BMMK5103

JANUARY 2021 SEMESTER

PART A
QUESTION 1
a. Define the ‘customer value’ and use an example to explain the customer value in
detail.
Customer value refers to the worth of a product or service compared to potential
alternatives. It tends to be intrinsically linked to price, sometimes referring to how well the
item is priced, other times referring to the price itself. Customer value can usually be
determined through a comparison between the item’s benefits and its cost. An example to
explain the customer value in detail is by using diamonds. Diamonds don’t have an intrinsic
value. Diamonds are not particularly rare and they decay faster than most other minerals
contradict to popular belief. The diamond’s value is completely artificial, stemming from
artificial scarcity and artificial traditions. These are derived from a series of very successful
marketing campaigns in 1938 when Harry Oppenheimer worried that the sales of diamonds
were falling due to the Great Depression, hired N. W. Ayer & Son to market them. “A
Diamond Is Forever” is the first campaign refers to the cemented diamonds as the stone of
choice for engagement rings. That same marketing team created the myth of the need to
spend two months’ salary when purchasing an engagement ring during the ‘80s. Now,
diamonds are considered to be the most valuable precious stone.

b. Describe six benefits of customer value to companies. Explain each of the

benefits with an example.

Firstly, customer value will make company focuses on the most potential customer.
Customer value is defined differently from one customer to another. All customers have their
desired needs and wants when they pay for a product or service. Lifelong and repeat
customers have always been more valuable than others. Once the company understands about
their customers, they can make a smarter decision to decrease the wasting of sources and
time. As an example, Bonia will send a greeting and offer letter to their member card users on
their birthday. So, this group of potential users are being the focus group to promote their
new products. When the customers receive this type of invitation, the extra value is added to
the product, thus the customer value will automatically increase. Next, can sustain
competitive advantage. Company need to always improve with their customers needed and
their satisfaction. Managers need to determine which improvements are needed and bring it
into the quality effort. As an example, Ford’s product development teams wanted to create a
best-in-class standard car and benchmarked some vehicle attributes. But finally, they
compromised with all the vehicle’s features. This attitude made most of the customers
disappointed because there was not much differentiation from other models and hence, Ford
lost their customers. Thirdly, customer value creates value for the company. This is because
when the values that are added on in the product will increase the customer value. Thus it
increases with the value of the company, which includes service, quality, image and price.
For example, Singapore Airlines (SIA), if a customer is willing to pay more for a first class
ticket from this airline company, he/she will want to gain value from it. So, the company
should know the customer needs that they want to enjoy the product or service that they
spend on. Thus, unlike the Economy class, SIA offers them personal attention, luxurious
amenities and even private spaces for this group of consumer. This service creates more
customer value from the customers and thus increases the company’s reputation. Customer
value also can attract new customers. By satisfying customers to the point that recommending
your company over others comes naturally to them can bring about lasting changes in your
market position. Customers who become advocates for your company do the work of your
marketing team free of charge. Their enthusiasm for your organisation helps tremendously in
attracting additional leads, which contributes to your business’s growth over the long term.
Word of mouth marketing is far and away the best way to generate some buzz around your
business. While many customers will do this organically, it’s just a fact that most of them will
be looking for something in return. So, think about setting up a customer referral programme,
offering free or discounted products or services in exchange for people sending new
customers your way. Besides that, customer value can help improvement on quality.
Companies’ needs to always improve by ensuring that their customers’ needs are met and
they are satisfied. Managers need to determine which improvements are needed and put in the
quality effort. For an example, Ford’s product development teams wanted to create the best-
in-class standard car and benchmarked some vehicle attributes. But finally, they
compromised with all the vehicle’s features. This attitude made most of the customers
disappointed because there was not much differentiation from other models and hence, Ford
lost their customers. Finally, customer value also can increasing company profitability or
sales. Retaining an existing loyal customer is more profitable than trying to acquire a new
customer. If the customers strive to build a high customer value, the customers get repaid by
loyal customers and raised the profit. One of the most common customer retention examples
is rewarding consumers for doing business with a brand. Rewards programs encourage
customers to return by giving those discounts, exclusive access, or special offers. Starbucks
has one of the most popular and praised customer rewards programs. Their program helps
customers earn free food and drinks, place and pay for their orders, and receive personalized
offers. This is gainful strategy, as well as in today’s business world it is important.

QUESTION 2
a. Explain the purposes of SWOT analysis.

The purpose of SWOT analysis is to analyses the internal areas of an organisation to

indicate where they are performing well or where they are weak and need to improve. On top
of that, it examines external areas that could be used to improve performance or profitability
in the future and possible threats that can exist externally which means an organisation is
ready for any eventuality. Besides that, SWOT analysis aim to find out what is causing
success or failure in competing in and meeting the needs of your market. The analysis will
look at the objectives of an organisation and identify a strategy that will improve their
performance. For each factor decide if it is a strength, weakness, opportunity or threat. Lastly,
SWOT analysis gives better information and so results in better decisions and saves rash
decisions.

b. Prepare a SWOT analysis for Open University Malaysia. List two fact
statements for each element.

OUM is the seventh private university in Malaysia. Although incorporated as a private

university under the Private Higher Education Institutions Act 1996, the University leverages
on the quality, prestige and capabilities of its strategic partners - a consortium of 11 public
universities. OUM adopts the motto "University for All" which is consistent with its
philosophy of democratization of education. The SWOT analysis focuses upon four
environmental factors namely strengths, weaknesses, opportunities and threats. Strengths are
things that your organization does particularly well, or in a way that distinguishes you from
your competitors. Weakness refers to areas where the business needs to improve to remain
competitive. While opportunities refers to favourable external factors that could give an
organization a competitive advantage. Next, threat refers to factors that have the potential to
harm an organization.
 Strength Weakness
 Open Entry  Need to upgrade the supportive research
Refers to non-restrictive entry requirements for infrastructure such as adequate and quality
a degree programme, applicable to adults who research laboratories, efficient research
possess learning experience which can be assistants and the existence of a reliable
assessed and matched against the learning and dependable server. With the numerous
outcomes of an academic course. offerings of research grants given recently
 Blended learning methodology as listed the question about supportive infrastructure
below: arises.
- Face-to face-learning: Tutorials were  Research assistants alone are not adequate
conducted where students have the but the more important question is a very
opportunity to physically meet their tutors competent research assistant who can help
and discussed their subject and their manage the research processes. We can
assignment also find academic staff without the
- E-Learning: Students are required to necessary prerequisites with academic
participate in an online forum using a workload tensions.
learning management system and discussed
among each other's and with their tutors and
peers on their subject matters and on their
assignment.
- Self-managed learning module:
Students do not have to come over for their
tutorials but they still need to come for their
tests. They learn by using participating in
the learning management system and using
their own modules.
- M-Learning: The learning materials are
designed in downloadable formats that can
be accessed using a desktop or laptop
computer. Students then opt to transfer these
contents into a hand phone to view them.
One needs a hand phone equipped with the
necessary features.
Threats Opportunities
  The race for university ranking  Opportunities to work closely with NGO’s,
The research university achievement in NFO’s and GLC’s to foster friendship and
research and other related activities can be the complementary relationships that enhance
number one priority in these universities. the progress of the community.
 Derived from the government quality  The expansion of OUM through
assurance goals and responsibility to international collaboration.
students

c. Explain any six measurements that can be used to generate a marketing

objective. Design a marketing objective statement for each measurement.
When setting your objectives, you must ensure that they are SMART! That is, you want
them to have the following characteristics: specific, measurable, achievable, realistic and
time-bound. Firstly, start by recording your sales goal in total dollars or as a percentage
increase. For example, you might decide that in the next year, you will achieve gross sales of
$1 million. You can also aim for a 25 percent increase in sales. As part of your objective
regarding sales, you can include the strategy you will use to reach the objective. Second step
is set a target for market share by making this both realistic and incremental. For example,
“We will increase market share by 10 percent in the next year” should be more in line with
what you believe you can accomplish. Thirdly, decide on the number of customers you need
to achieve your sales objectives and market-share targets. This requires you to analyse the
size of an average purchase. For example, if the average customer spends $200, you will need
10 customers for every $2,000 you want to increase sales. Next, you should choose a
percentage increase for each customer purchase. If, for example, your customers currently
spend $200 per purchase, choose a percentage you would like to add to that. Then, review
your current prices to determine how they position you in the marketplace. Your marketing
objectives depend on effective pricing. For example, a limited-edition wine could justify a
high price to appeal to well-to-do connoisseurs. On the other hand, local IT services might
have to be priced to compete with neighbouring businesses. The goal is to set a price target
that leaves you a profit margin yet makes you competitive. Reaching this price objective
might take several small steps, such as increasing prices 10 percent per year. Finally, you
should combine all of your key objectives into one summary paragraph, so you can see
whether they work together. For example, if your summary states, “We will increase sales by
15 percent and lower our prices by 20 percent,” you can see that you have two objectives that
work against each other. An effective summary of your key marketing objectives might read,
“We will achieve sales of $1 million, which will give us a 15 percent market share. We will
increase the number of customers by 20 percent, and increase the average purchase by 10
percent. Also, we will increase our prices by 5 percent over the next three years.
 PART B

QUESTION 2

Coca-Cola is replacing its front-of-pack logo packaging with a series of resolutions

representing hope and optimism for 2021 as part of its ‘Open to Better’ campaign in the
UK. (Source: beveragedaily.com, 2021).

a. Use the five product levels in the customer value hierarchy to explain the
product of Coca-Cola.

The Five Product Levels model provides a way to show the different levels of need
customers have for a product. These needs range from core needs to psychological needs. At
each product level, more customer value is added. First level is core benefit. It is the main
functionality of a product without which the product has no value. For example, Coca-Cola
drinks main function is to quench thirst. Second level is basic product refers to the very first
look of the product. It is mainly the physical appearance of the product. Example physical
appearances of Coca-Cola drinks are a burnt smelling, black, bubbly, and sweetened foamy
drink. Third level is expected product which is the very good features that are expected in a
product. The greater a company meets the expected product level, the sustainable brand a
company can create. For example, cold Coca-Cola drinks come from refrigerators. Fourth
level is augmented product, the very amazing features that exceed the customer expectation.
The inclusion of additional features, benefits, attributes or related services that serve to
differentiate the product from its competitors such as diet coke that is free of calories. The
final level is potential product, the very futuristic concept of an existing product. One way in
which Coca-Cola delights customers is by running competitions and prepare prize that money
cannot buy like experiences. Over time the competition prizes change frequently to continue
delight customers.

b. What are the purposes of Coca-Cola focusing on the packaging?

The primary purpose of packaging is to protect its contents from any damage that
could happen during transport, handling and storage. Packaging retains the product intact
throughout its logistics chain from manufacturer to the end user. It protects the product
from humidity, light, heat and other external factors. This is the most important purpose
of packaging. Next, packaging has an important role in keeping its contents and
consumers safe. Packaging should contain important information of the product and its
safety. Moreover, packaging counts an important part of the product brand and marketing.
A unique packaging can increase the product attractiveness and thus affect to the
willingness to buy the product. Lastly, consumers are increasingly conscious about the
environmental impacts of their actions. They evaluate the carbon footprint of the
packaging before buying a product. The labelling on the packaging which gives clear
information on the products and packaging’s environmental impacts and recyclability,
will definitely catch consumer’s eye positively. Hence, Coca-Cola Company and its
global network of bottling partners will tackle the ambitious goal, which is part of a
holistic plan called “World without Waste,” through a renewed focus on the entire
packaging lifecycle from how bottles and cans are designed and made, to how they’re
recycled and repurposed.

c. Is labelling similar with packaging? What are the purposes of labelling?

Labelling is not similar with packaging. Packaging is a process of designing and

creating a container for a product while labelling is a display of all the information on the
packaging material or product itself. Labelling is an important part of the marketing of a
product. Labelling is essential as it helps to grab the attention of a customer it can be
combined with packaging and can be used by marketers to encourage potential buyers to
purchase the product. Labelling is also used to exaggerate the product. Also, it is used for
identification. This kind of labelling helps a viewer to differentiate the product from the
rest in the shelves of the market. In addition, labelling should also contain information
relating to whether the product has harmful chemicals, especially if it is a product that is
meant for children.
QUESTION 3

a. Explain what is ‘psychology pricing’ and discuss three types of psychology

pricing. Support your answer with an example how the psychology pricing had
been implemented for each type.

Psychological pricing is the practice of setting prices slightly lower than a whole
number. This practice is based on the belief that customers do not round up these prices,
and so will treat them as lower prices than they really are. Customers tend to process a
price from the left-most digit to the right, and so will tend to ignore the last few digits of a
price. This effect appears to be accentuated when the fractional portion of a price is
printed in smaller font than the rest of a price. An example of psychological pricing is
setting the price of an automobile at $19,999, rather than $20,000. This type of pricing is
extremely common for consumer goods. A variation on the concept is to set prices higher,
in the belief that customers will attach more importance to a product if the price is set at a
premium level. The idea behind it is that customers will read the slightly lower price and
treat it lower than the price actually is. First type of psychology pricing is artificial time
constraints. Stores will place an artificial time constraint on a sale to create a sense of
urgency. Stores employ time restrictions because they act as a catalyst for consumers to
spend. The psychological tactic creates a sense of fear in consumers. If they don’t act
now, they risk missing out. The truth is, though, there will always be another sale. Next,
prestige pricing is used when goods are priced at a high amount to convey quality. It
works even better in the luxury goods market. People generally don’t trust luxury goods if
they’re considered to be cheap in price. Nike is a perfect example of a company that
effectively uses prestige pricing, which is a pricing strategy where prices are set higher
than normal because lower prices will actually hurt sales. If customers value the image of
your brand and the features of your product over those of your competitors, then prestige
pricing can help you capture value despite the production costs or quality of the product.
Lastly, charm pricing is ending a price in 9 or 5. These kinds of tactics justify the buyer’s
decision to purchase in two key areas which are 1) specificity because most items include
some form of tax, 99p appears to contain the VAT and no kind of mark up; 2) reduction
since it is technically true but it plays into the need to save money and get more for less.
By feeling they’re “underpaying”, they’re more inclined to buy.
b. The Covid-19 vaccines have been tested, produced and licensed. What are the
aspects that must be considered to finalise the price?

There are a number of factors that can influence vaccine prices, including but not
limited to product characteristics, product maturity, level of competition, individual and
specific contract terms, capacity to pay of the purchaser, and the volume procured. The
first aspects that must be considered to finalise the price of Covid-19 vaccines is the
technology behind it. A lot of vaccines being worked on right now make use of different
technologies-mRNA, DNA vector technologies, which not just require a bit of scientific
precision but are costly to procure. The cost will also be reflected in the final mark-up of
the vaccine being sold. Hence, different companies are subject to selling the vaccine at
different prices. In the future, when we have more than one (or two) vaccines ready, the
pricing could also differ on the basis of efficacy. Higher the response and efficacy rate,
higher could the price go. Next, storage and transportation need to be considered. mRNA
vaccines make use of special enzymes (vaccinia capping enzyme) which not only degrade
faster, but are also considered to be one of the costliest ingredients in the world, and also
difficult to procure. Cold storage, in places where it isn't possible, would also require the
use of additional resources and shoot up the cost as well. Far-off areas may also have to
pay a higher upfront cost, to facilitate vaccine delivery, which, again, could add up the
costs. Price, product, promotion and place are the four ‘p’s of a marketing mix. The
pricing policy of a firm must consider the other components of a marketing mix as well,
because these factors are closely related. Moreover, these factors will change according to
changing market conditions and will be different for each market. Multiple factors could
be driving the observed variation in prices. These include, for example, differences in the
associated development and manufacturing costs; the amount of public funding that
developers received; companies' approaches towards licensing and the establishment of
production networks; the extent to which COVID-19 vaccines fit into pharmaceutical
companies' overall profit-making strategies; the presence of intellectual property rights;
funders' demands like CEPI's access conditions; and political pressure on companies to
keep prices low.
c. Suggest with justifications a pricing objective that should be selected by the
company that produces Covid-19 vaccines.

Customer-related objectives should be selected by the company that produces Covid-

19 vaccines. Customers should be central to every marketing decision so, in order to keep
customers on your side you need suitable pricing policies and practices to win the
confidence of customers: Customers are your "targets". Your company should be setting
its pricing policies to win over the confidence of your target market. By appropriate
pricing, you can establish, maintain or even strengthen the confidence of customers that
the price charged for your product(s) is fair and that they are not being cheated. To
increase customer satisfaction: to satisfy customers should be the prime objective of all
marketing efforts and pricing is no exception. Your company should set, adjust, and
readjust its pricing to satisfy its target customers. Companies have gradually been
disclosing the prices they are offering to countries of different income levels, with marked
variation in the lowest price per course. Some companies such as AstraZeneca and
Johnson & Johnson, which are benefiting heavily from public-sector investments, have
pledged to sell their vaccines globally at low prices. Both companies have committed to
maintaining these prices during the pandemic. The optimal pricing strategy for a new
vaccine involves setting a fair and sustainable price that enables the eligible population in
need across the world to gain access, while also rewarding innovation and supporting
further research and development. In short, design pricing in such a way that results in
maximum customer satisfaction.
QUESTION 4

Sole Founder of Postcard Mania, Joy bootstrapped her business to $62 million in 2019
with only a phone, a computer and postcards. From a survey, 81% of people reported
that they look forward to seeing what they have received in their mailbox. (Source:
Forbes, 2020)

a. Explain the most appropriate communications mix tool as described in the case
above. Discuss three channels most commonly used for the selected
communications mix tool.

The most appropriate communications mix tool as described in the case above is direct
marketing as Sole Founder of Postcard Mania, Joy bootstrapped her business to $62 million
in 2019 with only a phone, a computer and postcards. From a survey, 81% of people reported
that they look forward to seeing what they have received in their mailbox. Direct marketing
consists of any marketing that relies on direct communication or distribution to individual
consumers, rather than through a third party such as mass media. Mail, email, social media,
and texting campaigns are among the delivery systems used. It is called direct marketing
because it generally eliminates the middleman, such as advertising media. Unlike traditional
public relations campaigns pushed out through a third party such as media publications or
mass media, direct marketing campaigns operate independently to directly communicate with
target audiences. In direct marketing, companies deliver their messaging and sales pitches by
social media, email, mail, or phone/SMS campaigns. Some of the major channels of direct
marketing are as follows: a) Face-to-Face Selling (b) Direct Mail (c) Catalogue Marketing (d)
Telemarketing (e) TV and other Direct Response Media (f) Kiosk Marketing.

Catalogue marketing occurs when companies mail one or more product catalogues to
selected addresses. They may send full-time merchandise catalogues and business catalogues,
usually in print form but also sometimes as CDs, Videos. The success of catalogue marketing
depends on the company’s ability to manage its customer lists so carefully that there is little
duplication or bad debts, to control its inventory carefully, to offer quality merchandise so
that returns are low, and to project a distinctive image. Catalogue marketing is common in
USA, and Europe with reputed companies such as Tiffany and Co., Patagonia, Eddie Bauer
and Lands’ End operating in this field successfully. Telemarketing means selling products
directly to the customer by using the telephone. Telemarketing can attract more customers
and maintain contact with existing customers as well. Telemarketing can help the company to
reduce the sales force costs, which are expensive. Customers will become more comfortable
with e-commerce when sales and travel costs go down. The benefit of telemarketing is to help
the business to increase sales volume and customer base. The company should provide the
right telemarketer’s training and provide performance incentives to achieve effective
telemarketing. Next, the direct market is using all the major media to direct reach information
to the potential buyers. The direct market can use many channels such as newspaper,
magazines that can carry abundant print ads, articles and other goods and services for
individuals to order by dialling a toll-free number. A more recent form of direct-response
television marketing is interactive television which lets the customer interact with television
advertising. Some TV channels are focused to sell goods and services. A company can use
the television marketing to promote the products and let the customers know more
information about the product before purchasing.

b. Discuss three advantages and three disadvantages of the selected

communications mix tool in question (a). Support each of your answers with
strong evidence.

The disadvantages of direct marketing includes, difficulty to obtain the necessary data to
provide customer database, consumer rejection and limited reach. The disadvantage of direct
marketing is difficult to acquire the necessary result to provide customer database. The
customer database is the determination of direct marketing and presence is one of the biggest
advantages, get data that can be a tremendous task. Not everyone might be willing to take
part in market surveys and provide personal and professional details. Data from dealers and
services that sell based on customer data to marketers also charge high for some of the data
and the first creation of a database will be quite a difficult task for marketers. In addition, the
disadvantage of direct marketing on the Internet is that people tend to skip watching
advertising over the Internet. Internet users usually find information about products that users
interested in visiting the rating and review site. When consumers are bombarded with
marketing materials directly, consumers may tune out the message. This is a waste of money
and advertisers can create a negative product connotation in the minds of consumers. Despite
having a finite set of customer-defined target actions as an advantage in a variety of ways to
focus marketing efforts, this can also be a limiting factor because marketers reach the
limitation. Although database updates and the addition of new customers, the range of direct
marketing cannot reach the mass marketing methods.
 The advantages of direct marketing, including quickest calculation, determined targeting,
low cost and quick production, and enable to build a list of potential or existing customers.
The most obvious advantage is quickest calculation. Direct marketing is easier to detect,
compared to advertisement or word-of-mouth. For example, if a salesperson sends out 50
leaflets, and received 10 responses; this can indicate that the campaign had a 20 per cent
response rate. The salesperson can also monitor the open rates and click-through by using the
basic program to send out emails through an e-mail campaign. Next, by sending information
continuously to consumers can specifically target the demographic segment that a company
wants to reach. This can increase the rate of reaction as the information is related to
consumers. This will also give the company the opportunity to personalise every single
interaction, such as e-mail addresses, with the name of the customer or individual. Lastly,
direct marketing that is going to be used, is generally cheap and quick to produce depending
on which form it is used. For example, email campaigns have little cost, do not take much
time to create and can be delivered to people’s e-mail instantaneously.