Unit 3 Sample Answers August 2014
Essential Business Studies for Cambridge IGCSE®
Sample Answers to Practice questions
Unit 3 The marketing mix
Section 1: Short-answer questions
1. Likely objectives of the marketing department will include increasing sales, increasing market
share, increasing brand awareness, and similar. Objectives should also be measurable, so, for
instance increase sales by 10%.
Understanding of objectives plus examples [4]
2. The features of a product are physical attributes and specification, e.g. a mobile phone may
have a particular design, colour and features such as a camera. Benefits are what the product
can do for the user, such as keeping in touch, communicating pictures.
Understanding plus example [3]
3. A business may carry out market research to find out the preferences of customers and what is
being offered by competing businesses. This is to enable the production of a product which
meets customer needs and is competitive with existing market provision. Therefore the product
should sell.
Understanding of reasons for market research [4]
4. In a market economy, consumers have a choice of products, so they will buy the one which they
prefer. Products which meet consumers’ needs will be bought, and those which do not will not
sell. Therefore the consumer makes the decision over which businesses survive and which do
not. Statement explained [4]
5. Field research is information collected for the first time in the form of surveys, interviews and
other observations. Thus the researcher must go to customers to collect this. Desk research is
the use of information already collected, so can be accessed from newspapers, magazines, the
internet etc., and therefore the researcher does not need to go to the consumer.
Differences identified [4]
6. In the case of a face-to-face survey or questionnaire, consumers may not be truthful about their
views, as they may not want to upset the researcher, or respondents may not fully understand
the questions, therefore giving inaccurate answers. The other problem may be with intentions
versus ability to buy. For instance a high priced product may be desired, but the respondent may
not have the available income to afford to buy.
Unit 3 Sample Answers August 2014
Two reasons plus explanations [6]
7. A consumer survey will usually have a set of questions to answer, with many of the questions
having a range of answers, of which one must be picked (example). A focus group is a much
more in depth discussion, focusing on all aspects of a product, where views may be expressed
freely, without constraints of a choice of answers.
Differences plus explanations [4]
8. A pie chart shows percentages and a line graph shows continuous data. Thus market shares may
be presented as a pie chart and changes in population over time may be presented as a line
graph.
Examples explained [4]
9. Geographical segmentation groups consumers according to their location; gender by
male/female; socio-economic group by income/occupation. Local examples here.
Understanding and application of segmentation [6]
10. Geographical – food products by local taste or custom (local example)
Gender – clothing for boys/girls (local example)
Socio-economic – newspapers or magazines (local example)
Correct examples [6]
11. Answer will depend on country, but typically a food which meets a particular need, such as for
people with diabetes, would be a niche market. Must be a small specific market and not, for
instance, vegetarian.
Example plus explanation [4]
12. A niche market product is aimed at a small group of customers who have specific needs,
therefore it is easy to target these with promotion and advertising. There may also be less
competition in a niche market, enabling higher prices to be charged.
Benefits explained [4]
13. The marketing mix, or ‘ 4 Ps’ (product, price, promotion, place), are the elements which combine
to make a successful product. If one is not right, for instance the price is too high or not enough
promotion is done, then the product will not sell.
Reasons analysed [4]
14. All products have a life cycle, starting at launch, through growth, maturity, and ending with
decline. If a business maintains products at different stages, they should ensure a steady
revenue stream and that all products do not decline at the same time.
Reasons analysed [4]
Unit 3 Sample Answers August 2014
15. A skimming strategy may be used for a technical product, such as a new phone, computer or
games console, to attract high income consumers who ‘must have’ the latest model. A
penetration strategy will be more suitable for the launch of a new ‘single use’ product such as a
soft drink, to encourage consumers to buy it for the first time.
Examples [4]
16. Expansion into foreign markets can be difficult, due to different cultures, styles and even
weather conditions. For a clothing company, local culture may make certain styles
inappropriate, such as short trousers or skirts, and different climates may make items such as
woollen coats unsuitable. (Good to use examples here.) For a clothing company, sizing may also
be a problem as local sizes may differ in terms of classification but also in average
measurements. Also allow answers such as difficulties in translating style names and
descriptions, and also logos on t-shirts.
Three examples plus explanation in context [6]
Section 2: Longer-answer questions
The pizza delivery company
1. Prakesh has changed his product (traditional food to pizza) and the way his product may be
bought (take-away to home delivery).
Understanding, in context plus explanation [4]
2. The target market for traditional food may have been based around older, lower income
consumers whereas pizzas tend to appeal more to young people and possibly the family market
for home delivery.
Changes explained in context [4]
3. Pizza is a relatively ‘new’ single use product and Prakesh needs to persuade as many people as
possible to try it. Therefore a ‘penetration’ or ‘competitive’ pricing method will mean that he
enters the market at a price lower than other competing fast food companies. However, Prakesh
also needs to consider costs, so a ‘cost plus’ pricing method may also be useful.
Two methods analysed in context [6]
4. Remember the low budget for marketing, so methods such as a big sign in the shop window,
leaflets and word-of mouth, may be suitable here. Prakesh could also have a ‘launch party’
where he invites all his existing and potential customers to come along and taste the new
product.
Three methods explained in context [6]
5. The problem with the existing name ‘Tikka Takeaway’ is that it does not now convey the idea of
the new product, which is pizza. However, it is familiar in the area, so if it is changed
Unit 3 Sample Answers August 2014
completely, people may think he has gone out of business. A possible compromise may be
something like ‘The New Tikka Pizza Takeaway’ or similar.
Reasons for and against plus decision [6]
The Maldives Reef holiday company
1. Niche market in this case is the market for travellers who want to gain the advanced diving
qualification and who have the income needed to afford high priced accommodation and
facilities.
Understanding and explanation of term [2]
(incorrectly shown as 6 marks in student book)
2. This is a luxury product with a high positive income elasticity of demand. The high incomes of the
target market and their preference for high quality accommodation allows high prices to be
charged. The service and unique selling point is also exclusive, which makes demand relatively
price inelastic, hence supporting high prices. Price inelastic demand means that an increase in
price will lead to a lower than proportional decrease in demand and higher revenue.
Analysis in context [6]
3. Loyal customers are those who return year after year. They are familiar with the product and do
not need to be attracted by expensive promotion methods. They may also recommend others.
However, the young professionals in this instance may not be customers once they marry and
domestic circumstances change, for instance when they have children. Also a worldwide
recession may have a negative effect on incomes, and luxury goods are the first to be foregone.
Therefore it is advisable not to rely on existing, loyal customers.
One advantage and one disadvantage explained in context [6]
4. See question (3) for reasons not to rely on existing customers. Also attracting a different target
group of customers will widen the range and make the company less vulnerable to downturns in
one area, for instance the financial sector where many young professionals are employed.
Reasons explained [6]
5. The product will need to be changed to some extent in terms of some of the high cost elements,
such as the expensive accommodation, but the diving instruction standard must remain as this is
the USP. The price will need to be decreased in line with similar activity holidays offered
elsewhere and promotion may be best through sporting magazines and clubs. With this in mind,
Fiona needs to identify a group of prospective customers and carry out a survey, to find out
which elements are more/less important to the new target group. Fiona also needs to research
the competition in terms of what is successfully sold to these customers.
Supported conclusion [6]
Unit 3 Sample Answers August 2014
Zigzag - The school enterprise company
1. As all the potential customers are school pupils, there is some doubt as to the amount they will
really be able to pay on the day of any event or sale, as they rely on money from parents. Also
the pupils may not take the questions seriously or they may give answers that they think the
enterprise group wants to hear, especially if they are younger students.
Two reasons identified and explained [4]
2. The target market is exclusively school pupils so the success of the school enterprise company
will be limited by the number of pupils at the school and their available resources, such as
pocket money.
Two reasons identified and explained [6]
3. PED for Talent show 10%/40% = 0.25 (Inelastic)
PED for doughnuts 66%/40% = 1.65 (Elastic)
Correct calculations [6]
4. The PED for the Talent show is inelastic, so higher price means increase in revenue,($1250 at $5,
$825 at $3) so $5. The PED for the doughnuts is elastic so lower price will generate more
revenue. Actually in this example revenue is the same ($150), so it will depend on company
objectives, for instance maximising sales would lead to lower price.
Consideration and analysis of issues plus conclusion [6]
5. Zigzag will face far more competition in this new market as other similar products will be
available. They will need to consider a competitive pricing strategy, so they are not more
expensive than competitors, and also carry out advertising and promotion, for instance by
handing out leaflets to tourists at hotels to let them know about the craft market.
Analysis plus recommendation [6]
6. Personal selling in this context will mean approaching tourists and/or talking to them when they
come to the stall. This way Zigzag can explain why their products are superior, perhaps helping
to find suitable items for presents. This way more sales should be made. However, a very
‘persuasive’ sales technique may put some buyers off, if they would rather browse
independently. On balance, most sellers at the market will be using these tactics so Zigzag will
lose out on sales if they don’t!
Consideration and analysis of issues plus conclusion. [6]
