Economic growth in country X has created many opportunities for new businesses such as TGH. TGH manufacture a range of personalised mobile (cell) phone cases using job production. Quality assurance is important to all 8 employees. TGH operate in a niche market. The Marketing Manager uses e-commerce as TGH's channel of distribution. She is considering ways to build customer relationships.

Mark scheme

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

1. [2] When a country's GDP increases / more goods and services are produced than in the previous year
2. [1] Partial definition e.g. increases in a country's spending/income/output
3. [1] Increase in GDP
4. [2] Checking for quality standards throughout production process / at every stage
5. [1] Partial definition e.g. checking work done
6. [K] Increase sales [app] of phone cases
7. [K] Customer loyalty/retention [app] when using e-commerce
8. [K] Help build reputation / brand image / act as free advertising [app] for this new business
9. [K] Opportunity for feedback / help identify customer needs [app] as operate in a niche market
10. [K] Provide a competitive advantage [app] as other businesses may also set up because of economic growth
11. Advantage: [K] Unique / meet exact customer needs [app] for its phone cases [an] can help brand loyalty
12. Advantage: [K] Workers likely to make fewer mistakes [app] which helps ensure quality assurance [an] so less need for rework
13. Advantage: [K] More varied work (leads to higher motivation) [app] helping retention / lower absenteeism [an] in this new business
14. Advantage: [K] Can charge a higher price [app] in a niche market
15. Advantage: [K] High quality products [app] which are personalised
16. Disadvantage: [K] Skilled labour can cost more [app] for the 8 employees [an] which increases labour costs
17. Disadvantage: [K] No economies of scale (likely) [an] leading to higher average cost
18. Disadvantage: [K] Production can take a long time [an] causing lower output / efficiency / productivity
19. Disadvantage: [K] Costs are higher as it is labour intensive
20. Disadvantage: [K] Mistakes can be expensive to correct
21. Cost-plus: [K] Know cost can be covered [an] and can make a profit per item
22. Cost-plus: [K] Simple and easy to calculate [an] so saves time when setting prices
23. Cost-plus: [K] Prices may be higher than competitors [an] leading to a fewer sales
24. Cost-plus: [K] Little incentive to control costs
25. Other pricing methods: [K] Penetration pricing [an] as setting a lower price than competitors should attract customers
26. Other pricing methods: [K] Competitive pricing [an] but the business will have limited or no control over the price [an] so may not be able to recover its costs
27. Other pricing methods: [K] Price skimming [an] customers may expect / be willing to pay more in a niche market
28. Other pricing methods: [K] Promotional pricing
29. [Eval] Cost plus pricing is simple and easy to calculate [k] so saves time when setting prices [an]. Although penetration pricing [k] setting a lower price than competitors should attract customers [an]. Cost plus pricing is the best pricing method as covering costs is important for a new business [eval]. Although the price maybe slightly higher this is less important in a niche market where there are likely to be fewer alternatives [eval].