Question Answer Marks Guidance

1(a) Define ‘cost-plus pricing’. 2 First mark is for explaining what the ‘plus’ is e.g. profit.
Second for reference to / description of mark-up.
Award 2 marks for a full definition. Award 1 mark for a
partial definition. Price is based on / related to cost of product [0] (reordering
only).
The price is based on the cost of making a product and the
addition of a fixed percentage for profit [2]

OR The cost of manufacturing the product plus a (profit)

mark-up [2]

OR Formula e.g. [total cost / total number of units]  % mark up

[2]

Partial definition e.g. profit added to the cost [1]

1
1(b) Define ‘marketing mix’. 2 For 2 marks candidates must understand that it involves four
elements AND what it is used for (e.g. help sell products /
Award 2 marks for a full definition. Award 1 mark for a attract customers / make marketing decisions / market a
partial definition. product).

All activities that go into the marketing of a product or service. Do not award answers such as 4P’s or 7P’s these do not define
These activities are often summarised as the four P’s – product, the term.
promotion, place and price [2]

OR Four marketing decisions needed for the effective

marketing of a product [2]

OR The combination of product, price, promotion and place

(distribution) that determines how a firm market itself to its
customers and potential customers [2]

Partial definition e.g. (combine) price, product, promotion and place

[1]
OR Different strategies a business can use to help market / sell
its products [1]

2
Question Answer Marks Guidance

1(c) Outline two reasons why offering a high quality service might
be important for Aisha’s business.
Award 1 mark for each relevant reason.
Award 1 mark for each relevant reference to this business.
4 Note: To use words from the stem as application, the reference
must be appropriate (i.e. make sense) in relation to the point
being made.
The following words are likely to be appropriate for this
question:

Points might include:  Sole trader

 20 years
• Increase sales / maintain sales / attract customers [k] of  Healthy catering / lose weight/ health issues/ diabetes/
healthy foods [app] hypertension/ heart disease
• Helps maintain / increase customer loyalty [k] for this sole  Niche market
trader business [app]  Cost-plus pricing
• Maintain reputation / improve brand image [k] built up  3 employees
over 20 years [app]
 Successful business
• Set/maintain high prices [k] which helps as use cost- plus
Other appropriate examples in context can still be credited.
pricing [app]
• Way to add value [k] as operates in a niche market
Do not award 3 employees as application where answer refers
[app]
to sharing profit or using profit to pay wages.
• To reduce complaints [k] for the 3 employees [app]
• No need to replace faulty work [k]
• Gain competitive advantage [k] which can help her
business remain successful [app]

Other appropriate responses should also be credited.

3
Question Answer Marks Guidance

1(d) Do you think operating in a niche market will help a small
business have a better chance of success than operating in
a mass market? Justify your answer.
Award up to 2 marks for identification of relevant points.
6 This is a general question so there are no marks for
application.
To access evaluation marks, candidates must identify
points for both types of markets.

Award up to 2 marks for relevant development of points. To gain both evaluation marks, answer must clearly relate to a
small business.
Award 2 marks for justified decision as to whether operating in a
niche market will help a small business have a better chance of Do not award definitions of terms as this is NAQ.
success than operating in a mass market.
Advantages of operating in one type of market can be presented
Points might include: as disadvantages of the other option but do not award the same
point twice as mirror answers are not accepted.
Niche market:
• Able to focus more closely on customer’s needs [k]
leading to customer loyalty / good customer relations [an]
• Less competition [k] less pressure to lower prices /
easier to attract customers [an]
• May be able to set higher prices (for a high status,
exclusive product) [k] so able to have high / increase
profit margin [an]
• Can become expert in the segment [k]
• Small size of market means will not benefit from
economies of scale [k] leading to higher average costs [an]
• Less potential for growth / low potential demand [k]
• Over dependence on single product / less able to
spread risk / vulnerable to changes in consumer
spending patterns [k]
• Likely to attract competition if successful [k]

4
Question Answer Marks Guidance

1(d) Mass market

• More (potential) customers/sales [k] leading to higher
(potential) revenue [an]
• Increased /high level of competition [k] so might have
high level of customer loyalty [an]

Other appropriate responses should also be credited.

Justification might include:

In a niche market a business can focus more closely on

customer’s needs [k] leading to higher levels of customer
loyalty [an]. In a mass market, there are more potential
customers [k] which could mean higher revenue [an].
However, I do think a small business has a better chance of
success in a niche market because it can continue to charge high
prices [eval] as large companies will not see the market as
worthwhile because of potentially low sales. [eval]

5
Question Answer Marks Guidance

2(a) What is meant by ‘brand name’? 2

Clear understanding [2]: unique name of a product /

business [1] that distinguishes it from other businesses or
products[1].

Some understanding [1]: e.g. makes a product ‘stand out’

6
Question Answer Marks Guidance

3(a) What is meant by ‘mass market’? 2

Clear understanding [2] e.g. selling the same product to the

whole market (everyone)
Some understanding [1] e.g. Selling to the whole market OR lots of
customers OR lots of sales OR lots of buyers

3(b) What is meant by ‘price elastic demand’? 2

Clear understanding (2) e.g. demand responds more

than proportionately to a change in price

OR change in demand is greater than change in price

Some understanding (1) e.g. demand changes with

price
OR where PED has a value greater than 1
OR responsiveness of demand to a change in price

7
Question Answer Marks Guidance

3(e) Do you think GLOSSY should change its pricing strategy? Justify your 6 Application marks may be awarded for
answer. appropriate use of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) (Max 1)  laissez faire
Application [1] – award 1 mark for relevant reference to this business  face care products
Analysis [2] – award up to 2 marks for relevant development of point(s)  factory in another country to head
Evaluation [2] – justified decision as to whether GLOSSY should change its office
pricing strategy.  mass market
Relevant points might include:  high level of competition in market
Competitive pricing:  price elastic demand
 Will not discourage customers from buying [k] its face care products [app]  complaints about communication
so will buy again [an]  competitive pricing
 Business does not lose market share [k] which is important when there is a  correct use numerical data from table 2
high level of competition [app]
 Time OR money to find out competitor’s prices [k] increase costs [an] Note: candidate’s final decision may be for
 Need another way to attract customers [k] or against changing its pricing strategy
 Customer may be prepared to pay more [k] could lose potential revenue [an]
 May not cover the costs (of production) [k] so may not be able to break- even
[an]
Lower price:
 Customers will be attracted to the lower prices [k] in a competitive market
[app] which may increase sales [an] but competitors may also lower prices
so do not gain as many additional sales [an]
 Customers may think product is lower quality [k] decreasing sales OR
revenue [an]
 Revenue will increase [k] to $225 000 [app + an]
 No guarantee will gain forecast extra demand [k] of 50 000 [app + an]

8
9