Pamela is a sole trader. She started her successful photography business 30 years ago. She specialises in taking pictures of people and places for use in posters, calendars and fashion magazines. It is a niche market. Pamela uses cost-plus pricing as part of her marketing mix. Offering a high quality service is important to Pamela and her 2 employees.

Mark scheme

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

1. [2] The price is based on the cost of making a product and the addition of a fixed percentage for profit
2. [2] The cost of manufacturing the product plus a (profit) mark-up
3. [2] Formula e.g. [total cost / total number of units] + % mark up
4. [1] Partial definition e.g. profit added to the cost
5. [2] All activities that go into the marketing of a product or service. These activities are often summarised as the four P's - product, promotion, place and price
6. [2] Four marketing decisions needed for the effective marketing of a product
7. [2] The combination of product, price, promotion and place (distribution) that determines how a firm markets itself to its customers and potential customers
8. [1] Partial definition e.g. (combine) price, product, promotion and place
9. [1] Different strategies a business can use to help market / sell its products
10. [1] Increase sales / maintain sales / attract customers [k] of calendars / poster [app]
11. [1] Helps maintain/increase customer loyalty [k] for this sole trader business [app]
12. [1] Maintain reputation / improve brand image [k] built up over 30 years [app]
13. [1] Set/maintain high prices [k] which helps as use cost-plus pricing [app]
14. [1] Way to add value [k] as operates in a niche market [app]
15. [1] To reduce complaints [k] for the 2 employees [app]
16. [1] No need to replace faulty work [k]
17. [1] Gain competitive advantage [k] which can help her business remain successful [app]
18. [1] Keeps all the profit [k] from photography business [app] so has an incentive to (continue to) work hard [an]
19. [1] Has complete control / makes all the decisions / does not need to consult with anyone [k] such as the 2 employees [app] so able to take decisions more quickly [an]
20. [1] Own boss [k]
21. [1] Freedom to choose her own holidays / schedule / work time [k] so can choose time off when the business is less busy so does not miss out on sales [an]
22. [1] Able to keep (financial) information private / do not need to produce annual accounts [k] so competitors cannot use information to take away her customers / market share [an] which can help her stay successful [app]
23. [1] Has close contact with customers / able to offer a more personal service [k] as it's a niche market [app] which can help encourage customer loyalty [an]
24. [k] Able to focus more closely on customer's needs [an] leading to customer loyalty / good customer relations
25. [k] Less competition [an] less pressure to lower prices / easier to attract customers
26. [k] May be able to set higher prices (for a high status, exclusive product) [an] so able to have high / increase profit margin
27. [k] Can become expert in the segment
28. [k] Small size of market means will not benefit from economies of scale [an] leading to higher average costs
29. [k] Less potential for growth / low potential demand
30. [k] Over dependence on single product / less able to spread risk / vulnerable to changes in consumer spending patterns
31. [k] Likely to attract competition if successful
32. [k] More (potential) customers/sales [an] leading to higher (potential) revenue
33. [k] Increased/high level of competition [an] so might have high level of customer loyalty
34. [eval] In a niche market a business can focus more closely on customer's needs [k] leading to higher levels of customer loyalty [an]. In a mass market, there are more potential customers [k] which could mean higher revenue [an]. However, I do think a small business has a better chance of success in a niche market because it can continue to charge high prices [eval] as large companies will not see the market as worthwhile because of potentially low sales. [eval]