Question Paper

Marketing Management (MB221) : October 2004

Section A : Basic Concepts (30 Marks)

1.

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.

(a) Reminder Advertising

(c) Informative Advertising
(e) Teaser Advertising.
2.

5.

6.

7.

8.

< Answer >

(b) Market development

(d) Diversification

Marketing chewable vitamins for children and a different version for adults is an example of
(a) Geographic segmentation
(c) Regional segmentation
(e) Physiological segmentation.

< Answer >

(b) Green marketing

(d) Relationship marketing

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
(c) Product development
(e) Cost leadership.

< Answer >

(b) Variety seeking behavior

(d) Dissonance reducing buying behavior

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
(c) Mega marketing
(e) Proactive marketing.

< Answer >

(b) Flanker Brand

(d) Umbrella Branding

Which of the following describes the buying behavior, where customer involvement is high and
significant differences between brands exist?
(a) Habitual buying behavior
(c) Complex buying behavior
(e) Rational buying behavior.

< Answer >

(b) By-product Pricing

(d) Mark-up Pricing

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

(a) Co-brand
(c) Brand Extension
(e) Blanket Branding.

< Answer >

(b) Perceived Value

(d) Mark-up
(e) Psychological.

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
(c) Captive Product Pricing
(e) Going-rate Pricing.

4.

(b) Persuasive Advertising

(d) Comparative Advertising

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
(c) Going-rate

3.

< Answer >

Reinforcement advertising is a form of

(b) Psychographic segmentation

(d) Age and life-cycle segmentation

< Answer >

9.

Elena intends to buy her favorite brand of camera but her best friend persuades her to buy the lowestpriced one. Which of the following can be said to have influenced her purchase decision?
(a) Purchase intention
(c) External influences
(e) Competitors price.

(b) The self-concept

(d) Unexpected situational factors

10. A firm that bases its price on how it thinks the competitors will price, rather than on its own costs or
demand, in order to win a contract, is most likely using
(a) Going-rate pricing
(c) Perceived-value pricing
(e) Auction-type pricing.
11.

(b) Causal

(c) Descriptive

(a) Commercialization
(c) Market analysis
(e) Idea screening.

< Answer >

(d) Investigative

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

< Answer >

(b) Concept testing

(d) Idea generation

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

(a)
(b)
(c)
(d)
(e)

< Answer >

(b) Demographics
(d) Biographics

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
(e) Behavioral.

< Answer >

(b) Market challengers

(d) Market nichers

14. What is market segmentation based on customers values and lifestyles, known as?
(a) Geographics
(c) Psychographics
(e) Behavioral.

< Answer >

(b) Slotting brand

(d) Licensed brand

13. Which of the following are runner-up companies that aggressively attack competitors to get more
market share?
(a) Market leaders
(c) Market followers
(e) Market penetrators.

< Answer >

(b) The reactive level

(d) The proactive level

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
(c) Private brand
(e) Dealer brand.

< Answer >

(b) Cost-plus pricing

(d) Sealed-bid pricing

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
(c) The accountable level
(e) The partnership level.

< Answer >

< Answer >

Awareness, Interest, Evaluation, Trial, Adoption

Interest, Evaluation, Awareness, Trial, Adoption
Evaluation, Awareness, Interest, Adoption
Trial, Evaluation, Awareness, Interest, Adoption
Adoption, Evaluation, Trial, Interest, Awareness.

18. Which of the following is/are included in product mix?

< Answer >

(a) Product length

(c) Product depth
(e) All of the above.

(b) Product width

(d) Product consistency

19. The level of product which gives actual benefit to the basic consumer need is
(a) Augmented Product
(c) Core Product
(e) Product service.

(b) Actual Product

(d) Product Mix

20. The pricing strategy, where a low quality product is offered at a high price, is called
(a) Super value strategy
(c) Medium value strategy
(e) Good value strategy.

< Answer >

(b) Administered marketing system

(d) Horizontal marketing system

27. Which of the following statements best reflects the definition of a product?
(a)
(b)
(c)
(d)

< Answer >

(b) Post Purchase

(d) Purchase

26. When IBM and Apple Computer announced a joint operation to develop a new computer operating
system, it was an example of a (n)
(a) Corporate marketing system
(c) Conglomerate marketing system
(e) Contractual marketing system.

< Answer >

(b) Internal marketing

(d) Marketing myopia

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
(c) Information Search
(e) Dissonance.

< Answer >

(b) Going-rate pricing

(d) Value-based pricing

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
(c) Interactive marketing
(e) Captive marketing.

< Answer >

(b) Informative advertising

(d) Comparison advertising

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
(c) Sealed-bid pricing
(e) Perceived-value pricing.

< Answer >

(b) Cash rebates

(d) Loss leader pricing

22. Which type of advertising is most appropriate for introducing new product categories?
(a) Reminder advertising
(c) Persuasive advertising
(e) Reinforcement advertising.

< Answer >

(b) High value strategy

(d) Rip-off strategy

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
(c) Low interest financing
(e) Psychological pricing.

< Answer >

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

Services are intangible and do not result in the ownership of anything
Organizations tend to compete at the augmented product level
The core product is what consumers really seek when obtaining a product

< Answer >

(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)
(b)
(c)
(d)
(e)

< Answer >

A state of heightened attention

Active information search
Exploratory prepurchase mode
The dynamic exchange paradigm
Post purchase dissonance.

29. When a university charges tuition fee that does not cover costs, knowing that it must rely on private
endowments and public grants to cover the remainder, which of the following pricing objectives is the
university pursuing?
(a) Survival
(c) Partial cost recovery
(e) Market-skimming.

(b) Product-quality leadership

(d) Full cost recovery

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
(c) Consumer affairs

< Answer >

(b) Infomercial
(d) Home shopping
END OF SECTION A

(e) Advertorial.

< Answer >

Section B : Caselets (50 Marks)

This section consists of questions with serial number 1 8.

Answer all questions.

Marks are indicated against each question.

Detailed explanations should form part of your answer.

Do not spend more than 110 - 120 minutes on Section B.

Caselet 1
Read the caselet carefully and answer the following questions:
1.

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.
(6 marks) < Answer >

3.

Getting a brand endorsed by a celebrity has its share of risks. Discuss the risks associated with celebrity
endorsements and explain how the same can be hedged.
(6 marks) < Answer >
CELEBS: DO THEY DELIVER?

Stars, who are known to shape destinies, cast an enormous influence. No, were not talking about astrology here. Were
referring 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 film
stars 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 in
the 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 whether
to 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 Dravid
for 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
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 message
strategy 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, where
they 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 celebrity
to 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
Read the caselet carefully and answer the following questions:
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?
(6 marks) < Answer >

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.
(8 marks) < Answer >
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
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 of
extreme 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-known
brand 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 fits
along 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 their
ROI 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 be
a 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 directbuying synergies in the area of wheat procurement, which ensures that maida (wheat flour), the main raw material for
bread, 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. The
objective 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 year
post-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's
brands, 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 of
Geep 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.

Caselet 3
Read the caselet carefully and answer the following questions:
6.

Krispy Kreme is considered the king of the doughnut world. What made it so successful in so short a period?
(6 marks) < Answer >

7.

Will Krispy Kreme benefit financially from supermarket sales? If not, suggest a suitable distribution strategy for
the company.
(6 marks) < Answer >

8.

Krispy Kreme has created a lot of buzz for their products. What are the advantages of buzz marketing? Does it
(buzz) happen naturally?
(6 marks) < Answer >

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. They
truly 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 to
any 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 ride
appears 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)

This section consists of questions with serial number 9 - 10.

Answer all questions.

9.

Marks are indicated against each question.

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

Britannias flavored milk, Milkwala offered in different flavors did not succeed in the market. P&Gs Ivory, a
floating 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 can
marketing research help in making them successful?
(10 marks) < Answer >

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 salespersons
thought 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 decisionmaking in the customer.

b.

< TOP
>

Persuasive advertising is aimed at persuading the customer.

c. Informative advertising aims to provide basic information about the

product to the customer.
d. Comparative advertising occurs when two companies enter into
promotional 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
in a series of advertisements at different timings.
2.

Answer :

(e)

< TOP
>

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

a. Target Return Pricing : The firm fixes the price that would yield
its target of return on investment (ROI).
b. Perceive Value Pricing : The price is based on buyers
perception of the value of the product.
c. Going Rate Pricing : The firm bases its price largely on
competitors prices.
d. Mark-up Pricing : The elementary method used is to add a standard mark
up to the
production costs.
3.

Answer :
Reason :

(c)
Some products require use of ancillary or captive products like printers and
cartridges.

< TOP
>

a. Service firms often engage in two-part pricing consisting of a

fixed 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. If
the by-products have value to a customer group, they should be priced on
their value.
c. Mark-up pricing: The elementary method used is to add a
standard mark-up to the production costs.
d.

Going rate pricing: The firm bases its price largely on

competitors prices.
4.

Answer :
Reason :

5.

Answer :
Reason :

< TOP
>

(c)

Significant differences
between brands
Few differences
between Brands

6.

< TOP
>

(a)
Self-explanatory.

High - Involvement

Low - Involvement

Complex buying behavior

Variety seeking

(occurs for Branded consumer

durables )

buying behavior

Dissonance reducing buying

behavior

Habitual buying behavior

Answer :
(d)
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.

< TOP
>

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 Markets

Market Development
Strategy

Diversification Strategy

< TOP
>

Ansoffs Product-Market Expansion Grid.

Alternative (a) is incorrect because in Market penetration strategy, the company
considers 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 current
products. 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.
8.

Answer :
(d)
Reason :Marketing chewable vitamins for children and a different version for adults is an
example 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 incorrect
as 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 :
Reason :
example.

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>

10. Answer :

(c)
External influences have acted on Elenas purchase decision in the given
(a)

< TOP
>

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.

11. Answer :
(b)
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. Alternative (a) is incorrect as in basic level the
salesperson simply sells the product. In Accountable marketing, the

< TOP
>

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 created
by the dealer to distribute the product/service is referred to as Dealer brand.

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13. Answer :
(b)
Reason :Market challengers are runner-up companies that aggressively attack competitors
to get more market share.

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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 the
market 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.

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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 Descriptive
research 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 the
research plan.

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16. Answer :

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(d)

Reason : Idea generation: Its the fist stage of new product development. Brainstorming is one of the
techniques used for idea generation.

a.

Commercialization: Last stage of new product development.

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

tested.
c.

Market Analysis: Its the stage where demand for new product is

analyzed.
e.

Idea screening: Second stage where ideas generated are

screened.
17. Answer :
Reason :

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(a)
AIETA Model

Awareness

Interest

Evaluation

Trial

Adoption
18. Answer :
(e)
Reason :
Product Mix = Product Length x Product Width x Product Depth x Product
consistency

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19. Answer :
Reason :

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(c)
d

C o re
P r o d u c tio n
C

(e )

W h i c h is
Co nsum ed
b y con su m e r

P ro du c t &
S e rv ic e

P r o d u c tio n

20. Answer :
Reason :

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(d)
PRICE

QUALITY
High
Medium
Low

High

Medium
1. Premium Strategy 2. High value Strategy
4. Over Charging
Strategy
7. Rip-off Strategy

Low
3. Super Value
Strategy
5.
Medium
Value 6. Good Value
Strategy
Strategy
8.
False
economy 9.
Economy
Strategy
Strategy

21. Answer :
(d)
Reason :Loss leader Pricing: Supermarkets drop the prices on some of their products to
increase customer traffic.
a. Special event pricing: Sellers establish special seasons to draw
in more festive offers.
b.

Auto companies and other consumer goods companies offer

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cash rebates to encourage purchase of manufacturers production within

a specified span of time.
d. Loss leader pricing involves offering heavy discounts on one
product to attract customers into the store.
e. Psychological pricing: Many sellers believe that prices should end in odd
numbers.
Bata always uses Rs.599/- instead of Rs.600/-.
22. Answer :

(b)

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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 setting
advertising objectives; hence option (d) is incorrect. Alternative (e) is incorrect
because Reinforcement advertising aims to convince current purchasers that they
made the right choice.
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 type
of 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.

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24. Answer :

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(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.

(d)
In the given example, Sandy is in the purchase stage of the buying decision

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26. Answer :
(d)
Reason :Distribution channels can be arranged in vertical, horizontal and multichannel
marketing systems. Corporate and Administered marketing systems are vertical
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 of
production and distribution integrating their programs on a contractual basis;
hence option (e) is incorrect. Alternative (c) is not a real term.

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25. Answer :
Reason :
process.

27. Answer :
Reason :

(e)
All the statements given reflect the definition of a product.

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28. Answer :
Reason :

(b)
In the given example, Naina is in the active information search stage.

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29. Answer :
Reason :

(c)
In the given example, the university is pursuing partial cost recovery.

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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.

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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 of
advertisements 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 to
capitalize 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.
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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 of
Maruti 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 the
brands 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 upswing
since 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, the
advertising 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 Britney
wouldve 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,

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 billion
people 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, Unfortunately
using 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 performance
conscious.
Confusion/ Scepticism

The use of celebrities can be confusing. Some viewers forget the brand that a celebrity is
approving. 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 best in
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?
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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 involving
celebrity 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 distance
itself with the tainted celebrity, the huge costs spent on roping in the celebrity and making of
the 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 brand
ambassador 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

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 several
cricketers 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.
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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 value
chain. 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 potential
acquisition.
The absence of an integrated approach may result into acquisitions adding to brand
proliferation and market confusion. However, if brand strategies are brought into discussion
before deals are finalized, M&A strategies can fill the gaps and expand the relevance and reach
of 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 exist
so 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 cases
where 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.
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5. The following are some of the practical steps that would help an MNC enhance its brand
equity.
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. Another
businessman 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 is
one 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

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 customers
make more money by using computers to help their clients sell more. Of course, the extra
business 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 you
put 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 computer
hardware 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 doing
that.
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 list
through 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. Although
only 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 same
message and represent what you stand for. All your literature, and even your office, should
convey the same message.
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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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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 has
successfully 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 doughnuts
being 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. Though
this 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 another
doughnut 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 business
formula 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 and
in the process, they spread the brand message. In the long run, this will expand the reach and
customer base of the product.
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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 chief
advantages 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 about
the 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 most
cases, buzz is managed. Buzz is increasingly the result of shrewd marketing tactics in which
companies send a vanguard group, ration supplies, use celebrities to generate buzz, leverage the
power of lists, and initiate grass roots marketing.
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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

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 associate
Britannia 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 in
question. 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 of
Floating 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 the
needs 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.
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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 a
good 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 a
limited 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 negotiate
the terms of the sale.
Users will include all salesforce members who would use the cellular phone.
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