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StudentID______________________

Name__________________________

(Usebothsidesofthissheettoansweryourquestions)QuestionB1(8marks)Matcheachofthesegmentationrelatedconceptslistedinthefirstcolumnwiththemostappropriatedescriptorlistedinthesecondcolumn.(1.0markforeachcorrectanswer)SegmentationVariable/Strategy

Descriptor AnswerExample:S0.Segmentation D0.Dividingthemarketinparts

S0:D0

S1.Psychographic D1.Customerreliesonsupplierservicingcapabilities S1:D3S2.Concentrated D2.Earlyinhistory,CocaColamarketsasingle,Classic

Cokeversionofitssoftdrinktotheworld.S2:D4

S3.Behavioural D3.Customerhasanactivesociallifewhichhemixeswithbusinessactivities

S3:D5S4.Undifferentiated D4.Laterinhistory,CocaColadevelopsagroupofdrinks

(e.g.,Sprite,DietCoke)forthedietdrinkmarket.S4:D2

S5.Situational D5.Customermakessurethathehasthemoststateoftheartsoftware.

S5:D7S6.Differentiated D6.Alsolater,CocaColadevelopssoftdrinksandother

productstoappealtodiversemarketsegments.S6:D6

S7.Demographic D7.Customerinsistsonpromptdeliveries S7:D8S8.Operational D8.Customerismaleandinhisearlythirties. S8:D1QuestionB2(1.5+6=7.5marks)WhatismeantbythetermCoreProduct?Listtwocoredimensions;twoactualdimensionsandtwoaugmenteddimensionsofWindowsXPoperatingsystems.Definition Coreproductreferstothebasicproblemsolvingservicesthataproduct

offers.(Between0and1.5:Wronganswer>>0;Excellentanswer>>1.5)CoreDimension

(i) Professionaladvancement;(ii) moreproductiveemploymentofmoneyandtime;(iii) expansionofsocialandlearningexperiencesthroughaccesstointernet.(1markforeachcorrectdimension)

ActualDimension

(i) Cost;(ii)Easeofoperations(ii) AssociationoftheMicrosoftBrand;(iv)Programsincludedinthe

(1markforeachcorrectdimension)softwareAugmentedDimension

(i) Moneybackwarranties;(ii) lessonsintheuseofWindows;(iii) AtollfreeTelephonenumbertocallforassistance.

(1markforeachcorrectdimension)

MARK1012:MarketingFundamentalsQUIZ 2: SET B (BLUE)

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QuestionB3(8marks)Column1inthetablebelowlistsSIXitemstwouniquecharacteristics,twodifferentobjectivesandtwostrategiesatvariousstagesofaproductslifecycle(PLC).Fillineachoftheeight(8)numberedboxes(underdifferentPLCstages)withtheappropriatecharacteristic,objectiveorstrategy(using14wordsasshownintheexamples).(1.0markforeachcorrectanswer)

PLCStages Introduction GrowthCompetitiv

eturbulence

Maturity DeclineCharacteristics Example:Prices 1.Lower Sales 1. Low UnitProfits

2. High,Rising

Objectives ExampleDistribution 2.Maximum

Numberofoutlets

Product 3. One 4. FullProductLine

Promotion

5.StresspointsofDifference

6.Minimalpromotion

Strategy ExampleManufacturing 7.Decentralise,

Manyshortruns

3.Reverttosubcontracting

Price

Communication

8.Centralise,Massproduction,Undercapacity

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QuestionB4(3+3=6marks)Boxesof25teabagsofanewweightreducingteaformulamadebyHealthFoodsInc.(HFI)aresoldtoconsumersfor$4.99each.Retailersearn27%ontheretailsellingprice.Wholesalerstypicallyearn25%markupontheircostofgoods.Whatisthemanufacturerssellingprice?TomanufactureandmarketthisproductHFIincursfixedcosts(FC)of$20,000andunitvariablecost(UVC)of$2.00perpacketof25teabags.Howmanyboxes(of25bags)mustHFIproducetobreakeven?DrawabreakevendiagramandshowtheBEP.Solution:Retailsellingprice: $4.99[Thisiswhattheconsumerspay]Retailmarkuponsellingprice: 27%[$4.99includesthisportion]Retailerscost: $4.99(10.27)=$3.64>>Wholesalerssellingprice (1.5marksforcorrectanswerforthepartabove)

Wholesalerssellingprice: $3.64[Thisiswhatretailerspay]LetusassumethattheWholesalerbuystheproductforWc[i.e.,wholesalerscost]Then, Wc+0.25Wc=$3.64 Or, Wc=$3.64/1.25i.e.,$2.91>>Manufacturerssellingprice (1.5marksforcorrectanswerforthepartabove)LetthebreakevenquantitybeQThen;$20,000+$2.00Q=$2.91QOr.Q=$20,000/0.91=21,978.(1markforcorrectanswertothispart+2markforthediagram)(Thisfiguremayslightlyvarydependingontheroundingofpricefigurescalculatedearlier) 80

60 4020 0 5 10 15 20 25 30(000)

BEP >> 21978 units Cost

Profit

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QuestionB5(4+4=8marks)AnswereitherAORB

A. Marketersusechannelstoovercomefourspecificdiscrepancies.Listthesediscrepanciesanddefineanytwoofthem.

Answer:

1 DiscrepancyofQuantityReducethedifferencebetweentheamountofproductproducedandtheamountanenduserwantstobuy.

2 DiscrepancyofAssortmentTransformtheassortmentofproductsmadebyproducersintotheassortmentwantedbyconsumers.

3 TemporalDiscrepancyAllowingcustomerstobuyaproductwhenthecustomerisnotreadytobuyit.

4 SpatialDiscrepancyAllowingthecustomertobuyaproductirrespectiveofthelocationofproduction(widelyscatteredmarkets).

OR

B. AfarmerinCabramattagrowsvegetablesinhisfirmsandsellsthesevegetablesdirecttocustomers.Whatisthischannelcalled?Explainhowthischannelcanbenefitboththefarmerandtheconsumercitingatleasttwoadvantagestoeachparty.

Answer:Thischanneliscalledthedirectchannel.Thisisthesimplestchannelofdistribution.(3.5marksforcorrectdefinitionabove)Threemajoradvantagesthatthefarmerenjoysusingthischannelare:

1) thefarmerwillbeabletodirectlyservethecustomer;2) thefarmermayalsobeabletosellthevegetablesatalowerpricethanif

anintermediarywasinvolved;and3) thefarmerhascontroloftheproductandthesaleinmakingsurethatthevegetablesaresoldwhentheyarestillfresh.

1.5marksforeachcorrectreasoncitedabove)

(1markforeachcorrectdimension;anyofthetwodimensionsnamedineachcell

Maximum 2 marks for each correct definition.

Actual mark would depend on the quality of answers.

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StudentID______________________

Name__________________________

(Usebothsidesofthissheettoansweryourquestions)QuestionY1(8marks)Matcheachofthedescriptorlistedinthefirstcolumnwiththemostappropriatedistributionchannelrelatedconceptlistedinthesecondcolumn.(1.0markforeachcorrectanswer)Descriptor DistributionChannelRelated

conceptsAnswer

Example:D0.arestoreretailerswhoprovideconvenienceintheformoflonghoursandphysicallocation.

C0.Conveniencestores

D0:C0

D1.Ikeaholdsafurnituresale C1.thisisanexampleofanadministeredVMN D1:C3

D2.Amarketersellingcollectibles C2. ismostlikelytouseselectivedistribution. D2:C4

D3.Wholesalerssellbeeftojobbers,whoselltosmallretailers

C3. thisis anexampleofaonelevelchannel D3:C5

D4.Amanufacturerof"hardproducts"suchasfurnitureandstereos

C4.ismostlikelytouseexclusivedistribution. D4:C2

D5.50%ofthegoodsSears sellscomefromcompaniesthatitwhollyorpartlyowns

C5.thisis anexampleofathreelevelchannel. D5:C7

D6.Toyotalicensesindependentdealerstosellitscars

C6.thisisanexampleofacontractualVMN D6:C6

D7.PillsburyandKraftFoodscooperatetoadvertiseandsellproductstoretailers

C7.thisisanexampleofacorporateVMN D7:C8

D8.CampbellSoupssizeandpowercommandcooperationfromretailers.

C8.thisisanexampleofa HorizontalMarketingSystem. D8:C1

QuestionY2(1.5+6=7.5marks)WhatismeantbythetermActualProduct?Listtwocoredimensions;twoactualdimensionsandtwoaugmenteddimensionsofapersonalcomputerpurchasedforhomeuse.Definition Actualproductreferstothetangibleproductorintangibleservice

thatservesasthemediumforreceivingcoreproductbenefits.(Between0and1.5:Wronganswer>>0;Excellentanswer>>1.5)

CoreDimension

(i) Benefitofthecomputerasanentertainmenttool(Socialnetworks)(ii) Benefitofthecomputerasaneducationaltool;(iii) Communicatingwithpeople(1.0foreachcorrectdimension)

ActualDimension

(i) Cost;(ii)Brandname(iii)Hightechlook;(iv) ProgramsincludedintheSoftware(Wordprocessing,graphics(1.0foreachcorrectdimension)

AugmentedDimension

(i) Deliveryandinstallation(ii) Moneybackwarranties;(iii) Customerfriendlyfinancingpackage;(iv) AtollfreeTelephonenumbertocallforassistance.(1.0foreachcorrectdimension)

MARK1012:MarketingFundamentalsQUIZ 2: SET Y

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QuestionY3(8marks)Column1inthetablebelowlistseightitemsreflectingtwouniquecharacteristics,twodifferentobjectivesandtwostrategiesatvariousstagesofaproductslifecycle(PLC).Fillineachoftheeight(8)numberedboxes(underdifferentPLCstages)withtheappropriatecharacteristic,objectiveorstrategy(using14wordsasshownintheexamples).(1.0foreachcorrectanswer)

PLCStages Introduction Growth Competitiveturbulence Maturity DeclineCharacteristics Example:Sales 1. DecliningPrices 1. High

Customers

2.EarlyMajority

Objectives ExampleDistribution 2. Maximumnumberof

outlets

Competition 3.FeworNone

4.ReducedorFew

Distribution

5.Moreoutlets

Strategy ExampleManufacturing

3.Reverttosubcontracting

Product

6.Diversifybrandsandmodels

Distribution 7.Selective

8.Intensiveandextensive

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QuestionY4(4+4=8marks)) AnswereitherAORB

A. You work for a local restaurant. Business has been slow, and you plan to have some promotions targeted to specific market segments. What three demographic segmentation variables would you recommend using? Answer: Students answers will vary. Their answers must identify specific demographic-based segments. However, acceptable answers will list age, gender, income and social class, race and ethnicity, and stage of family life cycle variables. (mentioning at least 3 of the above >> 3 marks) Better students will provide more detail about each of these broad categories e.g. singles, Generation X members, divorced, newlyweds, grandparents, etc. (mentioning at least 1 of the above >> 1 mark) Relative to promotions, one example might be segmenting based on age and then offering a seniors discount to everyone over 65. If segmenting based on stage in family life cycle, a promotion might be children under 5 eat free. (maximum4marksbasedonthequalityoftheanswer.Eachanswermustbegradedonitsownmerit)

OR

B. SingaporeAirlinesisamemberoftheStarAlliancewhichincludesairlinessuchasAirNewZealandandLufthansaAirways.Qantas,ontheotherhand,isamemberoftheOneWorld,includingairlinessuchasCathayPacificAirways.WhattypeofmarketingsystemarebothSingaporeAirlinesandQantasusing?Whatarethelikely(i)benefitsand(ii)conflictsinsuchachannel?Theseairlinesaremembersofahorizontalmarketingsystem.(2marks)Ahorizontalmarketingsystemisanarrangementwithinachannelofdistributioninwhichtwoormorefirmsatthesamechannellevelworktogetherforacommonpurpose.(2marks)Benefitsofsucharrangementallowsthemtocooperateinprovidingpassengersairservice,sharingreservationsystems,aircraftandairportlounges.(3marks)Possibleconflictsarelikelytobehorizontalinnaturesuchasargumentabouteachotherscompetitivepractices;operatinginthesameroute.(1mark)

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QuestionY5(2+2+2=6marks))

KitchenAidInc.manufacturesahandykitchentoolforhousewives.Thefixedcost[FC]formanufacturingandmarketingthisproducthasbeenestimatedas$560,000andperunitvariablecost[UVC]is$2.00.KitchenAidsellstheproducttowholesalersfor$5.40/unitmakingaprofitof15%onfullcosts.Whatisthebreakevenquantityatfullcosts?DrawadiagramtoshowtheBEP.Theproductissoldthroughwholesalerstoretailers.Thewholesalerandtheretailertakeamarkup(onsales)of10%and15%;respectively.Whatistheretailpriceofthisarticle?SOLUTIONLetusassumethatunitfullcost(manufacturing+marketing)fortheproductisCM.Then,theprice/unitpaidbythewholesalertomanufactureri.e.,$5.40=1.15xCMOr; CM=$5.40/1.15=$4.70(rounded)

LetQBEbethebreakevenquantity.(2marksforcorrectcalculation+2marksfordiagram)Then,forbreakingeventhefollowingequationmustbetrue. FC+UVCxQBE=CMxQBEOr; $560,000+$2xQBE=$4.70xQBEOr; $2.70xQBE=$560,000 Or; QBE=207,407(rounded)

900 800 700600500

400 300 200 100 0 25 50 75 100 125 150 175 200 225 250Thewholesalertakesa10%markuponsales.Letthewholesalersprice(i.e.,thepricethatretailerspaytowholesalers)isWPThen,$5.40=WPx(10.10) HenceWP=$5.40/0.90=$6.00(1markforcorrectanswerforthepartabove)Theretailertakesa15%markuponsales.Lettheretailersprice(i.e.,thepricepaidbyconsumers)isRPThen,$6.00=RPx(10.15) HenceRP=$6.00/0.85=$7.06 (1markforcorrectanswerforthepartabove)

ProfitCOST

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StudentID______________________

Name__________________________

(Usebothsidesofthissheettoansweryourquestions)

QuestionG1(8marks)MatcheachoftheProductrelatedconceptslistedinthefirstcolumnwiththemostappropriatedescriptorlistedinthesecondcolumn.(1.0foreachcorrectdimension)Productrelatedconcepts

Descriptor AnswerExample:P0.Productwidth

D0.referstonumberofdifferentproductlinesmarketedbyafirm.

P0:D0

P1.Coreproduct D1.Occurswhenacompanyseekstoextendexistingbrandqualitiestolaunchnewproductsormodifiedproductsinanewcategory.

P1:D3

P2.Qualitylevel D2.describethesalesitemintechnicalterms. P2:D4P3.Shoppinggoods

D3.referstotheusebenefit,problemsolvingservicethattheconsumerisreallybuying

P3:D5P4.Productfeatures

D4.isanactualproductdimension,referstoproductperformance.

P4:D2P5.Productlinefilling

D5.areproductsthatarecomparedonsuchbasesassuitability,quality,price,andstyle.

P5:D7P6.Upwardstretch

D6.referstointroductionofitemstohighendofmarket P6:D6P7.Lineextension D7.addingitemswithintheexistingproductrangeofthe

line.P7:D8

P8.Brandextension

D8.occcurswhenacompanyextendsexistingbrandnamestonewforms,colours,sizes,ingredients,orflavoursofanexistingproductcategory

P8:D1

_

MARK1012:MarketingFundamentalsQUIZ 2: SET G (GREEN)

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QuestionG2(1.5+3+3=7.5marks)Listthedifferentmarketcoveragestrategiesandbrieflyexplainanyoneofthem.Whatfactorsaffectmarketcoveragestrategydecisions?

UndifferentiatedorMassmarketing

Targetingbroadly:Coverstheentirepopulation Ignoremarketsegmentation; focusonwhatiscommonratherthanwhatisdifferent; designaproductandmarketingprogramthatappeals

tolargestnumberofbuyers.Examples:Steel,Apples,Salt

DifferentiatedorSegmentedmarketing

Targetingparticularsegment(s):Coversaparticularsegment(s)usedasthetargetmarket

Targetseveralmarkets; designseparateofferforeach; caterforeverypurse,price,andpersonality.

Examples:ColesMyerSupermarket,Bilo,Myerstores,Toyota

ConcentratedorNichemarketing

Targetingnarrowly:coversasmallpartofthemarket Goforlargeshareofoneorfewsubmarketsrather

thanforsmallsharesofmanymarkets.Examples:DELL[PC],CRAY[Mainframe],APOLLO[Workstation]

(0.6marksforeachfactorlisted>>total3marks)

Factorsthataffectmarketcoveragestrategydecisioninclude:(i) Companyresources;(ii) Productvariability;(iii) StageinPLC;(iv) Marketvariability;(v) Competitorsstrategy

(0.5markforeachcorrectdimension;anyofthetwodimensionsnamedineachcell

Maximum 3 marks for each correct answer which should contain three parts: A general definition ( see first line in each

cell); The bullet points; and finally At least one example

Actual mark would depend on the quality of answers.

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QuestionG3(4+4=8marks)AnswereitherAorB

A. What ismeant by VerticalMarketing Networks?Whymarketers use them? List itsthreemaintypesanddescribeanyoneofthem.

Answer:VerticalMarketingNetworkscomprisesproducers,wholesalersandretaileractinginasaunifiedsystem.(Max1.5marks;0forwronganswer)

MarketersuseVMNtohavebettercontroloverthechannelofdistribution.(Max1.5marks;0forwronganswer)TherearethreemaintypesofVMN.Theseare:(1markforeachcorrectlisting;2marksforcorrectdefinition.0forwronganswer)

CorporateVMN: Thecorporatebodycombinesandownssuccessivestagesofproductionanddistribution.ContractualVMN:

Consistsofindependentfirmsatdifferentlevelsofproductionanddistribution.Resultsinmoreeconomiesandsalesthaneachmemberscouldachievealone.

AdministeredVMN:

Coordinatesdistributionbythepowerexertedbyofoneofitsmembersinthemarketplace,notbycontractorownership.

OR

B. Contrast intensiveandexclusivedistribution.Provide twoexamplesofproducts thatwouldlogicallybedistributedineachoftheseways.Answer:(Forcorrectlydescribingeachtype2marks(2x2=4);formentioningtwoexamplesineachtype2x1markx2=4).Intensivedistributionaimsatmaximisingmarketcoveragebysellingaproductthroughallwholesalersorretailersthatwillstockandselltheproduct.Examplesincludealmostanyconveniencegoodsuchasbread,milk,ballpointpen,ketchup,toothpasteetc.Exclusivedistributionmeanslimitingdistributiontoasingleoutletinaparticularregion.ExamplesincludemanyspecialtygoodsandanybrandforwhichthereisastrongdemandandnoperceivedsubstitutesavailablesuchasHoldenorFordcars.

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QuestionG4(2+2+2=6marks)PullmanGardens(PG)manufacturesalineofproductsforuseingardens.OneoftheirbestsellingproductsisaninsectrepellantcalledSprepel.TomanufactureandmarketthisproductPGincursfixedcosts(FC)of$120,000andunitvariablecost(UVC)of$4.00.Averageannualsaleoftheproductis80,000unitswhichyieldaprofitof$100,000.CalculatethebreakEvenQuantityandshowitonadiagram.PGmarketstheproductsthroughwholesalerstotheretailoutlets.Ifwholesalerstakeamarkuponmanufacturerssellingpriceof12.5%andretailersearnamarkupof20%ontheircost,whatisthepriceconsumerswillpayforSprepelSolution:

LettheManufacturerssellingpricebeMP;(1mark)Formakingaprofitof$100,000thefollowingequationmustbetrue:$120,000+$4x80,000+100,000=80,000xMPOr,$540,000=80,000xMPOr,MP=$6.75(Thisiswholesalerscostprice:thepricethatwholesalerpaystomanufacturer)

LettheWholesalerssellingpriceisWP;(1mark)Wholesalersmarkuponmanufacturerssellingpriceis12.5%

Then, Wp=MP+0.125MPOr Wp= $6.75+.125x6.75Or Wp= $7.59(rounded)

LettheRetailerssellingpricebeRp;(1mark)Retailersmarkuponcost:20%Then, Rp=$7.59+0.2x7.59=$9.11

LettheBreakEvenQuantitybeQ(1marksforcalculation+2marksfordiagram)$120,000+$4Q=$6.75Q

Or,Q=$120,000/(6.754.00)400

43636units 300 200100 0 10 20 30 40 50 60

BEP >> 43636 units

COST

PROFIT

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QuestionG5(8marks)Column1inthetablebelowlistsSIXitemstwouniquecharacteristics,twodifferentobjectivesandtwostrategiesatvariousstagesofaproductslifecycle(PLC).Fillineachoftheeight(8)numberedboxes(underdifferentPLCstages)withtheappropriatecharacteristic,objectiveorstrategy(using14wordsasshownintheexamples).(1markforcorrectanswer)

PLCStages Introduction Growth Competitiveturbulence Maturity DeclineCharacteristics Example:Prices 1. Lower UnitProfits 1.Negative .

Competition

2. Growing 3.Moredecline

Objectives ExampleDistribution 3. Maximumnumberof

outlets

Product

4.Fullproductline

Price 5.Skimmingorpenetration

Strategy ExampleManufacturing

3.Reverttosubcontracting

Communication

6.StimulateWidertrial

Overall

7.Protect,Strengthenniche

8.Reduceexpenditureandharvest

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StudentID______________________

Name__________________________

(Usebothsidesofthissheettoansweryourquestions)

QuestionW1(8marks)MatcheachoftheChannelrelatedconceptslistedinthefirstcolumnwiththemostappropriatedescriptorlistedinthesecondcolumn.(1markforeachcorrectanswer)Channelrelatedconcepts

Descriptor AnswerExample:CH0.Retailers

D0.Generallyobtaintheirmerchandisefromwholesalers.

CH0:D0

CH1.BulkBreaking

D1.utilizesasmanyoutletsaspossible;especiallyappropriateforconveniencegoodsandcommonrawmaterials. CH1:D3

CH2.Warehousing D2.consistsofaverylimitednumberofoutletsholdingalltherightstodistributeaproductline. CH2:D4

CH3.Transportation D3.referstobuyinglargequantitiesandlotsandbreakingthemintosmallerlots CH3:D5

CH4.ExclusiveDistribution

D4.referstoholdinginventories,reducinginventorycostsandriskstosuppliersandcustomers. CH4:D2

CH5.RiskBearing D5.dealswithprovidingquickertransportoforderstocustomersthandoproducers.. CH5:D7

CH6.MarketInformation

D6.referstoprovidinginformationtosuppliersandcustomersaboutcompetitors,newproducts,andprice CH6:D6

CH7.ProductAssortment

D7.meanstakingtitleandabsorbrisksforloss,damage,ortheft. CH7:D8

CH8.IntensiveDistribution

D8.istheproductofthewholesaler. CH8:D1

QuestionW2(1.5+6=7.5marks)

WhatismeantbythetermAugmentedProduct?Listtwocoredimensions;twoactualdimensionsandtwoaugmenteddimensionsofapersonalcomputerpurchasedforofficeuse.Definition Augmentedproductreferstoadditionalconsumerserviceandbenefitsthatare

addedtocorebenefitandproductwhichenhancesthequalityoftheactualproduct.(Between0and1.5:Wronganswer>>0;Excellentanswer>>1.5)

CoreDimension

(v) Benefitofthecomputerasanofficetool,(vi) Benefitofthecomputerastimesavingtool;(vii) Communicatingwithpeople.(1.0foreachcorrectdimension)

ActualDimension

(i)Cost;(ii)Brandname(iii)Professionallook;(iv) ProgramsincludedintheSoftware(1.0foreachcorrectdimension)

AugmentedDimension

(i) Deliveryandinstallation(ii) Moneybackwarranties;(iii) AtollfreeTelephonenumbertocallforassistance(1.0foreachcorrectdimension)

MARK1012:MarketingFundamentalsQUIZ 2: SET W (WHITE)

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QuestionW3(8marks)AnswereitherAorBbelow

A. Define market segmentation. A marketer uses buzz words such as Generation X, Generation Y, and baby boomers. What marketing segmentation variable is the focus of this marketers thoughts? Explain your answer. (3+5 = 8 marks)

Answer: Market segmentation is aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action. (Max 3 marks for an excellent answer; 0 mark for completely wrong answer.) The buzz words Generation X, Generation Y and baby boomers relate to the calendar years that people were born. Generation X groups people born between 1965 and 1976. Generation Y members were born between 1977 and 1994. Baby boomers were born between 1946 and 1964. (Max 1 mark for each buzzword explained correctly; 0 mark for wrong explanation.) The marketer is focusing on the demographic variable of age. (Max 2 marks for an excellent answer; 0 mark for completely wrong answer.)

OR

B. What is meant by loss leader strategy? Explain the concept with suitable examples. Why it is not considered unethical? (2+4+2 = 8 marks)

Answer: Loss leader strategy is a special type of pricing strategy that also act as a promotional strategy. (Max 2 marks for an excellent answer; 0 mark for completely wrong answer.)

This strategy, generally used by the retailers, involves deliberately selling a product below its customary price to attract attention to it.

This strategy is used in hopes that customers visiting the store to buy the loss leader will buy other products as well, particularly discretionary items carrying large markups.

(Max 2 marks for mentioning each of the above mentioned points; 0 mark for completely wrong answer.) This strategy is not unethical as the purpose of this loss-leader pricing strategy is not to harm competitors or force them out of business. (Max 2 marks for an excellent answer; 0 mark for completely wrong answer.)

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QuestionW4(2+2+2=6marks)HomeDcor,asmallfamilybusiness,sellsframedpicturesforanaveragepriceof$100.00perpicturewhichcoverstheiraveragecostsof$5forglass,$2formatting,and$12fortheframe,and$25forthelabourinvolved.Thebusinessmustalsocovermonthlyexpensesof$1,250forrentandinsurance,$200forheatandelectricity,$400foradvertising,and$3,750forwages.CalculatetheBreakEvenquantity.IfHomeDcorincreasedtheaveragepricechargedforaframedpictureto$114.00perpictureframedkeepingeverythingelseasthesame,howtheslopeofthetotalrevenuecurveandthebreakevenquantitywouldbeaffected?Drawabreakevendiagramexplainingyouranswer.FC=[$1250+$200+$400+$3750]=$5600VC=[$5+$2+$12+$25]=$44LettheBEPQuantitybeQ(2marksforcorrectcalculation+2marksfordiagram)Then100Q=$5600+$44Q;orQ=100framesIfthepriceisincreasedto$114.00perframe(costsremainingunchanged)NewBEQuantitywouldbe114Q=5600$44Q=80Frames. . . $ 14000 . $ 11200 . Total revenue (at $114/Frame) $ 8400 . Total cost curve $ 5600 Fixed Cost . $ 2800 . Total Revenue (at $100/Frame $ 0 . . . . . . . . . . 0 25 50 75 100 units Hencetheslopeincreases.(2marksforthispartoftheanswer)(Slopeofastraightline>>>howthestraightlineanglesawayfromthehorizontal)

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QuestionW5(8marks)Column 1 in the table below lists several items. Each of these items reflects uniquecharacteristicsanddifferentobjectivesandstrategiesatvariousstagesofaproductslifecycle(PLC). Fill in thenine (9)numberedboxeswith the appropriate characteristic, objectiveorstrategyusing1ortwowordsasshownintheexamples.(1 mark for each correct answer.)

PLCStages Introduction Growth Competitiveturbulence Maturity DeclineCharacteristics

Example:Prices 1.Lower UnitProfits

1.

Declining

Customers

2. EarlyAdopters

Objectives ExampleDistribution 2.Maximumnumberof

outlets

Distribution

3.Maximumnumberofoutlets

Competition

4.MoreorIncreasing

5.Reduced

Strategy ExampleManufacturing 6.Centralisemass

productionUndercapacity

3.Reverttosubcontracting

Product 7.Basic Price 8.Defensive