demonstrated through direct sales

Question 16

Describe the following elements of the extended marketing mix: * people * process * physical evidence. (6)

Answer 16

People
any member of staff who comes into contact with the customer
the organisation needs to create a culture of good customer care
the organisation may need to create customer service policies
staff are trained in customer care
motivated staff are required
good after-sales service and advice should be available
Process
the systems and procedures that deliver a product or service
the experience the customer has when making a purchase
the impression left on the customer
the organisation must be able to handle complaints
contingency planning could be put in place
short waiting times
user-friendly internet experience
quality of information given to customers
Physical evidence
the physical environment experienced by the customer
the layout and design of the premises
the ambience of the premises
the cleanliness of the premises
must reflect customer expectations.

Question 17

Explain the advantages to an organisation of using a smartphone application (app) to promote products (3)

Answer 17

The application can be accessed anywhere as long as there is a mobile Internet signal - which means organisations can contact customers
Operates 24/7 so can promote at all times – reaching more people
Allows customers worldwide to be targeted - giving the organisation a broader customer base
Information about products and offers can be updated quickly - keeping customers informed
Thus giving the organisation a good channel of communication
Photographs and video demonstrations can be uploaded to the app - highlighting benefits of the product o Increasing chance of sales

Question 18

Discuss the costs and benefits to Police Scotland of marketing through its social media network. (4)

Answer 18

Costs
only available to citizens with a social media account
negative comments are public
so can affect Police Scotland’s image
account may be susceptible to hacking, fraud or viruses
requires constant monitoring and updating
which can be labour intensive

Benefits
access to a huge number of citizens who use social media
increase public awareness of Police Scotland’s work
cheaper advertising platform than traditional methods, for example TV/radio etc
adverts may be targeted to citizens based on internet history
post can be shared making them viral
video, animation and images can be used in posts

Question 19

Distinguish between product led and market led organisations (2

Answer 19

Product led is when an organisation produces a product first and then tries to sell it to customers whereas a market led focuses on customer wants and produces a product to satisfy them
Very little market research is carried out with product led but in market led there is a lot of market research carried out before production starts
In product led the organisation focuses on product testing but in market led the organisation focuses on market testing

Question 20

Distinguish between product orientation and market orientation (2)

Answer 20

Product orientation produces a product and then attempts to sell it whereas market orientation produces a product that consumers want/need
Product orientation does not conduct any market research whereas market research is central to market orientation
Product orientation focuses on product research/testing whereas market orientation focuses on customer needs
Market orientation is more able than product orientation to meet consumers changes in fashion/tastes
Product oriented products have little competition in comparison to market orientation

Question 21

Describe the various means of sampling that could be used to obtain a cross section of views when carrying out market research (4)

Answer 21

Random Sampling − individuals are pre-selected at random and an interviewer makes calls to those people from the list.
Lists can come from the electoral register or telephone directory.
Can be difficult to carry out as once the people are selected they must be interviewed.
This means the interviewer must continually try to contact the person.
Quota Sampling − instructions are given as to the number of people to interview and in what characteristic they should be from, ie, married or single, each different income group.
The researcher must then find the correct number of people in each category.
It is cheaper than random sampling.
Stratified Sampling − the sample is divided up into segments based on how the population as a whole is divided up.
This makes a random sample more representative of the population as a whole.
For example, income groupings will be divided up closely to match the national percentages of each income group.

Question 22

Describe 4 methods of field research (8)

Answer 22

Personal interview: face-to-face interview that can be held in the street or at a persons home.
Focus group: selected individuals are involved in discussions about an organisations product or service.
Telephone survey: individuals are telephoned at their home and asked specific questions.
Postal survey: questionnaires are sent through the post to selected individuals.
Consumer audit: continuous market research is carried out with a selected group of consumers who record their purchases in a diary which is then analysed.
Hall test: individuals are invited to try out a product and then give their opinion on it.
Observation: customers actions and purchasing patterns are observed by trained staff.
EPOS: used to gain an insight into what products are selling in each store.
Test Marketing: product is launched on a small area to gauge the consumers response. (8)

Question 23

Describe 3 market research techniques that an organisation could use to assess customer satisfaction (3)

Answer 23

Telephone surveys are used by organisations to call customers and gain their views.
Postal survey where questionnaires are posted out to customers who complete them and return them to the organisations.
Personal interview where people are stopped in the street and asked questions.
Secondary information such as statistics on the number of subscribers to satellite TV.
Online survey.
Interactive surveys.
Focus group.
Hall test.

Question 24

Justify 3 market research techniques that an organisation could use to assess customer satisfaction (A different justification should be used each time (6)

Answer 24

Telephone surveys - Instant feedback can be given.
Postal survey - Could send these out to all customers, or customers in selected areas, gaining their opinions.
Personal interview - Can clarify any questions to aid understanding. Allows 2 way communication.
Secondary information - Easily accessible. (Max 1 for secondary information.)
Online survey.
Interactive surveys.
Focus group.
Hall test.

Question 25

Distinguish between quota sampling and random sampling (2)

Answer 25

Quota sampling is when an interviewer is left to find the people who fit certain categories whereas random sampling pre- selected individuals, these individuals must be interviewed. Random sampling is an expensive technique to carry out whereas quota sampling is less expensive as the interviewer can use their judgement to find people to interview Random sampling limits the amount of bias that can occur whereas interviewer bias can occur in quota sampling due to being able to choose who to interview

Question 26

Discuss market research techniques used by an organisation (6)

Answer 26

Street surveys allow the organisation to directly gain the views of customers Can clarify any questions to aid understanding Allows 2 way communication Very expensive method in comparison to others Specific target segments can be targeted, e.g. children, females Telephone surveys mean instant feedback can be given Sometimes gains a hostile response from the person called Postal survey can be sent out to all customers (wide geographical area) or customers in selected areas (target area) low response rate Secondary information is easily accessible More cost effective Focus group Hall test Test market

Question 27

Discuss the use of 3 field research techniques. (6)

Answer 27

Personal Interview Allows 2 way communication and encourages answers Misunderstandings can be ironed out Can be an expensive method Home interviews tend to be unpopular with consumers Telephone Survey Is fairly cheap Response is immediate allowing large numbers to be surveyed quickly Hostility to the person making the call is common as people do not like being disturbed at home Postal Survey Is cheaper method than street survey as it does not require trained personnel Questions need to be very simple and easily understood Response rate is very low Free gifts are used to increase the return rates High design costs Wide range of views and opinions Hall Test Gives consumers the chance to see or try a product and to be questioned on their opinions of the product Is often used in supermarkets and wholesalers Fairly cheap method Can be difficult to analyse qualitative information Consumers often give favourable replies simply to be polite Consumer Audit Can be accurate information on consumer buying patterns which can be used to predict consumer trends Is a very expensive method as many consumers receive payments to complete diaries Consumers get fed up quickly resulting in a high turnover of respondents and inaccurate data Consumers may not complete the journals accurately or on time Test Marketing Allows for the product to be amended or improved before national launch Saves the cost of a national launch if the product does not receive good reviews in the test market Regional tastes may not represent the nation as a whole Observation Provides accurate quantitative information There is no direct contact with the customers Cannot clarify any situations or ask for explanations

Question 28

Customers provide organisations with personal information. Explain the ways in which organisations can use this to their advantage.(4)

Answer 28

To establish a database of existing or potential customers, to whom they can send information of relevant offers. Information may be passed or sold to other companies. Gives company information on their market segments allowing them to target specific markets so they can vary product to suit the needs of the market. Differentiation of products possible. Prevents products being promoted to people who are not interested – a waste of resources. Information gathered in this way is more likely to be up-to-date – users will change information when online more readily than informing organisations by post/telephone. When an order is placed, the organisation already has customer’s details – thus saving time ordering online – if the ordering process is speedier and easier, more customers may use it. Max 1 mark for different forms of promotion

Question 29

Describe the field research methods Santander UK plc may use to gather feedback from its customers so it can improve its service. (6)

Answer 29

Focus Groups a range of opinions from a group of customers qualitative information may be difficult to analyse participants will require payment or to be reimbursed for their time Personal Interview/Street Survey often face-to-face questioning provides instant clarification/feedback shows body language/facial expressions which aids communication Telephone Survey may be done by cold calling and asking questions may be perceived as an invasion of privacy/nuisance by customers Social Media gather information from customers who use social media and post comments comments are ‘public’ so anyone can read reviews including competitors Postal Survey sent out to customers’ homes, filled-in and returned can target areas with specific attributes eg high income households may be perceived as junk mail which lowers the response rate Online Survey/EPOS/Test Marketing/Observation/Hall Test…

Question 30

Describe the benefits of holding a varied product portfolio (5)

Answer 30

Allows organisation to spread risk. They can meet the needs of different market segments. Increased profits from selling different products. Newer products can replace those at the end of the life cycle. Increases brand awareness Easier to launch new products Seasonal fluctuations

Question 31

Describe the reasons why organisations focus on research and development (4)

Answer 31

Ensure consumers are provided with the products they want – this is the only Market Research point available Improves on existing products Produces new products Keeps the organisation ahead of its competitors Finding a unique product can become very profitable Ensures products are safe

Question 32

Explain why some firms spend vast sums of money on product innovation (3)

Answer 32

Ensure consumers are provided with the products they want – this is the only Market Research point available Improves on existing products Produces new products Keeps the organisation ahead of its competitors Finding a unique product can become very profitable Ensures products are safe

Question 33

Explain why organisations choose to spend large sums of money on marketing.(5)

Answer 33

Persuades consumers to buy their product as opposed to the competitor’s Gives consumer information about the product Reminds consumer that the product still exists Identifies the requirements (changing) of the consumer Consumers need to know of new product developments Targeting a market segment which is influenced heavily by promotion and product endorsement Attempt to increase market share and enter new markets

Question 34

Describe the stages that take place before a new product is launched onto the market. (6)

Answer 34

Generate the idea through market research. Analyse the idea. Find the appropriate finance for the new product. Decide if product is legal/technically possible/can be produced. Produce a prototype. Test market. Make any required alterations. Full scale production. Advertise the product prior to launch.

Question 35

Lees change the packaging of their products which made them more eye-catching and appealing to consumers. Explain 5 other methods of extending a product's life cycle. (5)

Answer 35

1 mark for appropriate diagram Improve the product – eg lighter, new features etc. Alter price – eg increase/decrease price. Change the method of advertising – eg from TV to radio. Change the use of the product – eg Lucozade once was used to reenergise ill people, now used as a sports drink. Introduce line extensions to the product – eg different flavours, sizes, formats etc. Change the name of the product – eg Opal Fruits to Starburst, Marathon to Snickers. Alter the place the product is sold – eg selling on-line.

Question 36

Explain how extension strategies can prolong the life of a product (6)

Answer 36

Increased advertising of the product will increase awareness, or persuasive advertising techniques, might mean consumers may purchase more of the product or service Reduce the price to increase sales therefore people will buy more frequently/in larger volume Change the market for the product Re-launch the product Alter the products packaging Change the products name Find a new use for the product Develop a range of the same product in different sizes or shapes Use promotional techniques to stimulate demand

Question 37

Explain how various methods of extending a product's life cycle can increase sales (6)

Answer 37

Improve the product – this will attract new consumers to purchase the product, or previous consumers to retry the product to find out what has been improved or if the product is better Alter the packaging – this may appeal to a different market segment or may attract new customers to the product as the packing is eye-catching. Eg, Pepsi altered the colour of their cans to attract a younger generation Increase/decrease the price – price changes can attract new consumers to purchase the product and existing consumers to purchase more of the product. Price rise may make the product seem more exclusive and attract new customers. Price decrease may mean existing customers purchase more of the product. Eg, lowering the price will mean families with lower income may purchase the product Use a different or new advertising campaign/advertising media – this will highlight the product in a different manner or could be eye-catching to a new group of consumers. Eg, change advertising from newspapers/billboards to TV Change the use of the product – new use of the product will be popular with different market segments than the original use and attract a wider consumer base. Eg, Lucozade became a fitness drink from a health drink Introduce line extensions to the product – various product line extensions will appeal to different segments and may increase overall sales Change the name of the product – by changing the name, the product may appear different or better in the eyes of the consumer. Also allows for a whole new range of promotions/adverts to be launched which should attract attention Alter the place the product is sold – selling the product in a variety of ways will mean a larger number of consumers can purchase the product, ie, selling online can attract a worldwide audience

Question 38

Describe the stages that a product might go through prior to being launched onto the market (5)

Answer 38

Generate the product/service through research and development. Find the appropriate finance for the new product. Decide if product/service meets legal requirements. Analyse if it is technically possible that it can be produced. Produce a prototype of the product/service. Launch the prototype on a test market in a smaller geographical location. Make any required alterations from the feedback given or data researched. Advertise the product nationwide/set a price/establish place – max 1.

Question 39

Describe the 4 main stages of the product life cycle (4)

Answer 39

Introduction – the product is launched onto the market. At this stage sales will be low and costs of advertising may be high Growth – customers awareness of the product increases and sales start to grow sharply Maturity – the product is commonplace in the market and sales are at the highest and constant. Decline – the product has many competitors and new products will be forcing sales to decline. Accept development and saturation as stages

Question 40

Describe the effect of each stage (of the product life cycle) of profits (4)

Answer 40

Introduction – Profits will still be low, if any at all Growth – Profits should start to rise at this stage Maturity – Profits should be steady at this stage although the industry profits as a whole will be shared between many competitors Decline – Profits will start to fall unless efficiency is improved in distribution and production. May even be making a loss before the product is withdrawn altogether Accept development and saturation as stages

Question 41

Describe 5 extension strategies that could be used to extend a product’s life-cycle (5)

Answer 41

Improve the product – e.g. lighter, new features etc. Alter price – e.g. increase/decrease price. Change the method of advertising – e.g. from TV to radio. Change the use of the product – e.g. Lucozade once was used to reenergise ill people, now used as a sports drink. Introduce line extensions to the product – e.g. different flavours, sizes, formats etc. Change the name of the product – e.g. Opal Fruits to Starburst, Marathon to Snickers. Alter the place the product is sold – e.g. selling on-line.

Question 42

Mobile phone operators have been criticised for overcharging customers and may be forced by legislation to reduce their prices. Describe 4 factors which allow organisations to remain successful while charging customers high prices.(4)

Answer 42

Brand loyalty – consumers choose to buy the product despite cheaper alternatives being available Lack of competition – there is no alternative product for the consumer Successful marketing – strong advertising/promotion can convince consumer that the price is worth paying Image – consumers wish to be seen wearing/using the expensive product as it enhances their personal image Holding a Unique Selling Point – the product may have a unique feature Limited supply Holding a patent

Question 43

Describe pricing strategies which could be used to achieve these objectives (high prices in a competitive market) (4)

Answer 43

Low price strategy (destroyer) could be used to undercut the competitor; price can be raised once competitor leaves the market High price strategy could be used to increase profits; demand may fall as a result of the high prices High prices can be charged for an innovative product (skimming); money spent on innovation can reduce profits Discriminatory where different prices for the same product are charged according to time of day, age, etc – may increase sales/profits Penetration pricing where low price is charged when a new product is launched – enables growth Promotional pricing where price charged is reduced in order to increase sales

Question 44

Describe a pricing tactic which could be used to ensure a new product or service appears exclusive (2)

Answer 44

Skimming Where a product is highly priced when entering the market for the first time. Some people are prepared to pay this and once this market segment is saturated, the price is lowered to target another segment. Premium The premium price is highly priced and retained. Gives a USP

Question 45

Distinguish between a high pricing tactic and a pricing tactic which could be used by a firm in a highly competitive market (2)

Answer 45

A high pricing strategy will have higher prices than competitors whereas in a competitive market prices will be similar to competitors A high pricing strategy competes on its luxury image whereas in a competitive market they may compete on branding or promotional offers

Question 46

Explain why firms use loss leaders as a pricing tactic (3)

Answer 46

Brings customers into the shop to buy the products. Customers then buy other products which are normally priced. Profits are made on the whole amount a customer purchases. Creates customer loyalty as customers don’t go to competitors shops. Can be used in a marketing campaign.

Question 47

Describe 3 pricing tactics that could be used when an organisation attempts to break into a new market (6)

Answer 47

High Price – price is set higher than competitors to give the image of quality and exclusiveness. Low Price – price is set lower than competitors to attract customers to their product/service. Skimming – price is set high initially when no competition exists, when competitors enter the market price is lowered to market price. Market/Competitive Pricing – price is set at the same level as competitors, normally used for products that are identical. Penetration Pricing – price is set slightly lower than competitors to attract customers, once a customer base has been created price is slowly increased to same as competitors. Promotional Pricing – a low price is set for a short period of time to boost sales in the short term, possibly even making a loss on the product. Destroyer Pricing – price is set very low compared to competitors and once there is no competition in the market the price is then put back up to the previous level or higher, used mainly by larger organisations to destroy competition, must have large reserves to sustain this over any length of time. Cost plus pricing

Question 48

Describe 2 pricing tactics that an organisation could use when selling an exclusive product (4)

Answer 48

Premium Pricing Choose a high price to sell the product This will give the customer an image of quality Market Skimming Start off with a high price to sell the product This will appeal to a certain market segment who want the product in the introductory stage Allows the business to make high profits prior to competitors entering the market As competitors enter the market the price is reduced This allows people on lower income to purchase the product

Question 49

Justify the use of loss leaders as a pricing tactic (4)

Answer 49

Brings customers into the shop Customers then buy other products which are normally priced. Profits are made on the overall amount a customer purchases. Can create customer loyalty. Can be used in a marketing campaign.

Question 50

Describe 3 pricing tactics that could be used when an organisation attempts to launch a new product. (6)

Answer 50

High/Premium Price – price is set higher than competitors gives the image of quality and exclusiveness Low Price – price is set lower than competitors Skimming – price is set high initially when no competition exists, when competitors enter the market the price is lowered to market price Market/Competitive Pricing – price is set at the same level as competitors normally used for products that are identical Penetration Pricing – price is set slightly lower than competitors to attract customers once a customer base has been created price is slowly increased to same as competitors Promotional Pricing – a low price is set for a short period of time used to get rid of old stock possibly even making a loss on the product Destroyer Pricing – price is set very low compared to competitors once there is no competition in the market the price is then put back up to the previous level or higher used mainly by larger organisations to destroy competition must have large reserves to sustain this over any length of time Cost Plus Pricing – add up the costs of production and add on a percentage profit

Question 51

Describe the pricing tactics that could be used to extend the life of a product. (6)

Answer 51

High Price – price is set higher than competitors to give the image of quality and exclusiveness Low Price – price is set lower than competitors to attract customers to their product/service Accept skimming if well described Market Pricing – price is set at the same level as competitors, normally used for products that are identical Promotional Pricing – a low price is set for a short period of time to boost sales in the short term, possibly even making a loss on the product Destroyer Pricing – price is set very low compared to competitors and once there is no competition in the market the price is then put back up to the previous level or higher, used mainly by larger organisations to destroy competition, must have large reserves to sustain this over any length of time Cost plus pricing – reducing the mark up onto the cost of the product

Question 52

Other than altering prices, describe 2 methods of promotion which are used by organisations. (2)

Answer 52

Advertising (newspaper, magazine, TV, etc) where the product is displayed using photographs and text Product endorsement where a famous personality is seen using the product Buy one get one free – two products are given and the customer pays for one Free gift given with the purchase Free sample of a product is given so that the customer tries it out and then returns to purchase it Demonstrations – where the product is shown operating so that consumers can see how it works Bonus packs – a larger pack of the product is offered at the same price Coupon – may be attached to the product to allow for discount on the return purchase Display material – given to retailers to provide materials to help them display the product attractively in the shops Dealer loaders – where retailers are given a free product eg 13 packets and they pay for 12 Sale or return – the retailer is allowed to return any unsold goods and be reimbursed Dealer bonuses – the retailer selling the most will be given cash or eg a holiday Staff training – the manufacturer trains the staff who will be selling the product Credit facilities – retailers or consumers are allowed to buy the goods and pay for them at a later date

Question 53

Describe 3 methods of promoting Scotland's tourist industry (3)

Answer 53

Direct mail (post or e-mail) where promotional materials are sent directly to potential customers. Reward card where points are collected which can be traded for discounts or gifts. Collection of newspaper tokens. Competitions where people are offered the chance to win a prize by returning a promotional leaflet etc. Advertising where descriptions, pictures etc are displayed or described in magazines, on television or radio (maximum 1 mark). Promotional pricing where customers are offered reduced prices for visiting tourist sites or reduced rates in hotels. Product endorsement where celebrities are linked with the country eg politicians, Sean Connery visiting the US for “Tartan Day”. Using Tourist Boards Using Scotland for film sets

Question 54

Manufacturers use short term promotional measures to boost sales of products or services to retailers (into the pipeline promotions). Describe 2 of these measures (2)

Answer 54

Point of sale of materials. Dealer loaders. Sale or return. Competitions. Staff training. Credit facilities. Bulk buying discounts.

Question 55

Describe the methods available to a Public Relations department to improve the image of an organisation. (5)

Answer 55

Use of press release to counteract bad publicity. Give donations to charities. Sponsor events locally and nationally. Product endorsements/celebrity endorsements. Publicity literature given out. Give out company merchandise. Use press conference – invite media to attend – 2-way interaction. (5)

Question 56

Describe the advantages and disadvantages of product endorsement (5)

Answer 56

Consumers associate products with the personality. Gives a good image of the organisation. Consumers will purchase products to be seen as the same as the personality. Increases sales if the personality is successful. Involves very high costs to pay personalities for their name/image. If personality has a problem then the product can suffer the negative publicity. Organisations need to choose personalities carefully and ensure they portray the correct image the organisation wants to use.

Question 57

Describe 4 different sales promotions that could be carried out by a retailer (4)

Answer 57

Free samples to consumers to attempt to make them purchase the product if they like the sample Credit facilities given to customers to allow them to pay back over a period of time Bonus packs for customers that often have extra free amounts or a gift included BOGOF – buy one item and get another item free of charge Competitions used by companies which consumers enter to win prizes Demonstrations of products in supermarkets to let customers try products/services before purchasing Loyalty cards

Question 58

Describe the advantages and disadvantages of product endorsement (6)

Answer 58

Advantages Consumers buy the product in an attempt to be the same as the celebrity Photographs of the · celebrities are used to create visual connections to the product Higher prices can be charged due to the endorsement Brand loyalty may be created due to the endorsement Statements can be used in promotions to further enhance the product e.g. the official hair product of David Beckham Disadvantages Can cost vast amounts of money to retain the celebrity If the celebrity gains bad publicity the product is also tarnished Product endorsement does not guarantee a quality product

Question 59

Describe methods of a public relations department could use to improve the image of an organisation (4)

Answer 59

Use of press release to counteract bad publicity. Give donations to charities. Sponsor events locally and nationally. Product endorsements/celebrity endorsements. Publicity literature given out. Give out company merchandise. Use press conference – invite media to attend – 2-way interaction

Question 60

Describe the methods available to a Public Relations department to improve the image of an organisation. (5)

Answer 60

Use of press release to counteract bad publicity Give donations to charities Sponsor events locally and nationally Product endorsements/celebrity endorsements Publicity literature given out Give out company merchandise Use press conference – invite media to attend – 2-way interaction Release Mission Statement

Question 61

Explain the role of a wholesaler (4)

Answer 61

Saves manufacturer from making numerous small deliveries to retailers – therefore transport and administration costs are saved Saves manufacturer from costs of holding high stock levels Saves manufacturer from being left with outdated stock Wholesaler may take on the work of labelling products for the retailer Wholesaler may sell products direct to customers

Question 62

Describe the factors affecting an organisations choice of channel of distribution.(7)

Answer 62

The product: If the product requires specialised technical knowledge then direct selling between the manufacturer and the customer may be the best option. If the product is aimed at the mass-market then wholesalers and retailers will probably be used as it can be more easily distributed. Wholesalers may break down bulk for retailers saving the manufacturer doing so. Perishable products would be best distributed through a direct channel. Consumers buying habits: Manufacturers will place products where customers expect to buy them. Finance: Large companies may have the finance to support their own distribution network. The desired image: If an exclusive image is desired, then it may be distributed in exclusive outlets. Legal restrictions: Prescribed medicines have to be sold by a pharmacist. The distribution capability: A manufacturer may choose to use a wholesaler if it cannot distribute the products themselves, eg due to lack of transport. A manufacturer may use wholesalers and retailers when the market is large and widespread as it would be expensive and time-consuming for the manufacturer to distribute to a very large number of shops.

Question 63

Discuss different forms of direct selling available to organisations (8)

Answer 63

Offers credit facilities. Can be exclusive and only way to purchase some products. Saves expensive High Street locations. Consumers may not like the lack of personal service and many goods require to be returned. Involves high advertising costs. High levels of bad debts occur. Internet selling − firms sell their products or services over the Internet. consumers can order online from the comfort of their home. Saves time and hassle of travelling to High Street stores. Some concerns over the use of credit cards and the security involved. Goods delivered direct to home of consumer. Saves on overhead costs. Available 24/7. Cheaper prices. Direct mail − companies send letters/leaflets advertising their products for sale directly to the homes of possible consumers. Consumers within specific market segments can then be targeted directly. Can reach wide geographical areas. Consumers do not respond well to vast amounts of junk mail. Specialist magazines − used to describe and sell specialised products direct to consumers. Consumers can telephone or fill in order forms and send them in. Consumers who purchase the magazine are interested in that area. Personal selling − products are sold door-to-door or by telesales. Can be direct to retailers or to consumers. Allows the product to be demonstrated. Consumers are not keen on being disturbed at home.

Question 64

Discuss the advantages and disadvantages to a manufacturer of using a wholesaler (5)

Answer 64

Advantages Saves on a number of smaller deliveries. Administration costs are reduced. Less money tied up in stock. Less stock goes obsolete. Wholesalers may label the product. Wholesalers break product down into smaller more saleable size. Wholesalers can give market research direct to manufacturer. Disadvantages Loss of control of how the product is presented. Less profits as wholesaler makes profit, ie using middle men. Costs involved in producing point of sale merchandising for wholesalers. (5)

Question 65

Explain the advantages to an organisation of selling products over the internet (4)

Answer 65

The full range of an organisations products can be shown on a website therefore the products are available for consumers to look at Customers can purchase online from their own home – increase sales Allows worldwide sales – global economy Sales can be made 24/7 Reduces costs due to not requiring expensive premises or large amounts of staff Customers can leave comments on websites Can make use of customer details for market research purposes Customer satisfaction

Question 66

Justify 4 methods of direct selling that could be used by an organisation (4) 2010

Answer 66

Personal selling – products are sold by experienced sales personnel Direct contact can be made to the retailer or consumer Can be tailor-made to customer requirements Demonstrations of the product or service can be shown Mail order – goods sold via catalogues Offers credit facilities No need for High Street stores Internet selling – making use of websites to sell products Consumers can order online from offices or homes Is available worldwide Can be accessed 24/7 Specialist magazines – used to describe and sell specialised products or services Customers who are sent or purchase the magazine are directly interested Consumers can phone in orders or speak to specialists Max of 4 description marks Watch for repetition (No ID marks are given. A description of the method must be given to be awarded a mark.)

Question 67

Describe the factors an organisation would take into account before choosing a channel of distribution (5)

Answer 67

The product being sold – if the product is flowers it needs to be a fast method with appropriate facility to transport flowers The finance available within the organisation – if there is limited finance available then this will affect the choice of channels The image of the product – if the image is of a high quality product this will affect the channel that the organisation chooses The reliability of the other companies in the chain Legal restrictions Where the product is in the life cycle The organisation’s own distribution capabilities Durability of the product

Question 68

Explain the impact that recent trends in retailing have had on organisations (4)

Answer 68

Increase in customers shopping at large retail parks have meant that organisations are moving from high street stores to retail parks. Increase in large superstores have meant many small local shops going out to business. Vast use of e-commerce has meant organisations now must have websites with access to online purchasing. Changes to opening hours means many organisations have to pay overtime to staff to work on Sundays and late evenings. Large supermarkets selling a wide range of products has meant customers needs can be catered for under the one roof. Increase in discount stores selling products at discounted prices has meant competitor organisations have had to reduce prices in order to keep customers.

Question 69

Describe the reasons why some manufacturers sell their products to retailers rather than directly to customers (4)

Answer 69

Retailers are located closer to the customer. They often have an established customer base. They can hold stock. Have trained sales staff who are knowledgeable about the products. Will attract customers by offers of credit facilities. Can offer appropriate after sales services. Retailers buy in bulk. Reduced delivery cost. Retailers paying for advertising. Products displayed attractively by the retailer.

Question 70

Explain the advantages and disadvantages of using a wholesaler (5)

Answer 70

Advantages Saves the manufacturer from making lots of smaller deliveries which saves them on transport costs Administration costs Saves the manufacturer from having high stockholding costs as a lot of the stock is held by the wholesaler If there are changes in trends and fashions the manufacturer will not be left with unsold stock Wholesalers can help label and package the product for the manufacturer which is less time consuming/less work for the manufacturer. Retailers can buy from wholesalers in smaller amounts which can help increase overall sales of the manufacturers product Disadvantages By using wholesalers manufacturers lose control over the image of their product which could mean the product not being presented the way the manufacturer would want Profits are lost to the wholesaler which could be kept by the manufacturer improving their financial position.

Question 71

Describe the factors an organisation would take into account before choosing a channel of distribution. (5)

Answer 71

The product being sold The finance available within the organisation The image of the product The reliability of the other companies in the chain Legal restrictions Where the product is in the life cycle The organisations own distribution capabilities Durability of the product Target market

Question 72

Justify 4 methods of direct selling that an organisation could use. (A different justification must be used each time.) (4)

Answer 72

Personal selling – products are sold by experienced sales personnel. Other methods are available Direct contact can be made to the retailer or consumer Can be tailor-made to customer requirements Demonstrations of the product or service can be shown Mail order – goods sold via catalogues. Offers credit facilities No need for high street stores Internet selling – making use of websites to sell products. Consumers can order online from offices or homes Is available worldwide Can be accessed 24/7 Specialist magazines – used to describe and sell specialised products or services. Customers who are sent or purchase the magazine are directly interested Consumers can phone in orders or speak to specialists

Question 73

Explain the advantages to an organisation of selling products over the internet (4)

Answer 73

The full range of an organisations products can be shown on a website therefore the products are available for consumers to look at Customers can purchase online from their own home – increase sales Allows worldwide sales – global economy Sales can be made 24/7 Reduces costs due to not requiring expensive premises or large amounts of staff Customers can leave comments on websites Can make use of customer details for market research purposes Customer satisfaction

Question 74

Describe the advantages of e-commerce to an organisation (5)

Answer 74

The full range of an organisation’s products can be shown on a website Saves the firm having to have large outlets or costly high street shops to display them. Reduces costs due to not requiring large amounts of staff. Customers can purchase online from their own home Allows worldwide sales – access to global economy Sales can be made 24/7 Customers can leave comments on websites Can make use of customer details for market research purposes by email to contact customers with promotions

Question 75

Describe the advantages to an organisation of having a website (6)

Answer 75

Website can give potential customers information about the organisation and its products E-commerce 24/7 availability Wider audience reached Market research (questionnaires) can be carried out online Information gathered about potential and actual customers who leave their details having entered website Can email customers with info on new products

Question 76

Describe the benefits of using the internet to market products (5)

Answer 76

Can sell its products on the Internet, e-commerce OR customer benefit of on-line shopping eg free delivery, online discounts etc. Increased potential market to become worldwide. Consumers can order 24/7. Customers can leave their details on company website. Customers can gain information about the products. Market research can be carried out/on-line questionnaires. Can research information on competitors or suppliers. Gives the image of an up-to-date company. Hyperlinks with other sites. Quality of internal information.

Question 77

Explain the impact on a marketing department of introducing modern technology (5)

Answer 77

Will improve communication through use of: e-mail which will speed up sending files to colleagues throughout the world can have attachments sent to colleagues to view use of videoconferencing will allow meetings to take place without travelling. Increased access to information through the use of the Internet and access to worldwide sources will allow organisations to look at competitors’ websites find suppliers’ anywhere in the world access information from anywhere in the world. Increases productivity and speed of work as computers often work faster than humans. File sharing can be carried out anywhere in the world through the organisation’s network which will improve decision making as files can be shared and worked on at the same time by colleagues anywhere in the world. Saves on costs travel costs with use of videoconferencing labour costs as use of computers will reduce labour requirements. Improves quality of product or service computers will produce a consistent quality each time reducing the number of errors and wastage. Allows for more flexible working with staff as they can work from home and stay in contact via ICT − better relationships. E-commerce/e-tailing Image and competitiveness