IB Business Management HL Marketing Question Bank

Explain two values of a marketing audit as a business tool for CC.

Values of a marketing audit for CC could include:
- Given that C C is currently unprofitable, it would seem appropriate to conduct a marketing audit to assess where the organization is. A marketing audit enables C C to identify its strengths and weaknesses in terms of the 7Ps. It looks like C C was able to identify customers' perceptions with regard to their 4 products.
- Moreover, with the information found as well as information about market growth and existing market share, C C management can have a thorough product portfolio analysis (BCG matrix). The answer to the first question, can give C C a sound bases for objectives and strategies.
- It will determine whether the current promotional mix is appropriate (see below) and allow CC to adapt any of their marketing mix accordingly in light of their limited marketing budget.
- It may give more insight into customers' opinion and perceptions about whether to continue production of The Ventura.

Accept any other relevant value and explanation.
N.B. Do not credit twice for an explanation that refers to any of the 7Ps, such as the value regarding the price and promotion and so on.

Mark as 3+3.
Award [1 mark] for identifying each appropriate value, [1 mark] for an appropriate explanation that directly refers to C C and [1 mark] for a further development of this explanation up to a maximum of [3 marks].

Secondary market research or desk research refers to the collection of second hand data by a business for decision-making that is derived from second hand sources/published sources by a third party. It has not been collected first hand by the business themselves.

Award [1] for a basic definition that conveys partial knowledge and understanding.

Award [2] for a full definition that conveys knowledge and understanding similar to the answer above. For [2] there should be some indication that the organisation is actually carries out a research/ action.

Some students are likely to define secondary sources while the definition is about research.

No examples are needed
No application is required.

One advantage of using sales forecasting is that it will allow a firm such as M M to look at future sales forecasts of its product portfolio and make changes where necessary. This will save the business considerable expense, stocking costs and influence future cash flow needs. Forecasting allows M M to plan ahead and can also impact on human resource planning and finance needs if cash flow forecasts indicate that there may be a shortage. There is evidence form the case study that MM's product portfolio revenue streams are changing. M M is experiencing changing sales of all of its stock so is planning by using forecasts, André can avoid over stocking and tying up valuable capital in unsold DVDs or CDs for example or can transfer more resources towards the fast selling computer games. Decision making at M M may be more accurate. To be forewarned is to be forearmed.

Disadvantages for M M are linked to the inevitable fact that sales forecasts are merely that - future predictions are based on past data, which, given the existence of external factors some of which are mentioned in the stimulus and unexpected events, cannot be fully accurate. There is evidence from the stimulus that André expects sales to be variable (possible cyclical or seasonal variations) and even with all relevant future economic and social data at his disposal, forecasts can still be widely inaccurate. For example, vinyl record sales are expected to rise but what if another musical format is created within the next five years? André also has considerable experience in this industry and is aware that sales are changing rapidly. Sales forecasts may be out of date by the time the data has been collected if they are every month or quarter. Sales forecasts in this context may be of little value to M M in such a fast changing industry.

Mark as 2+2.
[2] cannot be awarded per advantage / disadvantage if the response lacks either explanation and/or application.

For example:
- For an identification or a description of an advantage / disadvantage with or without application [1].
- For explanation of an advantage / disadvantage with no application [1].
- For explanation of an advantage / disadvantage and application [2].

Candidates are expected to show some understanding of sales forecasting methods.

The benefits to M M from setting up an e-commerce website will be linked to increasing customer awareness and sales.
- CD and especially vinyl sales should increase, as the e-commerce site may allow for targeting more potential customers in different regions who are interested in vinyl records and possibly CD. There is a greater chance of success as relying on customers for such a retro segment to visit the physical store is rather limited.
More detailed product descriptions, customer feedback/reviews will be possible. The e-commerce website will deepen customer relationships, especially if M M can run a social media campaign alongside building brand and customer loyalty to the site.
- The e-commerce platform will also allow MM to generate much needed advertising revenue through increased loyalty in the future.

The costs are linked to the inevitable restructuring of the business that e-commerce will demand and could be considered to be both short term and long term.
- The e-commerce site will need to be built, managed and monitored by a new staff member. This will drain MM's cash reserves at a time when total revenue is falling.
- Existing staff will require training or newly employed staff hired such as technology experts to run and update the e-commerce facility and possibly create social media support. Costs are likely to rise in the short term and again, M M is facing fall in revenue and finance is limited.

If the e-commerce site is to be fully functional then new distribution channels around delivery of vinyl records and newly released CDs that are both growing in sales to the customer will need to be identified, researched and set up. This will also take time and André will have to find additional resources. The stimulus indicates that finance is limited.

An e-commerce website will add a new layer of complexity to M M 's operations and logistics and M M has not got the right experience therefore more finance will have to be raised for training, hiring people and so on.

Please note:

Whatever relevant costs that a candidate explains or describe needs to be applied specifically to MM's lack of finance / lack of experience.

Mark as 2+2.

Award [1] for identifying or describing the cost / benefit for MM of setting up e-commerce and a further [1] for a development with respect to MM. Award a maximum of [2].
[2] cannot be awarded per cost / benefit if the response lacks either explanation and/or application.
For example:
- For an identification or a description of a cost / benefit with or without application [1].
- For explanation of a cost / benefit with no application [1].
- For explanation of a cost / benefit and application [2].

Customers:
- repeat purchase the brands that they are loyal to;
- often promote the brands they are loyal to by word of mouth;
- often feel a sense of community with others who are loyal to the brand;
- will be prepared to pay more / pay higher prices / less sensitive to price increases;
- will buy / try other products made by the business / try new products released by the business;
- have an emotional connection to a product or service / develop a relationship with the brand.

The business:
- will have reduced need for marketing / lower marketing costs.

Do NOT accept:
- a loyal customer base;
- stable source of income;
- customers trust the brand;
- will prefer / favour your brand over competitor products;
- consistent sales / consistent / loyal customer base.

Award [1] for each correct feature stated up to a maximum of [2].
N.B. Responses do not have to be worded exactly as above, and examiners should be aware that candidates may talk about customer action and feelings, as written above or they may frame their response from a business' perspective. Remember: "Customers repeat purchases of the brands that they are loyal to" is really the same thing as "the business gets repeat sales to past customers."
(b) Using Table 2:

Explain one reason why FY should carry out market research into Yoghurt B.

FY do not carry out research and have relied on brand loyalty. The forecast returns for B are confusing as they start high and then forecast to fall each year despite having the shorter payback.

Reasons why FY should carry out market research into Yoghurt B.
- to gather valuable information about their target market or the industry;
- to help stay competitive;
- to make informed decisions;
- to improve product B;
- to find out why B's forecasted returns fall in years 2 and 3;
- to find out why it has a much lower ARR than product A.
N.B. Do not award "FY need to know who they are competing against" (as they will already know this).

Application:

The market is also constantly changing.
Competitors regularly introduce new products.
Use of data relating to ARR.
Product B has a higher initial cost.

Award [1] for explaining a reason why FY should carry out market research into Yoghurt B. Award [1] for application from stimulus.