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Irfan Arshad 1

Muhammad Irfan Arshad


Roll No: AX846575
Professor Dr. Adnan Riaz
LEVEL: MS (MANAGEMENT SCIENCES)
Date: 30
th
July 2014
STRATEGIC MARKETING (8703)
SEMESTER: SPRING 2014
ASSIGNMENT No. 1
(Units: 14)
ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Business Administration)
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Question 1: A Vision Statement is an inspirational description which takes
into account the current status of the organization and serves to point the
direction of where the organization wishes to go. It is intended to serve as a
clear guide for choosing current and future courses of action. However,
sometimes organizations have to review and change the vision. Discuss the
key factors behind reviewing and altering vision of the organization. You
have to support your answer with any case study from local scenario.
In this age of high competition, companies need to understand the real difference between
what should never change (Core values, capabilities, competitive advantage) and what should
be open for change (Technology, customer value, market orientation etc), between what is
actually sacred and what is not. This unusual ability to manage continuity and change
requiring a consciously practiced disciplineis closely linked to the ability to develop a
vision. Vision outlines what the organization wants to be, or how it wants the world in which
it operates to be. Vision statement describes the foundation of an organization or business and
looks into the future concerns of business. Normally vision is not frequently changed may be
changed when your business or organization changes its focus completely. However, as the
organization or business evolves, you might incorporate additional elements into your
mission or vision statement. This might include building on your present goals or expanding
your audience.
Its always a good idea to review your corporate vision periodically to see if it still works for
your organization as part of any new planning you may do to seek answers of the following
questions:
If your vision is still relevant and valid to rapid business changes?
Has something changed in the world and business pattern?
If your company is aptly on the right track, have you achieved your vision?
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Does everyone in the organization is in line with the corporate vision?
Do Customers have healthy trust upon your vision?
Do you need to define a new vision to cope with radical changes in business environment?
If above answers of the above questions are not satisfied then you must revise your vision. It
may also be changed if your industry were shaken by economic, social, or political pressure,
change or event. Your company may likely have other pressures that may have had an
influence on your companys vision and mission. And more often, its the case that you can
articulate your vision and mission better, based on the experience of the past year.
Change Forces
Change in new government policies and legislation, Change and development in new
materials, Social and culture value change, Change in national and global economic condition
and trade policies and regulation, Technology development, Change in customer taste and
requirements, Development and innovation in manufacturing process, New product and
service design innovation, New ideas about the products that how to deliver customer value
and satisfaction, Office and factory relocation closer to customer, supplier, and market, nature
of the workforce, technology, economic shocks, completion, social trends, and world politics
Some examples of change that drives change in your vision and mission statements:
1. In case your product or service line has become obsolete due to regulation, or
replacement i.e cigarettes, or full service gas stations.
2. Due to technological advancements, your current product version is being replaced by
another i.e iPods into iPhones.
3. As a result of merger or acquisition, acquirer has a different agenda (Oracle buys
PeopleSoft changes Peoplesofts goals).
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Why Organizations Change their vision:
1. Crisis: Obviously 9/11 is the most significant example of a crisis which caused
countless organizations, and even industries at world level, to change. Similarly the
financial crisis of 2008 created many changes in the financial services industry as
organizations attempted to survive.
2. Performance Gaps: Changes are required to meet the gaps between organization's
goals and objectives.
3. New Technology: Identification of new technology and more efficient and
economical methods to perform work.
4. Identification of Opportunities: Opportunities are identified in the market place that
the organization needs to pursue in order to increase its competitiveness.
5. Reaction to Internal & External Pressure: Management and employees, unions
often exert pressure for change. External pressures include customers, competition,
changing government regulations, shareholders, financial markets.
6. Mergers & Acquisitions: Mergers and acquisitions create change in a number of
areas often negatively impacting employees when two organizations are merged and
employees in duel functions are made redundant.
7. Change for the Sake of Change: Often times an organization will appoint a new
CEO. In order to prove to the board he is doing something, he will make changes just
for their own sake.
8. Sounds Good: Another reason organizations may institute certain changes is that
other organizations are doing so (such as the old quality circles and re-engineering
fads). It sounds good, so the organization tries it.
9. Planned Abandonment: Changes as a result of abandoning declining products,
markets, or subsidiaries and allocating resources to innovation and new opportunities.
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Example of PTCL
Pakistan Telecom Communication Limited (PTCL) which has undergone major changes in
the recent past. The Government announced PTCL to be privatized. In year 2005 Govt. had
decided to sell 70% shares to private organization named ETISALAT UAE. After privatizing
PTCL the new management was introduced this changes its vision, mission statements and
objectives and goals and structure as well.
Key factors that forced visionary change for PTCL:
There are Internal and External factors of strategic change factors for PTCL
Internal factors:
Internal factors includes following Mergers & acquisitions; Restructuring; Technology
change; Financial position of the organization; Change in strategic position.
Mergers & acquisition:
One of the major changes was the acquisition of PTCL by ETISALAT UAE who introduced
new management. Sole monopoly of PTCL coupled with less span of control and
dissatisfaction of customers from the services led to acquisition of PTCL.
Restructuring:
Once merger and acquisition occurred, new management started expending and restructuring
in the organization to increase the performance for the satisfaction of customers and to get
competitive edge in the industry. They divided the responsibilities of S.E.V.P and E.V.P and
Regional managers by increasing the number of them.
Technology change:
Keeping in view the rapid technological advancements at world level, PTCL also changes its
technology by introducing fiber optical lines which is much better and faster than copper
lines which they were using before.
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External Factors:
External factors are related with the outside of the organization including Economical
changes; Technological advancement; Taxation and regulation.
Economical changes:
Because of economical changes and growth the life style of people in Pakistan is changing
and standards are increasing. Now the customers have a lot of other alternatives.
Technological advancement:
Due to advancement and innovation in technology in Pakistan the organizations are bound to
change their existing technology to be competitive in industry. PTCL just change its network
from copper line to fiber optical network.
It focuses on how PTCL has developed a shared vision and mission to re-energise the
company and unleash the creativity of its employees. Like other large international
companies, PTCL has developed ways of thinking based on a common culture and a sense of
direction.
Example of PSO
PSO is another example that undergone a visionary change in Pakistan. Pakistan State Oil
Company Limited, namely PSO was found in 1976, as a result of amalgamation of the formal
three oil marketing companies i-e Pakistan National Oils Limited, Premier Oil Company and
Esso Undertakings in Pakistan. There is a chronology of events leading to the formation of
Pakistan State Oil Co. Ltd .
As part of PSOs policy of providing better customer services, it has embarked upon its New
Vision retail development program. Equipped with the most modern facilities like Electronic
dispensing units, auto car wash, convenience stores, internet facilities and business centers,
these sate of the art designed stations provide greater customer confidence and a friendlier
environment. As a manifestation of PSOs greater customer focus PSO 24hr customer service
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has been launched where customers can lodge their queries and suggestions about various
PSO products and services. Being the largest of the three marketing companies in Pakistan,
PSO has consistently maintained an edge over its competitors Shell and Caltex.
To sum up, under the globalization effect, every organization strives to sustain the loyal
customer, trained the employees, introduce and adopt new method of productions and best
control the activities of the organization, so the idea of change in vision geminates. When the
company feel that the activities which they are doing, the management, the way of
administration, the use of technology, the human resource policies, the culture of the
organization, the liking and disliking the contents and context of the organization by the
employees, organization structure, group concept ,the product quality are continuously
destroying the image and reputation of the organization the question arises that how will
change the organization present scenario, so when the expert specialist decides about all the
situation and preparing for changing the organization it leads to the concept of organizational
change or change management.
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Q. 2 Organizations in the competitive environment have many challenges
which restrict its growth in long-run. How would you suggest to an
organization operating in highly competitive but progressive environment,
to assess upcoming threats for early counter strategies?
The world has become a more turbulent place, where anyone with a new idea can put it into
action before you can say startup and launch widespread movements with a single Tweet.
This has left organizational leaders with a real problem, since the trusted, traditional approach
to strategic planning is based on assumptions that no longer hold. The static strategic plan is
dead.
As the business economy rebounds, many entrepreneurs are thinking that life will soon get
easier, and their opportunity can only grow. In reality, the business world gets tougher every
day, with new entrants, new technology, and competitors more easily entering the fray from
around the globe.
Threats can take a number of forms, including the emergence of new competitors or low-cost
competitors, new products that offer better performance, slow market growth, barriers to
market entry, changing customer needs or regulatory changes that increase cost or make it
difficult to comply. You may also face the impact of changes in the political, economic,
social or technological environment. The pace of change in the economy means that you must
continuously monitor threats to your business and be prepared to adjust your strategy as new
threats emerge.
Michael E. Porter, in 1979, proposed his Five Forces framework for analyzing the competitive
environment for every business so that they may reassess their product or service in the
context of these five forces:
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1. Intensity of competitive rivalry. This is where most current business plan analyses
focus today. These plans just list a few key competitors out there now; compare feature
richness, quality considerations, and pricing. This is an important first step, but its only
the beginning. It depends upon:
The structure of competition. Rivalry will be more intense if there are lots of small or
equally sized competitors; rivalry will be less if an industry has a clear market leader.
The structure of industry costs. Industries with high fixed costs encourage competitors
to manufacture at full capacity by cutting prices if needed.
Degree of product differentiation. Industries where products are commodities (e.g.
steel, coal) typically have greater rivalry.
Switching costs. Rivalry is reduced when buyers have high switching costs.
Strategic objectives. If competitors pursue aggressive growth strategies, rivalry will
be more intense. If competitors are merely "milking" profits in a mature industry, the
degree of rivalry is typically low.
Exit barriers. When barriers to leaving an industry are high, competitors tend to
exhibit greater rivalry.
2. Threat of new competitors entry. Startups that target profitable and growing
markets with high returns should realize that these will draw many new entrants. It will
certainly also decrease profitability over time, as well as test your sustainable
competitive advantage. That leads to switching costs, sunk costs, brand equity, and a
host of other considerations, commonly called barriers to entry.
Threats of new entrant depend upon:
Economies of scale.
Capital / investment requirements.
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Customer switching costs.
Access to industry distribution channels.
Access to technology.
Brand loyalty. Are customers loyal?
The likelihood of retaliation from existing industry players.
Government regulations. Can new entrants get subsidies?
3. Utility of alternative solutions. You are never the only alternative, hopefully just
the best, in price, utility, and satisfaction. If your new vehicle costs too much, people take
the bus. At some level of function, availability, and price performance, customers jump
ship away from you. These elements are referred to as barriers to exit.
Quality. Is a substitute better?
Buyers' willingness to substitute.
The relative price and performance of substitutes.
The costs of switching to substitutes. Is it easy to change to another product?
4. Bargaining power of customers. This is the degree to which customers can put
your company under pressure, or leverage prices, delivery, features, and quality (market
of outputs). A key is your differential advantage from alternatives. Small differentials
and more competitors give customers higher leverage.
Concentration of buyers. Are there a few dominant buyers and many sellers in the
industry?
Differentiation. Are products standardized?
Profitability of buyers. Are buyers forced to be tough?
Role of quality and service.
Threat of backward and forward integration into the industry.
Switching costs. Is it easy for buyers to switch their supplier?
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5. Bargaining power of suppliers. Suppliers of raw materials, components, labor,
and services to you can be a source of power over your ability to compete (market of
inputs). You need to identify substitute inputs, supplier concentrations, and employee
solidarity (labor unions), which can limit you or give you the advantage.
Concentration of suppliers. Are there many buyers and few dominant suppliers?
Compare: Kraljic Model.
Branding. Is the brand of the supplier strong?
Profitability of suppliers. Are suppliers forced to raise prices?
Suppliers threaten to integrate forward into the industry (for example: brand
manufacturers threatening to set up their own retail outlets).
Buyers do not threaten to integrate backwards into supply.
Role of quality and service.
The industry is not a key customer group to the suppliers.
Switching costs. Is it easy for suppliers to find new customers?
6. A few years ago, Andrew Grove is credited with postulating a sixth force in the
marketplace government, pressure groups, and the public. This force adds the
concept of complementary, and has led to the growth of partners and strategic alliances to
balance the competitive environment.
A change in any of them should be your cue to re-assess the marketplace so that you must
cry:
We dont have any competitors.
Most common threats encounter strategies:
Price Competition
To protect your market share against competitors offering lower prices, develop a strategy
based on your cost or product strengths. If you have cost advantages over your competitors,
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use that ability to reduce your own prices without damaging profit levels. Consider
outsourcing manufacturing to a lower cost producer if you cannot reduce your own cost base.
You can also overcome price challenges by offering customers products that represent added
value. Including free installation or maintenance within the product price, for example,
represents good value.
New Products
If you face threats from new products that offer superior performance to your existing range,
incorporate new product development plans in your long-term strategy. You can overcome
the threat in the short term through a strategy of sourcing or licensing new products from
business partners.
New Competitors
New competitors with a strong market offering can threaten to reduce your market share.
Protect your customer base by developing a customer loyalty strategy or increasing the
barriers to entry for competitors. Introduce a customer loyalty program that rewards
customers for maintaining or increasing levels of business. Increase barriers to entry by
forming strategic alliances with suppliers of essential components or raw materials to restrict
access for competitors.
Weaknesses
Weaknesses in your product and service portfolio, skills, distributor network or supply chain
can increase your vulnerability and make it difficult to respond to external threats. Identify
any weaknesses and prioritize actions to deal with the factors that represent greatest risk. Use
the analysis to develop investment, recruitment or training strategies to overcome the
problems.
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Q. 3 Market segmentation involves dividing potential market for a
product into groups of people who have similar needs, and then addressing
these needs in a focused way. Segmenting can help to increase sales and
market share, protect brand and provide a variety of other benefits selling
to specific audiences. However, there exist some situations when market
segmentation is not possible. Discuss these situations and also highlight
some key disadvantages of segmentation with appropriate example.
When segmentation is not the best way to go?
Segmentation is an ongoing process in marketing strategy areas, where we look at our
existing customers and scenario and decide whether to divide or not to divide these markets
into logical sub-groups based on observation through surveys. The basic idea is that segments
would respond differently to marketing efforts. Generally it is assumed that segmentation
would be more cost effective to treat these clusters of customers than focusing on mass
market. It only works if all consumers have the same needs, wants, desires, and the same
background, education and experience
Segmentation requires marketing survey and extensive data collection, preferences developed
in diverse studies, behavioural data sourced from customer transactions or website analytics,
geography, buying styles, point in the buying cycle (first-time purchaser vs. tenured
customer), and so on. Quite often marketers find themselves in need of more than one market
segmentation system to effectively manage their programs.
1. Products and services are constantly reinvented by consumers. What a marketer
intended to be a childrens toy becomes a cult object among college students.
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2. A fizzy drink is not only drunk but is also used in imaginative ways, it becomes the
perfect cleaning companion, removing rust spots from chrome car bumpers or
cleaning corrosion from car battery terminals Consumers wacky uses of product and
services hint at some of the shortcomings associated with market segmentation.
3. Market segmentation assumes that consumers are static and stable. Furthermore it
places very complex behaviours into neat and exclusive categories that fail to account
for all the complexities of human behaviour. Most people find it difficult to describe
their own personality. There is also an underlying supposition that human behaviour
is always rational, failing to take into consideration spontaneous and playful
behaviour.
4. The different roles an individual plays everyday also conflict with the somewhat
limited categories used to segment markets. You are a student, a friend, a sister or a
brother, a citizen or a rebel. While you recognise all these different facets, advertising
appeals treat you mostly as an educated middle class student. Consequently market
segmentation strategies provide marketers with the illusion of a certain and effective
tool to operate, but the question remains as to whether or not this strategy allows
marketers to know and talk to consumers.
When Not to Segment your Market
To decide whether to divide or not to segment your market, ask yourself different questions.
If you answer YES to these following questions then believe it that segmentation is not
favourable option for you.
Are you selling completely new product?
If you are going to sell a product like toothpicks?
Do your customers have static preferences to purchase in exactly the same fashion?
Are they all worth the same in terms of profitability?
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Do they consume media in the same fashion?
Are your prospects all sourced from the same pool?
If you answered yes then segmentation is not for you. However, even lowly salt was once
thought of as a commodity. Now however, you can find many varieties of sea salt including
Celtic, salt seasoned with other spices, lite salt with less sodium, salt with or without iodine
and so on. These variations were created with market segments in mind.
Disadvantages of segmentation
Obviously segmentation is one of the most important processes in the strategic marketing
plan for your business but it also has certain limitations as well. You must analyse both
aspects, its importance and limitations, segmentations needs to be implemented in the proper
manner knowing that what pitfalls lie ahead if you go wrong with your target market
segment.
1. Targeting multiples segments increases marketing cost. It is an expensive tool that
costs a lot to develop 1 product f or 1 segment than multiple products for multiple
segments. For this purpose surveys cost thousands of dollars.
2. Segmentation may miss important potential customers due to limited market
coverage. Since the communication etc will only be targeted at the chosen target
market.
3. Segmentation can lead to proliferation and excessive differentiation of products - this
may eventually lead to cannibalization of the product, when the new product takes
sales away from the existing product
4. Narrowly segmenting a market can hamper the development of broadband equity
5. Competitive products are substitutable; similarities between brands create a
competition on the same customer base.
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6. If the chosen segment is too small then it will affect the total margins and the
viability of the business.
7. One of the risks of the segmentation is that consumers are misinterpreted when the
right product is put to the wrong customers. For example if your customers want a
new soap and you come out with a new facial cream.
8. Segmentation may confuse the consumer If the consumer himself doesnt know
whether he will be interested in a particular product or not, then thats a sign that you
need to get out of that segment / product.
9. Segmentation is not effective tool when your product is completely new. You need to
market it to the masses and as acceptance increases, only then will you be able to
focus on one particular segment.
10. Market segmentation is time-consuming that involves developing customer profiles
and personas from the research data.
Q. 4 Marketing research is a fundamental process for all managers associated with
different marketing task. Managers have to consider various ethical issues while
collecting data to come at reasonable conclusion. Discuss various ethical issues involved
at each stage of executing research.
Just as the "caveat emptor" philosophy in the early days of marketing has been replaced with
consumer rights, the focus of ethical research concerns has changed. While early ethical
concerns in marketing focused on protecting the image and rights of the marketer, the current
emphasis is shifting toward protecting the rights and privacy of respondents. One way in
which researchers can help each other is by including ethical concerns in their publications.
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While empirical researchers are always careful to publish 'p' values establishing the
"significance" of their results, ethical considerations should be of equal importance.
When talking about market research, ethical concerns mean the set of moral principles that
are recognized when performing market research to guide us for right and wrong. Obviously
ethical quandary is now being faced by consumer researchers. Ethical decisions are basically
observations that researchers must face according to their own standards. First, it is essential
that market researchers must address ethical issues within the said order before externals
forces such as the government, or university administrations does so. Second, good research
design should not exempt the ethical questions arising in the research process.
Historical Overview
Ethical issues in marketing research are certainly not new and may be traced back to 1963,
when marketing Twedt proposed a code of ethics, focusing on three main issues. 1) The
desire to maintain public confidence in marketing research procedures; (2) The need to self-
regulate the discipline before outsiders decided marketing research needed regulation; and (3)
The concern to maintain a positive public image of marketing in general. Then Journal of
Marketing Research published an article named Blankship in 1964 addressing ethical
concerns in marketing research. In 1976, Steiner stated that prejudices against marketing date
back as far as ancient Greece. In 1987, Farmer lamented on ethical issues-such as
confidentiality and deceptive research. Sawyer (1975), Kelman (1967), Bramel (1962; 1963),
Milgram (1963), Suedfeld and Silverstein (1973) were all concerned about honesty and
deceptive research in marketing. (1979) argued that deception is an integral part of all social
relations. In Humphrey's (1970) published new insights into homosexual behavior. Sagrin
(1973), on the other hand, challenged researchers to respect the rights of people who do not
wish to be researched.
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Some of the common ethical issues involved in marketing research ethical issues are as
follows:
Privacy and Confidentiality
Honesty in collecting, analyzing and presenting data
Responsibility of researchers
Privacy and Confidentiality
Confidentiality means that identity or information shared within the research context will not
be revealed. Privacy and confidentiality may be observed at financial, medical, political,
governmental and legal issues. It generally involves: the participants right to decide whether
to obey with the investigators request, their right to be debriefed about what is involved in
their participation, the extent to which personal information is collected, the disclosure and
retention of personal information, and adhering to codes of conduct and laws that dictate how
to properly manage participants privacy and keeping their information safe and confidential.
As we can see, respecting respondents privacy and keeping their information confidential
plays a big role in being ethical when doing marketing research. As researchers, it is
important to be aware of our duties and obligations with the people we interview or observe.
We must let them know of their rights: right to choose, right to safety and right to be
informed. Finally, we must also respect the information they contribute for a given
investigation by managing it well and by keeping it secure and confidential.
Clearly, most researchers agree that the privacy of respondents should be respected (Hill
1993; Spradley 1980). Government legislation also limits the disclosure of records. Johnson
(1975) found that establishing trust was one of the most difficult parts of a research and
promises of confidentiality may be helpful in establishing trust with respondents so that
meaningful and valid data is obtained.
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Informed Consent is one method frequently used by researchers to assure respondents of
confidentiality and is strongly recommended in the "Ethical Principles. It also encourages
respondents to share sensitive information about topics such as drinking and sexual behavior
for valid responses. There are types of personal information that can often be associated with
invasion of privacy. A researcher therefore must be aware that asking participants questions
about their sexual orientation, religion, political affiliations or income can be seen as
discriminative or irrelevant thus invading their privacy. If such questions are necessary to the
study, it is important to explain participant the relevance of these questions and to warrant
them that such information will be kept anonymous and confidential.
At the same informed consent to may prompt a halo effect, it may bias field research. When
researching illegal activities or behaviours, respondent confidentiality becomes an even
thornier dilemma and researcher may face contempt of court charges. A more radical form of
assuring confidentiality offered by Adler and Adler (1993) involves self-censorship on the
part of the researcher.
Honesty in Presenting and Analyzing Results
Analyzing results is the procedure of assessing, illustrating, and reviewing data by using
statistical and logical techniques. To curb the misleading of marketing research and errors of
statistics, its necessary for researchers to honestly present and analyze results. The reports
should be written in a way that is logical and persuasive. Both primary data and secondary
data can be used for presenting and analyzing. Secondary data may be brought into the
analysis to help find results. However, in order to avoid unreliable information, researchers
need to consider the following items:
1. Specification and methodology used.
2. The dependability of the source must be seen.
3. Is the data current?
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4. Does it apply to the time frame youre interested in?
Responsibility of Researchers
Individuals all have responsibility to ensure that they have ability to meet the goal of research
when they work with a research project. Responsibility of researchers plays an important role
in research project, and it can help the people perform the project efficiently. Researchers
who are working on a project need to have the following responsibility:
1. Conducting the research
2. Ensuring the outline is on the track
3. Protecting the confidential data
4. Recording any events
Researchers have overall responsibility for the project and accountable to the employer of the
research; therefore, they are required to provide appropriated management to all working,
ensure all the date is appropriated, and report any of misconduct.
Following are some of the general guidelines for researchers to consider ethical issues when
designing research.
1. Just as the marketing concept revolves around the customer, so too should consumer
research focus on the welfare of the respondent.
2. When interviewing people on sensitive topics, the researcher needs to be as prepared as
possible to handle difficult situations if they arise. For example, if child abuse is discovered,
the researcher must report it to the police.
3. Consider the Cost/Benefit of the Research Project. Do the potential research benefits
outweigh risks to the respondent and researcher?
4. When In Doubt: Pre-Test. Consumer research often includes pretesting to insure valid
results; If unsure how the sample population might react to an experiment, the researcher
could survey a sub-sample about ethical concerns.
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Q. 5 (a) New product development process comprises various steps to launch product
into the market. Among all of the steps, test market may provide misleading results. Explain the
reasons behind with example?
Over the past three decades considerable progress has been made in developing new
products, yet the product failure rate has remained high and constantsome estimates place
it at about 85 percent for consumer goods. So managers are almost always too ego involved
with their products, almost always overestimate demand and almost alwayssince by
definition overestimated demand increases the chance of product failurehave products that
fail more than succeed. (Recall that about 85% of new consumer packaged goods fail.)
Test Marketing is the final step before commercialization. The objective of this marketing
phase is to test all the variables in the marketing plan, including different elements and
characteristics of the product. This stage represents the launching of the total marketing
program, albeit on a limited basis. It includes an estimate of sales, market share, and financial
performance over the life of the product. Test markets are generally wise when there is a high
degree of risk surrounding the introduction of the new product. Three questions can be
answered through test marketing:
1. Is the overall workability of the marketing plan realized as planned?
2. Do alternative allocations of the budget need to be evaluated?
3. Can we determine whether users are being inspired to switch from their
previous brands to the new one, and whether repeat purchases are taking place?
Difference between Product Testing and Test Marketing
Both initial product testing and test marketing are different concepts. Product testing is totally
initiated by the producer: he or she selects the sample of people, provides the consumer with
the test product, and offers the consumer some sort of incentive to participate.
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Test marketing, on the other hand, is distinguished by the fact that the test cities represent the
national market. The consumer must make the decision herself, must pay his or her own
money, and the test product must compete with the existing products in the actual marketing
environment. For these and other reasons, a market test is meant to serve as an accurate
simulation of the national market and serves as a method for reducing risk. It should enhance
the new product's probability of success and allow for final adjustment in the marketing
mix before the product is introduced on a large scale.
Risk of Misleading results through test Marketing
1. Certainty concerning consumer acceptance cannot be exactly assessed through test
market of a product; any sort of wrong estimates may mislead the results.
2. Similarly uncertainty regarding revenue generation potential may affect the fulfilment
of required results.
3. Production and marketing costs may be hard to pin, any gap among financial
resources available and required to undertake the test market may affect the results.
4. Aggressive promotion is the key element of test marketing costs a lot coupled with
several other indirect costs. Weak promotional plan will modify the required results.
5. The risk of losing consumer goodwill through the testing of an inferior product is
also very real.
6. Engaging in a test-market might allow competitors to become aware of the new
product and quickly copy it.
7. Special expertise are needed to conduct test market that requires hiring of research
agencies, trained project directors, statisticians, psychologists and field supervisors
otherwise results tend to be biased and more objective
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8. Selection of test market cities should reflect the norms for the new product in such
areas as advertising, competition, distribution system, and product usage. Wrong
selection of cities will mislead the results.
9. Similarly number of test cities should be based on the number of variations
considered (i.e. vary price, package, or promotion), representativeness, and cost.
10. Sample size determination: the number of stores used should be adequate to represent
the total market for certain results.
Example:
Candia is a product of CDL, which was launched in Pakistan in 1999, and although, when
launched, it had high expectations attached, it failed to deliver. CDL invested around 200
million rupees to launch Candia in Pakistan out of which 10 to 15 million were spent on its
advertisements as it was launched early during the World Cup of 1999. Candia has not shown
the result which was expected of it.
Market tests for Candia milk were being carried out in Lahore whether people or actually
going to buy it or not. In these test, sales and repeat buying behaviour of the consumers was
monitored. The product launch was preceded by market research and need identification.
Pull strategy was adopted because market potential was already identified since UHT (Ultra
HighTemp) sales were increasing. The product was made by keeping in the view the
customer need rather than producing it and then trying and push sales as in a selling strategy.
Fairly high amount of the people recommended Candia that satisfied the marketing directors
for the possibility of success of Candia. Even then Market test failed to fulfil required results
due to following major factors:
1. Market test failed to determine the target age group and milk has been able to
stimulate demand the age group of 6-12 youth forgetting the elderly people.
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2. Test market was carried out in posh areas where price was not considered but during
commercialization phase general consumer found its pricehigher than other brands in the market.
3. Test market didnt explain its response in remote areas, small towns and northern
areas of Pakistan where it failed to deliver required results.
4. Its colour and thickness was not monitored during test market and it was not generally
accepted during commercialization.
Another example is that of PepsiCo when launched Pepsi Max in 2009, zero-calorie, no-sugar
cola, in Pakistan. The new drink was targeted at 25-35 year old urban young adults. It was
time, decided the company, to move on justifying the addition of yet another zero-calorie cola
in its kitty. 'Maximum kick, no sugar,' screamed the tagline. Again its market test forecast
huge success because customers responded it keeping in view the famous Pepsi brand. In
actual consumer observed that there is nothing unique or value added in Pepsi Max as Diet
Pepsi was already present in the market, there was no need for the addition of Max.
Q. 5 (b) Select some brands available in Pakistan and specify their functional, experiential
and symbolic positioning?
Positioning is an integral part of marketing campaign that can help increase sales drastically.
It may be defined as "the process by which marketers try to create an image of identity in the
minds of their target market of is product, brand, or organization."
Positioning is in the mind of the consumer and can be described as how the product is
considered by that consumer. When researching the positioning of a product, consumers are
often asked how they would describe that product if it were a person.
There are typically three different types of positioning concepts:
1. Functional Positions which do three things; solve problems, provide benefits for
customers, and get a favourable perception by potential investors and lenders.
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2. Symbolic Position which help with enhancing yourself image, ego identification,
social meaningfulness, and affective fulfilment.
3. Experiential positions that provide sensory and cognitive stimulation.
Positioning of some brands in Pakistan
1. Coca Cola has positioned itself as a part of their daily life. This affinity between the
brand and the consumer leads to a high degree of loyalty and makes the purchasing
decision easier. Coca Cola has been successful by using Unique Selling preposition as
Live the coke side of life. Coke basically associates this brand with emotions and
joy. We name of Coke comes into mind the first thing comes into mind is fun and
entertainment.
2. QMobile, A home grown mobile phone brand that, with its relentless marketing push,
has cemented its foothold in the Pakistani market, giving established global brands
like Nokia and Samsung a serious beating. They have a product strategy that caters to
all tastes and market segments. To market this extensive product portfolio they
employ a entire army of high profile celebrity endorsers, ranging from Fawad Khan to
Shaan, Iman Ali to Sara Loren and, very recently, Kareena Kapoor! Getting onboard
the Aashiqui 2 dude at the perfect time was just one more feather in the cap of the
accomplished brand.
3. National Ka Pakistan : As we reported earlier this year, National Ka Pakistan is a
brilliant initiative. It shows how quality, relevant content and natural brand integration
can elevate a brand. National, with its overall brand focus on celebrating Pakistani
food is right on the money with a traveling roadshow that takes you to beautiful
places and tantalizes you with local recipes. The creative work on this is also world
class.
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4. PTCL Landline Link: We know were stepping into a minefield with this one but
we think that, despite what it looks like on the face (disaster?), it was actually a very
smart move by PTCL. See, what do brands like Zong, Mobilink, Lipton and Nokia
have in common? Theyre well known and spend a lot on building their brands, right?
Hence they have a lot to lose (and would likely lose) if they tried to pull a stunt like
this featuring The One-Pound-Fish Guy. Zong already fell flat with its take on
Gangnam Style, remember? And PTCL? Well, PTCL really didnt have much to lose
because all the PTCL brand is renowned for is being sucky. With a stunt like this,
they could either get a lot of publicity and exposure for their unloved-by-consumers
landline service, or it could be total flop in which case life would go on undisturbed.
We commend PTCL for taking this risk and think it paid off with the kind of publicity
(either kind is good) this generated. Heck, even we covered it!
5. Tarang Housefull: If theres one thing Tarang wins on hands down, its consistency.
Keeping a laser-sharp focus on Lollywood from literally day one, Tarang has added a
lot of glitz and glamour to our film industry and its stars. Some might argue that
investing in this dying beast is a dumb strategy. It might be partly correct, but with
this approach, Tarang not only builds a lot of nostalgic/patriotic association with
itself, but also maintains a strong connection with the overall entertainment platform
which, ofcourse, is fool-proof in Pakistan. With Housefull, they have tried to do
something really grand and ambitious. They might not have made a strong mark but
we definitely think they deserve a place on this list for the thinking behind this.
6. Dawlance is mainly know as good quality, affordable price products and the
management always focused on these aspects. Dawlance started its operation in 1980
and positioned itself as reliable and inexpensive brand. Recently, Dawlance offers
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reasonable the prices of its products not only to facilitate its consumers but also set a
trend in market.
7. Gai Banaspati: Whats in a name? A lot, actually, when it comes to branding. Yes
we understand you had your laundry soap brand of the same name that has some
degree of an iconic status in Pakistan (Remember those Gai soap banane walon kee
janib se dili eid mubarak text messages?)- but that absolutely doesnt mean that you
should blindly plaster it onto your next brand extension adventure. Much, much less
when youre moving from laundry soap to effering cooking oil! The launch was high
profile to say the least. Juhi Chawla from across the border is endorsing the brand in a
campaign that is chock full of clichs and half a dozen melodramatic episodes over
things like jalaibee and chips.
8. Consider the example of Ariel that offers a specific benefit of cleaning even the
dirtiest of clothes because of the micro cleaning system in the product.
9. Colgate offers benefits of preventing cavity and fresh breath.
10. Surf Excel is positioned as stain remover
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Question 1: Suppose the management of Allama Iqbal Open University wishes to
establish a product-management function covering both new and existing programmes
offered by the university. Develop product planning program in this regard?
Question 2: Product life cycle provides an overview of the life stages. However, some
products follow long and stringent life cycle whereas some products have very short life
span. Discuss reasons with appropriate examples from local environment?
Question 3: The management of a telecom company wants to increase its tariff rate. The
company is operating in highly competitive environment and losing its customers in
some of geographical areas. What ways would you suggest to the operational managers
to cope with the situation?
Question 4: Differentiate between advertising and publicity. How can a manager strive
to get positive publicity of the product and how to cope with the situation when product
is experiencing negative publicity?
Question 5: Marketing strategies and functions have proved to be the key elements in
overall success of the products and organization. However, some small and medium size
organizations in Pakistan do not have any marketing department. If you have to
develop a marketing department for water purifiers, how would you proceed? Explain
in detail.

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