IB Business Management HL 4.5.5 Promotion Questions
Practise analysing above-the-line, below-the-line and social media promotion for IB Business Management HL marketing decisions.
- Syllabus
- First assessment 2024
- Course
- Business management HL
- Level
- HL
Exam points
- Explain and apply promotional methods and the promotional mix.
IB Business Management HL 4.5.5 Promotion Questions question 1
[Maximum number: 4]
Charles Smith and seven friends started a private limited company, Smith’s Foods Ltd (SF ), to produce ready-made healthy meals for people with diabetes*. Using a cost-plus (mark‑up) pricing strategy, SF ’s mission is to make inexpensive, widely available meals that help diabetics manage their carbohydrate intake accurately. Despite reliance on inexpensive social media marketing, SF grew rapidly. Due to this rapid growth, however, the quality of its products deteriorated, and a number of its meals were found to contain different quantities of carbohydrate than those stated on the packaging. Negative comments appeared on SF ’s Instagram page. Charles responded quickly to reassure customers and offered refunds. SF ’s response led to the company receiving an industry award for ethical behaviour. Charles introduced flow production to reduce the cost of SF ’s meals, which changed SF ’s scale of operations and increased its gearing ratio. However, Charles had little business experience of using flow production and problems emerged.
Smith's Foods Ltd (SF)
Charles Smith and seven friends started a private limited company, Smith's Foods Ltd (SF), to produce ready-made healthy meals for people with diabetes*. Using a cost-plus (mark-up) pricing strategy, SF's mission is to make inexpensive, widely available meals that help diabetics manage their carbohydrate intake accurately.
Despite reliance on inexpensive social media marketing, SF grew rapidly. Due to this rapid growth, however, the quality of its products deteriorated, and a number of its meals were found to contain different quantities of carbohydrate than those stated on the packaging. Negative comments appeared on SF's Instagram page. Charles responded quickly to reassure customers and offered refunds. SF's response led to the company receiving an industry award for ethical behaviour.
Charles introduced flow production to reduce the cost of SF's meals, which changed SF's scale of operations and increased its gearing ratio. However, Charles had little business experience of using flow production and problems emerged.
External stakeholders began to look into SF's operations. One supermarket chain, Good Foods (GF), contacted Charles and offered to take over SF, keeping Charles on the board of directors. This takeover would allow SF's meals to be produced at a lower cost and reach a wider target market. GF would also finance research and development into new meals with more carefully controlled carbohydrate levels.
However, SF would close. Negative publicity would be considerable. The remaining shareholders have threatened to launch a new business, creating their own brand of meals for people with diabetes in direct competition with GF.
* diabetes: a medical condition that causes a person's blood sugar level to become too high. People with diabetes need to be mindful of the amount of carbohydrates (which includes sugar) they include in their diet.
Explain two benefits for S F of using social media marketing.
Social media marketing allows accurate targeting through social media. Below the line could allow targeting to families who have a strong interest in purchasing Diabetic meals though Facebook or Reddit groups
Cheap and quick to set up and very wide reach. Evidence that S F has grown fast indicating that below the line promotion has exceeded expectations
The speed of response of social media may be instant. Charles' quick response on social media managed to reduce the impact of the negative publicity after the quality issue.
Below the line promotion allows SF to create customer loyalty programmes which can be managed online and have continued direct links to current and potential customers looking for diabetic meals.
Award [1] for a benefit of social media marketing with an additional [1] for application to SF.
Mark as [2+2]
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