IB Business Management SL

Marketing Unit Test

Paper 2 Style

You are to complete this paper in a single session of one hour thirty minutes (ninety minutes).
This test is marked out of 40; the maximum score is 40/40.
You are required to answer both questions for this test.
You are NOT allowed to use any outside sources for this test.
All questions are subdivided into parts.
The command terms used in each part indicate the depth required.
The questions may require: knowledge and understanding (AO1); application and analysis
(AO2); synthesis and evaluation (AO3); and a variety of appropriate skills (AO4).
The marks available for each part are indicated.
You can use a calculator for this paper, but it should not be needed.
You are advised to use pen and paper for this test, unless you will be using a computer for your
IB exams.
Some questions require graphs, calculations and diagrams. These questions will need to be
done using pen and paper.
Once you are done, you will need to scan and upload your work.
 You are required to answer both questions for this test.
You are expected to allocate around forty-five minutes of this ninety-minute paper for each
question.

High Plains PLC (HP)

High Plains PLC (HP) owns 600 budget hotels. It operates in a rapidly growing market and has a
60% market share of the budget hotel market.
Recent secondary market research on the hotel industry revealed:

• Guests of luxury hotels are brand-loyal;

• 80% of guests of budget hotels respond positively to a price reduction;
• The budget hotel market is growing rapidly;
• Detailed statistics and information on all hotel chains.
HP’s directors aim to increase occupancy rates in HP’s hotels from the current 65% to 80% by
the end of 2024. Each of HP’s hotels has 400 rooms. People on business trips account for only
15% of bookings.
HP is considering two options:
Option 1: Price discounts on 100 of the rooms in each of HP’s hotels
The discounts would undercut prices charged by its major competitor, Kampfort Inns (KI), by
10%. HP would also offer a price match guarantee, which means that it would match any lower
price charged by KI for any room.
Option 2: Upgrade 100 of the standard rooms in each of HP’s hotels
Upgraded rooms, called HP+, would have improved IT facilities, new decor, a coffee machine
and a better shower. HP+ rooms would cost $20 per night more than standard rooms.
Estimated upgrade costs are $1,500 per room, and the upgrades would take two years to
complete. The HP+ rooms are targeted both at the business traveller market segment and at
customers who are willing to pay slightly more for an enhanced hotel experience.

(a) Define the term ‘market segment’. [2]

(b) Construct a Boston Consulting Group (BCG) matrix for HP, identifying the correct segments
for HP’s standard rooms and its HP+ upgraded rooms if Option 2 is chosen. [4]
(c) Explain one advantage and one disadvantage for HP of using secondary market research. [4]
(d) Discuss whether HP should choose Option 1 or Option 2. [10]
Secco Vineyards (SV)
Secco Vineyards (SV) is a family-owned business producing wine in Sonoma, California. In 1977,
SV opened using cost-plus (mark-up) pricing. The wines were medium-priced and were
available in local grocery stores.
In 2007, Joe Secco, grandson of the founder, created a new strategy. He rebranded SV’s wine
for a niche premium market.

• SV began to sell directly to customers at its winery instead of in local grocery stores.
• SV stopped using cost-plus (mark-up) pricing and began charging much higher prices.
• Regular wine tastings and promotional events were held at its winery. At these events,
wine experts would promote SV’s wines by creating an elegant experience based on a
luxurious culture of wine consumption. SV’s physical evidence in its marketing mix
became much more important.
• Joe hired his daughter, Livi, to implement social media marketing as a promotional
strategy.
However, SV has recently faced intense competition and sales have fallen. Local wine producers
and overseas competitors have entered the market with similar market positioning. In order to
maintain its brand image, SV has not changed its pricing strategies.
SV conducted secondary market research about other possible markets in the US for its
premium wines. The research suggested that other possible markets for high-quality wines,
such as those of SV, exist. As a result, SV is considering two new options to increase sales in
addition to its current distribution channel:

• Option 1: open a business-to-consumer (B2C) e-commerce store along with increasing

its social media presence.
• Option 2: sell SV wines to wholesalers serving the whole of the US market for premium
wines.

(a) Describe one characteristic of a niche market. [2]

(b) With reference to SV, explain one advantage and one disadvantage of using social media
marketing as a promotional strategy. [4]
(c) Given the intense competition, explain two pricing strategies SV might consider. [4]
(d) Recommend which of Option 1 and Option 2 SV should consider to increase sales. [10]