Jagannath International Management School, Kalkaji

(Please write your Roll No. immediately) Roll No. ___________________

End-Term Examination

III Trimester (PGDM) – April/May 2008

Second Batch (2007-09)

Paper Code: C -302Subject: Marketing Research

Time: 3 Hours Maximum Marks: 60

Note: - Part A is compulsory and carries 24 marks. Attempt any three questions from Part B which carry 12 marks each.

Part-A

Case studyStudy the following case ` LEXUS: IMPARTING VALUE TO LUXURY’ and answer the questions given at the end of the case.

LEXUS: IMPARTING VALUE TO LUXURY

In the 1980s, Toyota developed a concept for a new car that was destined to be a success. The concept of the car, to be called Lexus, was based on the observation that there was a large, affluent market for cars that could boast exceptional performance. A significant portion of that market, however, ranked value highly. Thus, they were loathe to pay the extraordinary prices that Mercedes charged for its high-performance vehicles. Toyota planned to target this market by creating a car that matched Mercedes on the performance criteria but was priced much more reasonably, providing consumers the value they desired and making them feel that they were smart buyers.

Toyota introduced the Lexus in 1989 with much fanfare. A clever advertising campaign announced the arrival of this new car. One ad showed the Lexus next to a Mercedes with the headline, "The First Time in History That Trading a $73,000 Car for a $36,000 Car Could Be Considered Trading Up." Of course, Lexus had all the detail that the Mercedes did: a sculptured form, a quality finish, and a plush interior. The detail was not, however, limited to the car. Separate dealerships were created that had the type of atmosphere that affluent consumers expected from a luxury carmaker, including a grand showroom, free refreshments, and professional salespeople.

Toyota placed a strong emphasis on the performance of the new car. A package was sent to potential customers that included a 12-minute video displaying Lexus's superior engineering. The video showed that when a glass of water was placed on the engine block of a Mercedes and a Lexus, the water shook on the Mercedes while the Lexus had a virtually still glass of water. This visually told

the viewer that the stability of Lexus was far more extraordinary than even one of the most expensive cars around. Another video showed a Lexus making a sharp turn with a glass of water on its dashboard. The glass remained upright; again, the Lexus proved itself These videos were successful in bringing in customers, whose expectations were surpassed.

The luxury carmakers noticed and realized that they had to respond somehow. They could either lower their prices, admitting they were overpriced to begin with, or they could increase prices, adding more extras and reinforcing the image of the rich person's vehicle. They chose the former strategy and decided to beat Toyota at its own game. Since 1992, Mercedes, BMW, and Jaguar, which is now owned by Ford Motor Company, have kept prices low and have increased quality. This has led to significant sales growth for all three auto manufacturers. Mercedes and Jaguar saw 20% increases, each, in 1994 from the previous year.

As a result of its success, Lexus decided to raise prices from $30,000 to $50,000 in 1994. This strategy has not worked out as well as Lexus had hoped. Sales dropped 10% to 72,000 cars in the first ten months of 1994 compared with 1993 sales. Lexus has since realized that it lacks the heritage for prestige that European luxury cars command and that people are once again willing to pay extra for it. As a result, it has turned to a new advertising campaign to inspire an emotional response to its cars. The campaign must be exceptionally powerful because it also has to combat the decrease in growth of the luxury car market compared to the auto industry's overall growth. Partly responsible for this decline, the "near luxury" autos have skimmed away potential luxury auto consumers. Included in this group are the Toyota Avalon, the Nissan Maxima, the Mazda Millenia. BMW and Mercedes have also introduced products for this segment: the BMW 3 Series and the Mercedes C Class.

The $50 million advertising effort by Lexus is the most expensive campaign since the introduction of the LS 400. Created by Team One Advertising, a unit of California based Saatchi & Saatchi, the TV ads, as reported in the Wall Street Journal, feature "majestic shots of fast-running schooners and endless rippling sand dunes. The images build a feeling of speed, performance and timelessness before the car is finally revealed at the end Of the ads." Team One did not limit itself in finding the appropriate places to shoot the ad. Maine's coast was chosen to portray the smooth boating scenes while the desert scenes were shot in Africa's Namibia.

The imagery and the style of the ads are 180 degrees from the campaign that launched the LS 400. Those ads spoke of Lexus' "relentless pursuit of perfection" by showing images of the car with those of a ball bearing rolling smoothly down an engineered groove and a balancing act of champagne glasses over the hood. The ads clearly emphasized that the car was extremely well engineered, The focus was on tangible aspects of the vehicle. In contrast, the recent advertising campaign focuses on feeling and emotion, those intangibles that are worth big bucks to some consumers. The intangible aspects of aspiration and luxury also appear in the new ad campaigns of Mercedes and BMW To promote its position as leader, Lexus portrays them as a pack of barking dogs in dealer advertising ads that account for 25% of the total budget.

Lexus is also launching a print campaign in which ads will focus more on the car's physical attributes rather the intangibles. Readers of news magazines will receive a 12-page insert, and 78 magazines will carry monochromatic ads that promote features of the product. Current Lexus owners, which total about 400,000, will also be targeted with mailed invitations to test-drive the new LS 400.

QUESTIONSa). Describe the management decision problem facing Lexus as it seeks to fight competition from

other luxury car manufacturers such as Mercedes, BMW, and Jaguar as well competition from the "near luxury" autos like the Nissan Maxima and the Mazda Millenia.

b). Formulate the marketing research problem corresponding to the management decision problem you have identified in (a).

c). Describe the secondary sources of data that may be relevant for focusing on the research question.

d). Identify two research questions based on the definition of the marketing research problem and develop at least one hypothesis for each research question you have identified.

(4x6 marks = 24 Marks)

Part B

Q.1 (a) Briefly discuss the nature and scope of marketing research in the context of changing business environment in India.(b) Enumerate the steps involved in the marketing research process and briefly discuss the importance of each of them.

Q.2 (a) What are respondent errors? How can they be minimized?(b) People tend to respond to surveys dealing with topics that interest them. How would you exploit

this fact to increase the response rate to a survey of attitudes toward the local transit system in a city where vast majority of people drive to work or to shop?

Q.3 (a) In what ways can attitude information be used to help make marketing decisions? (b) Explain the major differences between semantic differential scale and Likert’s ummated scale.

Q.4 (a) Briefly explain the observational methods of data collection. Illustrate your answer with suitable examples.

(b) What are the differences between primary and secondary data? What are the different forms of computerized databases?

Q.6 Write short notes on any two of the following:

(a) Principles of designing a good questionnaire(b) Sample design(c) Focus group interviews(d) Exploratory research

(e) Types of Experimental designs.