Jagannath International Management School, Kalkaji

(Please write your Roll No. immediately) Roll No. ___________________

End-Term Examination
III Trimester (PGDM) – April/May 2008
Second Batch (2007-09)

Paper Code: C -302

Subject: Marketing Research

Time: 3 Hours Maximum Marks: 60

Note: - Part A is compulsory and carries 24 marks. Attempt any three questions
from Part B which carry 12 marks each.

Part-A

Case study
Study the following case ` LEXUS: IMPARTING VALUE TO LUXURY’ and answer the questions
given at the end of the case.

LEXUS: IMPARTING VALUE TO LUXURY

In the 1980s, Toyota developed a concept for a new car that was destined to be a success. The
concept of the car, to be called Lexus, was based on the observation that there was a large, affluent
market for cars that could boast exceptional performance. A significant portion of that market,
however, ranked value highly. Thus, they were loathe to pay the extraordinary prices that Mercedes
charged for its high-performance vehicles. Toyota planned to target this market by creating a car that
matched Mercedes on the performance criteria but was priced much more reasonably, providing
consumers the value they desired and making them feel that they were smart buyers.

Toyota introduced the Lexus in 1989 with much fanfare. A clever advertising campaign
announced the arrival of this new car. One ad showed the Lexus next to a Mercedes with the headline,
"The First Time in History That Trading a $73,000 Car for a $36,000 Car Could Be Considered
Trading Up." Of course, Lexus had all the detail that the Mercedes did: a sculptured form, a quality
finish, and a plush interior. The detail was not, however, limited to the car. Separate dealerships were
created that had the type of atmosphere that affluent consumers expected from a luxury carmaker,
including a grand showroom, free refreshments, and professional salespeople.
Toyota placed a strong emphasis on the performance of the new car. A package was sent to
potential customers that included a 12-minute video displaying Lexus's superior engineering. The
video showed that when a glass of water was placed on the engine block of a Mercedes and a Lexus,
the water shook on the Mercedes while the Lexus had a virtually still glass of water. This visually told
the viewer that the stability of Lexus was far more extraordinary than even one of the most expensive
cars around. Another video showed a Lexus making a sharp turn with a glass of water on its
dashboard. The glass remained upright; again, the Lexus proved itself These videos were successful in
bringing in customers, whose expectations were surpassed.

The luxury carmakers noticed and realized that they had to respond somehow. They could either
lower their prices, admitting they were overpriced to begin with, or they could increase prices, adding
more extras and reinforcing the image of the rich person's vehicle. They chose the former strategy and
decided to beat Toyota at its own game. Since 1992, Mercedes, BMW, and Jaguar, which is now
owned by Ford Motor Company, have kept prices low and have increased quality. This has led to
significant sales growth for all three auto manufacturers. Mercedes and Jaguar saw 20% increases,
each, in 1994 from the previous year.

As a result of its success, Lexus decided to raise prices from $30,000 to $50,000 in 1994. This
strategy has not worked out as well as Lexus had hoped. Sales dropped 10% to 72,000 cars in the first
ten months of 1994 compared with 1993 sales. Lexus has since realized that it lacks the heritage for
prestige that European luxury cars command and that people are once again willing to pay extra for it.
As a result, it has turned to a new advertising campaign to inspire an emotional response to its cars.
The campaign must be exceptionally powerful because it also has to combat the decrease in growth of
the luxury car market compared to the auto industry's overall growth. Partly responsible for this
decline, the "near luxury" autos have skimmed away potential luxury auto consumers. Included in this
group are the Toyota Avalon, the Nissan Maxima, the Mazda Millenia. BMW and Mercedes have also
introduced products for this segment: the BMW 3 Series and the Mercedes C Class.

The $50 million advertising effort by Lexus is the most expensive campaign since the introduction
of the LS 400. Created by Team One Advertising, a unit of California based Saatchi & Saatchi, the
TV ads, as reported in the Wall Street Journal, feature "majestic shots of fast-running schooners and
endless rippling sand dunes. The images build a feeling of speed, performance and timelessness
before the car is finally revealed at the end Of the ads." Team One did not limit itself in finding the
appropriate places to shoot the ad. Maine's coast was chosen to portray the smooth boating scenes
while the desert scenes were shot in Africa's Namibia.

The imagery and the style of the ads are 180 degrees from the campaign that launched the LS 400.
Those ads spoke of Lexus' "relentless pursuit of perfection" by showing images of the car with those
of a ball bearing rolling smoothly down an engineered groove and a balancing act of champagne
glasses over the hood. The ads clearly emphasized that the car was extremely well engineered, The
focus was on tangible aspects of the vehicle. In contrast, the recent advertising campaign focuses on
feeling and emotion, those intangibles that are worth big bucks to some consumers. The intangible
aspects of aspiration and luxury also appear in the new ad campaigns of Mercedes and BMW To
promote its position as leader, Lexus portrays them as a pack of barking dogs in dealer advertising ads
that account for 25% of the total budget.

Lexus is also launching a print campaign in which ads will focus more on the car's physical
attributes rather the intangibles. Readers of news magazines will receive a 12-page insert, and 78
magazines will carry monochromatic ads that promote features of the product. Current Lexus owners,
which total about 400,000, will also be targeted with mailed invitations to test-drive the new LS 400.
 QUESTIONS
a). Describe the management decision problem facing Lexus as it seeks to fight competition from
other luxury car manufacturers such as Mercedes, BMW, and Jaguar as well competition from
the "near luxury" autos like the Nissan Maxima and the Mazda Millenia.

b). Formulate the marketing research problem corresponding to the management decision problem
you have identified in (a).

c). Describe the secondary sources of data that may be relevant for focusing on the research
question.

d). Identify two research questions based on the definition of the marketing research problem and
develop at least one hypothesis for each research question you have identified.

(4x6 marks = 24 Marks)

Part B

Q.1 (a) Briefly discuss the nature and scope of marketing research in the context of changing business
environment in India.
(b) Enumerate the steps involved in the marketing research process and briefly discuss the
importance of each of them.
Q.2 (a) What are respondent errors? How can they be minimized?
(b) People tend to respond to surveys dealing with topics that interest them. How would you exploit
this fact to increase the response rate to a survey of attitudes toward the local transit system in a
city where vast majority of people drive to work or to shop?

Q.3 (a) In what ways can attitude information be used to help make marketing decisions?
(b) Explain the major differences between semantic differential scale and Likert’s ummated
scale. Q.4 (a) Briefly explain the observational methods of data collection. Illustrate your answer with
suitable examples.
(b) What are the differences between primary and secondary data? What are the different forms of
computerized databases?
Q.6 Write short notes on any two of the following:
(a) Principles of designing a good questionnaire
(b) Sample design
(c) Focus group interviews
(d) Exploratory research
(e) Types of Experimental designs.