Business Studies · May / June 2022 · Paper 11 · Question 1
0450
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The question as text
Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys and candy (sweets). When Pamela started her business 30 years ago she had no help to manage 1 the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important. She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela does not use e-commerce.
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Show the answer and mark scheme
1(a)[2]
Define ‘competitive pricing’. Award 2 marks for a full definition. Award 1 mark for a partial definition. When a product is priced in line or just below competitors’ prices (to try to capture more of the market) [2]
OR Setting a price similar to that of competitors products which are already established in the market. [2]
OR When the price of a good is set at the same level as other products in the market and at a level customers expect or are willing to pay [2]
Partial definition e.g. have similar prices to other businesses [1]
OR bases their prices on the competitors pricing [1]
1(b)[2]
Define ‘marketing budget’.
Award 2 marks for a full definition. Award 1 mark for a partial definition. A financial plan for the marketing of a product or product range (for a specified period of time) [2]
OR
The amount of money made available by a business for its marketing activities during a particular period of time [2]
Partial definition e.g. money to be spent on marketing [1]
1(c)[4]
Outline two possible threats to Pamela’s business of using e-commerce. Award 1 mark for each relevant threat (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Points might include:
Increased competition [k] which makes it harder to calculate a competitive price [app]Unfamiliarity / customers are less likely to buy from a business they don’t know [k] leading to fewer sales of toys [app]No face-to-face contact which could make it difficult to establish a relationship [k] so difficult to gain customer loyalty [app]Website design must be clear / attractive / easy to use, or customers will not visit [k]Limited/no access to the internet [k]Increasing costs as a specialist may need to be employed / website design / maintenance of sites [k]May need a larger space to store products increasing costs [k]Packaging/delivery of each item will increase costs per product [k]Larger number of returns could lead to higher business costs [k]All customers can see negative reviews [k]Other appropriate responses can also be credited.
1(d)[6]
Explain two methods Pamela’s business can use to maintain customer loyalty.
Award 1 mark for identification of each relevant method (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
Communicate with customers e.g. newsletters, social media [k] so that they remember your business [an] when they next need candy (sweets) / toys / cards [app]Offer rewards to existing customers / introduce a loyalty scheme [k] using money from the marketing budget [app] so consumers have an incentive to return [an]Train staff / offer good quality service [k] from all 5 employees [app]Extra services or examples such as delivery / credit facilities [k]Ask for feedback / carry out market research [k] so the items you are selling match customer needs [an]Resolve complaints quickly [k] so that customers don’t go to other businesses [an]Introduce new products / high quality products [k] satisfying the customers’ needs [an]Brand loyalty [k]Other appropriate responses should also be credited.
1(e)[6]
Do you think being a risk-taker is a more important characteristic of a successful entrepreneur than being creative? Justify your answer. Award up to 2 marks for identification of relevant points.
Award up to 2 marks for relevant development of points.
Award 2 marks for a justified decision as to whether being a risk-taker is a more important characteristic of a successful entrepreneur than being creative. Points might include:
Risk-taker:
A successful entrepreneur must take risks otherwise there is no business [k]Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an] however they may fail and lose their personal possessions [an]Taking risks is a way to learn [k] if an idea is good or not [an]Creative:
New ideas [k] leading to increased sales/revenue [an]Creativity adds value [k] so higher prices can be charged [an].Creativity alone does not guarantee success [k] if customers do not purchase [an]Other appropriate responses should also be credited.
Justification might include:
Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an]. Being creative maybe a more important characteristic as making a business different to its competitors [k] can lead to increased sales [an]. In a competitive market creativity is especially important because it helps the business stand out from competitors. [eval] An entrepreneur can take risks, but if customers will not buy, they will not be successful. [eval]
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