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 NEW FOR
2015

Edexcel AS/A
Edexcel AS/Alevel
level
BUSINESS
ECONOMICS

Dave Hall
Rob Jones
Carlo Raffo
Alain Anderton
Alain Anderton Jennifer Lee
Edited by Dave Gray Keith Hirst
Andrew Redfern
6th
5thEDITION
EDITION Edited by Dave Gray
 About this book

‘Preparing for your exams’ At the end of Themes 1 and 4 you’ll find detailed exam
preparation sections to help consolidate your learning. Exam-style questions, mark
schemes and answers, together with useful tips for how to approach the exams, will
give you extra confidence in your performance.

Extract D Global hotel industry revenue from 2008 to 2016

The global hotel market Revenue ($ billions)
600
550
Following a dip in 2009, possibly the result of a global downturn
500 457
in demand, revenue in the global hotel market has shown 447 419
400 395
consistent growth. It was expected to generate around $550
billion in 2016. 300
200
100
0
2008 2009 2010 2011 2016*
*Estimate Year

Source: adapted from www.statista.com

Question 2 (b), Student answer

Since 2008 revenue in the global hotel industry has grown
significantly. By 2016 it is expected to have grown by
23 per cent from $447 billion to $550 billion. One possible
reason for this pattern of spending on hotel accommodation
could be the growth in global incomes. There is usually a
strong link between consumer incomes and the demand
for products. In recent years the BRIC countries of Brazil,
Russia, India and China, have enjoyed relatively high levels of
economic growth. This has resulted in people earning more
money and having extra to spend on non-essentials, such
as hotel accommodation. The expansion in India planned
by InterContinental Hotels (IHG) supports this view. IHG
currently operates 19 hotels across 10 cities in India. It also
expects to open another 45 hotels in the country over the
next few years. The company is likely to be responding to
rising demand for hotel accommodation in India resulting from
growth in incomes. The hotels are likely to serve both Indians
and overseas tourists visiting the country.

Comment, Question 2 (b)

Questions like this require you to demonstrate knowledge,
application and possibly analysis. One or two marks might be
awarded for identifying one factor that might have led to more
spending on hotel accommodation over the time period, i.e.
growing incomes. Up to two application marks might be awarded
for keeping the answer in context. This answer focuses on the
hotel industry. Finally, credit may be given for analysis. In this
case, explaining how economic growth in developing nations has
resulted in higher spending on hotel accommodation.

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vii
Introduction
The 5th edition of Edexcel AS/A level Business is designed
to develop the skills and approaches you may need, in a variety
of contexts, when making business decisions. It develops an
analytical, rigorous and critical approach to the decision-making
process and to your studies of business. It does not provide a
step-by-step guide to how to be ‘good at business’ as there is
no simple set of rules that can be applied in all contexts that
will always be successful. It is possible that different approaches
may be used by different people in business and there may be
disagreement about which approach to take.
Business is integrated and different areas of business are
interdependent. There are links, for example, between:
●● what is being produced and the funds available to pay for it
(production and finance)
●● the selling of the product and ethical considerations
(marketing and ethics)
●● the type of business and many aspects of its operation.
Being aware of these aspects of business will help you to
understand how and why business decisions are made, and
how they affect a variety of people, both within and outside the
business. The aim of the 5th edition of Business is to help you
as you study Edexcel AS level and A level Business to understand
business decisions and to be analytical, rigorous and critical in
your business thinking. A number of features are included in the
book to develop and extend your skills and approaches – see
About this book, page iv.
Comprehensive course coverage
This book covers the material found in all four themes of the
Edexcel A level Business specification:
●● Theme 1 Marketing and people
●● Theme 2 Managing business activities
●● Theme 3 Business decisions and strategy
●● Theme 4 Global business
By covering all four themes of the specification in detail, this
book takes you through the course, ensuring your skills and
understanding are developed, so that you can have confidence
when approaching your exams. Units in Theme 1 and Theme 2
allow you to gain an in-depth understanding of core business
concepts, with the content in Theme 3 and Theme 4 building
on these topics. Theme 3 and Theme 4 extend breadth and
depth of knowledge through focusing on business strategy and
decisions, and exploring the global context in which modern
businesses operate. This focus on developing a breadth
and depth of knowledge across the course will allow you to
develop the synopticity needed for your final paper.

viii
 1 The market
Key points
1. Mass markets and niche markets:
●● characteristics
●● market size and market share
●● brands.
2. Dynamic markets:
●● online retailing
●● how markets change
●● innovation and market growth
●● adapting to change.
Getting started
The market for holidays has changed dramatically over time.
In the 1960s a typical holiday for a UK person might have been
an annual two-week family trip to the seaside at Blackpool,
Scarborough or Brighton, staying in a caravan, a holiday camp or
small hotel. Today people might take several holidays a year and
the choice of destination, duration and style is enormous. Holidays
can range from a weekend break with friends in an Eastern
European city, such as Prague, or a romantic mini-break for two
in Paris, to a fortnight in the sun in the Caribbean, or a camping
expedition in the Lake District. There are specialist holidays, such
as trekking in the Atlas Mountains, golfing trips in Dubai or white-
water rafting down the River Wye, and theme-park holidays,
such as Disneyland®. Increasingly people are going to long-haul
destinations, such as Australia, China and South Africa.
How has the market for holidays changed over time? What
might have caused these market changes? How do people
choose their holiday destinations? What role does the internet
play in the sale of holidays by businesses?
Markets and marketing
Businesses make money by selling their goods and services
in markets. Historically, markets were places where buyers
and sellers would meet to exchange goods. However, today
it is possible to trade goods and services without buyers and
sellers meeting up. For example, trading can be done over the
telephone, using newspapers, through mail order or on the
internet. Some examples of markets are given below.
●● Consumer goods markets – where products such as food,
cosmetics and magazines are sold.
●● Markets for services – this can include services for
individuals, such as hairdressing, or business services, such
as auditing.
●● The housing market – where people buy, sell and let property.
●● Commodity markets – where raw materials such as oil
copper, wheat and coffee are traded.
●● Financial markets – where currencies and financial products
are traded.
1.1.1
Theme 1
3. How competition affects the market.
4. The difference between risk and uncertainty.
Marketing involves a range of activities that help a business sell its
products. However, marketing is not just about selling, it involves:
●● identifying the needs and wants of consumers
●● designing products that meet these needs
●● understanding the threats from competitors
●● telling customers about products
●● charging the right price
●● persuading customers to buy products
●● making products available in convenient locations.
According to the Chartered Institute of Marketing, ‘Marketing
is the management process responsible for identifying,
anticipating and satisfying customer requirements profitably’.
The characteristics of mass markets and
niche markets
Some businesses sell their products to mass markets. This is
when a business sells the same products to all consumers and
markets them in the same way. Fast-moving consumer goods,
such as crisps, breakfast cereals, computer software and
Coca-Cola®, are sold in mass markets. The number of customers
in these markets is huge – possibly billions if products are
sold globally. This means that businesses can produce large
quantities at a lower unit cost by exploiting economies of scale.
This might result in higher sales and higher profits. However,
there is often a lot of competition in mass markets and therefore
businesses may spend a lot of money on marketing. For
example, Advertising Age reported that the Coca-Cola Company
spent around $3.3 billion on global advertising in 2013.
A niche market is a small market segment – a segment
that has sometimes gone ‘untouched’ by larger businesses.
Niche marketing is the complete opposite of mass marketing.
It involves selling to a small customer group, sometimes with
specific needs. Small firms can often survive by supplying niche
markets. They may also avoid competition. It is a lot easier to
focus on the needs of the customer in a niche market. Also,
if there is no competition it may also be possible to charge
premium prices. An example of a business that targets niche
markets is Zumiez, which sells products related to surfing,
skateboarding and snowboarding.
1
The market Unit 1
However, if a business successfully exploits a niche market
it still may attract competition. Niche markets, by their nature,
are very small and unable to support many competing firms. As
a result, if a large business decides to enter a niche market they
may find it easy to overrun a smaller rival. Also, businesses that
rely on a single niche market may be vulnerable because they
are not spreading their risk. If they lose a grip in their chosen
market, they may collapse because they do not have other
products or markets as a back-up.
Exam tip
In examinations it is helpful to give examples when explaining the
meaning of business terms and concepts. Relevant examples
support your answer and show that you understand the meaning of
the term or concept. It is also important to use information in the
case material in the question to support your answer. This
approach will show your skills in ‘application’ in your answer.
Question 1
David Algunik, a Canadian Emergency Room doctor, designed
Banana Guards. He wanted to prevent bananas from being
bruised and squashed during his journey from home to work,
so designed Banana Guards from lightweight plastic. Once shut
inside a Banana Guard, a banana of almost any shape or size
can be transported completely undamaged inside a lunchbox,
bag or backpack – even when travelling on a packed tube. The
contents are kept fresh by ventilation holes in the side of the
bright yellow Banana Guard, which also prevent the banana
from ripening prematurely until ready for consumption. The
Banana Guard is also safe for the dishwasher.
Sources: adapted from www.bananaguard.com and
www.johnlewis.com
(a) Explain what type of market the Banana Guard is aimed at.
(b) Explain one possible disadvantage of targeting a niche market
for a business selling a product like Banana Guard.
Market size
The size of a market can be estimated or calculated by the total
sales of all businesses in the market. Market size is usually
estimated in a number of ways.
Value: This is the total amount spent by customers buying
products. For example, it was estimated that the value of the
fast-food market in 2014 was just over £29.4 billion. This included
branded fast-food chains and independent outlets selling hot or
cold eat-in food without table service, or takeaway food.
2
Volume: This is the physical quantity of products which are
produced and sold. For example, the global crude steel production
in 2014 was 1,661 million tonnes (worldsteel.org). Some
estimates of volume are based on the number or percentage of
users, subscribers or viewers. This is often the case in markets
for services, such as the number of mobile phone users, the
number of television viewers or the percentage of households
with digital television.
Different markets are likely to differ in size. For example, the
sale of savory snacks in one year is likely to be much smaller than
the sales of footwear in the same year in the UK.
Market share
Market share or market penetration is the term used to describe
the proportion of a particular market that is held by a business, a
product, a brand or a number of businesses or products. Market
share is shown as a percentage. The market share of a business
can be calculated as:
Sales of a business × 100%
Total sales in the market
Why might the measurement of market share be important?
It might indicate a business that is a market leader. This could
influence other companies to follow the leader or influence the
leader to maintain its position. It might influence the strategy
or objectives of a business. A business that has a small market
share may set a target of increasing its share by 5 per cent over
a period of time. It may also be an indication of the success or
failure of a business or its strategy.
Figure 1 shows the market shares of supermarkets in the UK
in 2013. It shows, for example, that Tesco was the market leader
with nearly one-third of the total market. It also shows that the top
four supermarkets share 75.3 per cent of the total market, i.e. the
market is dominated by just four firms.
Figure 1
UK market shares of supermarkets in 2013
Market share (percentage)
Key
Tesco Morrisons
Asda Co-op
Sainsbury's Lidl
Waitrose Iceland
Aldi Others
Source: www.kantarworldpanel.com
(data for 12 weeks ending 10.11.2013 and from data source
comparing 12 weeks ending 25.11.2012)
Brands
Many businesses try to establish themselves in markets by
giving their products a brand name. Products are given brand
names to distinguish them from other products in the market.
Branding is particularly important in mass markets where lots of
products are competing for a share of the market. Examples of
common brand names include Google, BBC, Toyota, Nike and
 Marketing and people

Apple. Branding might be used to: ●● Online retailing affords greater flexibility. An online store can be
●● differentiate the product from those of rivals updated instantly and as frequently as is necessary. For example,
●● create customer loyalty it is possible to promote a ‘deal of the day’ on the home page,
●● help product recognition without the need for expensive printed display material.
●● develop an image ●● Distance is no object with online retailing. Customers can buy
●● charge a premium price when the brand becomes strong. products from anywhere in the world.
Branding is discussed in more detail in Unit 10.

Dynamic markets Question 2

Most markets do not remain the same over time – they tend to
be dynamic, which means they are likely to change. They may
grow, shrink, fragment, emerge or completely disappear. For
example, there is no longer a market in the UK for cassettes.
Most people buy DVDs or download music from the internet.
Dynamic markets can have a huge impact on businesses.
A failure to adapt in a dynamic market can lead to the collapse
of a business. For example, when digital photography emerged
in the 1980s, Kodak (the camera company) continued to rely
on sales of film cameras. Eventually, the market for these types
of cameras collapsed and Kodak went into liquidation. Those
businesses that can adapt to changes in dynamic markets are
more likely to survive in the long term. The changing nature of
markets is discussed in more detail later.

Online retailing
One of the biggest changes to occur in the marketing of products
has been the development of online retailing or e-tailing. This
is a popular branch of e-commerce that has emerged along with
the development of the internet. It involves shoppers ordering
goods online and taking delivery at home. There are specialist Online grocery retailing has not quite taken off in the same way
e-tailers such as Amazon and Alibaba – retail ‘giants’ that sell a that other forms of online retailing have.
huge range of goods online. However, many retailers, both large
However, reports estimate that online grocery sales may rise
and small, now have online services. Growth in online retailing is
from 4.4 per cent to 8.3 per cent in the period 2014–2019. This
rapid and expected to continue into the future.
may be due to busier lifestyles and the further integration of
Businesses may enjoy a number of benefits from offering
mobile technology into daily life as people increasingly become
online retail services.
on-the-go consumers. Online shopping is convenient and saves
●● Retailers can market their goods to people who prefer to
time and fuel. Research shows that 27 per cent of people
shop from home or who find it difficult to get to traditional
shopped online for groceries in 2014, with 10 per cent buying
shops. For example, people who do not enjoy the physical
the majority of their groceries via the internet.
shopping experience, people too busy to go shopping and
people with conditions or disabilities that make physical It was reported in 2014 that click & collect was also being used
shopping difficult. by around a quarter of online shoppers and this figure was
●● It is easier to gather personal information from customers so
growing as more services were made available.
that they can be targeted with other products and offers in Click & collect is a good example of a trend that took off. Major
the future. retailers, including Tesco and ASDA, invested heavily to roll out
●● Selling costs such as sales staff, rent and other store the service to the majority of their stores, as well as convenient
overheads can be avoided. The savings might be enormous locations such as London travel hubs. Click & collect became
and allow online retailers to charge lower prices. available at some London tube stations, with plans to include
●● Marketing costs will also be lower. It is much cheaper, for travel hubs and workplaces as future locations, as retailers
example, to send a marketing message by e-mail to 1,000 continue to experiment and innovate.
customers than it is to send 1,000 newsletters by post.
Source: adapted from www.essentialretail.com
●● Online retailers can reach more customers. A single store in

a high street can only attract a limited number of customers.
However, a website advertising a 15,000-item product range
can have a global reach.
●● An online retailer is open 24/7. There are not many stores
that can match this level of service.
(a) Explain one reason why online grocery retailing is likely to grow
in the future.
(b) Assess the benefits and drawbacks to supermarkets of
online retailing.

3
The market Unit 1
Thinking bigger
A development in online retailing is the emergence of comparison
websites. These sites provide shoppers with search engines that can filter
and compare products based on price, features and other criteria. Most
comparison shopping sites compare prices from many different retailers,
but do not sell products themselves. They also tend to specialise in
particular product groups. For example, trivago is used to compare hotel
prices, skyscanner compares the prices of flights, MoneySuperMarket.com
compares financial products and uSwitch.com compares energy prices.
However, some of these sites have been criticised for not giving the
best deals. For example, it was reported in 2014 that consumers were
missing out on the best energy deals. This was because comparison
sites filter out the tariffs that do not pay commission. The Big Deal
website was set up in 2013 to help consumers reduce their energy bills.
They reported that the cheapest energy deals were not presented to
customers by the five major price comparison websites. Instead, the sites
provide an option to users to click ‘yes’ if they want to see tariffs they can
switch to ‘today’ or ‘now’. Any deals that do not earn the comparison
site commission from the energy companies are filtered out from the
search findings.
How markets change
The size of markets: The size of some markets can remain
quite stable over a period of time. For example, the size of the
milk market in the UK probably hasn’t changed much for many
years. This is because consumption of milk is fairly constant.
However, the majority of markets are likely to grow. For
example, The Future of Global Packaging to 2018 reports that
the global packaging market stood at $799 billion in 2012,
increasing by 1 per cent over 2011 with sales projected to
increase by 3 per cent. Some forecasters reckoned growth to
2018 would reach 4 per cent per year, with sales reaching over
1 trillion US dollars. Factors for growth in packaging include
increasing urbanisation, investment in construction and housing,
development of retail chains, and the expanding cosmetics and
healthcare sectors in the emerging economies.
Some markets are in decline. For example, the market for
coal in the UK has fallen sharply since 1970. Markets often
decline because the need for a product ceases to exist. In the
case of coal, other fuels, such as oil, gas, nuclear and renewable
sources are now preferred by households and industry.
The nature of markets: Many markets are in a state of flux.
This means that the structure and nature of the market is subject
to constant change. For example, in many markets products
are constantly updated, modified and re-launched – the choice
available increasing enormously over time. This is the result of
new entrants into the market and existing firms widening their
ranges and extending their lines. For example, the restaurant
market in the UK, worth around £40 billion in 2014, has seen
many changes. In the 1960s, the industry was dominated
by fish and chip shops, the occasional Chinese restaurant,
cafés, independents and hotel restaurants. Today the sector is
large and diverse. Restaurants range from top-end fine-dining
establishments to quick service takeaway outlets. UK high
streets tend to be dominated by chains, such as Nando’s, Prezzo
and Domino’s Pizza, and café chains, such as Costa Coffee
and Caffè Nero. There has been a significant development of
4
‘upmarket’ restaurants, some of which evolved around famous
chefs, for example Jamie Oliver, Marcus Wareing and Gordon
Ramsay. Add to this the huge range of ethnic restaurants selling,
among others, Indian, Thai, Chinese, Vietnamese, Malaysian and
Japanese cuisines.
New markets: While it is possible for some markets to
completely disappear, new markets are always developing. One
big source of new markets is from the development of ‘emerging
economies’. These include the BRIC (Brazil, Russia, India and
China) countries and other developing nations, such as Mexico,
Thailand, Indonesia and some South American countries.
New markets also appear when completely new products are
launched. In the 1970s no one had a mobile phone. In the
1980s no one had a smartphone. In the 1990s no one had a
flat-screen television. In the 2000s few people had e-books.
These are all examples of brand-new markets.
Innovation and market growth
Markets can grow over time – some rapidly, some more slowly.
Growth in existing markets and new markets may occur for the
following reasons.
●● Economic growth. Global living standards tend to rise
over time. This means that the world’s population has more
money to spend. As a result businesses can supply more of
their output to growing global markets. Also, as people get
wealthier they are likely to demand different types of goods.
For example, the markets for holidays, electronic goods, cars,
air travel, cosmetics, furniture and luxury goods will grow.
●● Innovation. Businesses can grow their markets through the
process of innovation. They can create new wants and needs
and meet them with new products. A lot of innovation emerges
through technological research and development. The arrival
of smartphones, tablets, the internet, 3D printing, driverless
cars, wearable technology and space travel have all created
brand-new markets that did not exist before the technological
breakthroughs. However, innovation can take other forms.
Businesses can use clever marketing techniques to develop
new wants. They can supply their products in new locations
– for instance supermarkets offering a click & collect service
at London tube stations. New businesses can cash in on the
inadequacies of others. For example, since the ‘credit crunch’
in 2008, new businesses have been set up to compete with
banks. Crowd funding and peer-to-peer websites have started
to provide unsecured loans. At the moment their market shares
are relatively small. But if they prove successful the established
banks will have to match these new innovations.
●● Social changes. Changes in society can have a big impact
on markets. For example, the decline in the number of
marriages, an increase in the proportion of working women
and the growth in the number of one-parent families have
increased the market size for childcare and housing.
●● Changes in legislation. New laws can affect markets.
For example, environmental legislation has helped to foster
growth in renewable energies and ‘green goods’. Tighter laws
relating to payday lending has resulted in many firms leaving
the market. A ban on tobacco advertising in the UK might
have reduced the market size for cigarettes.

●● Demographic changes. Changes in the structure of the
population can affect the size of markets. In most countries
the population is aging. This will help a lot of markets to grow
because populations get bigger. But there will also be an
increase in the markets for specialist holidays for the elderly,
healthcare, care homes and mobility aids.
Adapting to change
If businesses do not adapt to market changes, they are likely
to lose market share. At worst they could collapse. In 2014,
it was reported that Tesco was losing market share to other
supermarkets. There were a number of reasons for this, but
several reports suggested that they were failing to meet
customer needs. They were losing market share to the big
discounters such as Aldi and Lidl. There was a need for Tesco
to adapt quickly, or risk losing more of their market share. What
might help businesses adapt to market changes?
Flexibility: Businesses need to be prepared for change. One
way is to develop a culture of flexibility within an organisation.
A business might need flexible working practices, machinery
and equipment, pricing and staff. This could mean that staff have
to be trained in a variety of skills and be prepared to change
the tasks they undertake in the workplace. This might help
businesses to serve customers more effectively when changes
occur. For example, if customers want access to the business
during the evening, then staff might have to work shifts. If
businesses have flexible operations it will be a lot easier for
them to adapt to market changes.
Market research: Businesses must keep in touch with
developments in the market. One way to do this is to undertake
regular market research. This might be aimed at current customers
or potential customers. Firms need to be aware of any changes
in customer needs or tastes. Communication with customers and
potential customers should be an ongoing process if firms want to
keep completely up to date. Market research is discussed in Unit 2.
Investment: Those businesses that invest in new product
development are likely to survive for longer in the market.
Although expenditure on research and development is
expensive, a failure to innovate could be costly. A unique new
version of a product or a brand-new model could rejuvenate
sales and help win a larger share of the market. In the car
industry, firms spend very large sums of money in product
development. BMW has enjoyed a larger slice of the small car
market by extending the range of its Minis. Investment might
also be needed in training and use of flexible machinery.
Continuous improvement in the increasingly
competitive environment: Businesses need to make continual
improvements in all aspects of their operations. For example, if
they can improve efficiency, costs will be lower and prices can be
held or reduced. If customer service is flawless, customers are
more likely to return. If new product ideas are encouraged, they
may gain a competitive edge. A culture of continuous improvement
can help businesses be more adaptable in the market.
Marketing and people
Develop a niche: If a market is in decline and a business is
unable to diversify, it may survive by serving a niche. A niche
strategy is appropriate if groups of loyal customers can be
served profitably. For example, Harley-Davidson survived by
leaving most of the motorcycle market to the Japanese. They
sold high-horsepower ‘hogs’ to a small segment of motorcycle
enthusiasts. As a result they became quite profitable and
survived. Generally, if firms cannot adapt quickly to the changing
needs of customers, they will lose out to rivals that do adapt.
How competition affects the market
Competition is the rivalry that exists between businesses in a
market. It would be rare for a business to operate in a market
where there was absolutely no competition. The existence
of competition will have an impact on both businesses and
consumers in the market.
Businesses: Competition puts businesses under some
pressure. It means that they have to encourage customers to
buy their products in preference to those of rivals. They will
use a range of methods to attract customers. These methods
include:
●● lowering prices
●● making their products appear different to those of rivals
●● offering better quality products
●● using more powerful or attractive advertising or promotions
●● offering ‘extras’ such as high-quality customer service.
All of these methods cost money and generally reduce the
amount of profit a business can make. However, businesses
have to use such methods in order to survive in the market.
Because competition makes running a business more
challenging and reduces the profit potential, owners and
managers might try to reduce competition in the market. One
way of doing this is to take over their rivals. This might be
achieved by purchasing a rival in the market. Alternatively, they
might try to create obstacles that make it difficult for others to
enter the market. For example, they may spend huge amounts
of money on advertising, which potential entrants might struggle
to match. It is generally the larger businesses in the market
which are able to reduce competition in this way. However, there
is a range of legislation which prevents businesses restricting
competition using practices that are considered unfair.
Consumers: Consumers will generally benefit from competition
in markets. In markets where there are lots of businesses
competing with each other, there will be more choice. Most
people enjoy having lots of choice because it makes their life
more interesting. For example, when people buy a car they can
choose from a huge range of different models, styles, colours
and endless variations in specifications. Consumers may also
enjoy better quality products and lower prices.
In the absence of competition consumers might be exploited.
A business with little or no competition might raise prices and
restrict choice. They will lack the incentive to innovate. For
example, they are unlikely to invest money to develop new
products. Consequently, one of the roles of a government is to
ensure that competition exists in markets.
5
The market Unit 1
The difference between risk and
uncertainty
One of the challenges when running a business is dealing with
risk and uncertainty. Although both risk and uncertainty are likely
to pose threats to a business, they are not the same.
Risk: Owners take risks when running a business. This means
they take actions where the outcomes are unknown. More
specifically, they commit resources that could be lost. Initially,
they take a risk when setting up a business. This is because they
invest their own money to get the business ‘up and running’ and
there is a chance that the business will not succeed. If the worst
happens and the business collapses it is possible that all the
money invested by the owner is lost.
In the UK, around 23,000 businesses each year are
expected to fail. It is also reckoned that about 90 per cent of all
new businesses do not survive beyond five years.
Even when businesses are established, they may continue to
take risks. This is because they often spend money on ventures
that may not yield positive results. For example, they may invest
in a new product which subsequently fails in the market. If the
product is withdrawn, most of the money spent on development
and launch will be lost.
In 2014, Amazon, the online retailer, launched a mobile
phone called the Amazon Fire Phone. It failed in the market and
the price was reduced very quickly from $199 to just 99 cents.
It was reported that Amazon lost $170 million as a result.
Uncertainty: The markets in which businesses operate are
often subject to external influences. This means that events
which are completely beyond the control of businesses can have
an impact in the market, which can have financial consequences.
For example:
●● a new competitor might enter the market with a
superior product
6
●● consumer tastes might change as a result of a new social trend
the government might introduce a new policy or piece
●●
of legislation
●● some new technology might be invented
●● there may be a natural disaster such as a flood
●● the economy might go into recession.
Unfortunately, such influences are very difficult to predict. This
means that businesses have to operate all of the time in an
environment of uncertainty.
However, the consequences of uncertainty are not always
negative. For example, new technologies can provide new
opportunities. The introduction of the internet has resulted in an
enormous range of new business opportunities. Generally though,
businesses do not like uncertainty. It makes decision making more
difficult – particularly when making investments for the future.
Key terms
Brand name – a name, term, sign, symbol, design or any
other feature that allows consumers to identify the goods
and services of a business and to differentiate them from
those of competitors.
E-commerce – conducting business transactions online.
Online retailing or e-tailing – the retailing of goods online.
Market – a set of arrangements that allows buyers and
sellers to communicate and trade in a particular range of
goods and services.
Marketing – a management process involved in identifying,
anticipating and satisfying consumer requirements profitably.
Market share – the proportion of total sales in a particular
market for which one or more businesses or brands are
responsible. It is expressed as a percentage and can be
calculated by value or volume.
Mass market – a very large market in which products with
mass appeal are targeted.
Niche market – a smaller market, usually within a large
market or industry.
Knowledge check
1. What is the difference between a mass market and a
niche market?
2. What is a key advantage of selling in a mass market?
3. State two disadvantages of selling in a niche market.
4. How is market share calculated?
5. State three advantages of giving products brand names.
6. State two advantages to customers of online retailing.
7. What is meant by a dynamic market?
8. How might the nature of a market change over time?
9. State three reasons why a market might grow.
10. Describe two ways a business might adapt to changes
in markets.
 Marketing and people

Case study
Figure 2

HYBRID AND
UK sales of electric vehicles between 2010 and 2014
Sales
55,000

ELECTRIC CARS 50,000

45,000
40,000
Growing concerns about the environment, and agreements 35,000
by many countries in the world to cut carbon emissions, 30,000
25,000
have helped to encourage sales of hybrid vehicles, electric 20,000
cars and other alternatively fuelled vehicles (AFVs). A hybrid 15,000
vehicle is one that uses two or more power sources. Hybrid 10,000
electrical vehicles (HEVs) combine an internal combustion 5,000
0
engine and an electric motor. These vehicles are now 2010 2011 2012 2013 2014
beginning to grab market share from traditional petrol and Key Year

diesel models. Petrol/electric hybrid

It was reported by the Society of Motor Manufacturers
and Traders (SMMT) that 9,955 AFVs were registered in
September 2014, a 56 per cent rise on the same time in 2013.
This accounted for 2.3 per cent of the total market –
a 44 per cent year-on-year rise.
An SMMT spokesman said the AFV market is seeing the
benefit of more models coming on to the market – in
2014 there were more than 20 plug-in vehicles available
compared to six in 2011, ranging from hatchbacks and
saloons to sports utility vehicles (SUVs) and sports cars.
Of the 9,955 AFVs registered in September 2014, 3,090
were eligible for the government’s plug-in grant that
offered up to £5,000 off the cost of a pure-electric or plug-
in hybrid vehicle. The volumes started off small, but with
the government investing £500 million in supporting the
market and car makers unveiling an even wider range of
models, the direction of travel is increasingly clear.
One of the barriers to rapid growth in the market is uncertainty
about supporting infrastructure – stations that provide facilities
Diesel/electric hybrid
Other electric (plug-in hybrid/range extender)
Pure electric
www.smmt.co.uk
for recharging batteries. In 2014 awareness about the locations
of recharging facilities was not yet widespread. Figure 2 shows
UK sales of electric vehicles between 2010 and 2014. Figure 3
shows oil prices from 2000 to 2014.
Sources: adapted from www.smmt.co.uk and
www.blueandgreentomorrow.com
(a) What is meant by market share? (2 marks)
(b) Explain one reason why the global car market is likely to
grow in the next five years. (4 marks)
(c) Assess how a car manufacturer might adapt to changes in
the market. (8 marks)
(d) Assess the factors that might affect the growth of the hybrid
and electrical vehicles markets in the future. (12 marks)

Figure 3
Crude oil price
Oil prices from 2000 to 2014 69.31 USD/bbl
4 December 2014
180
160
140
Crude oil price (USD/bbl)

120
100
80
60
40
20
0
May 22 Dec 24 Jul 31 Mar 7
2000 2004 2009 2014
Source: www.infomine.com

7
 2 Market research
Key points
1. Product and market orientation.
2. Primary and secondary market research data (qualitative and quantitative) used to identify and
anticipate customer needs and wants, quantify likely demand and gain insight into consumer behaviour.
3. Limitations of market research, sample size and bias.
4. Use of ICT to support market research: websites, social networking and databases.
5. Market segmentation.
Getting started
In 2014, Alok Hossain decided to set up a Bangladeshi
takeaway food service in Great Harwood, Lancashire. Before he
started trading he gathered information about the market for
takeaway food in the town. He spent a lot of time finding out
about competitors. He found out about the:
• number and location of takeaway restaurants in Great Harwood
• menus and prices charged
• opening times
• advertising and promotions used
• additional services offered such as delivery
• speed of service
• types of customers who bought Bangladeshi cuisine.
The information gathered by Alok was very helpful. For example,
he found that one of the main criticisms of current takeaways
was the slow speed of service. When Alok opened Chittagong
Paradise his speed of service was a unique selling point.
Why would it have been a mistake for Alok not to carry out
research? Alok used primary or field research. What does
this mean? Is market research expensive? What might be the
limitations of Alok’s research?
Product and market orientation
Some businesses are said to be relatively product orientated
or market orientated.
Product orientation: Many businesses in the past, and
some today, could be described as product orientated. This
means that the business focuses on the production process
and the product itself. It puts most of its efforts into developing
and making products which it believes consumers want and
which will sell well.
In the past, businesses producing radios and televisions
could be said to have been relatively product orientated. It was
their novelty and the technical ‘wonder’ of the product that sold
them. There were few companies to compete against each other,
and there was a growing domestic market. There were also few
overseas competitors. The product sold itself.
Some industries today are still said to be product orientated.
The machine-tool industry, which produces machines used in the
8
1.1.2
Theme 1
production of other goods, has to produce a final product which
exactly matches a technical specification. However, because
of increased competition, such firms are being forced to take
consumers’ needs into account. The technical specification to
which a machine-tool business produces might be influenced by
what customers want, for example.
Product-orientated businesses thus place their emphasis on
developing a technically sound product, producing that product
and then selling it. Contact with the consumer comes largely
at this final stage. There will always be a place for product
orientation. A great deal of pure research, for example, with no
regard to consumers’ needs, still takes place in industry, as it
does in the development of pharmaceuticals.
Market orientation: A business that is market orientated
is one which continually identifies, reviews and analyses
consumers’ needs. It is led by the market. A market orientated
business is much more likely to be engaged in effective
marketing if it is market orientated. Henry Ford was one of the
first industrialists to adopt a market orientated approach. When
the Ford Motor Company produced the Model T, it did not just
design a car, produce it as cheaply as possible, and then try
to sell it to the public. Instead, in advance of production, Ford
identified the price at which he believed he could sell large
numbers of Model Ts. His starting point was the market and
the Model T became one of the first ‘mass-market’ products.
This illustrates the market orientated approach – consumers are
central to a firm’s decision making. Sony is one of many modern
businesses that has taken a market orientated approach. The
iPhone® 6 by Apple is an example of a product being developed
in response to the wishes of consumers.
A more market orientated business may have several
advantages over one which is more product orientated.
●● It can respond more quickly to changes in the market
because of its use of market information.
●● It will be in a stronger position to meet the challenge of new
competition entering the market.
●● It will be more able to anticipate market changes.
●● It will be more confident that the launch of a new product will
be a success.
What effect will taking a market orientated approach have on a
business? It must:
●● consult the consumer continuously (market research)
 Marketing and people

●● design the product according to the wishes of the consumer

●● produce the product in the quantities that consumers want
Figure 1
to buy Product vs market orientation
●● distribute the product according to the buying habits and

delivery requirements of the consumer

More product orientated More market orientated
●● set the price of the product at a level that the consumer is

prepared to pay.
The business must produce the right product at the right
Examples Examples
price and in the right place, and it must let the consumer know Coal mining business Clothing retailer
that it is available. This is known as the marketing mix. Wheat farmer Soap powder manufacturer
The adoption of a market orientated approach will not Water supply business Supermarket chain
always guarantee success. Many well-researched products
have been failures. Coloroll was a business which started in
the wallpaper market and expanded into home textiles and soft
furnishings. Its attempt to enter the DIY burglar alarm market, Question 1
however, was a failure. The company’s reputation and design
skills had little value in that section of the DIY market compared AstraZeneca is a large British-Swedish pharmaceuticals company,
with other companies, whose reputations were based on home which serves the global market. It focuses on particular areas of
security or electronics. Whether a business places a greater healthcare, including treatments for cancer and heart diseases.
emphasis on the product or on the market will depend on a The company has around 57,500 employees globally and has
number of factors. manufacturing sites in 16 different countries. In 2014, its total sales
revenue was just over $26 billion.
The nature of the product: Where a firm operates in an The UK is the major location for AstraZeneca’s research and
industry at the edge of new innovation, such as bio-technology,
development of new medicines. One research and development
pharmaceuticals or electronics, it must innovate to survive.
(R&D) centre in Alderley Park plays a vital role in their strategy
Although a firm may try to anticipate consumer demand,
as the lead centre for cancer research. The site houses the
research is often ‘pure’ research, i.e. the researcher does not
Advanced Lead Discovery Centre, which has innovative
have a specific end product in mind.
compound management and high throughput screening facilities
Policy decisions: A business will have certain objectives. to assist with the drug discovery process. AstraZeneca is one of
Where these are set in terms of technical quality or safety, the the world’s largest spenders in R&D. Figure 2 shows the amount
emphasis is likely to be on production. Where objectives are in spent on R&D between 2006 and 2013.
terms of market share or turnover, the emphasis is likely to be
on marketing. Figure 2
AstraZeneca R&D expenditure 2006–2013
The views of those in control: An accountant or a
($ million)
managing director may place emphasis on factors such as
cash flow and profit forecasts, a production engineer may give 6,000
5,523
5,162 5,179 5,138 5,243
technical quality control and research a high priority and a 5,000
4,821
marketing person may be particularly concerned with market 4,409
3,902
research and consumer relations. 4,000

3,000
The nature and size of the market: If production costs
are very high, then a company is likely to be market orientated. 2,000
Only by being so can a company ensure it meets consumers’
needs and avoid unsold goods and possible losses. 1,000

0
The degree of competition: A company faced with a 2006 2007 2008 2009 2010 2011 2012 2013
lack of competition may devote resources to research with Year
little concern about a loss of market share. Businesses in Source: www.statista.com
competitive markets are likely to spend more on marketing for
fear of losing their share of the market. (a) Comment on the pattern of R&D expenditure shown in Figure 2.
The distinction between product and market orientation
(b) Explain one benefit to AstraZeneca of being product orientated.
can be seen as a spectrum, as in Figure 1. Most business are
(c) Assess to what extent AstraZeneca is product orientated.
somewhere along the spectrum. For example, supermarkets
may be more market orientated and a copper mining company
more product orientated.

9
Market research Unit 2

Market research ●● whether customers take out holiday insurance

Market research involves gathering, presenting and analysing ●● how people travel to the airport.
information about the marketing and consumption of goods and Getting an insight into how people behave will help a business
services. Businesses spend money on market research because to meet customer needs more effectively. This is qualitative
it helps to reduce the risk of failure. Products that are well data and might also help them to identify new opportunities.
researched are more likely to be successful. Market research Businesses can use a number of different methods to gather
data can be used for the following specific purposes. market research data. Some of these methods are explained in
detail below.
Identify and anticipate customer needs and wants:
Businesses will benefit if they can clarify the specific needs and
Primary research
Primary research or field research involves collecting primary
wants of consumers. In order to design products that are likely
data. This is information which did not exist before the research
to sell, they need to identify as precisely as possible the product
began. In other words, it has to be collected by the researcher.
features that people desire. For example, a car manufacturer
It can either be carried out by a business itself or by a market
will need to find out which product features are important to
research agency. Because of the high costs of using the services
potential customers. Examples include:
of a market research agency, many small businesses choose to
●● body design and style
conduct market research themselves.
●● colour
Most primary information is gathered by asking consumers
●● interior design and style
questions or by monitoring their behaviour. The most accurate
●● economy
way to do this would be to question or observe all consumers
●● ease of maintenance
of a particular product (known as the population). However, in
●● durability
all but a few instances this would be either impractical to carry
●● performance (e.g. acceleration and top speed).
out or expensive. It is usual to carry out a survey of a sample of
The data that market researchers gather need to be as
people who are thought to be representative of the total market.
comprehensive as possible so that all the needs and wants are
identified. This data will be qualitative. This is explained later
in the unit.
Methods of primary research
Some of the main methods of gathering data are discussed
briefly below.
Quantify the likely demand for a product: It is important
to find out how much of a product a business might expect to
Questionnaires: A questionnaire is a list of written questions.
sell in a market. This data will be quantitative. This is discussed
They are very common in market research and are used
in detail later in the unit. One reason for this is to help determine
to record the views and opinions of respondents. A good
whether or not a particular product is going to be commercially
questionnaire will display the following qualities.
viable. If market research finds that demand is inadequate, a
●● Have a balance of open and closed questions.
business might cancel the launch of a product. This could save
o Closed questions allow respondents a limited range of
the business a lot of money. This is one of the reasons why
responses. An example would be ‘How many times have
businesses carry out research.
you flown with Emirates this year?’ The answers to closed
Assuming that demand is adequate, a business will need
questions are easier to analyse and represent numerically.
to know how much it should produce. Once demand has been
o Open questions let people say whatever they want. They
quantified a business can plan production of the product. This
do not have to choose from a list of responses. Open
means that it can start to organise the resources that will be
questions are best used if there are a large number of
needed for production and draw up production schedules.
possible responses. An example would be ‘How would you
For example, it might need to recruit more staff to work in the
improve the quality of service provided by Emirates?’
factory and co-ordinate with different departments to ensure that
●● Contain clear and simple questions. Questions must be clear,
the necessary resources can be acquired.
avoiding the use of jargon, poor grammar and bad spelling.
●● Not contain leading questions. Leading questions are those
Provide an insight into consumer behaviour: Some that ‘suggest’ a certain answer. They should be avoided
market research is aimed at analysing consumer behaviour.
because otherwise the results will be biased.
Businesses might be more successful if they can identify and
●● Not be too long. If questionnaires are too long people will not
understand patterns of consumer behaviour. For example, a
give up their time to answer them.
holiday company selling package holidays abroad might use
market research to find out:
Questionnaires can be used in different situations.
●● when consumers book their holidays
●● Postal surveys. Questionnaires are sent out to people and
●● when consumers are most likely to go on holiday
they are asked to complete them in their own time. They
●● the number of holidays people take each year
may be more convenient for people but the vast majority of
●● which methods consumers use to book their holidays, e.g.
questionnaires are never returned. This means that resources
online or travel agent
are wasted.
●● how much money people spend on holiday

10

●● Telephone interviews. The main advantage of interviewing
people over the telephone is that it is cheaper. People from
a wide geographical area can be covered. However, some
people do not like being telephoned by businesses.
●● Personal interviews. These are often carried out in
the street and the interviewer fills in the answers. The
advantage is that questions can be explained if a respondent
is confused. It may be possible to collect more detailed
information. However, many people do not like being
approached in the street.
●● Focus groups or consumer panels. If a business wants
very detailed information from customers it might use focus
groups or consumer panels. A focus group is where a
number of customers are invited to attend a discussion led
by market researchers. The group must be representative
of the whole population and be prepared to answer detailed
questions. This is a relatively cost-effective method of
collecting information but the group may be a little small.
Consumer panels are similar to focus groups except that
groups of customers are asked for feedback over a period of
time. This approach allows businesses to see how consumers
react to changes in their products.
●● Observation. This is where market researchers ‘watch’ the
behaviour of customers. This approach might be used in
retail outlets. Observers might record the amount of time
customers spend looking at particular products and displays
in the store. However, because there is no feedback when
using this method a lot of questions go unanswered.
●● Test marketing. This involves selling a new product in a
restricted geographical area to test it before a national launch.
After a period of time feedback is gathered from customers.
The feedback is used to make modifications to the product
before the final launch. This reduces the risk of failure.
Secondary research
Secondary research or desk research involves the collection of
secondary data. This is information which already exists in some
form. It can be internal data, from records within the business, or
external data, from sources outside the business.
Internal data: This may be collected from existing business
documents or other publications, including the following.
●● Existing market research reports.
●● Sales figures. The more sophisticated these are the better.
For example, sales figures which have been broken down
according to market segments can be particularly useful.
●● Reports from members of the sales force resulting from
direct contact with customers.
●● Annual report and accounts published by businesses.
●● Businesses increasingly make use of company intranets
to provide up-to-date information. These are restricted to
company employees. But some information may be available
on the internet on company websites.
●● Stock movements. These can often provide the most up-to-
date information on patterns of demand in the market. This
is because they are often recorded instantly, as opposed to
sales figures, which tend to be collected at a later date.
Marketing and people
External data: Secondary data will also be available from
sources outside the business. Individuals or other organisations
will have collected data for their own reasons. A business might
be able to use this for its own market research. Examples are
given below.
●● Information from competitors. This may be, for example, in
the form of promotional materials, product specifications or
price lists.
●● Government publications. There are many government
publications that businesses can use. These include general
statistical publications such as Social Trends, the Census of
Population and the Annual Abstract of Statistics. Many are
now online.
●● Data from customer services on complaints which have been
received about a product.
●● The European Union. The EU now provides a wide range of
secondary data which can be highly valuable to businesses
operating within EU countries. Such publications include
Eurostatistics, which is published by Eurostat (the Statistical
Office of the European Union).
●● International publications. There is a huge amount of
information about overseas marketing published each year by
organisations such as the World Bank and the International
Monetary Fund.
●● Commercial publications. A number of organisations exist to
gather data about particular markets. This information is often
highly detailed and specialised. Mintel, Dun & Bradstreet and
Verdict are examples of such organisations.
●● Retail audits. The widespread use of EPoS (electronic
point of sale) has meant that it is now much easier to
collect detailed and up-to-the-minute data on sales in
retail outlets such as supermarkets and other retail chains.
Retail audits provide manageable data by monitoring and
recording sales in a sample of retail outlets. Businesses
find these audits especially helpful because of the way
in which they provide a continuous monitoring of their
performance in the market. A well-known example is data
on the best-selling CDs which make up weekly music
charts. The data to compile the official charts is drawn
from a highly complex tracking service representing
one of the most sophisticated ongoing market research
programmes anywhere in the world. Traditionally, this data
has been limited to sales of vinyl and CDs – but this has
been enhanced with the addition of digital download sales
(of singles and albums) and also streaming information –
which was added to the singles chart in July 2014 and the
official albums chart in February 2015.
●● General publications. A business may use a range of
publications widely available to members of the public for
its market research. These include newspaper and
magazine articles.
●● Internet website pages. Increasingly businesses make use of
the internet to search for secondary data outside of their own
organisations. Many of the sources of secondary information
above (including, for example, government publications) can
now be found on the internet.
11
Market research Unit 2
Quantitative and qualitative research
Data collected through desk and field research can be either
quantitative or qualitative in nature. Qualitative research involves
the collection of data about attitudes, beliefs and intentions. Focus
groups and interviews are common methods used to collect
qualitative data. An example of qualitative research could be
face-to-face interviews with 100 purchasers of new Land Rover
Discoveries to find out why they prefer this product to similar
four-wheel drives sold by other car manufacturers. The information
collected through qualitative research is usually regarded as being
open to a high degree of interpretation. This means that there are
often disagreements within businesses about the significance and
importance of qualitative research data.
Quantitative research involves the collection of data that
can be measured. In practice this usually means the collection of
statistical data such as sales figures and market share. Surveys
and the use of government publications are common methods of
collecting quantitative research data. An example of quantitative
research would be a survey of four-wheel drive owners in
West Derbyshire to establish their places of residence, ages,
occupations, incomes and gender. The information collected
through quantitative research is usually regarded as being open to
less interpretation than that collected through qualitative research.
Limitations of market research
If market research was totally dependable, businesses could use
it when introducing or changing products and be completely
confident about how consumers would respond to them. This
would mean that all new products launched onto the market,
which had been researched in advance, would be a success.
Similarly, no products would flop because businesses would
receive advance warning from their research and take any
necessary measures.
In reality, things can be different. It has been estimated that 90
per cent of all products fail after they have been initially launched.
Some of this may be put down to a lack of, or inadequate, market
research. However, a number of businesses that have conducted
extensive research among consumers before committing a
product to the market place have launched products which have
failed. Given estimates which suggest that the minimum cost of
launching a new product nationally is £1 million, this is a risky
business. Famous examples of thoroughly researched products
which have turned out to be flops include the Sinclair C5, a cheap
vehicle with more stability than a moped and lower costs than a
car. In research, consumers enthused over this vehicle. In reality,
it was almost impossible to sell. Similarly, when the Coca-Cola
Company launched ‘New Coke’ with a new formula flavour onto
the market, research suggested it would be a huge success. In
practice, ‘New Coke’ was quickly withdrawn from the shops.
Businesses want to be sure that the data they collect is
reliable. One way of checking the reliability of data is to pose
the question, ‘If this information was collected again would the
same or broadly similar results be obtained?’ Businesses acting
upon research data need to be sure that they can depend upon
it. There is a great deal of debate among researchers about the
reliability of different research methods. There are a number of
reasons why primary research does not always provide reliable
information for businesses.
12
●● Human behaviour. Much marketing research depends upon
the responses of consumers who participate in the collection
of primary data. While the responses of consumers may be
honest and truthful at the time, it does not mean that they
will necessarily respond in the same manner in future. This is
because all human behaviour, including the act of consuming
and purchasing goods, is to some extent unpredictable.
●● Sampling and bias. When carrying out market research,
it is usual to base the research upon a sample of the total
population. This is because it would be impossible and costly
to include every person when dealing with a large population.
It is possible, however, that results from the sample may be
different from those that would have been obtained if the
whole population had been questioned. This is known as a
sampling discrepancy. The greater the sampling discrepancy,
the less reliable the data obtained.
●● As mentioned earlier, questionnaires need to be carefully
constructed to avoid the problem of encouraging particular
responses from consumers through the use of leading
questions. Similarly, the behaviour of interviewers can affect
the outcome of interviews.
Businesses must also be careful when using secondary data.
For example, businesses may use a government publication to
estimate the size of markets in which they might wish to operate.
However, these market sizes may not always accurately match
the product market being researched.
Use of ICT to support market research
Developments in information and communications technology
(ICT) have had an impact on the way businesses carry out
market research. ICT can provide support in a number of ways.
Company websites: These can be used to provide access
to online surveys. These are similar to postal surveys except
respondents may be directed to a questionnaire after receiving
an email confirming an online transaction, for example. Online
surveys may be more sophisticated because they are flexible
and can be tailored to the responses of individuals – for instance
if someone responds ‘yes’ to a particular question the survey
can then take them to a further set of questions, and if ‘no’ it
takes them to a different set of questions. They are cheap to
administer and can be made available to respondents 24/7.
However, many people still ignore them.
Some businesses have review systems on their websites.
These allow customers to write accounts of their experiences
after buying or consuming a product or service. TripAdvisor, the
online hotel booking site, offers such a facility. Not only can a
business collect information from their own customers, but they
can also look at the reviews of rivals’ customers.
A business can also carry out secondary research by
gathering data from the websites of rivals. By analysing the
websites of competitors a wide range of information can be
gathered very easily and cheaply. For example, information
about prices charged, product ranges, delivery terms, payment
terms, store locations, details of special offers and useful links
that might provide even more information. A business might also
use comparison websites to identify the cheapest suppliers in
the market.
 Marketing and people

Social networking: Few businesses can afford to neglect Databases

the role social media can play in marketing. A very fast
growing number of businesses make use of social media
platforms such as Facebook, Twitter, YouTube, blogs and
coupon sites. Social media can provide a cost-effective and
in-depth tool for gaining insights into a firm’s customers,
market, brand appearance and other important market
research aspects.
For example, most social media platforms offer numerous
ways to analyse trends and conduct market research. By
simply searching the latest posts and popular terms, it is
possible to gain insight into emerging trends and see what
customers are talking about in real-time. One example of this
is conducting hashtag searches on Twitter. By setting up a few
searches with hashtags related to a specific brand, industry or
product, instant notifications can be received when customers,
clients or competitors use key terms.
One of the biggest weaknesses to most marketing
research methods is that they are driven by questions. To
obtain the proper information, you must first know what
to ask. At the same time, simply rewording a question
can result in drastically different answers. This means that
market research is only as good as the questions used.
With the broad scope and interactive nature of social media,
information is gained through interaction and observation.
Instead of leading the discussions, businesses can simply
observe or join in as an equal. This can result in a variety of
answers and discoveries that might have remained hidden
using other research methods.
Table 1 summarises the advantages of using social media
for market research.
Table 1 The advantages of using social media for market
research
Broad reach It can reach millions of people all around the world.
Ability to Social media allows specific groups of people to be
target targeted.
Free or The use of social media may be free for businesses and
low cost paid options are usually cheap.
It allows communication on a personal basis with
Personal individual customers and groups.
Information can be collected very quickly from large
Fast numbers of people.
A database is really an electronic filing system. It allows a
great deal of data to be stored. Every business which uses
computers will compile and use databases. The information
is set up so that it can be updated and recalled when
needed. Table 2 shows part of a database of a finance
company which gives details about their clients. The
collection of common data is called a file. A file consists of
a set of related records. In Table 2 all the information on
Jane Brown, for example, is a record. The information on
each record is listed under headings known as fields, e.g.
name, address, age, occupation, income each year. A good
database will have the following facilities.
●● User-definable record format, allowing the user to enter
any chosen field on the record.
●● File-searching facility for finding specified information
from a file, e.g. identifying all clients with an income
over £33,000. It is usually possible to search on more
than one criterion, e.g. all females with an income over
£33,000.
●● File sorting facility for rearranging data in another
order, e.g. arranging the file in Table 2 in ascending
order of income.
●● Calculations on fields within records for inclusion
in reports.
In the world of business and commerce there is actually
a market for information held on databases. It is possible
to buy banks of information from market researchers who
have compiled databases over the years. Names and
addresses of potential customers would be information well
worth purchasing if it were legally available. The storage
of personal data on a computer is subject to the Data
Protection Act. Any company or institution wishing to store
personal data on a computer system must register with the
Data Protection Office. Individuals have a right under the Act
to request details of information held on them.
Table 2 An extract from a simple database
Surname First Address Town Age Occupation Income
name p.a.
Adams John 14 Stanley St Bristol 39 Bricklayer £32,000
Appaswamy Krishen 2 Virginia St Cardiff 23 Welder £26,000
Atkins Robert 25 Liverpool Rd Cardiff 42 Teacher £32,000

High level IT skills and complex equipment are not Biddle Ron 34 Bedford Rd Bath 58 Civil servant £35,000
Easy needed.
Brown Jane 111 Bold St Newport 25 Solicitor £41,000

13
Market research Unit 2

Question 2
Some businesses use online surveys to gather data. This involves
providing a link to a questionnaire on a company website and
inviting people to complete it. An online questionnaire can
be completed quickly and responses can often be analysed
immediately. Survey costs are low because there are no printing
and postage charges. Online surveys can be interactive and may
be fun to complete. They can also be accessed 24/7 and be
completed when it is convenient. However, there are problems.
The sample of respondents may not be representative. This is
because online surveys are only presented to internet users. The
views of others may not be taken into account even though they
may be potential customers.
Some businesses are keen to find out what customers think of
their websites. They might use an online survey similar to the one
shown in Figure 3.

Figure 3
An example of a website survey

Website survey How did you find our site? Please select all that apply.
❏ Recommended by others
Thank you for using our website. We'd like to ask you some questions about
your experience so that we can improve. ❏ Link from email our site sent you
❏ Link from another website
We would like your feeedback about the content on our site. How satisfied are
you with the content? ❏ Link from marketing leaflet
❍ Very dissatisfied ❍ Dissatisfied ❍ Neutral ❍ Satisfied ❏ Search engine results
❍ Very satisfied ❏ Other, please specify
Please tell us how our site compares with similar sites for each of the items How frequently do you visit our site?
below If you did not experience an item, please select “N/A”.
❍ First choice ❍ Daily ❍ A few times per week
Much Worse About Better Much N/A
worse the better
❍ A few times per month ❍ Once per month ❍ Less frequently than
once per month
same
Overall organisation/ ❍ ❍ ❍ ❍ ❍ ❍ The next questions will only be used to group your answers with others
navigation 1 2 3 4 5 – like yourself.
Please tell us how you access the internet. Check all that apply.
Home page content ❍ ❍ ❍ ❍ ❍ ❍
1 2 3 4 5 – ❏ Home ❏ Cafe
Product information ❍ ❍ ❍ ❍ ❍ ❍ ❏ Work ❏ Mobile phone
1 2 3 4 5 –
❏ College ❏ Computer tablet (eg iPad)
Ease of finding how to ❍ ❍ ❍ ❍ ❍ ❍ ❏ LIbrary ❏ Other, please specify
contact us 1 2 3 4 5 –

Downloading information ❍ ❍ ❍ ❍ ❍ ❍ How long do you spend on the internet each day? Select a choice.
1 2 3 4 5 –
❍ 1–2 hours ❍ 3–4 hours ❍ More than 8 hours
How likely are you to recommend our site to others?
Please indicate your gender
❍ Definitely not ❍ Unlikely ❍ Neutral ❍ May be likely
❍ Very likely ❍ Male ❍ Female
What prompted you to visit our site today? Please select all that apply. Please select the category that includes your age.

❏ Comparison shopping ❍ 18–30 ❍ 31–55 ❍ 56 or older

❏ Interested in purchasing products/services Which one of the following ranges includes your total yearly household
❏ Looking for contact information income before taxes?
❏ Looking for technical support ❍ up to £28,000 ❍ over £28,000
❏ Other, please specify ❍ Prefer not to answer
Submit Back

(a) Give one reason why it might be important to find out what people (c) Discuss the advantages and disadvantages of online surveys.
think of a business website.
(b) Explain whether an online survey would benefit a company selling
to: (i) customers in isolated areas (ii) less developed countries,
such as Ethiopia, Bhutan and Haiti.

14
 Marketing and people

Market segmentation more than other ethnic groups on leather goods, furniture,
Markets can be divided into different sections or market appliances and electronic equipment.
segments. Each segment is made up of consumers that have ●● Religion. Different religious groups can display different
similar needs. Businesses recognise this and target particular tastes. For example, Muslims do not eat pork or drink alcohol.
market segments with their products. In the US the market for kosher (Jewish) food is thought to be
●● Some businesses concentrate on producing one product for
worth $100 billion.
one particular segment, for example luxury cars targeted at a
very wealthy market segment in the car market. Table 3 Socio-economic groups
●● Some businesses produce a range of different products and % of UK
Social Social Head of household
target them at several different segments. population
grade status occupation
●● Some businesses aim their products at nearly all consumers.
(approx)
For example, large food manufacturers are likely to target Higher managerial, administrative
A Upper middle or professional – doctors, lawyers 4%
their brands at everyone. and company directors
However, by dividing markets into segments businesses can
Intermediate managerial,
more easily supply products that meet customers’ needs. B Middle class administrative or professional – 12%
teachers, nurses and managers
Geographic and demographic Supervisory or clerical and junior
segmentation C1 Lower middle managerial, administrative or 22%
class professional – shop assistants,
Geographic segmentation: Different customer groups are clerks and police constables
likely to have different needs depending on where they live. For Skilled manual workers –
example, groups living in hot climates, such as Australia or South Skilled
C2 working class carpenters, plumbers, cooks and 33%
Africa, will have different needs to groups living in temperate train drivers
climates such as the UK. There might also be differences between Semi-skilled and unskilled manual
groups living in different parts of the same country. For example, D Working class workers – fitters, window cleaners 19%
in India different regions have slightly different tastes in cuisine. and storekeepers
State pensioners or widows,
Demographic segmentation: It is common for businesses to E The poor casual or lower grade workers, or 10%
divide markets according to age, gender, income, social class, long-term unemployed
ethnicity or religion of the population.
●● Age. Infants, teenagers, young adults and the over 65s are all Psychographic segmentation
likely to have different needs because of their different ages. Geographic and demographic segmentation have limitations. For
Many products are targeted to different consumer groups on example, there is a wide variety of spending patterns among
the grounds of age. For example, clothes are produced in females aged 16–18 living in Manchester. Yet people in this
different styles for people in different age groups. consumer group share the same gender, age and location. An
●● Gender. Men and women are likely to be targeted by alternative way of grouping customers is through psychographic
businesses with different products. For example, producers segmentation. This groups customers according to their
of clothes, cars, magazines, toiletries and drinks target attitudes, opinions and lifestyles.
different products to different genders. ●● Sports products may be aimed at those who are interested in

●● Income. Incomes in most countries vary considerably. As a ‘extreme’ sports such as skiboarding.
result businesses target products at certain income groups. ●● Chocolate manufacturers have identified two categories of

For example, luxury watchmakers target products at very
high-income groups. In contrast, low-cost supermarket chains
target lower income groups.
●● Social class. Businesses pay a lot of attention to different
socio-economic groups. Such groups are usually based on
chocolate eaters. ‘Depressive’ chocolate lovers eat chocolate
to unwind, predominantly during the evening. ‘Energetic’
chocolate eaters eat chocolate as a fast food and live life at a
fast pace.
●● People’s attitudes to life may also be used to segment the

occupations. An example of a commonly used measure of market. Some pension funds are geared towards those who
social class is shown in Table 3. It is compiled by the Institute of only want investments in ‘ethical’ businesses.
Practitioners in Advertising (IPA) and divides social class into six ●● Clothes may be geared at those who are interested in ‘retro’

categories. These can be used by businesses to target products. fashions from earlier decades.
●● Ethnicity. Many countries in the world are becoming more ●● Travel companies target holidays at families with younger children.

cosmopolitan. This means that people from different ethnic ●● Certain newspapers are geared towards Labour voters, while

groups are likely to live in the same country. This is important
for businesses because different ethnic groups are likely to
have different needs and tastes due to their different cultures.
For example, in Canada, where there are over 200 different
ethnic groups, Chinese consumers are likely to spend
others are geared towards Conservative voters.
One of the drawbacks of psychographic segmentation is that it
can be difficult for businesses to collect data about the beliefs,
attitudes and lifestyles of consumers. In order to do this they
may require the help of specialist businesses.

15
 Market research Unit 2
Behavioural segmentation
Behavioural segmentation attempts to segment markets
according to how consumers relate to a product. There are a
number of different methods of behavioural segmentation.
Usage rate: This is when consumers are categorised
according to the quantity and frequency of their purchases.
One example of this is British Airways, which established
an ‘Executive Club’ to encourage and develop the custom of
regular business travellers.
Loyalty: Consumers can be categorised according to their
product loyalty. The Tesco Clubcard, for example, which offers
discounts to regular customers of Tesco supermarkets, seeks to
reward and encourage loyalty to Tesco and its products.
Time and date of consumption: Consumers often consume
particular products at particular times and dates. Businesses
can take advantage of this in order to improve their marketing.
So, for example, manufacturers of breakfast cereals, while
recognising that their product will be primarily consumed in the
morning, encourage consumers also to consume their products
in the evening. Similarly, many bars and clubs seek to encourage
different groups of consumers according to the night of the
week. For example, Thursday nights are often for older singles
and Friday nights for younger consumers.
Like other segmentation methods, a drawback of behavioural
segmentation is that on its own it may fail to adequately capture
a target market for a business. For this reason, in many cases a
business might employ a variety of the segmentation methods
explained above. So, for example, a manufacturer of luxury
apartments may be interested in segments that included single
men or women with no children, in the 30–40 age range, with
high incomes that fall into social class AB. Because of the likely
one-off nature of such a purchase, behavioural segmentation
would be less important in this instance.
Benefits of market segmentation
Generally a business is more able to meet the needs of different
customer groups if the market is segmented. Some specific
advantages include the following.
●● Businesses that produce different products for different
market segments can increase revenue. For example, airlines
charge first class passengers many times more than they
charge economy passengers for the same flight. This helps to
increase revenue from the flight.
●● Customers may be more loyal to a business that provides
products that are tailored specifically to them.
●● Businesses can avoid wasting promotional resources by not
targeting products at customers that do not want them.
●● Some businesses can market a wider range of goods
to different customer groups. For example, many car
manufacturers have several different models, each of which is
targeted at a different segment.
16
Question 3
In common with many airlines, Emirates offers three distinct
services on most of their flights. For example, on 22nd June
2015, a flight from Manchester to Dubai was showing the
following services.
Economy class Price = £432.60
Business class Price = £2,349.60
First class Price = £3,237.60
(a) Describe the different customer groups targeted by Emirates in
this example.
(b) Discuss how Emirates might benefit from this method of market
segmentation.
Key terms
Consumer panels – groups of customers are asked for
feedback about products over a period of time.
Database – an organised collection of data stored electronically
with instant access, searching and sorting facilities.
Focus groups – where a number of customers are invited to
attend a discussion about a product led by market researchers.
Market orientation – an approach to business which places
the needs of consumers at the centre of the decision-making
process.
Market research – the collection, presentation and analysis
of information relating to the marketing and consumption of
goods and services.
Market segment – part of a whole market where a particular
customer group has similar characteristics.
Primary research or field research – the gathering of ‘new’
information which does not already exist.
Product orientation – an approach to business which places
the emphasis upon the production process and the product
itself.
Qualitative research – the collection of data about attitudes,
beliefs and intentions.
Quantitative research – the collection of data that can be
quantified.
Respondent – a person or organisation that answers
questions in a survey.
Sample – a small group of people who must represent a
proportion of a total market when carrying out market research.
Secondary research or desk research – the collection of
data that is already in existence.
Socio-economic groups – division of people according to
social class.
Another random document with
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"For mercy's sake, no!" ejaculated Foster, looking at the children with no loving eye. "Dogs an'
childer be the garden's curse!"

"Oh, hush!"

Mrs. Inglefield looked really shocked.

"Of course they will have their own bit of ground and keep to it. But you were a boy once, Foster, and
I'm sure you were always fond of flowers."

"He's a nassy old man!" said Noel in a loud voice; and his mother, taking him by the hand, left the
kitchen garden and returned to the house.

In the afternoon it was a very happy little party that set out down the village. Diana and Chris were
losing their shyness, and were able to chatter as freely as Noel to this new mother of theirs. It was of
no use to point out to them the pretty thatched cottages, the geese and ducks upon the green, the
lambs at play in the fields, the cows going home to be milked, the pale primroses appearing in the
hedges, and the budding fresh green on every tree and bush. All these were delightful no doubt
when there was nothing else on hand. With three shillings almost burning a hole in their pockets,
was it likely that anything could keep them from their goal?

Along a green lane, up a hill, and then a very pretty whitewashed cottage appeared inside a big gate.
Glass greenhouses stretched away on a sunny slope behind it. Mrs. Inglefield made her way to one
of these, for she recognized Mr. Henry Sharpe, an old man with a white beard, standing at the door
speaking to a workman.

And when he saw her, he came hurrying towards her with outstretched hands.

"Why, if it isn't Miss Bessie! Beg pardon, ma'am, but I do forget your married name. You are always
Miss Bessie to me."

"I love to be called by the old name," said Mrs. Inglefield with her happy laugh, "and here is my little
flock waiting to be made acquainted with you. They are going to start gardens, Henry, but they can
make their own choice. Do you remember how I used to tear up to you when my pocket-money was
due? What a lot of money I spent on seeds and flowers!"

"You were a born gardener, that you were!"

"Well, I haven't had a nice garden in India; we have moved about so much."

"Mums," said Chris, "may we see the flowers and choose?"

"Aye, come along then, and tell me what you want. Fruit to eat, flowers to smell, or shrubs to grow?"

"Is your daughter still with you?" asked Mrs. Inglefield.

"She is. She married, was left a widow in the war, and came back to me. My grandson is a big boy
and goes to school. If I may say so, ma'am, you've a garden round you worth cultivating. Young fruit
trees want a lot of training to make them fruit-bearing!"

Mrs. Inglefield looked at her children and then at the old man.

"You are right," she said, "and I'm going to try to do it, and if I get into difficulties I shall come to you. I
think I will leave my children with you, and go into the cottage and have a talk with Bessie."
Mr. Sharpe took the children down between the houses to see the rows and rows of spring flowers
and seedlings which were all coming on. He was very different to Foster. He loved children, and they
all chattered away to him as if they had known him all their life.

By and by, he brought three very happy children back to their mother. Chris and Diana held fat
packets in their hands. Noel had his in his pocket, but his blue eyes were shining mysteriously. They
had each made their choice, and certainly Noel's choice seemed the strangest of all.

CHAPTER III
The Christmas Tree

Old Mr. Sharpe insisted upon the children coming into the cottage and having some refreshment. It
was too early for tea, but he produced some home-made ginger beer, and some currant cake. His
daughter, a sad-faced young woman, had traces of tears on her cheeks. She had been talking about
the young husband killed in the war. But she smiled at the children's eagerness and enthusiasm for
the garden.

"Oh, Mums, such rows and rows of daffodils and narcissus! Isn't it a pity it's too late to plant them
now?"

"And, Mums, you should have seen the flowers in the hot-houses, but none of them will grow out of
doors now!"

"And the little trees, all coming out in pink and white flowers!"

It was not until they were on the way home that Mrs. Inglefield was told of the purchases.

Diana had chosen nothing but flowers. She had a tiny rose tree coming up the next day to be placed
in the middle of her bed.

"It will be the queen," she said with the dreamy look in her grey eyes that her mother loved to see;
"and I shall have her ladies-in-waiting all round her: Lady Pansy, and Lady Blue Cornflower, and
Lady Pink Verbena, and Lady Snapdragon, and Lady Yellow Eschscholtzia; and then her little pages
will be Tom Thumb Nasturtiums. Don't you think my bed will be lovely, Mums?"

"Lovely, darling. You have done very well, I think. What is Chris's choice?"

"I've got mustard and cress, and radishes," he said sturdily, "and one strawberry plant. And two red
geraniums are coming to me when it's time to put them in the ground. And I've a lot of mixed sweet-
peas, and one little gooseberry bush."

"You have a lot for your money. First rate," said his mother. "What has Noel got?"

Diana looked at Chris, and they both giggled.

Noel looked at them angrily, and turned to his mother:

"I'm going to have one fing only, but it's quite big, it's what we never had in India, and what I've
always been wanting ever since you read me about it in my fairy book."

"I believe I can guess," his mother said: "it's a Christmas tree."

"Yes, that's just what it is. And Mr. Sharpe and me choosed for ever so long before we found a big
one, and it's coming to-morrow."

"But, my darling, won't it be rather a dull garden with only that tree in it?"

"It won't be dull to me," said Noel. "I love it. And it will be ready for next Christmas. It's been
wondering when its turn was coming to be taken away, it didn't know it was coming into this lovely
garden with me to love it. Don't you r'ember the fir tree that was always finking and being
disappointed? I mean to tell mine exac'ly what's going to happen to him."

"You're a funny darling," said his mother, but she kissed him and said no more.

"Mr. Sharpe gave him some flower seeds as a present," said Chris, "but he says he isn't going to put
them in his garden."

"No, my Christmas tree won't like them. He likes plenty of room all to himself, and I shall put those
seeds where I want to."

Mrs. Inglefield looked at him a little perplexedly.

"You're a funny boy," she said again; "but if your Christmas tree will make you happy, I shall say
nothing against it. You've made your choice, so it's all right."

Noel seemed quite content. But he refused to tell Diana and Chris his plan about his seeds. All three
of them wanted to go into the garden after tea, but Nurse refused to let them do it.

"It is too cold, and rain is beginning to fall. You must just stay in the nursery."

"We can go to Mums," said Diana.

"No, you can't. The mistress is going to rest. She's been at it all day long."

So they tried to make themselves happy in this new nursery of theirs. Chris got out his paint-box and
began to colour the picture in a story-book of his. Diana got out her beloved sheets of paper and
commenced a fresh story under the inspiration of this fresh home. Noel got a chair and knelt up at
the window, looking out upon the English scene with keen, observant eyes.

Suddenly he looked round:

"What are those green lumps all over the church garden?" he asked.

"Those are graves, of course," said Chris, "where people are buried when they die."

"Why do they crowd into the church garden? Haven't they gardens of 'er own?"

"Oh, that wouldn't be proper," said Chris.

"I s'pose," Noel went on thoughtfully, "they try and get as near to God as they can, poor fings! But
they aren't really vere at all, it's only their bodies. It isn't a very pretty garden: God ought to have a
better one."

Chris made no reply.

Noel was always dressed first, and then Nurse went to Diana. It was a lovely sunny morning. Directly
Nurse's back was turned, Noel slipped downstairs very quietly: then he ran out into the garden,
opened the little gate that led to the churchyard and began his operations. Going from one green
mound to another, he made a hole with his finger in the middle of each, opened his precious packet
of seeds and dropped one or two seeds in it. Then he carefully covered it up with earth, and went on
to another. Mr. Sharpe had put several varieties of seed into his packet. There was mignonette,
aster, lobelia, and a few other summer flowers. Noel knew nothing about the names or the flowers,
but he went on steadily planting seed by seed, and by and by a clergyman came out of the church.
He looked at the small boy in surprise. He was a young, cheerful-looking man with a very quick,
decided manner.

"Now, what on earth are you doing here?" he asked. "And who are you? We've never seen each
other before, have we?"

"I'm Noel. Who are you?"

"I'm John Wargrave, the parson. And this place belongs to me."

Noel looked at him stolidly.

"This is God's garden," he said, "and that place you've come out of is God's house. It all belongs to
Him."

"So it does, sonny. You've corrected me. But it isn't nice to make a playground of the churchyard.
What are you doing?"

"I'm not playing. I'm working very hard."

Noel spoke in an injured tone. Mr. Wargrave looked at the packets of seeds in his hands, and
wondered. Then Noel explained himself.

"I've made myself into God's gardener, and I'm going to make flowers come all over His garden. God
loves flowers. Mums told me He did. It's an ugly garden now: not half as nice as ours."

"Do you love God?" Mr. Wargrave asked gently.

Noel nodded.

"It's a very nice thought, my boy, but a lot of people own a bit of ground here. The graves belong to
them, and they wouldn't like you to meddle with them. Have you many seeds left?"

Noel spread out three small packets.

"Well, look here. There is a rose tree over the church porch. It is in a bed of its own, and you can
plant the rest of your seeds there. I'll come and help you do it now."

Noel was quite willing. Mr. Wargrave produced a trowel from a little room at the back of the church,
and they made quite a good job of it. He soon found out who Noel was and where he lived, and he
said he was coming to call on Mrs. Inglefield very soon. They were good friends when they parted,
and Noel trotted upstairs to his nursery breakfast. Nurse scolded him for his dirty hands, but
supposed he had been playing in the garden. He did not tell anyone what he had been doing.
But later in the day when his Christmas tree arrived, and Diana and Chris were busy with their
gardens, he was asked where his seeds were.

"God has got them," he said solemnly; "I've given them to Him."

He would say nothing more.

Diana remarked to Chris:

"I can't think why Noel is so religious. He isn't a good boy at all, and yet he is always talking about
God."

"He's too little to know he oughtn't to do it," said Chris decidedly.

"Why oughtn't we to do it, I wonder?" said Diana musingly. "The people in the Bible talked about
God."

"It isn't respectful," said Chris: "rev'rent, I mean. Granny always hushed us about religious things."

"Yes, but Mums talks about them quite easily: she doesn't whisper."

Chris gave it up.

"I only know Noel wouldn't do it if he was amongst a lot of other boys. They'd laugh at him."

"We laugh at him, but he doesn't care."

"He's a most cocky little beggar!"

The Christmas tree almost overshadowed Noel's small garden. It looked strangely out of place there,
and would do so even more when surrounded by spring and summer flowers. Chris and Diana, up in
the medlar tree the next day, watched Noel standing, hands in pockets, in front of it. A pert saucy
robin came and perched on the topmost branch. Noel stood so still that he did not frighten it away,
but he commenced to talk to it.

"You're sitting on my tree. I don't know if you know it. I'm a Chris'mas child and the tree is a
Chris'mas tree, and we bofe belong to the best day in the whole year, and that's Jesus Christ's
birfday and mine. It will take a long time to come this year, for we haven't got to the summer yet, but
I'm going to be patient, and as for my tree, he is finking all the time of the wonderful day that's
coming to him: the glorious, beautiful day when he'll be dressed from his head to his feet all over with
lovely shining fings of glory, and crowds of chil'en and people will be dancing round him and looking
up at him as if—as if he was a king. So, Mr. Robin, if you sit on his branches, you must re'mber
you're almost sitting on a king!"

"Isn't he a funny boy?" whispered Diana to Chris.

Then Noel went on talking to his tree:

"I'm going to call you Firry; you must have a name. I hope you're happy in this garden; you haven't
got any bruvvers to talk to, but I'd rather talk alone than to Chris. He never understands, and so you
must be like me and like best to be alone. And if the trees wiv flowers on laugh at you, tell them that
when winter comes—the English winter—they'll be dead and gone, and you'll be alive and glorious, it
will be Chris'mas, and the very happiest day in the whole year. I don't want you to be unhappy, Firry. I
cried for the poor little Chris'mas tree in Germany that was forgotten when Chris'mas Day was over. I
shall never forget you. That's why I brought you here. I'll talk to you all the summer and tell you
what's coming to you, and after Chris'mas you shall come back here and live and be happy and get
ready for the nex' Chris'mas."

"He's talking drivel!" said Diana, and then she sprang down from the tree with a shout, and Noel,
after giving a violent start, walked away and didn't go near his Christmas tree again that day.

The first Sunday came.

To Chris and Diana church was no treat; yet they looked forward to the novelty of going to a strange
church and seeing strange people. To Noel this was a momentous day. He had never been to church
in England yet. In London, for several reasons, he had not been taken there.

It was a bright sunny morning. Noel was dressed in his white sailor suit. It was a new one, and he felt
rather self-conscious in it. As Mrs. Inglefield walked down the garden and through the little gate into
the churchyard, she felt proud of her children. Diana had slipped her hand into her mother's, but
Chris and Noel were having a tussle the other side of her. Each felt he ought to be nearest to his
mother. When they reached the church door, Mrs. Inglefield looked down upon two hot, rather angry
faces, and she said immediately:

"Now, boys, I can't have this. I am going to have Diana on one side of me in church, and Noel the
other. Chris must be content to be the outside one. He shall sit near the aisle, for he is my eldest
son, and that is where his father would sit if he were with us."

Chris brightened up immediately. They took their seats in the middle aisle, not very far from the
pulpit. There was a good congregation, and the service was a hearty one. Mr. Wargrave, the young
vicar, preached so earnestly and simply that even Noel could understand him. His big blue eyes
seemed to be taking in everybody and everything. He was very still; he did not fidget as much as
Chris did, and when they came out of church, he looked up at his mother with shining eyes:

"When I grow up, I shall have a white dress on, and stand up in church and preach like that man. I
shall be a padre when I grow up."

Mrs. Inglefield looked down upon him tenderly.

"You couldn't be anything better, Noel," she said.

And then an old lady came up to them and shook hands with Mrs. Inglefield in a delighted way.

"I heard you were coming back to these parts. How's your mother? Still wedded to her town life? And
are these your children? Bring them to tea with me to-morrow. Four o'clock. Good-bye. So glad to
welcome you."

And then she bustled off and got into a car and was whirled away from them before Mrs. Inglefield
had time to say a word. She turned to her children.

"That is Lady Alice Herbert. She's an old friend of Granny's. She lives at the Hall, and her husband,
General Herbert, is a great invalid."

"And we're all going to tea with her. What fun!" said Chris.

In the afternoon the three children went into the garden whilst their mother rested; but by and by Mrs.
Inglefield heard a little tap at the door, and Noel walked in. He did not look very happy.

"Am I asturbing you, Mummy?" he asked in his most angelic tone.

"No, darling, I am not sleeping; come and sit down by the couch here. What have you been doing?"
"I don't like those uvver two," said Noel, shaking his head with a heavy frown. "They're always
playing and talking outside me."

"You mean without you; but you see they've not been accustomed to have a third in their games. I
hope you're nice to them?"

"I don't want to have nuffin' to do with them. They laugh at me about the Chris'mas tree. You and me,
Mummy, can be two as we've always been, and they can be just a two away from us."

"Oh, my darling," said Mrs. Inglefield, half laughing, yet with a perplexed face, "you mustn't talk so!
This comes of bringing you up away from them. You all belong to me and to each other, and we must
be a very happy little family. I can't talk to you any more now, so if you want to stay with me, get a
picture-book from my table over there. There's that one you love about the boys in the Bible."

Noel got the book, and drawing a stool up by his mother's side, was quite happy till tea-time.

Chris and Diana appeared in very good spirits, and if Noel was rather silent, they did not seem to be
impressed by it.

They were full of anticipation of going to Lady Alice Herbert's to tea the following day, and talked
about it till bedtime.

Very great was their disappointment the next morning when their mother told them that she had
received a letter from Lady Alice saying that, as the General was not very well, she would not ask the
children, but only herself.

Diana pouted, Chris cried "What a shame!" and Noel stumped up and down the room in real anger.

"Never mind, chicks, she will ask you another day, I am sure, and perhaps it is just as well, for it
looks like rain."

And rain it did in an hour's time. The children played contentedly in the nursery all the morning. They
had their early dinner downstairs with their mother, and afterwards she took them up to her boudoir,
and read a story to them till it was time for her to go off to the Hall. The car came for her a little
before four o'clock, and the children watched her depart with envious eyes. They waved their hands
to her, standing on the doorstep till they could see her no more, and then very reluctantly they went
back to their nursery.

"What is there to do?" said Chris discontentedly as he put his hands deep in his jacket pockets and
stood gazing out of the window at the driving rain and sodden garden.

"I'm going to finish my story, and then I'll read it to you," said Diana happily, as she drew her chair up
to the table and produced some crumpled sheets of paper out of her pocket. Diana always carried
her story about with her, in case of sudden inspiration seizing her.

"Read it to us first, and finish it afterwards," said Chris with a grin.

Noel looked at him contemptuously, and Chris caught the look and resented it.

"What are you going to do, Baby?" he asked.

Noel's eyes flashed.

"I aren't going to play with you," he said, and then, he marched out of the room.
A few minutes later a little figure in sailor cap and overcoat was plodding down the path to the gate,
in the rain.

It was Noel. He felt that he could not be shut up in the nursery with his brother and sister all the
afternoon, and suddenly thought that he would go and see Mr. Wargrave. Then he changed his mind.
He would go into the church if the door was unlocked. There were a lot of things he wanted to see
and understand there.

Half an hour later the house was being searched by Nurse for the truant. When she missed his cap
and coat she was very angry with Chris and Diana.

"I was only ironing in the kitchen; you might have kept him quiet and out of mischief, the two of you,"
she said. "He's a child, I'll say that, but if he's wandering about in this rain, he'll be laid up with cold,
with his Indian constitootion."

"He's most likely in the garden talking to his fir tree, or in the churchyard," said Chris. "Shall I go and
look for him and bring him in?"

"Put on your mackintosh then, and be quick about it," said Nurse. "'Tis your fault he's wandered out, I
consider. You're none too kind to him, either of you!"

CHAPTER IV
A Nursery Entertainment

Chris was delighted to have an excuse to go out in the rain. He sped away, down the garden, but
there were no signs of Noel, then into the churchyard. When he got there, he found the young vicar,
Mr. Wargrave, in the church porch. He had the door ajar, and to Chris's mystification seemed to be
peeping through the opening.

"Have you seen my little brother?" he asked him.

"Hush!" said Mr. Wargrave, turning round, then he smiled at Chris.

"Don't make a noise," he said, "but have a look at him."

Chris peeped into the church. He caught sight of Noel's fair curly head at once. It was just above the
edge of the pulpit, and two small arms were waving in the air. This was what he heard:

"And so you see, my frens, God wants you to be good. And my tex' is 'Fight the good fight,' and
that's Satan, and I'll say good afternoon to you now, and mind you come next Sunday and I'll preach
about the wind and rain trying to drown the boat. Amen."

Chris giggled loudly. Mr. Wargrave shut the door.

"We won't disturb him," he said.

"But he's no business there," Chris said; "Mums would be horrified. Noel thinks he can do anything
he likes. He's going to be a clergyman, he says, so he's practising. He oughtn't to play in the church."

"It isn't play," said Mr. Wargrave. "Would you two boys like to come over to the Vicarage with me? My
brother Ted would like to see you on a wet afternoon like this."

"I'd love it," said Chris; "but Nurse sent me to fetch Noel in. He's run away."

"I'll step across with you and ask Nurse to spare you for an hour. I live close here, you know."

Then he opened the church door with a little clatter. Noel darted down out of the pulpit. He looked
very uncomfortable when he saw his brother's head peeping from behind Mr. Wargrave.

But he adopted a very careless air as he came down the aisle towards them.

"Are you come to have a—a service?" he asked the young vicar.

"No, I was coming to fetch a book in the vestry," Mr. Wargrave said; "and I want you and your brother
to come back to the Vicarage to tea with me. We are going to your house to ask if you may. Perhaps
you can get the permission while I get my book, Chris."

Chris sped away as fast as his legs could carry him. Noel stood still in the porch, looking out into the
rain with grave thoughtful eyes. Mr. Wargrave was only a moment getting his book, and he joined
him before Chris came back.

Putting his hand on his shoulder, he said, smiling:

"You'll be a preacher by and by, but don't hurry. We have to learn a lot before we can teach others."

Noel's cheeks became hot and red.

"Did you see anyone in the pulpit?" he asked in a whisper.

Mr. Wargrave nodded.

"I foughted I was quite alone. I only pretended the peoples. I just wanted to see if I could do it."

"Yes, yes, I understand. We'll forget it."

Mr. Wargrave pitied the small boy's distress and confusion. Chris reappeared, very breathless and
happy.

"Nurse says we can come," he said. And then the three of them walked down the road a very little
way, and turned in at a big iron gate with a thick shrubbery and a drive, and arrived at an old grey
stone Vicarage, with small casement windows and walls covered with creepers.

The vicar took them straight through a long narrow hall to a room at the back of the house
overlooking a very pretty garden. It was a cosy room. A bright red carpet was on the floor, and a
blazing fire in the grate. There were bookshelves and many pictures lining the walls. On a big red-
and-white chintz-covered couch by the fire, reclined a boy with a white face and a cheerful smile. He
was a big boy, about fifteen or sixteen. Chris and Noel looked at him in awe.

"Two small neighbours, Ted," said Mr. Wargrave; "the other side of the church. They've come to tea.
I'll go and tell Mrs. Hurcombe. You amuse them till I come back. I have my churchwarden waiting to
see me."
He left the room. Chris and Noel stood by the side of the couch feeling a little shy of this strange boy,
but when he looked at them and laughed, they laughed too.

"Don't think me an awful frump tucked up on a couch like this. It's only for a year. I was at school and
hurt my back in the gym. Like to see how I spend my time?"

He drew a table by the side of his couch nearer, and showed them on a wooden tray a complete set
of dolls' furniture. There was a most beautiful little cabinet of polished wood, which opened and shut
its doors, six chairs with red leather seats, a four-post bedstead, a polished square table, and two
chests of drawers.

"Oh!" cried Chris. "Did you make these all yourself?"

"Yes, and a lot more. They go to an Arts and Crafts Depot and sell like old boots. And I made them
myself with the help of a book only, so I feel rather swanky over them."

"I wish Dinah could see these," said Chris.

"Here's something you may like better."

He produced a little canoe, and then a tiny tram and a wheelbarrow and a cart.

"It passes the time," he said.

"Don't you never go out of doors?" asked Noel, looking at him gravely.

"Not often. I have to be wheeled out in a flat pram, and I hate it. But when summer comes, I can lie
on a rug on the lawn and then I shall feel first rate."

Chris was fingering the toys lovingly.

"I wish I was clever," he said with a little sigh.

"Can you make houses?" asked Noel eagerly. "Could you make a church?"

"He's mad on church," said Chris; "we've only just dragged him out of it. He's been in India, and
doesn't know England."

"Tell us about India," said Ted, smiling at Noel.

Noel launched forth at once, waving his hands and getting quite excited as he described his home in
India and the native servants, and all the pets he had kept out there. Chris openly yawned, but Ted
was interested, and when Mr. Wargrave returned all three boys were talking fast and freely. Tea was
brought in by a very smiling housekeeper, and they had a merry time.

But Chris watched Ted gravely, and at last he said to him:

"I couldn't laugh like you do if I had to lie on my back all day long. I'd have to die straight off if I
couldn't jump up and run about."

"That's how I felt first of all," said Ted simply. "But of course it doesn't say much for your pluck if you
can't face pain. And I came to see that I must make the best of it, and that I could be thankful that I
wasn't blind or deaf and dumb, or covered over with loathsome sores. And—I—well, I've been helped
along by remembering that there's a suffering corps in God's army, as well as a fighting corps."

Chris looked at him with big eyes.

Here was a big boy talking about God. He could not understand it.

But after tea, he was made very happy by having a lesson in wood-carving from Ted.

Noel went off with Mr. Wargrave to his study.

He sat on the deep window-ledge there, and swinging his legs, told the vicar all about his Christmas
tree.

Mr. Wargrave was a good listener.

"I think it's splendid," he told him. "And then at Christmas perhaps you'd be able to make numbers
happy. If I had a tree like that, I would ask a lot of children out of the village, and there are some in
the Union, about a mile off on the high road. I'm the chaplain there, and I always feel sorry for the
children. They don't have many pleasures. If you love Ted, he'll make you a lot of toys for your tree."

"Oh, will he?" Noel was radiant. "And I'll have a very big party. Mums will let me. I'll have all the
children who live here. I do wish it was Christmas time."

"Oh, don't wish that. We have the lovely summer coming first. All of us are happy in summer-time.
The flowers and the bees and butterflies, and the birds and squirrels and rabbits—they all love the
warm sunshine. And you will, too."

"I don't like it when the sun is very hot," said Noel thoughtfully; then his thoughts took another turn.
"What's a hypercrit?"

"Someone who pretends to be what he is not."

Noel frowned.

"And a 'cocky beggar'? I thoughted beggars were poor ragged men who asked for money: they were
in India."

Mr. Wargrave smiled.

"Oh, that's a boy's expression for anyone who thinks a lot of himself. I suppose your brother has
been calling you that?"

"If you speak about God at all, you're a hypercrit," said Noel. "I 'spect Chris doesn't know what it
means: it's too long a word for him. I'll tell him so. I don't pretend half as much as they do; they're
always pretending in their games. Why is it wrong to talk about God?"

"It isn't wrong; it ought to be the natural thing with every one of us. If we love anyone very much, we
can't help talking about them. But—"

Mr. Wargrave hesitated; then he went on:

"Boys and girls, and grown-up people too, are shy sometimes of telling people what they feel deeply
in their hearts; and when children play about with each other, they keep their thoughts about God
and heaven to themselves, and don't quite understand anybody talking freely about it. I'm not saying
they are right. But it makes us more reverent if we speak about God very gravely, almost in a
whisper."

Noel listened and nodded his head.

"I'll try."
And then he caught sight of a case of butterflies, and for the next half-hour hung over it entranced,
whilst Mr. Wargrave talked about butterflies and their ways.

When Chris and Noel's visit was over, they went home and described all the glories of the Vicarage
to Diana, who was quite curious about them.

She was wild to see the dolls' furniture.

"I don't see why I shouldn't go straight in to-morrow. I'll ask Mums if I may. That ill boy would be very
glad to see me. Mums was only saying the other day that visiting sick people was a very nice thing to
do."

When Mrs. Inglefield returned home, three eager children met her in the hall.

She was quite pleased that the boys had gone to tea at the Vicarage.

"Lady Alice was telling me about that poor boy. It is a dreadful trial for him to be laid up like that for a
year, or perhaps longer."

"But he's quite happy," said Chris. "He laughs like anything!"

"Yes, he has a brave cheerful spirit. I shall be very glad for you to know him. He must be a nice boy."

Two or three days afterwards, Diana got her chance. Mr. Wargrave came to call, and spoke to her in
the hall as he was leaving. Diana was always outspoken.

"I don't want to be rude," she said, "but I'm just dying to see the dolls' furniture at your house. Could
you ask me to, do you think? I wouldn't expect tea. I wouldn't be as mean as that, but just to see
them."

"You shall come in now," he said, smiling, "if your mother will let you. Ted will be only too delighted to
show you all his toys."

Mrs. Inglefield, who was standing by, gave her permission, and Diana danced off, and was a good
hour away. She came back to the nursery with glowing eyes.

"He not only makes toys," she said to the boys emphatically, "but he makes poetry! He said some to
me!"

The boys were impressed. Ted and his doings were much discussed amongst them for the following
days.

The weather kept them indoors a good deal. It was rain and wind every day, and the nursery was a
small room for three active children. One morning Nurse, sitting at her work there, was visited by
Mrs. Budd.

Chris and Noel were busy in a corner with their bricks, Diana was finishing her story, but as she
scribbled off the last sentence she caught a fragment of conversation between Nurse and her visitor.

"I always felt she would be dull here. She misses the master, of course, and she's been accustomed
to a life in India. I feel fair worried when I sees her so quiet knitting for the boys, and tears in her eyes
all the time."

"'Twill be better in the fine weather when there's plenty of gentry round her to keep her from
dullness."
Diana shut up her papers and went over to the window. She had what Nurse called her "thinking cap"
on!

After their early dinner she called the boys to her and said:

"Look here, I promised to keep Mums from feeling dull. It's come upon her, and we've got to do
something."

"What?" asked Chris.

"We'll give her an entertainment," said Diana grandly. "And I'll tell her it's coming, so that will take
away the dullness, to feel it's coming. We'll do it after tea."

"What can we do?" asked Chris helplessly.

"I've thought it all out. I'll read her my story. It's finished, and she's never heard any of my stories. It's
awfully exciting. And you and Noel can learn something to recite, like we did with Miss Carr to
Granny once."

"We can dance," said Chris, romping round the room, "and dress up! Oh, that will be the thing,
Dinah!"

Mrs. Inglefield was feeling rather lonely that afternoon. She had been writing to her husband, and
now she was knitting socks for Chris, and thinking about his schooling. She was in her boudoir.
Presently she heard a sharp rattat at her door, a little giggle, and then a note was pushed through
the bottom of the door.

She picked it up and opened it.

"OUR DEAR MUMS,—"

"We're sorry you are dull, but we are not going to let you be
any more. At half-past five we invite you to our Grand Entertainment.
Tickets free. The performance will be thrilling."

"YOUR LOVING CHILDREN."

"P.S.—It will be done in the Nursery—punctule."

So Mrs. Inglefield had enough to keep her expectant and smiling. She heard a good deal of noise
overhead for the next hour or so. But punctually at half-past five she presented herself at the nursery
door.

It was opened by Noel, who had a pink paper cap on his head, and his body and legs all wound
round and round with coloured handkerchiefs and ribbons.

He gave her a very low bow and led her to Nurse's armchair, which was draped in an old red shawl.

It was the seat of honour. Then she was presented with a programme.

AFTERNOON ENTERTAINMENT

An acrobatic exhibishon.
Two gentlemen's duel.
An Authoresses story.
Beautiful Poem resited by motor-car and horse.
General Dance and Wind up.
All can join.

A row of chairs divided the audience from the performers.

The entertainment opened by Chris standing on his head in the corner, and Diana balancing a doll's
tray of tea-things on his feet. Catastrophe was saved by her snatching the tray away, as his feet
began to shake.

Then Noel and Chris had a fencing bout with two hoop sticks. Mrs. Inglefield drew a long breath
when it was over and neither combatant was hurt. The next item on the programme was:

"An Authoresses story."

Diana made her appearance in one of Nurse's best gowns. A wreath of ivy was round her head. She
had sheets of paper in her hand and commenced to read in a high sing-song voice.

The story was about a miserable ragged little girl in London who was given sixpence and a kiss by a
beautiful lady one afternoon when she was selling matches in the streets. The lady's face and dress
was described with much detail. Mrs. Inglefield had no difficulty in recognizing herself as the lady.
The little girl's name was Sally, and she fell in love with this lady and used to follow her round in
London every day, only at a distance. At night she dreamt of her. And then one day the lady was
nearly run over by a motor. Sally dashed into the middle of the road and saved her, but got knocked
down herself and had her leg broken. Then the lady burst into tears at her bravery, and told her
coachman, who had arrived on the scene, to take her home in her carriage. She was carried to the
"most beautiful house in London." Her bedroom was "covered with pink satin curtains and cushions
all over the place." Sally was placed in bed, and a doctor sent for who mended her broken leg.

"But suddenly Mrs. Field fell on her knees by the bed and seized the broken leg:"

"'It is her, my long-lost daughter,' she cried. 'I know the scar which she had as a baby. My nurse lost
her one day when she was wheeling her pram in Kensington gardens!'"

"And all was true, and Sally's leg mended very soon, and she never had to go back to the old woman
who made her sell matches, but she lived with her darling mother ever after. And she grew up and
married a relation of the Royal Family. But she always remembered her ragged time and gave
money to match-girls. This is the moral and the end."

There was much applause when the young authoress sat down.

Then the children retired into the night nursery. After a time, with a rush and a fierce snorting noise,
Chris tore backwards and forwards several times.

"A motor-car!" said Mrs. Inglefield, clapping her hands.

Then Noel entered, galloping up and down and whinnying so loud that Mrs. Inglefield called out very
quickly:

"A horse!"
And then he and Chris stood together and recited the following poem:

CHRIS. "I shriek and everybody flies!

I tear along beneath the skies,
I stop as quickly, for I feel
My master's hand upon the wheel."

NOEL. "I trot along the hard high road,

To journey slowly is my mode.
We want to see, to feel, to smile,
To scent the beauty of each mile."

CHRIS. "Past meadows, villages I fly,

No time to see as I go by!
The wind, the air is all I feel,
Beside the hand upon the wheel."

NOEL. "My master's hand is on my rein,

His eyes are in the country lane.
I canter on up hill, down dale,
Through grassy fields and lovely vale."

CHRIS. "I scorch up hills, I fly along,

My warning 'honk' is all my song.
Towns, rivers, sea, all pass away.
A hundred miles we do each day."

NOEL. "But cars can't hunt, or ride at will

Through woods, or up untrodden hill,
Nor soak their souls in beauty fair,
That's only done through my brown mare."

CHAPTER V
Lesson Days

"Splendid!" cried Mrs. Inglefield enthusiastically, applauding with her feet and hands. "May I ask who
is the author of that poem?"

"Ted wrote it," said Diana. "He said it to me when I went over to see him, so I made him write it down,
and Chris and Noel have been learning it as fast as they could all the afternoon."

"I think you are all extremely clever," said Mrs. Inglefield. "I am quite proud of you."

"And which do you like best, Mums, a horse or motor?" asked Noel.
"It's easy to see which the poet liked best," said Mrs. Inglefield, laughing. "I think I like them both; if I
were rich, I would keep a car to take me long distances, and a horse to ride when I wanted to enjoy
the country."

"And now we'll have our dance," said Diana.

There was a great bustle then, clearing the chairs away. Chris had the honour of dancing with his
mother, and Diana danced with Noel. They turned their small gramophone on, and all enjoyed
themselves. When they at last had to stop from sheer fatigue, Mrs. Inglefield made a little speech in
which she thanked them all most gratefully for their successful entertainment.

"It has kept your dullness away," said Diana with a satisfied smile. "I'm so glad. I promised you I
would keep you from being dull."

Her mother did not remember the promise, but she was touched by her little daughter's thought for
her.

"Did you like Dinah's story?" Chris asked.

"Very much. It was a sweet little story. I did not know I had a daughter who was an authoress. What a
proud mother I shall be when her first book is published!"

Diana got rosy red. That was the dream and desire of her heart. She lay in bed at night imagining the
time when a real book of hers should be in her hand fresh from the publishers, with her name in big
letters across its title page.

A little later that evening they all went down to the boudoir. They always spent an hour before their
mother's dinner with her there.

Diana and Noel were looking at a beautiful book of engravings together which belonged to their
grandmother and had been left in the cottage. Diana was weaving stories out of every picture, and
Noel listened to her with the greatest interest. Chris crept up close to his mother's chair, and sat
down on a stool at her feet.

"I wish I was clever like Dinah," he sighed. "I can't write stories, Mums: I've tried and tried and tried.
You'll never see a book of mine in print. There'll be nothing for you to be proud about in me."

His mother caressed his smooth brown head with her loving hand.

"Now, Chris, we'll have a little talk together. God gives us all different gifts. It isn't everyone who can
write books. I am glad it isn't. We have quite enough books in the world as it is. And, do you know, I
am very glad that my eldest son does not write stories. Somehow or other, I don't think it is very
noble or uplifting work for strong men to do. A man who spends his life in making up stories of what
silly men and women do and say isn't much of a man, to my thinking. Mind, Chris, there are great
writers amongst men, and writers who do a lot of good by their pen, but there are men who do the
reverse. I would far rather my son went out into the world, and endured hardness and worked hard
for his country and fellow-men. I want you to be an Empire-builder, my boy, or an Empire-keeper. You
can be a sailor, or a soldier, or a judge, or a policeman, or even a colonist, but if you're putting God
first, service for country next, and self last, I shall be proud of my son."

Chris squared his shoulders. His heart caught fire at his mother's words.

"I will make you proud of me, Mums," he said earnestly. "I will work hard all my life till I die."

And then his mother stooped and kissed the top of his head, and a bright tear fell as she said:
"God bless and keep you, my boy, and help you to keep your promise."

Chris was a happy boy that night. He had often bewailed his inferiority to his sister, who was so quick
and agile with her words and pen, but now he felt that he had a goal in front of him: a vision in which
he saw himself as a doer if not a talker or a writer; and he fell asleep murmuring to himself:

"I'll do, do, do, and Mums will be proud of me!"

The weather cleared in a few days and spring came along in a rush.

Very soon Mrs. Inglefield had made her plans. She had found a good boys' school about six miles
away, and though the schoolmaster did not care to take day boys as a rule, he made an exception in
Chris's case, and took him as a weekly boarder. Chris was to come home every Saturday and stay
till Monday. There was a train which would take him and bring him back. His mother meant to give
him a bicycle very soon, but meanwhile, he used the train.

Then a young governess was found in the neighbouring town. Her name was Miss Morgan, and she
came every morning at ten o'clock to give Diana and Noel some lessons. She stayed to lunch, took
them for a walk afterwards, and then went home. Diana was a very tractable pupil, though she was
apt to get dreamy and careless in her work. Noel was difficult. He did not like sitting still, and hated
his lessons. He was always ready to talk, but never ready to learn, and Miss Morgan found her
patience sorely tried by his inattention and restlessness.

One morning he had been very troublesome: he would not give his attention to an addition sum set
down for him on his slate. He kicked his chair, he drummed with his elbows on the table, and he
made grimaces at Diana, who sat on the opposite side of the table.

"Noel, if you don't start that sum at once I shall punish you," Miss Morgan said sternly.

"How?" asked Noel, not a bit abashed. "And why are figures so horrid, Miss Morgan? I like letters
best: you don't have to add them up. But yesterday I did count up. I counted the bwanches of my fir
tree, and I got up to twenty."

"No more talking. Begin your sum."

Noel balanced his slate pencil across his fingers, dropped it under the table, then scrambled down to
get it. He was a long time under the table, and then announced that the pencil was broken into a
"fowsand bits."

Miss Morgan produced another pencil promptly, and started him at his sum again.

She was giving Diana a French dictation lesson: when she looked at Noel again, she found him
leaning back in his chair, his eyes upon the ceiling.

"I'm counting the flies," he said; "they're more interesting than sixes and sevens."

"Very well," said Miss Morgan, "as you are determined not to do that sum, you will stand in the corner
till you are sorry for your idleness."

Noel did not like this at all, but he pretended he did. He marched off to the corner and stood with
hands behind him and his face to the wall.

Then he began to mutter to himself. Miss Morgan told him to be quiet.

Presently he spoke out loud:

"I'm telling God about you, how unkind you are to me."

"You're displeasing God very much. Ask Him to take away the naughty spirit who is making you idle
and disobedient."

"What's his name?" asked Noel, turning round with interest on his face. "Is it Satan?"

Miss Morgan made no reply. Diana giggled.

And then, with a sudden rush, Noel dashed at the door, opened it, and tore downstairs as fast as his
two feet could carry him. Down the garden he went, through the little gate into the churchyard, and
from there into the quiet silent church.

Miss Morgan went after him, but could not find him. She did not think of going into the church.

As she came back from a fruitless search in the garden, she met Mrs. Inglefield. In a few words she
told her about Noel.

"He really is extremely naughty this morning," she said. "He won't do his lessons, and now he has
run away."

Mrs. Inglefield looked distressed.

"He has been spoiled by his ayah in India," she said. "He has never been made to do things he
doesn't like. Don't spend your time looking for him, Miss Morgan. Leave him alone. He must be
punished when he comes back."

She sighed a little, for punishment of any sort was a painful necessity to her.

It was some time before Noel came back to the house. His mother caught sight of him stealing
across the garden on tiptoe.

She met him at the garden door.

"Why are you not at lessons?" she asked gravely.

Noel stood still, his gaze irresolute, then he smiled, and when Noel smiled he was adorable.

"Oh, Mums dear, I've been doing a dweffully difficult fing. Casting out Satan like Jesus did in the
Bible." Then he dropped his voice to an impressive whisper. "I fink I've left him in the church. I don't
know whether he's there still, or where he's going nex'."

"I'm quite sure you haven't been able to cast him out," said Mrs. Inglefield.

She always took Noel seriously.

"Well, no, not 'zackly, but Miss Morgan said he was in me, and I fought I'd better get as near God as I
could and then He'd help me. And I walked into the top seat and knelt on the stool."

"Are you good now?"

Noel nodded.

"It wasn't me that was wicked," he said, looking up at his mother with solemn eyes. "It was Satan.
God said to him in church, 'Get behind me, Satan,' and he did it."
"I am afraid, Noel, you have vexed Miss Morgan very much. If you have told God that you are sorry,
you must now go and tell her. And remember this. No one can make you naughty against your will.
You have liked being naughty, and you went on being naughty. And to make you remember that you
must not give way to such naughtiness, you must stay up in the nursery this evening and not come
down with the others after tea."

Noel began to cry, then he spread out his hands pathetically:

"But I'm good now. You can't puni' me when I'm good."

"I'm very glad you're good now; but you must be punished all the same. If a man gets sent to prison
for stealing, however good he feels and is, after stealing, it won't save him from the prison."

Noel stared at his mother. Then he sobbed out:

"But I want to be forgiven."

"Miss Morgan will forgive you if you tell her you are sorry, but you must still be punished."

And then she left him climbing slowly up the stairs to the schoolroom. She longed to take him in her
arms and pet him, but she knew it would not be good for him if she did.

Noel went into the nursery a chastened boy.

"I've come to say I'm sorry," he said.

Miss Morgan looked at his red eyes, and wisely did not ask him where he had been.

"I am very glad to hear you say so," she said. "Now, to show me you are sorry, sit down and do your
sums."

In silence Noel took up his slate and pencil. Miss Morgan had no cause for complaint of him again.

But when lessons were over Noel said to her:

"And though I'm as good as any angel, I'm going to be punished this evening. It isn't fair."

Miss Morgan asked him to explain. When she heard about it she said to him:

"Whatever your mother does is absolutely fair. It would not be fair to let you go unpunished. It is to
remind you next time you are going to be naughty that punishment will surely follow."

Noel said no more. His mother could not have punished him more severely than by preventing him
from joining her and Diana for what they called their happy hour.

But after this, he was better behaved in lesson time.

The flowers and bulbs in the garden were now making a good show.

Chris worked away in his garden when he came home on Saturday. His mustard and cress and
radishes were quite a success, and he was a proud boy when he presented his mother with the first
dish of them.

Diana was as busy as he, attending to her rose tree and seedlings. Noel weeded his plot, and talked
to his fir tree whilst he was doing it. He was very delighted one Sunday to see some of his seeds
coming up by the church porch.
But when Chris got his bicycle, there was not so much gardening done. Noel insisted upon learning
to ride it, and Chris for some time was good-natured about it. The two boys helped each other, and
strange to say Noel mastered the machine before Chris.

One Saturday afternoon their mother allowed them to go out with it. She was always anxious that the
boys should play and do things together. Noel seemed to have more respect for Chris now he was at
school, and was always asking him questions about it and longing to join him there.

Diana, strangely enough, did not take any interest in the bicycle. She tried to ride it one day and had
a bad fall and hurt herself. Since then she never touched it.

Mrs. Inglefield, seeing her walking about the garden rather aimlessly, suggested to her that she
should come for a walk with her.

Of course Diana was only too delighted to do so. She adored her mother and loved having her to
herself.

"We will go and see a farmer's wife, a Mrs. Cobb. I knew her as a little girl. She is getting old, and is
not able to leave home as she is stiff with rheumatism. It is such a pretty walk across the fields and
through a bit of wood."

"I hope Chris and Noel won't be quarrelling," Diana said in her grown-up tone as she started from the
house with her mother. She thought that her brothers would be envious of her when they heard how
she had spent the afternoon.

"I hope not," said her mother, smiling. "The more they are together, the better I am pleased. That was
why I let them go out by themselves to-day."

Diana gave a little sigh.

"I don't know why it is, but since Chris has gone to school, he turns up his nose at girls. He never
used to, and he'd do anything I told him to, and now he won't do a thing, and laughs at me."

"Poor little girl!" said Mrs. Inglefield sympathetically. "I went through that with my brothers, when I
was small. It is only when they first go to a boys' school. They get swelled heads, and think that boys
are the most superior beings in creation. Chris is very fond of you, Diana; he'll soon come back to
you if you take an interest in his cricket and games, and talk to him about his school."

Diana was silent; she knew she had not done this. They crossed some green fields, keeping to the
little path which was the right-of-way, and then they came to a wood with a beaten path under
overhanging trees. The fresh green foliage, the primroses and anemones and blue hyacinths
enchanted Diana.

"In the country," she said as she went down on her knees to pick the flowers, "you have everything
without paying for it. We couldn't do this in London. And the flowers in the parks are only to look at,
not to pick."

It was a bright sunny afternoon. Mrs. Inglefield, who was in no hurry, sat down to rest herself on a
fallen tree-trunk. Then suddenly a rather angry child's voice broke the silence:

"I won't go home—I won't! I won't ever again! I shall stay away till they find my dead body starved to
death, a skillington! I hate them all! I'll live up in the trees with the birds. They can hunt and hunt and
hunt for me, and will never find me. They'll be only hunting for me to punish me!"

Diana started up. She stood still and listened, and so did her mother. In a moment, pushing herself
passionately through a lot of bushes and undergrowth, appeared a little girl about Diana's age. She