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Marketing Management (MB221) July 2004
Section A : Basic ConceptsMarketing Management (MB221) July 2004
FedEx had money back guaranteed approach too. FedEx home delivery uses technology to provide better service to
shipper and their residential customer. Shippers transit all package data electronically, via electronic date interchange,
which allowed FedEx home delivery,as FedEx was receiving all its shipping data electronically from shippers that can
tailor its delivery services specifically for the residential customer.
For example, Federal Express the first service company to win the Balridge Quality award, is built on a commitment to
reliable and fast delivery service. The company makes an explicit promise to its customers. “When it absolutely,
positively has to be there overnight”. Keeping that promise is essential to the relationship FedEx has established with its
customers because FedEx – like a travel agent, stockbroker, or realtor- acts on behalf of a customer. For this reason,
relationship marketing is a major strategy practiced by FedEx.
To strengthen its customer relationships in 1993 FedEx introduced the Power-ship program. Regular FedEx customers
are given a computer loaded with special software; the customer only has to pay for a phone line to connect the
computer to the local FedEx office. Using this computer, a customer can check on the status of all its FedEx shipmentswhether
they have left the local FedEx office, arrived in the destination city, or been received at their final destinations
(including the name of the person who actually received the item and at what time). This ability to check a shipment’s
progress and easily confirm its arrival provides customers with peace of mind, a definite added value. With its addedvalue
service, FedEx is building stronger customer relationships. Some experts speculate that this concept of
relationship marketing is as important in the 1990s as the basic marketing concept was thirty years ago.
END OF SECTION B
Section C : Applied Theory (20 Marks)
• This section consists of questions with serial number 8 - 9.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on section C.
8. Assume that you are in charge of test marketing your company's new brand of nonalcoholic wine. List ten criteria
you should consider when choosing a good test market city. What is an advantage for your company of using test
marketing? What is a disadvantage of using test marketing?
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9. Services have four unique characteristics that distinguish them from goods. Name and briefly define each of these
four characteristics. These characteristics can make the marketing of services more difficult. What special
strategies should marketers adopt for services to address each of the four characteristics? Use the example of a
restaurant to help describe each of the four characteristics.
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END OF SECTION C
END OF QUESTION PAPER
1. 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
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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.
2. Answer : (a)
Reason : Maturity is characterized by a slowing of total industry sales or product class revenue. Marginal
competitors begin to leave the market. Profit declines because there is fierce price competition among
many sellers and the cost of gaining new buyers at this stage increases. Marketing attention in the
maturity stage is often directed toward holding market share through further product differentiation and
finding new buyers.
(b) The decline stage occurs when sales and profits begin to drop. A company will follow one of two
strategies to handle a declining product: deletion or harvesting.
(c) The introduction or pioneering stage is characterized by little competition. Product development
costs are high. Promotion focuses on stimulating demand for the product category, rather than a
single brand.
(d) In the growth or market acceptance stage, both sales and profits rise. Competitors enter the
market and profits start to decline.
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3. Answer : (d)
Reason : Test marketing is a limited introduction of a product and a marketing program to determine the
reactions of potential customers in a market situation. Test marketing involves offering a product for
sale on a limited basis in a defined area. Market tests are also used to check other elements of the
marketing mix besides the product–such as price, level of advertising support, and distribution.
Disadvantages are that market tests are time consuming and costly and they also reveal plans to
competitors.
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4. Answer : (d)
Reason : Difference between goods and services, and related to problems of consistency, is inseparability. The
consumer cannot (and does not) separate the deliverer of the service from the service itself. The amount
of interaction between the consumer and the service provider depends on the extent to which the
consumer must be physically present to receive the service.
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5. Answer : (c)
Reason : The straight rebuy is characterized by the routine purchase of familiar products from regular
suppliers. It is common for suppliers to set up automatic ordering systems to ensure that buyers
continue to order from them and to make the process more convenient.
(a) In a modified rebuy, the buyer requires additional information or a change to the original
product.
(b) New task buying is a situation in which a buyer purchases a product for the first time.
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6. Answer : (d)
Reason : Some producers select two or more different channels to distribute the same products to target markets,
a practice called dual or multiple distribution.
(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) 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
(c) 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
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7. Answer : (e) <>
Reason : A frequently used demand-oriented pricing practice is bundle pricing-the marketing of two or more
products in a single "package" price. Bundle pricing is based on the idea that consumers value the
package more than the individual items. It often provides a lower total cost to buyers and lower
marketing costs to sellers.
(a) Manufacturers will sometimes estimate the price that the ultimate consumer would be willing to
pay for a product. They then work backward through markups taken by retailers and wholesalers
to determine what price they can charge wholesalers for the product. This practice, called target
pricing, results in the manufacturer deliberately adjusting the composition and features of a
product to achieve the target price to consumers.
(b) Captive-product pricing is setting a price for products that must be used along with a main
product, such as blades for a razor and film for a camera. In the case of services, this strategy is
called two-part pricing where there is a fixed fee and a variable usage rate.
(c) Psychological pricing is the concept that certain prices are more appealing than others are. The
psychology of prices and not simply the economics are considered. The price is used to say
something about the product.
(d) A penetration pricing policy involves setting prices of products relatively low compared to those
of similar products in the hope that they will secure wide market acceptance that will allow the
company to later raise its prices. Such a policy is often used when the firm expects competition
from similar products within a short time and when large-scale production and marketing will
produce substantial reductions in overall costs.
8. 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) Direct marketing is direct communications with carefully targeted individual consumers to
obtain an immediate response through the use of nonpersonal tools (mail, telephone, fax, and
email).
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9. Answer : (c)
Reason : Peter’s is considering its Media mix in the given situation.
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10. Answer : (b)
Reason : In the maturity stage, sales increase at a decreasing rate. Price competition intensifies, and profits
decline.
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11. Answer : (b)
Reason : Institutional advertising promotes a concept, idea, or philosophy. The objective of institutional
advertisements is to build goodwill or an image for an organization, rather than to promote a specific
good or service.
(a) Informative advertising is used to inform consumers about a new product or feature and to build
primary demand.
(c) When a brand is directly or indirectly compared to a competitor, it is known as comparative
advertising.
(d) The objective of reminder advertising is to remind people about the brand.
(e) Product advertising places a message to promote a good or service.
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12. Answer : (b)
Reason : The given situation is an ideal example of Reinforcing customer purchase decision.
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13. Answer : (c)
Reason : When a firm has several different businesses, it often organizes them into single groupings of related
businesses called strategic business units (SBU). They are defined in terms of customer groups,
customer needs, and technology. SBUs consist of separate units of the company that can be planned
independently from other company businesses. Thus, to be identified as an SBU, an entity should be a
separately identifiable business, have a distinct mission, have its own competitors, and have its own
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executive group with profit responsibility.
Strategic alliances - cooperate for the purpose of achieving common goals such as competitive
advantage or customer value creation.
14. Answer : (c)
Reason : Problem Children (also called a "Question Marks") 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.
(a) Dogs are often targets for divestment, but may still be profitable and/or contribute to other
organizational goals. The strategy is to minimize expenditures.
(b) Cash Cows, which should be "milked," are low growth, high share businesses. When the
market’s annual growth rate falls to less that 10%, the star becomes a cash cow. Cash cows have
the ability to generate more cash than can be reinvested profitably in its own operations. Thus,
the profits are used for investment in other businesses. The strategy is to defend market share.
Also, they are possible candidates for a harvest strategy
(d) 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.
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15. Answer : (b)
Reason : Inflation is a measure of the change in the value of money which is generally expressed as a percentage
reduction in value over the previous year which is the rate of inflation. Inflation causes consumers to
decrease their brand loyalty to products they have traditionally used
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16. Answer : (e)
Reason : Gatekeepers control the flow of information to other members of the buying center.
(a) The influencer is the member (or outsiders) who affect the purchase decision by supplying
advice or information.
(b) The buyer is the member with the formal authority to purchase the product.
(c) Users - these people in the organization actually use the product or service.
(d) The decider is the member who makes the actual purchase decision.
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17. Answer : (e)
Reason : Forecasting or estimating the actual size of a market is often a key goal in a marketing research study.
Good sales forecasts are important for a firm as it schedules production. To develop a sales forecast
involves understanding (1) some basic forecasting terms, (2) two major approaches to forecasting, and
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(3) specific forecasting techniques.
18. Answer : (c)
Reason : 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.
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19. 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) Build - increase market share through cash injection; make stars out of question marks.
(b) Divest- sells the SBU; this generates cash for more promising SBUs. Question marks and dogs
are ideal candidates to divest.
(d) A Harvest strategy should be used in the two cells just below the three-cell diagonal. These
SBUs should not receive substantial new resources.
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20. Answer : (c)
Reason : A penetration pricing policy involves setting prices of products relatively low compared to those of
similar products in the hope that they will secure wide market acceptance that will allow the company
to later raise its prices. Such a policy is often used when the firm expects competition from similar
products within a short time and when large-scale production and marketing will produce substantial
reductions in overall costs. The low price must help keep out the competition, and the company must
maintain its low price position.
(a) A skimming pricing policy involves setting prices of products relatively high compared to those
of similar products and then gradually lowering prices. The skimming price is the highest price
possible that buyers who most desire the product will pay (skim the cream off the top -- skim the
innovators).
(b) Price discrimination is the practice of unfairly pricing the same quality, grade, and quantity of
goods differently for different customers.
(d) Dumping is the practice of pricing products in host countries below cost or less than their
price in the marketer's home country. Nearly every country outlaws dumping.
(e) Predatory pricing is the illegal practice of setting unreasonably low prices to force competitors
out of business. The Sherman Act and the Federal Trade Commission Act cover predatory pricing.
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21. Answer : (b)
Reason : Adverting would be the prime choice P& G prefer to promote the new offering.
Personal selling is the face-to-facd interaction with one or more prospective purchasers for the
purpose of making presentations, answering questions and procuring orders, hence opion (b) is
incorrect. Sales promotion is the variety of short-tem incentives to encourae trial or purchase of a
product or service. Public relations are variety of programs designed to promote or protect a company’s
image or its individual products, hence option (d) is incorrect.
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22. 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
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23. 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.
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(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
24. 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
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25. 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.
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26. 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.
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27. 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.
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28. 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).
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29. 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.
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30. 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
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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).
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