BMK1024 FUNDAMENTALS OF MARKETING 11 MARCH 2021

QUESTION 1

What is a horizontal marketing system? Elaborate TWO (2) examples where

companies join together for a horizontal marketing system?

20 marks

Horizontal marketing system is a channel arrangement in which two or more

companies at one level join together to follow a new marketing opportunity.
Horizontal marketing systems are prevalent in industries with fewer businesses, where
competition is stronger and the synergies and possible market share benefits from
combining companies are far greater. There are several companies who join together
to follow new marketing opportunities.

The 2 examples where companies join together for a horizontal marketing

system are Facebook & Instagram, and Disney & Pixar. Firstly, Facebook &
Facebook's purchase of Instagram for a record $1 billion in 2012 is one of the most
definitive examples of a horizontal marketing system. Facebook and Instagram were
also in the same industry (social media), and their photo-sharing sites had identical
development stages. Facebook wanted to improve its role in the social media space,
and it saw Instagram's acquisition as an opportunity to increase market share, reduce
competition, and reach new audiences. Both of these were known as a result of
Facebook's acquisition. Instagram is now operated by Facebook, but it continues to
function as a separate social media website.

On the other hand, The Walt Disney Company's $7.4 billion purchase of Pixar
Animation Studios in 2006 is another notable example of a horizontal marketing
system. The Walt Disney Company started as an animation studio in 1923, but has
since expanded to include live-action film production, television, and theme parks.
Disney started as a children's and family-oriented animation studio. It started to
experience a period of stagnation in the early twenty-first century, after a string of
successful projects, and was searching for ways to reinvent itself. With its new
activities, however, the entertainment giant was experiencing market saturation as
well as creative stagnation. Pixar began as an American computer animation studio in

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1986, with a contribution from Steve Jobs. The first film, Toy Story, was released in
1995, marking the start of a successful foray into animation filmmaking. Pixar
competed with Disney in the animation industry, but its digitally animated films
incorporated cutting-edge technology and a unique vision. Walt Disney's planned
acquisition was a prime example of a horizontal marketing system at work in the same
industry. Apart from the normal advantages of putting together the best in the
industry, it also acted as a way for Disney to avoid future competition and thereby
retain and probably increase its market share. Disney's established experience in 2D
animation was combined with Pixar's state-of-the-art production value in 2006, and
the company has been able to consistently produce great works in the film industry
since then. Pixar kept its core values and refused to let Disney change the winning
culture that defined the brand. As a result, the best of both companies have merged to
form one of the world's largest production houses. The deal is now generally
recognised as having practically and figuratively revived Disney, increased its market
share, and increased profits.

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QUESTION 2

What is concept testing? Explain why concept testing is important in the process of
product development.

20 Marks

Concept testing refers to testing new product concepts with groups of target
consumers. The concepts may be presented to consumers symbolically or physically.
Many firms routinely test new product concepts with consumers before attempting to
turn them into actual new products. Concept testing is a research approach that
includes asking customers questions about product or service concepts and ideas
before introducing them. As a result, consumers' approval and willingness to buy can
be gauged, allowing important decisions to be taken prior to the launch.

Concept testing is important in the process of product development because

concept testing can help filter ideas so to know which to develop further.Concept
testing will assist in moving beyond speculative thought and determining which
concepts would be successful. Instead of relying on individual judgement, it offers
evidence that can unite the whole team by creating a consensus on which projects to
undertake and which to abandon. Great design testing unites teams around projects of
real potential in this way. There's no need to be concerned with workplace politics or
time-consuming and inconvenient "plan by committee" processes. It will be easier to
decide what will work and what will not work by idea testing. A business can
consider the consumer's perspective on various topics by using a variety of qualitative
and quantitative approaches, as well as investigate whether the goods or services a
company is looking to develop will resonate. Using a variety of research methods, we
can determine which product ideas have the most appeal, as well as how they can be
improved. This gives us the courage to move on to the next stage of growth. It's no
exaggeration to suggest that a well-designed idea testing survey or a skillfully
moderated online community will help to succeed. Any survey template or discussion
guide, on the other hand, must be structured in such a way that both the overall
package and individual features or attributes are evaluated and feedback is given.

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Secondly, concept testing can help steer clear of bad decision-making even the
most successful companies make mistakes. It might appear that thoroughly testing
concepts prior to launch will cause a pause in the go-to-market plan, but in the long
run, it will save the company time, money, and preserve the consumer relationship.
Failed products or services are very expensive, but fortunately, design testing exists to
not only help prevent bad ideas, but also to identify those with untapped potential.
Concept testing can assist in deciding the best choice to follow from a range of
alternatives or in finding ways to develop underperforming concepts. Either way, it’s
a great way to ensure, quickly and easily, that whatever planning has a solid chance of
success. In this way, concept testing will help prevent a humiliating failure and
improve the product creation processes.

Next, concept testing will assist in deciding which elements are essential to
customers. Even if a company automatically decides that the product concepts are
likely to succeed, there are several other considerations to consider by research
methods, such as placement, the type of packaging or branding that will be considered
appealing, and, perhaps the most significant factor in the development of any product
or service, the consistency of the product or service with the most appropriate price.
In this way, a concept test will help to improve creativity, reduce the risk of project
failure, and keep costs down. For product creators, design testing is important in
assessing the probability of an innovation's success. It may reveal blind spots,
inefficiencies, misunderstandings, or other issues that could lead to failure. Testing
approaches such as surveys, as well as qualitative research conducted through a focus
group, in-depth interview, or online forum, can both help in eliciting the wants and
needs of the target audience.

In addition, concept testing helps us to detect and resolve issues prior to

launch. The earlier design testing begins, the more options there are for fine-tuning
initial concepts and creating a product that consumers really want and need. Through
concept testing we can understand what elements don’t fly with customers so can
ditch underperforming elements to save costs or iteratively improve concepts so that
they will meet consumer needs. For example, with an online community, it is possible

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to create concepts based on customer feedback and then submit them for more
feedback, enabling ideas to be refined quickly.

Finally, concept testing ensures that companies develop products that

consumers will buy. Concept testing places the voice of the customer at the centre of
product growth, ensuring that innovative ideas can resonate with consumers and
boosting market performance dramatically. The results of a concept test will aid in
determining whether new ideas are causing pain or delight. Concept testing will help
determine how the product can fit into the lives of the target audience, how often they
will use it, and, most importantly, which product concept they can pay for.
Consumers' responses to concepts are best understood by concept research. It clarifies
the need solution is addressing, consumers’ perceptions of the product, how it fares
against other similar solutions, and what can be done to maximise adoption and
market impact.

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QUESTION 3

What do you understand by the term service differentiation? Explain the application
of service differentiation using an example of a fast food restaurant known to you.

20 Marks

Service differentiation is the design and delivery of a service to have unique and
valuable characteristics relative to other services in the market. When it comes to
service differentiation, where goods are concrete in nature and easily differentiated on
the basis of features, shape, results, and quality, it's a difficult task that requires
creative thinking. Customers can be provided services individually or as part of a
package with a product.

The application service differentiation using an example of a fast food

restaurant is McDonalds. McDonald's has a specialised (regionalized) menu available.
As a result, the goods can be distinguished from those of competitors. Every country
where they have restaurants, they try to adapt their menu to match different tastes and
local traditions. They are conscious of the importance of cultural differences. As a
result, each nation has its own menu item creation strategy. McGrilled sandwiches are
popular in the United States and Canada. Since Japanese consumers have a different
appetite than Americans, serving sizes of burgers, fries, and drinks are smaller in
Japan. McChicken Premiere & Zesty chicken are available in the UK, France, Italy &
Belgium. To overcome their health issues McDonald’s added salads & other lighter
options to its menu & encouraged people to visit more often. Product adaptation in
India are vegetarian selections, no beef or pork items, and McMasala. According to
Indian menu products, there is a wide range of vegetable and non-vegetarian choices.
Thailand's McDonald's serves several odd foods and is one of the most unusual
international McDonald's locations. A Samurai Pork Burger is one of the most
well-known dishes. In Thailand, McDonald's offers a wide variety of desserts,
including pineapple pie, regular Thai rice pudding, and Millionaire's Cheesecake.
Since the majority of Indonesians are Muslims, McDonald's adapted its menu to suit
their needs by substituting fish for pork. McDonald’s outlets in Indonesia are Halal
and since Indonesians prefer rice to bread, they serve rice alongside some spicy local

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dishes. Pita bread sandwiches are available in Morocco. Common spices like
coriander and cumin are also used in the restaurants. For Ramadan, McDonald's has a
special menu. It's known as f'tor (fasting's end), and the meal consists of a Large Mac,
milk, dates, and traditional Moroccan soup. Since Germans eat a lot of meat, their
burgers include Nürnberger sausages as well as beef. It's also a well-known fact that
Germans enjoy beer with their meals, so beer is available at McDonald's locations in
Germany.

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QUESTION 4

What is product-form pricing? Explain your answer with appropriate examples.

20 marks

Product-form pricing is different versions of the product are priced differently, but not
according to differences in their costs. Product form pricing is a subset of higher
prices that is one of the pricing strategies used when a company wants to maximise
the value of its brand name or use recently launched well-known products. Different
variants of the product are priced differently under product-form pricing, but the
difference is not due to cost differences. Product-from pricing includes a round-trip
economy seat on a flight versus a more expensive business class seat and different
prices for seats in a theater based on their location.

For example, at the local supermarket, a 1-litre bottle of Evian mineral water
may cost $1.59. If, on the other hand, a 150ml aerosal can of Evian Brumisateur
Water Spray sells for $11.39 at beauty boutiques and spas, The water comes from the
same spring in the French Alps, and the aerosol packaging isn't any more expensive
than the plastic bottles. The content, though, is the same, only in a different product
form. Moreover, when in retail, wherever quality is a variable, product form pricing
can be efficient. For example, clothing: an outlet is likely to have product form based
on the material and tailoring quality of different items of clothing. For example,
‘ASOS’ online store, there is one product form that comprises leather boots, faux
leather boots, and canvas boots from the same collection. They all have price points
that are sufficiently different to highlight the differences in quality. Phones are
perhaps a more visible example of efficient product form pricing. Apple offers the
iPhone XS and iPhone XR thus positioning them as luxury options in a subtle yet
unmistakable way. The iPhone 8 and iPhone 7 are then offered as extra features, and
the ‘Compare' tab at the bottom further informs the user that the items will vary.
They're all part of the same product form, though. The same is true for hotels, on the
other hand. Some people are checking into the penthouse suite of a hotel. That's how
product form pricing works. Budget rooms are available as a base product, with all of
the usual facilities. Customers would almost certainly have to pay more per feature if

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they want a large bathroom, a concierge, or a space with a view. The rooms are part of
the hotel's product form, which means they can accommodate customers who want a
budget-friendly alternative as well as those who want to splurge. Finally, in Malaysia,
canned sardines are about RM5 but when buying a sardines fish usually they are
worth more extra than.

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QUESTION 5

A company that fails to integrate their various communication channels will most
likely not generate profit. Do you agree? Justify your answer.

20 marks

Yes, I agree with that statement because integrated marketing strategies help pull all
of a brand's message points together into one cohesive whole to ensure that the
message is not disjointed and confusing. Especially in today's world, where
consumers are bombarded with news and information of all kinds, integrated
marketing sends a single message through all channels. While integrated marketing is
not new, it still is important in today's world. There are more marketing channels now
than ever before, and different channels can be led and directed by different people.
Integrated marketing communications is the method by which a company ensures
different promotional methods within a marketing campaign are clear, consistent and
working toward the same goals. For example, if an advertising agency wants to
initiate a creative campaign, they can first use coordinated marketing communications
to ensure that all marketing methods are delivering the same message and offering the
same branded experience. An integrated approach would use a variety of
communication tools to convey the same branded message, including traditional
advertising, online marketing, public relations activities, sales campaigns, and email
marketing. Integrated marketing communication is very important in a business
because it will help the company to build brand recognition and trust. If a brand is
able to reach its intended consumer multiple times, across various channels, they
begin to resonate with its audience. If the various channels do a good job of
communicating the brand and message consistently, then the person is even more
likely to recognize and trust the brand. This consistent delivery is made possible by an
integrated marketing communications strategy. Without this communication, the
audience would have a disjointed brand experience, and the intended message will be
less likely to be understood. Integrated marketing will also allow communication to
reach a large audience. Using more channels to communicate will increase the number
of people a company is able to reach. If a brand launched an advertising campaign
strictly on subway car posters, they would be missing the audience that drives to work
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by overlooking radio advertising and billboard ads. Having an awareness of integrated

marketing communications allows a company to create a multi-pronged marketing
campaign that targets wider audiences. A master’s in integrated marketing
communications teaches students how to determine the right channels that will target
the right audience with the right messaging. The most importantly, integrated
marketing communication will yield higher revenues to a company. Naturally, sales
growth will improve if a business is able to deliver a consistent brand message
through multiple platforms to a vast audience. Businesses are fiercely competitive,
and they rely on a variety of strategies to generate sales, including analysis, strategy,
public relations, digital and social media marketing, design, and more. It's no longer
feasible to concentrate solely on one department. If a company wishes to stay
competitive in its market, it must learn to communicate effectively through all
divisions.

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