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How to cite this thesis

Surname, Initial(s). (2012) Title of the thesis or dissertation. PhD. (Chemistry)/ M.Sc. (Physics)/ M.A. (Philosophy)/M.Com. (Finance) etc. [Unpublished]: University of Johannesburg. Retrieved from: https://ujdigispace.uj.ac.za (Accessed: Date).

TilE V L lJ E OF A BR ()

11

II I TII I·. IARKETII ; F T ) H)TI V E L UBlH ~A T

I BILl E "T IlIJ I E ' E IRO

II ' .' )UTII AFRICA

YDER

A r ear It r p rt . . ubmitt d 10 the \ it v t 'r. r nd T hnik n Bu.in

Ii nsc 10 tit' Uni 'r. it f \ I' . in p r i J fullilrn nt of th ' r quir nn mt: for th d r

I 1 I r of Bu in' Adrnini. Irati n

iii

DECLARATION

I declare that this research report is my own, unaided work. It is being submitted in

partial fulfilment of the requirements for the degree of Masterof'Business Administration

at the University of Wales, United Kingdom. It has not been submitted before for any

degree or examination in any other university.

DEDICATIONS

Rob Mahoney

An inspirational manager, who encouraged me

to tackle theunknown.

Joelean Snyder

For the commitment and endless refreshments

that kept me going in difficult times.

Geoff Bick

Supervisor and lecturer, who converted me tothe

Marketing discipline, and who showed meit can be fun.

iv

v

ACKNOVVLEDGEMENTS

John Vevers and the other members of the BP International Lubricants Team. For the

research you made available and your valuable input.

Group H: Duncan, Gary, Marthie and Sara. We made a great team.

Anita, for all her effort, input, hard work, and above all for all the fun we have together.

Rene deConing, BPmarketing research manager. Your input and guidance as well as the

management of theprocess is appreciated.

Justine Snider, Gerhard Smit and Peter Searll from Research International. Thank you

for your patience and professionalism whilst I continuously changed the format, the

presentation of thedata and theassistance afterwards.

All the other team members in DP who gave input, encouragement advice and help. I

could not havedoneit without you. Thank you.

ABSTRACI'

The marketing of lubricants in a business to business environment is facing some tough

challenges. Continuous advances in technology means declining volumes, as the oil lasts

longer and reduces oil drain intervals. During the guarantee/warranty period of the

vehicle, the original equipment manufacturers' specification as to what oil can be used,

plays a critical role, as using unapproved oil can lead to the warranty becoming null and

void. In the market, any number of lubricant manufacturers meet or exceed these

specifications. Once the guarantee period has expired, (OEM) specifications become less

important, and a number ofother variables start influencing the buying decision.

The market in South Africa is highly competitive, with a large number ofplayers capable

of meeting or exceeding OEM specifications. Thus quality alone can not be used as a

competitive advantage. Other variables in the marketing mix must thus be found to

create competitive advantage. In the paper we look at the traditional four P model, the

new four R model, the development of information technology and its role in creating

customer satisfaction. This research seeks to identify what variables in the marketing mix

contribute towards giving a sustainable competitive advantage, ultimately leading to a

strong, reliable and credible Brand.

The research uses the hypothesis that the Brand name plays a role when the decision

making unit has to decide what lubricants to use in their fleet. Market research, based on

the very latest marketing mix thinking investigates this hypotheses, and gives its findings

in a total unbiased, neutral report. Using conjoint analyses, Utility values obtained are

used to make recommendations on how to position the product in the market.

Lastly, based on theresearch, certain conclusions are drawn and recommendations made

on how best to utilise the power of the Orand for creating and sustaining long term

competitive advantage.

TABLE OF CONTENTS

DECLARATION iii

DEDICATIONS iv

ACKNOWLEDGEMENTS v

ABSTRACf vi

TABLE OF CONTENTS vii

LIST OF FIGURES xi

LIST OF TABLES xii

LIST OF ANNEXUR.:S xiii

vii

CHAPTER 1:OVERVIEW/INTRODUCTION

1.1 BACKGROUND

1.2 PROBLEM STATEMENT

1.30BJECfIVES

1.4 HYPOTHESES

1.5 DEFINITIONS, CONCEPTS AND CONSTRUCfS

1.5.1 Additive

1.5.2 Brand

1.6 LIMITATIONS

1.7 VALUE OF RESEARCH

1.8 METHODOLOGYIRESEARCH DESIGN

1.8.1 Research Method

1.8.2 Qualitative or Quantitative

1.8.3 Data Collrction

1.8.4 Da.a Analysis

1.91AYOUT OF RESEARCH REPORT

CHAPTER 2: Tiff; MAKING OF A BRAND

2.1 THEAIM OF CHAPTER

2.2 ADEFINITION OF BRANDING

2.3 COMPONENTS OF TilE BRAND

1

3

3

4

4

4

4

5

6

7

7

7

8

10

10

11

11

12

2.3.1 The Traditional Paradigm

2.3.2 Brand Architecture

2.3.3 Brand Soul

2.4CUSTOMER R.:LATIONSIIIP MANAGEMENT

2.4.1 The New Paradigm

2.4.2 Advertising in Brandbuilding

2.5 BRAND EQUITY

2.6 SUMMARY

CIIAPTER3:

COMMERCIAL MARKETING, LATEST PERSPECTIVES

3.1 TilE AIM OF TilE CHAPTER

3.2 PORTER'S FIVE FORCES MODEL

3.2.1 The Risk of New Entry by Potential Competitors

3.2.2 The Bargaining Power of Suppliers

3.2.3 The Buying Power ofBuyers

3.2.4 The Competitive Forte of Substitute Products

3.2.5 The Degree of Rivalry Among Established Companies

3.3 MARKETING MIX, TIlE FOUR P'S

3.3.1 Product

3.3.2 Price

3.3.3 Place

3.3.4 Promotion

3.4 RELATIONSHIP MARKETING

3.5TilE FOUR R MODEL

3.6 ORGANIZATIONAL BUYING BEHAVIOUR

3.7 ELECTRONIC REPLENISIIMENl'

3.8SUMMARY

CIIAPTER4:

TIIESOUTII AFRICAN MARKET AND ENVIRONMENT

4.1 TIlE AIM OF TilE CHAPTER

4.2 LUBRICANTS IN AFRICA

\-iii

lZ

14

17

18

18

21

22

23

25

25

26

27

28

29

29

31

32

33

33

34

35

36

38

44

45

47

47

4.3 TilE SOUTII AFRICAN LUBRICANTS INDUSTRY 48

4.3.1 Lubricants Manuradu~ 49

4.3.1 Distribution and Logistics 51

4.3.3The Automotive Lubricants Industry 51

4.3.4Comparative 1100 Brands 57

4.4 MARKET SEGMENTATION 63

4.5 EFFICIENT CONSUMER RESPONSE 64

4.6 SUMMARY 65

CIIAPTf:R 5: TilE RESEARCH DESIGN

5.1 TilE AIM OF TilE CIIAPTER 67

5.1 QUALITATIVE AND QUANTITATIVE RESEARCH PARADIGMS 67

5.3 PREVIOUS RESEARCH AND NEW RESEARCH REQUIREMENTS 69

5.4 SAMPLE DESIGN 71

5.5 RELIABILITY AND VALIDITY 74

5.6 QUESTIONNAIRE DESIGN 75

5.6.1 The Questionnaire 76

5.6.1 Conjoint Analysis 79

5.7I1YPOTHESIS TESTING 80

5.8 SUMMARY 81

CIIAPTER 6: DATA ANALYSIS AND INTERPRETATION

6.1 TilE AIM OF TilE CIIAPTER 83

6.1 SAMPLE COMPOSITION 83

6.3 BRAND AWARENESS 85

6.4 PRICE 88

6.5 PRESENTATION 90

6.6 PROMOTION 90

6.7 CUSTOMf:R Rf:I.ATIONSIIIP MANAGEMENT AND

TECHNOI.OGY 91

6.8 RANKING OF BRAND ATIRIBUTES 93

6.9 CONJOINT VALUEANALYSIS 94

6.10SUMMARY 97

CIIAPTER 7: CONCLUSIONS AND RECOMMENDATIONS

7.1 TilE AIM 0 ..' TilE CIIAPTER 99

7.2 IIYPOTIIESIS TESTING 99

7.2.1 Observed Validity 100

7.2.2 Regression Analysis 100

7.2.3 Conjoint Value Analysis Utility Ranking 101

7.2.4 The Chi-Square Goodness of Fit Test 101

7.3 RESEARCH CONSTRAINTS 104

7.4 CONCLUSIONS AND RECOMMENDATIONS ON BRAND 105

7.5 CONCLUSIONS AND RECOMMENDATIONS ON MARKETING

~U~ 1M

7.5.1 Customer Relationships and Information Technology III

7.5.2 Current Usen 112

7.5.3 Lapsed Users 113

7.5.4 Non-Users 114

7.6 TilE FUTURE 114

7.7 SUMMARY us

BIBLIOGRAPIIY 117

UST OF FIGURES

Figure 1.1: Market Overview

"'igure2.1: The Function of the Brand for Buyen and Sellen

Figure3.1: Porter's Five Forces Model

Figure3.2: Marketing Mil Model

Figure3.3: Comparative Growth of Various Communications Media

Figure4.1: Lubricants Demand in Africa

Figure4.2: Commercial Vehicle Sales

Figure4.3: Lubricants Market Share, Commercial Only

Figure4.4 : Lubricants Market Share, Including Retail

Figure4.5: Diesel Lubricants Positioning Matrix

Figure6.1: Sample Composition by Market Segment

Figure6.2: Spontaneous Brand Awareness, Fint Mention

Figure6.3: Spontaneous Brand Awareness, Total Mention

Figure6.4: Length of Relationships

Figure6.5: Brand ImageVanellus, All Respondents

Figure6.6: The Price Ladder

Figure6.7: Vanellus Price Perceptions

Figure6.8: Packaging Perceptions

Figure6.9: Advertising Awareness

Figure6.10: Current and Preferred Methods of Ordering 1100 Oil

Figure6.11: Current an Preferred Methods ofContact with Supplier

Figure 7.1: Brand Knowledge by Manufacturer

Figure7.2: Areas of Under Performance

Figure7.3: Artas of Under Performance continued

Figure7.4: Reasons for Switching Brands

Figure7.5: Methods ofSourcing Oil

1

13

16

34

44

47

51

55

55

61

84

85

85

86

87

88

89

90

90

91

91

.. 105

107

107

109

110

xi

LIST OF TABLES

Table 2.1: Architecture or Added Value

Table 3.1: Market Share or Lubricants Majors

Table 3.2: Importance or radors in making buying dtcisions

Table 3.3: Influences in the buying decision

Table 3.4: Sources used in keeping up with market trends

Table 4.1: Automotive Lubricants Sales Volumes 1994 to 1998

Table 4.2: IIDD Oils,Comparable Brands

Table S.I: Sample Breakdown, Project Shuttle

Table S.2: Market ShartlElptcted Users in Sample

Table 6.1: Sample Composition in Terms or Users

Table 6.2: Position orDecision Makers

Table 6.3: Brand Attributes Ranked in Order or Importance

Table 6.4: Utility Ranking for Total Market

Table 7.1: Observed Usen or the Brand

Table 7.2: Amended Table of Expected Frequency of Users

Table 7.3: Calculation of the Chi-Square Statistic

15

JO

41

42

42

53

58

73

81

83

84

93

97

102

102

103

xii

· jii

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I nn ure

CHAPTER 1

OVERVIEW/INTRODUCTION

1.1 BACKGROUND

The research is intended to have a practical application. The student is employed in

South Africa as Automotive Lubricants Marketing Manager by DP Southern

Africa, one of the major global petroleum companies. A substantial amount of

Business Process Re-engincering took place in this company in 1999, and

numerous departments were restructured, downsized and then re-focused on a

sector based approach. Very recently this company also bought the Burmah

Castrol Oil Company, oneof the leading Brands of lubricants in the world.

Prior to the acquisition of Castrol, the company was not seen to be a lubricants

focused organisation, being better known as a major player in the petroleum fuels

industry. Whether this perception is justified or not, the company is very

innovative and in 1999 launched the first application branded lubricants range in

South Africa, namely the Visco range ofautomotive oils. This range is unique, as

it takes the guesswork out of picking the right oil for the consumer's vehicle. The

container clearly shows a picture of the vehicle it is intended for. As such, one gets

on oil for older vehicles, Taxi's, 4 x 4's, Sport vehicles, Diesel vehicles and an oil

for light delivery vehicles. (See Annexure Afor a positioning matrix of this range

ofoils.)

Part of the range oflubricants supplied by BP, is a veryspecific range ofdiesel oils,

branded Vanellus. Vanellus is an oil designed for application in heavy duty diesel

(1100) vehicles, from light commercial to extra heavy transporters and off-road

vehicles.

During 1999, the company lost a substantial volume of sales on the Vanellus

range, in excess of 900 000 litrcs, at a substantial loss of contribution to the

company (Sec Annexure B for actual figures).

Th purp • of this r r h i ' th r fold: Firul , t d I rnun thi

10 's of bu in s, lookin riabl s of th III r ·tin rni appr h n

Br nd nd 1 md

nd thirdl , t u

h.th

po itionin J pi

Th pr du t. rc hi hI t hni I, hn i

sp ilk uion , a ' pr s ' rib d b numb r of t stin 1'1 iliti s, th II n n

being th urn In lustry (API) r lin (. ' 1lI1 ' , ur f n

xampl or r hni al sp .cif u ions ).

Over md abov this, th n III :.quipm III M nu f turer ( ~M ' s hay

sp cific r

list th pr dUCI in thoir b

vchicl "

t or ' ,C d in order for th m to

pprov d pr ducts that can be u. d in th ir

omp titi n is fierc , and in uth frica th r ar 7 major who d Jar th rr

figur and about a hundred mall bl nd r. and fill rs of lubricant .

rk t 0 e rv icw U Amoro

.., ' ·. Il - jl,.- --" '-..-

1,,·•• <--_ .". .

- -- ~---::---

i 1

... . - . J

b ll" I I

A, n Ill. r r m in d irtu 11

tatic

d linin

r th I I upl

dr in.

ov r 11 m r

min Ion r th qu lit f lubri nt r

3

continuously improving. A loss of substantial volume is thus of major concern to

any ofthe players in the industry.

This study shall look at the power of the Brand in the decision making process,

consumer behaviour in the commercial context as far as the Brand is concerned,

the traditional 4Pmarketing mix and its role in Brand building, the more recent 4

R marketing mil', the integrated solutions approach and the actual needs and

requirements ofthe commercial consumer ofdiesel automotive lubricants, and how

BP/Castrol can best satisfy those needs and further enhancelbuild these Brands. Of

particular interest would be a question included on a guarantee against engine

breakdown, should the prescribed oil be used, and if this will influence the

purchasing decision and further enhance the Brand.

1.2 PROBLEM STATEMENT

To determine the reason for the volume loss of Vanellus and how this can enhance

the Brand to better meet consumer's needs.

Identify ways and means to improve the Brand proposition, in order to attract

more customer loyalty, enhance its Brand equity in the process, and increase sales

and market share.

I.J OBJECTIVES

• Identify extent and cost ofvolumeand contribution loss tothe company.

• Investigate and analyse the South African commercial lubricants market.

• Determine the key drivers that influence the purchasing decision and that make

up the overall Brand image.

• Make recommendations and reposition the Brand in its optimum position, based

on the research findings.

..

1.4 IIYPOTHESIS

The hypothesis would be that Brand name is a significant criterion in the decision

making process when procuring HOD oils in the business to business environment

in South Africa.

1.5 DEFINITIONS, CONCEPTS AND CONSTRUCTS

1.5.1 Additive

• Additive: Any material added to base stock oils to change its properties,

characteristics or perfonnance.

1.5.2 Brand

• Brand: (Kapferer, 1992: 15 - 20), says the following:

A Brand is both the memory and the future of its products. A Brand

becomes credible through endurance and repetition. By creating satisfaction

and loyalty, the brand enters into avirtual contract binding it to the market.

A Brand is not a product: it is the product's source, its meaning, and its

direction. The primary capital of many businesses are their brands. Brands

are the only truly international language • a business Esperanto.

According to him, it is necessary todefine what the Brand infuses into the

product orservice, and how theBrand transforms it:

• What attributes arc embodied in the productor service ?

• What advantages does it incorporate 1

• What benefits docs it provide?

• What obsessions docs it represent?

• User; The users will be those who respect the product's values. culture.

and personality.

When an audience can visualise all six dimensions ofthe Brand, the Brand

is deep, otherwise it is shallow..

• Brand: (Koller, 1997: 443). says:

A Brand is essentially a seller's promise to consistently deliver a specific set

of features, benefits and services to the buyers. The best Brands convey a

warranty ofquality. But a Brand is even a more complex symbol. A Brand

can convey up to six levels of meaning:

• Attributes

• Benefits

• Values

• Culture

• Personality)

(• (Dickens, 1998: 11), Describes Brand as follows:

A Brand is a name, Brand equity ist~that name. Brand loyalty is

"- ----built onquality, price, image and service. all elements that constitute value.

~~~~ the value in and ~f a brand. Brands and Intellectual

Properties are intrinsically linked. Without Brands, a company is nameless,

without a name a company has no equity. without equity you can not build

customer loyalty. Nobody knows your quality; one cannot assess your

value. You have no image and can offer no service..

1.6 LIMITATIONS

BP Vanellus users are spread throughout South Africa, over a wide geographic

area as well as over a wide variety of segments. These segments include

workshops, fleet operators. construction, mining. agriculture, marine. forecourt

top-up, resellers, high street retailers, do-it-yourself mechanics and original

equipment manufacturers.

6

As set out in the research design section that follows later, the survey covered

large, medium and small fleets in thethree major geographic areas of Cape Town,

Durban and Johannesburg.

By the very nature of the complexity of the interviews, the potential sample size

and the geographic area, there were serious financial constraints.. The cost of this

survey was capped atR 120000.00

1.7 VALUE OFRESEARCH

Leedy (1997: 189), says that causal comparative research describes relationships

between something that occurred in the past and subsequent responses. The intent

isto uncover possible cause-and-effect relationships among these phenomena.

These variables, which include amongst others, quality, specifications, economy,

preventive maintenance qualities and technical performance, also include "soft"

variables like relationships between businesses, service provided, risk aversion,

references and reassurances, and realised performance.

The research has also investigated all the latest thinking in terms of commercial

marketing, investigated the available models and highlighted relevance to the study

undertaken.

By making use of the survey findings and conjoint analysis, it was possible to re­

position Vanellus in its optimum marketing position.

In conjunction with all of the above, it was also possible to make very positive

recommendations to overcome existing weaknesses, to meet consumer needs and

to recapture lost sales volumes and market share.

7

Ultimately the research , survey and recommendations can be incorporated in a

fuUy fledged Marketing Plan for np Vanellus. That does, however, faU outside tho

scopeofthis research document.

1.8 METIIODOLOGV/RESEARCII DESIGN

1.8.1 Researeh Method

As this research isbased on known variables that can beapplied in different ways

in tho market place, the research can be classified as applied research. Its findings

wiU be used to manage the Brand and range of products better, to re-position the

Orand and to formulate a new marketing plan. AU of this puts it in the applied

research category, in contrast to basic research which is abstract and is used in

subjects like mathematics, chemistryand physics.

1.8.2 QUllitativeor Qu.ntUative

Quantitative research consists of thosestudies in which the data concerned can be

analysed in teons of numbers. Quantitative research is based morc din:ctJy on its

original plans and its results are more readily analysed and interpreted (Dm and

Kahn, 1989: 89·90 in Blaxteret aJ., 1996).

The questionnaire is designed in such. way that the findings can be expressed

numerically, thus making statistical analysis possible. As it is also dealing with a

Orand, an intln8lblc, some open ended questions will be included, questions that

will have to be analysed through personal judgement by experts in the panicular

field (ChisnaJl, 1981: 170).

As • whole, the research design is more quantitative than qualitative, no one-to­

one discussions, group discussions, psychometric - or psychological testing wu

conducted.

8

1.8.3 Data Colltction

A personal interview was held with respondents, using a customised and pro­

tested questionnalre. This primary data was then analysed and presented in figure

and table form, with conclusions drawn from it.

As far as researching the South African Market and environment is concerned,

desk research using secondary data was conducted. Books, trade journals, the

Internet, company records and internal data sources were utilised.

1.8.3.1 Population and sampling techniques.

The universe is all businesses in South Africa that operate vehicles powered by

diesel engines.

Sample sizeplanned is 2S0 respondents.

BP has comparative customer records ofall customers who purchased Vanellus for

1998 and 1999. The sample population will be 100 current customers taken from

this list, 7S lapsed users and 7S companies who do not appear on this list, that is,

fall in one of the required segments, butare not currently BP Vanellus users

The initial selection criterion for the users will be according tovolumes used.

Less than 1000 litre per annum: small user.

Between 1000 and SOOO litreper annum: medium user.

More than SOOO litre per annum: large user.

From this, thefollowing stratification ofthe population will be done:

Long distance haulien, heavy dutylJight vehicles.

Short distance haulien, heavy dutylJight vehicles

Workshops for the above.

Agricultural Co-operatives

9

Mining

Construction

The sample will beweighted to include 60010 larger customers/users. 200.10 medium

usersand 20% small companies.

Over and above mining and agriculture, that has to be sampled at geographic

locations nonnaJly outside cities. research will be concentrated around Cape Town,

Durban and Johannesburg for ease of data collection.

Chisnall (1981: III), states that stratification of population in sample design

involves stratification or division of the population to be surveyed into groups

with characteristics identified as relevant to the needs of the particular survey.

From these strata and the known non-users of the product, a quota will be

selected for interviewing.

Quota sampling is a form of judgementsampling in which the biases arising from

the nonprobability method of selection are controlled by some extent by

stratification and thesetting ofquotas for each stratum (Chisnall, 1981: 81).

1.8.3.2 Datacollection techniques

Ultimately primary data was collected through personal interviews with 233

respondents using a customised. pilot tested questionnaire. The interviews were

done by trained professionals, employed by a bona fide research company of note.

This ensured impartiality and neutrality. It also greatly enhanced the validity of the

research, as the same format and fonnula can be used again in future and it should

produce similar results. It is intended to set a benchmark through this survey as far

as brand tracking and brand recognition is concerned, so that future efforts can be

measured against this base. Telephone screening was conducted and appointments

made for the interviews with bona fide decision makersin the company.

10

1.8.4 Oata Analysis

Statistical measures were used to test the hypotheses and certain other variables.

but in the main lhe research results are more descriptive, expressed in graphs of a

comparative naiure and showing correlations between the major players in the

market. Finally, conjoint analyses is used toshow the best possible positioning for

BP Vanellus, laking all the variables into consideration.

1.9 LAYOUT OFTilE RESEARCH REPORT

Sec Index and Tables ofContent.

11

CHAPTER 2

THE MAKINGOF A BRAND

2.1 TilE AIM OF TilE CIIAPTER

This chapter, the first of the literature review section, reviews what has previously

been published about Brands. It will consider all the attributes ascribed to Brands,

objective and subjective perceptions about Branding, its various components and

the role it plays in adding value to the prOduct and the company. It is extremely--important to understand exactly all the meanings and connotations of the Branding

. _..~.~. -- -- .~ ._,--...-_., .. ~-_. _._--~.--_._- ....

concept, ifoneis to study its importancein the buying scenario......,._. - ". ~ ..,.~._ ... _.

2.2 A DEFINITION OF BRANDING

I Hankinson and Cowking (1993: I), define a Brand as a product or service made

distinctive by its positioning relative to the competition and by its personality. Its

positioning defines a Brand's point of reference with respect to the competition

whilst the Brand's personality consists of a unique combination of functional

attributes ~~s;~~~~ Collectively, the positioning and Brand--personality

are termed the Brand proposition. This constitutes the starting point for Brand

managers charged with the responsibility ofdeveloping and/or maintaining a Brand

in the marketplace.

Also see 1.5.2: 4 for more definitionsof Branding.

In developing and maintaining a Brand, you need to have a simple proposition._-_._---_._----._--------which is easy to understand. Brand propositions which are complicated or

inconsistent, will have little chance of success ( Davidson, 1987 ).

Wilson (1999:3), states that Branding and the strength of brand-person relations

may be one of the last domains of sustainable competitive advantage for firms. It is

12

hard to replicate another brand's personality and copy the traits and meaning

developed over time from a successful Brand relationship. Once a Brand

~ relationship isestablished, it is very hard totake away: if you don't believe it, try to

~0( change your grandparent's political beliefs. He continues: Trends, such as

~:'\' ~~, increasing product and service diversity, increasing global competition, accelerated

~ '\:'f' (" product life cycles, converging product quality, increased technological parity and

~)" the escalation ofbuyer power, have helped contribute towards shifting the focus

towards branding issues.

From the above it isalready clear that a Brand is a very complex issue. It is not

merely made up from a number of product attributes, a name, logo and slogan; it- '-'-----"'-

also contains "soft" elements like a personality and values, and this personality is

made up by emotional and self-expressive benefits.

2.3 COMPONENTS OF THE BRAND

N 2.3.1 The Traditional Paradigm(l\

Pitt (1998: 95), states that the quintessential function of Branding is to create-----_ ... _- .---

differences between entities with a similar potential forneed satisfaction. From this._",---- --, "-"-' - --_.- _.._._~ --,-----_._---

primary distinction a series of utilities or benefits emerge for both buyers and~._---" _._- ----_._.- ....__ . ------------._-_..._---------- -,-

sellers. He uses the figure2.1 below to summarise the benefits for both parties. For

buyers it performs the function of reduction. It reduces search costs, it reduces the~ _.- - -~ .-.. ----- -

buyers perceived risk, and interestingly, the buyer is considered to receive certain

psychological rewards by purchasing Brands which symbolise status and prestige,

thereby reducing the social and psychological risks associated with owning and

using the wrong product.

The sceptic may say that this does not apply in commercial procurement, but as

will be evident later in the research, more than sixty percent ofthe buying decision

is ultimately made by one person, and then psychological factors can come into

play

1101101nd,

- -- - ---- ..- -

l"i UN 2.1 : I"uSou 101

lSu)"Q and SelInAppra8dI U'. P

lEC

Pitt ( I ), I I that th r nd p rfonn Ih fun

t n d 10 b P rf rm d,

2 I) il fi ili t I

fimili IN I th m) , nd

n b n blin th

Dr nd It

t m r up,

rt ntl , Br nd f ilit t pr mium

r lu th

c h r nt m

ih m Dr nd i.

pri in b

pr du I r m b

parti ul rl imp rt nt in pr du t

14

buying behaviour. He sees the Brand as a symbol around which both parties can

establish a relationship.

His viewsstill hold true, but other authors expand quite considerably on this basic

paradigm. Some ofthis thinking is reflected below.

2.3.2 Brand Architecture

Architectural thinking on Branding as a core value adding process suspends

judgements onmany conventional rules ofthumb which applied when Brands were

operated as separate empires within a corporation. Architecture links Brand

identities - for example corporate Brand and product sub-brand - so that both

endorse each other, and play different leading roles in fonning stakeholder

relationships and earning customer loyalty.

2.3.2. I Business Wide Brands

Uncles (1995: I), has some very interesting insight into this. He proposes that the

number of standalone Brands must be reduced and moreequity must be invested in

business-wide Brands and less in products. "We need to re-learn what Brand

marketing is all about and we need to elevate marketing to ensure that there is

widespread participation in the process of adding value." The organisational

implications orthis are dramatic and challenging (www.b).

Table 2.1 clearly points out that Branding should no longer be product focused,

but should reach far wider, encompassing the total organisation and all its people,

with everyone focused towards a common goal, that of adding value to the total

business through service and support to the customer. Brands should also be

leveraged to maximise goodwill between linked Brands. Permanent double-branded

linkages between different levels of Brands should be developed so that over time

both Brandsgain from the other's goodwill.

T bl • _. I: r .hite ture of Add V ilu • Melnet, 6

2..2.2 Lea lJ'S of Brandin

Th ne t cone pi entail ari u league of Branding. gue of Br ndin II u

the purp whieh a particular Br nd i aiming 10 fulfil. The tru tur I c n i

of h. rt 'ring i de ign d to

wor In n the me goal . Th ide of Brand lea u

Br nd' ult in

ppo it d

• if

d

• Ih

nd I I, on 111 di nl

• th Br ndin

• th

di iplin d

(

16

2.3.2.3 Brand Architecture at Work

Aaker (1999: 3), at a Brand Summit had the following to say about Brand

architecture: "There are three mistakes that companies make when it comes to

Brand architecture.

The first is the 'Brand is an island' trap. A stand alone Brand is a wasted

opportunity. By launching sub-brands and endorsed-brands, a company increases

its presence in the market while eliminating any chances of cannibalisation". Aaker

(1993), proposes that the value entry ismade as distinct from the master Brand as

possible.

The second Brand identity trap is the external perspective trap. When a company is

intent on selling to external customers, it forgets all about creating a clear Brand

identity within the organisation. As a result, the staff are not able to identify, and

communicate, the heart of the Brand.

The third trap is the company's fixation with the product attributes. Companies

should expand the value proposition and bring emotional and self-expressive

benefits into playas well. Features can be matched by the opposition every day.

There are four ways of projecting a Brand: as product, organisation, person or

symbol. While product attributes can be matched, intangible benefits can not

(www.d).

2.3.2.4 Human Characteristics of the Brand

Americar car marketer Saturn is a Brand that derives its image from the values of

its organisation. Then there are a whole slew of Brands that come across as a ~ ..

bundle of human characteristics: Harley-Davidson (macho, male, freedom),

Anderson Consulting (competent, confident), Virgin (meteor-like, underdog, but

energetic) and many more. Turning to symbols, there is the Michelin man, the Nike

Swoosh and so on.

17

Aaker (1999), summed up byadvising the audience to look for emotional and self­

expressive benefits. They make for a much stronger relationship with the customer.

Mike Lipkin, a well known South African Motivator, propagates that people make----_.

decisions on emotional grounds. then justify them withlogic.-~ ~- _..- -~--

In an unpublished paper. Prashun Dutt (1998), says that the role of familiar

Brands in reducing uncertainty may be salient with customers seeking security.

This aspect will be addressed under the new marketing variables of risk aversion

and realised performance in the next chapter.

2.3.3 Brand Soul

Wickens Tutt Southgate, a London based Brand agency. are evolving a manifesto

for a radical new approach to Brand marketing. Their approach of Brand Soul

questions whether the Brand fully realises the concerns of marketing to literate

consumers. They integrate visions. values and passions as a necessary condition in

organising campaigns for real Brands. This represents a synthesis ofmany schools

of thought about people. drawing particularly on the work of pioneers such as

Carl Jung (Man and his Symbols), Stephen R Covey (Principle Centred

Leadership), and Gary Zukav (the Seatofthe Soul) (www.cc).

The sourcesof Brand Soul arc threefold: Culture. Context and People.

• Values draw on historical company Culture

• Vision draw on future Context (Consumers, Customers, Competitors)

• Passion draws on the present-day team ofPeople

The company culture within which the Brand is managed gives a Brand its noons,

rules and paradigms, in other words, its values. The passions of the people

currently involved with the brand (all of them, not just those in the marketing

department), represent the drives and energies behind the Brand. Finally. the

IS

marketplace context (in terms of consumers, customers and competitors), give rise

to the Brand'sdrive in defining and constantly updating itsvision.

The aim is no longer to build Brands however the consumer wants them. but to

build Brandswhich truly live up to their full potential. This potential will always be

far greater than customers would ever have imagined. It involves a completely

new. and much more inspirational. set ofstrategic planning techniques (www.a).

The article continues by stating that the next step is about Brand Realisation.

Brand Realisation isconcerned with the "reality" of the Brand - with the Brand as

the customersees it, touches it. uses it and interacts with it. It is about creating and

developing the living embodiment of the Brand's Soul through the reality of

products. services, packaging. 3D environments and everything else by which the

Brand is made physically manifest. It is Brand building at its most holistic

(www.a).

This concept is gaming ground. specifically in qualitative research, where

respondents in focus groups are often asked how they perceive the product or

company as a person. often with interesting results.

2.4 CUSTOMER RELATIONSHIP MANAGEMENT

2.4.1 The New Paradigm

Two outstanding features highlighted so far are the need for emotional appeal to

the customer's own aspirations towards self-aetualisation and the absolute

necessity of impeccable service. In America service is part of the paradigm; in

South Africa it is still sadly lacking. The latest developments in information

technology can help to overcome this. as to a large extent it eliminates the people

factor, and ineffective people can seriously harm the Brand. Through electronic

data interchange and seamless just-in-time supply streams. customers can be tied in

with their suppliers. thus raising barriers to exit and cementing relationships.

19

Moore, (1996: 2- 3), quotes the following real life example:

Part of the genius of Wal-Mart's ecosystem was also its unprecedented

involvement and entanglement in the affairs of its suppliers. By 1984 Wal-Mart

began exerting heavy pressure on suppliers to keep their prices down. Moreover,

Wal-Mart compelled its suppliers to set up cross-company infonnation systems to

obtain maximum manufacturing and distribution efficiency. In 1987, Wal-Mart and

Proctor and Gamble reached an unprecedented partnership that involved extensive

electronic ordering and information sharing between the companies,

2.4.11 Just in Time Concept

Rexha (1998: 2), explains the just-in-time concept very well. Based on strong

functional links between big Brand owners and their suppliers in a system of

networked organisations, the Japanese developed highly efficient collaborative

buyer-seller relationships, highlighted by the just-in-time manufacturing system and

earlier supplier involvement in customer innovation efforts (Blenkorn and Noori,

1990~ Dion, et al, 1990; Turnbull, et al, 1992). Aiming to follow this path, Western

firms are increasingly interested in the Japanese model of buyer-seller co-operative

relationships and they make efforts to implement them in their own environment.

2.4.1.2 Information Technology

Towards this, information technology is playing an ever increasing role. McCann

(1995: 18), explains: "Brand managers spend their time studying consumers and

working with advertising agencies to find and communicate the right image for

their Brand". Since advertising is a means of establishing a strategic competitive

advantage, marketing managers make sure they understand how it works and how

they can usc it to their advantage. The target of the majority ofa Brand's budget is

usually the customer, not the consumer, When the target shifts to the

retailer/reseller, the usc of information to enhance the product becomes even more

important. But this time, the advertising agency is not the key partner in product

enhancement, it is the IT professional. Marketing programmes aimed at the

20

customer are becoming computer dependent becausethe computer is the means by

which information is attached to the product. In Computerworld (1994: 133), a

marketing manager describes how he was able to achieve Brand growth by being

tops at delivering actionable data. In the eyes of the customer, the Brand is clearly

enhanced when marketing managers can provide information on how the customer

can use the Brand to increase profits. This inevitably raises the issue of the Internet

and its roleas a channel to market and a medium to build the Brand.

2.4.1.3 The Internet

Lindstrom (2000: 3), sees the Brand as the gateway to the Internet. He says that

for many users, Brands will act as a trusted consumer guide to the Internet, a

development that will make greater demands of the online Brand. And this might

be the off-line Brand's survival kit. One of the emerging problems of today's

Internet world is the lack of trust consumers have in web sites and online Brands.

One cannot buy goodwill and trust - you earn it over time. This means that trusted

Brands have a free ticket to consumer trust on the web while the online market is

still immature. It isnot surprising that online consumers tend to visit their preferred

main Brands on the Internet within a relatively short period of time, because they

already have a positive relationship with the product in the off-line world. Creating

a Brand is now easier than it ever has been. However, committing Brand suicide is

even easier, due to the inability to adapt tothe rapidly changing technology.

2.4.1.4 Off-line Brands

Off-line Brands lack interactivity. They are passive. Off-line Brands can only

communicate one way via television, print and radio. Online Brands 'listen' to the

consumer, learn from them and react based on the consumer's needs. This new

skill - this interactivity - is an online Brand's strongest asset. It enables the Brand

owner to fonn aone-to-one relationship with the customer hum-.dd).

21

2.4.1.5 Summary

The web's power to drive awareness, interest and action, give it attributes of both

an advertising medium and a sales channel. Customers may never visit a brick-and­

mortar store, talk to a company or have physical contact with a particular product,

yet Brand preferences and choices have been made. In such scenario's, the Web

experience isthe complete Brand experience.

Lou Gerstner (www.e), from IBM warned that the new dot com companies (like

Amazon. com, Netscape. com) arc fireflies before the storm· all stirred up,

throwing ofTsparks. The storm that's arriving - the real disturbance in the force - is

when thousands and thousands of institutions that exist today seize the power of

this global computing and communications infrastructure and use it to transform

themselves.

2.4.2 Advertising in Brandbuilding

Rosenshine (1999), in a debate with Freeling, sees the situation asset out below.

Branding will move beyond traditional advertising to embrace a slew of media. In

other words, customer relationship management (CRM) is the future. This is where

agencies have a crucial role to play. Creating relationships is an area where

agencies hold the edge. It will take creative people thinking about consumers'

hearts and minds to dev~~p.J!!C? Brand images. And you will not find the creative

people at the consulting companies or at the dot-corns, one will find them at the

advertising agencies.

Freeling (1999), in the same article, sees it differently.

There are four new rules of Branding.

• The first is that, increasingly. there is little functional difference between---_.,~,,_._-~-_._._~----------

products. To surmount this. companies will have to co~e on functional... __ .,.~. -- .._---~.- .._.-

22

benefits (product attributes), process benefits (ease of purchase, servicing_.~ --_.~ .•. ----------

benefits), and relationship benefits.-• Two, a company will have to deliver the key touch points - basically, identify

the mo~~nts ~~e.~ the ~u:!~~_~r _r~quires assistance, and spring into action.

• Third, surround the customer with the Brand. Take greater recourse to non-._-->_._------~.- ..._--- ~_..-._ ..-._----_._,--_.__.__ ._-----

traditional -mcdill~~ Brand building. As the media fragments, trust in

advertising falls, and the Net takes eyeballs away from television, non­

traditional media will come to playan important role in Brand building.

• Finally, there is permission marketing, where companies will forsake intrusive

marketing inorder to build a dialogue with the customer.

CRM focuses the Brand image on the current customer, who is more likely to

purchase any given product tomorrow. It is only a matter of time before marketers

will create the necessary databases that will fonn the basis for their Customer

Relationship Marketing exercises.

~ • Z.5 BRAND EQUIT\'

\,j \

Brand is called an intellectual asset in the management field and called an intangible

asset in the accounting field. Brands represent a certain quality and image

acknowledged in the market. The power ofa Brand derives from the fact that. as

soon as a customer perceives a Brand, it reminds customers of its quality and

image, and this fact gives rise to loyalty to a certain Brand or company (Gale,. -- . _. --------------------

1994). The essence of a Brand can be regarded as a source of an excess return

because oftheBrand 10~a1~JOkada, 1998: 2).

Cullman, stated as far back as 1982, that in today's environment, building strong.-._-- _.• _.-._--, ------

Brands and establishing Brand equity is becoming more and more challenging.

Increased pressures to compete on price, increased competition through product---

introductions and the fragmentation of advertising and market segments arc just a

2)

5ADlDhLQfthe preuures being faced by companies in today's highly competitive"-._"~'_._-_ .._~._.~.--._----

envirC?nm~t_ (www g)

The most important asscts of any busin~~~_ ar~i!'tan~~le - including its base of

loyal customers, brands, symbols and slogans - and the Brand's underlying image,--- - - ._. ...

personality, identity, auitudes. familiarity, associations and name awareness. These

assets· along with patents, trademarks and channel relationships - comprise Brand

equity, and arcaprimary source of competitive ad~a..!1tatte an~ f~!~r~.~rnings.

At least five general approaches to asscssing the value of Brand equity have been

proposed.

• Price premium that the name can support

• Impact of the name on customer preference

• Stock market valuation (in BP's Annual Report of 1999, net auets are given as

about $44 billion, yet Market Capitalisation exceeds $ 1SO billion)

• Replacement value ofthe Brand

• Earning power of the Brand

• The set of consumer associations and behaviours that permits the Brand to earn

greater volume or margins than it could without the Brand name (www.h).

Cravens and Guilding (1999:61), states that ultimately the success of any brand

valuation method depends on the firm's ability to use the measure to help improve

financial performance. Some suggest that the measurement of intangibles such as

brand value, human capital, and innovation power should take precedence over the

measurement of profits It is these longer-lasting assets of an organisation that will

traMlate to sustainable long term profits

1.6 SUMMARY

Thi, charter point, out that a nrand is made up of • "lUI mJmber of variables.

some tangible, but even more that arc intAngible A Urand is normall)' auoaatcd

with a name, symbol or slogan, but this purely serves to identify a product

24

Companies are trying to appeal to psychological motivators to establish an

association with the Brand. a sense of belonging. This is done by positioning the

product correctly according to its attributes. but also by giving it a Brand

personality. This personality stands for the values and norms. not only of the

product. but also of the company and its people. If this image is favourable. and

compatible with the customers aspirations, the purchase of the product is made

much more readily.

Products can be differentiated. even when considered to be an everyday

commodity. bygiving it a Brand soul. This allows for a premium price to be asked.

Even when the customer believes that he/she isdealing with technical products that

are all similar. subconsciously he/she will have a preference, a Brand hclshe best

associates with. And even in business-to-business marketing. sixty percent of

decisions aretaken by one individual.

Numerous ways exist to build Brand equity. but the latest focus ison relationship

building and the role information technology will play in growing and advancing

the Brand.especially as the Web develops as a newchannel to market products.

2S

CHAPTER 3

COMMERCIAL MARKETING, LATEST PERSPECTIVES

3.1 TilE AIM OFTilE CIIAPTER

In Chapter I thecomposition of a Brand was discussed. It was clearly shown that a

Brand does not simply consist of a product or range of products with certain

attributes, a name and an icon to identify it. Ogilvie and Mather, the global

advertising agency, uses the concept of three hundred and sixty degrees branding.

This simply means that the total presentation and communication of the Brand

must be consistent and be based on the Brand print or DNA of the Brand as they

call it. It is the unique set of values, personality, perceptions and resources that

makes up the customer's perception of the overall or so called corporate or banner

Brand (Makin, 2000).

It would thus make sense to look at and analyze all the levers that make up a

Brand strategy in order tounderstand fully how far the integration process must go

and to make meaningful recommendations at the end of this study. This will be

done by looking at the accepted marketing models, reflecting the latest thoughts

on these models and adding the impact of infonnation technology. Finally, The

study looks at buying behavior in the commercial environment, asopposed to retail

consumer buying. This need to be understood, as the traditional belief is that

Brand plays a lesser role in business-to-business procurement.

2.1 PORTER'S FIVE FORCES MODEL

Ifill and Jones(1998: 123), says that the Sforces that shape the competition in an

industry influence profits of the established companies in that industry. If we refer

to Porter's model in figure 3.1, one finds that these forces are: The risk of new

entry by potential competitors, the bargaining power of suppliers, the bargaining

..pm I' () bu I' • th rnp titi f ub titut pI' du I nd th

din , th

infl u /I III rk etin in th comrn rei I lubri nt

induu in • outh fri will b an ti t d.

comp 'Iit rs i bra rd 'I' til /I wh t

KOII-r, (I 7' 229), . th I th r /I of tu I nd P t nti I

lik -I

10 b· outdo n . b it. III rgin

comp niror s

rnp -tit I' or n w t hn ie. th n b it. urr nt

The t5 ForelS Driving Comp tlon:

Thr I of oowII' 11

I TRYCOMPETlTORS

8 8

Th t ofproducts ex

Fizu 3.1'

uuv d\ nt c:

. I ncr

3.2,1 'I , R ' of l e ./11 b t nli 1 , mp til

In . t imp rt nt pI' int til III I' I

reh h uld pr

I' h it d

th I'

thi. I'

rnrn rei I lubri nt '

Th purpo.

Dr ndin in th

I' n thi

27

Kotler (1997:230), describes this as Brand Competition. i.e. offering a similar

product and services to the same customers at similar prices. Following on this

definition, existing competitors would be: Shell, Castrol, Mobil, Caltex, Engen,

Zenex, Sasol, Total, Agip and Elf These would be the Industry Competitors in

figure 3.1.

Kotler (1999), also mentions industry competition which occurs when a company

sees its competitors as all companies making the same product or class of

products. In South Africa there are almost a hundred small fillers and blenders

servicing mostly niche markets. The barriers to entry arc low, especially if the

focus is on a small niche market. The major oil companies do however have

absolute cost advantages due to their integrated supply chain, infrastructure and

economies of scale. The lubricants business, contrary to petrol, is not regulated, so

this does not create a barrier to entry.

Black Economic Empowerment poses the biggest threat to existing oil companies,

as the market has traditionally been dominated by multinational oil giants. Under

the new dispensation in South Africa. it is the Government's intent, through

employment equity and redistribution of wealth to, rectify this situation. Every

lubricants business will be well advised to remember this and include it in their

strategic plan, especially as the main stream customer of the future will be Black.

This has serious but interesting repercussions on future Brand personality.

(Source: In-house minutes, 1999).

3.2.1 The Bargaining Power of Supplien

Because the supply chains of all the majors are almost fully integrated, very few

suppliers exert any influence over the big multinationals. They all have their own

upstream and downstream resources. It is vinually only the chemical additives

companies that supply any other components to the product, and theoil industry is

their lifeblood. The result is that there is parity on this attribute of the product, and

no competitive advantage can be obtained from this (fig 3.1).

28

An anomaly exists though in that the oil companies actually supply base oil to the

small nichemarket players at prices that allen allow them to undercut the powerful

big players, inorder to maximise production at the upstream refinery and to obtain

benefits ofscale (Reynolds, 2000).

With the addition of Castrol to the fold of DP, it will be interesting to see if the

company is now going to exert its power as a supplier, 8S it now has sufficient

market share to utilize full production capacity.

3.2.3 The Buying Power of Buyen (Figure 3.1)

The main buyers of lubricants in the industrial sector are original equipment

manufacturers, factories, mining, agriculture, marine and transport fleets.

According to Hill and Jones (1998), buyers will be powerful when they are few and

large in size, suppliers are many and small, buyers purchase in large quantities, they

can switch cost-effectively between companies or they can threaten to implement

vertical integration. Of all of these, the cost effective switch between companies

creates by far thebiggest threat. The market isextremely price sensitive and highly

competitive with all suppliers adopting a pragmatic approach to gain market share

(Reynolds, 2000).

The product is also very easy to compare, as it has to show technical

specifications, approvals and endorsements of OEM's. In most instances price,

and to a lesser extent Brand and support. become the differentiators. This

highlights the need of finding a more substantial differcntiator that will provide a

sustainable competitive advantage. Only CastroI seems to have established a

significant Orand presence that allows them to charge a premium price for their

product (Source: E-mirg, 1999).

29

3.2.4 The Competitive Force or Substitute Products (Figure 3.1)

There is no threat of substitute products at this stage. It is foreseen that

hydrocarbons will be with us for the foreseeable future. Products are continuously

improved and enhanced, but there are noother products that can perform a similar

function.

3.2.5 The Degree of Rivalry Among Established Companies (Figure 3.1)

The University of Oregon (www.i) gives a very comprehensive framework of

factors to be considered here. Amongst these are : The industry competitive

structure, demand conditions, exit barriers, high fixed costs, access to distribution

channels and a number more, all of which have to some extent, been covered

above. Some of the above do merit individual discussion.

The competitive structure of the industry is such that there is no interdependence.

Each has its own very elaborate, very expensive infrastructure. There is no

collaboration or collusion, the industry operates under total free market conditions.

Each of the majors are backed by enormous multinationals with substantial

resources, andall have as their objective tocapture market share.

Exit barriers to the majors are extremely high, as huge capital investment has been

made in refineries, tanks, blending and filling plants, pipelines, transport facilities,

distribution depots and other infrastructure. The Black Economic Empowennent

companies are looking at importing as much as possible rcady made product, but

the deterioration in the value of South Africa's currency makes this a somewhat

unviable proposition. The majors, who have an integrated supply stream, benefit

from upstream operations when the price ofcrude oil is high, as they can then sell

the unrefined product at high margins. Should the price of crude drop, they benefit

in the downstream operations as margins then increase on the refined lubricants

sold to the commercial market. The more efficient the logistical supply chain of

the oil majors, the more competitive they can become. As a result of the heavy

investment in infrastructure, all the companies have high fixed costs and they all

o

hav- I ' • 10 and u . th - un - d i tribution h nn I , 11 hould be ob u th t 11

th - lubri 11I1 companic need rn nhin 'Is ' 10 ti e th nu I comp 'Iili

(Rc nol ds, 20 0)

T ibl - , I: [arket h ire Lubri 1111 ijor " our " : UP 10 omp n

Sep.99 Oet,99 Nov-99 Dec-99 Jan·oo Feb-OOBP 1U1 13.11 11.93 14.60 14.23 15.38CALTEX 18.90 18.59 19.05 18.45 19.36 19.54CASTROL 10.40 9 .95 10.06 9.20 9.55 8.48ENGEN 22,57 23.66 25.25 24.89 24.77 23.81SHELL '23.29 23.61 23.28 21 .76 21.32 21.56TOTAL 9.48 10.18 9.13 10.19 9.64 10.06ZENEX 0.94 0 .90 1.30 1.11 1.13 1.18Total Market 100.00 100.00 100.00 100.00 100 .00 100.00

Dnnand conditions arc . u h, th t d pile a . Ii ht rowth in th gro dorn Ii

product, th overall demand i d rca. ing due 10 improvement in th qu lit of

lubricants and mbsequent Ion 'r dr ining interval "

A. n b een from tabl . I, although fluctuating within a p rccnl or . 0, th r

arc n i nificant change. in mar -t harc of th major if taken over a p ri d f

time,

Th obj hould thu b to in a long term u t inabl advanta . r . ult

of thi , th r arc devclopm nt III th markcl thr I ar n I covered b r '

model. Puri I rna rgue Ih I it ill fa ll und r

camp tit rs, \ hil I oth r III

ch n

add d I nt

Ih nd III u. f I hn

r I lion. hips, i. r ut I n to obt in nd III int III

mp titiv ad nu

Thi r liz d nd n d 10 form n int rip rt of n fiuur ( r nd

n.hip mark lin nd I hnolo \ ill di. u: din m r d pth in

31

the marketing mix in the next section. A major shill in the perception of the

fundamentals of marketing is taking place. The shifl is so dramatic that it can, no

doubt, be described as a paradigm shill (Kuhn: 1962). Marketing researchers have

been passionately convinced about the paradigmatic nature of marketing mix

management and the four P model as the basic foundation for all marketing

thinking and to challenge it has been as heretic as it was for Copernicus to proclaim

that the Earth moved (Kuhn, 1970: 149-1 SO).

3.3 MARKETING MIX, TilE FOUR P'S

Marketing, the way most textbooks treat it today was introduced around 1960.

The concept of the marketing mix and the Four P's of marketing - product, price,

place and promotion - entered the marketing textbooks at that time (McCarthy,

1960). It quickly it became the unchallenged basic model of marketing, totally

overpowering previous models and approaches. Other P's have from time to time

been suggested as additions. like people, physical evidence and processes, such as

the & P's model used particularly for services marketing (Booms and Bittner,

1982), and Kotler (1999), in the context ofmegamarketing, added public relations

and politics.

Lauterbom (1990:26), suggested that place becomes convenience, price becomes

cost to user, promotion becomes communication and product becomes customer

needs and wants. Although this has widened the scope of themodel, itwas evident

in chapter two that a Brand needs more than these attributes in order to create a

distinct identity, create brand equity and give it a sustainable competitive

advantage.

This section shall cover the attributes, but also substantially expand on the whole

marketing mix concept to include a number ofnew variables believed to be crucial

in the Brand architecture in order to achieve a strategic advantage.

32

In the market survey questionnaire respondents are asked to rank the importance

ofthe product attributes of the traditional four P model as well as new variables

such as relationships, risk management, references and realized performance,

For this reason, it is important that the product attributes that can contribute

towards the perception ofthe Orand, bediscussed and understood.

3.3.1 Product

The following product attributes are included in the questionnaire:

3.3.1.1 All season application (or viscosity)

This is an attribute easily met by opposition

3.3.).2Quality

This can be subjective or objective, objective in that the product must display

technical specifications and approvals, but effective Brand building. like Castrol, do

lead to certainsubjective preferences.

3.3.1.3 Engine protection

Increased power and performance, quality base oils, prevents breakdowns, protects

against rust and fouling of injectors, reduction of friction and wear, superior

lubrication. These arc all very basic attributes ofall lubricants, but once again there

are perceptions that certain oils pcrfonn better than others, and that is why it is

included. In Brand building perception isasgood as reality.

The following attributes arc measurable and quantifiable, and as such can provide

proofof being a superior product, therefore they are included:

• Extended engine life (in kms)

33

• Fast oil circulation (kinematic viscosity)

• Fuel savings (liters per kilometers)

• Minimum oil consumption (reducing number of top-ups)

• Reduces drain intervals (more kilometers traveled between oil changes)

• OEM specified (dealer approved oilchart),

Aseparate, detailed question then deals with packaging and labeling, its look and

feel, practicality, identification and ease of use, It tests thecustomer perception on

Drand presentation, the visible expressionofwhat the Brand stands for.

3.3.2 Price

Price can either be the initial price paid for the product, or it can bederived savings

as the result of the usage of a superior product. For this reason a number of

questions have been included on price: How important is it to be the best (initial)

priced oil ? Or a1tcrnatively have long term savings through the prevention of

breakdowns, by being reasonably priced or by being good value for money ?

These questions are intended to measure the awareness of thecustomer to the long

term benefits of using a superior product, rather than a short term trade-off on

initial savings on an inferior product.

3.3.3Place

In the commercial market this plays a much smaller role than in retail marketing

where visibility and availability is critical. Goods are often ordered unseen,

especially re-order merchandise, and these goods can be supplied from virtually

anywhere in thecountry, as a lead time normally fonns part of the supply contract.

For this reason one question was included on place, and that measures how

important availability is to the customer.....

3.3.4 Promotl n

n nd dv rti in . n - n­

r B nd .

pI t nn f

n b m ur d.

i bliv d t b

nd

in Iud d to m

in t which futur Br nd building ff rt

lIinon

qu

Any mar tin PI di m h uld b w 11

notion th t th firm i be t off y d ining nd dir tin it tiviti ace rdin t

One can ily rgu that th f ur P ' of th m rk tin nux are not w 11 bl t

fulfi ll th r quir m nt of th mar ting can pt . Di on and Bioi :4 ).

explain : " Inde d, it would n

with a cu tom r' int ~ t (i. . m b dy for whom om thing i don), th

implicit in the Four P approach that the cu tomer i om body to wh m

om thing i don !" Although Mc arthy (1960), r cogniz the interactiv n tur

of th P' , th model it Ifdo not includ any interactiv I m nt . Furth rm r ,

it do not indicate th natur and

" 1I~ ......

, .It , ,

. .. . .. .. . Io.h ' .. . .. H'

Fi re .2:

u : Pri W Ier

Mi. 1.

Mnn:JgJcmcnl.(1 9:I )

R fI rrin t fi ur 3. 2, it i cI

of th our P m d I, th IT

th t n in thi m d m nd upd t d r i n

till pint in on dir tion, 1m impl in

35

unilateral action taking place. This model, designed by one of the leading

consultancies in the world, implies exactly the opposite, bringing into the process

loyalty and relationship management. According to PricewaterhouseCoopers

(1999: 14 - 16): "In some mature industries, or in markets in which many

competitors operate loyalty programs, Relationship.based solutions may be the

final available pathway to sustainable competitive advantage. Customer solutions

often need to be made to fit and they usually require an extensive exchange of

information between customers and value providers. This basically supports an

automatic interest for both parties in maintaining constructive and intimate

relationships".

The right hand side of the model (figure 3.2) , focuses on value driven activities

that aim to optimize the total consumption experience. This involves the

establishment of value-adding relationships with customers and the integration of

products andservices delivered through multiple channels.

In strategic terms, the left hand side of the model is about maximizing the

companies' customer share of wallet, whereas the right-hand side focuses on

achieving maximum customer share oflife.

This serves as the introduction to a new school of thinking, namely that of

relationship marketing.

3.4 RELATIONSIllPMARKETING

The concept of relationship marketing has emerged within the field of services

marketing and industrial marketing (Jackson, 1985: 120 - 128). The phenomenon

described by this concept is strongly supported by on-going trends. Gronroos

(1990: 18), in his book defines relationship marketing as ''marketing to establish,

maintain and enhance relationships with customers and other partners, at a profit,

so that the objectives of the parties are met". This is achieved by a mutual

exchange and fulfillment ofpromises.

36

Relationship marketing is still in its infancy as a mainstream marketing concept,

although it has established itself as an underlying paradigm in modem industrial

marketing. Kotler (1992: I). concludes that companies must move from a short­

tenn transaction oriented goal to a long-term relationship building goal.

3.5 TilE FOUR RMODEL

Groundbreaking work was done by the Wits Business School in South Africa by

Abratt, Spence and Bendixen (1997). indeveloping a model that can explore new

marketing frontiers. adopting the relationship based approach, but also taking it

further. They postulate that knowledge products. that is products where a lot of

infonnation is required to understand properly. is not adequately provided for by

the FourP model. They suggested a new model. namely the4P • 4R framework.

While the traditional 4P's in the marketing mix can be seen to cover the

characteristics ofgoods and services relatively thoroughly. the same is not true for

knowledge products. Instead. 4R's appear to emerge as being the relevant

variables ofthemarketing mix. Abratt et al. (1997). propose the following:

• Risk management - to overcome customer's feelings of anxiety and minimize

the consequences ofmaking a wrong choice. This is specifically focused on the

customer and does not relateto reducing risk for the seller.

• Recommendations and references - endorsements by knowledgeable persons

because of the credence qualities of a product. This tends to hold much more

sway than traditional advertising.

• Rdationships - provision of long-term support through networks, alliances and

partnerships. This essentially involves the development of trust and

interdepency between thesupplier and the client.

37

• Realization of perfonnance - to ensure and re-inforce that the product has in

fact met its purpose. The essential element here is setting. managing and

meeting the expectations oftargeted customers.

Products that arc in essence goods or services rather than knowledgc products may

display the characteristics of knowledge products over some period of time. This

results from the fact that there is a knowledge gap between provider and user, the

former having a great deal more knowledgc about the nature and use of the

product thanthe latter.

Enough support for this model exists to justifY the inclusion of these factors as

cause-and-effect variables in the market survey. Questions on the importance of

these variables have been included in the marketing mix section of the

questionnaire, and their importance will be rated against that of the traditional

attributes. The questions cover amongst others risk management and realized

performance by offering a guarantee against engine failure if the product is used

correctly. It also explores the importance of customer/supplier relationships,

including preferred way of communication and order placing, even making

provision for totally electronic relationships, where all interaction takes place via

computers, versus the traditional one-on-one selling.

Calonius (1988: 86 - 103), sees the promise concept as an integral element of the

relationship marketing approach. A finn that is preoccupied with making promises

may attract new customers and initially build relationships. However, if promises

arc not kept, the evolving relationship cannot be maintained and enhanced.

Promises should be mutually given and fulfilled. This ties in very well with the

concept of realized perfonnance above. Promised performance will either be

realized or not after a certain period of timc hu elapsed, and fulfilling promises

that have been given is equally important as means of achieving customer

satisfaction, retention of the customer base and long term profitability. It is all

about credibility, a very important requirement ofa successful Brand.

38

Another key element is trust. The resources of the seller - personnel, technology

and systems· have to be used in such a manner that the customer's trust in the

resources involved, and thus in the firm itself, is maintained and strengthened

(Gronroos, 1990: 3·12). This ties up well with the risk management aspect of the

4Rmodel.

Moorman et aI. (1993: 3), define trust as a willingness to rely on an exchange

partner in whom one has confidence. If a customer believes in his supplier and his

products, he will also believe that risk will be minimized by his supplier·s

recommendations and products.

In support of the argument of 360 degree branding and the role of relationship

marketing in building the Brand. Wilson (1995: 335 - 345),has the final say: By

reviewing available literature studying factors determining success or failures of

relationships. Wilson selected twelve constructs that have both theoretical and

empirical support as focal variables. These relationship variables are: commitment.

trust. cooperation. mutual goals. interdependence and power, performance

satisfaction. structural bonds. comparison level ofthe alternatives, adaptation. non­

retrievable investments. shared technology and social bonds. The constructs have

both an active time phase where they are very influential to the relationship and a

latent phase where they are still important but not under active consideration in

relationship interaction. The five stages characterizing the buyer-seller relationship

development process are; I) partner selection. 2) defining purpose. 3) setting

relationship boundaries, 4) creating relationship value. and S) relationship

management. The logical progression from here is to look at industrial buying

behaviour.

3.6 ORGANIZATIONAL BUYING BEIIAVIOVR

Alarge body of research indicates the importance of the buying center or decision

making unit. as it isalso called. in the vendor selection decision-making process.

Since the classic studies of the 1970·5 the buying center has been a focus for

39

examining vendor selection decisions (Webster and Wind, 1972~ Speckman and

Stem, 1979). However, even the early proponents of buying center decision­

making point outthat many vendor selection decisions may be made by individuals

alone (Sheth, 1977), and Webster and Wind (1992), also stated earlier on that it is

the specific individual who is the target of the marketing effort, not the abstract

organization (Webster and Wind, 1972).

The question asked in this research is if the power of the Brand plays a role in the

decision making process of the decision making unit, or of the individual who

ultimately places the order. In today's society, every person fulfills multiple roles,

and inevitably that person will be exposed to the Brand outside the work

environment. If this happens, the person is bound to have some perceptions about

the Brand, and this, even if subconsciously, may have an effect when a buying

decision has to bemade at work. If enough individuals are empowered to make a

buying decision, this can have major influence on how commercial lubricants

should be Branded and marketed in South Africa.

Patton III (1995), in a research paper sets out how he conducted research with

431 industrial buyers in the United States. He found that 65.4% of these make

decisions as individuals, 19.3% make decisions jointly with the department and

15.3% makedecisions jointly with peopleoutside the department. The proportions

in each cluster, or decision style group, substantially match the results from

previous research that suggested that approximately two-thirds ofvendor selection

decisions are made by individuals (patton et al., 1986). After refining the date, he

amended the figures so that 56.90.Ic. ofall the vendor selections involved were made

by individuals, 26,3% were made jointly with others in the procurement

department and 16.8% were made in conjunction with people outside the

department (For lubricants, these may be the technical experts, the automotive

engineers).

Patton (1995), asked the subjects in the study to indicate which of five competing

vendors they would select in a hypothetical vendor selection situation. The vendors

were classified as follows:

40

• V: Good performance, low variability

• M: Excellent performance, higher variability

• W: Bi-polar performance

• Y: Extremely low on one attribute

• H: Extremely variable performance

Nearly 62% of the industrial buyers in the sample selected vendor M, which

offered the best overall perfonnance, butalso offered more variability than did the

second best overall performer, Vendor V, who was selected by just over 300At of

the sample. Patton (1995), found that there is a statistically significant difference

(chi-square p =.034) inthe way the individual decision makers (Loners), shy away

from the variability shown by Vendor M and to select the less variable but lesser

qualified Vendor V than did their counterparts who normally make such decisions

jointly with others. The Loners also tended to spread their selection over a broader

spectrum of vendors, but the tendency to avoid variability is subtle but clear,

showing avoidance of the downside risk, by selecting the less variable of two

reasonably well qualified vendors.

This could have significant implications for lubricants marketers inSouth Afiica. as

itclearly implies the need for effectiveoverall or360 degree Branding.

The findings reported above indicate that the individual industrial buyer faced with

making vendor selection decisions on his or her own is the dominant vendor

selection situation and should be recognized as such by purchasing firms and

industrial marketers.

The style of the Loner is predominant and pervasive. Industrial marketers should

anticipate that a significant proportion of vendor selection decisions will be made

by a single individual rather than a buyinggroup (patton, 1995).

Some further research on industrial buying models were conducted by Gresham

and Gruben (1993). They conducted research amongst 135 buyers in East Texas,

d rkans n tl ir u in m of th ir findin

T bl .2 I rI indi t th t qu lit

fo llow d h n

lion in, n III I di unt

do I 10 th

provid fi r III

th thr t. f n w ntr nt ,

bottom !

hli ht

up Ii r ' I n th in u in w t d ri ht t th

Tabl .2: h Import ne of ct r in

nd . rub n I

6.5706.3786.ZJ7

Mrirnmam 'rel rB1s 6.1785.gJ)5.437

MniaiLrer's rTirinunMrE intte~

'reIlB t5 5.1254.9483.8D3.281

T bl nd .4: Influ n in th

U ed in Kc p in ' Up with M rkct Trendnd rub en ( 199 )

rch d n b P tton n individu I d i ion m in

m up th d min nt

m r t . m n nt

in hi hli ht th rin th

up t d t ith in Ih mar • i. it

tin

r intin t t

to m

m r . Th pp r t i1din

to bu . , oth r th np on I, lIin ( p h t I.. 19 3: 107 .

43

In research conducted in South Africa by van Veijeren (1994:41), on factors

influencing buyers when buying capital equipment, he rated the facton as follows:

• Possible savings as a result ofusing the equipment

• Reliability of the equipment

• Quality

• Price

•

18.1%

16.5%

14.3%

13.3%

This would support Abrau's model ofReaJizcd Performance, the item behaving the

way it has promised to(see 3.5).

Van Veijeren (1994:40), also states that the typical industrial buyer ismore human

in his or her buying than industrial marketers usually reaJize. Second, a fair

observation seems to be that to the extent that products and services become

objectively alike, the role ofsubjectiveemotional factors loom larger in the buyer's

final purchasing decision. Thus one has to accept that any marketing plan would

have to embody the fact that marketing actions are directed in the first and last

instance at individuals, and not merely at organizations.

Sheth (1997), also discuss the roles ofusers, gatekeepers, deciders and influencers.

For the purpose of this research, their relevance arc that they are also individuals in

own right, also subject to perceptions about the Brand, so the better the Brand

strength, the more likely it is to gain acceptance in the decision making unit

(www.m).

The last aspect of the organizational buying behaviour to be covered, are the

three types of buying activity: straight rebuy, modified rcbuy and new task buying

(www.m). In the industrial buying arena, for the modified re-buy and new task

buying" one-on-one personal selling and personal relationship marketing still plays

a very big role. As for straight re-buy; it isvery rapidly being replaced by electronic

replenishment· and communication systems.

I R L I II

h in • bu in processes

lion I tru tur

c rdin

mp OJ

indu I uppl

tr n fonnin

Th lnt m tin I ju I tr n f rmin

nd th w p

Tunn (2

bu in

in n ti tin onlin IIi n

nd d v lopin c nt nt.

b 200 (H

plotting tr t

"i re 3. : om ro 1h of rious ommuni ti n M

" (2000)

A can b in Ii ure .

Int m t

lin • it

r n

in futur

il i n

f th Intern

r mph iz d

Iii in

45

GE Global eXchange Services, the biggest of its kind in the world, sees it as

follows:

• Plan

Accurate demand forecasting

Real-time collaboration to drive quality improvements and lower cost

Reduce global risk andexposure

• BuyAccurate procurement process

Effective supplier management

• MakeReal-time integration withbusiness applications intralinter company

• Move

Fastercustoms clearance

Management ofinterlintra-company inventory to drive efficiencies in

planning and distribution

Timely integrated view ofproduct movement

• SellAbility to integrate with Customer's demand data

Provide Customer's easy ordering (www.o).

3.8 SUMMARY

In this chapter the emphasis was to focus on the various marlceting models, to

show how their workings and processes can impact on the creation of a Brand

strength, the perceived Equity of a Brand. In line with the much broader

perspectives discussed in chapter 2, it looked at how the 4P and 4R models fit into

the Brand architecture. Also discussed, was Porter's Five Forces Model, and how

that can affect Brand strategies. It also suggested here that Infonnation

Technology can revolutionize the way industrial marketing is taking place, and it

was briefly looked atagain at the end ofthechapter.

46

As the research is about how the buyer will react to the Brand in an industrial

purchase situation, the chapter would not have been complete without looking at

organizational buying behaviour. The traditional thinking of the Seth model was

looked at. and then it was pointed out. that due to the many roles people live out

today. they must inevitably have subjective views/perceptions of the Brand.

Research also pointed out that more decisions arc taken by individuals than what

would generally be expected. supporting the need for a powerful Brand. Key

innuencers in Industrial procurement was listed. noted and discussed.

Without all of this background. no meaningful survey canbe done. and neither can

proper. valid recommendations be madeasto the future direction that a company

must take.

This concludes the theory on how to build a strong Brand. It needs correct

positioning, creating a personality for the Brand. support through relationship

marketing strategies. use of all channels of communication possible to

communicate this Brand proposition, and 360 degree Branding, toall customers.

In the next chapter, the South African Lubricants market will be dealt with, its

players. Brands. market size and competitive activities.

7

P R4

TU o H RI R T D

4.1 Til ' 1M OF II II

III th ov rvi w in eh pt ron , it w . t t d th t thi. r . rch i to have pr ti

appli tion , n m Iy to sist RP uth frica to r w m r • thr u h th

stren th ning of th Br lid. rch w uld not b c mpl t if th

mark t in uth Afrie is 1I0t COy rd .

The form t of thi ch pt r i not ing to follow th tr dition I W

approach. It i r th r going to 1 rt with a br d v rvi w of th

mark t, th n narrow it down t th uth African m rk t, m rk t iz

har . A hort ov rvi w of ch of th major play r will b given, with r I v nt

trat gi wh r it i d m d t ting and h Ipful. Oth r nvironm nt I

influ nc will b dealt with on basi .

Th chapt r clo with a short umm

4.2 L DRI

CountryLu o m nd _ Propo on 0'I Alrtn 0 m nd

Fi re 4.I: Lu . nl mand in fri . : \ \.p

48

The African consumption of lubricants accounts for approximately five percent of

the total world demand ofabout 37 million tons per annum. While there has been a

general world-wide decline in the demand for lubricants during the 1990's, the rate

ofdecline in African demand has been somewhat slower and Africa's share of the

world market has shown marginal increase over the period (figure 4.1).

The market covers automotive, industrial, marine and aviation lubricants. The

demand for industrial lubricants is driven primarily by the major industry sectors

which include the petroleum industry, mining, agriculture and industrial

manufacturing and processing, where present. Lubricants markets are generally less

impacted by thecontrols and regulations which are often applied to fuels products

in Africa.

Africa lube oil demand is some 8 million barrels per year of which 18% is

consumed in South Africa (Figure 4.1). The sector split for Mrica is industrial

(36%), marine (4%), aviation (10/0), cars (31%) and trucks and buses (28%)

(www.p).

4.3THE SOUTH AFRICAN LUBRICANTS INDUSTRY

Mbendi (www.q), gives a very good summary and they supplied the information

used below.

The South African lubricants market demand is approximately two million barrels

per year which accounts for a fifth of the African continent's lubricants

consumption and about one percent of the world consumption. The market covers

the full spectrum of applications for lubricants and greases, including industrial

(49%), marine (7%), aviation (1%), cars (22%) and trucks and buses (21%). Also

used arc various process oils such as those which find application in printing ink

and tyre manufacture. The range of products includes mineral based lubricants, and

various combinations of synthetic lubricants, although these comprise a small

proportion ofthe overall products demand.

49

The marketers of lubricants include the local affiliates of multinational oil majors,

South African based oil companies, the synthetic fuels producers, local affiliates of

international lubricant companies, specialist lubricants ruche marketers and jobbers.

Mobil re-established a South African lube presence in 1997 and has quickly

established itselfas a force in the market, particularly with itshighly rated synthetic

lubricants. (Mobil also follows the politically correct policy ofdistributing through

joint venture partnerships with Black Economic Empowennent Groups)

(Reynolds, 2000). The oil companies which market lubricants include BP, Caltex,

Engen (whose recently acquired agency for Esso lubes could be thwarted by the

Exxon-Mobil merger), Shell, Total and Zenex.

These companies market lubricants through their service station forecourts,

through supermarkets, wholesalers, spares outlets and workshops, through

commercial channels and by direct customer sales. Sasol has more recently entered

the market, deriving part of its technology through its shareholding in the Europe

based, Carl Bechem. Smaller market share oil players include specialist CPI

Engineering, Exel (BEE), which market Mobil Lubricants on its forecourts, Agip

and Petromin. Castrol, as a specialist lubricants marketer has an important position

in the South African lubricants industry holding close to a seventh ofthe market.

Other companies include Chemica, Dimol, Fuchs, Flexilubc, Germ Lubricants,

Highveld Petroleum, Kluber Lubrication, Cera (Shell Lubricants Plus), Pennzoil

and Chemrite Lubricants (www.q).

4J.1 Lubricants Manufacture

Base oil refining is carried out at two refineries located in Durban. These are the

Samco base oil refinery which is jointly owned by BP and Shell and the Safor base

oil refinery which is owned by Engen Petroleum, Caltex and Total. The Samco

base oil refinery is one of the largest in Africa with a capacity of 175,000 mega

litres (15S thOU51U1d tonnes) per annum. Sarnco is downstream of the Sapreffuels

refinery. Safor, which is downstream of Engen's refinery, haJ a capacity of

165,000 megaIitres (145 thousand tonnes) per annum. Despite having two base oil

refineries. South Africa tends to be short ofbase oils and imports ofvarious base

oil grades are made (www.q).

Reynolds (2000), the product manager from BP. explains that UP previously

supplied Castrol as a customer with base oils. With the merger, Castrol will take up

any spare capacity BP had. with a resultant cost advantage. This will lead to

margin benefits for the new organization and put pressure on the small

independents to source base oil, as they will have to import, and with current high

international crude oil prices and the substantial deterioration of the country's

exchange rate, this is going to put them at a severe cost disadvantage. Also

imported are a range ofsynthetic base stocks, although the market demand for

these products is not as high as in Europe and elsewhere. Mobil South Africa is

one of the leaders in this high technology field.

South Africa has substantial lubricant blending capacity, with eleven blending

plants of various capacities, and with four grease plants. Engen owns a blending

plant in Durban as well as an unused facility located near Johannesburg at its

subsidiary. Chemico (www.q).

Shell and BPjointly own a blending facility, Blendcor, which is located in Durban.

Shell also owns a plant by thename of Veetech (now Unico) inDurban and a small

plant in Johannesburg, Cera, which fllls thefighting Brand.Honeylube (www.q).

Other companies with their own blending plants in Durban include CaJtex, Castrol,

Total and Fuchs. Zenex, Sasol and Agip share a blending plant which is located at

the Zenex facility in Durban. Flexilube has a blending facility in Johannesburg

(IDnM).

The available lubricant blending capacity in South Africa currently exceeds the

local market demand for lubricants (www.q).

Engen Petroleum has a grease facility with two trains located at Chemico, its

subsidiary company. near Johannesburg. Shell and BP share a grease plant in

Durban. and Dimol has asmall grease plant near Johannesburg. Caltex has a grease

blending plant and petrolatum blending facility at its site in Island View. Durban

(www.q).

4.3.2 Distribution and Logistics

In South Africa. lubricants are marketed and distributed in a range of bulk and

packaged forms. These include road tankers, bulk Iso-tainers, mini-tainers,

maxipacs, 210It. drums and numerous small pack sizes. Distribution is done either

direct to the end user or through company depot and distribution networks.

Logistics and cost control management are very neglected functions in the

lubricants supply stream, and leaves much space for improvement.

Some companies recently startedusing specialist logistics companies, like Tongaat

Food Distributors, who have superb computers and logistics support systems to

distribute to the High Street market. Unfortunately. due to outdated systems. an

integrated category management approach for this very important market segment

is not yet possible. As will be seen later, Castrol dominates this market, and

category management principles will necessarily have to follow.

Direct product profitability measures are not in place. possibly leading to incorrect

allocation of costs and hiding inefficiencies and non-profitable operations and

products. For various reasons. filling and repacking has also been outsourced to a

number of small companies. This further increases costs and complicates logistics.

as well as cost allocation and measurement. No proper use of existing distribution

channels are made to distribute related products, like detergents and car care

(Reynolds, 2000).

,3.3 'I h ulomoli e Lubri nt I du l

Fi ture 4.2: Comm ial

from l Ot

v r thi p .riod. n th

2 fi ur . Thi h, v

lubricant i d ri d

r J growth

d m nd for autom ti

hid in u

th annu I

is d

contr it t ok almo t 15

important impli tion , th

d emand, i.

t 01 int inin

n th 01 r t for nd

II th tim . it

ith th

n t

hrin rin .

in hi hl i ht th

v hi Ith P

h nd v hi I

b f ir to

h uld

c n qu n

mp n I m r t h r in hrin in

f r it pr fit bilit . p m ti ppr

m r t , it c uld h

h nd

ir

nd i

bl 4.1 h \ th utornoti m r t lum f r th I t num r

Table4.1: Aulcmotivc Lubricant Sales Volwnct 1994 to 199tl: Soum: Lubrizol Survey

SIIOI ITotll Roported I

1~ 1995 1aH '"7 18981 AUTOMOTIVE OILS

1AENGINE KiloQll.§ It.SE/CC • MULTI 166 110 1006 351 0SF/CC • MULTI 7542 6280 6068 5451 5994SF/CO • MULTI 8577 9999 9836 694 695SF/CE • MULTI 5588 4993 4934 996 727SGlCCorCD • MULTI 10954 10675 8123 10318 9314SGICE • MULTI 835 991 237 165 115SGlCF4 • MULTI 10310 13084 12873 11712 13117SHICO • MULTI 3907 5781 9396 9305 11371SJ/CF • MULTI 1906 4555CG-4 Min - MULTI 0 0 1115 5878 8138HPOO - MULTI 3927 5077 8217 8536 8510

(SHPDCD+)PART-SYNTHETIC MULTI m 964 951 540 529FULL-SYNTHETIC MULTI 133 82 95 97 172

SUBTOTAL 52716 58016 62851 55947 63237

SCICC • MONO 2645 2006 1322 1141 1057SE/CC • MONO 1542 1291 1111 1370 1151SF/CC • MONO 39258 42097 40474 40455 35029SE/CD • MONO 24 164 164 1890 2005SF/CO/CE • MONO 45027 43019 43019 32383 29735SGICc/CD • MONO 1579 1335 1335 1671 2402CD • MONO 6013 8478 6478 9503 8188HPOO -MONO 1547 651 651 479 528

(SHPOCD+)SUBTOTAL 97635 97041 94554 88892 80095

TAlTB 411 306 230 170 84

TC 450 726 766 865 912NMMATC-W 270 96 95 95 102NMMATC-W 264 308 384 432 391IINMMATC-W 0 5 5 7 153Synthetic Two- 15 17 20 24 28StrokeMotor Cyclefour ,trek. 8 1 2 8 5Other : (1) 14 15 16 11 24

(2) 78 2 87 113 2(3) 0 0 0 0 0

SUBTOTAl 1511 1476 1615 1n5 1563

1AENGINE TOTAl(kl) 151862 156333 158378 14656<4 144895OILS

JPOWOILS (Kilo l.it.,,)

GL·l 130

1

123 146 103 84

GEAR OILS 18N 1895 1He 1897 1898CONTINUEDGL·3 8 7 0 0 1GL-4 2541 3437 3679 3798 3886

GL·5 (Mono-75W.8OW.90) 3988 2240 2067 1981 1501GL·5 Multi (8) 75W90 0 0 14 22 76

(b) 80W90 5052 6635 6995 6303 5601(c) 80W140 104 17 17 9 7(d) 85W90 324 328 360 341 337(e) 85W140 1102 1393 2222 1810 1743

GL-6 3 3 2 2 1Other: (1) Borated 673 727 700 684 534

(2) Limited 64 77 118 123 121Slip (Minerai)(3) Synthetic 61 91 99 98 103(4) others 448 25 43 31 12

lBGEAR OILS TOTAL (kl) 14498 15103 16462 15305 14007

lit (KJIo Liters)TRANSMISSIONW

AUTOMATIC TRANSMISSIONFLUIDS (ATF'S)

(I) DEXRON(R)- 6106 6665 6497 6524 6714110 Type

(II) DEXRON-IIE 6 2 3 2 87(III) TYPE F&G 690 813 654 519 453

(FORD)(Iv) TYPE C3 ONLY 65 24 24 16 10

(EXCLUDING ENGINEOILS)

(v) ALLISON C-4 (EXCLUDING 9 207 224 185 0ENGINE OILS)

(vi) TYPE A 251 249 167 145 120SUFFIX A

(vii) TASA/C3 459 529 494 412 370(viII) CATT0-4 749 1937 3190 3063 3238(Ix) OTHER ATF'S 25 28 34 n 134

SUBTOTAL 8360 10454 11287 10943 11126

TRACTOR TRANSMiSSION 3221 3092 3232 3074 2704OILS (UTTO)TRACTOR UNIVERSAL OILS 10551 10716 12083 11846 11532(STOU)OTHER UNIVERSAL OILSE.G.TRACKLESS MINING 3 48 56 148 nOILSlCONSTRUCTlON PLANT OILS1C TRANSMISSION OILS TOTAL(kl) 22135 24310 26658 25809 25439

1AUTOMOTIVE OILS TOTAl (kl) 188-495 195948 201499 187678 184341

The table supports the trend indicated (figures 4.2 and 4.4), that of an overall

decline in volume. It does however, also offer opportunities for astute marketers.

The individual market share of the major players is next to be analyzed..

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thinking about the High Street, or Retail Market, as it is also called. In OP,

workshops fonn part of this market segment. Together the two fonn a powerful

force, opening new avenues for penetrating this market channel, and maximizing

sales and profitability from it.

In a Market survey, undertaken by e~aRO market intelligence resource group in

July 1999, where 1990 interviews were conducted with workshops in South

Africa, the following was found:

• 46% of the workshops were linked to a branded service station

• 60.7% service between I and 10 cars a day

• Castrol emerges as the market leader with 28.6%, followed by Shell (14.8%)

and BP (13.4%)

• 83.8% of respondents were either extremely or very satisfied with their major

lubricant Brand

• Castrol owns the largest amount ofdispensing equipment in the field (37.2%)

• Alarge percentage (32%) havetheir lubricants supplied in S litre containers

• 39.3% had supply contracts, with 77.6% ofthese unlikely to look for alternative

suppliers at thecontract renewal stage

• Car washing isa standard part of the service offer for 91 %

In the summary it said that there is no doubt that inertia exists among the customer

base who seem to be happy to let their respective status quo continue. This,

according to them, creates a major opportunity for aggressive promotion and

selling approaches where the company that takes the lead, could create excitement

and take market share. Mobil is deemed to work hard to gain market share, and

their effort is felt byboth customers and the industry.

The viability of Castrol's investment in dispensing equipment merits discussion.

Rexha (1998), sees this asarequirement ofrclationship management. He says that

in order to satisfy a customer in a business-to-business situation, the supplier often

has to make significant tangible and intangible investments, defined as relationship

specific investments (RSI's). RSI's are expected to develop a close and long-term

buyer-seller relationship with the focal customer. This fonn of non-retrievable

investment, which creates exit barriers for the supplier, are intended to increase

customer trust and strengthen its commitment. The reward continually increases

the supplier's interest in adapting its offering to specific needs of the focal

customer through RSl's. Supplier RSI's also have a positive effect on customer's

satisfaction (Rexha and Miyamoto, 1997).

This strategy certainly seems to have worked for Castrol, although there seems to

be an anomaly between the amount of equipment they own and actual market

share. This could be as a result of having a lot of the smaller accounts, or

alternatively, asanindication that even the supply of equipment can sometimes not

prevent a customer from switching Brands.

Similarly, Shell also realized the need to add additional value in order to cement

relationships. They introduced the concept of Predictive Oil Analysis (www.s).

Predictive oil analysis is an accurate way of providing operators of lubricated

equipment, be it a fleet of trucks or industrial plant, with information about the

condition of machinery, giving fair warning about potential problems which may

cost time and money ifnot attended to. Oil is tested at presceduled times, and any

wear ofequipment noted, reported and repaired before actual breakdowns occur.

Initiatives like these can only add substantial value to the Brand.

4.3.4 Comparative lleavy Duty Diesel (1100) Brandl

Although this paper gives ageneral overview ofthe lubricants market. it is specific

to the hcavy duty diesel oil products. HOD oils are lubricants formulated for usc

specifically in large, diesel powered, internal combustion eegines, It is these

products that will beincluded in the market survey questionnaire. The table below

(Table 4.2) lists all the comparable to the BPVanellus Brand.

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4.5 E......ICIENT CONSUMER RI-:SPONS.:

Efficient consumer response(ECR) is the latest development in the management of

products to market. ECR was initiated in the United States during 1992 and has

rapidly expanded into a global movement of the consumer goods industry. Today

there arc national and international ECR programs in Europe, Asia, Australia,

Canada, South America, and it has just started in South Africa

(PricewaterhouscCoopers, 1999: !2).

PriccwaterhouscCoopers (1999: 13), has conducted research in South Africa, and

the company sees the process as centering around three primary focus areas:

• Demand side, with four detailed improvement concepts: Strategies and

Capabilities, Optimize Introductions, Optimize Assortments, Optimize

Promotions

• Supply side, with six detailed improvement concepts: Integrated Suppliers,

Synchronized Production, Continuous Replenishment, Automated Ordering,

Reliable Operations and Cross Docking

• Enabling Technologies, with four detailed improvement concepts: Electronic

Data Interchange (EDt), Electronic Funds Transfer (EFT), Item Coding and

Data Base Management, and Activity Based Costing (ABC).

Individually theseconcepts are commonly known and well documented methods of

improving effectiveness and efficiency. However, when applied under ECR, they

have four distinct differences:

• an integrated approach;

• focused on customers;

• across demand and supply; and

• across the entire supply chain.

Category Management was the scientific tracking of sales through the supply

chain, maximizing returns through the best possible presentation and promotion of

a focused, sales driven range of products. ECR takes this to the next level,

offering a totally integrated solution, initiated by the final user ofthe product.

4.6 SlJMMAUV

In this chapter an overview of the lubricants market in Africa and South Africa

was given. All the major players were briefly discussed, their manufacturing and

blending capabilities pointed out and a few of their potential strengths and

weaknesses highlighted. Through the use of a comprehensive table, the size of the

automotive lubricants market and its make-up was clearly demonstrated.

Distribution and the availability of the product can severely harm the sales and

image of a Brand, and forthis reason it was covered again.

The Brand names that arc used in the survey questionnaire were shown in table

format, and a shortdescription of the major Banner Brands was given. The major

product Brands were then plotted on a positioning matrix. The market segments

with thebiggest potential were shown.

In closing, Efficient Consumer Response wasbriefly discussed. This becomes very

important when the High Street becomes a major customer, as category

management principles and an efficient supply stream, supported by the correct

technology, is vital in this market. Over and above substantial logistical savings, it

cements relationships and is a critical ingredient for the successful conduct of E­

commerce.

This concludes the literature review section. In these three chapters. all the factors

that can influence a company's Brand building strategies, have becn analyzed and

discussed, particularly in the light of the latest thinking about Brand architecture

and Brand chartering. These concepts postulate that Brand image and Brand equity

are no longer dependent upon product attributes, but span a much larger field,

namely corporate values, attitudes, behaviours, customer relationship management,

realized performance, credibility and personality. In the survey, through conjoint

value analysis, the importance of each factor will be identified through the utility

score allocated to it,

67

CI-IAPTER 5

THE RESEARCH DESIGN

5.1 TilE AIM OF rue CIIAPTER

The aim of this chapter is to describe the field research methodology and how the

data was collected and analyzed.

The difference between a qualitative and quantitative research paradigm will be

discussed briefly. The findings of a previous qualitative research project will be

summarized before new research requirements are discussed. Then follows a

section on the questionnaire design, sample design and hypotheses testing.

The selected method ofresearch will then be discussed in depth.

5.2 QUALITATIVE AND QUANTITATIVE RESEARCH PARADIGMS

According to Burgess (1985: 97), at the most basic level, qualitative and

quantitative approaches are sets of different research techniques, each with their

own advantages and limitations.

Qualitative researchers nrc interested in knowing how things occur. Meanings and

interpretations arc negotiated with human data resources because it is the subject' 5

realities that the researcher tries to reconstruct. Objectivity and truthfulness are

critical because the researcher seeks credibility, which is based on coherence,

insight and instrumental utility (Creswell, 1994: 162).

The quantitative research paradigm makes usc of deductive methods where

theories and hypotheses are chosen before the study begins Quantitative studies

are carefully worked out procedures where rules for research exist. Collection and

analysis of data involves a shorter period of time than that required in qualitative

68

designs. Quantitative research is impersonal and experimental; it is therefore not

suitable to study human phenomena (Creswell, 1994: 7 - 8).

Quantitative research is a formal, objective, systematic process in which numerical

data is utilized to obtain intormation about a specified universe (Burns and Grove

cited by Cormack, 1991: 140).

Burns and Grove (1993), mention four types of quantitative research. These are :

descriptive, quasi-experimental, experimental and correlational. Experimental and

quasi-experimental studies are designed to examine cause and effect. They are

conducted to examine thedifferences in dependent variables thought to be caused

by independent variables. Descriptive and correlational studies examine variables in

their natural environments and do not include researcher imposed treatments.

A brief consideration of the major distinctions between the two types of research

ean help put quantitative research into context. Both designs are said to be

systematic. Having a system or following a process is a defining principle of

research.

Quantitative research is thought to be objective, whereas qualitative research often

involves a subjective clement. In gathering, analyzing and interpreting quantitative

data, the researcher can remain detached and objective. Often this is not possible

with qualitative research where the researcher may actually be involved in the

situation of the research. Quantitative research is inclined to be deductive, in other

words, it tests theory. This is in contrast to most qualitative research which tcnds

to be inductive, inother words, it generates theory.

Quantitative designs of research tcnd to produce results that can be generalized,

whilst qualitative studies tend to produce results that are less easy to generalize.

Feelings can change, depending on the particular sct of circumstances. Even if the

researcher encountered the same set of respondents on another day, different

results may be found ifqualitative research isused.

---------------------- - ------

69

Lastly, the most obvious difference between the two is that quantitative research

uses data that are structured in the form of numbers or that can be immediately

transported into numbers (www.y), while qualitative results cannot bequantified or

extrapolated to theuniverse under observation.

5.3 PREVIOUS Rt:St:ARCIi AND NEW IU:SEARCII REQUlRt:MENTS

In 1999 Strategic Marketing Services (Ply) Limited (SMS), conducted qualitative

research in South Africa, Tanzania and Mozambique, The objectives of the study

were:

• Toconduct a reality check on the current understanding of customer needs and

behaviours when purchasing heavy duty diesel oil.

• To check current Brand awareness levels ofVanellus (a brand ofdiesel oil) on a

qualitative basis.

• Tounderstand the brand equity of Vanellus against competitive brands.

• Totest proposed brand positioning concepts.

In South Africa, twelve in-depth interviews with important decision makers werc

conducted, six were conducted in Mozambique, and in Tanzania, one focus group

was conducted. Some of the main highlightsofthe findings are reflected below.

Price and serviceare two chiefunderlying motivators in selection of a supplier of

diesel oil. The components of 'service' comprise not only aspects such as delivery

and accessibility, but (perhaps more importantly) 'customer care' • a readiness to

assist whenever necessary, keeping customers up to date with new developments

and developing strong interpersonal relationships. Since products of the different

oil companies arc all seen to be similar (in other words, a "parity" market) and

price isalwaysopento negotiation, this aspect ofservice is the one area which can

be used to differentiate a supplier of heavy duty diesel oil and create customer

loyalty (C~fiRO :1999).

70

In contrast to diesel oil users in some other countries, South African customers did

not articulate any specific emotional needs. It was pointed out. however, that the

chief selection criteria all contribute to the ultimate efficacy of the customer's own

business, and thus the primary need is to feel secure with these aspects of service

(C~Ill((J :1999).

Customers are more aware of oil Brands within their main Brand, than within other

brands. There is little intrinsic differentiation between Brands. Brand positioning is

rather influenced by the corporate image of the supplier. South African purchasers

of diesel oil at the level of large companies are generally not able to verbalize

intrinsic associations used to position oil companies (C~URO :1999).

Two problems arose out ofthis research:

• The first one is that due to the qualitative nature and the associated small

sample, the findings arc not statistically significant.

• Secondly, it appears to contradict the reality that certain Brands docommand a

premium price in the market, and the research did not indicate exactly what

gave these Brands the competitive advantage.

It became evident that further research would have to be conducted. but this time

more 'relationship type variables' would be included in the research. TIle findings

also had to be statistically significant and allocate levels of importance to the

various attributes that would build a successful Brand.

BP has a good range of products and the Brand has very high credibility and

Brand equity globally. It is therefore important to determine the reason for this

decline in sales.

A brief to market research companies was done and four market research

companies were each asked to submit 8 research proposal. In line with our problem

71

statement in 1.2, they had to establish the strength of the Brand and its importance

to the customer and determine the reasons for the loss of volume sales of the

Vanellus Brand. The research companies had to identify ways and means to

improve the Brand proposition in order to attract more customer loyalty, enhance

its Brand equity and increase sales and market share.

Research International won the contract. They summarized the problem as foIlows:

The marketing challenges facing the Vanellus range are numerous and complex. It

is proposed that a complete marketing mix benchmark analysis be conducted for

the Vanellus range. This will incorporate product assessment, pricing comparisons,

distribution issues and promotional awareness. This marketing mix analysis will

provide detailed infonnation regarding the current state of the Brand, which can be

used both for diagnosis of the current position, as well as a benchmark

measurement that can be tracked over time. This component of the study will

identify the reasons behind the decline in volume of Vanellus.

Furthermore, the research must uncover the motivation behind the purchase of

diesel engine oil ingeneral, the role that various factors playin the decision making

process; and critically assess pricing and the factors which inhibit and contribute to

Brands being able to charge premiums.

Methodology: It was proposed that face-to-face interviews be conducted with

dccisionmakerslinOuencers to collect the required information. This would be

necessary due to the use of prompt material, particularly for the conjoint value

analysis (eVA) that would be used.

The questionnaire will take the following fonn (Sec the cn ROM in Annexure G

for the fuIl document):

Section I: Filter questions to ensure the correct respondent is selected, testing

brand and advertising awareness, brand usage, reasons for changes in brand (if

any), and the decision making process.

72

Section 2: Requirements from diesel engine oils, importance of all the attributes

and the performance ofeach Brand against these requirements.

Section 3: An image battery to identify the position that each brand holds.

Section 4: A eVA including the following elements to be traded-off against each

other:

• Brand level

• Technical Specifications

• Support and theCompany

• Price

Macro level elements like price and technical performance can be identified, but

one can also understand the ability of the specific attributes thatcan contribute to a

price premium.

• The model is constructed at the level of Brands. Different attributes will have

different utilities and various levels. A powerful tool is the ability to create a

hypothetical Brand, based on selected attributes, which determine what would

happen to its utility ifthe levels were altered.

• The output also generates a goodness of fit measure, which indicates the degree

ofinternal consistency amongst respondent's choices.

• The image analysis will provide insight into the potential positioning of

VaneUus, and in conjunction with the CVA and needs analysis, a strategic

marketing plan can be established, designed to optimize the relaunch of the

Brand (Research Proposal; Project Shuttle 2000/322).

5.4 SAMPLE nfo:SIGN

From a customer list, BP could identify current customers, lapsed customers and

customers where there has been a significant change in volumes. Bearing in mind

the purpose of the research, it was decided to design the sample 8lI follows:

7

Tabl ~ . I · ampl IIr al \\ II, I r I hUIII ur It .1 h lru mali /IJI

USERS (100) lAPSEDUSERS (76) NON·USeRS (75) TOTAL

CATEGORIES llllOe Meld Srnll q Laroe M. d Small l .arDO Me\lAREAJoI 1 7 32 5 7 18 10 10 IPrelorl:i 0 ~ 6 0 0 12 8 10Durban '} 1 ~ 1 -L. 0 9 10 ,CapoTown 0 2""'~ 1 4 ---n- 8 10 77Sf GMENTS

1-Long & . hort hlIul - - 20 26

I tnlnlPOlI -Buses " 4AgrlcUnurnJ co- ol 3OllOfllUvcaRC$Cllino - - 4Con$lructlon & 4 3mlnlllllTolal 3 12 I II 7 18 112 35 40 21lO

1Il11 'I' U. pI' ti I pI' bl Ill . \ r in urred \ h m makin up the mpl .

lnsuff i nu I I' U ' I" uld b Ii und fr III the BP ust III ' I' Ii. I, and thi lit n

off ct b mall U I' in th lion, in ord I' to III k lit

ur

ult • I lit I'

allo t d quota . A. an b . cn rr\ 'I' not I a il blc, nd \ ill b

\ ith a h rt di U ion on pI' I m in urr d and

r Ih \ h I

It i. nti U. I' I p d u r. n n-u I' 0

m nt, I it 0 I I' I,

kcv th ut 111 I th rc. I' h

74

5.5 RELIABILITY AND VALIDITY

The University of Washington Faculty for Research (www.z), describes these

concepts as follows:

• Reliability means that the test, model, or measurement is consistent. One

example of reliability is the SAT (standardized application test); one assumes it

measures each person the same way.

Fortunecity (www.y: 12-13) describes the same concept as follows:

• Reliability is concerned with the accuracy (consistency, stability and

repeatability) of a measure in representing the true score of the subject being

assessed on a particular dimension. The same results must be achieved as far as

possible, regardless of whom is doing the measuring. Reliability of measurement

reduces influence or bias on the part of the person(s) doing the measurement to

a minimum.

• Validity refers to whether a particular instrument actually measures the

construct it is designed to assess. Internal validity is the extent to which the

effects detected in a study are a true reflection of what is real. External validity

is the extent to which study findings can be generalized beyond the sample used

in the study (Burns and Grove, 1993).

• Validity also means that the test, model or measurement represent what it is

supposed to. A valid measure accurately represents the relationship between

things. For example, if SAT's are valid, then they accurately predict how

successful 0 student will bein college. Face validity is oflen used to test whether

something makes sense to us. Face validity means that on the surface,

something appears to bean appropriate measure. As this is not a rigorous way

oflooking at things, care must be taken not to sec results out ofcontext. On the

other hand, there is construct validity, that is, it reflects an actual relationship

7S

that exists statistically. This form of validity seeks to find a high correlation

between the independent variable and thedependent variable.

• Another issue to consider is generalizability, also known as external validity.

Generalizability describes how far research findings apply outside research

settings. If in theresearch, the subject is exposed to extremes of any kind, how

far can one generalize the findings?

• Validity refers to whether a particular instrument actually measures the

construct it is designed to assess. Internal validity is the extent to which the

em..xts detected in a study arc a true reflection of what is real. External validity

is the extent to which study findings can be generalized beyond thesample used

in the study (Bums and Grove, 1993).

Great care was taken in both the sample design as well as questionnaire design that

the research complied with these requirements.

5.6QUESTIONNARE m:SIGN

Rich (2000), says that research design mustcomply with four characteristics.

There must be freedom from bias, that is, thedata and the statistics computed from

them do not varyinany systematic way.

Secondly, there must befreedom from confounding. Two variables areconfounded

when the effect of one can not be separated from theem.."Ct of the other.

The third characteristic is control of extraneous variables. lie says that many

variables affect the result ofa research project, beside the independent variablc(s)

The design must evaluate potential sources of variation and design procedures to

counter their effects

76

The fourth is statistical precision for testing the hypotheses. The data must have

enough precision so that the hypotheses can be tested with confidence. Where

statistical control of variance is used. the measures used must be applied at the

appropriate times, and must be appropriate to the construct being evaluated.

Within these parameters and the original research requirements, the questionnaire

was changed numerous times to meet all these conditions.

5.6.1 Thr Questionnaire

What follows below is a brief outline of the construct of the survey questionnaire.

All the questions were done in English and Afrikaans. the two main languages

spoken in the business world in South Africa, to ensure that both interviewer and

interviewee would be very clearon the meaning ofthe question (see: 73).

Page I covers all the required corpographics needed for future reference, as well as

the breakdown and classification according to sample requirements. It includes the

very first filters to ensure that companies contacted telephonically do in fact use

diesel oil. If affirmative. they are then classified according to segment for further

filtering. If not. the call is terminated (Sec questionnaire in Annexure G).

Then follows six filter questions which accurately sort and classify respondents into

the correct and required quotas. During this process. contact was made with

numerous potential customers currently not using the DP product. With consent

from the respondents, this infonnation will be forwarded to the sales teams as leads

for future business. Once the respondent had been adequately classified, and he/she

met the requirements, an appointment was made for a personal interview.

Questions one to three arc very basic and put the respondent at ease, dealing

simply with the sizeofthe company. location and number of outlets,

Question four deals specifically with who decides on what diesel oils to use and the

amount of control exercised over procurement.

77

Questions five to eleven deal very specifically with Brand and advertising tracking.

It measures recall and recognition. both spontaneous and prompted. This section

already gave the first indication as to how important Brand names are in the

Industry. Low recall will be a possible indicator of relatively low importance.

As one of the purposes of the research is to determine reasons for loss of sales of

HI) Vanellus, question 12 is an open ended question asking for reasons (ifany) why

the customer has changed brands in the last two years. The interviewer is

instructed to probe fully into the reasons. The outcome of these questions would

be particularly interesting for the seventy five lapsed BP users. but it is quite

possible that interesting data may surface from non-DP users who also changed

Brands in the last two years.

Question 13 deals with the link between fuel supply and lubricants supply.

Petroleum companies work on a fuelsllubricants ratio. For every Xamount of fuel,

the customer should use Yamount of lubricants. Normally it would be expected

that thesame supplier will supply both fuel and lubricants. If this is not the case, it

can bean indicator that the customer prefers another Brand of lubricants and buys

thefuel only on convenience or price. This may be another instance of face validity,

butit must not be taken for granted. For that reason, questions fourteen and fifteen

probe relationships between the customer and its supplier. This isvery important in

terms ofestablishing the relationship management part ofan offer.

Question sixteen tests the preferred way of managing contact. It gives an option

from traditional personal calls right up to e-mail and electronic data interchange. It

is necessary to know this. both in terms of knowing the preferred options, but also

in order to set up suitable one-on-one marketing campaigns and improving

customer relationship marketing, as explained in chapter three. Of particular

interest would be to determine how technologically advanced the customers arc

and how this affects their preferred ways ofordering and contact.

Question seventeen is the critical question as far as the make-up of the Brand is

concerned. It lists twenty-seven attributes that can build the Brand. Using sort

78

cards, the respondent is asked to select the 10 most important considerations

when deciding which engine oil to usc. It is important to note that these attributes

include all the variables discussed under the different models in chapter two, and

the outcome should be a fairly accurate validation of the model's accuracy or not.

lt covers relationships, the 4R model as well as some of the traditional 4P

marketing mix. Other parts of the 41> mix are handled in separate questions.

The ten considerations selected arc then further refined to the three most important

attributes. These are then linked to the Brands, by asking the respondent which

Brand(s) he/she perceives to comply with all these requirements, if any. Very

interesting deductions can be made on Brand strength from this, especially if the

preferred Brands differ from the Brand currently used. These attributes were also

used in the design of the Conjoint Value Analysis.

Question eighteen deals very specifically with Brands. It lists eleven Brand

statements, and the respondent is asked to match each statement to the Brand

he/she thinks it fits best. This is very valuable to determine perceptions of Brand

image.

Question nineteen deals with product packaging and presentation and aims to

identify specific preferences.

Question twenty deals with price and price perceptions, introducing a price band

twenty percent below and above OP's wholesale list price. It is also intended to

measure perceptions about Brands that are considered cheap and Brands that are

considered expensive.

This concludes the conventional questionnaire. From the depth and scope of the

questionnaire, it can now be seen why it was so important to go into the detail

described in chapters one and two as to fnctors exerting influence over Brand

perceptions. The survey questionnaire attempts to cover virtually all angles, except

maybe intangibles like psychological triggers.

79

5.6.2Conjoint Analysis

Many applications of conjoint analysis to academic and commercial market and

marketing research projects have been observed since the late 70s. A boost in the

use of the technique has been observed since the late 80's early 90's and it

coincides with the introduction of several computerized packages for designing the

survey, collecting and analysing the conjoint data (Wittink et aI., 1994).

The main application of the technique in the marketing field is related to new

product development projects, while market segmentation and pricing studies also

represent a considerable portion ofall conjoint analysis applications both in Europe

and in the U.S. (Cattin and Wittink, 1982; Wittink et al., 1994).

Three types of conjoint analysis are available, namely Adaptive Conjoint Analysis.

Choice-Based Conjoint and Conjoint Value Analysis, each with its own advantages

and benefits (www.bb). Conjoint Value Analysis was the method chosen and a

detailed explanation as to its workings is given in Annexure G.

5.6.2.1 Conjoint Analysis

Organizations undertaking quality programs invariably require feedback from the

customer base that changes initiated by management are impacting on customers.

At the same time, there is a continuous need to monitor customer expectations.

since it has been widely reponed that the growth of a service culture in many

industries itself leads to a growth in customer expectations of service quality

(Parasuraman et al., 1984).

Customers perceptions of service quality from suppliers arc likely to change more

rapidly than their own intrinsic needs. Consequently, a continuous tracking

program can concentrate on measuring these perceptions, and only update on

measuring needs at planned intervals (Buros and Blackall, 1992)

80

Conjoint analysis has proved over the years to be a very useful and reliable

research tool to organizational management, and its application in the area of

customer satisfaction represents a major enhancement of its appeal to both

researchers and marketing people alike (Page and Rosenbaum. 1987).

5.6.2.2 Project Shuttle eVA

The computer elicitation method was used to design the questionnaire. It is a self

completion document, consisting of forty questions. These questions consist of

combinations of attributes of different levels. The respondent is asked to indicate

ona scale of I to 9 whether he strongly prefers the combination on theleft (make a

cross in block I) or strongly prefer the combination on the right (make a cross in

block 9), or to indicate his preference somewhere on the scale, either a tendency

to the left. or a tendency towards the right.

Using these choices, the computer will decompose the data and allocate utility

values to all the attributes.

These utility values will beused to model potential new versions of Vanellus diesel

oil, positioning it in such a way that it will gain maximum acceptance in the

selected market segments.

5.7I1YPOTIIESIS TESTING

The Hypothesis to be tested is the following;

110: The Brand name is a significant criterion in the purchasing decision

H,: The Brand name is not a significant criterion in the purchasing decision.

This hypotheses will be tested using the Chi-square Goodness-of-fit test at the I~~

level of significance.

lJ f an • •111\pI II f . HI' 10 1IIp:1II' 1:l\ i u

.AJW All/ l l bl)w CU-U ~.WIJ Ll 1)W ....... 'VI Iblt>JW IlJ"~If' 11 ft) l1al 144 I 11 " 141 1~ ]I 10~rx :.u1ll ~ ~ 'J.1 a .1 41 .~ IQ:J 10. ll . le .: I'U}/ 11 0( 111 , .

'" 7J ~I );

fl l 19 4 .'-f : I 1 7; ~ ~lOIAl lltl ~ 141 , QI tO l II -----l~jj}o llC Q~ Q~ Q I I 11 I ..OIlIH (1:fJl\ ~'

.....J1l ll1d I(l) 1(.1) I{l)(I I 'UJU] IOJO.' KO(lJ !lOW /.1 z'o

. 111 III Ilk 'I hIf', it

ure I. I ).I1l1l11b 'r o f u. 'rs of th I1Il 'Or HI' ind (Table

of distributi II fr III th S mpl •

13 runrun number f r r nif nt rrel ti n

d termin d.

b IIPI rt r r i t th h P Ih . It

h uld h lidit

•. 8 Hi l I nY

r, I t ' ll d I th r th d I \

III , the r II r

lU ntit ti method in \ hi h l it

rt n l it

pr po. mpl , dr wn up lin I r Ih If. l ili d quot rnodclv di 1I I

82

Conjoint Value Analysis, the main tool to analyze the data, is discussed at length

and in great detail in Annexure F, and the expected results from the conventional

questionnaire and its meaning was also covered.

Lastly, the hypotheses and ways and means oftesting it was covered.

This concludes this section. In the next section the results of the survey will be

shown.

Kl

CI-IAPTER 6

DATA ANALYSIS AND INTERPRETATION

6.1 rue AIM OF THE CHAPTER

In this, the last section of the dissertation, the results of the field survey are

presented and analyzed, conclusions are drawn, and recommendations are made.

It must be emphasized that only data relevant to the hypotheses is reflected here.

The data collected in table form are in excess of two hundred and twenty pages

and it is impossible ( and unnecessary ) to try and represent all of it here, as our

main concern is about the value of the Brand name in decision making only. For

this reason, that is the only data that will be shown and discussed. For those who

dowant to see and investigate the data further, the questionnaire plus all the tables

as well as a PowcrPoint slide presentation is contained on the CD ROM

(Annexure G)

Inorder to facilitate the easy reading and understanding of the data, themajority of

it is reflected in figure format. All figures and tables arc followed with a more

comprehensive explanation and analysis of the data.

6.1 SAMPLE COMPOSITION

Table 6.1: SampIc Composition in Terms of Users. Source: Research International

Sample Composition

Segment Sample sizeUsers 1IILapsed Users 54Non-users 68Total 233

In . ti n the prop d m -u f th mpl 'Ih'r it \ S

pr p d th t th mpl mpri II n-u r

) u to I numb er of th wi th th

I .quir nn nts, n I rh .•imple, ith refl t d III

t ble6 I II \ S f'lI tha: it \ uld n t III ike I si nili nt diff I Jl in th ut n

of th result

h Int mati n;1I

1 bl 2' P

dUI di

nd r Ii bilit .

p r nu

th

I oil, nd

n l

c,n be n fr m the t bl .2, tit

rniker inte , th

tit • actual d I. Ion III kef in thIt bu in

v lidity and r Ii bili t nd n b • n id r d

, th • mpl ha vi i I

tit lInJV r .

n

6. Hit D I' IU

• Non-users : 4% mentionedV3nollusl BP Vanellus first

• Lapsed users: 13% mentionedVanellusl BP Vanollus first

• Users: 52%mentioned VanolluslBP Vnnellu l first

vanellus-""'-29r:::...:.: - ' 17RilTlJla~7

castrOI_ 7

Diesclube~8Delo.3

5.~

Rubia ~~

~Ivac ~1zenex f

• Brand I

l '~ Company name]

o 20 40 60%

80 100

ntion.

• j II 6.3:

\I : R h lnt man 11.,1

t, n f til ' v nu di u d w I r nd

t tl tim ' it wa

Brand r nition e i ts, it could ilr id b •

Br nd Il 111 pia

respons h w n in Ij ure 6.2 and fi ure

variou Brands . It must b rem rnber d

k ·w. th pictur in BP ' fav ur. IIow cvcr, wh n pr mpt d,

58% U1d Rimul

th t th ir pr du t Brand and

have an advanta e ov r th th r

ros to 97%, an 'lIus to 80%, Z ne: 7 0/0,

57%. ip h v

orporate Brand i the am , and a '

sub brand , a B nn r Orand (al

e: p ct d to b hi h r than p ifi pr

much high r awar n of the van u rand than th ir r

Thi rna b an indi tor of th imp rt n

Brand, wh n mar ting lubricant in th

Africa.

-bu in mark t in uth

hat i of particular cone m in f ur .2 i that 0 f n n-u r , and ven I p d

u ers, m nti n d an lIu fir l. It

known am n t th

uld appear if th Br nd i

. 8Morc lha n 10 year. 3 1 «

285 • 10yel1r1 26

18

182 ·5 yelu, 26

21

6Loulhan 2 yel1r1.-18, 18

0 20 40 60

%

BP V..nollu•

• Engon DIO.Cllubo

Shell RimulJ

80 100

Fi u 6. : Len nh or Rclat i n h i ur : R I h lntcrna ti nal

7

. I d 'I nd lit vtriable. ith rand I tit in I 1 'lid 'nt viri IIlI • i.

to tit illll rt Ul th Br nd n J11 , nd It 'r on

to an -lI l1s. indi uin th It it is. str n Hr nd

nn tit

It

mpl

uld

Ul

m th

pr dll t, thi m thot th I nd n tr pr rmum

pn III

R r to Ann ur I , th lid r n tin I p cd nd n n-u r. Am II I

1I r . 17% th nt. n. id r th pr du t Th

di. pp intm mt nd 0 11 'In h 'I" i th It nl 4% of th I' P ndent thin th t

an lIus ill b th m t uitabl I' th ir mpan '. n ds.

Oil- II. r. d n .% f th 6 I' P lid III

r 'pl in in th iflirmativ " I~. .pt I' r hi zh 'Ill il it II %, the pI' du Is r •

" eptionIII I w n III th oth I' bund ntl

\ ork 11 'd I ) be done amon st thes I I I two cal ' orics I' ustomer 10 r II

nd 0 dwill.

a 11'01 P I' I'm b I of all th oth 'I' I r nd , with a hi h rr lin

6.4 I'RJ E

h \I ll, '

a qu Iii Br nd.

, upp rt III' urn ti lh t

. In fi ur nl 11 %

h it i m r

'. p 11. ivc than the n ,-I Brand, nd 1m . t 20% • th h ap I . p I'

91

Apart from Castrol (Figure 6.9), who regularly advertises the generic, corporate

Orand, there is very little advertising recall. This may be attributable to the

common (but possibly incorrect) belief that relationship marketing plays a bigger

role in business-to-business marketing than Brand-building, above the line

advertising. More will besaid on this topic in the conclusion.

6.7 CUSTOMER RELATIONSHIP MANAGEMENT AND TECHNOLOGY

In 3.4 and 3.7, customer relationship management, and in particular the role of

information technology in enhancing this relationship was discussed.

In order to test the validity of this theory and to measure the readiness of the

market for Electronic commerce (E-commerce), questions were included to

measure preferred ways ofplacing orders and maintaining contact.

The results were quite astounding, especially considering the current hype around

E-commerce. The results clearly justify BP's decision to establish a Customer

Service Unit where all thesmaller customers are serviced via telephone. By far the

majority found this method totally acceptable, with a much smaller portion

preferring personal calls. These, who are mainly the big customers, arecatered for

by Key Account Managers. Only a very, very small part of the market is

technology enabled (Figure 6.10).

Despite the relatively low preference given here to personal visits (Figure 6.11), it

isworthwhile highlighting that when trying to introduce a product to a customer,

there is still no better method than personal, one-on-one calls.

Aconclusion can bedrawn that for customer acquisition or conversion, there is a

need for personal selling, whilst for customer retention and straight re-buy

purchasing, the useofthe telephone will suffice.

,82Telephono 72

1Pcrson.'ll Visit. 24

I 18

FLU8

15

JInternot 2

"'

1 Current Method

E·mall3 Preferred Method

j1

Automntcd re·ordering system 1

0 20 40 60 100

%

" 1 h lntcrnat ionnl.

J77Telephone 65

J 33Personal Visits

27J

Filx 10

Int'''ict ! 6

CurrentMethod1

E-mOlilJ 2

Preferred Method

Automated ro-ordering system )

0 40 60 100

%

nu with IIppli r

II

Th r . • r h h hi hli hI d nf rru lJt

untndrn

n. In

In lu bl

rn unt

r urn nt th I

databa • th P r. nal

')3

o BRA [) rRIB T

Table 6, • mpil d from d t bt in d in qu tion 17 f th qu stionn ir •

umm riz s th imp rtanc of II th - tt ribute that III upth nsllu Br nd .

Table . Br md ttribute R n d 111 rder of Import nc ' . our" Pr ~ t

huttI

Th qu . ti dim r nt a " Fir. tl nd nt

Ii t in ord r th rt

di I oil. ked to Ii. t the thr rt nt

con id rati n . r ult. ofth fir t qu tion ar li.t In lumn 2 nd . hil.t

th r ult f th cond qu tion ar Ii tcd in th I t column. Int r tin I . th

94

results differ substantially. In the first question, technical performance is by far the

most important, concentrating on the product aspect of the 4P model. In the

second question, the rankings come out quite differently. (the top four attributes

are now highlighted in green.) Overall quality now takes prime position, with

creating and maintaining a good business relationship third. The other aspects of

the 4R model are highlighted in red in the table. They are low on the priority list,

indicating relative low importance currently.

Price issues feature much lower than anticipated. Value for money ranks number

six, long term savings isatnumber seven, whilst reasonably priced only comes in at

number eleven. This corroborates the data represented in the pricing ladder earlier.

Price then is a lower priority than commonly suggested.

Technical approval of lubricants by the original equipment manufacturer, often in

the country of origin, is absolutely essential if a company wants to supply to a

manufacturer inSouth Africa. Yet this very important attribute for OEM's is much

less of a priority for customers in the field. This is a concern as far as factory

guarantees and warrantees are concerned, but an opportunity for lubricant

suppliers, as it substantially reduces the barriers toentry.

6.9 CONJOINT VALUE ANALYSIS

The outputs of the eVA are utility values, which indicate the strength of

preference for various offers. These are calculated at the level ofthe individual, or

micro level. Four components were measured in the trade-off exercise, namely:

Brand; Technical issues; Supplier issues and Price.

These attributes arelisted below for each eVA component:

• Brand

1. Agip

2. Vancllus

3. Dclvac

4. Castrol

S. Sasol

6. Rimula

7. Rubia

8. Zenex

9. Delo

10.Dieselube

• Technical

11. Meets orexceeds OEM specifications

12. The most advanced oil

13. Oil that reduces enginewear

14. Ensures low oil consumption

1S. A long life oil • i.e. it extends drainage intervals

16. Oil thatensures good fuel economy

17. Oil that ensures increased enginepower

18. Oil thatguarantees against engine breakdown

• Supplier

19. Purchase both fuel and lubricants from one company

20. Excellent customer service

21. Good technical support

22. Suitable payment and credit terms

23. Complete range of oil for all my needs

24. Easily available

9S

96

25. Equipment provided for workshop.

• Price

26. R 7.80per litre

27. R 8.20per litre

28. R 8.60per litre

29. R 9.00 per litre

30. R 9.40 per litre

The analysis examines both the leverage of the component (like price) and the

attractiveness of each attribute (like R 7.80 per litre).

As can be seen in table 6.4, Brand has the highest leverage across all user groups.

After Brand, technical issues have the highest leverage for lapsed users and non­

users. (The utility rankings for the various user groups, can be found in the

annexures, as annexure d.) The percentage of Vanellus users in the interview

sample skew the Vanellus utilities, but the result isstill valid.

Price and supplier issues feature much lower, with price as high leverage for users,

but low for lapsed users. Supplier issues aregenerally least important.

In table 6.4 all the attributes are ranked in descending order, according to their

utility values. Conjoint Value Analysis allows one to take various attributes from

this table, and by calculating the total value, to select the attributes that will give

the product the highest chance ofsuccess.

97

Table 6.4: Utility Ranking for Total Market. Source: Project Shuttle

TOTAL MARKET Utility RankingVln.llu. 2.531105 1CI.trol 2.21134<11 2Rlmull 1.1111118 3OI••• lub. 1.5119424 4Olllhil r.duc...naln. W.I' 1.431784 5O.lvlc 1.335913 1IOlllhil aUII.nl... lalln.1 enaln. brllkdown 1.311319 7A lona 111.011 1.295397 IICom DI.I. rlna. 01 oil lor III m v n.ed. 1.2115349 8Aglp 1.2311114 10M.el. or nClid. OEM 'Plcillcitlonl 1.2311114 11Purch..1 bolh lu.l.nd lub,lclntl 'rom on. comD.nv 1.2311114 12R 7.110 plr IIlr. 1.2311114 13Good I.chnicil .UDDOrl 1.23711311 14Sllol 1.232287 15Olio 1.2111437 IIIEIIlIv Iv.Ulbl. 1.1871118 17E qulpm .nl Drovld.d lor work.hop 1.195789 18The mo.l.dvlnc.d oU 1.1l14812 18Olllh.l.n.ur.. lncr....d enalne Dow.r 1.173078 20E xc.lI.nl cu.lom.r ..rvlce 1.1511773 21011 Ihel en.ur.. Good lu.1 econom v 1.158157 22Rubll 1.155397 23Sult.bl. D.vm.nl.nd cr.dll t.rm. 1.14l1l1115 24Zen.x 1.12l104l1 25RlI.60 D.r IlIr. 1.126585 28R lI.20 D.r IIlr. 1.09311116 27En.urlslow 011 consumDllon 1.083387 28R9.00 D.r IIlr. 0.9941121 28R8.40 p.r IIlr. 0.80ll28'- 30

6.10 SUMMARY

In this chapter. therelevant data, pertainingtothe hypothesis, that Brand nameis a

significant criterion in the decision making process when procuring HDD oils in the

business to business environment in South Africa, have been presented and,analyzed. There is substantially more data available on the CD ROM (Annexure G)

in the back of the dissertation. but it would not serve the purpose to reflect all of it

here. Rather. after the conclusions and recommendations concerning the Brand. a

section will be devoted to more tactics that BP may use to recapture the lost

volumes of Vanellus diesel oil.

This chapter started offby looking at the 4P marketing mix. It looked at Brand

awareness and found high Brand recognition. Looking at product attributes. it

became evident that performance factors and technical issues arc still the major

levers that givecredibility to the Brand. Apart from customer service. very littleof

98

the 4R model featured in the results~resentation and packaging for Vanellus was

found to be acceptable, and not a reason for the decline in sales. Promotion, and

specifically advertising awareness, showed very poor results, and is a concern if the

Brand is to be promoted amongst non-users.

The readiness of the market for E-commerce initiatives was tested, and it was

found that only a very small proportion of the market is technology enabled. This is

quite surprising in terms ofthe current hype around electronic commerce.

Lastly, the results of the conjoint value analysis were shown. This shows very

clearly that Brand name has the highest utility value by far. No less than four of the

top positions inthe overall market are occupied by Brand names.

In the next chapter, conclusions will be drawn from these results, recommendations

for strengthening the Brand will be made, some tactical recommendations will be

made on recovering lost sales and the constraints of this research will be listed.

99

CHAPTER 7

CONCLUSIONS AND RECOMMENDATIONS

7.1 TilE AIM OFTilE CHAPTER

In this, the final chapter, the hypothesis testing will take place. Any constraints

relevant to this research will then be noted and discussed. Finally, conclusions will

be drawn from the research findings and recommendations made as to possible

solutions. This will be a two pronged approach. The first will refer to matters

related to the Brand, and the second, to marketing strategies and tactics that may

be deployed to recover lost sales of Vanellus. The chapter, asusual, closes with a

summary.

The researcher will remain as unbiased in this interpretation, aspossible. Dr. Henry

Nowik (1964), points out that findings should always be confined to factual

reporting, unembellished by the opinions of the researcher or by his conclusions,

however pertinent in his opinion these might be...It is essential that marketing

people should look upon and rely on research reports as unbiased findings and this

confidence can only be established when the personal opinions ofthe researcher are

not in evidence.

7.2I1YPOTIIESIS TESTING

In the dissertation proposal, the following hypothesis was put forward to accept or

reject:

The Brand name is a significant criterion in the decision making process when

procuring heavy duty diesel oils in the business-to-business environment in South

Africa.

100

Four methodologies will be used to accept this hypothesis.

7.2.1 Observed Validity

In figures 6.2 and 6.3, it clearly shows spontaneous Brand awareness exceeding

fair (relative) market share. When prompted, this increases to very high levels of

awareness. This fact, that customers have such high awareness of what is

considered a technical, business-to- business product, supports the hypothesis that

the Brand name does playa significant role.

7.2.2 Regression Analysis

As can be seen in annexure E, a regression analysis was performed, using all the

attributes listed in the conjoint value analysis.

• On page I, Attribute 2, the P (2 tail) column, shows a 100% level of

significance for Vanellus. The standard coefficient of a positive 0.636 can be

interpreted to mean that there is a 63.6% chance that the Brand name influences

the purchasing decision. Other Brands having a higher than 9()01o level of

significance, are Agip, Rimula and Rubia. As their standard coefficient is

negative, it indicates that it counts against the selection of Vanellus (Gerhard

Srnit, Research International).

• On page 3, Customer service, technical support and the supply ofequipment

are other attributes that showmeaningful levels ofsignificance.

The results of this shows significant correlation between usership and the Brand

attributes. This supports the hypothesis that Brand name does playa significant

role.

101

7.2.3 Conjoint Value Analysis Utility Ranking

In table 6.4, the utility values obtained from the conjoint value analysis. are ranked

in descending order. The first four positions are all occupied by Brand names, and

these have the highest utility values ofallattributes.

This proves conclusively that the Brand name is 8 significant criterion in the

decision making process when procuring HDD oils in the business-to-business

environment in South Africa.

7.2.4 The Chi-Square Goodness or Fit Test

The chi-square statistic can provide a measure of the goodness-of-fit between an

observed frequency distribution of a random variable and an expected frequency

distribution. These expected frequencies can be based on a particular theoretical or

empirical distribution which the random variable is hypothesized to follow

(Wegner, 1999: 257).

In table 5.2, the relevant market shares were mathematically adapted to give an

expected amount of users for the selected sample. As the actual sample

composition changed, the table had to be modified. The actual. observed

frequencies and modified tables are shown inthe table.

As can be seen from table 7.1 and 7.2, the expected frequency has been amended

from the expected sample size of 250, to the actual number of respondents

interviewed. It also accommodates the larger than expected amount of Vanellus

users included in the sample.

• The hypothesis will betested at the 5% level ofsignificance.

For a specified hypothesis that is being tested, the level of significance of the test

refers to the maximum probability with which a Type I error (reject a true

hypothesis) would be an acceptable risk. This means that there are 5 chances in

10

100 th t the h pothesis \ ould b reje ted wh 'n it should actually III b n

accepted ; in other word . the onfidcn ' level of th d i ion i 5 %

198 1: 11 5).

Table 7. 1 bs .rved 'rsof the Br nd

Dr.ud En" U\('d Cu.-n nll" IIIC'

tullnber % number %AWll l) :lY. 3 W.Vunellus 177 JoW. 116 37%Cnl tex 46 W. 22 'lY.CIL,lrul 42 KY. 30 10%Engen 71 1,1% 44 14%MoW 17 Jr. R 3r.Sllsol 7 1% I 0%Shel l 75 15% '12 13%Ruti n 2R sr. 20 6r.Zenex '" 1% 2 1%Other 39 8% 24 /w.

TOTAL 515 100'/. 3 12 100%

hi n II.

Table 7.2: mendedTable of •

• Th null nd It rnativ It p th

ers

110 : Th I r nd narn i. II ignif nt rit rion in th d i"i n m kin pro ,, \ h n

bu. in .. - t nt in .. uth fri

H.: Th Br nd nam i not i niti d ision m kin

wh n pr urin HI /) oil in th bu. in n ironm nt in outh

103

• The area of acceptance.

The number of classes in our exercise are 8 (the number of Brands). The general

rule for the goodness-of-fit degrees of freedom is (k - m-I), where k is the number

ofclasses, m is the number of population parameters that needs to be estimated

from the sample data. There are no population parameters to estimate, hence m

equals zero.

Thus the degrees offreedom are 7.

The level of significance a is given as 5% (i.e. O.OS).

From the chi-square tables, with a = 0.05 and degrees offreedom of 7, the critical

chi-square limit is 14,067.

The next step is to calculate the appropriate sample statistic x'ClIo. This is done in

table 7.3 below.

Table 7.3: Calculation ofthe Chi-Square Statistic

Product Observed Expected (fo•f.)":

fo f.2

f.(fo•f.)BP 114 111 9 0.081Caltex 13 22 81 3.681Castrol 19 13 36 2.269Engen 27 29 4 0.138Shell 24 27 9 0.333Total 11 12 1 0.083Zenex 2 1 1 1.000Other 23 18 25 1.389

X:lCALC = 8.974

Comparison of thesample statistic to the area ofacceptance.

The chi-square sample statistic (X2calc = 8.974) lies inside the area of acceptance,

i.e. less than X2 =14.067.

• Conclusion

Accept Hoat the 5% level ofsignificance.

,

104

This concludes that the Brand name is a significant criterion in the decision making

process when procuring HOD oils in the business-to-business environment in

South Africa. (Wegner, 1999: 258 - 260)

7.3 RESEARCHCONSTRAINTS

This research suffered under a number ofconstraints. They arelisted below:

• Very little is available in terms of published literature on the topic in South

Africa

• Generally sales, volumes and market share are considered confidential, and this

information was not readily available

• It was extremely difficult to find the required number of respondents of correct

size and usership, according to the original plan. In the end the sample had to be

adjusted to meet with reality.

• Certain segments, like franchised workshops are not sufficiently covered in the

survey, whilst others, like spares shops and other high street outlets are not

covered at all. Further research may be required on this, as these are

particularly susceptible to Brand influences.

• The research had more than one purpose, thus losing some focus on the main

hypothesis. It also resulted in a mass of information which made interpretation

very difficult, not to mention almost impossible to represent in the text.

• Measurement of the hypothesis statistics were problematical in the beginning,

but was overcome eventually. Longitudinal research may be needed to measure

the cumulative effects of a particular relationship construct (measured by

attitudinal scales) in customer behaviour and the ultimate market share

(measured by choice behaviour).

7.4 ON LV ION A DR 0 ME DATIO o BRA D

105

As one o f the original objective , th goal was to d t nnin th rol of th Brand

and Brand name in po itioning the product. We now look at orne factor :

In figure 6.9 , it was shown that very low advertising awarene s exi ts. This can b

a seriou damp er for the growt h of V anellus, as explained below.

In figure 7. I, the respondents were asked who manufactures Vanellus. The fact

that 56% of non-users are not aware o f who the manufacturer of Vanellus is, i a

major reason for concern. This would indicate a very low level of Brandawarene

amongst the major new business pro sp ects. This becomes even a bigger co ncern

when seen in conjunction with figure 6.4, which ee Vanellus enjoying smaller

usership with customers that have a relationship of less than 5 years. This would

indicate a severe lack of Brand awa reness. User reinforcement will also assist in

preventing the current attrition rat e s . It is necessary to reinforce the reasons for

choosing Vanellus as the right choice.

Figu re 7.1: Brand Kn wlcdzc Manufacturer. ur : Proiect huttlc

106

The Brand image is strong, but lapsed users feel that the Brand does not suit their

company's need best whilst non-users have a weak image of the Brand, reinforcing

the potential role ofadvertising.

Rossiter and Percy (1987) describe Brand awareness as being essential for the

communication process to occur as it precedes all other steps in the process.

Without Brand awareness occurring, no other communication effects can occur.

For a consumer to buy a Brand they must first be made aware ofit. Brand attitude

cannot be formed, and intention to buy can not occur unless Brand awareness has

occurred. In memory theory, Brand awareness is positioned as a vital first step in

building the bundle of associations which are attached to the Brand in memory

(Stokes, 1985).

It is therefore highly recommended that the Brand be extensively advertised and

promoted. The following media can be used: Trade magazines; Direct response;

Event marketing; Sponsorship; Public Relations; Web sites; Packaging design;

Merchandising; Point-or-sale design; Sales promotion; Consumer competitions;

Industrial theater and Exhibitions.

The pack image isquite strong, but not that attractive.

Vanellus usersarenot asprice sensitiveasusers ofother Brands.

The research reveals that attributes forming Brand personality are mainly technical,

and relationship management and information technology, apart from service

aspects, still play a very minor role in the Brand architecture. The Brand

proposition, as discussed in chapter two, where Brand soul and Brand personality

were held as essentials for a successful Brand, obviously apply less to a technical,

business to business product in SA.

107

Fi ure 7.3: rca on Un r

Fi ure 7.2 nd 7. c1earl point

r It uld tak n In f nnul ti n of lit pr du I nd ub u nt

that th d and

It i r

qu lit and

int rv I. lit m

in dv n in th B nd im

nn n , wilh I n lif oil

d n in

I nd d d an

r. lit m an

d I rmin th p I nti I f limit

r h und tit I limit d gu nt

n lIu pr duct u d ill

br d wn.

down, It uld th

An tit r

guaranI

gain t n in br

108

remains a distinctly viable way of differentiating the Brand, especially amongst

current users.

The Internet should be used to widen the scope of the Brand, but itsmain purpose

should be to determine the "touch points", that is, identify the areas where

customers need help and immediately act upon it. Another primary use would be to

use it to build up a customer database.

This concludes the section on the Brand.

It must be highlighted that throughout the research, Castrol has proved the superb

equity that the Brand possess. If the Castrol knowledge, skills, culture, advertising,

and sales promotion expertise can be successfully transplanted in the cost

conscious BP organization, tremendous benefits can be reaped from the merger. It

links two very powerful Brands that should have no problems in setting new

benchmarks in the industry. The Castrol Brand should be leveraged to its fullest

extent, possibly even considering adding the Castrol icon on the product and/or

saying that it is underwritten by Castrol (part of the Castrol family of quality

products).

7.5CONCLUSIONS AND RECOMMENDATIONS ON MARKETING

ISSUES

One objective of the research (other than Brand tracking), was to detennine the

reason for the substantial loss of sales volume for Vanellus, and to use these

findings to make recommendations. Even ifit falls somewhat outside the scope of

the hypothesis, it is justified that the reasons for this loss are highlighted and

recommendations made. Very valuable findings were made, and the avid scholar

will be able to gain more insight by lookingat the data contained in Annexure G.

Supplier relationships and product attributes would appear not tohave contributed

much towards the loss in sales volume. Very few negatives were highlighted by

the research. Figure 7.4 reflects the reasons given by lapsed users for changing

109

Brand . Pric and lor paym nt term w r th mo t fr qu nt r on giv n, with

convcnienc , product choice and qualit and customer ervice II on par.

Thre v ry d finit area of cone rn r highlighted by th r arch:

Fir tty i th fact, reflected in figur .4 , th t compared to th oppo ition, V n lIu

has ubstantially fewer u rsthan th comp titionthat u th product for I than

five year . This i a poor reflection on SP' tafT, a it means that cu tom r

lost, are not r placed by new cu tom r . Loyalty re t in long time u er , and th y

are the customer mostly tied in by long term contracts.

econdly, as figure 7.5 hows, the co mpany is extremely exposed, as a ubstantial

amount of Vanellus u ers are buying on an ad hoc ba is, without any contractual

obligations. ompared to the competitors, the situation is equally bad for short

term contracts . This leaves BP vulnerable, as the barriers for these customers to

switch are very low.

' igurc 7,..: R n for 'it h in Brands, ourcc : Pro' hurtle

110

Fi me 7.5: Meth hU1I1

Thirdl , I r nd awaren amon t n n-u cr I v I w, making it dim ult t

ualit and pric are th two con i t nt th m thr u hout the rc arch. om

eu tomer want b 'Her qualit , t nd d drain int 1 and r duced nglO w r ,

whilst oth

u t f r Ion life oil, i. il

hi h lubri it ,

nt, r ullin in I n t ITO

cu tom r • r

oil al o h

m r fu I ffi

pr duct b add d onto th rang . t th t P

lubricant n b dd d. Th

n In

ti r, nth tic - or ml -

availabl , and thi will compl

with nded dr in int rval .

r nd m in th

vm .

t th b It m f th curr nt r n

rcquir m nu , but n thin

pr duct th t m t m in tr m m r

intr du cd th

pri . Thi i

D ro 5 th trurn, it u • I

u r or n non-u r .

III

It is also proposed that aconcerted sales drive is made by the sales force to tie up

existing customers with a contract. Supply ofworkshop equipment may help them

achieve this. This thought is further supported by the previous research results

(discussed section 4.3.3), that shows that only 39.3% of workshops are

contractually bound to their lubricants supplier. The next step would be to create

above the line advertising support and below the line sales aids. Armed with this,

and qualified leads, BP"s sales staff should go on a concerted sales drive to recruit

new customers for Vanellus. The research also showed a segment of consumers

(25%) who buy their lubricants and fuels from separate suppliers. This also offers

additional business opportunities.

An incentive scheme that rewards the sales team for new business is

recommended.

7.5.1 Customer Relationships and Information Technology

The research has very clearly highlighted that the market isnotready for Electronic

commerce yet (Figures 6.10 & 6.11). This can be seen as a negative or as a huge

opportunity. In terms of improved logistics, it is vital that product sales, product

demand and product stockholding be tracked. The research shows that very few

customers havethese facilities available.

The astute marketer may now approach the supply of computer hardware and

computer software in the same light as they handle relationship specific

investments in workshop equipment. Not only does it provide the opportunity to

tie in the customer contractually, but it will vastly improve logistics and other

marketing communication and infonnation. Amongst others, it also opens channels

for direct marketing through E-mail, paperless transactions and electronic fund

transfers, and seamless customer relationships. Supplier relationship specific

investments also have a positive effect on customer satisfaction (Rexha and

Miyamoto, 1997).

112

For the retail and wholesale FMCG market in particular. ECR as discussed in

Chapter 4. section 4.5. needs to be developed rapidly.

Using the utilities obtained from the Conjoint Value Analysis. the following

recommendations can bemade:

7.5.2 Current Usen

• Price has a high leverage for users.

• Supplier issues are least important to users.

• Oil that guarantees against engine breakdown and a long life oil (extended drain

intervals) are the most important attributes for users. Oil that reduces engine

wear also has a high utility.

• Acomplete range ofoil for all needs is important too.

Regression analysis revealed that excellent customer service is the main driver for

current usership.

It is thus recommended that relationships with these customers be strengthened by

entering in transparent. fixed margin, flexible pricing. In this way both parties will

win in a market where base oil prices fluctuate wildly. It should satisfY both parties

onthe price issue. as normally customers lose out if after a price increase. input

costs come down again. This benefit is seldom passed on. Castrol's culture of

providing solution specific products should also produce solutions for the product

related matters.

It is very important toget all existing customers tied up in a supply contract.

Awell planned. guarantee programme similar to the BP fuel guarantee can assist in

increasing sales.

113

Service then becomes the other focus area, and BP will be well advised to institute

a continuous service improvement program with distinct measurables on key

performance indicators.

7.5.3 Lapsed Users

• Lapsed users are not as price sensitive as Brand users, inferring that price

perception isnot the prime motivator to lapse.

• After Brand, technical utilities have the highest leverage for lapsed users.

• Brand has lesser leverage than for Vanellus users.

• Lapsed users want oil that reduces engine wear. a long life oil and the most

advanced oil asattributes.

• Good technical support and excellent customer service have a higher utility

value for lapsed users than users.

Acampaign to recover these lost customers must be concentrated around service

and technical support. Towards this end. the technical help desk number and

website address must appear on all new product labels. Sales staff recruited must

be more ofa technical nature and be able to assist with technical problems. as well

as be able to use the computer software (OATS: Earl 4 programme) that can do

instant price surveys. cost quotes and recommendations for the correct lubricant.

Training in technical aspects is also a priority. Added to this, develop a new range

ofproduct brochures, showing the new range and include technical specifications

and detailed usage. Also make technical data sheets available to all (annexure C).

on the DP Intranet as well as on the BP lubricants Internet website, at web address

www.bplubricants.com.

As this sector is not so price or Brand driven, an own name Brand at a cost benefit

may be a consideration for them.

114

7.5.4 Non-Usen

• Non-users have a weak image of the Brand, reinforcing the potential role of

advertising.

• Vanellus users are not so price sensitive as users of other Brands, and as

Vanellus is priced at a premium, this implies that strong motivations will have to

be forwarded ifBP wants to attract customers for Vanellus.

• Technical issues arc important for non-users.

• Supplier issues are least important for non-users.

• Oil that reduces engine wear has the highest utility and oil that guarantees

against engine breakdown has the second highest utilityunder technical.

• A complete range of oils for all my needs, technical support and equipment

provided for workshop, are further requirements.

The recommendation here would be that this sector be approached with a totally

integrated offer, including all of the above, but also the complete information

technology package. All recommendations included for users and lapsed users

should also be included here, but this campaign must be supported by a strong

media campaign to create awareness, especially ifthe guarantee route is taken.

7.6 THE FUTURE

Even ifa concerted sales drive is launched, only a certainslice ofthe market can be

captured, as the rest is contractually bound. (An astute sales force will know when

these contracts are due for renewal, and will then pitch for the business). If the

research results are extrapolated to the universe, more than fifty percent of lapsed

users and more than sixty percent of non-users are contractually bound to their

current Brand. So where docs BP go from here?

Hamel and Prahalad (1994:5), argue that any company that succeeds at

restructuring and re-engineering, but fails to create the markets of the future will

115

find itself on a treadmill, trying to keep one step ahead of the steadily declining

margins and profits ofyesterday's business.

This research did not cover service station forecourts, spares shops and other

outlets that buy products for resale. In these markets there is a need to develop

category management principles. detailed annual strategic category plans.

improved supply chain performance, informed promotions and planned

presentations. From this platform, loyalty programmes, and finally. totally

integrated solutions can be developed.

Neither BP nor Castrol has proper main line truck stop facilities, and providing

facilities can substantially increase Brand exposure and create substantial goodwill.

Lastly, there is the option of marketing an existing product in new channels. In

terms of social responsibility and Black empowerment. the establishment of

franchised truck and light delivery vehicle workshops for Black entrepreneurs

comes to mind. Ultimately they will service the mainstream market, the vastly

expanding pool of previously disadvantaged Black people now acquiring motor

vehicles. and they must be brought into the fold. For BP automotive (passenger

vehicles) this may be a mobile shop in a trailer selling the range of lubricants and

car care products in convenient locations in the townships under a franchise

arrangement. This will drastically improve penetration in developing markets.

The way to go for BP is to promote the Corporate Brand, with all its values and

beliefs, rather than individual products. The Company has huge credibility, and this

should be maximized.

?7SUMMARY

In this chapter the hypothesis tests were done that proved conclusively that the

Brand name is a significant criterion in the decision making process when

procuring HOD oils in the business-to-business environment in South Africa. The

116

constraints of this research were listed, and then conclusions and

recommendations, flowing from the survey and models covered in the research,

were made. These covered the Brand as well as marketing issues that should be

addressed when relaunching/rejuvenating Vanellus. Finally, the creation of future

markets were discussed briefly, and certain proposal made.

In closing this research on the Brand, there is a final guiding quote from Hamel and

Prahalad (1994):

"The Banner Brand (in this instance BP) is directed as top level Brand, in which

corporate reputation, awareness and leadership foresight are invested. It works as

an Unique Organizing Purpose. It embodies a uniquely relevant service raison

d'etre which transforms into a feedback loop between employee pride in winning,

and consumer joy in the best. It acts as the consumer's editor of choice by

transferring high level values, such as trust and delight, across temporary product

manifestations of the Branded organization. Banner Brand impact is "glocally"

(global and locally) multipliable by linkages toother Brands, including sub-brands"

This is so relevant where Amoco, Arco and now Castrol, with all their products

must operate under the global, new BP Brand. But as they say, products may be

temporary, but theCorporation will keep onexisting.

117

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Th • nc , lobal HP Br ind

Ann ur . co Po itio In tri

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.:

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-

Annexure B: Comparative Turnoverand Volume Figures

1998 1999

Vanellus VANELLUS C3 10W Sum of Ytd_VOlume_Litres_ 709623 568390 80.10%

Sum of Ytd_Contribution Net_Margin 1757350.716 1621286.~ 92.26%

VANEUUS C3 203 Sum of Ytd_VOlume_Utres_ 0 0 0Sum of Ytd Contribution Net_Margin 0 0 0

VANELLUS C3 20W Sum of Ytd_VOlume_Litres_ 410 750 182.93%Sum of Ytd Contribution Net Margin 1592.96818 2924.14822 183.57%

VANELLUS C3 30 Sum of Ytd_VOlume_Utres_ 2744145 2189368 79.78%

Sum of Ytd_Contribution NeCMargin_ 7071550.841 6367223.217 90.04%

VANEUUS C3 40 Sum of Yld_VOlume_Utres_ 514130 549950 106.97%

Sum of Ytd_Contribution NeCMargln_ 1127055.329 1415872.623 125.63%

VANEUUS C3 50 Sum of Ytd_VOlume_Utres_ 68430 57390 83.87%Sum of Ytd Contribution Net Margin 146032.5808 143760.7604 98.44%

VANELLUS C3 EXTRA 15W/40 Sum of Ytd_VOlume_Litres_ 614585 572154 93.10%Sum of Ytd Contribution Net Margin 1568770.525 1696663.717 108.15%

VANELLUS C3 EXTRA 30 Sum of Ytd_VOlume_Litres_ 38370 14020 36.54%Sum of Ytd Contribution Net Margln_ 97289.02627 34668.84504 35.63%

VANELLUS C3 MULTIGRADE Sum of Ytd_VOlume_Utres_ 3906919 3n9956 96.75%

Sum of Ytd Contribution Net Margin_ 9265134.375 10283351.92 110.99%VANELLUS DO SAE 40 Sum of Ytd_VOlume_Litres_ 26580 21880 82.32%

Sum of Ytd Contribution Net Margin 59020.91962 56715.10722 96.09%VANELLUS FE 10W/40 Sum of Ytd_VOlume_Litres_ 26190 17020 64.99%

I Sum of Ytd_Contribution_NeCMargln_ 37585.68046 35134.81629 93.48%

:!

VANELLUS M 30 Sum of Yld_VOlume_Utres_ 0 0 0Sum of Ytd Contribution Net Margin 0 -18881.3 0

VANELLUS M 40 Sum of Ytd Volume Utres 0 0 0

Sum of Ytd Contribution Net Margin -21 0 0.00%(blank) Sum of Ytd_VOlume_Utres_ 0 0 0

Sum of Ytd Contributlon Net Margin -5n246.79 -714345.93 123.75%(blank) Sum of 0 0 0Ytd Volume Utres(blank) Sum of -5n246.79 -714345.93 123.75%Yld Contribution Net Margin

Vanellus 8649382 mOS78 89.84%Sum ofYld_Volume_UtresVanellus Sum of 20554115.17 20924374.47 101.80%Ytd Contribution Net Marcin

Annuure C: Technical Data Sheet.

ApplicationsViscoBakkle 15W-40 Is a premium quality versatileengine 011 specifically designed to meet the demands ofcompact diesel engines. The edvanced formulation ofViscoBakkle uses high quality base oils combined with aperformance enhancing chemical additive system toprovide excellent engine protection.

Main Benefits• Excellent soot handling characteristics, to preventslUdge formation;• Veryhigh levels of enginecleanliness and weerprotection in high performance tUrbocharged andnaturally aspirated engines:- Superior performanceassures extended enginereliability andoperational economy;• Excellent high temperaturestability and oxidationresistance minimises the formation d lacquers anddeposits:

SpecificationsAPICH-41 CG-4 1CF-4 1SJACEAB3/AJ

StorageAll packages should be stored under cover. Whereoutsidestorage Is unavoidable drums should be laidhorizontally to 8VOId the posSible Ingress of water

Visco BakkieA tough motor 011 for the working vehicle

Visco Bakkle has been specifically formulated with highsulphated ash to su~ theappetite for the Japanese highspeed diesel engine.Visco Bakkle Is suitable for use In normally aspirated endturbochargeddieselengines (API CH-4) and It'sadvanced formulation with API SJ gasoline engineperformancemake ~ Ideally suited to mixed fleeteppllcatlons

• Advanced formulation provides excellent dispersancyend protects against low temperature sludge formation;• High levels of bothdiesel and gasoline performancemake Visco Bakklesuitable forapplication In mixedneels where productrationalisation Is required.

Mercedes-Benz Sheet 'n7.1 &'n8.1SABS 151611517

end the oblltet'lltlon d drummarkings. Products shouldnot be stored above6O'C, exposed to hot sun or freezingconditiOns.

Health, Safety and EnvironmentHealth, l8fety and environmentallntormatlon Is providedtor this product In the Materials Safety Data Sheet. Thisgives details of potential hazards, precautions and FirstAid measures, togetherwith environmental effects anddisposal of used products.

2

The British Petroleum Company p.l.c. or its subsidiarieswillnot accept liability If theproduct is used other than Inthe manner or with the precautions or for the purpose/sspecified. Beforetheproduct Isused other than asdirected, advice should be obtained from the localBPoffICe.

Visco BakkieA tough motor011 for the workingvehicle

Typical Characteristics

Te.t Methods Units Grade:

15W-40

Density at20C ASTM 01298 kgJJ 0.8836

Flashpoint (CeC) ASTM 092 C 220

Kinematic Viscosityat40·C ASTM 0445 mm2ls 104at 1OO·C ASTMD445 mm2ls 14.4

Absolute viscosity ASTM02602 cP 3310

Viscosity Index ASTM02270 141

Pour Point ASTM097 C -24

Sulphated Ash ASTM 0874 "'mass 1.59

Total Base Number ASTM 02896 mgKOHlg 13.0

calcium AA %(mlm) 0.430

llnc AA %(mlm) 0.130

Phosphorus XRF %(mlm) 0.115

'lMDIla__,",-._.~ID"'_"""_'"poII'*lf 110 .......... '.__ ......,..__ ......-.tyooCOll'iiJlllllO-"' _ .....-.- ..-...-

.....UNft~ pIOlIudI..." --~.............__ ID-..., ....-- ...,.-No___.... ........-.llIIIlIMCllI'IIIII*I•• ....--..' .....111.._01_... _ ..............,ID,.-...,..--..__.--

n. M IooMy...... -....--.t.nMy........01 ---.. ..__ ......

__~_... _tNlI .... IfrecI...,-, "' .....d .......-~-*l8P~ AIrfca IPTYl Llil..T_ ......II 8l000Ip'.a.­CapeT_lOOlPO.. llOO8IloggoMM llO1:l...-.-Tal .• '11 :ll «II :lltll

Annexure D: Conjoint Value Analysu, Utility Ratings

TOTAL MARKET Utility RankingVanellus 2.537105 1Castrol 2.283441 2Rimula 1.781118 3Dleselube 1.589424 4011 that reduces enalne wear 1.431764 5Delvac 1.335913 6011 that auarantees aaainst enalne breakdown 1.311319 7A long life 011 1.295397 8Complete ranae of all for all my needs 1.285349 9Aalp 1.238114 10Meets or exceeds OEM specifications 1.238114 11Purchase both fuel and lubricants from one company 1.238114 12R7.80 per Inre 1.238114 13Good technical support 1.237638 14Sasol 1.232297 15Delo 1.218437 16Easllvavailable 1.197616 17Equipment provided for workshop 1.195769 18The most advanced 011 1.184812 19011 that ensures Increased engine power 1.173079 20Excellent customer service 1.158773 21011 that ensures good fuel economy 1.156157 22Rubia 1.155397 23Suitable payment and credit terms 1.148865 24Zenex 1.128048 25R8.60 per Inre 1.126585 26R6.20 per litre 1.093886 27Ensures lowall consumption 1.093367 28R9.00 per litre 0.994821 29R9.40 per litre 0.908284 30

USERS Utility RankVanollus 3.397284 1Castrol 2.326404 2Rimula 1.616781 3Dleselubo 1.563781 4011 that reduces enalne woar 1.369378 5011 that guarantees acalnst enolne breakdown 1.33o.c59 6Delvae 1.262358 7A long life 011 1.257488 8Complete range of all for all my needs 1.250229 9Aglp 1.246771 10Meets or exceeds OEM specifications 1.246771 11Purchaseboth fuol and lubricants from ono company 1.246771 12R7.80 per litre 1.246771 13Easily available 1.237413 14Suitable pavment and credit terms 1.235028 15011 that ensures Increased engine power 1.216882 16Excellent customor service 1.197606 17Sa501 1.186138 18Delo 1.16544 19011 that ensures cood fuel economy 1.165037 20The most advanced 011 1.156706 21Zenex 1.154385 22R8.60 per litre 1.147963 23Good technical support 1.145633 24Equipmentprovided for workshop 1.093413 25Ensures low 011 consumption 1.072789 26R8.20 per litre 1.062798 27R9.00 per litre 0.958688 28Ru~a 0.913183 29R9.40 per litre 0.835514 30

2

LAPSED USER Utility RankCastrol 2.278278 1Vanollus 1.~S37 2Rimula 1.8727llG 3OIOS4)lubo 1.718G07 4Rubfa 1.8e2148 5Oolvac 1.40&37 8011 that nlduces cmolne woar 1.383574 750501 1.3eM48 8Good lechnlcal suDClOrt 1.348~4 80010 1.341574 10ComPlete range of allfor all my neGds 1.322722 11A long life oU 1.31542& 12Excallent customer service 1.275407 13Equipment DroVldod forworkshop 1.238704 14Tho most advancod all 1.22788" 15Ensuros lowallconsumption 1.22038" 18Easily ovallable 1.215648 17AQlp 1.209852 18Moots or exceeds OEM SDOdfieatlons 1.209852 18Purchasobolh fuel and lubr1cantsfrom one comDBnv 1.209852 20R7.80 par litre 1.209852 21R9.00 par litre 1.181444 22OU that onsures aood fuol oconomy 1.1455 23R8.20 per litre 1.13537 24R8.eo per litre 1.12783 255ultabfo payment and credit terms 1.115S144 28OUthat auaramees against onalno bnlakdown 1.08075" 27R9.40 per litre 1.078852 28OU1M! ensures lnaoasod onaloo DOWOr 1.0735"3 28Zonox 1.oe~07 30

1

NON-USER Utility RankCastrol 2.216712 1Rimula 1.895727 2011 that reduces engine wear 1.574227 3Vanellus 1.571879 4Dleselube 1.5275 5011 that ouamntees against encine breakdown 1.468348 6Delvac 1.399742 7A long life all 1.341652 8Equipment provided forworkshop 1.329682 9Complete range of 011 for all my needs 1.312773 10Good technical support 1.298515 11Aglp 1.246939 12Meets or exceeds OEM specifications 1.246939 13Purchaseboth fuel and lubricants from one company 1.246939 14R7.80 per litre 1.246939 15Delo 1.205212 16SaseI 1.198606 17The most advanced oil 1.195985 18011 that ensures Increased engine power 1.182167 19011 that ensures oood fuel economy 1.150212 20Rubia 1.140803 21Zenex 1.13253 22Easily available 1.117136 23R8.20 per litre 1.111288 24R8.60 per litre 1.090424 25Suitable payment and credit tenns 1.0335 26Ensures low 011 consumption 1.023424 27Excellent customer service 0.999212 28R9.00 per litre 0.918167 29R9.40 per litre 0.888909 30

Annexure E: Regmsion Analysis Tables

UDPO - Uaer8hlp: U8er8 -I, I11P8tid and non-uae r s -0Orlver8 ot u8erehlp

MGLII>MOOEL UOPO - CONSTANTtATltAT2tAT3tAT4tAT5tAT6tAT7tATOtAT9tATI0>ESTIMATE

TUE 20/06/00 1\: 41:47 AM 1l:\DPSA-l \SIlUTTL-I\DATA\CVA\SIIUT3.SYS

OEP VAR: UDpD N: 233 MULTIPLE R: 0.581 SQUARED MULTIPLE R: 0.337AOJUSTEO SQUAREO MULTIr'LE R: .307 STANDARD F.RROR or ESTIMATE: 0.417

VARIABU: COErnCIENT 5TO ERROR STO COEr TOI.l:RANCE T 1'12 TAIL)

CONSTANT -0.125 0.247 0.000 -0.509 0.612ATI 0.397 0.204 0.119 0.819 1.949 0.053AT2 0.166 0.017 0.636 0.692 9.602 0.000AT3 -0.027 0.031 -0.060 0.500 -0.961 0.307AT4 -0.033 0.023 -0.106 0.572 -1. e61 0.146AT5 -0.031 0.029 -0.087 0.476 -1.0ge 0.275AT6 -o.ors 0.021 -0.1!>5 0.590 -2.162 0.032AT7 -0.019 0.027 -0.206 0.596 -2.991 0.004I\T8 0.039 0.030 0.086 0.669 1.271 0.205AT9 -0.013 0.031 -0.032 0.496 -0.412 0.601I\TlO -0.009 0.026 -0.025 0.511 -0.326 0.145

ANALYSI S Or VARIANCE

1

SOURCE SUM-Of-SQUARES or M£/\N-SOUARE

REGRESSION 19.216 10 1.929RESIOUAL 37. ge2 218 0.1 H

r-RATIO

11. 104

r

0.000

HODEL UOPO • COtlSTANT+ATll+AT12+AT13+AT14 +ATI 5+ATl6+AT1"'A1'18>ESTIHATE

TUE 20/06/00 11 :45:41 AM II: \BI'SA-l \SIlUTTL-I\DATA\CVA\SIlUTJ.SYS

DEl'VAR: UOPD N: 233 HlJI.TIPLE R: 0.146 SQUARED MULTIPLE R: 0.021ADJUSTED SQUARED MULTIPLE R: .000 STANDARD ERROR or ESTIMATE: 0.504

VARIABI.E COEFfICIENT STO FoRROR STD COEr TOLERANCE T 1'12 TAIL)

CONSTANT 0.243 0.306 0.000 0.792 0.429ATll 0.220 0.253 0.066 0:117 0.873 0.384ATI2 -0.012 0.053 -0.022 0.460 -0.220 0.826ATI3 -0.049 0.O4!> -0.110 O.HO -1. 090 0.2"17AT 14 -0.021 0.048 -0.046 0.401 -0.434 0.665AT15 -0. 0~2 0.050 -0.099 0.502 -1.04~ 0.297AT16 0.030 0.051 0.063 0.298 O. ~16 0.606liT11 0.066 0.061 0.17.5 0.339 1.089 0.21"1IIT19 0.011 0.043 0.039 0.483 0.402 0.698

/lNAI.YSIS O~' VARIANCE

2

SOURCE SUM-OF-SQUARES or Hf.AN-SQUARE

REGRESSION 1.220 9 0.1~3

RESIDUAL 55.898 220 0.254

r-RATIO

0.600

P

0.171

>MODEL UDPO • CQjSTANTIAT19+AT20+AT21 +AT22+AT23IAT24+AT25>F.STIHATE

TUE 20/06/00 11:16:17 AM 1l:\BPSA-l\SIlUTTL-l\OJ\TA\CVA\SIlUT3.SYS

DEP VAR: UOPD N: 233 MULTIPLE R: 0.273 SQUARED MULTIPLE R: 0.074ADJUSTED SQUARED MULTIPLE R: .045 STANDARD ERROR or ESTIMATE: 0.489

VARIABLE COF.f'FlCIENT STD ERROR STD COEr TOLERANCE T PI2 TAILI

CONSTANT 0.199 0.288 0.000 0.689 0.491AT19 0.311 0.239 0.093 0.817 1.299 0.195AT20 0.101 0.052 0.222 0.361 2.061 0.041AT21 -0.151 0.061 -0.245 0.424 -2.459 0.015AT22 0.061 0.049 0.123 0.520 1.369 0.1731'.123 -0.021 0.059 -0.046 0.426 -0.165 0.642AT24 0.029 0.061 0.045 0.455 0.169 0.640AT25 -0.102 0.045 -0.174 0.699 -2.243 0.026

ANAI.YSIS or VARIANCE

3

SOURCE SUM-or-SQUARES or MEAN-SQUARE

REGRESSION 4.251 7 0.601RESIDUAL 52.861 221 0.239

r-RATIO

2.539

P

0.016

HODEl. UDPD - cotlS'fANTtAT26tAT2HAT28 tAT29tATJO>ESTIHATE

TUE 20/06/00 11:16:51 AM 1t:\OPSA-l\SIIUTTL-l\DATA\CVA\SItUT3.SrS

OEP VAR: UOPD N: 233 MULTIPLE R: 0.181 SQUARED HULTIPLE R: 0.033ADJUSTED SQUARED HULTIPLE R: .011 STANDARD ERROR OF ESTIMATE: 0.498

VARIAB1.E COE:FFICIENT STD ERROR STO COEr TOLERANCE T Pl2 TAIL)

CONSTANT 0.150 0.292 0.000 0.516 0.607AT26 0.28" 0.246 0.086 0.801 1.110 0.243AT21 -0.120 0.011 -0.145 O. !l04 -1.561 0.119AT28 0.110 0.015 0.261 0.314 2.275 0.024AT29 -0.001 0.058 -0.002 0.393 -0.015 0.988AT30 -0.099 0.060 -0.198 0.299 -1.614 0.102

ANAI.YSIS Of' VARIANCE

4

SOURCE SUH-Of-SQUARES Dr Mf:AN-SQUFlRE

RE:GRESSION 1.865!J 0.373RE:SIDUAL 55.253 223 0.248

F-RATIO

1.506

p

0.189

CUSSIZE- customer !llze: llmall -11 medium -21 large -3

MODEL CUSSIZE - CONSTANT+AT1+AT2+AT3tAT4+AT~tAT6+ATHAT8+AT9tATIO>ESTIMATE

TUE 20/06/00 11:49:02 AM 1l:\OPSA-l\SIIUTTL'I\DATA\CVA\SIlUT3.SYS

DEP VAR: CUSSIZE N: 233 MULTIPLE R: 0.333 SQUARED MULTIPLE R: 0.111ADJUSTED SQUARED MULTIPLE R: .070 STANDARD ERROR OF ESTIMATE: 0.731

VARIABLE COEFfICIENT STD ERROR STO COEr TOLERANCE T Pl2 TAIL)

CONSTANT 0.934 0.434 0.000 2 .1~4 0.032ATl 0.647 0.357 0.128 0.818 1. 809 0.072AT2 -0.078 0.030 -0.198 0.692 -2.581 0.011liT3 0.082 0.055 0.136 0.500 1.509 0.133liT4 0.041 0.040 0.088 0.572 1.039 0.300liT5 -0.153 0.050 -0.283 0.416 -3.051 0.003liT6 0.006 0.037 0.014 0.590 0.163 0.871liT7 0.043 0.048 0.014 0.596 0.892 0.313liT8 -0.010 0.053 -0.104 0.668 -1.337 0.183liT9 -0.040 0.054 -0.066 0.496 -0.728 0.468IIT10 0.094 0.046 0.181 0.511 2.022 0.044

ANALYSIS OF VARIANCE

5

SOURCE SUM-Of-SQUIIRES or MEAN-SQUIIRE r-RATIO P

REGRESSIONRESIDUAL

14.567 10116.621 218

1. 4570.535

2.723 0.004

>HODEL CUSSIZE - CONSTANTtATlltATlZtATI3tATUtATl!>tATI6tATPtATI8>ESTIHATf:

TUE 20/06/00 11:49:38 AM II: \UPSA~ 1 \SIlUTTL-1 \llATA\CVA\SIIUT3.SYS

OEP VAR: CUSSIZE H: 233 HULTIPLE R: 0.15!> SQUARED HULTIPLE R: 0.024ADJUSTED SQUARED MULTIPLE R: .000 STANDARD ERROR or ESTIMATE: 0.763

VAR I ADU: COEffICIENT STD £RROR STD coar TOLERANCE T PI2 TAI1.I

CONSTANT 1.158 0.464 0.000 2.496 0.013ATll 0.389 0.302 0.077 0.771 1.018 0.310AT12 -0.042 0.081 -0.051 0.460 -0.521 0.603ATI3 0.020 0.060 0.041 0.440 0.410 0.682AT14 0.003 0.072 0.004 0.401 0.041 0.96'1ATI5 0.066 0.076 0.061 0.502 0.863 0.389ATI6 0.093 0.007 0.131 0.298 1.073 0.204AT 17 -0.140 0.092 -0.174 0.338 -1.516 0.131ATI0 -0.022 0.065 -0.033 0.483 -0.342 0.733

ANALYSIS 0.' VARIANCE

6

SOURCE SUH-or-SQUARES or HEAN-SQUARE

REGRESSION 3.166 8 0.396RESIDUAL 128.022 220 0.582

r-AATIO

0.680

P

0.709

MODEL CUSSIZE • CONSTANTtAT19tAT20tAT21 tAT22tAT23tAT24tAT2!i>ESTlHATE

TUE 20/06/00 11:~0:10 AM 1I:\DPSA-1\SIIUTTL~1\OATA\evA\SHUT3.SYS

DEP VAR: CUSSIZE N: 233 MULTIPLE R: 0.280 SQUARED MULTIPLE R: 0.018ADJUSTED SQUARED MULTIPLE R: .049 STANDARD ERROR or ESTIHJ\TE: 0.140

VARIABLE COEFrICIENT STO ERROR STD COEr TOLERANCE T Pl2 TAIL)

CONSTANT 1. 046 0.436 0.000 2.400 0.011AT19 O. 4~2 0.361 0.089 0.011 1.250 0.213AT20 -0.140 0.018 -0.192 0.361 -1.190 0.015AT21 0.211 0.093 0.226 0.424 2.273 0.024AT22 -0.219 0.015 -0.263 0.520 -2.940 0.004AT23 0.009 0.000 0.010 0.426 0.10~ 0.917AT24 0.069 0.093 0.012 0.45!i 0.148 0.455AT25 0.013 0.060 0.002 0.699 1.062 0.290

ANALYSIS OF VARIANCE

7

SOURCE SUM-or-SQUARES or MEAN-SQUARE

REGRESSION 10.215 1 1.468RESIDUAL 120.913 221 0.541

r-RATIO

2.683

P

0.011

>MODEI. CUSSIZE - CONSTANT+AT26+AT27+AT28+AT29IAT30>ESTIMATE

TUE 20/06/00 11 :~0:39 AM 1I:\UI'SJ\-I\SIIUTTL-I\DATA\CVA\SIlUTJ.SYS

DEP VAR: CUSSIZE N: 233 HULTIPI.E R: 0.199 SQUARED MULTIPLE R: 0.040ADJUSTED SQUARED MULTIPLE R: .018 STANDARD ERROR or ESTIMATE: 0.752

VAAIADLE COErnCIENT STD ERROR STD COEr TOLERANCE T PI2 TAIL)

CONSTANT 1.456 0.441 0.000 3.304 0.001AT26 0.124 0.371 0.024 0.801 0.334 0.739AT27 0.239 0.116 0.191 0.504 2.061 0.040I\T28 -0.216 0.113 -0.286 0.314 -2.09 0.016I\T29 -0.036 0.087 -0.043 0.393 -0.411 0.681I\T30 0.120 0.091 0.158 0.299 1.315 0.190

FlNI\I.Y:;I:; OF VARIANCE

8

SOURCE SUM-or-SQUARES or Hf:J\N-SQUI\RF.

REGRESSION 5.211 5 1.042RESIDUAL 125.917 223 0.565

r-RATIO

1. 845

p

0.105

AT2 - Vanell U3

HODEL AT2 - CONSTANT t liT11tAT12tllT13tATl HilT! ~tAT16t1\T17 tllT18>ESTlMATE

TUE 20/06/00 12:19:31 PH 1I:\OPSI\-1\SIIUTTL-l\DATA\CVA\SIlUT4.SYS

DEP VAR: I\T2 N: 233 MULTIPLE R: 0.294 SQUARED MULTIPLE R: 0.086IIDJUSTED SQUIIREOMULTIPLE R: .053 STANDJIRD ERROR or ESTIMATE: 1.868

VARIAOLE COF.FrICIENT STO t:RROR STD COEr TOLERANcr. T Pl2 TAIL)

CONSTANT 1.562 1.136 0.000 1.376 0.17011TH 1.112 0.936 0.087 0.771 1.191 0.236AT12 0.227 0.197 0.109 0.460 1.150 0.2!>1IIT13 -0.183 0.166 -0.10" 0.440 -1.104 0.271AT 14 -0.531 0.177 -0.310 0.401 -3.0" 0.003IIT15 -0.134 0.106 -0.065 0.502 -0.120 0.472IIT16 0.555 0.213 0.308 0.298 2.612 0.010liT17 -0.lC2 0.226 -0.070 0.338 -0.629 0.530AT18 -0.093 0.159 -0.054 0.403 -0.586 0.5!>8

ANALYSIS of" VARIANCE

9

SOURCE SUM-OF-SQUARES Dr MEAN-SQUARE

REGRESSION 72.519 8 9.065RESIDUAl. 767.540 220 3.489

r-AATIO

2.598

p

0.010

MODEl. AT2 • COOSTANTtATl9tATZOtAT21 tAT22tAT2JtATZ. tATZ!>>£STIHATr.

"UE 20/06/00 12 :20: n PH II: \OPSA-I \SIIUTTL-l \ DATA\CVA\ SIlUT4 .SYS

DEP VAR: AT2 N: 233 MULTIPLE R: 0.238 SQUARED MULTIPLE R: 0.0!>7ADJUSTED SQUARED MULTIPLE R: .027 STANDARD ERROR or ESTIMATE: 1.894

VARIAOU: COEffICIENT SrD ERROR STD COEr TOLERANCE T Pl2 TAIL)

CONSTANT 1. 780 l.ll!> 0.000 1. ~96 0.112ATl9 0.468 0.92!> 0.03"/ 0.817 O. ses 0.614AT20 0.022 0.201 0.012 0.361 0.108 0.914AT21 -0.329 0.23'1 -0. 1J 9 0.424 -1. 387 0.167AT22 0.~31 0.191 0.2!>2 0.!>20 2.7e!> 0.006AT23 -0.06. 0.225 -0.028 0.426 -0.20. 0.777An. 0.022 0.237 0.009 O. 4!>~ 0.091 0.928AT2!i 0.005 0.175 0.002 0.699 0.031 0.97 !>

ANALYSIS 0.' VARIANCE

10

SOURCE SUM-or-SQUARES Dr Mr.AN-SQUARE

Rf:GRESSION .7.613 'I 6.802RESIDUAl. 792.U1 221 3.!>86

F'-IV\TIO

1. 891

P

0.071

MODf.L AT2 - CONSTANT. AT26.AT27 t AT28. AT2 9tAT30>f.STIHATE

TUE 20/06/00 12:21:16 PH 1I:\UPSA-l\SIIUTTL-l\DATA\CVA\SIIUT4.SYS

DEP VAR: AT2 1'1: 233 MUl,TIPLE R: 0.263 SQUARED MULTIPLE R: 0.069ADJUSTED SQUARED MULTIPLE R: .049 STANDARD ERROR of ESTIMATE: 1. 872

VARIABLE COEfFICIENT STD ERROR STD COEf TOLERANCE T Pl2 TAIL)

CONSTANT 0.198 1.098 0.000 0.121 0.468AT26 1.968 0.924 0.154 0.801 2.129 0.034AT21 -0.458 0.280 -0.14!> 0.504 -1. 588 0.114AT20 -0.643 0.202 -0.263 0.314 -2.281 0.023AT29 0.430 0.211 0.204 0.393 1. 918 0.049AT30 0.111 0.227 0.0!>8 0.299 0.490 0.62!)

ANALYSIS 0.' VARIIINCE

11

SOURCr. SUM-Of-SQUARES Of MEAN-SQUARE

REGRESS I ON 58.319!> 11. 664RESIDUAL 781.141 223 3.506

f-RATIO

3.321

I'

0.006

I

Annexure F: Conjoint Analysis

1. INTRODUCTION

Many applications of conjoint analysis to academic and commercial market and

marketing research projects have been observed since the late 70s. Aboost in the

use of the technique has been observed since the late 80's early 90's and it

coincides with the introduction of several computerized packages for designing the

survey, collecting and analyzing the conjoint data (Wittink et aI., 1994).

The main application of the technique in the marketing field is related to new

product development projects, while market segmentation and pricing studies also

represent a considerable portion of all conjoint analysis applications both in Europe

and in the U.S. (Cattin and Wittink, 1982; Wittink et al., 1994).

Three types of conjoint analysis are available, namely Adaptive Conjoint Analysis,

Choice-Based Conjoint and Conjoint Value Analysis, each with its own advantages

and benefits (www.bb). Conjoint Value Analysis was chosen and a detailed

explanation as to its workings is given. Justine Snider from Research International

in Cape Towngave a substantial amount ofher own input (Snider, 2000).

1.1 Introduction to Conjoint Analysis

Acommon problem faced in research is the need to determine the pricing potential

for products that are made up of discrete additional 'extras' that carry separate

prices. Examples of this are most common in the durable goods area. where

features can beeither costed extras on a 'base' model (e.g. automobiles), or where

a range of pre-formed 'feature bundles' are determined by the manufacturer (e.g.

hi-f], cameras, washing machines) (King, 1991: 3 - 13).

The classic response to this problem hasbeen the use of Conjoint Analysis, which

measures the appeal or 'utility' of the various potential features, and can estimate

the likely appeal of a variety of bundles. Moreover, if 'price' is included as a

2

variable. the 'demand function' for each ofthe options can also be measured. This

makes it a useful tool for pricesetting.

However. there are occasions when this approach does not quite fit the problem in

hand. For example:

• where costs for the features are determined (e.g, by manufacturing). and

where the aim is tofind the best 'mix' offeatures,

• where consumers or customers have individual 'budgets' that they do not

wish to exceed.

• where the manufacturer in recognition ofthis. wishes tomarket a 'range' of

products orservices (e.g. rangingfrom 'basic' to 'luxury' models).

Clearly. some of these conditions can arise together.

By analyzing consumers' declared interestin the alternative features, together with

patterns of inclusion of features into personal ideal packages, key information is

gained not only about the appeal of specific features. but also the way in which

these interact to fonn natural bundles with other features.

Moreover. byconducting this process onan individual basis and then analyzing the

'ideal packages' across a number of respondents, the model isable toarrive at the

best specification for the product (or for a range of products) that will satisfY the

most consumers. as well as accounting for the maximum of their declared budgets

(King, 1991: 3 - 13).

2. FROM FACTORIAL TESTING TO CONJOINT ANALYSIS

Irnauin tit. t oft drink \ nted 10 kn the r I tiv pp dill' nt

cone mtrution of w etener, md lev I of

tin '. It

test ' p rim nt wher two r

arnpl 't

e amination - nam ely th tw

overall app I of tit drink f r tit two mpl , pp I

betw en tit rn could b attribut d t th different on ntration of 'we t n r - nd

we would hav determined tit m t of thi variabl .

How v r, I t u uppo e that w t n r wa not th only i ue 10 b d id d, nd

that th company wa al int re t d in level of carbonation. I rly, it w uld

po ible to repeat the sw t ncr periment, but thi tim varying th I f

carbonation. Thi would certainl mea ure thi variabl a well, but at th c t f

repeating a po sibly e pensiv arn p ling operation.

p rim nt nTlterc would al 0 bc another problem. If we conduct d th

swe tcncr and carbonation in i o lation, we would n

the e variable 'interact' with eac h th r, in th

carbonat d drink, might d p nd up n whether it wa v ry w t or th

or alternatively, that the pr f r n for a we t drin mi ht dep nd up n it I

offizzi n

A urm n th t th r w r t

nnoth w f h, ndlin thi m nuf tur th fI ur

n in t bl I.

Table 1: Combinations of V aria b l s

Variable 1 2 3 4Sweetener High Low High Low

4

____I High , Low , Low I High IlCarbonation

Ifone recruited a separate sample to test each of these variants, one could use a

particular statistical technique known as Analysis of Variance, not just to

determine the contribution of each of the variables and their levels, but also to

determine the degree to which these interacted with each other. This would be a

much more efficient use ofthe data.

Extending this principle, we could examine many more variables than the two we

have looked at so far. However, the more variables we look at simultaneously, the

more the number of possible combinations to test. This poses the problem of

consumers being able to differentiate accurately between the combinations if too

many variants have to be tested. For example, with two variables each at two levels

we have 2 x 2 =4 possible combinations. But in an experiment with, say, 8

variables each at two levels, we would have 2 x 2 x 2 x 2 x 2x 2 x2 x 2 =256

possibilities.

Moreover, if some of the variables had more than two levels, this would lead to

even greater numbers ofpotential products, e.g, 2 x 2 x 3 x 2 x 4 x 2 x 3 x 2 =1152. This full number ofpossible combinations is known as a 'full design' for the

variables being considered. Unfortunately, many problems do have large numbers

ofvariables and levels that need to be quantified,leading to very large full designs.

In these circumstances, itisclearly impossible tomanufacture Oct alone test among

separate samples) this number of possibilities.

In order to cope with this problem, it is possible to test a reduced number of

combinations taken outofthe full design, known as a 'partial balanced design'. This

is a subset of the full design, but with combinations chosen in a very careful way

such that the representation of each variable level, and its pairing with other

variable levels, is balanced so that the analysis is not biased. This end result is

known as an 'orthogonally balanced reduced design'. The entire process of

examining the effect of more than one variable by testing combinations of them is

known as 'factorial testing' (Green and Srinivasan, 1990~ 3 -19).

s

In the late 60's and early 70's, experiments began to be conducted in which the

variables being tested in a factorial experiment were less 'hard' than the kind of

physical product composition type of variable described above, and which did not

require actual product testing by respondents. For example, motorists could be

asked to examine alternative automobile concepts described in tenns of variables

such as 'engine size', 'fuel economy', 'seatcomfort', and so on.

The assumption here was that, with this sort of variable, respondents could

themselves assess their likely level of liking orpreference from a simple description

of its composition, rather than test a complete physical example. Moreover, the

variables used need not even be so hard as to involve a physical issue (such as

engine size) - an example in the airlines sector might include variables such as

'quality of food', 'punctuality', 'pleasantness ofair-hostesses', and so on (Buros and

Blackall, 1992).

In terms of the analysis of such experiments, a further refinement was possible in

circumstances where it was not expected that any of the variables tested were

likely to interact with each other - a condition known as 'independence'. In these

circumstances the aim oftheanalysis is to measure the 'main effect' ofeach variable

and its levels, and the major benefit of this approach is that, with no interactions

between variables tomeasure, the number ofproduct concepts required to measure

the main effects can bevery much reduced (Green and Srininvasan, 1990: 3 - 19).

Another development dating from the 1970's involved the scope of the analysis

itself. In conventional factorial product testing, theaim of theanalysis is to identify

the main effects (and possibly interactions too) at the aggregate level - that is to

say, average values derived across the sample. In contrast, the aim ofthe reduced

design main-effects experiments is to identify the main effects values for each

individual in the sample. This approach has considerable implications, as will be

described below, since it makes possible not just the identification ofsegments of

individuals with similar values, but also the possibility of a wide range of modeling

activity.

6

• A reduced design is used (except on the simplest experiment),

• Analysis is for main effects only,

• The analysis isconducted for every individual in thesample,

• Modeling and segmentation analysis is commonly applied to the resulting

individual values.

Conjoint analysis is a particular method of analyzing experimental data in such a

way that the contributions of different experimental conditions can be

systematically separated and quantified. Its origins derive from a classical form of

statistical analysis known as •Analysis of Variance', and factorial designs (Alford et

aI.,1992).

2.1 Conjoint Importance

In many senses, therefore, conjoint analysis is the best technique for measuring

attribute importance's - partly because it is an 'indirect' method (that is, it does not

ask the respondent to think about what is important, only what is preferred) that

obtains a measure of importance by 'decomposing' stated preferences so that the

importance ofcontributory factors can beinferred (www.bb).

At the same time, conjoint analysis also scores over other methods of measuring

importance by specifically dealing with stated levels of attributes, rather than

dealing with them as complete entities. This is extremely important in customer

satisfaction measurement, where it is often insufficient to indicate that a particular

service area is important - it is also necessary to provide an operational definition

ofany breakpoints that apply. For example. it might not be enough to know that

opening hours is an important service dimension for banking • we also need to

know the relative appeal ofdifferent bands ofopening (www.bb).

1.2 Identification and Measunment ofKey Decision Criteria

7

In order to be able to understand the detenninants of consumer choice. of which

customer service is but one, we need to understand the fuJI range of variables

involved, and their hierarchical relationships. One way of classifying choice criteria

is to separate them into the macro issues that transcend the product, and the micro

issues that represent the specification of the product itself.

One of the most obvious criteria of consumer choice is that of the Branding

attached to the product or service. In market research, this is nonnaJly either the

traditional notion ofa manufacturer's brand (Marlboro, Persil, Sony) or the name

of an organization providing service (British Airways, Taco Bell). The

characteristics ofthe branding process have lent these names an equity based upon

their symbolic value, where the symbolism acts as a shorthand for other qualities

such as dependability, personality, advertising recall etc. (Green and Srinivasan,

1990).

Another macro issue must be price itself. This, after all, is a bottom line topic

against which all the other components must be weighed. Price can be simple and

unitary (e.g. the price tag attached to most grocery products), or can be complex

with elements that trade off against each other. Examples of the latter might be

many financial products. Another might be mobile phones, where at least three

pricing elements (handset cost, monthly charge, and call rates) operate (Wittink et

aI.,1994).

It is against these topics (or topics like them) that service stacks up. In research

terms, it is useful tokeep service separate from issues of product specification (the

micro variables) since service is often a context within which products (possibly

changing overtime) are evaluated (parasuraman et al., 1984).

In this study usc was made of four Macro issues, namely Brand level, Technical

Specifications, Support(Service)/Company and Price.

8

In addition to the macro issues that operate at a global level, the specific

characteristics of products must also be taken into account as variables that

consumers use for decision making. A wide variety of criteria are encountered in

product design, ranging from the emotional to the physical or functional. These

have a role to play even in service lndustriea- for example, type of aircraft for

airlines, or regularity ofstatements in banking.

2.3 Designing theeVA

The computer program identifies the unique set of importances (or utilities) for

each respondent by a series of iterative questions, the nature of which are

determined by the preceding answers. Aswell as providing accurate measures, the

task also has the benefit of sustaining interest among respondents (Alford et al.,

1992).

An example of the type ofquestion posed by the computer is shown in figure 1.

However, for many researchers, the most appealing feature ofconjoint analysis is

that it can be used as a model, in which different product configurations can be

simulated to provide a rich source of management information. Using a conjoint

simulation model, organizations can identify those strategies which appear to offer

the greatest benefit, in terms of providing customer satisfaction, product feature

optimization, or even optimal pricing. Moreover, given cost data from within the

organization, themodel output can be used as input into a costlbenefit analysis to

provide a shortlist for strategy options.

'8

Suppll.r ACOlt AArrlng.d In1wtlk

.tc.

'12

Suppll.r BCOltCArrlng.d In 2-3d8YI

ete.

9

1 .... 2 .... 3 .... 4 .... 5 .... 6 .... 7 .... 8 .... 9Strongly

prefer left

Indifferent

Indicate on the scale yourpreference between the two

items

Strongly

prefer right

Figure I: Semantic Differential Scale Used In Conjoint Analysis.

(Source: ResearchInlcmationnl.2(00)

Hitherto, conjoint analysis has been applied toa small part of the entire set of key

choice criteria (www.bb),

2.4 Applying Conjoint Analysis to Measure Key Choice Criteria

Historically, conjoint analysis has most often been applied to product features,

although other macro issues such as branding and price have sometimes been

included in studies. However, recent thinking has tended to move away from using

classical conjoint approaches in studies that mix macro and micro variables, on the

grounds that micro variables do not naturally trade-offagainst macro ones; and

that the process tends tounderestimate the importance of themacro issues, given

the many micro ones ina typical study.

This distortion can be quite severe, and has been shown to result in price

elasticities (for example) that are considerably lower than what might be expected

from the market from which they arc derived.

The solution to the problem, as pioneered by Research International, is known 8S

dual scaling. This essentially presents thetask to the respondent as two conjoints •

th fi r t Ifl nJ int m nu pr du t fe tur n11

tit n

-t, but in ludin 'unon I the rnond bein

d t rmin d bundle of micr

the utiliti

III th 111 ro ntin tit

pond nt, but with ut th dist rti n th I

produ f atur

attribut i thu

f d tn icro th ,t

uld

b incurr d ifth 'y hid be n in Iud d in a comm n I sk www.bb).

This i hown in figur 2:

'MICRO'

'MACRO'

PRODUCTFEATURES

BRAND

PRICE

SERVICE

Fi mre 2: Du: I lin hint m: ti ru1,2000)

2. D t olle tion

Alth u h Ih principl of th r imil r, f di r nt m th

i. t f r c II tin inf rill ti n r m r p nd nts.

Th principl on ar :

11

• Full concepts

• Pairwise grids

• Computer elicitation

The method used in this research is computer elicitation.

The most recent fonn ofelicitation to emerge is one where respondents are asked

to make choices between combinations of attributes and their levels which are

chosen bya computer (Alford et aI., 1992;www.bb).

It may seem at first sight that this is no more than a sophisticated recording method

where the underlying system is still a full concepts or a pairwise approach.

However, this isnot the case, since the computer need not administer a fixed list of

attribute choices by rote, but can be allowed to compute from previous answers

given the next attributes to present to the respondent. This can be done on the

basis of the 'information gain' that would arise from obtaining data on some

attributes rather than others.

Conjoint enables respondents to be given a much more appropriate task to

complete, namely stating their preferences between different packages of features.

Analysis is then able to decompose these preferences into measures of the value

attached to the features involved.

The major output from conjoint analysis is a measure of the value attached to

different items, which form part of a package. These items are levels, or different

options of a series of features or attributes, which arc the component parts of the

product or service under study. The value attached to each feature is what drives

customers' preferences for one combination of features relative to another. The

difference in thevalue attached to the levels ofeach feature, provide a measure of

the importance ofthat feature, in terms of its ability to drive customers' preference.

Because these measures arc calculated at the individual level, mean scores can be

run for anygiven group ofrespondents(www.bb).

12

2.6 Analysis

As previously stated, the main aim ofconjoint analysis is to obtain estimates of the

'main effects' of the variables being examined - which canbe regarded as measures

ofthecontribution or importance ofthem in determining preference.

The usual terminology for describing such conjoint importance weights is in terms

of'utilities'. Thefact that these are fractional numbers (i.e. they arcexpressed with

decimal places) may seem odd, especially since the elicitation procedures may ask

for nothing more than rank orders ofpreference (Burton, 1975).

The way in which this is done is illustrated in figure 3, taking as an example a

single pair-wise grid oftwoattributes: shape (square/round) and size (large/small).

SHAPE

SIZE Square Round

Large J 2

SmaJl 3 -I

Figure 3: Pairwise Grid ofAttributes. (Source: Research International, 2000)

In figure 3, the respondent has taken the Large-Square option as the most

preferred (i.e. rank I) and the Small-Round option as the least preferred

(i.e. rank 4) one.

Aconjoint analysis of this single pair-wisegrid might assign the following utilities:

Table 2: Pair-wise Utilities in Grid Format

Size ShapeLarge +100.0 Square 50.0Small -100.0 Round -50.0

The utility value have a numb ' f v 'ry lJ ·fiJl pr p rti

II) Reproducibility of datil - t ilit value ar d riv d by 'd mp In

re p ndent' tared pref r n into e timatc

tati tical m thods C<1n bud t do thi - of

(M NAN VA), multipi

few.

ion, and lin ir pro rarnrnin , to n m but

If th e timate are good, th y h v an important pr p rty - th can bud t

recon truct the original pr fercnc . Take for e mple tabl ' 2 above. n th

utility values calculated, it i po ibl to calculat th 'utili t urn' for ach f th

four choice , a follow (Table ):

Table 3: Rank Order of Prefere nce

'.Combinations ,Rank Utility SumLarge/square 1 +150.0Large/round 2 +50.0Small/square 3 -50.0Small/round 4 -150.0

A can b

orderin

n, th origin ) r n

urn . " hi

p<prVM in th

IIlC imul

ill

II

m htc , th

mi ht

, it mightIn p

arbitr , inc quit i nifi nt

th ir abilit to r

Ihattribut

of attribut r ws, th a tu I lu . thai would

14

system get more and more precise - in fact, turning rank values into 'real' fractional

values (Table 3 and Figure 3).

b) Scaling - As can beseen, the values within an attribute span both positive and

negative ranges. This is arbitrary, and indeed utility values are often expressed

purely as positive numbers. The main point is that they can be expressed in a

variety of ways (Table 3).

c) Relativity - However, although they can be scaled differently, they have one

important property in common: ratios between levels are preserved. Thus, the

utility values for Large and Small in the above example could have been

expressed as +100 and -100, +1000 and -1000, +1.0 and -1.0, or even 2 and O.

All these values preserve the central relationship, which is that the utility or

value ofLarge is twice that of Small Table 3).

Moreover, in the two attribute system, the value of going from Small to Large

(200 points) has twice the value ofgoing from Square to Round (100 points). This

is an extremely important point, since it means that importance measures derived

from conjoint exercises are not absolute, but have meaning only in a relative

context alongside other variables collected atthe sametime.

This type of relative value is known in the mathematical world as a 'ratio scale' ­

having no absolute start or end point. Another common example of such a scale

would be temperature. In the same way that we cannot really say that a

temperature of 60 degrees is 'twice as hot' as a temperature of 30 degrees, we

cannot say that a utility value of +60 is 'twice as important' as a value of +30.

However, in the same way that we can interpret ratios of temperatures, we can

interpret ratios ofutilities.

The best way to interpret utility values, therefore, is in terms of differences

between levels, rather than in absolute terms.

d) p n f tilit • II vin id thi , it i oil Il u ul t id nti th

of the ttributc a wh I , r th th n in t nil fi t Il titu nt I v I .

Thi n be d ne b find in th I P n f utilit

b'tw lue nd th

h ttribut

J h in th

p'f nt in th nt in th t m.

Thu , in ur two attribut

Table 4:Span ofUtilities

200.0 67%100.0 33%300.0

In fact, thi calculation can b don in two way - whieh mi htn t necessari

the am an wer,

The fir t way i to p norm th

m an utilit value . Thi giv

leulation a hown in figur 4, workin n th

umma of th n t em t f r th

itu tion wh r h Ifth m I

I. h

outcom

that f r

lik I t h pp n.

min th rd r

m utin th n

of utilit f r th

"Ihi \ ill pr vide

opini n . i 1.

in itu tion

The I pan of utility' n be a use ul umm ry OJ · ure, but n ~ t bud \ ith

d. n

ult in diller nt v lu , OJ U1 u h

chan ' to thi ( ueh

or cv n different lev I

ttribut

a comp ri on inv lid (Burton: I 7 Iford et I. , I 2).

2.7 Int rpreting Utility V lu

Having conducteda conjoint tud , nd h Yin bt in d th utility v lu d ri d

abov , th ta k of th rc earch r i n w to int rpr t th

In gen ral, th r are thre maj r w of u ing th m nid r,2000).

a) Pr -d fined ubgroup mean

In the arne way that ordinary urv data can b brok n down for ub- up

rag b nd , tc.),analy i (suc h a eompari on of

value can b grouped tog th r nd th m n valu

other roup . This provid

attribut and their I vel mon pr -d fin d r up of int r t - p

mark tin h vi ral r up .

Table 5: Mean Utility Valu

E&.- ~. :", ~ ~~W!) te'EN ,,L •-. ..,."',

•<;.\ Utlnty;~', ~ ....I" Utility•• r" I....\"·~pan

SizeLarge +35.6 46 % +26.4 47%Small -35.6 -26.4

17

ShapeSquare +24.8 32% +18.3 33°hRound -24.8 -18.3

ColourRed +15.4 22% +13.5 20%Green +3.7 -8.2Blue -19.1 -5.3

In table S (a hypothetical) example, despite similar levels of importance attached to

the attributes overall. considerable differences in preference between levels exist

between men and women. While both sexes tend to prefer Large sizes to Small,

this is a greater issue to men than women; and in the caseof Shape. the preference

is actually reversed. Finally. in the case of Colour, while both sexes prefer Red to

other colours. men clearly prefer Green to Blue as their second choice. while for

women bothGreen and Blue take second place toa similar extent.

b) Segmenting utility values

Looking at predefined subgroups of interest is one way to examine the way in

which individuals vary in terms of the importance that they attach to issues.

However, this depends by definition on identifying criteria beforehand for

specifying subgroups that are likely to prove discriminating, in the sense that the

different groups have different importance weights. Naturally. ifthe subgroups are

of no intrinsic marketing interest in themselves. but are merely used to expose

differences between individuals. the risk is that the prior definitions that are used

may not reveal the principle differences between individuals.

Another way is to approach the problem the other way around. Instead of pre­

defining the groups of interest, why not approach the problem with a clear mind,

and search forgroupings ofindividuals who are similar in terms ofattaching similar

levels of importance to the sameattributes?

18

This can be done using a particular multivariate technique known as Cluster

Analysis. which searches through the utilities and identifies groups of individuals

having similar patterns of utility values. This can provide a very useful form of

segmentation in marketing terms, since it is essentially able to identify and define

'need groups' that exist in a market. which often provide a more actionable basis to

market studies than other forms of segmentation based on behavioral

characteristics or general attitudes (Snider, 2000).

c) Simulation modeling

The third. and some would consider the most appealing, way ofanalyzing conjoint

values is through the process ofsimulation modeling.

This is made possible by the property possessed by utility values referred to earlier

• that of being able to reconstitute the original order of preferences given by

respondents.

For example, in the case of reduced designs (where respondents were not exposed

toall possible combinations ofattribute levels), itwouldbe possible toestimate the

likely preferences that might be shown towards hypothetical combinations that had

not actually been tested. Moreover. this can be done at the individual level. As an

example, consider the following utility values generated bythree respondents, A, 8

andC.

Table 6: ThreeRespondent Utility Table

A B CSize

Large +55.6 +27.6 -16.9Small -55.6 -27.6 +16.9

ShapeSquare -23.8 +34.5 +48.3

Round +23.8 -34.5 -48.3

Colour

Red +37.1 -12.8 -0 .7Green -27.1 +15.9 -36.1Blue -10.0 -3.1 36 .8

ow, upp th I w w r int r t d in fiv p ibl

tabl 7. It i po ible 10 mputc th 'utilit nun' rr pond nt • n foil w :

Table 7: Utility Packages

described in

I h f the • f r u th

, R89kage, . A ', . 8 ~ C1 Large/square/red 68.9 49.3 31.72 Small/round/green 4.6 -57.5 -67.53 Large/round/blue 69.4 -10.0 -28.44 Large/square/green 4.7 78.0 -4.75 Small/square/blue -89.4 3.8 102.0

Taking the view that the it m with th high t utilit um will offi r a r p nd nt

the be t combination of de ir d pr p rti out of th fiv ndid t th n

a impl mod ling rule would b to t k

item 'ch n': i. . A chao 4, and eh 5.

th

th i

attribut e mbinations i 't t d' n

conjoint

th I bl

ch individu I, th 'b t' pti

umul I d th

Table 8 : Simulat d Choic Sh r

Sample ize =300

litem1 I 24% I

20

Item 2 13%Item 3 35%Item 4 7%Item 5 21%

This kind of modeling is an example of 'micro-modeling' • so called because the

decision process is modeled at the individual level. This makes the modeling

process of particular interest in situations where full account should be taken of

individual differences (e.g. in segmentation exercises). Since no average

importance values are calculated, there is much less danger of an average

misrepresenting the true diversity ofopinion on an issue(Snider, 2000).

In reality, the modeling process can be more sophisticated than the simple account

given above, and various techniques canbe used to mimic:

• Joint choice situations - such as with Respondent A in the example above,

where items 1and 3 have similar utility sums. In these cases, it isunrealistic to

assume that a respondent would radically prefer one to theother, given the very

small difference that might be within the precision of the method. It is possible

to define a resolution factor for a model, which would then take items with

utility sums within a certain band as ~oint choices'.

• Probabilistic choices - such as occur in markets where consumers purchase

from a repertoire of products. In these cases, the aim of the modeling is not to

predict a certain outcome, but the probability of purchase in agiven purchasing

situation. These can be estimated from the ratios ofthe relevant utility sums.

• Respondent weighting. for example in situations where it is advantageous to

weight people according to some criterion, such as heaviness ofconsumption in

the product field, level ofdisposable income, and so on (Snider, 2000~ www.bb;

Alford ct al 1992).

2.8 Using the Data

21

The data canbeexamined in three mainways, discussed below:

• Understanding importances. The apparently complex procedure described above

results in a common set of utilities for all the attributes. These can then be

compared, and an overall understanding of the relative impact ofservice and

otherattributes tothe choice itselfcan beunderstood.

• Customer segmentation: It is by no means necessary to restrict the use of

conjoint utilities to measuring the values attached to features by predefined

groups of respondents. This process can be reversed by using segmentation

analysis to identify groups of respondents who attach values to features in a

similar fashion, and then identifying who these groups are and profiling their

characteristics (Wittink et al., 1994).

•Since conjoint utilities are typically computed at the individual level, they can be

analyzed by various multivariate techniques such as Cluster Analysis to provide an

indication of the natural groupings or segments of consumers that occur within a

market. This approach is an example of benefit segmentation. Such segmentation

exercises are highly thought of, since they in effect map out thedemand groupsin a

market, and directly lead to the development of targeted products, and

optimization procedures in general.

This can often bea valuable means of identifying important market segments who

may have similar needs, but do not coincide exactly with pre-determined groupings

and are therefore difficult to find through conventional analysis (Wittink et ai,

1994).

' i turc 4: Dr akd wn of : R 'I h Inlcrn:llional.2

Th aim would b fir t1y t m nt a ampl on th b i or Ih m cr nj int

variabl a hown in figur , Thi would identif individu wh

than av rage en itivit on m cr pic , In th c

th n n thin cI - thi m nt i or inter t in it If

Other cgrn nt could b id ntifi d in

ervicc, or po ibly arc product fl ture driven. 110 groupin r t

crud to provide much in ight int o what cau d th ir n itivitv. on qu ntl ,

ccondary cgmentation can b applied, In the of th driv n b pr du t

featur , we would utilize th valu from th micr conjoint (\ .bb; lf rd

al, 19 2; Wittink et al., 19 4) ,

It hould b pointed out th t thi

oil n m i r), but that th ut

m nt tion ppro ch ,

particularl n t mpl (th real

m i m r fI u d th n c n

rid i

nti n 1

rim

t nu

n til

th t m

m nt ti n f r til r r h t

d m nd in m rk I,

(or ill-d fin link \ ith fu tur

nj int

nt

III I rin onn f r rmm

of til nj int

n th r. Thi

Th r n th r m r pr ti I r

utiliti , nd thi i b

to 'tr d - ff on attri ut

23

differentiation in the data than is often the case with attitude statements (for

example), and this can in tum lead to a 'cleaner', more understandable (and

ultimately, more actionable) segmentation outcome. It is probably true to say that

needs segmentation via conjoint analysis is one of the most useful applications of

the method.

• Simulation modeling: It is possible to take the use of conjoint utilities a stage

further than the basic analysis which identifies what is important, by

constructing specific scenarios for respondents to consider and simulating the

choices respondents would make when deciding between them (www.bb).

Research International has developed its own simulation program which is able to

use the conjoint data for every individual respondent. Within the model one

creates a scenario in which one can 'design' two (or more) different combinations

of all the features. The program will, for each individual, then calculate which

combination of features is preferred by calculating the total value they assign to

each package. The resultant shares of preference for one or another package can

then help identifY the optimum design.

The core of the simulation process involves constructing a set of decision rules

based upon the total sum ofutility generated by hypothetical product profiles. The

model computes the likely choice or preference of every individual in the sample,

and aggregates these to provide a summary of market share changes. This is an

example ofmicro-modeling sincedata is handled in this way at the individuaileveJ.

The power of this procedure lies in the ability to simulate the likely customer

reaction to a very large number of possible initiatives, which can be defined in

terms of the input variables. In this case, since we have all data on a common

metric, we can define our input variables to be the full range of key choice criteria ­

brand, price, product features, service features, and so on. A futl model of this sort

may well have 30-40 such variables.

In additi n, unlike m n

indi idu I im

njoint III d I , \ bl to in Iud th

th m d -I dat it elf Thi

curr nt m r t brand or

pini n,

of sirnul ting til

v ri bl , a c rnrn n uiven thi " in th ca

perform a

outcom in c nario wher

ti faction. At th

that, while currentl

rat . Mor v r, th

is ue (

area that lead to the greate t d gr

same time, the proce al 0 nable u to identify ar

performing w II, would cau gr

model allow u to quantify th

The modeling proce allow a large range of imulation po ibilitie - curr nt

market pecification can be creat d , new product introduced, and product n

be optimized (in the en e of finding the e act combination of attribut th t

maximally sati ties the greatc t numb r of cu tomer ).

1, 2 ).

....... ..­...­,.--..

Imp m nt, (.i !\Ire

n b cr at d , n \ produ t intr du :d. nd pr du n

Th m pr

market p ifi tion.

allow - urr nt

25

be optimized (in the sense of finding the exact combination of attributes that

maximally satisfies the greatest number of customers) (Figure S)

3CONCLUSION ON CONJOINT ANALYSIS

Organizations undertaking quality programs invariably require feedback from the

customer base that changes initiated by management are impacting on customers.

At the same time, there is a continuous need to monitor customer expectations,

since it has been widely reported that the growth of a service culture in many

industries itself leads to a growth in customer expectations of service quality

(Parasuraman et aI., 1984).

Customers perceptions ofservice quality from suppliers are likely to change more

rapidly than their own intrinsic needs. Consequently, a continuous tracking

program can concentrate on measuring these perceptions, and only update on

measuring needs atplanned intervals (Buros and Blackall, 1992).

Conjoint analysis has proved over the years to be a very useful and reliable

research tool to organizational management, and its application in the area of

customer satisfaction represents a major enhancement of its appeal to both

researchers and marketing people alike (page and Rosenbaum, 1987).