Perfik Plumbing (PP) PP is a plumbing business owned and managed by Navpreet. She set up PP as a sole trader three years ago when she qualified as a plumber. The majority of Navpreet's work is repairing and fitting water pipes in customers' homes. However, there is also a growing market for fitting new appliances, such as washing machines and dishwashers, in customers' homes. Navpreet is the only female plumber in her town. This is her Unique Selling Point (USP). Her business has been reasonably successful. Navpreet has relied on recommendations from satisfied customers to promote her business. However, if PP is to grow in the future Navpreet will need to use new promotional methods. In the past, Navpreet has used a cost-based pricing strategy, but she believes she may have been setting her prices too low. Navpreet did a survey of her customers to find out how much they would be willing to pay per hour of labour (see Table 2). Table 2: Survey data Price per hour ($) Number of customers 24 10 30 8 36 7 Navpreet has expanded PP through internal growth and now there is an opportunity to open a small shop on the main street of her home town. The shop would allow Navpreet to expand her product portfolio by selling electrical goods, such as washing machines. Navpreet is considering taking out a mortgage on her own home to provide the finance she needs to expand PP.

Mark scheme

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

1. [2] A correct definition
2. [1] A partially correct definition
3. [0] No creditable content
4. A unique selling point is something that makes a product stand out from the competitors, such as a phone with a new feature that no other phones have.
5. It is a feature that none of the other businesses have and means the product can be sold for a higher price.
6. [1] C Example or some other way of showing good understanding, e.g. also known as organic growth
7. [1] B An idea of 'growth' – i.e. the increase in size of a business
8. [1] A An idea of 'internal' – i.e. through the reinvestment of profits. Increasing sales/stores/outlets
9. Exemplar: Internal growth is when a business get larger through the use of retained profit. This is usually a slower way to grown compared to external growth.
10. [3] Correct calculation of the PED (no minus sign required) with or without correct working)
11. [2] Correct formula (can be implied through the use of figures) and correct calculation of % change in price and correct calculation of % change in QD
12. [1] Correct formula or correct calculation of % change in price or correct calculation of % change in QD
13. [0] No creditable content
14. Formula: % change in QD / % change in P
15. % change in QD = (-)20%
16. % change in P = 25%
17. PED = (-)0.8
18. Note: an inverted formula is one error repeated as long as there is working to support the answer
19. [3] Level 2 (APPAPP) Explanation of one way PED calculations could be useful in context
20. [2] Level 2 (APP) Identification of one way PED calculations could be useful in context
21. [1] Level 1 (K) Identification of one way PED calculations could be useful
22. [0] No creditable content
23. Answers could include:
24. Navpreet see that plumbing services are price inelastic.
25. Navpreet should increase her price – she may make more profit if she increases her prices.
26. Price is obviously not the most important factor when customers purchase plumbing services.
27. The inelastic response may be due to Navpreet's USP.
28. $24 to $30 brings in same amount of revenue (but will probably increase profit. $30 to $36 increases revenue (and presumably profit).
29. Good analysis of one advantage AND one disadvantage to Navpreet of taking out a mortgage to finance expansion in context [4]
30. Good analysis of one advantage OR one disadvantage to Navpreet of taking out a mortgage to finance expansion in context [3]
31. Limited analysis of one advantage AND one disadvantage of a mortgage as a source of finance [2]
32. Limited analysis of one advantage OR one disadvantage of a mortgage as a source of finance [1]
33. Shows understanding of taking out a mortgage to finance expansion in context [3-4]
34. Shows knowledge of mortgages and expansion [1-2]
35. Limited analysis in context: Marks limited to 4+2=6
36. Annotate advantages on the left and disadvantages on the right
37. Analysis should be about the use of a mortgage NOT expansion
38. Answers could include: Advantages
39. Would allow Navpreet to retain control of PP and raise sufficient finance for the lease
40. Long term source of finance so would allow Navpreet to repay the majority when the new shop is making a profit
41. Relatively (compared to loans) low rate of interest, would reduce repayment costs.
42. Disadvantages
43. Navpreet may lose her house if she is unable to pay back the mortgage with earnings from the new shop
44. The bank may not allow Navpreet to take out a mortgage for the amount required
45. Navpreet must pay interest on the mortgage and she does not know if the new shop will be successful.
46. Justified evaluation based on argument(s) in context [7]
47. Developed evaluation based on argument(s) in context [6]
48. An evaluative statement based on arguments in context [5]
49. Argument based on TWO promotional methods in context [4]
50. Argument based on ONE promotional method in context [3]
51. Limited analysis of TWO promotional methods [2]
52. Limited analysis of ONE promotional method [1]
53. Shows understanding of TWO promotional methods in context [4]
54. Shows understanding of ONE promotional method in context [3]
55. Shows knowledge of TWO promotional methods [2]
56. Shows knowledge of ONE promotional method [1]
57. No creditable content [0]
58. Allow above and below the line as methods
59. Answers could include: Above the line methods
60. Advertising - Plumbing is likely to remain a local business so national advertising is likely to cost too much and be inappropriate. Local TV, radio, newspapers and magazines may be appropriate and could be targeted to the appropriate market segments.
61. Below the line methods
62. Word of mouth – Navpreet has been using this, but unpredictable and unlikely to help further growth
63. Sponsorship – Navpreet could sponsor a local team/programme etc.. May allow PP to become a more well-known brand
64. Direct mailing/Leaflets – relatively cheap and puts the contact details for Navpreet into potential customers homes for when needed.
65. Price promotions – would need to be communicated (perhaps through new shop if it goes ahead).
66. New shop could be a form of promotion – high street signage, repeat customers etc...
67. Promotional pricing – sales, discounts etc.
68. Branding - Navpreet has a USP and could build on this (perhaps with new shop) to make PP a household brand. Nature of the service is that it is not a day to day product, so a brand needs to be known for when it is needed.
69. Packaging - Only appropriate for products sold through the shop. Could cross advertise using packaging.