Cases and Readings :

Product-market fit, competition and pricing Gap Analysis

Assess product performance in Smartphone market.
A smartphone is a mobile phone that has an advanced mobile operating system designed
to provide the user many features of a handheld computer and advanced connectivity
options.
Although smartphones have been around for a while in various avatars, given their high
cost, they were initially used primarily for business communications. Things changed
when Apple launched the iPhone in 2007. With revolutionary features such as complete
touch screen operations, Apps available through its own App Store it completely changed
the business of smartphones by turning it into a consumer electronics device that anyone
could use.
Given the phenomenal success of Apple with its iPhone, competition could not ignore the
opportunity for long as they too wanted a share of the pie. Slowly all large players and
small players came up with their versions of smartphones largely trying to emulate
Apples success. Even small regional players, such as Micromax, who could not afford to
develop their own smartphones, started marketing rebranded Chinese generic
smartphones. The global smartphone market is estimated to be worth US$150.3 billion by
20141.
With smartphones becoming more affordable, they are slowly becoming another
ubiquitous consumer electronics product. The quality and features of the smartphones are
converging rapidly leading to a loss of differentiation. Given this rapid fragmentation of
the market it is important for the manufacturers to understand the consumer preferences
related to their product attributes. Using proven Statistical Analysis Tools manufacturers
can confidently predict the several facets of consumer behavior brand loyalty, feature
awareness and how such behavior is determined by the consumers demographic
characteristics and experience with the current product.

Once manufacturers are able to predict consumer preference related to their products they
can take appropriate decisions about new product launches and promotions.
With this objective a survey was conducted among randomly selected Smartphone users
to capture the following details
1. Demographic Details
2. The attributes that consumers consider important in smartphones
3. The satisfaction levels with those above attributes
4. If the respondent already owns a Smartphone and if yes which brand
5. If the respondent is going to buy a Smartphone in the next 3 months.

The number of survey responses ( sample size) received was 126. Using these responses
it was proposed to implement different tools to analyze the responses from Smartphone
owners . One such tool was going to be Gap Analysis:
In business and economics, gap analysis is a tool that helps companies compares actual
performance with potential performance. At its core are two questions: "Where are we?"
and "Where do we want to be? In the project gap analysis will help to understand the
gap between people placing importance to certain variables and satisfaction on the same
variables after the purchase of various smart phones.

Attributes Captured:
The survey captured the various attributes that a consumer values in a smartphone. The
attributes captured were:
1. Battery Performance
2. Operating System
3. Speed
4. Screen Size
5. Weight
6. Sound Quality
7. Aesthetics
8. Availability of Apps
9. Camera Quality
10. After Sales Support and Availability of Service Centers

Assignment : Open file : gap=smartphone=pgpmflex.xls

Carry out Gap Analysis.
Question1 :Which are the attributes considered significantly important by the market?

Question2 : Which are the attributes found to be significantly satisfactory by users of

Brand1?

Question3 : Which are the attributes found to be significantly satisfactory by users of

Brand2?

Question 4: Which are the attributes found to be significantly satisfactory by users of

Brand3?

Question 5: If you were to launch a new design smartphone in the market, what attributes
must be built into the new design?
Case 2: Online Shopping Platform : Maya.com
Maya.com is a leading e-commerce platform in India for fashion and lifestyle
products. Maya has tied up with over 500 leading fashion and lifestyle brands in
the country such as Nike, Adidas, Puma, Lee, Levis, Wrangler , Arrow, Biba, Fab
India and etc and the likes to offer a wide range in latest branded fashion and
lifestyle wear.
Mayas value proposition revolves around giving consumers the power and ease
of purchasing fashion and lifestyle products online. The companys unique
offerings include the largest in-season product catalogue, 100% authentic
products, cash on delivery and 30-day return policy making, the preferred
shopping destination in the country.
The various factors which has helped Maya in becoming one of the leading
players in e-commerce industry are as follows:
i) Price
ii) Hassle free return and exchange policy

iii) Discount offers

iv) Dimensions mentioned on screen
v) Size and colour availability
vi) Assortment purchase option
vii) Visual effect in different directions
viii) Delivery boys attitude

ix) Customer call representative response

x) Grievance addressable mechanism
xi) Convenient and variety of payment options
xii) On time delivery

Factors which inhibit online buying decision process

i)
ii)
iii)
iv)
v)

Complicated exchange and return policy

Restricted payment options and lack of mechanisms for payment on delivery
Late delivery
Poor Visual effects
Dimensions not properly mentioned

Gap Analysis
While shopping online through a website, different customers look for different factors
that makes the overall shopping experience convenient, smooth and easy. So it is
important to find the gaps between the factors that customers think are important to an
online site and how much they are satisfied on these factors while shopping at Maya,
compared to other sites where they have shopped online. To determine the gap between
importance and satisfaction levels on different pertinent attributes at Maya a survey is
used to determine
(1) the gap between the importance level of different attributes pertaining to
an online site and satisfaction level on those factors at Maya,
(2) Compare the satisfaction levels between Maya and Online Platform A as
well as Online Platform F.
The attributes that were taken to conduct the gap analysis are
1. Variety of brands
2. Product Description
3. Discounts and coupons
4. Quick Delivery
5. Payment options
6. Ease of registration
7. Guarantee/ return policy
8. Interactive website with multiple angle views
9. User reviews
RFM Analysis:
In order to determine the most likely buyers segment for Maya.com the Marketing
Director in Maya decided to conduct an RFM analysis to start with. For this, a
random sample was taken on the consumer database existing at the company and
apart from age, income, gender, occupation, three RFM variables were considered.

(1)Months passed, months elapsed since the customer last purchased on the online
platform
(2)Frequency in five years ( total number of times the customer made purchase in last
five years.
(3)Amount spent in Five years.( Total amount of money spent in last five years ).
To the respondents in this sample a question was asked:
Are you willing to acquire a Loyalty Card?
Willing=1, Not willing=0

Case3: Assessing product performance in primary target market: Chestnut Ridge

Country Club: Gap Analysis
Filename: chestnut1=2011.sav, Chestnut =IIMA 2012.
The Chestnut Ridge Country Club has long maintained a distinguished reputation as one
of the outstanding country clubs in Elma, Tennessee, area. The clubs golf facilities are
said by some to be the finest in the state, and its dining and banquet facilities are highly
regarded as well . This reputation is due in part to the commitment by the Board of
Directors of Chestnut Ridge to offer the finest facilities of any club in the area.
For example , several negative comments by club members regarding the dining facilities
prompted the board to survey members to get their feelings and perceptions of the dining
facilities and food offerings at the club .Based on the survey findings, the board of
directors established a quality control committee to oversee the dining room and a new
club manager was hired.
Most recently ,the board became concerned about the number of people seeking
membership to Chestnut Ridge. Although no records are kept on the number of
membership applications received each year, the board sensed that this figure was
declining. They also believed that membership applications at the three competing
country clubs in the area Alden, Chalet and Lancaster were not experiencing similar
declines. Because Chestnut Ridge had other facilities , such as tennis club and a pool
,that were comparable to the facilities at these other clubs , the board was perplexed as to
why membership applications would be falling at Chestnut Ridge.
To gain insight into the matter, the board of directors hired an external research team to
conduct a study of the country clubs in Elma Tennessee area and assess their market
performance. The goals of the research were (1) to determine peoples overall perception
of Chestnut Ridge and (2) to provide recommendations for ways to increase membership
applications at the club.
Assessing trend in the membership application at Chestnut Ridge Country Club

The research team first wanted to check if the hypothesis believed to be true by the
Board, that membership application at Chestnut Ridge was declining, was indeed
supported by data.
For this purpose the research team obtained total yearly membership applications from
the accounting office of Chestnut Ridge Country club for the last 10 years.
The data is as follows:

Table 1.1
Year

Application in numbers
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

132
135
133
125
126
124
122
110
105
103

Assessing Market Performance

The research team met with the board of directors and key personnel at Chestnut Ridge
to gain a better understanding of the goals and directions adopted by the company. A
literature search of published research relating to country clubs uncovered no studies. The
researchers then decided to interview country club goers in general including people who
were enrolled at the other three clubs. This interview would be gain insights regarding the
needs and preferences of country club goers which would lead to the development of
issues and concerns in designing the questionnaire which would form the research
instrument in the subsequent empirical survey research.
The research team thought it would be useful to survey members from Alden, Chalet, and
Lancaster in addition to those from Chestnut Ridge for two reasons. One, members of
these other clubs would be knowledgeable about the levels and types of services and
facilities desired from a country club, and, two, they had at one time represented potential
members of Chestnut Ridge. Hence their perceptions of Chestnut Ridge might reveal why
they chose to belong to a different country club.
The researchers obtained a consolidated list of members from all four country clubs
which became the sampling frame for the research. A review of the lists subsequently
obtained showed Alden had 114 members, Chalet had 98 members and Lancaster had

132 members. Thereafter a sample of 348 was obtained across all four country clubs and
the questionnaire mailed to each individual in the sample. A final sample of size 120 was
obtained with the break up as given in the data sheet.

questionnaire.
(1) Of which club are you currently a member (2) Alden
(4) Lancaster

(3) Chalet
(1) Chestnut Ridge

Demography :
(2) your age : (a) <20

(b) 20-35

(c)36-50

(3) sex :

Female (0)

Male(1)

(4) Marital Status

Married

Single widowed

(5) Number of dependents including yourself:

(6) Distance of residence from your club

(7) Monthly income

(d) 50-60 (e) >60

2 or less
3-4
5-6
>6

0-2 km(1)
2-10 km(3)

divorced
(1)
(2)
(3)
(4)

2-5 kms(2)
>10 km (4)

less than $ 20,000

$20,000 - 29,999
$30,000 49,999
$ 50,000 99,999
$ 100,000 or more

(8) on the whole how satisfied are you with your country club
(1) not satisfied
(2) neutral
(3) somewhat satisfied
(4) satisfied
(5) very satisfied
(9)The following is a list of factors that are usually important to you in a country club.
Please rate the factors according to their importance in country club.
1=not at all important and 5=extremely important

9.1 golf facilities

9.2 tennis facility

1
9.3 pool facilities
1
9.4 dining facilities
1
9.5 social events
1
9.6 family activities
1
9.7 number of friends who are members
9.8 cordiality of members
1
9.9 prestige
1
9.10 location
1

2
2
2
2
2
1
2
2
2

3
3
3
3
3
2
3
3
3

4
4
4
4
4
3
4
4
4

5
5
5
5
5
4
5
5
5

10)The following is a list of factors that usually influence your satisfaction in a country
club. Please rate the factors according to their extent of satisfaction in your country club.
1=not at all satisfied and 5=very satisfied

9.1 golf facilities

1
9.2 tennis facility
1
9.3 pool facilities
1
9.4 dining facilities
1
9.5 social events
1
9.6 family activities
1
9.7 number of friends who are members
9.8 cordiality of members
1
9.9 prestige
1
9.10 location
1

2
2
2
2
2
2
1
2
2
2

3
3
3
3
3
3
2
3
3
3

4
4
4
4
4
4
3
4
4
4

5
5
5
5
5
5
4
5
5
5

Questions:
What kind of research design is being used? Is it a good choice?
Overall how does Chestnut Ridge compare to the other three country clubs
(Alden, Chalet, and Lancaster)?
In what areas might Chestnut Ridge consider making improvements to attract additional
members?

Chestnut Ridge Country Club (B)

For many years Chestnut Ridge Country Club has been one of the most well-respected
country clubs in the Elma, Tennessee area. It has one of the finest golf courses in the state
and its dining and banquet facilities are highly regarded.
In addition, the club provides its members with outdoor tennis courts and a swimming
pool. The country clubs outstanding reputation is due in part to the commitment by

Chestnut Ridges Board of Directors to keep attuned to the needs of current and potential
club members. Recently, the board was concerned that applications for membership to
Chestnut Ridge were declining. The board members believed that a similar decline in
applications was not occurring at the other country clubs in the area Alden, Chalet and
Lancaster. As a result, the board contracted an outside research team to survey members
of the various clubs to see how Chestnut Ridge was perceived in comparison to others.
Currently the board is interested in determining what personal characteristics differentiate
the members of Alden, Chalet, Lancaster and Chestnut Ridge. The board wants to know
if demographic features such as age, sex, income and so on, or club features themselves,
bear any relation to the extent of satisfaction in the country clubs.
Question :
Are there any demographic factors or club features deemed influential in the extent of
satisfaction in a country club.

Chestnut pricing
Having completed a market assessment study and also a risk assessment study the
Management of Chestnut Ridge wanted to take a relook at the pricing strategy of the
country club. The annual fees due to the country club from existing members currently
stood at $3000 per annum.
The Management wanted to carry out a consumer based pricing analysis from potential
customers so as to check if they needed to charge a different pricing level from new
applicants.
Proposed consumer based pricing approach.
The price scale, which Chestnut Ridge wanted to use had three basic elements :
(1) Beginning price level
(2) Price interval, and
(3) Ending price
The price scale :
$.1500
$.1750
$.2000
$.2250
$.2500
$.2750
$.3000
$.3250
$.3500
$.3750
$.4000
$.4250
$.4500

The Management assigned two researchers to visit 50 respondents from his target market,
the potential customers, hand over to the respondent the price scale and then ask, At
what price on this scale will you begin to feel that this country club is already too
expensive so that you will not want to apply for membership anymore. The price at
which the revenue ix maximum is the optimal price.
This is also the price where there is a kink in the demand curve.
200000
180000
160000
140000
120000
price

100000

revenue

80000
60000
40000
20000
0
1

Price
1500
1750
2000
2250
2500
2750
3000
3250
3500
3750
4000
4250
4500

total not buy

0
2
5
2
5
2
8
4
5
2
6
4
5

10

not buy cumulative

0
2
7
9
14
16
24
28
33
35
41
45
50

11

12

still buy
50
48
43
41
36
34
26
22
17
15
9
5
0

13

revenue
150,000
168,000
172,000
184,500
180,000
187,000
156,000
143,000
119,000
112,500
72,000
42,500
0

Conclusion: Chestnut Ridge should bring down the membership fee to $ 2750 per
annum so as to maximize the revenue.

Chestnut Ridge Country club (C )

Studying competition. Exercise in Perceptual Mapping
Few years have passed. Chestnut Ridge have carried out many improvements in its
operations. The Board has been satisfied too regarding the improvements. Now they feel
10

it is time to take a relook at Chestnut Ridge customer perceptions with respect to its
competition. In order to study competition in the form of a spatial perceptual map once
again a research team was called upon to construct a perceptual map giving competition.
The researchers considered the Multidimensional Scaling approach and decided to collect
data on consumer perceptions on 10 attributes for the all the country clubs in the region.
Taking a relook at the country clubs after the previous exercise carried out earlier, the
research team observed that there has been a new entry in the industry a new country
club called New Town, perceived to be exclusive in prestige and other facilities, has
started operating and has already captured some market share.
They took another survey, specialized for setting up the perceptual map, collecting
ratings on the 10 attributes for the five country clubs.

Golf
Tennis
Pool
Dining
Social
Family
friends
cordiality
prestige
location

alden
6.28
5.37
4.99
5.38
5.91
5.42
6.17
6.45
4.89
5.12

chalet chestnut lancaster newtown

4.65
6.48
5.97
4.65
4.67
6.03
5.51
4.67
4.79
5.36
4.14
5.79
4.35
5
5.23
7.35
4.1
5.66
5.48
5.1
4.78
4.46
4.79
4.78
5.01
6.43
5.89
6.01
4.89
5.28
5.28
5.89
6.35
4.68
5.49
6.01
5.48
5.21
4.39
5.48

The survey was administered over a target population of individuals not necessarily
belonging to any specific country club. The map was to depict the general perception
regarding the five country clubs.

11

Dining high
Dimension 1 Dining
Dimension2 Prestige.
Perceptual Mapping by Correspondence Analysis
To construct a perceptual map the researchers considered the correspondence analysis
approach and the optimal scaling approach.
They took another survey, specialized for setting up the perceptual map, with the
following question:
Given a choice which country club would you choose and for what single feature ?
Golf, Tennis, Pool, Dining, or family activities organized, choose only one.
They also considered a third variable ,income having five labels, very high, high, medium
high, medium and low.
Chestnut : club label 1
Chalet : club label 2
Lancaster : club label 3
Alden
: club label 4
New Town : club label 5
Features:
Golf =1
Tennis = 2
Pool = 3
Dining=4

12

Family activities organized = 5

Income level:
Very High= 1
High=
2
HighMedium=3
Medium=
4
Low=
5

The survey was administered over a target population of individuals not necessarily
belonging to any country club. The map was to depict the general perception regarding
the five country clubs.

13

From the perceptual map above the Management of Chestnut Ridge observed that
Customers wanted Chestnut Ridge for golf facility. Also essentially high income people
wanted to join this Country Club.
The Management felt that in addition to high income market segment, they would also
target high-middle income market segment by reducing the membership fee to $ 2750, as
conclude from the perceptual map.
All the same, if the membership fee has to be reduced, to remain profitable they would
need to reduce the operating cost for the country club.
Upon looking at the B/S and P& L accounts, the Management saw that the largest cost
component in the operating cost was the cost of energy, electricity and fuel cost.
Thus they consulted external experts as to how to bring down the energy cost.
The consultants submitted a few options of which one option recommended replacing the
electricity cost by generating power in house.

14

Enhancing competitive advantage by energy cost reduction

The management of Chestnut Ridge decided to set up an in-house bio-gas power

generation outfit by collecting their in house kitchen waste and feed it as input material
to the bio-gas plant which will thereby generate methane. The methane can subsequently
be used to generate power to be used in the country club facility as well as be used in the
kitchen, thereby reducing the huge fuel-cost incurred by the country club..
The Plant would require a total initial cost of $10,000 , would have an estimated
economic life of about 8 years and would give a significant cost saving.
All the same the management wanted to get an estimate of the risk associated with the
cost saving to be accrued in the facility.
To estimate the risk, the country club obtained the following probability distributions.
Initial cost in dollars :
Cost
8,000
10,000
12,000

probability estimate
.05
.80
.15

cumulative probability
.05
.85
1.00

random numbers
00-04
05-84
85-99

probability

cumulative

random numbers

.10
.20
.40
.20
.10

.10
.30
.70
.90
1.00

00-09
10-29
30-69
70-89
90-99

Cost saving per year prob

cumulative

random numbers

2000
3000
5000

.20
.60
1.00

00-19
20-59
60-99

Economic life:
Economic life
(in years)
5
6
7
8
9

.20
.40
.40

===============================================================
Risk assessment under the assumption of uniform distribution
Initial cost has Uniform Distribution on the range 8000 to 12,000
Cost Saving has Uniform distribution on 2000 to 5000.
Risk assessment under the assumption of Normality
15

Chestnut Ridge Management also wanted to conduct the risk assessment as per
another set of probability distributions, as determined by an external consultant, as
follows:
Initial cost having a Normal distribution with mean $ 10,000 and
Standard deviation, sigma = $2000
Economic Life having the same discrete distribution
Cost saving having a Normal distribution having mean $ 3000 and
standard deviation= $ 500.

Perceptual map for Shopping Malls:

The owners of a premium shopping mall in Chennai wanted to find out consumer
perceptions on the service offered by the Mall and four of its competitors. As a first step
they wanted to create a perceptual map by correspondence analysis.
Towards this end the Mall authorities created a specific survey for correspondence
analysis by asking the respondents: Which shopping mall do you prefer to go to and for
which particular reason (attributes) . The reasons were as follows:
Parking Facilities, Brand Availability, Variety of Merchandise, Store Ambiance and
prices.
Question: Using the data as given in midterm=shoppingmall.sav, create a perceptual map
with five shopping malls and the five attributes.
Question :Which shopping mall is perceived to have highest level of Variety of
Merchandise
Shopping Mall 2
Question : Which shopping mall has the lowest level of Variety of Merchandise
Shopping Mall 4.

MDS: hairoil.
arnica canther amla
jabakusum
keokarpin mahabhringaraj parachute
tata
makes hair shine
3.6
3.6
3.7
3.9
4
3.8
4
good for scalp
3.5
3.4
3.6
3.8
3.7
3.6
3.6
repairs broken edge
2.7
2.7
3.5
3.5
2.3
3.7
2.8
repairs discoloring
3.3
3
3.2
3.2
3.5
3.1
3.2
makes hair grow
3.7
3
3.4
3.6
3.4
3.5
3.4
Volume
3.5
3
3.1
3.3
3.1
3.3
3
repairs itchiness
2.8
2.3
2.6
2.6
2.7
2.3
2.6
keeps hair smooth
2.9
2.5
2.8
2.4
3.8
2.3
2.5
keeps hair flowing
3.2
3.6
3.3
3.9
4
2.3
2.6
no oily feeling
2.3
1.8
2.3
1.6
4.3
1.7
4.1
light and non sticky
2.8
2.4
2.7
2.6
3.6
2.2
2.9
makes hair manageable
2.8
2.9
3
2.9
3
3
3.3

16

Case 4: Offering a new product : Product design and Positioning :

Arjun Aryan
Think of a simple young individual, Arjun Aryan, who lived in a little township around
Udaipur, India . Arjun inherited a beautiful, historical, ornate, Rajasthani traditional
ancestral home , though falling apart ,surrounded by bajra farm ,cultivated by a farming
community who had been with Arjuns family over generations.
But the farming community and Arjuns family encountered bad times and faced severe
difficulty economically. Arjun witnessed the downturn of his own family and the
community surrounding him and decided to do something about it , someday.
Initially Arjun joined a local medical school but did not forget the idea. Someday he
would renovate his historical ancestral home which came with unique Rajasthani
architecture ,carved marble arches, priceless antique collections and even a white marble
temple, in the middle of a fountain lake to a culture tourism destination .
The organization he would thereby set up would be a social enterprise where Arjun
would generate wealth but distribute it back towards the farming community and
empower them in the long run.
Strengths of Arjuns social enterprise would be a great potential product offering, first
movers advantage and human capital advantage . Like any venture ,Arjun knew that he
would also have to deal with a lot of weakness like his property in run down condition
and lack of in-house funding .
So, after graduation, he decided to set up his own clinic in the outhouse of his ancestral
house where decades back the manager of the property would stay .Beside the clinic
he would also maintain a small dispensary which would house some emergency and
generic medicines.
But besides this clinic he would set up a social enterprise ,where he would transform
his ancestral house ,with its exquisite architecture ,antique furniture ,and art collection
to a historical and cultural place to visit called culture tourism destination in the
modern tourism language.
Arjun knew that tourism products such as nature and adventure, health, sports, ecotourism, convention and business are already well accepted in this industry. In addition
,new types of products such as cultural and heritage tourism, health and wellness tourism,
learning and experiential tourism were also being conceptualized.
All the same, before investing on his project Arjun wanted to have a realistic assessment
of the market and determine if there was really a demand for culture tourism destination.
For this purpose Arjun conducted a random survey with a detailed questionnaire where
he asked questions on demography of the respondents and also asked them to rate the
importance of various attributes of a tourism destination.
The question he asked is :
Demography
(a) your age : (a) <20
(b) sex :
( c) Marital Status

(b) 20-30
Female (1)
Married

(c)30-40
Male(2)
Single

(d) 40-50 (e) 50-60

17

(d) Do you have children

Yes
No
(e) Occupation
Other student self-employed salaried
(f) Educational attainment High school college graduate
post graduate
(g) Monthly income(in Rupees) 250,000 & over(4) 140,000-250,000(3)
70,000 140,000(2) 10,000-70,000(1)
(h) Are you permanent resident

Yes

(1) How often do you go on vacation every year ?

once a year 2 a year
3 times a year

tourist

more than 3 times a year

(2) How much do you spend on a vacation ?

50,000 & above
20,000-50,000
10,000 20,000

5,000 10,000

(3) How long is your vacation on an average

<=3 days
3-5 days
5-7 days
more than 7 days
(4) What type of a resort do you prefer to go to
Beach
Dive Wildlife
Golf Mountains Heritage/culture

other

(5) When did you last go on vacation

Less than 3 months 3-6 months 6-12 months more than 12 months
(6) How did you find out about the resort you last visited
Previous visit radio ad
travel agent travel guide internet
TV ad
friend
article
referred by office
(7) Are you familiar with culture/ heritage tourism
(8) would you be interested in culture tourism destination

yes(1)
yes(1)

newspaper ad

no(0)
no(0)

Please rate the factors you feel are important for a tourist destination for you.
Not imp
somewhat imp
imp
very imp
9.1 good infrastructure
9.2 accessibility
9.3 modern comfort
9.4 natural setting
9.5 affordability/price
9.6 outdoor/golf tennis
9.7 good food
9.8 locations with old forts
9.9 educational for kids
9.10 indoor/ indoor activities
9.11snorkeling, trekking
9.12 good dining experience
9.13 ethnic music and dancing
9.14 museum facility/activity

18

9.15 locations with running water

9.16 locations with natural monuments
9.17 locations with heritage/historical facilities/museum
9.18 beach resorts
9.19 mountain resorts
9.20 boating/water park experience
9.21.trekking/outdoor games
9.22 places famous in history
9.23 traditional rajasthani food
9.24 old world ambiance
(10) How likely would you be to visit Parampara Ghar ?

Assessing Competition : Perceptual Mapping: Multidimensional Scaling and

Correspondence Analysis.
Before investing to set up his culture tourism destination Arjun wanted to assess the
competition, not exactly in the dimension of culture tourism destination but in general
tourism industry in the region.
To set up a perceptual map of the competition, Arjun first identified which other tourist
destinations were popular with individuals and families in the nearly locality.
There were in fact five such resorts:
Rupnagar,
Seemabari,
Sancharpur,
Suryaghar,
Gangotri.
He set up another survey to rate the five resorts on a few chosen attributes which he
considered as important in the industry. The survey was implemented on a population of
respondents who were familiar with at least some of these resorts. Please rate on a five
point scale, to what extent the following resorts possess the following attributes:
1= not present
2= little present
3= neither present nor absent
4= present
5= very much present.
Based on the responses the following matrix was set up.

accessability
natural setting
dining experience
food quality
running water
natural monuments
heritage/historical

rupnagar seemabari sancharpur suryaghar gangotri

3.6
3.6
3.7
3.9
4
3.5
3.4
3.6
3.8
3.7
2.7
2.7
3.5
3.5
3.6
3.3
3
3.2
3.2
3.8
3.7
3
3.4
3.6
3.4
3.5
3
3.1
3.3
3.3
4.4
3.6
2.6
2.6
2.8

19

ethnic music
old world ambiance
High price
traditional food
trekking/outdoor games

2.9
3.3
2.3
2.8
2.8

2.5
2.6
1.8
2.4
2.9

2.8
2.3
2.3
2.7
3

2.4
2.9
2.2
2.6
2.9

3.8
2.6
4.3
3.6
3

The data matrix above generated the following perceptual map.

Stress value = 0.00755, R-square = 0.99970

Thus Gangotri definitely had an unique positioning , far from the other resorts.
The vertical dimension somewhat appears to be aligning towards high in
heritage/historical and low in dining. The horizontal dimension appears to be aligning
towards price, Gangotri having the perception of high priced facility, as compared to
others.
Correspondence Analysis.
To obtain a more direct association of each resort with the different attributes, Arjun
obtained data asking the question, which resort would you go for and why?
The resort options were:
Rupnagar,
Seemabari,
Sancharpur,
Suryaghar,
Gangotri
The attributes to a tourist destination were :
Natural monuments
Golf& tennis
Dining & food
Heritage
Famous in history

20

First a Chi-square test of association was carried out.

Pearsons Chi-square = 52.260, Degrees of freedom = 16, Asymptotic significance
0.000
Hence Arjun was statistically allowed using the perceptual map by correspondence
analysis.

Hence Sancharpur perceives to have the most association with heritage and thus will be
Arjuns closet competitor. However Sancharpur is perceived to be low in dining & food.
Hence Arjun should have a positioning on very good association with heritage as well as
very good dining& food. That is how he will differentiate from Sancharpur.
Consumer based Pricing: Arjun Aryan
Arjun realized that now he had to do the pricing of the proposed tour price on the daily
basis of his culture tourism destination. The tour price would include lunch and use of
any other facility at the Parampara Ghar. He also realized that pricing policy he adopts
must consider a number of factors which may work in conflict with one another. He knew
the three major considerations in pricing were profitability, competitiveness and market
sensitibility. A profit based pricing would require data from inside the organization,
basically accounting data. However, because he was offering a completely new product,
he did not have this kind of data already with him. However Arjun figured out that his
21

largest concern will be market acceptability and his price must be such that the market
finds it acceptable. In any case he thought the price he offers cannot look at competition
because of the novelty of his product .Neither could he base it on cost- plus- margin
approach because it might be totally unacceptable by his market.
Thus he decided to consider market sensitivity factor as the most crucial element to lead
to pricing in his case.
Proposed consumer based pricing approach.
The price scale, which Arjun wanted to use had three basic elements :
(4) Beginning price level
(5) Price interval, and
(6) Ending price
His price scale :
Rs.1500
Rs.1750
Rs.2000
Rs.2250
Rs.2500
Rs.2750
Rs.3000
Rs.3250
Rs.3500
Rs.3750
Rs.4000
Rs.4250
Rs.4500
He assigned two researchers to visit 50 respondents from his target market, hand over to
the respondent the price scale and then ask, At what price on this scale will you begin to
feel that this tourism destination is already too expensive so that you will not want to visit
this place anymore. The price at which the revenue ix maximum is the optimal price.
This is also the price where there is a kink in the demand curve.

22

200000
180000
160000
140000
120000
price

100000

revenue

80000
60000
40000
20000
0
1

Price
1500
1750
2000
2250
2500
2750
3000
3250
3500
3750
4000
4250
4500

total not buy

0
2
5
2
5
2
8
4
5
2
6
4
5

10

not buy cumulative

0
2
7
9
14
16
24
28
33
35
41
45
50

11

12

still buy
50
48
43
41
36
34
26
22
17
15
9
5
0

13

revenue
150,000
168,000
172,000
184,500
180,000
187,000
156,000
143,000
119,000
112,500
72,000
42,500
0

Monte Carlo Simulation by EXCEL and Crystal Ball.

Simulation is one of the most widely used quantitative approaches to decision making. Here one
observes a real life system and then constructs a model that represents the system. The simulation
contains the mathematical expressions and logical relationships that describe how to compute the
value of the outputs given the values of the inputs.

Any simulation model has two inputs:

Controllable inputs/ controllable variables
Probabilistic inputs/ random variables

23

Probabilistic inputs
Controllable inputs
Output

Model

Case : North western company

Northwestern Inc. produces valves on a weekly schedule.
Shipments are made to two customers, A and B. The customers enter orders , by phone, every
friday after their weekly maintenance inspection is completed and want immediate delivery. Past
experience has indicated the following demand pattern:
Customer A orders 15 valves 35 % of the time or 20 valves 65 % of the time
Customer B orders 25 valves 20 % of time; 30 valves 40 % of the time or 35valves in the
remaining cases.
Probability distribution and random numbers:
Customer A
Valve
prob
15
.35
20
.65

cumulative prob
.35
1.00

random numbers assigned

00-34
35-99

cumulative prob
.20
.60
1.00

random numbers assigned

00-19
20-59
60-99

Customer B
Valve
25
30
35

prob
.20
.40
.40

The company would like to meet all demand at least 95% of the time. The production manager
thinks that he can do it with a weekly production schedule of 48 valves. Valves not demanded on
Friday are used as safety stock which currently stands at five units. Demand that cannot be met
from production is met from the safety stock. Demand that cannot be met is considered as lost
opportunity.
Compute average weekly profit if one valve brings $ 27.50.
Week RN1 demand A
1
2

63
87

20
20

RN2 demand B total demand left over lost sales sales

5
34
30
50
3
0
50
66
35
55
0
4

24

3
4

06
51

15
20

12
87

25
35

40
55

8
1

0
0

Case : Comparing Project proposals for marketing two separate products in different
markets : Monte Carlo Simulation Wilton Toy Company.
In May 2010, Mr. Brian Cunningham, President of Wilton Toy Company, was evaluating two
new product proposals for two separate market segments, to determine which one his company
should accept. After the two proposals had each reached the final planning stages, Mr.
Cunningham reviewed the companys financial position and decided that only one new product
proposal could be undertaken at that time.
He wanted to select the most profitable venture but, more so, he hoped to avoid a great deal of
risk.
In the past, Wilton Toy had always calculated the before tax return on investment that could be
expected for a new venture. When two or more proposals were in the final planning stages and
were competing for the same funds, the Return on Investment, ROI, was used as the determining
factor.
The two proposals being considered in May recommended that Wilton produce a toy pistol or a
plastic mini motorcycle replica. Sales estimate for the pistol were made with considerable
confidence since the market potential was well known for this kind of product. The sales manager
believed that 30,000 pistols could be sold at a price of $ 4.00 per unit. The project would require
an investment of about $110,000 and would incur $ 4,000 fixed costs and $3 per pistol variable
costs.
The sales manager, however, experienced considerable difficulty in making a sales estimate for
mini motorcycle due to the novelty and the uniqueness of the toy. After considerable discussion
and deliberation, the sales manager set the best estimate for motor cycle sales at $ 6,000 units for
Wilton s $11.50 selling price. The required investment would be $ 116,000 while fixed costs
would be $ 5,000 and variable cost would be $ 6.00 per motor cycle.
Mr. Cunningham realized the ROI for the motor cycle proposal was 24.1 % compared to 23.6%
for the pistol, but he was worried about the uncertainty of the motor cycle sales volume. So he
hired a consultant to suggest how uncertainty could be better estimated in the two proposals.
The consultant identified three random variables for each proposal and estimated probability
distributions as follows. Thereafter he planned to run Mote Carlo Simulation to illustrate the risk
by revealing the spread of possible outcomes for each proposal.

Estimate
24,000
28,000
30,000
31,000
33,000
36,000

Table 1 : Wilton Toy Company Sales Forecasts

Toy Pistol
probability
estimate
.05
2,500
.25
3,500
.20
6,000
.25
7,500
.20
9,000
.05
11,000 .05

Toy Pistol
Estimate

Wilton Toy Company Investment forecast

Motor cycle
probability
estimate

Motor cycle
probability
.05
.25
.20
.30
.15

probability

25

106,000
108,000
109,000
110,000
112,000
115,000

.05
.10
.15
.20
.30
.20

113,000.05
115,000.20
116,000.25
118,000.20
120,000.20
123,000.10

Wilton Toy Company variable cost forecast

Toy Pistol
Motor cycle
Estimate
probability
estimate
2.94
.05
5.85
2.96
.20
5.90
2.98
.15
5.95
3.00
.10
6.00
3.02
.20
6.05
3.04
.20
6.10
3.07
.10
6.15

probability
.05
.15
.20
.10
.25
.15
.10

Case :Assessing and Analyzing risk of marketing a high quality printer.

Portacom manufactures personal computers and related equipment. PortaComs product
design group has an innovative design and the potential to capture a significant share of
the portable printer market.
Preliminary marketing analyses have provide the following selling price, first year
administration cost and first year advertising cost:
Selling price = $ 249 per unit
Administrative cost= $ 400,000
Advertising cost = $ 600,000.
The cost of direct labor, the cost of parts and the first-year demand for the printer are not
known with certainty and are considered probabilistic inputs.
Direct labor cost per unit
$ 43
0.1
$ 44
0.2
$ 45
0.4
$ 46
0.2
$ 47
0.1
Parts cost has uniform distribution between $ 80 and $ 100.
Demand has normal distribution with mean 15,000 and standard deviation of 4500.
Profit = (249- direct l-parts cost) * demand 1,000,000.
Portacom would like to know the estimated profit for the first year. Also they would
like to know the Probability that Profit would exceed $1,000,000.

26

(1) Optimal selection of Promotional Channel

Portacom next has to select a promotional channel to communicate to its target market
the attributes and benefits of their product to the potential customers.
Thus they have to consider whether to reach the audience by advertising in the press,
or on TV, or radio, or on billboards? By using direct marketing mailshot? Through
PR? On the Internet?
For each promotional they need to consider the impacts of the channel chosen, in
terms of Reach, Recall and Actual Purchase, whose estimated probability distributions
can be obtained from advertising research companies.
Consider a probabilistic model for optimal selection of a promotional channel using
Monte Carlo Simulation, using Crystal Ball.
To start with assume portacom is thinking of only two channels, TV and press.
The Reach percentage for TV and Press have been obtained by an advertising research
company called Consumer Pulse. The probability distributions for the two random
variables, Reach-TV and Reach-press, are as follows
Reach-TV

Reach-Press

Value

probability

value

probability

60%

0.30

50%

0.50

70%

0.40

60%

0.30

80%

0.30

70%

0.20

The Recall percentage for TV and Press, expressed as percentage on Reach, have also
been similarly obtained by Consumer Pulse.
Recall-TV

Recall- Press

Value

probability

Value

probability

50%

0.40

40%

0.30

60%

0.30

50%

0.40

70%

0.30

60%

0.30

27

The Actual Purchase percentage for TV and Press, expressed as percentage on Recall,
have also been provided by Consumer Pulse as given below.
Actual Purchase-TV

Actual Purchase- Press

Value

probability

Value

probability

20%

0.25

15%

0.30

30%

0.50

20%

0.40

40 %

0.25

25%

0.30

Total cost for TV promotion

Total cost for Press
Size of audience, target market

= 200,000
=120,000
=500,000.

Advise Portacom as to which channel to select based on (No actual purchase/

total cost).
(2) Customer Lifetime Value ( LTV) for consumer segments at Portacom.
LTV is the expected profit that a company will realize from sales to a particular
customer in the future. Although it builds on past customer history, LTV is all about
future. It is based, primarily, on the customers expected retention and spending rate,
plus some other factors that are easy to determine. To understand LTV, consider the
following table.

customers
retention rate
orders per yr
avg order
size
total revenue
costs
cost of sales
acqui/mrkco
st
marketing
cost

acquisition
second
year
year
third year
100,000
60000
42000
0.6
0.7
0.8
1.8
2.5
3
90
16200000

95
14250000

100
1.3E+07

0.7
11340000

0.65
9262500

0.65
8190000

55

20

20

5500000

1200000

840000

discount rate
15%

28

total costs

16840000

10462500

9030000
LTV=npv/100,00
npv

gross profit

-640000

3787500 3570000

$4,654,705.35

0
$46.55

Based on the above model PortaCom wanted to estimate the CLV for a middle-to-high
income segment which comprised about 100,000 customers.
Now for PortaCom, the retention rate was obtained as a random variable having a
Normal Distribution with mean 0.7 and standard deviation as 0.1.
Retention Rate = N( 0.7, 0.1)
The number of orders per year was found to be having an Uniform Distribution on the
domain 0.5 and 2.0.
Number of orders = U( 0.5, 2.0 )
Average order size is a random variable having an Uniform distribution between $60
and $80.
Average order size = U ( 60, 80 ).
The estimated number of customers in the base year, when the portable printer will be
launched = 100,000. This number holds for the particular customer segment PortaCom
was interested in.
Cost of sales = 70 % in the base year and 65 % thereafter.
The Acquisition and marketing cost = 55 in the base year and 30 thereafter.
PortaCom assumed the customers would continue to remain customers for a span of
10 years and under this assumption they estimated the customer life time value for this
segment.
Simulating Returns on portfolio:
A company wants to invest in 4 different stocks in IT, FMCG, Steel and Real-estate.
The total investment will be $5000.
The percentages invested in the 4 stocks will be 10%, 25%, 35% ,30%.
The yearly percentage return, Ri, R2, R3, R4, on stocks is given by ( average stock
value this year average stock value last year) average /stock value last year.
So the return on the portfolio = ( 0.10*R1 + 0.25*R2 +0.35*R3 +0.30*R4)*5000.
R1 has a normal distribution with mean 15 %, standard deviation 20%,
R2 has a normal distribution with mean 5 %, standard deviation 20%,
R3 has a normal distribution with mean 4 %, standard deviation 20%,
R4 has a normal distribution with mean 10 %, standard deviation 20%,

Case on probability distribution of IRR by Crystal Ball.

A company is thinking of investing in a new venture involving setting up a vocational
educational facility for the family members of its employees. The facility would also be

29

open to general public after giving priority to the company employees. The facility is
expected to generate a net yearly cash- flow of INR 200,000 growing at an yearly rate
which is normally distributed with a mean of 4% and standard deviation of 1%. ( The
yearly growth rate is assumed to be the same for all years).
The initial investment required for the facility is estimated to be normally distributed with
a mean of INR 900,000 and standard deviation of 100,000.
Run Monte Carlo Simulation on Crystal Ball software for 1000 runs. Find
(a) Mean IRR=
(1) 12 -15 %
(2) 15-20%
(3) 20-24%
(4) 24-30%
(b) Use certainty grabbers to determine:
Probability ( 20 % <= IRR <=25%) = 54.1%
(1) 20-35 %
(2)35-50%
(3) 50-58%

(3 marks)
(4) 58-68%

(c) What is the spearmans rank correlation between IRR and growth rate: = .26 (2
marks)
(a) 28-35% (b) 35-45% (c) 45-55% (d) 55-65%
(d) How many assumption variables do you have?`
(2 marks)
(a) 2
(b) 3
(c) 11
(d) 12

Using Probability Distributions in Crystal Ball

Normal : This is the most important distribution in probability theory beaus it
describes many natural phenomena like demand and sales distribution, operating
cost incurred, inflation rates, price distributions lead time, etc. ,
Lognormal : Widely used in situations where values are positively skewed, like in
financial analysis for security valuation or in real estate for property valuation
Triangular Distribution : used to describe situation where oe knows the minimum ,
maximum and most likely value( mode), like car sales for a week, where past sales
can give minimum, maximum and usual number of cars sold.
Students t- distribution: to describe small sets of data which look like normal but
with thicker tails ( more outliers)
Exponential distribution : for Inter arrival time, time between failures ..related to
Poisson distributions.
Erlang: fot IAT when events are not completely random.
Uniform
Weibull : failure time in reliability studies
Beta distribution: Used in critical path analysis (PERT and CP

Launching a dry shampoo brand in India

30

Based on the Business Analytics project conducted by Abhishek Shastri, Atul

Kumar, Ashish A, Dhananjay Kumar,Roberto Micozzi, Shashikant,and Saurabh
Meena at IIM Ahmedabad, 2012.

Dry Shampoo
Dry shampoo is an innovative product which uses powder like substance to work without
water. Following features make them an attractive offer for customers: Eco-friendliness
Flexibility
User friendliness
Convenience in use
Customized products
The convenience of anytime and anyplace shampoo is supplemented by environmental
considerations of less use of water. But the idea and effectiveness of a shampoo without
traditional use of water creates suspicion and doubts in minds of consumers.
There are mostly two types of dry shampoos:
Loose powder form
Aerosol(spray) form
Powder dry shampoos can be applied directly on to the scalp from the bottle and either
brushed through or massaged in using your fingers. Dry shampoo aerosols can be sprayed
directly onto the scalp from a few inches away.
The ingredients in dry shampoo soak up oil and dirt on the scalp. When hair appears
greasy, its usually just the roots that need to be refreshed. Applying a dry shampoo
effectively soaks up any oil and dirt, leaving hair looking refreshed and clean.
Many hair types may be sensitive to over washing and may lose their color. So, hair
should not be washed for more than 2-3 times a week. On other occasions, when one is
time strapped or one needs to freshen looks of ones hair dry shampoo may serve as a
great option. It is also a good option for women especially busy women who have
problem in washing their long hairs again and again. Dry shampoo provides a good
option.
The idea behind dry shampoo is to remove excess oil from hair follicles without having
to actually wash the hair using a traditional shampoo and water. Households may keep a
small amount of dry shampoo on hand as part of an emergency hygiene kit. In the event
that water is not available, the dry shampoo compound can be applied and provide at least
a partial cleansing of the hair.

Questionnaire for Survey

The following online survey was floated for collecting responses. A total of 116
responses were received.

Dry Shampoo-BA

31

This survey is intended to collect information about perception and need of dry shampoo
among consumers. The survey is conducted as a part of Business Analytics, an
academic course at IIM Ahmedabad. The information collected will be used to assess the
acceptability of dry shampoo and required features of dry shampoo among consumers
and would be used purely for academic purposes.
Rate the following attributes, on a 10-point scale, in accordance with their importance
while deciding which shampoo to buy.
______ Time Saving
______ Ease of Use
______ immediate effect on hair
______ Use by Peer
______ Dandruff fighting Capabilities
______ Anti-hair fall capabilities
______ Contains moisturizers
______ Provides shine to hair
______ Makes hair soft and silky
______ Removes greasiness and oiliness
______ Prescribed by dermatologists
______ Assurance of performance like company certification
______ Saves Water

How frequently do you use your shampoo?

1-2 times a month

Weekly
2-3 times a week
Daily

What is your awareness of dry shampoo?

Used it
Heard of it
Don't know about it

Rate the following benefits ( in 10-point scale, 10 being very important ) in accordance
of their importance with respect to a dry shampoo
______ I can use it anywhere
______ It requires less time for application and drying
______ It does not require water

32

Would you use a dry shampoo?

Yes
No

Your Gender: Male, Female

Your Age Category

Below 18
18-25
26-35
36-45
Above 45

Your Family Annual Income (Expected if you are a student)

Less than 3 Lakhs

3 lakhs - 8 Lakhs
8 Lakhs - 15 Lakhs
Above 15 Lakhs

Your Profession

Service (Public)
Service(Private)
Self-employed / Business
Student
Others

Statistics
Predicted probability
N

Valid

1.0900000000E
2

Missing

4.0000000000E
0

Percentiles

20

.0001400971

40

.2082519717

60

.7498446807

80

.9999999964

33

RFM analysis for Loyalty Program

We are conducting this survey to understand customer needs and preferences for a loyalty
program.
Age :

<20 Years
21- 35 Years
36- 45 Years
46 - 60 Years
Over 60 Years

Male / Female
Occupation:

Student
Salaried
Self Employed
Other

Monthly income

Less than Rs. 10,000 p m

Rs. 10,000 R 24,000 p m
Rs. 25,000 Rs. 40,000 p m
Rs. 41,000 Rs. 60,000 p m
Rs. 61,000 Rs. 1,00,000 p m
Over Rs. 1,00,000 p m

Have you shopped at any of the following outlets:

Shoppers Stop
West Side
Lifestyle
Pantaloons
Other __________ ( kindly specify)

I own a customer loyalty card for the above outlets: Yes / No

How often do you use loyalty cards when you shop offline?

Every time I shop

Roughly once every 2 or 3 times that I shop online
At least once a month
At least once every six months
Rarely
I dont own one!

34

Please rate the importance of the following benefits of a loyalty card

Features
Reward points
every time I shop
Exclusive checkout counters
Direct mailers on
promotions and
special offers
Exclusive
shopping hours
during sales
Parking privileges
Benefits beyond
shopping (eg:
discounts at a
restaurant, spas,
movie tickets etc.)
Credit card
benefits ( eg :Tie
up loyalty card
with credit card
and earn points)
Return policies

1 = not important
2 = somewhat important
3 = neither Important nor
unimportant
4 = important
5 = very important
Please rate the level of satisfaction on the following features on usage of the loyalty card
at above outlets:
Features
Reward points
every time I shop
Fast service
(Exclusive checkout counters)
Direct mailers on
promotions and
special offers
Exclusive
shopping hours
during sales
Parking privileges
Benefits beyond
shopping (eg:
discounts at a
restaurant, spas,
movie tickets etc.)
Credit card

35

benefits ( eg :Tie
up loyalty card
with credit card
and earn points)
Return policies

1 = not satisfied
satisfied
4 = very satisfied

2 = somewhat satisfied

3 = moderately

5 = extremely satisfied

Structural Equation Modeling:

Example : Customer satisfaction in banking industry.
Research question : To identify critical factors affecting overall customer satisfaction
with banking service.
Five unobserved variables, latent variables, have been considered.
(1)
(2)
(3)
(4)
(5)

Responsiveness of service
Speed of transaction
Availability of service
Professionalism
Overall satisfaction with service.

The manifest/indicator variables are:

Responsiveness of service :

SD D N A SA

I waited a short time before I was helped

The service started immediately when I arrived
Speed of transaction :
The teller handled transaction in a short period of time
The teller did not waste any time in completing work

SD D N A SA

Availability of service:
The financial consultant was available to work
with me at a good time
My appointment with the financial consultant
Was at a convenient time

SD D N A SA

36

Professionalism
The teller talked to me in a pleasant way
The teller had a professional appearance
The teller carefully listened to what I had to say
The teller knew how to handle the transaction

SD D N A SA

Overall satisfaction with service

The quality of the way the teller treated me was high
The way the teller treated me met my expectation
I am satisfied with the way teller treated me.

SD D N A SA

Developing a structural equation model on the above variables/constructs.

Model
Default model
Saturated model
Independence model

NPAR
26
45
9

CMIN
38.297
.000
973.654

DF
19
0
36

P
.005

CMIN/DF
2.016

.000

27.046

Default model = my model

Saturated model =best model
Independence model = worst model.

37

e1

e2

avail1

avail2

availability
1
1

e9

e6

e7

e8

overall1

overall2

overall3

1
1

overall satisfaction

e10

e3

e5

e4

profess1

e12
1

profess3

profess2

profess4

professionalism
1

e11

A project report on
Understanding the drivers of customer satisfaction and Customer Loyalty at Caf
Coffee Day
Ankur Banka
Ashwini Kumar
Yugal Tiwari

INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD

38

Understanding the drivers of customer satisfaction and Customer Loyalty at Caf

Coffee Day

In recent times there has been a spurt in the opening of coffee bars in tier 1 as well as tier
2 cities in India. Coffee bars have emerged as a Third Place after home and office
where people can socialize over a cup of premium coffee. Coffee, as a beverage has been
finding favor with the youth. International brands like Starbucks have opened shop in
India.
In light of the increasing competition, incumbent players like Caf Coffee Day (CCD)
have been feeling the heat. The customers are prone to experimentation and may switch
to other brands.
This study was undertaken with the view of understanding how the customers of CCD
rate it on various attributes and understanding the attributes which drive customer
satisfaction and customer loyalty.

Research Design
We were primarily interested in urban customers in the age bracket of 18-35 years, the
primary target group for coffee bars like CCD.
We started out by doing 5 in-depth interviews among this TG to understand what
customers look for from a coffee bar. This resulted in a list of attributes that the
customers considered important.
Then a survey was designed to capture the customers evaluation of CCD on these
parameters. We considered responses from customers who have visited CCD in the last 3
months. 124 valid responses were received.
Data Analysis was done by. Structural Equation Modeling (To confirm and fine-tune our
understanding of the drivers of Customer Satisfaction and Customer Loyalty)

39

Survey Questionnaire

If the answer to the above question is yes, continue survey; else thank respondent and
abort.

40

124 valid responses were recorded from the above questionnaire.

CSR and Employee Motivation

From the Marketing Analytics Project at IIM Ranchi ( July 2013 ) conducted by:

Abhishek Chaudhary
Mujhaid Ahmad
Soubhagya Nayak
Swati Shalini Kujur
Vikash Bhagat
Priti Vandana

41

PGDM 2014.
In our country today, Corporate Social Responsibility( CSR) approach has been adopted
by many organizations to address economic, social and environmental issues in a way
that aims to benefit people, communities and society. Lot of research is available
showing relations between CSR and business especially showing a positive impact on
business and financial performance But very few people have actually thought about
how CSR effects employee motivation as well as customers, communities and other
business partners.
Recent researches have shown that there is a relationship between CSR activities of the
organization and employee perception of the CSR activities which impacts employee
organizational commitment. There is positive correlation between external CSR and
organizational commitment and that it is equivalent to job satisfaction (S.Brammer,
A.Millington, B.Rayton 2007). A Journal on Employee perception of CSR activities
(E.M.Lee, S.Y.Park, H.J.Lee 2012 ) suggests that the employee perception of CSR
activities of the organization plays a positive role in influencing employee attachment,
which in turn leads to increased performance. Therefore many companies are using CSR
as a means to motivate employees.
CSR concept
Corporate social responsibility is also been referred to as corporate consciousness,
community relations, sustainable responsible business/ responsible business and social
responsibility. This concept began with the publication of H. R. Bowens social
responsibility of business in 1953. Since then it has become strategically important tool
for businesses in contemporary times to achieve sustainable development. There is no
common definition of CSR but there are certain common threads which connects all
perspectives of CSR. It talks about the ethical behavior of the companies towards its
internal and external stakeholders which are its customers and employees on one hand
and on the other hand responsibility of the company towards the society and
environment. Kotler, Lee (2005) has defined corporate social responsibility as corporate
social responsibility is a commitment to improve community wellbeing through
discretionary business practices and contributions of corporate resources
Internal and External CSR
The concept of CSR has been related to different stake holders of the company. Green
paper 2001 by European commission, S.Brammer (2007), have categorizes CSR
activities into External CSR and Internal CSR.
Internal CSR activities are activities concerned within the company and employees are
the main stakeholders. It also relates to other issues such as human capital, health and
safety, adaptation to change.
External CSR relates to the external stakeholders of the company which consists of
customers, local communities, suppliers business partners and government authorities.
Here we will be discussing the External CSR in terms of Customers, Local Community
and business partners.
External CSR( customer related ) . Company who consider themselves as socially
responsible provide such products to their customers which are efficient, of superior
quality and reliable. Products which are ethically produced and follow all environmental
guidelines.( Green paper 2001 by European commission). Companies try to build a strong
and everlasting relations with their customers by keeping in mind customers needs while
designing products.

42

External CSR ( Local Community related) This is the most common and widely
practiced form of CSR . Where organization communicates CSR efforts by External
stakeholders especially community and society to improve its brand image and also
promote companies social and ethical practices. This includes investments in hospitals,
schools and parks and roads. Companies provide employment and training to local
community people and thus make them independent. Socially responsible companies
resort to using clean mode of production so that they do not degrade the surrounding
environment.
External CSR ( business partners related ) This is practiced by choosing business
partners in such a way which are aligned towards ethical practices. Following in a
socially responsible way in the whole supply chain process. Making sure that the supply
chain is cohesive towards societys interests. Labor practices should be in accordance to
socially and legally excepted norms which benefits the work force.

Employee internal motivation

The term motivation is derived from the latin word movere, which means to move.
Motivation has been divided into internal and external motivation. External motivation
includes an incentive which provides materialistic benefits whereas internal motivation
relates to all behavior which leads to satisfaction, enjoyment and pleasure in doing your
tasks. We will be restricting ourselves to internal motivation which relates to our
research.
Internal motivation is the driving force within us which enable us to perform better than
others and do a good job.
Internally motivated employees feel a closer relationship with the organization they work
and hence perform. Rewards are secondary when performing of jobs. Thus company tries
to incentivize employee through activities like CSR activities which generate intrinsic
motivation among Employees (Richard .M. Ryan, E.L.Deci 2000). And employees also
prefer working for companies, which are high on social responsibility parameters as it
leads to internal satisfaction.
Link between CSR and internal employee motivation
In explore the link between CSR and Employee motivation the above constructs have
been used with the following indicator variables defining each construct.
Internal CSR
1. Providing equitable wage system and career
prospects for all employees.
2. Improving psychological climate at work.
3. Honest and flexible communication with employees.
4.Involving employees into decisions making process
5. Providing equal recruitment opportunities for all employees (i.e. disabled people or ethnic minorities, etc).

6. Taking care of health and safety issues of its employees (i.e. providing health checkups and healthy life sty
7. Creating of good work-life balance and providing a family-friendly work environment (i.e. flexible time sc
8.Providing job trainings and career planning
External CSR ( Customer)
1.Implementing a procedure to handle customer complaints
43

2. Providing truthful and honest information to the consumers

3. Avoiding engaging in price fixing and using fair pricing.
4. Avoiding false and misleading advertising or sales promotions that use deception or manipulation.

External CSR ( local communities)

1.Supporting local sport, cultural, or other community activities and projects

2. Donating money to local charities,
3. Invest in communities development such as investing in roads, schools, hospitals, garbage removal system
4. Involving into partnership with community based organizations.
External CSR ( business Partners )
1. Engaging in fair trading transactions with suppliers and waste handlers
2. Implementing procedures to help streamline supplier operations.
3. Greening the supplier operations, distributors and retailers.
Internal employee motivation
1. What matters most to me is enjoying what I do
2. It is important for me to have an outlet for self expression
3. I enjoy trying to solve complex organizational problems
4. I enjoy doing work that is so absorbing that I forget about everything else
5. I find my work providing me with opportunities for increasing my knowledge and skills
6. I am more comfortable when I can set my own goals
7. I prefer to figure things out for myself
8. In my work I enjoy new experiences
9. It gives me satisfaction to work for the company
10. My motivation to work for the company is growing every year
11. In addition to my regular work I feel I am contributing to society because of company policy.
Green Supply Chain Management (GSCM)
1.
2.
3.
4.
5.

Company organizes environmental seminars for suppliers

Company uses green transportation systems
Company uses Cleaner Production for its own production center as well as for suppliers
Company and suppliers handle waste in environment friendly manner
Company requires all suppliers to provide MSDS ( Material safety data sheet) and use non hazardou

44

e1

e2

e3

e4

e5

employee1 employee3 employee6 employee7 employee8

1

csr=employee

e26
e6

e7

e8

cust2

e91

e24

cuist4

cust3

cust1

e23

motivn9

e22
1

motivn10

csr=cust

e27

motivn5

e11

e121

e131

motivation

community2 community3 community4

csr=commu

e28

community1
1
e10
e14

e15

bpartner1
1

e29

bpartner2

motivn11

e25

e16

e20

1
1

bpartner3

e18

e19

gscm2

csr=bpart

gscm3

gscm4

e30
1

e17

gscm

1
1

gscm1
e31

e21

gscm5

45

Conjoint Analysis to determine Relative Customer Preferences for Smartphone

attributes:

Finish

rounded corners finish

non-rounded corners

Scroll

Bounce back
Normal

Zoom

Pinch/Double tap
button zoom

Price

Rs. 26500 / $460

Rs. 22500 / $420

Multitasking

switch between running apps

run one at time

Conjoint Analysis to determine relative customer preferences for Sneaker

Attributes
Sneakersole

rubber
Polyurethane
Plastic

Uppershoe

leather
Canvas
Nylon

Price

30
60
90

46