4.5 Marketing Mix, IB Business

A business wishes to sell consumer goods in a large country. Which of the following methods of distribution is most suitable? 

• Wholesaler

• Mail order

• Agent

• Direct retail

Answer explanation

Selling through wholesalers allows consumer goods to be distributed in a large country. The wholesalers break the bulk by buying in large quantities and selling it to retailers in smaller quantities. Selling through an agent or mail order would not allow the business to reach a large number of consumers, and direct retail would require time and large setup costs.

A farmer sells his produce directly to consumers. Which of the following is not an advantage of this method of distribution? 

• The produce will get to the consumers quickly.

• Profits will be higher because there is no intermediate mark-up charge.

• The storage costs will have to be paid by the farmer.

• It will be possible to get feedback directly from the customers.

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Answer explanation

A farmer selling directly to consumers is an example of direct selling or having no intermediates. This method of distribution will have no mark-up and will therefore increase the profit margins for the farmer. It will also enable fast distribution, and will allow direct feedback from customers. However, the cost of storage will have to be paid by the farmer.

The Copper Clothing Company is a privately owned clothes manufacturer. It uses penetration pricing for its products. Which of the following is not a reason for setting prices low? 

• To increase market share

• To compete effectively

• To encourage word of mouth recommendations for the products

• To demonstrate a unique image

Answer explanation

Setting lower prices will not allow the Copper Clothing Company to demonstrate a unique image. However, adopting penetration pricing will attract more customers, increase competitiveness, and could increase word of mouth recommendations. 

What pricing strategy sets extremely low prices with the objective of forcing competitors out of the market? 

• Cost Plus (Markup)

• Predatory

• Penetration

• Dynamic

The cost of producing one unit of output is $40. A company uses a mark-up of 50% on top of the production cost. What will be the selling price of this product? 

• $50

• $60

• $70

• $80

Answer explanation

Selling price =  $40 + (50 × $40 ÷ 100) = $60 

Which stage of the product life cycle is characterised by high sales, intense competition and marketers making an attempt to hold the position of products in the market?

• Growth

• Maturity

• Decline

• Introduction

Answer explanation

Maturity is the stage in the product life cycle in which sales are very high. During this stage competition is intense and marketers make attempts to hold the position of the product in the market.

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An organisation collects a sample of 100 workers. In the sample, 75% are full-time employees and 25% are part-time employees. These proportions are the same in the population of the organisation as a whole. Which method of sampling is the organisation using? 

• Snowballing

• Quota

• Random

• Cluster

Answer explanation

This is quota sampling. The population of the organisation is first divided into two groups: full-time employees and part-time employees. The sample is then selected on the basis of the population of the whole organisation. 

A gym chain wishes to add new machines and different forms of workout at one of its locations. Which primary research method will be most suitable to collect information about its customers’ preferences? 

• Survey

• Interview

• Observation

• Focus Group

Which would be the most appropriate size of a typical focus group? 

• 1-3 people

• 4-7 people

• Over 15 people

• It depends on what you are researching

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Answer explanation

Although there is no exact answer, 4 to 7 people is generally considered to be a reasonable size for a focus group. It is large enough to get a range of opinions, but not too big that people are unable to be heard. It becomes more expensive to run focus groups when more people are involved

Dividing the market on the basis of values, interests and lifestyle choices is which type of segmentation?

• Geographic

• Demographic

• Psychographic

• Gender