Marketing Exam 2: Market Segmentation, Pricing Strategies, Brand Building, and Advertising

Running head: MKT203EXAM 2
MKT203 Exam 2
Name of the Student
Name of the University

1MKT203EXAM 2
Question 1:
Table 1: Market segment and its characteristics
Name I like it Nice and easy Pressed for time
Characteristic
s Taste Easy option Necessity
Heavy user
not always in the mood to grocery shop
and cook light users
loyal to the
brand benefit of convenience
responsive to sales
promotion
varieties of
flavour Local outlets convenience factor
Based on the cluster analysis the market of new fast food restaurant is divided into
three segments. Based on the characteristics, the segments are named as “I like it”, “Nice
and easy” and “Pressed for time”. The main characteristics of the first segment are focus on
tastes, heavy users, loyalty to the brand and varieties of flavour. The characteristics of
second segment are easy option for the customers, not always in the mood to grocery shop
and cook, benefit of convenience and local outlets. The third segment consists of features
like necessity, light users, responsive to sales promotion and convenience factor. The
selection of targeted segment based on the aspect of profitability, sales volume or any other
factor that is beneficial for the company.
Evaluating the characteristics of the three segments, targeted segment for the
restaurant should be the first segment. The first characteristic of the segment is tastes.
Improvement in tastes attracts more and more customers in the restaurant. The second
advantage is the focus on heavy users. The heavy users lead to higher sales for the
restaurant. As heavy users, purchase a considerable large volume of the product, this helps
to maintain a steady sales volume throughout the year. Lower demand from some group
then would not be a disrupting factor for company’s revenue and profit (1). The third
important aspect of this segment is loyalty to the brand. The brand loyalty is an important
aspect to hole the consumers. Buyers who are loyal to the brand would not switch to some
other cheaper brand. This makes the product relatively less elastic to price. A relatively price
inelastic demand allows the company to increase their revenue through rising price of the
product. This in turn increases profitability of the company. The brand loyalty reduces risks
of losing consumers from a higher price. Another important aspect of this segment is
offering a variety of flavour. New variety of flavour helps to attract new customer and retain
the existing customers. Same monotonous flavour often encourages buyers to switch to
some other brand (2). Varieties of flavour solve the problem and help to maintain a steady
customers’ base.

2MKT203EXAM 2
Question 2:
Table 2: Quality of online app of Walmart
Walmart
Site quality
Dimension
Organization and Ease of Use Processing
Speed
Entertainment
Rating 68% 75% 60%
Average
rating 68%
Retailer quality
Dimension
Product and Retailer
Reputation
Product
Delivery
Competitive
Price
Rating 84% 73.30% 60%
Average
rating 72%
Walmart is an America originated retail multinational company operating a chain of
department stores, hypermarket, and grocery stores. The online app of Walmart helps the
customers to find necessary items and nearby grocery stores with no loss of time. The table
above evaluates quality of Walmart digital app. The quality evaluation is based on the two
main categories – quality of the site and quality of the retailers. For site quality, there are
three dimensions – organization and ease of use, processing speed and entertainment. The
average rating for organization and ease of use is 68%. Survey revealed that the app is quite
confusing and easy to locate (3). The quality of navigation, user-friendliness, ease of finding
and understanding is low and there is need to work on it to improve rating. The processing
speed is quite good with average rating being 75 percent. The website has advantages of
fast accessibility, faster loading of web page and fast processing. In the site quality, the
rating I lowest for entertainment. The site needs to focus on entertaining, playful, and fun
objects to attract more visitors. Overall, the average rating for site quality is 68%, which is
though above the average quality but still there are rooms for improvement.
The three main dimensions of retailer quality are product and retailer reputation,
product delivery and competitive price. For product and retailer reputation, the average
rating 84%. The advantages of the retailer include brand name products, well-known
products, products with reputation, popularity of the site and already established
reputation. The product delivery is quite satisfactory except fast delivery. The retailer is
well-reputed for delivering problem free products. The average rating for product delivery is
73.3%. In case of competitive price, ratings are not so good with average rating being 60%.
Combining the three dimension, the average rating for the retailer is 72%. The company can
improve its rating by improving its pricing features.

3MKT203EXAM 2
Question 3:
Price skimming refers to a pricing strategy where producers initially set a high price
for a particular product or service and then reduces price overtime. It is a temporary form of
price discrimination allowing firms to recover the sunk cost of production (7). The main
objective of price skimming strategy is to capture the consumer surplus in the market. This
allows firms the position of a monopolist. Price skimming strategy is recommended in a
situation satisfying the following characteristics
Firms are price seekers
The concerned product or service is durable
Firms are guided by profit motive
The market information is poor
There is high quality connotation of price
Low degree of competition and low production capacity
Penetration pricing on the other hand is a strategy where firms initially set a low
price in order to achieve a higher market share in domestic and international market. The
strategy is most commonly related with the objectives of increasing market share and
exploits the economies of scale. In contrast to price skimming, consumers here constitute
price aversion. The particular product is non-durable and main purpose in to increase
market share (8). Some other characteristics of penetration strategy include plentiful market
information, high price elasticity of demand, low price of quality connotation, high
competition followed by high production capacity.
If a new fast food restaurant using fake meat rather than real meat option then it
should adapt penetration strategy. Consumers in the fast food market mostly prefer real
meat option. They are hence price averse. Burgers are nondurable product and hence,
penetration rather than skimming is an appropriate strategy. As revealed from the article,
producers in the fast food industry are facing high degree of competition. The new entrant
thus likely to face high competition. Under this circumstance, firm should focus on
increasing their market share instead of raising profit. Besides, the fake meat burgers face a
high price elasticity of demand. Consumers preferences though are changing toward more
protein-based foods, they still prefer real meat more (4). Consumers tend to substitute fake
meat burger with a real meat one in case found to be relatively cheaper. Producers also
enjoy a high production capacity, as fewer resources are needed to produce cultured meat
compared to conventional meat. Following the market condition such as degree of
competition and other characteristics penetration seems to be more appealing strategy in
the market over price skimming strategy.