Posted: November 29th, 2015
Marketing and the competitive environment – 2.18 Using the marketing mix: place
1 Calculate the difference in the annual margin of safety for the two locations based on an estimated number of customer visits in a year of 29 750. (5 marks)
2 Explain one benefit of Choccy Delight buying directly from the manufacturer. (6 marks)
3 Analyse two consequences of Choccy Delights taking a stall at local markets. (8 marks)
4 Charlotte and Georgia have decided to open their shop in their preferred location. Georgia believes that this is the most important element of the marketing mix. Do you agree? Justify your view. (13 marks)
(Total marks 32)
Location Location Location
ChoccyDelights have made all the decisions in relation to the marketing mix for the expansion of their on-line business except one, place. They are opening a shop in Bath for their high quality chocolates. These products are not available elsewhere in the local area. As a retailer in the distribution channel they purchase their chocolate products directly from wholesalers. Charlotte thought it might be a good idea to travel to Belgium in person. She could visit different manufacturers and buy the products directly. This would cut out wholesaler costs and would give the business greater insight into the products being bought. It would also reduce variable costs per customer visit, estimated to be £15.00. Annual fixed costs will depend on the decisions to be made about place. Choccy Delight’s premium prices and estimated elasticity of -0.6 suggest spending per customer visit will be £25.00.
Charlotte and Georgia’s business consultant has helped them find suitable locations for the planned shop. The preferred location is in Bath city centre which is visited by tourists all year round. The annual fixed costs in this case will be £150 000. Alternative premises in a quieter location will reduce the annual fixed costs by £20 000 a year. Charlotte feels they need to extend the opportunities for potential customers to taste their range of products. This could be achieved by taking a stall at local markets, in particular the famous Christmas market in Bath. Georgia wondered if this would fit with the other elements of the marketing mix.
Charlotte and Georgia are confident they have a marketing mix that will make them successful. The business consultant has used secondary research to identify that the total value of the chocolate market in the UK in 2010 was £3.6 billion, with 9 out of 10 adults purchasing chocolate on a regular or semi-regular basis. New product development has been limited in the UK in recent years. The market’s large size, abundance of products and dominance of well-known brands means potential growth in the chocolate market is limited. Price elasticity of demand for chocolate such as Dairy Milk is elastic. Choccy Delights faced competition from speciality chocolatiers such as Hotel Chocolat and Thorntons in addition to the well-known brands such as Cadbury and Nestle.
After much consideration, Charlotte and Georgia decided to open their shop in their preferred location.
Assessment 2.18 Using the marketing mix: place
Place an order in 3 easy steps. Takes less than 5 mins.