BB Pizza Company manufactures and packages pizzas which it distributes to supermarkets. Fig. 2.1 shows the cost and selling price of each pizza sold. $ Base 0.50 Sauce 0.06 Cheese 0.24 Selling price to supermarket 2.50 Supermarket retail price 5.00 [Figure 2.1 BB Pizza Company logo and table of costs/prices] Use Fig. 2.1 to help you answer the following questions.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [1] (a)(i) Circle around image of pizza only in Fig. 2.1
2. [1] (a)(ii) Answer = $0.80 (accept 80 cents)
3. [2] (a)(iii) 100% (2) Method: Mark-up percentage = ($5 - $2.50)/$2.50 = 1 (1)
4. [1] (b)(i) Wholesaler; Website/online/ecommerce; Through a restaurant; Direct to customer/consumer
5. [4] (b)(ii) BB might make a larger profit/profit margin if it continues to sell directly to supermarkets (1) if it negotiates a good price for the new range (1). Selling to wholesalers might mean selling to a wider range of businesses (1) increasing brand awareness (1) but sales may be low in the short term when BB's new range/brand is not well-known (1). Selling directly through a website would allow BB to control its brand image (1) which would differentiate their business, making it more valuable in the long term (1) but would have massive set up costs and require multiple outlets (1). Selling directly to restaurants might gain a higher quality image (1) which could help BB to become a premium brand / enable its pizzas to be sold at a higher price (1). Selling directly to customers will enable stronger relationships (1) able to target customer needs/wants better (1) develop brand loyalty (1) repeat customers (1) more sales/profits (1). Selling directly to customers will allow access to customer data (1) can follow-up with emails (1) special offers (1) increase sales/profits (1). As it is perishable (1) it needs a shorter channel of distribution (1) so that the pizzas do not go bad/stale (1) less customer complaints (1). If they choose a longer chain (1) it will increase costs (1) e.g. transport (1) may have to increase prices (1) less sales (1). Shorter distribution chain (1) less costly/less transport costs/increases profit (1). So that it is accessible to consumers in remote areas (1) increases potential market (1).
6. [8] (c) Direct mail is personally addressed advertising delivered through household letter boxes. Free samples are small, packaged portions of a product usually distributed to the public on a high street or other busy shopping area. Advantages and disadvantages of direct mail: Targeting - can send specific messages to particular groups of buyers and potential buyers based on demographics and buying behaviour; Personalisation - can reach buyers with a personal touch. Direct mail can be addressed to a specific person, and even include details like past orders; Affordable - in comparison to mass media advertising campaigns; Measurable - if the marketing message asks the buyer to take a particular action or use a specific voucher code, it can easily track the success of campaigns; Informative - can deliver detailed information on the company products, services and prices unlike some other forms of advertising; Intrusive some people find direct marketing annoying and consider it as junk mail to be thrown away, making the buyers less likely to buy; Low response rates – when the buyer isn't interested in the product, it is wasting money; Competition - hard to make the message stand out when buyers receive a high number of direct mail adverts; Cost - can have high financial/resource costs in the actual delivery; Environment – litter is bad for the environment, which may have a negative image on BB Pizza Company. Advantages and disadvantages of free samples: Increases awareness of BB Pizza Company – so consumers consider using the company in future; Encourages buyers to try the new brand – and gain sales; Tempt buyers to buy more – help BB to remain successful; Way to get feedback - so BB can improve the new brand; Cheaper - than some other marketing methods; Free word-of-mouth marketing – with buyers taking to social media; No guarantee that there will be sales – people take free goods without intention of purchasing; Cost - giving free samples is an investment of BB's resources that can be expensive; Buyers who are hungry will eat the food - without wanting to buy any. Evaluation: Deciding whether to do a traditional direct mailing to buyers or free sampling will yield different results based on the target market's preferences. Free samples can be a very good way for BB to get their new brand seen and tasted but it does carry risk and requires planning. So, it is recommended that BB carries out a specific targeted campaign, using direct mail, instead of giving any free pizza samples to people who may not then buy.