A-LevelBusiness StudiesMarketing9609/32 · May/June 2018 · Q418 Marks

Refer to Appendix 2. Calculate:

(a)Refer to Appendix 2. Calculate:
(a)(i)promotional elasticity of demand for the DA range of walking boots if spending on promotion is increased from $200000 to $300000[3]
(a)(ii)price elasticity of demand for the DA Explorer boot if price is reduced from $200 to $180.[3]
(b)Use your results to 4(a) and any other relevant information. Discuss the importance of marketing planning to the success of DA's entry into the market for walking boots.[12]

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

[1] (a)(i) AdED = %AQd / %AAd (1 mark if no relevant calculation)
[1] (a)(i) %AQd = 25% (1 mark)
[1] (a)(i) %AAd = 50% (1 mark)
[3] (a)(i) AdED = 0.5 (3 marks)
[1] (a)(ii) PED = %AQd / %ΔP (1 mark if no relevant calculation)
[1] (a)(ii) %AQd = 13% (1 mark)
[1] (a)(ii) %ΔP = -10% (1 mark)
[3] (a)(ii) PED = -1.3 or 1.3 (3 marks)
[2] (b) Knowledge: Marketing plan: The plan of how the marketing objectives are going to be achieved; Clear objectives gives business direction and focus; Market research will help DA understand the market and make appropriate marketing decisions; Estimating PED/AED aids making decisions about pricing/promotion
[2] (b) Application: OFR from (a) applies i.e. candidate using own figure should be rewarded; Demand for DA Explorer is price elastic – responsive to changes in price; Demand is advertising inelastic – not responsive to changes in advertising expenditure; Comparing revenues with and without the change in price/advertising expenditure
[4] (b) Analysis: Knowledge of PED will help shape marketing mix. It is a competitive market – PED is estimated to be 1.3. Is market penetration pricing therefore most appropriate? Pricing at $180 rather than $200 will boost revenue but how will profit be affected?; Promotion will be important as DA has not sold walking boots before, therefore it is essential to raise awareness of DA's entrance into the market. However, promotional elasticity of demand is only 0.5; does this suggest that spending $100 000 more is ineffective?
[4] (b) Evaluation: Completely new marketing plan needed – most important factor could be identified and explained; Essential to have fully integrated and supportive marketing mix aimed at this market; Competitive rivalry will be an important factor; Original objective needs to be realistic (market share?) and used as a form of assessment of this strategy