Marketing Research Project for a Russian Company
Marketing Research Project for a Russian Company
Research Project for a Russian Company
Identifying market segments.......................................................................... 4
Marketing research............................................................................................. 5
The corporation...................................................................................................... 7
The history of the company............................................................................. 7
The choice of the industry ............................................................................... 9
Entering the market of pastas and the present
position of the company. 11
The problem of the company......................................................................... 12
The marketing research.................................................................................. 13
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
The present situation................................................................................................. 16
Products in the market.............................................................................................. 17
Market segmentation........................................................................................ 19
The questionnaire................................................................................................ 21
The results............................................................................................................... 23
General findings................................................................................................... 26
Recommendations apropos automation of the process of
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Èññëåäîâàíèå ïðîäåìîíñòðèðîâàëî, ÷òî àâòîìàòèçàöèÿ óïàêîâî÷íîãî ïðîöåññà
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ïðîèçâîäèòåëüíîñòè òðóäà. Ýòî áûëî íîâûì äëÿ êîìïàíèè.
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
Market segmentation can be carried out at four levels:
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 identical.
Many different variables can be used for segmenting:
or income (though they correlate, they are not the same);
Habits and so on
Market segmenting can be made using one or more variables.
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
We will not use any other variables to make our segmenting
size, purchasing power, and characteristics of the segments can be measured.
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 several
problem and research objectives.
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:
Secondary data are data that were collected for another
purpose and already exists somewhere.
The sources of secondary data are:
There are following contact methods:
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 contact
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 this goal:
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 pastas.
Understand and formulate the problem of the company.
out a marketing research to give the necessary information to the management of
I had to make the following steps to do it:
Formulate the problem the research is to solve and the research
Develop the research plan.
Make conclusions apropos the state of the market and reasonability of
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 reason.
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
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 industry.
The basic motives which made the LBS Corporation chose this
industry were the following:
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.
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
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 barriers.
The demand for
many foods is not seasonal, neither the prices are.
and production cycle.
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
The basic advantages of this decision were:
Easy to start:
The technology of
pasta production is not sophisticated
The equipment is
relatively inexpensive and available
Short list of
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.
necessities. Because of this people with low disposable income are among the
potential buyers. This is extremely important in Russian environment.
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.
The biggest indirect competitor of pastas is potato. Of course, the price of
potato does vary during the year, but:
The 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
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.
of the product.
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 importance.
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
The nomenclature of pastas being manufactured by the LBS
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 of packaging.
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 research is to help to solve the problem of the
company discussed above. We can formulate the problem of the research more
inexpensive labor in Russia, the automated packaging process will increase the
cost of product.
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.
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:
research objectives sharply.
history of the market of pastas of Saint Petersburg and its present state.
market of pastas and develop profiles of resulting segments.
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.
Having known the
preferences and attitude towards packaging, quality and price, identify
conditions upon which an automatically packed product will not fail.
necessary positioning concept for automatically packed pastas that will be
offered to different segments.
I had formulated the following specific research
attractiveness of each segment.
kind of people would be the most likely to purchase pastas in high quality
segment do the most heavy users belong to?
the preferred form of pastas (corns, shells, etc.).
the most important factors which influence the consumer’s subjective
concerning the quality of the product.
the consumer usually estimate the quality by appearance of the product?
there a stereotype that a quality product can be packed only in a high quality
there a stereotype that imported pastas are better than the domestic ones? How
strong is it?
the importance of quality packaging for the buyer.
the quality of packaging correlate with the quality of the product in
must be the quality of the product which is automatically packed?
much will a buyer desire to pay for packaging?
are the main factors which make packaging important (estimated quality of the
product, precise weight, other)?
the desired characteristics of the package.
size of the package will be the most popular? Shall we offer packages of
should be the packaging be made of and what shape should it have(plastic or
polyethylene packet, cardboard box)?
the loyalty status of the consumers.
the “patriot” status of the consumers.
they feel unsatisfied that most of the high quality pastas are imported?
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 research.
Since the company:
lack of information about the market in general;
some specific information ;
not want to spend money on purchasing the available secondary or primary data;
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 research
I have two basic sources of information:
The buyers of
The salesmen who
sell pastas .
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 to
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.
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
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
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 develop.
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
Often the product
is of low quality;
The product is
manually packed in most of the cases;
The 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:
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.
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 20-25%.
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
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:
There 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
Pastas 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
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
¨ Jobless people,
¨ Families with more than 3 children,
¨ Public employees (doctors, teachers).
¨ People who are not paid for their job
Though their income is low, this segment is important because of its size.
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:
¨ working pensioners;
¨ retired officers;
¨ public employees;
¨ workers and employees of different
professions, usually not complex ones ;
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:
¨ white collars, office workers;
¨ representatives of complex
¨ representatives of militia, army, tax
“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:
¨ small entrepreneurs;
¨ people 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.
¨ New Russians.
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
customer has bought pastas:
Automatically manually packed
Sort: Corns Shells Spirals Spaghetti Vermicelli
Quality: high midle low
Trade mark: (for automatically packed)
Nordic Big other_______ unknown
Weight: 300g 500g 1000g
Quantity: 1 2 3 more
customer is making or has already made another purchases
customer’s sex: M F
customer’s age: 10-18, 18-25, 25-35, 35-45, 45-55,
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):
you bought pastas manually or automatically packed?
the questions 2 and 3 if the pasta bought is manually packed) What is the
trademark of the pasta you have just bought?
prefer to purchase pasta
of this trademark
of this and some others trademarks (if yes, what are they)
the trademark does not mean
is the sort of the pasta you have bought?
Corns Shells Spirals Spaghetti Vermicelli
is the size of the package?
300g 500g 1000g
is the optimal size of the package?
300g 500g 1000g other ____________
is the price of the package? __________________
is the form of the pastas you have bought?
Shells corns spirals vermicelli
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 _____ months
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 market?
24. What are the members of your
25. What is your personal
26. What is the income per head
in your family?
27. How old are you?
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
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.
3. 36 %
of respondents claimed they prefer corns to other pastas, 22%like spirals, 26%
like shells, 7% prefer vermicelli, and 2% usually buy spaghetti.
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 their decision.
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
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 August, 17th.
most desirable size of package is 1kg (57%), then goes a 500g package (38%).
almost do not purchase domestic automatically packed pastas. Their price is
almost equal to the price of imported pastas.
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 imported pastas.
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
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 than 50%.
Putting two and two together, we can state the following.
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
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
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
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.
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
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
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 higher class.
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
The decision 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.
B.C., Eaton D.F., Microeconomics, 2nd edition.
R.D., Peters M.P., Entrepreneurship. Starting, Developing, and Managing a
New Enterprise. 3rd edition. Irwin.
P, Marketing Management, 9th edition, Prentice Hall
 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
 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
 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 below 100%.