MS-61 : CONSUMER BEHAVIOUR

Time : 3 hours
Maximum Marks : 100
(Weightage 70%)

Note : This paper consists of two sections A and B. Attempt any three questians from
Section A. Section B is compulsory. All questions any equal marks.

SECTION A

1. You are the brand manager of a new line of light weight autofocus, economically
priced digital cameras. Describe how an understanding of consumer behaviour will help
you in your segmentation strategy and promotion strategy. What are the consumer
behaviour variables that are crucial to your understanding of this market ?

2. Gillette, an established market leader in shaving products, is planning a foray into skin
care products for men. How can the company use stimulus generalisation to market these
products ? Can instrumental conditioning also be applied in this marketing situation ?
How ?

3. Which of the stages of the family life cycle would constitute the most lucrative
segment/segments for the following products and services?

(a) Domino's pizza

(b) Mobile telephones
(c) Mutual funds
Justify your answer.

4. What do you understand by extensive problem solving, limited problem solving and
routinised response behaviour ? What kind of decision process can you expect in the
following cases and why ?

(a) Purchase of a greeting card for a close friend.

(b) Purchase of an after shave lotion/moisturiser.

5. Write short notes on any tree of the following :

(a) Factors likely to increase prepurchase search for information

(b) Economic model of buyer behaviour
(c) Howard Sheth Model
(d) Post purchase dissonance
(e) Trait theory of personality

SECTION B
6. Read the case study given below and answer the question at the end of the case.

A PRODUCT FAILURE AT SATURN

Saturn is attempting to create committed customers. Saturn, a division of General Motors,

advertises around the theme :

A different kind of company.

A different kind of car.

Thought Saturn cars cost only $10,000 to $16,000, the firm attempts to provide its
customers the same level of service and consideration typically associated with expenstve
luxury cars. Its stated objective i5 to be "the friendliest, best-liked car company in the
world " The company states :

"We're going to do more than what the customer expects, and in the long run, I think it
will enhance our image."

Saturn's attempt to build an image of a high-quality car built by skilled, caring workers
and sold in helpful, nonpressure dealerships, had received two small tests in its first two
years. In one, it had to recall and replace 1,836 cars that had received improper coolant.
In another, it had to repair 1,480 cars with faulty seat-back recliners. In the second case,
the firm made a TV commercial showing a Saturn representative flying to location to fix
the car of a resident who had purchased it in the first year of its launch.

However, in 1993 Saturn began receiving reports of a wire short-circuiting and causing a
fire. Thirty-four fires (no injuries) were reported. Saturn faced a dilemma. A recall would
involve 350,000 cars and a direct expense of as much as $ 35 million. Any negative
publicity associated with the recall could seriously depress sales. Saturn had yet to break
even and General Motors was under serious financial pressure.

Saturn managers decided to deal with the problem in a manner consistent with its
company objective described early. It quickly notified all purchasers of the affected cars
and asked them to contact their dealers to have the defective wire replaced at no charge.
The dealerships extended their operating hours, hired extra personnel, arranged door-to
door pickup and delivery, provided free car washes, and often provided barbecues or
other festivities. All the repaired cars had a courtesy card placed inside that said :

"We'd like to thank you for allowing us to make this conection today. We know an event
like this will test our relationship, so we want to repeat to you our basic promise - that
everyone at Saturn is fully committed to making you as happy a Saturn owner as we can."

According to Steve Shannon, Saturn's director of consumer marketing, the decision to

handle the recall in this manner was simple :
"The measure of whether we are a different kind of company is how we handle the bad
times as well as the good. We're trying to minimize the inconvenience and show that we
stand behind the cars, so that our owners don't lose faith in us or the cars."

How have consumers responded to the recall ? Mrs. K, a customer, learned of the recall
from friends who had heard of it on news reports before she received her letter from
Saturn. She took her car to the dealer who served her coffee and doughnuts during the 24-
minute repair. Her response :

"I expected this would be my first bad experience with Saturn. But it was so positive, I
trust them even more than when I purchased the car."

Questions :

(a) Describe the evaluative process followed by the consumers and do outcome that
Mrs.K , went through.

(b) Evaluate the manner in which Saturn handled the recall. What options did it have?

(c) How will publicity about the recall affect Saturn's image among non-owners ?

Section A

1. (a) How do organizational buyers manage risk in buying?

(b) Outlining the key differences between individual buying and organizational buying.
Explain what variations in marketing effort will have to be made by a manufacturer of
stationery items, who now intends to enter organizational markets, after successfully
established himself in the individual consumer market.

2. Briefly discuss the Behaviour Intention Model of attitudes. Can markets 'manage'
attitudes? Use examples to support your answer.

3.
a. What do you understand by 'consumer socialization'?
b. How would you use the family life cycle concept to plan your marketing effort for
i. launching compute training courses
ii. marketing of housing schemes offering 1, 2 or 3 bedroom houses in metropolitan town.

4.
a. How do simple problem recognition and complex problem recognition vary? How can
marketers apply the knowledge of this variation?

b. How can marketers influence the information search process of their consumers?
Illustrate by taking suitable example.
5. You are planning to buy your first personal home computer though you have been
using one for a long time in your office. Explain your buying behavior in terms of the
Bittman information processing model.

Section B

6. Read the case given below carefully and answer the questions at the end of the case.

Amex Card

American Express Co launched its charge card in 1958 expecting to free the consumer's
wallet from the large number of credit cards contained therein. The first card was purple
cardboard model. Today there are over 34 million plastic American Express cards in use
around the world, mostly green but also the more recent gold, platinum and Optima
additions which offer credit lines and extended payment schedules. The cards have
achieved tremendous success, being accepted at almost 3 million establishments in 130
countries. American Express as become one of the best known brand names among
consumer businesses.

American Express' strategy has been to focus strictly on upscale spenders in top-line
establishments. However, as its cardholders level off, a new tack has been to get current
customers to use their cards more frequently, even for mauncane occasions. It is welcome
at over 1800 Cineplex movie theaters and has been tested at McDonald's. Not only are
above-average salaried cardholders welcome, but also college students, who have
potential for greater earnings.

The American Express card has carefully built its image over a period of time by
stressing five factors affecting its prestige: higher price, high quality, limited supply,
higher qualifications and exclusive reference groups. The card has been prices far higher
than alternative bank cards. Even silver or gold so-called 'prestige' or premium bank
cards can often by obtained for no fee. Thus, because the American Express card is
priced higher than most other cards around the world it connotes much prestige.
However, the challenge is to be expensive enough to be profitable and perceived as
exclusive, but low enough to be attainable by appropriate segments. While American
Express claims its interest rates are lower than other cards, some feel that consumers
don't understand percentage rate comparisons, but instead, respond more directly to fees.
Another side of the pricing issue is the fee charged business who accept the card. This
'merchant discount', or the amount American Express keeps from the charges business
submit, is believed to run from 1-25 percent to 1-5 percent higher than other bank cards.
This difference can be a significant amount for low-margin or struggling businesses.

The quality issue is closely connected to the pricing question, as people reflect on value
received for the price paid. AmEx has pursued a high-quality image based on ordering
more and better services than other cards. It provides over 1,400 travel service offices
throughout the world. Executives do not apologize for the high cost of the card because
they feel the quality is superior. According to one executive, AmEx customers want the
best product, not the cheapest product. Although it may sound like a cliché, Management
truly insists that the company strive to deliver the highest possible level of service. The
service emphasis extends from the chief executive down through the organization. The
company has a system for quantifying quality that measures how long it takes operators
to answer service center phones (7 seconds) and how long it takes customers reporting
lost cards to receive replacements by mail (48 hours). In addition, AmEx spends heavily
to research card member's perceptions of the service they receive.

While AmEx seeks widespread ownership of its card, it must be perceived as not suitable
for everyone if it is to maintain its prestige. As AmEx broadens its card's appeal it asks
alienating those who are attracted by its upscale image. Such a move has the potential of
endangering the card's niche. While helping its profitability, the move may damage its
image in the failure.

Will the card be able to retain its 'snob appeal' when the person who uses it to charge a
purchase at an exclusive store knows that across town it is being used to buy petrol at a
grimy self-service station? Executives claim that the card is a badge of distinction and it
doesn't matter where or how the card is used. Others feel that the move to broaden its
usage can help profits but hurt the American Express image.

Advertising for American Express has reinforced the desire exclusive image of the card
but also broadened it somewhat through successive campaigns. Ads also stress service
and try to minimize concern about qualifications by encouraging prospectus to apply
even offering an 800 number to facilitate the process. Effective advertising has made the
brand extremely recognizable. During the 1970's AmEx ran the 'Do you Know Me?'
campaign which presented interesting and well-known famous-named people who were
not recognizable but were accorded importance when they used the American Express
Card. The promise was that the ordinary user would also be accorded prestige when they
used the card. In the long-running 'Membership Has Its Privileges' campaign, cardholders
are showing enjoying the man, benefits of the card's services. In all of these campaign,
consumers are encouraged to think of being members of an exclusive club, not with 34
million participants.

Perhaps the brightest area for credit card growth is the foreign market, although AmEx
lags far being its compotators in Japan and Europe. The eventual foreign target market
consists of 100 million or more people. One problem slowing expansion will be the
merchant discount which some merchants say differs by 4 percent from the charged by
bank cards. Another element which may restrict the growth of American Express in
foreign markets is the company name. Politically the name could be a negative factor in
some markets. In France, Germany and Britain, the card market is mature therefore,
competing against well established cards has been challenging for AmEx. In the Japanese
market the card has been able to grow rapidly as a niche player, appealing to users
designer-abel affinity. However, the AmEx upscale image is being toned down somewhat
as evidence by applications forms that are found even in the back seats of Tokyo taxis.
The ultimate competator for AmEx is not another credit card, but cash. It is estimated that
today only 15 percent of the items that could conceivable be charged, are.

American Express has been able to gain success by effectively discerning what its present
and potential card members want, and by carefully refining and test marketing new ideas.
Te company has learned just what card 'enhancements' (such as automatic car insurance)
are really important to customers and don't cost to much to make available. The company
maintains a profile of 450 attribute and purchasing patterns on all cardholders that is
updated weekly. AmEx segments card owners by lifestyle and income, and then aims
services appropriately for each group, such as extra travel insurance for senior citizens
concerned with security or a special magazine for students. AmEx then piles its customer
database with bill stuffers or catalogs to sell other items to receptive buyers. By carefully
targeting direct marketing efforts to cardholders only for products and services that are
relevant to them, the company tries to avoid harming the client relationship.

Questions:

a. Would you consider the purchase of a card like American Express card a low
involvement or a high involvement decision? Give reason for your answer

b. How is the concept of social class relevant to marketing of American Express card?

c. How has American Express used the concept of social class in marketing its credit
cards?

(3)
Fill in the Blank

1. Attempting to woo the end customer directly through advertising is and consumer
promotion is called __________ strategy.

2. A firm which holds the largest market share in the industry is a ___________.

3. If the manager defines the research problem poorly which potential error in the
research process did they commit___________.

4. The only statistical sampling method which allows the researcher to measure the
reliability of the sample data is _______________.

5. SBU stands for _____________

6. SBU classification in BCG matrix is based on _________

7. SBUs with low relative market share as well as low market growth rate are called
______________.
8. GE matrix is based on _____________

9. _________________Strategy involves launching a new product at low price as well as

low promotion level.

10. Market ______________is a firm that targets a small but specific segment which is
left untapped by larger players

11. _______________ of product mix refers to the total number of product lines a firm
carries.

12. Extending existing brand name to new sizes, flavours etc. in an existing product
category is called ____________.

13. ____________ distribution means one retailers serving a given area is granted sole
rights to carry the product.

14. The different elements of a Promotional Mix are ____________, ___________ ,

______________ and _____________.

SectionII

Write short answers(150 words) for the following questions (any 10)

1. Explain various strategic option given by Ansoff matrix

2. What are the different methods used for setting promotional budget

3. What are the different types of decisions

4. What are attitude and its component

5. What are the advantages and disadvantages of a secondary data

6. What are the advantages and dis- advantages of focus group method

7. How is experimental research different from descriptive

8. What are the different strategic options available to a markete4 for expansiob of its
product line

9. What do you mean by gap analysis

10. What are the strategies for the growth stage of the PLC.

11. Briefly describe the various types of scales.

12. What is a control and an experimental group

13. What are the factors which affect length of channel.

14. What should be the pricing strategy for established product.

Section III

Do any two questions

1. You are a part of the product – management team of HLL laundry detergent line. Your
groups objectives is to challenge P&G’s Ariel the market leader , but you are not sure
how you should proceed Discuss the pro and cons of the following frontal, flanking
encircling or guerrilla strategy used by a challenger.

2. A manufacturer of Soap like DOVE finds that the product has reached the stage of
maturity. Briefly describe the various strategies available to revive the product.

3. You are the marketing manager of Johnson and Johnson firm which has been carrying
a number of baby products on its product line . the company wishing to diversify and
expand its product mix. Briefly describe what product line extension and brand
extensions should it undertake. Justify your answer.
a) Learning model of consumer behaviour.
(b) Selective attention
(c) Role of opinion leaders on consumer behaviour.
(d) Product motives
(e) Media research
(f) Mechanical instruments used in marketing research.

SECTION B- ( 3 X 15 = 45 marks)
Answer any THREE questions.

2. Define the concept of consumer behaviour and explain the need for its study.
3. Define reference group. How does it influence in the purchase of a personal computer?
4. How do you manage customer satisfaction?
5. Bring out the scope of marketing research in the case of TV purchase and use.
6. Explain the various techniques of analysing the primary data.
7. Define “attitude”. Explain the balance theory of attitude.

SECTION C- (15 marks)

This question is Compulsory
8. The Indian PC market is increasing at rapid strides. The giants in this market are HCL,
Wipro, LG, HP, and IBM. The computers is no more perceived as a product needed for
software engineers. It is being used even school going children, internet users, colleges,
universities, engineers, doctors etc. keeping in view the attitude towards the computer,
you are required to design a model to study about the consumer behaviour to know about
various factors that influence consumer behaviour in India for a new brand of a computer.

. How does the study of consumer Behaviour help in marketing decision making

2. Describe the nature and characteristic features of India Consumers.

3. How the social class and reference group influence the Consumer in Brand selection?

4. What are the sources for measuring consumer satisfaction and dissatisfaction ?

5. What is learning ? Give a brief account of learning theories.

6. Is qualitative analysis superior to quantitative analysis ? In what conditions ?

7. How do you develop a good research proposal ?

8. Explain the different sources of secondary data. State its limitations.

9. Define marketing research. Describe the nature and significance of Marketing research

10. Explain the term ‘questionnaire’. Draw a suitable Questionnaire for survey