Business

1. 1.

   Fictional case: a new streaming service sets a low introductory price to attract subscribers. Explain penetration pricing and one risk.

   [2 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. The service trades some early revenue per customer for faster acquisition. It needs a credible route to retaining subscribers at a sustainable price after the introductory period.

   Marking points

   • A low initial price aims to build adoption or market share.
   • Low margins or customers leaving after later price rises can undermine returns.

   Examiner tip: Penetration pricing has an adoption objective, not simply any discount.

2. 2.

   Fictional case: a desk costs 80 to make. The seller adds a 25% mark-up on cost. Calculate the selling price and gross profit margin as a percentage of sales, assuming no other cost of sales.

   [3 marks]

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Mark-up uses cost as its base, whereas margin uses revenue. The same profit of 20 represents a quarter of cost but a fifth of the selling price.

   Marking points

   • Mark-up = 80 * 0.25 = 20.
   • Selling price = 100.
   • Gross margin = 20/100 * 100 = 20%.

   Examiner tip: A 25% mark-up is not a 25% sales margin.

3. 3.

   Fictional campaign: 20000 advertisement clicks cost 4000. Of those clicks, 600 lead to paid orders. Calculate conversion rate and advertising cost per order; explain why neither alone proves profit.

   [4 marks]

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Use paid orders rather than clicks as the outcome in acquisition cost. Compare that cost with contribution and measure incremental purchases to decide whether the campaign generated a return.

   Marking points

   • Conversion = 600/20000 * 100 = 3%.
   • Cost per order = 4000/600 = 6.67 to two decimals.
   • Product contribution, fulfilment costs and returns also determine profit.
   • Orders attributed to advertisements may include customers who would have bought anyway.

   Examiner tip: Do not divide advertisement cost by clicks when asked for cost per order.

4. 4.

   Fictional case: a premium cosmetics producer switches from selected stores to a mass discount marketplace. Analyse effects on reach and brand positioning.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Distribution is part of the marketing mix, not just logistics. Wider access can raise sales while eroding the signals that justified a premium price, especially if service quality falls.

   Marking points

   • The marketplace can reach more customers and simplify ordering.
   • Price comparisons and discounts may weaken exclusivity.
   • Reduced advice or uncertain seller quality can change the customer experience.
   • Channel selection should match the promised premium service as well as volume targets.

   Examiner tip: Analyse brand effects alongside channel reach.

5. 5.

   Fictional case: a niche publisher can sell directly online or through bookstores. Evaluate abandoning bookstores entirely.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Removing a retailer's margin does not remove its functions. Direct sales may suit loyal readers, while stores may introduce new ones; compare full costs and incremental reach before abandoning a channel.

   Marking points

   • Indicative: direct sales can retain intermediary margins and customer data.
   • The publisher takes on fulfilment, returns and customer-acquisition costs.
   • Bookstores offer browsing discovery and access to customers outside the existing audience.
   • A justified judgement weighs channel contribution and reach, considering a mixed approach.

   Examiner tip: Count the distribution tasks transferred to the producer.

6. 6.

   Fictional case: a supermarket uses personalised discounts derived from purchase histories. Evaluate this compared with the same discount for every customer.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Personalisation is useful only if improved response exceeds data and trust costs. Transparent consent and fair access can matter as much as short-term sales lifts; uniform offers are simpler but less targeted.

   Marking points

   • Indicative: targeting can reduce discount spending on customers unlikely to change purchases.
   • Relevant offers may raise retention or basket value.
   • Privacy concerns or perceived unfairness can damage trust.
   • A justified judgement considers consent, transparency and incremental contribution after data costs.

   Examiner tip: Evaluate customer trust as a commercial consequence, not an unrelated ethical aside.

Original, unofficial practice questions from SubjectScout — not official past-paper questions.