Open University of Mauritius

CEMBA [OUpm003]
CEMPA [OUpm004]
MBA GENERAL [OUpm005]
MBA SPECIALISATION [OUpm006]
MBA EDUCATIONAL LEADERSHIP [OUPM007]

EXAMINATIONS FOR: May/June 2016 – Year 1 Semester 1

MODULE: C8 Marketing Management (OUpm0031104/OUpm0041104/

OUpm0051104/OUpm0061104/OUpm0071104]

DURATION: 3 HOURS

READING TIME: 15 Minutes

INSTRUCTIONS TO CANDIDATES
1. This paper consists of Sections A and B.
2. Section A is compulsory and has THREE (3) questions.
3. Answer any TWO questions from Section B.
4. Always start a new question on a fresh page.
5. Total Marks: 100

This question paper contains 6 questions and 7 pages

Page 1 of 7
 SECTION A
(COMPULSORY)

[Attempt ALL questions]

Case Study (60 MARKS)

Sonic Drive-In - A Challenging fast-food chain

that is suddenly becoming a huge threat to
McDonald's and Burger King

Adapted from Business Insider – April 2016

The fast food industry is one of the most competitive industries to enter in the entire
world. “Sonic Drive-In” is one of the smaller competitors in the fast food industry but
continuously maintains a stronghold because of its well-established niche in offering
an “eat in your car-centric” service. Over the last 40 years, fast food chains have
infiltrated the American society and is now firmly placed within the global society as
well.

Nearly 60 years of history, 3,500 drive-in locations, and more than 3 million customers
a day — why aren’t more people talking about Sonic? Sonic Drive-In is the fourth-
largest burger chain in the US, after McDonald’s, Burger King, and Wendy’s. The
expansion plan will bring its total number of restaurants to 4,500. Sonic currently has
less than half the number of locations as Burger King, its next biggest competitor,
which has 7,100 U.S. restaurants.

However, the carhop chain is often left out of the national discussion of the fast-food
industry, in part because Sonic is not quite like any other chain around. The most
obvious differentiator is that Sonic uses a “drive-in” model. As opposed to most quick-
service chains, which are “walk-in” and “drive-thru”, Sonic sets itself apart from its
competitors with a unique ordering system: Customers drive up to an intercom to
order, and then, carhops deliver food directly to the cars, either on foot or roller
skates.

One of the features is that Sonic allow customers the chance to take their time in
ordering from a wide variety of menu options which would present difficulties at a drive-
thru-centric chain. A lot of times when customers pull up to a drive-thru and they are
trying to contemplate the menu, customers may feel stressed out by a line building up
behind them.

Page 2 of 7
Who are those fast food consumers’ demographic that Sonic heavily advertised to?
Common thought is that low income people eat at fast food restaurants because their
prices are the lowest among the options available to those who wish to dine out. But
according to recent studies, researchers found that fast-food restaurant visits
increased commensurately with an individual’s income. And they also found that these
visits tapered off once an income reached approximately $60,000 annually. The
middle class is the main consumer of fast food. The study authors described the typical
fast food consumer as “a lower-middle income head of household, who is budget-
conscious and likes the convenience and low price of fast food, compared with other
restaurants”.

According to reuters.com, a 2011 report revealed that fast food restaurants are
stepping up efforts to market their products and brand name to children. Huge amount
is spent annually on advertising. This is done to maintain companies’ current
consumer base and, now also increasingly, to groom their up and coming consumers,
i.e., children, with ads that promote familiarity and a positive association with the
brand. From 2003 to 2009, fast food ads viewed went up to 30% among pre-school
and school age children.

Kids are playing an increasing role in building a successful fast food brand. The
marriage of the target market and the average fast food consumer is a wholly perfect
union. Children and teens are among the largest demographic with readily available
spending money and the middle-class head of household, attracted by the low pricing,
is available as a source to provide the products that these target market kids have
been seeing on television. That is not to say that kids are the only demographic
advertised to in the fast food industry, but this practice is definitely rife among some of
the larger chains. Contrary to the standard bright and shiny fast food advertisements
that worked at appealing to kids and teens, the new Sonic ads have bland colors and
camera/film quality, and featured two paunchy, middle-aged men goofing around in
their car while enjoying Sonic products and being amusingly ironic and silly.

But not all of Sonic’s history was golden. There was a sales decline of over $200 million
from 2009 to 2010 after experiencing a steady gain for 22 consecutive years. Food
standards were raised with better burgers and “real” ice cream, new items were offered
to add menu diversity, customer service was strengthened, and these changes were
broadcast to a national audience.

The Sonic brand has always been about personalization and customization. Given the
breadth of their menu and the ‘five-day’ part they serve, they definitely feel like they
have something to everybody. They have 1.3 million drink combinations available at
the chain, with long lists of flavors for slushes, shakes and other beverages. The menu
is broad, serving ‘all-day’ breakfast long before McDonald’s and hot dogs far before
Burger King. Plus, everything is fully customisable. Most of their competitors play
primarily at lunch and dinner with a narrow range of products. Sonic has a ‘five-day’
part strategy and a diverse, differentiated product portfolio that allows a lot of runway
for growth, and they aim to sustain strong momentum in the year ahead with new
breakfast items, premium ice cream offerings and chicken sandwich products.

Page 3 of 7
McDonald’s is similarly taking notes from the chain with the company’s successful
launch of all-day breakfast. The ability to order what you want, when you want is a
major draw for millennial customers, an enviable market that competitors need to
attract. The one item that consumers come back for is ‘whatever item that is special
for them’. "They come back due to personalization and customisation." Said Sonic
CEO.

Before Burger King put hot dogs on its menu, Sonic was the biggest chain selling the
barbecue favorite. Sonic sells one in seven of all hot dogs sold in the US. Sonic has
been in this space for quite a long time mainly because of its price point, may be its
portion size, the hot dog is something that can really appeal to consumers both as
snacks and meal times. So the management of Sonic thinks that part of the reason it’s
surfacing right now.

New menu items and a national media campaign contributed to strong sales growth
for Sonic Corp. Expected to drive continued momentum for the fast-food chain are
technology initiatives designed to provide a more personalized experience for
customers, particularly the millennial consumer and their use of 21st century forms of
communication beyond what their parents have utilised.

Sonic’s old technology platform of data collection and dissemination was highly
inflexible. If someone at Sonic wanted to look at some different data in order to get
new perspective or see a different aspect of the business, it could take months or year
to develop and distribute that report. The whole process also cost excessively high.

In 2012, Sonic started the roll-out its Big-Data cloud based platform across its more
than 3,500 drive-in restaurants and the results have been impressive. Sonic has
ditched its big, heavy-duty data warehouse for a cloud service, and it is opening the
company’s eyes — or at least its arms — to all sorts of new possibilities. The promise
is a centralized system that stores the company’s most-important data, the stuff used
for producing annual reports and tracking the metrics deemed critical to the business.
Previously it was hard to connect the various systems that feed into and from the data
warehouse. It was expensive and time consuming to scale them as data volumes
grow. Now they have access easily to Business Intelligence that actually generate
forward looking reports at better costs and being more factual.

Its massively parallel processing engine provides fast queries, and the system requires
much less cleaning of data before uploading. Sonic is already adding in new data
sources about stores, markets, weather, customer tastes, purchasing trends and other
meaningful behavior, and is even bringing in data from syndicated sources.

The new software-based point-of-sale system, which is designed to streamline order

processing, reduce product waste, optimize labor allocation and reduce theft, is now
in more than 1,100 stores. The point-of-personalized service system, which has been
added to more than 900 stores, plays into Sonic’s integrated customer engagement
strategy, which leverages mobile apps and social media to strengthen customer loyalty
and increase traffic.

Page 4 of 7
Executives noted an improvement in performance at restaurants with the new
platforms. Building a technology platform that integrate Sonic’s 3,500 stores across
the US and from which 90% of them are franchised was a major challenge for
collecting real-time data. The outcome is that they are now able to get insights and
new perspective on a weekly basis which help the Executives in making company-
wide decisions. This is a breakthrough transformation for Sonic. They are now able to
disseminating from a big system in the corporate data center to various divisions,
regional offices and employees in the field that need it, and all in real-time.

Sonic wanted to simplify data collection and storage, and it wanted to analyze new
ideas and new data sources as they popped up. Sonic core competency is preparing,
selling and serving food. Right now, Sonic is using its new data and new platform in
much the same way as it used to — measuring the success of marketing campaigns,
and analyzing consumer trend and behavior, franchise data at the corporate level and
using it to guide franchisees on how to do better. But the move to the cloud is already
paying off. For example, Sonic’s operational scorecard, which analyzes data on more
than 150 regional markets, now runs quarterly instead of annually, letting the company
react faster to changing consumer behavior.

Sonic has saved in millions of dollars in many ways. Sonic is looking at bringing data
from all sorts of sources (mobile, social media even commodity markets among them)
and wants to delve deeper into predictive analytics. Once all this information is
available “you move from ‘what happened yesterday or last week’ to ‘what do you think
is going to happen tomorrow?'

The drive-in model has also given Sonic the opportunity to tap into emerging
technologies, with digital screens and mobile apps that allow the chain to directly
market to customers in their cars.

When all of the above information is considered, it becomes clear how Sonic has
consistently maintained its place among the extremely competitive world of the fast
food industry. One of the features that keeps Sonic ahead of the competition is its
dedication to maintaining the Americana authenticity of the car-hop experience. Not
only did the chain develop innovations in the drive-in concept, but it kept them up to
standard through the years. Carhops still deliver food prepared-to-order right to the
customers’ cars. In addition to that, Sonic has kept its classic menu of burgers and
shakes that its customer base has come to love combined with its historic aspect of
the drive-in restaurant that it helped to define, becoming a part of Americana history
and a destination all on its own. Sonic is uniquely itself.

Page 5 of 7
 [Attempt ALL questions]

QUESTION 1

(a) Briefly explain the concept of Big Data?

[10 Marks]

(b) Using materials from the case study, discuss how Sonic has been successful in
using Big Data in reshaping its business model?
[10 Marks]

QUESTION 2

Using materials from the case study, explain the STP process at Sonic and its
relevance in the way the fast-food sector, henceforth, segments customers?

[20 Marks]

QUESTION 3

(a) Explain what you understand by the term Marketing “Product Mix” as it applies
to Product Management?

[10 Marks]

(b) Using relevant examples from the case study, discuss Sonic’s Product Mix
attributes and how it is differentiating itself in terms of product offering in the fast
food sector?
[10 Marks]

Page 6 of 7
 SECTION B
Attempt any TWO questions
Each question carries 20 marks.

QUESTION 4

(a) “In the high growth technology sector, products often quickly reach the mature
phase of the Product Life Cycle”.

Using a product or an organisation of your choice, discuss what actions might

be taken to prevent products from becoming commodities.
[10 Marks]

(a) Identify the stages in the consumer buying process model and discuss using
an example how some of the stages of this model is changing today with the
emergence of technologies?
[10 Marks]

QUESTION 5

(a) Explain the SAVE concept and discuss how the marketing mix has now shifted
from the traditional 7Ps model and having more focus in the Service elements?

[10 Marks]

(b) Briefly discuss the different Business Orientations? Using an example,

distinguish between Marketing and Customer Orientations?
[10 Marks]

QUESTION 6

Choose TWO of the following Marketing Strategic Frameworks and discuss their
relevance in the contemporary marketing environment?
[10 Marks EACH]

(a) Ansoff Growth Matrix

(b) Porter’s Generic Strategy
(c) BCG Growth/Share Matrix
(d) Porter’s Competitive Five Forc.

Page 7 of 7