Marketing Management (MB221): January 2005

Marketing Management (MB221): January 2005

Section A : Basic Concepts (30 Marks)
• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
• Maximum time for answering Section A is 30 Minutes.
1. Advertising display material located at the retail store, usually placed in an area where payment is
made, such as checkout counter, is called
(a) Newscaster (b) Painted bulletin (c) Point of purchase display
(d) Spectacular (e) Exterior display.
< Answer >
2. Which of the following is the definition of Proactive marketing?
(a) A sales person sells the product but does not contact the customer again
(b) A sales person sells the product and encourages the customer to call if he has any complaints
(c) Sales person calls the customer after a small time period to check whether customer is satisfied
with the product
(d) Sales person contacts the customer from time to time with suggestions about product usage
(e) Companies work in tandem with their customers to provide better services.
< Answer >
3. Sanjana buys L’Oreal products because Diana Hayden endorses the product and she wants to be like
her. In this case the reference group which is affecting Sanjana’s buying behaviour is
(a) Membership reference group (b) Aspirational reference group
(c) Disclaimant reference group (d) Avoidance group
(e) Secondary reference group.
< Answer >
4. Consumers show a great amount of brand differentiation when buying a low involvement product and
only a few will stick to one brand. This kind of buying behaviour can be termed as
(a) Extensive problem solving behaviour (b) Impulsive buying behaviour
(c) Variety seeking behaviour
(d) Dissonance reducing buying behaviour (e) Habitual buying behaviour.
< Answer >
5. In a recent research study initiated by Tel-E-Fone Telecommunications, survey calls were made to a
randomly selected group in which every member has an equal chance of selection. This type of sample
selection is called
(a) Probability sample (b) Convenience sample
(c) Judgement sample (d) Quota sample (e) Area sample.
< Answer >
6. The reseller market mainly consists of
(a) Consumers (b) Manufacturers
(c) Wholesalers and retailers (d) Industrial users (e) Government.
< Answer >
7. Mohan wants to buy a refrigerator and he has checked out a few brands like LG, Kelvinator, etc. and is
contemplating which brand to buy. Which stage of the buying decision process is Mohan in?
(a) Information Search (b) Evoked set formation
(c) Evaluation of alternatives (d) Problem recognition
(e) Post purchase analysis.
< Answer >
8. Reading through a copy of ‘The Outlook’ containing advertisements for sweaters from Monte Carlo,
Jeans from Levi’s and tennis shoes from Adidas, Martin remembers only the shoes ad. Martin has
engaged in selective
(a) Distortion (b) Decision-making (c) Analysis
(d) Retention (e) Reading.
< Answer >
9. Penetration pricing occurs when a business
(a) Charges the lowest price possible to achieve a large market share
< Answer >
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(b) Charges a high price to provide a certain image
(c) Charges a price above that of competitors
(d) Is forced to charge a high price to cover the costs of advertising
(e) Charges high price because they want to skim the market.
10. Generally at hill stations, the hotels increase the prices during the holiday season because they expect
more demand. This kind of pricing strategy is called
(a) Perceived value pricing (b) Going rate pricing
(c) Value pricing (d) Differentiated pricing
(e) Psychological pricing.
< Answer >
11. A market niche
(a) Is a broadly selected target market segment
(b) Involves a business directing its marketing efforts to two or more target market segments
(c) Is a narrowly selected target market segment
(d) Involves a business directing its marketing efforts to an international target market
(e) Focuses only on individual customers.
< Answer >
12. A branded, high volume, low value consumer good is most likely to be sold through which of the
following types of distribution channels?
(a) Direct sale from the manufacturer to consumer
(b) Sale through brokers
(c) Sale through specialist retail outlets
(d) Sale through many general retail outlets
(e) Directly from the wholesalers without retailers.
< Answer >
13. Which one of the following buying situations is most consistent with routine response behaviour?
(a) Anil buying his first pair of basketball shoes
(b) Gita buying a new set of tyres for her car
(c) Sunil buying a new fishing rod and reel
(d) Sita buying a 10kg rice bag at Food World
(e) Manoj buying a new software programme.
< Answer >
14. Many a times, we have seen electronic touch screens in railway stations and airports, which provide
information to customers regarding products and services of the organization. This is an example of
(a) Direct marketing (b) Database marketing
(c) Kiosk marketing (d) Telemarketing (e) Multilevel marketing.
< Answer >
15. Vauxhall Motors is producing a new sophisticated model of a van. Which one of the following would
be a likely variable for segmenting the market for this new model?
(a) Religion (b) Geographic location
(c) Income (d) Gender (e) Values.
< Answer >
16. Which of the following are runner-up companies that aggressively attack competitors to get more
market share?
(a) Market leaders (b) Market challengers
(c) Market followers (d) Market nichers
(e) Market penetrators.
< Answer >
17. Which of the following stages is not included in AIDA’s theory?
(a) Gaining interest (b) Evaluation (c) Securing attention
(d) Inducing action (e) Building satisfaction.
< Answer >
18. Procter and Gamble makes at least eight different detergents. This illustrates
(a) Product mix width (b) Product mix consistency
(c) Product mix depth (d) Market item width
(e) Product line depth.
< Answer >
19. To gain market share, ‘Lada’ entered car markets with a comparatively low price. One of the negative
side effects of taking this pricing position is
(a) A negative impact on consumers' perceptions of quality
(b) The matching of the price by the competitors
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(c) A high return on investment levels affecting tax balances owed
(d) Poor survival chances in the market
(e) Failure of the product.
20. Sigma-Sunco has decided to introduce its new sunscreen eye drops in a limited market consisting of
only two cities and closely monitor the reactions of potential customers to the product and marketing
program. This is called
(a) Diffusion analysis (b) Use test (c) Concept test
(d) Test marketing (e) Laboratory test.
< Answer >
21. Rajeev Kapoor is a chef in a new downtown restaurant. He has sent out press releases to the major local
media and has invited food critics to dine in his restaurant. Rajeev is engaging in
(a) Public relations (b) Personal selling (c) Sales promotion
(d) Advertising (e) Direct marketing.
< Answer >
22. When the salesperson told the safety engineer that his company needed to buy a mercury clean-up kit,
the engineer promptly replied that his company did not need such a thing and refused to introduce the
salesperson to the company’s purchasing agent. In this instance, the safety engineer acted in which
buying center role?
(a) Influencer (b) Buyer (c) User (d) Decider (e) Gatekeeper.
< Answer >
23. Munna jumps out of his truck and runs into a Food World store to grab a drink. While he is paying for
his drink, he notices the chocolate bars at the counter and grabs one to buy. The chocolate bar in this
case is considered to be a/an
(a) Specialty product (b) Unsought product
(c) Convenience product (d) Shopping product
(e) Industrial product.
< Answer >
24. Acme Ltd. has agreed to provide financial assistance to a local community festival so long as the
company name is prominently displayed at the event. Acme is engaging in
(a) Publicity (b) Sponsorship (c) Public relations
(d) Advertising (e) Sales promotion.
< Answer >
25. A brand is a name intended to identify the product of one seller and differentiate the product from
competing products. Coca-Cola is the best-known brand name in the world. The name has a highperceived
quality and high brand loyalty among soft drink users. The company has developed the brand
name for over 100 years. Coca-Cola has a valuable
(a) Line extension (b) Brand mark (c) Private brand (d) Package (e) Brand equity.
< Answer >
26. When a customer buys one of its cars, a Ford Motor Company dealership sends out the entire team that
was responsible for handling the customer's business to meet the customer. The team congratulates the
customer for his/her purchase in a small celebration. This is an example of
(a) Increasing the effectiveness of distribution channel marketing
(b) Reinforcing the customer purchase decisions
(c) Identifying the best customers
(d) Designing the targeted marketing communications
(e) Inducing product trial by new customers.
< Answer >
27. Rahul is a marketing manager faced with planning marketing strategies during times of inflation. He
should be aware that inflation causes consumers to
(a) Purchase more goods and services to support their psychological well-being such as counseling
and stress management training
(b) Decrease their brand loyalty to products they have traditionally used
(c) Buy in small quantities until inflation is over
(d) Consume more meals away from home
(e) Put more money into savings accounts because prices are too high.
< Answer >
28. In testing her firm’s new TV ads for Batman action figures, Beth discovers the ads make children think
that the action figures can actually fly. Beth now faces an ethical decision regarding which event of the
marketing mix?
(a) Product (b) Price (c) Distribution (d) Promotion (e) Strategy.
< Answer >
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29. Dakotah, a South Dakota-based producer and marketer of fine home furnishings, authorized Dan River
Mills to produce and market a line of sheets under the Dakotah name. This arrangement is an example
of
(a) Brand extension (b) Brand licensing (c) Family branding (d) Individual branding
(e) Co-branding.
< Answer >
30. Pankaj’s purchase behavior is influenced by his hobbies of antique firearms, working out, computers,
his interest in scuba diving, music, swimming and his deeply held political opinions. All of these things
are part of the personal influence factor called
(a) Lifestyle (b) Personality (c) Beliefs (d) Attitude (e) Values.
< Answer >
END OF SECTION A
Section B : Caselets (50 Marks)
• This section consists of questions with serial number 1 – 5.
• Answer all questions.
• Marks are indicated against each question.
• Detailed explanations should form part of your answer.
• Do not spend more than 110 - 120 minutes on Section B.
Caselet 1
Read the caselet carefully and answer the following questions:
1. The Internet has not only revolutionized personal lives, but has even transformed the world of business to a great
extent. Comment on the statement with reference to Amway’s Online Marketing strategy. What are the advantages
and disadvantages of Online Marketing?
(8marks) < Answer >
2. What are the other forms of direct marketing in use? Briefly explain, giving examples of at least two other
companies, which are using direct marketing strategy.
(6 marks) < Answer >
The emergence of direct marketing has been one of the most significant developments in recent years. The growth of
direct marketing has been phenomenal, with marketers continuously adopting the latest technologies to derive
maximum profits from direct marketing. Beginning with the conventional telephonic sales, direct marketing has now
taken off on a global scale, as companies around the world are using web technologies to make their marketing
programs more effective. The Internet has quickly become very important to businesses. It allows one computer to talk
to others, linking them across the world.
What is Amway?
Amway is one of the world’s largest direct sales companies. It makes and brands its own products. It sells these to
people who want to run a business, selling Amway products. These people (called Independent Business Owners or
IBOs) then sell them to consumers. It allows the IBOs to build business through retailing products and sponsoring other
people, who in turn, can retail products and offer the business opportunity to others. By passing sales and marketing
knowledge to the developing team, IBOs not only build their own business network but also enable others to build one
of their own. With operations in more than 80 countries and territories and products tailored for local regulations and
preferences, Amway is one of the largest local companies in the world. Amway's business opportunity reaches people
all around the globe, helping them to live better lives and realizes their hopes for themselves and their families.
Amway gives IBOs help and support when it is needed. Amway thought that the best way to do this, across the world
and at any time of the day (24/7) was through websites. It carried out some market research to see if its IBOs would be
keen to work this way. It found that many IBOs:
• Wanted advice and information quickly.
• Wanted to work from home.
• Were ‘go getters’ keen to use new technology.
The Amway model
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Amway helps IBOs by giving them advertising and other material to help sell its products. IBOs then order products
from Amway. A website allows IBOs to get the information they need and also to order products on-line. It also lets
them work at any time of the day they want to and from wherever they want.
Amway’s plan
As far as it could, it grouped countries together to lower costs. Once the first sites were running, Amway could see that
the direct sales model worked well on the web. Amway then took the best parts of the sites – the bits that worked the
best – and used these in its new sites. The new site in the UK is called AMIVO. Over a third (and rising) of Amway’s
UK sales are now made using this website.
Conclusion
Amway uses the web to link to its 3.3 million IBO customers all over the world. The web helps with sales, advice,
transport, distribution and production. The use of the web has helped Amway – with its direct sales model – to compete
better with other businesses that use more traditional methods.
Caselet 2
Read the caselet carefully and answer the following questions:
3. Product innovation should be a major component of the product policy of a firm. Explain how Gillette has met its
customers’ expectations by continuously making innovations in its products.
(8 marks) < Answer >
4. In this era of cut-throat competition, New Product Development is very crucial for the survival of a firm, but there
are many risks involved in it. Identify the risks involved in being the “first mover” in the market.
(5 marks) < Answer >
5. What are the stages of new product development? Explain with reference to the Gillette case.
(8 marks) < Answer >
Mr. King C. Gillette devised and marketed the first safety razor in 1901. In a short span of time, Gillette converted his
idea into a highly successful, marketable product. Speed to market has been a characteristic of the famous company,
which still bears his name, ever since. The Gillette Company continues to recognize the importance of 'being ahead of
the field' in a competitive market in which consumer requirements are becoming increasingly diverse and demanding.
Rather like batteries, razors and shavers are a means to an end - it's what they produce that really matters. Looks and
style are increasingly important, but to the person looking for the perfect shave it is the razor's performance that matters
most of all. Meeting this challenge involves Gillette coming up with good ideas for product improvement and then
taking advantage of modern technology to convert them into economically viable products. Gillette's vision statement
reads:
'To build total brand value by innovating to deliver consumers value and customer leadership faster, better and more
completely than our competitors.'
The Gillette Company has a long history of being 'the first to market...' in its own areas of operation. Its achievements
include producing the first successful:
• Safety razor in 1901.
• Trac II introduced in 1971.
• Twin bladed razor which was the world's first twin blade shaving system, lightweight and easy to handle, launched
in 1972. GII, its international version, was introduced in Germany, its first overseas market, in 1972.
• Twin bladed disposable razor in 1976.
• Pivoting head razor in 1979.
• Pivoting head disposable razor in 1980.
• Razor designed specifically for women called Sensor, in 1992. Sensor Excel was introduced in 1993. The Sensor
Excel twin blade cartridge incorporates a revolutionary skin guard composed of five soft, flexible microfins that
deliver — at the time — unprecedented shaving closeness and comfort. It debuted in Western Europe, with a U.S.
launch in 1994.
• The Custom Plus line of twin blade disposable razors for men and women was introduced in 1994, featuring an
improved lubricating strip and longer handle for greater control.
• Triple blade razor “Mach 3” launched in 1998. Gillette M3Power -- a MACH3 innovation -- is a groundbreaking,
powered wet shaving system for men that delivers a totally new shaving experience resulting in Gillette’s best
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shave ever.
• Gillette for Women Sensor Brights razors in 1998.
• 1999 -- The Gillette Company introduced its second entry into the growing teen shaving category, new Gillette for
Women Sensor Dazzlers razors.
• Gillette Sensor 3 three-blade premium disposable razor. Sensor 3 represents a significant breakthrough in
disposable razor performance.
• 2003 – Building on the tremendous success of Venus, the world's best-selling women's razor, the Gillette
Company introduced Venus Divine, a new razor that delivers the closest shave for divinely smooth skin.
As well as being first to market, Gillette has also continuously produced products, which feature improvements to
existing technologies, including 3 bladed disposables and ergonomically superior handle developments, including
Sensor and Venus for Women as stated above.
This timeline above also demonstrates how the speed of innovation has accelerated with shorter and shorter gaps
between new introductions and superior products. Being 'the first to market…' can bring advantages known as 'first
mover advantages'. These include being able to generate initial consumer interest via both media investment and
accompanying press and PR coverage. This then leads to the main retail stores displaying the products in-store and
supporting the products with powerful promotional campaigns.
There are risks of being the innovator, however. To be successful, the innovation process has to be conducted
thoroughly. This usually involves a great deal of research and in more than one form.
Gillette conducted detailed research before launching any of their new products. They went through all the stages of
new product development right from the idea screening stage to the commercialization stage.
They undertook Qualitative research (working with several small focus groups comprising, for example, people who
shave and discussing with them what they look for in a razor/blades/shaving system) and Quantitative research (using
a questionnaire with a large, representative sample of people, for example, how many people shave what do they use to
shave, what products do they buy). From consumer research, the company moved into technological research and
development. This involved converting a good idea into a product design and then discovering whether modern
technology is able to reproduce it to the high specifications required and in the quantities needed. Then the firm
produced prototypes that were test-marketed on a representative sample of potential consumers. In the light of their
reaction, the product was then refined and developed until it is as good as it can be.
Within the original research and analysis, there was also another vital question, which needed to be asked. "Will this
proposed new venture generate profits for the company"? Many businesses have come unstuck by wrongly believing
the answer to be "Yes". Generally speaking, any business must be careful in estimating potential sales. Some
organizations may get into financial difficulties if they are overly optimistic in their planning, which may result in them
going bankrupt or being acquired by a better-managed rival. Ironically, the rivals may not be as creative but are better at
managing their overall business.
Gillette recognized that different segments of the market are seeking different product benefits. So, over the years, it
has sought to develop several product categories ranging from popular disposable razors to elaborate shaving systems.
Gillette has the following four core business areas.
• Personal grooming: A range of products using the Gillette brand, including razors, razor blades, shaving creams.
Brands include Gillette, Gillette Series, Right Guard, and Right Guard Extreme.
• Portable power: The full range of batteries and torches sold under the Duracell brand name.
• Oral care: Dental and oral care products. e.g. Oral-B manual toothbrushes and Braun Oral-B electric
toothbrushes.
• Electrical appliances: Domestic items e.g. dry shavers, hair dryers and hair stylers, under the Braun brand name.
Personal diagnostic appliances. e.g. electronic ear thermometers, under the Thermo Scan brand name. A range of
Braun household appliances including kettles, coffee makers and food processors.
Gillette is the market leader in the majority of these areas, and the company continues to invest in each of these core
categories and remains innovative. Its scientists, technicians and product engineers are continually trying out new
features and production techniques with a view to improving product performance. The company's longstanding interest
in being 'first to get it right' remains a key element of its continuing prosperity and progress.
Caselet 3
Read the caselet carefully and answer the following questions:
6. Chart out a marketing strategy for ‘MUMBO’, listing out the various decisions Mr. Green is required to make
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regarding the marketing mix variables.
(8 marks) < Answer >
7. Tea Bar being a new concept, discuss how the product differentiation and product positioning needs to be done so
as to capture the minds of the customers.
(7 marks) < Answer >
Michael Green has decided to put the British cuppa back on the map by launching the first of what he believes will be a
large chain of specialized tea-shops.
Mr. Green previously had experience as a 'brand-builder' and has worked on brands including Prêt a Manger and
Haagen Dazs. But now he wants to create one of his own and has launched 'Mumbo' - a tea-bar concept.
The challenge
Some 5.8 billion cups of tea are consumed in the UK each year. With this in mind, Mr. Green wants to launch a global
brand to rival the latest coffee craze that is taking over the Great British high street. "Having seen the development of
the cafe lifestyle, it struck me that there was a gap in the market for those who enjoy tea and also for the many who do
not know leaf tea," he explains. Of course, every brand needs a symbol or an icon. Mr. Green has created a friendlylooking
Indian elephant as the official logo for Mumbo. He hopes that it will become a regular feature of towns and
cities across Britain.
Mr. Green also enlisted the help of Phil Mumby who has spent more than twenty years working for one of the country's
largest tea firms before setting up his own tea tasting and consultancy business. Together they have identified 35
different teas from around the world to ensure Mumbo 'sippers' get the best cuppa going. They import their tea from
reputable suppliers, ensuring that a wide selection is available. The first of the Mumbo outlets recently opened in King's
Street, Manchester. The Mumbo (Number One) operates on three floors and serves sippers a range of food including
afternoon teas and evening cocktails. Coffee and tea bags are off the menu. Customers can choose to drink on one of
Mumbo's three floors, which include a covered roof terrace, or they can of course take out their tea.
"I knew we would succeed if we got people to taste the sensation of real leaf tea. Tea is more interesting than coffee
because it has more flavor and variety and it is healthier".
Now that the flagship store is in place, Mr. Green can concentrate on his mission to introduce the public to an entirely
new approach to the taste sensation of leaf tea. He is already working on rolling out the concept throughout the UK and
then the world.
“We want to enable our sippers to find their own personal tea taste sensation. However, if they do not like their first
choice after taking their first sip we will change it for a flavor they believe they will prefer”, says Green.
END OF SECTION B
Section C: Applied Theory (20 Marks)
• This section consists of questions with serial number 7 - 9.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on section C.
8. Ever Glow is a company that is into manufacturing and marketing of skin care products. Of late, the sales of the
products are reducing and the company wants to try out some sales promotion techniques to improve the sales.
Discuss the importance of sales promotion and suggest the various sales promotion techniques that can be used by
this company to improve its market share.
(10 marks) < Answer >
9. Pet food and pet care products is one of the emerging markets in India, even though it is still in a very nascent
stage. A company called Azmira, involved in production and marketing of pet care products in USA, wants to
enter the Indian market. It wants to conduct marketing research before launching its products.
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Discuss the importance of marketing research, stating the various research instruments that Azmira can make use
of to collect information.
(10 marks) < Answer >
END OF SECTION C
END OF QUESTION PAPER
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Suggested Answers
Marketing Management (MB221): January 2005
Section A : Basic Concepts
1. Answer : (c)
Reason : (a) Newscasters are electronic signs which spell out newsflashes in lighted strips,
interspersed with ads and are placed along high buildings.
(b) Painted bulletins are painted directly on movable steel panels that are then mounted on
the sign structure.
(d) Spectaculars are the most conspicuous outdoor signs like flashing lights, animation or
simulated waterfalls.
(e) Exterior displays are waterproof posters appearing on outside of buses and other
transit vehicles.
< TOP >
2. Answer : (d)
Reason : (a) Basic marketing.
(b) Reactive marketing.
(c) Accountable marketing.
(e) Partnership marketing.
< TOP >
3. Answer : (b)
Reason : Aspirational group is one to which the individual is not a member but aspires to be in that
group.
(a) Membership reference group is the group to which a person holds membership and
has frequent interaction with other members of the group.
(c) Group to which individual does not hold any membership.
(d) Includes religious groups, professional associations and trade unions with which the
interaction of customer is formal and infrequent.
(e) Secondary reference group refers to family, friends etc.
< TOP >
4. Answer : (c)
Reason : (a) Extensive problem solving is shown in buying expensive, infrequently purchased and
unfamiliar products.
(b) Impulsive buying behaviour takes place without involvement in the buying decision
process.
(d) In dissonance reducing buying, the customer is highly involved in the purchase but
sees little difference in the brands.
(e) Habitual buying occurs in products which are bought under conditions of low
consumer involvement and absence of brand differentiation.
< TOP >
5. Answer : (a)
Reason : (a) Probability sample results form a process of random selection whereby each member
of the universe has an equal chance of being selected.
(b) Convenience sampling is chosen on the basis of convenience.
(c) In judgment sampling, the items are selected on the basis of expert judgment.
(d) In quota sampling, each cell or stratum is not done at random as the field
representatives are given wide discretion in selecting respondents for meeting their
quotas.
(e) Area sampling: In this, areas are first defined and then samples from those areas are
taken for detailed investigation.
< TOP >
6. Answer : (c)
Reason : Reseller market does not consist of consumers, manufacturers, industrial users or
government.
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7. Answer : (c)
Reason : (a) Information search is done after the problem has been recognized.
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(b) Evoked set is formed when the names of different brands come to customer’s mind.
(c) Evaluation of alternatives is done after the options are thought about.
(d) Problem recognition is the first step of buying process.
(e) Post purchase analysis is shown only after the purchase has been made.
8. Answer : (d)
Reason : In this case Martin has engaged in selective retention because whatever he has seen he
retains only a part of it. So none of the other options is right.
< TOP >
9. Answer : (a)
Reason : Penetration pricing is chosen when the company wants to increase its market share,
penetrate into the market and for that they keep the price low. So (a) is the correct answer.
< TOP >
10. Answer : (d)
Reason : Charging different prices for the same product will be differentiated pricing.
(a) Perceived value pricing is on the basis of perceived value of the product in the minds
of customers.
(b) Going rate pricing is done on the basis of the competitors’ prices in the market.
(c) Value pricing occurs when a company sets low prices for high quality goods and
services.
(e) Psychological pricing is based on the general perception that high price means high
quality.
< TOP >
11. Answer : (c)
Reason : A market niche is a narrow target segment. So other options are incorrect.
< TOP >
12. Answer : (d)
Reason : This kind of product will be sold generally through general retail outlets only.
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13. Answer : (d)
Reason : Rest of the customers are buying for the first time, so it cannot be part of routinized buying.
< TOP >
14. Answer : (c)
Reason : (a) Direct marketing is done by direct mails, online marketing etc.
(b) Database marketing uses customer databases to contact them.
(d) Telemarketing uses telephones and television to showcase the products.
(e) Multilevel marketing companies use different levels to sell the product. e.g. Amway,
Oriflame.
< TOP >
15. Answer : (c)
Reason : Income would be a likely variable for segmenting the market for this new model because
the product is highly priced and segmentation is not possible on basis of religion,
geographical location, gender or values.
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16. Answer : (b)
Reason : Market challengers are companies who want to acquire the status of market leader and so
they aggressively attack the competitors.
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17. Answer : (b)
Reason : AIDA stands for attention, interest , desire and action followed by satisfaction.
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18. Answer : (e)
Reason : Detergents will be the product line and the depth will be the number of detergents in that
line.
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19. Answer : (a)
Reason : When the product is new and also a specialty item like car, lower price can make the
customers think that the product is of low quality.
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20. 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
< TOP >
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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.
21. Answer : (a)
Reason : (a) 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 communication with carefully targeted individual
consumers to obtain an immediate response through the use of nonpersonal tools
(mail, telephone, fax, and e-mail).
< TOP >
22. Answer : (e)
Reason : Gatekeepers control the flow of information to other members of the buying center.
(a) The influencer is the member (or outsider) who affects 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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23. 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 e-mail messages).
(d) Shopping products are less frequently purchased and are carefully compared on
suitability, quality, price, and style (clothing).
(e) Industrial products can be classified in terms of how they enter the production
process. e.g. raw materials, capital items etc.
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24. Answer : (b)
Reason : (a) Publicity is a non-paid form of communicating information about the company.
(c) Public relations are activities to enhance the image of the company.
(d) Advertising is a paid form of non-personal presentation of ideas.
(e) Sales promotion refers to incentives like free samples given by the company.
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25. 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 extension 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
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consumer. Package cues include color, design, shape, brand name, physical materials,
and product information labeling.
26. Answer : (b)
Reason : The given situation is an ideal example of reinforcing customer purchase decision.
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27. 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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28. Answer : (d)
Reason : TV ads are part of advertising and advertising is one of the elements of the promotion mix.
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29. Answer : (b)
Reason : (a) Brand extensions are brand names extended to new product categories.
(c) Family branding occurs when all the products that come under one family are given
the same brand name.
(d) Individual branding refers to different brands for different products.
(e) Co-branding refers to the phenomenon where two or more well known brands are
combined in an offer.
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30. Answer : (a)
Reason : A Lifestyle is a person’s pattern of living as expressed in his or her activities, interests, and
opinions (AIOs). Lifestyle is a rich descriptor of peoples’ buying patterns.
(b) Personality is an individual’s pattern of traits that influence behavioral responses.
(c) Beliefs are a consumer's subjective perception of how well a product or brand
performs on different attributes.
(d) An attitude is a learned predisposition to respond to an object or class of objects in a
consistently favorable or unfavorable way.
(e) Values represent a reflection of a person’s needs adjusted for the realities of the world
in which we live.
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Section B : Caselets
1. Companies traditionally relied on ads, sales promotion, personal selling etc. to reach customers. However, due to
competitive pressures, companies began to realize the need to compress or eliminate the intermediary channels,
reduce the costs in reaching customers, pass the savings or benefits to the customers and maximize their reach. At
the same time they can also learn more about their customers and their needs and wants. Therefore more and more
companies are adopting direct marketing to provide their products and services directly to customers.
Technology has become the predominant element in many businesses. Information technology has added to the
capabilities of companies enabling them to set new standards in buisness. The power of Internet has transformed
everything. E-commerce has redefined markets, industries and the way one does business. Every company today
has a presence on the Internet.
Amway being one of the world’s largest direct sales companies realized that use of Internet marketing would help
them reach more customers and also provide support to its IBOs. Amway provides all the advertising support and
required support material to the IBOs. IBOs can collect any information they want from the website and they also
have the facility to order products on-line. This way any customer can contact them anytime. This not only helped
Amway lower its costs but also acquire a more competitive position.
Advantages of online marketing:
1. Reach a large customer base (global reach).
2. Allows customers to shop at their own convenience from their homes.
3. Allows firms to provide customers with video clips and statistics to compare with competitors’ products.
4. Saves costs.
Disadvantages:
1. People are still not accustomed to shopping online.
2. Use of credit cards etc. Indians are still very reluctant to give credit card details.
3. Customers don’t have the choice to actually touch and feel the product; so there may be post purchase
dissatisfaction.
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2. Forms of direct marketing:
1. Catalog marketing
2. Telemarketing
3. Kiosk marketing
4. Home shopping
5. Direct mails.
Examples:
Oriflame is a cosmetics company that sells high-quality natural skincare and cosmetic products through an
independent sales force, outside the traditional retail environment. Direct sales allow customers to get advice and
inspiration from people they know and trust. Buying direct is reliable and convenient. Although the company has
grown rapidly it never lost sight of its original business concept - Natural Swedish Cosmetics from friend to
friend. Oriflame has:
• About 652 million Euros in annual sales
• 1.5 million Sales Consultants
• 4,600 employees
• 550 products
• Over 64 million catalogues in 35 languages
Avon: Leading seller of beauty and cosmetic products.
Modicare: Personal care products are sold through direct marketing.
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3. Advances in science and technology have changed the lifestyle of people, their standard of living, habits,
expectations etc. People are seeking better and improved products that are easy to use, occupy less storage space
are aesthetic and provide value for money. The increasing expectations of customers are forcing companies to
concentrate on product innovation.
A good product is the primary ingredient that ensures a continual growth and prosperity for a firm. That is the
reason why companies invest heavily in introducing new products and improving the existing ones.
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New product can be
1. New to the world.
2. New product lines.
3. Additions to the existing product.
4. Improvement and revision of existing products.
Gillette has 4 core business areas: personal grooming range, portable power, oral care and electrical appliances.
Gillette is into such a market where technology is changing and consequently habits of customers and their
attitude to convenience are changing everyday. Such a situation becomes a real challenge for a company like
Gillette, which produces products that are used by consumers everyday. Gillette has realized that innovation is the
key to success in this kind of market and they have been implementing it successfully.
It has constantly brought new products into the market right from the safety razor in 1901 to latest Sensor for
women in 2003. (should be explained from the caselet)
It has constantly made use of new technology to produce better products and has been ‘first in the market’ in its
specialized area.
It has also invested in detailed research and information provided by the research has helped them in making their
innovations successful.
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4. New product development is both important and risky for a firm.
Risks involved:
1. Faults in product launch strategy.
2. The customers may or may not accept it.
3. Lot of money goes into the process. So if developing new products is done without proper research, it can
prove to be disastrous for the company.
Examples of companies where new products have failed:
Ivory floating soap, Bakeman’s cookies, Kellogg’s cereals etc.
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5. Before the introduction of a product in the market it has to go through several stages of development. These stages
of development include:
1. Idea generation.
2. Idea screening.
3. Concept testing and analysis.
4. Business analysis.
5. Product development.
6. Test marketing.
7. Commercialization.
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6. The marketing process of a company typically involves identifying the viable and potential marketing
opportunities in the environment, developing strategies to effectively utilize these opportunities, and supervising
the implementation of these marketing efforts.
‘Mumbo’ is supposed to be a new concept to be introduced in the market with the aim of changing customers’
taste from coffee to tea. The marketing strategy has to be charted in a very careful manner. Marketing mix
variables are: Product, Price, Place and Promotion.
Product: The basic/core product is tea. So MUMBO will have to concentrate on procuring the best quality raw
materials, the process, the taste, and different flavors of tea in different countries according to the different tastes
and preferences of the customers.
Price: Pricing strategy has to be carefully decided upon depending on the country and geographical factors. In the
introduction stage, since it is being positioned as a specialty product, the pricing should not be too low. The
company can go for psychological pricing because in this kind of situation the customers will tend to judge
product’s quality by its price; they will feel that a higher price indicates higher quality.
Place: In case of MUMBO, the place, that is the physical evidence, the kind of ambience it provides will be very
important. The aim is to attract customers not just for tea but also for an “experience”.
Promotion: Helps marketers communicate information to potential customers about the product’s existence, value
and benefits that can be accrued from it. Promotion mix tools have to be chosen. Advertising will be important
since the concept is new. Publicity can also been done in newspapers etc.
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7. Tea bar being a new concept, the success will depend to a large extent on the product differentiation and product
positioning techniques.
Products can be differentiated on basis of their form, design, features, and quality etc. In this case it can be on
basis of:
1. Form: Physical attributes of the product, the quality of raw materials used and the taste.
2. Quality: It should conform to the expectations of the customers.
3. Service quality: The ambience provided, the service of personnel etc.
4. Image differentiation: This can be done by providing the right atmosphere that is consistent with the image
they wish to portray to the customers.
Product positioning: Activities undertaken by a marketer to create and maintain the concept of value regarding its
brands in the minds of its customers as against competitor’s brands. MUMBO can position itself as a bar where
customers “get to taste the sensation of real leaf tea” in different flavors and variety and the experience of going to
a MUMBO Tea bar.
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Section C: Applied Theory
8. Sales promotion includes those sales activities that supplement both personal selling and advertising and coordinate
them and make them effective, such as displays, shows, demonstrations and other non-recurrent selling
efforts not in the ordinary routine. Compared to any other element of the promotional mix, sales promotion is
more action-oriented. It helps in stimulating the customers to buy a product.
Importance of sales promotion:
1. When new products are launched, sales promotion gives an incentive to the customer to buy it.
2. Attract new customers.
3. Counter competitors’ promotional activities.
4. Make customers brand loyal.
Kinds of sales promotion that can be used by this company are:
1. Price promotions.
2. Coupons.
3. Free gifts/samples.
4. Money refunds and rebates.
5. Frequent user incentives.
6. Point of purchase displays.
7. Consumer contests.
8. Consumer sweepstakes.
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9. MARKETING RESEARCH is a methodical and purposeful study conducted to obtain solutions for specific
marketing problems. According to American Marketing Association, marketing research refers to the systematic
gathering, recording and analyzing of data about the problems relating to the marketing of goods and services. The
research process provides a scientific platform, contrary to the traditional intuitive approach of decision-making
by managers, which used to put large amounts of resources of the organization at risk. Marketers need to analyze
the various paradigms of the market with precision to serve their customers and survive. Marketing research
operates precisely in this area by helping managers to analyze the market correctly and take effective decisions
from time to time.
Marketing research process consists of:
1. Formulating the problem: What is the market potential for pet care products in India?
2. Developing objectives of research.
3. Designing an effective research plan.
4. Data collection techniques.
5. Evaluating the data and preparing a research report.
Research instruments that can be used for collecting primary data are:
1. Questionnaire.
2. Sampling.
3. Mail interviews.
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5. Telephonic interviews.
6. Personal interviews.
7. Observation.
Secondary data can also be collected to know about the existing players and their strategies.
In this case, the company can conduct a market research of the sample of pet owners, asking them whether they
would prefer buying the pet products and their attitude towards the products. They also have to conduct a study on
the potential market and decide which city it should be launched first, the type of distribution channel, pricing etc.
So, the company has to conduct a consumer survey along with market study in detail before entering the Indian
market.