Cheung owns a small retail shop in the city centre selling fashion clothing for children. As it is a competitive market, Cheung knows market research is important. Cheung is worried about the effect of an increase in shop rent on his costs. Cheung said: 'I will have to pay this higher rent as it is a good location. I need to increase revenue or reduce other costs.' Cheung buys all his supplies from a wholesaler located in a nearby town. He is thinking of buying directly from a clothing manufacturer in another country.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] Process of finding out what consumers want or need [1] before a product is made [1]
2. [2] Process of finding out what consumers want or need [1] depending on age group, income and location [1]
3. [2] Process of gathering (primary and secondary) data [1] on the buying habits and attitudes of potential customers [1]
4. [2] Process of gathering data about customers, competitors and market trends [2]
5. [1] find out what customers want
6. [1] find out about competition
7. [1] (i) Variable cost: No change / same
8. [1] Fixed cost: Increase
9. [1] Near potential target market OR customers [k]
10. [1] so need to be somewhere where there are lots of children [app]
11. [1] Busy area OR high footfall [k]
12. [1] as many people likely to visit city centre [app]
13. [1] Good access OR there is parking [k]
14. [1] Good Image of site [k]
15. [1] as sell fashion items [app]
16. [1] There are utilities or other facilities [k]
17. [1] to reduce other costs [app]
18. [1] Proximity (far from or near) to competitors [k]
19. [1] Near to other shops and services [k]
20. [1] Low transport costs OR already has relationship with supplier [k]
21. [1] as near wholesaler [app]
22. [1] Increase advertising [k]
23. [1] attracting or persuading or encourage new customers [an]
24. [1] to his shop [app]
25. [1] Sell to different target market [k]
26. [1] so do not sell only to children [app]
27. [1] so able to attract different customer [an]
28. [1] Increase prices [k]
29. [1] increases amount of revenue per item sold [an]
30. [1] Lower price or offer price promotions OR discounts [k]
31. [1] acts as incentive to buy more [an]
32. [1] Offer new OR additional products [k]
33. [1] e.g. different clothing [app]
34. [1] to appeal to a new market segment [an]
35. [1] Loyalty schemes [k]
36. [1] could encourage existing customers to buy more from him [an]
37. [1] Use of sales promotions e.g. competitions [k]
38. [1] Increase quality [k]
39. [1] Use e-commerce or sell via website [k]
40. [1] Build relationship with supplier [k]
41. [1] in the nearby town [app]
42. [1] Wholesaler offers choice OR variety OR feedback [k]
43. [1] which could help increase revenue [app]
44. [1] Wholesaler breaks bulk [k]
45. [1] helpful for a small shop [app]
46. [1] as do not have to worry about storing additional stock [an]
47. [1] More time OR paperwork [k]
48. [1] if buy from manufacturer overseas [app]
49. [1] Cheaper to buy direct [k]
50. [1] from overseas manufacturer [app]
51. [1] as do not have to pay anything to third party [an]
52. [1] Purchasing economies of scale OR buy in larger quantities when buy direct [k]
53. [1] leading to lower average costs [an]
54. [1] of its clothing [app]
55. [1] Quicker access to inventory (stock) [k]
56. [1] from wholesaler [app]
57. [1] so can satisfy any increases in demand [an]
58. [1] Not able to check quality [k]
59. [1] as manufacturer is based in another country [app]