Курсовая работа: Marketing Research Project for a Russian Company
Курсовая работа: Marketing Research Project for a Russian Company
Marketing Research Project for a Russian Company
Marketing research................................................................................................... 5
The corporation...................................................................................................... 7
The history of the
The choice of the
industry ...................................................................................... 9
Entering the market
of pastas and the present position of the company. 11
The problem of the
The problem................................................................................................................. 13
Research objectives................................................................................................. 13
Research plan............................................................................................................. 15
The history of the
market of pastas of Saint Petersburg and its present state. 16
Historical approach.................................................................................................. 16
Products in the
Market segmentation.............................................................................................. 19
The questionnaire..................................................................................................... 21
The results.................................................................................................................. 23
General findings....................................................................................................... 26
apropos automation of the process of packaging.... 27
В данной работе анализируется проблема российской
компании, производящей макаронные изделия. Компании было необходимо принять
решение о целесообразности автоматизации упаковочного процесса. После
последнего финансового кризиса рынок макаронных изделий значительно изменился,
и компании было необходимо собрать информацию о его состоянии после кризиса.
Для сбора релевантной информации было проведено маркетинговое исследование.
Работа включает отчёт об этом исследовании, анализ его результатов, а также
другую релевантную информацию, которая была необходима для подготовки
исследования, включая описание истории рынка макаронных изделий, анализ
предполагаемых последствий финансового кризиса и сегментацию рынка. Информация,
собранная при помощи исследования, показала, что автоматизация упаковочного
процесса целесообразна только в том случае, если компания выберет определённые
сегменты рынка как целевые и помогла понять новую среду, сформировавшуюся после
кризиса. Исследование продемонстрировало, что автоматизация упаковочного
процесса является скорее средством маркетинга, нежели средством повышения
производительности труда. Это было новым для компании.
In this paper a problem of a Russian
pastas manufacturing company is analyzed. The company had to make decision
weather it is reasonable to automate the process of packaging. After the last
financial crisis, the market of pastas undergone very substantial changes, and
the company needed to collect information about its state after the crisis. To
collect the relevant information, a marketing research was prepared and
performed. The paper includes a report on this research, analysis of the
results of the research, and relevant information that was necessary to prepare
the research, namely the description of history of the market of pastas,
analysis of proposed influence of the financial crisis and segmentation of the
market. The information acquired with the help of the research made it clear
that automating of the packaging process is reasonable only if the company chooses
certain market segments as target ones and helped to understand the new
environment that has formed after the financial crisis. The research
demonstrated that automating of packaging is mainly a mean of marketing, not a
mean of increasing labor productivity, it was new for the company.
Markets consist of buyers. Since buyers
differ in many ways, markets can also be segmented in a number of ways.
Market segmentation represents an effort to increase a
company’s targeting precision
Market segmentation can be carried out at four
3. Local areas
For the market of pastas the reasonable level of
segmentation is the first one.
A market segment consists of a large identifiable
group within a market.
When segmenting at this level a company tries to
isolate some broad segments that make up a market. The consumers belonging to a
segment are assumed to be similar in their wants and needs, though they are not
Many different variables can be used for segmenting:
power or income (though they correlate, they are not the same);
and so on
Market segmenting can be made using one or more
In our case we will use consumer’s income per head as
a variable for market segmentation.
We will use income per head because the price is the
most decisive factor in making purchase decision and because the demand for
pastas is elastic.
We will not use any other variables to make our
The size, purchasing power, and characteristics of the segments can be
The segments are large and profitable enough to serve. A segment should be the
largest possible homogeneous group worth going after with a tailored marketing
The segments are conceptually distinguishable and respond differently to
different marketing-mix elements and programs.
Marketing research is the systematic
design, collection, analysis, and reporting of data and findings relevant to a
specific marketing situation facing the company.
The marketing research process usually includes
1. Define the problem and
2. Develop the research plan.
3. Collect the information.
4. Analyze the information.
5. Present the findings.
Data sources. All data sources can be divided into two
large groups: primary data and secondary data.
Primary data are gathered for a specific purpose or a
specific research project.The primary data are collected by the researcher and
had not been collected before or is outdated, inaccurate, incomplete, or
Primary data can be collected in four ways:
2. Focus groups.
Secondary data are data that were collected for
another purpose and already exists somewhere.
The sources of secondary data are:
1. Internal sources.
2. Government publications.
3. Periodicals and books.
4. Commercial data.
There are following contact methods:
1. Mail questionnaire.
2. Telephone interviewing.
3. Personal interviewing
In our case we will have to collect primary data
because secondary data on the subject is incomplete and outdated.
We will use the survey research because it will be
able to give us more reliable, precise data apropos the questions that are of
interest for us. They will be discussed below.
We will use personal intercept interviewing as a
After last financial crisis in Russia the
business environment had changed dramatically. Companies have to adopt to new
conditions. Manufacturing companies have a chance to push their foreign
competitors out of the Russian market because ruble have devolved.
In this paper I will describe how I
helped a pasta manufacturing company to make an investment decision apropos
reasonability of investing in a new packaging line using a marketing research.
The following tasks were to do to accomplish
Analyze the problem of the company.
To do this it was necessary to do the following in advance:
Study the history of the company.
Study the reasons of its choice of industry.
Study the present position in the market of
Understand and formulate the problem of the
Carry out a marketing research to give the
necessary information to the management of the company.
I had to make the following steps to do it:
Formulate the problem the research is to solve
and the research objectives.
Develop the research plan.
Make conclusions apropos the state of the market
and reasonability of investing.
The LBS Corporation started operations in
September 1992. It was started-up by three young men who had enough risk-taking
propensity to make a decision to start-up in the Russia of 1992. One of them
had a formal economic education, though a kind of a Soviet one but nevertheless
economic, another one was a kind of a lawyer, and the third one was just a
friend with no formal education useful in business administration (he had a
higher education though). Their cooperation had began before they started-up
the firm- they earned the capital necessary to start-up together. The idea
belonged to the third man who had some connections in Germany. Some people he
new there had a used car shop. So the information about prices of used cars in
Germany was available for them. They borrowed some money and invested some of
their own savings to drive several used cars from Germany. During their later
trips they hired several people (in Russia) to help them drive cars. After
they had made several trips to Germany they possessed about five - seven
thousand dollars which they invested in the LBS Corporation which was
started-up. They continued to import cars for a while but soon they decided to
quit the used cars importing business after an unlucky trip during which an
accident has happened and one of them was seriously injured and one car was
completely destroyed. The matter is that the cars were often in a poor
technical condition and problems with Mafia constantly appeared, so this business
was really risky and in addition they saw another opportunity of making money
with the help of the newly established firm. I should mention that in that time
the environment they had to deal with was really unstable and they had no
definite intentions, no business plan when they decided to start up, that is
interesting. When I asked one of the founders how could it be and what were
they thinking about, he replied that they were thinking in a way that “there
will be a day, there will be food”. I think, hardly someone except Russians can
refer in that way to that sort of questions. But everything happened exactly
like that. First they founded their firm and then they began to look for an
opportunity and found it.
In that time the depression effect had been in force
and the demand for river tours in Russia dramatically decreased. As a result of
it, the Volga river fleet was doing almost nothing. As a consequence of that,
it was easy and inexpensive to freight a ship, if you needed one. So they did.
They organized river tours for foreigners for whom Russia was extremely
interesting after the Iron Curtain had just been lifted. They were in this
business for one season only and then quit. It became unprofitable for some
Here I have to step aside a little from the point and
mention the following: it is very often difficult to get information in Russia,
especially from a businessman about his business. They are used to keep silent
and they are sometimes extremely jealous about the figures. Though they know
you cannot harm their business and the information will not go further, they
will feel uncomfortable if their confidential information is shared with
someone. Sometimes you have to be glad they give you some information about
their business and when once began to get into details during speaking with one
of the three men he went ballistic and told in an unpleasant manner that he
would not let him been questioned. So I had some lack of information about the
past of the LBS Corporation, but the situation with information about its
present is much better for me since I was and I am connected with that company
and I have a job there, but I will return to this a little bit later when we
are finished with the history of the LBS Corporation.
After they quit the river tour business they saw their
next opportunity in the computer industry business. A friend of one of them was
a programmer and an informal leader of a collective of programmers and
technicians. It was the dawn of Russian computer market in that time. The LBS
Corporation hired that collective and began to manufacture (to be more exact-
to assemble) and to resell computers and develop software.
The LBS Corporation was more oriented towards
corporate users. In 1993-1995 not many Russians could afford a personal
computer. The buyers were mostly corporations. After the Soviet system the
market environment required new methods of business administration and for many
corporations it became clear that what they really need is computerization.
Also a deficit of software solutions was taking place at that time. Of course,
there was imported software but there was a demand for individual solutions in
the market. And of course the networking business was growing.
The LBS Corporation operated in all of the three segments
and offered complex solutions consisted of computers, software and networking.
This business was bringing significant income. But as
the computer market developed, the competition became stronger. Some of the
hired programmers separated and started their own business. On the other hand,
the LBS Corporation did not want to go to the basic level computers segment
which became growing faster and faster. This required investment and they did
not think they should go into that segment because they though that in a year
“everyone in Russia will be assembling computers”.
As the market was growing, there became more software
developing companies offering their products in Russia. The LBS Corporation had
do face many strong competitors among which there were not only newly
established Russian companies but also some of the Western software developers
which decided to start operations in Russia. Despite of this, the LBS Corporation
still operates in this market but it failed to capture a significant market
share. It still has many of the clients which were acquired in 1993-1995. The
LBS Corporation does not want to make expensive marketing efforts to increase
its market share. In my opinion, if the LBS Corporation had decided to
manufacture and market computers for personal use when it had that opportunity,
it would have succeed much more than it had, though it would have faced
significant difficulties connected with the last financial crisis in Russia.
But the LBS Corporation decided to invest the biggest
part of its profit in bonds. It was extremely profitable until 1997 to have
your money invested in the government bonds. Later the market of shares began
to grow, and the LBS Corporation reinvested in shares. But then, approximately
in may, 1998 the economic situation in the country began to dramatically and
rapidly deteriorate. For the LBS Corporation it meant a partial loss of the
money invested in bonds and shares.
But the management of the LBS Corporation did not want
to hold all eggs in one basket. In 1995 they decided to go into the food
The basic motives which made the LBS Corporation
chose this industry were the following:
1. The food industry in
Russia and especially in big cities was growing fast. After the Perestroika it
survived a significant decline which was actually a crisis caused by old
methods of business administration, antiqueness of technology, poor quality of
products and packaging and availability of imported foods. Then the process
reversed: more and more of consumers realized that the imported foods they
used to buy were of poor quality though packaging was good-looking. In addition
to this Russian manufacturers began to use more progressive methods of business
administration and more modern technology of manufacturing and packaging. This
made the consumer’s preferences to change in favor of the Russian manufacturers
and Russian foods.
2. Market size.
3. The fact that most of
foods are necessities. As a consequence of this, people will not reduce their
consumption of foods or will reduce it less than consumption of other products.
4. Absence or low competition
with Russian manufacturers due to small quantity of them, the tendency of
pushing the foreign manufacturers out of the market, and as a consequence- an
opportunity to capture a significant market share and relatively low entering
5. The demand for many foods
is not seasonal, neither the prices are.
6. Short operation and
After the industry had been chosen it was necessary to
choose the concrete product to be manufactured. The management of the LBS
Corporation decided that the most acceptable product according to the resources
possessed was pastas.
The basic advantages of this decision were:
1) Easy to start:
a) The technology of pasta
production is not sophisticated
b) The equipment is
relatively inexpensive and available
c) Short list of ingredients
d) On the first stage
automated packaging process is though desirable but not necessary. This
significantly decreases the capital necessary to start-up because in the food
industry the cost of a packaging line very often is similar to or even exceeds
the cost of the production line.
2) Market size:
a) Pastas are necessities.
Because of this people with low disposable income are among the potential
buyers. This is extremely important in Russian environment.
b) The technology makes it
possible to vary the quality of the product by using wheat of different quality
and different technology of packaging. Using the wheat of lower quality allows
to decrease costs and, as a consequence, the price of the product. This allows
to cover more segments of the market of pastas if we make an income
segmentation of it. This is important because income of people of different
stratas in Russia differs dramatically.
c) Market stability. The
biggest indirect competitor of pastas is potato. Of course, the price of potato
does vary during the year, but:
period when the price of potato is significantly below average is short,
ii) The seasonal variation of
the price of potato does not usually exceed 40%.
iii) Since potato and pasta
have a lot of different features, the decision to purchase this or that is
greatly influenced by consumer’s preferences. As a result of it we should not
expect the cross-price elasticity to be high. We certainly can estimate it to
be less than one.
As a result of what was said, we can estimate the market of pastas to be stable
and to be a subject for seasonal changes in a low degree.
3) Long life-cycle of the
4) As a result of all this,
high economic efficiency.
In 1995 the LBS Corporation started manufacture of
pastas. Since the biggest part of its capital was in the financial market, the
LBS Corporation considered the foods manufacture business to be the secondary
source of income, to be on the safe side. There were alternatives, such as
potato chips, ketchup and others. But the fact that it was possible to buy
inexpensive equipment of low capacity and use the manual process of packaging
to see how it goes than to tie up much money at once was of the highest
The LBS Corporation bought the necessary equipment and
started pastas manufacture.
Thus, at this moment the LBS Corporation manufactures
about 50 tons of pastas a month. It is a small manufacturer and we cannot talk
about the market share it has in the market. The management would like,
however, to increase production.
The nomenclature of pastas being manufactured by the
LBS Corporation are:
of different shape:
The LBS Corporation plans to deepen the nomenclature
by starting manufacture of spaghetti.
The LBS Corporation uses the manual process of
packaging. The management of the LBS Corporation must decide weather it should
use the automated process of packaging instead of the manual one. It also wants
to know how the last crisis in Russia affected the market of pastas and what is
its present state. It needs it because it knows the crisis had a strong effect
on the market and the secondary data available is now out of date. It is not
sure though, what particular information it needs to make the decision. It
feels it is unable to predict customer’s reaction and other consequences of
such a change in technology. It also has several different options of
performance of this decision. These options are different in costs and quality
Since I have already worked for the LBS Corporation
and I am the only person here who has some formal education in marketing, I was
offered to do this job.
Since 1995 the LBS Corporation used the manual process
of packaging only, it used match-the-market or expenses plus pricing and didn’t
ever think about the questions like these. The idea of having the process of
packaging automated had not been discussed seriously, in the sense that it was
thought to be mainly the way to increase the labor productivity, but it really
was more connected with marketing. When I told them about this they looked a
little surprised. Saying it another way, the decision to automate the process
of packaging meant use of marketing for the LBS Corporation.
Since the secondary data was difficult to find and
absolutely useless after the financial crisis, I had to make a marketing survey
to collect the preliminary data to solve the problems of the company.
The first task I had to accomplish was, so to say, to
formulate my task more precisely.
The marketing research.
The research is to help to solve the
problem of the company discussed above. We can formulate the problem of the
research more precisely:
1) Due to inexpensive labor
in Russia, the automated packaging process will increase the cost of product.
2) Since it is a mean of
marketing, we should identify where it is reasonable to use it. It will require
efforts of the economists and accountants of the corporation. I have to
collect the necessary marketing information to make them able to answer the
question: . “will offering an automatically packed product create enough
incremental preference and profit to justify its cost against the other possible
investments that could be made?”. This information must also be helpful for the
further analysis and design of necessary marketing mixes.
3) The necessary information
is information about the situation in the market, about people’s attitude
towards automatically and manually packed pastas.
To do this I need to:
the research objectives sharply.
the history of the market of pastas of Saint Petersburg and its present state.
the market of pastas and develop profiles of resulting segments.
the attractiveness of each segment.
preferences of the buyers and their attitude towards such factors as price,
quality of the core product, quality of packaging, etc.
known the preferences and attitude towards packaging, quality and price,
identify conditions upon which an automatically packed product will not fail.
(VII) Identify the necessary
positioning concept for automatically packed pastas that will be offered to
I had formulated the following specific
Evaluate attractiveness of each segment.
What kind of people would be the most likely to
purchase pastas in high quality packaging?
Which segment do the most heavy users belong to?
Define the preferred form of pastas (corns,
Define the most important factors which
influence the consumer’s subjective probability
concerning the quality of the product.
Does the consumer usually estimate the quality
by appearance of the product?
Is there a stereotype that a quality product can
be packed only in a high quality package?
Is there a stereotype that imported pastas are
better than the domestic ones? How strong is it?
Define the importance of quality packaging for
Does the quality of packaging correlate with the
quality of the product in consumer’s mind?
What must be the quality of the product which is
How much will a buyer desire to pay for
What are the main factors which make packaging
important (estimated quality of the product, precise weight, other)?
Define the desired characteristics of the
Which size of the package will be the most
popular? Shall we offer packages of different size?
What should be the packaging be made of and what
shape should it have(plastic or polyethylene packet, cardboard box)?
Define the loyalty status of the consumers.
Define the “patriot” status of the consumers.
Do they feel unsatisfied that most of the high
quality pastas are imported?
Does the fact that Russia substitutes natural
gas and oil for “colonial” goods?
As can be seen from the goals and
objectives, the research combines the features of both exploratory and casual
Since the company:
has lack of information about the market in
needs some specific information ;
does not want to spend money on purchasing the
available secondary or primary data;
thinks that the secondary data available can be
outdated due to the last crisis; primary data must be collected.
The most reasonable research approach in
this situation is a survey research. It will allow to gather more information
in less time, and some information needed can be acquired only directly from
the purchaser’s answer. As a consequence, a questionnaire should be used as a
I have two basic sources of information:
1. The buyers of pastas.
2. The salesmen who sell
Of course it is much easier to talk to salesmen than
to the buyers, since the seller knows his market and he can give you a complete
idea about what the situation in the market is like. But for this ease we have
information can be not so accurate because the salesman though can give you
information about how much of this or that good had been sold, probably will
have difficulties with determining such things as percentage of buyers of
different age, sex, etc. Here a problem of selective remembering may arise.
are questions which can be answered only by the buyer himself and about which
the salesman can have no idea at all. It regards to, for example, such things
as the expected reaction for a price change, attitude towards packaging and the
“reasonable” price of it in the consumer’s eyes.
As may be seen, this source of information could not
satisfy our needs, but I decided not to neglect it for that reason but leave
for the purposes of control. It is reasonable to expect that the results from
the both sources must correlate.
The consumer survey was made by me and
two other employees of the LBS Corporation between the 5th and the
10th of November at outdoors markets of Primorsky district of
Saint-Peteersbug. About seventy customers were asked. The results of the survey
are shown and discussed below in the appropriate section.
Before and during the Perestroika the market of pastas
of Saint Petersburg was offering only the products of the Soviet manufacturers.
There were no imported pastas at all. Due to the system, the market of pastas
of the city was actually offering something. In the province it did not. There
was a deficit of everything. Since there was no competition between the
manufacturers, the quality of pastas was extremely poor. The technology of
pastas manufacture itself was of interest: it was a so-called “double
technology”. A double technology is one that can be used both for manufacture
of civil and military products. In the USSR the equipment used for pastas
manufacture could be used for manufacture of ammunition. I think it did
not affect the quality of pastas positively.
In addition to this, high quality pastas
can be made only of high quality durum wheat flour. And of course, there was a
deficit of this kind of wheat in the USSR.
The consequence of all these plus bad management was
the poor quality of the pastas manufactured in the USSR.
When later the market was open for foreign
manufacturers of pastas the native ones were pushed out of the market since
they were non-competitive.
For several years the market of pastas was saturated
with imported products. Only in the last few years the situation began to
improve for native manufacturers. This was because the difference in prices
between them and the foreign manufacturers they could achieve became more
significant and the quality of Russian pastas improved. The industry began to
In this section some information that had been
available for us before the research was made is given.
We can say that the Russian manufacturers use and have
used price methods of competition mainly. The reasons why they have to do it
are the following:
the product is of low quality;
product is manually packed in most of the cases;
reason which in my opinion is of the highest importance: Russian people have a
stereotype which was, as we say, absorbed with the mother’s milk: made in the
USSR means made badly. That is why Russians have negative attitude towards
products manufactured in Russia or Post-Soviet area. It makes people think that
anything imported is better. And that is why English on the packaging is a mean
of marketing in Russia. We have to break this stereotype if we want to succeed.
We can divide all pastas available
into three major categories:
1. Low quality pastas. They
are cheap, manufactured in Russia or Byelorussia, made of flour which is not
actually for pastas manufacture. 
Their poor quality can be easily identified by their appearance. They are not
smooth and their color is a kind of whitish, not the ultimate specific
yellow-gray color of good pasta. Their packaging is always manual.
2. Middle quality pastas.
This category will include domestic pastas made of good durum wheat flour but
packed manually. As a consequence, the only possible method of competition is
low price. The low price influences the position of these pastas, though they
are more expensive than the ones from the previous category, approximately by
3. High quality pastas. This
category includes pastas made of high quality durum wheat flour and packed
automatically. Most of the high quality pastas are imported. The strongest
position in the market belongs to Italian and Finnish pastas. Domestic offerings
of these pastas are rare. The best known domestic manufacturer of high quality
pastas in the city is “Panna”, the former “First pasta factory”.
During the last crisis after August,
the 17th, the foreign manufacturers of pastas had to face problems
in Russia. If before the crisis Russian pastas were approximately 20-30 %
cheaper than imported ones, after the crisis when the economic situation became
relatively stable again (in October-November), the imported pastas were two
times more expensive than the Russian ones. This relates to all or almost all
imported pastas since they cost approximately the same nevertheless they are
made in different countries- from Italy to Iran. In addition to this, the price
level in Russia increased dramatically during only a few weeks. Many imported
goods became 2-3 times more expensive than they were. This means a decrease of
real income. Since attitude towards Russian pastas comparatively with the
imported ones is negative, we can assume that Russian pastas are inferior goods.
This means that even if only the people’s income had decrease without any change
in price, the consumption of the imported pastas would have reduce in favor of
the Russian ones.
Having applied some microeconomics
issues to our analysis we found an interesting detail: we have not only one
process which can improve the conditions of Russian manufacturers but two. They
are a change in price and a change in income. According to the economist of the
LBS Corporation the average increase in prices of foods was about 50%. This
means the effect of the second process should have been significant. What this
led to was called “pastas boom”. According to the information gained with the
help of some channels of the LBS Corporation, some big Moscow and Petersburg manufacturers
increased their production by three times in September and October
comparatively with August. This means the foreign manufacturers which dominated
our market became non-competitive and where pushed out of the market. We had to
think how should we use this. One of the ideas, as was said before, was to
start package automatically, design the appropriate marketing mix for our
product, and use this opportunity to gain the brand recognition. We had to
break the stereotype and make people think our product is a high quality one
though it is made in Russia. We should use this time when foreign competitors
are destroyed to capture some market share in which the people would have
positive attitude towards our product.
We can also estimate that the overall
capacity of the market of pastas will decrease since the most dangerous for us
substitute of pastas, potato, have not became significantly more expensive.
Trying to estimate the market
capacity of our product, we meet some difficulties:
are a lot of small manufacturers and the market is saturated with their
products, and they do not declare their true level of production to reduce or
completely avoid taxation.
are sold in the outdoors markets without cash registers, some pastas are imported
through Byelorussia to avoid Russian customs.
That means we cannot trace the
quantity of pastas manufactured in the city using top-down approach. The only
powerful mean of estimating the capacity of the market we still have at our
disposal is the bottom-up approach. We can figure out how much pastas an
average person consumes and it will give us an idea about the capacity of the
My next step was to segment the
In my opinion, the most important
variable of segmenting of the pastas market is consumer’s family income per
head. Later we can apply a kind of sub-segmentation to some of the segments to
divide them into smaller ones using another variables.
The segments we can name are the
1) “Low class”. Poor people. Their
income per head is below 500 roubles. Since they have to make a living somehow,
they will want to save on anything. They will most probably buy low quality
pastas. The following social groups belong to this segment:
with more than 3 children,
employees (doctors, teachers).
who are not paid for their job
Though their income is low, this segment is important because of its size.
2) “Lower middle class”. This
category will denote people with income per head from 500 roubles to 900
roubles per month. They are able to satisfy their needs for food, though they
will try to save on it because their disposable income is still low.
We can name the following groups of people who match this definition:
and employees of different professions, usually not complex ones ;
3) “Higher middle class”.
People with an income of 900 to 1500 roubles per head per month will be included
in this segment. These people have a significant disposable income for Russia.
This means sometimes they will prefer the quality to the price, but the price
still is of the highest importance.
To this segment belong:
collars, office workers;
of complex professions;
of militia, army, tax police, etc.
4) “High class”. We will
encounter in this category everyone whose income per head is higher than 1500
rubles per month. These people have a big disposable income for Russia. At
least they can afford buy the pastas they like. This means we can expect the
price elasticity of this segment to be the lowest one. The representatives of
this segment will be influenced by such factors as brand name recognition,
quality of packaging, etc. in the highest degree.
In this segment we can include:
who have a good job, have a good income, but are not entrepreneurs. This
category will include a lot of different professions from drivers to butchers.
We should underline, though this segment is relatively small (according to the
sources of the LBS Corporation, 20-30% in Saint Petersburg), it is huge in its
absolute figures. In addition, its representatives have the highest disposable
income and are concerned about prestige and self-respect much more than the
representatives of the other segments. That is why we can be sure a-priori that
this segment will require an elaborated marketing mix of its own.
We should not deepen our segmentation using other
variables because it will complicate our model of the market and the
subsegments which will result from this will hardly differ significantly. The
deeper segmentation will not be relevant to our problem.
Before and during asking the questions
try to notice the following:
The customer has bought pastas:
Automatically manually packed
Sort: Corns Shells Spirals Spaghetti
Quality: high midle low
Trade mark: (for automatically packed)
Nordic Big other_______ unknown
Weight: 300g 500g 1000g
Quantity: 1 2 3 more
The customer is making or has already made
The customer’s sex: M F
The customer’s age: 10-18, 18-25,
25-35, 35-45, 45-55, 55-65,
The customer’s dress is:
poor average rich
The questions to be asked (skip the
question if the answer is obvious, just mark the right answer):
Have you bought pastas manually or automatically
(skip the questions 2 and 3 if the pasta bought
is manually packed) What is the trademark of the pasta you have just bought?
You prefer to purchase pasta
of this trademark
of this and some others trademarks (if yes, what
the trademark does not mean
What is the sort of the pasta you have bought?
Corns Shells Spirals Spaghetti Vermicelli
What is the size of the package?
300g 500g 1000g
What is the optimal size of the package?
300g 500g 1000g other ____________
What is the price of the package? __________________
What is the form of the pastas you have bought?
Shells corns spirals vermicelli
Why have you chosen exactly this pasta?
Price Quality Familiar trademark Other
10. How often do you buy pastas?
____ times a week once a _____weeks once a _____
11. How many people will eat the pasta you have bough? _______
12. Did you use to buy more or less pastas before crisis? MORE LESS
13. You have planned to buy pastas in advance? YES NO
14. You have made your decision about which particular pasta (
brandname, sort) you will buy in advance? YES NO
pastas are better than the domestic ones. Yes No
16. How much would you pay to have a 500g package of imported pastas
instead of Russian? ___________________
17. Automatically packed pastas are better than manually packed ones:
often, but sometimes manually packed pastas are not worth
manually packed pastas are as good as automatically packed
18. How much should a 500g package of good-looking automatically packed
pasta of an unknown domestic brand cost to make you switch to it? _____________
19. What is the biggest disadvantage of manually packed pastas?
Poor quality Unknown manufacturer No guarantee on weight
20. When you buy imported goods do you have a feeling that it is bad
that we have to substitute natural gas for foods, cloths, etc.
Usually Sometimes Seldom Never
21. What are you?
22. Have the reforms performed in Russia been in your favor?
23. Do you prefer to buy clothes and footwear in the shop or in the
24. What are the members of your family?
25. What is your personal income?
26. What is the income per head in your family?
27. How old are you?
We revealed a negative correlation between
income per head and consumption of pastas. The biggest part of buyers were
representatives of the lower class or the lower middles (31% and 33%
respectively). 27% were higher middles, and 16% belonged to the high class.
Since only pasta buyers were asked, the average consumption of pasta is lower
than our research show, but nevertheless we can get an idea of structure of
consumption of pastas. According to our calculations, the consumption of pastas
per head is:
Lower class- 0.6 kg/month
Lower middles – 0.55 kg/month
Higher middles – 0.32 kg/month
High class - 0.13 kg/month
Only 12% of the respondents claimed they consume
more than 1.3 kg of pastas a month per head. We can treat the lower class and
the lower middles as the heavy half and the higher middles and the high class
as the light half.
36 % of respondents claimed they prefer corns to
other pastas, 22%like spirals, 26% like shells, 7% prefer vermicelli, and 2%
usually buy spaghetti.
46% of buyers claimed the price to be the most
important factor which influenced their purchase decision, for 37% of consumers
the quality is the priority. 5% think they should buy only automatically packed
pastas, and 3% claimed some specific features as taste (we should assume that
good taste is a part of quality and that is why this group is small). There
were also 4% of loyals who are driven by a familiar brand name while making
Usually people plan to purchase pastas in
advance (87%). In spite of this, the decision about the particular sort and
brand name (if there is any) is usually impulse (63%).
The crisis dramatically affected the market of
pastas. We talked to the salesmen of pastas to shed light on this question. All
of the salesmen we talked to said that before the crisis people preferred
imported pastas to domestic ones. Now domestic pastas of low quality (37%) and
middle quality (45%) are bought (according to our survey, not to salesmen). We
expected changes to happen, but we did not expect them to be so huge, though
LBS Corporation’s manufacture of pastas very notably increased since before
The most desirable size of package is 1kg (57%),
then goes a 500g package (38%).
People almost do not purchase domestic
automatically packed pastas. Their price is almost equal to the price of
72% of respondents said that they would prefer
automatically packed pasta to manually packed one. 35% would do it because they
are afraid of being given light weight, 19% do not like unawareness about the
manufacturer, and 11% think the quality is poor.
In spite of this, people are not willing to pay much for packaging, though 82%
of them agree that they would prefer automatically packed pasta to manually
packed one. Only 9% were willing to pay more than 1 ruble for a 500g package,
24 % would pay from 0.6 to 1 ruble for a 500g package, 28% would pay about 0.5
ruble, and 10% would pay nothing at all (some even said they would prefer
manually packed pastas because they can use the packaging).
10. People would not like to buy pastas in cardboard or other non-glassy
packaging. Actually all of the respondents said they need to look at the
product to estimate its quality.
11. Though people agree that imported pastas tend to be better than the
domestic ones, most of them (67%) would not like to pay more than 25% more for
12. People do not worry a lot about the brand name. There are no
hard-core loyals. There are a few split loyals (11%). They are among the people
who still prefer imported pastas. The most popular brands are: Nordic (27% of
imported pastas purchased were of this brand), Big (21 %). Non of the
respondents was a loyal of any domestic trademarks.
13. Actually all people said that it is bad that Russia substitutes
natural resources for industrial goods, but only 4% said they often think about
it when they make their purchase decision, 7% said they sometimes do, 5% seldom
think of this.
14. Since it was difficult for the respondents to answer weather they
used to consume more or less pastas before the crisis (more than 50% could not
answer at all or hesitated), we used the salesmen as our reserve source of
information. According to them, the overall consumption of pastas decreased by
approximately 15%, and consumption of imported pastas has just slummed- by more
Putting two and two together, we can
state the following.
The price is the most important factor
influencing the consumer’s purchase decision. It will probably keep its
position or even be able to strengthen it if we take the constantly
deteriorating economic situation in the country into account.
The lower middles and the lower class are the
most attractive segments from the point of value. The lowers will more likely
need low and middle quality pastas. Taking into account the role of price in
purchase decision, we should assume that this segment will hardly react the
traditional marketing measures. The other segments high class will probably
require more elaborated marketing mixes, since quality plays the most important
role there. Quality is estimated subjectively, and we can affect subjective
probability using the means of marketing.
The lower middles and higher middles will probably prefer middle quality
pastas. the biggest difference between them is in the price they are ready to
pay for quality. A company can acquire competitive advantages using automated
process of packaging. The main difficulty it is likely to face here – the
increase in price must be low enough. It also should be careful and remember
about positioning: even if it is able to automatically pack at a low cost and
provide the necessary low price, its products than will be positioned as middle
quality ones due to the low price. It may harm its reputation and its marketing
in the higher middles and high class segments.
The high class segment is relatively small and less attractive because its
representatives are less likely to buy pastas in general and when they buy,
they are more likely to buy imported pastas.
Actually we can join the higher and the lower middles in one market segment
since there are no differences in their preferences which are of principle.
Both of them will require pastas positioned as middle ones. Though quality is
the most important factor for the representatives of those segments, the price
is also of the great importance, and the main difference between the
representatives of these segments is the price they are ready to pay for
quality (or for the quality packaging).
The crisis seriously affected the market of
pastas. The domestic manufacturers now have a lucky chance to grab the market
share that earlier belonged to foreign manufacturers. They can gain brand
recognition and loyalty.
The main task, in my opinion, for a pasta
manufacturing company in Russia now is gaining brand recognition and good
attitude of consumers (of course, if it thinks of its long-term perspectives).
People have to give up consumption of imported pastas. This gives a great
opportunity to get people used to consume domestic pastas. Since quality of many
domestic pastas is actually as high as of the imported ones, the stereotype
which has formed in the time of the USSR and which has been providing a
negative attitude towards domestic goods will slack.
Since the final decision about
reasonability of the automation requires complicated accounts, such as
breakeven analysis for instance, my recommendations which result from the
survey are preliminary, they are an object for application by the economists
and managers of the Corporation. A lot of exogenous and endogenous variables
will affect this decision, and only a part of the exogenous ones may be
revealed by a marketing research.
We should think that the automation of the
process of packaging may be reasonable if:
The company can provide low increase in costs
resulting from the automation. In this case the corresponding increase in price
will be also low. This will make orientation towards the heavy half (lowers and
lower middles, and partly even the higher middles) possible. We can estimate
that it will not be possible to provide high quality of packaging in this case.
The company will position its product somewhere between automatically packed
(or high quality) and manually packed (or middle quality) pastas. This may
cause a positive reaction of up to 72 % of buyers depending on the price
The other alternative is to use packaging of
higher quality at higher costs. The limit here is about a one ruble rice
increase per 500g package. It is also possible to make 1000g packages, this
will decrease cost of packaging. The most important thing resulting from the
research we should remember about is: class pricing will hardly do. We have not
made a special research, but we have the reasons to think that most of domestic
manufacturers of automatically packed pastas position their products too high
and face significant problems. . Providing a high quality packaging and a
comparatively low price (if it is possible) will position the product as an
inexpensive and quality one. This should cause a positive reaction of about
20%, we may estimate (of course, this figure will depend upon marketing efforts
made). This decision will mean orientation towards the higher middles and the
Though this option will probably be less attractive than the first one, it is
more attractive in prospect, since it will increase competitiveness of the
company, improve its reputation and help gain loyalty.
The best alternative, in my opinion, is to
combine the features of the first two. It is possible if the company can vary
costs of packaging. This actually will mean full covering of the market.
We see, that
alternative decisions depend on the costs of packaging, so the market coverage
does. We have a strict limit here- we cannot afford using packaging which will
cause a price increase more than 1 ruble per 500g package. This means we will
have to think of production first, and only after that continue thinking about
marketing (do not mix it with actually manufacturing first and than thinking
about marketing). It is a specific feature of our country- everything is made
of the management of the Corporation based on this research and on the
economists’ opinion was to seek means to decrease costs of packaging and make
the third option possible to be performed. One of the possible decisions is
sharing a packaging line with another foods (not pastas) manufacturing company.
When the company has several alternative possible solutions of this problem,
elaborated marketing mixes will be developed for the segments that will be
selected as the target ones.
Eaton B.C., Eaton D.F., Microeconomics, 2nd
Hisrich R.D., Peters M.P., Entrepreneurship.
Starting, Developing, and Managing a New Enterprise. 3rd
Kotler P, Marketing Management, 9th
edition, Prentice Hall International.
 According to corporate information.
 Subjective probability- a
term from microeconomics which denotes the probability which is subjectively
estimated by a person while making a choice decision.
 High quality pasta can be
made only of appropriate high quality flour. This flour must be made of limited
variety of sorts of wheat. These sorts are called durum. If pasta is made of a
usual flour which is generally used for baking, its quality leaves a lot to be
desired. Of course, durum wheat is more expensive than usual. Pastas made of
usual flour are of poor quality but cheap.
 Digital data without reference is based
upon corporate information.
 Though I use the
categories denoting social stratas in sociology, their usage here hardly
corresponds with their original meaning. I have to change it according to
conditions of Russia. The Lower Class will denote people whose income is
not enough to provide them with necessary quantity of food and other
essentials, or is lower than the subsistence level. The Middle Class will
consist of people whose income is higher than the subsistence level. They have
a disposable income as a consequence.
 Since income per head in
a family depends on the quantity of those members and on the income of everyone
of those members, it is not surprising that the same social group will be found
in different segments.
 Of course, this may sound
awkwardly, but I think we can use this category in Russian conditions due to
specific traditions, stereotypes and differences in technology.
Since people were not
always willing or able to answer some questions, the total of the percentages
of respondents answered in different manner this or that question is often