NFC manufactures shoes using batch production. Quality assurance is used to maintain quality. NFC uses market segmentation. The Marketing Director is reviewing NFC's product range. He knows there are both benefits and limitations to developing new products. He also knows the promotion of products is important. Do you think the benefits for a business of developing new products are greater than the limitations? Justify your answer. .......................................................................................................................................
Exam No：0450_s25_qp_12 Year：2025 Question No：1(e)
Answer:
Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether the benefits of developing new products for a business are greater than the limitations.
Points might include:
Benefits:
- Increase demand/customer (base)/sales [k] which may increase revenue/market share [an]
- Can help spread risk/diversification [k] if sales fall for one product, this can be offset by sales of another product [an]
- Provide competitive advantage/unique selling point (USP) [k] which could increase customer/brand loyalty [an]
- Enter new markets [k]
- Improve brand recognition/reputation [k]
Limitations:
- Must produce new/trial products/more raw materials [k] increases costs [an]
- Need to carry out market research [k] increases cash outflows [an]
- Need to launch/promote/market the new product [k]
- Often requires large capital expenditure/cost of new machinery [k]
- May need to recruit/train additional employees/specialists [k]
Other appropriate responses should be credited.
Justification might include:
New products can help increase potential sales \([\mathrm{k}]\) which increases revenue [an]. However, there is a cost of developing new products \([\mathrm{k}]\) which increases cash outflows [an]. The benefits of developing new products are greater because the extra revenue gained could cover the additional costs [eval] which can increase the chance of growth/long term survival [eval].
Points might include:
Benefits:
- Increase demand/customer (base)/sales [k] which may increase revenue/market share [an]
- Can help spread risk/diversification [k] if sales fall for one product, this can be offset by sales of another product [an]
- Provide competitive advantage/unique selling point (USP) [k] which could increase customer/brand loyalty [an]
- Enter new markets [k]
- Improve brand recognition/reputation [k]
Limitations:
- Must produce new/trial products/more raw materials [k] increases costs [an]
- Need to carry out market research [k] increases cash outflows [an]
- Need to launch/promote/market the new product [k]
- Often requires large capital expenditure/cost of new machinery [k]
- May need to recruit/train additional employees/specialists [k]
Other appropriate responses should be credited.
Justification might include:
New products can help increase potential sales \([\mathrm{k}]\) which increases revenue [an]. However, there is a cost of developing new products \([\mathrm{k}]\) which increases cash outflows [an]. The benefits of developing new products are greater because the extra revenue gained could cover the additional costs [eval] which can increase the chance of growth/long term survival [eval].
Knowledge points:
3.3.1.1. The limitations and benefits of developing new products
3.3.1.2. Brand image; impact on sales and customer loyalty
3.3.1.3. The role of packaging
3.3.1.4. The product life cycle: main stages and extension strategies; draw and interpret a product life cycle diagram
3.3.1.5. How stages of the product life cycle can influence marketing decisions, e.g. promotion and pricing decisions
3.3.2.1. Pricing methods (benefits and limitations of different methods), e.g. cost plus, competitive, penetration, skimming, and promotional
3.3.2.2. Recommend and justify an appropriate pricing method in given circumstances
3.3.2.3. Understand the significance of price elasticity: difference between price elastic demand and price inelastic demand; importance of the concept in pricing decisions (knowledge of the formula and calculations of PED will not be assessed)
3.3.3.1. Advantages and disadvantages of different channels, e.g. use of wholesalers, retailers or direct to consumers
3.3.3.2. Recommend and justify an appropriate distribution channel in given circumstances
3.3.4.1. The aims of promotion
3.3.4.2. Different forms of promotion and how they influence sales, e.g. advertising, sales promotion
3.3.4.3. The need for cost-effectiveness in spending the marketing budget on promotion
3.3.5.1. Define and explain the concept of e-commerce
3.3.5.2. The opportunities and threats of e-commerce to business and consumers
3.3.5.3. Use of the internet and social media networks for promotion
Solution:
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