Marketing Management (MB221) : January 2004:Suggested Answers

Suggested Answers
Marketing Management (MB221) : January 2004
Section A : Basic Concepts
1. Answer :
(b) <>
Reason : Inflation causes consumers to regulary switch to other brands.
2. Answer :
(a) <>
Reason : Routine Response/Programmed Behavior--buying low involvement frequently purchased low
cost items; need very little search and decision effort; purchased almost automatically. Examples
include soft drinks, snack foods, milk etc
(b) Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or
infrequently bought products. High degree of economic/performance/psychological risk.
Examples include cars, homes, computers, and education. Spend a lot of time seeking
information and deciding. Information from the companies, friends and relatives, store
personnel etc. Go through all six stages of the buying process.
(c) Limited Decision Making--buying product occasionally. When you need to obtain
information about unfamiliar brand in a familiar product category, perhaps. Requires a
moderate amount of time for information gathering. Examples include Clothes--know
product class but not the brand.
(d) Impulse buying, no conscious planning
3. Answer :
(d) <>
Reason : The product concept holds that the consumers will favor those products that offer the most
qulaity, performance or innovative feautures.
(a) The production concepts hold that consumers will prefer products that are widely available
and inexpensive.
(b) The selling concept holds that consumers and businesses, if left alone, will ordinarily not by
enough of the organisation’s products.
(c) The marketing concept holds that the key to achieving its organisational goals consists of
the company being more effective than competitors in creating, delivering, and
communicating superior customer value to its chosen target markets.
(e) The societal-marketing concept holds that the organisation’s task is to determine the needs,
wants and interests of target markets and to deliver the desired satisfactions more
effecitively and efficiently than competitors do.
4. Answer :
(b) <>
Reason : Stitching niches means seeking common interests, motivations or needs across ethnic groups.
Mass marketing does not take the needs of various distinct cultures into account, and creating
unique marketing mixes for individual mixes does not try to find a common basis among niches.
5. Answer :
(b) <>
Reason : Public sources of information such as magazines, consumer rating organizations or even
professionals not associated with the marketing company are known as nonmarketing-controlled
information sources.
6. Answer :
(c) <>
Reason : Selective retention is the process whereby a consumer remembers only that information which
supports his/her personal feelings or beliefs.
(a) Selective Distortion-Changing/twisting current received information, inconsistent with
beliefs.
(b) Selective Exposure-select inputs to be exposed to our awareness. More likely if it is
linked to an event, satisfies current needs, intensity of input changes (sharp price drop).
(d) Subliminal Perception, which means that people see or hear messages without being
aware of them, is a hotly debated issue with more popular appeal than scientific support.
Research evidence suggests that such messages have limited effect on behavior
(e) Selective Comprehension involves interpreting information so that it is consistent with a
person's attitudes and beliefs.
7. Answer :
(c) <>
Reason : The demand for soft drink containers is driven by the consumer demand for soft drinks;
therefore, the containers have a derived demand. Inelastic demand exists when a 1 percent
decrease in price produces less than a 1 percent increase in quantity demanded. With inelastic
demand, price elasticity is less than 1; hence option (b) is incorrect. Unitary demand exists when
the percentage change in price is identical to the percentage change in quantity demanded. In this
instance, price elasticity is equal to 1; hence option (d) is incorrect. Elastic demand exists when a
1 percent decrease in price produces more than a 1 percent increase in quantity demanded. Price
elasticity is greater than 1 with elastic demand; hence option (e) is incorrect.
8. Answer :
(b) <>
Reason : Usage rate- (quantity consumed or patronage—store visits during a specific period). Whether a
person is a nonuser or a light, medium, or heavy user is important in many segmentation
problems. The 80/20 rule, a concept that suggests 80 percent of a firm’s sales are obtained from
20 percent of its customers, is not fixed at exactly 80 and 20 percent but suggests that a large
fraction of a firm’s sales come from a small fraction of its customers.
(a) Geographic segmentation divides the market based upon the geographic distribution of
population (regional, urban, suburban, and rural); hence option (a) is incorrect.
(c) Demographics are the vital statistics that describe a population (gender, age, income,
family size, education, social class, and ethnicity).
(d) Psychographic segmentation involves examining attributes related to how a person
thinks, feels, and behaves (personality, lifestyles, and values).
9. Answer :
(c) <>
Reason : Marketing research is the process of defining a marketing problem and opportunity,
systematically collecting and analyzing information, and recommending actions to improve an
organization's marketing activities. Objectives are specific measurable goals the decision maker
seeks to achieve in solving a problem. Typical marketing objectives are (1) increasing revenues
and profits, (2) discovering what consumers are aware of and want, and (3) finding out why a
product isn't selling well.
10. Answer :
(c) <>
Reason : Convenience products are bought frequently, immediately, and with a minimum of comparison
and buying effort (groceries). The lack of forethought that went into this purchase made it a
convenience product.
(a) Specialty products are unique in some way and substitutes are not accepted (expensive
automobiles).
(b) Unsought products are those not normally thought of either because consumers don’t
want to think of them (burial insurance) or consumers are unaware of them (a telephone
number allowing you to check your email messages
(d) Shopping products are less frequently purchased and are carefully compared on
suitability, quality, price, and style (clothing).
11. Answer :
(c) <>
Reason : Brainstorming is a process designed to obtain the maximum number of ideas relating to a
specific area of interest.
12. Answer :
(e) <>
Reason : Heterogeneity results because no two customers are precisely alike; each will have unique
demands or experience the service in a unique way. Thus the heterogenity connected with
services is largely the result of human interaction and all of the vagaries that accompany it.
(a) Inventory problems exist with goods because many items are perishable and because
there are costs associated with handling inventory. With services, inventory carrying costs are
more subjective and are related to idle production capacity, which is when the service provider is
available but there is no demand. The inventory cost of a service is the cost of paying the person used to provide
the service along with any needed equipment. Inventory carrying costs of service vary widely,
from the high end of airlines and hospitals with highly trained, salaried specialists to the low end
of real estate agencies and hair salons with employees working on commission and needing little
expensive equipment.
(b) The quality of a service is often inconsistent. People who have different capabilities and
also vary in their job performance from day to day provide services. Inconsistency is much
more of a problem in services than it is with tangible goods, but problems can be reduced
through standardization and training.
(c) Services are intangible; they cannot be held, touched, or seen before the purchase
decision. A major marketing need for services is to make them tangible or show the benefits
of using the service.
(d) Incorrectness or Inaccuracy is otherwise referred as Impropriety.
13. Answer :
(e) <>
Reason : Dual distribution is an arrangement whereby a firm reaches different buyers by employing two
or more different types of channels for the same basic product.
(a) Intensive distribution means that a firm tries to place its product or services in as many
outlets as possible. It is usually chosen for convenience products or services.
(b) Exclusive distribution is the opposite of intensive distribution because only one retail
outlet in a specified geographical area carries the firm's product. It is typically chosen for
specialty products or services.
(c) Selective distribution lies between these two extremes and means that a firm selects a few
retail outlets in a specific geographical area to carry its products. It weds some of the
market coverage benefits of intensive distribution to the control over resale evident with
exclusive distribution. For this reason, selective distribution is the most common form of
distribution intensity.
14. Answer :
(c) <>
Reason : Social interpersonal bonds are common among professional service providers and their clients
as well as among personal care providers ( Hairdressers, Counsellers, health care providers) and
their clients.
(a) Financial bonds is considered to be the level one in the levels of relationship strategies,
the customer is tied to the firm primarily through financial incentives-lower prices for
greater volume purchases or lower prices for customers who have been with the firm a long
time.
(b) Service recovery refers to the actions taken by an organization in response to a service
failure.
(d) Customization bonds approach suggests that customer loyalty can be encouraged through
intimate knowledge and individual customers and through the development of “one-to-one”
solutions that fit the individual customer’s needs.
(e) Structural bonds are created by providing servicestore the client that are frequently
designed right into the service delivery system for that client.
15. Answer :
(d) <>
Reason : A discount store or discount house or discount center is a retail outlet engaged in selling
merchandise at prices below those customarily charged. It generally deals in national-branded
merchandise and fixed-price products. The discounter provides emphasis on a high-volume of
sales and rapid inventory turnover. Aggressive merchandising techniques are employed.
(a) Store retailers include many types, such as Specialty stores, department stores,
supermarkets, convenience stores, superstores, combination stores, hypermarkets, discount
stores, warehouse stores, and catalog showrooms.
(b) The factory outlet store is an off-price retailing operation that is owned and operated by
a manufacturer and that normally carries the manufacturer’s surplus, discontinued, or
irregular goods at a marked-down price. Many such stores are being organized into factory
outlet malls, which are located on freeways but at some distance from major population
areas. Examples of these retailers are the “Nike Outlet Store” and “Liz Claiborne Factory
Outlet.”
(c) A warehouse membership club is an off-price retailer that sells a limited selection of
brand-name grocery items, appliances, clothing, and other goods at deep discounts to
members who pay annual membership fees. The largest national chain warehouse club is
Sam’s Club. Stores look more like warehouses and offer few frills or services and consumers are expected to
buy in bulk. In exchange, consumers get low prices.
(e) Category killers are superstores that focus on a narrow product line. A category killer
carries a very deep assortment of a particular line and is staffed by knowledgeable
employees. They usually come into markets and “kill” the competition in that line of
products by virtue of their size and assortment. Examples of category killers are Toys ‘R’
Us and Best Buy.
16. Answer :
(c) <>
Reason : Prestige pricing involves setting a high price so that quality- or status-conscious consumers will
be attracted to the product and buy it. Products with an element of prestige pricing in them may
sell worse at lower prices than at higher ones because buyers tend to associate a lower price with
lower quality. Firms such as supermarkets often use target return-on-sales pricing to set typical
prices that will give them a profit that is a specified percentage of sales volume. Target returnon-
investment pricing is a method of setting prices to achieve an annual return-on-investment
(ROI) target; hence option (a) is incorrect.
17. Answer :
(a) <>
Reason : Public relations builds good relations with the organization’s various publics by obtaining
favorable publicity, building up a good “corporate image,” and handling or heading off
unfavorable rumors, stories, and events.
(b) Personal selling is a personal (face-to-face) presentation for the purpose of making sales
and building relationships.
(c) Sales promotion is a short-term incentive to encourage the purchase or sale of a product.
(d) Advertising is any paid form of nonpersonal presentation by an identified sponsor.
(e) Publicity is a non-personal, indirectly paid presentation of an organization, good, or
service. The primary advantage of publicity is its credibility. Disadvantages relate to the
lack of control over what the message says, to whom, or when.
18. Answer :
(a) <>
Reason : Comparative advertising shows one brand's strengths relative to those of a competitor.
(b) Advertisements or messages within advertisements, the concerning body orders a
company to run, for the purpose of correcting consumers' mistaken impressions created by
prior advertising.
(c) Advertising designed for the generic product category, as opposed to selective demand
advertising.
(d) Advertising to promote an institution or organization, rather than a product or service, in
order to create public support and goodwill.
(e) Pioneering advertisements tell people what a product is, what it can do, and where it can
be found.
19. Answer :
(c) <>
Reason : Strategic planning is the process of developing and analyzing the organization's mission,
overall goals, general strategies, and allocating resources. The strategic planning process is
carried out at the corporate level, business level, and product level. It begins with an analysis of
the organization's current strategic posture, but strategic planning focuses on the future.
20. Answer :
(c) <>
Reason : A strategic business unit has several distinct characteristics in it: (a) Is a single business that can
be planned independent of other businesses. (b) Has its own competitors. (c) Has one manager
with profit responsibility. The SBUs are analyzed as though they were a collection of separate
investments. This is called business portfolio analysis. The SBUs are positioned on a growthshare
matrix.
21. Answer :
(b) <>
Reason : Cash cows are dominant share of slow growth market enables sbu to generate large amounts of
cash to be used for company overhead and investment in other SBU.
(a) Question Marks/Problem Child (also called a "Problem Child") are high growth, low
share businesses. A question mark requires a lot of cash both to keep up with a rapidly
growing market and improve its share position. Strategy must decide between further
investment to move question marks to star status (differential advantage) or to phase out the
product.
(c) Stars are high growth, high share businesses. They are the market leaders in fast-growth
markets and often require heavy investment to build and/or maintain share in rapidly
expanding markets. The strategy is to build or even maintain or hold its position as long as
possible.
(d) Dogs are often targets for divestment, but may still be profitable and/or contribute to other
organizational goals
22. Answer :
(c) <>
Reason : Hold: Maintain market share. Often used for cash cows, which are already generating large
amounts of cash, and are fairly stable.
(a) Increase market share through cash injection. Make stars out of question marks.
(b) Sell the SBU. This generates cash for more promising SBUs. Question marks and Dogs are
ideal candidates to Divest.
(d) Increase short-term cash output of the SBU, even if this results in a loss of market share.
Pump cash from dogs or cash cows into stars or question marks.
23. Answer :
(c) <>
Reason : Product portfolio analysis is based on the idea that a product’s market growth rate and its
relative market share are important determinants of its marketing strategy.
24. Answer :
(b) <>
Reason : The number of channel levels from raw material to final product and distribution in which a
company will participate.
(a) The range of industries in which a company will operate. Some companies will operate in
only one industry; some only in a set of related industries; some only in industrial goods,
consumer goods, or services and some in any industry.
(c) The type of market or customers a company will serve. Some companies will serve only
the upscale market
(d) The range of regions, countries, or country groups in which a compnay will operate. At
one extereme are companies that operate in a specific city or state. At the other extreme are
multinationals such as Unilever and Caterpillar, which operate in alomost every country in
the world.
(e) The range of technological and other core competencies that a company will master and
leverage
25. Answer :
(b) <>
Reason : By employing a market development strategy, an organization might identify new markets for
its product by determining potential user groups for its current products, seeking additional
distribution channels in its present locations, or offering its product for sale in new geographic
locations, either domestic or international
(a) A market penetration strategy suggests that growth is possible by achieving a deeper
penetration (sell more) of its present product within a present market.
(c) Through a product development strategy, an organization might create an augmented, or
entirely new, product in order to stimulate the current markets and create new ones.
(d) An organization could consider diversification as a growth strategy. The organization
develops new products to sell to new markets. Also, it could involve acquiring or starting
businesses outside current markets
26. Answer :
(b) <>
Reason : Relationship marketing is building mutually satisfying long-term relationships with customers.
The aim of Customer relationship management is to produce high customer equity. There are
five levels in customer relationship building. Alternative (a) is incorrect as in basic level the salesperson simply
sells the product. In Accountable marketing the salesperson phones the customer to check
whether the product is meeting expectations, hence alternative (c) is incorrect. Alternative (d) is
incorrect because in the proactive level of relationship marketing the salesperson contacts the
customer from time to time with suggestions about improved products uses or new products.
27. Answer :
(b) <>
Reason : Marketing research is the systematic design, collection, analysis, and reporting of data and
findings relevant to a specific marketing situation facing the company.
Alternative (a) is incorrect because Exploratory research is used when there is a need for large
amounts of information. Alternative (c) is incorrect as Descriptive research is conducted when
there is a need to understand in detail about a specific phenomenon to solve a particular problem.
Alternative (d) is not term used for developing the research plan. Alternative (e) is incorrect as in
Observational research fresh data is gathered by observing the relevant actors and settings.
28. Answer :
(d) <>
Reason : Even if the channels are well designed and managed, there will be some conflict, if for not other
reason than the interests of independent business entities do not always coincide.
Alternatives (a) and (b) are not real types of conflict in distribution; hence they are incorrect.
Vertical conflict means conflict between levels within the same channel; hence option (c) is
incorrect. Alternative (e) is incorrect because multi-level conflict exists when the manufacturer
has established two or more channels that sell to the same market.
29. Answer :
(a) <>
Reason : Rangan, Moriarty and Swartz studied mature commodity market, steel strapping and found four
business segments; Programmed buyers, Relationship buyers, Transaction buyers and Bargain
hunters.
Alternative (b) is incorrect because Programmed buyers view the product as routine purchase
item, usually paying full price and receiving below average service. Relationship buyers regard
the product as moderately important and are knowledgeable about competitive offerings; hence
option (c) is incorrect. Alternative (d) is incorrect because Transaction buyers are price and
service sensitive; they see the product as very important for their operations. Gatekeepers are
people who have the power to prevent sellers or information from reaching members of the
buying center; hence option (e) is incorrect.
30. Answer :
(e) <>
Reason : Brand equity is the value a brand adds to the product. The sources of brand equity include the
product, its name, and its personification, logo, country of origin, advertising themes, and style
and packaging approach.
(a) Line extensions is the practice of using a current brand to enter a new market segment in its
product class.
(b) A brand mark is the part of the brand that appears in the form of a symbol, design, or
distinctive coloring or lettering
(c) A company uses private branding, often called private labeling or reseller branding, when it
manufactures products but sells them under the brand name of a wholesaler or retailer.
(d) The package is the most important component of the product as a communications device. It
reinforces associations established in advertising, breaks through competitive clutter at the point
of purchase, and justifies price and value to the consumer. Package cues include color, design,
shape, brand name, physical materials, and product information labeling.Services have four
major characteristics that greatly affect the design of marketing programs; Intangibility,
Inseparability, Variability and Perishability.
Section B : Problems
1. KFC has been successful due to the following reasons:
a. Universal Appeal (Protein)
b. Focus on core product (Chicken)
c. Consistency (Taste)
d. Emphasis on Quality
e. Socially well accepted (transcending religious beliefs)
KFC'S challenges in Global expansion
a. Legal/Regulatory
b. Cultural/Adaptation
c. Think Global, act Local.
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2. Questions to ask when analyzing International Markets are given as under:
a. About Markets
How large is the market?
How many consumers use the product?
What is our expected market share?
Is the market growing?
b. About competitors
Who are our major competitors?
What is the market share of each competitor?
What are the trends in market share among competitors?
c. About Culture
What is the distribution of the population by education, occupation, and religion?
Does our product fit the cultural values of the foreign country?
Can our marketing program be adapted to these cultural values?
d. About Consumers
What types of consumers buy this product?
What are the characteristics of the consumers in terms of demographics, life-style, and
attitudes?
How and when do consumers use the product?
What are their motives for buying the product?
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3. Population Services International (PSI) is partially successfull in delivering the message to the target
audience. As there is lot of hue and cry about the Balbir Pasha and Puliraja campaigns raised by number of
women’s organisations in Maharashtra and Andhra Pradesh, this campaign is considered as partially
successful campaign. The consulting agency (Lowe) and PSI should have taken these organisations into
consideration while launching the campaign.
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4. Government intervention in such campaigns is definetely a positive sign for the society. As these social
campaigns will not generate any revenue, the governement bodies will fund most of the campaigns. Nongovernmental
organisations like PSI will have tough time, if they are engaged in such campaigns. The
advantages of government intervention can be studied under following heads:
(a) Ample funding can be provided to these campaigns.
(b) There is a less chance of agitations, if the government would launch these campaigns with consensus.
(c) If any such complicacies takes place, government can easily handle with its adminstration.
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5. Students are expected to write how Dell Computers is selling products on its website http://www.dell.com/.
Students to cover following marks: -
a. CRM is attracting, aquiring and growing profitable customers.
b. CRM can identify profitable customer group for which mass customisation can be offered,otherwise
doing mass customistion to all the customers would be difficult,impracticable and non/less profitable
activity.
c. CRM can identify profitable customers however for attracting such customers mass customisation
can be of great help.
d. With mass customisation, customers gets delighted and sticks to the same brand, customer gives more
business fulfilling the objective of CRM.
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6. Mass customization is best defined as a delivery process through which mass-market goods and services
are individualized to satisfy a very specific customer need, at an affordable price. A firm by enabling itself
with CRM tools and its processes will get first hand inforamation on the customers needs and wants. This
data can be further utilised to new product development which will certainly help firms to bulid products
and services on mass cutomization
Advantages of Mass Customization Low inventory --Inventory control is one benefit clothing
manufacturers could gain from mass customization. These manufacturers tend to have high inventories of
finished products and must forecast demand many months in advance. But those forecasts are likely to be
wrong, resulting in surpluses of some products. What's needed to transfer the concept of mass
customization to the commercial clothing industry is for manufacturers to abandon their mass-production
techniques and create flexible product-manufacturing teams that would be able to add to clothing special
features such as differently shaped pockets.
Consumers will demand it because they are getting so much smarter and know how things work. If the
larger clothing manufacturers do it, everyone will .
Retaining of customers - Consider a Fictitious Customized Online Magazine:
Mass customization provides a way to automate relationship marketing, and thus provides small firms
another way to beat their bigger, slower competitors. The winning firms in the information economy will be
those that can deliver the right message, to the right customer, at the right time. Savvy marketers today will
look for ways to adapt their strategy to the dynamics of one-to-one marketing.
Profit Potential - It’s also potentially very profitable. In one study by the American Apparel Manufacturers
Association in Washington, it was estimated that if 10% of manufacturing output were devoted to mass
customization, it would produce 30% of company profits.
Less operating cost, long term business relationship, less operating expense and inventory. Another thing is
the creation of a long-term business relationship with customers. It's much better from a cost perspective to
keep a current customer than to get a new one. So even if your mass-customized product is not cheaper to
make, it can reduce your marketing costs because it satisfies customers to such a degree that they don't
leave you.
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Section C: Applied Theory
7. The problems which will be encountered in doing such research across a variety of countries include the
difficulties associated with sample design (inadequate population data), questionnaire design,
hiring/training/control over interviewers, data collection methods (phone versus personal interviewing), and
actual data collecting (asking questions and recording answers). It will be difficult to compare the results
across countries given the variation in the sample designs, the response rates of different groups, the caliber
of the interviewers, and the meaning of key words in the questionnaire.
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8. The initiator of the buying decision could be identified as the salesperson who identified the need but
more likely would be the sales force manager who suggested the purchase be made.
Influencers/evaluators might include the finance office (which would control the amount of money
available for the purchase), members of the sales force (who might provide information about phones that
competitors are using), and the purchasing department (which would have a good knowledge of alternative
suppliers).
Gatekeepers could include management (which would only approve of certain phone models that are
compatible with existing phone systems), the finance office (which may only approve a limited budget),
and the purchasing department (which would recommend matches with likely vendors).
The decider might be the president of the company, the president of marketing, or the sales force manager;
the decider is the person with the power to approve the brand of phone.
The purchaser will be the purchasing agent in the purchasing department who will negotiate the terms of
the sale.
Users will include all salesforce members who will use the cellular phone
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9. Substantiality: A selected segment must be large enough to warrant developing and maintaining a special
marketing mix. (This means that the segment is commercially viable.) One could assume that many people
have a dry scalp problem, especially in dry climates, after a sunburn, or when participating in outdoor
activities with high winds (skiing, sailing, and so on).
Identifiability and Measurability: The segments must be identifiable and their size measurable.
Descriptive data regarding demographic, geographic, and other relevant characteristics of segment
members must be available. It may be difficult to identify people who have dry scalps and describe them in
terms of relevant characteristics. People may not realize that they have dry scalps and therefore may not
respond to marketing research probes.
Accessibility: The firm must be able to reach members of targeted segments with customized marketing
mixes. If the segment is not measurable and cannot be described, it may be difficult to precisely know how
to reach the dry scalp segment. Where do people with dry scalps shop? What media do they watch or read?
What are their buying habits?
Responsiveness: The market segment must respond differently from other segments to a marketing mix;
otherwise, there is no need to treat that segment separately. People with dry scalps may not consider their
problem to be important enough to respond differently and may continue to buy their current shampoo,
which seems to meet their needs
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