AS and A Level Business Studies - Six Candidate Responses from

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AS AND A LEVELBusiness Studies F293H030/H430MarketingSix Candidate Responses from May 2014 Examination Series with Examiner’s Commentary

Business

Unit F293 Marketing

2Six Candidate Responses from May 2014 Examination Series with Examiner’s Commentary

CONTENTS Page

Candidate One, Grade A* 3

Candidate Two, Grade A 12

Candidate Three, Grade C 20

Candidate Four, Grade D 28

Candidate Five, Grade E 37

Candidate Six, Grade U 45

Appendix: Case Study 52

Unit F293 Marketing


QUESTION 1

Analyse one appropriate marketing objective for SNL.

Answer

One appropriate marketing objective for SNL is growth. This is because they are a new business in Waddington trying to enter the skating market. By targeting growth SNL can try to increase sales. This can lead to brand awareness as people can recognise the brand and can therefore become ‘potential’ customers. As well as brand awareness the growth of the business can lead to more profit. This can therefore in the short term pay for all the investments and money spent on starting the business and market research they undertook. Therefore in the long term SNL can create better market share in the skating and they can meet their growth objective and invest in the play zone. However it can be seen as a inappropriate because they have only just started therefore there initial cost will be a negative therefore as a tactical objective it may not be suited as they first need to survive. However as the long term Coporate objective it can be fine as the long term impact as seen in the forcast in table one is positive therefore they can meet the growth objective.

Commentary

The candidate has identified growth as an appropriate marketing objective for SNL. Although a more general business objective, this was acceptable as long as the link was to marketing and the context of SNL. In this case the candidate has shown that the objective is appropriate because SNL is new to the skating market, it will allow the business to increase sales and increase brand recognition eventually leading to more profit and a return to the investors. It is at this point that the candidate is awarded L3 because they have shown the impact of the objective on the business in context.

There is no necessity to analyse why the objective may be inappropriate, although this candidate has gone on to do this. This candidate obviously had the time to complete the paper, but there is a common issue in going beyond the requirements of the question in the early responses and running out of time later. (6/6)

Candidate OneMark: 55/60Grade: A*

Strengths:• Hits top level on every question• Very good analysis and makes effective arguments

Weaknesses:• Evaluation only occurs at the end of the response• Context can be weak, but just acceptable

Unit F293 Marketing


QUESTION 2

SNL only used convenience sampling in its market research.

Evaluate sampling methods which could have been used to research the market prior to the launch of SNL.

Answer

One sampling method which could be use to research the market prior to the launch is quota sampling. This is because quota sampling takes into consideration the characteristics of the population. This can therefore lead to more accurate results as the sample chosen are specific. Skate nation are a business targeting the ‘young people’ as skating is the ‘latest street sport’ therefore by using quota sampling they are able to know what their target market wants especially as they make up 52% of sales In the short term they can therefore alter their business to suit the young for example ‘modern facility’ therefore attract more customers and increase this 52% segment. This can lead to more sales in the long term which can generate more profit for skate nation. This can then lead to SNL meeting their growth objective. However the negative of this is that to alter the business in the short term may be expensive, as well as the sampling is time consuming. However this can be overcome as this is a short term impact. Therefore the long term objectives outweigh the short term.

Another sampling method they could use is stratified. This is when they divide the population into groups of interest and then use random sampling to choose sample. This is good for SNL because they are able to have a range of data from different interest groups. This is attractive for SNL because it is ran by a grandfather aged 62 and they have 5 different segments. Therefore the skate nation may attract not only the young population, but other segments (figure 1) as well especially as the owner can adapt to the needs of the other segments. The positive of stratified sampling is that SNL can target more than one segment. This can lead to a more diverse customer range in the shortterm. In the long term they can gain more sales and successfully meet their objective of growth. The negative with stratified is that it is not specific to one segment in the population which mean that the answers are not as clear in the short term. This can lead to strategies eg promtion being to generalised. This can be overcome because SNL can see which target markets are interested in the business and after stratified sampling he could be more specific.

In conclusion, quota sampling could have been used to research the market prior to the launch. This is because SNL can target their consumers (the young) more specifically therefore they could make more changes adapted to them. Stratified would have be useful but as SNL want to target the young it wouldn’t be as appropriate as quota. However this depends on the trends of the market because it is currently for skate nation but this may change which can affect sales.

. . . continued

Unit F293 Marketing


Commentary

The candidate has obvious knowledge about sampling methods, starting by analysing quota sampling. The danger in this answer is that candidates analysed the benefits of market research not sampling, however this candidate recognised the increased expense of using quota sampling and L3 was awarded at this point. The attempt to evaluate quota sampling is a poor attempt and far too generic. Many candidates try to evaluate by having a formulaic approach to using terms such as short term and long term. In this case it does not lead to L4 because it means nothing.

The candidate gains L4 in the final paragraph where they make a judgement over quota sampling being more appropriate than stratified sampling because it would allow SNL to target their market more. This is in line with their previous analysis and therefore gains L4. They go on to justify this by stating that it depends on the trends in the market which can change and again this is in line with their arguments.

Whilst this is not an excellent response, it does provide a justified judgement based on their analysis which is always going to be at least the middle of L4.

Unit F293 Marketing


QUESTION 3

Using Table 2, calculate the price elasticity of demand for a one hour session if the price were to be reduced from £6 to £4.50. (Give your answer correct to one decimal place).

Answer

different / original x 100 =

290 / 620 x 100 = demand = 910 – 620 = 290

15 / 6 x 100 = 25 price = 6 – 4.50 = 46.7

%Δ in demand = 25 / 46.77 = 0.53

%Δ in price

Answer: 0.53 inelastic

Commentary

A common mistake where the candidate has inverted the formula for price elasticity of demand. This is one mistake and the rest of the calculations are correct so the candidate gains 3/4 marks based on the ‘own figure rule’.

Unit F293 Marketing


QUESTION 4

Evaluate ways in which the pricing strategy at SNL may change as the skate park moves through its product life cycle (lines 35–37).

Answer

The product life cycle shows the products growth in terms of sales.

When SNL are in introduction – they have only just opened the skate park therefore it is relative new. Therefore SNL should have a pricing strategy which is specific to the business. This is promtional. This is because they can lower the price initially of the skate park. This can lead to more people being attracted to the park because the price is lowered help meet forecast of 77,000 in year 1 This is the short term can increase customers in the park therefore helping to create brand awareness. In the long term they can therefore earn more profit and reinvest in the proposed ‘children’s soft play’. As well as meet their objective of growth. The problem is that they won’t be getting as much profit as they have lowered the price. This can be overcome as the number of sales should increase therefore this impact is reduced.

Another pricing strategy they could use is competitive especially when the skate park is in growth in the product life cycle. This is because they can offer a lower price than their competitors to gain more sales. This makes SNL more attractive than the other competitors as they have a lower price and in the short term the number of customers can increase which is seen in table 1 where the forcast is 116,000 in year 3. This can help SNL as they can create more brand awareness of their ‘skate park’. In the long term, this can make more profit in SNL and can help them meet their objective of growth. They can also in the long term gain more market share than their other skating competitors. The negative of this is that it may not be apprioate because the business is in waddington therefore competitors may be far away as well as in the short term SNL will get a lower profit margin. This can be over come by the long term as SNL will have more sales which can mean the loss in profit is a minimal impact.

In the maturity stage of the product life cycle the pricing strategy they can use is contribution pricing. This is because it will make sure SNL fixed costs are paid for. SNL currently have a predicted growth of 14.3% – 31.8% therefore they could do well. However in maturity this can drop and sales may be harder to stabilise. Therefore contribution pricing can help SNL in the short term by gaining more profit and this can lead to more retained profit and not see the 175000 in year 5 drop to much. In the long term it means the product is able to last longer in the product life cycle and they can get more profit out of the product / business. The negative of contribution is that it doesn’t consider variable cost which can be risky as SNL can start to get a cost in the long term. This can be overcome by doing research to see if contribution is working and if they should include a extention strategy to help improve sales.

In conclusion, the pricing strategies will change depending on the position the business is in, in the product life cycle. The most important being the growth stage as this is where the most sales should be located. Therefore the competive pricing should be use to aid this. However this depends on the economy. This is because the business is inelastic therefore the sales won’t change much however there may be less people creating more sales.

. . . continued

Unit F293 Marketing


Commentary

The candidate has followed the obvious route in this question, which is to start with the introduction stage of the product life cycle. The candidate has analysed the use of promotional pricing and shown the impact on the business in context gaining L3. The response goes on to analyse the use of different pricing strategies at different stages, but until the final paragraph they have not evaluated the change in pricing strategies. In other words the paragraphs are not linked together very well to evaluate the changes. Many candidates easily gained L4 by showing how, as the product life cycle progressed, there was a need to change the pricing strategy.

However this candidate leaves this evaluation until the end of their response, which, whilst valid, is not always the best approach, especially if there are time pressures or the candidate does not remember the original question.

On this occasion the candidate has referred back to the question. Level 4 is gained when they identify the most important stage, in terms of pricing, as being the growth stage. This is based on their analysis of pricing strategies in the growth stage and in the context of the business. This is not a perfect answer, but it gains full marks (13/13) because it answers the question and in the time given for an unseen case study examination, this is what is expected.

Unit F293 Marketing


QUESTION 5

Analyse two appropriate methods of below-the-line promotion which might be used in SNL’s promotional strategy.

Answer

One appropriate method is direct mail. This is because SNL are in Warrington therefore not only is it more specific but it can attract the people in the local area. Danny knows that ‘below-the line strategy is needed’, therefore by using direct mail it can lead to more sales and better brand awareness at SNL. The negative of this is that it can be time consuming and expensive. This is because they need to create and deliver the mail to their customers and recruit someone to do the job.

Another below-the-line strategy is personal selling. Danny knows that ‘word of mouth promotion would not be enough’. therefore personal selling can increase response of people as well as make people more aware. Personal selling has more direction therefore people are less likely to ignore this method of below the line promotion as it is a physical person. The negative of this is that the opportunity cost of Danny using his employees to promote the business as well as it being time-consuming.

Overall Direct Mail would be most appropriate because it can be done only a larger scale. This can help increase sales.

Commentary

Two below the line promotion methods given, but only the first one is analysed in the context of SNL. This is a common problem, especially in an unseen case study, but candidates must make sure every point they analyse is specifically in the context of the given business. (5/6)

Unit F293 Marketing


QUESTION 6

Considering marketing and other issues, should SNL diversify by opening the ‘Play Zone’ facility? Justify your view.

Answer

By opening the ‘play zone facility’ SNL is able to enter a new market. This is a positive for SNL because they can increase their product mix – This can lead to less risk as the risk is more spread out in the short term. This can lead to the cafe gaining more sales because there will be people from the skate park and play zone. This therefore can increase profitability at SNL is the long term and successfully meet their objective of growth.

The negative of the marketing is that the initial start up cost shall be expensive in the short term as well as Danny wanting to gain investment from the bank. This will therefore add interest to their cost. This can be overcome because the long term investment of the play zone shall out weigh the short term expense. The skate park is forecast to be a success therefore the retained profits can help pay off the debt.

Another factor SNL need to consider is the Human resources. This is because as they expand SNL will need more employees. The ‘play zone’ employees may need different skills as it is targeting younger children and they require more care. Therefore SNL will need new employees. The positive of new employees are the new ideas they can bring to the business in the long term. This can lead to positive changes in the business which can help them gain sales. In the short term, the new staff can motivate the old staff so the productivity at SNL can increase. This can help SNL meet their objective of growth. The negative of Human Resources is that the recriutment process is very time consuming and expensive. In the long term, they may also need training to help staff which is another expense. However this can be over come because the staff may be more specific to their job role and the productivity can increase in the long term. Therefore the negative is a small impact compared to the gain SNL can get

Overall SNL should diversify because it can help the business grow. This is because the business already has families and children under 12 enter therefore the new play zone can help increase those percentages. The biggest factor is the finance as they need to have sufficient revenue before diversify. The finance needs to be looked at because it is incorporated into both the human resources and marketing therefore SNL will be dependent on how well their financial status looks. This all depends on the trend because sales are good due to the latest trend being skate boarding ect., therefore SNL will need to consider if the trend changes and how that will affect their diversification.

. . . continued

Unit F293 Marketing


Commentary

The first paragraph gets straight on with answering the question and brings the point to show the impact on SNL of opening the Play Zone facility in terms of meeting their objective of growth (this is an obvious objective for SNL and it refers back to the candidates answer to Q1 where they identified growth as an appropriate objective - this shows the importance of working through the questions in order). There is not a great deal of context in the first point but enough to show that this candidate is writing about SNL and not any old business.

The candidate then goes on and looks at a negative marketing point, setting the foundation for a two sided argument about whether SNL should open the Play Zone facility.

By using a HRM issues in the next arguments, the candidate has addressed the ‘other issues’ aspect of the question and is now able to progress beyond the bottom of the levels.

Like many candidates, the evaluation is left to the final paragraph. In this case there is a clear judgement based on the previous analysis. The candidate has justified their judgement by showing what the most important aspect of the decision was and also what their decision may depend upon. This is a good L4 answer, that could have been improved by having the judgement/evaluation built up towards within the body of the arguments, rather than left until the end.

Unit F293 Marketing


QUESTION 1


Answer

Marketing objectives are important for any business in order for them to be successful with their marketing, and to also generate more sales and hopefully profits; which is ultimately what most businesses aim for.

Specifically for SNL, I would state that a marketing objective to “increase awareness of SNL’s facilities, products and services,” would be a good objective to undertake. This is because SNL have only just been launched and the business is in its very early stages. Although they will have already used methods of promotion to market their business and to inform people of the business, they will most likely want to extend this now the business has been launched. By increasing awareness more people will know about SNL and therefore this is likely to increase customer’s and sales, which will ultimately increase profits and exceed growth figures forecasted in the case. However, Danny and the SNL team may feel that they have advertised enough and increasing awareness should not be high on their priorities. Although, it would seem that it ought to be considering that SNL is a brand new business and they will want to increase sales throughout, and increasing awareness is a good way to do so.

Commentary

This answer starts poorly, but there is a marketing objective of generating more sales and profit hidden in the first paragraph. Ideally the candidate should have been more obvious as to what objective they are suggesting.

There is context in this answer and the candidate not only analyses the impact of the chosen objective but also analyses why it is an appropriate objective for SNL to use. (6/6)

Candidate TwoMark: 49/60Grade: A

Strengths:• Hits top level on every question, except Q2 where

knowledge is poor• Good use of context throughout answers

Weaknesses:• Wastes time at the start of answers• Poor knowledge/revision

Unit F293 Marketing


QUESTION 2



Answer

Convenience sampling is a method of market research. It’s when a business will pick at random people, this may be in the street etc, to answer some questions or whatever the business choose to do in order to find out opinions of general customers, this is extremely cheap and is also easy to collect.

Another method of sampling that could have been used to research the market prior to the launch of SNL could have been group sampling. This is where a business could have gathered a group of consumers that are within their target market and then got the group to sample their business, this could have been helpful to SNL as they could have seen how their target market reacted to their product and if it may be a success or not. They could of involved their grand children who they talked extensively to about the business, this could have offered them an honest opinion on the product, or they could have been biast towards their family which could have been a misrepresentation of the research carried out. However, this may have been difficult to do as the business may still have been having building work to it etc and therefore people may not of had a true representation of the experience that SNL would have wanted to offer. This method of sampling could be fairly easy to collect, however in the context of SNL it may not have been accurate or reliable and therefore a waste of resources.

SNL could have also used quota sampling to carry out market research prior to the launch of SNL.

Quota sampling is where a business will carry out market research with consumers or potential consumers and they will have to cover a specific quota for that target market.

Commentary

This is a good example of a candidate who has not got a comprehensive knowledge of the Marketing specification. They are struggling to identify any sampling methods and gain some poor L2 where they show some understanding of convenience sampling in terms of using the grandchildren.

There is a specific body of knowledge required for this examination and without it candidates are unlikely to reach their full potential. On this occasion the inadequate response to this question has stopped the candidate gaining an A* grade as the rest of the responses are excellent. (4/13)

Unit F293 Marketing


QUESTION 3


Answer

%change in demand%change in price

= 910 – 620 = 290 x 100 = 46.8 620

= £6.00 – £4.50 = 1.50 x 100 = 25 6.00

46.8 = 1.925

Answer: 1.9 (elastic)

Commentary

Well laid out formula with a correct answer in the right place. (4/4)

Unit F293 Marketing


QUESTION 4


Answer

The product life cycle shows the different stages that a business or product will go through throughout it’s ‘life.’ As it states in the case on line 35–36 “the market research highlighted that this type of ‘craze-driven’ facility has a definite product life cycle.” This shows that the business will definitely come to a saturation and decline point in its product life cycle.

On table 2 in the case it shows that the lower the price the higher the demand. At £3.00, demand is 1080 and at £7.50 an hour demand is over halved at 500. Therefore, this could suggest that at the beginning of the product life cycle, in development or in introduction stage that SNL may like to use penetration pricing. This is where they will put their prices at a lower rate to begin with as it’s a new business / product and will then start to increase their prices in order to increase profits. If SNL adopt this pricing strategy then there will most likely be an increase in demand, this is shown by figures in table 2. And therefore will increase the number of customers therefore they will hopefuly make a profit even though price will be lower than desired.

Still using penetration pricing, as the business goes through the next stages of the product life cycle, growth and maturity; SNL can probably afford to increase its prices. With the introductory price being low they are bound to have a lot of customers who visit their business and are learning the different sports available and because of the ‘good access by public transport and plenty of parking’, people are likely to keep using this facility. Therefore people are more likely to pay an increase in price as they knew the business and know the product they are getting. However, SNL shouldn’t increase prices too much as some customers demand may be price dependant and therefore they could loose alot of business and profit along with that too. So, looking at table 2 it states that at £4.50 per hour demand is still 910, this is still a lot and they are gaining an extra £1.50 per hour; this should help to increase sales and profits, whilst also maintaining a good flow of customers.

SNL, through the last part of the product life cycle, saturation and decline will want to keep as much interest in the business as possible because of the decline stage the business is likely to loose alot of customers and sales along with that too. Therefore, they may want to decrease their prices again, this could further increase demand in order for SNL to try and maintain a good cash flow and profit margin. This may help the business from going into decline as customers maybe more enclined to pay for the service / product as it’s so cheap. However, this could also be damaging to the business because the low prices could mean that the businesses profit drops substantially especially with loss of business. Also, if SNL’s costs and overheads increase they are likely to be in a tough financial position as they won’t have a substantial amount of profits to cover those overheads. This could mean that SNL go into decline quicker than expected and it could be more damaging for them. Therefore they could decide to keep the prices at the same number or even try to increase them further as they will have an increase in profits from the customers utilising the products even in the saturation and decline stage, this could help SNL to keep profits up and prevent a loss of cash flow. It could also deter people from using SNL further and cause SNL to decline further.

. . . continued

Unit F293 Marketing


Commentary

This response starts with a great deal of context and knowledge but no real understanding of pricing strategies. The first pricing strategy is introduced in the second paragraph and quickly moves through understanding and on to an analysis in context of the impact of penetration pricing at growth and maturity stages of the product life cycle.

The candidate then goes on to show how the pricing strategy should change as SNL enters the decline stage of the product life cycle. This is what the question asked, so they gain L4 at this point. Although they do not analyse another strategy this does not matter as the question only asks how the pricing strategy may change, not the strategies. To gain full marks the candidate could have been expected to have shown the change in strategy between more than one stage of the product life cycle. (12/13)

Unit F293 Marketing


QUESTION 5


Answer

Below-the-line promotion is a method of promotion that is adopted to target more specific segments of the market that are applicable to a businesses target market. It’s different to above-the-line promotion; as this is used to target a more mass and general target market, that isn’t necessarily that specific to the business.

Figure 1 in the case shows that 52% of age segmentation for SNL is teenagers. This is over half of SNL’s target market. Therefore, taking this into account SNL could use the internet and more specifically twitter, facebook (social media) as a method of below-the-line promotion. As this area of promotion is more commonly used by teenagers, so SNL would be targeting the segment they desire the most, it is also relatively cheap and easy, and it can be monitored and changed at SNL’s disposal which could make it easier for them to target their market more effectively and at a quicker rate.

Staying with using the internet, SNL could also use e-mail as a method of below-the-line promotion. As 23% (as shown in figure1) of customers are families e-mail could be affective for targeting teenagers and families as SNL can send e-mails to parents and to teenagers, with advertisements or special offers, which could incentivise people and families to go to SNL. However, this could be time consuming and the business may not have everyone’s email address, along with people not having an e-mail address or access to the internet; it’s not guaranteed that SNL would target everyone they want to and could end up being a waste of money and resources.

Commentary

Again some wasted time at the start of this answer as there are no marks available for knowledge of below the line promotion, only the methods. There is little context in the first point but just enough to get L3BOD (benefit of the doubt).

The second point uses case material and analyses the impact of this method. (6/6)

Unit F293 Marketing


QUESTION 6


Answer

Danny and the other investors at SNL find it to be essential that they could expand the business and increase growth (line 51–52). Danny thought that a ‘soft play’ venue for younger kids would be the best idea to do this.

First of all SNL would need to consider the marketing of this new venture. Although it may be easy to target the market that they would want for the ne ‘Play Zone’ facility as children with their families would also be using the products that pre exist at SNL, making it easier for SNL to advertise and market this new venture to existing customers. However, they will also need to market to new customers, this is always costly for a business; especially as SNL have already been spending its capital on marketing methods for SNL this could be alot of time and money SN may not possess. On line 15 in the case it states that SNL have “an additional 12 staff to be employed.” This would take a load of responsibility of Danny and the investors shoulders. However, marketing for the new play zone and starting this could cause SNL to suffer as Danny and the investors may not keep an eye on SNL and may loose track of how the business is being run. This could cause a loss of sales and profits, which is something that they don’t need, especially if they are considering the new venture. However, online 59–60 in the case it states that “they could diversify the current busness and target new market segments.” This could also be beneficial for SNL as this could help them to generate more sales and profit. Also, as the soft play venue would only be next door to SNL they could also increase sales in both aspects of the business by marketing in each of these, which could help to generate profit in order for them to make some money back from two heavy investments if they choose to expand.

SNL will also have to consider the finances and finance department of the business. When setting up SNL Danny and his investors used their redundancy from a previous position (line 7–8), and therefore so far have had no outside help with paying for the business. However, it states on line 59 in the case that SNL will have “additional investment from the bank.” This could mean that SNLtake out a loan to fund this venture. Interest rates currently are 0.5%, which is the lowest they have ever been, which could act as an incentve for SNL as they may not have to pay back as much money as they may have had to in previous years. However, with the economy in recovery, interest rates could easily increase and SNL could find themselves paying back alot more on their loan than they had forecasted to, which would leave them with alot of debt depending on the success of the new venture should they choose to do so. It also states that on line 36, that the business has a “definite product life cycle,” therefore they are prepared for a definite decline stage. This new venture could also have a definite product life cycle as demand may decrease after a while and novelty may wear off. This could then put SNL in an even worse financial position as they will have two businesses in decline and debts to pay from the bank. So, they would have to do alot of market research in order to highlight any signs of potential decline for the play zone and weigh up if its worth investing more money in with help from the bank. However, the new play zone could also continue to do really well and exceed SNL and its expectatons and could almost act as a safety net for SNL if it does enter the declines stage; acting as a steady cash flow in order for SNL to pay their debtors and costs whilst also still being able to increase their profit margin at the same time. This could be an incentive for them to enter into this new ventre. SNL may also want to consider

. . . continued

Unit F293 Marketing


Commentary

A brief introduction which reads well, but adds nothing to the answer. A nice analytical point based on the cost of marketing the new venture. Nice use of context throughout this point. There are a number of different arguments in this paragraph and it might have been better to split them up into their own paragraphs to make it easier to follow.

The candidate then goes on to look at financial arguments, again in a long winded paragraph that could have been split up more for better impact.

Although the candidate has covered the basics of using Marketing and other issues at this point, they also look at HRM issues. Using another aspect of the business is always going to provide better analysis and arguments. In these questions there should be enough context to find arguments for all four of the functional areas and candidates should be encouraged to focus on the most persuasive arguments.

A judgement at the end based on the analysis given leads to L4 and this is then further justified with the need to spread risk and use of the product life cycle. Lastly they suggest the business needs to carry out more market research before they diversify. Good structure, good, convincing arguments and a nice evaluation. (17/18)

HR (human resources). For SNL, along with the investors an “additional 12 staff would also be employed.” So, for the new venture it is also likely that even more staff need to be employed. If this is the case, it’s costly and time consuming to recruit and train new staff and on top of an investment they may not have the spare capital to do so. However As SNL is not a huge business it could be easy for staff to feel more valued than if it was a big business and therefore staff may be motivated to do well for Danny and the investors, which could increase efficiency in the business and cut costs; this would be extremely beneficial for SNL. It could also help to give them a good reputation, making it easier in the future to recruit new staff as there may be the demand to work for SNL.

Overall, I think that SNL should diversify by opening the ‘Play Zone’ facility, as I feel that diversifying the business will help to keep consumer interest along with sales and profits; which is needed as SNL has a definite product life cycle and this new venture could help SNL to spread risk and support them when going through a decline stage. However, SNL need to be cautious about borrowing money from the bank to finance the new venture as they could get into a lot of debt. So, as long as they know that they are capable of paying it back then I would say that they should go ahead and diversify their business.

Ensuring that they carry out substantial market research for them to know if there is demand for it and if it will likely be a success.

Unit F293 Marketing


QUESTION 1


Answer

A marketing objective can be differientated into strategic methods such as increase in market growth or market share or even to maintain those two things. However there could also be more specific marketing objectives within the 4p’s: price, product, place and promotion.

An appropriate marketing objective SNL should consider is to use the most appropriate promotion methods in order to target the right market and this would require market research. SNL has already considered below-the-line promotional methods such as local newspapers and local radios, however they should consider other methods in order to gain brand loyalty and customers who would be willing to use the service. This would require sound market research as to help where they would promote SNL specifically for their target market which are mainly teenagers (52%) following on by families (23%). By choosing the correct promotion methods would be seen as beneficial and would not waste time or money for SNL, as they would not want to target the wrong market as it would be problematic and would have many cost implications in terms of changes to the marketing mix for SNL.

Commentary

The candidate has identified promotion methods as an objective. Whilst this may not be what most would consider an objective, the question allowed a vast range of tactical, strategic and corporate objectives to be used, so this was appropriate. There is good use of context in the answer, but the candidate does not analyse the impact of the objective on the business or the appropriateness. By saying that this objective would ‘not waste time and money for SNL’ there is an attempt at L3 but it lacks depth and does not really show the full impact on SNL. Hence this answer remains at L2. (3/6)

Candidate ThreeMark: 42/60Grade: C

Strengths:• Good use of context throughout• Good ability to analyse

Weaknesses:• No conclusions to Qs 2, 4 and 6 which limits answers• Analysis is not always consistent• Some evidence of timing issues

Unit F293 Marketing


QUESTION 2



Answer

Market research is used to find out what a business customer’s want within the market. Businesses could use different types of sampling methods, such as quota, systematic, random and stratified sampling. In the case for SNL, they have used convenience sampling which is whereby they ask people who may just walk past them to conduct market research. However SNL could consider other methods to the launch of SNL.

First of all, SNL could use a random sampling, simply because they are able to ask anyone about the launch of SNL. The advantage of using this method is that everyone has an equal chance of being chosen so therefore this may be seen as representative for their market research. SNL would be able to find out from all ages and different people their opinions which would partly benefit them as to whether the launch of SNL should proceed further. However the main disadvantage of using this method is that SNL may be asking the wrong target market, i.e. people who are not interested in skating or rollerblading etc. Therefore SNL may not recieve the response that they would want to hear. However SNL should consider that market research should help with their decision-making and should not solely be based on their market research.

SNL would although first need to find out what they want to ask and who at in order for sound market research, as market research can be costly and time-consuming. For example systematic sampling would require quite a bit of time as you are picking a certain number of people each time and would be fixed in order for it to be a sample. Sampling is just asking a smaller group which may represent the whole area or population. The usefulness of using a systematic sampling method is that it is seen as fair to all the people they are choosing between. Therefore there is a large scope of opinions for the launch of SNL. Therefore this produces quantitative data for SNL and they would easily be able to calculate in terms of percentages as to whether the launch of SNL would be successful or not.

SNL could also use quota sampling which would be seen as useful as they are able to segment into a smaller group and have

Commentary

Starts reasonably well with an analysis of random sampling in the context of SNL. However the candidate then seems to run out of steam with a weak attempt at using stratified sampling and quota sampling. This is likely to have been the last question attempted by the candidate as it has an unfinished feel to it. Whilst there is merit sometimes in taking questions out of order, the candidate really needs to be disciplined about their timings and finish every answer.

Unit F293 Marketing


QUESTION 3


Answer

PED = %ΔQD %ΔP

6 – 4.50 = 1.5

1.5 x 100 = 25 6

910 – 620 = 290

290 x 100 = 46.77620

PED = 46.77 25

= –1.87

Answer: –1.87

Commentary

Although we allowed correct answers that were not given to one decimal place (as the question stated), this shows a lack of reading the question. (4/4)

Unit F293 Marketing


QUESTION 4


Answer

Pricing strategies is what business uses and decide upon on how to set their prices for a certain product and / or service. A product life cycle is a virtual image of where a business’s products are as there are different stages which are introduction, growth, maturity, saturation and decline.

The first stage of the product life cycle is the introduction stage and this is important for SNL in terms of what pricing strategy they should consider. SNL could either propose to use either penetration pricing or price skimming, although it would be the better option to choose penetration pricing due to its target market / audience. Penetration pricing is whereby a business starts its price low and eventually as the skate park moves through the product life cycle, prices would start to increase. However start-up cost may be high in terms of equipment for the skate park as well as the cafe area as it would require substantial investment. SNL may need to consider borrowing cash / bank loan from the bank to cover cost until they eventually pick up on sales which would eventually lead to higher profits in the long term. However as stated on the case study that rent is “relatively cheap” so therefore SNL may not need to require as much external funding to cover the costs. Therefore it could be contemplated that SNL should consider price skimming due to the fact that the investment onto the cafe and the equipment inside would be expensive. Price skimming is whereby a business chooses to set their prices high and over the product life cycle they would reduce the price to make it more affordable as SNL would have been able to cover the capital expenditure. However in general, due to high start up costs, most businesses tend to start their prices high to cover the start-up costs.

When the skate park moves through the product life cycle, SNL may possibly be able to lower its prices as they should be generating more sales as there is an increase in consumer awareness of the skate park. However due to high cost in the introduction stage, it may be difficult to pass that stage as SNL would discover difficulties with try to gain customers. SNL would require considerable investment in order to gain sales. As it moves along the product life cycle, sales would increase as well as market share within the market. This is when SNL may be able to lower prices in order to generate more sales, because at this point SNL may be experiencing with an increase in competitors if demand is high for the skate park so therefore they would need to stay competitive and may consider doing market research in order to maintain / generate more sales.

At the growth or maturity stage of the product life cycle, SNL could consider using captive pricing which is when a business decides to complement another good with the service. SNL could also consider predatory pricing if there are more competitors entering the market so they can generate more sales. This is when a business sets a price below the market price in which competitors are unable to do as well which makes them leave the market. If SNL considers this, it may lead to economies of scale as they have lowered their cost as output rises.

. . . continued

Unit F293 Marketing


Commentary

Like many candidates, this candidate identifies penetration pricing as appropriate for the initial stages of the product life cycle. They then use good context to show the impact on the business in terms of higher profits in the long run. this is contrasted with the use of price skimming within the same stage of the product life cycle.

As the candidate shows how the price strategy may change as SNL moves through the product life cycle they gain L4 quite quickly. This is a good example of how L4 can be gained in the body of a response, rather than a candidate waiting until a conclusion to attempt it. Sadly the candidate treats the saturation and decline stages of the product life cycle as separate entities and does not evaluate the changes in the pricing strategy, just new strategies. There is also not attempt to conclude at the end and focus on the changes, so the response has only one piece of evaluation and stays at a mid L4 mark of 11/13.

As and if the skate park starts to enter the saturation stage, SNL may discover that there sales are falling and that the start to generate a loss. At this stage, SNL should consider different extension strategies to prolong the life of the skate park. ‘SNL in this could could consider their expansion of ‘Play Zone’ in order to generate more sales in the longer-term, although SNL may need to consider their current position in terms of liquidity and cash-position. Extension strategies would need to be considered such as introducing a new service a pricing strategy wise, they would need to offer deals and bargains in order to attract and maintain their customers. SNL could consider using pschyscolgical pricing as it gives their customers a thought that it is cheaper as price is set just before a whole number e.g. setting the price for one hour at £6.99 rather than at £7.00. This may help in the short term for SNL in terms of trying to regain or maintain their current customers.

If the skate park hits the decline stage of the product life cycle, sales have fallen below the market price and SNL are not competitive in comparison to other possible competitors. This would mean that SNL would need to charge their customers at a lower price and may have to consider additional finance from the nl to be able to cover the rest for their loss.

Unit F293 Marketing


QUESTION 5

Analyse two appropriate methods of below-the-line promotion which might be used in SNL’s promotional strategy

AnswerAs mentioned already, SNL has decided to use local newspapers and local radio to promotion their business as a below-the-line promotion strategy. Below-the-line promotion is whereby it has more control in terms of branding by the business.

An appropriate method SNL should consider to use are posting posters around the local area. It is simple and cheap to do and the main advantage is that they are able to put what they want and say what they want on the poster. They could decide on the colours, size and font of the words. The only disadvantage of this method is that it may be seen as time-consuming and if they lack of I.T skills may mean they would need to go and find someone who could help them. This can lead to cost implications, however they are able to place their posters where they would want to around their local area which would benefit SNL.

Another appropriate method SNL should consider as a promotional method is simply posting their business on local billboards that would attract or be seen the most by local people as especially teenagers, so for example possibly at bus stops where school children are more likely to be standing by whilst waiting for the bus. This would be effective as it is simple and SNL would have some direct control over their advertisement. Although there are limited spaces on billboards so therefore SNL may be restricted, also it is more expensive than using local posters to post around, however would not be a huge cost implication.

Commentary

This is an example of a candidate who does not know what below the promotion actually is and has been lucky to stumble across a method. Although billboards (the second method) is definitively above the line, if SNL put their own posters up then this is below the line which is how the first method was interpreted. There is context and analysis of the cost of producing the posters.

Unit F293 Marketing


QUESTION 6


Answer

SNL has considered an opportunity to expand the business of SNL to open a ‘Play Zone’ facility for younger children next door to SNL. SNL would need to consider the drawbacks as well as benefits as to whether they should open the ‘Play Zone’ facility or not.

As stated in the case study, the site is ideal as it has plenty of space with good access to public transport as well as parking for parents. This brings the benefit of ‘Play Zone’ especially for parking and good access to public transport as it would be seen as convenience for the parents to take their children to the ‘Play Zone.’ SNL would need to consider conducting market research as to whether it would be worth expanding to open a ‘Play Zone’ facility next door to SNl. They would need to do sound market research to find out whether their are potential customers for the Play Zone. Market research would be taken into account however SNL should not solely base on market research findings to come to the final decision. If they discover that there is high consumer demand for the play zone facility then SNL should open the play zone facility.

However SNL would need to look into their finance as to whether they physically can afford to purchase the warehouse next door as well as being able to buy the facilities inside for the play zone. Although they have mentioned that they should be requiring additional finance from the bank suggests that SNL knows that they would not be able to fund for the play zone with external funding from a bank. However it is not stated what sort of additional investment from the bank it would be. It may be just a short term as the skate park is generating even revenue in order to purchase the warehouse as well as some of the facilities. Although it is more likely that they require a bank loan from the bank.

SNL would need to ensure that the play zone area is fitted and the environment should be young children friendly; otherwise this could be detrimental to SNL as it could affect their reputation if health and safety is not consider. However if SNL skate park has a good reputation in terms of health and safety, then customers are more willing to be able to rely on the ‘play zone’ facility as a skate park would also need to consider many health and safety standards. Although SNL would need to ensure that two facilities for the ‘play zone’ would be suitable for young children, e.g. making sure there are no sharp objects from the materials and ensuring that the equipment is soft etc. If health and safety procedures are not considered then this would affect the reputation of the business which may also lead to negative publicity, so they would really need to consider that as well as it being clean.

In terms of marketing, SNL would need to be able to promote the Play Zone facility at places where mothers and young children are more likely to see the advertisement for the skate park facility. This could be at places such as arte, local parks also there might be a billboard to advertise or even an local magazines and newspapers where it is likely to catch the attention for the right customers. For younger children, SNL could produce leaflets at school and could also open up to school trips with offers if certain number of children attend. This way, Play Zone facility would be able to be recognised. SNL could consider using AIDA which is a promotional method which stands for Attraction, Interest, Desire and Action, which is what SNL would do. . . . continued

Unit F293 Marketing


Commentary

The candidate starts by looking at the need for market research which is a common beginning for this question. however there is no analysis of the costs or benefits of the market research for SNL - a wasted point.

Again, a finance point about raising external finance, but not analysed in terms of the impact on the business, so only L2.

Health and safety concerns are argued well with nice context, but the analysis is implied rather than explicitly stated which is why L3BOD (benefit of the doubt) has been awarded.

There is not good L3 until the candidate starts to argue that SNL should look at the competitors in the market and what revenue is being generated by the skate park. This has nice analysis, obviously in context. These points go far enough to show the real impact on SNL rather than stopping before the impact is shown or just implying the impact.

Like the previous answers, there is no attempt to conclude in this answer and on Q6 this will often lead to no judgement being made. The question specifically asks ‘should SNL diversify..’. it therefore requires a decision to be made to gain L4.

SNL would need to consider different pricing strategies to use in order to gain revenue. SNL should consider to use price discrimination in order to benefit and to be able to generate more revenue and, thus, to maximise profits margins. This would be beneficial for SNL as they could change prices where they are the most busiest so for example they could charge at a lower price during school hours and increase the price for after school and over the weekend. The main advantage of this is so that they can maximise revenue and so younger children who do not attend school would not have to pay as much as there would not be a lot of customers during school hours. However this depends upon the liquidity and position of the business in order to conclude as to whether they should do that or not.

SNL should also take into consideration about its competitors, and potential competitors that could join the market. This would mean that there price would have to be at a competitive price if they can afford to. In the short-term SNL may be able to charge at an average price due to the business of the skate park covering the other cost. However it is dependant on SNL’s competitors as to how they should set their prices. It also depends on the situation of SNL’s skate park. Is that business generating high revenue? Are they struggling to cover costs? If so, they the ‘Play Zone’ should not be considered as it would not necessarily help them as they would generate negative cash flow which would also mean that they could have trouble with trying to borrow a bank loan.

SNL are considering to employ an additional 12 staff for the skate park. Danny and his fellow investors would need to consider the cost of employing more people as if they consider to open ‘Play Zone’, they would need to find people through the recruitment process and possibly training which would have cost implications for SNL. Therefore this may put off Danny and his investors to expand unless the skate park is successful and generating high revenue.

As they would be able to target new market segments, leading to diversification according to the Ansoff’s matrix, it would be seen as beneficial and a huge opportunity for Danny and his investors only if the business for the skate park is successful. If they decide to not proceed, there will be an opportunity cost for SNL which would be seen as a lost if they see the potential. However they should consider the risk they are taking as well as costs implications with marketing and recruiting more staff.

Unit F293 Marketing


QUESTION 1


Answer

A appropriate marketing objective for SNL could be to raise awareness and build a positive reputation in the first 12 months of the launch. This could be monitored throughout the number of sales as this is likely to increase with raised awareness and consumer feedback People need to be made aware of SNL in order for it to encourage people to visit the ‘skate park’ and lead to success of the business. Building a positive reputation will help it to become more established in the area. This will encourage word of mouth which can be an effective promotional strategy for the business as people make reccomendations leading to more people visiting the skate park, meaning higher inflows and higher chance of success for SNL.

Commentary

Some context in this answer in terms of a new business becoming established in the area and some understanding that a tertiary business such as a skate park will require positive word of mouth. The objective of raising awareness and gaining a positive reputation is analysed at the end of the response showing the effect on the business in terms of ‘higher inflows and higher chance of success’. The sixth mark could have been gained through more in depth analysis or an analysis of the appropriateness of the objective for SNL. (5/6)

Candidate FourMark: 38/60Grade: D

Strengths:• Structure of answers is OK• Candidate has good knowledge

Weaknesses:• Lacking consistent use of context• Weak evaluation does not secure high L4 marks

Unit F293 Marketing


QUESTION 2



Answer

It is too difficult for most businesses to ask the whole population when conducting market research. Sampling is the method used to try and attain research results that is representative of the population. Many methods of sampling SNL could have been used.

One method that could have been used is Quota sampling. This is where the market is segmented / split into specific groups relating to characteristics then specified people are asked. SNL could have split the population up based on age and then specifically aimed their market research at teenagers. An advantage of this is that they are getting opinions of the target market. It is important SNL appeals to it’s market in order for the business to be a success. This would mean if the results were positive SNL would have higher chance of success and potential for more profit when launched. A disadvantage of this method is although SNL would be asking their target market, this is not representative of the whole population. It excludes potential customers such as families and therefore research results may not be an accurate judge on whether it would be a success.

Another method that could be used is proportionate stratafied sampling. This is where the population is split up (as in quota), then a proportionate amount of people are asked from each group to get a fair representation of the whole population. This is advanterous to SNL as they can get the opinions of all potential consumer not just one group. This could mean the research results could be a better indication of success getting a wider range of opinions. A disadvantage is that some who may be asked may not have an interest in the business (eg. the over 30’s) (from fig.1) this could portray that it is a bad business idea when it would actually be a huge success amongst it’s target market.

Another option could be to use random sampling. This is where everyone has an equal chance of being selected, names are chosen at random from a list. Advantage of SNL using this is that it reduces bias as noone chooses who is asked. However disadvantage is that it may not be completely random due to the order of the list.

Considering customers as a key stakeholder in the business, SNL could use quota sampling to get the opinions of their target market. However, considering the local community, they may like to give opinions as it is affecting them therefore proportionate stratified sampling may seem a better option. Resources available would have affected the decision to what method could have been used. Quota has a two stage process so therefore may be more time consuming and a higher cost. However, in the longterm this may be beneficial as SNL would be getting more reliable results to base decisions on. Overall, I think Quota sampling would have been best to use.

. . . continued

Unit F293 Marketing


Commentary

The difficulty in this question is determining whether the candidate is analysing the sampling method or the market research. In this case the sampling methods chosen are obviously understood and the analysis follows on from this understanding. It is logical that a better sample would give a better chance of a successful launch and in this response the link between the sampling method and success of the business is made clear enough.

There is better analysis in the final paragraph where the candidate states that quota sampling may be more time consuming and have a higher cost. This is linked to the context earlier in the paragraph. This leads on to a judgement that quota sampling would have been better gaining L4 at the bottom of the level.

To gain a higher mark on this question the candidate could have gone on to justify their judgement over quota sampling further and ‘play it off’ against stratified sampling which they also analysed in the body of the answer. (9/13)

Unit F293 Marketing


QUESTION 3


Answer

PED = % change in demand % change in price

6 – 4.5 x 100 = 25% 910 – 620 x 100 = 46.8% (to 1dp) 6 620

46.8 = 1.872 25

above 1 = elastic

Answer: 1.872 (elastic)

Commentary

Although we allowed correct answers that were not given to one decimal place (as the question stated), this shows a lack of reading the question. (4/4)

Unit F293 Marketing


QUESTION 4


Answer

Pricing strategies need to change as the skate park moves through the life cycle in order for it to be a success.

In the introduction stage of the life cycle, SNL may choose to use a price skimming strategy, this is were prices are set high for a short period and lowered overtime. The advantage of using this is that it would allow SNL to receive higher profit margins and potentional for high cashinflows on their investment, reducing the risk of cash flow problems. However, a disadvantage of this is that it is likely to reduce demand due to the higher pricing. SNL therefore needs to balance this carefully in order for this strategy to be a success as SNL have an elastic demand.

Moving into the growth stage, SNL could use cost plus pricing. This is were a percentage is added on for profit. This is advanterous as it will ensure profit is being made and running costs are covered. This is important to ensure SNL is not making a loss to there is a higher chance of success. Although, a disadvantage is that customers may not feel they are benefiting from a could deal due to the set prices with no promotions, it will allow SNL to vary prices more in maturity stage as they have been profitabile through their stage and can afford a slight drop in inflows.

In the beginning of the maturity stage price discrimination may be a good strategy to use. This could allow SNL to attract new market customers who would not normally visit the skating park but will because of the lower prices they are benefiting from. This links to the market development stage in the ansoff matrix and brings the opportunity for higher sales to be made because of an increased customer base for SNL.

However, towards the end of the maturity stage when SNL could be heading for decline, SNL would need to change pricing strategies in order to extend the life of the business. This could be done by using promotional pricing. These promotions are likely to attract customers helping the business to maintain its demand. Although prices per hour may be lower reducing profit margins, it allows the business to keep running still making a profit even if lower than in previous stages.

As the business enters the decline stage of the life cycle. It will be a ‘dog’ in terms of the boston matrix – low market share with low-growth. As it is a skate park it will not have ‘stock’ to sell off which would usually be done at low prices. It may therefore be a better decision to close the skate park down or have a new / improved business model to launch in its place.

In the long term, SNL are likely to use many pricing strategies in order to stay competitive and successful. Stakeholders will have a key influence on the strategies chosen. Such as the investors, they may want to start with price skimming to recover costs rather than maybe using penetration setting prices low to attract customers. The price customers are willing to pay is a key consideration. We know that SNL has an elastic demand therefore prices need to be monitored carefully in order to not decrease demand too much. External factors will also affect the pricing strategies used. If a competitor opens up in the area, SNL may need to respond by lowering their prices to give them a competitive advantage.

. . . continued

Unit F293 Marketing


Commentary

The answer simply lacks context in the analysis. The candidate looks at how the pricing strategy changes as SNL moves through the product life cycle, but there is not any real context related to SNL’s pricing or product life cycle. The lack of context will always be a barrier to a candidate gaining level 3 marks. Business Studies, especially at A2 level, must relate to the business given and not be generic. In this answer the candidate could be discussing any business and it lacks the specifics needed to analyse. (5/13)

Unit F293 Marketing


QUESTION 5


Answer

Below-the-line promotion is aimed more specifically at a target market rather than using mass media to reach a wide audience as in above-the-line promotion.

One method that could be used is magazine advertisements. SNL’s target market is teenagers therefore advertising in teenage magazines could be effective. The advantage of this is that it reaches a specific market segment who are potential customers of SNL. It is therefore more likely to create interest and lead to sales for SNL. A disadvantage however is that many people may just flick past adverts in magazine and it therefore may not reach as many people as desired.

Another method that could be used is leaflets. These could be given out in secondary schools so that they are given directly to a potential customer group. These would not only create awareness amongst this group of people but it likely to encourage word of mouth promotion as teenagers talk to each other and in their home environment about the skate park.

Commentary

The first method chosen by the candidate is an above the line method and clearly wrong as an answer to this question. The second method only reaches L2 because there is no impact on the business of the chosen below the line promotion method. In essence this point requires another sentence analysing the method, along the lines of, ‘this could lead to more teenagers visiting the skate park, more revenue for SNL and a quicker return on the investment for Danny and the other owners’. (3/6)

Unit F293 Marketing


QUESTION 6


Answer

Many issues need to be considered before making the decision as diversification can be a high risk for a business as it is a new service aimed at a new market.

Marketing issues are created as there is no evidence that any market research has been done into the ‘Play Zone’. This could create issues at a time when the marketing department is likely to be focusing on the launch of the skate park. To open up the facility without having conducted market research is a huge risk for a SNL. Research needs to be conducted by the marketing department and the results need to be analysed before making the decision as this will be a good indication on whether the opening of ‘Play Zone’ would be a success. The marketing department needs to have the staff and time available to do this.

Human resources implications could be created by these plans to diversify. Firstly, human resources will need to ensure the marketing department have the staff available to conduct market research. This may involve recruitment and training of new staff. This means increased outflows for SNL reducing profit margins. If the ‘Play Zone’ was to be opened, more staff is likely to be needed further increasing these costs. It may be difficult for SNL to find the appropriate skilled / qualified staff at a time when the economy is in a recovery and unemployment is falling leading to skills shortages. These human resource implication need to be carefully considered.

Finance department is a key consideration in the decision. If SNL were to diversify it is likely to create large costs for the business due to the marketing and human resource implications. SNL will need to look at their accounts to determine whether the business would be able to cope with these increases in costs. SNL need to plan for this carefully so that they do not risk cashflow problems and failure.

In the short term, making the decision to diversify could be a huge risk and may create many issues in regards to the business functions. However, in the long term, if successful, it could be hugely profitable for SNL and help with their future success. As they would be in different markets, it spreads the risk for the business. If the Skate Park was to go into the decline stage of the product life cycle, SNL could still make their profit and continue their business with the ‘Play Zone’. Stakeholders are a key consideration. Market research needs to be conducted to find out the opinions of potential consumers / people in the local area. The other investors will also have a key influence to whether the investment goes ahead therefore Danny will need to convince them that it is a good idea. External factors are also a consideration. Research needs to be done into whether there are any competitors in the area. If there is the decision to diversify in this way may be of higher risk to SNL. Strategic plans will need to be made as to how SNL could overcome this.

. . . continued

Unit F293 Marketing


Commentary

The first point in this answer focuses on market research, which is a good place to start the arguments. The analysis is weak at the end of the paragraph and could have gone further to show the effect on costs for the business. It received L3BOD (benefit of the doubt).

The next point focuses on HRM and there is some good analysis on the profits of SNL. Both of these points so far are against the diversification.

The next point is financial and there is no context in this paragraph that makes this argument specific to SNL. Therefore this paragraph stays at L2.

At this point there is only a one sided argument and the mark scheme is clear that a one sided argument can not gain a L4 mark. The candidate attempts to start their evaluation but their judgement is irrelevant because of the one sided argument. However there is a piece of analysis in the middle of the final paragraph which suggests that the Play Zone may bring in profit when the Skate Park goes into decline. On its own this is not evaluative but can be rewarded as the other side of the argument, giving this candidate a top L3 mark of 12/18.

Unit F293 Marketing


QUESTION 1


Answer

To use a successful method of below the line promotion in order to reach a specific target market which will help ensure demand continues to grow in the future, could be an objective.

From setting the objective SNL have a clear goal of one specific type of promotion that needs to be used in order to meet demand & for the demand to exist.

This will allow Danny & his additional investors a clear goal as to what target market they are going to reach & how. for example this could be through direct mail or sponsorship for other types of young people’s activities within the area.

From setting the objective SNL can put in place a strategy that will help make the objective more achievable.

As a result of setting the objective the awareness of the SNL warehouse will increase & so long as the promotion method used is of good quality & in the right place demand should increase having a number of implications for SNL. This may include a greater revenue from the increased number of sales per day as a result of the extra demand, also if more people are using the skate park the extra demand of the cafe will increase which could result in Danny & investors going from purchasing economies of scale as they will be able to buy more food / drinks for the cafe as there is a higher demand yet at a lower price.

Commentary

There is an objective in using a below the line method of promotion to reach the specific target market and the candidate goes on to show good understanding of this objective. The analysis is not fully targeted on the objective and wanders off into economies of scale which is not really answering the question. However there is enough context and analysis to award L3BOD (benefit of the doubt) at the bottom of L3. To gain the last mark the candidate would have to have focused their analysis to give it more depth and analysed the appropriateness of the objective as well as the effect.

Candidate FiveMark: 34/60Grade: E

Strengths:• Knowledge is sound, apart from Q2• The candidate knows how to analyse• The candidate is able to write plenty

Weaknesses:• There is too much focus on telling the examiner everything

they know and not focussing on the higher skills of analysis and evaluation

• Poor starts to questions led to wasted time• Poor evaluation/judgement skills

Unit F293 Marketing


QUESTION 2



Answer

Sampling methods are used by businesses to see where the population would use / buy a certain product or service.

In this case it is hard for SNL to use an appropriate sampling method because their target market is so specific. Therefore if they was to used stratified sampling for example then the result could represent an [***ILLEGIBLE***] representation of what SNLs actual consumers would want.

Cluster sampling could be used to use a group of people who specialize in the target market. As a result these people re able answer questions & give feedback when will represent the activities provided by SNL.

By using a subgroup of the population, SNL re able to specialize in the specific customer base. This is usually to reduce the risk of sampling error in that more people who arent interested in SNLs activities will give the answers they believe to be correct.

Instead of using sampling methods which are random & have no impact on the success of SNLs market research SNL should consider a more specific method.

This could include focus groups as mentioned in the case study.

This method enables SNL to identify a correct target market & what services & activities should be made available.

Commentary

Either the candidate left this question until the end of the examination or they simply had no real understanding of sampling. There is some basic knowledge of two sampling methods, but no real understanding. This question is based on a specific piece of the Marketing specification, but as sampling also appears at AS level, this would seem to show a gap in the candidate’s revision that should have been resolved. The Marketing paper is always going to have some questions which require specific Marketing knowledge. This candidate seems to lack this for sampling and has not been able to access any further than L1. With so few questions on this paper this is always going to lead to a disappointing result.

Unit F293 Marketing


QUESTION 3


Answer

6 – 4.50 = 1.50

% Δ price % Δ Quantity demanded

620 – 910 = –290

Answer: 1.9

Commentary

A correct answer, but a dangerous gamble to not fully reference the working. Candidates must show the examiner how they got to their answer so that marks can be awarded even if the answer is wrong. On this occasion the candidate was lucky.

Unit F293 Marketing


QUESTION 4


Answer

After the initial pricing market research it was clear to Danny & investors that the lower the price the higher the demand as shown in table to at £3.00 the demand was at 1080.

In respect to his market research, which SNL, have cleary done lots of it is clear that SNLs specific target market is young people due to the types of activities SNL provided. Therefore by SNL setting the price lower is specific to their target market as young people are unlikely to have the money to afford $7.50 an hour. Or if parents are paying they will be put off of the price is set too high therefore effecting the demand.

seeing as SNLs warehouse is currently at the introduction stage in the product life cycle it is likely that the predictions made by Danny in that SNL will be a success may not be true, as it is at the introduction stage where the majority of problems occur.

Although the price of £3.00 fits the target market that SNL are trying to target, it may be argued that for an introduction this may be too low.

Cost plus pricing may be considred whereby the cost of rent for the warehouse & the cost of supplying the activities should be considered into the price so that SNLs revenue covers the costs.

Another successful method that SNL could consider is the physcological pricing, as the demand for the product increases therefore making the product life’s stage to growth this pricing strategy could be successful. Although it can be argued that if the product is in the growth stage revenues from the product start to rise & sales are continuing to rise, however as mentioned in the case Danny wanted to utilise some of the resources from the skate park into the young “play zone”.

From using physcological pricing in the growth stage SNL would be able to significantly rise the price of the park per hour which is still an increase but only small from the consumers point of view.

For example if SNL consider charging £3.50 an hour at the introduction stage, after a year of growth SNL could increase this to £3.99. Although this is almost a 50p increase per hour & may not seem entirely expensive from the consumers point of view, the extra 50p made per hour can be used & [***ILLEGIBLE***] back into SNLs business but into the different product of “play zone”.

If and when the SNL warehouse for the skating activities reaches the mature stage in the product life cycle it at the point whereby the demand for SNLs products have reached a peak & therefore unlikely to grow. The danger SNL must consider when deciding upon the appropriate strategy is that there is a possibility the demand could go into a decline.

To ensure this danger is minimised SNL should cross out any pricing strategies that increase the price such as price penetration as if the price rises, the more likely that the product will enter the decline stage. Therefore to ensure sales &

. . . continued

Unit F293 Marketing


Commentary

The candidate obviously knows the product life cycle and also knows a number of pricing strategies, but this answer lacks structure and analysis to lead to a waffle description of both pieces of theory. Where a question requires two pieces of theory to be used in conjunction with each other, there must be some attempt to use them to analyse the impact on the business. This candidate has some good points but the attempts at analysis either lacks the impact on the business and/or the context of SNL. This can be resolved by practice of similar questions (where there are two pieces of theory to be used) and a focus on two or three precise and contextual points to analyse. The fact that the candidate has written so much and never managed to get to L3 has hampered their chances of writing good answers to other questions on the paper and may have contributed to a poor response to Q2.

profits remain [***ILLEGIBLE***] & not in decline SNL may consider promotional pricing such as “BOGOFF” or buy one hour & get the other for free. Although Dany may argue this could make costs rise & sales fall however so long as the method is successful it will get more people through the door, particualy young people who are their target market, as they would like a deal / cheap offer.

From this pricing strategy at the mature stage to continue to be at this stage loss leader strategy may also be considered. If the price per hour of the use of the skate park & services fall, SNL could ensure prices of food & drink within the cafe remain competitive therefore the price lost from the promotional pricing strategy can be outweighed from the sales revenue in the cafe. This should therefore prevent the use of SNLs activity to go into decline.

If the pricing strategies in the mature stage of the product life cycle fail to materialise & the product fall into decline then SNL may want to consider that the promotional pricing strategy used is more significant i.e. the discounts are greater therefore the people will continue to use [***ILLEGIBLE***]but at a lower price.

SNL may also consider strategies that are specific to it [***ILLEGIBLE***] such as a student discount for 16–18 year olds or if there are school groups that use the [***ILLEGIBLE***] offering them a good competive price. This may in the short run prevent the products going into decline.

However Dannys proposal of introducing “play zone” is a good long term strategy for SNL to adopt particularly if the current warehouse activities do fall into decline.

Such proposal could also be viewed as an extension strategy so that if the current warehouse becomes unprofitable / not successful as Danny forecasted, the extension strategy can compensate for the loss made on the skating activities.

Although each pricing strategy can be effective at the different stages of the product life cycle. However it must be noted that the pricing strategies used are based on predictions & therefore may not be as successful.

The extent to which one correct pricing strategy at each stage will be successful will depend upon the level of demand, price elasticity of the products. For example if the local economy in Waddington is in decline it is likely that the demand for the activities will fall therefore the strategy may need to change depending on unforeseen external shock, PED & YED as well as the [***ILLEGIBLE***] of additional demand and whether or not the services & activities are of a good enough level so that demand continues to rise in the future.

Unit F293 Marketing


QUESTION 5


AnswerDirect mail could be one method used. This enables SNL to approach & reach the specific target market they want & within a specific area. This may be more successful in the local area & less costly as SNL wouldnt need to send them to as many people as Word of mouth promotion would result. However direct mail may well result in SNL being able to send promotional messages to people from all over & not just around Waddington. This would result in SNL being able to use this as a promotional strategy as it will broaden SNLs target market for the future resing in greater revenues & profits.

A second could be sponsorship. In order to reach those interested in the activities SNL provide, SNL could sponser school or local clubs that specialise within the activities that SNL provide. This will not only make people in the teams SNL are sponsoring more aware of SNL & its existence but also people watch the [***ILLEGIBLE***] that SNL sponser.

As a result not only will people from local areas be attracted to SNL but from all over the country particularly if the teams SNL sponser play other schools or clubs from other [***ILLEGIBLE***]. This therefore will help SNLs strategy of attracting the right target market from a broader area. Which in turn could lead to extra demand impacting the costs & revenues made by SNL. Particularly as the warehouse has good public transport access near.

Commentary

Two good below the line methods chosen and both taken to L3 (just). If this question has just asked for one method, then the analysis would only be weak and it would gain 5 marks. However when an analysis question asks for two methods, such as this question, full marks can be gained by two weak analytical points.

Unit F293 Marketing


QUESTION 6


Answer

By diversifying into the “play zone” idea is a good proposal to consider as it spreads risk if the SNL activities ready to launch isnt a success but also widen the range of markets open to SNL. However for a big move such as the “play zone” facility there are a number of factors to be considred.

In order for a new proposed facility to be a success there needs to be a sufficient level of market research. It is clear that dany has worked on an updated business plan but it doesn’t mention the sufficient level of research that Danny had undertaken. With the market research Danny must consider whether there is additional demand for the “play zone”, are there any competitors that provide a soft play venue for children & whether or not after doing the research it is likely to be a success. Under market research Danny [***ILLEGIBLE***] consider that if there is already a demand for the product, what price is charged by competitors & what is likely to attract the consumer as well as cover the costs for SNL. Therefore Danny will need to ensure that he considers the price as which would be suitable for the play zone & the strategy, for example would paying hourly re successful use at the SNL activities warehouse.

Therefore Danny cannot just set a price he believes to be the correct price it must fit what consumers are willing & able to pay & customers or not competitors are seeing at a similar price.

The product itself will need to be researched, at the moment Danny has just said it would be a childrens soft play venue. Danny will need to consider what soft play activities to offer which will particularly depend upon the age of children because if they are very young there will be high, health & safety concerns within a play area which will reqire a lot of supervision which may add to the cost of introducing the play area. Not only will the price & product need to be considered but so too does the ability for people to find out about the new play zone. There will be limited demand if people arent aware that the playzone exists therefore Danny needs to consider a successful promotional campaign that will get people to use the play zone. It states that Dany & the investors had introduced this as a result of the love for skating & other activities of their grand children. It is unlikely they’re grandchildren use play zone so therefore Danny & investors are moving into a new product that they have no market knowledge about.

Therefore the extent to which the proposal of play zone will depend upon the extensive market research considered by Dany & investor’s.

It is clear that from expanding into a play zone there are segmenting other market into the age group of young people using the play zone. It is clearly for those who arent old enough to attempt the bike & skating activities.

Therefore Danny will need to consider the type of segment & what new needs & wants are so that in the longrun young people decide to use the play zone over competitors.

. . . continued

Unit F293 Marketing


Commentary

This is an example of a candidate taking a long time to actually start answering the question with some analysis. There is plenty of good contextual understanding but none of it in the first two pages analyses the arguments. this type of description is not rewarded well at A2 level and candidates should be taught to analyse quickly so that they have more time to build up arguments rather than telling the examiner what they know and understand. This is a question that requires a judgement, so every paragraph must contribute on one side or the other of the argument.

The first piece of contextual analysis occurs two and a half pages into the answer where the candidate suggests that SNL may have more success gaining a loan because of the established (although still new) skate park.

From this point onwards the candidate has ‘woken up’ and every point is analysed, but what a waste of two and a half pages!

The judgement is only just a judgement. This is an example of a candidate who really does not want to make a decision. The question asks ‘should SNL diversify..’ and if this was a real business and advice was sought, the business will require a definitive answer. It is fine to go on to say what that decision depends on, or the assumptions made - in fact this is good evaluation. However at the end of the day the candidate must have an answer to the question to gain better L4 marks. (13/16)

A major concern with such extensive market research is the finance needed. It states that SNL have additional investment from the banks this suggests that they have money still left from the loan need to finance SNL & therefore if they already have a loan the banks may be more willing so give them another loan. Moreover this will depend upon the success of SNL. The banks may be cautious to give out another loan if their current product is only at the introduction stage in the product life cycle. Therefore this may suggest that Dany is jumping ahead & bring the proposal of play zone too soon in the [***ILLEGIBLE***] of SNL which could therefore impact the current products that have just been made available.

Danny needs to consider that if the second place to offer play zone is in a warehouse there will need to be a significant investment in transforming a warehouse into a young childrens environment. This could [***ILLEGIBLE***] increase the loan in the short term as more investment will be needed to transfer the warehouse.

The fact that the play zone is in a warehouse may suggest to parents the area that it is located in is not child friendly & so may deter people from allowing their children to go there.

However in order for people to know about the play zone there will need to be promotion which involves a considerable amount of work. Therefore although Danny says that the second warehouse is available at a barginal rent price, the costs need in order for the play zone to be a success [***ILLEGIBLE***] significantly outweigh the low rent costs. The low rent cost may also only be short term & the rent might rise depending if it isnt at a fixed rate.

The rate of interst could also impat SNL if it is high because it is likely they will need to take out more loans therefore if the interst rate is high SNL will have to pay back more.

It is clear that Danny & investors arent specialised with the play zone segmentation of the market therefore will need significant training on how soft play areas work. Whether or not Danny is trying to make the play zone a place for parents or a place to put children as a day care is unknown. If it is more of a day care [***ILLEGIBLE***] then SNL will need to consider the recruitment & training process needed which will again result in additional costs.

Therefore the extent to which Danny should consider the play zone depends upon whether there is additional demand, if there isnt then the success will be limited whether or not there are competitors with the local area and the price they charge & also the economic cycle. If the play zone is a day care parents are unlikely to pay if there is an economic down turn or of they become unemployed which could therefore impact the demand significantly.

Therefore although the play zone could be an effective strategy in the long run, however in the short term Danny should concentrate on this current development of products & see how successful that is until they rush into a product that they have little knowledge and requires a substantial amount of cost.

Unit F293 Marketing


QUESTION 1


Answer

SNL (Ltd) are a newly invested skate park facility. Danny had invested in this new venture building a modern facility in a unused warehouse. Danny had to conduct market research to ensure how to meet target audience and react to competitors.

One marketing objective Danny could propose is to increase market share by a certain amount when entering the market and make themselves unique to the competitors. An objective is a long term plan for a business. As SNL are new to the market they may set their prices for latest street craze lower than that of their competitors. This will attract consumers and therefore increase sales in the long term. However, in the short term SNL’s cashflow may be negative as they are only covering costs. The primary research may help to find the needs of the consumer directly which also helps in achieving objectives. SNL could also introduce a marketing plan to find out the nature of the business, the competitors and the share of market, all will help achieving an objective for SNL.

Commentary

A waste of time in the first paragraph, not answering the question. however, the candidate soon identifies an appropriate marketing objective, shows they understand it and then goes on to analyse the impact on SNL of adopting this objective. There is just enough context in the analysis (new business and ‘street craze’). To gain the last mark, the candidate needed to have more depth and detail in their analysis and/or analyse why this is an appropriate objective for SNL. (5/6)

Candidate SixMark: 28/60Grade: U

Strengths:• Structure of answers is OK• Candidate has good knowledge and understanding

Weaknesses:• Poor analysis limits the effectiveness of the responses

Unit F293 Marketing


QUESTION 2



Answer

Evaluate sampling methods which could have been used to research the market prior to the launch.

Sampling is a method of researching the market to ensure that SNL are targeting the correct audience and to find out consumers needs and wants. Random sampling is a way in which anyone from the population has a random chance of being selected e.g. names on a list and anyone can be chosen at random. Systematic sampling is where there is a one out of ten chance of someone being chosen from the population. Another method of sampling is quota sampling where the company ensures a sample of people can be chosen to be a part of research. As SNL are a new company in the market they should use random sampling whereby anyone is chosen from the population at random, this will mean the person being sampled will not be biased, and SNL would know their position in the market.

Systematic sampling would also be a good idea for SNL as it is easy to conduct any potential customers from all age groups can be spoken to. Customers can also initiate their ideas to SNL and could recommend anything they would prefer. This is a benefit to SNL as they are looking for a gap in the market to make them unique from their competitors. Sampling is a cheap method and you can get answers from a range of consumers, which is needed for SNL as they are not targeting one particular age in the market, but the age range varies. Conducting sampling prior to the launch is a great idea as it enables Danny to make a few changes and give the best service possible. However, targeting all age groups can also be a challenge as it is a very competitive market. SNL will have to ensure whichever sampling method they use will help them to achieve the best research and fill the gap in the market.

The sampling size is not an issue as long as everyone has a fair chance of selection in the population.

Commentary

There is a lack of context and depth to this answer. The candidate knows about sampling and makes some attempt to analyse (‘sampling is a cheap method’) but without more detail and the specific context of SNL the response cannot gain L3 marks.

The last paragraph makes the common mistake of answering a different question to the one set. The question does not ask if sampling is a good idea, but to evaluate methods that could have been used. What follows again shows understanding but is not specific to a method or to SNL. (5/13)

Unit F293 Marketing


QUESTION 3


Answer

% change in quantity demanded % change in price

910 – 620 = 0.31 = 0.31 = 1.24 910 0.25

6 – 4.5 = 0.25 6

Answer: PED = 1.24

Commentary

Another common mistake, this time the candidate has used the wrong starting figure for the change in quantity demanded calculation. However, because there is clear evidence of the process that the candidate has gone through, the response is still worth 3/4.

Unit F293 Marketing


QUESTION 4


Answer

The product life cycle includes four main features which are the development of the product, growth, maturity and decline. At the beginning of a product’s life cycle it is at growth stage where the skate park is new in the market and sales are low and negative cashflow is involved because this includes costs of advertising the skate park. This also depends on which pricing strategy is being used. As SNL are new in the market they could use price penetration this means at first when skate park is at the growth and development stage they could first use price penetrating which is keeping their price lower as they are new in the market, and once they have gained market share the prices of tickets of skate park could be increased. Then the product will be at a maturity stage, where sales will be high in volume and cash would not have to be spent on advertising as they are well known.

Furthermore, Danny suggests that from his research that the product may decline and sales will be low as a competitor has come into the market or consumers may not go to the skate park anymore as they have found a better place.

Also, from research Danny identifies that the facility has a definite product life cycle which means it will decline and sales will be no more. To overcome this Danny could develop an extension strategy which would enable the facility to go on for a lot longer, this could be done by making the facility unique in the market or adding more features to it.

SNL also use another pricing strategy, which is price discrimination, which determines that prices are different and vary during the day according to age; so kids under 5 are charged less. It could also be determined to time, what time consumers go to the facility. There are 4 different prices that are charged during the day and the cheapest one being £3 has a demand of 1080 tickets. This shows that the facility is elastic (price sensitive). Demand changes according to price.

A pricing strategy of loss leaders pricing should be adopted when the facility is in decline as SNL will have negative cashflow in the short term, but will generate sales in the long term. Loss leaders pricing is setting a price below competitors, generating more sales, therefore more net profit.

Commentary

This is a good example of a response which leaves the examiner asking ‘so?’ Each point is well understood, must contain enough context but the candidate does not take it far enough. So what if demand increases, or the facility goes on for longer, or consumers may not go to the skate park? In each example the candidate needs to show the impact on SNL. This could have simply been added into each point by linking to costs, profits, success and other impacts on the business. Because it is lacking this answer remains at L2 but could so easily have progressed to L3 and beyond.

Unit F293 Marketing


QUESTION 5


AnswerBelow the line promotion that could be used for SNL’s promotional strategy could be emails, internet advertisments, public relations and press conferences. This will ensure that the consumers are targeted in the correct way as Danny suggests word of mouth is not enough.

Danny should publicise his launch through going to a press conference and ensuring public-relations why SNL is different to it’s competitors and how they have conducted market research to segment the market and find the targeted audience as this is an important part of promotion. A more targeted approach could be done by emailing consumers and having family offers (Buy one get one free) tickets on a special occasion or a family package. Market research has shown the segmentation is widely targeted at teenagers, this ensures that during summer many teenagers would go with their friends. SNL should ensure to make their advertisments targeted to school children as if there is an offer schools may take the opportunity to bring a school trip to SNL. This increases customer base and market share.

Commentary

The candidate seems to run out of steam on their first method and not take it any further. This is a shame because so many candidates could not identify two below the line promotional methods, so this candidate missed an opportunity. Again, as with Qs 2 and 4 the candidate is unable to take their understanding to L3.

Unit F293 Marketing


QUESTION 6


Answer

Marketing is a main factor when diversifying products as SNL have to ensure to be aware of the nature of the market, the competitors, the consumers needs and wants, and the actual diversification or new facility the company is providing. Firstly, SNL need to undertake market research to find a gap in the market, and target their audience who will actually use the ‘play zone’. SNL should ensure that by expanding they also have to remain unique in the market and offer facilities that their competitors don’t. The place, location is important for a ‘play zone’ facility as the place should not be congested as customers may feel uncomfortable and may not visit.

Also, SNL should ensure that as this expansion of the business is for a different target audience; younger children’s soft play venue they will have to segment their market and find potential customers as the ‘play zone’ facility is different from that of the skate park. This will enable SNL to diversify and make them unique from their competitors.

Another factor of the marketing mix is price, SNL are currently using the price discrimination strategy, as the prices for skate park hours vary from £7.50 to £3.00. This mean SNL charge different prices during different times of the day. Price discrimination is determined by age, time and area. This enables SNL to achieve maximum possible revenue where it is most effective, e.g. when it is £3.00 demand is increased, and this varies to different times of the day. Similarly, SNL could use price penetration by setting prices lower for the ‘Play Zone’ and once they have gained market share they could increase the prices. In the beggining this will mean negative cashflow but in the long term, this is an effective way to generate more sales.

SNL’s promotion approach has been above-the line as this will attract potential customers e.g. seeing advertisments on TV and reading about it in the local newspaper.

Another issue SNL should consider when diversifying is sources of finance. Will the bank be willing to lend them a loan? SNL would need the finance to diversify. The investors should be willing to invest money for SNL to open a ‘play zone’. The rental price of the ‘play zone’ may be high and SNL have to ensure that they are covering costs so the expansion is successful. As SNL require a loan from the bank they will have to pay a fixed rate of interest which is an expense and it may not be able to change along with paying rent. As the loan has to be repaid. Another issue could be human resources. SNL would need to hire extra staff to work at the ‘play zone’. This could be done by on the job training and off the job or by a recruitment agency. The staff may have to be trained, this could be an expense to SNL as they must know the health and safety of young children and SNL would have to offer incentives to ensure they are different to their competitors.

On the other hand, SNL would also have to buy equipment for the ‘play zone’ facility again ensuring it is suitable for young children and may not cause harm. This will be an expense as it cannot be leased.

. . . continued

Unit F293 Marketing


Commentary

Again this candidate shows how much not analysing can cost in terms of lost marks in an A2 examination. There is good understanding shown of a number of contextual issues relating to SNL’s diversification, but only one comes close to being analysed. The structure of this answer is good and if the response had analysis in more points then the judgement in the conclusion could have been relevant and gained L4 marks for this candidate. This is a technique issue that can be rectified by question and case study practice. Any candidate that gets to the final examination on an A-level Business Studies course who can not analyse consistently should expect a U or and E grade at best.

In conclusion, I think Danny should diversify by opening the ‘play zone’ facility as it would make SNL unique in the market and which will overcome competition and Danny’s market research is reliable as it is primary research conducted by himself and is higher in validity. As the results are quantitative data which is easy to analyse and spot a trend or correlation in the market.

All these factors will influence Danny and his investors about going ahead with opening a ‘play zone’ facility.

Unit F293 Marketing


APPENDIX

CASE STUDY

Unit F293 Marketing


Skate Nation Ltd (SNL)

With a loud cheer, the launch party for Skate Nation Ltd (SNL) was fully underway. Tomorrow

will be the first day of trading for this new business in the busy northern town of Waddington.

Skate Nation is a purpose-built skate park targeting some of the latest street sport crazes for

young people including street surfing, rollerblading, freestyle skate boarding and BMX racing.

Danny Major surveyed the party in the warehouse where his dream had just become reality. 5

As a grandfather to four boys, he would never have thought that, at the age of 62, he would be

opening a skate park facility in his home town. Danny had taken a redundancy payment with

three of his colleagues only six months earlier. They had jointly invested in this new venture

building a modern facility for the young people of Waddington in a disused warehouse in the

centre of the town. 10

The site was ideal, with plenty of space, good access by public transport and plenty of parking

for parents and grandparents to bring their families. The warehouse was relatively cheap to

rent; however, the equipment inside and the café area had required substantial investment.

Although Danny and his fellow investors had agreed to work in the skate park on a rota basis,

an additional 12 staff would also be employed. 15

Danny was doing an interview for the local newspaper at the launch party. The newspaper wanted

to do an article based on the fact that four grandfathers were responsible for the development of

SNL with an in-depth feature into their motivation and the research behind the launch.

Danny explained, “We may be grandads, but we are not ready for our slippers just yet! We have

all had careers in industry here in Waddington and we not only wanted a new challenge but also 20

to put something back into the community. The idea of a skate park came about from listening

to our grandchildren and their friends. They are all crazy about skating, rollerblading and BMX

biking but Waddington did not have anywhere for them to do this. Well, it certainly does now.”

Over the previous six months, Danny and his fellow investors had been busy conducting their

market research. They had spoken at length with their various grandchildren and even conducted 25

some interviews on the streets of the town talking to potential customers of all ages about their

ideas. The responses which they received had helped to shape their business proposal, its

design and the marketing objectives and strategy on which they had been working.

The responsibility for marketing the new venture was Danny’s. His fellow investors had taken

on other responsibilities such as the legal elements, finance, staffing and operations. Together, 30

the four investors were sure that they had all aspects of the business strategy covered. Danny

had continually advised his fellow investors on the results of the market research from which the

marketing plan for the business had been drawn up. His initial findings from the focus group of

families included the data in Fig. 1.

Unit F293 Marketing


Estimated age segmentation percentages for SNL based on focus group of families

Fig. 1

In addition to this quantitative data, the market research highlighted that this type of ‘craze driven’ 35facility has a definite product life cycle. This would require careful management of the marketingmix over time. The need for continual review of the product strategy was also identified. Dannybelieves and has produced a sales forecast (see Table 1).

Danny’s sales forecast for SNL

Sales forecast for skate park hours

Year 1 Year 2 Year 3 Year 4 Year 5 Annual % growth average

Skate park annual hours demanded (beginners)

77 000 94 000 116 000 142 000 175 000 31.8%

Skate park annual hours demanded (experienced)

35 000 39 000 44 000 49 000 55 000 14.3%

Table 1

Based on the initial pricing market research, Danny presented the following pricing options perhour in the skate park to his fellow investors with an in-depth report on the sensitivity of the 40pricing proposals (see Table 2).

Quantity of skate park hours demanded per day

Price per hour £7.50 £6.00 £4.50 £3.00

Demand 500 620 910 1080

Table 2

Unit F293 Marketing


The rest of the marketing plan, which was to be used following the launch, was still being written.

Some basic advertising had been undertaken in local newspapers and on local radio, but Danny

knew that a more targeted, below-the-line, promotional strategy was needed. It was fine to

go with mass approaches to publicise the launch, but more thought would be needed in the 45

future. Above all, Danny believed that it was the ‘product’ which would be the key element in the

marketing plan. If the existing warehouse could be changed into a flexible, multi-function ‘skate

space’ which attracted the right target market, customers would come from far and wide to visit

it. Danny had explained some of his strategy to his fellow investors that, when established, and

well into its product life cycle, word of mouth promotion would not be enough. 50

As the launch party drew to a close, Danny and his fellow investors got together as the enormity

of the task going forward in growing the business became more apparent to them. Based on

their research, business plan and forecasts they were sure that SNL would be a success.

However, Danny was now discussing a new business challenge with SNL’s investors. Danny

had worked on an updated business plan to open a younger children’s soft play venue next 55

door! The warehouse next door to SNL had now become available at a bargain rental price and

Danny saw this as an opportunity to expand the business.

They agreed to meet in two days’ time when Danny would present his updated plan to open a

younger children’s soft play venue. With additional investment from the bank, they could diversify

the current business and target new market segments. Danny felt an additional advantage of 60

this would be that they could utilise some of the results from the skate park business market

research for the new venture. The café facility could be used by both young families from the

proposed ‘Play Zone’ and the customers of the skate park. Danny could only see success in this

development and he was confident his fellow investors and the bank would see this as well.

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AS and A Level Business Studies - Six Candidate Responses from