Marketing Management (MB221) – October 2005

Marketing Management (MB221) – October 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.
< Answer >
1.
Which of the following is a trade sales promotion method aimed specifically at retail outlets?
(a) Trade show (b) Buyback allowance
(c) Merchandise allowance (d) Scan back allowance
(e) Free merchandise.
2.
A company in its communication message lays emphasis on the quality, performance and value of its products. What is the communication objective of the company?
(a) Awareness (b) Knowledge (c) Liking
(d) Preference (e) Conviction.
3.
Which of the following is not a condition necessary for an exchange to take place?
(a) Each party must have something that interests the other
(b) Each party must be in a position to communicate and deliver the product
(c) The parties must involve themselves even if they consider each other undesirable or unacceptable to deal with
(d) Each party must be free to accept or reject any offer from the other party
(e) At least two parties must be involved.
4.
In which approach of the marketing costs analysis, is the net income calculated by deducting direct andindirect expenses from the gross margin?
(a) Variable costs (b) Full costs (c) Average costs
(d) Sunk costs (e) Marginal costs.
5.
Tools Inc. buys hammers, bolts and other hardware items and sells them to hardware shops at a pricethat includes a profit. Tools Inc. would be a part of what kind of market?
(a) Reseller market (b) Producer market
(c) Institutional market (d) Target market
(e) Government market.
6.
If Adidas needs to survey retailers attitudes on the availability of product literature in athletic shoe shops and needs the results within four working days, Adidas will probably use a/an_________ survey.
(a) Mail (b) Telephone (c) Mall intercept
(d) Personal interview (e) In-home.
7.
Sony’s communication objective is to achieve 95 percent awareness for its latest camcorder modelduring the six-month introductory period. Which of the following methods can Sony use to set itsadvertising budget?
(a) Affordable method (b) Percentage of sales method
(c) Objective and task method (d) Competitive parity method
(e) Discount method.
8.
The statement that "It costs five times as much to attract a new customer as it does to keep an oldcustomer" means that firms should
(a) Advertise more (b) Build lasting customer relationships
(c) Provide quality products (d) Price their products low
(e) Customize their products.
9.
Automobile manufacturers such as Maruti, manufacture different models like Maruti800, WagonR andEsteem to cater to different segments with different levels of income. This is an example of
(a) Selective specialization (b) Product specialization
(c) Market specialization (d) Full market coverage
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
1
(e) Single segment concentration.
10.
In examining her firm's recently completed market attractiveness-business position model, Jenna Cook finds that the firm's sportsunglasses unit is high on relative market share and relative market growthrate. Which one of the following strategies would this placement dictate?
(a) Invest (b) Harvest (c) Divest (d) Maintain
(e) Grow.
11.
Seagram Co., which markets alcoholic beverages, acquired Coor Corp, which produces movies andtelevision shows and owns publishing houses, theme parks, and movie theatres. What type of growthstrategy does this acquisition represent?
(a) Conglomerate diversification (b) Horizontal integration
(c) Concentric diversification (d) Forward integration
(e) Horizontal diversification.
12.
The Nike swoosh that is prominent on all of the firm's packaging, products, and advertising is a
(a) Trade name (b) Corporate mark (c) Brand name
(d) Brand mark (e) Brand equity.
13.
If the frozen foods division of Unilever purchases food trays and boxes from the organization's packaging division, the form of pricing used to charge the frozen foods division is called
(a) Zone pricing (b) Base-point pricing
(c) Business-unit pricing (d) Transfer pricing
(e) Price discrimination.
14.
A fruit and vegetable wholesaler buys truckloads of strawberries from local farmers and then dividesthem into 1 kg and half kg baskets to sell to grocery stores. This function is called
(a) Allocation (b) Assorting (c) Accumulation (d) Sorting
(e) Storing.
15.
Trent Wholesale Plumbing has seen its sales in the Southwest triple in the past two years. Materialshandling director Anil Menon announces plans to the board for a Calicutfacility that will combine shipments received from Trent's twenty-five suppliers for nearly immediate shipment to plumbingstores and contractors in the southwest region. This new facility would be best classified as which of thefollowing?
(a) Private warehouse (b) Public warehouse
(c) Field public warehouse (d) Distribution warehouse
(e) Bonded warehouse.
16.
Which of the following services is/are least likely to be franchised?
I. Industrialised services.
II. Highly variable, customised, one-to-one services.
III. Mass-market services.
IV. Low value services.
(a) Only (II) above (b) Both (I) and (II) above
(c) (I), (II) and (III) above (d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
17.
Sellers that emphasize factors other than price, such as distinctive product features, quality of products,packaging, etc. to encourage brand preferences among customers are practicing
(a) Oligopolistic competition (b) Non-price competition
(c) Brand differentiation (d) Image differentiation
(e) Service differentiation.
18.
Harsha, a trained engineer, is a salesperson for a chemical manufacturer. She provides currentcustomers with advice about a product's characteristics and applications. She is a
(a) Missionary salesperson (b) Trade salesperson
(c) Field order taker (d) Inside order taker
(e) Technical salesperson.
19.
Positioning of a product is based on
I. The price charged for the product.
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
2
II. The promotional pitch for the product.
III. Product characteristics.
(a) Only (I) above (b) Only (II) above
(c) Only (III) above (d) Both (I) and (II) above
(e) All (I), (II) and (III) above.
20.
There are seven principles that guide the formulation of public policy toward marketing. Of the principles listed below, which does not represent one of those principles?
(a) The principle of curbing potential harm
(b) The principle of economic efficiency
(c) The principle of maximising profits at any expense
(d) The principle of consumer education and information
(e) The principle of innovation.
21.
Location is extremely important to a retailer because
(a) Suppliers charge service stores in certain trading areas an extra amount
(b) A desirable location appeals to consumers' emotions and encourages them to buy
(c) Location is the major determinant of store image
(d) Location determines the trading area from which the store must draw its customers
(e) Convenient location is an essential for good customer service.
22.
A market share pricing objective
I. Is not recommended when sales for the total industry are declining.
II. Is useful only when sales for the total industry are increasing.
III. Is not especially useful when sales for the total industry are flat.
IV. Can be used effectively whether total industry sales are rising or falling.
(a) Only (II) above (b) Only (IV) above
(c) Both (III) and (IV) above (d) (I), (II) and (III) above
(e) All (I), (II), (III) and (IV) above.
23.
Environmentalism is defined as
(a) An organised movement of concerned citizens and government agencies to protect and improve people's living environment.
(b) The practice of adopting policies and developing strategies that sustain the environment while producing profits for the company
(c) A political movement that divides liberals and conservatives
(d) Pollution prevention
(e) A comprehensive, systematic, periodic review of a firm’s marketing environment, objectives, strategies etc.
24.
A manufacturer has decided to improve the inventory management by maintaining low inventory levelsand waiting to purchase materials until right before they are needed in production. This inventorymanagement technique is called
(a) Just-in-time (JIT) (b) Inventory minimization
(c) Economic order quantity (d) Reorder point maximization
(e) Safety stock.
25.
Anita, a buyer for Nestle, buys carpeting for use in an office area. What determines whether thiscarpeting is a consumer or an industrial product?
(a) The price of the carpet (b) The type of selling organisation
(c) The buyer's intended use of the product (d) The terms of the sale
(e) Whether the carpet is a replacement item.
26.
Polaroid’s instant camera is an example of
(a) New to the world products (b) Product line extension
(c) Line stretching (d) New product lines
(e) Improvement/revision of existing products.
27.
A company uses the Indian Cricket Team to endorse its range of snack foods. This endorsement islikely to be particularly effective if the Indian Cricket Team is seen by large numbers of the company'starget market as a/an
(a) Membership reference group (b) Tertiary reference group
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
< Answer >
3
(c) Secondary reference group (d) Non-reference group
(e) Avoidance group.
28.
In a product organization, which of the following comprises a product manager who is responsible for liaising with other department and functional heads and seeking their cooperation in various productrelated efforts?
(a) Horizontal product team (b) Triangular product team
(c) Divisional product team (d) Simple product team
(e) Vertical product team.
29.
Which of the following is/are factors hindering the growth of online marketing?
I. Online marketing efforts reach a larger customer base.
II. Online marketing allows counting of exact number of customers visiting the site.
III. Maintaining an online store does not have additional costs associated.
IV. Reluctance of Indian customers to give credit card details for online purchases.
(a) Only (III) above (b) Only (IV) above
(c) Both (I) and (II) above (d) Both (III) and (IV) above
(e) (I), (III) and (IV) above.
30.
Rakesh Sharma has been promoted as the sales manager at a new firm and is trying to come up with a sales-force compensation method. He would like to have selling expenses relate directly to salesresources, a highly aggressive sales force aiming at greater challenges and, minimization of non-selling tasks. What compensation method would best fulfill his requirements?
(a) Salary plus commission (b) Straight salary
(c) Straight salary plus generous fringe benefits (d) Straight commission
(e) Salary plus a bonus.
END OF SECTION A
< Answer >
< Answer >
< Answer >
4
Section B : Caselets (50 Marks)
• This section consists of questions with serial number 1 – 7.
• Answer all questions.
• Marks are indicated against each question.
• Detailed workings 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. Discuss Porter’s generic strategies that help firms analyze their position and attractiveness in an industry. In order to establish itself, which of these strategies would be appropriate for Chandamama and why?
(9 marks) < Answer >
2. Although Chandamama has revamped, it faces competition in the world of children’s entertainment. What are the various factors that Chandamama should take into consideration in order to fight competition as well as to do an analysis of competitors?
(7 marks) < Answer >
The English edition of the children's magazine series, Chandamama, was given a major facelift in late 1999. The children's magazine was relaunched in a new avatar to keep step in a globalised entertainment world where Teenage Mutant Ninja Turtles compete with Shaktimaans for a child's fancy. In addition to English, Chandamama was to be relaunched in all 11 regional languages it was being published in, including Hindi, Marathi, Tamil, Kannada, Malayalam, Gujarati, Bengali, Oriya and Assamese.
The revamped edition is targeted at urban kids. The objective is to inculcate a reading habit among urban children, which has taken a beating with the inroads of television and computers. Though the entire magazine is in story format, there are lots of quizzes, puzzles, interesting snippets associated with the stories activity charts and an eight-page supplement, called Young Chandamama, for kids in the age group of five to eight years. All this would definitely attract children.
The focus of the magazine continues to be on Indian history, culture and mythology, but there would be sections on contemporary issues such as environment and ecology. The company plans to invite more children's writers such as Ms Swapna Dutta to write for the magazine. Well-known writers for children such as Ruskin Bond and Manoj Das are already writing for the magazine.
To reboot their fortunes, Chandamama's publishers, the Chennai-based Reddys, set up a new company, Chandamama India Ltd (CIL). Chandamama's founders, B Nagi Reddy and Chakrapani, were involved with the freedom movement and felt the need to inspire children of the sub-continent to imbibe the heritage of the country. They founded Chandamama in July 1947 with a vision to serve independent India. Since then, the magazine's trademark USP has been an illustrated color cover, folk tales from India and abroad and quizzes, profiles and science and ecology tid-bits. The magazine was even available in Gurmukhi and Sinhalese, but the editions were suspended in 1981 and 1987 respectively due to ethnic unrest. A Braille edition in four languages were added on in 1980 for free distribution among the blind and in 1984, a Sanskrit edition.
The intervening idle period has forced a rethink in content. “We felt the need for a formal relaunching of Chandamama with some improvements both in presentation and production, at the same time keeping the content value intact,” said V Madhusudhan, director, marketing. “Many have tried the concept, but at the heart of Chandamama is something that nobody could touch. It’s not just a storybook, but has character and instills human values. It’s been a read-along for children for generations,” he added.
Subtle changes were incorporated to make the magazine contemporary. But these changes were not to mean that Chandamama would lose its brand appeal. It was to have a more pleasant feel in termsof quality of paper and color illustrations. But the magazine would not lose its Oriental appeal.
The company also intended to continue having the same vibrant and happy colors on covers. The new series of Chandamama is priced at Rs 15, and was to be made available at bookstores and magazine stalls across the country. The company also intended putting up publicity material like posters at various points-of-sale and also planned to go to schools with subscription offers. Schools will be an important directmarketing avenue tapped by the company to peddle Chandamama.
The company planned a door-to-door sales campaign for the new summer issue in 1999 and targeted a sale of at least
5
20,000 copies through this campaign. A 16-page supplement on bio-diversity was part of summer issue and the supplement marked the World Environment Day.
Though Chandamama India Ltd. doesn't have major plans to revamp its 11 regional language editions, the company is planning to foray into CD-ROMS, which will also be in a story format. Chandamama, with its multilingual editions, is reported to have a circulation of three lakh copies, with the company's turnover being approximately Rs 5 crore.
Caselet 2
Read the caselet carefully and answer the following questions:
3. Discuss the various bases or criteria for segmenting consumer markets. Explain Tanishq’s segmentation and positioning strategy.
(8 marks) < Answer >
4. What are Tanishq’s key brand values or brand strengths? Explain.
(6 marks) < Answer >
The market for jewellery in India is second only to that for foods and the trade is built around so-called family jewelers. Tanishq belongs to the House of Tata and, true to the group's policy it aims at bringing in credibility and professionalism to the jewellery industry.
India's jewellery market is estimated to be worth Rs. 400 billion a year and the share of the organised sector -jewellery stores and brands managed by corporate houses - stands at about Rs. 10 billion. This small but significant niche is largely the creation of Tanishq, a path-breaking effort that has earned a well-deserved reputation for reliability and excellence, and for introducing pioneering concepts in an industry where tradition once ruled. The brand has a 40% share of the organised jewellery market and a 1% bite of the overall jewellery pie. There are more than 300,000 independent, non-branded jewellery retailers in India.
Tanishq was a trailblazing endeavour to create a national retail chain that would provide consumers with jewellery of reliable worth and high design value. Its entry changed, in more ways than one, the way the Indian jewellery market operates. With 66 exclusive outlets spread across some 50 cities and a fully integrated jewellery manufacturing facility at Hosur, in Tamil Nadu, Tanishq has emerged as one of India's biggest retailers.
The introduction of 'Karatmeters' - instruments that can be easily used by consumers to measure the purity of gold in a non-destructive manner - at its outlets is a key innovation that has developed tremendous equity for the brand. Another Tanishq novelty, one on which the brand's growth strategy is premised, is in the matter of differentiated designs, be they contemporary or traditional, Indian or international.
Modern retail values and principles in the selling of branded jewellery in Indiaare almost completely the handiwork of Tanishq. The brand has broken fresh ground in retailing by creating exclusive outlets with hitherto unknown in-store ambience and hospitality touchstones. It has launched new collections at a quicker rate than its competitors, and conducted marketing promotions and fashion shows to enhance the shopping experience of consumers.
Although the purchase of branded jewellery is still a new experience for a whole lot of Indians, the Tanishq brand enjoys increasing levels of consumer loyalty. In 2002, about one million people shopped at Tanishq stores all over the country. A highlight of the brand's success is that, while the jewellery market growth has declined during the past two years, Tanishq has recorded an annual growth of approximately 40%.
Besides catering to Indian consumers, Tanishq has successfully entered key export markets such as the US, the UK, theMiddle East, Singapore and Australia. This is testimony to the brand's ability to craft products that meet the requirements of varied cultures and sensibilities. The brand Tanishq, like the Tata name, has established itself as an ethical brand, earning the respect and affection of its consumers.
The Tanishq portfolio comprises a wide range of jewellery, including 18-carat studded products, 22-carat plain-gold products, silverware and coins. Tanishq is the first brand in the jewellery category to introduce collections designed exclusively for the modern Indian woman, especially working women. Among the Tanishq collections that have caught the imagination of consumers are Aria and Diva. Collection G, with a selection of over 90 designs, addressed the everyday jewellery needs of working women. Positioned as ‘9-to-5 jewellery’, the collection is stylish and modern and is designed to suit all forms of attire, western and Indian, casual and formal. The introduction of lightweight gold –jewellery that looked heavy but was light in weight and on the purse –marked another milestone in Tanishq’s brand history.
Tanishq’s retail boutiques are temples for the brand and are used as a platform for celebration, be it the launch of a new collection, a new marketing promotion or a festival. This gives Tanishq outlets a unique appeal and consumers an opportunity to heighten their shopping experience. One of Tanishq’s more innovative ideas is to offer special schemes during various festivals. Tanishq has also initiated a loyalty program called the Golden Harvest Savings Scheme, which offers buyers the benefit of getting more jewellery than what they have paid for. The scheme allows consumers to plan
6
future purchases in advance and pay for them in easy installments.
In sync with the Tata brand values, Tanishq is synonymous with trust and purity in a category that is fraught with questionable practices. Being a member of the Tata family has meant that it can leverage the group’s well-earned reputation for ethics and values in a business where such attributes are critical to win the trust of consumers. Tanishq consumers can afford to take issues such as purity for granted, and they know they can depend upon the brand to deliver quality products all the time. The brand’s winning virtues in design and overall quality have shaped a class of discerning buyers who seek the best in jewellery products.
Leadership and innovation are two of the other brand features that Tanishq is consistently identified with. These values have helped the brand bond with its consumers like no other Indian jewellery retailer.
Tanishq has deliberately moved away from mass-media advertising and focused on store promotions to make the brand more accessible to consumers. This has been done to correct the consumer perception that the brand is highly priced and only meant for the rich and the famous. This approach has also ensured that Tanishq’s promotional approach is product-led.
Caselet 3
Read the caselet carefully and answer the following questions:
5. What are the various types of channel conflicts? Explain.
(5 marks) < Answer >
6. In a globally competitive world, it is no longer viable for manufacturers to use power to resolve and manage conflicts. Discuss the causes for channel conflicts and the methods for solving and managing conflicts.
(9 marks) < Answer >
7. Selection of a distribution channel involves evaluation of channel alternatives. Explain the criteria on which channel evaluation can be based?
(6 marks) < Answer >
If you think adding new distribution channels will only result in increased sales volume, then think again. The consequence could be a spurt of channel wars. Welcome to a world where an infinite number of distribution channels are chasing a finite number of customers. The emergence of the Internet has added considerable complexity to distribution channels by offering a variety of e-market places such as B2B auctions (PEFA.com), reverse auctions (Freemarkets.com), B2C operations (Amazon), C2B auctions (Priceline.com), and C2C formats (Ebay.com).
As a result, the various types of distribution channels available in industries such as airlines, financial services, music industry, publishing, and telecommunication services are exploding. And manufacturers who took pride in the integrity of their distribution channels with specific channels reaching specific customer segments are suddenly facing a dizzying array of choices.
The addition of new distribution channels brings with itthe potential for additional sales volume at the cost of greater channel conflict. A new channel, regardless of whether it is the Internet, an emerging low cost indirect channel, or a new manufacturer sales force will increase channel conflict. The fear of conflict with existing channels can paralyse a company. But on the other hand much of what channel members call channel conflict is healthy channel competition. Therefore, the objective of conflict management should not be to eliminate channel conflict but rather manage it so that it does not escalate to destructive levels.
From the manufacturer's perspective, channel conflict becomes destructive when the existing distribution channels react to channel migration by reducing support or shelf space for themanufacturer. In extreme cases, an existing distributor may drop the brand. Channel conflict becomes particularly destructive when parties take actions that hurt themselves in order to hurt the other party.
The rationale for having multiple types of channels should always be built on a clear end user segmentation strategy. For instance, a convenience store and Wal-Mart serve two different segments and each should be encouraged to specialise on its target segment. Of course, the brand owner should ensure that the number of distribution points that they have within a particular type of distribution channel is balanced against the size of the segment that the channel reaches.
Many designers who have pushed for sales through outlet stores have managed the conflict with their existing retailers by developing special products for these outlet stores. Similarly, many luxury brand companies, like Camus Cognac and Guylian chocolates, offer special pack sizes and products that are attractive to travelers at duty-free airports in order to minimise the conflict with their regular high street retailers. On the Internet, manufacturers can offer those SKUs which retailers are usually not willing to carry. At the extreme, some manufacturers dedicate different brands to different channels, sometimes referred to as channel brands.
7
Having a new 'hit' product helps facilitate channel migration. Goodyear managed the migration to the mass merchandisers with only a reasonable amount of conflict by simultaneously restricting the distribution of its new Aquatred tyre to the independent dealers. This allowed the independent dealer to protect their profit-ability and sales volume through the higher margin, higher value, Aquatred tyre
Some manufacturers agree to compensate the existing channels for sales through the new channel. While it may be perceived as just buying off the support of the existing channels for the channel migration, it can be useful if the existing distribution is given a role to perform in support of the new channel.
Some retailers will be upset that the prices at which they purchase from the manufacturer are higher than those charged to other retailers or the direct sales force. There is often the feeling that the manufacturer is favoring other channels at their expense. While one may never fully be able to overcome these concerns, the best antidote is to treat channels equitably and in a transparent manner. If the manufacturer's prices differ across channels, it should be based on thefunctions that the particular channel member performs.
The temptation for manufacturers is always to expand the number of distribution points as it usually results in an immediate increase in sales. However, having too many channels chase too few consumers results in channels dropping the level of support to the brand.
In the long run, this can have a deleterious impact on sales as well as brand image. On the other hand, changing customer preferences modify industry structures. Traditional industry leadershave frequently neglected the fastest growing new distribution channels. A delicate balance must be maintained between moving too quickly and unleashing destructive channel conflict versus clinging too long to declining distribution networks.
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. Maharaja Company Ltd.has come out with a dishwasher in the Indian market. Discuss the various stages in the Product Life Cycle that the dishwasher is expected to go through.
(10 marks) < Answer >
9. Raycon Water Purifier is a manufacturer and distributor of water purifiers. A strong sales force that is involved in selling these water purifiers through Personal Selling, backs the company. Describe the stages in the personal selling process that the salespersons go through to accomplish their sales goals.
(10 marks) < Answer >
END OF SECTION C
END OF QUESTION PAPER
Suggested Answers Marketing Management (MB221) – October 2005
< TOP >
1.
Answer : (d)
Reason : A Scan back allowance is specifically aimed at retail outlets. Retailers are rewarded on the
8
basis of the number of units moved through their scanners during a specific time. (a) Trade show is a consumer sales promotion method. (b) In buyback allowance, the channel members are offered a monetary incentive for each additional unit purchased after the initial deal. (c) In merchandise allowance, a manufacturer agrees to pay the reseller certain amount of money for promoting the company’s product. (e) In free merchandise, additional amount of the product is offered to middlemen without any additional cost as an incentive to purchase a minimum quantity.
2.
Answer : (d)
Reason : The customers may like a product but do not prefer to buy it. The marketer’s communication objective in this case is to develop the preference of potential customers by focusing on the quality, performance, value etc in its communication messages. (a) Companies communicate with customers to create awareness about a new product or upgrades for an existing product. (b) The customers are aware of a product but have little or no knowledge about it, then the company’s objective is to increase the knowledge of potential customers about the product and services. (c) The company tries to find out customers liking for their products. (e) Conviction is to make customers believe that the company’s product is the best.
3.
Answer : (c)
Reason : For an exchange to take place, the parties must involve themselves voluntarily and should consider each other desirable and acceptable to deal with. Therefore, option (c) is the answer.
4.
Answer : (b)
Reason : In the full costs approach of marketing costs analysis, the net income is calculated by deducting direct and indirect expenses from the gross margin.
5.
Answer : (a)
Reason : Resellers are marketers who do not purchase products for converting them into finished products or for personal use, but for selling them to other customers for a monetary gain. Wholesalers and retailers form a part of the resellers market. (b) Producers buy the products from suppliers, not for direct sales to the customers but for processing them and converting them into finished goods. These finished goods are then sold to customers for their use. (c) Institutional markets are combination of government and private organizations. A marketer trying to cater to customers must adopt marketing strategies that suit both government markets and private commercial markets. (d) Option is not applicable. (e) Government market refers to the federal, state, local and foreign governments that buy goods and services.
6.
Answer : (b)
Reason : Telephonic interviews are often conducted when the information required is not great and needs to be collected quickly.
7.
Answer : (c)
Reason : Objective and task method is used for developing the promotion budget by defining specific objectives, determining the tasks that must be performed to achieve these objectives and estimating the costs of performing these tasks. (a) Affordable method is used for setting the promotion budget at the level management thinks the Company can afford. (b) Percentage of sales method is used for setting the promotion budget at a certain percentage of current or forecasted sales. (d) Competitive parity method is used for setting the promotion budget to match competitors’ outlays. (e) Discount method is a sales promotion tool.
8.
Answer : (b)
Reason : Repeat or old customers indirectly market the company’s products through word-of-mouth communication. Marketers have realized how difficult and costly it is to attract new customers in comparison to retaining existing customers. Hence, it is profitable for a company to build a long-term relationship with its existing customers.
9.
Answer : (a)
Reason : Selective specialization is a process in which the company focuses its resources on a few market segments and develops its expertise in fulfilling the needs of those segments. In case of Maruti, the company specializes in cars but targets various segments of the markets.
10.
Answer : (a)
Reason : The BCG growth-share matrix displays the position of business units comparing their market
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
9
growth rate against their market share relative to competitors. It contains four cells –question marks, stars, cash cows and dogs. Stars are the business units, which have a large market share in fast growing markets. The sunglasses unit is therefore a star. As per the BCG matrix, firms need to invest in stars as the industry is still emerging and market share is also growing.
11.
Answer : (a)
Reason : In conglomerate diversification strategy, the company tries to perform unrelated business activities. In the above case Seagram Co ventures into producing movies and television shows, it is adopting a conglomerate diversification strategy. (b) Horizontal integration involves expansion of a business by acquiring or developing businesses engaged in the same stage of marketing or distribution. (c) In concentric diversification strategy, a company tries to diversify by serving a new customer base with products that are related to the existing product category. (d) If a company plans to start its own distribution network, then it is adopting forward integration. (e) If a company tries to attract current customers with new products even if the company has to acquire a new manufacturing capability, it is known as horizontal diversification strategy.
12.
Answer : (d)
Reason : Brand mark is the portion of a brand that cannot be expressed verbally, such as a graphic design or symbol.
13.
Answer : (d)
Reason : When one division of an organization transfers or sells goods or services to another division, the price charged for the goods is called transfer pricing.
14.
Answer : (a)
Reason : Allocation is the process by which larger quantities of homogeneous products are broken down into smaller quantities. Allocation is one of the ways to alleviate channel discrepancies.
15.
Answer : (d)
Reason : The function of distribution warehousing is to act as a temporary port for transfer of goods from one location to another. Distribution warehouses do not stock goods for long periods of time, but only serve as a kind of stopgap arrangement, where the goods are stored for very short periods of time before they are dispatched to their respective locations.
16.
Answer : (a)
Reason : Franchising is particularly well suited to industrialised, mass market and low value services, such as fast food, photo processing and dry cleaning. It is less suited to highly variable, customised, one-to-one services.
17.
Answer : (b)
Reason : Non-price competition ensues when marketers focus on factors other than the price, such as product features, quality of the product/service being provided, packaging, promotions and so on.
18.
Answer : (e)
Reason : Technical salesperson is the salesperson who contributes technical expertise and assistance to the selling function.
19.
Answer : (e)
Reason : Positioning refers to the standing in the market place of one product in relation to other competing products. All elements of the marketing mix are used to position a product. Therefore, all the three statements (I, II and III) aid in positioning.
20.
Answer : (c)
Reason : The principle of maximising profits at any expense is not a principle for public policy towards marketing.
21.
Answer : (d)
Reason : Location determines the trading area from which the store must draw its customers. Location of the store is of significant strategic importance for a retailer because it can provide him with a competitive advantage. A retailer can adapt himself to the changing market conditions by changing his product, price, promotion or distribution strategy but changing the location
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
10
of store is very difficult and can impact the business in the long-term.
22.
Answer : (b)
Reason : A market share pricing objective can be used effectively whether total industry sales are rising or falling. The objective of pricing the products and services of many organizations is to either increase or maintain the market share. The growth rate of a firm’s market share is independent of the industry’s performance in which the firm is operating. Absolute sales volume of a company might increase though its relative market share is decreasing.
23.
Answer : (a)
Reason : An organised movement of concerned citizens and government agencies to protect and improve people's living environment. Environmentalists want people to operate with more care for the environment.
24.
Answer : (a)
Reason : Just-in-time is based on the process of systematically controlling the supplies as well as production system of the organization. The concept of just-in-time implies that the raw materials are delivered in required quantities to the production plant as and when they are needed without any delay. Just-in-time process focuses on the reduction or elimination of inventory in the plant.
25.
Answer : (c)
Reason : Products can be classified depending on who the final purchaser is and how he uses them. Based on the usage of the products, they are divided into consumer products and industrial products.
26.
Answer : (a)
Reason : New to the world products are new products and have not been introduced earlier and are expected to create a new market. (b) Product line extension is when a product is introduced in the market with slight variations like size, flavor, color, and packaging etc. (c) Product line stretching is introducing new products into a product line. (d) Product line is a group ofclosely related product items. Polaroid camera is not a product line but it could be part of a product line. (e) Improved versions of the existing products involve modifications for better performance.
27.
Answer : (c)
Reason : A secondary reference group comprises individuals and groups who we have no direct contact with, but with whom we nevertheless identify. It includes religious groups, professional associations and trade unions with which the interaction of customer is formal and infrequent.
28.
Answer : (e)
Reason : A vertical product team comprises a product manager who is responsible for liaising with other department and functional heads and seeking their cooperation in various product related efforts.
29.
Answer : (b)
Reason : Reluctance of Indian customers to give credit card details for online purchases is hindering the growth of online marketing. Therefore, option (b) is the answer. Statements (I), (II) and (III) are advantages of online marketing.
30.
Answer : (d)
Reason : Compensation paid for achieving specific targets in a given time is known as straight commission compensation. (a) Salary plus commission plan provides a guaranteed salary along with performance incentives. (b) Straight salary compensation plan provides a fixed amount of salary to the sales personnel at the end of the week or month. Options (c) and (e) are not applicable.
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
< TOP >
11
Part B : Caselets
1. Michael E Porter suggested that all strategies are the derived strategies from three generic strategies:
Cost Leadership Strategy: A firm gains cost leadership in an industry when its cost of production is lower than that of its competitors. This strategy involves attempting to minimize costs in every aspect of the business. Costs
can be controlled by developing efficient methods of production, curbing overhead and administrative costs, procuring materials at low prices and monitoring costs of promotion, distribution and service. By bringing down its operational costs, an organization can offer its products and services at lower prices. It can also earn higher profits because either the profit margins are greater or the sales volume has increased. Thus, an organization, which follows an overall cost leadership strategy, can gain an edge over its competitors. A cost leadership strategy works well for the company in the event of a price war in the industry. Since the firm is already working on a low price strategy, it can reap profits while the competitors are bound to make losses. Firms’ gain this cost leadership position by employing certain measures like increased production efficiency, Six Sigma techniques, economies of scale, etc.
Differentiation Strategy: The differentiation strategy adopted by the firms needs to possess sufficient skills and abilities to differentiate the product from that of the competitors based on some attributes that allow the consumers to perceive the product as different from that of the competition. Firms that adopt the differentiation strategy successfully have access to advanced scientific research, a highly skilled labor force, effective customer communication strategies, etc. A firm may differentiate its products and services in various ways. It may differentiate itself from others in terms of design or brand image (e.g. Coca-Cola), features (e.g. Cadillac), technology (e.g. Intel microprocessors), customer service (e.g. Hilton hotels), or quality (e.g. Sony). By using the differentiation strategy, a firm is able to influence the perception of customers that a product or service is unique, rather than having to reduce its costs to attract customers. There are, however, certain risks involved in the differentiation strategy like competitors trying to lure the market with the same kind of differentiation strategies.
Focus Strategy: A firm pursuing a focus strategy tends to serve a specific segment instead of catering to the entire market. This segment may be a special group of customers; a specific geographic area, or a particular product or service line. The customers will also be loyal to the company and therefore, the entry of a new competitor into that area becomes difficult. A firm following a focus strategy and also a differentiated strategy will have the advantage of pricing their products higher. The risks involved in focus strategy are easy replication of the firms' strategies by other players.
Chandamama should adopt a differentiation strategy. The revamping efforts are indicative of the efforts to differentiate and create a unique position. Chandamama can differentiate in terms of brand image by leveraging its standing of several years which has given it the resources to cater to the needs of the target market.
2. Strategies: Companies devise several strategies to sustain themselves in the market, earn profit and gain a competitive advantage over competitors. Each company has to constantly monitor the moves and strategies of its competitor and formulate counter strategies to effectively deal with the competition. Companies need to monitor the changes in the environment carefully and convert them into opportunities.
Objectives: Objectives state the end results to be achieved by an organization. Objectives can be short-term and long-term and are dependent on the environmental factors and the organization preparedness to face the environmental changes. Organizations can adopt either the top-down approach or the bottom-up approach for setting objectives. In the top-down approach, the organizational objectives are first determined and then, on that basis, the objectives of various individuals in the organization from the top management to the lowest level are determined. In the bottom-up approach, on the other hand, individuals develop their objectives. When developing objectives, managers also need to consider competitors' objectives. The objectives will also depend on the state of industry.
Strengths and weaknesses: Strengths are the resources, skills or other advantages a firm enjoys relative toits competitors. They are the distinctive competencies that give the firm a comparative advantage in the marketplace. Some of the strengths that an organization may possess are distinct technical superiority with the best technical know-how, financial resources, skills of the people in the organization, brand value and image in the market, access to the best distribution network, supplier relationship with buyers and suppliers, etc.
A weakness is a limitation or deficiency in resources, skills and capabilities that seriously impedes effective performance. It refers to a constraint that checks movement towards a distinct competitive advantage for the firm. Some sources of weakness could be limitations of:
• Facilities Financial resources
• Management capabilities
• Marketing skills
• Brand image
Corporate strengths and weaknesses are a matter of interpretation. Understanding the key strengths and weaknesses of a firm helps in narrowing down the choice of alternative strategies. The study of internal strengths and weaknesses provides a useful framework for making the best strategic choice.
Reaction Patterns: The competitors' reaction patterns to a firm's competitive strategies should be observed continuously, because it is necessary to attack the competitors in their vulnerable areas. Normally, there are four types of competitors based on their reaction patterns. The first type is the slow reactor. This type of competitor reacts very slowly to the competition. The second type or competitor is the selective competitor, who reacts only
< TOP >
12
to certain types of strategies, perhaps to added product features or line extensions. The tough competitor, the third type, strongly retaliates to the slightest move of his competitors. The fourth type is the unpredictable competitor who mayor may not respond to the strategies of his competitors. This is usually the case with small firms, which attack the competitors if they are strong enough to persist in the attack or else refrain from attacking.
Most companies resort to price reductions by neglecting the reaction patterns of the competitors. Managers have to analyze the past data about how the competitors have reacted to different strategies of the firm. Identifying the exact competition is very essential for the sustenance of the firm.
3. Consumer markets are mostly segmented on the following bases:
Geographic segmentation: The market is divided into geographical areas such as localities, regions, cities, states, countries etc. The marketer must have a clear idea about which markets to serve. It can be like offering a single product for the entire market with adjustments to suit local needs.
Demographic segmentation: The market is divided into groups based on demographic attributes such asage and life cycle, gender, income, generation, occupation, religion, race, nationality, social class, family size, family life cycle etc. This form of segmentation is highly effective because most customers’ tastes and preferences are based on these attributes and they are also easy to measure.
Psychographic segmentation: Psychographic factors based on which markets can be segmented include motivation, values, beliefs, lifestyle, personality etc. While demographic segmentation provides information about the people who own a product, psychographic segmentation answers the question why people buy a certain product. This helps marketers understand buyer behavior better and design communication programs, which will appeal to the target audience.
Behavioral segmentation: Organizations can divide markets on the basis of behavior that customers show towards the usage of the products. This type of segmentation shows what the customer has purchased in the past. Various variables for segmenting markets on the basis of purchase behavior of customers are occasions, benefits, user status, usage rate, loyalty etc.
Tanishq has segmented its market based on a combination of psychographics and behavior. The segmentation variables can be understood as follows:
• Tanishq segments based on gender, by being the first brand in the jewellery category to introduce collections designed exclusively for the modern Indian woman, especially working women.
• The brand values Tanishq is synonymous with are trust and purity, in a category that is fraught with questionable practices. Being a member of the Tata family has meant that it can leverage the group’s well-earned reputation for ethics and values in a business where such attributes are critical to win the trust of consumers.
• Tanishq also follows a behavioral segmentation by offering benefits such as addressing the everyday jewellery needs of working women, thereby increasing usage, by offering schemes during festivals or occasion and by offering loyalty programs.
Tanishq has positioned itself as a unique jewelry that is both contemporary and traditional and jewelry that stands for purity. Also, Tanishq’s Collection G range is positioned as ‘9-to-5 jewellery’, which is stylish and modern and is designed to suit all forms of attire, western and Indian, casual and formal.
4 Tanishq’s key brand values and strengths are:
• Tanishq has created a small but significant niche, a path-breaking effort that has earned a well-deserved reputation for reliability and excellence, credibility and professionalism.
• Tanishq is synonymous with trust and purity in a category that is fraught with questionable practices.
• Leadership and innovation are two of the other brand features that Tanishq is consistently identified with. These values have helped build tremendous equity for the brand.
• Tanishq has pioneered the creation of a national retail chain that would provide consumers with jewellery of reliable worth and high design value.
• Differentiated designs, which are contemporary, traditional, Indian or international. Tanishq is the first brand in the jewellery category to introduce collections designed exclusively for the modern Indian woman, especially working women.
• Tanishq has also successfully launched new collections at a quicker rate than its competitors.
• Although the purchase of branded jewellery is still a new experience for a whole lot of Indians, the Tanishq brand enjoys increasing levels of consumer loyalty.
• With a 40% share of the organised sector, Tanishq has a dominant position in the industry. While the jewellery market growth has declined during the past two years, Tanishq has recorded an annual growth of approximately 40%.
< TOP >
< TOP >
13
• Tanishq is broadening its base thereby enhancing its strength by has successfully entering key export markets such as the US, the UK, the Middle East, Singapore and Australia.
5. There are normally three types of channel conflicts:
Vertical channel conflicts: This type of channel conflict arises when channel members operating at different levels compete for the same market share, as for instance, when a manufacturer and resellers compete with each other for a share of the business profits from the same segment of the market. For example, General Motors attempted to buy back some car dealer franchises as a possible step towards selling directly over the Web. The dealers protested so vehemently that both GM and Ford Motor spent a lot of time in reassuring dealers that they would not sell directly to consumers.
Horizontal channel conflicts: This type of conflict arises between channel members operating at the same level and also within the same market. For instance, department stores like FoodWorld, Trinethra, Apna Bazaar, etc., in Andhra Pradesh compete for the same segment of the market.
Multichannel conflict: Multichannel conflicts arise when a manufacturer sets up two or more channels that serve and compete for the same market segments. For example, the conflict between showrooms and factory outlets of a manufacturing company for the same market segment is an example of multichannel conflict.
6. Causes of Channel Conflicts
• Channel members have individual goals and objectives that are not compatible with one another
• Conflicts arise between the producer and the intermediaries because the primary aim of the producer is cost reduction, while the aim of the channel members is to differentiate the products and serve as many customer segments as possible.
• The channel members are margin focused in their approach. Producers, on the other hand, would prefer mass production to reduce costs. However, this is incompatible with the needs of the channel members who look for constant improvements in products and their quality as well as customization of the products so that they can differentiate these products and sell them to as many customer segments as possible.
• The lack of clearly defined roles and responsibilities is another reason for channel conflict. Clearly defined roles and responsibilities of the manufacturer and the distributors help them allocate their resources efficiently to achieve their goals. The absence of clearly defined roles and responsibilities, on the other hand, leads to ambiguity and confusion, which, in turn, leads to increased costs owing to redundancy and inefficiency. Thus, the performance of the entire channel suffers.
• Channel conflicts may also arise because of both the manufacturer as well as the channel members fighting for the same market.
Managing Channel Conflicts
There are several methods for solving and managing conflicts:
Negotiation: Negotiation is the process of having discussions between two conflicting parties in order to resolve the causes of conflict. Effective negotiation skills improve one's own position and will become an effective tool for self-defense. There are certain steps that can be followed for negotiationto be effective. These include identifying the problem, determining the issues related to the cause of conflict, generating and evaluating possible solutions and evaluating the results after implementing these solutions.
Problem-solving strategies: there are three major sources of problems -issues relating to the timeliness of delivery, employee issues relating to failure to follow policies and procedures, or issues relating to communication. Likewise, the problem-solving strategies also vary. One problem solving strategy is logrolling. By definition, logrolling is the act of exchanging favors for mutual gain. Another strategy is the compromise strategy where the channel members as opposed to their initial positions identify a middle path. The final strategy is aggressive strategy where the problem is resolved using coercion, threat or punishment.
Persuasive mechanisms: In this process, an individual channel member influences the behavior of other channel members. This is more a process of give and take.However, each channel member has to identify what he can give and what he needs to obtain from the other member. The process of persuasion takes place by gaining the acceptance of the other party, motivating it and dispensing the rewards.
Legalistic strategies: Legalistic strategies involve following legal processes such as arbitration and settlements for resolving the conflicts that arise between channel members.
Climate management: Channel conflicts do not arise overnight. Therefore, channel members have to develop a long-term perspective on how to manage the climate within the channels so that conflicts do not arise in the future.
Cooperation and coordination: Maintaining proper relationships with other channel members is indeed an asset for any channel member and goes a long way in securing the objectives of the firm. If cooperation and coordination of the channel members is obtained, it will help the firm in leveraging its limited resources through
< TOP >
< TOP >
14
the combined efforts of the channel members. In such an environment, every member takes advantage of the skills and experiences of other channel members to achieve profits and an increased market share by delivering value to the customers. Cooperation is the process in which a channel member is motivated to work jointly with other channel members and follow its policies, procedures and strategies. It makes every channel member work towards, the achievement of the common goals of the entire channel. For better cooperation, a proper coordination of all the activities of the channel members must exist.
7. Before selecting a specific channel for distribution of its products or services, a firm evaluates the channel alternatives on the basis of three criteria:
Economic criteria: While evaluating channel alternatives, the first question a firm needs to answer is, which channel member can produce more sales? Although the company's sales force is better equipped and trained to sell the products of the company, there is a possibility that a specialized sales agency might sell more. The simple reason can be customers' willingness to deal with sales representatives dealing in several brands of the same product rather than a specialized sales representative dealingin only a single brand. By giving higher commissions to these specialized agencies, the company might leverage larger sales from their long-standing experience and customer relations. But if the sales agencies are new to the product, it is better to use the company's sales force.
The next question to be answered is, what are the relative costs involved in selling different amounts through the two intermediaries. The fixed costs incurred in using a sales agency are lower than that of developing a company's sales force. However, these costs go up as the sales increase owing to the higher commissions of the sales agency. Control criteria: Normally, firms are not self-sufficient. This warrants their dependence on the services of external agencies. However, the more a company depends on external services, the less it can control its product and resources. Therefore, while selecting an intermediary, a company has to strike a balance between its desire to control important functions of the firm, and the need to market coverage with the help of external agencies at a given expenditure level. Thus, control normally is a major issue while evaluating a channel alternative.
Adaptive criteria: The last criterion in evaluating channel alternatives is the adaptive nature of the relationship between the manufacturer and the distributor. There should be some agreement on the commitment levels from both the sides before the actual start of the business. If the channel member is committed, then he will try to maintain the relationship with the manufacturer. Channel members who operate in a highly turbulent atmosphere will try to structure the channel in a way that will allow them to adapt to the changes by altering their channel strategy.
Part C: Applied Theory
8. A typical product goes through four stages in its life:
Introduction: In the introduction stage, the product is introduced to the customer. Introducing a new product is difficult because (a) only a few sellers can afford the technological know-how, marketing and other costs to launch the product and (b) the risk of new product failure is quite high. The introduction stage is marked by zero profits and negative or negligible sales. This is because initial revenues generated are low. Promotional expenses are at their highest because the company needs to (i) inform the customer about the product (ii) induce product trial and (iii) secure distribution in retail outlets. Advertising is one of the most effective tools at this stage of PLC because marketers must communicate their product's features, usage and advantages to potential customers.
Growth: The introduction stage is followed by the growth stage. The growth stage is crucial for the product's survival in the market because the reactions of the competitors to the product's success will affect the product's life expectancy. This stage is characterised by increase in sales, heavy demand for the product and peaking of profits. New firms enter the market in the growth stage, attracted by the promising opportunities in the market. They introduce new product features and a wider distribution network. Companies increase their 'level of promotional expenditure to meet the competition. The profit of the firm increases initially as (a) promotional costs are spread over a larger volume and (b) the unit manufacturing cost falls. At a later phase in growth stage, the profits begin to decline as competition increases, forcing the lowering of prices and heavy spending on promotion.
Maturity: The maturity stage is marked by a steady decline in profits. The sales tend to (a) grow, (b) stabilise and (c) then start to decline. The sales growth rate slows down as the distribution channels get exhausted. Then the sales tend to flatten or stabilize on a per capita basis as the market reaches its saturation. And finally the sales start declining and customers try out new products and substitutes. Competition is fierce at this stage as many brands compete at the same time. Each competitor tries to improve his product and highlight the product benefits. Weaker competitors and smaller firms are squeezed out of the market.
Decline: Eventually the sales and profits of almost all products and brands tend to decline. Some products experience a faster rate of decline while others experience a slower decline rate. The reason for decline in sales could be (a) technological advances, (b) increase in competition and (c) shift in consumer's tastes and preferences, etc. During the decline stage of PLC, the sales of the product fall rapidly, forcing firms to withdraw from the market. The size of the exit barriers influences the capacity of the firms to withdraw to a great extent. The lower the exit barriers, the easier it is for firms to leave the industry. Those firms that stay on in the market see it
< TOP >
< TOP >
15
(withdrawal by the other firm) as an opportunity to attract the withdrawing firm's customers.
9. The steps involved in the personal selling process are:
Prospecting and Evaluating: Prospecting is the process of finding and evaluating potential customers. For qualifying, as a prospect the salesperson must identify whether the customer has an immediate or a distant need to be satisfied. Prospecting involves (a) generating sales leads, (b) identifying prospects and (c) qualifying prospects. Salespersons use a variety of sources to generate sales leads such as people, events, published information and associations.
Preapproach: The preapproach stage involves further sub stages such as creation of the prospect’s profile, deciding on the approach, establishing the objectives of the sales call and preparing for the presentation.
Approach: In this stage, the salesperson makes the initial contact with the potential customer and tries to find out his needs. The salesperson lays the foundation for a successful presentation later, by attracting the prospect’s attention, building a rapport with him and generating an interest in him for the product. The salesperson may make use of referrals, cold canvassing and repeat contact to approach customers.
Presentation: The aim of a sales presentation is to attract the prospect’s attention, stimulate his interest and stir a desire for the product by communicating product benefits effectively.. Sales presentations are based on the AIDA concept. Salespersons can use a number of approaches like the canned sales approach, formulated sales approach and the need satisfaction approach to make the presentation.
Handling Objections: Salespersons need to clarify any doubts or objections that the customer may have. Absence of objections indicates that the customer is not interested in buying the products. An effective salesperson should consider the objection as an opportunity to satisfy the customer and restrain him from switching to a competitor. Therefore, the salesperson needs to probe into the objection to understand the true nature of the problem and try to solve it.
Closing: This is the stage in which the salesperson asks the potential customer to make the purchase. Objections can be raised in this stage too which the salesperson should earnestly try to address. Salespersons can attempt to make a trial close at several points during the presentation by enquiring about the financial terms and conditions suitable to the customer, the preferred mode of delivery etc. The customer response to these questions helps the salesperson know how close the customer is to placing an order. The most popular techniques for closing a sale are silent close, direct close, assumptive close, alternative close, concession close and cautious close.
Follow-up: The aim of follow-up is to develop long-term relationship with the customer to ensure repeat sales by enhancing customer satisfaction. Follow-up also helps in reducing cognitive dissonance. It also helps in generating new referrals and determining future needs of the customer or in the long run repurchase orders.