Fabian will use job production when completing each order for flowers.

Mark scheme

Marking points from the official mark scheme (May/June 2014). The mark or mark type is shown in brackets.

1. [8] Content: • Meets individual needs of customers • Unique product • High quality • Can charge a higher price • Job satisfaction • Fewer unsold products The marks available for this question are as follows: 2 marks for knowledge; 2 marks for application and 4 marks for explanation/analysis. 1 mark for each benefit identified (2 marks maximum). Up to two further marks are available for explaining how the benefit is applicable to Fabian. 2 application marks are also available. Possible application marks: flower shop; partnership; part-time employees; hotels and restaurants; flower arrangements; weddings/Valentine's Day/birthdays; imported supplies of flowers. There may be other examples in context which have not been included here. 1 knowledge mark + up to 2 explanation marks + 1 application mark for each benefit (4 marks x 2 benefits) Benefit: Can meet the individual needs of consumers (1 mark for knowledge). Developed Explanation: Can meet the individual needs of consumers (1) as the flower arrangement can be to the exact design of the customer (2). This makes each product unique to that customer and so they will be happier with the order and may tell their friends to go to the shop (3). Application: The application mark could be achieved as the answer makes reference to flower arrangements (1 application mark).
2. [12] Content: Cost-plus pricing • average cost calculated and then a percentage is added on for profit • easy to apply this method • competitors' price may be lower Competitive pricing • set pricing around the same price as competitors' prices • sales possibly higher • research costs to check on competitors' prices Penetration pricing • set pricing below competitors' prices • attract customers to make purchases • may be below costs/reduce profits Level 1 – 1 mark for each statement. E.g. Cost-plus pricing is where the cost is calculated and then a profit is added to determine the price to charge customers. Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional level 2 answer up to maximum of 8 marks. E.g. Cost-plus pricing is where the cost of buying the flowers is calculated and then a percentage of the cost is added for profit to determine the price to charge customers. This is a simple way to work out the price of a flower arrangement but it may not result in higher profits being earned if he does not look at competitors' prices. (L2) 5 marks for level 2 answer plus 1 application mark for making reference to flowers and flower arrangements. Level 3 – Detailed discussion of at least two level 2 answers. There will be a recommendation at the end which justifies which pricing strategy would be the best one to use compared to the alternative strategies. Possible application marks: flowers; flower shop; hotels and restaurants; flower arrangements; weddings/Valentine's Day/birthdays; imported supplies of flowers; quality of supplies; new business. There may be other examples in context which have not been included here. Knowledge/Analysis/Evaluation: Level 3: 9-10 marks - Must have two × Level 2 + good judgement shown as to the best pricing strategy to use and why not the other strategies (comparison made). Level 2: 5-8 marks - Good discussion of the advantages or disadvantages of pricing strategies OR balanced argument. Some judgement shown in recommendation about which method should be used. Level 1: 1-4 marks - Definition of pricing strategy. Simple statements made on the advantage or disadvantage of each pricing strategy.