College of Administrative Sciences and Economics

MKTG 402 – Marketing Strategy

Spring 2021 – Exam I

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There are 3 essay questions worth 40 points total in this exam.

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I.    Analysis Questions:

1.  Ink & Paper, a small independent bookseller in Washington, D.C., is owned by the Page family. To reverse a declining sales trend, the Pages feel they must redesign its bookstores and product offerings to appeal to a specific target segment. Hence, they hired a market research firm, Beltway Research, to undertake a benefit segmentation study of book consumers in the D.C. metropolitan area.

Beltway Research surveyed 1000 consumers by mail. One part of the survey asked consumers to rate how important each of the following bookstore attributes is to them, using a scale where 1 = not at all important and 10 = very important. Beltway Research has taken the results of this survey and grouped the consumers to form three benefit segments: I, II, and III. The mean importance ratings of consumers in each of these segments are (the higher the importance rating, the higher the segment’s expectation regarding the bookstore attribute):

I             II         III

Attractive stores                                                                      4.6       4.5       7.2

Can quickly special-order books not in stock                         3.5       7.9       4.8

Events where authors read from their books and poetry        2.6       7.8       7.2

Low prices                                                                              8.2       3.3       5.7

Staff knowledgeable about books                                           5.7       8.5       5.2

Lots of books on sale                                                  8.4       4.3       4.8

Lots of chairs and tables to read in                                         5.2       6.7       8.3

Free gift wrapping                                                                  7.5       2.8       6.1

A good coffee and snack bar                                                  4.7       2.6       8.1

                    i.            Using these study results, identify and profile the market segments in the Washington, D.C. bookstore market based on their importance ratings (3 points).

(HINT: For example, a profile for the pet food market would be “pet lover”).

Segment I: Book lovers

Segment II: Knowledge lovers

Segment III: Stationary lovers

                  ii.            Based on the results of the analysis, identify the specific value priorities the Page family should focus on serving these three segments. Provide them with (one-sentence) recommendations on strategies for gaining sustainable competitive advantage in these markets (3 points).

Value Priority I: Development of the customers’ and preferences and therefore develop the required value and quality of the product that attracts them. For example, increasing the number of books produced and supplied

Value Priority II: Ensure high levels of quality and service delivery.

Value Priority III: The business model should be developed in a manner that the value proposition is achieved, by maximizing the stationery stocks

The Page family should adopt differentiation as a key strategy where they should create products with superior products as compared to their competitors as a way of sustaining a competitive advantage.

                iii.            Ink & Paper now need to communicate with consumers in the chosen target segment. Beltway Research could have carried out research to identify demographic instead of benefit segments. Describe and justify to the Pages the most important advantages of using benefit segmentation instead of demographic segmentation, concerning designing a communications strategy (8 points).

First of all, benefit segmentation classifies the target customers by the values received from the commodities or services offered to them. Demographic segmentation is a classification of the target customers based on some features such as age, sex, and level of education. In this segmentation, firms can understand their consumer needs and preferences.

However, when developing a communication strategy, benefit segmentation is preferred over demographics for some reasons.

First, the benefit segmentation strategy helps the organization to know the group of customers who will benefit the most and that which will benefit less. In such scenarios, they can communicate, provide feedback and deliver the goods in the right quantities. In this case, the firm will be able to know if the goods that were delivered were of the designated value and quality if the clients deliver positive feedback.

2. Illustrate the differences between a market orientation company and a marketing myopic company. Use two companies (one for each concept) from the list of cases we have discussed in class to exemplify the differences between the concepts (10 points)

Marketing orientation refers to a scenario where a company is focused upon evaluating the consumer needs and ensuring that they are met while a marketing myopic firm focuses on accomplishing the firm’s needs rather than promoting the business to meet the customer's requirements. A typical example of marketing orientation is Coca-Cola and Facebook companies. An example of a marketing myopic company is Sony Walkman and Kodak companies.

In marketing orientation, the goods and service are designed based on the qualities and preferences desired by the clients while the marketing myopia companies prefer prioritizing and mainly focusing on the promotion of the current commodities by developing the key characteristics that could increase the sales volumes

Marketing orientation determines all the organizational processes such as sales, market, product, and societal approaches while marketing myopia is only concerned with narrow-end strategies meant to manage the products and firm’s growth.

Marketing orientation ensures high consumer levels and thus shaping the consumer behavior as well as their retention while marketing myopia leads to potential loss of good customers because their product specifications are not met as expected.

3. In a consumer survey for a new personal coffee machine design, three features are tested in conjoint analysis: (1) availability of espresso brewing; (2) capacity, (3) price. The average value system scores of the features (a ranking of 1 indicates the best choice, while 8 indicates the worst) are summarized in the following table (10 points)

Compare the consumers’ choice decisions across the different levels of the three attributes of the coffee machine, and interpret the tradeoffs as perceived by the consumers? Support your answer with numerical calculations.

The customers prefer brewing without Espresso at an average of 5.75 as compared to Brewing with the machine

With Espresso: 7+1+3+2= 13/4= 3.25

Without Espresso: 5+6+4+8= 23/4= 5.75

CALCULATIONS:

CONCLUSION:

A customer is willing to exchange ________$30________(least preferred attribute) for _______________$ 70_____(most preferred attribute).

4.  A manufacturer of electrical components for industrial applications has four strategic business units (SBUs), shown in the following table (10 pts).

                    i.            Using the Boston Consulting Group model, evaluate the strength of the company's current condition by placing each SBU onto the portfolio matrix.

                  ii.            According to the BCG portfolio model, what strategies should it consider to improve its future position?

Use the following perceptual map to answer question 5 (8 points):

5. Select the best quadrant (I, II, II, and/or IV) for a new product-market entry. Discuss.

Market entry as a strategy is the introduction of new products to a new target market

Segment III is the best quadrant for the product-market entry strategy. Segment III does not have any competition since it only has Buick as the only car dealer. Therefore, the introduction of a new car product would face lesser barriers to entry as compared to the other quadrants where there are stiff competitors like have Volvo and Honda, and IV has Mercedes and Lincoln. Quadrant II would have also proved as ideal but BMW is a strong and well-established brand that is hard to compete with because of its high spheres of influence and have a loyal customer base would prove almost difficult to breaks. 

II. Use the following explanation to answer question 6 (10 points):

Xerox 914, introduced in 1959, truly revolutionized the copying industry. The first plain-paper copier was easy to use and operated at seven copies per minute. The 914 was responsible for the number of copies made in the United States increasing from 20 million to 9.5 billion in only ten years. A major strategic thrust for Xerox in the 1970s was the ‘‘Office of Future.’’ This concept recognized that the copier was only one instrument of office productivity, and Xerox wanted to be a leader in the broader playing field.

Savin was a small company obsessed with participating in the copier market and frustrated by the patent chokehold of Xerox. Finally, with the help of an Australian inventor and a consortium of firms from the United States, Germany, and Japan, Savin developed a liquid-toner approach that avoided Xerox patents. Its breakthrough became the Savin 750, manufactured by Ricoh in Japan and introduced in 1975 at $4,999, less than the (then) annual lease price of a Xerox machine. Instead of a direct sales force, Savin sold through dealers who could contact Xerox customers with an attractive alternative when their contracts expired. Dealer service was feasible because the machine was relatively small and reliable; the Savin 750 averaged 17,000 copies between failures. It made twenty copies per minute, the first in less than five seconds, a pace far superior to Xerox efforts at the low end. By 1977, Savin placed more copiers in the United States than Xerox. Meanwhile, Ricoh captured the top market share in Japan, as measured in units.

Kodak entered the market in 1975 with its Ektaprint 100, a plain-paper copier that soon became the industry standard for reliability in the mid-volume market. The firm then developed a series of high-end machines that were by many measures the best in the industry. Kodak moved slowly, however, making sure the products were reliable, carefully building a strong service and marketing organization, and avoiding building capacity too quickly. Kodak was still able to move into third place in copier sales by 1985 because of its technology, reputation, and resources-and because Xerox was not successful in developing comparable products.

6.    Identify and evaluate the strategies of Savin and Kodak. How did they overcome Xerox’s entry barriers?

Savin’s Strategies

Savin used innovation through the help of and Australian and other companies in the US, and Japan to come up with a product that would outdo the competition posed by Xerox 914.

Another strategy applied by Savin was outsourcing. Outsourcing is a strategic plan where a firm hires another agent to perform some internal functions on its behalf. In most cases, the strategy is used to create spheres of economies and reduce costs. In this case, Savin marketed and sold their products through agents or dealers.  Besides, the dealers contacted Xerox’s clients with lucrative contracts whenever they expired.

Kodak

Again, this company made innovation the key strategy for success. For example, Kodak invested in the development of a multitude of high-end machines until they got the best in the industry. They achieved this by improving their technologies which produced high-quality products hence building its reputation on the market.

Another strategy was concentrating on service quality and marketing plans. Kodak invested much in product promotion and marketing strategies in terms of its value proposition, branding, and ensuring that its potential customers have the requisite information about the products.

III. Read the case below and answer the following questions:

THE ENERGY BAR INDUSTRY

In 1986, PowerBar, a firm in Berkeley, California, single-handedly created the energy-bar category. Positioned as an athletic energy food, it was distributed at bike shops and events that usually involved running or biking. The target segment was the athlete who needed an efficient, effective energy source. Six years later, seeking to provide an alternative to the sticky, dry nature of the PowerBar, a competitor, also located in Berkeley, developed an energy bar with superior taste and texture and branded it the Clif bar. About the same time, another competitor introduced the Balance bar, which offered a blend of protein, fat, and carbohydrates based on the nutrition formula associated with the "Zone diet." Faced with these challenges, Power Bar responded with Harvest (a bar with a much more accessible taste and texture) and Protein Plus (an entry into the high-protein subcategory closely related to that defined by Balance).

The makers of the Clif bar (Luna) observed that many women were athletes, and many more were involved in fitness. They further observed that this half of the population had unique needs in terms of vitamins and supplements and that the energy bar industry had yet to recognize or fill them-a classic case of unmet needs. As a result, they introduced Luna as the first nutritional (not energy) bar for women, using media and promotions targeting active females. The bar had a light, crunchy texture, came in flavors like "lemon zest" and chai tea and contained nearly two dozen vitamins, minerals, and nutrients. The target market consisted of time-strapped women who wanted both taste and nutrition and would appreciate a bar tailored to their needs.

Both in reaction to Luna's success and to expand the segments for which the category was relevant, PowerBar studied why women did not buy its products. One answer was that the calorie hit from any member of the Power Bar family was simply too great. In response, the firm created the almost-indulgent Pria. With only 110 calories, Pria was designed to respond to Luna while attracting new users into the category.

In addition to the major brands, challengers from a variety of small and large firms advanced subcategories by positioning themselves around such factors as age (bars for seniors and kids) and health (products to fit dairy-free, diabetic, and heart-conscious diets). Over ten years, some 450 products were introduced. New products in the category are going in several directions. The popularity of low-carbohydrate diets has prompted a host of food bar entries, including Atkins Advantage, which gained a substantial market share that peaked in 2003 and fell off sharply thereafter. A trend toward indulgent icings, coatings, and coverings has led some to morph toward candy bars. Others went the opposite way: The makers of the Clif bar also have introduced a Mojo line of salty snack bars to provide alternatives to sweet-tasting bars and the Clif Nectar bar, an entirely organic nut and fruit bar. Power Bar introduced Nut Naturals, a low glycemic index bar. Currently, there are market positioning opportunities involving natural, sugar-free, and organic bars, those containing no preservatives and no genetically altered ingredients.

The energy bar category has gone mainstream, moving from the bike shops to the grocery stores and exploding from just over $100 million in revenue in 1996 to an estimated $2 billion or more a decade later. Along the way, the market became large enough to attract the attention of major packaged goods firms. In 2000, Nestle purchased Power Bar, which has remained the leading player.

7.  Write a value proposition for Luna products linking it to customer motivations. (7 points)

Follow the form: To (target group & need), our (Brand) is (concept) that (differentiation point)

Luna offers its customers an energy bar. The majority of the customers are athletes, and therefore the products offered have low calories and substantially high nutritional values. The bar ensures that the stock goods meet their consumer preferences and tastes: high nutritional levels and less intake of calories. Therefore, the bar manufactures highly differentiated products that meet every customer’s needs.

8. What product developed by BarM is a new market entry (i.e., innovation)?  Explain what type of innovation it corresponds to (9 points).

Pria was a new market entry innovation developed by Power Bar in response to the competition it faced from the other bars. Such a type of innovation is called disruptive innovation because it comes with new technologies and processes in the current industry’s market. The technology is stealthy and superior to the other existing firms. The fact that the new technology used in developing Pria is expensive and difficult to use, the other bars cannot easily copy. Therefore, Power Bar can fend off competition from its rivals.

9.  Identify PowerBar’s competitors. Indicate two direct and two indirect competitors at the brand or firm level (6 points).

Direct Competitors

Power Bar’s rivals are the energy Bars. The bars were operating in the same demographic settings in which Powe Bar was located. They are Clif Bar and Balance Bar.

Indirect Competitors

These are commodities the same as the ones of the energy bars. The indirect rivals are candy, diet granola, and breakfast bars. The shown entities offer the same value and quality of commodities provided by the energy bar. However, there might only be a few variations in terms of the taste, components, targeted market, and demography.

10. At what stage is the energy bar market relative to the product life cycle in 2000? Identify and explain the strategies that should be used by Power Bar given the life cycle stage and Power Bar’s position in the market? (16 points)

Stage of the energy bar market

The market of the energy bar is at maturity. That is when relating it to the product-life cycle. Moreover, the marketplace is full of rivals producing and offering similar products to their customers. Therefore, the firms’ profitability values have seriously dropped. The increase in the number of energy bars in that area is attributed to the ever-changing consumer tastes and preferences.

Position of Power Bar:

The bar is a market leader since it innovated a counter product to fend off the competition posed by the other rivals.

The market objective of Power Bar:

To evaluate and incorporate new customer segments

Reducing the prices for its energy bars to fight its rivals

Designing Pria Bar to be meant for only women

Introduction of other differentiated commodities with diverse names for clients who are preservative in terms of calorie intake.

Pick one strategic approach Power Bar should implement, and briefly explain:

The main strategic approach that the Power Bar can implement is Brand Differentiation. That is because several competitors are offering similar products; hence the bar is supposed to produce commodities with unique features compared to those of the competitors.