MBAMARKETING ICFAI OCT04

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Question Paper

Marketing Management (MB221) : October 2004

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. Reinforcement advertising is a form of

(a) Reminder Advertising (b) Persuasive Advertising

(c) Informative Advertising (d) Comparative Advertising

(e) Teaser Advertising.

< Answer >

2. Which of the following methods of pricing does Bata, the leading footwear company, follows when it

prices its products at such price points as Rs. 599.95?

(a) Target-return (b) Perceived Value(c) Going-rate (d) Mark-up (e) Psychological.

< Answer >

3. Manufactures of razors and cameras often price them low and set high mark-ups on razor blades and

films respectively. This method of pricing is known as

(a) Two-Part Pricing (b) By-product Pricing(c) Captive Product Pricing (d) Mark-up Pricing

(e) Going-rate Pricing.

< Answer >

4. BPL Sanyo brand of televisions is an example of a/an

(a) Co-brand (b) Flanker Brand(c) Brand Extension (d) Umbrella Branding

(e) Blanket Branding.

< Answer >

5. Which of the following describes the buying behavior, where customer involvement is high and

significant differences between brands exist?

(a) Habitual buying behavior (b) Variety seeking behavior

(c) Complex buying behavior (d) Dissonance reducing buying behavior(e) Rational buying behavior.

< Answer >

6. The shift in marketing from trying to maximize profit on individual transactions to maximizing

mutually beneficial relationships with consumers and others is called

(a) Social marketing (b) Green marketing(c) Mega marketing (d) Relationship marketing

(e) Proactive marketing.

< Answer >

7. If Levi Strauss company decides to enter the sportswear market, in which it currently has no presence, it

would be pursuing which growth strategy?

(a) Market penetration (b) Market development

(c) Product development (d) Diversification(e) Cost leadership.

< Answer >

8. Marketing chewable vitamins for children and a different version for adults is an example of

(a) Geographic segmentation (b) Psychographic segmentation

(c) Regional segmentation (d) Age and life-cycle segmentation(e) Physiological segmentation.

< Answer >
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9. Elena intends to buy her favorite brand of camera but her best friend persuades her to buy the lowest-

priced one. Which of the following can be said to have influenced her purchase decision?

(a) Purchase intention (b) The self-concept

(c) External influences (d) Unexpected situational factors

(e) Competitors price.

< Answer >

10. A firm that bases its price on how it thinks the competitors will price, rather than on its own costs ordemand, in order to win a contract, is most likely using

(a) Going-rate pricing (b) Cost-plus pricing

(c) Perceived-value pricing (d) Sealed-bid pricing

(e) Auction-type pricing.

< Answer >

11. When Julie gives her customers her card during a sale and invites them to call with any questions they

might have later, which of the following levels of relationship marketing is Julie practicing?

(a) The basic level (b) The reactive level

(c) The accountable level (d) The proactive level

(e) The partnership level.

< Answer >

12. If Wrigleys makes bubble gum and sells it through middlemen, who market it under individual store

brands, which type of brand-sponsorship is Wrigleys utilizing?

(a) Manufacturer's brand (b) Slotting brand

(c) Private brand (d) Licensed brand

(e) Dealer brand.

< Answer >

13. 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 >

14. What is market segmentation based on customers values and lifestyles, known as?

(a) Geographics (b) Demographics

(c) Psychographics (d) Biographics(e) Behavioral.

< Answer >

15. Ellen decided to conduct an experiment in her mall's car park to see if shoppers would respond to a

lower parking price to park in some of the under-utilized sections of the car park. Which of the

following types of market research was Ellen using?

(a) Exploratory (b) Causal (c) Descriptive (d) Investigative

(e) Behavioral.

< Answer >

16. In which of the following stages of new product development is the brainstorming technique used?

(a) Commercialization (b) Concept testing

(c) Market analysis (d) Idea generation

(e) Idea screening.

< Answer >

17. The order of the steps in the consumer adoption process is

(a) Awareness, Interest, Evaluation, Trial, Adoption

(b) Interest, Evaluation, Awareness, Trial, Adoption(c) Evaluation, Awareness, Interest, Adoption

(d) Trial, Evaluation, Awareness, Interest, Adoption

(e) Adoption, Evaluation, Trial, Interest, Awareness.

< Answer >

18. Which of the following is/are included in product mix?< Answer >
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(a) Product length (b) Product width

(c) Product depth (d) Product consistency

(e) All of the above.

19. The level of product which gives actual benefit to the basic consumer need is

(a) Augmented Product (b) Actual Product

(c) Core Product (d) Product Mix(e) Product service.

< Answer >

20. The pricing strategy, where a low quality product is offered at a high price, is called

(a) Super value strategy (b) High value strategy

(c) Medium value strategy (d) Rip-off strategy

(e) Good value strategy.

< Answer >

21. Supermarkets and department stores often drop the prices on well-known brands to stimulate additional

store traffic. Such pricing is called

(a) Special event pricing (b) Cash rebates

(c) Low interest financing (d) Loss leader pricing

(e) Psychological pricing.

< Answer >

22. Which type of advertising is most appropriate for introducing new product categories?

(a) Reminder advertising (b) Informative advertising

(c) Persuasive advertising (d) Comparison advertising

(e) Reinforcement advertising.

< Answer >

23. When a coffee shop in an airport and a fine restaurant in a luxury hotel charge different prices for the

same meal to customers who find the atmosphere in the hotel worth the difference, which of the

following methods of pricing is used?

(a) Markup pricing (b) Going-rate pricing

(c) Sealed-bid pricing (d) Value-based pricing

(e) Perceived-value pricing.

< Answer >

24. When a service firm effectively trains and motivates its customer-contact employees and the support

personnel to work as a team to provide customer satisfaction, it is practicing(a) Results-oriented marketing (b) Internal marketing

(c) Interactive marketing (d) Marketing myopia

(e) Captive marketing.

< Answer >

25. Sandy has decided to go to Wofford College because of the scholarships she will receive. Which stage

of the Buying Decision Process is Sandy in?

(a) Problem Recognition (b) Post Purchase

(c) Information Search (d) Purchase

(e) Dissonance.

< Answer >

26. When IBM and Apple Computer announced a joint operation to develop a new computer operatingsystem, it was an example of a (n)

(a) Corporate marketing system (b) Administered marketing system(c) Conglomerate marketing system (d) Horizontal marketing system

(e) Contractual marketing system.

< Answer >

27. Which of the following statements best reflects the definition of a product?

(a) A product is anything that is offered to the market for need satisfaction

(b) Services are intangible and do not result in the ownership of anything

(c) Organizations tend to compete at the augmented product level

(d) The core product is what consumers really seek when obtaining a product

< Answer >
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(e) All of the above statements are true vis--vis definition of a product.

28. In terms of buyer decision processes, if Naina looks for reading material, phones friends, and seeks out

information about laptops because she is thinking of buying one, she is said to be in

(a) A state of heightened attention

(b) Active information search

(c) Exploratory prepurchase mode(d) The dynamic exchange paradigm

(e) Post purchase dissonance.

< Answer >

29. When a university charges tuition fee that does not cover costs, knowing that it must rely on privateendowments and public grants to cover the remainder, which of the following pricing objectives is the

university pursuing?

(a) Survival (b) Product-quality leadership

(c) Partial cost recovery (d) Full cost recovery

(e) Market-skimming.

< Answer >

30. A themed TV programme, typically 30 minutes long, during which the features or virtues of a product

are discussed by 'experts', is known as

(a) Commercial (b) Infomercial

(c) Consumer affairs (d) Home shopping (e) Advertorial.

< Answer >

END OF SECTION A
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Section B : Caselets (50 Marks)

This section consists of questions with serial number 1 8.

Answerall 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. Companies are banking on star power to enhance the visibility of their brands. Discuss at least six uses of

celebrity endorsements.

(6 marks) < Answer >

2. Advertisements featuring celebrities do not always produce the desired results. Explain some of the reasons why

celebrity endorsements may not work.


3. Getting a brand endorsed by a celebrity has its share of risks. Discuss the risks associated with celebrityendorsements and explain how the same can be hedged.


CELEBS: DO THEY DELIVER?

Stars, who are known to shape destinies, cast an enormous influence. No, were not talking about astrology here. Werereferring to the powerful effect of celebrities on destinies of brands. One approving nod from a famous face can

translate into millions in brand sales. Perhaps thats why the world over, companies have been using stars to endorse

everything, from food to food chains, from soft and hard drinks to health drinks, from clothes and accessories to cars

(and the tyres on which they run). Even political parties are awestruck by the charisma of stars. Such is the magnetism

of celebrities in this country that in the recent general elections, major political parties fielded a record number of filmstars and cricketers to contest from important constituencies around the country. So what is great about celebrities that

drives companies to spend in millions on obtaining their stamp of approval on their brands?

Signing up stars for endorsements is a time-tested strategy and has been effectively used by some of the top brands inthe world including Nike and Pepsi. In India too, HLL has used Hindi film stars to endorse their beauty soap Lux since

the fifties. Vimal, Thums Up, Gwalior and Dinesh are some of the other brands that used star-appeal in the early days of

mass advertising. And who can forget Kapil Palmolive Dev?

Ask about the objective of using a celebrity in an ad and most admen will talk about making an impact on the bottom

line. They believe that star endorsements have several benefits, key among them being building credibility, fostering

trust and drawing attention any or all of which can translate into higher brand sales. So how does one decide whetherto put a celebrity in an ad? Ideally, this should be dictated by the communication idea. Advertising professionals

recommend celebrity endorsements when the case is justified. There are many cases where you need to use the celebrity

to break out of a category clutter. At times celebrity endorsement is used to build credibility to the brand offer.

Most experts concur that, when used judiciously, celebrity endorsements can be an effective strategy. Using a celebrity

by itself is not a bad idea provided it is done intelligently. And there are many examples of good and bad use of

celebrities. Take Amitabh Bachchan, who has been used by some companies like Parker Pens and ICICI Home Loans

remarkably well while some others have been unable to exploit his Big B status too well. Shah Rukh Khans

endorsement of Hyundai Santro too seems to have worked well. Ad agency FCB Ulka used cricketers like Rahul Dravidfor Castrol in an attempt to break out of the clutter, as well as have an image rub off of dependability on to the brand.

Yet, there are some who dont have much conviction in star endorsements. Some admen do not recommend celebrity
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endorsements because they think that to be really successful, a brand needs to have a strong identity of its own. It

should ideally not piggyback on the identity of a celebrity and hope to achieve success. They feel that not much effort is

put in to think through an ad with a celebrity. Most times it seems like it is just the celebrity saying I use this product,so why dont you kind of thing and the ad agency thinks it has done its job. Celebrity endorsements are capable of

manifesting both favorable and adverse effects for the brands with which they associate.

Celebrity endorsements are very expensive. Therefore their use in an ad should be justified. In other words, the messagestrategy for a brand should strongly warrant the use of a known face in an idea. Sadly, very often the celebrity is hired

first and an idea is then weaved around his or her presence. The important thing to remember is that putting a celebrity

in an ad is not an idea in itself. Unfortunately, this is how most celebrities are being used in Indian advertising, wherethey just become a prop. Ideally, there should be an idea that makes the celebrity relevant to the product and the

consumer.

A celebritys presence in the ad should be contextual. When Sachin Tendulkar declares, Boost is the secret of my

energy, it doesnt seem out of context. Internationally, Nikes association with Michael Jordan is legendary and also

logical. Celebrity endorsements work best when the celebrity is not introducing the brand. When the product already

has a strong identity and a USP that is well established, then a celebrity can come in and give the brand an added fillip

and generate some more interest value. However, what is of paramount importance is to find a complete fit between the

values of the brand and the values of the celebrity. One needs to create a unique situation or story that links the celebrityto the product.

In the last decade or so, there has been a spurt in the use of celebrity endorsements. And with it, there has been an

increase in the number of instances of brands failing to take off in spite of the biggest and brightest stars endorsing it

and consequently leading to speculation about the soundness of celebrity endorsements as a communication strategy.

Many celebrity endorsements fail because they identify a celebrity they like in an emotive and un-researched manner,

and then try to create advertising to force-fit the celebrity into the creative concept. Often, the finished advertising is at

best contrived, and often, simply laughable. In the end, the brand suffers from a mismatched concept and celebrity, and

millions of dollars are flushed away. If this company is publicly listed, imagine the disservice the company has done for

its shareholders.

There are several reasons why celebrity endorsements fail to produce the desired effect, and each of them has more to

do with the core communication strategy and less with the celebritys pull. Celebrities cannot really be blamed if their

endorsements fail to push up the brand sales. Indeed, it is important to recognize that celebrities can create interest -whether that interest converts into sales depends on various factors such as brand-celebrity disconnect, improper

positioning, clutter of celebrities, or even product life-cycle.

Caselet 2


4. Several MNCs have chosen the M&A route to expand their brand portfolios in India. But this strategy is not

without risks. How can MNCs derive the maximum mileage out of brand acquisitions?


5. MNCs that have an understanding of the ground realities, the heterogeneity of the Indian market, and the tastes

and preferences of the Indian customer have a distinct edge. Suggest some steps that would enhance the brand

equity of MNCs in India.


MNCs AND BRANDING IN INDIA

Emerging markets like India constitute major growth opportunities in the evolving economic order.

In a liberalized global business regime, the potential of markets like India has already affected an accent in the approach

of MNCs, which now customarily highlight emerging market investments even when communicating with shareholders.

Traditionally, India has always featured in the strategic plans of the multinationals globally. European and American

MNCs were among the first ones to enter the Indian market and gain a sound foothold here.

MNCs in recent times have exhibited the tendency to grow inorganically - through M&As - since that is a fast track
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route to enter markets, with a host of facilitators existing. However, it will be more important in the future for

companies to own markets than factories. And the only way to own markets is to own dominant brands. A brand can be

timeless. Hence the issues of brand acquisition by MNCs - through M&As - and ultimately brand value creation, are ofextreme importance.

Business strategists too have always emphasized the significance of 'Brand Value,' while confronted with the subject

area of M&A as a strategy to pursue growth objectives. The opportunity for exploiting common use of a well-knownbrand name among others is a significant pointer towards the existence of 'strategic fit', whenever exploring the case for

related diversification strategies. Similarly germane are the aspects of a company's brand name and reputation in the

context of these virtues being transferable to other businesses (vide M&As) arising from cross-business strategic fitsalong the value chain.

A 'Profit Impact of Market Share' study showed a strong interaction between, among other things, brand rank and

profitability. The evidence shows that it is difficult to make profits unless the company has one of the three leading

brands. The framework, further assessing strategic potential of businesses, assigns an important rating to brands

constituting competitive strength of a firm.

Total Research Corporation's EquiTrend study shows that firms experiencing the largest gains in brand equity saw theirROI average 30 per cent, those with the largest losses in brand equity saw their ROI average a negative 10 per cent.

The success of a venture by the MNC floating in tested waters is dependent on a multitude of factors. The extent of

awareness of the acquired brand is the key in any success script. The marriage of an Indian brand with an MNC will bea hit love story if, and only if, the MNC is able to rouse the interest in the offering as an international brand with better

standards than its local counterparts.

There have been cases where MNCs wanting to enter the Indian market, acquired companies with successful brands. In

the quest for wanting scale, merger partners were identified; whose products and brands more or less complemented

their line of businesses.

The example in this regard would be the buying of Modern Foods by HLL. Analysts say Modern Foods fits into HLL's

major thrust in the area of foods. The company's branded atta business (under the Annapurna brand) has been showing a

handsome growth. In this context, Modern Foods has a strategic fit with the HLL's business plans. There are direct-

buying synergies in the area of wheat procurement, which ensures that maida (wheat flour), the main raw material forbread, is made available at the desired quality and at the most competitive prices to the company.

HLL has been trying to synergize the Modern Foods brand with its other brands at regional levels. In New Delhi for

instance, Modern buns were promoted along with Kwality Walls ice cream and Taj Mahal tea.

Gillette, having identified oral care as one of the faster growing categories, acquired the old Parle brand, Prudent. Theobjective here was the acquisition of a brand in the popular segment to extend the Gillette Oral Care franchise. Gillette

also wanted to acquire a vehicle to extend the franchise to a larger universe of outlets and to enter the rural market,

largely untouched hitherto. Also, Gillette wanted to synergize with Oral B worldwide, which has a two-brand strategy.

However the challenges facing Gillette were manifold. Prudent had fairly high brand awareness, but carried some

negative perceptions. Faced with these challenges, Gillette revamped the entire product range, changed the packaging

completely, making it much more contemporary, rationalized price points and put in place a well thought-out sales

strategy, backing it up with powerful trade and consumer promotion. The results were phenomenal. A dead brand was

revived. The Prudent brand turnover doubled! Prior to acquisition, the turnover was roughly Rs. 20 crore and one yearpost-acquisition it was Rs. 45 crore! But the icing on the cake was that the flagship brand Oral B grew too.

But there have also been cases of overlapping and unrelated brand acquisitions. Duracell, one of the MNC Gillette'sbrands, undertook the acquisition of Geep, an Indian player in the non-alkaline batteries segment in 1998. Gillette

needed a plank in the low price segment, rural market as also the non-alkaline segment. But after acquisition its

turnover reduced from Rs. 150 crore to Rs 100 crore in one year. Gillette ended up with huge trade outstanding.

Margins on the business continued to be low and all re-launches failed. Gillette did not perhaps assess the market ofGeep correctly. Geep had limited equity outside of Uttar Pradesh and Madhya Pradesh, which contributed to half of the

total volumes. Gillette was unable to manage the wholesaler dynamics - this was not an area of core competence for the

company. Brand/displays/technology, which were Gillette's core competence, were irrelevant in this industry. Brand

misfits, thus, are a result of limited market and straying competencies and hence a brand loses its sheen.


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Caselet 3


6. Krispy Kreme is considered the king of the doughnut world. What made it so successful in so short a period?


7. Will Krispy Kreme benefit financially from supermarket sales? If not, suggest a suitable distribution strategy forthe company.


8. Krispy Kreme has created a lot of buzz for their products. What are the advantages of buzz marketing? Does it

(buzz) happen naturally?


HAS KRISPY KREME PEAKED?

I walked into the store for a quick snack. A vast glass wall invited me to see the inner workings of the operation. Theytruly had nothing to hide. A conveyor belt carried fist-sized rings into a pool of oil. An employee was there to snag

anything that did not fit the companys exacting standards of what the product should look like. Out of the oil, and

through a thin waterfall of sweet glaze, the fluffy hoops of delight were then placed in flat boxes or set neatly in display

trays. I proceeded to the counter, and stood there for a moment examining the menu of choices. As I carefully

considered my options, an employee handed me one of the newly created treats, and invited me to enjoy it in the house.

After one bite, the words Ill take a dozen flew out of my salivating mouth. A two-doughnut snack turned into a treat

for the whole family when I got home.

If you havent heard about Krispy Kreme doughnuts by now, you dont have any friends, and you dont have access toany news sources. Its the king of the doughnut world. Krispy Kreme spends almost nothing on advertising. No TV

commercials. No billboards. No radio ads. No print ads. They let the press give them free TV, radio, and print coverage

because their store openings are so popular. Hundreds of people line up on the first day of a new store opening. After

going public in 2000, its stock has whipped every major stock index over that time period.

Many stories have been written about how they have grown so fast in the last few years. They give away free samples in

areas they will open stores. They only open one store in any single community to create demand for a scarce product.They embrace and support a community of Krispy Kreme fans. Their product is damn tasty, and as addicting as a

doughnut can be. If it werent, they would never have attracted the legions of loyalists they now have. Word of mouth

has worked well for them. Not only is the product without peer, but also the customer experience is the best in the

business. While Subway lets you see your food being made, its not nearly the same magical trip you get at a Krispy

Kreme store. A sandwich can be very tasty, but a hot Krispy Kreme is a religious experience. Watching the doughnuts

being made adds to the magic of the product. One of my friends drags people to the nearest Krispy Kreme store if they

say they have never had one. He wont let them have their first taste out of a box from a grocery store.

While shopping at my local mega supermarket, I saw boxes of Krispy Kreme doughnuts near the entrance to the store.Obviously, some marketing genius at Krispy Kreme thought this would be a great way to leverage the buzz about their

product. Make it easier for people to buy the product, and sales will multiply exponentially, right? But the joy rideappears to be eventually coming to an end for Krispy Kreme with sales beginning to go down hill. If the product is

wonderful, and the experience is magical, what could possibly slow them down?

END OF SECTION B

Section C : Applied Theory (20 Marks)
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This section consists of questions with serial number 9 - 10.

Answerall questions.

Marks are indicated against each question.

Do not spend more than 25 -30 minutes on section C.

9. Britannias flavored milk, Milkwala offered in different flavors did not succeed in the market. P&Gs Ivory, afloating soap bar, failed to impress the consumers. Bakemans cookies also could not leave a lasting impression in

the consumers minds. Analyze the reasons for the failure of these and other products in general. How canmarketing research help in making them successful?


10. Assume that you are the vice-president of marketing in a small firm that has the following departments: marketing,

finance, purchasing, and strategic planning. The sales manager has mentioned to you that one of the salespersonsthought that cellular phones would help the sales force become more efficient. The manager requests that eight

such phones be purchased. Illustrate the six buying decision roles that would be relevant for the purchase of these

cellular phones.(10 marks) < Answer >

END OF SECTION C

END OF QUESTION PAPER

Suggested Answers

Marketing Management (MB221) : October 2004

Section A : Basic Concepts

1. Answer : (a)

Reason : Reminder advertising is a form of advertisement, which creates a reinforcement of decision-making in the customer.

b. Persuasive advertising is aimed at persuading the customer.

c. Informative advertising aims to provide basic information about theproduct to the customer.

d. Comparative advertising occurs when two companies enter intopromotional war, like Pepsi and Coca Cola.

e. Teaser advertising is the form of advertising where suspense is

created by giving part of the advertisement at one time and then concluding it

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in a series of advertisements at different timings.

2. Answer : (e)

Reason : Psychological pricing : Many sellers believe that prices should end in odd numbers. Bata alwaysuses Rs.599.95 instead of Rs.600.00.

a. Target Return Pricing : The firm fixes the price that would yieldits target of return on investment (ROI).

b. Perceive Value Pricing : The price is based on buyersperception of the value of the product.

c. Going Rate Pricing : The firm bases its price largely oncompetitors prices.

d. Mark-up Pricing : The elementary method used is to add a standard mark

up to the production costs.

< TOP

>

3. Answer : (c)

Reason : Some products require use of ancillary or captive products like printers and

cartridges.

a. Service firms often engage in two-part pricing consisting of afixed fee plus a variable usage fee: Telephone services are an example.

b. By-product pricing: The production of certain goods petroleum products and other chemicals often results in by-products. Ifthe by-products have value to a customer group, they should be priced ontheir value.

c. Mark-up pricing: The elementary method used is to add astandard mark-up to the production costs.

d. Going rate pricing: The firm bases its price largely on

competitors prices.

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>

4. Answer : (a)

Reason : Self-explanatory.

< TOP

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5. Answer : (c)

Reason :

High - Involvement Low - Involvement

Significant differencesbetween brands

Complex buying behavior

(occurs for Branded consumerdurables )

Variety seeking

buying behavior

Few differences

between Brands

Dissonance reducing buyingbehavior

Habitual buying behavior

< TOP

>

6. Answer : (d) < TOP>
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Reason :Relationship marketing is building mutually satisfying long-term relationships

with customers. The aim of Customer relationship management is to produce high

customer equity. There are five levels in customer relationship building.

7. Answer : (d)

Reason : Ansoff has proposed a useful framework for detecting intensive growth opportunities called a

Product-market expansion grid.

Current Products New Products

Current

Markets

Market Penetration

Strategy

Product Development

Strategy

New MarketsMarket Development

StrategyDiversification Strategy

Ansoffs Product-Market Expansion Grid.

Alternative (a) is incorrect because in Market penetration strategy, the companyconsiders whether it could gain more market with its current products in their

current markets. Alternative (b) is incorrect as in Market development, the

company considers whether it can find or develop new markets for its currentproducts. Alternative (c) is incorrect because in Product development strategy, the

firm considers whether it can develop new products of potential interest to its

current markets. Alternative (e) is one of Porters generic strategies.

< TOP

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8. Answer : (d)

Reason :Marketing chewable vitamins for children and a different version for adults is anexample of age and life-cycle segmentation. Alternative (a) is incorrect because in

Geographic segmentation, the marketer divides the market into different

geographical units such as nations, states and regions. Alternative (b) is incorrectas in Psychographic segmentation, buyers are divided into different groups on the

basis of lifestyle or personality or values. Alternatives (c) & (e) are incorrect

because they are not real terms.

< TOP>

9. Answer : (c)

Reason : External influences have acted on Elenas purchase decision in the given

example.

< TOP

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10

.

Answer : (a)

Reason : Firms that base their price on how they think the competitors will price, rather than on their own

costs or demand, in order to win a contract, are using going-rate pricing.

< TOP

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11

.

Answer : (b)

Reason : Relationship marketing is building mutually satisfying long-term

< TOP

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relationships with customers. The aim of customer relationship management is to

produce high customer equity. There are five levels in customer

relationship building. Alternative (a) is incorrect as in basic level thesalesperson simply sells the product. In Accountable marketing, the

salesperson phones the customer to check whether the product is meeting

expectations, hence alternative (c) is incorrect. Alternative (d)is incorrect because in the proactive level of relationship marketing the

salesperson contacts the customer from time to time with suggestions about

improved products, new uses or new products.

12.

Answer : (c)

Reason :A manufacturer will have several options vis--vis brand sponsorship. Alternative(a) is incorrect because Manufacturers brands dominate; large retailers and

wholesalers have been developing their own brands. Slotting brand is not real

term, hence option (b) is incorrect. Alternative (e) is incorrect as the brand createdby the dealer to distribute the product/service is referred to as Dealer brand.

< TOP

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13.

Answer : (b)Reason :Market challengers are runner-up companies that aggressively attack competitors

to get more market share.

< TOP

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14.

Answer : (c)

Reason : Market segmentation is a process of dividing a larger market into sub-markets

each having different market demand patterns, needs, buying styles and responses

to various suppliers marketing strategies.

Alternative (a) is incorrect because Geographics is concerned with dividing themarket into different geographical units such as nations, states and regions.

Alternative (b) is incorrect as Demographic variables include age, family, size,

family life-cycle, gender, income, occupation, religion, race, generation,nationality and social class. Alternative (d) is not a real type of market

segmentation. Alternative (e) is incorrect because in Behavioral segmentation,

buyers are divided on the basis of their knowledge, attitude toward, use of, or

response to a product.

< TOP

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15

.

Answer : (b)

Reason : Marketing research is the systematic design, collection, analysis, and

reporting of data and findings relevant to a specific marketing situation faced by

the company.

Alternative (a) is incorrect because Exploratory research is used when there is a

need for large amounts of information. Alternative (c) is incorrect as Descriptiveresearch is conducted when there is a need to understand a specific phenomenon

to solve a particular problem. Alternative (d) is not a term used for developing theresearch plan.

< TOP

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16

.

Answer : (d)

Reason : Idea generation: Its the fist stage of new product development. Brainstorming is one of thetechniques used for idea generation.
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a. Commercialization: Last stage of new product development.

b. Concept testing: Its the stage where concept of the product istested.

c. Market Analysis: Its the stage where demand for new product isanalyzed.

e. Idea screening: Second stage where ideas generated are

screened.

17

.

Answer : (a)

Reason : AIETA Model

Awareness Interest Evaluation TrialAdoption

< TOP

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18

.

Answer : (e)

Reason : Product Mix = Product Length x Product Width x Product Depth x Product

consistency

< TOP

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19.

Answer : (c)

Reason :A u

g m e nt e d P ro d uction

Ac t u

alPa c k a g ing etc

. ,

C o r eP r o d u c t i o n

C

(e)

P r o d u c t &S e r v i c e

W h i c h i sC o n s u m e d

b y c o n s u m e r

P r o d u c t i o n

< TOP

>

20

.

Answer : (d)

Reason :

PRICE

QUALITY High Medium Low

High1. Premium Strategy 2. High value Strategy 3. Super Value

Strategy

Medium4. Over Charging

Strategy5. Medium ValueStrategy

6. Good ValueStrategy

Low7. Rip-off Strategy 8. False economy

Strategy9. EconomyStrategy

< TOP

>

21 Answer : (d) < TOP>


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. Reason :Loss leader Pricing: Supermarkets drop the prices on some of their products toincrease customer traffic.

a. Special event pricing: Sellers establish special seasons to drawin more festive offers.

b. Auto companies and other consumer goods companies offercash rebates to encourage purchase of manufacturers production withina specified span of time.

d. Loss leader pricing involves offering heavy discounts on oneproduct to attract customers into the store.

e. Psychological pricing: Many sellers believe that prices should end in oddnumbers. Bata always uses Rs.599/- instead of Rs.600/-.

22

.

Answer : (b)

Reason : Advertising objectives can be classified according to whether their aim is to inform, persuade,

remind or reinforce.

Reminder advertising aims to stimulate repeat purchase of products and services;

hence alternative (a) is incorrect. Alternative (c) is incorrect as Persuasive

advertising will create liking, preference, conviction and purchase of a product or

service. Comparison advertising is not real time classification used in settingadvertising objectives; hence option (d) is incorrect. Alternative (e) is incorrect

because Reinforcement advertising aims to convince current purchasers that they

made the right choice.

< TOP

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23.

Answer : (d)

Reason :Companies select the pricing method considering competitors prices and the

prices of substitutes. Generally the firms set the prices using seven pricing-setting

methods; markup pricing, target-return pricing, perceived-value pricing, value

pricing, going-rate pricing, auction-type pricing and group pricing.Alternative (a) is incorrect because in Markup pricing, price is set to cover costs

and pre-determined percentage of profit. Option (b) is incorrect as in Going-rate

pricing, the firm bases its price largely on competitors prices. Sealed-bid is typeof auction pricing in which suppliers can submit only bid and cannot know the

other bids; hence option (c) is incorrect. In Perceived-value pricing companies

base their price on the customers perceived value; hence option (e) is incorrect.

< TOP

>

24.

Answer : (b)

Reason : When a service firm effectively trains and motivates its customer-contact employees and the

support personnel to work as a team to provide customer satisfaction, it is practicing internal

marketing.

< TOP

>

25

.

Answer : (d)

Reason : In the given example, Sandy is in the purchase stage of the buying decisionprocess.

< TOP

>

26

.

Answer : (d)

Reason :Distribution channels can be arranged in vertical, horizontal and multichannel

marketing systems. Corporate and Administered marketing systems are vertical

< TOP

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marketing systems which combine successive stages of production and

distribution under single ownership; hence options (a) and (b) are incorrect. A

contractual vertical marketing system consists of independent firms at levels ofproduction and distribution integrating their programs on a contractual basis;

hence option (e) is incorrect. Alternative (c) is not a real term.

27

.

Answer : (e)

Reason : All the statements given reflect the definition of a product.

< TOP

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28.

Answer : (b)

Reason : In the given example, Naina is in the active information search stage.

< TOP

>

29

.

Answer : (c)

Reason : In the given example, the university is pursuing partial cost recovery.

< TOP

>

30

.

Answer : (b)

Reason : A themed TV programme, typically 30 minutes long, during which the features or virtues of a

product are discussed by 'experts', is known as an infomercial.

< TOP

>
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Section B: Caselets

1. Six uses of Celebrity Endorsements:

Establishes Credibility: Approval of a brand by a star fosters a sense of trust for that brand

among the target audience- this is especially true in case of new products.

Attracts Attention: Celebrities ensure attention of the target group by breaking the clutter ofadvertisements and making the ad and the brand more noticeable.

Associative Benefit: A celebritys preference for a brand gives out a persuasive message -

because the celebrity is benefiting from the brand, the consumer will also benefit.

Psychographic Connect: Stars are loved and adored by their fans and advertisers use stars tocapitalize on these feelings to sway the fans towards their brand.

Demographic Connect: Different stars appeal differently to various demographic segments

(age, gender, class, geography etc.).

Mass Appeal: Some stars have a universal appeal and therefore prove to be a good bet to

generate interest among the masses.< TOP >

2. Some of the reasons why celebrity endorsements may not work:

Improper positioning

Associating with a star, however big he or she may be, in itself does not guarantee sales. The

most it can do is generate interest in the product or create a buzz around it. Take the case of

Maruti Versa, which was launched amidst a lot of fanfare about three years ago. In spite ofMaruti signing up superstar Amitabh Bachchan and his son Abhishek Bachchan as brand

ambassadors for Versa, the brands sales remained sluggish. To be fair, the Big B magic did

work and the ads created significant interest, drawing people into the showroom. But perhaps

the positioning itself was faulty as people were expecting a larger than life car, just like thebrands ambassador. Last year, we saw Versa being re-positioned as a family car, with the core

proposition being, the joy of travelling together. In the words of Ravi Bhatia, General

Manager of Marketing at Maruti, Versa has started doing well and has witnessed an upswingsince the new positioning. Last year, the average sales were 80-100 vehicles a month. Now they

are selling 450 vehicles a month.

Brand-celebrity disconnect

If the celebrity used represents values that conflict with the brand values and positioning, theadvertising will create a conflict in the minds of the target audience who may reject the

proposition. Take for instance Toyota, one of worlds leading auto companies. Toyota chose

teeny-pop singer Britney Spears for its brand Soluna Vios, a family sedan, which is preferred

by married men and women with children. According to Phan, a youth icon like Britneywouldve been better used by Toyota for a sleek sports vehicle and for Soluna Vios, Toyota

should choose someone like a mature man, Harrison Ford for example.

Clutter Flutter

In recent times, there has been such a deluge of celebrity endorsements that it has led to the

very clutter that it aimed to break. For instance, Amitabh Bachchan endorses or has endorsed

Pepsi, ICICI, BPL, Parker pens, Nerolac, Dabur, Reid & Taylor, Maruti Versa, Cadbury and a

few social messages too. Bollywood Badshah Shah Rukh Khan endorses Omega, Tag Heuer,
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Pepsi, Hyundai, Clinic All Clear and Airtel among other brands and has to his credit more

television commercials than feature films since 1992. This over-exposure can be bad for the

brand. Khan adds, We seem to have just 2 celebrities per brand in a country of 1 billionpeople which is a terrible tragedy. Consequently, each celebrity is called upon to push maybe a

dozen brands or so, which is great for the celebrity, but I think it is pretty daft for the brand

because the impact of the celebrity reduces as the number of brands he endorses increases.Parmeswaran agrees, Unfortunately in India, we have too many brands chasing too few

celebrities. And the recall value drops by a huge margin when you move from an A Class

celebrity to a B Class.

Dissatisfaction with product quality/performance

You cannot sell an ordinary product just by making a celebrity endorse it. In fact, if anything,

the product will fail faster because the presence of the celebrity will create a buzz and more

people will know about the ordinariness of the product. Parmeswaran says, Unfortunatelyusing a celebrity seems to be the easy way out of a parity product situation. Sachin

Tendulkars endorsement of Fiat Palio was quite a success initially. But as word about the poor

fuel efficiency of Palio spread, its sales took a beating. In this case, Sachins presence couldve

worked wonders but for the poor performance of the car in a market that is highly performanceconscious.

Confusion/ Scepticism

The use of celebrities can be confusing. Some viewers forget the brand that a celebrity isapproving. Others are so spellbound by the personality of the celebrity that they completely fail

to notice the product/brand being advertised. The brand is overshadowed in the overwhelming

presence of the star. In some cases, a celebrity can give rise to scepticism because it might be a

bit too much for the masses to believe that the celebrities who are rich and can afford the bestin the world are actually using a mass product being advertised on television. On the contrary,

people might speculate about such things as how much did the brand pay to rope him/her in as

the brand ambassador?< TOP >

3. Celebrities, being humans, make mistakes. But their mistakes get as much attention as their

celebrity status and this can adversely affect the brands that they are endorsing. There are a

number of examples, both Indian and International, where scandals and scams involvingcelebrity endorsers have caused embarrassment to the brands they endorse. Companies have to

make quick decisions when one of their endorsers comes under fire or their own image could

be tarnished. Guilty by association in a consumers eyes describes it best.

Magic Johnson lost his endorsement deals when he announced in 1991 that hes HIV-positive.It wasnt until July 2003 that he landed his first endorsement deal since the announcement.

Its a tricky situation for marketers. If a brand continues with the celebrity, it may adversely

affect the image of the brand and consequently, brand sales. If the brand chooses to distanceitself with the tainted celebrity, the huge costs spent on roping in the celebrity and making ofthe ads may go down the drain and even then the association of the brand with the celebrity

might by then be so ingrained that the damage is already done. Its a two-way street. One way

it shows the strength of the brand promotion. But it is also fraught with risk if your brandambassador fails to perform in the related field

Hedging the risk

The first thing to ensure, when zeroing in on a celebrity, is to try and choose someone whose


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record is impeccable. Having said that, its best not to depend on one celebrity, for that can

backfire. Instead, its better to use many celebrities who represent the same values. Pepsi does

this quite well. Capitalizing on the popularity of cricket and films in India, Pepsi uses severalcricketers and film stars in their ads. So when Azharuddin and Jadeja got embroiled in the

match-fixing controversy, Pepsi severed its association only with these stars, but its relationship

with cricket continued.< TOP >

4. The strategy of acquiring existing brands gives a company the opportunity for exploiting

common use of a well-known brand name that in turn delivers a strategic fit. The companys

brand name and reputation are relevant in the context of these virtues being transferable to

other businesses (through M&As) arising from cross-business strategic fits along the valuechain. Brand rank and profitability are strongly correlated since brands constitute competitive

strength of a firm. Since most M&A activity is also focused on achieving bottom-line growth,

businesses must give a serious thinking to the issues of brand equity pertaining to potentialacquisition.

The absence of an integrated approach may result into acquisitions adding to brand

proliferation and market confusion. However, if brand strategies are brought into discussionbefore deals are finalized, M&A strategies can fill the gaps and expand the relevance and reachof brand portfolios.

MNCs are required to undertake a holistic approach while acquiring brands and must attempt to

understand relationships between brands across portfolio, where fits and disconnects may existso that they could be better leveraged to create more value to the organization.

MNCs have other compelling reasons to look forward to brand acquisitions in emerging

markets like India. This arises out of the poignant need to address the peculiarities of the Indian

market. With global brand premiums vulnerable, MNCs may want to develop local brands,typically through acquisition, to position along with global brands in their overall product

portfolios.

In the recent past there have been disasters where MNCs, trying to launch brands in India

without understanding the relevance of the brand in an Indian market, had to recoil. In caseswhere MNCs wanted to continue with their international brands, they are adapting to appeal to

Indian tastes and deliver the value that the customer seeks. Kellog's and McDonald's are good

examples.

< TOP >

5. The following are some of the practical steps that would help an MNC enhance its brandequity.

Work for referrals: Word of mouth is the least expensive, most effective way to get new

business. An American entrepreneur used to make his new customers write on the back of their

business cards why they bought his products. These become mini-testimonials. Anotherbusinessman calls at least one client a day just to keep in touch. This builds the relationship by

showing he does not just care about them when he wants something, allows him to update files,

and generates referrals. Dr Batra of Positive Health Clinic started off very small and today isone major homeopathy chain. He uses the referral technique and word-of-mouth very

effectively.

Use online marketing: You do not have to have a Web site like Indiainfoline.com to do
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business online. You can send personalised e-mail. You can pay only for the leads generated

for you by advertising on many sites. You can research potential clients for better presentations.

Or you can post free ads in discussion groups.

Do not sell; help people buy: When you truly put the clients interests above your own, you

will become a consultant, a team member, and a partner for your client. When you have earned

trusted advisor status, doing business is no problem. For instance, Dell helps its customersmake more money by using computers to help their clients sell more. Of course, the extrabusiness comes around as the client grows. A small consultants big client felt they needed a

Big 5 firm to handle their M&A plan. Instead of resisting, the consultant helped the client

select a Big 5 firm, thus maintaining and extending the relationship with the client. When youput the customer first, you earn long-term loyalty that is more profitable than a larger quick

sale.

Partner with other companies reaching your market: There might be other traders in a

commercial hub doing something like a shopping festival, or Intel associating with computerhardware manufacturers to better serve the customer. Or it could be something like Home

Trade sponsoring the Experiential Marketing seminar in India to bring attention to both the

brand and the seminar theme, which is being practised by them.

Shift the risk to yourself and you will profit: A believable guarantee makes it safe for

prospects to give you a try. Very few people will exploit a generous guarantee compared to the

extra business it generates. Money back guarantee always elicits trust and confidence from

customers. Indica Hair Dye from Cavin Kare started challenging market leader Godrej by doingthat.

Be personal: To build relationships you have to build a personal connection. A handwritten

invitation pulls better than a printed one. One nursing home in Dubai created a waiting listthrough great referrals by greeting visiting relatives by name and filling them in on their loved

ones at the start of each visit.

Create free publicity: Large consulting firms such as McKinsey, KSA Technopack, PWC, etc,do surveys every year on their fields of focus such as IT, garment industry, retail, etc. Althoughonly parts of the data would be given out to the media, their clients in the industry get full

access to the data and this indeed helps these clients benchmark their operations, etc. while the

consulting firms get free publicity across media.

Integrate your marketing: This means that everything you do should convey the samemessage and represent what you stand for. All your literature, and even your office, should

convey the same message.

< TOP >

6. The following are the reasons for the success of Krispy Kreme:

Product quality (taste, crispiness)

Choice for the customer (a wider menu)

Creating demand by opening a limited number of stores in a given geographical area

Inducing trials by giving away free samples at the time of opening new stores

Allowing customers to watch the products being manufactured

Spreading word of mouth through satisfied customers


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< TOP >

7. Krispy Kreme has achieved the success it has, largely due to the fact that it created curiosity

among the customers by making them go all the way to the works to get the product. This hassuccessfully created a great amount of hype and prestige around the product. This also has

given the customers an opportunity to have the magical experience of watching the doughnutsbeing made. The limited availability of the product has created demand for it. But now the

company has chosen the supermarket route to increase the availability of the product. Thoughthis could increase sales and hence profits in the short term, it could prove disastrous over the

long term. The very basic plank on which Krispy Kreme achieved enviable success was

uniqueness and the supermarket sales will destroy it. Krispy Kreme will become just anotherdoughnut in the market.

Therefore, Krispy Kreme should consider franchising as an option to increase profitability

without hurting the image of the product. This option helps retain the exclusivity of the product

while at the same time generating attractive cash flows for the company. A successful businessformula always attracts franchisees and results in a mutually profitable business proposition

(for the franchiser and the franchisee). The franchisees work hard to grow their businesses andin the process, they spread the brand message. In the long run, this will expand the reach andcustomer base of the product.

< TOP >

8. Buzz marketing involves passing on information about the companys products and services

from user to user i.e. spreading product/brand message through word of mouth. The two chiefadvantages of word of mouth are that it is convincing and it is low cost. Personal influence

carries especially great weight in two situations. One is with products that are expensive, risky,

or purchased infrequently. The other situation is where the product suggests something aboutthe products usage or status. Buzz marketing saves the company a lot of money since it needs

little advertising. In some cases, positive word of mouth happens in a natural way. But in mostcases, buzz is managed. Buzz is increasingly the result of shrewd marketing tactics in whichcompanies send a vanguard group, ration supplies, use celebrities to generate buzz, leverage the

power of lists, and initiate grass roots marketing.

< TOP >

Section C: Applied Theory

9. Here are some of the reasons why new products fail:

No competitive point of difference

Unexpected reactions from competitors

Poor positioning

Product didn't deliver promised benefits

Too little marketing support

Bad estimates of market potential (or other marketing research mistakes)

Improper channels selected
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Rapid change in the market or economy after launch

Britannia is known for its wide-range of biscuits. They are introduced in different flavors and

packages to satisfy different segments of consumers. Since most of the consumers associateBritannia brand name with the product, biscuit, its diversification into flavored milk market

was not welcomed. And the product was introduced in a tetra-pack, the quality of which was inquestion. The high price of the drink was also responsible for poor sales. P & Gs floating soap

Ivory could not make a lasting impression in the minds of consumers since the concept ofFloating Soap did not give them any value addition. Moreover, it was highly priced.

Marketing research would help the companies in overcoming the uncertainties involved in

product launch. Research would help the companies in forecasting sales and understanding theneeds of the target consumer. Analysis of the competitors marketing strategies would help

price the products effectively. In addition, test marketing would help the companies in knowing

the potential demand for the product, which resulted in successful launch of the products.

< TOP >

10. The initiator of the buying decision could be identified as the salesperson who identified the

need but more likely would be the sales force manager who suggested the purchase be made.Influencers/evaluators might include the finance office (which would control the amount of

money available for the purchase), members of the sales force (who might provide information

about phones that competitors are using), and the purchasing department (which would have agood knowledge of alternative suppliers).

Gatekeepers could include management (which would only approve of certain phone models

that are compatible with existing phone systems), the finance office (which may only approve alimited budget), and the purchasing department (which would recommend matches with likely

vendors).

The decider might be the president of the company, the president of marketing, or the sales

manager; the decider is the person with the power to approve the brand of phone.

The purchaser will be the purchasing agent in the purchasing department who will negotiatethe terms of the sale.

Users will include all salesforce members who would use the cellular phone.

< TOP >

< TOP OF THE DOCUMENT >
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Documents

MBAMARKETING ICFAI OCT04