Analyse why a business might invest in market research.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2021). The mark or mark type is shown in brackets.

1. [7-8] Good analysis of why a business might invest in market research.
2. [5-6] Some analysis of why a business might invest in market research.
3. [3-4] Some application of why a business might invest in market research.
4. [1-2] Knowledge and understanding of market research/investment (in market research).
5. Knowledge and Understanding 2 marks: Clear understanding of market research. Clear understanding of investment (in market research).
6. Application 2 marks: Reference to why a business might invest in market research.
7. Analysis 4 marks: To reduce the risks associated with a new product launch. Enable a suitable marketing mix to be developed. Explain changes in sales of existing products. Identify patterns in sales/trends of existing products. Gain awareness of consumer preferences. Identify gaps in the market. Assess demand levels in the market. Assess supply levels in the market. Identify key conditions in the external environment. Understand strengths and weaknesses of competitors. Gain higher market share.
8. [9-12] Effective evaluation of whether an airline business might increase its profits by more effective market segmentation.
9. [7-8] Limited evaluation of whether a business might increase its profits by more effective market segmentation.
10. [3-6] Application and analysis of how a business might increase its profits by using market segmentation.
11. [1-2] Knowledge and understanding of profits / market segmentation / airline business.
12. Knowledge and Understanding 2 marks: Clear understanding of profits. Clear understanding of market segmentation. Clear understanding of airline businesses.
13. Application 2 marks: Reference to increasing profits. Reference to using market segmentation.
14. Analysis 2 marks: How segmentation helps to identify sub-groups in a market. How segmentation can allow targeted marketing campaigns. How the use of effective market segmentation might improve quantity of sales and/or revenue. Use of price differentiation. How the business might use segmentation to identify opportunities for growth. How a business might increase its profits by effective market segmentation. Use of specific examples of market segmentation which could apply to any business e.g. type of consumers / age / family grouping / income / social class / niche market / mass market.
15. Evaluation 6 marks: A judgement/conclusion is made as to whether an airline business might increase its profits by more effective market segmentation. These judgements/conclusions may be made at any point in the essay not only in a concluding section. There may be consideration of the current market segmentation compared to what needs to be done to make it more effective. Whether the current profitability may be influenced by factors other than market segmentation e.g. external environment. Whether changing the market segmentation may involve extra costs of market research without being able to influence profitability. Evaluation might recognise that it depends on how important the objective of profit is to the business. The context is an airline business There should be specific reference to airlines e.g. planes / internal and international passengers / destination / business or economy class / facilities/extras required / pilots / fuel / frequency of travel. Is it aiming to maximise sales by selling as many tickets as possible to whoever will buy them? This might target the mass market which can be highly competitive. This may involve reducing prices without decreasing costs, which may decrease profits. Is it aiming to increase sales revenue to increase profitability? It may wish to enter wealthy niche markets in order to charge high prices whilst not increasing costs. What is the competition like in these markets? Is it aiming to increase capacity utilisation to fill seats and better cover fixed costs? This might lead to economies of scale and therefore increase profits. Is it aiming to increase journeys/destinations? How will the costs involved in this compare with the revenue change? The ability to improve profits may depend on the reputation and current popularity of the airline and how competitive the industry is. There may be differences in PED between different operators, market segments and destinations and this can influence profits due to the prices which can be charged. Will depend on the accuracy of the research which identifies the market segments.