Analyse the role of marketing in adding value to a product.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [8] Answers may include: Candidates may well use the 4Ps framework to answer this question, but must link to adding value to gain Level 2. Marketing is linking the production of goods and services to the consumer profitably and satisfying business and consumer objectives. Adding value is the difference between the cost of purchasing bought in materials and the price finished goods/services are sold for – the greater the difference the greater the potential for more profit. Marketing / market research / market intelligence can add value by: identifying how to get a product to the right customers more effectively/cheaply so reducing cost and adding value; determining the right offer price to set for the target market so creating the optimal amount of added value for that target market; creating a distinctive brand that becomes a 'must have' name that consumers will pay a premium price for; increase the perception of this product being more valuable so customers are willing to pay more for it; positioning a business/product/creating a USP so that it stands out from the competition; customers likely to buy the product even if the price is higher than rivals; creating an exclusive and luxurious retail environment to convince customers to pay more for a 'luxurious' product – cosmetic retailers, luxury cars; using high quality packaging to differentiate a product – perfume – luxury chocolates and make it appear worth the higher price; promoting the benefits of a product to achieve a result / outcome / emotion - not just a commodity so higher price is justified; including testimonials in advertising to suggest social proof that the product should be bought at the higher price.
2. [12] Answers may include: market segmentation – identify different segments within a market and target different products/services to those segments; a customer-focused marketing strategy with the promise of increased sales and profitability; it might lead to gaps in the market being identified and exploited; price discrimination can be used to increase revenue and profits; profitability - the ability of a business to earn a profit by increasing revenues and decreasing costs.
3. NOTE. Some may adopt a 'macro approach' and focus on the whole of the hotel being segmented such as becoming a luxury hotel. This is acceptable if appropriately discussed.
4. [12] Hotel objectives might include – growth, profitability, full occupancy. Specific hotel market segments i.e. business traffic during the week, leisure traffic at weekends, special event traffic (celebrations, weddings), conference traffic, all ensuring different revenue streams. Specific provision could include: luxury penthouse rooms for high-income earners, family rooms, budget rooms etc. all potentially generating higher levels of profit.
5. [12] Evaluative points: increasing hotel facilities to suit different segments involves costs e.g. refurbishment, staffing, materials. Must be enough potential revenue to cover this. Depends on existing reputation / location / competition of hotel as to how successful and therefore profitable, increased market segmentation might be. Impact on decisions if say an economy goes into recession.