MK187: Principles of Marketing Marking Scheme – May/June 2013
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Question 1
a)
Which three (3) elements constitute a “market orientation”? Draw the model, name each element
and explain the use of the “market orientation” model.
(10 marks)
ANSWER: Student draws the marketing orientation model, including the three elements Customer
Orientation, Competitor Orientation and Interfunctional Coordination. Together these elements lead
to a long-term profit focus. The interaction between the different elements allows for market
information to be shared and acted upon throughout the organisation, not just in the marketing
function.
b)
Discuss the three (3) differences between marketing and sales.
(10 marks)
ANSWER: Student compares Marketing (long term customer satisfaction, more co-creation with
customer and focus on stimulation of demand) with Sales (short term customer satisfaction, less cocreation and more focus on meeting existing demand).
c)
The procurement process in public markets often leads to a phenomenon called “winner’s curse”.
Explain.
(5 marks)
ANSWER: Students discuss the rivalry in bidding for public contracts which often leads to a race to
the bottom where under-pricing or over-promising leads to the winning bidder suffering from
“winner’s curse” where the winning bid leads to an unprofitable contract.
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MK187: Princ of Mktg (May/June 13)
Question 2
a)
There are two main approaches to segmenting markets. One is called the build-up method. Name
the other method and explain both.
(10 marks)
ANSWER: The other method is the “break down” method. Using the build-up method, all consumers
are regarded as different, and the task is to find similarities in order to find create segments. In the
break-down method, all consumers are regarded as similar, and the task is to find particular
differences.
b)
Name four (4) criteria that segments must conform to in order to guarantee effective market
segmentation. Explain.
(10 marks)
ANSWER: Students names and explains the following four criteria: Distinct – each segment has to be
clearly different from other segments. Accessible – can buyers be reached through the appropriate
promotional channels and distribution channels. Measurable – is the segment easy to identify and
measure. Profitable – is the segment large enough to provide a continuing stream of income and
profits.
c)
What are “SIC codes” and why have they received limited application in market segmentation?
(5 marks)
ANSWER: Student names Standard Industrial Classification (SIC) and explains that SIC code
categories are often too broad to be useful for effective market segmentation although they do
provide some preliminary indication of the industrial segments in a B2B market.
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MK187: Princ of Mktg (May/June 13)
Question 3
a)
What is “servitization”? Explain the concept and give an example.
(10 marks)
ANSWER: Student explains the concept of servitization where organisations offer products and
services in an integrated bundle where services are an integral part of the core product. An example
could be Rolls Royce which work with performance-based contracts where airlines buy “power by the
hour” where airline engines and their integral servicing are bought in ten-year contract cycles. Other
examples may be given.
b)
What is the difference between co-branding and licensing? Explain both concepts using the example
of Pepsi and Beyoncé.
(10 marks)
ANSWER: Student explains both licensing (the permission in exchange for a fee to use a trademark to
promote other products for a defined period of time in a defined arena) and co-branding (two brands
working together on one product, sharing resources and allowing for synergy). The new arrangement
between Pepsi and Beyoncé (as discussed in a seminar case study) is a typical case of co-branding,
whereas before most co-operations between Pepsi and artists would have been a less complex
licensing agreement.
c)
The three product forms constitute the “anatomy of the product”. Name the product forms and
apply this model to a Qeelin panda bear.
(5 marks)
ANSWER: Student discusses the core product, the tangible/embodied product and the augmented
product using the Qeelin panda bear (diamond necklace) where the core product would be
decoration/status, the tangible product reflecting quality and high price in materials and design, and
the augmented product includes things such as brand image, after-sales servicing and guarantees.
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MK187: Princ of Mktg (May/June 13)
Question 4
a)
Milton Friedman claimed that “the doctrine of “social responsibility” involves the acceptance of the
socialist view that political mechanisms, not market mechanisms, are the appropriate way to
determine the allocation of scarce resources to alternative uses”. Discuss his viewpoint using the
example of Apple and Foxconn.
(10 marks)
ANSWER: Student discusses the way in which Apple initially ignored labour issues at the Chinese
plants of supplier Foxconn (HonHai), taking the view that it was just sourcing from the lowest price
supplier and that it had no role in the internal operation of Foxconn plants. However media exposed
the problems and customers started to look at Apple and the Apple brand image was in danger. This
market mechanism then led Apple to realise they could not stay quiet and as a result Apple worked
with Foxconn to guarantee better employee facilities and pay. Friedman would agree with the way
Apple operated, where it only took action after the market mechanism (customers possibly boycotting
Apple) led to a clear danger for Apple profits and only then to step in with (limited) measures to
placate its consumers desires.
b)
Name and define the six (6) levels of the relationship marketing “ladder of loyalty”. Explain each level
by applying it to the company Coca Cola.
(10 marks)
ANSWER: Student names and defines: Prospect, Purchaser, Client, Supporter, Advocate and Partner.
Coke will use advertising to get prospects and turn them into purchasers using sales promotion. Over
time purchasers will re-buy regularly and become clients (also because of strong distribution channels
available to Coke). Through games and online communities Coke will then try to turn Supporters into
Advocates (like on Facebook for intstance). The Partner status will probably not be relevant to Coke in
B2C, but would be for the B2B relationships that Coke has.
c)
Draw the Ansoff matrix. Name all axes and quadrants.
(5 marks)
ANSWER: Student draws the Ansoff matrix with correct axes and quadrant names. No further
explanation is needed.
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MK187: Princ of Mktg (May/June 13)
Question 5
a)
Name the three “generic strategies” proposed by Michael Porter. For each strategy explain
what it entails and give an example of a company using this particular strategy.
(10 marks)
ANSWER: Student explains the Cost Leadership, Differentiation and Focus strategies and for
each gives a relevant example.
b)
What is a “churn rate” and how is it generally used as a marketing metric (what does it
measure)?
(10 marks)
ANSWER: Student explains that telecoms companies measure customer satisfaction by
looking at the churn rate which is the proportion of customers who fail to renew their
contracts against the proportion of new customers acquired. (p. 194 in Baines)
c)
Draw the Porters Five Forces model and name all five forces.
(5 marks)
ANSWER: Student draws the Five Forces model and names all five forces. No further
explanation is needed.
Question 6
a)
Explain the concept of “mark-up pricing” and discuss the pros and cons of its use.
(10 marks)
ANSWER: Student explains mark-up pricing where a fixed percentage is added to the costprice in
order to calculate a price for the end customer. It is an easy method used by many companies, but
does not allow for value based pricing where a customer might be willing to spend more (or less)
depending on the specific situation that customer is in.
b)
What is “operant conditioning”? Explain how customer loyalty programs use this principle.
(10 marks)
ANSWER: Operant conditioning is a technique where the customer is steered toward a certain
behaviour by continuous rewards whenever the desired behaviour is displayed. Customers earn
loyalty points and as such can be steered in their buying behaviour over time.
c)
Name the five primary tools of the marketing communications mix.
(5 marks)
ANSWER: Student names Advertising, Sales Promotion, Direct Marketing, Public Relations and
Personal Selling (p. 388 in Baines)
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