1) Due to inexpensive labor in Russia, the automated packaging process will increase the cost of product.

2) Since it is a mean of marketing, we should identify where it is reasonable to use it. It will require efforts of the economists and accountants of the corporation. I have to collect the necessary marketing information to make them able to answer the question: . “will offering an automatically packed product create enough incremental preference and profit to justify its cost against the other possible investments that could be made?”. This information must also be helpful for the further analysis and design of necessary marketing mixes.

3) The necessary information is information about the situation in the market, about people's attitude towards automatically and manually packed pastas.

To do this I need to:

(I) Formulate the research objectives sharply.

(II) Analyze the history of the market of pastas of Saint Petersburg and its present state.

(III) Segment the market of pastas and develop profiles of resulting segments.

(IV) Evaluate the attractiveness of each segment.

(V) Evaluate preferences of the buyers and their attitude towards such factors as price, quality of the core product, quality of packaging, etc.

(VI) Having known the preferences and attitude towards packaging, quality and price, identify conditions upon which an automatically packed product will not fail.

(VII) Identify the necessary positioning concept for automatically packed pastas that will be offered to different segments.

Research objectives.

1) Evaluate attractiveness of each segment.

a) What kind of people would be the most likely to purchase pastas in high quality packaging?

b) Which segment do the most heavy users belong to?

2) Define the preferred form of pastas (corns, shells, etc.).

3) Define the most important factors which influence the consumer's subjective probability Subjective probability- a term from microeconomics which denotes the probability which is subjectively estimated by a person while making a choice decision. concerning the quality of the product.

a) Does the consumer usually estimate the quality by appearance of the product?

b) Is there a stereotype that a quality product can be packed only in a high quality package?

c) Is there a stereotype that imported pastas are better than the domestic ones? How strong is it?

4) Define the importance of quality packaging for the buyer.

a) Does the quality of packaging correlate with the quality of the product in consumer's mind?

b) What must be the quality of the product which is automatically packed?

c) How much will a buyer desire to pay for packaging?

d) What are the main factors which make packaging important (estimated quality of the product, precise weight, other)?

5) Define the desired characteristics of the package.

a) Which size of the package will be the most popular? Shall we offer packages of different size?

b) What should be the packaging be made of and what shape should it have(plastic or polyethylene packet, cardboard box)?

6) Define the loyalty status of the consumers.

7) Define the “patriot” status of the consumers.

a) Do they feel unsatisfied that most of the high quality pastas are imported?

b) Does the fact that Russia substitutes natural gas and oil for “colonial” goods?

As can be seen from the goals and objectives, the research combines the features of both exploratory and casual research.

Research plan.

1) has lack of information about the market in general;

2) needs some specific information ;

3) does not want to spend money on purchasing the available secondary or primary data;

4) thinks that the secondary data available can be outdated due to the last crisis; primary data must be collected.

The most reasonable research approach in this situation is a survey research. It will allow to gather more information in less time, and some information needed can be acquired only directly from the purchaser's answer. As a consequence, a questionnaire should be used as a research instrument.

I have two basic sources of information:

The buyers of pastas.

The salesmen who sell pastas .

Of course it is much easier to talk to salesmen than to the buyers, since the seller knows his market and he can give you a complete idea about what the situation in the market is like. But for this ease we have to pay:

This information can be not so accurate because the salesman though can give you information about how much of this or that good had been sold, probably will have difficulties with determining such things as percentage of buyers of different age, sex, etc. Here a problem of selective remembering may arise.

There are questions which can be answered only by the buyer himself and about which the salesman can have no idea at all. It regards to, for example, such things as the expected reaction for a price change, attitude towards packaging and the “reasonable” price of it in the consumer's eyes.

As may be seen, this source of information could not satisfy our needs, but I decided not to neglect it for that reason but leave for the purposes of control. It is reasonable to expect that the results from the both sources must correlate.

The consumer survey was made by me and two other employees of the LBS Corporation between the 5th and the 10th of November at outdoors markets of Primorsky district of Saint-Peteersbug. About seventy customers were asked. The results of the survey are shown and discussed below in the appropriate section.

The history of the market of pastas of Saint Petersburg and its present state.

Historical approach.

Before and during the Perestroika the market of pastas of Saint Petersburg was offering only the products of the Soviet manufacturers. There were no imported pastas at all. Due to the system, the market of pastas of the city was actually offering something. In the province it did not. There was a deficit of everything. Since there was no competition between the manufacturers, the quality of pastas was extremely poor. The technology of pastas manufacture itself was of interest: it was a so-called “double technology”. A double technology is one that can be used both for manufacture of civil and military products. In the USSR the equipment used for pastas manufacture could be used for manufacture of ammunition. I think it did not affect the quality of pastas positively.

In addition to this, high quality pastas can be made only of high quality durum wheat flour. And of course, there was a deficit of this kind of wheat in the USSR.

The consequence of all these plus bad management was the poor quality of the pastas manufactured in the USSR.

When later the market was open for foreign manufacturers of pastas the native ones were pushed out of the market since they were non-competitive.

For several years the market of pastas was saturated with imported products. Only in the last few years the situation began to improve for native manufacturers. This was because the difference in prices between them and the foreign manufacturers they could achieve became more significant and the quality of Russian pastas improved. The industry began to develop.

The present situation.

In this section some information that had been available for us before the research was made is given.

We can say that the Russian manufacturers use and have used price methods of competition mainly. The reasons why they have to do it are the following:

Often the product is of low quality;

The product is manually packed in most of the cases;

The reason which in my opinion is of the highest importance: Russian people have a stereotype which was, as we say, absorbed with the mother's milk: made in the USSR means made badly. That is why Russians have negative attitude towards products manufactured in Russia or Post-Soviet area. It makes people think that anything imported is better. And that is why English on the packaging is a mean of marketing in Russia. We have to break this stereotype if we want to succeed.

Products in the market.

We can divide all pastas available into three major categories:

Low quality pastas. They are cheap, manufactured in Russia or Byelorussia, made of flour which is not actually for pastas manufacture. High quality pasta can be made only of appropriate high quality flour. This flour must be made of limited variety of sorts of wheat. These sorts are called durum. If pasta is made of a usual flour which is generally used for baking, its quality leaves a lot to be desired. Of course, durum wheat is more expensive than usual. Pastas made of usual flour are of poor quality but cheap. Their poor quality can be easily identified by their appearance. They are not smooth and their color is a kind of whitish, not the ultimate specific yellow-gray color of good pasta. Their packaging is always manual.

Middle quality pastas. This category will include domestic pastas made of good durum wheat flour but packed manually. As a consequence, the only possible method of competition is low price. The low price influences the position of these pastas, though they are more expensive than the ones from the previous category, approximately by 20-25% Digital data without reference is based upon corporate information. .

High quality pastas. This category includes pastas made of high quality durum wheat flour and packed automatically. Most of the high quality pastas are imported. The strongest position in the market belongs to Italian and Finnish pastas. Domestic offerings of these pastas are rare. The best known domestic manufacturer of high quality pastas in the city is “Panna”, the former “First pasta factory”.

During the last crisis after August, the 17th, the foreign manufacturers of pastas had to face problems in Russia. If before the crisis Russian pastas were approximately 20-30 % cheaper than imported ones, after the crisis when the economic situation became relatively stable again (in October-November), the imported pastas were two times more expensive than the Russian ones. This relates to all or almost all imported pastas since they cost approximately the same nevertheless they are made in different countries- from Italy to Iran. In addition to this, the price level in Russia increased dramatically during only a few weeks. Many imported goods became 2-3 times more expensive than they were. This means a decrease of real income. Since attitude towards Russian pastas comparatively with the imported ones is negative, we can assume that Russian pastas are inferior goods. This means that even if only the people's income had decrease without any change in price, the consumption of the imported pastas would have reduce in favor of the Russian ones.

Having applied some microeconomics issues to our analysis we found an interesting detail: we have not only one process which can improve the conditions of Russian manufacturers but two. They are a change in price and a change in income. According to the economist of the LBS Corporation the average increase in prices of foods was about 50%. This means the effect of the second process should have been significant. What this led to was called “pastas boom”. According to the information gained with the help of some channels of the LBS Corporation, some big Moscow and Petersburg manufacturers increased their production by three times in September and October comparatively with August. This means the foreign manufacturers which dominated our market became non-competitive and where pushed out of the market. We had to think how should we use this. One of the ideas, as was said before, was to start package automatically, design the appropriate marketing mix for our product, and use this opportunity to gain the brand recognition. We had to break the stereotype and make people think our product is a high quality one though it is made in Russia. We should use this time when foreign competitors are destroyed to capture some market share in which the people would have positive attitude towards our product.

We can also estimate that the overall capacity of the market of pastas will decrease since the most dangerous for us substitute of pastas, potato, have not became significantly more expensive.

Trying to estimate the market capacity of our product, we meet some difficulties:

There are a lot of small manufacturers and the market is saturated with their products, and they do not declare their true level of production to reduce or completely avoid taxation.

Pastas are sold in the outdoors markets without cash registers, some pastas are imported through Byelorussia to avoid Russian customs.

That means we cannot trace the quantity of pastas manufactured in the city using top-down approach. The only powerful mean of estimating the capacity of the market we still have at our disposal is the bottom-up approach. We can figure out how much pastas an average person consumes and it will give us an idea about the capacity of the market.

Market segmentation.

1) “Low class” Though I use the categories denoting social stratas in sociology, their usage here hardly corresponds with their original meaning. I have to change it according to conditions of Russia. The Lower Class will denote people whose income is not enough to provide them with necessary quantity of food and other essentials, or is lower than the subsistence level. The Middle Class will consist of people whose income is higher than the subsistence level. They have a disposable income as a consequence. . Poor people. Their income per head is below 500 roubles. Since they have to make a living somehow, they will want to save on anything. They will most probably buy low quality pastas. The following social groups belong to this segment:

Ё Pensioners,

Ё Jobless people,

Ё Families with more than 3 children,

Ё Public employees (doctors, teachers).

Ё People who are not paid for their job
Though their income is low, this segment is important because of its size.

2) “Lower middle class”. This category will denote people with income per head from 500 roubles to 900 roubles per month. They are able to satisfy their needs for food, though they will try to save on it because their disposable income is still low.
We can name the following groups of people who match this definition:

Ё working pensioners;

Ё retired officers;

Ё public employees Since income per head in a family depends on the quantity of those members and on the income of everyone of those members, it is not surprising that the same social group will be found in different segments.;

Ё workers and employees of different professions, usually not complex ones ;

3) “Higher middle class”. People with an income of 900 to 1500 roubles per head per month will be included in this segment. These people have a significant disposable income for Russia. This means sometimes they will prefer the quality to the price, but the price still is of the highest importance.
To this segment belong:

Ё white collars, office workers;

Ё representatives of complex professions;

Ё representatives of militia, army, tax police, etc.

4) “High class”. We will encounter in this category everyone whose income per head is higher than 1500 rubles per month. These people have a big disposable income for Russia. At least they can afford buy the pastas they like. This means we can expect the price elasticity of this segment to be the lowest one. The representatives of this segment will be influenced by such factors as brand name recognition, quality of packaging, etc. in the highest degree.
In this segment we can include:

Ё small entrepreneurs;

Ё people who have a good job, have a good income, but are not entrepreneurs. This category will include a lot of different professions from drivers to butchers.

Ё New Russians.
We should underline, though this segment is relatively small (according to the sources of the LBS Corporation, 20-30% in Saint Petersburg), it is huge in its absolute figures. In addition, its representatives have the highest disposable income and are concerned about prestige and self-respect much more than the representatives of the other segments. That is why we can be sure a-priori that this segment will require an elaborated marketing mix of its own.

We should not deepen our segmentation using other variables because it will complicate our model of the market and the subsegments which will result from this will hardly differ significantly. The deeper segmentation will not be relevant to our problem.

The questionnaire.