BM EE Sample 9.pdf

Candidate name: Hiteshbhai Patel, Krishna Session: May2009
Candidate number: 001070-004
Page | 1
Abstract: 299
words.
Total word count:
3999 words.
"How should Shenanigan segment its market and fix
appropriate pricing policies to increase its profits?
Business studies extended essay submitted by:
Candidate name: Hiteshbhai Patel, Krishna
Candidate no.: 001070-004
Session no.: May 2009

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Table of Contents:
1. Abstract ……………………………………………………………………………3
2. Letter of authentication …………………………………………………..4
3. Introduction ………………………………………………………….............5-7
4. Identifying target markets and predicting future sales………8-33
5. Determining the pricing policy …………………………………………34-36
6. Conclusion ……………………………………………………………………….37-38
7. Bibliography …………………………………………………………………….39
8. Appendix 1: First interview with the Mr. Dipan Patel…………40-41
9. Appendix 2: Second interview with the Mr. Dipan Patel…….42-45
10. Appendix 3: questionnaire for the customers………………….46-48
11. Appendix 4: Ratios analysis………………………………………………49
12. Appendix 5: calculations for the projected sales……………….50

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Abstract
[Research question]
‘Shenanigans’ is located in Minnesota. ‘Shenanigans’ due to its size enjoys economies of scale
and also has advantage of good location. However, since ‘Shenanigans’ has started, it has been
following undifferentiated marketing.
The ownership of ‘Shenanigans’ was transferred in May 2008 to a group of partners. They were
interested in segmenting their market, which got me interested in helping them find possible
ways to segment. So, I did further research, which lead me to form a question: “How should
Shenanigans segment its market and fix appropriate pricing policies to increase its profits?”
[Scope of Investigation]
To answer this question, a variety of primary data such as interviews, surveys and observations
has been utilized and variety of secondary data such as profit and loss a/c, prices at
Shenanigans and its competitor of liquor, a lot of books, websites and articles have been
utilized to analyze, evaluate and subsequently recommend solutions to this problem.
Primary and secondary data have helped me develop the following strategic map as an
approach to the research question.
a) Segmenting the market based on various variables.
b) Selecting the best variable to segment the market
c) Determining the future sales and profits.
d) Determining the best pricing policy.
This allowed me to use various tools like position map, ratios etc.
Due to the word limit, my essay only focuses on one part of the marketing mix that is, pricing
policies for the various target segments to increase their profitability.
[Conclusion]
I evaluated the possible ways to segment the market, the conclusion made was, the best
variable to base the market segmentation would be on income levels and to focus primarily on
the high-income market(65,000$+)
The best pricing strategy that should be considered for the high-income group would be price
skimming. This is because this income-group people are less price sensitive.
299 words

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Introduction
‘Shenanigans’ is located in Minnesota, United States. It has been in the
market since a long time. Dipan Patel and Apurva Patel have owned it
in partnership since May 2008. ‘Shenanigans’ is located very close to the
Minneapolis/St. Paul airport and Mall of America. ‘Shenanigans’ has been
well known for its fine collection of liquor.
However, ‘Shenanigans’ has been facing problems of rising transportation
costs for quite some time1
. Even the US economy has been facing rise in
the transportation costs, which has affected ‘Shenanigans’2
.3
Since
reduction in the transportation costs is unavoidable ‘Shenanigans’ plan to
segment their market in order to increase their sales and profitability4
.
1
Appendix 2: interview questions asked to the partner of the company.
2
http://www.boingboing.net/2008/04/28/gasoline-to-cost-10.html as referred on 17th
October
2008
3
Business world of 12th
May, article Bush and oil prices by Omkar Goswami.
4
Appendix 4: trend seen in rise in the cost of goods sold.

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The trend of sales and expenses5
:
Though the sales has not fallen drastically the gross-profit and the net-
profit has decreased by a great lump sum.6
This could be due to
increase in overhead expenses. It could also be due to increase in the
transportation costs of liquor which is based on the quantity ordered.
Since the expenses are rising it would be necessary for ‘Shenanigans’ to
increase their sales to increase their profitability. For this, all variables
that will help in identifying target market needs to be considered. Since
‘Shenanigans’ is required to identify their target market and then set a
new marketing mix, it led to development of this essay:
"How should Shenanigan segment its market and fix appropriate
pricing policies to increase its profits?
5
Appendix 4: values of overhead expenses and sales.
6
Appendix 4:gross profit and net profit margin calculated.
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
0 1 2 3 4 5
Sales trend in the past
months
Overhead expenses

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To answer this, all possible variables to segment the market will be
taken into consideration. This will help in identifying the best way to
segment the market. This would lead to all aspects of the marketing
mix to change. The essay will focus primarily on the pricing mix that will
be suitable for ‘Shenanigans’.
Research methodology:
For this essay both qualitative and quantitative techniques have been
utilized. For primary research, direct and telephonic interviews have
been conducted with one of the partners of ‘Shenanigans’. Apart from this
several observations have been made on customer behavior and
purchasing patterns in the store and survey has been conducted.
Tools such as Position Map have been used to compare the prices of
different products in ‘Shenanigans’ and Star liquor. Profit and loss a/c of
‘Shenanigans’ has been utilized in order to calculate the net-profit and
gross-profit margins to determine the sales trend. Apart from all the
tools used textbooks, online materials and articles related to the
marketing specifically focusing on target segmentation, marketing mix,
pricing strategies and objectives have been used.
It must also be noted that there may be some limitations in the analysis
and evaluation, which could have occurred due to word constraint,
time and inability to gather all the relevant information.

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2. Identifying target segments
To identify the target segments of the market, it is important to know
what it means. “Division of market into sub-groups that share similar
characteristics.”7
Identifying the target segments is necessary because
it helps the firm to develop a marketing mix for a specific market. To
divide the market into groups many variables can be considered such as
demographic, psychographic, behavioral, socio-economic group and
benefit segmentation. This helps the company to identify the type of
marketing required for them.
The best segmentation variable for Shenanigans’ would be the one that
the marketer finds would be the best for them in order to increase their
sales and profitability.
7
Chapter 20: market segmentation from Dave Hall’s business and management.

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The major steps in market segmentation and selection of target market
are as follow8
:
“Sampling is the practice of selecting a representative group (known as
the sample) of a population for primary research purposes”9
. This helps
8
The Power of Marketing (seventh edition) by Zikmund/ d ‘Amico. Part 2, analysis of market
behavior, chapter 8.
9
Business and management by Paul Hoang, unit 4.2
#1 #2 #3
So that a target
market can be
chosen
C1
C2
C3
C4
C5
C6
C7
C8
#1
#2
 product
 place
 distribution
 promotion Target market
#3
C1
C2
C3
C6
C5
C4
C8
C7
The market is
broken down
And grouped into
meaningful market
segments
C1 C2 C3 C4
C5 C6 C7 C8
(Individual consumers)
(Fairly homogeneous market segments)
(Heterogeneous group of consumers)
Step 1
Step 2
Step 3

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in identifying the types of customers the firm would like to target in
order to gain the maximum benefits.
One primary research method used was observations made in
‘Shenanigans’. Many observations have been made in order to observe the
different purchasing patterns of the customers. This is done using the
random sampling methods (selecting every 5th
person entering the
store). In total 10 customers were observed in a period of 2.5hours. The
observation was conducted on 15th
June2008.
Findings made from the observations.
 63% customers of the store are men most of whom
seem to be of high class.
 60% of the customers visiting the store were between
30- 45yrs in age. There were very few customers above
the age of 45yrs. Majority of customers were between
the ages of 21-30yrs.
 80% customers did not observe the price tags whereas
there were some customers who observed the price
tags and still bought the same products. But there
were also customers who saw the price tags and did
not buy the same product. These 80% of the customers
seem to be from high class.
 The customers between the ages of 21-30 mostly
bought beer whereas the customers above the age 0f
30yrs bought whisky, champagne, etc.
 Many of the customers who visited the store were the
people who bought the products they desired and left.

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 On an average the customers spent between 5–
10minutes in the store.
This information of customer spending was obtained from the main
desk where the receipts are made for the customers.
In the above graph the customers belong to the following age group.
AGE CUSTOMERS
21-30 yrs Customer 1, Customer 4,
Customer 6, Customer 10
30-45 yrs Customer 2, Customer 3,
Customer 7, Customer 9
45 and above Customer 5, Customer8
0
50
100
150
200
250
Total spendings in the shop.(in $)
Total spendings in the shop.(in
$)

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The observations played a crucial role in deriving the conclusions such
as:
 The customers between the age of 21-30 are the people whose
expenditure were minimum compared to the expenditure of the
people from other age groups.
 The customers between the age of 30-45 are the people whose
expenditure are generally more than the people between the age
of 21-30yrs.
 The customers above the age of 45 are also the people whose
spending are very high.
Using observations ‘Shenanigans’ can segment its market based on many
variables. The first one is based on socio-economic grouping.
Socio-economic segmentation: “It is the division of market based on
socio-economic categories. That is the people are divided based on
their class”10
.
10
http://dictionary.bnet.com/definition/socioeconomic+segmentation.html as referred on 20th
October 2008

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Market segment by socio-economic grouping.11
People are classified into these categories based on their attire, the
phone models they carried, the car by which they came in, the
confidence they had etc.
It is also possible for the firm to segment the market based on the
status of the customers.
Status orientated segmentation: “They are the consumers who look for
products and services that demonstrate these individuals’ success to
their peers”12
.
11
Source: JICTAR from ‘Marketing Principles and Practices’ (second edition) by Dennis Adcock,
Ray Bradfield, Al Halborg and Caroline Ross.
12
Marketing Hospitality by Cathy H. C. Hsu, Thomas S. Powers and Tom Powers.
High class
people
Middle class
people
Low class
people
• company directors
• established doctors
• junior managers
• supervisors
• semi skilled or
unskilled labours
• per hour earners

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Status orientated segmentation13
Actualisers usually come from high-class families. They are the people
who have well-established business or they are directors of the
company. They are the people who buy higher range of products such
as blue label.
Achievers are the people who have money but are still not well
established. They have been successful to a certain extent and are
usually junior managers.
Strivers are those striving to achieve something in their lives. They are
clear about what they want to achieve.
Strugglers are the people who have difficulty in going on with their
lives. These people have minimum resources with which they survive.
13
‘Marketing Principles and Practices’ (second edition) by Dennis Adcock, Ray Bradfield, Al
Halborg and Caroline Ross.
Actualisers
Achievers
Strivers
Strugglers
status
orientated
abundant
minimal
resources
in terms of
money

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They are usually unskilled or the people who earn money per hour of
their work.
These people are classified based on their dressing style, their code of
conduct, their car models etc.
Another type of segmentation that ‘Shenanigans’ can consider would be
benefit segmentation.
Benefit segmentation:14
Benefit required Other characteristics
Sensory segment Flavor, product
Appearance
Generally bought by
people of high class.
Worrier segment Addiction but trying to
leave alcohol.
Generally bought by
the people who are
addicted to drinking
but are trying to leave
alcohol. (So they will
look for minimum
alcohol content)
Independent segment Products with low
prices
The people who buy
these products are the
people who generally
14
Page 95 ‘Marketing Principles and Practices’ (second edition) by Dennis Adcock, Ray
Bradfield, Al Halborg and Caroline Ross.

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look for products on
sale and they do not
look at the brand
name.
Thus merging the income levels and the age factors with benefit
segmentation.
Benefit required Other characteristics
Sensory segment Flavor, product
Appearance
Bought by all age
groups but by people
with income above
65,000$.
Worrier segment Addiction but trying to
leave alcohol.
Age generally above
45yrs; all income level
groups.
Independent segment Products with low
prices
Age between 21-30
yrs; income below
20,000$
Apart from observation as a primary research a questionnaire was
distributed to the customers at ‘Shenanigans’ on 25th
and 26th
August
2008. This questionnaire helped in identifying the customer profile of
the people visiting the store. The survey included some questions like
the income levels of the customers, their age group, and the types of
products they prefer.

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Though this questionnaire would have helped me in making certain
conclusions it must be taken into account that the customers visited
the store in those two days are not the representation of the total
population visiting the store and also there could have been human
bias from the customer while answering the questions.
The data collected from the survey has helped me to segment the
market based on certain variables. The segmentation is based on the
demographics.
“Demographic segmentation is segmentation based on demographic
factors such as age, income”15
.
This segmentation is done based on age.
15
http://www.businessdictionary.com/definition/demographic-segmentation.html as referred
on 20th
October 2008
21-30
yrs
30-45
yrs
45 and
above
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Percentage of people visiting the shop from each age group
Percentage of people
visiting the shop from
each age group

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Another type of demographic segmentation that would be possible
would be on the basis of income levels earned from all the groups. The
different group levels on the basis of income levels16
are as follows:
 Below 20,000$
 20,000-65,000$
 65,000$ and above
Thus, after looking at the various ways to segment the market, for
‘Shenanigans’ that would be possible by using the data available from the
customer survey.
Another type of segmentation possible would be based on the use of
the secondary data available to me:
Behavioral segmentation: “It is segmenting the market on the basis of
how the users use the products”17
.
16
Income levels ranges obtained from Paul Hoang ‘Business and Management’ Unit 4.2
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
below
20000$
20,000-
65,000$
65,000$and
above
Percentage of people from each income level
Percentage of people from
each income level

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The different users of the products could be:
 Heavy users
 Medium users
 Light users
 Occasional users
 Non-users
-never user brand
-lapsed users of brand
Users Using the product Other characteristics
Heavy users Every day Maximum contribution
to sales.
Medium users Once a week Contributes to a
certain extent to sales
Light users Once a month Minimum contribution
to sales.
Occasional users During grand
occasions
They contribute to a
great extent but the
sales based on
occasional users are
not certain.
Non-users, never
used brands
First time use These people seem to
be a great opportunity
for the business as
they may become your
regular customers
later.
17
Page 95 ‘Marketing Principles and Practices’ (second edition) by Dennis Adcock, Ray
Bradfield, Al Halborg and Caroline Ross.

Page | 20
Behavioral segmentation would help the company in identifying the
customers who would contribute most to the sales of the company. It
also helps the company in identifying who their potential customers
could be. These potential customers could be identified from the group
of people who are first time users. These people could then become
heavy users and can thus contribute to the sales of the company.
Thus looking at all the various possible ways to segment the market the
best variable needs to be considered in order to increase sales and
profitability. ‘Shenanigans’ has the option either to continue with
undifferentiated marketing or to do differentiated marketing or
concentrated marketing.
Shenanigans has always been doing undifferentiated marketing in its past.
There are three segmentation strategies that are possible:
 “Undifferentiated marketing is absence of segmentation”18
. This
means that the target market for the store would be everybody.
Undifferentiated marketing is the current practice of ‘Shenanigans’19
.
 “Differentiated marketing is a marketing effort in which a
marketer selects more than one target market and then develops
a separate marketing mix for each target market. It is also known
as multiple market segmentation”20
.
18
behavior, chapter 8 pg. 214.
19
Appendix 2: interview with the partner.
20

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 “Concentrated marketing is development of a marketing mix and
direction of marketing efforts and resources to appeal to a single
market segment”21
.
21

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Three segmentation strategies22
Target segment
22
An integrated approach business studies (4th
edition) by Bruce R Jewell
Segment A
Segment B
Segment C
Segment D
Firm
Total population with
potential customers
unrevealed
Undifferentiated marketing
Differentiated marketing
Firm
Concentrated marketing
Firm

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Characteristics of market segmentation strategy23
:
Strategy Market
segment
Market
characteris
tics
Advantage Disadvantage
Undifferentiated
marketing
Everyone Little/no
diversity
May enjoy
economies of
scale
More
competitors
may join
Differentiated
marketing
Multiple
segments
Wide
diversity of
customers
If one
segment is
not
successful
there are
other
segments
Requirement
of resources
may be very
high.
Concentrated
marketing
One
segment
Targeted
segments
have
special
needs
Can become
a monopoly if
the firm is
doing good
and prevent
other firms
to enter the
market
Market may
be too
narrow to
even cover
the costs
‘Shenanigans’ is following the process of undifferentiated marketing.
However, it is possible for ‘Shenanigans’ to segment the market based on
various segment variables.
23

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‘Shenanigans’ following the undifferentiated marketing method
determines the prices of all the products in the shop. This is done by
comparing their prices products with the prices set by the competitor
(Star Liquor). The prices of the competitor were gathered by visiting the
store on 17th
June2008.24
24
Ratings of the products from http://www.epinions.com as referred on 27th
September
Low price
Low ratings
3
1
1
3
5
5 7
6
6
7
High price
High ratings
2
2
4
4
9
10
10
8
8
9
The following are the names of the ten
products: (Legend)
1. Absolut Vodka 80Proof750ml
2. Johnnie Walker blue label 200ml.
3. Ciroc French Vodka 80proof750ml
4. Grey Goose Vodka 80Proof750ml
5. Skyy vodka 80proof750ml
6. Crown Royal 750ml
7. Jim Beam 750ml80Proof
8. Malibu Coconut Flavor Rum 42 Proof
750ml
9. Heineken Beer 6 12Oz bottles
10. Budweiser Bud Light Beer 6 12 Oz
bottles

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The boxes in the blue represent the prices set for the same products by
‘Shenanigans’ whereas the boxes in the red represent the prices of the
only competitor in the nearby area.
From this, the following conclusions can be made:
 Most of the products sold in ‘Shenanigans’ have higher prices than
the competitor. This is especially true when it comes to products
that are meant for the low class people.
 There are some products where the prices of the products are the
same in ‘Shenanigans’ its competitor. This could also lead to a loss of
customers from the store because the customers who come to
‘Shenanigans’ may go its competitor and thus could cause a loss in
profits and the sales.
Since ‘Shenanigans’ has only one direct competitor in the nearby area it is
beneficial to ‘Shenanigans’ as it allows them to set their prices. However
since they have only one competitor in the near area, and I have not
considered any other competitors who are far, it could have restricted
my research and analysis.
‘Shenanigans’ can capture a huge market because the demand for liquor is
inelastic. This means that even if the prices of the products rise by a
great extent the demand will fall by a very small extent.

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Thus the best way for marketing and increasing their sales and
profitability will be by either considering doing differentiated marketing
or concentrated marketing where it can set different prices for
different products according to the segments.
While considering doing segmentation, all variables will have to be
looked at. Age segmentation: This would not be a good way for
‘Shenanigans’ to segment their market. This is because it is not known
how many people would contribute to increasing sales from each
segment.
Behavioral segmentation would not be advisable as it will be difficult
for Shenanigans’ to segment the customers under different categories.
It would be advisable for ‘Shenanigans’ to segment their market based on
the income levels of the customers as they can concentrate on a
specific market or they can identify few target segments which would
increase their sales and not stretch their resources.
Price
Quantity
D

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The decision, whether to do differentiated marketing or concentrated
marketing; the decision would be based on projected financial figures.
Here the percentage of people visiting the store from each class would
be considered from the questionnaire, as the questionnaire was
conducted for 2 days. The value from the observation was not
considered as it was done for one day. To get a more realistic value
survey results were considered. Though this may be better than
observations it would have some limitations as the whole market is not
taken into consideration.
Concentrated market when followed would be:
Target segment
If ‘Shenanigans’ consider doing concentrated marketing there would be
many possible ways to segment the market based on the income. They
could target the group whose income is less that 20,000$ or they can
target the group whose income is between 20,000$-65,000$ or the
group whose income is above 65,000$.
It is possible to concentrate on any of the target segment. Since the
group of people below the income level of 20,000$ contribute to 7% of
the total sales of the company it would be better not to concentrate on
Concentrated marketing
Firm

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this group. Since the middle income group contributes to 27% of the
total sales this would also reduce the total income of the store. The
group whose income is above 65,000$ would be a better option while
doing concentrated marketing.
Thus to predict the sales under concentrated marketing, three
representative products from each category of products are chosen.
Since these three products which represent the different target
segments, add up to make the sales of the month the following
equation is derived. For this purpose average sales(May-August) is
considered
31x+4x+x=292,317.21
36x=291,408.67
X=292,317.21÷36
X=8119.92
25
Appendix 6: reference to the table.
26
Appendix 2: obtained from the interview held with Mr. Dipan Patel
Product Proportion of
price
differences25
Target segment26
Blue label 200ml 31x High class
Green goose vodka
750ml
4x Middle class
Jim beam 750ml X Low class

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After finding the value of ‘x’ it must be multiplied with 31 in order to
get the make up of high class products to the total sales.
31×8119.92=$251,717.52
The high class products make up 67percent of present sales; if they plan
to concentrate their market then all the sales would come from high
class and thus converting the sales to 100percent which would give:
251,717.52
67
× 100=$375,697.79
After finding the sales for ‘Shenanigans’ calculating the net-profit for
future sales. For the purpose of calculations the average net-
profit(May-August) is considered.
Finding 15.87%of $375,697.79
The net-profit which ‘Shenanigans’ could earn if the do concentrated
marketing would=59,623.23$.
Differentiated marketing when followed would be:
Segment A: income level between
20,000-65,000$
Segment B: income level above
65,000$
Differentiated marketing
Firm

Page | 30
The people in segment A are middle class people. This people when
categorized under status oriented would generally be strivers. The
profession of people with income between 20,000$ to 65,000$ would
be junior managers, supervisors, bankers, new models27
.
The people in segment B are generally high class people. This people
when categorized under status oriented would be actualisers. The
profession of people with income higher than 65,000 $ would generally
be managing directors, doctors, physiatrist.
The people below the income of 20,000$ would not be targeted as they
do not form a great part of the customers. The people below this
income level visiting ‘Shenanigans’ is only 7percent of the total population
who visit the store. Since there are not many customers from this
group, these people will not be targeted as they would lead to waste of
resources and time.
Determining the future sales of the ‘Shenanigans’ if they consider
differentiated marketing.
The same products would be taken from each category of products.
For purpose of the calculations I have considered that 70percent of the
income comes from the high class people and the rest 30percent comes
from the middle class people. It would be advisable to take 70percent
and 30percent as the present trend is that majority of the customers
come from the higher class and a few come from the middle class.
27
Professions obtained from appendix 3.

Page | 31
From the equation obtained above:
31x+4x+x=$292,317.21
Since the value obtained for the high class products is $375,697.79 it
would be advisable to take 70percent of this income which would give
$262,988.45.
To find the other 30percent, the contribution of the middle class we
take the value of ‘x’ obtained above and multiply it by 4 because the
middle class products are 4 times the low class products.
4× 8119.92=$32,479.68
Now converting $32,479.68 to 100percent
32,479.68÷27×100=$120272.89
Now converting $120272.89 to 30percent in order to predict the future
sales for differentiated marketing
120272.89÷100×30=$36,081.87
After obtaining the value from the middle and the high class adding
them together to predict the future sales

Page | 32
After finding the sales for ‘Shenanigans’ calculating the net-profit for
future sales. For the purpose of calculations the average net-
profit(May-August) is considered.
Finding 15.87% of $299,070.32
The net-profit which ‘Shenanigans’ could earn if the do differentiated
marketing would be=$47,462.46.
Marketing strategy Future predictions of
sales.
Net profit
Concentrated marketing $375,697.79 $59,623.23
Differentiated marketing $299,070.32 $47,462.46
262,988.45 36,081.87 $299,070.32

Page | 33
If differentiated marketing would be followed, the net-profit would be
more than undifferentiated marketing. However if concentrated
marketing is done the net-profit would be much higher than earned
from differentiated marketing. Thus ‘Shenanigans’ should go for
concentrated marketing. This decision is made by predicting future
sales and calculating the net-profit.
The decision made about the future sales is based on the prices of
different products. Quantity sold from each class of products is not
taken in consideration.
Thus after selecting the best market segment which is based on income
levels it is necessary to prepare a marketing mix. However in this essay
the focus is only on the pricing policies.

Page | 34
Determining the pricing policy
The marketing mix includes the 4 P’s, they are
In order to select the pricing policies the main factor that needs to be
considered is who your target market is. Pricing is very important
because it will help in product positioning.
After deciding to do concentrated marketing the company has to select
the pricing strategy which it would use in order to attract the customers
from the high class.
Product
Promotion
Price
Place
Target market
Price

Page | 35
Since the demand for liquor is inelastic and the high class people would
not mind paying extra money because of the snob value status28
the
pricing strategy which ‘Shenanigans’ can use for its target segment could
be price skimming. “Price skimming attempts to “skim the cream” off
the top of the market by setting a high price and selling to those
customers who are less price sensitive”29
.
By using this pricing strategy ‘Shenanigans’ can achieve high profit
margin. This allows the marketer to set the prices of products as they
wish to set for different products. The way people perceive ‘Shenanigans’
will also change and thus their image in the public will change. Now to
attract more people from high class many high class products which are
not available in ‘Shenanigans’ or in the competitors store (Star liquor)
could be bought to ‘Shenanigans’. Some products such as Vielle Bon
Secours, Samuel Adams' Utopias, Tutankhamen Brew30
could be bought
which are difficult to find it in any other store.
‘Shenanigans’ could also loose on their other target segment which could
be their potential target market in the future. However the decision to
do concentrated marketing is based on the financial factor. There are
also many other factors that needs to be considered. Also since
28
Economics course companion by Jocelyn Blink Ian Dorton.
29
http://www.netmba.com/marketing/pricing/ as referred on 7.08.08
30
http://www.socyberty.com/Lifestyle-Choices/Top-3-Worlds-Most-Expensive-Beer.40307 as
referred on 24th
October 2008.

Page | 36
‘Shenanigans’ would change its target segment and the marketing mix it
will take some time to improve their image in the public.

Page | 37
Conclusion
In conclusion, after finding that ‘Shenanigans’ did not segment their
market and that they tried to segment the market, certain steps were
taken to find the best variable for segmenting the market. First I
collected primary data by interviewing the partner of the company,
‘Shenanigans’ and then did observations and conducted a survey for
customers to know more about the customers spending patterns in the
store.
After the primary research I was able to breakdown and classify the
problem and set forth solutions for that.
Segmenting the market is important as it helps in saving the cost and
resources that would have been wasted if they do not know who their
main customers are.
The problems faced and the solutions found were:
Problems Solutions
Segmenting the market This should be done on the basis
of income levels.
To do concentrated or
differentiated marketing
To do concentrated marketing
based on predicting the future
sales using both techniques of
marketing. Concentrated
marketing should be done as the
sales would be much higher.
Who is the target market Income group above 65,000$, high
class people
Which pricing strategy to be used Price skimming as the demand is

Page | 38
for this income group inelastic and also they are less
price sensitive.
The way to measure the success of making these changes would be to
look at the future sales of the company and also a questionnaire could
be conducted after a certain period of time. The responses of the new
questionnaire could be compared with the old questionnaire to find the
no. of people from the high income group. However ‘Shenanigans’ must
also look at the present economic conditions of the country before
implementing the changes. ‘Shenanigans’ must also be able to look at the
various ways they can differentiate with their competitor.

Page | 39
Bibliography
Books referred:
a) An integrated approach business studies (4th
edition) by Bruce R
Jewell.
b) Business and management by Dave Hall.
c) Business and management by Paul Hoang.
d) Economics course companion by Jocelyn Blink Ian Dorton.
e) Marketing Hospitality by Cathy H. C. Hsu, Thomas S. Powers and
Tom Powers.
f) Marketing Principles and Practices’ (second edition) by Dennis
Adcock, Ray Bradfield, Al Halborg and Caroline Ross.
g) The Power of Marketing (seventh edition) by Zikmund/ d ‘Amico.
Magazines referred:
a) Business world of 12th
May,
Internet sites referred:
a) http://www.epinions.com
b) http://www.netmba.com/marketing/pricing/
c) http://www.boingboing.net/2008/04/28/gasoline-to-cost-10.html
d) http://dictionary.bnet.com/definition/socioeconomic+segmentation.html
e) http://www.businessdictionary.com/definition/demographic-
segmentation.html
f) http://www.socyberty.com/Lifestyle-Choices/Top-3-Worlds-Most-
Expensive-Beer.40307

Page | 40
Appendix 1
The following is a transcript of the direct interview held with
a partner (Dipan Patel) of ‘Shenanigans’ on 15th
June 2008.
1. How has Shenanigans been doing in the past few months?
- The Store, after we took over in April has been doing well. However,
due to the rise in the gas prices it surely has been affecting the prices of
the products and hence, in turn has been affecting the business.
2. Does Shenanigans have any USP which it enjoys the most? If yes
please mention?
-Yes, we enjoy the benefit of being located in a fast growing suburb as
well as the benefit of bulk buying, we do have to order our stocks every
week, but since we remain with the same suppliers we do get
discounted prices. Lastly, economies of scale also work to our
advantage as the more we order the better prices we get.
3. Are there any special achievements of Shenanigans? If any
please mention.
- Yes, Shenanigans is very well known for its massive and varied
collection of fine wines. It has about 1500 types of liquor in the store. It
also has many loyal customers.

Page | 41
4. Is Shenanigans facing any restrictions from the government?
- No, we do not face any specific kind of restrictions from the
government, except the law of checking and ensuring that all the
customers we sell liquor to be above 21, and we enforce that law very
tightly.
5. What is the business set up of Shenanigans?
- It is a privately owned store, however, it’s owned in partnership.
6. Are your customers satisfied with the type of products and
services you provide to them?
- Yes, our customers are satisfied with the variety of products and
services that we have to offer. They also appreciate our input in helping
them find a product suitable to their taste and their spending level.
7. How do you find out whether your customers are satisfied or
not?
- We find this out by asking customers about their views on the main
desk while they are paying for their products.

Page | 42
Appendix 2
The following is a transcript of the telephone interview held
with a partner (Dipan Patel) of ‘Shenanigans’ on 19th
August
2008.
1. How much of liquor (quantity) has Shenanigans been selling in
the past few months? (separate of bottles and cans)
The amount of liquor we have been selling is in huge sums. Our sales
have been about the same in the past few months. The store has been
selling about 3,000 bottles and cans in total per month. The data for the
month of May and June are provided:
Month No. of cans sold. No. of bottles sold.
May 1725(approx) 1360 (approx)
June 1690(approx) 1400(approx)
2. How much has been the increase in the transportation cost in
the past few months?
- The increase in transportation costs greatly depends on the gas price
fluctuations. In May the gas prices shot up by almost a $1 and later did
not fall down and hence this has lead to a big increase in the
transportation costs too.

Page | 43
So in the month of May and June the transportation cost was between
90cents-$1.10 cents per a box of bottle and in the month of July
transportation cost has shot up to $1.20. This leads to our net profit
margin falling.
3. As you mentioned earlier that there has been a rise in your
transportation cost then has the pay back period to the suppliers
of Shenanigans increased in the past few months?
- At first we paid our suppliers within 15-20 days after the order
whereas after the transportation costs have increased there is much
more to pay off and hence, yes, it does take us about a month to pay
the suppliers off.
4. Has the sales fallen drastically after increase in the price of
liquor?
- Liquor, is an addictive product and hence though the prices have
changed in recent times which are due to increase in the transportation
costs it hasn’t affected the sales much. But it has fallen by a small
extent.
5. Who are the competitors of Shenanigans?
- The closest competitor is star liquor. Star liquor, is right across the
street from Shenanigans. However, since Shenanigans has been around
for quite some years and since we also offer a larger variety of products
and we do a lot of promotions we have build our loyal customer
clientele. This has lead to a greater advantage for Shenanigans
compared to its competitor.

Page | 44
6. Is there any data which is available with you about your
customers?
- Yes, the data available with us about the customers is from where
they come. This information is obtained because while making a receipt
we ask customers for their area code. This helps us in analyzing where
our customers mainly come from. About 80% of our customers come
from nearby areas within 15 miles of the store. About 15% of our
customers are one time visitors. This is because some customers come
to Minnesota for business meetings and since the store is not very far
from the airport it attracts customers from the airport. And the other
5%of the people come from the attraction of Mall of America, which is
also very close to the store.
7. Do Shenanigans segment any specific target market? If yes then
how?
- Well, we don’t have any specific target market as such but we are
trying to identify the target market for the store. However this has not
lead us to any problems as such because in our store we have products
that cater to needs of all the people of all classes.
8. As you have been doing well without segmenting the market why
do you think there is need to segment the market?
-Segmenting the market will help the store to concentrate into a
specific part of the market and thus will help us to cater into a specific
part of the market. By doing this, it will definitely increase our sales and

Page | 45
profitability in the long run. Also, by segmenting, we will be able to use
our resources more efficiently.
9. What do you think would be the best possible way to segment
your target market?
- Well, as of now I don’t know what would be the best possible way to
segment the market. However, as any businesses would look for the
segment which would give them maximum returns, in the same way we
will also look for a segment that would give us the highest returns.
10. Can you name few products that are aimed for the high class,
middle class and the low class?
- Yes, for the high class we have blue label which is very costly, for the
middle class we have many different types of vodka, to be specific we
have green goose vodka and for the low class we have Jim beam which
any usual worker can also afford.

Page | 46
Appendix 3
I am a student of IB diploma program studying in Chinmaya International
Residential School in India. As a part of my extended essay which is a
requirement of the IB program I have decided to do my extended essay on this
shop ‘shenanigans’.
Hence please spend some time in filling up the questionnaire.
 Name:
 Gender:
 Occupation:
 Income levels: per year(please underline)
 Below 20,000$
 20,000 to 65,000$
 65,000 and above.
 Age: (please underline)
 21-30 yrs
 30-45 yrs
 45 and above
 How far do you stay from the shop: (please underline)
a)15 miles from the shop.

Page | 47
b) 15-50 miles from the shop
c) more than 50 miles.
 For what occasion are you buying the products: (please
underline)
 Social events
 For casual drinking
If any other reason please mention……………………………
 Is this your first visit to the shop? (please underline)
Yes
No
 How did you find the prices of the products in the shop?
 Very high
 High
 Reasonable
 Low
 Very low
 What to do you generally buy?
 Beer
 Whisky
 Champagne
 Gin
 Or any other please mention……………………………..

Page | 48
 Out of the ten products mentioned below are then any
specific products you prefer?(please tick)
1. Absolut Vodka
2. Johnnie Walker Blue Label
3. Ciroc French Vodka
4. Grey Goose Vodka
5. Skyy Vodka
6. Crown Royal
7. Jim Beam
8. Malibu Coconut Flavor Rum 42
9. Heineken Beer
10. Budweiser Bud Light Beer
All the information collected is purely for research and will
not be revealed to any one.
Thanking you for spending your time to fill the questionnaire.
Krishna patel
IB student, CIRS

Page | 49
Appendix 4
Gross profit margin =
𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
𝑆𝑎𝑙𝑒 𝑠 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
× 100
Net profit margin =
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑠𝑒𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥
𝑆𝑎𝑙𝑒𝑠 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
× 100
Operating ratio =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑 +𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠
𝑆𝑎𝑙𝑒𝑠 𝑟𝑒𝑣𝑒𝑛 𝑢𝑒
× 100
May June July August Average
Sales 290,614.56 283,891.38 303,354.26 291,408.67 292,317.21
Cost of
goods sold
193,446,80 189,349.55 197,406.73 220,304.95 200,127.00
Gross profit 97,167.76 94,541.83 105,947.53 71,103.72 92,210.75
Controllable
expenses
27,338.15 30,300.19 28,645.59 28,084.00 28,591.98
Net profit 69,829.61 64,240.92 77,301.94 43,019.72 63,598.05
Net profit
margin
18.14% 16.61% 19.85% 8.89% 15.87%
Gross profit
Margin
33.43% 33.30% 34.92% 24.40% 31.51%
Operating
ratio
75.97% 77.38 % 74.52% 85.24% 78.28%

Page | 50
Appendix 5
Calculations for the projected profit and loss a/c.
Product Price Price for 1ml. Proportion
Blue label 200ml $62.99 $0.31 31x
Green goose vodka
750ml
$29.99 $0.04 4x
Jim beam 750ml $13.99 $0.01 X
From the above table it can be seen that the value for every ml. in all
the three categories of products. Thus it can be said that value of every
1 ml of blue label is 31 times of Jim beam. Similarly value of green
goose vodka is 4 times of Jim Beam.

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