SOLUTIONS MANUAL for Essentials of Marketing 18th Edition By Joseph Cannon

Instructor’s Manual & Digital Implementation Guide

Essentials of Marketing, 18th edition Joseph P. Cannon William D. Perreault, Jr. E. Jerome McCarthy

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Instructor’s Manual & Digital Implementation Guide

Essentials of Marketing A Marketing Strategy Planning Approach 18th edition

William D. Perreault, Jr., University of North Carolina Joseph P. Cannon, Colorado State University E. Jerome McCarthy, Michigan State University

2024 McGraw-Hill Higher Education

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McGraw-Hill Higher Education Instructor’s Manual to accompany Essentials of Marketing,18th edition

by William D. Perreault, Jr., Joseph P. Cannon, and E. Jerome McCarthy Copyright ©2024 by The McGraw-Hill Companies, Inc. All rights reserved.

Previous editions 2021, 2019, 2017, 2014, 2011, 2009, 2008, 2005, 2002, 1999, 1996, 1993, 1990, 1987, 1984, 1981, 1978, 1975, 1971, 1968, 1964, 1960 Printed in the United States of America

Contents of this book, or parts thereof, may be reproduced for use with ESSENTIALS OF MARKETING, provided such reproductions bear copyright notice. They may not be reproduced in any form for any other purpose without permission of the publisher.

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ESSENTIALS OF MARKETING, 17th EDITION INSTRUCTOR’S MANUAL & DIGITAL IMPLEMENTATION GUIDE Table of Contents PART I: HOW TO USE THIS MANUAL ..................................................................................... I-1 INTRODUCTION .................................................................................................................................... I-1 QUICK START GUIDES—A FASTER WAY TO GET STARTED .......................................................... I-1 OVERVIEW OF THIS MANUAL – A ROAD MAP .................................................................................. I-2 CONCLUDING REMARKS ..................................................................................................................... I-4

PART II: OVERVIEW OF THE MAJOR ELEMENTS OF P.L.U.S. .................................. II-1 INTRODUCTION ................................................................................................................................... II-1 ESSENTIALS OF MARKETING, 17th EDITION ................................................................................... II-1 WHAT’S NEW IN THIS EDITION OF ESSENTIALS OF MARKETING? .................................................Ii-2 Marketing for a Better World (#M4BW) ............................................................................................. II-2 Marketing Analytics … ....................................................................................................................... II-3 Currency ............................................................................................................................................ II-3 Active Learning Exercises ................................................................................................................. II-3 Chapter-by-Chapter Updates .......................................................................................................... II-4 SMARTBOOK WITH LEARNSMART… .................................................................................................. II-8 INSTRUCTOR'S MANUAL & DIGITAL IMPLEMENTATION GUIDE TO ACCOMPANY ESSENTIALS OF MARKETING 16E…… ..........................................................................................II-8 POWERPOINT LECTURE SLIDES AND SCRIPTS .............................................................................. II-9 BANK OF OBJECTIVE TEST QUESTIONS ......................................................................................... II-9 VIDEO PACKAGE FOR ESSENTIALS OF MARKETING 17E: TEACHING VIDEOS, VIDEO CASES, AND iSEEIT! VIDEOS ...................................................................................................... II-10 CONNECT FOR ESSENTIALS OF MARKETING 17E… ..................................................................... II-10 Connect Interactives… .................................................................................................................... II-10 Now in Connect – Marketing Analytics: Data to Knowledge… ....................................................... II-10 Connect Questions… ...................................................................................................................... II-11 LearnSmart Questions… ................................................................................................................. II-11 Practice Marketing simulation…. ..................................................................................................... II-11 FIND INSTRUCTOR RESOURCES ON CONNECT (LIBRARY →INSTRUCTOR RESOURCES) at the ONLINE LEARNING CENTER FOR ESSENTIALS OF MARKETING, 16e… ..................... II-12 AUTHOR BLOG FOR INSTRUCTORS – TEACH THE 4 PS… ............................................................ II-13

PART III: IDEAS ABOUT TEACHING THE FIRST MARKETING COURSE ............... III-1 INTRODUCTION .................................................................................................................................. III-1 1. COMMENTS ON APPROACHES TO TEACH BEGINNING MARKETING .................................. III-2 Essentials of Marketing and P.L.U.S. Support Many Approaches ................................................. III-2 In-Class or Online Lectures… .......................................................................................................... III-2 Active Learning and Essentials of Marketing ................................................................................... III-2 It Helps to Remind Students about the Structure of Your Course ................................................. III-4 Students Often Appreciate a Written Course Overview ................................................................. III-7 How Joe Cannon, author of Essentials of Marketing teaches his class (with syllabus) ............... III-10 2. SUGGESTIONS FOR WRITING COURSE OBJECTIVES ........................................................... III-16

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3. SUGGESTIONS FOR THE PACE AND COVERAGE FOR COURSES WITH VARIOUS LENGTHS ......................................................................................................... III-16 4. SUGGESTIONS FOR “FLIPPING THE CLASSROOM” AND/OR ACTIVE LEARNING IN YOUR CLASSROOM .................................................................................................................... III-17 5. COMMENTS ON THE CONNECT HOMEWORK EXERCISES AND APPLICATION-BASED ACTIVITIES .................................................................................................................................. III-18 Connect Assignments ................................................................................................................... III-18 Marketing Analytics: Data to Knowledge – In Connect… .............................................................. III-18 SmartBook 2.0 for Essentials of Marketing ................................................................................... III-19 Application-Based Activities .......................................................................................................... III-19 Putting it all Together .................................................................................................................... III-20 6. COMMENTS ON MARKETING ANALYTICS: DATA TO KNOWLEDGE ..................................... III-20 Problems with a Focus on Marketing Decision-Making ............................................................... III-20 Teaching/Learning Objectives ...................................................................................................... III-20 Specific Benefits of the Approach ................................................................................................ III-21 Complete Solutions to All of the Problems ................................................................................... III-21 Other Factors to Consider: Time Required .................................................................................. III-22 Content ......................................................................................................................................... III-22 Ideas on Ways to Incorporate the Problems in the Course ......................................................... III-23 7. COMMENTS ON WHAT’S NEXT? IN-CHAPTER BOXES ........................................................... III-23 8. COMMENTS ON THE ETHICAL DILEMMAS ............................................................................... III-23 9. COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) BOXES AND IMAGES ...... III-24 10. COMMENTS ON THE MARKETING ANALYTICS IN ACTION ..................................................... III-24 11. COMMENTS ON THE END-OF-CHAPTER QUESTIONS AND PROBLEMS ............................ III-24 12. COMMENTS ON THE CASES ...................................................................................................... III-25 Overview of Marketing Situations in Cases ................................................................................. III-28 13. COMMENTS ON ESSENTIALS OF MARKETING’S OBJECTIVE TEST QUESTIONS ............. III-28 14. COMMENTS ON THE POWERPOINT LECTURE SLIDES AND YOUTUBE POWERPOINTS . III-29 YouTube PowerPoints ................................................................................................................... III-29 Table of YouTube PowerPoints and Chapter Links… ................................................................... III-31 15. COMMENTS ON THE INSTRUCTOR’S RESOURCE SITE TO ACCOMPANY ESSENTIALS OF MARKETING ........................................................................................................................... III-42 16. COMMENTS ON VIDEOS ............................................................................................................. III-42 17. IDEAS FOR STUDENT PROJECTS ............................................................................................. III-43 18. FEEDBACK TO THE AUTHORS ................................................................................................... III-44

PART IV: CHAPTER-BY-CHAPTER AIDS – COMMENTS AND ANSWERS TO QUESTIONS AND EXERCISES ............................................................................................... IV-1 INTRODUCTION .................................................................................................................................. IV-1 CHAPTER 1: MARKETING'S VALUE TO CONSUMERS, FIRMS, AND SOCIETY ....................... IV-1-1 COMMENTS ON USE OF ETHICAL DILEMMAS ...................................................................... IV-1-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-1-2 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-1-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-1-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-1-8 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-1-8 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-1-9 SUMMARY OF CONNECT INTERACTIVE EXERCISES & APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-1-12

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CHAPTER 2: MARKETING STRATEGY PLANNING ...................................................................... IV-2-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-2-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-2-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-2-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-2-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-2-9 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-2-10 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-2-12 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-2-14 CHAPTER 3: EVALUATING OPPORTUNITIES IN THE CHANGING MARKET ENVIRONMENT ................................................................................................................ IV-3-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-3-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-3-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-3-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-3-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-3-7 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-3-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-3-9 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-3-12 CHAPTER 4: FOCUSING MARKETING STRATEGY WITH SEGMENTATION AND POSITIONING ............................................................................................................................ IV-4-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-4-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-4-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-4-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-4-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-4-4 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-4-5 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-4-7 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-4-10 CHAPTER 5: FINAL CONSUMERS AND THEIR BUYING BEHAVIOR ......................................... IV-5-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-5-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-5-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-5-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-5-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-5-7 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-5-8 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-5-9 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-5-13 CHAPTER 6: BUSINESS AND ORGANIZATIONAL CUSTOMERS AND THEIR BUYING BEHAVIOR ............................................................................................................. IV-6-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-6-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-6-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-6-2

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COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-6-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-6-7 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-6-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-6-7 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ..

IV-6-10 CHAPTER 7: IMPROVING DECISIONS WITH MARKETING INFORMATION ............................... IV-7-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-7-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-7-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-7-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-7-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-7-6 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-7-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-7-8 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-7-11 CHAPTER 8: ELEMENTS OF PRODUCT PLANNING FOR GOODS AND SERVICES ................ IV-8-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-8-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-8-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-8-1 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-8-1 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-8-8 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-8-9 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-8-10 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-8-13 CHAPTER 9: PRODUCT MANAGEMENT AND NEW-PRODUCT DEVELOPMENT ...................... IV-9-1 COMMENTS ON USE OF ETHICAL DILEMMA ......................................................................... IV-9-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ........................................... IV-9-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ........................................ IV-9-2 COMMENTS ON QUESTIONS AND PROBLEMS ..................................................................... IV-9-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................... IV-9-6 COMMENTS ON USE OF SUGGESTED CASES ..................................................................... IV-9-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................... IV-9-8 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-9-11 CHAPTER 10: PLACE AND DEVELOPMENT OF CHANNEL SYSTEMS ................................... IV-10-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-10-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-10-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-10-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-10-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-10-7 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-10-8 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-10-8 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ....................................................................................................................... IV-10-11

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CHAPTER 11: DISTRIBUTION CUSTOMER SERVICE AND LOGISTICS .................................. IV-11-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-11-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-11-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-11-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-11-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY 1 CLINIC EXERCISE ............................................................................................................. IV-11-6 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-11-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-11-7 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ....................................................................................................................... IV-11-10 CHAPTER 12: RETAILERS, WHOLESALERS, AND THEIR STRATEGY PLANNING ............... IV-12-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-12-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-12-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-12-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-12-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-12-7 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-12-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-12-8 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ....................................................................................................................... IV-12-11 CHAPTER 13: PROMOTION – INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS ................................................................................................ IV-13-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-13-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-13-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-13-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-13-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-13-6 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-13-6 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-13-7 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-13-9 CHAPTER 14: PERSONAL SELLING AND CUSTOMER SERVICE ............................................ IV-14-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-14-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-14-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-14-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-14-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-14-4 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-14-5 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-14-5 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-14-8 CHAPTER 15: ADVERTISING AND SALES PROMOTION .......................................................... IV-15-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-15-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-15-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-15-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-15-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-15-7

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COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-15-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-15-8 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ....................................................................................................................... IV-15-11 CHAPTER 16: PUBLICITY: PROMOTION USING EARNED MEDIA, OWNED MEDIA, AND SOCIAL MEDIA… ....................................................................................................... IV-16-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-16-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-16-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-16-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-16-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-16-4 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-16-4 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-16-5 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-16-8 CHAPTER 17: PRICING OBJECTIVES AND POLICIES .............................................................. IV-17-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-17-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-17-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-17-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-17-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-17-6 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-17-7 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-17-7 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ....................................................................................................................... IV-17-10 CHAPTER 18: PRICE SETTING IN THE BUSINESS WORLD ..................................................... IV-18-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-18-1 COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION ......................................... IV-18-2 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-18-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-18-2 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-18-5 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-18-6 DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE ................................. IV-18-6 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-18-9 CHAPTER 19: ETHICAL MARKETING IN A CONSUMER-ORIENTED WORLD: APPRAISAL AND CHALLENGES ........................................................................................... IV-19-1 COMMENTS ON USE OF ETHICAL DILEMMA ....................................................................... IV-19-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ...................................... IV-19-2 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................... IV-19-1 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE ............................................................................................................. IV-19-5 COMMENTS ON USE OF SUGGESTED CASES ................................................................... IV-19-5 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ......................................................................................................................... IV-19-7 “CASE-STYLE” INTEGRATIVE CROSS-CHAPTER TEST QUESTIONS ................................ IV-19-7 BONUS CHAPTER 1: IMPLEMENTING AND CONTROLLING MARKETING PLANS: EVOLUTION AND REVOLUTION … ................................................................................IV-BC1-1

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COMMENTS ON USE OF ETHICAL DILEMMA .................................................................... IV-BC1-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ................................... IV-BC1-1 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................ IV-BC1-1 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE .......................................................................................................... IV-BC1-3 COMMENTS ON USE OF SUGGESTED CASES ................................................................ IV-BC1-4 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ...................................................................................................................... IV-BC1-5 BONUS CHAPTER 2: MANAGING MARKETING’S LINK WITH OTHER FUNCTIONAL AREAS … ..........................................................................................................................IV-BC2-1 COMMENTS ON USE OF ETHICAL DILEMMA .................................................................... IV-BC2-1 COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) ................................... IV-BC2-1 COMMENTS ON QUESTIONS AND PROBLEMS ................................................................ IV-BC2-1 COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE .......................................................................................................... IV-BC2-4 COMMENTS ON USE OF SUGGESTED CASES ................................................................ IV-BC2-5 SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES ...................................................................................................................... IV-BC2-6

APPENDIX A: ECONOMICS FUNDAMENTALS ............................................................................ IV-A-1 COMMENTS ON QUESTIONS AND PROBLEMS .................................................................... IV-A-1 APPENDIX B: MARKETING ARITHMETIC .................................................................................... IV-B-1 COMMENTS ON QUESTIONS AND PROBLEMS .................................................................... IV-B-1 APPENDIX C: CAREER PLANNING IN MARKETING ................................................................... IV-C-1 APPENDIX D: HILLSIDE VETERINARY CLINIC MARKETING PLAN .......................................... IV-D-1

PART V: COMMENTS ON CASES IN ESSENTIALS OF MARKETING ....................... V-1 INTRODUCTION ................................................................................................................................... V-1 Traditional Cases .............................................................................................................................. V-1 Video Cases ..................................................................................................................................... V-1 COMMENTS ON EACH OF THE TRADITIONAL CASES .................................................................... V-2 Case 1: McDonald's "Seniors" Restaurant ...................................................................................... V-2 Case 2: Guadalupe Natural Foods, Inc. .......................................................................................... V-2 Case 3: COLORADO United Soccer Academy .............................................................................. V-3 Case 4: Petosega Tech Support ..................................................................................................... V-4 Case 5: Resin Valleys ..................................................................................................................... V-6 Case 6: Valley Steel ......................................................................................................................... V-6 Case 7: Lake Omarama Lodge ....................................................................................................... V-6 Case 8: Zefferelli’s Italian Restaurant .............................................................................................. V-7 Case 9: Rest Easy Motel ................................................................................................................. V-8 Case 10: Anderson’s Ice Center ................................................................................................... V-10 Case 11: Luciana’s Running Shop ................................................................................................ V-11 Case 12: PersonalHealth.com—Custom Vitamins ....................................................................... V-13 Case 13: Piper-Paul, Inc. (PPI) ..................................................................................................... V-15 Case 14: Shrock and Oh Design ................................................................................................... V-15 Case 15: The Wabash Group ........................................................................................................ V-16 Case 16: Montana Company.......................................................................................................... V-16

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Case 17: WaterWiser, Inc. ............................................................................................................ V-17 Case 18: West Thomasville Volunteer Fire Department (WTVFD) .............................................. V-21 Case 19: PlanMyWedding.com ..................................................................................................... V-23 Case 20: Lake Manina Marine & Camp ........................................................................................ V-25 Case 21: Gimballl-Tonie International (GTI) ................................................................................. V-26 Case 22: Bright Light Innovations: The Starlight Stove ................................................................ V-26 Case 23: Wireway Products ........................................................................................................... V-28 Case 24: Abundant Picking ........................................................................................................... V-29 Case 25: ABA Tools (ABA) ........................................................................................................... V-29 Case 26: ZONE6 Custom Castings, Inc. ....................................................................................... V-30 Case 27: Canadian Mills, Ltd. ....................................................................................................... V-31 Case 28: Kirkwood Home Health Services (KHHS) ...................................................................... V-31 Case 29: Kramer & Geary (K&G) .................................................................................................. V-32 Case 30: Maggiano’s Pizza Pies .................................................................................................... V-32 Case 31: Brian’s Sustainable Homes ............................................................................................. V-33 Cases 32 & 33: Mallory’s Lemonade Stand (A) and (B) … ............................................................ V-37 Cases 34: Working Girl Workout … ................................................................................................ V-39 Cases 35: The Norbank Baseball Club … ...................................................................................... V-40 Cases 36: BE Bold Electric Bike … ................................................................................................. V-41 Cases 37: Chick-fil-A “Eat Mor Chikin” (Except on Sunday) … ...................................................... V-42 Cases 38: Bass Pro Shops (Outdoor World) … .............................................................................. V-43 Cases 39: Toyota Prius: The Power of Excellence in Product Innovation and Marketing … ......... V-44 Cases 40: Potbelly Sandwich Works Grows Through “Quirky” Marketing … ................................. V-46 Cases 41: Suburban Regional Shopping Malls: Can the Magic Be Restored? … ......................... V-47 Cases 42: Invacare Says “Yes, You Can!” to Customers Worldwide … ........................................ V-48 Cases 43: Segway Finds Niche Markets for Its Human Transporter Technology … ..................... V-51 Cases 44: Red Light Challenge … .................................................................................................. V-53

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Part I:

How to use this manual INTRODUCTION The almost 400 page manual comes in three formats—individual sections in Word and PDF format and a combined single PDF file. We don’t recommend printing the big file, but Adobe’s search feature and our table of contents makes that an easy format to work with.

There are many effective ways to teach the beginning marketing course – and we know that how you design your course depends on your objectives and your students' needs. Our aim in preparing this Instructor's Manual and Digital Implementation Guide—and more generally in preparing Essentials of Marketing and everything that goes with it—has been to provide you with a complete and flexible set of high-quality teaching and learning materials. These materials work together and help you offer your students a truly professional course. You can design your own course system by selecting from among a wide variety of teaching units those elements that fit your style and your students' needs.

We developed our Professional Learning Units System (P.L.U.S.) for those instructors. Your system represents the mix of P.L.U.S. elements you select for your students. Part II of this manual describes details of the elements of P.L.U.S. (also listed on the following page) you can choose from for your class and your students. The units you select will work well together. To help you in selecting from this "menu," this Instructor's Manual and Digital Implementation Guide provides discussion of each of the major components of P.L.U.S.

QUICK START GUIDES—A FASTER WAY TO GET STARTED Instructors who have taught this course before—or are familiar with Essentials of Marketing—may want to jump to our Quick Start Guides. The Quick Start Guides provide an overview of different elements of the Essentials of Marketing teaching and learning package. These “light” versions of the Instructors Manual and Digital Implementation Guide can be accessed quickly. You can find these in the Connect→Library→Instructor Resources→Quick Start Guides: • • • • • • • • • • • • • •

Quick Start Guide 1 - EM18e Planning your marketing class.

Quick Start Guide 2 - EM18e “What’s New?” for users of Essentials of Marketing 18e Quick Start Guide 3 - EM18e SmartBook Quick Start Guide 4 - EM18e Connect Assignments Quick Start Guide 5 - EM18e Instructor’s Manual and Digital Implementation Guide Quick Start Guide 6 - EM18e PowerPoint presentations and YouTube PowerPoints Quick Start Guide 7 - EM18e Resources for active learning and flipping your classroom Quick Start Guide 8 - EM18e Test bank Quick Start Guide 9 - EM18e Videos Quick Start Guide 10 - EM18e Cases Quick Start Guide 11 - EM18e Ethics in your class Quick Start Guide 12 - EM18e Marketing for a Better World (#M4BW) Quick Start Guide 13 - EM18e Marketing analytics in your class Quick Start Guide 14 - EM18e Marketing plans and marketing planning

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OVERVIEW OF THIS MANUAL – A ROAD MAP This manual is organized into five major parts. The focus and purpose of each part is briefly described below:

Part I: How to Use This Manual Part I simply provides a short overview of the rest of the manual.

Part II: Overview of the Major Elements of the P.L.U.S. Package The purpose of this part of the Instructor's Manual is to provide you, in one place, with an overview of the major elements of P.L.U.S. (short for Professional Learning Unit Systems) that are available to you. This section provides an overview of the major elements of P.L.U.S.: •

Essentials of Marketing, 18th edition

•

What’s new in this edition of Essentials of Marketing?

•

SmartBook and Connect Assignments

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Instructor’s Manual & Digital Implementation Guide to Accompany Essentials of Marketing PowerPoint Lecture Slides and Scripts

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Bank of Objective Test Questions and Test Builder

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Video Package for Essentials of Marketing “Instructor Resources” for Essentials of Marketing on Connect (Library→Instructor Resources) at the Online Learning Center for Essentials of Marketing.

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Author blog for Instructors – Teach the 4 Ps (www.teachthe4ps.com)

Part III: Ideas about Teaching the First Marketing Course Part III is designed to help you plan your course and create a syllabus. It provides a comprehensive set of ideas about teaching the first marketing course – including more detailed information about some of the possibilities for using various components of P.L.U.S. You can easily skip any section in this part which is not of interest. Specifically, Part III includes 17 sections that cover: 1. COMMENTS ON APPROACHES TO TEACH BEGINNING MARKETING 2. SUGGESTIONS FOR WRITING COURSE OBJECTIVES 3. SUGGESTIONS FOR THE PACE AND COVERAGE FOR COURSES WITH VARIOUS LENGTHS 4. SUGGESTIONS FOR “FLIPPING THE CLASSROOM” AND/OR ACTIVE LEARNING IN YOUR CLASSROOM 5. COMMENTS ON THE CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES 6. COMMENTS ON MARKETING ANALYTICS: DATA TO KNOWLEDGE 7. COMMENTS ON WHAT’S NEXT? IN-CHAPTER BOXES 8. COMMENTS ON THE ETHICAL DILEMMAS 9. COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) BOXES AND IMAGES 10. COMMENTS ON MARKETING ANALYTICS IN ACTION 11. COMMENTS ON THE END-OF-CHAPTER QUESTIONS AND PROBLEMS 12. COMMENTS ON THE CASES AND VIDEO CASES

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How do use this Manual

13. COMMENTS ON ESSENTIALS OF MARKETING’S OBJECTIVE TEST QUESTIONS 14. COMMENTS ON THE INTERACTIVE POWERPOINT LECTURE SLIDES, PRINT ADS, AND YOUTUBE POWERPOINTS 15. COMMENTS ON THE CONNECT INSTRUCTOR RESOURCE OF THE ONLINE LEARNING CENTER TO ACCOMPANY ESSENTIALS OF MARKETING 16. COMMENTS ON THE TEACHING VIDEOS 17. IDEAS FOR STUDENT PROJECTS 18. FEEDBACK TO THE AUTHORS

Part IV: Chapter-by-Chapter Aids: Comments on and Answers to Various Exercises in Essentials of Marketing, 18e Part IV provides answers to or discussion of all the student assignment material, including: •

Comments on the Ethical Dilemma exercise in each chapter,

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Comments on the use of the Marketing Analytics in Action activities in each chapter, Comments on Marketing for a Better World boxes and images,

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Questions and Problems that appear at the end of each chapter, Comments on the use of Marketing Planning for Hillside Veterinary Clinic end of chapter exercises in each chapter,

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Comments on the use of the "Suggested Cases" at the end of each chapter (this is in addition to more detailed comments on each case provided in Part V),

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Comments on Marketing Analytics: Data to Knowledge exercises in Connect,

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A summary of the Connect Homework Exercises for each chapter.

The material in this part of the manual may be helpful to you at the point when you are planning/selecting specific assignments for your syllabus. In addition, all the materials are organized on a chapter-bychapter basis – to make it easier for you to find them when you need them during the course. Further, the answers are clear and complete; you have everything you need for class discussion of the questions or for grading of assignments. For example, the answers to the questions and exercises based on the Marketing Analytics: Data to Knowledge include printed copies of the computer spreadsheets – so you don't need to spend time doing the assignments yourself.

Part V: Comments on Cases in Essentials of Marketing Part V includes comments and teaching notes on each of the 44 marketing cases at the end of the text.

The discussion of each case supplements the suggestions that appear in the chapter-by-chapter aids (Part IV).

CONCLUDING REMARKS It has been our objective in preparing this edition of Essentials of Marketing – and the whole set of P.L.U.S. materials that are available with it – to provide the most complete set of high-quality teaching and learning materials available anywhere for the first marketing course. We sincerely hope that you find these materials helpful and that they assist you in developing a course that meets your needs and your objectives for your students.

Our work on all these materials is an ongoing process. As you read this manual we will already be at work on refinements and innovations for the next edition. Thus, we would welcome your comments and suggestions about this manual, or more generally about any of the P.L.U.S. components. The most efficient way to reach us is by sending an email to Joe.Cannon@ColoState.edu.

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Part II:

Overview of the major elements of P.L.U.S. INTRODUCTION The purpose of this part of the Instructor's Manual is to provide you, in one place, with an overview of the major elements of P.L.U.S. (short for Professional Learning Units System) that are available to you. This section provides an overview of the major elements of P.L.U.S.: •

Essentials of Marketing, 18th edition

•

What’s new in this edition of Essentials of Marketing?

• •

SmartBook Instructor’s Manual & Digital Implementation Guide to Accompany Essentials of Marketing

•

PowerPoint Lecture Slides and Scripts

•

Bank of Objective Test Questions and Test Builder

• •

Video Package for Essentials of Marketing 18e Connect Assignments for Essentials of Marketing

•

Author blog for Instructors – Teach the 4 Ps (www.teachthe4ps.com)

ESSENTIALS OF MARKETING, 18th Edition by Cannon, Perreault, and McCarthy The student package for Essentials of Marketing 18e is available in the following formats: • eBook – instant digital access, includes highlighting, note-taking, and quick search capabilities, and accessible offline or on a mobile device with the ReadAnywhere app.

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Print format – 150 day textbook rental or loose-leaf purchase.

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Connect – instant digital access, eBook included, loose-leaf add-on at discounted price, access to SmartBook 2.0 and Connect assignments. Access offline or on a mobile device with ReadAnywhere app. Accessible through one online portal.

All formats include the same chapter-by-chapter content. Each chapter in Essentials of Marketing features the following: • Case study – a chapter-opening case study motivates the chapter content by describing a particular company’s application of key concepts from that chapter.

• Learning Objectives—at the beginning of the chapter.

• Revised and updated text material—across all chapters, there are hundreds of new, carefully integrated examples based on well-known companies, as well as smaller, entrepreneurial companies and nonprofits.

• Relevant illustrations - new and continuing full-color ads and photographs selected, positioned, and annotated by the authors to effectively illustrate concepts in the text. o NEW! – 28% more advertisements and photos in this edition as compared to the previous edition. o NEW! – this edition adds discussion questions to many captions.

• Exhibits (charts, tables, graphs, and conceptual organizers) – many new and updated exhibits help students understand key concepts. o NEW! – 11% more exhibits in this edition as compared to the previous edition.

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Ethical Dilemma – Based on “gray area decisions” faced by real people working in the field of marketing. To make the exercises more engaging, specific questions promote student reflection and offer opportunities for class discussion.

“What’s Next?” – highlighted and “boxed” special topics take a forward-looking perspective on marketing practice by looking at trends and emerging practices.

“Marketing Analytics in Action” – Challenging exercises which introduce students to real-world marketing analytics examples. Most require students to calculate and apply. #M4BW – boxes and photos show students how marketing can be used to make the world a better place, in addition to providing profitability for corporations.

Integrated treatment of important topics – big data, e-commerce, sustainability, social media, customer value, the impact of the Internet, relationship marketing, international, marketing analytics, and marketing ethics are included in most if not all chapters.

NEW! Learning Objectives Review – chapter conclusions reference each learning objective and describe how the chapter achieves that objective.

End of chapter material: o Key Terms – are emboldened and clearly defined when they are first used – and listed alphabetically in the glossary at the end of the text. o End-of-chapter Questions and Problems – answers for which are given in Part IV of this manual. o Marketing Planning for Hillside Veterinary Clinic exercise – ties concepts from the chapters with a real marketing plan for Hillside Veterinary Clinic (plan in Appendix D). o Suggested Cases – 44 written cases based on well-known companies. Teaching notes on the 44 regular cases are provided in Part V of this manual, and additional comments are provided with the chapter-by-chapter materials in Part IV. o “Marketing Analytics: Data to Knowledge”—provide the text of analytics exercises located at the Essentials of Marketing Connect site. Part III of this manual provides more information about these activities.

Following the 19 chapters, you will find: • Appendix A: Economics Fundamentals* • Appendix B: Marketing Arithmetic* • Appendix C: Career Planning in Marketing* • Appendix D: Hillside Veterinary Clinic Marketing Plan • Bonus Chapter 1: Implementing and Controlling Marketing Plans: Evolution and Revolution* • Bonus Chapter 2: Managing Marketing’s Link with Other Functional Areas* • Cases – 44 print cases, revised and updated.

• Glossary • Endnotes – keyed references in each chapter • Name Index, Company Index, and Subject Index *Full content of these only available online through Connect or McGraw-Hill’s Create custom publishing.

WHAT’S NEW IN THIS EIGHTEENTH EDITION OF ESSENTIALS OF MARKETING? Each revision of Essentials of Marketing has a few basic themes—areas we try to emphasize and include in each chapter. One constant over 18 editions of Essentials of Marketing is an emphasis on currency.

Our instructors and our students value current thinking that reflects the latest in marketing theory and practice. We keep up and integrate the latest concepts in academic journals and the popular press. Our students appreciate current examples from companies they know. We have hundreds of updated concepts, examples, and images.

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This big themes in this edition include: (1) purpose orientation, (2) diversity, equity, and inclusion, (3) photos, images and exhibits as teaching tools, (4) marketing analytics, and (5) active learning. Here is a quick overview of what we changed for the 18th edition of Essentials of Marketing.

Purpose and purpose orientation. The previous edition of Essentials of Marketing examined where marketing practices meet target customer needs and make the world a better place. We decided to highlight those efforts, and you will still see our “green boxes” and #M4BW (marketing for a better world) in every chapter (many updated for currency). Since that time, a movement has come about. There is emerging theory and practice around firms integrating purpose in their business and marketing strategies.

More than a triple bottom line, a purpose orientation focuses on an organization’s reason for being that extends beyond profit and creates value for stakeholders, including customers, employees, suppliers, investors, and communities. We introduce this idea in Chapter 1 and its implications are discussed in every chapter. Purpose reflects a trend in business and marketing strategy that many firms will embrace.

Diversity, equity, and inclusion. The purpose orientation followed some tragic incidents that have brought more attention to racial justice, diversity, equity, and inclusion. This edition tackles some of those topics head-on. Inspired by her episodes on the McGraw Hill podcast Marketing Insights, we reached out to Professor Shanita Akintonde for some suggestions. We also did our own research on the topic and integrated what we learned across chapters. We want all our readers to see themselves in our book—and we want them all to understand how marketing operates for all people. Finally, we increased the number of people of color and assured we had adequate coverage of gender in images across the book.

Enhanced use of photos, images, and exhibits. Do you see it? I see it. My kids and my students seem to enjoy visual social media (Instagram and TikTok) the most. In our textbook we use many advertising examples and graphical exhibits to give students, visual examples and reinforce their learning. Essentials of Marketing has always relied on this—but with this edition we doubled down! Well not quite double, but we added more than a hundred images (28% more than the previous edition) and exhibits (11% more) to enhance student learning. We bring many of these images and exhibits into our PowerPoint slides and Connect Interactive exercises. Our customers—students—lead us in that direction.

Marketing analytics. The last couple of editions of Essentials of Marketing featured increased coverage of big data and marketing analytics. Following marketing practice and feedback from instructors, this edition builds on that coverage of these topics. Our students—whether marketing majors or in some other area of business—are expected to know what marketing analytics is and how it can be used in marketing strategy planning.

We had discussions with many instructors about how to add marketing analytics to the introductory marketing course. While everyone agreed that today’s student needs to know more about how businesses use marketing analytics, there was disagreement about how much time and focus it should receive in the intro course. Given that, we make our coverage flexible, allowing you the instructor to decide how much attention marketing analytics gets in your class. Most of our extended treatment of marketing analytics can easily be added or left out—as it involves an in-text boxed element, end-ofchapter and Connect exercises, a marketing simulation, and a bonus chapter. The following table shows how each can contribute to the learning objectives you have for your students.

You Decide How Much Marketing Analytics to Add to Your Class I want my students to…

Resources in Essentials of Marketing

…understand the importance of analytics and some key terms.

→

Each chapter features key terms and/or marketing analytics examples.

…understand how marketing managers use analytics.

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Each chapter includes a “Marketing Analytics in Action” activity—a mini-case study of analytics in practice, including discussion questions.

…calculate some basic marketing analytics.

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Each chapter includes a Connect homework exercise “Marketing Analytics: Data-to-Knowledge”

…conduct sales and performance analysis.

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Assign Bonus Chapter 1 “Implementing and Controlling Marketing Plans: Metrics and Analysis”

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Active learning. Maximize student engagement with active learning. Connect and SmartBook offer your students better opportunities to get grounded in the basic concepts of marketing. Many instructors count on these to prepare students for class and utilize more active learning activities inside or outside the classroom. We have designed many active learning exercises so students can learn more critical thinking and application of concepts, which helps them understand how marketing really works. The teaching and learning package for this edition of Essentials of Marketing features: •

New! Active learning PowerPoints. Our updated PowerPoint slides feature more photos, images, questions, and checking your knowledge questions. Make your lectures more engaging to your students. This includes a major updating of our YouTube PowerPoints – with 137 new slides with videos added to this edition.

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New! Caption questions. Each chapter features three to six image captions with embedded questions to foster student reflection. These can be assigned or brought into class discussion.

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Flip Your Marketing Class. A few years ago, Joe Cannon decided to “flip” his marketing classes.

He no longer lectures and now uses about 90% of class time on in-class activities. Whether you are ready to completely “flip” your class or are just looking to add more active learning to mix in with your lectures, you will appreciate the materials he has put together. Joe’s Flip Your Marketing Class e-book can be downloaded from the Instructor’s Resource Materials.

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In-Class Activities. As part of the Flip Your Marketing Class e-book effort, Joe produced a series of exercises that can be used in class. For each chapter there are two to four In-Class Activities.

These exercises can be completed in small groups in class. They reinforce and apply concepts learned from Essentials of Marketing. Beyond that, many of the following elements of Essentials of Marketing could also be used as in-class activities. We have added some brand-new activities, and updated others.

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Marketing Analytics in Action. These in-chapter boxed features place students in the situation many managers face: analyzing and interpreting marketing analytics. The activities show students how marketing analytics are used—but they also ask questions that force students to use critical thinking skills to make marketing decisions. These exercises work particularly well for in-class discussion.

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Practice Marketing. The Practice Marketing simulation offers a unique way to learn and apply the Four Ps of marketing. Students take on the role of a marketing manager tasked with creating and launching a new product; they do actual marketing strategy planning around a backpack— analyzing customers, competitors, and company—then making target market, product, place, promotion, and price decisions. After seeing the results of their initial decisions, they can adapt their strategy. The simulation allows students to compete with other students or artificial intelligence characters. Many students refer to Practice Marketing as a virtual internship.

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What’s Next? Each chapter includes an active learning boxed element. Each What’s Next? offers an in-depth analysis of some trend or marketing future—and asks students about its implications.

These elements have all been updated to make them more forward-looking and active learning focused.

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Ethical Dilemma. Several of these critical thinking exercises are updated from previous editions, and focus on students making decisions in gray areas. Many deal with the challenges posed by he advancing technologies used in marketing.

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Questions and Problems. Our chapter opening cases primarily serve to motivate a chapter’s subject matter. We have now added two end-of-chapter “Questions and Problems” (always questions 1 and 2) designed to have students reflect on the opening case studies. Students experience higher-order learning when they are asked to recognize concepts in a case study—so we ask them to do that in question 1. Question 2 turns the chapter opener into a discussion case.

Both questions can be used for in-class discussion or homework assignments for instructors looking for higher-order learning objectives for their students. Other questions and problems can also be used to stimulate class discussion or assigned as homework.

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Marketing Analytics: Data to Knowledge. These end-of-chapter exercises—which can be done through Connect—show students how data analysis is used by marketing managers. Using concepts and examples from each chapter, the exercises build higher-order learning skills and demonstrate data-driven marketing decision making. Each practical question walks students through a real-life scenario, shows them how to use a spreadsheet to find answers, and then asks (optional) discussion questions to build critical thinking skills.

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Cases. Our cases continue to provide students with opportunities to explore how real companies conduct the marketing strategy planning process. Three brand new cases on topics that will engage your students: Norbank Baseball Club (sports and DE&I), BE Bold Electric Bikes, and Red Light Challenge (music industry).

Chapter-by-chapter. Note that every chapter now includes an updated conclusion. Now titled “Learning Objectives Review” this final section revisits the chapter learning objectives and reminds students of that objective and how it was learned in that chapter.

Although we don’t have space to list all our changes, the following highlight the more significant changes made in this edition of Essentials of Marketing: Chapter

Updates new to the 18th edition of Essentials of Marketing

1 Marketing’s Value to Consumers, Firms, and Society

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2 Marketing Strategy Planning

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3 Evaluating Opportunities in the Changing Market Environment

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Updated Nike case opener Exhibit 1-1 replaced with new exhibit on the universal functioning of marketing in two markets.

Many updates on macro-marketing section Revision of “What Does Marketing Concept Mean” section Major update to Exhibit 1-4 Small modifications to Exhibits 1-5 and 1-6 Deleted “The Marketing Concept Applies in Nonprofit Organizations” New key term: purpose organization A new chapter-opening case scenario features the millennial focused Lemonade insurance.

Enhanced coverage of customer lifetime value and SWOT analysis, adding more current examples throughout chapter New Exhibit 2-10 Starbucks SWOT Analysis Examples updated for currency throughout chapter.

Introduced the purpose statement as a variation of the mission statement and included a table with several examples.

New key terms include purpose statement, metaverse, Generation Alpha and black swan event.

Key term economies of scale moved from Chapter 1 to Chapter 3 Several new Exhibits 3-2 and 3-4 and updated Exhibit 3-3 designed to make some concepts easier for students to understand.

A new What’s Next? box introduced black swan (highly unusual and unpredictable) events in the context of the murder of George Floyd Added coverage of the BCG Matrix

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4 Focusing Marketing Strategy with Segmentation and Positioning

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• • 5 Final Consumers and Their Buying Behavior

6 Business and Organizational Customers and Their Buying Behavior 7 Improving Decisions with Marketing Information 8 Elements of Product Planning for Goods and Services 9 Product Management and New-Product Development

10 Place and Development of Channel Systems

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Added new exhibits 4-2 and 4-4 and examples to clarify the concepts of and differences between generic- and product market definitions—and why they are important.

Added a major new section: “A Best Practice Approach to Segmenting Product-Markets.” This extended example clearly lays out a method for segmentation and targeting.

Added new exhibit 4-12, 4-13 and 4-14 to show product market segmentation.

Added major new section: “More Sophisticated Techniques May Help in Segmenting and Targeting” Examples updated for currency throughout chapter.

Updated subsection: “Marketing Managers Appeal to Customer Needs.”

Major update to section: “Individuals are Affected by the Purchase Situation” Updated Exhibit 5-4 to add a level (societal and global needs) to our PSSPS hierarchy of needs.

Added examples of purpose-oriented marketing New key term: societal needs New chapter opener case, the Swiss company Bühler, a purpose-driven firm.

Examples updated for currency throughout chapter, with many new images.

Many updates and new examples as marketing research continues to evolve— drawing on new sources of data and new types of marketing analytics.

Major revision and reorganization of “Getting Problem-Specific Data” (including a new Exhibit 7-7) New key terms depth interview and observation method Examples updated for currency throughout chapter.

Updated for current topics specifically related to pandemic trends, purpose drive brand promises, and brand name changes due to increased sensitivity to DE&I New key terms: non-fungible tokens (NFTs) and brand evangelism Updated for currency.

New Exhibit 9-3 with multiple examples of industries (and firms) at each stage of the product life cycle Enhanced discussion of speeding up new product development and new examples of new product failures New What’s Next? box introduces design thinking.

Coverage of purpose inspired innovation.

New key term: return on investment (ROI) New Exhibit 10-2 better explains how product classes connection to Place.

Completely updated coverage of direct-to-consumer distribution and selling through channel intermediaries, including a table (Exhibit 10-3) summarizing the benefits of each Integrated Chapter 1’s separations between producers and consumers with our coverage of channel specialists reducing discrepancies; exhibit 1-4 clarifies key concepts

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11 Distribution Customer Service and Logistics 12 Retailers, Wholesalers and Their Strategy Planning

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Updated for currency.

Discussed pandemic-driven supply chain problems

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We always have a lot of revisions in our coverage of retailing—and this edition is no different. To remain current, every edition requires significant rewriting, especially in our section on retailing and the Internet.

New topics including social commerce, influencer storefronts, the rise of online retailing platforms (Shopify), and purpose-oriented retailers Many new and updated exhibits—Exhibits 12-4, 12-5, 12-7, and 12-9 are completely new and Exhibit 12-2 has been updated.

New key terms: warehouse club and social commerce Added coverage of the purchase funnel, including a new Exhibit 13-2 and discussion Significantly enhanced coverage of direct-response promotion and email marketing Revised our discussion of pushing and pulling, including an updated Exhibit 13-6 New key term: direct-response promotion Added a lot more coverage of the inside sales force, including a new purposeoriented example featured in our What’s Next? box Enhanced coverage of sales force compensation and motivation, including new Exhibit 14-4 More discussion the personal selling “job,” adding more coverage up-front and a new final section and new Exhibit 14-9 comparing three real sales jobs.

New Learning Objective 14-9 Because it reflects evolutionary changes in advertising, this chapter always has major changes, especially our coverage of digital and online advertising Updated sales promotion with several new examples Lots of small changes to update for currency Changes to earned, owned, and social media require that this chapter be substantially updated each edition.

Updates to data in Exhibits 16-3, 16-4, 16-5 and 16-7 and a new Exhibit 16-8 Major updates on our coverage of social media, including more on TikTok. Updated Social Media section to give it a more strategic orientation.

New Learning Objective 16-9 New key terms: webinar, Tik Tok, and bounce rate This chapter was heavily revised in the previous edition and received fewer updates in this edition.

Updated and added new content on the ethics of “fees.”

Updated for currency.

New example showing how Costco margins are purpose-oriented.

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13 Promotion— Introduction to Integrated Marketing Communications

14 Personal Selling and Customer Service

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15 Advertising and Sales Promotion

16 Publicity: Promotion Using Earned Media, Owned Media, and Social Media

17 Pricing Objectives and Policies 18 Price Setting in the Business World

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19 Appraisal, Review, and Reflection on Marketing in the 21st Century

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Bonus Chapter 1: Implementing and Controlling Marketing Plans: Evolution and Revolution Bonus Chapter 2: Managing Marketing’s Link with Other Functional Areas Appendix A: Economics Fundamentals

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Major updates and reorganization in this chapter.

Updated Exhibit 19-1 Provided more focus to our evaluation of the effectiveness and efficiency of marketing.

Final third of the chapter received major changes and restructuring to focus on purpose driven marketing, the value of marketing, and its future, debating if marketing is evil or good and conclude that it is a tool that can be used for either end Updates for currency Added purpose orientation.

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Updated for currency.

Special attention to purpose orientation and diversity, equity, and inclusion

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No major changes

Appendix B: Marketing Arithmetic Appendix C: Career Planning in Marketing Appendix D: Hillside Veterinary Clinic Marketing Plan Cases

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No major changes

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Updated for currency.

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Updated for currency

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Most cases updated for currency, many with new case names, characters’ names, and dates.

Completely new cases include: Norbank Baseball Club, BE Bold Electric Bikes, and Red Light Challenge.

18 new Connect Interactive exercises – about one per chapter.

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• Connect Interactives

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SMARTBOOK 2.0 One of the main elements of P.L.U.S. is SmartBook 2.0. Here, mostly cut and pasted from the McGrawHill SmartBook 2.0 website is more on this technology, including why, the nature of assignments, learning science that supports SmartBook, how it works, reports, and the ReadAnywhere app. Boost confidence and better prepare students for success with SmartBook 2.0 - Connect’s adaptive learning solution.

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Why SmartBook 2.0?

• With more than a decade of collecting data from billions of questions answered across 90+ disciplines, McGraw-Hill has learned a lot about adaptive learning's impact on student performance. That, plus the author’s experience teaching marketing yields high impact learning.

• The results? The evolution of Connect’s SmartBook 2.0. We’ve created a secure space for learning that balances intentional rigor with the freedom to make mistakes. This is an environment that develops self-awareness through meaningful, immediate feedback that improves student success.

SmartBook 2.0 Assignments Easy for instructors to quickly deploy assignments that help students learn. Stay in total control with SmartBook 2.0, whether building a new assignment or helping students prepare for an upcoming exam.

More details in an upcoming section – a few pages ahead.

Learning Science Motivate and build student confidence with the power of learning science built into SmartBook 2.0. Three practices have been found to be particularly helpful to learning: • Deliberate Practice. SmartBook 2.0 creates a baseline of student knowledge and focuses their time on knowledge gaps.

• Spaced Practice. SmartBook 2.0 keeps students focused by mixing related topics and reducing fatigue to improve retention.

• Metacognition. SmartBook 2.0 helps students better understand what they know and what they don’t know.

How SmartBook 2.0 Adaptive Questions Work Rooted in several learning science principles like spacing, chunking, and interleaving, SmartBook 2.0 creates mini-cycles of questions that consist of no more than five concepts at a time creating smaller, easier to absorb “chunks” of content. Each mini-cycle works like this: 1. It utilizes questions that are different but with related ideas.

2. Once students demonstrate that they understand a concept, the related questions will no longer appear.

3. If students continue to struggle with a concept, they are more likely to encounter repeating questions. This is how SmartBook 2.0 limits guessing and short-term, rote memorization.

This unique question approach improves comprehension and long-term retention, and sets Connect with SmartBook 2.0 apart from any other adaptive tool on the market today.

SmartBook 2.0 Reports Instructors gain power and insight when they track performance and student knowledge. Guide your teaching and remediation with SmartBook 2.0 class and individual student performance data.

• Instructor Reports. Easily see class and student-level assignment data, metacognition levels, and even the most challenging concepts.

• Knowledge Gaps. Get more opportunities to close student knowledge gaps by tailoring your lecture to your class needs.

• Student Reports. Help students track their own learning with reports that reveal where they’re struggling.

ReadAnywhere App

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The ReadAnywhere app assures that learning fits into your students’ lives. Give your students what they need SmartBook 2.0 – a personalized learning experience they can now access on their smartphones or tablets with the free ReadAnywhere app. Help your students study when it’s convenient for them – anytime, anywhere, even offline. Key features of the app: • Offline Access. The free ReadAnywhere app lets students access their required reading and assignments, anywhere, anytime, across devices – even offline.

• True Flexibility. Your books are not with your students 24/7, but their phones are. Making it even easier for your students to fit studying into their lives.

• Cross Platform Syncing. Your students’ progress across devices syncs automatically, so they can pick up wherever they left off no matter what device they’re on.

INSTRUCTOR'S MANUAL & DIGITAL IMPLEMENTATION GUIDE FOR ESSENTIALS OF MARKETING, 18e This manual includes: • Extensive suggestions on teaching the first marketing course and on using P.L.U.S. • Descriptions and overviews of all the different teaching/learning materials that accompany Essentials of Marketing and make up P.L.U.S. • Suggested answers for all end-of-chapter Questions and Problems.

• Teaching notes questions in Marketing Analytics: Data to Knowledge.

• Teaching notes for cases.

• Teaching notes for Ethical Dilemmas.

• Teaching notes Marketing Analytics in Action.

• Teaching notes for all Marketing Analytics: Data to Knowledge questions.

• Suggestions for using the Connect assignments.

This Instructor’s Manual is available for download in digital form at the Instructor Edition of the Online Learning Center. We have also prepared the entire manual as a single PDF file for easy printing.

POWERPOINT LECTURE SLIDES AND SCRIPTS The Interactive PowerPoint lecture slides that come with Essentials of Marketing all come with extensive “Notes”. The Notes view in PowerPoint provides a “script” that can be read to your students or simply used as an idea about how to discuss each slide. Our “High Media” content slides are large files (which take longer to download) but include videos and online activities. We also have a separate PowerPoint file that includes slides with links to online videos.

All our slides are available in both an accessible and non-accessible format. You may want to use the non-accessible format in your class lectures because these include more images and slide builds. The content in the non-accessible slides is identical but takes out images and builds.

NEW! In this edition, reinforcing our themes of images and engagement, we have added 3-4 photos plus 3-4 YouTube PowerPoints to the end of each chapter’s slide deck. The photos from each chapter emphasize those with questions in the captions—to foster your in-class engagement. We also selected shorter, discussion oriented YouTube PowerPoints. These placed at the end of chapter PowerPoint deck and can be moved into a lecture as the instructor sees fit.

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TEST BANK OF OBJECTIVE TEST QUESTIONS AND TEST BUILDER The authors of the textbook have written, edited, or reviewed EVERY question in the Essentials of Marketing 18e test bank. We take full responsibility for the quality of the test bank and we are quite proud of this effort. We know how important the test bank is for many instructors. If you ever find any questions confusing, misleading, or flat our wrong – please send an e-mail to Joe.Cannon@ColoState.edu.

Tests can be created with McGraw-Hill’s Test Builder software, which can be accessed from the Instructor Resources page in Connect.

VIDEO PACKAGE FOR ESSENTIALS OF MARKETING 18e: TEACHING VIDEOS AND iSEEIT! VIDEOS Essentials of Marketing has always been proud to offer you the best video package in the business. Our package includes 27 teaching videos (generally 8-15 minutes in length) that explore key concepts from each chapter with real-life examples. In addition, we have 22 iSeeIt! animated videos can be shown in class (though you must be signed into Connect) or assigned to students through Connect (with autograded questions).

CONNECT ASSIGNMENTS FOR ESSENTIALS OF MARKETING NOTE: Most of these require adopting the Essentials of Marketing Connect format for your students.

Connect is the primary platform for many of Essentials of Marketing’s supplementary materials and where you can locate most of our P.L.U.S. supplements and the SmartBook 2.0 the adaptive learning system.

Connect for Essentials of Marketing includes a web-based assignment and assessment platform that enriches the learning experience for your students. We have created about 100 interactive exercises.

These exercises go beyond basic recall and create highly engaging interactive content that teaches and reinforces key concepts and assesses student performance on key course objectives.

Connect works for students. It helps students connect the marketing dots – in a fun and interactive way.

The exercises are not busy work; they are designed to stimulate critical thinking and reinforce key concepts from each chapter. All assignments can be automatically and instantly graded (though you decide when students get feedback) – so students know what they understand and what they don’t.

Connect works for instructors. It fits right in with our teaching and learning package and gives you even more options for teaching your students your way. While many instructors want to give application- and understanding-oriented homework assignments to their students, giving timely student feedback is timeconsuming and often impractical. With Connect Marketing, assignments are automatically graded – with grades dropped right into your Connect grade book. Plus, with dozens of exercises to choose from, the instructor has options and control. All assignments are tied to AACSB Assurance of Learning knowledge standards and Bloom’s Taxonomy guidelines.

There are 6-8 Connect Interactive exercises per chapter. Not that you will want to assign all of them, but this many gives you an opportunity to choose those that fit best with your learning objectives. Each of these exercises is designed specifically for Essentials of Marketing and was developed or reviewed by one of the book’s authors. All activities are assignable (you decide which exercises to use) and autograding. They are the perfect homework assignments for your students – giving them an active learning approach that supplements and extends what they learn from reading the book.

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Assignments in Connect Connect gives you a lot of flexibility. You can develop your own or use ready-made assignments. Let us review all the different types you can find for use with Essentials of Marketing. Within Connect you can find Connect Orientation Videos to help you handle the technical issues with creating assignments. Or, you can reach out to a McGraw-Hill Digital Faculty Consultant to help you set up your course.

When you set up your course in Connect, you will see the image to the right when you seek to add an assignment. This can look intimidating but just start exploring or check out Quick Start Guide (QSG04) to give you some suggestions or reach out to your Digital Faculty Consultant.

The instructor names each assignment and chooses from a host of controls (due date, give students answers after they complete the assignment after the due date or not at all, and many other choices).

Question Bank This is the main area where you can find questions to assign your students. They are organized by Chapter.

From there, you can assign your students: 1. Exercises (6-8 per chapter). These assignments are all about applying what you learn in a particular chapter. They include video cases, multiple choice, click and drag, matching, or marketing analytics. The applied active elements make them a favorite way to engage students. This includes our Marketing Analytics: Data to Knowledge assignments which are discussed in more detail below.

2. Quizzes (25 questions per chapter). Students enjoy practice quizzes to help them study for exams. You can choose to give your students some or all these questions.

3. Test bank (~250-300 questions per chapter). Creates exams or quizzes using the Essentials of Marketing test bank and you can go through and choose those that meet your needs.

SmartBook 2.0 This section assigns students to read specific chapters (or parts of chapters) with adaptive learning questions presented to students as they read. The instructor controls the number of questions students see—although a students’ performance also controls that number (students see more if they get questions wrong).

Adaptive Learning Assignment These assignments focus on students’ success and well-being and include tips for success.

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Writing Assignment Instructors can create their own writing assignments and rubrics to make for efficient student guidance and scoring.

Application-Based Activity Provide students with valuable practice using problem solving skills to apply their knowledge to realistic scenarios. Students’ progress from understanding basic concepts to using their knowledge to engage in complex scenarios. This includes the very popular “Marketing Mini Sims” and Role-Playing assignments which I highly recommend (our students love them).

File attachment Create a manually graded assignment that your students can respond to with an attached file (Word documents, Excel spreadsheets, etc.).

Web Activity Another way you to create your own activity tied to specific web links.

My Assignments One stop link to all the assignments you have created in this course.

Reading Assignment Create a reading assignment in the Connect eBook.

Marketing Analytics: Data to Knowledge Note: available via the question bank option.

Using Connect spreadsheet software our Marketing Analytics: Data to Knowledge offer your students the opportunity to use spreadsheet analysis on real marketing problems. 18 problems are featured in end-ofchapter material. The exercises were developed by the authors to deepen student understanding of important topics and concepts covered in Essentials of Marketing. The assignments simplify the “spreadsheet” details and make it easy for students to prepare assignments in Marketing Analytics: Data to Knowledge. Each exercise requires students to conduct “what if?” analysis in the spreadsheet and answer from 4-6 questions. A discussion question can be assigned or used in class to help students better understand how to apply the analysis.

There is a separate suggested problem (a short caselet) at the end of each of the first 18 chapters in the text. Each problem description concludes with questions for the student to answer – using the spreadsheet software.

Answers to all the questions – along with discussion suggestions and copies of all the relevant spreadsheets – are provided in Part IV of this manual (along with answers to all the other chapter-bychapter assignment materials).

The software has been designed – and extensively tested and refined – so it will be easy for students to use. It provides clear online directions. While students usually don’t need them, the text also provides a complete set of printed instructions on using the software.

Connect Questions You can create your own Connect assignments with your own questions – or use questions from prepopulated quizzes (up to 20 questions per chapter) or choose questions from the Essentials of Marketing test bank.

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Practice Marketing simulation We are excited to offer the Practice Marketing simulation. This simulation allows students to assume the role of a marketing manager in a simulated market. Students utilize the entire marketing strategy planning process to sell backpacks. The simulation can be used by students individually or in teams. NOTE: Practice Marketing can be purchased separately and is also available for a special package price with your textbook. Check with your McGraw-Hill sales rep for more details.

Note: for most introductory courses, we believe the mini-sims and role playing exercises in Connect offer the best learning (and financial) value for you and your students.

TEACH THE 4 Ps blog (www.teachthe4ps.com) – Author Blog for Instructors The Teach the 4 Ps blog (www.teachthe4ps.com) helps instructors of the introductory marketing course by offering instructors up-to-date examples, teaching tips, and ideas for student assignments. We make several posts a month during the spring and fall semesters – with links to recent articles, videos, podcasts, teaching tips, and more. The handy lists of “Categories,” “Tags,” and “Search” allow you to find the most recent posts on the topic you are teaching tomorrow (or today!).

ONLINE LEARNING CENTER – WHERE YOU CAN FIND ALL THIS STUFF? Now that you know about all the great resources to support your teaching and your students’ learning, you may want to know where you can find all this stuff. The hub of the P.L.U.S. system is in your Connect account. Add Essentials of Marketing to your course, click on the page, then go to LIBRARY→INSTRUCTOR RESOURCES, where you will find: The heart and soul of the supplements is Online Learning Center for Essentials of Marketing 18e (OLC) (accessed through Connect for Essentials of Marketing → Library→Instructor resources) at the OLC find: • Quick Start Guides o These guides are designed to be snippets to replace our more thorough Instructor’s Manual and Digital Implementation Guide. o Experienced instructors and previous users of the Essentials of Marketing teaching and learning package may find these are all they need to get their course up and running. o There are 15 guides in all. Start with #1 Planning your marketing class (QSG01) and determine which will work best for you.

• Instructor’s Manual and Digital Implementation Guide o Downloadable version of the document you are now reading – available as a single document or broken into parts and individual chapters.

• PowerPoint Presentations – each chapter file includes: o About 35-40 slides that follow chapter content. o Most slides have notes pages that can be used as a script or guide for your lectures. o Slides with “Checking Your Knowledge” questions that can be used in class to keep students engaged and thinking. These can also be used with any of the popular class clicker systems and related software to get feedback on how students are doing with the material. o The end of the file includes images from the chapter (usually advertisements) with captions and questions. These work great to foster in-class engagement and discussion. o The end of the file includes a few (3-4) select YouTube PowerPoints. A full set of about 225 YouTube PowerPoints is also available for download—see our Video Library tab.

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A special design that both looks great and makes it easy to integrate other PowerPoint materials (like those detailed below) without worrying about shifts in format. o Two versions of the slides: ▪ High Media slides – that include slides with click to build features and links to online video content. Great to use in class.

▪ Accessible slides – which meet accessibility standards for students and instructors with disabilities. Great to post for students (links and builds disabled). o YouTube PowerPoints – YouTube videos linked in a separate set of PowerPoints.

Essentials Video Library o Video Instructor’s Manual that offers suggestions about how to use the various videos in your teaching. o Links to all the video content available with Essentials of Marketing. o The video package for Essentials of Marketing 18e includes: ▪ 12 instructional video segments ▪ 25 iSeeIt! videos—all with corresponding Connect Interactive exercises ▪ Marketing Video Library – current video resources from across the web o Active Learning Package o Flip My Marketing Class – Active Learning with Essentials of Marketing, 18e ▪ This ebook includes a description of how an instructor can use the flipped classroom model – or simply add more active learning elements – to their principles of marketing class. o 55 In-Class Activities to bring active learning to your classroom.

Red Light Challenge Case o A print version of this new case – which was so current it didn’t make it to the print or ebook.

Study Guides o Chapter-by-chapter study guides you can share with your students. o All in Word format so you can adapt to your teaching approach.

Teach the 4 Ps Blog o Link to our Teach the 4 Ps (http://teachthe4ps.com/) blog for suggestions about adding current content to your teaching.

Connect Matrix o A summary of all the Connect material available for your course.

Test Builder o More than 6000 objective test questions (true/false and multiple choice). Ranging from 180-350 questions per chapter. o Access to the Manual of Tests document – which allows access to Word files for all questions. o Find link and information to McGraw-Hill’s TestGen test creation software Application-Based Activities o Information on all the activation-based activities available for you and your students.

Practice Marketing Simulation o Information on the Practice Marketing simulation you can use with your course.

Marketing Insights Podcast o A link to the McGraw-Hill marketing podcast with the latest ideas about how to teach your marketing course.

Writing Assignment Tools o Information on the Writing Assignment Tools you can use with your course.

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Part III:

Ideas about teaching the first marketing course INTRODUCTION This part of the manual provides several ideas about teaching introductory marketing – including some ideas about the possibilities open to you with different elements of P.L.U.S.

There are 18 major sections in this part of the manual. As an overview, these sections are listed below: 1. COMMENTS ON APPROACHES TO TEACH BEGINNING MARKETING 2. SUGGESTIONS FOR WRITING COURSE OBJECTIVES 3. SUGGESTIONS FOR THE PACE AND COVERAGE FOR COURSES WITH VARIOUS LENGTHS 4. SUGGESTIONS FOR “FLIPPING THE CLASSROOM” AND/OR ACTIVE LEARNING IN YOUR CLASSROOM 5. COMMENTS ON THE CONNECT HOMEWORK EXERCISES 6. COMMENTS ON NEW MARKETING ANALYTICS: DATA TO KNOWLEDGE 7. COMMENTS ON WHAT’S NEXT? IN-CHAPTER BOXES 8. COMMENTS ON THE ETHICAL DILEMMAS 9. COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) BOXES AND IMAGES 10. COMMENTS ON MARKETING ANALYTICS IN ACTION 11. COMMENTS ON THE END-OF-CHAPTER QUESTIONS AND PROBLEMS 12. COMMENTS ON THE CASES 13. COMMENTS ON ESSENTIALS OF MARKETING’S OBJECTIVE TEST QUESTIONS 14. COMMENTS ON THE INTERACTIVE POWERPOINT LECTURE SLIDES, PRINT ADS, AND YOUTUBE POWERPOINTS 15. COMMENTS ON THE INSTRUCTOR EDITION OF THE ONLINE LEARNING CENTER TO ACCOMPANY ESSENTIALS OF MARKETING 16. COMMENTS ON THE TEACHING VIDEOS 17. IDEAS FOR STUDENT PROJECTS 18. FEEDBACK TO THE AUTHORS

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1. COMMENTS ON APPROACHES TO TEACHING BEGINNING MARKETING Essentials of Marketing and P.L.U.S. Support Many Approaches The preface to Essentials of Marketing highlights many of the authors' preferences and priorities for the beginning marketing course. Certainly, there are many ways to teach this course – and we have worked to develop a complete set of materials that will support many different teaching and learning approaches. The "best" approach depends upon the instructor and his or her objectives. We firmly believe that any teaching approach can be used effectively as long as the instructor really believes that he or she has something to teach – and that it is important for students taking the course. As is clear throughout the text, the authors firmly believe in the importance of marketing – and a strong effort is made to impress its importance upon students.

The major differences among various teaching approaches are: • the kind and extent of student participation (including whether the course is a traditional in-class offering or an online course), and • the extent to which the course incorporates or uses computer-based technologies, multimedia materials, or both.

Essentials of Marketing provides extensive support for whatever approach meets the objectives set by the instructor. Many of the student materials can be used either independently for self-study or as the basis for class assignments (and discussions). All instructor-support materials are available in a digital format.

In-Class or Online Lectures Our Interactive PowerPoint slides are designed to give you plenty of flexibility in lecturing on key concepts from each chapter. Consider the following features: • The “Notes” section on each slide provides a “script” which can be read or used as a guideline for covering concepts in each chapter.

• Slides include “Checking Your Knowledge” questions which can be used with “clicker” systems or simply as a way to break up delivery of content and assure students are following the lecture.

• Slides include “builds” to give them a more professional look.

• The high media content slides include videos and our YouTube slides allow you to bring interesting, educational and often entertaining examples to your class.

• Joe Cannon is happy to share the PowerPoint files he used to record video lectures for his marketing course. These presentations are designed to be 7-15 minutes long and most include an external video to maintain student interest. There are 3-5 of these per chapter, with each covering 1-2 learning objectives. There are also some quiz questions that can be added to assure students complete these.

He uses these to prepare students in his hybrid class—students attend class for 1.5 hours a week where they engage in in-class activities. They use the other traditional class session to watch the video lectures on their own. Contact Joe.Cannon@ColoState.edu to get access – put “Video lecture slides” in the subject line.

Active Learning and Essentials of Marketing The authors think that it is desirable to get students really involved in the course. Otherwise, material may be "poured in" during lectures and then "poured out" at examination time – but without as much active learning taking place as is desirable. Consequently, the P.L.U.S. system is chock-full of exercises and activities you can use to add active learning to your course.

This involvement can be achieved in a variety of ways. NOTE: This topic is discussed in greater detail in Joe Cannon’s e-book Flip My Marketing Class – Active Learning with Essentials of Marketing – see “Instructor Resources” on Connect for a download. See also Quick Start Guide 7 Resources for active learning and flipping your classroom.

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1. In-class active learning activities often require students to come to class prepared – yes that means making sure your students read the chapters before they come to class. Our teaching and learning package offers a few different approaches to achieve this objectives: • We have found that assigning SmartBook and requiring to complete the reading (verified by their questions) before class assures that a high percentage of students come to class having read the assignment. We “grade” SmartBook assignments on a completion basis (if they do all the questions – right or wrong – they get 100% for that day’s assignment). Then we make sure the assignments are worth enough (we usually make sure it is 15-20% of their grade to complete the reading assignments). With this approach we are getting 95% or more of our students coming to class prepared. These are auto-graded and easily sync to our learning management system gradebook. We also like that this does not take up class time – which might be the case if we used a daily quiz to assess readiness.

• Another approach involves assigning self-test quizzes through Connect. These are easily created, self-graded, and provide another test of student readiness. That said, students may get the answers from another student and not complete the reading.

2. Many of our end-of-chapter activities offer ready-made active learning assignments that can be assigned as homework or an in-class activity.

• The “Questions and Problems” provide students with an opportunity to apply and/or practice critical thinking around the content in each chapter. With this edition we have focused the first two Questions and Problems around the chapter opening scenarios.

• Appendix D in the textbook and SmartBook features a marketing plan for Hillside Veterinary Clinic. At the end of each chapter the “Marketing Planning for Hillside Veterinary Clinic” features 2-4 questions that ask students to connect chapter concepts and learning to this marketing plan. The marketing plan and these exercises can provide an ongoing integrative thread to the chapter materials.

• Our Marketing Analytics: Data to Knowledge exercises are featured at the end of each chapter – though they must be assigned through Connect. We think that assigning the exercises in Connect and having them due before class – then using class to discuss or extend the exercises – provides a great critical thinking and analytics activity.

3. We have some different types of in-chapter exercises that are specifically designed to get students critically thinking about what they are learning. These exercises can be assigned as homework to be written up or used in class to stimulate discussion: • The Ethical Dilemmas integrated into each chapter offer an excellent start for student discussion and debate. For these questions there is not a simple “correct” answer, so different students are likely to have different opinions—which helps to make even a short discussion interesting.

• The #M4BW photos and boxes show students how, in addition to helping a company’s bottom line, marketing can be used to help make the world a better place. These are great for stimulating in-class discussion.

• The Marketing Analytics in Action exercises in each chapter • The What’s Next? boxed teaching elements in each chapter provide a forward look at the nearterm future of marketing practice. Sometimes speculative, sometimes already a change in the making, these have been redesigned to include discussion questions and spark students’ creativity and critical thinking.

4. Cases, cases, and more cases. We find that shorter cases work best in the introduction to marketing class. The textbook features many different cases that can be used to stimulate discussion in your classroom.

• Our chapter “openers” are cases based on real companies or real product-markets. There are 19 of these (21 if you count the bonus chapters). These cases are more descriptive – and less problem-focused – but our end-of-chapter questions and problems (see 1 and 2 in each chapter) provide some ideas about how to stimulate student thinking and discussion.

• The end of the textbook includes 44 short cases – mostly fictional scenarios based on real business experiences or observations of the authors.

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5. The Practice Marketing simulation involves students in the excitement of making marketing decisions in a dynamic, competitive situation. Students are more motivated to learn from the class because they have an immediate application of the ideas – in their next marketing plan. Each student can run his or her own firm. Or, if you wish, the simulation is a good way to get students involved in a team – which also means a team-learning experience. Teams are an especially good way to get involvement when the in-class activity is primarily focused on a large lecture section. Competition and peer pressure are great motivators!

6. The interactive exercises (including the graphical exercises) in the Interactive PowerPoint Lecture Slides provide an interesting, high-involvement basis for in-class discussion and lectures. With or without the interactive exercises, many of the lectures include a number of suggested discussion question slides • NEW! In-caption questions for photos and advertisements. Many of the photos and advertisements in each chapter (and in this edition you will find 28% more) now have reflection questions included in the caption. We reproduce those images and captions at the end of our PowerPoint slides. These are designed as built-in discussion opportunities.

• NEW! A selection of our YouTube PowerPoints is now included at the end of each chapter’s PowerPoint deck 7. The Teaching Videos or YouTube PowerPoints can be the opener for a high-involvement class discussion.

8. See the author blog for Essentials of Marketing (Teach the 4 Ps http://teachthe4ps.com/) for blog posts with links to articles, videos and websites that may be assigned as out-of-class homework and/or for in-class discussion.

9. Flip My Marketing Class exercises. Joe Cannon’s e-book Flip My Marketing Class: Active Learning with Essentials of Marketing features a series of exercises (and teaching notes) that can be handed out in class for group learning among students. See the Instructor Resources on Connect→Active Learning Package.

Regardless of the specific approach you select for your course, students will want to know what you have planned and what is expected of them. The following sections share some ideas on these topics. Perhaps some of them will be helpful to you as you plan your course.

Remind Students about the Structure of Your Course Essentials of Marketing was written so that there is a logical progression of topics from the beginning to the end. If you assign chapters in the order in which they appear in the text, you will probably not need a specific explanation of the logic behind this structure for your students. The ideas build logically on the 4 Ps framework introduced in Chapter 2 and the integrative framework for the marketing strategy planning process introduced in Chapter 2 (see Exhibit 2-9). The chapter-opening exhibits highlight how a chapter fits with other related chapters and the course as a whole. Even with this structure clearly presented, some students may benefit from an occasional refresher. An instructor may wish to occasionally remind students of the overall structure – and why the next topic is next. One simple and useful approach here is to reuse Exhibit 2-9 from the text to reinforce where the topics of the day fit within the whole course.

The chapters of the text fall into three broad groupings. The first seven chapters introduce marketing and a broad view of the marketing strategy planning process. They cover topics such as segmentation, differentiation, the market environment, and buyer behavior, as well as how marketing information systems and research provide information about these forces to improve marketing decisions. The next 11 chapters go into the details of planning the four Ps, with specific attention to the key strategy decisions (and what influences them) in each area. Then, in Chapter 19 we conclude the coverage with an assessment of marketing’s challenges and opportunities, as well as a discussion of the inherent nature of marketing – is it used for good or evil? If you have time, Bonus Chapters 1 and 2 let you cover implementation and control and/or marketing’s links with other functional areas.

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The first chapter deals with the important role of marketing—focusing on how a marketing orientation guides a business or nonprofit organization in the process of providing superior value to customers. It also covers the role of macro-marketing and how a market-directed economy shapes choices and quality of life for consumers.

Chapter 2 builds on these ideas with a focus on the marketing strategy planning process and why it involves narrowing down to selection of a specific target market and blending the four Ps into a marketing mix to meet the needs of those customers. With that foundation in place, the chapter introduces an integrative model of the marketing strategy planning process that serves as an organizing framework for the rest of the text.

Chapter 3 alerts students to the importance of evaluating opportunities in the external environments affecting marketing. As part of the cultural and social environment, this chapter introduces the demographic dimensions of the global consumer market and provides up-to-date coverage on important geodemographic trends.

Chapter 3 also highlights the critical role of screening criteria in narrowing down from possible opportunities to those that the firm will pursue.

Chapter 4 shows how analysis of the market and external market environment relate to segmentation and differentiation decisions as well as the criteria for narrowing down to a specific target market and marketing mix.

You must understand customers to understand marketing, segment markets, and satisfy target market needs.

So, the next two chapters take a closer look at customers. Chapter 5 studies the behavioral aspects of the final consumer market. Chapter 6 looks at how business and organizational customers – like manufacturers, channel members, and government purchasers – are using e-commerce and how they are like and different from final consumers.

Chapter 7 is a contemporary view of getting information–through “big data,” marketing information systems and marketing research – for marketing management planning. This chapter includes discussion of how information technology—ranging from intranets and speedy collection of market research data—is transforming the marketing manager’s job. This sets the stage for discussions in later chapters about how research and marketing information improve each area of marketing strategy planning.

The next group of chapters – Chapters 8 to 18 – is concerned with developing a marketing mix out of the four Ps: Product, Place (involving channels of distribution, logistics, and distribution customer service), Promotion, and Price. These chapters are concerned with developing the "right" Product and making it available at the "right" Place with the "right" Promotion and the "right" Price to satisfy target customers and still meet the objectives of the business. These chapters are presented in an integrated, analytical way–as part of the overall framework for the marketing strategy planning process – so students' thinking about planning marketing strategies develops logically.

Chapters 8 and 9 focus on product planning for goods and services as well as new-product development and the different strategy decisions that are required at different stages of the product life cycle. We emphasize the value of innovation and developing new products that propel a firm to competitive advantage and long-run profitable growth. Chapter 9 also details how quality management approaches can improve products and implementation, including implementation of better customer service.

Chapters 10 through 12 focus on Place. Chapter 10 introduces decisions a manager must make about using direct distribution (for example, selling from the firm’s own website) or indirect distribution (working with other firms in a channel of distribution). We put special emphasis on the need for channel members to cooperate and coordinate to better meet the needs of customers. Chapter 11 focuses on the fast-changing arena of logistics and the strides that firms are making in using e-commerce to reduce the costs of storing and transporting products while improving the distribution service they provide customers. Chapter 12 provides a clear picture of retailers, wholesalers, and their strategy planning–including exchanges taking place via the Internet. This composite chapter helps students see why the big changes taking place in retailing are reshaping the channel systems for many consumer products.

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Chapters 13 to 16 deal with Promotion. These chapters build on the concepts of integrated marketing communications, direct-response promotion, and customer-initiated digital communication, which are introduced in Chapter 13. Then, Chapter 14 deals with the role of personal selling, customer service, and sales technology in the promotion blend. Chapter 15 covers advertising and sales promotion, including the ways that managers are taking advantage of the Internet and other highly targeted media to communicate more effectively and efficiently. Chapter 16 focuses on the fastest growing areas of promotion – publicity, owned media, earned media, and social media.

Chapters 17 and 18 examine Price. Chapter 17 focuses on pricing objectives and policies, including use of information technology to implement flexible pricing, pricing in the channel, and the use of discounts, allowances, and other variations from a list price. Chapter 18 covers cost-oriented and demand-oriented pricing approaches and how they fit in today’s competitive environments. The careful coverage of marketing costs helps equip students to deal with the cost-conscious firms they will join.

The final chapter (Chapter 19) considers how efficient the marketing process is. Here we evaluate the effectiveness of both micro-and macro-marketing – and we consider the competitive, technological, ethical, and social challenges facing marketing managers now and in the future. Chapter 19 also reflects on the purpose orientation discussed at the beginning of the text, asking the students to evaluate whether marketing produces more good or evil in the world.

Bonus chapters in Essentials of Marketing 18e. These two chapters are available through Connect and SmartBook and can be bound in a printed version of the text through McGraw-Hill's Create custom publishing.

We call them "Bonus Chapters" because they are something extra and optional for instructors seeking this extended coverage. You will be able to access these optional chapters online within the Connect/SmartBook platform. Once you’re logged into Connect, access your SmartBook and click on the Bonus Chapters Tab to access these additional chapters.

•

Bonus Chapter 1: Implementing and Controlling Marketing Plans: Evolution and Revolution. Previously Chapter 18 in Basic Marketing 19e, this chapter builds on implementation and control, two concepts introduced in Chapter 2. This chapter goes into more depth on these concepts and offers how-to approaches for making implementation and control more effective. The chapter discusses how new information technology tools facilitate these practices and demonstrates how firms use sales analysis, performance analysis, and cost analysis to control marketing strategies and plans.

•

Bonus Chapter 2: Managing Marketing's Link with Other Functional Areas. Previously Chapter 19 in Basic Marketing 19e, this revised chapter covers some of the important ways that marketing links to other functional areas. The emphasis is not on the technical details of these other functional areas, but rather on the most important ways that cross-functional links impact your ability to develop marketing strategies and plans that really work. The chapter includes separate sections that describe how finance, production and operations, accounting, information systems and human resources interact with marketing to create and implement successful marketing plans.

Four appendices are included to aid student learning. The appendices provide background information that your students may or may not find helpful, depending on their academic preparation before entering the class or how you want to teach the class. Note that the full content for Appendices A, B, and C are not in the print format book, and can be accessed online through Connect or McGraw-Hill’s Create custom publishing.

• • • •

Appendix A explains some of the economist’s tools including demand and supply curves, elasticity and inelasticity of demand and supply, and competitive market situations.

Appendix B discusses some of the accountant’s tools including operating statements, operating ratios, stockturn rates, markups, markdowns, and ROI and ROA. Appendix B also includes forecasting.

Many instructors want to make sure their students are aware of the many different job opportunities in marketing – which is covered in Appendix C. Appendix D includes a marketing plan for Hillside Veterinary Clinic (disguised version for a real company). Many instructors like to expose their students to a real marketing plan and to use it as a

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backbone for going through the text – and our end of chapter questions tie this marketing plan to each chapter’s concepts.

Care has been taken in writing so that the chapters can be reorganized in a number of different sequences – to meet different needs. For example, some professors prefer to cover marketing research after covering the marketing mix chapters, and this reordering should cause students no problem. Similarly, some professors prefer to cover Price topics (Chapters 17 and 18) immediately after introducing Product concepts (Chapters 8 and 9), or to save the Place chapters until other marketing mix decisions have been covered. Some faculty elect to cover the Promotion chapters last, mainly because many students are interested in promotion, so they end the course on a high note. Essentials of Marketing is carefully written to be flexible in this regard – so changes in order can be made quite readily.

As a general suggestion, instructors who assign chapters in an order that differs from the text order should consider explaining to students briefly but explicitly the logic for the selected structure. The instructor who sees the "big picture" can have very good reasons for selecting a particular order, but students going through the material for the first time may wonder what the special value of the structure might be. They may not realize that Essentials of Marketing was prepared so that an instructor would have such flexibility.

Students Often Appreciate a Written Course Overview Most of us like to have some idea of what is expected of us, and usually students in the beginning marketing course do, too. A written course overview (syllabus) posted on a website or handed out at the beginning of the term – along with a schedule of assignments and dates when they are due – can often play an important role in clarifying what the instructor expects of students, and what the students can expect from the instructor. And if there is some problem during the course, the overview can be consulted as a "fair" source for resolving questions – without a student feeling that he or she has been singled out by the instructor.

Many instructors make their course overview available on the school’s computer network and/or on a website, perhaps a website that is handled with a learning management system.

A written course overview might include some or all of the following: 1.

Instructor's name, office location, and office hours (and instructor or website address, if applicable).

2.

How students can get a message to the instructor, if necessary (email address and/or telephone number).

3.

Instructor's grading policy, including: a. which aspects of course performance will be evaluated; b. how final grade will be determined; c. instructor's policy for dealing with "late" assignments, missed tests, and the like; d. procedure, if any, for reconsideration or change of an assigned grade; e. types of tests and exams.

4.

Policy concerning class attendance and expectations concerning in-class participation, questions, and the like.

5.

Special requirements or specifications (i.e., page limits on term papers, bluebooks needed for exams, etc.).

6.

What work for the course may be done with another person, and what must be done independently, along with any information concerning the school’s honor system.

7.

Key dates (last day to drop or add the course, due date for term paper topic, test and exam dates, etc.).

8.

Information (title, authors, date, publisher) about assigned and optional course text and materials.

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9.

Statement of what instructor wants course to do for students (special skills to be enhanced, career preparation, and the like; also see following section on writing course objectives).

10.

Outline of assignments and due dates.

Many students view a well thought-out course overview as a sign that the instructor takes the course seriously – and they in turn take it seriously. A good course overview often can be a worthwhile front-end investment that helps to keep a course on track – and the investment can pay off again because such an overview usually can be adapted or modified for similar teaching situations in the future with relatively little effort. For illustrative purposes, we are including a sample copy of a course overview used by one of the authors in a recent semester. Of course, our intent here is not to suggest that the policies reflected in this overview would be right for anyone else – but rather to simply share some ideas about how topics might be addressed.

In the list above, reference was made to a statement of objectives for the course and to the outline of course assignments. Both these topics can require a lot of time and thought – especially the first time they are developed for a course. The next two sections (following the sample course overview) provide information that makes effective preparation of course objectives and outlines faster and more convenient.

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How Joe Cannon, author of Essentials of Marketing, teaches his undergraduate introductory marketing class.

The following pages are an updated sample of a syllabus I have used in my classes. Please note the following: •

I flip my marketing class. If you want to learn more about flipping the classroom, email Joe.Cannon@colostate.edu for a copy of my Flip Your Marketing Class ebook – or find it on the Instructor Resource Site for Essentials of Marketing. By this I mean that students are expected to come to class having read that day’s chapter. I typically provide a short (10 minutes or so) lecture that reviews key content from the assigned chapter. o SmartBook provides my assurance that most students arrive in class having read the content. SmartBook assignments (adaptive learning questions) are graded based on completion and I drop their three lowest scores. I give a bonus if they get 100% on all of these – an added incentive to come to class prepared. With effort and planning, this 15% of their grade should be 100%. o Additionally, I typically assign 1-2 Connect Interactives for students to complete in addition to the assigned chapter. These are selected based on the learning objectives I find most important and which are not covered in the planned in-class activity.

•

The bulk of class time involves students working in 2-3 person groups on the day’s in-class activities. o The Essentials of Marketing teaching and learning package includes about 60 in-class activities. These activities can be found under the Active Learning Packager tab in the Essentials of Marketing Instructor Resource page on Connect. o These flexible activities allow students to apply, analyze, evaluate, and create (higher level Bloom’s learning objectives) key marketing concepts. o There are a separate set of test questions under this tab as well. This allows you to test students with questions specifically related to the in-class activities.

•

I give students four exams.

•

I also assign a Personal Marketing Plan project, where students develop their own marketing plan for their post-graduate goals – a job or graduate school. I have materials, including a description of the assignment and grading rubric on the Instructor Resource site.

Do not hesitate to contact me if you have any questions about how to teach the introductory marketing course.

Joe Cannon Joe.Cannon@ColoState.edu

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MKT 300: Marketing Fall 2023 Facilitator: Office: Class Meetings: Office hours:

Professor Joe Cannon e-mail address: Joe.Cannon@ColoState.edu Rockwell 010 Phone number: 970-491-6609 Tuesday and Thursday – 8:00 – 9:15 and 9:30 to 10:45 Tuesdays/Wednesdays 2:30 – 3:30, appointments and drop-ins welcome

“Marketing requires separate work and a distinct set of activities. But it is a central dimension of the entire business. It is the whole business seen from the point of its final result, that is, from the customer's point of view. Concern and responsibility for marketing must permeate all areas of the enterprise.”

Peter Drucker, Management Required Course Materials • eBook: An eBook version of Essentials of Marketing (EM), 18th edition, by Perreault, Cannon, and McCarthy. (https://connect.mheducation.com/class/XXX ) • A laptop computer or tablet will be needed for most class sessions.

• Other readings: See Canvas for other linked readings.

Course Description This course provides an overview of all the marketing activities involved in providing business customers and consumers with goods and services. More specifically, this course: (1) provides students with an understanding of marketing concepts; (2) applies learned marketing concepts to real world situations; (3) examines the adaptation of marketing strategy in a changing environment.

This class is about marketing and marketing strategy planning. At its essence, marketing strategy planning is about figuring out how to do a superior job of satisfying customers. All business students need a firm understanding of marketing concepts and marketing strategy planning.

The class focuses on the terminology and knowledge required to successfully navigate within the business world and to interact with marketing managers on an informed basis. If you decide to work in marketing, it will provide you a foundation upon which you can build and enhance your ability to be an effective marketing manager and marketing strategy planner. The course will also help you develop analytical abilities and howto-do-it skills. You will be equipped to make marketing decisions. The course has been designed so that students from all majors will see how marketing will be useful in their careers – and how marketing interfaces with other functional areas. All businesspeople use marketing principles – in selling their ideas or getting a new job.

We will be using some new teaching and learning approaches in this class. I rely on your reading the textbook in advance of class sessions. I will typically give shorter – 10-15 minute chapter reviews and use the remaining time for in-class activities. The in-class activities leverage discussion, small group activities, games, and projects to help you achieve our learning objectives.

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Learning Objectives This course provides students a broad exposure to the principles of marketing – by the end of this class you will know “what marketing is” and “how to do it.” Along the way, we will foster and hone your analytical skills and the ability to apply models and frameworks to the marketing strategy planning process.

By the end of Marketing (MKT 300), you will be able to: 1. Understand and use basic marketing terminology.

2. Understand and describe the key elements of the market environment: customers, competitors, company, and the external environment (economic, technological, political/legal, and cultural/social).

3. Understand how marketing managers segment markets, choose target markets, and choose a desired positioning.

4. Describe the elements of the marketing mix (Product, Place, Promotion, and Price) 5. Drawing on an analysis of the market environment, develop a coherent marketing strategy that addresses the specific needs of a particular target market.

6. Understand how marketing operates in different countries.

7. Understand ethical issues in marketing.

8. Integrate and apply these concepts to develop a marketing strategy and marketing plan.

Teaching Philosophy My teaching philosophy includes the following general principles.

• First, I believe in having fun! I will make every effort to make our time in class interesting and fun.

• Second, the class should be useful to everyone. Marketing is such a practical and important discipline – this class should make you a better businessperson and consumer. Marketing is everything and everything is marketing.

• Third, the Essentials of Marketing (EM) SmartBook will operate as our primary source of foundational knowledge – and you will pick up most of that outside of class. I will go over more challenging topics in class – but I will not lecture on most of the content you read in SmartBook.

• Finally, I believe that marketing is best understood through application. So, we will do many different exercises, in-class discussions, group breakouts, and other activities to help you understand and learn effective marketing practices. The course is designed for a great deal of learning to occur in the classroom – so attendance and advance preparation are essential to your success.

Learning Objectives and Learning Activities The model below is Bloom’s hierarchy of learning objectives – educators use it to design classes and learning materials. You might guess that your effectiveness as a businessperson, manager, or entrepreneur is closely linked to your skills in analyzing, evaluating, and creating – the upper levels of Bloom’s hierarchy. Bloom’s theory suggests that before you can master those skills, you need a foundation that begins with remembering, understanding, and applying.

In this class, SmartBook 2.0 includes reading and questions that assess your comprehension of the material, lecturettes, and some of our in-class activities are designed to help you remember and understand marketing concepts and terminology. Much of that is straightforward and best learned outside of class. This saves class time where I can act as a “guide on the side” to help you with applying, analyzing, evaluating, and creating. This is where we flip the classroom – because you will often do exercises and work on projects in-class instead of at home. At home, you need to get a solid grounding through reading, question-answering, and comprehension.

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Bloom’s Hierarchy of Learning o Marketing simulation – Practice Marketing o Personal marketing plan o Marketing Strategy Process Planning project o Most in-class activities and exercises

o Essentials of Marketing SmartBook 2.0 & Connect Interactives Chapter o Occasional lecturettes o Some of the in-class activities and exercises

Grades and Graded Activities The following are the points assigned to the various graded activities – and how the total points relates to final grades.

Graded Activities

Points Possible

Four exams SmartBook questions (completion percentage of each chapter) Participation & in-class activities and exercises

500 150 150

Personal Marketing Plan Marketing Strategy Planning Process project

100 100

Total Possible Points

1000

Percentage 92% or higher 90 – 91.99% 87 – 89.99% 82 – 86.99% 80 – 81.99%

Grade A AB+ B B-

Percentage 77 – 79.99% 70 – 76.99% 60 – 69.99% Less than 60%

Grade C+ C D F

Four exams (500 points). We will have four exams. The first three exams will cover 3-4 chapters and be worth 100 points each. Your final exam is not comprehensive but covers seven chapters and is worth 200 points.

The four exams will use multiple-choice questions and cover material from the textbook and anything we work on in class. Unless prior arrangements are made with the instructor, a missed exam will be given a zero grade. It is to the student's advantage to take the exam at the regularly scheduled exam period. Permission to take a make-up exam will only be granted during unusual circumstances arranged in advance. Contact the professor prior to the scheduled test time to arrange for a make-up exam. Make-up exams may follow different formats (e.g., essay, long-answer questions) than the exam given in class.

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SmartBook questions (150 points). SmartBook is an online adaptive learning platform designed to reinforce your learning of the content from the eBook. SmartBook assignments are due the day of class. Your grade is the “percent completed” by the due date/time. Your top 15 (of 17) grades will be used to calculate your points.

Participation & in-class activities (150 points). Participation & in-class activity grades are recorded almost every day class meets. Grading will be based on student participation in class or small group discussion, in-class activities, formal assignments or exercises completed during class (that may or may not be collected), and pop quizzes. I drop your three lowest daily scores. Unprofessional behavior in class—including texting, surfing the internet, or reading the newspaper among others—may negatively impact your grade. See the Marketing Department Student Professional Code of Conduct at the end of the syllabus.

Class sessions should be viewed as a business meeting – and as you would for any business meeting, you should notify the meeting organizer in advance if you will be unable to attend the meeting. Failure to do this is unprofessional and will result in point deductions.

The Personal Marketing Plan (100 points). This project requires you to write a mini marketing plan for yourself.

The plan should be written to give you a framework for marketing yourself to potential employers or a graduate school – or wherever you want to go next in your life. It will be graded on how well it reflects the structure of a marketing plan and applies the concepts to this situation. It will also be covered in class.

Policy on Reviewing Grades. Consistent with CSU policy, you have one week once exam or assignment grades are posted to appeal any grade. Should you disagree with my grading of an exam question or assignment, you will be required to provide an explanation in writing (use e-mail), with appropriate references to class or textbook material.

Academic Integrity and Cheating Fairness is one of my highest personal and professional values. I strive to treat all students fairly – and I expect all students to treat me and their peers fairly. In this class, fair means (in part) that unless explicitly noted, all assignments and exams should be completed individually. Giving, receiving, or using unauthorized assistance on any assignment can result in penalties up to and including automatic failure in the course. Note that it is a violation of academic integrity to add a student’s name to an assignment when that student didn’t contribute to work on the assignment.

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MKT 300 – Marketing –Tentative Course Schedule (subject to change) Students are responsible for any additional assignments posted on Canvas or announced in class.

Week

Topic

Module 1: Foundations of Marketing 1 Course Overview An introduction to marketing

Class Prep

Assignments Due

EM: Chapter 1

SmartBook questions and Connect interactives Chapter 1 (due before Thursday class)

2

Introduction to marketing strategy planning Marketing strategy planning (continued)

EM: Chapter 2

SmartBook questions and Connect interactives Chapter 2 (due before Tuesday class)

3

Evaluating marketing opportunities & the marketing environment Segmentation, targeting and positioning

EM: Chapters 3 & 4

SmartBook questions and Connect interactives Chapter 3 (due before Tuesday class) SmartBook questions and Connect interactives Chapter 4 (due before Thursday class)

4

Segmentation, targeting and positioning (continued)

Exam 1 – Thursday

Module 2: Understanding Customers 5 Consumer behavior

EM: Chapter 5

SmartBook questions and Connect interactives Chapter 5 (due before Tuesday class) SmartBook questions and Connect interactives Chapter 6 (due before Tuesday class) SmartBook questions and Connect interactives Chapter 7 (due before Thursday class)

6

Organizastional buying behavior Market research

EM: Chapters 6 & 7

7

Introduction to the Personal Marketing Plan project

EM: Appendix C Exam 2 – Thursday

Module 3: Product & Place 8 Product

EM: Chapters 8 & 9

SmartBook questions and Connect interactives Chapter 8 (due before Tuesday class) SmartBook questions and Connect interactives Chapter 9 (due before Thursday class)

Spring Break

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9

Product (continued) Place – channels of distribution

EM: Chapter 10

SmartBook questions and Connect interactives Chapter 10 (due before Thursday class)

10

Place – retailing

EM: Chapter 12 Exam 3 – Thursday

SmartBook questions and Connect interactives Chapter 12 (due before Tuesday class)

Module 4: Promotion & Price 11 Promotion – Integrated marketing communications & personal selling

EM: Chapters 13 & 14

SmartBook questions and Connect interactives Chapter 13 (due before Tuesday class) SmartBook questions and Connect interactives Chapter 14 (due before Thursday class)

12

Promotion (continued) – advertising, publicity, and sales promotion

EM: Chapter 15

SmartBook questions and Connect interactives Chapter 15 (due before Tuesday class)

13

Promotion (continued) – earned, owned, and social media

Personal Marketing Plan due

SmartBook questions and Connect interactives Chapter 16 (due before Tuesday class)

14

Price – Pricing objectives and policies & setting prices

EM: Chapters 17 & 18

SmartBook questions and Connect interactives Chapter 17 (due before Tuesday class) SmartBook questions and Connect interactives Chapter 18 (due before Thursday class)

Module 5: Integration – Pulling it All Together 15 Ethical marketing in a EM: Chapter 19 consumer-oriented world Course wrap-up and final exam review 16

Final Exam

SmartBook questions and Connect interactives Chapter 19 (due before Thursday class) Marketing Strategy Process Planning Model project due

Final Exam (200 points)

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2. SUGGESTIONS FOR WRITING COURSE OBJECTIVES Some schools are now requiring each instructor to write a set of course objectives – and some have gone even further and specified that they be behavioral or performance objectives (i.e., that they should be stated in terms of what the student should be able to do at the end of the course or even class by class).

To help you meet this requirement, the following suggestions are offered. Depending upon your own personal objectives for the course, two basically different objective statements can be developed. And depending upon the detail that is desirable at your own school, these statements can be either short or very long – as explained below.

The first possible objective should be concerned with ensuring that students are able to identify and understand the concepts that are usually introduced in the Essentials of Marketing course. It could be phrased as follows: • Students should be able to identify and explain the following (if they are to be listed) important concepts in marketing.

If all the concepts are to be listed, then the "important terms" (listed in the glossary) can be reproduced here – identifying each set of terms with the chapter where they are covered. Note that there are about 500 such concepts. The definition-oriented true-false and multiple-choice questions in the Bank of Objective Test Questions are intended to measure whether the students have accomplished this objective.

The second possible objective is more ambitious. If the instructor wishes students to be able to make use of – apply – the concepts and tools that are introduced in a basic marketing course, then he might want to specify the following objective: • Students should be able to identify and explain, and then apply important marketing concepts in case situations.

Depending upon the instructor's own preference with respect to teaching methods, this objective could be achieved by using the text with the Suggested Cases at the end of the text – and/or some of the end-ofchapter Questions and Problems – and/or Marketing Analytics: Data to Knowledge. The Practice Marketing simulation also provides students with an integrative case situation and good opportunity for ongoing analysis and application of marketing concepts. The important point with this type of objective is that the instructor should give assignments that require students to apply the concepts in case situations.

The integrating and application-oriented multiple-choice questions in the Bank of Objective Test Questions are designed specifically to be used when the instructor has chosen this objective.

If you identify with the second objective – but are especially concerned with the development of case analysis ability – then you might want to add the following statement to the second objective: • By applying these concepts cumulatively, the student should develop an ability to analyze marketing case problems confidently and meaningfully – providing a solid foundation for subsequent case analysis.

Implementation of this objective could be accomplished by more use of the cases at the end of the text. If you want your students to have skills in quantitative aspects of marketing analysis, you might intermix some or all the computer-aided problems into your course.

3. SUGGESTIONS FOR THE PACE AND COVERAGE OF COURSES WITH VARIOUS LENGTHS This section provides some suggestions concerning the pace and coverage of the course to accommodate school terms with various lengths. Sometimes, especially with distance learning courses, the time for a student to complete the course is self-paced or customized. However, here our focus is primarily on courses that are taught as part of a regular term schedule.

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The suggestions here assume that topics will be covered in the textbook order. However, as discussed in more detail in Section 1, care has been taken in writing so that the chapters can be used in different orders – to meet different needs.

For instructors wishing to give students less reading, they might consider dropping Chapter 11, especially if their school’s curriculum has a supply chain course. The details in Chapter 19 could also be covered in a course review lecture, instead of required reading.

The pace at which the class can move through the text will depend on the background of the students (and the other assignments, of course). For students without any accounting background, Appendix B on “Marketing Arithmetic” might be useful early in the course – especially if you plan to use Marketing Analytics in Action boxes, Marketing Analytics: Data to Knowledge, or place much emphasis on case analysis. For students without any economics background, Appendix A on “Economics Fundamentals” will be useful.

The SmartBook 2.0 and Connect offer a great way to integrate the material that students learn.

SmartBook 2.0’s adaptive learning software provides a great way for students to reinforce the reading material. Well-prepared students will go through each chapter’s SmartBook 2.0 questions in 20-45 minutes (the instructor can set the number of questions).

Instructors with more time may decide to add a project, simulation, or to add the “Bonus Chapters” to their course.

4. SUGGESTIONS FOR “FLIPPING THE CLASSROOM” AND/OR ADDING MORE ACTIVE LEARNING TO YOUR CLASSROOM Many instructors are moving from a focus on lecture to one that emphasizes more active learning approaches. With active learning approaches, students work in-class on collaborative activities, exercises, or projects. Some instructors take this a step further and use all (or almost all) of class time for active learning – moving any or all basic content acquisition out of the classroom (instead of through a more traditional lecture approach). Adding active learning to your class offers several challenges that Essentials of Marketing attempts to address: • Challenge 1 – Students need to acquire necessary content before they come to class. While some instructors may choose to develop video lectures their students can watch before class, we have found great success using Essentials of Marketing SmartBook. SmartBook’s adaptive learning tool reinforces student learning, and checks whether students understand what they have read. Most importantly, it holds students accountable for coming to class prepared. Be sure to put enough “points” on getting this done before class – incentives drive behavior. We have found that putting 15-20% of their grade on completing these assignments results in a high level (~95%) of preparation.

• Challenge 2 – Instructors need interesting activities that facilitate learning. Essentials of Marketing includes a wide range of active learning activities that can be brought into class.

If you are interested in learning more about how to flip your classroom – or simply looking for ways to bring more active learning approaches to your course, see Joe Cannon’s e-book Flip My Marketing Class: Active Learning with Essentials of Marketing. The book describes how Joe has flipped his class, offers his advice, and features a series of exercises (and teaching notes) that can be handed out in class for group learning among students.

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5. COMMENTS ON THE CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Marketing is an exciting addition to our supplement package. Connect Marketing for Essentials of Marketing is a web-based assignment and assessment platform that enriches the learning experience for your students. Connect Marketing provides access to a range of premium resources, including: • • •

Bonus multiple-choice quizzes (25 additional questions – more if the instructor wants to create more quizzes) Connect Interactives – choose from 144 (5-10 per chapter) – almost all of them auto-graded.

Application-Based Activities – choose from 43, including role playing and simulations. All of these auto-graded.

The instructor controls access to what students see at their class specific Connect Marketing for Essentials of Marketing site.

Connect Assignments Our teaching and learning package includes 144 engaging interactive exercises for homework assignments. Connect exercises go beyond basic recall to create highly engaging interactive content that assesses student performance on key course objectives. Students need to sign on once and grades from Connect Homework Exercises will be transferred directly to your Learning Management System’s grade book. The chapter-by-chapter overview in Section IV of this manual includes a summary of the Connect Homework Exercises for each chapter. See Quick Start Guide 4 Connect Interactive Exercises which includes a table showing all of the Connect Interactive Exercises.

Connect works for students. It helps students connect the marketing dots – in a fun and interactive way.

The exercises are not busy work; they are designed to stimulate critical thinking and reinforce key concepts from each chapter. All assignments can be instantly graded (you decide when and how much feedback students receive) – so your students will know right away what they understand and what they don’t.

Connect works for instructors. It fits right in with the teaching and learning package you have become accustomed to with this text by giving you even more options for teaching your students your way. While many instructors want to give application and understanding-oriented homework assignments to their students, giving timely student feedback is time-consuming and often impractical. With Connect, assignments are automatically graded – with grades dropped right into your Connect grade book. Plus, with dozens of exercises to choose from, the instructor has options and control. All assignments are tied to Association to Advance Collegiate Schools of Business (AACSB)’s Assurance of Learning knowledge standards and Bloom’s Taxonomy guidelines.

You can also easily create your own exercises and online quizzes – that will also be automatically graded. You can even pull questions right from the Essentials of Marketing test bank – create your own quiz, offer it via Connect to your students, and set up all the policies for the quiz.

There are many ways you can use Connect for Essentials of Marketing; here are a few ideas: • Select exercises that reinforce concepts you want to emphasize – or perhaps don’t have time to cover in class.

• Create your own quizzes – to help students study for exams or to grade.

Marketing Analytics: Data to Knowledge – in Connect This special type of Connect interactive exercise fosters critical thinking and show students how data and spreadsheet analysis is used by marketing managers in strategy planning. These Connect interactive exercises are discussed in more detail in a separate section of this guide – see Section 6.

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SmartBook 2.0 for Essentials of Marketing Many students really enjoy reading SmartBook 2.0 – an adaptive learning system that has been designed to help students learn the content from their textbook in a systematic way. Each chapter includes 125 – 175 questions – although students experience only a subset of the questions. The software adapts to student learning. So, for example, if a student indicates they are confident in their answer to a certain question and they get the right answer, they will not see additional questions on that topic. On the other hand, expressing uncertainty about the answer or getting an answer wrong will stimulate more questions to assure the student really understands the concept. The questions include traditional multiple choice and true/false formats – but also have matching, fill-in-the-blank, and ranking questions. We have found that SmartBook 2.0 reinforces the content from the textbook.

SmartBook 2.0 questions can be an integrated or optional element for an introductory marketing course.

To assure students are prepared for class, instructors can require that students complete SmartBook 2.0 questions before the instructor lectures on the topic. This requires a high amount of preparation – as completing SmartBook may take from 15-60 minutes (the instructor decides on how many questions to add) on top of reading the chapter. That said, it brings students to class prepared and the instructor can check student progress and success to identify where in-class lectures or discussions should concentrate.

Application-Based Activities One of the most exciting additions to the Essentials of Marketing teaching and learning package are the Marketing Application-Based Activities (ABAs). Students enjoy playing the role of a marketing manager and this portfolio of activities provides specific and general opportunities to do that. Review the three types below and figure out how they might fit into your teaching.

1. Marketing Role-Playing ABAs provide students valuable practice using problem solving skills to apply their knowledge to realistic business scenarios. ABAs often involve multiple decisionmaking paths and allow students to see the impact of their decisions immediately. Each RolePlaying ABA focuses on one topic and is intended to take approximately 15-20 minutes to complete. There are objective questions with correct and incorrect answers, and there are also branching questions that allow students to select optimal, suboptimal, and incorrect responses. A student’s particular path in the activity will depend on the decisions the student made on the branching questions. We have 23 Role-Playing ABAs—see Table 1 below for a summary.

2. Marketing Mini Sim ABAs put students into the role of a marketing manager for a backpack manufacturing company. Each simulation focuses on a different element of the marketing mix and forces students to make business decisions using the information provided to achieve the established mission goal. We have 9 Mini Sims—see Table 2 below for a summary.

3. Practice Marketing Full Simulation is a 3D marketing simulation enables students to put their marketing skills to the test in a fun and competitive environment. Practice Marketing puts players in the role of a marketing decision maker for a small backpack company. Within the game, students discover what it takes to be an effective marketing manager. Using strategies learned in class, students must successfully launch a new product to market. Within this simulated environment, players must analyze sales results, collect competitive information, and refine their product, price, place, and promotional strategies to maximize results and become a market leader. The simulation can be played against a computer or against fellow students.

This simulation is challenging – and probably best done as a class capstone activity. It can pull all the course learning together.

Practice Marketing has simple set-up within Connect, with a variety of quick options:

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•

Individual Sim Mode. There are options where students can be assigned to play anywhere from 2-30 turns. I like to have my students practice the simulation on a 2-4 turn (each “turn” is a quarter) round before doing the full simulation for a longer time period.

•

Group Corporation mode (multiplayer). In this mode of play, groups of players act as companies (up to 6 students per team) which compete against both computer-controlled and other team-controlled companies. Additionally, in this mode of play, the game can be configured for any turn length between 1 and 99 (each turn represents one business quarter). Players work together to analyze sales results, collect competitive information, and then refine their product, price, place and promotional strategies in order to maximize results and become a market leader.

Putting it all Together Joe Cannon assigns his students 1-2 (between Connect and the Application-Based Activities) exercises per chapter. He uses all auto-graded assignments. Joe counts students’ 15 highest Connect grades and makes each Connect exercise worth 10 points so the total points equal one exam. Given that I assign about 25, students can easily skip activities if they are too busy. Most students enjoy Connect – they feel it helps them learn the material and perform better on exams.

Here is a summary of various resources related to Connect and the Application-Based Activities (all available at Instructor Resources in the Online Learning Center (Connect→Library→Instructor Resources→Practice Marketing Supplements): • Quick Start Guide 4 – Connect Interactive Exercises • Quick Start Guide 15 – Application-Based Activities • Application-Based Activity Supplements - including orientation videos for students and an implementation guide for instructors.

• Practice Marketing Supplements – including an orientation video and overview guide for students and implementation guide for instructors.

More details can be obtained by downloading the Practice Marketing Instructor’s Manual or Practice Marketing Student Manual see the

6. COMMENTS ON MARKETING ANALYTICS: DATA TO KNOWLEDGE EXERCISES Problems with a Focus on Marketing Decision-Making Marketing Analytics: Data to Knowledge are a unique supplement for use with Essentials of Marketing.

These exercises show students how marketing managers use data and spreadsheet analysis to make better marketing strategy decisions. We are very excited to make this supplement more easily accessible to our students and instructors by updating content and offering the exercises in the Connect platform.

This section discusses the objectives that the problems are designed to achieve – and what is involved in using some or all of the problems in your course. Some instructors may want to place heavy emphasis on these problems – and others may decide that they are not well suited to their objectives for the course.

Hopefully, the discussion in this section will help you decide.

Marketing Analytics: Data to Knowledge contains 19 marketing management problems, and each problem in the set is different. As a set, they are designed to cover a full array of important topics from the first marketing course – ranging from issues related to market segmentation to the product life cycle to break-even analysis.

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Each problem is based on a specific marketing management decision situation – and is described in a short "caselet" at the end of the chapter. Each case description is accompanied by questions for the student to answer. The student reads the case description of the problem and the questions, and then uses the spreadsheet in Connect to analyze data related to the case and to make a decision. The spreadsheet has been specially designed and tested to be easy for students to use. At the same time, it provides students the opportunity to do the type of analysis that marketing managers do to evaluate the appropriateness of different decisions in different situations.

Teaching/Learning Objectives As a set, Marketing Analytics: Data to Knowledge is designed to achieve three basic objectives: • • •

To provide students with a simple analytical experience in learning about marketing concepts – so that they can see how strategic elements of marketing management decisions interrelate and influence the profitability of the organization.

To deepen student understanding about specific marketing concepts, theories, and frameworks – because the problems require students to work with marketing "numbers" – and see how the numbers relate to the details of the situation and the marketing problems.

To give students experience in using spreadsheets the way marketing managers often use them to analyze marketing problems.

It is important to emphasize that the objective here is not to teach the student skills related to computer programming. Such skills are potentially important as part of an overall curriculum, but the objectives of the introductory marketing course are focused on marketing content, not programming. Thus, the problems and accompanying spreadsheets are structured and designed to focus on content-related objectives. Here, using the software is a means to an end, not an end in itself.

Specific Benefits of the Approach There is a great deal of material to be covered in the first marketing course. Students must get a good introduction to marketing concepts and ideas that are necessary for effective market-oriented strategy planning. Essentials of Marketing – and class lectures/discussion – can do this very well. But it is usually difficult for an instructor to create learning environments in the first course that help the student to see how the qualitative ideas and the analytical aspects of marketing decision-making come together. Case analysis can help here - this is a primary focus of Marketing Analytics: Data to Knowledge. As students analyze values on the spreadsheet for a problem – and interpret the results – they see how the different decision areas relate and how they affect the firm's bottom line. They see that marketing managers don't make decisions just on hunches and intuition, but with careful analysis of strategies. And the student is doing it with the type of analysis that managers often use.

Further, the problems are not based on complicated mathematical models. Rather, the spreadsheets are based on simple arithmetic – so students can see what is being analyzed and why. The focus is on thinking about the marketing problem – not on the sophistication of the approach. The student doesn’t need to create the spreadsheet relationships or do any programming. Rather, the initial problems are very simple, and students can do the work without help from the instructor.

Complete Solutions to All of the Problems The chapter-by-chapter materials in Part IV of this manual provide complete suggested answers for all of the Marketing Analytics: Data to Knowledge problems. Along with the suggested answers for specific questions, this Instructor’s Manual also provides summaries of all of the relevant spreadsheets and ideas for framing class discussions. The instructor materials that accompany the computer-aided problems make it fast and easy to incorporate them in the course and discuss them in class.

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Other Factors to Consider: Time Required The Marketing Analytics: Data to Knowledge problems are designed so that students can do them quickly. However, here, as with any other type of assignments, there are time trade-offs – especially if the instructor plans to use most of the problems and they become a central activity in the course.

The problems are not interrelated. Thus, you don't need to use all of them. By reviewing the "suggested answers" in Part IV of this manual, you can determine which problems are of most interest to you – and most consistent with points you want to emphasize.

Content Marketing Analytics: Data to Knowledge covers topics across all of the chapters in Essentials of Marketing. More detail about the learning objectives and managerial setting for each problem is provided in the chapter-by-chapter materials (Part IV of this manual). However, to provide a brief overview, the following list shows the major content focus of the different problems:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Revenue, Cost, and Profit Relationships Target Marketing Competitor Analysis Segmenting Customers Selective Processes in Consumer Behavior Vendor Analysis in Organizational Buying Marketing Research Branding Decision Changes during the Growth Stage of the Product Life Cycle Intensive vs. Selective Distribution

11.

12.

13.

14.

15.

16.

17.

18.

19.

Total Distribution Cost and Distribution Service Level Selecting Channel Intermediaries Selecting a Communications Channel Sales Compensation Sales Promotion Sales Analytics Discount Policy in Pricing Break-Even/Profit Analysis in Pricing Marketing Cost

The content areas were carefully selected to give students exposure to analytical marketing problemsolving in a variety of contexts. As students work through the problems, they see that careful analysis is relevant in all areas of marketing decision-making – and that the decisions that the marketing manager makes in these different areas has an impact on the success or failure of the firm.

The content of the problems follows the chapter organization in Essentials of Marketing. For example, the first few deal with broad issues related to targeting, segmentation, and developing a competitive advantage. Then, the next two deal with buyer behavior and how it affects marketing strategy. The following one deals with how marketing research information is used. Then, the problems move into the marketing mix decision areas – progressing through the "4Ps." Thus, the organization of the problems represents a logical building-up of marketing knowledge and topics. Like the text itself, however, the problems are flexible and they can be used in a different sequence – if the instructor desires.

Problem 8 – which deals with branding decisions – is illustrative. Most students come away from a traditional study of branding decisions with an understanding of the differences between manufacturer brands and dealer brands, and with an appreciation of the importance of branding decisions. But, in Problem 9, a marketing manager for a producer of condensed milk is faced with a dilemma. A major retail chain wants the producer to supply its store brand. If the producer doesn't do it, the retailer is likely to take the business elsewhere – and sales will be lost. Yet, if the producer does what the retailer wants, profits are likely to be affected. The spreadsheet for the problem puts the student in the manager's shoes. It provides data about the various costs and revenue opportunities associated with the "status quo" and with the retailer's proposal. The student uses sensitivity analysis to see different results depending on the producer's decisions and on what the retailer does. The computer analysis does not give the student a specific answer about what would be best to do. Rather, it provides information from which the student

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will clearly see the implications of different possibilities. The student is thus stimulated to think about what he would do in this situation – and why.

Ideas on Ways to Incorporate the Problems in the Course Marketing Analytics: Data to Knowledge can be used as a homework assignment, as an assignment for a recitation section, or for independent study by the student. Some instructors use them for optional assignments – perhaps for extra credit.

A basic decision here is the extent to which in-class time will be devoted to discussion of the problems.

There is quite a lot of flexibility in this regard. The problems are experiential in nature – so the student can learn from doing the problems even without much class discussion. On the other hand, they can provide an effective backdrop or catalyst for class discussions.

One approach is to assign some of the problems that are most closely related to topics the instructor emphasizes in class lecture or discussion. By working the problems, students will have a deeper understanding of material in that area. The instructor can then reference the exercise as an example of points made in the lecture – without needing to spend a significant amount of time developing the details of the example. The suggested answers for the problems (found in Part IV of this manual) are very helpful in this regard.

Student work on the problems can be checked if the instructor desires – perhaps on an intermittent basis.

There is a button for students to print their spreadsheets (or save them as a file) along with their answers.

So, it’s quick and easy to turn in without a lot of busy work on the student’s part or eye strain on the part of the instructor to read.

The Marketing Analytics: Data to Knowledge problems can add a different dimension to the first marketing course. They are a high-quality teaching resource. But, they are not for everyone. The types of objectives that are achieved with Marketing Analytics: Data to Knowledge can sometimes be accomplished in other courses in the curriculum, or in the introductory marketing course those objectives can sometimes be achieved through other approaches – such as use of case analysis or participation in the Practice Marketing simulation.

7. COMMENTS ON WHAT’S NEXT? BOXES Each chapter includes a “What’s Next?” boxed teaching element. These boxes all relate to the chapter and provide a look into the future of marketing. We see these boxes as a way to give our students a view into the future. They can also offer a useful discussion question – and might be the topic of an in-class or online discussion. Each has questions at the end that are designed to develop critical thinking.

8. COMMENTS ON THE ETHICAL DILEMMAS Each chapter includes an Ethical Dilemma. These provocative scenario-based exercises place students in real-world situations that might be faced by students in their first job or at a lower level of management.

The questions encourage students to take a stand and think more deeply about the dilemmas facing marketing managers. The flexible format allows instructors to create written assignments, discuss the questions in class, or simply encourage student reflection while they read. Part IV of this Instructor’s Manual provides a detailed discussion of each of the Ethical Dilemmas.

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9. COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) BOXES AND IMAGES Marketing gets a lot of criticism. Those of us who teach marketing know that good marketing can contribute to a better world. Meeting customers' needs and wants can help people. That "bright side" of marketing motivated a recently released special issue of the Journal of Marketing, which, in its call for papers, notes: "Marketing has the power to improve lives, sustain livelihoods, strengthen societies, and benefit the world at large. At the same time, marketing can have a dark side—it has the power to hurt consumers, employees, communities, markets, institutions, and the environment that surrounds us."

Often our students come into our marketing classes thinking about the "dark side."

We are inspired by the Journal of Marketing special issue, a wide range of reading, and our own optimism about what marketing (and more generally business) can do. In this edition, we have added a series of boxed (green boxes) examples and images (green borders) that suggest how some leading organizations are making the world a better place—while also making money.

10. COMMENTS ON MARKETING ANALYTICS IN ACTION We are finding many instructors asking for increased coverage of marketing analytics. Essentials of Marketing includes end-of-chapter “Marketing Analytics: Data to Knowledge problems. In the previous edition, we added “Marketing Analytics in Action” in-chapter boxes. Each chapter introduces students to a new marketing metric and demonstrates how it is used by real companies. Each includes 2-4 discussion questions that encourage students to critical thinking. They can work well as assigned homework and/or to inspire in-class discussion. The following metrics are evaluated: 1. Chapter 1 - Revenue, cost, profit 2. Chapter 2 - Customer lifetime value 3. Chapter 3 - Market share 4. Chapter 4 - Cluster analysis 5. Chapter 5 - Adoption process (awareness, interest and evaluation, trial, decision) 6. Chapter 6 - Supplier scorecards 7. Chapter 7 - Sentiment analysis 8. Chapter 8 - Brand awareness 9. Chapter 9 - Return on investment (ROI) 10. Chapter 10 - Sales by channel report 11. Chapter 11 - Trade-offs and customer service level 12. Chapter 12 - Stockturn rate 13. Chapter 13 – Measures of email performance 14. Chapter 14 - Workload and sales force size 15. Chapter 15 - Advertising impressions (CPM) and media cost 16. Chapter 16 - Bounce rate 17. Chapter 17 - Price premium 18. Chapter 18 - Marginal analysis You can find a copy of each of these “boxed” elements in Quick Start Guide 13 Marketing Analytics.

Part IV of this manual includes “answers” for each problem.

11. COMMENTS ON THE END-OF-CHAPTER QUESTIONS AND PROBLEMS To provide maximum flexibility, there are two different kinds of Questions and Problems at the end of each chapter. The first kind has definite answers that are covered in the chapter. They are designed for student review or for "policing" by the instructor to check if students have studied the reading assignment and understand it. Some instructors use these questions for "pop" quizzes in class – or as short answer questions for essay-type examinations. These questions give some students a feeling of accomplishment III-24 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

– because they can find the answers in the text.

The second kind of question is designed to be thought provoking – to force the student to integrate previously acquired knowledge – and then project it into future or unfamiliar situations. Questions of this type may require the extension of ideas, concepts, or principles developed in the text. Frequently, the student's own background and common sense must be used to begin to work toward such ideas, concepts, or principles. In many questions the students are asked to develop a terminology, a classification system, approaches, or objectives that the firms might (or should) have – before they are equipped with the commonly accepted definitions and terminology. It is very pleasing to find how closely the students come to many of the commonly accepted definitions. Student solutions to some of the more difficult questions and problems of this nature are presented in Part IV – to give the instructor an idea of what to expect the first time these questions are used. Obviously, the correct terminology cannot be expected (reading ahead to find the correct terminology should be discouraged if the full value of the exercise is to be obtained). If you are inclined to experiment with the second kind of question, you might assign some of the following questions – along with other questions.

There are a variety of ways to use the different questions. The most direct approach – which works especially well in smaller classes – is to assign some of the questions along with the reading assignments and then discuss them in class. Students can be asked to prepare written answers – or alternatively to outline their key thoughts so that they will be ready to participate if called upon. If the instructor has time (or grading help) the written work can be collected and graded (or simply "checked off"). If the instructor does not have time to do much of this type of grading, an alternative is to tell the students that the work will be collected and graded on an intermittent basis – perhaps three or four times during the course. That can motivate improved preparation for the class – while reducing the total amount of grading.

Some students don't like to "volunteer" to talk in class – even if they are well prepared, while other students seize every opportunity for "airtime" – even if their comments add little to the class. By focusing some or all class participation grade on responses to the questions, these problems can be minimized.

Because the questions have been assigned in advance, the instructor can tell who is prepared – not just who is most verbal. Students who would otherwise be hesitant to "spontaneously" speak up in class may be more willing to talk if they have had a chance to think about what they would want to say – and if they know that everyone is going to be called on sooner or later.

12. COMMENTS ON THE CASES Although marketing cases can be used in several ways, most instructors assign cases to give their students an opportunity to apply principles and develop decision-making ability. Following the emphasis in this text, they would probably also wish their students to evaluate cases in terms of the kinds of marketing strategies the firms have developed – or should have developed. Case assignments also give students an opportunity to sharpen their ability to communicate – whether in writing or orally – about marketing problems. This is a skill that will be important later in their careers, and recruiters point out that it is a skill that is not well developed.

The 44 cases included in the text are designed to give students an opportunity to work with case situations without having to buy an additional text. There is substantial variety in the nature of the cases and they can be used in different ways. These cases are designed to deepen skills in marketing analysis and marketing problem solving. Some of the cases are quite simple; others require greater use of analytical skills. All are found at the end of each chapter. Suggestions for using them are included with the chapter-by-chapter aids in Part IV. Many cases have been provided – so an instructor can vary cases to be assigned from section to section or from one term to the next.

Part V of this manual contains discussions of the 44 cases. Often, the suggestions alert you to a direction that students tend to take with the case, or particulars of how the case relates to concepts in the text. The comments on these cases are intended merely to be helpful, not definitive. An instructor's own lecture emphasis may lead students to handle some cases differently than the authors' students.

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Often students ask how to analyze cases. You may have a preferred approach for students to follow.

However, the authors have found that the cases provide a good opportunity to really drive home the marketing strategy planning framework that is the thrust of the Essentials of Marketing text. Yet, students may have been in other courses where it was not clear to them how to apply what they were learning in the course. So, without your help early in the beginning marketing course, they may not make the "connection" that the approaches suggested by the text for marketing problem-solving are precisely the approaches that will guide them to developing logical and effective case analyses.

Moreover, when the professor explicitly encourages students to apply the text's marketing strategy planning to their case analyses, the students realize that it really does work, and their appreciation for the whole course is heightened. Specifically, the instructor might suggest that the students think about how good a job the firm has done in selecting target market(s), and what other target markets should be considered. In the same vein, students can use the 4 Ps framework to think about how the firm's marketing mix fits the needs of the firm's target market(s). The elements of the market environment should be considered – to determine if they are likely to be important in evaluating or shaping the marketing strategy. Students should be encouraged to think about the characteristics of target customer buying behavior and how it relates to the selection of the marketing mix. This problem-solving approach for evaluating the case is "intuitive" for instructors – but students just starting with the case method benefit from the reminder – both when a case is assigned (and perhaps on a recurring basis as the case is discussed). In this vein, Exhibit 2-9 from the text (available in the PowerPoint archive for Chapter 2), can be shown before, during, or after the case discussion as a way to highlight topics considered (or not considered) in the case and to provide structure to the discussion.

Some cases involve two or more possible target markets and marketing mixes. These situations may warrant a special comment here. Many students will have a tendency to "lump" all of their recommendations together into a grand marketing program. If done well, this may be fine and in line with what the instructor prefers. The authors have found, however, that students have a tendency to fall into "sloppy thinking" unless they are specifically encouraged to first really focus on and specify each individual strategy (i.e., target market and corresponding marketing mix) separately – before trying to come up with some combined or overall marketing program (as discussed in Chapter 2). When the students do not think first about individual strategies, they tend to see only the general – often superficial – problems and challenges that firms face.

Even with "coaching" in advance about how to approach a case analysis, many students are very uneasy about preparing a case. They may not have ever had cases in any other course or may simply need more confidence in their own abilities to cope with the open-ended type of thinking that is involved. Because of this, if an instructor plans to grade students' case analyses it is often best to give students at least one "practice case" and some feedback before assigning grades that "really count.” Some instructors require every student to prepare the first case assignment but include the grade for that case work in the final grade only if it does not lower the student's average on the case work portion of their grade. This rewards those who do a good job from the very beginning but does not frustrate those who need a little time to become accustomed to casework.

Case analysis can be a flexible means to encourage a wide variety of student skills. Some instructors assign students to a group, and have the group prepare a presentation of their case analysis and recommendations for the rest of the class. This is a good way to give students experience both in working with others and in developing skills in speaking before a group. Sometimes it is interesting to have two or more different student teams make presentations on the same case, and then have the rest of the class indicate which set of recommendations they would follow and why.

Cases also offer students excellent opportunities to develop skills in written communication. The authors have found that a page constraint (like one or two double-spaced pages) can be helpful in encouraging students to get to the important points – and not simply repeat the descriptive material in the case.

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The authors have found that students often ask to see an example of a "good" case write-up when a case written "brief" is assigned. Yet some instructors are hesitant to provide such a sample because of concern that students might think that there is only one "good" answer. On the other hand, distributing a copy of a case prepared by one or more of the students – especially for one of the "early" case assignments – can help to show students that the instructor has realistic expectations – and that the instructor doesn't necessarily expect a short write-up to cover every possible idea. If the instructor decides to duplicate and distribute a case prepared by one or more students, it is usually best not to identify the name of the student who prepared the case (and privacy considerations prohibit this at most institutions). While most students like having their work used as a good "example," they may be embarrassed when they are publicly identified to the class as having done a "good job." Moreover, if a sample case brief is distributed, it is usually good to point out to students that clearly reasoned "recommendations" other than the one(s) in the distributed case could elicit a very favorable reaction. If this precaution is not taken, some students may feel that they were somehow supposed to "read the instructor's mind" to get the "right" answer.

When the instructor of a larger class asks students to prepare a case for class discussion, some may only give the case a passing reading – or less than that – if they think that they will be able to sit quietly and let other students volunteer their analyses. One simple way around this problem is to encourage students to prepare a single page of "notes" – perhaps simply in outline form – in which they list what they consider to be the key "facts" of the case and their analysis and major recommendations. The instructor can indicate that these notes need not be "polished," but rather are simply to be used as a reminder during class discussion and that the notes will occasionally be collected – as part of an evaluation of daily preparation.

This does not create a lot of extra work for the students (or grading for the professor) – but does usually raise the percentage of students who are well prepared for class discussion.

See the table below for an overview of the cases.

Overview of Marketing Situations in Cases Firm Type

Case Name P

W

Firm Size R

S

•

•

M

L

Product Class

Good/ Service

C

G

S

•

•

•

•

•

B

1. McDonald's “Seniors” Restaurant 2. Guadalupe Natural Foods, Inc. 3. COLORADO United Soccer Academy

• •

•

•

•

4. Petosega Tech Support

•

•

•

•

5. Resin Valleys

•

6. Valley Steel

•

7. Lake Omarama Lodge

•

•

• • •

•

•

•

•

•

•

•

•

•

•

•

•

•

11. Luciana’s Running Shop

•

•

•

14. Schrock & Oh Design

•

•

• •

•

•

•

•

•

•

•

•

•

•

• • •

•

•

•

•

•

•

•

•

•

•

• •

•

16. Montana Company

• •

•

15. The Wabash Group

•

•

• •

PC

•

•

10. Anderson’s Ice Center

•

MC

•

9. Rest Easy Motel

•

O

•

•

•

M

•

•

13. Pierce Paul, Inc. (PPI)

D

•

•

•

•

M

•

•

•

G

•

•

•

I

Nature of Competition

•

8. Zefferelli’s Italian Restaurant

12. PearsonalHealth.com— Custom Vitamins

Product Life Cycle

•

•

•

•

•

•

•

•

•

• •

•

•

•

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Firm Type

Case Name P

W

17. Wise Water, Inc.

Firm Size

•

•

•

• •

• •

•

•

•

24. Abundant Picking

•

•

25 ABA Tools (ABA)

•

•

26. Zone 6 Custom Castings, Inc.

•

27. Canadian Mills, Ltd.

•

31. Brian’s Sustainable Homes 32. Mallory’s Lemonade (A) 33. Mallory’s Lemonade (B) 34. Working Girls Workout 35. The Norbank Baseball Club 36. BE Bold Electric Bikes 37. Chick-Fil-A “Eat Mor Chikin” (Except on Sunday) 38. Bass Pro Shops (Outdoor World) 39. Toyota Prius 40. Potbelly Sandwich Works Grows through “Quirky” Marketing 41. Suburban Regional Shopping Malls: Can the Magic be Restored 42. Invacare Says “Yes, You Can!” to Customers Worldwide 43. Segway Finds Niche Markets for its Human Transporter Technology 44. Red Light Challenge

•

•

•

•

•

•

•

•

• •

•

• •

•

•

•

•

•

•

M

D

M

O

•

•

MC

• •

•

•

•

•

•

•

•

• •

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

* * *

* * *

* *

*

*

*

*

*

*

*

*

*

*

•

• •

•

* *

•

* * * *

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

* *

•

* * *

*

*

•

•

*

*

• •

•

•

•

•

•

•

PC

•

•

• •

•

*

G

Nature of Competition

•

•

•

*

I

•

•

•

Product Life Cycle

•

•

•

•

S

•

•

•

•

30. Maggiano’s Pizza Pies

•

•

•

29. Kramer & Geary (K&G)

G

•

19.PlanMyWedding.com

28. Kirkwood Home Health Services (KHHS)

B

•

•

20. Lake Manina Marine & Camp 21. Gimball-Tonie International (GTI) 22. Bright Light Innovations: The Starlight Stove 23. Wireway Products

C

S

•

L

Good/ Service

R

18. West Thomasville Volunteer Fire Department (WTVFD)

M

Product Class

*

*

* *

*

KEY: Firm Type: producer, wholesaler, retailer. Firm Size: small, medium, large. Product Class: consumer, business. Product Life Cycle: introduction, growth, maturity, decline. Competition: monopoly, oligopoly, monopolistic competition, pure competition.

13. COMMENTS ESSENTIALS OF MARKETING’S OBJECTIVE TEST QUESTIONS Complementing this Instructor's Manual is a separate and very complete set of more than 5,000 true-false and multiple-choice questions. The Connect Instructor Resource site includes all of the test questions in a format that can be read by Microsoft Word. The easiest way to create objective tests is through the

III-28 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Instructor Resources on Connect. There you will find a link to McGraw-Hill’s Test Builder online test generation software.

In the print and test-generator software versions, all of the questions are arranged in the same order as the material in the text (and include a specific section where the material is introduced) – to make it easy to ensure even coverage. Immediately below each T-F question, the correct answer is given. Similarly, with each multiple choice question, the correct alternative is identified. Each true-false and multiplechoice question is classified according to: (1) an AACSB classification code for skills and abilities (i.e. communication, ethics, analytic, technology, diversity, and reflective thinking), (2) the expected difficulty level (Easy, Medium, Hard), (3) the number of the relevant Learning Objective from the chapter, and (4) a Bloom’s Taxonomy code for cognitive processes (i.e., remember, understand, apply, analyze, evaluate, and create). This information is summarized below each question – making it easier to select the questions you want for a test.

The large variety of carefully-prepared questions allow the instructor to easily develop an objective test that corresponds to the course objectives – whether the objectives focus on learning concepts and definitions or include higher level abilities – like the ability to apply the concepts or understand how a variety of topics interrelate. This means that the instructor can spend more time on other aspects of the course – or other responsibilities. Further, the test-generator software makes it easy to build your own tests.

14. COMMENTS ON THE POWERPOINT LECTURE SLIDES AND YOUTUBE POWERPOINT SLIDES The Instructor Resource Center on Connect offers you access to all different sets of presentation materials you can use with Essentials of Marketing, including: • • •

Standard PowerPoints – which include media and animations.

Accessible PowerPoint – stripped of media and animations to accommodate ADA compliance.

YouTube PowerPoints – include links to YouTube videos you can add to your presentations.

PowerPoint presentations feature: • Few bullet points – we don't like bullet points and our students don't either • A list of the learning objectives from each chapter • Exhibits form the textbook • Images from the textbook • Links to select YouTube videos • “Testing Your Knowledge” questions – to use with clickers or simply to “question” students during a presentation • A summary of all new “key terms” from each chapter • Slides have builds or animations (stripped out in “Accessible version”) to allow content to be presented to your students point by point • Slides “Notes” pages have scripts – which can be read as is or adapted by individual instructors • NEW! Each chapter slide deck includes 3-4 photos and/or advertisements from the chapter— usually including “caption questions” that might foster discussion.

• NEW! Each chapter slide deck includes 3-4 YouTube PowerPoints with hyperlinks from the slide to online video content.

YouTube PowerPoints Our students make frequent use of online video. Video can be engaging which foster deeper learning.

These days there are lots of online videos – and some of them are useful for marketing instructors. We have combed through hundreds and hundreds of videos to identify content that works well for the introductory marketing class. To give you some easy options for adding video to your classroom, we III-29 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

identified about 240 YouTube videos that offer opportunities for you and your students. We have created two different files: • EM18e YouTube PowerPoints V18e – this set of PowerPoints with linked videos was created in January 2023. More than 90% of these were (currently) less than three years old. These are numbered 0-137 in the chart below.

• EM18e YouTube PowerPoints CLASSIC – this set of PowerPoints with linked videos was initially included with the previous edition of Essentials of Marketing. By definition, they are videos from 2019 or earlier. We did go through and delete those with bad links and which felt very dated.

Many are “classic” though and still retain teaching and learning (and sometimes just entertainment) value.

Each video is labeled as one of six types: 1. Case Study – videos that tell a story.

2. Viral Video – videos that went viral.

3. Ad – an advertisement.

4. Guest Speaker – more of a talking head expert providing commentary.

5. Case Opener – a video of the company featured in our chapter-opening case study.

6. Explainer – provides an explanation of a marketing concept. Usually with additional graphics.

These videos can serve a wide range of purposes in the classroom. Some serve as an opportunity to demonstrate the wide range of creativity in marketing. Others allow the instructor to bring a virtual guest speaker in to discuss a particular topic. Some of the videos act as real world case studies – and include data on how well a particular campaign performed.

• • • •

WARNING: These PowerPoint slides require an active high speed Internet connection. In addition, owners of videos may decide to remove videos after they have been posted.

Confirm that videos work in the classroom where you are teaching before introducing them to your students.

Click on the “TV” icon to connect to the video.

Finally, know that YouTube often serves up pre-roll ads before showing you the right video.

III-30 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

YouTube PowerPoints – Version 18e (numbered 1-137 and generally more recent) *Our favorites are marked with an asterisk.

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4. Guest Speaker: Why are purpose driven brands so successful? (TikTok video)* 5. Guest Speaker: Purpose-Driven Branding (David Aaker) 6. Case Study: Liquid Billboard (The world’s first swimmable billboard) adidas 7. Case study: Pepsi creative award- winning ad – Better with 8. Case Study: Burger King – Non Artificial Mexico 9. Ad: Rolling billboard for funeral home turns heads 10. Case study: HAVAS – STAYBL App 11. Case study: Lil Sugar – Master for disguise 12. Ad: David’s Unusables 13. Case study: Dole and Ananas Anam Piñatex 14. Case study: The making of Billion Dollar Collection 15. Case Study: Azgard9 CO2AT Case 16. Ad: Google presents the #BlackOwnedFriday film* 17. Viral Video: Open Spaces Film 18. Viral Video: Escape from the Office – Apple at Work 19. Super. Human. – Tokyo 2020 Paralympic Games Trailer 20. "Los Santos +3º" by VMLY&R Brazil for Greenpeace

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21. Toxic Influence: A Dove Film – Dove SelfEsteem Project* 22. Case study: Lil Jif Project 23. Case study: Nike NikeSync Menstrual Cycle Sync 24. Top 10 Craziest Advertising Campaigns That Actually Worked 25. Case opener: Lemonade Insurance Video – Illustrated Explainer 26. Guest speaker: Social Media Marketing in 5 Minutes* 27. Chapter opener: Amazon is Using AI in almost everything it does* 28. Explainer video: Artificial intelligence is an innovation game-changer 29. Ad: Commercial by AI 30. Case opener: 1955 Lego System Commercial 31. Case opener: Adults Welcome Lego funny ads compilation* 32. Case opener: Lego’s Amazing Marketing Strategy 33. Case Study: Spotify A Song for Every CMO Rachel* 34. Case opener: Dunkin’ Donuts Fritalian Commercial 35. Guest speaker: Designing a Survey 36. Guest speaker: What is A/B Testing? – Data Science in Minutes 37. Case Study: The Best Marketing Ever – Story of Coffee in Japan 38. Case Study: How Apple and Nike have branded your brain 39. Case study: Elon Musk Spends $0 on Marketing – Tesla’s Marketing

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40. Guest speaker: How to create a great brand name – Jonathan Bell (TED Talk) 41. Chapter Opener: Under Armour creates athletic apparel of the future 42. Explainer: Product Life Cycle (iSeeIt!) 43. TED Ed: Ethical dilemma: The burger murders* 44. Explainer: The Life Cycle of a Cup of Coffee, TED Ed* 45. Explainer: The Life Cycle of a T-Shirt, TED Ed 46. Case Study: Why Starbucks failed in Australia 47. Explainer: How do focus groups work?

48. Explainer: The paradox of value – TED Ed 49. Explainer: Why are we so attached to our things? TED Ed 50. Guest Speaker: The Do-’Goodr’ Who Rescues & Delivers Food To The Hungry* 51. Case Opener: The new Bühler Corporate Movie 52. Ad: McDonald’s – Can I get Uhhhhhhhh 53. Ad: BMW – Zeus and Hera 54. Chapter Opener: Where Did Roomba Come From? iRobot CEO Colin Angle 55. Ad: iRobot Do You? Dance 56. Guest Speaker: The Surprising Secrets of Exceptional Product Leaders 57. Explainer: Overhauling Supply Chains to Ease Bottlenecks 58. Case Study: Two-Minute Case Study – Best Buy’s Omnichannel Strategy 59. Guest Speaker: In Focus: e.l.f.’s TikTok Success 60. Case opener: In Focus: Domino’s Pizza Loyalty

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61. Case Study: McCormick’s Seasoned YouTube Strategy 62. Case Study: Data & Gabbana: Stitch Fix's Predictive Algorithms 63. Case Study: Artificial Intelligence: Sephora's Newest Beauty Advisor 64. Case Study: Two-Minute Case Study Target Hits The Omnichannel Bullseye* 65. Case Study: Two-Minute Case Study - John Deere Digs Into Site Links 66. Case Study: Smirnoff Serves Up Healthy Competition 67. Case Study: Two-Minute Case Study - How Ford Wins At Search* 68. Explainer: What is Direct-to-Consumer* 69. Ad: Glossier – Product Video 70. Why Brands are going Direct-to-Consumer (D2C)* 71. Ad: “The Killer Pack” by VMLY&R India for Maxx Flash 72. The BCG Growth Share Matrix Today* 73. Explainer: How to Do Market Research!* 74. Explainer: How Much Should I Charge?

(Probably More Than You Think)* 75. Explainer: What is Service Design A Tale of Two Coffee Shops* 76. Explainer: What is design thinking?

77. Explainer: What is human centered design?

78. Explainer: What Is Design Thinking?* 79. Guest Speaker: Sales Is Just Like Dating 80. Guest Speaker: Simon Sinek on dealing with tough sale prospects and clients 81. Guest Speaker: Michael Porter – Why business can be good at solving social problems

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82. Case Study: Apple Pay Is Killing the Physical Wallet After Only Eight Years* 83. Guest Speaker: Pricing Strategies – ValueBased Pricing 84. Case Opener: How Drinks Helped Dunkin’ Become a $9 Billion Empire 85. Case Study: The Unconventional Franchise Model Behind Chick-fil-A’s Success 86. Case Study: Behind Dollar General’s Strategy to Dominate Rural America* 87. Cases Study: How Sephora Revolutionized Makeup Consumption 88. Case Study: Olympian Eileen Gu’s: The Risks and Rewards for Brands 89. Case Study: The Economics of IKEA: Why Does Labor Lead to Love?

90. Case Study: 'Tarjay:' Target’s Strategy Combines Bargain and ‘Elevated’ Products* 91. Case Study: Crocs—How the Polarizing Footwear Brand Became a Fashion Statement 92. Case Study: How Oatly Lost Its Grip on the Oat-Milk Market 93. Explainer: How Stores Play to Your Senses to Get You to Spend 94. Case Study: Behind Costco's Treasure-Hunt Shopping Strategy 95. Case Opener: How Home Depot Became the World’s Largest Home-Improvement Retailer 96. Case Opener: Why Home Depot Failed in China 97. Explainer: How TikTok's Algorithm Figures You Out 98. Explainer: The B Corp Movement: Transforming the global economy to benefit all people, communities and planet* 99. Explainer: Why LGBTQ Ads Have Evolved

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100. Explainer: Why Global Supply Chains May Never Be the Same 101. Explainer: How Companies Are Overhauling Supply Chains to Ease Bottlenecks 102. Explainer: Low Inventory and EV Sales Fuel Changes in How Americans Buy Cars 103. Explainer: What the Heck Is an NFT? (And Should I Buy One?) 104. Explainer: Why Instagram Reels Is Struggling to Compete Against TikTok* 105. Explainer: Can You Really Save Money by Going Green? (And How Much?)

106. Explainer: Is drone delivery practical?

107. Explainer: ShipBob Fulfillment Center Guided Tour - 3D 360° VR Video 108. Explainer: Decodes—Sustainable Logistics 109. Case Opener: How Coca-Cola Sells 1 Billion Cokes Every Day 110. Case opener: The Home Depot Commercial 111. Case Opener: Meet the kind of people who are in our parking lot at 5:45 a.m.

112. Guest Speaker: What Is The Future Of Retail Stores?* 113. Explainer: The future of shopping – what’s in store?

114. Here's why the future of retail is brick-andmortar: Analyst 115. Explainer: Creating New Products for Emerging Markets* 116. Explainer: How to Be a Disruptor 117. Explainer: What is Web3?

118. Explainer: The Art of Persuasion Hasn’t Changed in 2,000 Years* 119. Explainer: The Explainer: Don’t Just Sell Stuff — Satisfy Needs*

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120. Case Study: Competing Against Bling 121. Guest Speaker: Think Twice Before Updating Your Brand 122. Guest Speaker: Andrew Winston answers tough questions about the climate crisis* 123. Case opener: The Gecko Tells a Cinderella Story - GEICO Insurance 124. Case opener: Ferguson – Serving Commercial and Mechanical Professionals 125. Case Opener: Ferguson Trainee Program: Inside Sales* 126. Guest’ Speaker: Why ‘To Sell is Human’ 127. Guest Speaker: Guest Speaker: Dan Pink – Like it Or Not, You’re Probably a Salesperson* 128. Guest Speaker: Domino's strategy to become the fastest and the easiest place to order pizza 129. Case Opener: Carryout Heroes 130. Ad: Vidico – Brand Video 131: Guest Speaker: What are the important elements of customer service?

132. Guest Speakers: What will marketing look like in 2030?* 133. Explainer: The Future of Advertising: Four Scenarios 134. Guest Speaker: The Future of Marketing & 5 Brands That Are Leading the Way* 135. Guest Speaker: 10,000 years of branding explained in 6 minutes* 136. Guest Speaker: 5 Questions – Brent Adamson on the Future of Marketing 137. Guest Speaker: How Brands Stumble When Saying ”Happy Pride”

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YouTube PowerPoints – CLASSIC (from previous editions, numbered 201 and higher) *Our favorites marked with an asterisk.

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201. Guest Speaker: Where Good Ideas Come From 202. Case Study: Anthon Berg’s “The Generous Store”* 203. Ad: BGH – “Dads in Briefs” 204. Viral Video: Cartier 205. Case Study: Rehau Window 206. Guest Speaker: Steve Jobs 207. Case Study: ArtCenter Promotion 208. Ad: Toyota Venza 209. Case Study: Bing & Jay–Z* 210. Case Study: Swedish Post 211. Ad: Google 212. Viral Video: Drunk Valet* 213. Sales Promotion: Product Placement 214. Viral Video: Toyota Swagger Wagon 215. Ad: UPS 216. Ad: Apple 217. Viral Video: Old Spice 218. Viral Video: State Farm 219. Viral Video: Method 220. Guest Speaker: The Marketing Concept* 221. Ad: Chevy Volt 222. Ad: Toyota 223: Viral Video: Secrets from the Science of Persuasion 224. Case Study: Kix Creativity Lab 225. Case Study: The Organic Effect 226. Viral Video: Bill Nye Explains Holograms with Emojis 227. Ad: Chipotle – Back to the Start* 228. Case Study: Analytics Proves Perfect Assist for NBA Team 229. Case Study: Timberland

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230. Case Study: Last Week Tonight with John Oliver – Native Advertising 231. Guest Speaker: What Are Memes and Virality?

232. Guest Speaker: How to Persuade without Pressure 233. Case Study: The Willis Resilience Expedition 234. Ad: Experience the Power of a Bookbook™ 235. Guest Speaker: Morgan Spurlock 236. Case Study: Vince Wines in China 237. Ad: Budweiser USA: Global Be(er) Responsible Day “Friends Are Waiting” 238. Case Study: Kohler's Magic Toilet* 239. Viral Video: Customer Service Rep Recorded 240. Guest Speaker: Eoin Comerford on Merchandising with Content 241. Case Study: Life-saving Cable Project 242. Case Study: First Kiss 243. Guest Speaker: Dave Gilboa on Warby Parker 244. Ad: GoPro – Fireman Saves Kitten 245. Ad: Android – 100 Billion Words 246. Guest Speaker: Gary Vaynerchuk 247. Viral Video: Top 10 Marketing Failures 248. Guest Speaker: Dan Cobley 249. Case Study: Dove – Campaign for Real Beauty* 250. Viral Video: KLM Lost & Found Service 251. Viral Video: God Only Knows – BBC Music 252. Viral Video: World's Toughest Job 253. Viral Video: Dollar Shave Club

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254. Case Study: Progressive Insurance Commercial 255. Guest Speaker: History of Owned Media 256. Viral Video: Top 10 Business Rivalries 257. Ad: Priceline – Negotiator 258. Guest Speaker: Tony Fadell 259. The Home Depot Mobile AppAugmented Reality 260. Ad: Schick Xtreme 3 – La Entrevista 261. Viral Video: Ellen Degeneres – Oh No You Didn'stagram 262. Ad: Patagonia Denim 263. Case Study: SWISS – Rebranding Case Study 264. Guest Speaker: “Persuasion and the Power of Story” 265. Ad: Dr. Pepper – Mountain Man 266. Viral Video: 100 Years of Men’s Fashion in 3 Minutes 267. Viral Video: What is Branding?

268. Case Study: Pocket Fire Extinguisher 269. Case Study: Digital Marketing - Kraft Foods Make Something Amazing 270. Case Study: McDonald’s - Our Food.

Your Questions* 271. Case Study: Coca-Cola Contour Digital Campaign – Case Study (Africa 272. Case study: Wheelmate app 273. Case Study: Van Gogh BnB 274. Case Study: Whirlpool - Care Counts™ Program 275. Case Study: Meet Graham 276. Case Study: The Åland Index and the Baltic Sea Project* 277. Case Study: Did you mean MailChimp?

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278. Case Study: Google Home of the Whopper 279. Case Study: Santander “Beyond Money” 280. Case Study: Adidas – Original is Never Finished 281. Case Study: Jet.com – Innovating Saving 282. Ad: Coca-Cola Pool Boy 283. Viral Video: The New Volvo XC60 Moment 284. Ad: Earth – Shot on iPhone 285. Ad: Nespresso – Comin’ Home 286. Social Media: Lowe’s Instagram Story* 287. Social Media: Netflix’s Stranger Things World Lens (Snapchat) 288. Viral Video: Burger King – Bullying Jr. 289. Ad: Apple Music – Taylor vs. Treadmill 290. Viral Video: Morton Salt – OK Go – The One Moment 291. Viral Video: H&M Holiday Short Film 292. Case Study: How does Amazon Prime Now deliver packages in under two hours?*

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2:08

X

2:15

X

2:10

4

5

X

X

8

9

10

11

12

13

14

15

X

3:36

X

17

X

X X

X

X

X X X

X X

X X

X X

X

X X

4:12

X X

X

3:52

X

5:13

X

X

X

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18

19

X X

0:35 2:55 1:00

16

X

X

1:00

1:00 1:00 0:35

7

X

X

2:06

6

X

X

15. COMMENTS ON THE INSTRUCTOR’S RESOURCE SITE TO ACCOMPANY ESSENTIALS OF MARKETING You can access most of the course materials directly through Connect (→ Library → Instructor Resources). The Instructor Edition of Connect offers you access to: •

• • • • • • • • • • • •

Quick Start Guides – quick, easy to follow guidelines for all key resources from Essentials of Marketing, including: o Quick Start Guide 1 - EM18e Planning your marketing class. o Quick Start Guide 2 - EM18e “What’s New?” for users of Essentials of Marketing o Quick Start Guide 3 – EM18e SmartBook o Quick Start Guide 4 - EM18e Connect Interactive Exercises o Quick Start Guide 5 - EM18e Instructor’s Manual and Digital Implementation Guide o Quick Start Guide 6 - EM18e PowerPoint presentations and YouTube PowerPoints o Quick Start Guide 7 - EM18e Resources for active learning and flipping your classroom o Quick Start Guide 8 - EM18e Test bank o Quick Start Guide 9 - EM18e Videos o Quick Start Guide 10 - EM18e Cases o Quick Start Guide 11 - EM18e Ethics in your class o Quick Start Guide 12 - EM18e Marketing for a Better World (#M4BW) o Quick Start Guide 13 - EM18e Marketing analytics in your class o Quick Start Guide 14 - EM18e Marketing plans and marketing planning o Quick Start Guide 15 – EM18e Marketing Application-Based Activities Instructor’s Manual PowerPoint Presentations Essentials Video Library Active Learning Package Study Guides Teach the 4 Ps Blog Connect Matrix Test Builder Application-Based Activities Practice Marketing Simulation Marketing Insights Podcast Writing Assignment Tools

16. COMMENTS ON VIDEOS For full details and links to videos We have a broad set of video materials for use with your students, including: •

•

30 iSeeIt! short, animated videos. These short (~2-3 minutes) videos provide an engaging introduction to key marketing concepts by demonstrating how they might be applied in a real business. They can be assigned in Connect (with self-grading questions) or shown in class to stimulate discussion.

240 YouTube PowerPoints – see discussion in previous section.

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• •

19 instructional video segments. The instructional video segments focus on a particular company, and they are longer, averaging 10-15 minutes in length. They can be assigned for students to watch on their own or shown in class to stimulate discussion.

Marketing Video Library. This curated set of contemporary video materials provide a way to bring current video content directly to you and your students. As of this writing, almost 200 videos are linked. The video list is constantly updated—to check it out often to see if something new interests you.

Check out our separate Video Instructor’s Manual or Quick Start Guide Videos for more detailed information on all the videos available for use with Essentials of Marketing.

17. IDEAS FOR STUDENT PROJECTS Some instructors find it helpful to require their students to write a weekly one-page report on some marketing-oriented article in a current business newspaper or magazine. A variation on this is to have students select an ad (or several related ads that are part of a campaign) and write a report on what they think the rest of the marketing strategy should consider. At first this idea may seem “backwards,” but it actually works quite well if students are steered toward interesting firms.

Some instructors like to tie student projects to use of the Internet. For example, a student (or team of students) could be given an assignment to use the Internet to research marketing changes taking place at a particular company or in a particular industry. A problem here is that students may be tempted to take materials from the Internet without giving credit. Your guidelines for what you view as plagiarism should be very clear and it’s best to put them in writing.

Other instructors find the use of term papers helpful. One good approach is to have students write papers on topics that are introduced in the text. In the footnotes for each chapter, extensive current references are given to additional sources of information on key topics in the text. Some of these references are for "classic" articles and readings in an area, and others are for some interesting current papers. The references are grouped according to the corresponding topic in the text. Therefore, the footnote references often provide students with all the direction they need to get off to a good start in their research–either in the library or on the Internet. Here again, be aware that many students are tempted to obtain papers as downloads from the Internet, so be clear in stating your policies about what is and isn’t acceptable. (The footnotes for all chapters are located at the end of the textbook.)

The instructor can either let the selection of the research topic be guided totally by the student's interests, or can develop a smaller list of permissible topics tied to the available groupings of references, or perhaps to companies (and websites) used as examples in the text.

Other instructors have found the use of term reports helpful. They may assign specific topics or a general one – such as "The Dimensions and Characteristics of the American Market and Their Implications for Marketing Management."

Specific reports might include an analysis of market potential for some hypothetical new product selected by each student and then the development of their own marketing strategy. This would require some marketing research analysis as well as use of all of the text material.

Another specific project might require the student to select a business or industry with which they are familiar (for example, a family business, a business in which they have worked, a parent's current business, etc.) Then they would be expected to consider fully the implications of a wholehearted adoption of the marketing concept by this firm or industry. Specifically, they would discuss the possible changes in the industry and the possibility of completely obsoleting present methods and marketing institutions. The student would be encouraged to "think big" rather than suggesting minor changes. Perhaps new distribution methods or even new product concepts – would be needed.

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As a longer and more comprehensive project, the instructor could assign a term paper project that would consist of several papers. The student would select a broad market that is likely to have several interesting market segments – for example, the senior citizen market, the automobile market, etc. – and carefully analyze the nature and potential in various segments of this market. Then the student would be expected to develop one or more products to satisfy some segment and report on his analysis in a Product paper. Subsequently, the student would develop papers covering Place, Promotion, and Price – and a final paper discussing the integration of the marketing mix. Five or six short papers (six, if the student is required to explain his or her reasons for selecting their market) would comprise the whole term paper project. It might be desirable for the class to use the same market so that class discussion could use this area as a reference base. (Caution: A lot of paperwork is involved in this project.)

A shorter paper could require each student to select one example of how significant changes in the market environment affected a major company's marketing strategy. For example, a student might do a report on how a particular firm uses the Internet. Here, the student might be asked to indicate whether it appears that the company's management anticipated this change or merely adapted to it after it was already obvious that others had done so.

Another approach is to have students (perhaps working as a team) create a video or PowerPoint electronic slide show on a topic. One of the authors has had great success with such assignments.

Students do some very creative things when they are “turned loose” to use media that excite them. And students have reported that the projects they have produced have been great selling tools when they are interviewing for jobs or trying to get the attention of recruiters. Many companies now expect students to have multimedia skills! Recruiters also like to find students who have had successful experience in group projects, so team-building skills are a side benefit.

17. FEEDBACK TO THE AUTHORS We would like your suggestions and criticisms. Improving Essentials of Marketing and the whole set of P.L.U.S. teaching and learning materials that come with it is an ongoing process. We have been able to continue our position as innovators for the first marketing course for many years because we put a high priority on feedback from users. Even if your feedback is simply a comment about something you want to be able to do but can’t now do with the first marketing course, don’t hesitate to share your thoughts. We would like to hear them. Sometimes we have been able to create totally new teaching support materials by really focusing on instructor needs and then figuring out what new technology or teaching pedagogy we could draw on to address those needs. (Hey, that sounds like marketing thinking, doesn’t it?)

For most instructors, the easiest way to contact us is to send Joe an email or contact your McGraw-Hill representative. We are all here to help you and your students to succeed.

Joe Cannon Colorado State University Department of Marketing Fort Collins, CO 80523 Joe.Cannon@ColoState.edu

Bill Perreault 2104 North Lakeshore Drive Chapel Hill, NC 27514

Thank you for your support.

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Part IV:

Chapter-by-chapter aids: Comments and answers to questions and exercises

INTRODUCTION This part of the manual provides suggested answers (and related points for class discussion) for all of the student assignment material in Essentials of Marketing. Suggestions on ways to use these various assignment materials are provided in Part III of this manual.

The teaching and learning package for Essentials of Marketing offers a wide range of exercises, activities, questions, and problems that can be used to engage students. Most of the activities occur within a chapter (Ethical Dilemmas and Marketing Analytics in Action), at the end of each chapter (questions and problems, Marketing Planning for Hillside Veterinary Clinic exercise questions, suggested cases, and Marketing Analytics: Data to Knowledge exercises), or following all chapters (Hillside Veterinary Clinic sample marketing plan in Appendix D and cases).

These aids are organized on a chapter-by-chapter basis – to make it easier to find the relevant material as you are teaching the course. Within each chapter of the Instructors Manual and Digital Implementation Guide, the materials are organized as follows: • • • • • • • •

Comments about the use of the Ethical Dilemma questions in each chapter.

Comments on Marketing Analytics in Action exercises in each chapter.

Comments on #M4BW sections and photos in each chapter.

Comments and answers to the discussion Questions and Problems that appear at the end of each chapter.

Comments about the Marketing Planning for Hillside Veterinary Clinic questions at the end of each chapter.

Comments about the use of the Suggested Cases at the end of each chapter. (This is in addition to more detailed comments about each of the 44 cases, which are provided in Part V of this manual).

Answers to the questions from Marketing Analysis: Data to Knowledge that appears at the end of each chapter and in Connect. The suggested answers for these questions include copies of the spreadsheets from the Marketing Analysis: Data to Knowledge software.

A summary of the Connect Homework Exercises available on Connect for Essentials of Marketing.

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Chapter-by-chapter aids: Chapter 1

CHAPTER 1: MARKETING'S VALUE TO CONSUMERS, FIRMS, AND SOCIETY CHAPTER 1 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? A customer purchases a GE Profile refrigerator that comes with a oneyear warranty on parts and labor. The salesperson suggests that the customer consider the store’s threeyear extended service plan to cover any problems with the refrigerator. The customer replies, “I’m getting a GE Profile because it’s a reputable brand—and I have read these extended warranties aren't necessary." Fourteen months later, the customer returns to the store and complains that the ice maker on the refrigerator doesn't work right—and argues “the store needs to make it right.” If you were the store manager, what would you say? Would your response be any different if you knew that the customer was going to post a negative review on the company website?

Some students may have encountered a situation like this – either as a consumer or as an employee working in a retail store. And, even if a student has not had a warranty expire right before something bad happens to the product, it is likely that in purchasing an electronic product the student has had to decide whether to buy an extended warranty.

While stores (or their suppliers) often have policies about how to handle needed repairs or similar problems that come in shortly after a warranty expires, a store manager may be empowered to make exceptions.

This situation allows for discussion of a variety of topics. One concerns the extent to which customers are responsible for the choices they make. The customer was offered the extended warranty – and made the decision, on her own, to not purchase it. The customer also decided to purchase the GE rather than some other brand that might have had a longer manufacturer’s warranty. The store might be able to get GE to honor the warranty, but we don’t know here if that is possible or if the store manager would want to try.

Manufacturers worry that retailers sometimes misrepresent when problems with a product occurred to “give customers a break” or pass an out-of-warranty problem back to the manufacturer.

The manager might want to consider how her response may affect the store’s reputation (effects that may be greatly magnified by the threat of posting online). The discussion could also reference the marketing concept – where the foundations of profit and customer satisfaction may be seen as at odds in this situation.

One aspect of this situation that may be worth additional consideration: some well-known companies, intentionally place relatively short warranty periods on their products, even though their products may be priced at a premium relative to other brands. Other firms, might offer a longer warranty on the same type product. Students may think about this situation differently if they realize that the combination of GE’s powerful brand name and shorter warranty period gives retailers a greater opportunity to sell the extended warranty and make extra profit on the sale. For this reason, the retailer (or salespeople who work on commission) may have extra incentive to “push” the GE brand. The retailer likes the chance to “bundle” the sale of the popular-brand product and the warranty. It becomes an ethical balancing act for the salesperson to say, “This is a great brand,” but in the next breath to say “but you should protect yourself with a longer warranty because repairs can be very expensive.” Consumer Reports and most other consumer organizations advise against buying extended service agreements on just about any product—because they are not a good value. Most problems arise within the warranty period anyway.

Some students may argue that it is not ethical to sell service agreements. If other students don’t counterargue, it may be useful to ask whether consumers are required to buy the agreement and, further, whether it’s ok to let consumers (who don’t want the risk) decide if it’s worth the price.

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Chapter-by-chapter aids: Chapter 1

CHAPTER 1 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS IN THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise looks at important introductory concepts: revenue, cost, and price.

Marketing Analytics in Action 1: REVENUE, COST, PROFIT To help answer these questions, an instructor might show a simple spreadsheet like the one below: Last year

This year

Price

$20

$30

x Quantity sold

250

200

equals Revenue

$5,000

$6,000

Shirt cost

$12

$15

x quantity purchased

250

200

Cost

$3,000

$3,000

Revenue

$5,000

$6,000

minus Cost

$3,000

$3,000

equals Profit

$2,000

$3,000

1. $2,000 2. $3,000 3. This question is designed to get students thinking about marketing strategy and options. In the scenario, Julie makes a higher quality product and sells it for a higher price. Students might suggest selling multiple versions of the shirt, a lower quality (and lower priced version), or simply raising prices without raising quality. They might also raise issues around promotion (increased advertising or a sale price) or distribution (selling the shirts through different channels.

CHAPTER 1 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: Photos: • Adidas partnered with nonprofit Parley to make running shoes made from ocean plastics • United Nation’s World Food Programme (WFP) smartphone app to raise money for hungry children • Ben & Jerry’s “How We Do Business” screenshot • United Nation’s Sustainable Development Goals Section: • Can Marketing Help Create a Better World? This section provides examples of how marketing can be used to make a better world and provides examples of how specific companies are using marketing to create a better world.

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Chapter-by-chapter aids: Chapter 1

CHAPTER 1 – COMMENTS ON QUESTIONS AND PROBLEMS 1- 1.

This chapter opener case lets students know how pervasive marketing is in their lives. The case also foreshadows a number of different concepts from the chapter. Some of these are listed below, but students may find others in an abstract assignment like this: • Innovation – Nike running shoes initially and more recently its Flyknit shoes and Nike+ apps • Pure subsistence economy – example of rural Africa • Economic system – rural Africa, • Triple bottom line – Nike’s responses to child labor suggest concerns about community as well as its efforts at sustainability • A marketing orientation is reflected in many of Nike’s behaviors • Your students will identify more.

1-2.

Recall that the marketing concept suggests that firms aim all efforts at satisfying customers at a profit. The success of Air Jordan turned profitability around and suggest customers are highly satisfied. Its innovation efforts suggest that computer programmers and engineers are also focused on customers.

1- 3.

This is really just a contemporary variation on the “better mousetrap” line of thought – framed in the context of an important new technology. Even so, it deals with the question of whether it is “enough” just to develop a good new product that serves an important need. It is certainly possible that web-surfing consumers – on their own initiative – are able to use the Internet to find out about an important new product and then could go further and get all of the information about it that they might need. But, as a practical matter, that was also true for most new products before the Internet existed. The problem is that with millions of pages of material on the Internet, few consumers are likely to stumble across information that they need. There are software tools that make it efficient to find information that they know they want, but if they don’t know they want it, they won’t look.

1- 4.

The macro view of marketing is concerned with how a whole marketing system works, while the micro view of marketing is concerned with how individual firms do and/or should operate. In a market-directed economy, the actions of individual firms and consumers pretty much determine how the macro system works. But it is possible for others, including the government, to modify the macro-marketing system. It is important to see that individual business firms are only part of the macro-marketing system, and that their role and apparent efficiency may be affected by others – including consumers and the government (i.e., consumers acting through representatives).

1- 5.

See section “Macro-Marketing” in the text.

1- 6.

In a command economy, government officials decide what and how much is to be produced and distributed by whom, when, and to whom. In a market-directed economy, on the other hand, producers and consumers make their own economic decisions. That is, the producers decide what they are going to offer, and consumers decide, independently, which of all of the offerings they will accept. In other words, the economy is directed by the "market mechanism" that relies on many micro level decisions by individual producers and consumers. Each decision may be small, but together they determine the macro level decisions for the whole economy.

1-7.

Students will give many different examples here. The basic point is that a market-directed system encourages innovation because there is incentive (profit) to find a better way to meet

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Chapter-by-chapter aids: Chapter 1

customers' needs. Competition is also a related issue. As one new idea is developed and proves to be a success, competing firms tend to adapt or copy it. Thus, there is constant pressure on firms to find new and better ways to do things – because yesterday's breakthroughs and successes become today's "old" product.

1-8.

In the text, the marketing concept is defined in the section “What Does the Marketing Concept Mean.” A firm must have some objective to guide its efforts – and a profit orientation provides such an objective. But the marketing concept says that an organization should have more than just profit as its objective. It should attempt to satisfy some customers and make a profit. Profit can be seen not only as an objective, but also as a constraint if one really gets carried away with the marketing concept. If a marketing manager really wanted to satisfy some customers very well, he could design a very pleasing marketing mix for them that might include free products or services!! Adding profit in the definition, however, would preclude such a move. In other words, the marketing concept insists on some balance between fully satisfying some target customers and meeting a firm's own objectives.

1-9.

This question is intended to deepen the students' understanding of the marketing concept.

Applying it to the local situation can be illuminating, especially if there has been much discussion of the role of the student in college affairs. Substantial change might be indicated in some circumstances. At the same time, it should be seen that "all" students' views (not just those of the few self-appointed "spokespersons") should be considered. Further, this may be a place to bring in the customer value concept with consideration of benefits and costs. Both long- and short-run implications of the students' welfare and the institutions' welfare should be considered. By considering the problem of balancing conflicting long- and short-run objectives of different groups, they may come to see that applying the marketing concept is not easy – and they may better understand why it is not as widely accepted (or at least well implemented) as they might expect. What they see locally is probably typical of most institutions – academic, government, and business.

1-10.

This question is intended to give students an understanding of real-world companies that use a triple bottom line, what contributions they make to help people and the planet, and how those contributions might affect their profits. An example is Patagonia; they focus on the planet by making fleece out of recycled plastic bottles and using organic cotton as well as donating 1% of their sales to environmental causes; they focus on people by offering paid paternal leave, covering 100% of employee health insurance costs, and letting employees set their own schedules. Profit-wise, despite facing early bankruptcy, the company is now debt-free and has steadily increased its profits and revenues. This question can be used as a discussion point for students’ interactions with these companies and how they think not just focusing on profits affect a company.

1-11.

Students will come up with a variety of benefits and costs associated with the products for this question. At this point in their thinking about customer value, it is probably less important that they be detailed or exhaustive in coming up with examples than it is that they grasp the concept that each product (actually, each marketing mix) may have a variety of different benefits and costs. A class discussion is likely to highlight some cases when one student sees something as a benefit, but a different student argues that it is not so much a benefit as it is a cost if it is missing (e.g., good gas mileage may be a benefit of a car, or it may represent a cost if it is missing). The fact that different customers may “frame” benefits and costs in different ways is not an important distinction in the literature on customer value. On the other hand, it can be useful to know when this sort of difference occurs because it is at least indirectly related to customer expectations. a) Wrist watch: Benefits: accuracy, attractiveness, durability, warranty, and status. Costs: the opposite of any of the above, as well as factors such as hard to service, lack of warranty, price paid, or missing a needed battery. b) Weight-loss diet supplement: Benefits: more self-esteem, more energy, greater sex

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Chapter-by-chapter aids: Chapter 1

appeal, convenient to prepare or consume. Costs: any unfavorable side effects (nervousness, high blood pressure, nausea, etc.), difficult or inconvenient to obtain, high price. c) Cruise on a luxury liner: Benefits: excitement, variety, relaxation, pleasure, social interactions. Costs: boredom, fear (say, of a fire or of the boat sinking), sea-sickness, expense. d) Checking account from a bank: Benefits: convenience, record of spending (and in some cases cancelled checks), ability to obtain cash. Costs: monthly fees, check fees, fees for bounced checks, record keeping hassles, inconvenience of going to bank, some businesses do not accept checks, time to show identification.

1-12.

This exercise is designed to help students see how marketing principles can apply beyond the typical products. It also allows them to develop a deeper understanding of the concepts of value, costs, and benefits that are covered in this chapter. Students may come across any range of benefits they can provide for a prospective employer — from broad ideas like problem solving or new ideas, to something very specific — such as completing tax forms, building websites, and making sales calls. Costs include the more obvious salary, wages, and benefits — but also include training. An employee who frequently arrives late or often misses work provides lower benefits, but also increases costs when other employees must be added to make up for the lost productivity. Obviously, value involves increasing the benefits an employee delivers and lowering the costs. Students probably would rather deliver more benefits than work for lower pay.

Interestingly, much of this can also be tied to the chapter's coverage of the marketing concept.

You could point out to students that all the benefits they provide to an employer ultimately result in better serving customers (sometimes indirectly).

1-13.

Student answers will vary significantly here. The purpose of the question is to prompt students to think more deeply about the difference between buyer-seller exchange and the opportunities that exist for more enduring relationships, especially when a customer is likely to have the same need (or a similar need) again in the future.

One good way to prompt discussion of this question is to ask students to write down a couple of the most important things that the seller could do to strengthen the relationship. Next, call on a few students to explain the relationship they had in mind. Then, ask a few students to read their suggestions without going into much detail on the particulars of the purchase situation.

The interesting thing here is that the recommendations about what the seller could do often apply across many different types of selling situations. It is valuable for students to see that there are indeed "general lessons" that arise from thinking about how to better satisfy customers.

1-14.

High performance cars are fun, and their popularity is enduring. At the same time, as accident statistics show, people driving high performance cars are more likely to be in accidents. High performance cars also tend to use more fuel and to spew more fumes into the atmosphere.

These side effects influence consumers who are not interested in owning or driving a high performance car. Over time there has been discussion of regulations to limit the top speed or horsepower of cars offered for sale. After all, the speed limit is still 55 on most highways, but in many places, it is 65 or even 75. Ultimately, there seems to be very little popular support for the idea of limiting the choices that individual consumers can make in this product area.

Nuclear power is an emotional issue. Many people object to the use of nuclear power because of the risks involved. As the Three Mile Island incident and similar accidents show, the risks are real. Yet, in some areas, there are no cost-effective alternatives to nuclear power. Thus, using other sources of power might sometimes force people who do object to the risk of nuclear power to pay a higher price for energy. Here, what different individuals want may vary,

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Chapter-by-chapter aids: Chapter 1

yet in the event of an accident, everyone might be affected.

Many consumers like the convenience of bank credit cards. They don't like to carry cash, but want to be able to make purchases when the need arises. On the other hand, critics argue that "instant credit" encourages many people (especially the poor) to spend money they don't have.

Some economists also argue that "too-easy" credit has had serious economic effects because many Americans do not save as they once did. Another issue here is the cost of providing credit services. Banks take a percent of the revenue from credit card purchases – and there is a cost of "bad debt" that is included in the cost of using cards. Some critics argue that all consumers (not just those who use credit cards) have to pay higher prices because of this. Of course, some firms offer two prices – one for credit card purchases and one for cash.

For a number of people, the use of pesticides represents a dilemma. On the one hand, the use of pesticides improves the quantity and quality of agricultural yields and thus increases the availability and reduces the cost of many types of farm products. This presumably increases the quality of life and leaves more time/money for purchases that are not necessities. On the other hand, there are some undesirable side effects related to the use of pesticides. For example, run-off of pesticides from fields into lakes, streams, and rivers (or into groundwater in other ways) has the potential to contaminate drinking water. Some people think that the use of pesticides leaves toxic residue in or on crops, and that there is a serious hazard, over time, of eating food that has been treated with pesticides. Other critics argue that the use of pesticides results in the development of more robust (mutated) strains of insects – ones that require even stronger pesticides because they become resilient to current products in use. In highly developed economies, where, in general, people are adequately fed, it is understandable that much attention might be focused on higher order needs related to the use or misuse of pesticides. However, in third-world agricultural economies where production and distribution of food are still major problems, there is not likely to be much attention to – or concern about – the potential negative effects of pesticides. In that context, the benefits seem to clearly outweigh the costs. In other words, how one views a micro-macro dilemma may depend in large part on the severity of the different needs that might be involved, and the likelihood of the negative outcomes that might occur.

1-15.

This question gives students an opportunity to think about whether companies make the world a better place and how they could make the world a better place – and how that impacts profits. An instructor using this as a discussion question or written assignment might want to focus students on the definition of “better world” noted in the chapter: Our definition follows our discussion of the marketing concept, social responsibility, and marketing ethics. We believe a better world is one where: (1) buyers and sellers make better decisions, are healthier, and through their consumption choices (or decision not to consume) experience a better quality of life; (2) buyers and sellers make decisions that have less adverse impacts on others; and (3) marketing strategy decisions address some of the world’s most challenging problems—including hunger, poverty, and climate change.

CHAPTER 1 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Note: The Marketing Planning for Hillside Veterinary Clinic questions begin in Chapter 2

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Chapter-by-chapter aids: Chapter 1

CHAPTER 1 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 1: McDonald's "Seniors" Restaurant This case can be used to illustrate what marketing and business are all about – anticipating the material in Chapter 2 (on market-oriented strategy planning) without introducing the technical words that are discussed there and in subsequent chapters. Here, the emphasis can be on the problem of developing a compatible marketing program that includes a marketing plan (strategies) for different customer groups at different times of the day. Many people feel that a firm should have only one strategy and it is desirable to get rid of this idea as quickly as possible. This case can also be used to show that business can have a "social" dimension. And in this case, the McDonald's manager and personnel are concerned about their customers and have visited some "seniors" in the hospital. Now they are considering offering bingo. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 2: Guadalupe Natural Foods, Inc. This case can be used to illustrate a production-oriented company. It also shows the need for target marketing to escape from the low profits that usually result from selling “commodities” against many other production-oriented competitors who are doing the same thing. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter.

Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 16: Montana Company This case can be used here to discuss the strategy decision areas in Place (see section “Marketing Strategy Planning Decisions for Place”). For this chapter, the discussion can focus on what needs to be done in the channels and what types of channels are needed (and why) in these product-markets. Here, indirect channels are being used because of each producer's narrow product line and small size. This case can also be used to illustrate the concept of adjusting discrepancies of assortment as well as achieving ideal market exposure. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 35: The Norbank Baseball Club This case study gives students the opportunity to explore a scenario facing some colleges and universities as well as professional sports teams (new team names include the Cleveland Guardians and Washington Commanders which replaced Native American team names after some controversy). With respect to Chapter 1, this case allows an instructor to discuss purpose-orientation, marketing orientation, and marketing ethics in a context that many students will be familiar with. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Chapter-by-chapter aids: Chapter 1

COMMENTS ON MARKETING ANALYTICS: DATA TO KNOWLEDGE PROBLEM 1: REVENUE, COST, AND PROFIT RELATIONSHIPS This is a simple "practice" problem to introduce students to the software, to sensitivity analysis, and to revenue, cost, and profit relationships – a recurring theme in later problems.

The spreadsheet for this problem involves only a few rows. The focus of the questions is on making certain that the student knows how to "read" the spreadsheet. The various questions involved also lead the student through the steps of using the various features in the software.

The software is easy to use – and most students will "get up to speed" with it very quickly. But, for some students, working with the software will be their first experience with computers, with spreadsheet concepts, and more generally in working with marketing numbers. These students may have concerns about their own ability to handle such material. Working this problem will help these students develop confidence – as well as a base of skills to build upon in later problems.

If the instructor decides not to schedule this "practice" problem as a required first assignment, it might be good to encourage students – especially those who do not have previous experience with computers or spreadsheets – to spend a few minutes with this problem before moving on to the substantive problems that follow. The focus of later problems is on the marketing concepts related to a manager's decisions. It is important for students to see that the software is just a tool to facilitate the marketing analysis – that "getting the numbers" is not an end in itself. This practice problem will help to cultivate this point of view.

NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

This is the initial spreadsheet for this problem: SpreadSheet Calendar

Notebook

$5.00* 2,700*

$2.00* 6,000*

Revenue (Price x Quantity)

$13,500.00

$12,000.00

Total Cost

$11,500.00

$9,000.00*

Profit or Loss (Revenue - Total Cost)

$2,000.00

$3,000.00

Selling Price Quantity Sold

Answers to Marketing Analytics Problem 1: a.

This question just encourages the student to study the spreadsheet layout and understand the numbers on the screen. The answer, as can be seen from the initial spreadsheet display above, is (E) – $13,500.00.

b.

If Quantity Sold remains 2,700 and the price of calendars is increased to $6.00, then the Profit from Calendars will be (C) – $4,700.00.

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This question encourages students to do their own "checking" of numbers from the spreadsheet.

The objective here is not just to get them to do arithmetic, but rather to make them realize that in this spreadsheet (and all the others that follow!), that they can "follow" how the numbers on the spreadsheet are computed by studying the labels on the spreadsheet – and in the event of any remaining uncertainty by doing a few simple calculations themselves – as a check. You may want to emphasize this point – as it will help eliminate uncertainty later when they get to more detailed problems. If they see from the start that they can always study the "flow" of the spreadsheet display and figure out how numbers are being calculated, it will be less confusing for them. With very few exceptions (noted in this manual), the calculations on the spreadsheet are very straightforward. The spreadsheets are set up so that the "intermediate" steps in calculations are easy to follow. This helps the student develop skill in seeing how to organize and analyze problems.

The spreadsheet from which the answers for this problem are reported will look like this: SpreadSheet Calendar $6.00* 2,700*

Notebook $2.00* 6,000*

Revenue (Price x Quantity)

$16,200.00

$12,000.00

Total Cost

$11,500.00

$9,000.00*

Profit or Loss (Revenue - Total Cost)

$4,700.00

$3,000.00

Selling Price Quantity Sold

The calculations are straightforward: Revenue = Price x Quantity = $6.00 x 2,700 units = $16,200 Total cost = $11,500 (directly from the problem description and the spreadsheet) Profit = Revenue - Total Cost = $16,200 - $11,500 = $4,700. c.

This question introduces students to the consequences of changes to the marketing mix. Any changes may create multiple effects. In this example, increasing the price will naturally increase profit per unit sold but, if the calendars are priced too high, more students will choose to buy the product from alternative vendors or forego purchase altogether.

By changing the Selling Price in the spreadsheet to $6.00 and then adjusting the Quantity Sold to different values, students will find that (D) – 1917 units is the correct answer. Any quantity below this amount will result in a loss.

d.

This question simply introduces students to the concept of “What If?” analysis. The What If table they create for this result is given below. You may want to encourage students to create this table using a spreadsheet program rather than doing it by hand to learn how to create and manipulate spreadsheets to assist with “What If” analysis.

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Chapter-by-chapter aids: Chapter 1

-NotebookSelling Price $1.60 $1.68 $1.76 $1.84 $1.92 $2.00 $2.08 $2.16 $2.24 $2.32 $2.40

–“What If” Table -NotebookRevenue $9,600.00 $10,080.00 $10,560.00 $11,040.00 $11,520.00 $12,000.00 $12,480.00 $12,960.00 $13,440.00 $13,920.00 $14,400.00

-NotebookProfit or loss $600.00 $1,080.00 $1,560.00 $2,040.00 $2,520.00 $3,000.00 $3,480.00 $3,960.00 $4,440.00 $4,920.00 $5,400.00

The correct answers for this question and the next are bolded in the table. The correct answer for this question is (E) – $2.40. Profit reaches $5,400 at a price of $2.40. e. Using the table provided for the previous answer we can see that Profit will be $1,080.00 when the price is $1.68. This corresponds with answer (B).

MARKETING ANALYTICS DISCUSSION This section is included to facilitate discussion about various topics introduced in each exercise. Rather than asking students to find a set answer, the questions are designed to encourage the students to evaluate alternatives and explore trade-offs.

This first discussion provides an opportunity for the instructor to introduce many of the topics that will be covered later in the course. For instance, pricing could be established based on costs, based on competitive or substitute prices, based on desired profit thresholds, or on many other factors. Introducing these concepts to students early can help facilitate learning later in the course.

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Chapter-by-chapter aids: Chapter 1

CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises: Question 1: Universal Functions of Marketing Question Type: Click and Drag Learning Objectives: 1.3 Topic: Macro-marketing AACSB: Technology Bloom’s: Apply Question 2: Five Stages of Marketing Evolution Question Type: Timeline Learning Objectives: 1.1, 1.4 Topic: Evolution of marketing AACSB: Reflective thinking Bloom’s: Understand Question 3: Production and Marketing Orientation Question Type: Click and Drag Learning Objectives: 1.1, 1.4, 1.5 Topic: What does the marketing concept mean?

AACSB: Reflective thinking Bloom’s: Understand Question 4: Value Creation Through the Marketing Mix (iSeeIt! Video) Question Type: Video case Learning Objectives: 1.6 AACSB: Reflecting thinking, analytic Bloom’s: Apply, understand Question 5: Ethical Marketing (iSeeIt! Video) Question Type: Video case Learning Objectives: 1.7 AACSB: Reflecting thinking, ethics Bloom’s: Apply, understand, evaluate Question 6: Revenue, Cost, and Profit Question Type: Marketing analytic, spreadsheet Learning Objectives: 1.1, 1.3, 1.5 AACSB: Apply, analytic, technology Bloom’s: Apply, evaluate Question 7: Can Marketing Help Create a Better World?

Question Type: Click and Drag Learning Objectives: 1.7 AACSB: Knowledge, application Bloom’s: Understand, apply

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Question 8: Corporate Social Responsibility Question Type: iSeeIt! Video with Multiple Choice Learning Objectives: 1.7 AACSB: Reflective thinking, ethics, Bloom’s: Apply

Application-Based Activity Title: Marketing Ethics and Social Responsibility: Bohrd's Boards Type: Role-Playing Bloom’s: Apply Description: Play the role of a marketing consultant. Joe Bohrd was a celebrity surfer who has transitioned to making high performance, environmentally-friendly surfboards. You will need to navigate several issues regarding ethics and social responsibility as he tries to grow his business.

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CHAPTER 2: MARKETING STRATEGY PLANNING CHAPTER 2 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would do you do? You are the marketing manager for Jones Department Stores, a 125store chain in the northwestern United States. Your company used an outside developer to write the store’s smartphone app. The developer just added some new location-based features. For example, a customer can enter their “favorite Jones store” location into the app. When customers shop at the store, they can open the app to find a map of the store’s layout. The store can also deliver coupons to customers while they shop in the store (the app knows they are there). The developer also points out another feature. He tells you that another major retailer shows customers different prices on the app— depending on whether the customer is in the store or not. So, for example, the app might show the price of a particular sweater as $79 while in the store (matching the price tag in the store). But, when a customer who is not in the store looks at the same sweater on the app, the price would be lower—say $59. This other retailer found that in-store customers are much less price sensitive than online shoppers.

Online shoppers can click somewhere else and buy—so Jones could offer more discounts to online shoppers compared to those in the store. Because the app knows when a customer is in the store, higher prices can be shown there. When the customer is using the app away from the store, lower prices could be shown. Jones can decide which products have lower online prices and how much to discount the price. This helps the store maximize profits; “Why give customers a discount if they are willing to pay full price?” Would you recommend including this feature on the new version of the app? How would customers paying the higher price feel if they found out other customers paid lower prices? Explain.

Behavioral targeting is a controversial practice. Many privacy advocates are concerned about the implications of behavioral targeting. The question also introduces the students to price discrimination.

Usually, we find student less concerned about invasions of their privacy and more concerned about “unfair” pricing. If a discussion trends in these directions, you might ask students whether they think “ladies night” pricing at a bar or “student discounts” are “fair”? You might also ask how they would feel if they walked into a bookstore and the salesperson came up and suggested books by authors they had read before. Does the online context make it more acceptable to them?

CHAPTER 2 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise extends the chapter’s discussion of customer lifetime value by demonstrating how it is calculated. This exercise may require a bit more explanation by the instructor—as the analytics are more complicated. We think most students will be comfortable with the simple formula—and will not need to derive the formula.

Marketing Analytics in Action 2: CUSTOMER LIFETIME VALUE An instructor may want to create a simple spreadsheet like the one shown below to demonstrate how to calculate these answers:

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Chapter-by-chapter aids: Chapter 2

Current

Question 1

Question 2

M (Profit/customer/year)

$250

$250

$300

R (Retention rate)

60%

70%

60%

AC (Acquisition cost)

$125

$125

$125

Customer lifetime value

$250

$458

$325

1. $458 – these numbers were designed to demonstrate to students the power of customer retention on customer lifetime value.

2. $325 – in discussion, an instructor might ask if raising prices might impact any other numbers in the equation. It makes sense that retention rate might fall as more price sensitive customers chose to drink coffee at home or patronize another coffee shop – perhaps plugging lower numbers into retention rate might demonstrate such a tradeoff. Local Joe’s might also find that some of the “regular” customers would visit less often – maybe offsetting his desired higher margin per customer.

3. This question is designed to get students thinking. At this stage in the class, students may not know how far to take this or be comfortable making assumptions. Yet these are important skills for marketing managers. Instructors are encouraged to discuss this question in class. So, for example, ask students what might happen if Local Joe’s was more aggressive in advertising and had higher acquisition costs? One potential downside is that new customers are less of a fit for Local Joe’s and have a lower retention rate. Lower prices could encourage a higher retention rate and maybe higher profits per customer per year.

The goal with this exercise is to get students thinking about the options and how they might be entered into a spreadsheet. Instructors should remind students that this type of data analytics – based on assumptions – is not precise but will often provide some directional insight.

CHAPTER 2 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: Photo: • Everlane.com has a commitment to “Exceptional Quality. Ethical Factories. Radical Transparency.”

Section: • International markets can be opportunities for making a better world o This section describes how Danone produces more nutritious cheese in Brazil and Norwegian fertilizer maker Yara helps small farmers in Tanzania produce more crops.

CHAPTER 2 – COMMENTS ON QUESTIONS AND PROBLEMS 2-1.

This chapter opener case uses Lemonade Insurance to introduce a wide range of concepts from the chapter. Some of these are listed below, but students may find others in an abstract assignment like this: • Marketing strategy – targets millennials with the 4 Ps • Target market – millennials • Price - low – typically $5-$7/month for a renter’s policy

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• • • • • •

Promotion – digital advertising on Facebook and Google Publicity – gets positive word of mouth about its Giveback Program Place – smartphone app Product development – Smartphone apps; internet Product development – different insurance policies Evaluating opportunities – the third and fourth paragraphs describe how the founders saw a need in the market and what they did to differentiate themselves • Your students will identify more.

2-2.

The case opener suggests that Lemonade Insurance has already pursued some new opportunities. What follows are some potential examples: • Market penetration – offer different insurance to their current customers • Market development – offer insurance products that attract people besides millennials • Product development – the company has already engaged in product development by adding pet, auto and homeowners’ insurance. It might also add dental or vision insurance for examples of nother new products.

• Diversification – develop other apps for their customers – possibly investing, fitness, or real estate.

2- 3.

A marketing strategy includes the selection of a target market and the development of a marketing mix. Therefore, a marketing mix is only part of a marketing strategy.

2- 4.

Target marketing involves consciously picking some target (which might be the "mass market"), while mass marketing is not focused on some specific customers. The managers just naively assume that "everyone" or at least enough "someones" will buy to make the business successful. A meaningful example for students might be contrasting the operation of some fast-food franchises that have developed good strategies with a locally owned restaurant that is just serving "food," apparently to "everyone," and not doing very well. Local examples with which the student has had some experience are usually better than discussing the strategies of large companies that are managed from remote cities.

2- 5.

The target customer is placed in the center of the four Ps because the customer should be the focal point of all marketing efforts and really, all business efforts. Without potential customers – and eventually satisfied customers – there is not much point in any company effort. Almost any product (for example ball point pens or sports shirts) might be used to illustrate the way that products can and should be designed with the customer in mind, made conveniently available, promoted to these potential customers, and priced attractively or competitively – again with the customer in mind. The interrelatedness of the decisions (as shaped by the needs and attitudes of the various potential customers) should be noted.

2- 6.

It is important for a firm to have a clearly defined target market even if a company sells its products only from a website. This question is designed to prompt students to think about the idea of the website in the context of the marketing mix. The fact that the firm is distributing to customers “direct” via its website (rather than through wholesalers or retailers) is certainly an important decision in the marketing mix context, but the fact that the website it available to customers from all over the world doesn’t mean that the firm’s offering will be attractive to customers regardless of geographic location. The marketer still needs to think about the benefits its product offers relative to the needs of some set of customers, what competitors offer those customers, when and how the product is going to get to the customer’s place, what communications (promotion, customer service, etc.) the customers will need, what price is appropriate, and the like. There is intense competition for attention and business on the Internet, and just “building a better mousetrap” (if the firm has in fact done that…whether it is the product offering OR the website itself!) is not any sort of assurance that it will attract, satisfy, and retain customers. A firm that has a specific target market will be able to fine tune

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its message and the rest of the marketing mix to the needs of the target customers; that increases the odds that it can offer them superior customer value.

2- 7.

This question basically serves as a review of the text discussion in the section, “Developing Marketing Mixes for Target Markets.”

2- 8.

Strategy decisions are concerned with "grand plans," while operational decisions are concerned with more detailed decisions – which are made within the framework of the strategy.

A local retailer might include as part of his strategy an intention to price his whole line to meet his major competitors' price levels. Regular operational decisions will have to be made with respect to which products' prices to change in order to appear to remain competitive with competitors who are varying prices on different items at the same time. This continual adjusting of prices might be extremely important to his long-run success, yet should be seen as operational decision-making, given his strategy pricing decision.

2- 9.

This question provides students with an opportunity to demonstrate their level of comfort with this concept. This chapter provides the following definition: “the expected earnings stream (profitability) of a firm’s current and prospective customers over some period of time.” Students will find a way to put this definition in their own words. The emphasis should be on three elements: 1) profitability, 2) current and prospective customers, and 3) current and future profits. The implications of this approach are important because it provides a financial goal for marketing managers. The approach also emphasizes the need for a marketing manager to both retain current customers and acquire new ones. Thus, a marketing program will usually have some efforts directed at retaining and growing current customers (one or more target markets) and acquiring new customers (other target markets).

2- 10.

This question helps students consider the variations in marketing strategy when the objective is customer acquisition as opposed to retention or enhancing sales. So, for example, with a company selling oral health care products, acquisition might consider discounts and price promotions to encourage a customer to first use the product. It might also work through dentists for their recommendations. Having a high-quality product that does what it says will lead to customers satisfaction and customer retention. Finally, enhancing sales comes when users of a particular brand of toothbrush also use its brand of mouthwash and/or toothpaste.

Bundled packages or coupons on one product for the other might help with that. Similar strategies might also be employed by a ride-hailing service like Lyft or Uber, although the app’s knowledge of the consumer’s location may make it easier for promotions to target customers when the service would be useful (for example, sending discount notifications to customers at an airport).

2- 11.

A strategy is a "big picture" of what a firm will do in some market. A marketing plan includes a strategy and the time-related details for carrying out the strategy. And a marketing program is a blend of all of the firm's marketing plans. A department store might have a strategy for how to handle each of its departments and expect its department managers to develop marketing plans for each department – perhaps month by month for the next year or even up to five years. A marketing program would be the blending of all the marketing plans into one workable program. Developing the program might require some adjusting of the plans of some departments – in order to make effective use of all of the firm's resources but not exceed them.

2-12.

This question is designed to get the students thinking about the various target markets for a particular product – and the many factors that ought to be considered. If the instructor is familiar with the development of a new marketing strategy, it probably will be preferable to substitute this product for one of those suggested – in order to give the students a better "feel" for reality.

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This exercise can easily lead into an interesting discussion of marketing strategy planning and all the problems that can arise (but the instructor must guard against it degenerating into just a "bull" session). The general approach will be illustrated below for the new toothbrush.

The students must be led to see that there are many different potential target markets before going on to the development of one whole strategy. It might help to begin by trying to determine the degree of interest of some target consumers in toothbrushes in general – and the extent of interest they might have in the particular kind of product being considered. Using the marketing strategy diagram in Exhibit 2-9 as a framework – to begin to segment the "toothbrush market" – you could lead them to ask questions such as: What do consumers look for in toothbrushes? Why do they buy them? Where do they buy them? How much do they pay for them? Who buys them? All these questions should be raised by the students. Obviously, no one answer can be developed in the classroom for all these questions (there are many target markets), but some tentative conclusions might be advanced – some consumers are worried about their gums, not just their teeth, some people don't seem to think about brushes at all, some want a brush that's easy to pack for travel, etc.

The next step would be to analyze the product in the light of the consumers' image of toothbrushes and the ritual of tooth brushing. If this product seems to have any possibilities for satisfying the needs of some consumers, then the other three Ps – Place, Promotion, and Price – will have to be considered. Where consumers traditionally buy toothbrushes may have a bearing on where they will have to be distributed. If the same types of places are chosen, a great deal of promotion may not be necessary. However, if an entirely new set of places is chosen, promotion may become more expensive. If the consumer is not particularly enthused about new products of this type, even if they are superior, then the latitude on pricing may be rather narrow. The marketing executive's job would be to weigh the four Ps in light of consumer analysis in order to come up with a satisfactory marketing strategy.

At this time, a well-organized discussion of all these points probably should not be expected of the students, but it is surprising what they can do. In the following pages, some examples of students' work are presented to give you an idea of the caliber of work that can be expected this early in the course.

A.

The marketing problems I believe I would face if I were to develop a new design for a toothbrush: Concerning the consumer: 1. Characteristics of buyers and users 2. Size of purchase 3. Unfavorable attitudes of buyers of brand 4. Class of buyers 5. Number of competitors and brands 6. Differentiation of own brand from leaders Concerning the product: 1. Quality 2. Models and sizes 3. Attractiveness 4. Shape, material, design, color, and copy Concerning the place: 1. Number of wholesalers and retailers

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2. Degree of aggressive retailer cooperation Concerning the price: 1. Factory price 2. Wholesalers' and retailers' price 3. Discounts, allowances, and deals 4. Price support Concerning the promotion: 1. Selling 2. Advertising 3. Sales promotion ********** B.

The first thing we have to do in setting up the marketing strategy is to determine the target market. The target for a new spinning reel would, most naturally, be the sport fisherman. Since the consumer is of such great importance in the selection of a strategy, he should be considered first and foremost. To begin with, sport fishermen can be from any social or financial class. This fact in itself presents somewhat of a problem. The reel has to be such that it will appeal to the majority of the people from these different groups.

Next, we have to determine just how we are going to design this item to accomplish this. We have to make the reel so it has all the qualities we want, and price it so it can be sold in the volume necessary to make a profit. We have to decide whether we are going to make all the component parts ourselves or if we are going to do any subcontracting. These and many more considerations must be made in this connection.

Determining places of distribution to the customer is also very important. With an article such as a fishing reel, the best markets would no doubt be in or near river towns, fishing resorts, lakes, or oceans. Along the same lines, you must determine how you are going to work the distribution end of your business, whether you are going to use wholesale outlets, brokers, franchised dealers, etc.

The price of the reel now has to be set so that it will move fairly fast on the market. Competition will, of course, affect pricing. . You must also take into account the distributors and sales force and whether you are going to pay them a high commission.

Since this is a new product, promotion is going to be of major importance in establishing good markets. You will have to concern yourself with advertising, sales promotions, and training salespeople among other things. I think these would be the greatest problem areas you would encounter. **********

C.

Target market: College students for spring break might be one customer group and a target market.

Product: The product would include the swimming pool, beach, hotel rooms, restaurants, and the various services offered. It could also include the resort’s brand new.

Place: This would be the location itself as well as decisions about the number of locations.

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Price: The price would have to be lower than average, given the target market is cheap college students.

Promotion: They might advertise on college campuses or even recruit college students to sell the resort on campus. They could also use advertising on social media. ********** D.

The new type of industrial stapling machine causes students considerable trouble as few of them have had much industrial experience. This provides another opportunity to emphasize the need for careful customer analysis.

For class discussion, it is useful to segment the stapling machine market into at least two parts – thus requiring two sets of answers. The two basic markets are for office use and for plant use (fastening boxes or assembling wood or metal pieces).

You might show that reaching office managers, production managers, purchasing agents, and even top executives in businesses where fastening is especially important affects the Place and Promotion variables. The problems of marketing industrial products should only be raised here, as they are treated extensively in the rest of the text. By the end of the book, the students will be able to handle such a problem very nicely. It might be fruitful at this time, however, to get the students to notice that industrial marketing would probably be more economicallyoriented than final consumer marketing.

2-13.

This is an integrative question. As indicated in the section, “What Does the Marketing Concept Mean” (in Chapter 1) all functional areas are dependent upon a firm's market-oriented plans. A market-oriented plan starts with customers and then expects the rest of the firm to arrange its affairs accordingly. Therefore, an example from any functional area would be appropriate here.

2-14.

An "attractive" opportunity for a firm is one that the firm has some chance of doing something about – given its resources and objectives. A "breakthrough" opportunity is an attractive opportunity that will enable the innovators to develop hard-to-copy marketing mixes that will be very profitable for a long time.

Students will give a wide variety of examples here. They are often better at identifying "attractive" opportunities than "breakthrough" opportunities. In particular, it is not unusual for students to think that just about everything is "hard to copy.” ” Discussion of this question is a good way to highlight the importance of analyzing the current competitive environment and/or what is likely to happen with it in the future. This discussion can be used to foreshadow a similar discussion in Chapter 3, as well as introducing the concepts of product life cycles, which are developed more fully in Chapter 9.

2-15.

By defining a market in terms of a market's needs, it is usually possible to see subsets that are not completely satisfied with the present offerings. Students should be able to come up with examples – if nothing else, examples of needs that they personally have that are not completely satisfied. Suggestions from the class can be pursued to see whether each "opportunity" is likely to be large enough to be profitable to some firm, though the focus here is simply to get students to see that there are opportunities all around them. .

2-16.

The basic logic for thinking of the marketing strategy planning process as a narrowing down process is to be certain that the marketing manager considers the various alternative opportunities that might be available before putting all of his or her energy, and the firm’s investment, into a single strategy. There are usually more possible opportunities, each requiring different strategies (potential target markets and variations on the marketing mix),

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than the firm can actually pursue. The choice that is made may set the firm’s course for some time to come, so it’s important to focus on the strategy that has the greatest chance of success, rather than the one that at first glance appears to be OK. 2-17.

The major differences among the opportunities are related to whether the firm uses its present products or new products while pursuing present markets or new markets. Note: The student's examples should describe what a firm is or was doing before moving on to a new opportunity.

In other words, what would be a diversification for one firm might be simply market penetration for a firm that was already in that market.

2-18.

Familiarity with the firm's current market would probably reduce the cost and risk. The farther a firm moves from its present activities, the less it is likely to know about the market and its problems. "The grass is not always greener on the other side of the fence."

2-19.

The text provides a discussion of reasons that international opportunities should be considered. Student answers will usually incorporate the reasons given in the text, including: (a) it's now becoming easier and cheaper to deal with customers in international markets, because of advances in communications and transportation; (b) people in a foreign market may have needs that the firm could meet, and the people may have the money they need to be customers; (c) serving larger, international markets may result in additional competitive advantages, such as greater economies of scale in production, shared expertise, etc. (d) the product life cycle may be at an earlier stage in an international market, which effectively gives the firm the chance to "turn back the clock" to a stage where there is greater growth in sales and profits; (e) the foreign market may offer more favorable trends with respect to the marketing environments, including the competitive environment, the legal/political environment, the economic/technological environment, and the socio-cultural environment. For example, income and population growth has subsided in the U.S.; as a result, some consumer products firms’ growth will need to come from overseas markets.

CHAPTER 2 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Skim through the different sections of the marketing plan. Look closely at the “Marketing Strategy” section. a. What is the target market for this marketing plan? b. What is the strategy Hillside Veterinary Clinic intends to use? c. What are your initial reactions to this strategy? Do you think it will be successful? Why or why not?

At this point in the introductory marketing class, students need to learn about the different parts of a marketing plan at a very basic level. This helps them get an appreciation for the various elements of marketing. Often students walk into this class thinking that marketing is “easy” or “obvious.” ” The marketing plan shows them the amount of analysis that goes into creating a marketing strategy – even for a small business.

The first question simply requires that the student recognizes the target market. The HVC marketing plan identifies two target markets: 1) Pet owners with small animals living within 10 miles of Wellington, Colorado, who are not currently customers of HVC, and 2) Pet owners with small animals living within 10 miles of Wellington, Colorado, who are currently customers of HVC.

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In class discussion, the instructor may ask why HVC has chosen these target markets. Veterinarians often specialize in small animals (cats, dogs, etc.) or large animals (cows, horses, etc.). Other vets may choose to specialize in exotic small animals (monkeys, chinchillas, ferrets, etc.). The marketing strategy process planning model might be referenced. Competitors in the area specialize in large animals – which typically involve house (or ranch or farm) calls. A company factor is Doctor Hardy’s likely training in small animals – and perhaps her innate interests. Also, there are many consumers in the fast-growing area that are likely to have small animals – making for a ready market.

As a transition to the second question, the instructor might ask the class, “Why does the marketing plan differentiate between current customers and non-customers of HVC?” ” This allows for a discussion of the two different targets. The former are already familiar with HVC and have an established relationship. The marketing strategy for this group includes tactics that serve to remind customers and introduce them to new products and services offered by the clinic. On the other hand, non-customers may not be aware of HVC – so tactics here try to increase awareness and encourage customers to try the clinic.

The last question is designed to get students to evaluate a marketing strategy. There is no correct answer here, and certainly most introductory marketing students will not be able to offer a detailed critique. But the instructor can encourage students to judge the likely effectiveness in light of the situation analysis.

CHAPTER 2 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 3: COLORADO United Soccer Academy This case can be used to introduce the marketing strategy planning process and customer equity – both of which are discussed throughout the rest of the book. The COLORADO United Soccer Academy case provides an early opportunity to use both of these frameworks. The marketing strategy planning process in Exhibit 2-9 might be shown on the board and used to help guide discussion. In fact, the shortage of information on competitors – at least in the short case – becomes more obvious when this framework is shown. There is a need to match the company strengths with customer needs. A S.W.O.T. analysis might be done to help students understand these concepts.

The options clearly address some of the alternative growth methods suggested in the section “Recognizing Customer Lifetime Value and Customer Equity” in the text – acquisition of new customers, retention of current customers, and increasing purchases by current customers. To dramatize the effects of customer retention, ask your students what percentage of its customers COLORADO United Soccer Academy is likely to retain each year. Despite kids moving, changing interests, and growing too old for training, the current retention rate of 80% is really quite high. This means that of the 600 customers COLORADO United Soccer Academy currently serves, it needs to attract 120 new customers each year just to stay even – and COLORADO United Soccer Academy wants to double in size. If COLORADO United Soccer Academy can increase customer retention by 10%, this means the company keeps 60 more customers. But is that even possible? COLORADO United Soccer Academy may have no ability to control families moving from the area, kids changing interests, and aging of its customer base. This means that some customer acquisition efforts will be a necessary part of its strategy. Further, if COLORADO United Soccer Academy can get 25% of its customers to take one additional program per year, then sales should increase by about 25%. These numbers – or variations that you might create – help to dramatize the different customer equity options in the COLORADO United Soccer Academy case.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Case 4: Petosega Tech Support This case can be used to illustrate ideas related to marketing strategy planning, including S.W.O.T. analysis. A young woman decides to go into business (doing computer service work) in a small town where she is in direct competition with another established competitor who has a strong reputation and a loyal following (and it’s a firm with which she had a summer job before going into military service). Her choice of this business opportunity is influenced heavily by where she wants to live and what she has done in the past. It is of course reasonable to use these as criteria in evaluating opportunities and screening alternatives, but she doesn’t develop the elements of her marketing mix very carefully. Instead she seems to expect that the community will somehow see the wisdom of bringing business to her.

Students will have empathy for her situation, but she is nevertheless in a tough situation because it doesn’t appear that she has any particular competitor advantage. Equally important, she really has not done anything in developing her marketing mix to try to get an advantage. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 5: Resin Valleys Used in this chapter, this case also illustrates a production-oriented company that has ignored potential customers' needs and the uncontrollable environment. It is easy to show the need for target marketing in this case. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 12: PersonalHealth.com—Custom Vitamins This case can be used as an opportunity to introduce students to a relatively straightforward financial analysis involving some topics related to customer equity. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter.

Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 17: WaterWiser, Inc. This case summarizes the marketing strategy of WaterWiser, Inc. a small growing firm. At this point in the course, this case might provide an opportunity for students to show their understanding of the elements in the marketing strategy process planning model (Exhibit 2-9). An instructor could break students out into small groups and project Exhibit 2-9 (PowerPoint) on the screen. I would suggest walking through a discussion in parts. First, have students could then analyze the case and offer examples of context, customers, company, and competitors. An instructor could put these four headings on the board and get

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the students to offer examples of each. Then, have the students pull together a SWOT analysis from these factors. Next, have students discuss segmentation and targeting and positioning and differentiation among themselves before having a broader class discussion. Finally, repeat the process for marketing strategy (target and 4 Ps). The process allows instructors and students to be sure they understand each part of that model. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 40: Potbelly Sandwich This case summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along the 4Ps and features interviews with Bryant Keil, Chairman and CEO of the company. Chicago-based Potbelly Sandwich Works, Inc. is a chain of sandwich shops that competes in the Quick Serve segment of the restaurant industry. Billed as a unique and “quirky” sandwich joint, Potbelly has strong appeal to young urban professionals. The case covers each of the 4 Ps, which are introduced in this chapter. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 2: TARGET MARKETING In this problem, the student evaluates the profitability of a target marketing approach compared to a mass marketing approach. The spreadsheet for the problem focuses student attention on the size of the segments, the "share" that a firm wins in that market, costs of blending a marking mix to reach the market, and revenue and profit relationships.

The initial spreadsheet for the problem appears below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

Spreadsheet Targeting Mass Marketing $8.00* $7.50* $2.00* $2.50* $12,000.00* $60,000.00* $16.00* $14.00* $10,000.00* $20,000.00* 25,000* 275,000* 80.00% * 40.00% * 50.00% * 20.00% * 10,000 22,000 $160,000.00 $308,000.00 $122,000.00 $300,000.00 $38,000.00 $8,000.00

PRODUCT: Production Cost per Unit PLACE: Distribution Cost per Unit Sold PROMOTION: Total Promotion Cost PRICE: Selling Price per Unit Overhead Costs Number of People in the Market Percent of People Who Will Buy Firm's Percent (share) of Purchases Quantity Sold (Units) Total Revenue (Price times Quantity) Total Cost (Sum of Above Costs) Total Profit (Revenue minus Costs)

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Answers to Marketing Analytics Problem 2: a.

The correct answer is C. Although higher sales volume does result in lower production costs (answer B), the need to sell the product in more locations increases the distribution cost rather than decreasing the distribution cost. This concept is discussed in more detail in Chapter 10 when tradeoffs between intensive, selective, and exclusive distribution are discussed.

b.

If the target marketer could reduce distribution cost by $.25 per unit, from $2.00 to $1.75, total profit would increase by $2,500.00 – from $38,000.00 to $40,500.00. The point here is that reducing the cost of any element of the marketing mix – if it still meets the needs of target customers – will help to improve profits. The spreadsheet for this analysis is shown below: Spreadsheet Targeting Mass Marketing $8.00* $7.50* $1.75* $2.50* $12,000.00* $60,000.00* $16.00* $14.00* $10,000.00* $20,000.00* 25,000* 275,000* 80.00% * 40.00% * 50.00% * 20.00% * 10,000 22,000 $160,000.00 $308,000.00 $119,500.00 $300,000.00 $40,500.00 $8,000.00

PRODUCT: Production Cost per Unit PLACE: Distribution Cost per Unit Sold PROMOTION: Total Promotion Cost PRICE: Selling Price per Unit Overhead Costs Number of People in the Market Percent of People Who Will Buy Firm's Percent (share) of Purchases Quantity Sold (Units) Total Revenue (Price times Quantity) Total Cost (Sum of Above Costs) Total Profit (Revenue minus Costs) c.

If the target marketer can increase his share of the market from 50 percent to 60 percent, his profit will increase to $53,000.00 (Answer D). The spreadsheet for this analysis is shown below.

Spreadsheet Targeting Mass Marketing $8.00* $7.50* $1.75* $2.50* $12,000.00* $60,000.00* $16.00* $14.00* $10,000.00* $20,000.00* 25,000* 27,5000* 80.00% * 40.00% * 60.00% * 20.00% * 12,000 22,000 $192,000.00 $308,000.00 $139,000.00 $300,000.00 $53,000.00 $8,000.00

PRODUCT: Production Cost per Unit PLACE: Distribution Cost per Unit Sold PROMOTION: Total Promotion Cost PRICE: Selling Price per Unit Overhead Costs Number of People in the Market Percent of People Who Will Buy Firm's Percent (share) of Purchases Quantity Sold (Units) Total Revenue (Price times Quantity) Total Cost (Sum of Above Costs) Total Profit (Revenue minus Costs) d.

Using the spreadsheet above we can see that Total Revenue would increase to $192,000.00 (Answer B).

e.

This question is designed to start teaching students about the underlying relationships between cost, revenue, and profit. It also provides a very light introduction into the concepts of fixed and variable expenses. The correct answer is B. Total Cost does not equal Total Production Cost plus Total Distribution Cost. Those variable costs are both components of the Total Cost but you must also include fixed costs such as Overhead Costs and Total Promotion Costs.

MARKETING ANALYTICS DISCUSSION

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Going through this exercise, students should learn that while mass marketing provides the potential to reach more customers and achieve higher revenue, the costs associated with the effort usually overshadow the gains. The target marketer who can really fine-tune his marketing mix to the needs of the target market can increase his share of the business from that target market, and his profitability. The exercise shows that it is often better to get a larger share of a smaller target market than to use a perhaps very expensive marketing mix to inefficiently compete for a small share of a larger "mass market."

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CHAPTER 2 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATIONBASED ACTIVITIES

Connect Interactive Exercises Question 1: Target Marketing and the 4 Ps at Campbell’s Soup Question Type: Click and Drag Learning Objectives: 2.3, 2.4 Topic: Developing marketing mixes for target markets AACSB: Reflective thinking Bloom’s: Understand, apply Question 2: The Marketing Strategy Process Planning Model Question Type: Click and Drag Learning Objectives: 2.7 Topic: Marketing strategy planning process highlights opportunities AACSB: Reflective thinking Bloom’s: Remember, understand, apply Question 3: Marketing Strategy Opportunities at Olive Garden Restaurant Question Type: Decision Generator Learning Objectives: 2.3, 2.4 Topic: Marketing mix AACSB: Reflective thinking Bloom’s: Remember, understand, apply Question 4: The Marketing Plan (iSeeIt! Video) Question Type: Video Case Learning Objectives: 2.5 Topic: The Marketing Plan Is a Guide to Implementation and Control AACSB: Analytic, reflective thinking Bloom’s: Remember, understand, apply Question 5: Target Marketing Question Type: Marketing Analytics Learning Objectives: 3.3 Topic: Target marketing AACSB: Analytic, technology Bloom’s: Remember, understand, apply Question 6: Strategic Planning at Lemonade Question Type: Case Analysis with multiple choice question Learning Objectives: 2.2, 2.4, 2.6, 2.8 AACSB: Reflective thinking, analytical Bloom’s: Remember, understand, apply

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Application-Based Activities Title: Market Growth Strategies: The Better Bean Type: Role-Playing Bloom’s: Apply Description: Play the role of the owner of The Better Bean, a coffee shop that opened three years ago.

Your goal is to increase profit enough to hire another part-time employee.

Title: Marketing Metrics Type: Mini Sims Bloom’s: Apply Description: Analyze and apply marketing metrics to achieve a high market share of the School Children market segment.

Title: Planning and the Marketing Mix Type: Mini Sims Bloom’s: Apply Description: Create channel, advertising, and pricing plans for backpack to ensure a profitable market launch.

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CHAPTER 3: EVALUATING OPPORTUNITIES IN THE CHANGING MARKETING ENVIRONMENT CHAPTER 3 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You are a salesperson for a company that manufactures industrial lighting used in factories and warehouses. During a recent sales call on one of your customers, ABC Supply, an ABC engineer tells you that ABC is testing a competitor’s top secret new product. The competitor is making light bulbs with artificial intelligence and motion detectors to track employees throughout a large facility. The engineer shows you a box full of the light bulbs. When the engineer leaves the room, you have the opportunity, without anyone seeing or knowing, to put one of the bulbs in your briefcase. Your company promotes getting competitive information any way possible and gives bonuses for competitive information like this. Based on what you have heard, this “sample” might be worth $1,000.

Would you take one of the light bulbs? What do you think of this company’s “bonus” policy and attitude?

This scenario describes a general situation that might occur to a student. Often salespeople stumble upon information or samples of competitors’ products before they reach the market. Many companies encourage salespeople to report back on competitive activities they observe in the field. The AMA’s Statement of Ethics (Exhibit 1-7) suggests that marketers should not encourage others to engage in unethical behavior. This example is in the more egregious end, literally stealing from the customer. Most students find this a bit too much. But would it be appropriate for the salesperson to ask the customer if he could have one? What if the customer offered it? Would that change the ethics of the situation? This can lead to an interesting “Where do you draw the line? And why?” discussion.

CHAPTER 3 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise shows how a marketing manager might use market share for insights.

Marketing Analytics in Action 3: MARKET SHARE 1. These numbers provide several key insights: • In the U.S. and Japan, Apple’s iPhone has a large share of the market.

• In Japan, Apple’s iPhone is showing negative growth from 2020 to 2021.

• In China, Apple’s iPhone has a more modest share of the market.

• In China, Apple’s iPhone is showing strong growth from 2020 to 2021.

• In Mexico, Apple’s iPhone has a small share of the market.

• In Mexico, Apple’s iPhone is showing modest growth from 2020 to 2021.

2. The stark differences in sales performance across these four markets suggests the marketing manager must dig deeper to understand what it is about these markets that shows success and potential trouble. It might help to know about competitive activity across the various markets – for example has Samsung been more aggressive? In China for example, upstart smartphone makers like Huawei offer higher quality at much lower prices as compared to Apple. Students might also speculate on whether consumers are more or less price sensitive in these markets. Typically, Japanese customers are not as price sensitive – though they may be more price sensitive in China. Demographic data from later in the chapter (see Exhibit 3-6) can be used to make further speculations.

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CHAPTER 3 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: Photos: • Warby Parker markets itself as a socially conscious business by providing designer eyewear at inexpensive prices.

• SoftBank’s robotic baby seal Paro helps Japan provide emotional support in caring for its elderly • Plantbottle is 100% recyclable and partially made from plant material, resulting in a smaller carbon footprint.

• Cargill’s sustainability efforts help the food producers they supply make their products sustainable.

Section: • A special kind of mission statement – the purpose statement o Organizations can replace their mission statement with a purpose statement which defines their aspirational reason for being and benefits customers, employees, investors, and society at large.

• Machine learning teaches intelligent agents dermatology o A skincare app uses AI to differentiate between benign and cancerous skin lesions.

• Sustainability matters o Consumers care about the environment and are willing to pay more for products that is deemed more sustainable.

• Technology and marketing raise living standards in India o Johnson & Johnson uses mobile phones to help expecting and new mothers make healthy choices for themselves and their children.

CHAPTER 3 – COMMENTS ON QUESTIONS AND PROBLEMS 3-1.

Amazon is constantly evaluating opportunities in a fast-changing environment. Examples of key terms and concepts from this chapter include but are not limited to: • The economic environment – “encouraged by a strong economy” people with enough income (GDP) • Technological environment – Amazon took advantage of a fast-growing Internet • Technology racing across the globe – Amazon opens sites in many countries • Political environment – legal restrictions hold up drone delivery • Competitive environment – “Amazon closely monitors the strong competition in its markets…”

• And more.

3-2.

This is a more advanced exercise and might be a difficult question for the introductory marketing student. If used in class, though it would allow the instructor to clarify points and motivate higher levels of learning.

Trends eBay becomes a larger competitive rival Artificial intelligence (see What’s Next?)

Threat If eBay becomes a stronger competitor it could steal customers from Amazon.

Intelligent agents might guide customers to other

Opportunity Amazon could consider buying eBay. Amazon could use intelligent agents to offer customers a

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Faster Internet connections emerge across Africa

websites that may offer lower prices Customers in Africa have access to more products but may prefer local online retailers.

superior customer service experience.

The faster connections allow more customers to purchase online.

3- 3.

The purpose of this question is to encourage students to think about the link between a mission statement and the forthcoming discussion of generic markets and product-markets in Chapter 4. A mission statement should help set the course of the company and help managers understand what types of opportunities are priorities for the company and which are beyond the scope of what it is trying to do. In that sense, it is the most general (i.e., the first) qualitative screening criterion that might be used in evaluating opportunities to determine if they should be considered and evaluated further. The problem with basing a mission statement on the type of product the firm currently produces is that it might indirectly discourage the firm from thinking about new or better ways to meet customer needs. For instance, using the example given in the question, in recent years many of the industrial applications of electric motors have changed dramatically because of computerization. As a result, many motors are now being replaced by what is called an “electric drive,” which is really an integrated combination of a motor (that powers something) and a controller (that determines when and how much power will be applied). A firm could do a great job of creating motors but lose its market to a competitor that offers customers an electric drive that does a better job of meeting their needs.

In this example, the two products seem quite similar, but that may not always be the case. For example, a cable-TV weather channel might lose certain customers to a website that focuses on the weather. Thus, at a broader level this question gets at the issue of “marketing myopia” and the problems that arise from defining market opportunities too narrowly – in terms of products rather than in terms of customer needs and how those needs might be met by alternative product offerings. On the other hand, many firms do reference specific product types in their mission statements, perhaps to delimit the types of businesses they want to be in. Even so, there is a risk of creating mission statements with too narrow a focus on specific products rather than on the needs those products should satisfy.

3-4.

A firm can use its purpose statement to achieve revenue and profitability goals by focusing its mission to both meet customer needs, employee needs, and help society at large. By defining what its purpose is and how it helps society, firms are able to clearly identify their place in the market, as well as the larger world. Articulating that to customers can differentiate the firm from its less purpose-driven competitors. Exhibit 3-2 show examples of companies that currently do this – you can ask students if they believe the company is fulfilling its purpose, as well as identify other companies that would benefit from a purpose statement.

3-4.

A firm's resources provide both strengths and weaknesses, and a smart marketing strategy planner would try to make use of the strong points while avoiding weaknesses. Strengths may come from a firm's functional areas (production, research and engineering, marketing, general management, finance) as well as present products and markets. Other resources listed in the text include financial strength, production capability and flexibility, sources of supply, and marketing strengths such as, good relations with intermediaries, sales force skill, and knowledge of the target market.

3-5.

Students will focus on several different aspects of how competitor analysis is useful in avoiding situations that involve head-on competition. However, the thrust of the text discussion is that the competitor analysis encourages the marketing manager to think in terms of whole strategies – target markets and relevant marketing mixes – as well as competitive barriers when evaluating the competitive situation. There may be a number of competitors who are very similar with respect to one dimension (i.e., the product that they offer), but who are very

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different with respect to other aspects of the strategy (channel of distribution, promotion approach, etc.).

3-6.

The impact of technological developments on marketing is discussed in section “The Technological Environment.” This question can be interesting and thought provoking if the instructor persists in asking whether anything in the student's "hometown" must be produced there. Generally, services which are performed directly for or on a person (e.g., haircuts, tooth repair, etc.) must be produced locally. But beyond this, local and regional monopolies are becoming increasingly vulnerable if their primary reliance has been upon the high cost of moving goods.

Recently, the many countries have become much more protective of their home markets— imposing tariffs on imports. This might be used to counter the benefits of this new transportation options.

3-7.

This question is designed to get students thinking creatively. If it is used in class discussion, the instructor might offer some examples to spur students’ thinking. These ideas might help.

• Pens – a low-cost AI might let someone know when the pen was low on ink.

• Coffee cup – AI, combined with a heater embedded in the cup, might help keep the coffee at a constant temperature.

• Bicycle – AI might lock the wheels on a bike unless the owner’s smartphone was within the range of a Bluetooth signal.

3-8.

Some people think that the economic unification of Europe will make Europe a single, unified market. That is very unlikely – and the recent Brexit (Britain exiting the European Union is an example). It is true that the elimination of trade barriers and conflicting intracountry rules and regulations will make trade much more efficient. However, it is not wise to ignore the human side of the equation. Millions of people who have for hundreds of years had different cultures, different languages, different religions, different values, and different political and economic institutions will not instantly become homogeneous. The forces at work will "nudge" things in that direction, but whatever social changes occur are likely to be slow. Thus, it will continue to be important for marketing managers who target European customers to think about segmentation and possible submarkets. However, as a very practical matter, the costs of serving different submarkets within Europe will be reduced, and it will probably be easier to use combining approaches that lead to marketing mixes that target a number of different submarkets.

3-9.

Basically, it is attempting to protect consumers – but sometimes efforts have been made to protect individual competitors in the hope that this would preserve competition and help consumers.

3-10.

Students can offer many brands that have moved toward greater sustainability—after all they are the target market for many of them. Examples might include, • tentree apparel promises to plant ten trees for each product purchased • Toms gives a free pair of shoes for each one purchase, but all its shoes (and the shoeboxes) are made with sustainable and recyclable materials.

• Patagonia’s “100% for the planet” includes many promotions that support the environment.

3-11.

Developing an answer to this question should encourage students to think more carefully about the data in Exhibit 3-6, and in particular to compare and contrast the data for different countries. More specifically, the population of Romania is about 20 million (almost 4 times larger than Finland at 5.4 million), but it’s also significant that it has a higher negative population growth rate (5 percent compared to Finland’s -4 percent). In addition, Romania has a smaller percentage of the population in urban areas (55 percent) and its GNI per capita is IV-3-4

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quite low – only about $9,500 a year. With such a low average income, it is unlikely that Romania would be a particularly attractive market for a firm that produces home appliances.

On the other hand, there may be some higher-income consumers in Romania who would be eager to buy home appliances – and there may be less competition for this business (especially from producers who are based in Romania). Further, some students might argue that the market has lots of room to improve in the future.

The evaluation for Finland is likely to lead to a different conclusion. Although the population of Finland is even smaller (only about 6.0 million), its per capita income (as suggested by the $46,550 GNI per capita), its higher percentage of population in urban areas (84), and its extremely high literacy rate suggest a high quality of life and a potential interest in home appliances. On the other hand, the competition in such a market is likely to be strong already, and thus the new opportunity may be limited.

3-12.

See section “The Cultural and Social Environment.” It is important for students to see that not only GNI per capita but also income breakdowns ought to be studied when trying to determine the size of various markets. There are many wealthy landowners and businesspeople in Brazil, for example, and these middle and upper classes might be very attractive markets for some kinds of products. However, the average in that country is pulled down by the large groups who have very low incomes or exist almost at the subsistence level. Once you accept the need for segmenting markets, you become increasingly interested in more detailed data than averages such as GNI per capita. Regarding income, at the very least it would be desirable to have income distribution.

3-13.

The worldwide trend toward urbanization is having a dramatic effect on the opportunities for international marketing. The concentration of population in major cities makes it easier to set up channels of distribution and logistics facilities to reach foreign consumers. This is especially true in light of the fact that major cities often develop near harbors (which make international shipping easier).

The concentration of people can also simplify promotion strategy decisions. This is especially the case for consumers in high-income countries with an advanced standard of living. Some people think that the "urban lifestyle" leads consumers to have very similar needs and interests – even if they are from cultures that are traditionally very different.

Further, consumers concentrated in urban areas can't be self-sufficient in the same way that rural farmers can be self-sufficient. Urban consumers must rely on marketers to provide for their needs. On the other hand, it is important to keep in mind that much of the urban population around the world lives in terrible conditions – and with little or no discretionary income. It's easy for marketers to conjure up images of high-living consumers in Paris, New York and Tokyo and forget about the massive problems faced by the majority of consumers in Cairo, Mexico City, and Moscow.

3-14.

See section “Screening Criteria Narrow Down Strategies.” A set of product-market screening criteria should include both quantitative and qualitative components. The quantitative components state explicitly the objectives of the firm, while the qualitative criteria describe the nature of the business the firm would prefer to be in as well as constraints that it imposes upon itself. Such constraints include: markets it does not want to enter, geographic restrictions, building upon current strengths rather that starting anew, and going with trends rather than bucking them.

3-15.

See section “Screening Criteria Narrow Down Strategies.” The GE approach uses a nine-box matrix and tries to work with many more variables. The thing that makes this practical is that many of the variables are interrelated – and using many of them helps to deepen understanding. The authors' feeling is that the GE matrix is more useful for summarizing a firm's position in a particular product-market than for deciding future strategies. This requires a IV-3-5

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Chapter-by-chapter aids: Chapter 3

deeper understanding of the relevant product-market and what the future holds for that product-market.

CHAPTER 3 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. The situation analysis section of the marketing plan includes sections labeled “Competitors” and “External Market Environment.” Review those sections and answer the following questions. a. In the Competitors section, what dimensions were used to analyze competitors? What other dimensions might have been examined? b. How was competitor information gathered? How else could Hillside have gathered information about its competitors? c. What aspects of the external market environment are included in the marketing plan? What do you think is the most important information in this section?

Appendix B of the Hillside Veterinary Clinic marketing plan provides a competitor matrix – it includes a comparison of four major competitors with HVC. The different dimensions examined include: 1) target market (nature of practice is a rough approximation), 2) pricing for key services, 3) types of services offered, 4) location, and 5) hours of operation. There is also an attempt to infer positioning, primarily through a subjective assessment of a clinic’s website or Yellow Pages ad. The analysis could have done a better job trying to determine the nature of the target market and a more in-depth comparison of services and prices. Present the Marketing Strategy Process Planning Model as a useful framework for analyzing competitors. It might also be noted that sometimes this information can be costly to obtain – and so trade-offs must be made.

The marketing plan notes that competitor information was gathered primarily by looking at the Yellow Pages and by making phone calls to competitors. Competitive information might also be gathered from: 1) websites (although, as shown in the competitor matrix, only two of the chosen competitors have websites and these sites have relatively few pages), 2) brochures and prices lists collected from competitors, and 3) surveys or interviews with customers who use other vet clinics.

The marketing plan includes sections that assess the economic, technological, political/legal, and social/cultural environments. All of these environments are likely to have a tangential impact on the development of the marketing strategy for a vet clinic like HVC. The evidence presented in the plan suggests that the social/cultural environment may be most relevant to marketing strategy decisions.

CHAPTER 3 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 2: Guadalupe Natural Foods, Inc. This case can be used to generate discussion about the nature of competition in an almost purely competitive market – and the need for target marketing and perhaps new-product development to avoid this unattractive market situation. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Case 6: Valley Steel This case can be used to generate discussion about monopolies and oligopolies – and the implications for marketing strategy planning. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 22: Bright Light Innovations: The Starlight Stove This case can be used primarily to demonstrate the challenges of marketing in a developing country. The depth of discussion is likely to be relatively shallow, given that students have only limited knowledge of marketing strategy (at this point). However, this does not stop students from being fascinated by the opportunity and suggesting ideas. Exhibit 3-4 shows demographic data on many different countries, including some very poor countries with high rates of illiteracy like Nepal, the proposed target market for this product. Comparing some of the key indicators in this table starkly illustrates some of the challenges facing the marketers of the Starlight Stove. An instructor might suggest that students go to Michigan State University’s globalEdge (https://globaledge.msu.edu/) to gather more information about Nepal. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 29: Kramer & Geary (K&G) This case can be used to provide a good vehicle for discussion of competitor analysis and how a S.W.O.T. analysis can be helpful in evaluating potential opportunities or planning new strategies.

Differences between physical goods and services are not explicitly discussed until Chapter 8. However, this case also provides a way to preview some of that thinking and show how it relates to the choice of screening criteria. For example, the demand for the firm’s services is at present highly seasonal, so one criterion in evaluating alternatives is that new strategies (marketing mixes, target markets, or both) should increase demand and revenue in times when the firm has excess capacity but not put more strain on the firm when it is already “overtaxed.” We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 40: Potbelly Sandwich This case summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along the 4Ps and features an interview with Bryant Keil, Chairman and CEO of the company. Chicago-based Potbelly Sandwich Works, Inc. is a chain of sandwich shops that competes in the Quick Serve segment of the restaurant industry. Billed as a unique and “quirky” sandwich joint, Potbelly has strong appeal to young urban professionals. The case can be used to discuss external environmental trends and their impact on Potbelly’s marketing strategy. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Case 41: Suburban Regional Shopping Malls This case focuses on the current problems of suburban regional and superregional shopping centers.

Southdale Center located in suburban Minneapolis is a prototype for most of the suburban regional and superregional shopping malls built during the second half of the twentieth century. Southdale opened in 1956 and featured 70 retail tenants in an 800,000 square foot enclosed, climate-controlled mall, anchored by two department stores. This case addresses trends in the external environment and how shopping malls have (and have not) responded to those trends. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATE TO KNOWLEDGE, PROBLEM 3: COMPETITOR ANALYSIS In this problem, a marketing manager is evaluating a new opportunity. He wants to see who will have the competitive advantage. The student analyzes competition, competitive advantage, marketing strengths, pricing, and how changes in technology may result in new opportunities. The problem ties directly to many of the ideas discussed in Chapter 3 of the text. This spreadsheet could also be used in the chapter dealing with personal selling – since much of Mediquip's advantage here is based on its sales force strength.

This problem deepens student understanding of how a company's strengths – and weaknesses – can influence its competitive advantage, its evaluation of market opportunities, and its strategy planning. The case highlights that an advantage may come from different sources – not just from "economies of scale" in production. Another aspect of this problem is that it highlights the importance of thinking about competition. A marketing manager can't plan strategies in a vacuum. An opportunity might look quite attractive if the manager thinks that he has his own "little monopoly" – but profits from that opportunity may be very directly affected by what current or potential competitors decide to do. This is especially hard because it is often difficult to predict how a competitor will react.

The initial spreadsheet for the problem is presented below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

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SpreadSheet

Total Units All Hospitals Likely to Buy Each Supplier's Share (percent) of Total Each Supplier's Likely Unit Sales "Front-end" Design Costs Cost of Producing One Unit Total Cost of Producing Units to be Sold Cost per Sales Rep Number of Additional Sales Reps Needed Total Added Personal Selling Cost Total Design, Producing & Selling Costs Average Total Cost per Machine Desired Profit Contribution per Machine Price that would cover Costs and Profit Total Profit Contribution

Mediquip

Laser Tech

200* 50.00% * 100 $28,000.00* $7,000.00* $700,000.00 $25,000.00* 5* $125,000.00 $853,000.00 $8,530.00 $1,000.00* $9,530.00 $100,000.00

200 50.00% * 100 $19,000.00* $5,875.00* $587,500.00 $25,000.00* 14* $350,000.00 $956,500.00 $9,565.00 $1,000.00* $10,565.00 $100,000.00

Answers to Marketing Analytics Problem 3: a.

It appears that Mediquip does have a competitive advantage due to their salesforce (Answer A). The fact that they have an existing hospital salesforce that can (with limited incremental investment) sell the new product gives them a lower cost structure that can translate into a lower price point.

Assuming that Mediquip can capture a 50 percent share of the market (that is, it could sell 100 units), Mediquip would be able to make a target profit of $1,000 and charge only $9,530.00 per unit. This could give the firm a significant price advantage over Laser Tech in this price-sensitive market. If Laser Tech sells the other 100 units, its price would need to be $10,565.00 to make $1,000 per unit.

In net, it appears that Mediquip's marketing strength would give it cost advantages and more generally a competitive advantage. That is in spite of the likelihood that Laser Tech would have a significant cost advantage in actually producing the units. This initial spreadsheet (given above) can be used effectively to highlight the fact that different companies may have different strengths and weaknesses. Looking at only one element of a company's resources might provide a misleading picture.

b.

This analysis shows the student that a firm's assumptions can make a big difference in how attractive an opportunity appears to be. The two spreadsheets below summarize the different market share situations discussed in the question and the next. In this case, Mediquip appears to have a price advantage over Laser Tech even at a lower sales volume (Answer D). The implication is that Mediquip should be able to compete effectively – perhaps even able to keep Laser Tech out of the market – by offering a price that earns a good profit for Mediquip but which would not be profitable for Laser Tech. The costs for the two firms in the two different situations are summarized below – and more detail can be found in the spreadsheets for the problem – which follow:

Share 45 55

Mediquip Cost Per Machine $8,700.00 $8,390.91

Share 55 45

Laser Tech Cost Per Machine $9,229.55 $9,975.00

(Note: this analysis also affords an opportunity for the instructor to discuss the importance of a sales forecast, and how costs may change depending on the quantity sold. Such a discussion need not be detailed at this point, but rather can serve to "preview" topics developed in more detail later in the course and in the text.)

The spreadsheet for this question – based on a 45 percent share for Mediquip and 55 percent share for Laser Tech, is given below:

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Chapter-by-chapter aids: Chapter 3

SpreadSheet

Total Units All Hospitals Likely to Buy Each Supplier's Share (percent) of Total Each Supplier's Likely Unit Sales "Front-end" Design Costs Cost of Producing One Unit Total Cost of Producing Units to be Sold Cost per Sales Rep Number of Additional Sales Reps Needed Total Added Personal Selling Cost Total Design, Producing & Selling Costs Average Total Cost per Machine Desired Profit Contribution per Machine Price that would cover Costs and Profit Total Profit Contribution

Mediquip

Laser Tech

200* 45.00% * 90 $28,000.00* $7,000.00* $630,000.00 $25,000.00* 5* $125,000.00 $783,000.00 $8,700.00 $1,000.00* $9,700.00 $90,000.00

200 55.00%* 110 $19,000.00* $5,875.00* $646,250.00 $25,000.00* 14* $350,000.00 $1,015,250.00 $9,229.55 $1,000.00* $10,229.00 $110,000.00

Similarly, the spreadsheet showing a 55 percent share for Mediquip and a 45 percent share for Laser Tech is next:

SpreadSheet

Total Units All Hospitals Likely to Buy Each Supplier's Share (percent) of Total Each Supplier's Likely Unit Sales "Front-end" Design Costs Cost of Producing One Unit Total Cost of Producing Units to be Sold Cost per Sales Rep Number of Additional Sales Reps Needed Total Added Personal Selling Cost Total Design, Producing & Selling Costs Average Total Cost per Machine Desired Profit Contribution per Machine Price that would cover Costs and Profit Total Profit Contribution

Mediquip

Laser Tech

200* 55.00% * 110 $28,000.00* $7,000.00* $770,000.00 $25,000.00* 5* $125,000.00 $923,000.00 $8,390.91 $1,000.00* $9,390.91 $110,000.00

200 45.00% * 90 $19,000.00* $5,875.00* $528,750.00 $25,000.00* 14* $350,000.00 $897,750.00 $9,975.00 $1,000.00* $10,975.00 $90,000.00

c.

The correct answer is C - $8,390.91 vs. $9,975.00. See the detailed analysis and spreadsheets for the previous question.

d.

Mediquip must retain at least 40% (Answer D) of the market if they want to retain their price advantage. The spreadsheet showing the full analysis is given below.

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Chapter-by-chapter aids: Chapter 3

SpreadSheet

Total Units All Hospitals Likely to Buy Each Supplier's Share (percent) of Total Each Supplier's Likely Unit Sales "Front-end" Design Costs Cost of Producing One Unit Total Cost of Producing Units to be Sold Cost per Sales Rep Number of Additional Sales Reps Needed Total Added Personal Selling Cost Total Design, Producing & Selling Costs Average Total Cost per Machine Desired Profit Contribution per Machine Price that would cover Costs and Profit Total Profit Contribution

e.

Mediquip

Laser Tech

200* 40.00% * 80 $28,000.00* $7,000.00* $560,000.00 $25,000.00* 5* $125,000.00 $713,000.00 $8,912.50 $1,000.00* $9,912.50 $80,000.00

200 60.00% * 120 $19,000.00* $5,875.00* $705,000.00 $25,000.00* 14* $350,000.00 $1,074,000.00 $8,950.00 $1,000.00* $9,950.00 $120,000.00

The spreadsheet for this analysis (below) reveals that in this situation customers get a better product at a lower price, Mediquip's costs are lower, and it also makes more money. Everybody wins! The correct answer is B - $8,390.00. Being able to identify attractive new market opportunities where a firm can successfully meet customers' needs can help both the firm and customers. It can also give the firm a "pioneer's advantage"; by being first in the market it can do such a good job that it is hard for other competitors to catch up. But, of course, markets are dynamic – so a firm can't rest on its successes. Competition, markets, and opportunities change over time.

The spreadsheet for this analysis appears below; for comparison purposes, note that the Laser Tech column has been set to show how it might look if it had been able to capture all of the market): SpreadSheet

Total Units All Hospitals Likely to Buy Each Supplier's Share (percent) of Total Each Supplier's Likely Unit Sales "Front-end" Design Costs Cost of Producing One Unit Total Cost of Producing Units to be Sold Cost per Sales Rep Number of Additional Sales Reps Needed Total Added Personal Selling Cost Total Design, Producing & Selling Costs Average Total Cost per Machine Desired Profit Contribution per Machine Price that would cover Costs and Profit Total Profit Contribution

Mediquip

Laser Tech

200* 100.00% * 200 $28,000.00* $6,500.00* $1,300,000.00 $25,000.00* 5* $125,000.00 $1,453,000.00 $7,265.00 $1,125.00* $8,390.00 $225,000.00

200 100.00% * 200 $19,000.00* $5,875.00* $1,175,000.00 $25,000.00* 14* $350,000.00 $1,544,000.00 $7,720.00 $1,125.00* $8,845.00 $225,000.00

MARKETING ANALYTICS DISCUSSION This question introduces pricing strategy tradeoffs. Should the company use a price skimming strategy (charge more) to recoup investment and increase early profits or should they accept lower profits per unit in order to speed adoption and control the market? Many companies choose to charge a higher price since they control the market. One downside of that approach is that it provides an opening for competition. Competitors may be attracted due to the higher profit margins. In addition, higher prices will slow adoption which leaves the door open for another company to come in and compete at a lower price.

Ask the students for examples of companies that have used either strategy.

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CHAPTER 3 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: The m-Banking Revolution Question Type: Case Analysis Learning Objectives: 3.5 Topic: Technology AACSB: Technology Bloom’s: Understand, apply Question 2: Technology Modifies the 4 Ps Question Type: Case Analysis Learning Objectives: 3.5 Topic: Technology AACSB: Technology Bloom’s: Understand, apply Question 3: Understanding Company Resources Question Type: Click and Drag Learning Objectives: 3.3 Topic: Company resources AACSB: Reflective thinking Bloom’s: Understand, apply Question 4: Macroenvironmental Factors (iSeeIt! Video) Question Type: Video Case Learning Objectives: 3.3 Topic: The Market Environment AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 5: Competitor Analysis Question Type: Marketing Analytics Learning Objectives: 3.4 Topic: Analyzing Competitors and the Competitive Environment AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 6: Market Environmental Variables Question Type: Click and Drag Learning Objectives: 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7 Topic: Changing Market Environment AACSB: Knowledge, application, Bloom’s: Understand, apply

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Question 7: A Hierarchy of Objectives Question Type: Click and Drag Learning Objectives: 3.4 Topic: Company Objectives AACSB: Knowledge, application, Bloom’s: Understand, apply Question 8: Types of Competition Question Type: Click and Drag Learning Objectives: 3.2 Topic: Types of Competition AACSB: Knowledge, application, Bloom’s: Understand, apply Question 9: Marketing Environment Question Type: iSeeIt! Video with Multiple Choice Learning Objectives: 3.1, 3.5, 3.6, 3.7 AACSB: Diversity, Reflective Thinking Bloom’s: Apply, analyze Question 10: Mobile Marketing Question Type: iSeeIt! Video with Multiple Choice Learning Objectives: 3.1, 3.5 AACSB: Reflective thinking, analytical, Bloom’s: Understand, Apply

Application-Based Activities Title: Marketing Environment: Waves Speakers Type: Role-Playing Bloom’s: Apply Description: lay the role of a marketing consultant. Joe Bohrd was a celebrity surfer who has transitioned to making high performance, environmentally-friendly surfboards. You will need to navigate several issues regarding ethics and social responsibility as he tries to grow his business.

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CHAPTER 4: FOCUSING MARKETING STRATEGY WITH SEGMENTATION AND POSITIONING CHAPTER 4 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You have just started working as assistant brand manager for Silky Smooth skin cream, and your territory includes one Southeast Asian country. Silky Smooth is a skin moisturizer that also lightens skin tone. However, the lightening feature has not been noted on Silky Smooth product packaging or in advertising. In this country, there is discrimination against people with darker skin tones, so many consumers actively seek to lighten their skin. Two major skin cream competitors promote “skin-lightening” by showing ads featuring an unhappy woman who starts using the product and becomes very happy and more successful with her lighter skin. Activists have protested against skin-lightening products because they reinforce a negative stereotype. Silky Smooth’s consumer research predicts that promoting skin-lightening benefits to customers with darker skin tones would increase Silky Smooth sales by 20 percent in less than a year. You are wondering whether to target the market segment of women seeking lighter skin with advertising and packaging that emphasizes these benefits. Your boss says it is your call, while also reminding you of the bonus you receive for growing sales by 10 percent or more. Do you have any concerns about this issue? Would you target this darkerskinned segment of the population? Why or why not?

This scenario reflects a real issue in parts of Southeast Asia (see articles cited below). In India, it is estimated that over 60% of women use some sort of skin lightening product on a daily basis (Eagle, Dahl, and Low 2014). This ethical dilemma raises questions about marketing’s potential role in fostering racial stereotypes and attitudes. On one side of the issue, the discrimination already exists and Silky Smooth offers a product that will help some consumers feel better about themselves. On the other side of the issue, actively advertising Silky Smooth as a skin-lightener invariably results in directly stating or implying that dark skinned people are “losers.” The article in Quartz India below includes links to television ads that might be shown in class.

References: “New Advertising Guidelines in India Force Brands to Operate in a More Ethical Manner,” Mintel, July 1, 2014 (https://goo.gl/LTVXiZ); “Ethical Issues in the Marketing of Skin Lightening Products,” ANZMAC Conference Proceedings, 2014 (https://goo.gl/mDhFaf); “These Skin-Lightening Commercials Will Infuriate You (and Should Shame India’s Ad Industry),” Quartz India, June 12, 2014.

Two recent CNN articles provide some great background you can use to foster in-class discussion of this issue: “Skin whitening: What is it, what are the risks, and who profits?” and “’I would whiten my skin no matter the cost.’”

CHAPTER 4 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise looks at the results of a cluster analysis – a technique discussed in chapter 4. The exercise provides a demonstration of how a cluster analysis can provide insights – in this case on holiday shopping behavior. The questions have no clear right and wrong answers and might therefore provide a good basis for in-class discussion.

Marketing Analytics in Action 4: CLUSTER ANALYSIS 1. Students may offer a wide range of ideas here – many reflecting local stores. “Giving is Love” are likely to shop at unique specialty stores to purchase gifts. On the other hand, “Obligated Posers” might be more likely to shop online at Amazon.com – seeking a quick way to purchase a gift.

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“Utilitarian Grinches” might simply ask a recipient what gift they wanted – or prefer to shop at a place where someone could easily return or exchange the gift. They like to shop online so Amazon.com might be a good place to go.

2. “Giving is Love” shoppers might buy candles or a blouse at a boutique. “Obligated Posers” might purchase wine or a vase they find on sale. “Utilitarian Grinches” might purchase a gift card.

3. Buyer personas are introduced earlier in the chapter and defined as “fictional depictions of customers illustrative of each target market.” The idea here should be to encourage students to be creative. Examples might look something like the following: • “Giving is Love” – Margot is a 29-year-old mother of three who lives in Dubuque, Iowa.

She works part-time at a local grocery store. She enjoys crafting – on her own and with her children. She likes to shop at craft shows and artisan stores.

• “Obligated Posers” – Jessica is 48 years old and single. She is a partner at a local CPA firm where she has worked for 26 years. She works long hours. Jessica takes great pride in staying in shape and works out regularly at the local health club. She buys gifts for customers and family members, but does not enjoy the process. Sometimes she asks her executive assistant to come up with gift ideas on her behalf.

• “Utilitarian Grinches” – Sanjay is a 42-year-old engineering professor—married with two kids. He grew up poor and his family did not give many gifts. Now that he has “made it” he feels a need to buy gifts for his extended family. But he remains a practical man and typically shops on Amazon.com because he likes the convenience of online shopping, customer reviews, and free two-day shipping with his Amazon Prime account.

A follow-up discussion question might ask students how the buyer personas might be useful to a marketing manager – as opposed to the more bland description provided in the exercise.

CHAPTER 4 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following examples of how marketing can contribute to a better world: Sections: • Targeting the underserved makes a better world o PayPal’s Xoom app allows poor migrants to send money quickly to their families overseas with lower fees than traditional money transfer services.

•

See also questions and problem 10.

CHAPTER 4 – COMMENTS ON QUESTIONS AND PROBLEMS 4-1.

The LEGO case provides good examples of segmentation and targeting as well as other concepts in the chapter. Examples of key terms and concepts from this chapter include but are not limited to: • Generic market – “construction toy market” and “active play market” • Market segmentation and market segments –boys at different ages, girls preferring different types of play. Play also differs across different countries. AFOLs. • Segmenting dimensions – gender, age, country, • Qualifying dimensions – childhood • Combiners – German and American parents have similar values around play.

• And more.

4-2.

LEGO appears to be using age, gender, and country (at least) to segment its markets.

Students could view Exhibits 4-9 and 4-10 for many ideas. Brand familiarity, for example, might be one – where it might have to do different types of promotion depending on whether the target was aware of LEGO or not. It could also target people of different ethnicities – perhaps

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with kits that had min-figs of different ethnic backgrounds. Finally it might look at rate of use – since many customers are heavy users while others are not.

4-3.

A generic market is a market with broadly similar needs and sellers offering diverse ways of satisfying those needs, while a product-market is a market with narrowly similar needs and sellers offering close-substitute ways of satisfying those needs. The generic market for "containing" products in the home could be satisfied by a wide variety of containers – including dishes, plastic plates or containers, paper plates or containers, and so on. In the productmarket of paper plates for U.S. family picnics and informal gatherings, on the other hand, there are many competitors offering different styles, sizes, colors, and so on of paper plates, but they all have the advantages and disadvantages of paper plates.

4- 4.

Market segmentation is a two-step process of (1) naming broad product-markets and (2) segmenting these broad product-markets in order to select target markets and develop suitable marketing mixes. Naming a broad product-market involves "breaking apart" – disaggregating – all possible needs into some generic markets and broad product-markets in which the firm may be able to operate profitably. This step tries to "narrow down" to product-market areas where the firm is more likely to have competitive advantage. After this first narrowing down step, the second step is segmenting – aggregating individual customers with similar needs into a relatively homogeneous group of customers who will respond to a marketing mix in a similar way. See section “Market Segmentation Defines Possible Target Markets.”

4- 5.

This is a very difficult question, because there is much interaction among these dimensions and a great deal of intuition and judgment is required to find the "right" dimensions. The question is intended to force a review of the types of dimensions listed in the text. The students probably will want to use geographic dimensions first, and this would be reasonable for a national or international marketer. After that, however, it is not possible to single out the "obvious" second- and third-place candidates. The authors' preferences are to try to use the needs that potential customers want satisfied and the benefits that are offered by the firm's present or proposed products. But in situations where competitive products are "me-too" products, the differentiating characteristics may be minor and the determining dimensions may be minor also. The students should not be led into thinking of these minor differences as unimportant, however. If they are the determining dimensions, then they may determine who buys what. Substantial shifts in market share can result if some competitor correctly understands the determining dimensions and delivers the most appealing marketing mix.

Customers regularly buy some kinds of products – e.g., specific foods and household supplies – and large sales volumes can be won with "almost" "me-too" products.

4- 6.

First-time segmentation efforts can be disappointing because the analysts naively start with the whole "mass market" and try to find one or two demographic characteristics that will explain the behavior of submarkets. Basically, they stop at the stage of disaggregating markets.

Research shows that this approach has at least two major shortcomings. It often leads to trying to work with too few and probably the wrong dimensions. Second, perhaps as a result of the first problem, this leads to customers with dissimilar needs (and likely responses to marketing mixes) being "lumped together" as members of the same market segment. This is avoided if the manager first narrows down to the relevant product market – and then aggregates customers with similar needs into segments. See section “Market Segmentation Defines Possible Target Markets” for more discussion on the importance of thinking of segmenting as an aggregating process.

4-7.

Most colleges do attempt to develop reasonably homogeneous student bodies, at least with respect to scores on entrance exams or grade point averages achieved elsewhere. Some do attempt to recruit students from various ethnic groups and regions to provide better "balance" among their students, and others do appear to be aiming at the "mass market.” Admissions officers and counselors attempt to select "good" students for their particular "marketing mix.”

Among other things, the students' own preferences and previous records are relevant for IV-4-3

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deciding which colleges (or departments) within the larger academic environment will be most attractive and suitable to them. Ultimately, the academic units attempt to select students who want to be there and who are willing and able to do the kind of work that is required. To be sure, the students may facilitate the aggregating process by not applying at obviously unsuitable places, but it is still the responsibility of the admissions officers to select those whom they feel will be the best match with the academic unit's offering.

4-8.

This is clearly an open-ended question, but students do have some feelings about watches and generally are able to do a reasonably good job of describing their own market. Many are reasonably satisfied with the present offerings, while some real "watch buffs" have such esoteric demands that cannot be met on a student budget - and they are willing to admit it.

4-9.

Family Vacationers: might offer partitioned off or connecting rooms to give parents a place to relax and watch TV after putting the kids to bed. A pull-out couch and crib availability would accommodate large families or those with small children. A pool, game room, or other activities could be used to entice families to stay there. Free continental breakfast could be provided.

The hotel should be located near the family-friendly events in the area – a free shuttle could be provided to assist out of town guests who don’t have a car with them.

Budget-Oriented Travelers: rooms should be no frills; solidly made furniture with all of the necessities and no extras. Meals would not be offered onsite, and there need not be a fitness center, pool, or bar.

Long-Stay Guests: might offer comfortable, spacious rooms with distinct living and eating areas, and include a refrigerator, sink, microwave, and dining table. An on-site laundry facility would make it easy for guests to wash their clothes. Accommodations could be offered at daily, weekly, and monthly rates.

Event-Centered Guests: might offer special rates for guests attending special events. A shuttle bus could be made available to transport the guests to and from the event. Depending on the type of event, guests could purchase boxed lunches to take with them.

4-10.

Students may be able to identify a wide range of firms that target underserved communities.

On the other hand, the question may be difficult since many brands that do this are not particularly well known. Consequently, an instructor may want to have some examples available or encourage students to search online for examples. Another option would be to suggest students look through the textbook for examples as we have marked our #M4BW images and examples – many of which include companies targeting underserved markets.

Some examples include: • Mera Gao Power seeks out communities off the power grid in India.

• Israeli company Watergen makes an Atmospheric Water Generator that gets distilled water from the air and distributes it. They target areas of the world with limited access to clean water.

• In Chapter 9, we show an image of Microsoft’s Xbox adaptive controller which helps people with limited hand and arm mobility.

4-11.

Exhibit 4-12 shows the six steps used to segment product markets: 1. Select the broad product market 2. Identify potential customers needs 3. Form homogeneous submarkets 4. Name the possible product-market subsegment 5. Evaluate product-market segments behaviors 6. Estimate the size of each product-market subsegment An example of applying this to off-campus apartments yields the following 1. Off-campus apartments 2. Close to campus, transportation to campus, areas to study, areas to socialize, fitness center IV-4-4

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3. Traditional students; graduate students; non-traditional students with families 4. Traditionals, graduates, families 5. a. Traditionals: socializing is just as important as studying is; they view college as a chance to have a good time and make life-long friends as well as get an education; they need to be close to both the school, any campus Greek life, and any popular activities that take place in town. Many students may have family or financial aid that is paying for apartment, so cost may not be their primary concern. b. Graduates: Focused on completing their advanced studies; will most likely be working on campus as well as taking classes; important to have a calmer atmosphere where work can be completed. Many will be living on a graduate student stipend, so cost will be a concern. c. Families: potentially could be working, going to school, and raising a family all at the same time. Likely to be more driven than the traditional. Would want a safe, family-friendly home; unlikely to be interested in many of the social aspects that traditionals want. Location near school and public transportation could be important – common areas for young children to play in would also be important.

Cost considerations may be highest for this group – likely to be on a tight budget and also paying for childcare.

6. a. Traditionals: largest part of the market b. Graduates: middle of the market; less of them than traditional c. Families: smallest market segment

4-12.

Positioning approaches show where proposed and/or present brands are located in a market – as seen by customers. This information can help marketing managers in a number of ways.

First, it can help a marketing manager to decide whether he wants to leave his product where it is – or try to make changes (for example, in the product or in customer perceptions by changes in promotion). It can show what brands are viewed as most similar to the firm's offering – and thus it can help to identify which brand is competing most directly with which other brands. It can also point to market segments whose needs are not being met by current offerings.

Sometimes it can also help in making decisions about whether or not to try to combine several segments into a single target market. For additional detail, see Exhibit 4-11 and the section “Differentiation and Positioning Take the Customer Point of View.”

4-13.

This exercise brings the idea of a positioning statement home to students. What makes them different from their peers? Will those differences appeal to employers they hope will hire them?

If students become discouraged, encourage them to work toward differentiation – as many are probably still a few years from full-time employment.

CHAPTER 4 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Customers” section. a. How does the marketing plan segment the market? b. Can you think of other segmentation dimensions that could be used? c. What do you think of the approach Hillside used to determine the target markets? Are they using a single-target market, multiple target market, or combined target market approach? d. How does Hillside plan to differentiate and position its offering?

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The segmentation approach used includes a geographic dimension (living within 10 miles of Wellington, Colorado), demographic dimension (owner of a small animal/pet), and a behavioral dimension (purchase relationship – current vs. not current customers).

For part b, students could choose other examples from Exhibit 4-8. For example, needs or benefits sought – as some customers focus only on treating their pet when it is ill or injured, while others are more interested in preventive care (like the dental services). They might also consider segmenting based on the number of pets in a household or perhaps economic needs, income, or ethnicity.

The segmentation approach relies on a number of the concepts and ideas covered in the text. For example, it: 1) defines the broad product-market, 2) identifies potential customer needs (mostly by talking to the staff), and 3) identifies qualifying and determining dimensions.

The approach used also indirectly addresses other concepts: 1) forming submarkets – reasons for not pursuing more distant customers and owners of large animals and 2) roughly estimating size and growth of the overall market.

Some other concepts considered in the text are not included, like: naming the possible product-markets and evaluating the sub-market behaviors. The marketing plan clearly utilizes the multiple target market approach – by developing different strategies for current customers and non-customers.

The plan notes three points of differentiation – high level of customer service, compassionate animal health care, and location in Wellington, CO. The positioning emphasizes the compassionate and personalized care offered.

CHAPTER 4 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 2: Guadalupe Natural Foods, Inc. This case mostly addresses product issues for Guadalupe Natural Foods. An instructor might use this case to discuss differentiation, positioning, and segmentation. If the company is to avoid becoming commoditized, it must develop some points of differentiation. The case provides an opportunity to discuss the target markets, differentiation and product. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter.

Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 3: COLORADO United Soccer Academy This case can be used here to demonstrate making target market decisions. The four options presented in the COLORADO United SoccerAcademy case focus on distinct target markets. The best practice approach to market segmentation might be used to guide discussion: 1. Name the broad target market. The product-market definition should include product type, customer needs, customer types, and geographic area. It’s important to strike a balance between being too broad and too narrow. One might say that COLORADO United Soccer Academy’s product-market is soccer training for kids in northern Colorado interested in soccer and between the ages 6–18. Note that you might define any of these elements more broadly or more narrowly.

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2. List potential customer needs. This is a brainstorming step. Students might suggest factors like: shooting skills, dribbling skills (or more broadly technical soccer skills at a very basic or very advanced level), staying in shape, or getting a scholarship. Other factors might include the desire of parents to have a place for their kids to go after school, or for fun or social opportunities – a chance to hang out with or meet friends, or simply a way to keep their kids active.

3. Form homogeneous submarkets. Different market segments might emerge from looking at the different needs. For example, the needs of kids ages 6-9 would differ from older kids – and those playing for traveling, competitive teams might differ from those of recreational players. A matrix might be created to list each type of customer and likely needs.

4. Identify determining dimensions. At this point, students can help sort potential segmentation dimensions into qualifying and determining dimensions.

5. Name (nickname) the possible product-markets. These might include names similar to: “future soccer superstars,” “already superstars,” “good athletes,” “social soccer players,” “just wanna have fun,” “just learning the game,” etc.

6. Evaluate why product-markets behave as they do. Choose a couple of the segments from Step 5 and think more deeply about their specific needs.

7. Make a rough estimate of the size of each product-market. This may be difficult to do without more data. But an instructor could simply have students make educated guesses (which may be pretty accurate given these students were recently members of the broader market). One might also estimate the relative sizes – “Which product-market is largest?”

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 7: Lake Omarama Lodge This case can be used to illustrate a marketing mix that is focused on a very small, but potentially attractive, target market segment. Lake Omarama Lodge targets an elite group of people who have very public lives (celebrities like movie stars and other very wealthy, high-visibility executives), but want a unique vacation experience that avoids an invasion of their privacy. The case offers an opportunity to think about the needs of the people in this target market and the difficulties of trying to simultaneously respond to all of those needs. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 10: Anderson’s Ice Center Anderson’s Ice Center is an ice-skating rink that is faced with the challenge of trying to appeal to different target market groups. It deals with this challenge by offering different programs to different market segments at different times and days of the week. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter.

Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 14: Schrock & Oh Design This case examines a small service company – an architecture firm – that works with both businesses and consumers. The case was inspired by reading about another small architecture firm that built its business by relying heavily on various sources of owned media. The firm sells mostly B2B and it could be

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used to discuss some of the segmenting dimensions for business/organizational markets. And while it might be a bit early to cover new topics like organizational buying and social media in depth, students might enjoy some discussion of these topics so they can see why we segment and target markets. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 27: Canadian Mills, Ltd. This case presents a good opportunity to discuss market segmentation, target marketing, and the three basic ways of developing marketing-oriented strategies discussed in Chapter 4. The case is set in Canada and the basic question centers on: How different is the consumer market in Quebec and what should the company do about it? We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 40: Potbelly Sandwich This case summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along the 4Ps and features an interview with Bryant Keil, Chairman and CEO of the company. Chicago-based Potbelly Sandwich Works, Inc. is a chain of sandwich shops that competes in the Quick Serve segment of the restaurant industry. Billed as a unique and “quirky” sandwich joint, Potbelly has strong appeal to young urban professionals. This video case allows for a discussion of positioning and segmentation. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 42: Invacare Says “Yes, You Can!” to Customers Worldwide Home medical equipment markets can be segmented using an assortment of variables. Invacare, for example, uses a lifestyle segmentation to identify sports enthusiasts and other active users. Wheelchairs and other products are designed to uniquely meet their needs. Invacare has capitalized on these markets with constant innovation and total quality management. In order to provide the sophisticated integrated controls necessary for its power wheelchairs, the company acquired a manufacturer of control equipment and software. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 43: Segway Finds Niche Markets for Its Human Transporter Technology Some of the case questions specifically ask about segmentation and targeting. An instructor might ask, what types of applications and usage situations are there for Segway PTs in your area? The answer to this question could range widely, but here are some of the possibilities. Applications: Airport security, shopping mall security, campus police, campus tour groups (parents and potential students, freshman orientation), city tour groups, local manufacturing plants and warehouses, pedestrian areas (historic districts), hospital security and personnel, zoos, farms, and other types of spaces where walking takes a lot of time.

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We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 4: SEGMENTING CUSTOMERS The questions for this problem are intended to deepen students' understanding of ideas related to segmenting, clustering, and related concepts. The spreadsheet for this problem is different from the ones for most of the other problems because it is not oriented toward costs, revenue, and profits. Rather, for this problem the spreadsheet values are the "inputs" and "results" for a (simplified) cluster analysis technique. Because the "style" of this spreadsheet is different from some of the other spreadsheets, some instructors may wish to wait and use it later in the course – after students have had more experience with the more "typical" problems. This problem, could, for example, be used with the marketing research chapter.

The approach followed in the problem is like the approach that many firms follow in using cluster analysis techniques to aid in segmenting decisions – and to develop more information about segments. The problem presents data about the "benefits" that a (small) sample of customers seek from a product— voice-recognition software. Students enter the data for each customer and based on the clustering results classify the customers into one of several segments described in the problem. Each customer is classified into the segment with the most similar "ideal" benefits scores. Then, the students draw on the results of their analysis to get an idea of the cluster size, characteristics (computer used) of each segment, and other related information. A small number of customers are analyzed. The point here is for the student to see how the ideas apply – not to try to develop a "representative" set of results. After doing this exercise, students will have a better idea of how marketing research can be used to help with segmenting decisions.

The technical idea underlying this exercise is similar to the notion of "positioning" segments based on their "ideal" product features, and then seeing which are close and which are not. This point is not developed in the student materials. But, instructors who emphasize positioning approaches in class might want to develop this logic in discussing the exercise. The questions also show what can happen when a company tries to develop an "average" product in a shotgun approach to satisfying everyone – rather than more homogeneous segments.

This is one spreadsheet in which it will not be obvious to students how the values (the similarity scores) are computed. The approach used in computing the similarity scores is a simplification of a "distance measure" approach actually used in some popular cluster analysis programs. But, even so, the calculations involved are not very complicated. The overall similarity score for each customer is computed as the sum of a set of 3 similarity scores – one for each feature. How "close" a customer is to a segment's typical (average) preference for a feature is determined by subtracting that customer's rating from the average rating for a segment, and then squaring the resulting difference. By squaring the numbers, minus signs disappear – and bigger differences (from a segment average) are counted more heavily. Once a similarity score is computed for each feature, they are summed across features. Then, the same sequence is followed for the next segment.

The key point to emphasize – perhaps before students start this exercise – is the notion of a distance measure. The lower the computed score, the more like (closer) the potential customer is to the segment "ideal."

The value of this exercise will be enhanced with some in-class discussion. The key points to bring out in the discussion are covered below. Because the "answers" for the different questions are developed from across several different spreadsheets, summary tables (like those in the exercise) will be used here –

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rather than repeating all the individual spreadsheets. The initial spreadsheet for this problem is presented next: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Segmenting Data CUSTOMER'S RATING OF NEEDS: Importance of Special Features Importance of Ease of Use Importance of Ease of Learning

8.0* 4.0* 7.0*

Overall SIMILARITY SCORES: Similarity to FEARFUL TYPIST Segment Similarity to POWER USERS Segment Similarity to SPECIALISTS Segment

45.00 30.00 3.00

Answers to Marketing Analytics: Data to Knowledge Problem 4: a.

The customer (represented on the initial spreadsheet) would be aggregated (clustered) into the Professional Specialists segment (Answer C). From the initial spreadsheet (above), you can see that the similarity score for this segment is very small compared to the similarity score for the other two segments. One effective approach here for in-class discussion is to put the "average" scores for the three segments on the board – -along with the scores for this specific customer (i.e., the scores would be 8, 4, and 7). Then, ask the students what segment they think is most like the customer.

They will see that the computer program is simply doing what – in this case – they could have done "visually" by studying the segments and the needs of this particular customer. This provides an opportunity to make the point that clustering approaches attempt to speed up the judgment process by making some of the decision rules more "quantitative." If the instructor desires, the way in which the calculations are done (described above) can be explained at this point. Putting a table, like the one below, on the board will help to make everything clear.

Fearful Typist Power Users Professional Specialist Customer

Features 3 9 7 8

Easy to use 8 2 5 4

Fearful Typist Power Users Professional Specialist

(3-8)2 + (8-4)2 + (9-7)2 (9-8)2 + (2-4)2 + (2-7)2 (7-8)2 + (5-4)2 + (6-7)2

= = =

Easy to Learn 9 2 6 7

Score 45 30 3

Students will see that the arithmetic involved in not very complicated – but rather that it would be tedious to do by hand – especially if a large sample were involved.

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b.

The similarity scores for the different customers with each of the different segments are as follows:

Importance of need:

Similarity Scores

Segment

CustOmer

Computer

Feature

Easy to Use

Easy to Learn

Fearful

Power

Specialist

A

Dell

8

1

2

123

2

33

Power

B

HP

6

6

5

29

34

3

Specialist

C

Apple

4

9

8

3

110

29

Fearful

D

Apple

2

6

7

9

90

27

Fearful

E

HP

5

6

5

24

41

6

Specialist

F

Dell

8

3

1

114

3

30

Power

G

Apple

4

6

8

6

77

14

Fearful

Note that each customer is "aggregated" into the segment for which that customer has the lowest similarity score – i.e., the segment to which that customer is most similar. From the above, it can be seen that there are 2 customers in the Power User Segment, 2 in the Professional Specialist segment, and 3 in the Fearful Typist segment. The answer to this question is B – 3 Fearful Typists. c.

Using the table above, we see that the answer is A – 2 Power Users.

d.

A glance at the table above suggests that the Fearful Typists prefer Apple computers (Answer C).

More generally, the instructor can make the point that this is the type of analysis that is often used to identify segmenting dimensions. For example, if other information were available for each customer (demographics like age, sex, income, etc.), we could also develop profiles of what each segment was like on other dimensions – not just what computer the customer uses.

e.

Based on the analysis (see the table for Question b), it appears that customer D (Answer D) is least like any of the segments.

MARKETING ANALYTICS DISCUSSION The lowest similarity score for customer D is 9.00. All of the other customers have at least one similarity score lower than that. You can use this example to point out – reiterating the point made in the text – that some customers may really be different – and not fit "neatly" into a typical segment.

CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Honda Comprehension Case Question Type: Case Analysis Learning Objectives: 4.2, 4.3, 4.4, 4.5 Topic: Market segmentation AACSB: Technology Bloom’s: Apply IV-4-11 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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Question 2: Generic Markets and Product Markets Question Type: Click and Drag Learning Objectives: 4.1 Topic: Naming product-markets and generic markets AACSB: Reflective thinking Bloom’s: Understand, apply Question 3: Qualifying and Determining Dimensions Question Type: Click and Drag Learning Objectives: 4.4 Topic: Dimensions used to segment markets AACSB: Analytic Bloom’s: Understand, apply Question 4: The Segmentation Process (iSeeIt) Question Type: Video Case Learning Objectives: 4.4, 4.6 Topic: Segmentation AACSB: Reflective thinking, analytic Bloom’s: Understand, analyze Question 5: Segmenting Customers Question Type: Marketing Analytics Learning Objectives: 4.3, 4.4, 4.5 Topic: Market segmentation AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 6: Perceptual Mapping Question Type: Click and Drag Learning Objectives: 4.6 Topic: Positioning and perceptual mapping AACSB: Knowledge, Application Bloom’s: Understand, apply Question 7: Dynamic Behavioral Segmentation Question Type: Click and Drag Learning Objectives: 4.5 Topic: Market segmentation AACSB: Knowledge, Application Bloom’s: Understand, apply Question 8: Marketing Segmentation and Positioning at LEGO Question Type: Case Analysis and Multiple Choice Learning Objectives: 4.1, 4.2, 4.3, 4.4, 4.7 AACSB: Reflective Thinking, analytic Bloom’s: Remember, Understand, Apply Question 9: Customer Relationship Management Question Type: iSeeIt! Video with Multiple Choice Learning Objectives: 4.6 AACSB: Analytical thinking Bloom’s: Remember, Understand

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Application-Based Activities Title: Customer Relationship Management: Grab & Go Grocery Type: Role-Playing Bloom’s: Apply Description: Play the role of a manager of the Customer Relationship Management (CRM) program at Grab & Go Grocery, a meal delivery service. Manage the CRM data to enhance the customer experience and stand out from the competition.

Title: Segmentation Type: Mini Sims Bloom’s: Apply Description: Understand the impact of segmentation on the 4Ps and develop a backpack that appeals to the Urban Commuters market.

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CHAPTER 5: FINAL CONSUMERS AND THEIR BUYING BEHAVIOR CHAPTER 5 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You are a marketing assistant for Auntie Em’s Cookie Company, which makes and distributes packaged cookies through grocery stores. Your company recently ran a test market for a new brand of low-fat cookies called Tastee DeeLites. The new brand meets government standards to be labeled and advertised as “low fat,” so the ads and package used in the test market highlighted that benefit. Test-market sales were very promising. However, now a consumer activist group has created a website (www.TasteeDeLIES.com) that claims Tastee DeeLites package and ads are misleading because the product’s high calories make it even more fattening than most other cookies.

Your boss has asked you to recommend how Auntie Em’s should handle this situation. Drawing on what you’ve learned about consumer behavior, do you think consumers would be misled? Does your company have any responsibility to respond to these charges? Should changes be made to the product, package, or promotion?

This scenario raises questions about consumer attitudes and beliefs. Do consumers that read “low fat” assume “low calorie”? If so, would that make the ads and packaging deceptive? The AMA Statement of Ethics (Exhibit 1-7) indicates that marketing communications should not be deceptive. In discussing this scenario in class, an instructor might start with the question of deception. An instructor could poll the class: How many of you assume that something labeled “low fat” is also “low calorie”? The instructor might then ask if research should be conducted on members of the target market – to determine their attitudes and beliefs. Obviously, the company wouldn’t want to label the cookies “Low in Fat and High in Calories” but what should they do if research suggests that some customers are being misled? Should customers bear some responsibility, too?

CHAPTER 5 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise uses analytics to show how a group of customers moves through the adoption process – and narrows down along the way.

The exercise builds on an example using the Dropbox software program as a product.

Marketing Analytics in Action 5: ADOPTION PROCESS

Number of target customers aware Percent who watch the video Percent who download the free trial Percent who buy more space

Current Alternative 1,000,000 1,000,000 10% 10% 10% 15% 5% 5%

Number of paying customers

500

750

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Answers to questions: 1. The spreadsheet column labeled “Current” shows the answers using the assumptions initially outlined in the question. The 1,000,000 customers initially aware result in 500 paying customers.

Note that the 1,000,000 is multiplied by 10% x 10% x 5%.

2. This question is designed to help students learn how analytics allows for “What if?” assumptions.

In this case (shown in spreadsheet column “Alternative” shows that 750 paying customers could result from a more compelling video.

3. This question asks students to make their own “What if?” assumption. It asks for students to be creative in coming up with marketing tactics that might increase the percent of customers who download the free trial (perhaps by increasing advertising or offering a better product) or the percent who buy more space (perhaps by lowering the price or making it more convenient and automatic to save photos).

CHAPTER 5 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: Photos: • The Consumer Safety Index in the Netherlands reminds parent’s that children see cleaning supplies differently.

• The World Wildlife Fund draws attention tuna as an endangered species.

Sections: • Marketing managers appeal to customer needs and create a better world o ConAgra’s online tool helps customers make smart dietary choices while the California Milk Processor Board created an online game to teach kids about the importance of milk.

• Green attitudes change consumer behavior—the “5 R’s” o Consumer’s are choosing to support brands they see as practicing sustainability—leading some consumers to participate in the sharing economy.

• What’s Next? Will sharing replace owning? o Evolving needs, attitudes, and lifestyle make carsharing a viable alternative to owning a car.

• Green beliefs change marketing mixes o Consumer’s environmental concerns have led to different corporations embracing sustainability differently—from hybrid and electric cars to smarter packaging decisions.

CHAPTER 5 – COMMENTS ON QUESTIONS AND PROBLEMS 5-1.

The case of Apple – and its many products over the years sheds light on different elements of consumer behavior. Examples of key terms and concepts from this chapter include but are not limited to: • The economic buyers – “free iTunes software” and expensive Apple Watch (and model for “thriftier buyers”) • Opinion leader – “distinctive white iPod cords dangling from the ears of a friend who was ‘in’ on this cool new product.”

• Learning – “easy to use” • Cultural influences – strength of brand in China • Needs – “high need for status” buying the expensive Apple Watch • Extensive problem solving – competition complicates the buying process.

• And more.

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Chapter-by-chapter aids: Chapter 5

5-2.

A few examples from the book might include developing a “gift pack” to appeal to situational buyers, give the product away to opinion leaders or people in reference groups, or advertise with referents.

5-3.

The "economic buyer" model of consumer behavior suggests that people know all the facts (relevant to a purchase) and logically compare choices in terms of cost and value to get the greatest satisfaction from spending their time and money. Thus, its focus is often on economic needs such as economy of purchase or use, convenience, efficiency in operation or use, dependability in use, or improvement in earnings.

Students are likely to give a wide variety of examples of purchases – both those that seem to be consistent with the economic buyer model and those that are not. The amount of information that the consumer had (or decided to get) is a factor that typically differentiates the different types of purchases. As these differences are brought out, it may be useful to discuss the idea that consumers are more willing to search for information and compare products (i.e., consistent with the economic buyer model) in some situations than in others – for example, when the purchase is important, the financial risk is significant, etc. On the other hand, many purchases are made more or less habitually – especially once a satisfactory alternative has been found. For such purchases, most consumers see the cost of searching for more information as too high relative to its potential value.

Some students may realize that "economic buyer" comparisons are usually easier to make when the alternative ways of meeting a need are comparable. For example, it may be easier to compare different brands of 13" color television sets than to decide whether to buy a new TV set or alternatively to spend the money on a ski weekend. Both may involve entertainment needs, but really represent very different alternatives. Sometimes it is not easy to do economic comparisons even when alternatives are, on the surface, more similar. For example, a student who is interested in buying a large screen TV would need to decide if the extra money for a HDTV model, or perhaps a thin LCD model, was worth the difference in price. Evaluating the difference in price and features might be made even more difficult by uncertainty about how prices will change in the future and/or how quickly more HD broadcasts become available.

Student examples will often highlight purchases where economic buyer type comparisons don't seem sensible – or perhaps even feasible. For example, a purchase of a song download may be based on the emotional reaction to a particular song – or a specific artist. A purchase of a specific fashion item might be based on needs (such as status appeal or aesthetic reactions) that can't be easily calibrated on some sort on "economic need" basis. On the other hand, when the same basic products (brands) are available at different stores, consumers may search for the "best deal" on the desired product.

This question can also provide the basis for some forward integration – setting the stage for the consumer product classes developed and explained in detail in Chapter 8.

5-4.

See section “Psychological Influences within an Individual” for a discussion of the PSSP needs. Getting the students to illustrate these needs in their own particular cases will deepen their understanding of this important concept. Then, going on to show that economic needs affect how they behave with respect to satisfying the four basic needs will round out this discussion.

5-5.

The instructor might have several students discuss their ads in class – and then attempt to develop some generalizations as to whether magazine or newspaper advertisers appeal more to basic or economic needs. Chances are the magazine advertising will appeal more to basic needs. Newspaper advertising, which is usually more concerned with immediate results, will tend to be more economic-oriented. In addition, some generalizations might be drawn with respect to the use of needs for different classes of products. This discussion can anticipate our IV-5-3

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Chapter-by-chapter aids: Chapter 5

later discussion of the material on Product and Promotion. At this stage, it is only important that the students see that consumer behavior has some bearing on the kind of promotion that is used.

5-6.

See section “Psychological Influences within an Individual” with respect to the relation of drives, cues, responses, and reinforcement. Clearly, understanding learning processes would affect promotion planning – developing and then placing cues in appropriate places to encourage the specific response that is desired.

5-7.

Students can be expected to respond to this question in different ways – and that is part of the purpose of the question. The point is to prompt each student to think more deeply about the concepts involved: beliefs, attitudes, and intentions. For example, most students believe that compact fluorescent light (CFL) bulbs save them money or are good for the environment, but they may also believe the bulbs are higher priced and have a negative attitude toward them for that reason. Using this question in class, the authors have found that there is usually a very mixed pattern of intentions to use CFLs – regardless of a student's beliefs and attitudes. That perhaps just mirrors the general population: studies show that in 2008 only about 20 percent of light bulbs sold are CFLs. One way to provide some variation to this question in a class discussion is to ask how intentions might change if a student knew how much money could be saved. Many students don’t know this, so you can tell them that the average CFL bulb saves $30 over its lifetime. Some students may change their intentions – others may not believe the information or might figure they will not be in a home long enough to see these benefits.

5-8.

Student answers to this question will vary. The purpose of the question, however, is to prompt students to think more deeply about how satisfaction/dissatisfaction may be related to expectations – and how such expectations are formed in the first place.

This question opens the door for an interesting discussion of how changing expectations can make the marketing job a challenge. For example, a few years ago consumers expected cars to be unreliable and to need tune-ups and frequent service. Now, many cars can go 100,000 miles without a tune-up – and their promotion brags about it. On the other hand, promotion that prompts consumers to want/expect too much – more than it is possible for the firm to deliver – may just be setting the firm up for failure. Dashed expectations seem to go hand-in-hand with dissatisfaction.

It also allows for a deeper discussion of trust and how trust is formed and linked to expectations. Trust is a key term in this chapter, and we define it as “the confidence a person has in the promises or actions of another person, brand, or company.” Trust and expectations are closely related – and when a firm fails to meet expectations, trust is harmed.

5-9.

See section “Psychological Influences within an Individual” regarding definitions of psychographics and lifestyle analysis. In order to understand college students and plan a marketing strategy to reach them, it might be possible to segment the college market based on the activities, interests, opinions, and demographics of submarkets. Some might be easily reached through mailing lists – for example, members of fraternities or sororities, or engineering or science types (for expensive stereo equipment). As always, the more one knows about potential target markets, the easier it is to build a marketing mix to satisfy each market segment. Further, the AIO approach may help one learn more about potential customers by asking many questions.

5-10.

Reference groups are discussed in the section “Social Influences Affect Consumer Behavior.”

Personal examples are required to deepen understanding. In reviewing students' examples, it may be useful to highlight the distinction between reference groups with whom a student has a face-to-face association or relationship (associative reference groups) and, alternatively, aspirational reference groups (i.e., whom the person wants to imitate or be like). Regardless of the type of reference group, the effect of reference groups – not only as a direct influence on IV-5-4

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consumer behavior but also as a basis of social comparison – is important in many buying situations.

5-11.

Personal examples here will vary. The purpose of the examples is to prompt students to think about how purchase situation has influenced them personally. The text discussion of purchase situation emphasizes the reason for a purchase, time factors (when a purchase is made, time available to make the purchase), and surroundings. See section “Individuals Are Affected by the Purchase Situation.”

5-12.

Personal examples here will vary. The purpose of the examples is to prompt students to think about the varied information sources that might be used when making a purchase that involves extensive problem-solving. The text discussion of extensive problem-solving (see section “The Consumer Decision Process”) suggests that extensive problem-solving is more likely to occur in situations where there is high involvement in the purchase, when the product is infrequently purchased or expensive, when there is social or economic risk of a "bad" decision, and when much information is desired. It is useful here to classify the sources of information that students discuss as "marketing" sources (retail salespeople, advertising, product brochures, company "hot-lines," etc.) and "nonmarketing" sources (friends, parents, opinion leaders, articles in Consumer's Report, etc.). At the end of the discussion, it is useful to "wrap up" by pointing out that many of the sources consulted are not controlled by marketing management, and that means that word-of-mouth can be especially important for purchases that involved extensive problem-solving.

5-13.

This question raises many ideas that will be developed in later chapters. It especially provides a lead-in to the consumer product classes – convenience, shopping, specialty, and unsought products. The student should not be expected to use these terms. Rather, the instructor should encourage the students to develop their own terminology and generalizations rather than reading ahead. Later, the words they use can easily be related to the product classes. As an extension of this exercise, it will be worthwhile to have the students group these products into somewhat similar categories based on the characteristics they have discussed. Such a grouping will make the traditional terms much more meaningful when they are introduced later.

The table on the next page is in the format suggested in the question. A useful way to approach class discussion is to put the empty table on the board and then ask volunteers to begin to "fill in" the empty boxes.

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Chapter-by-chapter aids: Chapter 5

Product

How consumers would shop?

How far would they go?

Would they buy by brand?

Would they compare with other brands?

Other factors they'd consider?

Haircut

Little, once a good solution is found

Moderate

Yes (favorite haircutter)

No – hard to compare without risk

convenience (getting an appointment, etc.)

Shampoo

Convenience

Not far

Probably

Unlikely

Past experience

Digital Camera

Search for information

Far – if needed

Yes

Tennis Racket

Extensive

Moderate

Brand might be important – quality Probably

Might need expert advice, perhaps from salesperson See intro to Chapter 1

Dress Belt

Want choice

Must be convenient to other clothes

Probably not

No

Must match other items

Cell Phone

Quite a bit of search

Far

Yes

Yes

Decide on features and compare on price, brand

Insurance

Unsought

Not far

Perhaps – as a way to reduce risk

Yes

Not unsought for young parents, etc.

Ice Cream Cone

Impulse

Not far

No

No

Must be at the right place at right time!

Checking Account

Some comparison

Not far – must be convenient

Yes

Yes

Focus on low fees if services seen as the same

Yes

The "answers" provided in this template are a starting point, but they should not be taken as "correct" or the only answer. In fact, it is very likely that different students will come up with different notions on some of the items. Frequently this is because they have different target markets in mind or that their knowledge of consumer behavior is influenced by their own experience only. Class discussion on this question brings out the differences and enables the instructor to point out the need for explicitly stating the target consumers who the student has in mind and then the value of doing a little consumer research on the behavior of those consumers. The tennis racket, dress belt, cell phone, and digital camera probably are shopping products for most consumers and this also affects the other three Ps. Haircuts and checking accounts are services, and it is hard to evaluate the service in advance. Life insurance is also a service, but it is probably an unsought product for many consumers – at least for many college students. Of course, any of these products except life insurance might achieve a specialty product status if the product were especially outstanding and/or promotion has been especially effective.

5-14.

This question is designed to have students think about how a consumer may take into account the welfare of society or others. There is no right or wrong answer, but it gets them thinking.

5-15.

This exercise can help students in a couple different ways. It allows them to practice interviewing skills and shows them how much they can learn about consumer behavior by IV-5-6

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Chapter-by-chapter aids: Chapter 5

talking to someone about how and why he buys. The two purchase scenarios typically demonstrate very different buying experiences.

This exercise works very well as a class discussion. The instructor may start by writing each of the elements in Exhibit 5-8 horizontally across the board. On the far left side add two other headings – student name and product purchased. Then call on a few students and walk them through the elements of consumer behavior and routine purchase decisions. Then call on some other students to ask them to describe their important purchase. The differences are usually striking. For routine purchases, students typically find that their interviewees may have trouble thinking about their purchases and that they skip some of the steps altogether. On the other hand, the important purchases involve most (or all) of the stages and each step may take considerable time. This exercise leads naturally into a discussion of the problem-solving continuum (Exhibit 5-10) – comparing routinized response behavior, limited problem solving, and extensive problem solving. An instructor might want to extend the discussion by asking students how their findings affect marketers. Choose a product from each of the above categories and think about how the four Ps may differ.

CHAPTER 5 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Customers” section and consider the following questions. a. Based on the marketing plan, what do we know about the consumer behavior of the target market? b. What additional information do you think would be helpful before developing a marketing strategy for Hillside?

This chapter includes consumer behavior models that evaluate the consumer behavior process and influences on it. Influences include the following: 1) economic needs, 2) psychological variables, 3) social influences, and 4) purchase situation. An instructor might ask why the marketing plan provides so little information about these factors – “Do they matter in the selection of a veterinary clinic or the services purchased?” The answer is probably that this information can be difficult and costly to obtain in a large sample. On the other hand, the clinic staff may have some ideas about the relative influence of each of the factors. A low-cost way to learn more would be to interview staff members about HVC’s customers.

Animal health care services are largely driven by situational factors – a new puppy requires shots, a sick cat requires a vet visit, or a dog’s injured paw needs attention.

The plan has more information on the consumer decision process: 1) need awareness, 2) problemsolving [searching for information, identifying alternatives, setting criteria, and evaluating alternatives], 3) purchase decision, and 4) experience after the purchase. The survey in Appendix A indicates criteria important to the selection of a vet clinic (see questions 7 – 11). This survey also includes data about which services are used and the frequency of visits. A review of HVC’s customer records might also indicate which services are used most frequently – and HVC personnel could offer ideas about how consumers make decisions.

Dr. Hardy would like to sell more preventative services – like dental care. It might help to know more about consumer attitudes for services – and their interest in these services. It might also be helpful to know how consumers make decisions on elective (as opposed to required) treatment for their pets. Does the purchase process differ? Is there a time of year when such services might be more affordable? What information would be helpful to consumers before making these decisions?

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CHAPTER 5 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER. Case 1: McDonald's "Seniors" Restaurant This case can be used here to show that various social and situation-related dimensions may be useful for marketing strategy planning. Here, not only age and sex are relevant – but people's attitudes towards fast foods, and a friendly, social environment (and bingo) are important too. See case discussion.

Case 3: COLORADO United Soccer Academy This case can be used here to discuss different elements in the model of buyer behavior. To stimulate discussion, the instructor might start by showing the students Exhibits 5-2 and 5-8. For example, family buying behavior is particularly relevant since kids use the product but parents are likely paying for it. The role of reference groups may also be relevant since there may be peer pressure to participate for fear of others getting ahead. A discussion might also examine the needs that COLORADO United Soccer Academy addresses. The instructor might ask, “What needs does COLORADO United Soccer fill?” and “What other needs could COLORADO United Soccer fill?” See case discussion in Part V.

Case 8: Zefferelli’s Italian Restaurant This case could be used here to show how careful definition of likely target markets – coupled with readily available demographic data to estimate the size of markets – can be helpful in strategy planning. In this case, the owner of the business was unclear about her target market(s) and how many people were in these markets. As usual, a clear definition of target markets could lead to better marketing mix planning.

See case discussion.

Case 9: Rest Easy Motel This case can be used to show how different customers' attitudes affect their shopping and buying behavior. The owner of this motel must understand these different market segments and select a strategy that fits with what some customers want and what he can or is willing to offer. The case frames the issues in terms of whether the owner of the motel should join the Holiday Inn motel group, the Days Inn motel group, or stay an independent. However, in point of fact, the chains are focused on serving different market segments with different needs. See case discussion.

Case 10: Anderson’s Ice Center Anderson’s Ice Center is an ice-skating rink that is faced with the challenge of trying to appeal to different target market groups. It deals with this challenge by offering different programs to different market segments at different times and days of the week. This case can be used here to show that stage in the family life cycle, as well as other demographics like age and sex, are relevant to marketing strategy planning. See case discussion.

Case 11: Luciana’s Running Shop This case provides an opportunity to discuss the importance of understanding various kinds of needs – here, various functional needs for running and walking shoes and "fashion" needs. These needs can be used to describe and estimate the size of possible target markets and related marketing mixes. See case discussion.

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Case 12: PearsonalHealth.com—Custom Vitamins This case can be used to discuss discretionary income, expectations, trust, opinion leaders, dissonance, and the adoption process. See case discussion.

Case 27: Canadian Mills, Ltd. This case can be used to discuss market segmentation by the Canadian subsidiary of a U.S. multinational corporation. The emphasis can be on planning alternative strategies in possible submarkets versus moving towards a "global strategy.” See case discussion.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 5: SELECTIVE PROCESSES A marketing manager for a magazine subscription service is analyzing the direct mail promotion she uses to sell subscriptions. She is using mailing lists to target her mail promotion. The different customers reached with different lists respond to the mailing in different ways. In addition, the costs are different with different lists. The problem emphasizes the importance of consumers' selective processes to promotion planning, and shows how differences in selective processes among different segments of consumers can affect the profitability of a marketing strategy.

The problem also introduces the student to some of the detail of how companies actually evaluate and select "lists" for mail promotions. The problem is quite realistic in that regard. Thus, this problem could also be used with Chapter 13 (promotion) where direct-response promotion is discussed in more detail.

The initial spreadsheet for the problem is given below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet

Cost per Mail Promotion Piece Revenue from Subscription Number of Items Mailed Percent Bad Addresses on Mail List Number of Consumers Who Receive Mailing Percent Lost-Selective Exposure Number of Consumers Who Read Percent Lost-Selective Perception Number of Consumers Who Understand Percent Lost-Selective Retention Number of Consumers Who Subscribe Total Revenue from Publishers Total Mail Promotion Cost Expected Profit

Phone List

Assoc. List

$0.32* $3.12* 25,000* 10.00% * 22,500 8.00%* 20,700 70.00% * 6,210 50.00% * 3,105 $9,687.60 $8,000.00 $1,687.60

$0.36* $3.12* 25,000* 8.00%* 23,000 7.00%* 21,390 65.00% * 7,487 50.00% * 3,743 $11,678.16 $9,000.00 $2,678.16

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Chapter-by-chapter aids: Chapter 5

Answers to Marketing Analytics: Data to Knowledge Problem 5: a.

Based on the initial spreadsheet (above), the Association List appears to be the best choice (Answer B). This list costs more per initial mailing, but it also reaches a more "interested" target audience. The expected profit from using this list is $2,678.16 per mailing of 25,000 items – as contrasted with on $1,687.60 from the first list.

b.

The firm will need to send out a mailing of about 32,665 items (Answer D). The student should have selected the Association List in the question above. Then, the student can vary the number of items mailed – to see what profit is produced by mailings of different sizes. This is one of the first times that a question asks a student to do this kind of sensitivity analysis without providing a hint on how to do it. If students have trouble with this, it is worth spending a few minutes reviewing the ideas involved. Problems that follow will build on this approach. The spreadsheet with the "correct" answer is given below: SpreadSheet

Cost per Mail Promotion Piece Revenue from Subscription Number of Items Mailed Percent Bad Addresses on Mail List Number of Consumers Who Receive Mailing Percent Lost-Selective Exposure Number of Consumers Who Read Percent Lost-Selective Perception Number of Consumers Who Understand Percent Lost-Selective Retention Number of Consumers Who Subscribe Total Revenue from Publishers Total Mail Promotion Cost Expected Profit c.

Phone List

Assoc. List

$0.32* $3.12* 25,000* 10.00% * 22,500 8.00%* 20,700 70.00% * 6210 50.00% * 3,105 $9,687.60 $8,000.00 $1,687.60

$0.36* $3.12* 32,665* 8.00%* 30,052 7.00%* 27,948 65.00% * 9782 50.00% * 4,891 $15,259.92 $11,759.40 $3,500.52

It would make sense to add the reply card for both lists (Answer C). While it adds to the cost, it also increases the number of customers who subscribe – and profit increases to $2,407.92 for the Phone List and $3,598.16 for the Association List. The table below summarizes the initial situation and what would happen with the addition of the reply card.

Without reply card With reply card

Expected Profit Phone List $1,687.60 $2,407.92

Expected Profit Association List $2,678.16 $3,598.16

The spreadsheet for the analysis is given below:

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Chapter-by-chapter aids: Chapter 5

SpreadSheet

Cost per Mail Promotion Piece Revenue from Subscription Number of Items Mailed Percent Bad Addresses on Mail List Number of Consumers Who Receive Mailing Percent Lost-Selective Exposure Number of Consumers Who Read Percent Lost-Selective Perception Number of Consumers Who Understand Percent Lost-Selective Retention Number of Consumers Who Subscribe Total Revenue from Publishers Total Mail Promotion Cost Expected Profit d.

Phone List

Assoc. List

$0.33* $3.12* 25,000* 10.00% * 22,500 8.00%* 20,700 70.00% * 6,210 45.00% * 3,416 $10,657.92 $8,250.00 $2,407.92

$0.37* $3.12* 25,000* 8.00%* 23,000 7.00%* 21,390 65.00% * 7,487 45.00% * 4,118 $12,848.16 $9,250.00 $3,598.16

This question demonstrates the significant impact of assumptions. By choosing a loss rate 10% more conservative than the previous models, we see that the expected profit becomes an expected loss of $657.12 (Answer E). The spreadsheet for the analysis is given below: SpreadSheet

Cost per Mail Promotion Piece Revenue from Subscription Number of Items Mailed Percent Bad Addresses on Mail List Number of Consumers Who Receive Mailing Percent Lost-Selective Exposure Number of Consumers Who Read Percent Lost-Selective Perception Number of Consumers Who Understand Percent Lost-Selective Retention Number of Consumers Who Subscribe Total Revenue from Publishers Total Mail Promotion Cost Expected Profit e.

Phone List

Assoc. List

$0.32* $3.12* 25,000* 10.00% * 22,500 8.00%* 20,700 70.00% * 6,210 50.00% * 3,105 $9,687.60 $8,000.00 $1,687.60

$0.36* $3.12* 25,000* 8.00%* 23,000 7.00%* 21,390 75.00% * 5,348 50.00% * 2,674 $8,342.88 $9,000.00 -$657.12

This question is very similar to the previous question but it adds the conservatism later in the process. With this question Submag would achieve a profit of $344.40 (Answer A). The spreadsheet for the analysis is given below:

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Chapter-by-chapter aids: Chapter 5

SpreadSheet

Cost per Mail Promotion Piece Revenue from Subscription Number of Items Mailed Percent Bad Addresses on Mail List Number of Consumers Who Receive Mailing Percent Lost-Selective Exposure Number of Consumers Who Read Percent Lost-Selective Perception Number of Consumers Who Understand Percent Lost-Selective Retention Number of Consumers Who Subscribe Total Revenue from Publishers Total Mail Promotion Cost Expected Profit

Phone List

Assoc. List

$0.32* $3.12* 25,000* 10.00% * 22,500 8.00%* 20,700 70.00% * 6,210 50.00% * 3,105 $9,687.60 $8,000.00 $1,687.60

$0.36* $3.12* 25,000* 8.00%* 23,000 7.00%* 21,390 65.00% * 7,487 60.00% * 2,995 $9,344.40 $9,000.00 $344.40

MARKETING ANALYTICS DISCUSSION Even though an additional 10% loss is being factored in with both questions, with question e, Submag would still achieve a profit of $344.40 as opposed to the loss that was predicted with the previous question. This demonstrates the effect of compounded assumptions. Because selective retention was the last reduction made the relative impact of an additional 10% loss was much lower than the impact of the same loss earlier in the calculation.

CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES

Connect Interactive Exercises Question 1: Stages in the Family Life Cycle Question Type: Timeline Learning Objectives: 5.3 Topic: Social influences AACSB: Knowledge, application Bloom’s: Understand, apply Question 2: The PSSPS Hierarchy of Needs Question Type: Click and Drag Learning Objectives: 5.2 Topic: PSSP Hierarchy of Needs Model AACSB: Analytic, reflective thinking Bloom’s: Understand, apply Question 3: Psychological Influences within an Individual Question Type: Click and Drag Learning Objectives: 5.2 Topic: Psychological influences within an individual AACSB: Analytic, reflective thinking Bloom’s: Understand, remember, apply, evaluate

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Question 4: Consumer Solve Problems Question Type: Click and Drag Learning Objectives: 5.6 Topic: The consumer decision process AACSB: Analytic, reflective Bloom’s: Remember, understand, apply Question 5: Consumer Decision Process (iSeeIt) Question Type: Video Case Learning Objectives: 5.5 Topic: The consumer decision process AACSB: Analytic, reflective thinking Bloom’s: Understand, apply Question 6: Influences on Buying Behavior Question Type: Click and Drag Learning Objectives: 5.1, 5.2, 5.3, 5.4 Topic: Consumer behavior AACSB: Knowledge, application Bloom’s: Understand, apply Question 7: Selective Processes Question Type: Marketing Analytics Learning Objectives: 5.2 Topic: Selective processes AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze

Application-Based Activities Title: Consumer Behavior: Choosing a Nursing Program Type: Role-Playing Bloom’s: Apply Description: Play the role of a young professional who decides to go to college for nursing. A friend and coworker will help guide you along your decision-making path.

Title: Buyer Behavior Type: Mini Sim Bloom’s: Apply Description: Analyze buyer behavior of Outdoor Enthusiasts and design a backpack with high feature desirability.

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Chapter-by-chapter aids: Chapter 6

CHAPTER 6: BUSINESS AND ORGANIZATIONAL CUSTOMERS AND THEIR BUYING BEHAVIOR CHAPTER 6 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Assume that you work for a small manufacturing firm in the purchasing department. Your manager tells you that your supplier of cleaning supplies and paper products (paper towels, toilet paper) is going out of business and your job is to choose a new supplier. She tells you that these supplies are not central to operations, “so you should just find the cheapest source.” In evaluating three options, you see that one supplier (GreenCleanNow) sells environmentally friendly cleaning products and paper products made with recycled products. The salesperson’s demonstration clearly shows these products are functionally equivalent to the other products and clearly better for the environment. But the prices they charge are 2 percent higher than the best price from an alternative supplier offering products that are not so environmentally friendly. If you ask your boss, you are pretty sure she will say “I told you to get the cheapest products.” What would you do? Explain your choice. What are the pros and cons of your decision?

This exercise gets students thinking about personal ethics and company ethics and policies—and situations where they may clash. Exhibit 6-3 suggests that an individual’s needs, the company needs, and society’s needs will not always overlap. The easy answer is to follow company policy. A better answer, if a student feels this is important, would be to suggest the purchasing manager have a conversation with their boss. In the end, it might come down to company policy and students may need to understand that is sometimes the way business works.

CHAPTER 6 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS IN THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise shows how buyers’ typically monitor and evaluate supplier performance and the use of multiple sources for a particular supply. The buyer (HighFly Drones) shows three months of supplier scorecard “scores” for two suppliers. One supplier – Ace Electronics – has lower scores overall, but is showing improvement. The second supplier – Charter Components – has higher overall scores but performance (particularly with quality) have declined in the recent three-month period. The questions have no clear right and wrong answers and might therefore provide a good basis for in-class discussion.

Marketing Analytics in Action 6: SUPPLIER SCORECARDS

Ace Electronics Charter Components Sept. Oct. Nov. Sept. Oct. Nov. Quality 85 88 92 98 86 78 Communication 81 72 84 92 94 92 Delivery 71 94 82 92 96 94 Average 79 85 86 97 92 88 1. Ace Electronics might be questioned with respect to delivery and communication—both have very inconsistent ratings from month to month.

2. The major concerns with Charter Components is the recent decline in product quality. HighFly

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may want to find out the reasons for the precipitous decline to better understand if this is a temporary issue or a long-term trend.

3. There is no right answer to this question—it is the students’ interpretation of the data that will drive their decisions. The “Average” scores favor Charter Components while trends favor “Ace Electronics. The “Average” shown in the table assumes the three criteria are equally important, but that may not be the case. If communication and delivery are more important Charter is probably favored.

CHAPTER 6 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: Sections: • Sometimes society’s needs matter o Different companies consider societal needs differently when making purchasing decisions. New Belgium Brewing Company puts sustainable values in its mission statement while Falconbridge Limited changed to more efficient light bulbs.

• What’s Next? Buying for a better world o South African grocery chain Woolworths identifies key areas where it can make subSaharan Africa a better place, Levi Strauss created a course to improve the well-being of its garment workers, and other companies work to use their buying power to make the world a better place.

• Millennials want to buy sustainable products o Walmart told its suppliers it would not buy products with potentially dangerous chemicals, forcing suppliers to change ingredients. Walmart also had a campaign to reduce the amount of waste materials being sent to landfills.

CHAPTER 6 – COMMENTS ON QUESTIONS AND PROBLEMS 6-1.

6-2.

6-3.

The Bühler case highlights buying by business and organizational customers. Examples of key terms and concepts from this chapter include but are not limited to: • Types of business and organizational customers – Branco and Bühler are both producers of goods and services – and also manufacturers.

• Close relationships – Branco-Bühler • Relationship specific adaptations – Argonutris working with Bühler to build a factory focused on manufacturing insect protein that can be added to animal feed This question allows students to dig deeper into the Bühler case and to explore concepts in the section, “Step 3 – Managing Buyer-Seller Relationships in Business Markets.” Bühler might use a contract to spell out expectations. An instructor might point students to Exhibit 6-8. High levels of information sharing and cooperative bonds would also build a closer relationship with Branco. That might be contrasted by the relationship it would have with a supplier of cleaning supplies. Such a relationship may not need the same levels of bonding suggested by Exhibit 68.

This question can be used to highlight the similarities between buying processes of final consumers and organizational buyers, to highlight the differences, or both. The behavioral influences discussed in the previous chapter may apply equally to final consumers and organizational buyers. In most cases, the organizational buying process is likely to put more emphasis on economic needs than the final consumer with regard to how a purchase will help the organization achieve its objectives. That often leads to more systemic evaluation of possible choices – perhaps through a formal vendor analysis. But, in business purchases as in consumer purchases, how extensive the decision process is may depend on how important the IV-6-2

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purchase is. Here, it is useful to stress the parallel between the three kinds of organizational buying processes (new-task buying, straight rebuy, and modified rebuy) and the consumer problem solving continuum (extensive problem solving, routinized response behavior, and limited problem solving). As noted in the next question, there may be multiple influences on the purchase decision process with either final consumers or business customers – although it is probably more common (and more complicated) in organizational purchasing.

6-4.

It is important for a marketing manager to think about who is likely to be involved in the buying center for a business or organizational purchase because each person may influence the purchase – and perhaps influence it in different ways. The marketing manager needs to see if all of the different buyer center's needs are being met, and if not, why not. Clearly, this kind of thinking can help in guiding promotion planning. Multiple influences in consumer purchases are really quite common, and can operate much as the buying center idea does in the organizational buying context. For example, a decision about how much to spend – and how to spend it – for a family vacation may be influenced by every member of the household. See section “Multiple buying influence in a buying center” for more discussion of the buying center concept.

6-5.

The fact that the hospital is a nonprofit organization is not a critical issue in this question students should see that. As contrasted with the types of multiple influence in a purchase by a manufacturing concern, the specific titles of some of the people might be different (for example, doctors, nurses and imaging technicians might be the “users”- rather than "production" workers in a factory), but the fact remains that such a "high ticket" purchase would be treated seriously and a number of different people might be involved in determining the final purchase. For example, the hospital is likely to have a purchasing department with buying specialists who would manage many of the administrative aspects of dealing with potential vendors and who would actually develop the purchase contracts and place the order. Various people in the purchasing department – perhaps a secretary or administrative assistant – might be a gatekeeper and participate in determining what information is passed along to other influencers (or what sellers had a chance to call on specific specialists). The chief hospital administrator (who might not be a doctor) or the head of the imaging department at the hospital might have final say (be the decider) in the purchase. Others in the hospital – perhaps those concerned with financial matters or with physical facilities (who would have to arrange for power supplies, safety considerations, security, etc.) might also have inputs.

6-6.

When a producer of pickup trucks first designs a new truck, it is likely to go through a new task buying process. A number of different people in different roles in the firm may influence the specification of the lightweight bumper (appearance, materials, crash resistance, finishes used, etc.) and the selection of one or more vendors who are capable of providing not only the right quality bumper but also the service necessary to insure smooth production. When the firm is in a mode of producing the truck and simply replenishing the supply as needed to meet inventory or production requirements, the firm is likely to use straight rebuys – from a vendor or vendors who have been selected as meeting the requirements. Such purchases might even be made based on a longer-term contract negotiated when the supplier was initially selected. However, if something changes to break the "business as usual" pattern (e.g., there are quality problems, a breakdown in delivery reliability, etc. or if a new supplier makes an effective case that he can do the job better), the buying firm may seek to obtain new or updated information and reconsider the alternatives. This sort of discontinuity might even occur if there is not a specific problem – but rather a predetermined schedule to make sure that the producer isn't missing some opportunity (for example, to get bumpers at a lower price) by routinely working with the same supplier(s).

6-7.

Any of the organizations might rely on the use of competitive bids as part of the purchase process – although the "bidding process" or “collection of bids" might be more informal in some cases than in others. However, a hardware store that wants to add a new lawnmower line would probably be less likely to use competitive bids – as the overall relationship with a IV-6-3

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potential supplier might be influenced by many factors that would be hard to anticipate in setting up bid specifications.

More specifically: a) the small town that needs a road resurfaced is probably the most likely to get competitive bids; government organizations are often required by law to obtain bids, especially on purchases that are likely to involve a significant expenditure. While a small town might not have the resources (on its own) to set up an online bidding process, many states have a system that can be used by local governments (counties, towns, etc.) for their own purchases. b) a local scouting organization probably wouldn't get competitive bids; the people involved in a nonprofit organization like scouts are often volunteers, and they may be less inclined to go through the hassle of a formal bid process, especially if the printing job is not very large.; However, if the national organization were to contract for a large print job, it might very well handle the purchase like a business and get bids. c) the hardware retailer might first check with its wholesale suppliers to see if one of them could provide an acceptable line of mowers at a reasonable price. The retailer is more likely to want to learn about the available alternatives and then make a decision based on the overall marketing mix (including the reputation of the brand with consumers) that its supplier/channel partner can provide, not just on price. However, a large hardware chain that wanted to offer a lawnmower under its own brand name might very well go out for competitive bids. d) a grocery store that wants to install a new checkout scanner faces a significant outlay that has important long term consequences (compatibility with other computer systems, concerns about ease of use by employees, reliability, etc.) and it might very well seek competitive bids – especially if it could provide detailed specifications of exactly what capabilities were expected in a scanner. If such detailed specs were not feasible, the bid approach might not be used. e) as with the scouting example, the sorority would probably turn to one of its more knowledgeable members for volunteer help in selecting a computer system; a volunteer might simply make the purchase like a typical consumer would make a purchase; however, if the purchase were made through a university's purchasing department, it is probable that bids would be solicited.

6-8.

From the buyer's point of view, "just-in-time" delivery systems are likely to result in a lower total cost of working with a supplier, especially if it means that lower levels of inventory can be maintained. On the other hand, the close working relationship and coordination required between the buyer and seller means that the buyer must provide the seller with a significant amount of information about its operations, needs, and the like. The buyer may not want a seller to know that much about his or her company practices and policies. An advantage will result if by working together, the two firms can both benefit (improve profits and compete better with other, alternative channels). On the other hand, once a decision has been made to work very closely with a given supplier, it may be much harder to shift to someone else if the relationship does not work as well as expected. In other words, the close working relationship might increase the buyer's "switching costs" – costs of changing suppliers. From the supplier's perspective, it might be an advantage; for the buyer, it might be a disadvantage.

6-9.

The idea of a customer building a closer working relationship with a supplier is discussed in the section “Buyer-Seller Relationships in Business Markets.” There are a number of functions that can be done better or at lower cost if there is cooperation between the buyer and seller. For example, a buyer that is able to trust and work closely with a supplier may be able to share proprietary information (demand forecasts, inventory levels, costs of handling products, etc.) so that both parties can find ways to shift functions with the shared goal of reducing costs.

Similarly, approaches such as just-in-time delivery that involve a closer working relationship between the customer and the seller may involve operational linkages and/or specific

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investments. It simply may not be practical for a buyer to start from scratch with a new supplier each time there's a need to make a new purchase.

6-10.

A tool manufacturer would in all likelihood need a different strategy for dealing with a big retail chain than a single hardware store run by its owner. The large chain might employ buying specialists for each specific line of tools. The large chain might be very concerned about not only price and adequate availability but also issues such as computer-ordering compatibility and allowances for local advertising and marketing efforts. The owner-buyer of a single store might be concerned with these matters as well, but the relationship between the seller and the buyer might prove to be a more important consideration in how the decision was made. In other words, the personal selling effort might be much more important in the smaller store.

Further, the owner of the small store might be much more concerned with the extent to which the manufacturer has already presold the tool to the target market (shelf space is scarce) and whether or not the manufacturer will also be distributing the same tool through competing stores (including the big discount chains that might sell the tool at a lower price).

6-11.

Although business and organizational customers are not as numerous as final consumers are, there are many different types and varieties of them. Within these groups, there are many of the more subtle groupings that we discussed in the previous chapters. Therefore, target marketing is just as (or maybe even more) important here.

6-12.

NAICS codes are especially useful as a way of getting additional information about potential customers in a particular line of business – how many there are, where they are, and how these might be shifting. See “Manufacturers Are Important Customers” for a more detailed discussion of NAICS codes and how they might be used.

6-13.

This question anticipates the discussion of Promotion in later chapters. Here, the student should be led to consider the relative importance of personal selling and advertising in relation to the nature of the products being handled and the target markets. Large chain buyers might have to be approached with a meticulously developed presentation for consideration by a buying committee. Smaller, independent buyers, on the other hand, might call for a somewhat more emotional/personal approach. The brand familiarity that has been achieved for the firm’s products will also have a bearing on the personal selling job and, of course, affect the amount of advertising that will need to be done. The importance of and type of sales promotion effort needed will depend on the strength of the company's brand and whether it has any novelty elements that might help the retailer add variety to his offering. In other words, the nature of the other three Ps does have a bearing on the Promotion variable – and how personal selling, advertising, and sales promotion should be combined.

6-14.

One reason some firms tend to ignore the government market is the great number of heterogeneous target markets that have different procedures for announcing their requirements, bidding, and awarding bids. Further, specifications must be read carefully to determine the lowest cost item that will meet the minimum specification. Then it may be necessary to meet one or more city employees to explain how or why the firm's product does meet the specifications. In addition, sales and service efforts may not be rewarded if a bidding system is used with alternate suppliers offering the "same" physical products. In the extreme, wholesalers or retailers may find themselves in price competition for the sale of the identical physical item. In such situations, spending much time on personal selling effort may be a waste of money and yet without some personal selling effort the firm may not be aware of upcoming demands or bid notices. Some government buyers – especially federal government buyers – may require the maintenance of detailed cost records that will facilitate renegotiation of prices during the job or after the job is completed. This may require extra bookkeeping or records that are not normally maintained. By way of contrast, normal business customers may reward a sales rep who has been especially helpful – and when a price is set, it is up to the supplier to deliver the goods at that price without any supporting cost records or any possibility of price reductions.

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The great variety of customers in the government market, and their differences from each other as well as nongovernment customers, makes segmenting imperative. Some companies do make money catering to government markets. Others – especially small companies – seem to feel that it is more trouble than it is worth. In those situations, where a considerable amount of personal or technical service is part of the company's product, they may be right – because the normal bidding procedure does not easily provide compensation for these intangibles. This is a serious debility of the bidding method. It is not one easily remedied because of the possibility of favoritism entering into the awarding of contracts. Not all government buyers follow industrial purchasing agents along the "value analysis" route. Many are not trained for the purchasing job – being political appointees with no tenure. Therefore, they should be treated differently in marketing mix planning.

CHAPTER 6 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Hillside decided to focus on final consumers and their pets rather than include organizational customers that might need veterinary care for animals. Such customers might range from dog breeders and farmers to animal protection shelters and law enforcement agencies that work with dogs. Would it be easy or hard for Hillside to expand its focus to serve customers who are not final consumers? Explain your thinking.

Instructors might start by asking if students would expect any differences in the organizational customer market and HVC’s current consumer market. To the extent that customers and competitors are different, then the marketing strategy may need to be adapted to the new target market. The extent of the adaptation would drive the practicality of making such a change.

For example, these business customers would be larger and the higher volume might warrant moving into the market – even for a smaller number of customers. But the organizational customers may expect a vet to visit them – and this may not be practical for a small veterinary clinic like HVC that has only one vet.

These customers may also be more price sensitive, which may result in lower prices and lower margins.

Also, they may have different needs – forcing Dr. Hardy to develop new expertise or the clinic to purchase new equipment. The final answer depends on the assumptions made about these new markets.

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CHAPTER 6 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 5: Resin Valleys This case can be used to show multiple buying influences – and the importance of understanding the needs and attitudes of all of the influences in the U.S. and in global markets. Not fully understanding the buying process and market needs is a common cause of failure in business markets – as illustrated in this case. See case discussion.

Case 6: Valley Steel This case also illustrates the importance of multiple buying influence and correctly understanding the customers' buying processes. See case discussion.

Case 14: Schrock & Oh Design This case can be used to better understand organizational buying and information sources, as the case emphasizes earned and owned media.

Case 21: Gimball-Tonie International (GTI) This case may be used to discuss “Step 3: Managing buyer-seller relationships.” This case shows how Ford and Gimball-Tonie evolved their relationship toward a closer one with more cooperation and information sharing.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 6: VENDOR ANALYSIS In this problem, an industrial buyer is evaluating different suppliers of microchips used in producing the firm's products. The student uses the program to do a complete vendor analysis – evaluating the total cost of buying from the suppliers taking into consideration differences in price, order quantity discounts, delivery times, the number of defective products in an order, and other factors. The problem focuses attention on why industrial purchasers evaluate suppliers on many criteria – and shows why the "best" choice may not always be clear cut. It also shows how changes in a supplier's marketing mix – for example, introducing a wholesaler in a channel of distribution – can improve its competitive position in the industrial market.

This problem can also be used with Chapter 17 – to illustrate the idea of "value in use" pricing – or with the discussion of wholesalers in Chapters 10 or 12.

The initial spreadsheet for the problem is given below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

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SpreadSheet Supplier 1 Quantity of Chips Needed COST per Chip Cost for Total Order of Chips DEFECTIVE Rate (Percent Defective) Number of Defective Chips Cost to Replace Defective Chip Total Cost of Replacing Chips CONNECTOR Cost for Each Chip Total Cost-Connectors INVENTORY Cost as Percent of Total Order Total Inventory Cost TRANSPORTION Cost per Chip Total Transportation Cost TOTAL COSTS FOR VENDOR

Supplier 2

100,000* 100,000* $1.91* $1.87* $191,000.00 $187,000.00 1.00%* 2.00%* 1,000 2,000 $2.00* $2.00* $2,000.00 $4,000.00 $0.10* $0.08* $10,000.00 $8,000.00 2.00%* 5.40%* $3,820.00 $10,098.00 $0.02* $0.03* $2,000.00 $3,000.00 $208,820.00 $212,098.00

Answers to Computer-Aided Problem 6: a.

Based on the initial spreadsheet (given above), Supplier 1 appears to be the best choice (Answer A).

While the price of the needed chips is higher, the total cost of Supplier 1`s offering would be lower for purchaser. Supplier 1 also provides the qualitative benefit of being closer which can provide shorter transit delays in case of unexpected demand.

b.

At the lower quantity, Supplier 2 would probably be the best choice (Answer B). At the lower quantity, the price from Supplier 1 would be higher – and as a result the customer's total cost of purchasing from Supplier 2 would be slightly lower ($1,79222.81 vs. $1,79900.50 for Supplier 1.)

The spreadsheet for the analysis is given below: SpreadSheet Supplier 1

Quantity of Chips Needed COST per Chip Cost for Total Order of Chips DEFECTIVE Rate (Percent Defective) Number of Defective Chips Cost to Replace Defective Chip Total Cost of Replacing Chips CONNECTOR Cost for Each Chip Total Cost-Connectors INVENTORY Cost as Percent of Total Order Total Inventory Cost TRANSPORTION Cost per Chip Total Transportation Cost TOTAL COSTS FOR VENDOR

Supplier 2

84,500* 84,500* $1.95* $1.87* $164,775.00 $158,015.00 1.00%* 2.00%* 845 1,690 $2.00* $2.00* $1,690.00 $3,380.00 $0.10* $0.08* $8,450.00 $6,760.00 2.00%* 5.40%* $3,295.50 $8,532.81 $0.02* $0.03* $1,690.00 $2,535.00 $179,900.50 $179,222.81

c.

$1.87 per chip is the highest price at which Supplier 2 will be the "lowest cost" vendor. At $1.88 per chip, Supplier 2’s total cost raises to $180,113.44 which slightly exceeds Supplier 1’s total cost of $179,900.50. The spreadsheet for the analysis is found in the spreadsheet above.

d.

Even though this change represents a substantial improvement in quality for Supplier 2, the total cost is still worse than using Supplier 1 (Answer A). The spreadsheet for the analysis is found in the spreadsheet below: IV-6-8 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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SpreadSheet Supplier 1 Quantity of Chips Needed COST per Chip Cost for Total Order of Chips DEFECTIVE Rate (Percent Defective) Number of Defective Chips Cost to Replace Defective Chip Total Cost of Replacing Chips CONNECTOR Cost for Each Chip Total Cost-Connectors INVENTORY Cost as Percent of Total Order Total Inventory Cost TRANSPORTION Cost per Chip Total Transportation Cost TOTAL COSTS FOR VENDOR

e.

Supplier 2

84,500* 84,500* $1.95* $1.94* $164,775.00 $163,930.00 1.00%* 0.50%* 845 423 $2.00* $2.00* $1,690.00 $845.00 $0.10* $0.08* $8,450.00 $6,760.00 2.00%* 5.40%* $3,295.50 $8,532.81 $0.02* $0.03* $1,690.00 $2,535.00 $179,900.50 $182,922.22

The improvement in quality resulted in a higher cost per chip but one that is still less than what Supplier 1 is charging ($1.94 vs. $1.95). The cost of replacing chips is substantially reduced and the cost of connectors remains lower. However, the biggest issue is the additional inventory required for Supplier 2. Supplier 2 has an inventory cost of $8,943.48 vs. $3,295.50 for Supplier 1 (a difference of $5,647.98). That difference is primarily responsible for Supplier 2 being more expensive than Supplier 1 (Answer D). The spreadsheet for the analysis is found in the spreadsheet above.

MARKETING ANALYTICS DISCUSSION This discussion provides an opportunity to discuss qualitative factors that influence selection. In question b, we found the difference in cost would be less than $700. At that point the costs are close enough that other factors may be more important. For instance, factors such as existing relationship, lower failure rates, closer proximity, future forecasts, etc. might sway the company to choose Supplier 1 even though Supplier 2 is slightly less expensive.

CHAPTER 6 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES

Connect Interactive Exercises Question 1: Identify the Buying Process Question Type: Click and Drag Learning Objectives: 6.4 Topic: Buying Process AACSB: Knowledge, application Bloom’s: Understand, apply Question 2: Glass Bracelet Jewelry Question Type: Decision Generator Learning Objectives: 6.4 Topic: The decision-making process AACSB: Reflective thinking Bloom’s: Remember, understand, apply IV-6-9 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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Question 3: Multiple Buying Influences Question Type: Click and Drag Learning Objectives: 6.2 Topic: Many different people influence a decision AACSB: Reflective thinking Bloom’s: Remember, understand Question 4: Organizational Buyers Question Type: Click and Drag Learning Objectives: 6.2 Topic: Organizational customers are different AACSB: Reflective thinking Bloom’s: Remember, understand Question 5: The Buyer-Seller Relationship Question Type: Drag and drop Learning Objectives: 6.5 Topic: Managing Buyer-Seller Relationships in Business Markets AACSB: Analytic, understand, Bloom’s: Remember, understand, apply Question 6: The B2B Buying Process (iSeeIt) Question Type: Video Case Learning Objectives: 6.2, 6.3 Topic: Organizational buying AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 7: Vendor Analysis Question Type: Marketing Analytics Learning Objectives: 6.4 Topic: Vendor Analysis AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 8: Organizational Buying at Bühler Question Type: Case Analysis and Multiple Choice Learning Objectives: 7.3 AACSB: Reflective thinking Bloom’s: Remember, understand, apply

Application-Based Activities Title: B2B Marketing: Central Foods Type: Role-Playing Bloom’s: Apply Description: Play the role of a consultant to Central Foods. You will help the bakery manager navigate business-to-business.

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CHAPTER 7: IMPROVING DECISIONS WITH MARKETING INFORMATION CHAPTER 7 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Imagine you are the founder of GamifyNow a start-up that makes simple games for playing on smartphones. GamifyNow is struggling financially and may not make it even two more months. You are approached by one of your programmers who tells you that she has identified a way for GamifyNow to make some extra money. She tells you a social media site approached her and offered to pay GamifyNow cash up front to add some programming code to each of its games. The extra cash would help the company get through the next six months, giving the company enough time to gain a foothold in the highly competitive casual gaming market. The new code will automatically send data from each user’s phone back to the social media site. The data would include the names and phone numbers of all of a user’s contacts as well as other data the user enters into other smartphone apps. Your company would only have to update its user agreement and it would all be legal. While you know that few users read your user agreement, you know that most probably wouldn’t care anyway. They might even expect this because your games are free to download. Would you install this code on GamifyNow’s games? Why or why not? Explain your thinking.

This fictional scenario is based on behaviors practiced by many companies in the free gaming business.

In fact, this scenario was inspired by this Wall Street Journal article, “You Give Apps Sensitive Personal Information. Then They Tell Facebook” (February 22, 2019). I find that classes will sometimes lean one way or the other on this type of case—especially since young people have less concern about data privacy than many other demographic groups. If students don’t find the practice too problematic, you might remind them that the app is taking not only their data – but their friends’ data without permission. If they are troubled by the practice, they might be reminded of the company’s financial position or that the app’s service agreement, which customers have to “approve,” indicates data may be used for other purposes. They could also remind people that the games are free.

CHAPTER 7 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise looks at sentiment analysis – “an automated process of analyzing and categorizing social media to determine the amount of positive, negative, and neutral online comments a brand receives.”

Marketing Analytics in Action 6: SENTIMENT ANALYSIS The results of this analysis are “real time” so an instructor should conduct this analysis before instigating a discussion of the topic. At the time of this writing, socialmention provides four measures for each brand searched: • Strength is the likelihood that your brand is being discussed in social media. A very simple calculation is used: phrase mentions within the last 24 hours divided by total possible mentions.

• Sentiment is the ratio of mentions that are generally positive to those that are generally negative.

• Passion is a measure of the likelihood that individuals talking about your brand will do so repeatedly. For example, if you have a small group of very passionate advocates who talk about your products or brand all the time you will have a higher Passion score. Conversely if every

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•

mention is written by a different author you will have a lower score. Most frequently used keywords and number of times mentioned. Number of mentions by sentiment.

Reach is a measure of the range of influence. It is the number of unique authors referencing your brand divided by the total number of mentions.

Questions: 1. The answers here will vary depending on recent events and what students focus on in their interpretations.

2. This answer is straight up depending on the scores they identify.

3. Marketing managers can use sentiment analysis to monitor consumer attitudes about their brand and major competitors.

CHAPTER 7 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following examples of how marketing can contribute to a better world: Sections: • Solving a problem creates a better world o Unilever, Water and Sanitation for the Urban Poor (WSUP), and IDEO.org join forces to provide in-home toilets to people in Ghana.

CHAPTER 7 – COMMENTS ON QUESTIONS AND PROBLEMS 7-1.

The Dunkin’ Donuts chapter opener describes the role of marketing research and how Dunkin’ has used it to guide strategy. Examples of key terms and concepts from this chapter include but are not limited to: • Decision support systems – the Copernicus “product design software” and store location software.

• Hypotheses – the prototype stores allowed Dunkin’ Donuts to try different hypotheses about what a new store would look like.

• Qualitative research – asking customers to shop at a different coffee shop and interview them to learn more, • Survey – a psychographic survey gave insights on attitudes, values, and interests.

• Focus groups – were used to test new menu items • Secondary data – showed how customers purchases changed after getting the DD card • And more.

7-2.

Before and after opening stores in Russia, Dunkin’ Donuts might want to (1) find secondary data that showed where its target market lived – perhaps based on demographic characteristics. (2) Secondary data might also predict areas for faster growth. Both of these might reflect a situation analysis. (3) It might experiment by asking prospective Russian customers to taste different flavors of coffee to determine which were liked best. (4) A focus group might help it design a store. And (5) A survey of customer satisfaction might help Dunkin’ Donuts know if what it was doing was working.

7- 3.

This question relates to the text discussion in the section, “Effective Marketing Requires Good Information.” Basically, a marketing information system is an organized way of continually gathering and analyzing data to provide marketing managers with information they need to make decisions. It is important for marketing managers to be involved in planning the system because they are the ones who know what information they need – and what form it should be in to use it effectively. IT specialists who set up an MIS may know a great deal about organizing and processing information, but they may not know much about marketing strategy planning or how the gathered information is to be used. Note: many of the early efforts to IV-7-2

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develop marketing information systems were not successful because marketing managers were not involved in planning the systems. Now that managers know more about the capabilities of information processing – even if they don't know all of the technical computer details – they can do a better job of specifying what they want. In addition, many firms turn to outside consultants, who specialize in marketing information, when they are designing (or changing) their system. Because the consultants often have experience with marketing practices in a number of firms and industries, they often bridge the communications gap between a firm’s marketing people and the IT specialists.

7- 4.

A decision support system is a computer program that makes it easy for a marketing manager to get and use information as he is making decisions. It allows the manager to "interact" with the information. Students will provide a variety of possible examples here. The emphasis should be on applications where it is useful to "see" some data – and then probe deeper. For example, a marketing manager might do an initial analysis of sales by different sales reps, and then look in detail at the numbers for a specific rep (e.g., sales by customer or sales by product) if the initial information showed that the rep was experiencing problems somewhere.

Some firms develop decision support tools that are based on general-purpose business software packages like Microsoft Excel or Microsoft Access. An Excel spreadsheet with welldesigned “macros” to automate a set of analyses can be very powerful. Often, however, decision support software tools are quite complex and designed specifically to the needs of the company. Decision support software has become a multibillion-dollar market. In fact, this is creating tension in some marketing research departments. Their firms are spending so much money to upgrade information systems and decision support tools that budgets for traditional marketing research are being reduced. Both types of information play a role, so managers must find the right balance in how they spend money for information to improve marketing decisions.

7- 5.

This question can be addressed in different ways. Students will likely contrast the output of an MIS with the results that might be developed, for example, by doing a marketing survey. In that case, the emphasis is on the extent to which the MIS focuses on recurring information needs, whereas "special" marketing research projects often focus on "one-shot" marketing information needs. In addition, an MIS often allows the marketing manager to access a much broader base of information – and thus enables him to analyze relationships across more types of variables.

Often, the results of specialized marketing research studies are included in an MIS – so that they can be used in combination with other information the firm may have gathered or analyzed. As computer capabilities continue to expand and as data processing becomes easier and more convenient, we will see growing usage of MIS.

7-6.

Access to the Internet and better software search engines have simplified the "computer" part of efforts to search for competitive information. Even so, depending on the size and significance of a competing firm, there may be enormous amounts of information that need to be digested and analyzed before the competitor’s marketing strategy makes sense. A small software firm that thinks it is going to keep up with all of the information about Microsoft, for example, is likely to have a rude surprise. Further, much of the competitive information that is available will be old, not very useful, or just plain wrong. There is little basis on which to check or verify the correctness of much of the information taken from the Internet, unless the source website is considered highly reliable. On the other hand, when marketers are closer to the market and have a better understanding of competitors, their judgments will be superior to those made by someone who does not have any clue what competitors are doing. As the old saying goes, “in the land of the blind, the one-eyed man is king.”

7-7.

The key characteristics of the scientific method are its focus on being objective and orderly in testing ideas before accepting them. This is important to marketing managers because it helps them to see when more detailed information will really be useful – and when more information might be too expensive, too slow, or not relevant to the real problem. It also helps because it

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discourages a manager from trying to use research to "prove" a prior point of view. See section, “Five Step Approach to Marketing Research” for additional detail.

7-8.

Secondary data is information that has already been collected or published. Primary data is information that is specifically collected to solve a current problem. For example, data published by the Census Bureau is secondary data for the marketing manager. A survey of current customers' product preferences, on the other hand, would be an example of primary data. See section “Analyzing the Situation—Step 2.”

7-9.

There may be a great deal of secondary data that is useful, but often it is not as specific as the marketing manager would like, especially when it comes to customer reactions to the firm’s marketing mix decisions, present and future. This is especially the case when a product idea is new and different. Further, secondary data on consumers is likely to be quite general and it may be out-of-date.

7-10.

The main advantage of the focus group interview approach is that it would stimulate the respondents to interact. What one person says might prompt another person to elaborate on the idea and/or share his own view. Focus groups tend to be less structured than most personal interviews, however, so the researcher might not be able to get quite as detailed information from each person as in a separate interview setting.

7-11.

Basically, quantitative research seeks structured responses that can be summarized in numbers – like percentages, means, and other statistics. Usually the focus of quantitative research is on getting representative information about a population of interest. Qualitative research, on the other hand, seeks in-depth, open-ended responses. This allows the researcher to probe deeper into what the respondent is thinking. It is often difficult to summarize qualitative research in an objective fashion. See section “Getting Problem-Specific Data—Step 3” for more detail on the advantages and limitations of both approaches.

7-12.

Response rate is the percentage of people contacted who complete a question (or interview).

The response rate may affect how representative the responses are – especially if there is a difference between customers who respond and those who do not. For example, a manager might do a survey of 1,000 customers and ask how satisfied the customers are with the firm's product. It might be that only the unsatisfied customers would bother to respond. In that event, the marketing manager might conclude, based on a summary of the responses, that most people are dissatisfied with the firm's product. Of course, the response rate also affects the relative cost/benefits of doing the research as well. If a survey of 1,000 people costs $10,000 and only 100 respond, the research has cost $100 per respondent. If all 1,000 responded, the cost per respondent would only be $10. Thus, the response rate may affect both the cost and quality of information obtained in research.

7-13.

A firm may want to subscribe to a shared cost data service even if the same data is available to competitors. In fact, if competitors will definitely get some type of useful information, then the firm may have little alternative but to subscribe as well. However, just because shared cost data may be available to different clients does not mean that they will all use the information in the same way or even get precisely the same information. For example, a marketing manager might be very interested in customer reactions to certain competitors’ offerings—how they compare with customer reactions to the manager's own offering. On the other hand, the manager might pay little attention to data about a competitor who doesn't appear to be a significant threat.

7-14.

The free variable here is Promotion. How much can be expected from retailers and how much ought to be sought? To find out, researchers could be sent to various stores to observe the prominence of display and the rate of movement for similar products in various kinds of stores.

The survey method could query retailers directly on their intentions and the sales volume they expect. Or, consumers could be asked directly about the likelihood of their purchase of such a IV-7-4

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product. Questioning consumers directly, of course, would presume that the consumers could correctly reflect their future behavior. An experimental design might involve different kinds of displays in different types of stores – perhaps matching them against similar "control" stores – to get a measure of the movement of the product under various conditions. Alternately, the product might be distributed in a test area and a careful observation made of the kind of display and extent of distribution obtained when varying amounts of sales effort are applied.

7-15.

See textbook Chapter 7 sections “Defining the Problem—Step 1” and “Solving the Problem— Step 5.”

CHAPTER 7 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Customers” and “Competitors” sections in the Situation Analysis and consider the following questions. a. What different types of marketing research were conducted to fill out these sections of the marketing plan? b. What are the strengths of the research conducted? What are the weaknesses? c. Keeping in mind probable cost and time to complete, what additional research would you recommend?

To learn more about customers, the plan included a survey of current customers and an analysis of secondary data (e.g., housing starts and population). The source for local housing starts data was collected from the local real estate company (which prints a monthly report). The Census Bureau was used to gather current and future population statistics. The competitor section was developed by looking at Yellow Pages ads and by calling competitors and asking them questions.

The strengths of the data collection were that it was done relatively quickly and at a low cost. But the emphasis on speed and low-cost led to some trade-offs. Weaknesses include the sample used for the survey, the survey itself, and neglecting other sources of data. The convenience sample of customers who happened into the clinic calls into question the reliability of the findings. There is no survey data from non-customers. The survey focuses on limited information – students will suggest additional questions that might have been asked in the survey. As students suggest more questions, ask them why each additional question would be helpful. Students often don’t think about the need to ask questions to guide marketing strategy planning.

In a class discussion, the instructor might ask how much longer they could make a survey and still expect people to fill it out. This is a constant struggle and requires prioritizing questions and making hard tradeoffs. Students might also be critical of some of the questions in the survey. Note that the secondary data collected was quite limited – additional information about local pet ownership may have been available from other sources.

Cost and time are critical for a small business. The marketing plan demonstrates that while textbook treatment of marketing research emphasizes reliability and validity, trade-offs must be made for small businesses with limited budgets.

Other low-cost options might include interviews with customers. For example, an interview guide could be prepared and administered by phone to current customers and non-customers. HVC might develop a customer satisfaction survey to make sure it understands customers’ satisfaction with the clinic. HVC might also conduct some online research of best practices at other veterinary clinics. Such benchmarking studies might help HVC generate additional ideas for its marketing strategy.

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CHAPTER 7 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 3: COLORADO United Soccer Academy This case can be used to discuss gathering marketing information. Marc Kane of COLORADO United Soccer Academy appears to have relatively little factual information about his market. A discussion might center on what type of market research he could do to fill this knowledge gap. The instructor might show the marketing strategy planning process model (from the beginning of the chapter – or Exhibit 2-9) and walk through each element. For example, the case gives relatively little information about competitors.

Does Marc have this information? How could he gather such information? What does he currently know about his customers? Marc also has to make decisions about a marketing strategy. What information would help him make better decisions about his marketing mix for each target market? How could he gather that information?

There are opportunities to talk about both primary and secondary data. The five-step scientific approach to the marketing research process (see Exhibit 7-5) could also be used to guide students through a discussion. See case discussion in Part V.

Case 9: Rest Easy Motel Both require more careful analysis of alternative target markets. And both are small companies that probably will not be able to afford a formal research project – so the importance of careful execution of the first two steps can be emphasized. In fact, it is quite important that this point be made because many students feel that only "big companies" with marketing research departments can do marketing research.

They tend to feel that smaller companies have to neglect the research process and simply "shoot from the hip.” The thrust of this chapter is to emphasize that market analysis and (maybe) marketing research should be used to guide marketing strategy planning in all cases. See case discussion.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 7: MARKETING RESEARCH In this problem, a company has done a survey to help determine the size of a market for a new industrial product it is developing. The manager wants to see how profitable the market might be – based on responses from a sample. The problem focuses attention on issues of interpreting marketing research data, especially on the importance of understanding that estimates based on a sample may not be precise. Students evaluate the sensitivity of their conclusions to small – but important – variations in estimates from the sample respondents.

This problem gives students a (simplified) example of how a firm might use the results of a survey to evaluate a potential market opportunity for a new product. This is quite helpful because students often don't see how responses from sample surveys get converted to profitability information. At the same time, however, the questions for the problem alert students to the problems of treating survey responses – and calculations based on them – as if they were "exact." In this problem, the firm's expected sales volume and its profitability vary substantially with relatively small variations in estimates from the sample.

This makes more concrete the ideas related to confidence intervals, validity of response to questions, the representativeness of the sample, and other important marketing research topics. In addition, the ideas introduced in this problem serve as a prelude to some of the behavioral concepts (especially buying intentions) discussed in the next chapter. The problem could also be used effectively to illustrate evaluation of new product opportunities – a topic discussed in detail in Chapter 9 of the text. Similarly, it can be used with Appendix B that covers issues related to forecasting the likely size of a market.

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The initial spreadsheet for the problem appears below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Sample

Estimate for Total Market

Number of Firms Sample Firms as Percent of Market Ratio of Total Market to Sample

500 10.00% 10.00

5,000*

ESTIMATES BASED ON SURVEY RESPONSES Number of Old Machines Percent Who Want to Replace Old Machines

220* 40.00% *

2,200 40.00%

88

880 $10,000.00* $6,000.00* $8,800,000.

00 $5,280,000.

00 $3,520,000.

00

PROJECTIONS BASED ON DATA ABOVE Expected Quantity of Replacements Price per Replacement Machine Cost to Produce One Machine Total Expected Revenue Total Production Cost Contribution to Profit & Other Expenses

Answers to Marketing Analytics: Data to Knowledge: a.

If the total market actually consists of 5,200 firms – not Texmac's "guesstimate" of 5,000 firms, the estimate of expected replacement machines increases from 880 units to 915 units (Answer B). The spreadsheet for this analysis appears below:

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SpreadSheet Sample

Estimate for Total Market

Number of Firms Sample Firms as Percent of Market Ratio of Total Market to Sample

500 9.62% 10.40

5,200*

ESTIMATES BASED ON SURVEY RESPONSES Number of Old Machines Percent Who Want to Replace Old Machines

220* 40.00% *

2,288 40.00%

88

915 $10,000.00* $6,000.00* $9,150,000.

00 $5,490,000.

00 $3,660,000.

00

PROJECTIONS BASED ON DATA ABOVE Expected Quantity of Replacements Price per Replacement Machine Cost to Produce One Machine Total Expected Revenue Total Production Cost Contribution to Profit & Other Expenses

b.

Continuing the analysis above, the estimate of expected replacement machines increases from 880 units to 915 units – and that increase results in an increase in expected profits from $3,520,000 to $3,660,000 (Answer C). When students see that this "minor" error of judgment makes a "bottom line" difference of $140,000 they develop a better understanding of why it is important for marketing managers to have good information. The spreadsheet for the analysis appears above.

c.

If the total market is actually 5,200 machines and the number of old machines per 500 is really 200 (not 220 as estimated from the sample), the estimate of profits is $3,328,000 – a decrease in expected profit of $332,000 (Answer A) from the $3,660,000 profit expected with 220 machines per 500 firms.

This question provides a good opportunity to discuss the importance of knowing about the population when drawing a sample. In this case, being off by only 10 percent in the estimated size of the total population of concern makes a significant difference in expected profits.

The spreadsheet for this analysis (based on 5,200 firms) appears below:

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SpreadSheet Sample

Estimate for Total Market

Number of Firms Sample Firms as Percent of Market Ratio of Total Market to Sample

500 9.62% 10.40

5,200*

ESTIMATES BASED ON SURVEY RESPONSES Number of Old Machines Percent Who Want to Replace Old Machines

200* 40.00% *

2,080 40.00%

80

832 $10,000.00* $6,000.00* $8,320,000.

00 $4,992,000.

00 $3,328,000.

00

PROJECTIONS BASED ON DATA ABOVE Expected Quantity of Replacements Price per Replacement Machine Cost to Produce One Machine Total Expected Revenue Total Production Cost Contribution to Profit & Other Expenses

d.

The results of the What If analysis for this problem appear in the table below. At 44% (Answer E) the Estimate for Total Market Replacements equals 1,007 units. Note the large changes in the quantity estimate and the estimated profitability – depending on the relatively minor change in the estimate developed from the responses in the sample.

Table Analysis -Sample% Replace 36.00 37.00 38.00 39.00 40.00 41.00 42.00 43.00 44.00 d.

-Estimate forTotal MarketReplacements 824 847 869 892 915 938 961 984 1,007

-Estimate forTotal MarketContribution $3,296,000.00 $3,388,000.00 $3,476,000.00 $3,568,000.00 $3,660,000.00 $3,752,000.00 $3,844,000.00 $3,936,000.00 $4,028,000.00

The results of the What If analysis for this problem appear in the table above. At 38% (Answer B) the Estimate for Total Market Contribution equals $3,476,000.00.

MARKETING ANALYTICS DISCUSSION The question provides a good opportunity to discuss the quality of data one can get from marketing research – and how precise the data might be. The spreadsheet shows that it does make a difference!

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CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES

Connect Interactive Exercises Question 1: Plaza Pointe Grocery Question Type: Case Analysis Learning Objectives: 7.3 Topic: Getting problem-specific data AACSB: Reflective thinking Bloom’s: Remember, understand, evaluate Question 2: Five-Step Approach to Marketing Research Question Type: Timeline/Sequencing Learning Objectives: 7.2, 7.3, 7.4 Topic: Five-step approach to marketing research AACSB: Reflective thinking Bloom’s: Remember Question 3: Occupancy and Marketing Challenges for the Restful Night Motel Question Type: Case analysis Learning Objectives: Topic: AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 4: The Marketing Research Process (iSeeIt) Question Type: Video Case Learning Objectives: 7.4, 7.5 Topic: The Scientific Method and Marketing Research AACSB: Reflective thinking, analytic Bloom’s: Remember, understand, apply

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Question 5: Data to Information, Knowledge, and Wisdom Question Type: Drag and Drop Learning Objectives: 7.1 Topic: Market Research Information AACSB: Knowledge, Application Bloom’s: Understand Question 6: Problem-Specific Data Question Type: iSeeIt! Learning Objectives: 7.3, 7.4 Topic: Market Research Information AACSB: Analytic Bloom’s: Understand Question 7: Marketing Research Question Type: Marketing Analytics Learning Objectives: 7.4, 7.5 Topic: Marketing Research process AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 8: Improving Decisions with Marketing Information at Dunkin’ Question Type: Case Analysis and Multiple Choice Learning Objectives: 7.1. 7.2, 7.3, 7.4, 7.5 AACSB: Reflective thinking, analytical Bloom’s: Remember, Understand

Application-Based Activities Title: Customer Relationship Management: Grab & Go Grocery Type: Role-Playing Bloom’s: Apply Description: Play the role of a manager of the Customer Relationship Management (CRM) program at Grab & Go Grocery, a meal delivery service. Manage the CRM data to enhance the customer experience and stand out from the competition.

Title: Marketing Research: Swift and Snug Furniture Type: Role-Playing Bloom’s: Apply Description: Play the role of a market research consultant for the Swift and Snug Furniture. Guide the marketing director and CEO in their market research process and help them to make informed decisions based on the data collected.

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CHAPTER 8: ELEMENTS OF PRODUCT PLANNING FOR GOODS AND SERVICES CHAPTER 8 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Your construction firm was the low-price bidder on a plan to build three new runways at an airport. After winning the contract, you assured the airport commissioner that your work would far exceed the minimum quality specs in the contract. However, a test of the batch of concrete for the second runway shows that it’s not as strong as the concrete you’ve been using. While it exceeds the specs in the contract, it does so just barely. Throwing away the concrete would eat up most of the profit expected from the job and also delay the airport in using the runway. There are various options. You could proceed with the project and be quiet about it, later admitting what happened.

Alternatively, you could call the commissioner, reveal everything, and then ask for approval to proceed (chancing denial—an outcome that would seriously hurt your company). With or without approval, you could offer a special warranty. Explain what you would do. What, if anything, would you say to your employees about your decision?

This scenario lets students wade through the shades of gray often inherent in ethical decisions. Decision makers use these shades of gray to rationalize their actions – and some discussion could be made about principles. While the quality of the concrete does not meet what the construction firm promised, it does meet the standards in the contract. Throwing away the cement eats up profits and may delay the project.

It seems that the most honorable option would be to admit the mistake to the commissioner and ask for his recommendation. Being honest with customers is central to ethical conduct, but this is not so easy either. The scenario suggests you could admit it now or wait until after the concrete has been poured and offer some sort of warranty. In addition, how a manager or owner acts in these situations sets a powerful example for employees. The last question allows the instructor to discuss how employees might later behave depending upon how the owner responds.

CHAPTER 8 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise shows students how brand awareness is commonly measured. The questions require students to speculate and have no clear right and wrong answers and might therefore provide a good basis for in-class discussion.

Marketing Analytics in Action 8: BRAND AWARENESS

1. Unaided brand awareness of Rio Centro is highest in Knoxville – which may be due to its popularity, advertising, or lack of competition. Students may know that a major university (University of Tennessee) is located in Knoxville and perhaps sports sponsorship might provide some top of mind awareness benefit.

2. The answer to question 2 might be similar to question 1 but may also consider that target customers may know the brand but not typically choose it.

3. Students might speculate that Rio Centro is a more popular choice in Memphis and therefore is top of mind more often. Actual customers are more likely to think of a brand with unaided awareness.

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CHAPTER 8 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: •

•

Photos o Racist brand names Aunt Jemima and Uncle Ben’s are dropped. #M4BW Boxes o Quality evolves toward a better world. As consumer’s needs and requirements change their definition of quality, companies adjust to their new requirements.

McDonalds reduced antibiotics in its beef supply and IKEA uses only recycled of FSC certified wood in its products. o AI helps individuals with disabilities. Chinese retailing giant Alibaba developed an intelligent, interactive overlay for smartphones to help blind customers. o In the What’s Next? box: Internet of Things technology makes transportation more efficient and sustainable. o Purpose-driven brand promises. o Exhibit 8-8 – examples of packaging that fosters better world outcomes. o Greener packaging creates value for buyers and sellers. Firms such as Timberland and WholeFoods are making packaging choices that are better for the environment.

CHAPTER 8 – COMMENTS ON QUESTIONS AND PROBLEMS 8-1.

The Under Armour case details the rise of this brand. Examples of key terms and concepts from this chapter include but are not limited to: • Homogeneous shopping product – T-shirts • Heterogeneous shopping product – Under Armour’s high performance clothing • Product line – shoes and clothing for various sports • Brand name – Under Armour • Family brand – Under Armour • And more.

8-2.

Some potential examples include: • A high school football player loses his practice shirt and is forced to buy one on very short notice – an emergency product. Make products more readily available by selling through more outlets.

• A college basketball player needs a new set of shoes and shops around for the best pair – a heterogeneous shopping product. Sell the products at stores with related products and where a salesperson could answer questions.

• A runner does not know that an app might be able to help her track her runs (regularly unsought good). More promotion – possibly advertising – could make her aware of some of Under Armour’s new apps.

8-3.

This question draws on the text discussion in section “Differences between Goods and Services.” The major differences stressed in the text are highlighted below: Tangibility of the product: Goods are tangible, services are not. For example, a sweater is a tangible product, but the dry-cleaning service for the sweater is not.

Owned vs. consumed: Because of differences in tangibility, customers usually do not "own" a service in the same way they own a physical product. They experience the service, use it, or consume it. They can touch or store the good, use it or consume it when they wish. They will usually "consume" a service when it is purchased.

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Timing of production and consumption: Goods are usually produced and then sold (e.g., toothpaste). Services are usually sold before they are produced – and they are consumed as they are produced (e.g., having your teeth cleaned at a dentist's office). Because of this difference, the consumer can usually inspect ("see") a physical good before it is purchased – but the quality of the service cannot be evaluated until after the work is performed – which is often after the purchase.

Relation of production and marketing: With services, the person producing the product is often directly in contact with the customer and thus is involved in the marketing process. With physical goods, that is often not the case. For example, a bank teller produces the banking service while interacting with the customer. A worker in a print shop that prints checks, by contrast, is unlikely to come in direct contact with the customer. The difference between the teller and the check printer demonstrates how there is often a closer link between operations and marketing in a service business than in a business that emphasizes physical goods.

Quality consistency: Because of the human element introduced by the service provider, it may be difficult to control the quality of the product when it is primarily a service. A paint company can catch a bad batch of paint and dispose of it. If a painter does a bad job putting the paint on the house, the damage has already been done by the time it is possible to identify it.

Storage and transportation: Goods can usually be stored and transported; services cannot.

This often makes it possible to achieve economies of scale in producing goods but not services. Shoes can be produced in a factory where labor is cheap or plentiful – and then stored or shipped to customers. By contrast, if a hotel room is not rented for a night, the opportunity is lost.

Balancing production and demand: In combination, the above differences tend to make it more difficult to balance supply and demand with services. A store can keep shelves full of products that meet customers' needs – but if many customers show up all at once and there is only one check-out clerk to provide the "service" part of the product, customers will need to wait.

8-4.

A bicycle shop is selling a convenient assortment of bicycles and expert help on which bicycle best meets the customer's needs. The shop may also assemble the bike (often not the case for bikes purchased at department stores, sporting goods stores, and mass-merchandisers) and adjust it properly for the customer. The shop may also be selling repair services and/or "after the sale" warranty service if it is required.

A travel agent is selling convenience, information, and expertise! A travel agent is usually paid a commission by the travel service whose services are booked. The customer could handle the transaction without an agent, but the agent has detailed information that may be hard for the consumer to obtain. The travel agent maintains up-to-date records about changes that may affect a given customer's travel plans. While the equipment available to the travel agent (for example, computer links with an airline's ticket reservation system) may make some difference here, the real product is the quality of the service provided by the individual travel agent. The product, then, is any aspect of the service that helps the customer have a smoother, easier, and more enjoyable trip. It might include delivery of tickets or information to the customer's home or office. It might also include "tips" about restaurants in an area to be visited, suggestions about clothes to take, or the courtesy of finding needed information quickly and pleasantly. Some travel agents even provide transportation to the airport or arrange pet-sitting and plant-watering services while customers are away. These “special touches” contribute greatly to the customer having a better trip—and to the likelihood of the travel agent making a sale.

A supermarket is selling not only a collection of food and related items – perhaps at low prices – but also the convenience of a wide selection, wide aisles, and other conveniences without IV-8-3

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the unwanted assistance of clerks. Many people truly dislike the full-service grocery store.

Self-service stores are spreading throughout the world.

A new car dealer sells automobiles. It also provides services – such as set up and inspection of the car, and warranty work after the sale. Some auto dealers also sell "insurance" – maintenance agreements that cover work that is not covered by the manufacturer. Most new car dealers also sell financial services by helping to arrange financing on a new car.

8-5.

This question encourages students to think about the differences between products and services with regard to promotion. The lack of a physical object may make it more difficult to promote a service. It is harder to show the product in advertising. The customer cannot see it in advance – so credibility may be an issue. It is often harder for promotion to focus on specific features – since that may vary more with a service. It may also be harder to demonstrate quality differences. Some service firms try to make it easier to remember a service by using tangible symbols in their promotion. For example, Merrill Lynch uses a bull in many of its TV ads and Prudential Insurance shows "the Rock."

8-6.

The purpose of this question is to remind students that product means the “need-satisfying offering of a firm.” Marketing managers should understand the many factors related to a purchase – and try to differentiate their brand as meeting the specific needs of some customers. The following are examples that students might identify: • Airport branch of a rental car agency – Typically, customers renting cars are looking for speed, and may be under considerable stress and anxiety. Understanding this, the car rental agency might install monitors in the return facility showing flight arrival and departure times and locations. The return facility might also include computers with Internet access and fax machines. Where security is a concern, more security guards and cameras might be added.

• Fast-food restaurant – Factors to consider include: the friendliness and helpfulness of the staff, the speed of in-store service, the comfort of the seating, the tastiness and freshness of the food, the ease of parking, the cleanliness of the restrooms, the cleanliness of the parking lot, the speed of the drive-through line, and other elements of the service experience.

• Online firm selling software – Customer satisfaction could be increased by making sure the website is easy to use and that customers can quickly find the item they seek, that the download is fast and easy, that set-up is simple and understandable, and that customers can quickly get their questions answered if they have any (online or via phone).

• Hardware store selling lawnmowers – The customer experience could be improved by making it easy to compare alternatives (salespeople and/or brochures in the store), by giving customers the option of gathering information online before they visit the store, by providing a quick demonstration in-store of basic operating procedures, by allowing customers to test the mower to see how easy it is to start or how well it cuts (perhaps in an adjacent lot), by providing home delivery of the purchased mower, and by providing names of reputable repair people in the area if the store does not provide repairs itself.

8-7

This question is designed to stimulate students’ creativity and get them to apply concepts from the section “Technology and Intelligent Agents Add Value to Products.” That section notes that technology: 1) can be directly integrated, 2) apps to add services, 3) augmented reality, and 4) artificial intelligence. Some ideas for the four product examples might include: a) Hair salon – could add an app to facilitate making appointments, it could text appointment reminders to customers, it might use some sort of computer program that showed a client how their hair might look with a particular cut or color. b) Oil change shop – could add an app to facilitate making appointments, it could text appointment reminders to customers, it might even add technology to the car that reminded customers when they are due for an oil change.

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c) Passenger car tires – technology built into tires might signal low pressure or low tread to a customers’ phone, thinking more futuristic, tires might change tread for different weather conditions. d) Toaster – technology might allow a toaster to print a message on a piece of toast “I love you honey”, or it might adapt heating by type of bread – with sensors detecting the type of bread, an app might connect to a user’s phone to signal a few seconds before the toast is done. This is a product where technology might be too long of a stretch.

8-8.

Students will think of a wide variety of brand names. It can be useful to write the brands they list on the board. Invariably, some of the most frequently mentioned brands will be very popular consumer products with high brand awareness (for example, Coke, Campbell's Soup, and Nike shoes). Once a pattern has started to emerge where several "well known" brands have been listed several times by different students, ask the class if it is important to the companies involved that their brands are ones that quickly come to mind. This kind of exercise can really bring home the importance of having a well-known brand name – and also why it is hard for a lesser known brand to beat out a well-known, popular one.

8-9.

A family brand is a brand name that is used on two or more different products. A firm might use the same brand name for many products if all the products are similar in type and quality. The main benefit is that the goodwill attached to one or two products may help the others – and money spent to promote the brand name benefits more than one product. A retailing chain – such as Best Buy – might develop its own dealer brand (perhaps using a family brand name) to compete with some of the popular manufacturer brands it carries. The reputation of the store might help to attract customers to the dealer brand, and the dealer brand might offer higher profits. However, there are potential problems with the dealer brand in the Best Buy situation.

In particular, much of the demand for manufacturer brand products is stimulated by the manufacturer's marketing mix – especially promotion. If Best Buy were to be too aggressive with its own brand "imitations" of popular products, manufacturers might decide not to include Best Buy in the channel. While Best Buy is a powerful member of the channel because it attracts the manufacturers’ target market with its large selection and low prices, if many manufacturers felt that the retailer was competing directly, they might emphasize other channels – perhaps smaller retailers or alternatively discount stores such as Walmart.

8-10.

The degree of brand familiarity achieved indicates the success of past promotion (or more generally, the success of the whole marketing mix). The future promotion task depends upon the degree of familiarity desired. In a market with many weak brands, merely brand recognition may be a substantial achievement – and all that is necessary to obtain a significant share of the market through wider distribution (Place). The greater the degree of brand familiarity, the more inelastic the demand is likely to be – and perhaps the further to the right the demand curve is likely to shift. Thus, the company might be able to expand its sales volume and/or increase its price, depending on its objectives and capacity.

8-11.

a.

Probably any products sold in multiple packs (for example, a six pack) or sold in bulk (e.g., crackers). These packages tend to reduce handling costs, deterioration, and obsolescence – and may increase the size of the unit sale.

b.

Cosmetics or any product for which an attractive package is an important part of the product; however, it should be noted that consumers might willingly pay for these extra costs because luxury items sell better in aesthetically pleasing packaging.

8-12.

See Exhibit 8-9 and section “Consumer Product Classes.” Place convenience and perhaps some promotion might be important with the staple convenience product, while with a homogeneous shopping product, price will reign and to a lesser degree, the consumer will be concerned with place convenience. Place convenience might not be too important for a specialty product – emphasis on promotion and product might be adequate. For a IV-8-5

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heterogeneous shopping product, however, good display and perhaps competitive prices would be needed – perhaps supported by good personal selling because the customer is shopping and may need help. This question asks students to use examples to make their answers more concrete – and to provide a point of reference for their discussion.

8-13.

Here the instructor might attempt to draw out the functions or services that would be provided by various kinds of stores, rather than trying to get the students to use the conventional names that are presented in the Place chapters. It is intended here that the students use logic and common sense, describing what the stores should do (disregarding conventional labeling). By describing the kinds of stores that ought to be carrying these various kinds of products, they will obtain a better appreciation for what some actual retail stores do. They will also see that some stores carry several different kinds of products and that some particular stores do relatively little besides stocking the products.

A typical student answer follows: STORE TYPES

8-14.

a) Convenience Products 1) Neighborhood grocery stores 2) Vending machines 3) Supermarkets 4) Department stores 5) Hardware stores 6) Drugstores

c) Specialty Products 1) Supermarkets 2) Department stores 3) Clothing stores 4) Drugstores 5) Appliance stores 6) Jewelers

b) Shopping Products 1) Supermarkets 2) Department stores 3) Furniture stores 4) Clothing stores 5) Appliance stores 6) Discount stores

d) Unsought Products 1) Supermarkets 2) Department stores 3) Appliance stores 4) Drugstores 5) Discount stores

We are concerned only with business products here, but it should be mentioned that lubricating oil, electric motors, and landscaping services might also be consumer products. The following comments refer to business products only: a.

Maintenance or repair items, or component materials if used on the assembly line.

b.

If an especially large, complicated system (i.e., an electric motor for a steel mill), it would be considered an installation; if it were a small motor for a sprayer in the maintenance department, it would probably be considered accessory equipment. If it were incorporated in the company's product (i.e., a motor in a washing machine) it would be a component. If it were to replace a worn-out motor in the factory (or in a warranty repair) it would be a repair and maintenance item.

c.

A professional service – the firm could perhaps purchase its own lawn care equipment and hire its own crew, but often it makes sense to leave this work to experts – especially if there is not enough landscaping work to keep a person occupied full-time.

The important point to recognize is that similar products can be treated differently, depending upon the relative importance in the buyer's plans and how they are to be used. In other words, the firm may be catering to several target markets at the same time.

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See Exhibit 8-10 and section “Business Product Classes—How They Are Defined.” This question tries to anticipate material that is discussed in greater detail in subsequent chapters.

The instructor should not expect the students to use the conventional terms and probably should not supply them either. Rather, understanding of the nature of the institutions and functions required should be sought. Given that they have been asked to list the kind of distribution facilities needed, some students rather mechanically list some. But "why" questions may help them understand the reasons some business products producers sell directly to their customers. Similarly, focusing on the jobs that need to be done, the kind and caliber of salespeople required, and the kind of advertising needed can be pursued fruitfully for the various product classes.

8-15.

CHAPTER 8 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. b. c. d.

What goods does Hillside Veterinary Clinic sell?

What services does Hillside Veterinary Clinic sell?

What consumer product classes are offered by Hillside Veterinary Clinic?

The discussion of product classes in this chapter indicates what marketing mix is typical for different classes of products. Does the marketing strategy recommended in the marketing plan fit with those considerations? Why or why not?

While the clinic sells a small number of pet supplies, these are not described in the marketing plan. HVC has future plans to develop a retail store with a variety of goods, but right now all of the clinic’s products are services. While the marketing plan is not organized by products, some information can be inferred from the broader plan.

Some product classes appear to be relevant for the veterinary services offered by HVC. The table below looks at some of the product classes, examples at HVC, and evaluates the current strategy’s fit with the textbook recommendation.

Product Class

Examples at HVC

Fit with Recommendation

Emergency

Euthanasia, grief counseling, and general surgery are likely to fit the definition of an emergency product For many customers spay/neuter services and puppy/kitten shots may fit this category. Purchase of a new pet may require these services Dental services and acupuncture may fall into this category

The textbook suggests price sensitivity is low and availability should be widespread. The marketing plan does indicate that house calls are available for extra charges Customers may be price sensitive with these products – tending to see little difference across providers. HVC currently packages these services together at a 20% discount

Homogeneous shopping

Specialty products

The marketing plan suggests greater promotional activity around these higher margin products. This is consistent with the recommendations in the textbook – which suggest that not all customers may be sold on the product’s specialty status

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CHAPTER 8 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 1: McDonald's "Seniors" Restaurant This case can be used here to show that a company's "Product" can consist of much more than just a physical good. In the McDonald's case, they offer much more than just hamburgers, fries, and a coke.

And they offer more than just fast service too. They are clean, friendly, dependable, and so on. Over the years, many competitors have underestimated the importance of supplying more than just "fast food" and there have been many failures in this industry. Further, fast-food franchisers must continue to offer their "Product" day in and day out or customers will be dissatisfied and the web-of-word-of-“mouse” will spread rapidly. Bad news usually travels faster than good! We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter.

Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 3: COLORADO United Soccer Academy The product sold by COLORADO United Soccer Academy is a service. This case provides a way for an instructor to talk through some of the unique elements of a service. The instructor might start with a question like, “What is the product that COLORADO United Soccer Academy sells?” “What is the needsatisfying offering of the firm?” “How would customers define product quality?” We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Because this Product contains mostly services (as opposed to goods) elements, the instructor could use the case to bring out some of the unique differences between goods and services. The idea of a product line might also be presented. As COLORADO United Soccer’s customers become more proficient in soccer, their needs change. It would be useful for COLORADO United Soccer to have a product line that manages its customers’ transitions through these changing needs. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 7: Lake Omarama Lodge This case offers an opportunity to discuss the key dimensions of the marketing of services. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 13: Pierce-Paul, Inc. (PPI) One of PPI’s key intermediaries has approached the company about providing it with a product that it would sell under its own dealer brand. This case can be used to discuss the issues of dealer branding and how it might affect a producer's strategy. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes

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together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 28: Kirkwood Home Health Services (KHHS) The product sold by KHHS is a service…and this case happens in a nonprofit setting. Objectives must be set before or during the strategy planning—and these are still being considered. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 35: The Norbank Baseball Club This case deals with a branding problem. It is not unlike the challenge facing the Washington Football Team (NFL), Cleveland’s major league baseball team, and many college and university mascots. It is also like two photo examples offered in this chapter – Aunt Jemima and Uncle Ben. The problem then is whether to change the team’s name, if so to what, and then the implementation issues. The case offers a nice chance to deal with the diversity, equity, and inclusion problems facing many firms today.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 42: Invacare Says “Yes You Can!” to Customers Worldwide The Invacare Corporation produces home medical equipment for the domestic market as well as select global markets. Some of the manufacturing is in U.S. facilities, including a factory at the main headquarters in Elyria, Ohio and the HomeFill oxygen concentrator production plant in Florida. Invacare’s product line provides one avenue for discussion tied to the chapter. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 8: BRANDING DECISION The manager in this problem has been made an offer she "can't refuse." A big customer – a grocery chain – has proposed that the manufacturer make a product for the chain to sell under its own brand.

The manager is concerned that she will lose the customer if she says "no" – yet concerned about what might happen to profits if she says "yes." The student analyzes the potential benefits and limitations of the customer's proposal – and evaluates potential profitability under different conditions.

The problem underscores the adjustments that a firm might make in its marketing mix when an intermediary is doing the branding. It also helps students to see why some manufacturers produce dealer brands – even when they would rather do the branding themselves. The scenarios developed in the questions for the problem show how promotion and other marketing responsibilities (and costs) may be shifted among different members of a channel – depending on who is doing the branding.

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Students often see branding decisions as obvious – but the perspective gained by doing this problem helps them to see some of the important aspects of this decision that may not be so obvious "on the surface." The problem provides a very good basis for in-class discussion.

The initial spreadsheet for this problem is provided below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

Spreadsheet Current WHOLESTEEN Brand – Total Number of Cases Price per Case Cost to Produce a Case-WHOLESTEEN Advertising Allowance per Case FOODWORLD Brand – Total Number of Cases Price per Case Basic Cost to Produce a Case Less Savings per Case on Cans Less Savings per Case on Labels Cost per Case COSTS: Overhead Cost Promotion Cost Total WHOLESTEEN Ad Allowances Cost of WHOLESTEEN Cases Cost of FoodWorld Cases TOTAL of Above Costs REVENUE from WHOLESTEEN Brand Revenue from FoodWorld Brand TOTAL Revenue TOTAL PROFIT Gain/(Loss) in Profit from Proposal

Proposed

100,000* $8.88* $5.30* $0.25*

90,000* $8.88* $5.30* $0.25* 10,000* $7.40* $5.30* $0.24* $0.48* $4.58 $120,000.00* $120,000.00* $70,000.00* $70,000.00* $25,000.00 $22,500.00 $530,000.00 $477,000.00 $45,800.00 $745,000.00 $735,300.00 $888,000.00 $799,200.00 $74,000.00 $888,000.00 $873,200.00 $143,000.00 $137,900.00 ($5,100.00)

Answers to Marketing Analytics: Data to Knowledge Problem 8: a.

Based on data in the initial spreadsheet (given above), the proposed arrangement would result in a loss of $5,100 in profits for Wholesteen (Answer A).

b.

Wholesteen profits would drop to $109,700 if it turns down the proposal and FoodWorld reduced its order by 10,000 units (i.e., if it used another supplier for its dealer brand). Note that this is $33,300 less than the current arrangement and $28,200 less (Answer B) than it would make if it accepts the "losing" proposal.

c.

It gets worse if FoodWorld took all of its business to another supplier. That would reduce Wholesteen sales to 80,000 units, and profits would drop to $76,400 – a reduction of $66,600 from their current status and $61,500 lower than their forecast if they accept FoodWorld’s proposal (Answer D).

The analysis can be seen in the spreadsheet below with the additional scenarios compared to the original scenario. Scenario B represents the reduction from the loss of the FoodWorld branded products. Scenario C represents the result of the loss of the entire FoodWorld business.

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SpreadSheet Current Proposed WHOLESTEEN– Total Cases Price per Case Cost to Produce a Case Adv. Allowance per Case FOODWORLD– Total Cases Price per Case Cost to Produce a Case Can Savings per Case Label Savings per Case Final Cost per Case COSTS: Overhead Cost Promotion Cost WHOLESTEEN Ad Allowances Cost of WHOLESTEEN Cases Cost of FoodWorld Cases TOTAL of Above Costs REVENUE from WHOLESTEEN Revenue from FoodWorld TOTAL Revenue TOTAL PROFIT Gain/(Loss) in Profit from Proposal

c.

100,000* $8.88 * $5.30 * $0.25 *

90,000* $8.88* $5.30* $0.25* 10,000* $7.40* $5.30* $0.24* $0.48* $4.58 $120,000.00 * $120,000.00* $70,000.00 * $70,000.00* $25,000.00 $22,500.00 $530,000.00 $477,000.00 $45,800.00 $745,000.00 $735,300.00 $888,000.00 $799,200.00 $74,000.00 $888,000.00 $873,200.00 $143,000.00 $137,900.00 ($5,100.00)

Scenario B

Scenario C

90,000 $8.88 $5.30 $0.25

80,000 $8.88 $5.30 $0.25

$120,000.00 $70,000.00 $22,500.00 $477,000.00

$120,000.00 $70,000.00 $20,000.00 $424,000.00

$689,500.00 $799,200.00

$634,000.00 $710,400.00

$799,200.00 $109,700.00 ($33,300.00)

$710,400.00 $76,400.00 ($66,600.00)

As shown in the spreadsheet below, this change would actually result in an increase $3,900.00 over present profits (Answer C) – $146,900 compared to $143,000 at present. In this situation, the reduced profits from the first year of the proposal would probably be offset by increased profits from the FoodWorld business in purchases the next year. Of course, that doesn't help if the Wholesteen people don't want to give up control of branding!

SpreadSheet Current Proposed Growth Scenario WHOLESTEEN– Total Cases Price per Case Cost to Produce a Case Adv. Allowance per Case FOODWORLD– Total Cases Price per Case Cost to Produce a Case Can Savings per Case Label Savings per Case Final Cost per Case COSTS: Overhead Cost Promotion Cost WHOLESTEEN Ad Allowances Cost of WHOLESTEEN Cases Cost of FoodWorld Cases TOTAL of Above Costs REVENUE from WHOLESTEEN Revenue from FoodWorld TOTAL Revenue TOTAL PROFIT Gain/(Loss) in Profit from Proposal

100,000* $8.88 * $5.30 * $0.25 *

90,000* $8.88* $5.30* $0.25* 10,000* $7.40* $5.30* $0.24* $0.48* $4.58 $120,000.00 * $120,000.00* $70,000.00 * $70,000.00* $25,000.00 $22,500.00 $530,000.00 $477,000.00 $45,800.00 $745,000.00 $735,300.00 $888,000.00 $799,200.00 $74,000.00 $888,000.00 $873,200.00 $143,000.00 $137,900.00 ($5,100.00)

80,000 $8.88 $5.30 $0.25 25,000 $7.40 $5.30 $0.24 $0.48 $4.58 $120,000.00 $70,000.00 $20,000.00 $424,000.00 $114,500.00 $748,500.00 $710,400.00 $185,000.00 $895,400.00 $146,900.00 $3,900.00

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d.

A typical approach to this type of situation would be for Wholesteen to offer a counter to FoodWorld’s proposal. Whether or not FoodWorld accepts the counterproposal (or offers yet another counterproposal) depends on a number of variables. Wholesteen would need to propose a price of $7.91 per case (Answer B) in order to hold total profit at $143,000.00. The analysis is found in the spreadsheet below: SpreadSheet Current

WHOLESTEEN Brand – Total Number of Cases Price per Case Cost to Produce a Case-WHOLESTEEN Advertising Allowance per Case FOODWORLD Brand – Total Number of Cases Price per Case Basic Cost to Produce a Case Less Savings per Case on Cans Less Savings per Case on Labels Cost per Case COSTS: Overhead Cost Promotion Cost Total WHOLESTEEN Ad Allowances Cost of WHOLESTEEN Cases Cost of FoodWorld Cases TOTAL of Above Costs REVENUE from WHOLESTEEN Brand Revenue from FoodWorld Brand TOTAL Revenue TOTAL PROFIT Gain/(Loss) in Profit from Proposal

Proposed

100,000* $8.88* $5.30* $0.25*

90,000* $8.88* $5.30* $0.25* 10,000* $7.91* $5.30* $0.24* $0.48* $4.58 $120,000.00* $120,000.00* $70,000.00* $70,000.00* $25,000.00 $22,500.00 $530,000.00 $477,000.00 $45,800.00 $745,000.00 $735,300.00 $888,000.00 $799,200.00 $79,100.00 $888,000.00 $878,300.00 $143,000.00 $143,000.00 $0.00

MARKETING ANALYTICS DISCUSSION There is not a single "correct" answer to this question. But from the previous analyses, the student should see that it is a difficult decision. Most will argue that Wholesteen has little alternative but to accept the proposal. The instructor can use this problem to highlight the difficulties a firm can face when a large share of its business comes from one (or very few) customers. This problem can also be used to "preview" the idea of channel conflict – a topic that is discussed in more detail in Chapter 10 of the text.

On the other hand, as illustrated in the questions that follow, it may also be that the members of the channel can work out an arrangement that is suitable to all concerned – so that one firm's gain is not necessarily another's loss.

CHAPTER 8 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Branding the Product Question Type: Case Analysis Learning Objectives: 8.3 Topic: Branding is a strategy decision AACSB: Analytic, reflective thinking Bloom’s: Remember, understand, apply

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Question 2: Business Product Classes Question Type: Click and Drag Learning Objectives: 8.6, 8.7 Topic: Business products are different AACSB: Reflective thinking Bloom’s: Remember, apply, evaluate Question 3: Consumer Product Classes Question Type: Click and Drag Learning Objectives: 8.6, 8.7 Topic: Consumer product classes AACSB: Reflective thinking Bloom’s: Remember, apply Question 4: Legal Environment Affecting Product Decisions Question Type: Click and Drag Learning Objectives: 8.3, 8.4, 8.5 Topic: Legal environment and product decisions AACSB: Analytic, reflective thinking Bloom’s: Remember Question 5: Brand Equity (iSeeIt! Video) Question Type: Video Case Learning Objectives: 8.3 Topic: Branding AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 6: Branding Decision Question Type: Marketing Analytics Learning Objectives: 8.3 Topic: Branding AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 7: Differences between Goods and Services Question Type: Click and Drag Learning Objectives: 8.2 Topic: Goods and Services AACSB: Knowledge, Application Bloom’s: Understand Question 8: Product Planning at Under Armour Question Type: Case Analysis with Multiple Choice Learning Objectives: 8.1, 8.3, 8.4, 8.6 AACSB: Reflective thinking, analytical Bloom’s: Remember, understand, apply Application-Based Activities Title: Product, Branding, and Packaging: The Upcycled Dog Type: Role-Playing Bloom’s: Apply Description: Play the role of a branding consultant for The Upcycled Dog. Develop a marketing strategy for improving sales through brand revitalization and packaging.

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CHAPTER 9: PRODUCT MANAGEMENT AND NEW-PRODUCT DEVELOPMENT CHAPTER 9 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You have been working for a few months at a fast fashion clothing designer. Your company tries to spot trends in casual fashion, and quickly bring new clothes to market. You recently met with a supplier that offers a great cotton fabric that will last twice as long and costs the same price as other cotton materials. The supplier has a patented new weaving process. When you bring this innovation up at a meeting, your manager shoots it down, saying “Look, we don’t want our products to last very long.

Kids today don’t care how long something lasts, they just want the latest thing. And if we make our products last longer, customers will end up buying less.” You are somewhat uncomfortable with this argument. Should you bring this up subject up with your manager again? How would you address it with your co-workers? Your manager?

It is interesting to discuss why the company chooses to use lower cost ingredients. These days many products are designed for obsolescence. That may mean consumers don’t get as much value from products (useful life is shorter) but it can also mean that more of our goods move to landfills sooner—or they are not reused or recycled. What if a competitor takes advantage of the new cotton – and begins to offer longer-lasting products? Is the manager short-sighted?

CHAPTER 9 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS IN THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise looks at return on investment—which is often used as a criteria to evaluate marketing strategy decisions. In this exercise, the focus is on getting students to understand the concept rather than calculations.

Marketing Analytics in Action 9: RETURN ON INVESTMENT (ROI)

The two new products being considered differ in their anticipated sales revenue, profit margin, and the relative investment. These variations allow students to consider the advantages of different types of new product opportunities. The data also indicates that ROI can be increased by: 1) raising the profit margin, 2) increasing sales revenue, and 3) decreasing the investment in the new product. See table below.

There are no right or wrong answers and the exercise could foster some discussion about how these numbers could be changed.

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Choco GluFree First-year sales revenue* $20.0 $12.0 Profit margin (%) 15% 20% Net profits (revenue × profit margin) $3.0 $2.4 Investment in product development $10.0 $6.0 ROI (net profit ÷ investment) 30% 40% *All dollar figures in millions.

For questions 1 and 2, students (perhaps with some instructor nudging) can speculate about a wide range of ways to change the three variables influencing revenue (perhaps more aggressive advertising or sales promotion), profit margin (higher prices), or investment in product development (cutting budgets for new-product development).

Question 3 is also speculative. For example, more details on the development budget, competitor offerings and prices, and sales growth projections might help in decision making.

CHAPTER 9 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world:

•

•

Photos o Innovative new product types help people with disabilities play video games and protect marine life from plastic waste. o D-Rev created the ReMotion knee, an affordable alternative replacement knee for amputees in developing countries. o Zappos adaptive product line. #M4BW Boxes o Innovation is needed to solve global challenges. Businesses are creating solutions to problems such as climate change and hunger. o Customers must learn new behaviors for discontinuous innovations. Appliance maker Godrej needed to think differently about refrigeration in order to meet the needs of customers in rural India. o Technology speeds global solutions to market. Scientists use machine learning to speed up the development of medicine and cleaner energy.

CHAPTER 9 – COMMENTS ON QUESTIONS AND PROBLEMS 9-1.

The iRobot opening case describes in relative detail how the company’s new product development process operates – and the product life cycle. Examples of key terms and concepts from this chapter include but are not limited to: • The development of Roomba considers each step of the new product development process. Students might be asked to describe examples of each step. For example, step 2 (screening) is reflected in the decision to drop the toy ideas. Idea evaluation involves reactions from customers – and Roomba used its own employees as well as their friends and neighbors for feedback.

• The vacuum cleaner market was mature before the Roomba.

• Introduction stage requires more promotion and iRobot managers worked with specialty retailers’ salespeople to train them on the Roomba.

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• And more.

9-2.

Step 1 – Idea generation: iRobot could talk to doctors and nurses as well as patients for ideas about what the robot could do and should do. It could also see if competitive products exist for more ideas.

Step 2 – Screening: in this stage, iRobot is evaluating potential products. How well does this idea fit with market trends (an aging population and out of control health care costs would make it fit well). It would assess its own strengths and weaknesses in this market.

Step 3 – Concept testing could be done to get reactions from customers. At this stage it could estimate development costs.

Step 4 – Development: This stage would ramp up the investment for iRobot. It would invest in developing a prototype product and begin to test marketing mixes.

Step 5 – Commercialization: now iRobot might rollout the product in select market segments to see how it performs. A slow rollout would allow them to test its appeal.

9- 3.

This is just a review question. See section “Managing Products over Their Life Cycles” for relationships. It is important to recognize that market profits start declining in the market growth stage. This point is often missed and is crucial for understanding why competition begins to get stiffer toward the end of the market growth stage and certainly in market maturity. Market profits are declining because some firms are losing out in the competitive battle. Some may even lose money in the market growth stage. In market maturity, competitive activity accelerates – and everyone's profits may be below what they were projecting based on what was happening during the market growth stage. "Trend extenders" (see Appendix B) are especially frustrated with what begins to happen in the market maturity stage. They may have experienced attractive profit rates during market growth – or seen others earning attractive profits and agreed to enter this market. Now they find that many others also saw the opportunity, so entry and "stay-in" costs are rising. This "game" might be likened to a poker game where the stakes rise during the course of a particular game – especially if the pot is large.

9- 4.

This question is intended to encourage class discussion after the students have committed to examples. Actually, it is not nearly as easy as it seems because the stage of the product life cycle depends on how the related market is defined and how specifically the product is identified. Automobiles, for example, may be in the market maturity stage in the United States, but specific product concepts would certainly be in an earlier stage. Quick oil change services seem to be at market maturity in many states, but in some areas they are just being built and sales (and profits) are still growing at an attractive rate.

This question can lead to a "rich" (but hard to manage because of the subtleties involved) class discussion about the meaning of the product life cycle concept and its potential for marketing strategy planning.

9- 5.

The basic point of this question is to promote thinking about the idea that product life cycles should be related to specific markets as well as to specific product concepts. For example, in the U.S. the gas-powered car is probably at the mature – or even decline – stage of the life cycle. However, the electric car appears to be just catching on (although the idea has been around for decades). In other countries – like India – a smaller percentage of consumers can afford any type of car. However, growth is occurring rapidly in India and some other countries (China), and in recent elections India’s citizens voted in a new government. The pressure for change came from the provinces, where many consumers felt that they had not participated in the benefits of (or income from) the economic growth that had increased opportunities in other parts of the country.

9- 6.

A firm might introduce an individual product that is new for that firm at any stage of the overall product life cycle. Just because a product is new for a firm does not mean that it will ever achieve sales or profit growth. If it does not compete with other offerings on the market in IV-9-3

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meeting customer needs, it will fail. Further, even if a firm is the first to introduce a new product concept, it may never make it to the growth stage. It might fail and be forced out of the market if a creative imitator improves on the original product concept or some other element of the marketing mix. Further, some firms successfully introduce brands at the mature stage of the product life cycle. The examples that students give here are likely to vary. Many electrical appliances and most consumer-packaged goods – including most food products – are at the mature stage of the life cycle. Thus, just about any example of a new brand in these markets will do. For example, Kellogg’s recently introduced its Krave (chocolate) brand of cereal. While the product is new to Kellogg’s and to the market, the breakfast cereal market in the U.S. is certainly at the mature stage. If Krave proves to be successful and sales grow, it will be in spite of the fact that sales in the overall market are stagnant – and any growth in sales will come at the expense of some other brand's share of the market. And if the brand is not successful and the product dropped, it does not mean that cereal is in the decline stage of the cereal market.

9- 7.

See section “Planning for Different Stages of the Product Life Cycle.” Briefly, when the personal computer was first introduced, there was little direct competition. Potential customers did not know what it could do. Pioneering promotion was required to inform them and to stimulate primary demand. Intermediaries did not exist, and so new channels of distribution had to be developed. Prices were quite high – in part because the market was still small and there were not economies of scale in production and in part because the innovators "skimmed the cream" of the market with high prices. Over time, as sales began to grow, competing firms entered the market with similar products. More variety was introduced as different firms tried to find ways to meet customers' needs. Different channels of distribution were developed (different types of retailers, mail order, direct sales, etc.) and distribution became more intensive. General merchandise stores like Sears and Walmart even entered the fray.

Promotion focused more on the specific features of individual brands (for examples, IBM's "compatibility" with software from many companies or Apple's graphical user interface). Growth in the market for personal computers has slowed, and industry profits have begun to fall off as the market becomes more and more competitive. The competition and dropping profit margins have driven many computer dealers out of business. At this stage, the really successful new introductions in the market tend to be "niche" products oriented toward specific segments (e.g., lightweight laptop computers, engineering workstations specially designed for high-speed computations, tablet computers that recognize handwriting, etc.). Price has dropped dramatically, especially in relation to the performance of the machines.

9- 8.

A product may move more quickly through the product life cycle: 1) if it has a comparative advantage over existing products (DVDs offered higher quality for movies than VHS tapes and had more space for extra features like behind the scenes interviews with actors); 2) if it is easy to use (DVDs could be popped in a machine and it would automatically start to play, or could be controlled with a visual interface and remote control); 3) if its advantages are easy to communicate (a consumer can see the difference in quality that a DVD makes, and the image doesn’t degrade when a movie is played many times); 4) if the product can be tried on a limited basis (NutraSweet could be tasted easily in an inexpensive product); and 5) if it is compatible with the values and experiences of the target customers (cable TV did not require customers to do anything different than they did with regular TV – it just gave them more choices).

Note that these characteristics are always viewed from the perspective of potential customers.

Thus, in different countries the various characteristics might be viewed quite differently. For example, in the U.S. it was an advantage for NutraSweet that it could be tried easily at low risk because it was consistent with the "diet-oriented" needs of many consumers; however, in many other countries dieting is viewed as unhealthy and thus this characteristic would not be related to faster adoption of the product.

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9-9.

This is basically a review question. See section “New-Product Planning.” The important point is to identify for whom the product is new. A product might be new for a firm, while being a "me-too" product that will not be seen as "new" by any consumers or intermediaries. As illustrated in the text example of videodisc players, a product could be new if presented to a new market (1) to satisfy a need which had previously not been felt by that market or (2) as a new solution to the felt needs of a market.

9- 10.

See section “An Organized New-Product Development Process Is Critical.” The examples are suggested to make the discussion more concrete. The importance of designing a whole marketing strategy, including the selection of target market, not just a physical product, should be stressed throughout.

9- 11.

The purpose of this question is to highlight the general applicability of the new-product development process discussed in the text (see Exhibit 9-5 and section “An Organized NewProduct Development Process Is Critical”). [Some of the authors' students have taken this question as quite a challenge – as the motivation to come up with an idea for how to make money during the summer while living in a resort town]. Students will develop many different ideas, but the steps in the development process can be used to organize the discussion. For example, ideas about potential services might be developed based on 1) personal experience (for example, sailing or swimming lessons for kids), 2) what has been successful in some other market (catering services for beach picnics or cookouts), or 3) surveys of past visitors or residents of the town (safe, fun daytime or evening child care). Similarly, screening could be based on how hard or easy it would be to implement the idea. A "one shot" summer offering would need to be easy to start up without too great an initial investment; the market in turn would need to be sufficiently large to justify the effort. The idea evaluation stage might involve a more detailed "fleshing out" of the concept (i.e., exactly how would the service be provided, by whom, when, etc.). The development phase might involve some "tests" or prototypes of the service, perhaps very early in the summer or with some "friendly" customers to work out the bugs and make certain that the implementation could be handled as expected (especially important given the service concept). Based on the feedback during the development stage, the concept (and whole marketing mix) might be modified before moving into full-blown commercialization.

9-12.

See section “Need for Product Managers.” Product managers are not usually put in charge of new-product development efforts.

9-13.

This is a much more complex question than will be apparent to most students – at least at first.

It provides an excellent basis for discussion of whether "global" strategies are feasible at all, and if so, how the marketing organization can be set up to implement them.

The heart of this question is: can the firm obtain some sort of competitive advantage (such as economies of scale and/or greater sales revenue potential) by presenting a uniform image and homogeneous marketing mix to target markets in different countries – or are the customers in different places different enough that they are likely to require uniquely tailored strategies?

While some high-level marketing manager or brand manager may need to be in charge to combine the different strategies into an overall plan, each country is likely to require a "specialist" brand manager who really understands that market environment (i.e., laws, culture, media, etc.), as well as the specifics of consumer behavior (attitudes, beliefs, sources of information used, etc.).

Firms – such as Coke and Gillette – that present the same basic brand image in different parts of the world may try to maintain a certain consistency in promotion – especially advertising – across different markets. Brand managers often have responsibility for managing that promotion effort. On the other hand, the overall strategy for the brand – which must take into consideration channel relationships and logistics, pricing issues, product policies, and target market selection – usually requires important fine-tuning in different countries. (Note: the IV-9-5

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introduction to Chapter 11, which focuses on Coke, highlights these issues by explaining how the emphasis of Coke's distribution effort varies among different countries.)

9-14.

This is a question for each individual – and for society in general – to decide. Some critics feel the present American habits in this regard are highly wasteful, but it is extremely difficult to draw a line at a particular place. The idea of psychological satisfaction enters the picture. This may not be a question for marketing or even for business to decide. Their role is to cater to society's demands.

The new interest in "quality of life" may lead to less emphasis on material values and "planned obsolescence.” From a macro-marketing viewpoint, if it is business's responsibility to satisfy customer needs, then it will have to adjust its strategies to the "new consumers.” If this means less "planned obsolescence," so be it. But if consumers come to demand more variety, then some businesses will see these demands and move to satisfy these consumers – even if it means even more "planned obsolescence."

9-15.

The major advantage of total quality management as an approach for implementing a marketing plan is that it should help reduce the cost of lost customers. It should accomplish that by helping everyone in the organization to focus on the root causes of customer dissatisfaction, and what can be done to fix the problems. The concept of continuous improvement is a key issue here. TQM keeps managers from being satisfied, constantly refocusing attention on the next problem to solve.

A potential limitation of (problem with) total quality management type approaches is that they do take time and resources to implement. They focus on measuring and calibrating many different, detailed activities. That doesn't happen automatically. Time (money) might be spent more effectively on other matters if people could solve the quality problems on their own without having all of the data to guide the "detective work.” Further, some firms get so caught up in the "quality" process that they lose sight of the reasons for worrying about it in the first place: to satisfy customers by meeting their requirements.

CHAPTER 9 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. Hillside offers many different products. Identify several of these products and indicate where you think each of them is in its product life cycle. b. Exhibit 9-4 summarizes some marketing mix characteristics based on where a product fits in the product life cycle. Is Hillside’s marketing plan consistent with what this exhibit suggests? Why or why not?

Determining where HVC’s products fall in the product life cycle (PLC) requires some interpretation. While most students should be familiar with the general market, it is not important that they precisely determine life cycle stage. It is more important to understand their rationale for placing the product in a particular stage. The table below classifies some of HVC’s products by life cycle stage and looks at HVC’s marketing strategy and its fit with the recommendations in the chapter. An in-class discussion might ask students if the chapter gives them additional marketing strategy ideas for HVC.

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PLC Stage

Examples at HVC

Fit with Recommendation

Market introduction

Two products may fit here.

The dental services package is probably new for most customers (only 5-10% utilize the services now).

In addition, the geriatric health care package for dogs and cats appears to be new to the market.

Market growth

New puppy/kitten care packages (while vaccinations are a mature product, the package puts several services together and may be in the market growth stage) Vaccinations, spay/neuter, euthanasia services

Dental services are described as one of the more profitable services (suggesting a skimming price policy).

The veterinarian and vet techs are also asked to promote this product during appointments with customers – a form of personal selling. The introduction of a brochure (to be available at the clinic and at community events) suggests communication that informs – while signs generate awareness. The website recommendations include detailed descriptions of these services. These are consistent with recommendations in the chapter. Similar strategies are suggested for the geriatric health care package.

The new puppy/kitten packages wrap several services together at a discounted price. Promotion occurs through a brochure that will be available at the clinic and handed out at community events. The discounted packages fit with recommendations that pricing becomes more aggressive as products mature.

Market maturity

These products and services do not seem to receive special attention in the marketing plan. As more mature products, most customers know that all veterinary clinics offer these services. Some of the core services (spay/neuter) have been packaged with other services to provide a value-oriented package.

CHAPTER 9 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 6: Valley Steel This case can be used here to discuss what a “new” product is and the difficulty of winning acceptance for a new product if there is not a strongly felt need. The problems that result from production-oriented newproduct development can be emphasized. The new product does not address customers’ current needs and attitudes. Also, it does not meet standard specifications. The company has not worked with users and/or buyers (structural fabricators and/or architects) to encourage them to write a modified set of specs that would cover the “new” product. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 20: Lake Manina Marine & Camp This case can be used to discuss the nature of competition facing manufacturers and retailers who are selling more or less homogeneous products in market maturity. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Case 22: Bright Light Innovations The Starlight Stove represents a different kind of new product. While the product does not appear to be technically sophisticated, it does represent a breakthrough technology for its target market. While there are other products that provide electricity, or the heat and cooking benefits of the stove, no other product does both. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 9: GROWTH STAGE COMPETITION This revealing problem puts the student in the role of a manager whose innovative new agricultural fertilizer product is entering the growth stage of the product life cycle. The program simulates changes in price, promotion, costs, and profit for the manager's firm and competitors over time. The student uses sensitivity analysis to study what is likely to happen to the firm's market share and profit as competitors enter the market – and what happens to industry profits as price competition forces lower prices.

The "generating" model here involves some simplifications relative to what one might observe in real markets. These simplifications make it easier for a student to "follow" the changes taking place. Further, these simplifications are not very critical relative to the basic purpose of the simulation: to give students experience with the dynamics of how the competitive situation, the firm's profits, and industry sales and profits change over time. Students who spend some time thinking about this problem – and the analysis presented – will develop a deeper understanding of the why behind some of the changes that occur over the product life cycle. It is a good problem for some class discussion. The main points to bring out in such a discussion are covered along with the answers to specific questions for the problem.

Answers to Marketing Analytics: Data to Knowledge Problem 9: The initial spreadsheet for the problem is presented next: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

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SpreadSheet CURRENT SITUATION: Unit Sales Expected Unit Growth Each Year Current Price Unit Cost Current Promotion Spending Overhead Costs Number of Years in the Future Firms in the Market Price that Year Industry Unit Sales Industry Sales Revenue AgriChem's Share (percent) of Market AgriChem's Unit Sales AgriChem's Total Revenue AgriChem's Promotion Spending AgriChem's Total Cost AgriChem Profit Ratio of AgriChem Profit to Revenue Total Industry Profit a.

DATA 1,000,000* 200,000* $13.00* $4.00* $900,000.00* $1,200,000.00* 0* 1 $13.00 1,000,000 $13,000,000.0 0 100.00% $1,000,000.00 $13,000,000.0 0 $900,000.00 $6,100,000.00 $6,900,000.00 0.53 $6,900,000.00

By changing the "number of years in the future" variable to 1, the student gets a spreadsheet that characterizes what the marketing managers should expect (given their assumptions) in the coming year. The relevant spreadsheet is provided below.

SpreadSheet

CURRENT SITUATION: Unit Sales Expected Unit Growth Each Year Current Price Unit Cost Current Promotion Spending Overhead Costs Number of Years in the Future Firms in the Market Price that Year Industry Unit Sales Industry Sales Revenue AgriChem's Share (percent) of Market AgriChem's Unit Sales AgriChem's Total Revenue AgriChem's Promotion Spending AgriChem's Total Cost AgriChem Profit Ratio of AgriChem Profit to Revenue Total Industry Profit

DATA 1,000,000* 200,000* $13.00* $4.00* $900,000.00* $1,200,000.00* 1* 2 $12.22 1,200,000 $14,664,000.0 0 81.67% 980,040.00 $11,976,088.8 0 $990,000.00 $6,110,160.00 $5,865,928.80 0.49 $7,050,822.00

The answers are summarized in the table below. In the current year, AgriChem's market share is 100 percent – as the innovator here it has all of the market – and its profits are $6,900,000. The following year the market will have grown by 200,000 units, but given the entry of another competitor AgriChem's share will have slipped to 81.67 percent. Note that even with a loss of share its unit IV-9-9 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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sales drop only slightly – because of the growth in the market. But, its profit drops more – because the competition has forced prices down. Specifically, AgriChem profit drops from $6,900,000 to $5,865,928.80 – a decrease in profits of about 15 percent! The correct answer to the question is Answer E, Total Cost will be $6,110,160.00, not $990,000.00 which represents only promotion costs.

b.

Years in the Future

AgriChem's Share

AgriChem's Profit

0 (Current Year)

100.00 %

$ 6,900,000.00

1 (Next Year)

81.67 %

$ 5,865,928.80

A table showing AgriChem's expected profit, and expected industry sales revenue and profit can be developed by varying the "years in the future" variable between 0 and 5. The resulting table is presented below.

From the table, we see that industry revenue continues to grow throughout the entire period with the maximum occurring in Year 5 (Answer E). (Note that it grows at a constant rate – one of the simplifications noted above – rather than in the more typical "S-shaped" pattern.) Further, industry profit starts to go up, but as more competitors enter the market price-cutting occurs and more money is spent on promotion – so industry profits go down (in year 2).

-DATA-

-DATA-

Table Analysis -DATA-

-DATA-

Years

AgriChem

Industry

Industry

Profit

Revenue

Profit

$6,900,000.00 $5,865,928.80 $4,898,178.26 $3,991,836.48 $3,139,944.57 $2,337,218.06

$13,000,000.00 $14,664,000.00 $16,081,520.00 $17,276,147.20 $18,269,525.66 $19,081,504.58

$6,900,000.00 $7,050,822.00 $6,918,810.74 $6,514,337.40 $5,843,147.48 $4,908,157.93

0 1 2 3 4 5 c.

As discussed above, profit starts to decline as more competitors enter the market. In fact, industry profit reaches its peak in Year 1 (Answer B) and then continues to decline into the future.

d.

If growth is faster, industry profits will increase more rapidly, and they will continue to increase for a longer period of time before starting to decline (in year 3). Even so, AgriChem's profits start to decline and continue to decline over time as competitors enter the market. AgriChem’s profits are highest in Year 0 (Answer A) and decline each year after that. The instructor may want to make the point that the product life cycle concept does not say that the profits of the innovator will decline during this growth stage. In fact, this is often not the case. But, as this example shows, they can decline if the firm is not able to hold its own against the increasing competition, the fight for share, the reduction in price, and increased spending on promotion.

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-DATA-

-DATA-

Table Analysis -DATA-

-DATA-

Years

AgriChem

Industry

Industry

Profit

Revenue

Profit

$6,900,000.00 $6,402,990.72 $5,719,570.07 $4,950,296.95 $4,145,746.27 $3,334,553.47

$13,000,000.00 $15,641,600.00 $17,919,408.00 $19,867,569.28 $21,517,441.34 $22,897,805.50

$6,900,000.00 $7,696,368.19 $8,079,049.12 $8,078,463.32 $7,714,851.76 $7,002,562.30

0 1 2 3 4 5 e.

As shown in the table above, industry profits peak in Year 2 (Answer C) and then begin to decline into the future.

MARKETING ANALYTICS DISCUSSION The examples in this section illustrate some of the typical changes that occur throughout the Product Life Cycle (PLC). As the PLC evolves, more competitors will enter the market and products become more similar to one another. Those two factors cause competitors to start using price as the primary differentiator which puts downward pressure on total industry profits.

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CHAPTER 9 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: The Product Life Cycle and Strategy at Apple Question Type: Decision Generator Learning Objectives: 9.1 Topic: The product life cycle AACSB: Analytic Bloom’s: Remember, understand, apply, evaluate Question 2: Service Quality Problems at Century Bank Question Type: Case Analysis Learning Objectives: 9.6 Topic: Managing product quality AACSB: Reflective thinking, analytic Bloom’s: Understand, remember, analyze Question 3: New Product Development (iSeeIt) Question Type: Video Case Learning Objectives: 9.3 Topic: New product development AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 4: Service Quality (iSeeIt!) Question Type: Video Case Learning Objectives: 9.6 Topic: Service quality AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 5: Types of Innovations Question Type: Drag and Drop Learning Objectives: 9.2 Topic: New Product Planning AACSB: Knowledge, Application Bloom’s: Understand Question 6: Growth Stage Competition Question Type: Marketing Analytics Learning Objectives: 9.1 Topic: Product life cycle AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 7: Product Life Cycle Question Type: iSeeIt! Video with Multiple Choice Learning Objectives: 9.1 AACSB: Reflective thinking, analytical Bloom’s: Remember, Understand

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Application-Based Activities Title: Marketing Service Gaps: Evergreen Hotel Type: Role-Playing Bloom’s: Apply Description: Play the role of the customer service consultant for the Evergreen Hotel. Identify service gaps and create a new employee training program to increase the hotel’s customer service ratings.

Title: New Product Development: Cyberheads Type: Role-Playing Bloom’s: Apply Description: Play the role of a new marketing manager at Cyberheads. Decide on a strategy to reinvigorate sales of virtual reality headsets.

Title: Value Creation: Relevance Tech Company Type: Role-Playing Bloom’s: Apply Description: Play the role of the marketing manager of Relevance Tech Company. You will be leading the marketing strategies for their laptop products.

Title: Product Development Type: Mini Sim Bloom’s: Apply Description: Develop a backpack best suited for the needs, wants, and price sensitivity of the Outdoor Enthusiast market segment.

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CHAPTER 10: PLACE AND DEVELOPMENT OF CHANNEL SYSTEMS CHAPTER 10 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Assume you are the sales manager for a small but growing company that makes sustainable fashions. As you arrive at a trade show to promote your firm’s new line, your assistant pulls you aside to warn you that some of the owners of shops that usually carry your line are looking for you—and several are hopping mad. They’ve heard rumors that a big retail chain will be carrying your new line in all of its stores. In the past, your firm has distributed its fashions only through these small, “independent” retail shops, and they see the big chains as threats. Although you have had some negotiations with a buyer for the big retail chain, no deal has been reached yet. What will you say to the owners of the small shops, many of whom helped your firm get started and have always supported your marketing plans? If you are certain that most of these small retailers will not place any orders if they think the big chain will be carrying the same line, will you respond differently? Explain your thinking.

This scenario addresses an interesting question that faces many fast-growing firms. New start-up firms (or firms with new products) often rely on independent retailers (or wholesalers) for distribution and marketing support when the big players are not interested, which is often the case if they are already carrying a competing product. However, as soon as an upstart becomes popular, bigger middlemen will notice and want to enter the channel. Consequently, as a producer moves into the larger retail chains, it is likely to be seen by smaller retailers or wholesalers as disloyal. They view the decision as a breach of faith, even when there was not a contract in place to prevent it.

This scenario makes the discussion more complex, because the fashion producer has not yet actually made a deal with a big retail chain (but would probably like to). It is important that students see this for what it is—a potentially life or death issue for the producer. Being honest about negotiating with the large chain will surely alienate current small retail outlets and result in a nearly instant failure of the current marketing strategy as they spread the word. If negotiations with the large retail chain break down, the fashion producer will have no access to customers. This makes the small retail shop owners’ response even more crucial. Of course, lying now, and being found out later, may cost the fashion producer her credibility.

Problems like this can sometimes be avoided if managers think clearly in advance about how to help current distributors at the same time as working to get improved distribution. After all, the current small shops will probably continue to be important to the producer even if a deal is struck with a large retail chain. For example, it might be that certain types of fashions would go first (or only) to the smaller, independent shops. That sort of plan may or may not satisfy the owners of the small shops, but it is better to have a positive plan that can be discussed truthfully than to have nothing to say except “no comment.”

CHAPTER 10 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise looks at a salesby-channel report—which is something a marketing manager might review on a regular basis. The questions are straightforward, but they give the students some idea about the type of data marketing managers utilize in making strategy decisions.

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Marketing Analytics in Action 10: SALES BY CHANNEL REPORT

Number of Backpacks Sold by Channel Total by Aug Sep Oct Nov Dec Channel Department Store (e.g., Macy's) 2,644 1,658 1,421 1,854 1,721 9,298 Discount stores (e.g., Walmart) 14,844 7,854 3,956 4,112 4,725 35,491 Online stores (e.g., eBags) 1,354 1,892 2,786 4,025 5,688 15,745 College bookstores 8,632 2,864 1,432 1,874 9,435 24,237 Total by month 27,514 14,268 9,595 11,865 21,569 84,771 1. Discount stores and college bookstores are the channels that sell the largest number of BookPacks bags.

2. Peak sales occur in August and December.

3. Discount stores and college bookstores probably serve back-to-school customers. The online stores may cater less to this market and more to holiday gift-giving.

4. This question could go in many different directions and an instructor should listen to students’ rationale. For example, one student might argue that online stores are the growth market for the future and deserve more investment. Others might suggest that the sheer size of discount stores merits attention.

CHAPTER 10 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world:

Chapter 10 • Photos o Everlane – purpose-oriented clothing retailer. o Brazil-based food bank Banco de Alimentos uses reverse delivery to utilize delivery vehicles to take food donations from restaurants to those in need.

• #M4BW Boxes o Solar Sister trains women in local villages in Uganda, Tanzania, and Nigeria to sell its solar panels. o New laws require reverse channels in some industries. Laws in Europe and the United States make producers responsible for recycling, creating an incentive for manufacturers to develop more sustainable products. o Reverse channels—sustainable and profitable. Companies, such as Xerox and Coke find profitability in in reverse channels.

CHAPTER 10 – COMMENTS ON QUESTIONS AND PROBLEMS 10- 1.

The case study that opens this chapter describes the evolution of the personal computer industry – in particular how channels of distribution evolved over time. Examples of key terms and concepts from this chapter include but are not limited to: • Retail stores – IBM established its own chain of retail stores • Direct distribution – Dell started the practice of selling direct • Multichannel distribution – Dell eventually also sold through dealers. Lenovo started selling only through dealers and later changed to allow direct sales.

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• Exporting – Dell and Lenovo both sell in international markets.

• And more.

10- 2.

There are many concepts that Lenovo could employ; examples include: • Creating reverse channels for returns • Using multichannel distribution – selling through different types of retailers and direct • Licensing its technology to gain market share quickly in a new country • Attempt to become the channel captain to better control the whole channel

10- 3.

Channel specialists who work with service producers usually focus on buying/selling functions and on the information functions. For example, travel agents work as independent intermediaries to help travelers as well as hotels, airlines, car rental services, and the like.

They provide information about travel services as well as costs and other advantages or disadvantages. Similarly, financial service firms may rely on brokers or some sort of independent selling agent to reach their target market; for example, insurance firms often sell their products through independent agents.

This question provides an opportunity for in-class discussion and review of the universal functions of marketing (buying, selling, transporting, storing, standardization and grading, financing, risk taking, and marketing information) and the idea that they can be shifted and shared in various ways in the channel. It highlights the fact that the emphasis on some functions may be different when the product is primarily a service (rather than primarily a physical good), but that thinking about the various functions helps a manager figure out when and if an intermediary/specialist makes sense.

10- 4.

This question relates to the discussion of direct vs. indirect channel systems – and adds an international dimension.

A firm that sells installations might want to use direct distribution in its domestic market.

Installations are often a high-ticket purchase for the business customer and there may be many questions for the seller. Aspects of the marketing mix – especially after the sale service – may need to be negotiated. Direct distribution may be feasible because there are fewer customers at any given time – and they are likely to be concentrated in certain areas (cities).

The promotion emphasis is likely to be on personal selling. Direct distribution gives the marketing manager control over salesforce training, motivation (compensation), and how effort is allocated to different accounts or potential accounts. Further, direct contact with the customer may be important to fully understand the customer’s problems or requirements.

While there are often advantages to direct distribution, in international markets the potential benefits of direct distribution might be offset by the disadvantages of not having a specialist involved who is more knowledgeable about the foreign market environment, including regulations related to importing or knowledge of local business conventions.

10- 5.

There may be a discrepancy of quantity between the output of clothing manufacturers and the demands of individual consumers who may want only one or two of a variety of items. But since consumers usually want a wide variety of items and producers tend to specialize, there is bound to be a discrepancy of assortments. As a result, we see assorting – at least at the retail level – and some accumulating and bulk breaking at intermediate levels in channels of distribution. Sometimes this is done by the producer, or by large retailers who go directly to the producers to develop an attractive assortment.

In the case of steel being sold to the automobile industry, however, most sales are direct or through a wholesaler (broker or drop shipper who doesn't handle the goods). The size of the individual sale may be large and the buyer specialized by commodity, so discrepancy of assortment is not relevant. And, the concept of discrepancy of quantity may not be very

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relevant either, as the economical amount to ship and the amount demanded by the automobile plants may be about the same – that is, in carloads, barge loads, or shiploads.

The greater the discrepancies of quantity and assortment between the producer and the consumer, the more complicated the channel that is required.

10- 6.

See section “Channel Specialists May Reduce Discrepancies and Separations” for discussion of the regrouping activities. Which and how much of each of these activities are needed depends on how big the discrepancies of quantity and assortment are. There is obviously a big discrepancy of quantity between most producers of these products and the small building contractor or do-it-yourselfer. For a large tract builder, this discrepancy of quantity may be small. There may be little or no need for marketing specialists to adjust discrepancies.

Carefully specifying target markets is important in this question, because the greater the discrepancy of quantity, the longer the channel may be – requiring more bulk breaking. Given that this industry is concerned with "finished" products that are produced in reasonable quantity in a factory, there probably is little need for the accumulating process.

When it comes to adjusting assortment discrepancies, there may be great need for the assorting process, but little need for the sorting process (except to sort out and dispose of "seconds" in discount outlets). Assorting might be done by a small hardware store or a building supply wholesaler.

One would expect to find both direct and indirect channels in this industry. The large producers selling a single product or narrow assortments to larger builders might sell directly with their own sales reps – or agents. Indirect channels, on the other hand, would be necessary to reach the many small hardware stores and building supply wholesalers.

.

10- 7.

10- 8.

In general, most insurance companies offer a variety of different types of insurance to meet different types of needs. Therefore, many agents work with a variety of different suppliers. The agent brings together information and expertise about many different possible insurance products – both to help the suppliers of those services with the selling function and to help the customer with buying. On the other hand, insurance products can be complex and quite specialized. Some companies focus on specialized types of policies (for example, group health-care insurance for organizations, life insurance that is designed to also meet retirementoriented planning, etc.). Companies also focus on certain geographic areas. Because of these differences, an insurance agent may want to work with only one insurer, allowing the agent to work more closely with the insurer to meet customers' needs. Thus, there are opportunities for some agents to specialize in certain types of policies – such as policies for self-employed professionals, or life insurance – because the sellers and buyers in these situations often have special needs and requirements. The specialization may make it possible for the agent, as an intermediary, to do a better job for both the service suppliers and the public.

It is extremely important that each student specify the assumptions he is making about target markets and product classes. Then the Place objectives (Exhibits 8-6 and 8-7) should logically flow from these assumptions. a.

This scale would probably be appropriate only for homes and small offices and therefore would be a convenience or shopping product for final consumers – and a supply item in the industrial products market. The objective would probably be to get as widespread distribution as possible in appropriate outlets (i.e., in as many office and stationery supply stores and department stores as possible). Most prospective customers would probably seek such an outlet and then select among the available scales.

b.

The radio-controlled model airplane probably is a heterogeneous shopping product, at least by a person who treats this as a hobby. (A parent who is just buying an “entry level toy” for a child might see it as a homogeneous shopping product.) The Place objective

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might be to obtain adequate representation in major shopping areas, including (1) an adequate display for demonstration, and (2) aggressive promotion by competent salespeople.

Rubber balls, on the other hand, are probably impulse-convenience products and the Place objective would be to obtain widespread distribution, perhaps in every possible outlet including: variety stores, department stores, drugstores, novelty stores, supermarkets, etc. c.

This is accessory equipment and probably calls for direct sales or aggressive wholesalers to be sure all the necessary contacts are made.

d.

A fiberglass fabric used in making roofing shingles is a component material that happens to be fairly standardized. Usually, widespread contacts are necessary with component materials; but, when we are aiming at shingle producers, some modification in the distribution arrangements is likely because there aren’t a lot of large users, while there are many small ones. If we are primarily concerned with the large users, then direct distribution – or through agents who do not handle the products – may be practical. If we are concerned with the many small producers or the thousands of other business users, then intermediaries who will stock locally may be necessary. This would be especially likely if the product is thought of as a supply by potential customers.

10- 9.

Students will come up with a variety of examples here. The most common conflicts occur when different channel members feel that they are competing for the same customers. For example, IBM wanted to distribute its personal computers direct to large corporate customers through its own sales force, but have dealers sell to smaller business accounts. Sometimes a dealer would develop the business – but then when the firm bought more computers, IBM wanted to handle it direct. Obviously, this can produce conflict. As another example, during the energy crisis many chainsaw producers started to distribute through mass-merchandisers as well as through the power equipment retailers who had traditionally handled the saws. The dealers felt that the producers had abused them – and many complained that they couldn't compete with the low prices offered by the mass-merchandisers. Some argued that the big chains were selling at retail for less than the dealer had to pay the producer.

10-10.

A channel captain could show the independent firms how they could work together to simulate the activities of an integrated channel for the mutual benefit of all. Actually, independent firms are part of one or more channels of distribution – whether they realize it or not. This text argues that it would be more desirable and profitable for them if they recognized this interdependence and then made adjustment where necessary or desirable. The channel captain would provide the leadership in this direction.

10-11.

Student answers here will vary. Usually the advantages will appear in one of several basic ways: lower costs or more control. For example, a garden shop that sells landscaping plants may also grow some plants itself – to make certain that it has the supply it needs when needed. Or, a factory may have its own outlet to sell "seconds" or discontinued products – so that costs of production errors will be reduced.

10-12.

Intensive distribution is frequently desired for convenience products and some industrial supply items. This may be especially necessary in a highly competitive market. Selective distribution may be adequate for the many business products and shopping and specialty products that are truly differentiated. Exclusive distribution may only be feasible for specialty products or for those shopping products for which consumers can be counted upon to do a thorough job and therefore visit the exclusive outlet.

An exclusive distribution policy might require a little more Promotion and a good Product, while maintaining Price at somewhat competitive levels. It is used at times in highly competitive

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markets to tie up good intermediaries. Exclusive distribution is much more common with business products, as exclusive arrangements make sellers more aggressive, knowing that they will benefit from the fruits of their efforts. Thus, market exposure policy is related to the kind of Promotion desired too.

10-13.

Intermediaries would seek to be exclusive distributors to obtain the benefits of their own or the producer's planning and promotion of a good marketing mix. They would be less eager to get an exclusive if they had to carry large stocks and to do an aggressive promotion job. They may not be equally eager for any type of product, either, because if the product requires extremely widespread distribution, then the producer may expect them to cover the market. If they do not happen to cover the whole market, this may mean that they will have to aggressively expand their customer list – perhaps at a very high, even prohibitive, cost. If they are allowed to let the customers come to them, then almost all intermediaries would like to have an exclusive arrangement.

Producers, on the other hand, frequently give an exclusive relationship to secure the help of a more aggressive intermediary who will provide the necessary inventory and service facilities.

They should specify the Place and Promotion job that needs to be done and use exclusive intermediaries only if they feel that giving an exclusive arrangement will motivate them to do this job. Otherwise, they may be narrowing their coverage unnecessarily.

Exclusive distribution (at least in smaller markets) might make sense from the producer's viewpoint for golf clubs, televisions, and industrial woodworking machinery – because a strong selling effort might be desirable. From an intermediary's viewpoint, he would be willing to accept an exclusive on any of the items if no strings were attached. If, however, an intermediary was required to expand his customer list in an effort to reach all potential customers – or lose his franchise – then he might not be interested in any of the items. The Internet sometimes complicates exclusive distribution arrangements. Customers may use the web to get and compare information about alternative sellers. Even if there is only one “local” vendor, a customer who is well armed with information about the alternatives may be in a better position to negotiate with the local seller.

10-14.

This question is anticipating the material in Chapter 13 on developing a promotion blend. But first the student must clearly understand what is involved in channel planning for different products and target markets. Therefore, the focus here will be on the nature of the target market and the product, and then on the appropriate channel. Then, it should be clear what kind of promotion is needed in the particular situations cited by the student. For example, in the case of the grocery products producer, promotion would depend on whether he was moving into a new product category, just adding another product to an existing line, or starting from scratch. Further, it would be relevant whether he was going to use a pushing or a pulling policy – because pushing would require more personal selling while pulling would rely more heavily on advertising.

The dress producer would face similar decisions. The issues would be similar for a small producer of installations – but there would probably need to be more emphasis on personal selling (perhaps with agents if the company could not afford its own sales force).

This question can be used as a vehicle for integrating and summarizing the material covered thus far – and leading into the promotion area.

10-15.

This chapter introduces five basic approaches for entering international markets: 1) exporting, 2) licensing, 3) management contracting, 4) joint venture, and 5) direct investment. As shown in Exhibit 10-9, this represents a continuum – and moving up the ladder has the advantage of giving the marketing manager greater control over marketing mix decisions – but also involves and increasing investment and greater risk to the marketing manager. A discussion of control

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would help students understand that, in some of these entry modes, the marketing manager in the home country has little control over target market and marketing mix decisions.

Other advantages and disadvantages by specific entry mode: 1. Exporting tends to be an easy and fast way to enter a foreign market – as intermediaries can handle some of the complexities associated with international trade (e.g., customers, taxes, shipping, and exchange rates). The downside is that the exporting firm has little control over the strategy used by the importer.

2. Licensing works best if the marketing manager has trustworthy partners. There is low risk and little financial cost. But the risk can go up if the licensee handles the product poorly and ruins the seller’s reputation in a new market.

3. Management contracting helps keep the risk inherent in developing markets relatively low.

But the seller gives up significant control over the marketing mix and must be careful in selecting partners.

4. Joint ventures require a seller to put more time and money into relationship building as the two partners usually work together to develop a marketing strategy. This process gives the seller more control over the direction and implementation of a marketing strategy.

5. Direct investment, of course, involves the greatest level of financial investment and risk – particularly in markets where the marketing manager has little experience. This increases the possibility of losses, which might force a firm to leave. On the other hand, building a local presence helps the company develop a local reputation and learn more about an international market.

CHAPTER 10 – COMMENTS ON USE OF MARKETING PLANNING QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. Why does Hillside sell its product directly instead of indirectly? b. Hillside has a small selection of pet supplies that it sells to people who bring in their pets. What products does it resell at retail? What channel functions does it provide, and what channel functions are performed by its suppliers?

This chapter notes that services are usually sold directly. Services typically have to be produced in the presence of the customer – and may involve co-production with the customer. This allows for some class discussion on why most medical services are offered directly from caregiver to patient. The quality of a diagnosis largely depends on information provided by the patient (in this case, the pet owner). There are also no suitable intermediaries for this type of product.

The sample marketing plan does not focus on pet supplies, but the clinic retails dog food, leashes, and collars. While the marketing plan does not specifically address questions in part b, most students have enough familiarity with retail services to figure this out. A retail location for pet supplies likely provides the following functions: 1) accumulating (choosing products that meet its customers’ needs), 2) bulk breaking (making goods available in desired quantities) and, 3) assorting (putting together those specific goods desired by HVC’s target market). It may also provide information to suppliers.

Supplier-wholesalers in the pet food industry are likely to perform similar functions – although to a different extent. The wholesaler may provide products that work particularly well at vet clinics – as opposed to larger competitors like Walmart or PetSmart. Also, the supplier may sell to HVC in much smaller quantities as compared to larger competitors – so it provides bulk-breaking functions, too.

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CHAPTER 10 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 13: Pierce-Paul, Inc. (PPI) This case deals with the relationship between PPI, a producer, and one of its major distributors. It can be used here to illustrate the differences in objectives that may exist between different members of a channel of distribution, and ways in which channel responsibilities and strategies may need to be adjusted when dealer branding, rather than manufacturing branding, is used. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter.

Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 15: The Wabash Group This case can be used here to discuss the strategy decision areas in Place (see section “Marketing Strategy Planning Decisions for Place”). This case is suggested again for Chapter 12 – at which time the student should be able to identify this company as a manufacturers' agent that is now considering becoming another kind of wholesaler – a selling agent. But for this chapter, the discussion can focus on what needs to be done in the channels and what types of channels are needed (and why) in these product-markets. Here, indirect channels are being used because of each producer's narrow product line and small size. This case can also be used to illustrate the concept of adjusting discrepancies of assortment as well as achieving ideal market exposure. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 16: Montana Company This case can be used as suggested above for Case 15. Likewise, it is suggested for use in Chapter 12 – at which time students will understand that Tommy Montana is a drop-shipper who is now facing a tough oligopolistic competitor and is considering an opportunity that will change the functions he provides in the channels. He will be a manufacturers' agent. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 36: BE Bold Electric Bikes A key question in this case is whether BE Bold should sell direct-to-consumer or use a channel intermediary (in this case Amazon is under consideration). The case offers an opportunity to review Exhibit 10-3 and surrounding text in the context of an electric bikes. There are also transportation related issues that can arise (see Exhibit 11-5) and retail and online retail as discussed in Chapter 12. This case might be useful for discussion after covering Place as it brings together all three Place chapters.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 10: INTENSIVE VS. SELECTIVE DISTRIBUTION A manager for a company that has been selling to industrial customers is thinking about expanding into a consumer market – and the strategy requires new channels of distribution. The manager is trying to decide whether to use intensive or selective distribution. The student compares the two alternatives under different business conditions – and recommends which approach would be most profitable and why. The analysis helps the student to see how other elements of the marketing mix may change – depending of the exposure level chosen.

The initial spreadsheet for the problem is presented next: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Intensive Number of Retailers Retailers per Sales Rep Sales Reps Needed Salary per Sales Rep Personal Selling Expense Mass-selling Expense Overhead Cost Cost to Produce a Pump Total Pumps Sold by Dealers Hydropump's Percent of Dealers' Units Total Expected Units Price to Retailers Hydropump Total Revenue Hydropump Total Cost Hydropump Profit

Selective

5,600* 280* 300* 70* 19 4 $18,000.00* $18,000.00* $342,000.00 $72,000.00 $200,000.00* $50,000.00* $120,000.00* $80,000.00* $35.00* $35.00* 175,000* 26,000* 12.00% * 40.00% * 21,000 10,400 $70.00* $75.00* $1,470,000.00 $780,000.00 $1,397,000.00 $566,000.00 $73,000.00 $214,000.00

Answers to Marketing Analytics: Data to Knowledge 10: a.

Based on the initial spreadsheet (given above), intensive distribution (Answer A) would provide the highest total revenue - $1,470,000.00 vs. only $780,000.00 with selective distribution. By maximizing exposure of the product, Hydropump captures a more significant number of sales than with selective distribution.

b.

Based on the initial spreadsheet, selective distribution looks like the wisest choice (Answer B). In a "bottom line" sense, it produces the greatest profit – $214,000.00 vs. profit of only $73,000 with intensive distribution. Note that a large part of this difference is due to the increased number of sales reps to call on all of the retailers involved in intensive distribution – although not all of them sell in large quantities. Further, with intensive distribution the firm would need to spend more on mass selling. And, by focusing selectively on a subset of the retailers it is possible to get more of their attention for the product – and a larger share of their sales to their customers.

c.

Even if Hydropump had to spend an additional $50,000 on mass selling – to generate customer interest and help recruit dealers through added "pull" – the selective distribution approach would still be favored (Answer B). In fact, expected profits to Hydropump would be more than twice as large

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with selective distribution as with intensive distribution. The advertising dollars are not the only issue here. The spreadsheet for the analysis is given below.

SpreadSheet Intensive Number of Retailers Retailers per Sales Rep Sales Reps Needed Salary per Sales Rep Personal Selling Expense Mass-selling Expense Overhead Cost Cost to Produce a Pump Total Pumps Sold by Dealers Hydropump's Percent of Dealers' Units Total Expected Units Price to Retailers Hydropump Total Revenue Hydropump Total Cost Hydropump Profit d.

Selective

5,600* 280* 300* 70* 19 4 $18,000.00* $18,000.00* $342,000.00 $72,000.00 $200,000.00* $100,000.00* $120,000.00* $80,000.00* $35.00* $35.00* 175,000* 26,000* 12.00% * 40.00% * 21,000 10,400 $70.00* $75.00* $1,470,000.00 $780,000.00 $1,397,000.00 $616,000.00 $73,000.00 $164,000.00

Hydropump would need to get 14.08 percent of the retailers' total unit sales (Answer B) to make over $200,000. Actually, that percentage would yield profit of $200,400. The spreadsheet for the analysis is given below.

SpreadSheet Intensive

Number of Retailers Retailers per Sales Rep Sales Reps Needed Salary per Sales Rep Personal Selling Expense Mass-selling Expense Overhead Cost Cost to Produce a Pump Total Pumps Sold by Dealers Hydropump's Percent of Dealers' Units Total Expected Units Price to Retailers Hydropump Total Revenue Hydropump Total Cost Hydropump Profit

e.

Selective

5,600* 280* 300* 70* 19 4 $18,000.00* $18,000.00* $342,000.00 $72,000.00 $200,000.00* $100,000.00* $120,000.00* $80,000.00* $35.00* $35.00* 175,000* 26,000* 14.08% * 40.00% * 24,640 10,400 $70.00* $75.00* $1,724,800.00 $780,000.00 $1,524,400.00 $616,000.00 $200,400.00 $164,000.00

This question points out one of the downsides of going with a more efficient model. By using Selective distribution Hydropump only has access to 26,000 potential sales. Even if they had 100% market share they would not be able to reach the volumes needed to reduce their per unit cost (Answer E). However, the analysis shows that Selective distribution is still more profitable even at the present cost. A table showing profit if Hydropump had 100% of the Selective distribution sales is shown below.

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SpreadSheet Intensive Number of Retailers Retailers per Sales Rep Sales Reps Needed Salary per Sales Rep Personal Selling Expense Mass-selling Expense Overhead Cost Cost to Produce a Pump Total Pumps Sold by Dealers Hydropump's Percent of Dealers' Units Total Expected Units Price to Retailers Hydropump Total Revenue Hydropump Total Cost Hydropump Profit

Selective

5,600* 280* 300* 70* 19 4 $18,000.00* $18,000.00* $342,000.00 $72,000.00 $200,000.00* $100,000.00* $120,000.00* $80,000.00* $35.00* $35.00* 175,000* 26,000* 14.08% * 100.00% * 24,640 26,000 $70.00* $75.00* $1,724,800.00 $1,950,000.

00 $1,524,400.00 $1,162,000.

00 $200,400.00 $788,000.00

MARKETING ANALYTICS DISCUSSION Some students will argue that it should be easy to increase share of purchases by "just a few percentage points" – especially when this is compared with the much higher percentage used in the column for selective distribution. And, in some cases this might be possible. But, many firms mistakenly assume that such increases are going to come easily. They forget that it may be expensive – if possible at all – to try to extract "extra" effort from such a large network of retailers. The retailers may simply do what they want to do – depending on their own objectives, what other products they carry, and what profit they can make in other ways.

CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Regrouping Using Intermediaries Question Type: Click and Drag Learning Objectives: 10.3 Topic: Channel specialists may reduce discrepancies and separations AACSB: Reflective thinking Bloom’s: Remember, understand, apply Question 2: AAA Office World and Distribution Question Type: Case analysis Learning Objectives: Topic: AACSB: Analytic, understand Bloom’s: Remember, understand, apply

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Question 3: Global Entry Strategies (iSeeIt) Question Type: Video Case Learning Objectives: 10.8 Topic: Entering international markets AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 4: Supply Chain (iSeeIt) Question Type: Video Case Learning Objectives: 10.2 Topic: Entering international markets AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 5: Types of Marketing Channels Question Type: iSeeIt! Video Learning Objectives: 10.2 Topic: Marketing channel AACSB: Analytic Bloom’s: Understand Question 6: Omnichannel Distribution Question Type: iSeeIt! Video Learning Objectives: 10.7 Topic: Omnichannel AACSB: Analytic Bloom’s: Understand Question 7: Intensive Versus Selective Distribution Question Type: Marketing Analytics Learning Objectives: 10.6 Topic: Intensive versus selective distribution AACSB: Analytic, technology, reflective thinking Bloom’s: Apply, analyze Question 8: Development of Channel Systems at Lenovo Question Type: Case Analysis with Multiple Choice Learning Objectives: 10.2, 10.3, 10.4, 10.6, 10.7 AACSB: Reflective thinking, analytical Bloom’s: Remember, understand, apply Application-Based Activities Title: Global Marketing: Take and Bake Foods Type: Role-Playing Bloom’s: Apply Description: Play the role of a newly promoted Associate Manager on the marketing team. It is now your job to make recommendations on the best course of action on where to expand outside the United States Title: Supply Chain and Channel Management: Snack Attack Type: Role-Playing Bloom’s: Apply Description: Play the role of a supply chain manager. Your mission will be to evaluate the current condition and then implement changes needed to improve the supply chain and yield more growth and revenue for Snack Attack.

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Title: Supply Chain: Where's the Toilet Paper?

Type: Role-Playing Bloom’s: Apply Description: Play the role of vice president of distribution for ValueMart, a chain of American supercenters, to explain how COVID-19 has disrupted the supply chain.

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CHAPTER 11: DISTRIBUTION CUSTOMER SERVICE AND LOGISTICS CHAPTER 11 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Many major firms, ranging from Nike and Starbucks to Walmart and IKEA, have been criticized for selling products from overseas suppliers whose workers toil in bad conditions for long hours and at low pay. Defenders of the companies point out that overseas sourcing provides jobs that are better than what workers would have without it. Critics think that companies that sell products in wealthy countries have a social responsibility to see that suppliers in less-developed nations pay a fair wage and provide healthy working conditions. What do you think? Should U.S. firms be required to monitor the employment practices of suppliers in their supply chains? Should all suppliers be held to Western legal or moral standards? What solutions or compromises might be offered?

If you plan to discuss this situation in class, be aware in advance that it may turn out to be a very emotional topic—perhaps because of the displacement of local jobs and income rather than the “remote” sweatshop conditions. This is not the way the question is framed in the text, but as many businesses have turned to low-cost overseas suppliers, more factories in the U.S. have been shuttered and employees fired. In certain areas of the country, many students may have family members or friends who have been impacted by the loss of local jobs to overseas suppliers. Over time, those impacted may find better jobs. However, while such shifts are taking place, it can be devastating (and how it is handled is an ethical issue of its own).

The sweatshop issue has been around for some time. Sweatshops, typically located in developing countries, have been criticized for poor working conditions and low wages. They are most common among suppliers of clothing, but more recently, tech firms have been accused of having suppliers that utilize sweatshop labor. Protests, often by college student groups (see www.studentsagainstsweatshops.org), bring negative publicity to companies that are not out in front of this issue. Many firms have tried to avoid negative publicity or improve their image by conducting audits.

Nike even posts the results of all audits on its website. Of course, sweatshops can usually operate as very low-cost suppliers. The sweatshop issue is also not as black and white as it sounds. Some countries, like Cambodia for example, have raised labor standards and enforcement – only to see the country’s clothing factories go out of business. The endnote references for this Ethical Dilemma question provide some additional background on the topic.

CHAPTER 11 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise examines the tradeoffs made in customers service levels. The answers are generally straightforward after a student understands the data table (see following page).

Marketing Analytics in Action 11: TRADE-OFFS AND CUSTOMER SERVICE LEVELS

1. Current costs favor a 70-80% level of customer service – while the new kiosks suggest a lower inventory could be carried and customer service of 60-70% would be appropriate. Note the numbers remain estimates—which is why a range is provided for customer service levels.

2. The analysis here does not include the costs of purchasing and installing the new kiosks. They also take up floor space in stores that might be used for other merchandise.

3. After considering the lower cost of lost sales, the total cost of customer service is lower with the IV-11-1 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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new kiosks. It may also have additional benefits of higher customer satisfaction and more repeat business. On the other hand, as question 2 notes, we do not have the costs of the kiosks.

Customer Service Level 50% 60% 70% 80% 90% 100%

Current Costs* at Different Customer Service Levels Lost Total Transport Inventory Sales Cost $12 $22 $60 $ 94 $12 $24 $50 $ 86 $12 $27 $43 $ 82 $13 $31 $37 $ 81 $14 $37 $44 $ 95 $15 $45 $50 $110

Costs at Different Customer Service Levels with Kiosks Lost Total Transport Inventory Sales Cost $14 $22 $38 $ 74 $14 $24 $30 $ 68 $14 $27 $30 $ 71 $14 $31 $31 $ 76 $14 $37 $42 $ 93 $15 $45 $50 $110

CHAPTER 11 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: •

Photos o Trucking companies seek to be more sustainable – J.B. Hunt and Amazon.

•

#M4BW Boxes o Transportation choices have environmental costs too. FedEX and UPS are using more electric and alternative-fuel vehicles in their fleet while Peterbilt and International are working to build diesel-hybrid 18 wheelers. o Transportation analytics aid the environment and lower costs. UPS uses global positioning data to recommend routes for its drivers that can minimize fuel usage. o What’s Next? Who’s—or rather what’s—driving that truck. AI driving more sustainable. o Disasters create logistics challenges. Companies who are experts in logistics, such as DHL, FedEX, and Walmart, can respond quickly to help in times of natural disasters. o Disasters create logistics challenges.

CHAPTER 11 – COMMENTS ON QUESTIONS AND PROBLEMS 11-1

The Coca-Cola opener describes the soft drink marketer’s distribution efforts across the globe.

Examples of key terms and concepts from this chapter include but are not limited to: • Coca-Cola’s warehouse and distribution centers are described in some detail • It uses different supply chains and logistics in different countries – truck works well in Thailand and Japan. It uses two-wheel carts in Kenya.

• Sustainability is described in the chapter and in the Coca-Cola case.

• The Freestyle vending machines share information – a form of electronic data interchange.

• And more.

11-2

This change puts more pressure on Coca-Cola to quickly move product from manufacturing to store shelves. It may need to change its modes of transportation to deliver product more quickly. Students might be encouraged to think about the physical distribution concept and compare soda with a product like fruit with a shorter shelf life.

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11- 3.

A firm should offer the customer service level that is sufficient to meet customer needs, but not so high that it exceeds customers' needs and simply adds unnecessarily to the cost of the firm's offering. One example that has attracted a lot of attention recently is the "just-in-time" delivery approach. Auto producers and others are placing more emphasis on this problem.

They want suppliers who can deliver parts and components so they are there when needed – but not in advance, which would increase the costs of handling, storage, damage, and the like.

For additional discussion, see section “Physical Distribution Customer Service.”

11- 4

There is no reason to expect that students know much about furniture manufacturing or the upholstery fabrics industry. Thus, this is intended as a thought question and there is not a single correct answer. Rather, the idea is for the student to think about what the customer’s needs might be – based on what they do know – and come up with an "educated guess" about which service elements might be most important.

Many students will recognize that furniture is available in a variety of different upholstery fabrics – either as part of the selection at a retail store or via custom order through a retailer.

Further, with a little thought, most students will see that furniture producers usually produce a variety of different types of furniture (for example, chairs, sofas, loveseats, etc.). Since the producer is likely to need to plan production to accommodate the different types of fabric and different types of furniture, it will be very important to make certain that fabric is available when needed. The producer doesn't want to have to stop production – or switch to producing some other style – to wait for a correct fabric to arrive. (This is becoming even more important now because many U.S. furniture companies are shifting to overseas production, primarily in China but also to countries in Eastern Europe and the Middle East). He would like to rely on fast delivery – perhaps even next day delivery – for unexpected needs. Ideally, for regular orders, the producer would also like the fabric to arrive with just enough lead-time for it to be transported to where it needs to be cut. The producer doesn't want to stock a lot of extra fabric – not only because of the cost of capital invested in inventory but also because of the risk of having too much left over if a fabric proves to be unpopular and is discontinued. For some small producers, this might also relate to questions about minimum order size. Small producers in particular might not want to order numerous large bolts of a particular style of fabric if they don't expect to use much. They might be willing to pay a higher price to be able to get fast delivery on small orders.

11- 5.

Student responses to this question will vary – but an out-of-stock situation might prompt a customer to find another source for the desired product. When posing this question in class we have found that most students focus on situations where they selected a product or store because of a higher customer service level. It can be useful, however, to ask students to think of examples where they selected a product or source that involved lower customer service levels – perhaps because time was not critical, and it appeared that the lower customer service level resulted in a lower price. Examples here might include "cash and carry" furniture stores where you pick up your own purchase, mail order operations that offer low prices but slow delivery, and certain types of discount stores that have a limited inventory selection but good prices on what they do carry.

11- 6

Basically, there are trade-offs between the cost of the physical distribution system, the service level provided, and the sales achieved. There are also more specific trade-offs among elements of the logistics system. For example, a better system for coordinating logistics information in a channel (e.g., EDI order entry or computerized inventory/order system) might be more expensive, but it more than saves its cost in reduced inventory or storing costs.

Similarly, there are often trade-offs between transportation costs and storing costs.

A good way to wrap up discussion of this question is to review Exhibit 11-2 and the text section, “Physical Distribution Customer Service,” in class.

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11- 7.

There are many examples in the book that illustrate ways that coordination is taking place and/or why it is important, so students should not have a lot of trouble coming up with “hypothetical” answers. On the other hand, most students don’t have a clear idea how difficult it sometimes is for companies with different priorities, different philosophies, different computer systems, and different cultures to work together for their common good. So, one way to expand the thinking prompted by this question is to ask students what might get in the way of the coordination occurring, or with it happening smoothly. If they seem to be slow to come up with ideas, ask them to think about times when they have worked with a group of people where it was difficult to get cooperation and then ask them if the same problems might apply to relationships among whole firms.

11- 8.

The use of computers (and other types of information technology) in the physical distribution area are discussed throughout the chapter. Products are now stored in computer-controlled warehouses and moved using automated conveyor systems. Computers are also being used to keep track of inventory – and to order stock only when it is needed. EDI (electronic data interchange) is making the sharing of computerized information even easier. Computerized sales analysis also helps to identify unprofitable products or customers. In addition, many wholesalers use "bar code" labels or wireless transmitters that can be read with computer scanners/receivers to constantly update information about inventory and product flows. In addition, many wholesalers allow customers to connect to their computers to check on the current availability or prices of products, and even to use computer-to-computer connections to place orders. These are but a few of the examples that are discussed in the text. Computers help to determine efficient routes for delivery trucks, to track products that are in transit, and to communicate directly with suppliers. Innovations like these are providing important opportunities for some wholesalers to be more efficient.

11- 9.

A just-in-time delivery system can result in big problems if there is a breakdown in product quality – especially if products are not standardized (for example, different styles of seats in different type of upholstery for different makes of automobiles on a production line). At the extreme, one defective product within a delivery may mean that the whole production line must stop while adjustments are made. When products are standardized, the availability of some "backup" inventory may help to reduce or eliminate such problems – but it does add to the inventory cost. When products are not standardized, keeping an adequate backup inventory can be very, very expensive. As producers offer more choices and more features in the products they produce, quality becomes even more important. (The issue of service quality is discussed in more detail in Chapters 8 and 9 – so this question can help to tie together quality issues from those chapters and Place decisions from Chapter 10.)

11- 10.

It is no accident that firms that want just-in-time delivery systems prefer to work with suppliers located near. The greater the distance between the supplier and the customer, the greater the likelihood of some unexpected complication causing delays or irregularities in deliveries. Such problems are likely to be magnified in international shipments, especially if water transportation is involved. The long lead times required for water transportation make it difficult to respond quickly to a change in customer needs. Further, problems can arise because of a hold up in customs, with government red tape, bad weather, etc.

When a supplier is providing just-in-time delivery for its international customers, it is likely to need facilities near the customer's factory – or alternatively work with an intermediary who holds inventory and meets the demands of local customers on a just-in-time basis.

Air freight may make it feasible for a firm to provide just-in-time delivery in international markets for some products that are of high value relative to their size and weight (i.e., electronic components), but customers who have very high expectations concerning customer service levels often will prefer to work with suppliers who have facilities in the same country – and where possible, close by.

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11- 11.

The book is clear in explaining that EDI, the Internet, and related information technologies have had an important impact–often in ways that both improve customer service and cut costs at the same time. This question encourages students to go back and rethink the discussion of factors that impact customer service considering that discussion. They will realize that EDI or web-based information sharing can improve performance on many of the items on that list, and even for those items where it doesn’t have a direct effect, it often can make problems less serious (or, at least not so long-lasting) because it speeds up the whole order cycle process.

11-12.

The total cost approach requires a look at the whole physical distribution effort – not just at individual functions such as transporting or storing, with a view to minimizing the costs of the individual functions. Traditionally, these various functions have been handled by separate departments – or have been the responsibilities of separate managers. Looking at several functions together requires crossing departmental boundaries. Therefore, it might be necessary to appoint someone to manage the whole physical distribution effort. Then he can apply the total cost approach or – going even further – he can think in terms of holding costs down while attempting to improve service levels and thereby improving the whole marketing mix. Going even further, the marketing manager may be interested in a total profit approach that includes evaluating various service levels. Then, after the "best" strategy has been selected, the physical distribution manager might be required to minimize costs (using the total cost approach) while supplying the specified service level.

11-13.

Exhibit 11-5 provides a concise summary of the key points here. For more detail, see section “Which Transporting Alternative Is Best?”

11-14.

One reason is that there may be transportation economies in shipping large orders directly to a wholesaler, rather than shipping many smaller orders to local retailers (or other types of customers). As a related matter, long-distance shipping not only takes longer but may also involve less predictable delivery times. It is convenient for a retailer to call a local wholesaler and know that a delivery can be expected the next day or within a few days. That kind of speed may not be possible if a long-distance shipment direct from the producer is required. One result is that the retailer is less likely to "stock out" – which might mean lost business for the retailer and the producer.

11-15.

Airfreight is opening new markets, especially for lightweight, high value, perishable products.

Note that perishable here includes non-food items that have time value (such as fashions, weekly magazines, etc.). Airfreight is changing packaging requirements for some products – since less handling minimizes the chance of damage. Airfreight is creating new channels for some products – those that can be ordered by telephone from a central location and delivered to the customer within a day or two. This is reducing the costs of inventory and storage in the channel. In some cases, airfreight is increasing the price of products, but not often. For example, airfreight has made it possible to bring fresh flowers from areas where they grow all year round to areas where there are harsh winters. This has made flowers so popular in many of these areas that they are now available in grocery stores and from other mass merchandisers – and that has helped to bring the price down. See section “Which Transporting Alternative Is Best?” for additional discussion.

11-16.

Most suitable is usually interpreted as the lowest cost in the absence of any time requirement.

The suggested answers assume a lowest-cost criterion consistent with the type of product. a.

b.

Boat to Los Angeles and then truck to store. Note: some students will argue that lobsters are perishable and that airfreight might be the method of choice – to reduce the risk of spoiling during transit. That reflects useful thinking and airfreight is sometimes used, but it also ignores the availability of refrigerated shipping compartments on boats, trains, and trucks - and other specialized facilities that are often less expensive ways of accomplishing the same outcome.

U.S. mail (parcel post) or United Parcel Service (UPS), depending on rates.

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c. d. e. f.

Pool car unless speed required, then truck.

Speed required: Airfreight from Paris.

Boat from northern Germany (Hamburg or another port).

Carload rail shipment.

11-17.

Students in colleges located in a rural setting will probably find agricultural commodities stored nearby. On the other hand, students located near large urban areas will most likely find that the nearest major storage facilities are right downtown in the inner city. The discussion in the text (see section “The Storing Function and Marketing Strategy”) explains why the kinds of products are stored where they are.

11-18.

Use a public warehouse if needs for storage fluctuate during the year, or if needs are too small to justify a private warehouse. For example, antifreeze manufacturers build up inventories in many cities throughout the country in anticipation of a strong seasonal demand. They attempt to shift the burden of storage to wholesalers as much as possible, but still, additional public storage is required.

11-19.

The distribution center concept is especially important for items having a high turnover. For the many slower-moving items that have been the "bread and butter" of the conventional merchant wholesalers, much storage still may be necessary. A small grocery wholesaler may buy in carloads, for example, as this is the minimum economic lot to handle; but if he does not expect these goods to move out for several weeks, then the distribution center concept is less relevant. However, for a larger wholesaler it might be important, as he could anticipate his needs and schedule shipments so that there will be almost continuous flow through his warehouse to his retailers. These quantities should be contrasted with the volume and variety an industrial supply wholesaler sells to its customers – one screwdriver, three paintbrushes, etc., per order. Here, the traditional storing of a wide assortment provides a real service and the distribution center concept is less applicable.

11-20.

Storing is the basic object of a warehouse, while breaking-bulk and minimum storage is the object in a distribution center. A warehouse would be geared for efficient storage, perhaps with facilities to maximize vertical storage. A distribution center would be more concerned with horizontal movement of goods – and fast data processing to facilitate movement in and out.

11-21.

The logistics issues faced by Internet retailers and traditional retailers have some similarities and some differences. Both types of retailers need to consider the level of customer service they wish to offer their customers. Both face the same trade-offs between costs and level of service. Both should also consider inbound logistics decisions and how these choices interact with decisions about storage, inventory planning, and distribution centers. An Internet retailer does not need to consider inventory planning at bricks-and-mortar stores, but it has the added dimension of deciding how to get goods to individual customers. UPS offers different levels of service—from overnight air freight to slower (and less costly) ground transportation. The Internet retailer must decide what level of service to offer and how much to charge customers for each option.

CHAPTER 11 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. To provide veterinary care to pets, Hillside needs to have a variety of medical supplies on hand. To handle that, it relies on deliveries from suppliers and its own inventory decisions. It also sells some retail pet products to customers, and that requires a separate set of decisions about how it will handle inventory.

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a. What logistics issues related to medical supplies should Hillside consider? Can you think of ways in which delivery from its suppliers or its own inventory decisions will be important in its ability to help patients? b. With respect to the retail pet products that Hillside sells, what level of customer service should customers expect? c. What issues are involved in storage of pet supplies?

HVC must make some key decisions with respect to the level of customer service it chooses to offer.

These tie into the logistics decisions the clinic must make. With medical supplies, HVC must determine which items to maintain on hand and which can be obtained from a supplier quickly enough to provide adequate care to patients. Many medical supplies are likely to be used very infrequently, so stocking them at the clinic may involve significant costs. Some supplies, like medicines, are also likely to be perishable. So, these decisions are important. They point to the value of having a supplier that can quickly deliver products – perhaps within hours.

Customers probably expect the clinic to have access to the supplies needed for urgent medical care, but may be more forgiving if the clinic runs out of leashes or food.

The storage of pet supplies may involve a number of decisions. Inventory levels are important – as carrying too much inventory places strains on limited storage capabilities and raises costs. Pet food may attract pests and may also be perishable.

CHAPTER 11 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER. Case 16: Montana Company This case illustrates how a drop-shipper is used to avoid unnecessary transporting and storing costs in a one product-market. It probably should be emphasized that the drop shipper does sell to merchant wholesalers who do provide storing – because it is necessary to adjust both quantity and assortment discrepancies in this channel. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 24: Abundant Picking This case can be used here to discuss the role of food brokers – and, how they arrange for accumulating enough quantities to meet the needs of customers at other levels in a channel of distribution. The food broker would probably reduce transporting and storing costs to a minimum, while helping to accumulate the desired quantities. This illustrates a whole channel system trying to minimize total cost – and is an example of the marketing system applying the physical distribution concept (even if each of the individual channel members do not see themselves as members of a "total system"). We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 36: BE Bold Electric Bikes A key question in this case is whether BE Bold should sell direct-to-consumer or use a channel intermediary (in this case Amazon is under consideration). The case offers an opportunity to review Exhibit 10-3 and surrounding text in the context of an electric bikes. There are also transportation related

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issues that can arise (see Exhibit 11-5) and retail and online retail as discussed in Chapter 12. This case might be useful for discussion after covering Place as it brings together all three Place chapters.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 11: TOTAL DISTRIBUTION COST A company that makes plastic blanks for credit cards is considering two different physical distribution (PD) systems – airfreight and railroad. Classroom discussion will soon turn to weighing the balance between the bottom line ("Total Distribution Cost") and the customer service level that might result from these decisions.

Answers to Marketing Analytics: Data to Knowledge Problem 11: a.

The initial spreadsheet shows an advantage of $34,000 (Answer C) in Total Distribution Cost for the Airfreight option, even though the unit shipping cost is much higher:

NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Selling Price Expected Sales Quantity Inventory Carrying Cost Percent Unit Shipping Cost Number of Warehouses Cost Per Warehouse

Airfreight $40.00* 20,000* 5.00%* $7.50* 0* $0.00*

Total Cost-Transport Total Cost-Inventory Total Cost-Warehouse

$150,000.00 $40,000.00 $40,000.00 $80,000.00 $0.00 $104,000.00

Total Distribution Cost Total Revenue

$190,000.00 $224,000.00 $800,000.00 $800,000.00

b.

Railroad $40.00* 20,000* 10.00% * $2.00* 4* $26,000.00*

It is the inventory carrying cost and paying for warehouse space that makes the Total Cost for Railroad more than the Airfreight option. If the firm can save money on the warehouses, that's still not quite enough for Railroad to beat the Airfreight option as shown in the spreadsheet. Airfreight still has a $10,000 advantage (Answer A).

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SpreadSheet

c.

Selling Price Expected Sales Quantity Inventory Carrying Cost Percent Unit Shipping Cost Number of Warehouses Cost Per Warehouse

Airfreight $40.00* 20,000* 5.00%* $7.50* 0* $0.00*

Railroad $40.00* 20,000* 10.00% * $2.00* 4* $20,000.00*

Total Cost-Transport Total Cost-Inventory Total Cost-Warehouse

$150,000.00 $40,000.00 $0.00

$40,000.00 $80,000.00 $80,000.00

Total Distribution Cost Total Revenue

$190,000.00 $200,000.00 $800,000.00 $800,000.00

The cost of using airfreight increases faster with volume. At higher volumes, railroad transport becomes more efficient. The cutoff is at 22,857 units (Answer C). Above that point railroad becomes cheaper. Below that point airfreight is cheaper. The spreadsheet showing the analysis is below: SpreadSheet Airfreight Railroad Selling Price $40.00* $40.00* Expected Sales Quantity 22,857* 22,857* Inventory Carrying Cost Percent 5.00%* 10.00% * Unit Shipping Cost $7.50* $2.00* Number of Warehouses 0* 4* Cost Per Warehouse $0.00* $20,000.00* Total Cost-Transport Total Cost-Inventory Total Cost-Warehouse

$171,427.50 $45,714.00 $0.00

Total Distribution Cost Total Revenue

$217,141.50 $217,142.00 $914,280.00 $914,280.00

d.

$45,714.00 $91,428.00 $80,000.00

If interest rates and warehouse costs are also lower, the Total Distribution Cost for the Railroad option becomes slightly cheaper by $2,000.00 (Answer B): SpreadSheet

Selling Price Expected Sales Quantity Inventory Carrying Cost Percent Unit Shipping Cost Number of Warehouses Cost Per Warehouse

Airfreight $40.00* 20,000* 4.00%* $7.50* 0* $0.00*

Railroad $40.00* 20,000* 7.50%* $2.00* 4* $20,000.00*

Total Cost-Transport Total Cost-Inventory Total Cost-Warehouse

$150,000.00 $32,000.00 $0.00

$40,000.00 $60,000.00 $80,000.00

Total Distribution Cost Total Revenue

$182,000.00 $180,000.00 $800,000.00 $800,000.00

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e.

At the sales volumes forecasted, Phillips would have to negotiate a substantial reduction in cost for the two options to be equal. Railroad transport would have to go from $2.00 per unit down to $0.30 per unit (Answer A). This represents an 85% reduction in shipping cost which is highly unlikely.

Again, this reinforces the fact that the issue is not the shipping cost but instead the inventory carrying cost that drives the total Railroad cost up. The spreadsheet showing the analysis is below: SpreadSheet

Selling Price Expected Sales Quantity Inventory Carrying Cost Percent Unit Shipping Cost Number of Warehouses Cost Per Warehouse

Airfreight $40.00* 20,000* 5.00%* $7.50* 0* $0.00*

Railroad $40.00* 20,000* 10.00% * $0.30* 4* $26,000.00*

Total Cost-Transport Total Cost-Inventory Total Cost-Warehouse

$150,000.00 $6,000.00 $40,000.00 $80,000.00 $0.00 $104,000.00

Total Distribution Cost Total Revenue

$190,000.00 $190,000.00 $800,000.00 $800,000.00

MARKETING ANALYTICS DISCUSSION Many students will argue that a small savings using Railroad is not sufficient to dismiss Airfreight. After all, lower interest rates cannot be guaranteed. What Proto Company would actually do might depend on some additional factors: If volume is expected to grow substantially, then building a physical distribution system around the Railroad option might make sense – plastic blanks are heavy but nonperishable. On the other hand, if the company's marketing strategy includes being able to provide on short notice a wide range of different colors of blanks (to match customers' logos) then a physical distribution system based on Airfreight may be better able to meet customers' needs for a large product assortment. As emphasized in the text, all physical distribution cost decisions must be made in the context of the customer service level that certain target markets need.

CHAPTER 12 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Dell Computer Corporation Question Type: Case Analysis Learning Objectives: 11.1, 11.3, 11.4, 11.6 Topic: Distribution and logistics AACSB: Technology, reflective thinking Bloom’s: Remember, understand, apply Question 2: Transportation Options Question Type: Click and Drag Learning Objectives: 11.5, 11.6, and 11.7 Topic: Distribution and logistics AACSB: Technology Bloom’s: Remember, understand, apply

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Question 3: Transportation Alternatives Question Type: Click and Drag Learning Objectives: 11.5 Topic: Transportation Methods; Logistics AACSB: Reflective thinking Bloom’s: Remember, understand Question 4: The Supply Chain Question Type: Video Case Learning Objectives: 11.1, 11.2, 11.3, 11.7 Topic: Physical Distribution AACSB: Analytic, technology Bloom’s: Remember, understand, apply Question 5: Total Distribution Cost Question Type: Marketing Analytics Learning Objectives: 11.2 Topic: Distribution costs AACSB: Analytic, technology Bloom’s: Apply, analyze

Application-Based Activities Title: Supply Chain and Channel Management: Snack Attack Type: Role-Playing Bloom’s: Apply Description: Play the role of a supply chain manager. Your mission will be to evaluate the current condition and then implement changes needed to improve the supply chain and yield more growth and revenue for Snack Attack.

Title: Supply Chain: Where's the Toilet Paper?

Type: Role-Playing Bloom’s: Apply Description: Play the role of vice president of distribution for ValueMart, a chain of American supercenters, to explain how COVID-19 has disrupted the supply chain.

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CHAPTER 12: RETAILERS, WHOLESALERS, AND THEIR STRATEGY PLANNING CHAPTER 12 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Farmers in poor countries get very little money for crops—such as coffee, cocoa, and bananas—that they grow for export. Some consumers in prosperous nations are willing to pay retailers higher prices for “fair trade” goods so that the farmers receive greater compensation. But critics question whether fair trade works as it should. For example, Sainsbury’s is a popular British food retailer.

It was charging $2.74 per pound for “fair trade” bananas versus only $.69 per pound for regular bananas.

Farmers, however, only got $.16 extra from that $2.05 price premium. Critics charge that Sainsbury’s makes more from the “fair trade” promotion than the farmers it is supposed to help. Many retailers have similar programs. Do you think that Sainsbury’s is acting ethically? What do you think Sainsbury’s and other similar retailers should do? Why? This scenario was written based on a Wall Street Journal article, “What Price Virtue? At Some Retailers, ‘Fair Trade’ Carries a Very High Cost,” (June 8, 2004). A Google search should lead to a copy of the article. The stated goal of fair-trade efforts is to pay struggling farmers a fair price for the commodity products they grow. Many consumers are willing to pay a higher price for products if they know that part of what they pay is going toward helping poor farmers.

Questions of ethics arise when retailers make a larger premium from fair trade prices than do the poor farmers they are designed to help. Are consumers aware of how much of the premium in the fair-trade price goes to the farmer as contrasted with how much to the retailer? Sainsbury’s counters this criticism by noting that its stores have generated more than $1.8 million of funds for fair-trade projects. Tesco, another UK retailer, claims that criticisms are unfair because costs are higher for fair trade products and that its profit margin for these goods is actually lower than for non-fair-trade products. It is probably true that the costs of distribution, record keeping, promotion, handling, and the like are higher for fair trade products if they need to be handled separately from other similar commodities. On the other hand, it does seem that many retailers have been “opportunistic” (which means “self-interest seeking with guile”) in how they have handled this issue.

The AMA Statement of Ethics does not directly address this type of issue. Some people think that it is incumbent on the retailers to make sure customers know how much of the premium they pay actually makes it to the farmers. On the other hand, based on observation, it seems that most retailers feel that it is sufficient to respond to consumer interest in “fair trade” products—without providing information that many customers don’t request.

CHAPTER 12 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise introduces students to the concept of stockturn rate and reinforces the mass-merchandising concept. The table shows how supermarkets and mass-merchandisers rely on a high stockturn rate, while specialty shops and department stores have much lower stockturn rates.

Marketing Analytics in Action 12: STOCKTURN RATE

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turnover products like produce and meat.

2. Auto parts retails have to maintain inventory on a wide range of products because they require a high customer service level (see chapter 11). When a customer needs a new part, they want it immediately. They also service a wide range of cars and trucks—and require many different SKUs. 3. Not necessarily. Recall that stockturn does not consider profit margin.

CHAPTER 12 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world:

•

Photos o California-based grocery store 99 Cents Only is located in mostly low-income, inner-city neighborhoods and sells healthy food at reasonable prices. o Save the Children’s Federation’s online store provides an opportunity for donors to assist children around the world.

•

#M4BW Boxes o Stores reduce or eliminate packaging. Stores are using different methods to reduce packaging; Amazon encourages its suppliers to use less packaging; while some grocery stores in Vancouver and Singapore don’t sell items in packages. o Purpose-oriented online retailers. o Wholesaler find a way to add “better world” value. Wholesaler Henry Schein provides free oral health services to needy children around the world.

CHAPTER 12 – COMMENTS ON QUESTIONS AND PROBLEMS 12-1

The Home Depot case examines the history of the home center chain – but at the same time gives a flavor for the history of retailing. Examples of key terms and concepts from this chapter include but are not limited to: • Home Depot is a classic example of the mass-merchandising concept.

• Home Depot has moved to online retailing with great success. The case reinforces many of the advantages and disadvantages of online shopping described later in the chapter.

• • Home Depot’s “interconnected” retail efforts allow customers to move seamlessly across mobile, online and in-store channels – serving its multichannel shoppers.

• HD Supply sells to other retail outlets – so it operates as a wholesaler as well.

• And more.

12-2

The answer to this question will evolve as Home Depot’s “interconnected retail” (its name for omnichannel) efforts move along. It would be nice for shoppers to be able to check store stock from their phones or computer. The ability to return products purchased online to the store would also be helpful. Making prices the same across channels is probably important as well.

12- 3.

The purpose of this question is to have students recognize a marketing mix for retailers. This also allows them to compare an online retailer with a local brick-and-mortar store. The exercise can be challenging for students who are not used to thinking about the entire marketing mix – and target market – for a retailer.

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12- 4.

Specialty shops offer a service to particular groups of target consumers. Organizing a chain of specialty shops is a possibility when there are similar target consumers in many different geographic markets and the special offering would appeal to them equally. Without this relatively homogeneous demand in different markets, centralized management and selection of stock would be difficult. Rather, reliance would have to be placed on the local manager who knows the clientele and can buying accordingly. In such a situation, each individual unit in the chain might have little advantage over an independent shop run by a competent owner. There are some exceptions among chains of specialty shops; they include shops like SunGlasses Hut, which benefits from national advertising and economies of scale in buying. It relies on information technology and very detailed (and nearly immediate) analysis of sales data in each store to figure out what is selling and where. This is also seen in fashion retailing. However, specialty shops that really have close relationships with customers tend to be locally owned.

12-5.

Cheaper technology has made it easier for firms to install toll-free telephone order lines, Internet websites, and the like. Deregulation of the transportation industry has increased competition and lowered prices in that area, and that has lowered the costs of shipping products, especially small ones. There is an increasing poverty of time – especially with more households with two adults in the work force. This gives families the incentive to try using the Internet for at least some shopping, and many who try it like it. The same goes for telephone and mail order shopping: It can save the consumer time and trouble, especially during busy holiday seasons. Promotion for these firms has also improved because of new developments in computer selection of mailing lists as well as advertising on the Internet. More effective promotion has made more customers aware of these shopping alternatives. Also, for those customers who have given it a try, a number of firms have done a very good job of providing quality customer service at reasonable prices.

12-6.

This exercise is designed to give students an opportunity to reflect on their own online shopping experiences (or that of a friend or family member). The question might help them better reflect on the advantages described in Exhibit 12-6. This question can be useful as a class discussion point with references to Exhibit 12-6.

12-7.

This question will help students better understand types of retailers and wholesalers. Because students may not understand the complexity and details of the sales process for many of these situations, it is better to use this to encourage discussion than to hold them to a particular “correct” answer. (a) While shoes for college and professional basketball teams may sometimes be sold direct, it is more likely that at least the delivery component would be provided by a distributor. For professional teams and larger basketball programs, the shoe manufacturer (Nike, Adidas, etc.) might make the sale. This suggests a single-line or specialty wholesaler may stock and deliver the shoes in many situations. For smaller colleges, they may simply use a retailer. (b) Most families buy milk from a retailers – at the supermarket or supercenter, though some may go to a convenience store at times. (c) First time computer buyers may seek out more information before they purchase. So they may be inclined to go to a store that provides this information. A single-line mass merchandiser (like Best Buy) or a specialty (computer) shop might give them the one-onone attention they would need. Some online retailers offer enough information. If a student suggests an online retailer, an instructor may want to impress upon them what would this online site look like (seeking to get them to acknowledge it would have to be more educational about computers). (d) These buyers are assumed to be experts on their computers – and very particular about buying a computer that meets their high-end and specialized needs. These buyers may find the wider selection and more competitive prices they want at an online computer store. (e) Merchant wholesalers take title to the products they sell – and many specialize in single lines. They may be single-line, general line, or specialty wholesalers that sell directly to manufacturing businesses.

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12-8.

This question draws on text discussion from the “Nature of Retailing and other information throughout the chapter. Basically, a chain type operation offers the potential for economies of scale and greater purchasing power. For example, economies of scale may develop with respect to advertising (one ad serves many outlets) and certain types of specialization (one set of top managers, one credit department, one set of buyers, etc. can serve the needs of multiple stores). The increased volume that is possible with multiple outlets may make it possible for the chain to get products with a better quantity discount, or in general to have more clout with the supplier (i.e., be assured of delivery when product shortages exist, better attention from salespeople about upcoming promotions, etc.). That does not mean that a small retailer doesn't have some advantages in competing against a chain. Large organizations tend to be more bureaucratic and slower to change – even when market needs change. In addition, a retailer who is focused on a local market can fine-tune the store to the needs of the local market. Often, a large chain tries to control and standardize the strategy, which may make it less attractive in some of the markets where its stores compete. Sears, for example, has faced this problem. To make themselves more appealing in local markets, many chains centralized administrative functions, but at the same time gave local store managers a significant amount of flexibility in adjusting to the local market.

12-9.

Wholesalers need to constantly reevaluate the product lines they handle. As with other members of the channel, wholesalers have a variety of potential opportunities and they must decide how they are going to use their resources (warehouse space, promotion effort, etc.). As market needs change, a wholesaler must adapt. For example, if retailers being served by a wholesaler are scrambling their lines, then the wholesaler must also scramble its lines – or lose business to some competitor. Further, producers are constantly developing new products.

Certainly, some of these products come from suppliers with whom a wholesaler is already working. Yet, it may be a new product from a new company that will provide a new way to meet customers' needs – perhaps starting a totally new product life cycle. A wholesaler who is not attentive to new ways of serving the market may find itself handling only products for which the market is mature or declining. Take a simple example: an office supplies wholesaler who in years past might have handled many different varieties of carbon paper would have missed the boat by ignoring the opportunities to sell copy machines – or the special types of paper used by those machines. Over time, the use of carbon paper has all but disappeared (thank heavens!) and been replaced with alternative ways to make copies.

12-10.

Risks assumed include product deterioration, obsolescence, theft, fire, damage, and price changes over time. Risk is not constant – it depends on the product. There would be much more risk for fresh strawberries than for kegs of nails.

12-11.

It might wish to offer more technical service than the established wholesalers could or would provide. Also, sales branches might be set up in large cities only – where large sales volumes and greater profits could be obtained.

12-12.

The marketing mix for an agent wholesaler usually focuses on promotion. This is because he does not own the products he sells. The agent may be able to alter his product line by representing more or different producers – but the producer is the one who makes the decisions (branding, warranty, etc.) for specific products. In addition, the producer usually sets the price; to the extent that an agent has influence over price, it is usually limited to "suggestions" to the producer or, in rare cases, taking a smaller commission to lower the effective selling price to the customer. Since the agent is part of the channel, the agent is important in Place decisions; the agent's allocation of effort may mean that some customers receive very good service and others do not.

12-13.

Manufacturers' agents (one type of agent wholesaler) usually handle only noncompeting products for different producers because they are, basically, acting as salespeople for the producers. How they are paid is relevant here. They typically sell on a commission basis. A IV-12-4

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producer would worry about a conflict of interest if the agent were also selling a competing product from another producer. In fact, a good way for the agent to eliminate competition for one line would be to represent the competing line – but do it poorly. Merchant wholesalers, by contrast, buy and then resell the products they stock. The merchant wholesaler has a "stake" in selling the product once it is in his inventory. Of course, there may be friction or conflict between a producer and its wholesalers about how much of the wholesalers' effort goes to the producer's line rather than the lines of competing firms. However, there is incentive for the merchant wholesaler to handle and sell (at a profit) lines that are consistent with its market thrust and its customers' needs.

12-14.

The firm might try to establish direct distribution, but that is likely to require significant investment and is also risky. Another alternative is to work with agent wholesalers who specialize in international trade. Merchant wholesalers may be important if they provide financing for customers and/or invest in inventory so that it is available when customers want it.

However, the firm may be able to find a bank or other financial specialist who would be willing to handle the financial functions of the channel and to rely on an agent for buying and selling functions, information functions, and the like. A public warehouse and/or transportation specialist may be able to provide some of the logistical support that might otherwise have come from a merchant wholesaler. Just as there may be many different possible channel configurations in a firm's domestic market – and no single alternative that is ideal – foreign markets may offer even more diverse options.

In Chapter 10, the text goes into more detail on various approaches for pursuing international opportunities – including discussion of joint ventures and the like. It may be useful to review those issues at this point by prompting some discussion of the pros and cons or trying to find a "partner" in a foreign market. The key issue here has to do with the risk of picking the "wrong" partner and/or the potential loss of control over the marketing mix and marketing strategy.

CHAPTER 12 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. What kind of retail operation is the vet clinic? Does it fit any of the types described in this chapter? b. How could Hillside make use of a website? c. The marketing plan notes “future plans” to offer kennel (boarding) services and pet supplies. How will this change Hillside’s current strategy? Does the marketing plan provide a good sense of what needs to be done? Do you have other recommendations for Hillside?

HVC fits the description of a limited line store that specializes in lines of related products. It might be considered a specialty shop – a type of limited-line store. These types of retail outlets typically offer a limited assortment and high levels of service.

As the marketing plan notes, HVC currently does not have its own website. A website could be a useful source of information for customers. There could be links to other resources on pet care. For instance, HVC might develop an e-newsletter that could be posted on its website and linked to e-mails sent to interested customers. This could remind customers about annual pet care needs like the need for refills of heartworm prevention medications.

The addition of kennel services to HVC’s product offering should be pursued with care. There are clearly operational issues, but from a marketing standpoint it would be extremely important for the kennel

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services to be consistent with the clinic’s current positioning (which focuses on “compassionate care”).

This could require more service and staff than many kennels now provide – and that could raise costs and prices. As long as HVC feels there is a large enough local target market that is less price sensitive and more interested in service, the kennel could be a success.

CHAPTER 12 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 11: Luciana’s Running Shop This case can be used here to discuss the problems retailers face in planning their own strategies. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 12: PearsonalHealth.com—Custom Vitamins This case can be used to discuss some pros and cons of online retailing. The instructor might compare PersonalHealth.com.com with a brick-and-mortar competitor like Vitamin Shoppe or GNC. Why would a customer go to PersonalHealth.com versus one of these other stores? Which company can offer better customer service – an online retailer or a brick-and-mortar store? The answers to these questions are not clear, but a class discussion can illuminate differences in customer service delivery across the two types of stores. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 15: The Wabash Group This case can be used here to illustrate what a manufacturers' agent does and why it is important to have many complementary lines. Further, truly understanding what a manufacturers' agent does will help see that the new opportunity really is a different opportunity – it would cause her to become a selling agent rather than just adding another product to her manufacturers' agent line. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 16: Montana Company This case can be used to illustrate the functions of a drop-shipper. It is also possible to discuss what merchant wholesalers (and retailers) do—Joe Hanratty's customers in this case. But the major emphasis should be on the fact that Joe is considering a change in the wholesaling functions he will provide. He will become a manufacturers' agent – and for a producer with a "really new idea," which will require some (probably difficult) pioneering work. This would be a major change for him. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 36: BE Bold Electric Bikes

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A key question in this case is whether BE Bold should sell direct-to-consumer or use a channel intermediary (in this case Amazon is under consideration). The case offers an opportunity to review Exhibit 10-3 and surrounding text in the context of an electric bikes. There are also transportation related issues that can arise (see Exhibit 11-5) and retail and online retail as discussed in Chapter 12. This case might be useful for discussion after covering Place as it brings together all three Place chapters.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 41: Suburban Regional Shopping Malls This case focuses on the current problems of suburban regional and superregional shopping centers.

Southdale Center located in suburban Minneapolis is considered the prototype for most of the suburban regional and superregional shopping malls built during the second half of the twentieth century. Southdale opened in 1956 and featured 70 retail tenants in an 800,000 square foot enclosed, climate-controlled mall, anchored by two department stores. This provides an opportunity to discuss how retailing has evolved over the years – and to discuss where it is likely to go in the future. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 12: SELECTING CHANNEL INTERMEDIARIES A producer of glass gift items wants to expand into a new territory – and is trying to decide whether to use a merchant or agent wholesaler to reach gift shop retailers. The agent requires less investment, but the merchant wholesaler may provide access to more locations. The student analyzes the trade-offs between the two alternatives under different conditions, including different levels of demand for the product. This problem highlights the differences in various types of wholesalers – and why the differences can have a dramatic effect on profits.

This problem helps get students more interested and involved in this important topic. They see that the type of wholesaler selected (and what functions are provided) can be quite important. The problem is especially useful in drawing out some of the more important differences between agent and merchant wholesalers.

The initial spreadsheet for this problem is presented below:

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SpreadSheet Merchant 4,500*

Expected Quantity by Merchant Wholesaler Percent of Quantity Agent Could Sell Agent's Commission Percent Quantity Agent Could Sell Art Glass Selling Price TOTAL Revenue Expenses: Unit Shipping Costs Unit Shipping Cost Total Shipping Expense Unit Production Cost Total Production Cost Advertising Expense Agent's Total Commissions TOTAL Expense Total Contribution to Profit

$12.00* $54,000.00 $0.60* $2,700.00 $5.20 $23,400.00 $8,000.00* $34,100.00 $19,900.00

Agent 75.00% * 8.00%* 3,375 $14.00* $47,250.00 $2.00* $6,750.00 $5.20 $17,550.00 $0.00* $3,780.00 $28,080.00 $19,170.00

Answers to Marketing Data Analytics: Data to Knowledge, Problem 12: a.

Given the expected sales quantity (4,500 units by the merchant wholesaler, or 3,375 units for the agent wholesaler), the merchant contributes more to profit (Answer A): $19,900 vs. $19,170 for the agent. See the initial spreadsheet above.

a. If demand were lower than expected, so that the merchant wholesaler was only able to sell 3,000 units (or the agent wholesaler 2,250 units), the profit contribution would be higher with the agent (Answer B). The spreadsheet for this analysis is given below.

SpreadSheet Merchant Agent Expected Quantity by Merchant Wholesaler 3,000* Percent of Quantity Agent Could Sell 75.00% * Agent's Commission Percent 8.00%* Quantity Agent Could Sell 2,250 Art Glass Selling Price $12.00* $14.00* TOTAL Revenue $36,000.00 $31,500.00 Expenses: Unit Shipping Costs Unit Shipping Cost $0.60* $2.00* Total Shipping Expense $1,800.00 $4,500.00 Unit Production Cost $5.20 $5.20 Total Production Cost $15,600.00 $11,700.00 Advertising Expense $8,000.00* $0.00* Agent's Total Commissions $2,520.00 TOTAL Expense $25,400.00 $18,720.00 Total Contribution to Profit $10,600.00 $12,780.00 c.

At 4,124 units (Answer D) the contribution to profit would be roughly equal, as shown in the table below.

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SpreadSheet Merchant 4,124*

Expected Quantity by Merchant Wholesaler Percent of Quantity Agent Could Sell Agent's Commission Percent Quantity Agent Could Sell Art Glass Selling Price TOTAL Revenue Expenses: Unit Shipping Costs Unit Shipping Cost Total Shipping Expense Unit Production Cost Total Production Cost Advertising Expense Agent's Total Commissions TOTAL Expense Total Contribution to Profit

$12.00* $49,488.00 $0.60* $2,474.40 $5.20 $21,444.80 $8,000.00* $31,919.20 $17,568.80

Agent 75.00% * 8.00%* 3,093 $14.00* $43,302.00 $2.00* $6,186.00 $5.20 $16,083.60 $0.00* $3,464.16 $25,733.76 $17,568.24

d. With the extra attention and focus from the manufacturer’s agent, Art Glass would now do better to use the manufacturer’s agent, Margaret Degan (Answer B). Doing so would yield a profit contribution of $20,736 even though the commission expense increased significantly from 8 to 12%. Details may be seen in the table below.

SpreadSheet Merchant 4,500*

Expected Quantity by Merchant Wholesaler Percent of Quantity Agent Could Sell Agent's Commission Percent Quantity Agent Could Sell Art Glass Selling Price TOTAL Revenue Expenses: Unit Shipping Costs Unit Shipping Cost Total Shipping Expense Unit Production Cost Total Production Cost Advertising Expense Agent's Total Commissions TOTAL Expense Total Contribution to Profit

$12.00* $54,000.00 $0.60* $2,700.00 $5.20 $23,400.00 $8,000.00* $34,100.00 $19,900.00

Agent 90.00% * 12.00% * 4,050 $14.00* $56,700.00 $2.00* $8,100.00 $5.20 $21,060.00 $0.00* $6,804.00 $35,964.00 $20,736.00

e. If Art Glass can successfully negotiate the agreement, this would result in roughly 20% higher profitability (Answer D) - $24,786.00 vs. $20,736. The analysis may be found in the table below.

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SpreadSheet Merchant 4,500*

Expected Quantity by Merchant Wholesaler Percent of Quantity Agent Could Sell Agent's Commission Percent Quantity Agent Could Sell Art Glass Selling Price TOTAL Revenue Expenses: Unit Shipping Costs Unit Shipping Cost Total Shipping Expense Unit Production Cost Total Production Cost Advertising Expense Agent's Total Commissions TOTAL Expense Total Contribution to Profit

$12.00* $54,000.00 $0.60* $2,700.00 $5.20 $23,400.00 $8,000.00* $34,100.00 $19,900.00

Agent 90.00% * 12.00% * 4,050 $14.00* $56,700.00 $1.00* $4,050.00 $5.20 $21,060.00 $0.00* $6,804.00 $31,914.00 $24,786.00

MARKETING ANALYTICS DISCUSSION The use of the merchant wholesaler, Giftware Distributors, includes the up-front commitment of $8,000 to cover advertising expenses. While the spreadsheet takes that expense into account, if the quantities sold are significantly lower than forecasted it could result in a substantial loss. If Giftware Distributors failed to push the product or didn’t have the product in stores when the advertisements were published it could result in wasted advertising. To mitigate the risk, Art Glass may want to be a little more conservative when forecasting the expected sales quantity – if it still makes sense at lower figures that reduces some risk. In addition, this points out the need to coordinate activity and expectations to ensure proper execution of the marketing and sales plan.

CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Jack and Amy’s Pet Supplies Question Type: Case Analysis Learning Objectives: 12.3, 12.5 Topic: Retailing; Wholesaling; Channel Management; Marketing Channels AACSB: Technology Bloom’s: Remember, understand, apply Question 2: Rollie Johnson, Inc. Question Type: Case Analysis Learning Objectives: 12.8 Topic: Wholesaling; Strategic Marketing Planning AACSB: Reflective thinking Bloom’s: Remember, apply Question 3: Limited Function Wholesalers Question Type: Click and Drag Learning Objectives: 12.8 Topic: Wholesaling; Strategic Marketing Planning AACSB: Reflective thinking Bloom’s: Remember

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Question 4: Retail Strategy Question Type: iSeeit! Video Learning Objectives: 12.2 Topic: Retail strategy AACSB: Reflective thinking Bloom’s: Remember, understand, apply Question 5: Selecting Channel Intermediaries Question Type: Marketing Analytics Learning Objectives: 12.8 Topic: Selecting channel intermediaries AACSB: Analytic, technology Bloom’s: Apply, analyze Question 6: Online Retailers versus Physical Stores Question Type: Click and drag Learning Objectives: 12.4 Topic: Retailing and the Internet AACSB: Knowledge, understand Bloom’s: Understand Question 7: Types of Wholesalers Question Type: Click and Drag Learning Objectives: 12.5 Topic: Wholesaling AACSB: Knowledge, application Bloom’s: Understand Question 8: Strategy Planning at Home Depot Question Type: Case Analysis with Multiple Choice Learning Objectives: 12.3, 12.4, 12.5 AACSB: Reflective thinking, analytical, technology Bloom’s: Remember, Understand, Apply

Application-Based Activities Title: Retailing & Omnichannel Marketing: Fit Life Type: Role-Playing Bloom’s: Apply Description: Play the role of a consultant for the Fit Food Grocery Store to develop omnichannel marketing for the chain.

Title: Retail Strategy Type: Mini Sim Bloom’s: Apply Description: Explore the channels available and choose the right ones to meet your net profit and gross margin goals.

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CHAPTER 13: PROMOTION – INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS CHAPTER 13 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? A friend of your family owns an upscale Italian restaurant called Giupetto’s. Because you are a student of marketing, he asks for your help. Business has suddenly fallen off —their “regulars” are still coming in, but they don’t see as many new customers as before. His cook has heard that the owner of a competing restaurant has been pressuring his employees to post negative reviews of Giupetto’s food, service, and prices. When you check the website, there are a number of unfavorable, anonymous reviews. You also notice that there are about 30 very upbeat reviews of the competing restaurant. Your friend wants you to help give the competitor “what he deserves” and write some negative reviews about that restaurant. Would you do what he asks? Why or why not? What else could you do?

Online reviews may amplify the effects of word-of-mouth – instead of telling a few friends, an online review may be read by hundreds or even thousands of potential customers. Word-of-mouth can have a strong influence on consumer choice – especially for service-oriented businesses like restaurants. Yet, unlike traditional face-to-face word-of-mouth, the online variation may be more easily manipulated. There have been media accounts and rumors of people posting false recommendations and reviews to boost ratings at various sites. This scenario reflects a real concern with consumer-generated media – its credibility.

A discussion of the topic could go in many different directions. While students should view the practice as unethical, it prompts the broader question – what if the competition does it? Does this open the door for a firm to engage in unethical practices as well? Students should recognize that this type of practice could lead both firms down a dangerous ethical path. What would employees think about the management of the restaurant? How might this influence their ethical behavior – for example, would it make them more likely to steal from the restaurant?

What else could you do? Students might suggest talking to the website staff – perhaps they could find out what types of control are in place to prevent the competing restaurant from behaving in this manner. Is it possible to gather more proof and bring it to the attention of the review site, which may take action?

Review sites like this (see also Epinions.com, CNET.com, and Amazon.com) are usually very concerned about companies that might try to game its rating system because if reviews at their sites lose credibility, shoppers are less likely to visit their sites.

CHAPTER 13 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise helps students understand both email as a promotion method, the communication process, and its relationship to the AIDA model.

Marketing Analytics in Action 13: MEASURING EMAIL PERFORMANCE

1. Attention is best reflected in email open rate—and the “Low Cost” appeal has a higher open rate and thus best grabs attention.

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2. The click-through rate suggests customer interest—and the “Quality of Care” appeal leads to a higher level of customer interest.

3. The “Quality of Care” website, with its high form completion rate appears to do a better job of promoting customer desire.

CHAPTER 13 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: • •

Photos o KPMG instigated an internal marketing campaign to help their employees feel a greater sense of purpose in their work. #M4BW Box o What’s Next? Story to draw attention to global problems (and a brand). Lifebuoy soap created a “Help a Child Reach 5” campaign to show how hand washing lowered diarrhea incidences in a rural village in India.

CHAPTER 13 – COMMENTS ON QUESTIONS AND PROBLEMS 13-1.

This chapter opens with the story of GEICO – which invested heavily in advertising and other forms of promotion to grow rapidly in the highly competitive auto insurance market. Examples of key terms and concepts from this chapter include but are not limited to: • Promotion objectives – “GEICO uses social media to build relationships with its current customers and connect with potential new customers.”

• Promotion objectives and advertising – “An aggressive advertising campaign could achieve the objectives of increasing awareness of GEICO and bringing in new customers.”

• Word-of-mouth – “A potential customer is more likely to consider GEICO when they have seen a friend ‘like’ the brand.”

• Personal selling “Customers can call a GEICO salesperson to learn more about other GEICO products” • Owned media – “Current GEICO customers also visit its website. The website is a type of “owned media”—GEICO owns and manages it • Social media “GEICO maintains a blog, a YouTube channel, a Flickr photostream, an Instagram account, and Pinterest pinboards.”

• And more.

13-2.

This exercise achieves two objectives. First, it allows students to explore a big company’s Facebook page and Twitter account and look at it through a different lens – after reading the case and chapter – as well as by imagining the underlying objective of different Facebook posts and Tweets. Second, it challenges them to understand how different messages achieve different objectives. The question provides fodder for an in-class discussion.

13- 3.

See section “Which Methods to Use Depends on Promotion Objectives” for a discussion of the three methods.

13- 4.

Integrated marketing communications concerns the intentional coordination of every communication from a firm to a target customer to convey a consistent and complete message.

The focus on "consistent and complete" communications is important because in most firms there are many different elements in the promotion blend – specific efforts involving a mix of personal selling, advertising, and sales promotion – all of which are likely to be handled by different people with different views of what's important. It isn't reasonable to expect any

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particular element in the promotion blend to carry the whole communications load, but it is important that all of the various elements work together as an integrated whole.

13- 5.

When using the sales funnel concept, individuals and organizations move through seven steps on the purchasing path: awareness, interest, evaluation, trial, decision, confirmation, and increasing commitment. A specific example of this could be a person who sees an ad for a new product when watching the Super Bowl (awareness and interest), who then sees the product in the store and purchases it (evaluation and trial). If they liked the product and continued to purchase it, they’d be making a decision and confirming their opinion of the product. In the AIDA model, the basic promotion objectives are to inform, persuade, and remind – while the four tasks are getting attention, holding interest, arousing desire, and obtaining action. An example helps to make this more concrete. As illustrated, the four tasks (with shifting degrees of emphasis) are needed to accomplish each one of the objectives.

13-6.

There is no way for a firm to be absolutely certain that its communications won't be misinterpreted – by at least some consumers – regardless of the country in which it is communicating. However, many of the communication problems that arise can be avoided – perhaps even easily avoided – if "locals" are involved in developing, evaluating and criticizing the communications. An ad agency in a distant country may be able to get the correct translation or the ad might show people in the correct dress, but that doesn't mean that cultural issues relevant to the target market have been addressed.

In Chapter 15, there is additional discussion of the formation of international mega-agencies.

One reason for these international corporate "networks" is to be certain that an agency has the "in-house" skills and expertise to deal with communications around the world – wherever a target market may be.

13-7.

The highly persuasive advertising in the market maturity and sales decline stages is probably the culprit. Most of the products are essentially the same, but competition often centers on aggressive mass selling rather than price-cutting or product improvement. This advertising may have little or no informative content. This is especially disturbing to some critics. Consider, for example, the ads for different brands of dishwasher detergent. Ads may give the impression that the choice of the "correct" brand will prevent the user from being embarrassed by spotty or dirty dishes when serving friends or family. Yet, why that particular brand should indeed be better in that regard is not explained. The detergent may in fact be formulated to do a better job, but it is just as likely that the advertising is being used to "position" the brand as especially effective on this chosen dimension – perhaps because consumers assume that all dishwasher detergents should get their dishes clean.

13-8.

The use of direct-response promotion often involves a "building up" process. For example, the direct response may simply be an expression of interest (rather than, say, a purchase).

However, given the expression of interest by the consumer, the seller might send mail advertising or brochures and then follow up with personal selling. The idea is to focus the promotional effort on customers/prospects who are interested and who might be likely to go "to the next step.”

13-9.

This question asks the student to think about a topic that is discussed in more depth in Chapter 15, along with a number of other issues related to digital advertising. Students may give a variety of answers, but they are likely to take the hint concerning the Internet and mention that the information provided by the firm can be made available (say, by a link to a website) at the point where people with a particular type of interest are likely to be. Thus, a firm like Amazon.com puts button ads for books about sports on web pages that deal with sports, and then if the Net surfer clicks on the button, they are transferred to Amazon’s website to get more information. Of course, the same sort of approach is used in physical “places” as well. For example, a producer of video games might put a kiosk that features its games in the toy department of a department store. Then, the customer could use the kiosk to get more IV-13-3

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information or even a demo of the game. Other more sophisticated approaches are discussed in Chapter 15, but at this point, the objective is just to get the student to realize that this type of communication does not mean that the targeting idea has been forsaken.

13- 10.

The support supplied for each answer is extremely important here. This will reveal the assumptions that have been made about the target market(s) and the nature of the product.

Some of these products (digital tape recorder, car batteries, and perhaps castings for truck engines) could be both consumer and business products – and require several intermediaries in their channels of distribution. Students should be led to see the importance of their assumptions by having them answer pointed questions about why another blend was not used.

These questions can be especially revealing when the student has not carefully supported his answers. It might be useful to have several students place their blends (and supports) on the board. Then discussion can focus on why the blends are different – if they are – and if not, how similar the supports are. Then it might be fruitful to discuss how the blends would change if the assumptions changed.

In general, chocolate candy bars and pantyhose would require a blend of mass selling to final consumers, sales promotion to final consumers and to intermediaries, and personal selling in the channels.

Inexpensive plastic rainhats would probably involve personal selling in the channel, but probably would not be supported with much mass selling or sales promotion. (You might ask students to name a brand of inexpensive plastic rainhat. Few will be able to name one.)

The blend for each of the other products is likely to rely heavily on the personal selling effort, especially if sold to business customers.

13-11.

Student answers here will vary, but don't be surprised if they come up with some creative and interesting ideas. For example, the firm might give free samples to TV retailers – along with a point of purchase display – to encourage retailers to use it and recommend it to their customers. Similarly, the firm might be in a good position to generate positive publicity about its product. It's useful in class discussion to be clear about promotion in the channel as well as to final consumers and users.

13-12.

a) Almonds A few years ago, there might have been some skepticism about the possibility of promotion increasing the general demand for almonds. An attention-getting ad campaign from almond growers, however, might stimulate increased interest in almonds and – at least temporarily–increase demand. The California Raisin Growers did this with raisins, and people in the dairy business claim that the “got milk” campaign helped stimulate demand for milk. b) Air travel Promotion for air travel might increase demand, especially if the promotion convinces people that there were benefits to air travel relative to other modes of transportation that they’re considering. For example, some people might think that airfares are higher than they really are, or may not realize that convenient, direct flights are available to a destination of interest. In such a case, the general demand for air travel might increase. Note that people would probably not increase their travel because of the promotion alone, but rather would probably be switching from one mode of travel to another. c) Golf clubs Promotion for golf clubs might be effective in increasing general demand. Some people may not know much about golf, or may not view it as something of interest. Effective promotion might change that – prompting some people to pick up the game, and that might increase demand for clubs. d) Walking shoes Here again, consumers can be approached directly and effective promotion might stimulate an increase in demand.

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e) High-octane unleaded gasoline Petroleum producers have been putting increased promotional effort behind high-octane (high performance) gas in recent times and, indeed, demand has increased. f) Single serving, frozen gourmet dinners Promotion could help here – perhaps by informing consumers about the variety and quality of offerings available. g) Bricks Brick is a different situation from the ones above. The demand for brick is derived and promotion to contractors will have little impact in expanding general demand. On the other hand, brick trade associations have sought to expand demand by stimulating public interest in better housing, schools, professional and government buildings, and in landscape and noise and privacy buffers in highway construction. But, again, promotion to road builders/contractors is probably of little avail in expanding the national market for brick.

13-13.

Adapting the promotion blend to the adoption process is not a simple thing. For example, with respect to digital tape recorders, the adoption process may extend over a long period of time.

Some mass advertising might be used to gain awareness and interest but then personal selling and point-of-purchase displays might be valuable for helping in the evaluation and trial process. Many consumers will be skeptical that the new product is superior – and they will want a demonstration by the salesperson. Subsequently, mass advertising might be helpful to confirm the adoption decision. As a practical matter, it may be necessary to design mass advertising to build awareness and interest as well as to provide the material that will help confirm the adoption. At the same time, personal selling would be helping in the evaluation and gaining trial and adoption in the store. Therefore, as part of an ongoing strategy, it would be necessary to have both mass selling and personal selling – with each being responsible for parts of the adoption process.

13-14.

This discussion should focus on finding a way to obtain acceptance by others than the innovators – who might be willing to try the product for their own pleasure or business use. The innovators are likely to see technical announcements and publicity releases in specialty magazines. The early adopters might have to be approached with mass advertising as well as personal selling. Once the product has been tried and accepted by some of the early adopters, then we can expect that some of the early majority will begin buying and hopefully the web of word of mouth will take over some of the promotion job. We would also expect that some of the advertising would help confirm those who have already adopted – giving them the words they can use to spread the "word" to others.

13-15.

A marketing manager who uses the task method to budget for marketing promotion isn’t ignoring competitors' promotion spending levels. To the contrary, the "task" that a firm needs to accomplish with its promotion is certainly likely to vary depending on what competitors are already doing or are likely to do in the future. Student examples will vary, but it's important to draw out examples that take into consideration both competitors' previous actions as well as likely future actions.

CHAPTER 13 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. What are Hillside’s promotion objectives? How do they differ for the various goods and services the company offers?

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b. Do the promotion activities recommended in the plan fit with the promotion objectives? Create a table to compare them. Label the columns as follows: good/service, promotion objective, and promotion activities. c. Based on the situation analysis, target market, and intended positioning, recommend other (lowcost) promotion activities for Hillside.

While the HVC marketing plan does not specifically state promotion objectives, they can be inferred. The table on the following page outlines some possible objectives and the promotion activities.

Good/Service The clinic in general

Promotion Objective Informing – awareness in particular

Puppy/kitten care packages

Informing – awareness in particular Persuading

Puppy/kitten care packages Dental services and geriatric pet care packages

Informing

Dental services and geriatric pet care packages

Persuading

Once customers use dental services, reminders may be needed

Reminding

Promotion Activities Attending community events (e.g., Easter Egg Hunt, Town-Wide Garage sale, Pet Fair, etc.) and giving away swag (magnets, bandanas, signs, etc.)

Noted in Yellow Pages ad and in-clinic signage Brochures are designed to provide more information for interested customers Point-of-purchase signage and staff discussions with clients will generate awareness Brochures and staff discussions with patients will help convert those with awareness and interest to desire.

Nothing is noted in the marketing plan

Students may be able to generate many additional ideas for promotion. An instructor might use some of the conceptual organizers in the book to demonstrate how they can prompt ideas. For example, remind the class of the three types of promotion: 1) personal selling and customer service, 2) mass selling with advertising and publicity, and 3) sales promotion.

CHAPTER 13 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 14: Schrock & Oh Design The Schrock & Oh Design case can be used to reinforce the value of several concepts from chapter 13.

Schrock & Oh may want to revisit their promotion objectives—and the types of promotion that may best support those objectives. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 18: West Thomasville Volunteer Fire Department (WTVFD) When using this case with Chapter 13, place less emphasis on some of the issues not raised until Chapter 15 – like copy thrust and types of advertising. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Case 19: PlanMyWedding.com This case can be used here to discuss the need to develop the right blend of promotion methods– including personal selling – even though the business in the case is a website advertising service. The case stimulates substantial student interest and good discussion of a wide variety of issues related to promotion, while it also sheds some light on some of the issues related to how website advertising works.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 35: The Norbank Baseball Club This case deals with a branding problem. It is not unlike the challenge facing the Washington Football Team (NFL), Cleveland’s major league baseball team, and many college and university mascots. It is also like two photo examples from Chapter 8 – Aunt Jemima and Uncle Ben. The problem then is whether to change the team’s name, if so to what, and then the implementation issues. The case offers a nice chance to deal with the diversity, equity, and inclusion problems facing many firms today. With respect to this chapter, the question is how to communicate whatever decision the baseball club makes to its supporters. Clearly some of them will not be happy. How can Norbank manage this issue?

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 36: BE Bold Electric Bikes This case deals with a distribution question that can create challenges for Promotion. The Promotion blend for BE Bold will depend on whether it goes direct or through a channel intermediary. An interesting discussion might be started by placing the class into small groups. Have on third of the groups develop a promotion blend if BE Bold sells direct, another third if it goes through Amazon, and the last groups can look at if they sell through local bike shops. Each of these channels will contribute differently to promotion.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 13: SELECTING A COMMUNICATIONS CHANNEL In this problem, the owner of a chain of retail stereo stores is deciding what media to use in promoting a new store. The different media reach different audiences, require different "front end" costs for preparing ads, and yield different results in terms of customer awareness and purchases. The student analyzes the data and decides what media to use. The problem emphasizes the importance of ads being targeted to reach the market, and with evaluating the strengths and weaknesses of different media.

The initial spreadsheet for the problem is given below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Pandora Total Audience Size (People) Audience Percent in Income/Age Group Percent of Audience Local Residents Number of "Prospects" in Audience Preparation Cost for Ad Cost of One Ad "Insertion" Objective: Percent of Prospects Aware Insertions Needed to Achieve Objective Total Cost for All Ads Number of "Aware" Prospects Cost per Aware Prospect Percent of Aware Who Will Buy Likely Number of Buyers Cost per Buyer

100,000* 70.00% * 95.00% * 66,500 $200.00* $150.00* 80.00% * 60* $9,200.00 53,200 $0.173 2.00%* 1,064 $8.65

Magazine 200,000* 60.00% * 65.00% * 78,000 $2,000.00* $1,800.00* 80.00% * 6* $12,800.00 62,400 $0.205 1.50%* 936 $13.68

Answers to Marketing Analytics: Data to Knowledge, Problem 13: a.

Based on the initial spreadsheet (given above), Pandora appears to be the more cost-effective medium (Answer A). The cost per buyer for Pandora is $8.65 vs. $13.68 for the magazine.

The problem description and spreadsheet imply that either media plan would achieve the objective (expressed in terms of the percent of "prospects" who are aware of the new store). This issue is developed in more detail in later questions. But, in discussing student recommendations, the discussion will sometimes turn to qualitative advantages and disadvantages of the two media. If the instructor wants to go in that direction, such a discussion can provide an interesting contrast to the more quantitative flavor of the spreadsheet – and thus highlight why marketing managers usually need to consider both qualitative and quantitative criteria.

b.

Given the data on the spreadsheet (see below), the agency's proposal does not appear to be good idea (Answer B). Although the number of ad insertions would be lower, the high front-end cost of developing the ad would increase the total cost per buyer of the effort to $9.12 per buyer, up from $8.65 per buyer on the initial spreadsheet.

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SpreadSheet Pandora Total Audience Size (People) Audience Percent in Income/Age Group Percent of Audience Local Residents Number of "Prospects" in Audience Preparation Cost for Ad Cost of One Ad "Insertion" Objective: Percent of Prospects Aware Insertions Needed to Achieve Objective Total Cost for All Ads Number of "Aware" Prospects Cost per Aware Prospect Percent of Aware Who Will Buy Likely Number of Buyers Cost per Buyer c.

100,000* 70.00% * 95.00% * 66,500 $2,500.00* $150.00* 80.00% * 48* $9,700.00 53,200 $0.182 2.00%* 1,064 $9.12

Magazine 200,000* 60.00% * 65.00% * 78,000 $2,000.00* $1,800.00* 80.00% * 6* $12,800.00 62,400 $0.205 1.50%* 936 $13.68

This example illustrates the effect of diminishing marginal returns. The cost of increasing awareness from 80% to 95% exceeds the benefit no matter which advertising medium is used (Answer D). The spreadsheet below shows the analysis. Pandora costs would increase from $8.65 per buyer to $9.42 and the magazine costs would increase from $13.68 per buyer to $14.75.

SpreadSheet

Total Audience Size (People) Audience Percent in Income/Age Group Percent of Audience Local Residents Number of "Prospects" in Audience Preparation Cost for Ad Cost of One Ad "Insertion" Objective: Percent of Prospects Aware Insertions Needed to Achieve Objective Total Cost for All Ads Number of "Aware" Prospects Cost per Aware Prospect Percent of Aware Who Will Buy Likely Number of Buyers Cost per Buyer d.

Pandora

Magazine

100,000* 70.00% * 95.00% * 66,500 $200.00* $150.00* 95.00% * 78* $11,900.00 63,175 $0.188 2.00%* 1,264 $9.42

200,000* 60.00% * 65.00% * 78,000 $2,000.00* $1,800.00* 95.00% * 8* $16,400.00 74,100 $0.221 1.50%* 1112 $14.75

The spreadsheet below shows the effects of different levels of awareness on the two kinds of costs for the Pandora ad. The point here is that the cost-effectiveness of the ad varies significantly depending on how well the ad stimulates awareness – and ultimately converts "aware" prospects to buyers. For example, if only 50 percent of the prospects become aware, the cost per buyer is $14.59. This poor a result would make the magazine ad more cost effective (at $13.67 cost per buyer). However, if as high as 70 percent awareness is achieved, the cost per buyer is reduced to $10.42 (Answer B). This would be less expensive than the magazine ad.

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SpreadSheet Pandora 50% Pandora 70% Total Audience Size (People) Audience Percent in Income/Age Group Percent of Audience Local Residents Number of "Prospects" in Audience Preparation Cost for Ad Cost of One Ad "Insertion" Objective: Percent of Prospects Aware Insertions Needed to Achieve Objective Total Cost for All Ads Number of "Aware" Prospects Cost per Aware Prospect Percent of Aware Who Will Buy Likely Number of Buyers Cost per Buyer e.

100,000* 70.00% * 95.00% * 66,500 $2,500.00* $150.00* 50.00% * 48* $9,700.00 33,250 $0.292 2.00%* 665 $14.59

100,000* 70.00% * 95.00% * 66,500 $2,500.00* $150.00* 70.00% * 48* $9,700.00 46,550 $0.208 2.00%* 931 $10.42

Magazine 200,000* 60.00% * 65.00% * 78,000 $2,000.00* $1,800.00* 80.00% * 6* $12,800.00 62,400 $0.205 1.50%* 936 $13.68

Using the analysis above we see that at 50% the cost per buyer is $14.59 (Answer D).

MARKETING ANALYTICS DISCUSSION The instructor can use this question/analysis to raise issues related to the importance of having specific objectives – and trying to determine if those objectives are being achieved. Many firms don't set clearly defined objectives for their advertising – and those that do sometimes just assume that the objectives have been achieved. Although it is often difficult to trace the effectiveness of ads all the way to a "cost per buyer" (as is assumed in this simple example), it is possible to use research to determine if specific intermediate objectives – such as awareness levels – have been achieved.

CHAPTER 13 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Oscar Mayer Talent Search – Using the Tools of IMC Question Type: Case Analysis Learning Objectives: 13.1, 13.2, 13.3, 13.7 Topic: The role of promotion; The promotion mix; IMC; Strategic marketing planning; Consumer adoption process; Product life cycle; Role of marketing manager AACSB: Reflective thinking Bloom’s: Remember, understand Question 2: Adoption of Products: Consumer Technology Question Type: Click and Drag Learning Objectives: 13.7 Topic: Promotion budget AACSB: Reflective thinking Bloom’s: Remember, understand Question 3: Effective Communication: The Traditional Way Question Type: Timeline Learning Objectives: 13.4 Topic: The communication process; The role of promotion; Promotion budget AACSB: Ethics, reflective thinking Bloom’s: Remember, understand IV-13-10 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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Question 4: Business-to-Business Marketing Strategy Question Type: iSeeit! Video Learning Objectives: 13.1 Topic: AACSB: Reflective thinking, analytic Bloom’s: Remember, understand, apply Question 5: Advertising and Promotion Question Type: iSeeit! Video Learning Objectives: 13.1 Topic: Marketing communication AACSB: Reflective, analytic Bloom’s: Remember, understand, apply Question 6: Selecting a Communications Channel Question Type: Marketing Analytics Learning Objectives: 13.3, 13.8 Topic: Selecting a communication channel AACSB: Analytic, technology Bloom’s: Apply, analyze Question 7: The AIDA Model Question Type: Click and Drag Learning Objectives: 13.3 Topic: Which Methods to Use Depends on Promotion Objectives AACSB: Knowledge, application Bloom’s: Understand Question 8: Direct Response Promotion Question Type: iSeeIt! Video Learning Objectives: 13.4 Topic: Direct Marketing AACSB: Reflective Bloom’s: Understand Question 9: The Communication Process Question Type: iSeeIt! Video Learning Objectives: 13.4 Topic: The Communication Process AACSB: Analytic Bloom’s: Understand Question 10: Integrated Marketing Communications at GEICO Question Type: Case Analysis with Multiple Choice Learning Objectives: 13.1, 13.3, 13.4, 13.6, 13.8 AACSB: Reflective thinking, communication Bloom’s: Remember, understand, apply Application-Based Activities Title: Integrated Marketing Communication: Soar Travel Agency Type: Role-Playing Bloom’s: Apply Description: Play the role of a consultant for Soar Travel Agency. Advise on how to launch a new advertising campaign.

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Title: Integrated Marketing Communication Type: Mini Sim Bloom’s: Apply Description: Drive an effective IMC effort to create awareness of your product among University Students.

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CHAPTER 14: PERSONAL SELLING AND CUSTOMER SERVICE CHAPTER 14 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Assume that you are a sales rep and sell costly electronic systems used in automated factories. You made a sales presentation to a customer, but he didn’t place an order—and then wouldn’t take your calls when you tried to inform him that your company was coming out with a more reliable model at the same price. Months later, he faxes a purchase order for immediate delivery on the model you originally discussed. You have the old model in stock, and it will be difficult to sell once the new model arrives in two weeks. In fact, your company has doubled the usual commission rate to clear out the old model. Do you try to contact the customer again to tell him about the new model, or do you do what he has requested and immediately fill the order with the old model? Either way, if you make the sale, the commission will pay for your upcoming vacation to the Caribbean. Explain what you would do and why.

Sales representatives often face situations where there is incentive to relax ethical standards. Some of the difficult areas relate not to outright lies but rather to situations like this one, where the representative must decide how much information needs to be volunteered, especially when the customer doesn’t seem very interested, In this scenario, the salesperson made reasonable efforts to follow up and inform the customer of the new model. Further, and perhaps it is an emotional issue rather than something else, the purchasing agent has not treated the salesperson particularly well. Does the rep need to go even further to protect this buyer from himself?

We would argue that the most forthright approach is for the salesperson to make at least one last effort to inform the customer of another option. In other words, we would argue that the salesperson should try to be customer-oriented and keep the customer’s best interests in mind. If being customer-oriented is adopted as a guiding principle, it usually steers decisions in the right direction for both the short- and long-run.

On the other hand, the argument above for being customer-oriented is presented more as a practical way to build the relationship rather than as a clear-cut ethical mandate. For example, if the sales rep complied with the buyer’s wishes and filled the order, what specifically is unethical in his behavior?

CHAPTER 14 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise examines salesforce workload and size. The exercise shows how a sales manager might utilize “back of the envelope” calculations to estimate how many salespeople are needed.

Marketing Analytics in Action 14: WORKLOAD AND SALES FORCE SIZE 1. If each salesperson could manage a territory with 100 jewelry stores and the target market is 1182 stores, this suggests 1182/100 = 11.82 or 12 salespeople are needed.

2. In this case, 309 stores would require 3.09 or 3 salespeople.

3. This question requires a bit more thinking on students’ part. An inside salesperson could handle 240 stores (12/day x 20 days). This suggests 1182/240 = 4.9 or 5 salespeople.

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CHAPTER 14 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following examples of how marketing can contribute to a better world:

•

#M4BW Box o Zappos delivers happiness and customer equity. Zappos customer service reps make customers happy in ways that have nothing to do with shoes. o What’s Next? The ultimate inside sales force. Prisoners employed as salespeople learn life skills.

CHAPTER 14 – COMMENTS ON QUESTIONS AND PROBLEMS 14-1.

This case covers a range of personal selling activities that follow Pooja Gupta from her days as a college student to working as a salesperson for Ferguson Enterprises. Examples of key terms and concepts from this chapter include but are not limited to: • Basic sales tasks – order-getting, order-taking, and supporting: Ferguson’s sales force gets the initial orders with new customers, builds the relationships that instill customer loyalty, and provides the customer service support that Ferguson emphasizes.

• Sales territory and specialization - Gupta, for example, helps contractors in the Virginia market figure out how to satisfy the needs of final consumers for whom they are building or remodeling homes.

• Sales training – “Ferguson provides the sales training to make them even better.” This paragraph continues to discuss more detail in the training.

• Major account sales force – “And salespeople for Ferguson’s Integrated Systems Division (ISD) are really selling a big business idea rather than ‘pipe.’”

• And more.

14-2.

There is only a vague reference to Ferguson’s sales compensation. This “what if?” scenario gives students the opportunity to critically think about how compensation drives behavior. The compensation section of the chapter discusses this briefly, but you can challenge students to think about how moving to a commission basis drives salespeople to focus mostly on making sales – and less on other activities that may help the organization (information sharing/market research, helping other salespeople, paperwork, relationship building).

14- 3.

See Exhibit 14-1. Strategy decisions should be made by the marketing manager because personal selling is only a part of Promotion – which is only one of the four Ps. All of these must be interrelated to have an effective marketing strategy. Leaving these decisions to a sales manager commonly results in the personal selling area being run as an autonomous unit – spending the money allocated for personal selling. Once one accepts the concept of market-oriented strategy planning, it is clear that the marketing manager should set the guidelines for all of the four Ps. Just how much detail the marketing manager should specify depends on how much he knows about the needs of the target market. Perhaps very general guidelines will be all he can generate. If this is the case, then it is likely that the resulting strategy will be weak in some places and probably uncoordinated. Even if much is known about the target market, however, it is not necessary for the marketing manager to completely strait-jacket the various marketing specialists. As indicated here, only a few decision areas need to be treated. But they are important because they determine the nature of the personal selling job – and affect its cost, the resulting sales, and the profitability of the firm.

14- 4.

As with all questions of this type, it is extremely important to specify the target customers, the nature of the product, and now, the place policies. Without some assumptions, it is almost

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impossible to specify the kind of salesperson required and be correct for all situations. Here, the student should recognize that a different kind of salesperson may be required between the producer and the wholesaler, between the wholesaler and the retailer, and between the retailer and the consumer.

14- 5.

See the answer to Question 14-4.

14- 6.

This would usually call for a fairly high-caliber order getter, who may be very useful in the early stages of the product life cycle. Then, when the product is fairly well accepted, the marketing manager may be able to use order takers who can follow through on the promotion job.

Manufacturers' agents are typically paid on a straight commission basis; sometimes, however, a bonus arrangement is used to motivate specific types of sales effort (for example, opening up an important new account).

14- 7.

Those specialty shops which can retain good order takers or even order getters – or who are owned by good order takers/getters – may grow in sales as customers who desire special service lack decent alternatives to these specialty shops. If mass selling develops strong brand familiarity, however, then lower caliber order takers or perhaps even vending machines may be able to complete the transactions. For the majority of heterogeneous shopping products, this does not seem too likely, though. And these are the products specialty shops have emphasized.

14- 8.

This is a review question – see section “Supporting Sales Force Informs and Promotes in the Channel.”

14- 9.

Students can readily identify with this common situation. In a class discussion, an instructor may want to solicit a broad range of different experiences, “Can someone describe a particularly bad example of customer service?” A follow-up question might be, “Would you buy from this company again?” Sometimes you have interesting responses, for example, when a cable TV company or Internet service provider is involved. Since these companies have little to no competition in most areas, students may say, “I have to keep buying from them – but I would switch if I could.” Industries where customers have few alternatives often find low levels of customer service. The discussion is best focused on ways to improve customer service.

After this part of the discussion slows, an instructor might ask, “Can anyone describe a particularly good customer service experience?” and “What does this company do right?”

These experiences reinforce and extend the text’s discussion of customer service. The series of examples help to demonstrate the importance of good customer service and some tactics that work.

14- 10.

Few college campuses have a position of customer service rep – or something similar.

Students will likely advocate for such a position. Most have had at least some problems with registration, buying books, paying bills, in-class instruction, etc. It is interesting to discuss why colleges do not have such a position – all have salespeople (recruiting staff). But the costs of switching colleges can be pretty high – so maybe schools feel little incentive to invest in customer service systems that primarily impact retention. This may be penny-wise and pound foolish – a poor college experience with an inability to resolve problems can be detrimental to a school’s reputation and word-of-mouth referrals.

14- 11.

Many firms have used this type of incentive for their customer service reps (CSRs) – usually to the detriment of service quality. Such programs give CSRs an incentive to quickly get a customer off the phone. This increases the likelihood of transferring a problem to another CSR – and customers may have to start all over describing their problem. Or a CSR might give a quick answer to a customer’s question – with little concern about the quality of the response.

The primary advantage is that it provides an incentive for CSRs to work quickly – perhaps resulting in lower costs for customer service. Typically, this short-term benefit is offset by lost

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sales in the future. More broadly, this example shows how compensation schemes can influence employee behavior.

14-12.

Have two different pay scales – one for the experienced salespeople with much higher incentives, perhaps a straight commission, and another with almost straight salary but enough incentive to encourage rapid learning on the job. After a training period, the new person could be shifted to the commission plan.

14-13.

The intention here is to have students compare actual sales presentations they have experienced with their notion of what would be an "ideal" sales presentation. The "ideal," of course, would depend upon the nature of the target market, and the rest of the marketing mix.

Therefore, this can be used as an integrating question, too.

14-14.

The comments for Question 14-14 apply here. The only difference is that here the focus is on the consultative sales presentation.

14-15.

It is possible to conceive of a static society that had little or no need for personal salespeople.

The channels and relationships that had been established by previous promotion efforts could continue serving the consumer satisfactorily – as long as preferences did not change and no new products were introduced. Such a situation would probably encourage inefficiency among established channels and prices might be raised without too much fear of competition.

Depending on how carefully the law was written, even written contracts between buyers and sellers might be prohibited, except to state prices and quantities. In this case, new customers might have difficulty obtaining information about the relative merits of available products. Thus, it would seem desirable to permit at least some personal selling to provide information (answer questions). But once some personal selling effort is allowed, then it would be almost impossible to regulate equitably – as there are so many different types of selling situations. It would be difficult for legislative bodies to correctly anticipate and evaluate all of these situations (most business managers lack the know-how to do this for their business).

CHAPTER 14 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. What personal selling tasks are performed at Hillside Veterinary Clinic and who does them? a. If Hillside wanted to put more emphasis on “order getting” to promote growth, what ideas do you have for implementing this? b. Based on the situation analysis, target markets, and intended positioning, recommend some ways that Hillside could actively work to improve its reputation for customer service.

A veterinary clinic, like many service operations, requires providers to engage in many personal selling tasks. While service providers may not consider themselves “salespeople,” they regularly perform the personal selling tasks described in this chapter. One would expect the veterinarian and vet techs to perform order getting, order taking, and customer service. The supporting task may be performed by the receptionist – who may also help with ordering taking and customer service.

HVC might provide commissions or bonuses to encourage its staff to talk about certain services – for example, the dental services package.

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There are many different approaches that HVC might use to promote its reputation for customer service.

Given the company’s “compassionate care” positioning, a high level of customer service is probably expected by customers. To achieve that, the clinic might have someone make a follow-up call to all customers the day after a clinic visit to assure there are no continuing issues of concern. A customer satisfaction program is described in the Control section of the marketing plan. HVC might also leave more time during the day “unscheduled” to be available for patients on short notice. The clinic could establish a 24-hour hotline. Students are likely to generate additional customer service ideas.

CHAPTER 14 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 12: PersonalHealth.com—Custom Vitamins This case directly addresses a customer service issue. It emphasizes the important role played by customer service in handling customer problems and building customer loyalty. The case discussion in Part V details the potential financial implications of poor customer service.

The case also points out how difficult it can be to implement effective customer service. This can lead to a discussion of the training and selection of customer service personnel and the use of IT systems to deliver customer service. These issues are covered extensively in this chapter. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 16: Montana Company We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 17: WaterWiser, Inc. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 21: Gimball-Tonie International (GTI) This case can be used to discuss the need for adjusting the personal selling effort when target customers' buying methods change. In this case, there is a shift from dominance by purchasing agents – for "commodities" – to multiple buying influence in an industrial component products situation. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 25: ABA Tools (ABA) This case can be used to discuss the different kinds of personal selling efforts one would expect from general merchandise wholesalers and specialty wholesalers. Further, it gives practice in identifying different kinds of salespeople. We also recommend that you review the longer teaching note for this case

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in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 14: SALES COMPENSATION In this problem, a sales manager is trying to decide between a commission plan and a combination plan for compensating a sales rep in a new territory. The sales reps will sell two products – and the manager wants to motivate the rep to spend more time on one of them (Product B) by assigning it a higher commission rate. The student analyzes the costs of the two plans relative to possible benefits in increased sales and contribution to profit. One of the questions in the Learning Aid exercise for this problem adds a different dimension – by looking at how price cutting by the rep affects his compensation and company profits.

The initial spreadsheet for the problem is given below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Commission Combination Plan Salary Component of Pay PRODUCT A: Price Commission Percent (Of Sales $) Expected Sales (Units of A) Unit Cost-Product A PRODUCT B: Price Commission Percent (Of Sales $) Expected Sales (Units of B) Unit Cost-Product B Total (Sales) Revenue (TR) Total Compensation (TC) "Profit Contribution"

$0.00 $110.00* 5.00%* 4,000* $75.00* $150.00* 8.00%* 1,000* $105.00*

$15,000.00* $110.00* 3.00%* 3,600* $75.00* $150.00* 5.00%* 1,250* $105.00*

$590,000.00 $583,500.00 $34,000.00 $36,255.00 $151,000.00 $145,995.00

Answers to Marketing Analytics: Data to Knowledge, Problem 14: a.

b.

c.

From the initial spreadsheet (above), at the planned volumes for Products A and B, the rep would get the highest compensation ($36,255) under the Combination Plan (Answer B). and Nanek would get the highest Profit Contribution under the straight Commission Plan ($151,000 vs. $145,995).

From the initial spreadsheet (above), at the planned volumes for Products A and B, Nanek would get the highest Profit Contribution under the straight Commission Plan ($151,000 vs. $145,995) (Answer A).

If increase in unit sales per se is the objective, it might be reasonable to do what the sales manager has in mind since unit sales will increase from $590,000 to $605,000. But it does not appear to make sense from a profit perspective (Answer C). While the proposed arrangement would increase the rep's compensation to $38,500 (a $4,500 raise), the change does not alter Nanek's bottom line; it

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remains unchanged at $151,000! Thus, if the basic reason for increasing unit sales was to increase profit, this approach has not worked. It might make sense for the manager to think about other alternatives – perhaps alternatives that reduced the increase in sales rep compensation somewhat while shifting that money to the bottom line. The spreadsheet for the new part of this analysis is given below (see the Column labeled "Commission.")

SpreadSheet Commission Combination Plan Salary Component of Pay PRODUCT A: Price Commission Percent (Of Sales $) Expected Sales (Units of A) Unit Cost-Product A PRODUCT B: Price Commission Percent (Of Sales $) Expected Sales (Units of B) Unit Cost-Product B

$0.00 $110.00* 5.00%* 4,000* $75.00* $150.00* 10.00% * 1,100* $105.00*

Total (Sales) Revenue (TR) Total Compensation (TC) "Profit Contribution"

$15,000.00* $110.00* 3.00%* 3,600* $75.00* $150.00* 5.00%* 1,250* $105.00*

$605,000.00 $583,500.00 $38,500.00 $36,255.00 $151,000.00 $145,995.00

In class discussion of commission rates, it is worth noting two points. First, "Expected Sales" for one product (in this case, Product B) is not endlessly elastic. Purchasers may be reluctant to try large quantities of a new product no matter how hard the rep pushes it. Second, substantially different commissions between product lines may lead reps to ignore the firm's "tried and true" product line or, worse yet, actively discourage sales of low commission items and encourage customers to devote limited dollars to highly commissioned products. d.

Marketing managers often need to consider multiple paths to reach desired objectives. In this case, the manager must decide if it is better to provide a stronger incentive for the sales rep or change the marketing mix to drive more profit. In this case, we see that even though we get a 25% increase in units sold, a 10% reduction in price actually cuts the gross margin from $45 to $30 per unit which results in lower overall profits. In this case, profits drop from $151,000 to $142,000 – a decrease of $9,000 (Answer A). The spreadsheet for the analysis is below: SpreadSheet Commission Combination Plan

Salary Component of Pay PRODUCT A: Price Commission Percent (Of Sales $) Expected Sales (Units of A) Unit Cost-Product A PRODUCT B: Price Commission Percent (Of Sales $) Expected Sales (Units of B) Unit Cost-Product B Total (Sales) Revenue (TR) Total Compensation (TC) "Profit Contribution"

$0.00 $110.00* 5.00%* 4,000* $75.00* $135.00* 8.00%* 1,250* $105.00*

$15,000.00* $110.00* 3.00%* 3,600* $75.00* $150.00* 5.00%* 1,250* $105.00*

$608,750.00 $583,500.00 $35,500.00 $36,255.00 $142,000.00 $145,995.00

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e.

The right column (Combination Plan) of the Spreadsheet below shows the expected results of the compensation plan suggested by the sales rep. These results can then be compared with the results of the combination plan shown in the initial spreadsheet (above). The rep's proposal for a higher base salary (at the concession of a lower commission on Product B) increases the rep's security and reduces the incentive portion of pay for Product B. If the choice is between the rep's proposal (i.e., version of the Combination Plan) and the Combination plan in the initial Spreadsheet, the rep's proposal generates more profit contribution ($146,745 versus $145,995) for the company while at the same time reducing the total compensation that she would earn ($36,255.00 originally vs. $35,505.00 now) (Answer C). Thus, at first glance, the manager might be favorably disposed to the suggestion. On the other hand, the comparison is based on the assumption (as suggested in the question) that the quantity sold of each product would stay the same even with the change in compensation. However, we might normally expect performance to be related to the compensation scheme – which sets the stage for the marketing analytics discussion.

SpreadSheet Commission Combination Plan

Salary Component of Pay PRODUCT A: Price Commission Percent (Of Sales $) Expected Sales (Units of A) Unit Cost-Product A PRODUCT B: Price Commission Percent (Of Sales $) Expected Sales (Units of B) Unit Cost-Product B Total (Sales) Revenue (TR) Total Compensation (TC) "Profit Contribution"

$0.00 $110.00* 5.00%* 4,000* $75.00* $150.00* 8.00%* 1,000* $105.00*

$18,000.00* $110.00* 3.00%* 3,600* $75.00* $150.00* 3.00%* 1,250* $105.00*

$590,000.00 $583,500.00 $34,000.00 $35,505.00 $151,000.00 $146,745.00

MARKETING ANALYTICS DISCUSSION If Welles' marketing plan for Nanek calls for increased sales push on Product B, that goal isn't addressed by the rep's proposal to take the same commission on both A and B. Because sales reps' time is a scarce resource, the rep's proposal leaves open the "easy way out" – keep selling Product A. Of course, this is ignored if one accepts the assumption that unit sales for the two products would stay the same.

Students may come up with ideas on how to meet the rep's concerns and still keep the focus on Product B. But the main point reinforced throughout this problem is that it is important for the reward structure to be consistent with the firm's goals as well as the salesperson's needs.

CHAPTER 1 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: What Kinds of Personal Selling Are Needed?

Question Type: Click and drag Learning Objectives: 14.2 Topic: Personal selling AACSB: Knowledge, application Bloom’s: Understand, apply

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Question 2: Selling Emphasis and Sales Compensation Question Type: Click and Drag Learning Objectives: 14.1, 14.5, 14.7 Topic: Compensating and motivating salespeople AACSB: Analytic, technology, reflective thinking Bloom’s: Understand, analyze Question 3: Key Steps in the Personal Selling Process Question Type: Click and Drag Learning Objectives: 14.1, 14.2, 14.8 Topic: Personal selling techniques – prospecting and presenting AACSB: Analytic, technology, reflective thinking Bloom’s: Understand, analyze, evaluate Question 4: Schmidt Furniture: Personal Selling Tasks Question Type: Case analysis Learning Objectives: 14.2 Topic: What kinds of personal selling are needed?

AACSB: Analytic, understand Bloom’s: Remember, understand, apply Question 5: Sales Compensation Question Type: Marketing Analytics Learning Objectives: 14.7 Topic: Compensating and Motivating Salespeople AACSB: Analytic, technology Bloom’s: Apply, analyze

Application-Based Activities Title: Personal Selling: Buddle Health Type: Role-Playing Bloom’s: Apply Description: Play the role of an inside sales representative with a health care insurance firm. Apply your personal-selling skills to gain at least three new clients in your first week.

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CHAPTER 15: ADVERTISING AND SALES PROMOTION CHAPTER 15 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You are the director of marketing for an online dating company. Your company is an upstart in the industry—still trying hard to get attention in a world where Match.com, Hinge, Tinder, and others are well known. NewsSpace, an online site known for its cleverness in attracting readers with its entertaining and provocative headlines, has approached your marketing team with an offer to advertise an article it will post on the site. Your company slogan is “Mating Habits for Humans.” NewsSpace wants to post an article “9 Awesome Animal Mating Habits”—which would provide a photo of how different animals show care and concern for others of their kind. NewsSpace proposes that number 9 on the list would be something for humans and feature your company’s website. A video ad for your company would be in the number 10 slot. The company has ideas for ranking 1 through 8, but you can influence those in any way you like. The ad would appear to be just another article at the site— using the same form and function as other articles—but in small type it would be noted “Sponsored by....”

A couple people on your team think this is a great idea. A few others wonder if the practice might be deceptive or possibly even illegal. The representative from NewsSpace says that it is legal and they get few complaints. Would you run this type of ad? If yes, explain why and what you would tell those who oppose the ad. If no, explain why and what you would tell those who are in favor.

This ethical dilemma is designed to have students grapple with the issue of native advertising. Native advertising is when the nature of the advertising matches the form and function of the platform on which the ad appears. There is an increasingly blurry line between advertising and editorial content – and many media companies are willing to operate in this space to get advertising dollars. This can occur in newspapers, where an advertisement actually looks like a newspaper article. It can also occur on a website, where a firm creates an ad designed to appear as an article. Buzzfeed has been considered an expert at developing “listicles” (articles based on lists – like the example used in this exercise) which are apparently good click bait (click bait is a provocative title that encourages a reader to click through to the article).

The question for students is if this type of advertising is misleading and therefore unethical. Grabbing customer attention through traditional means is getting increasingly difficult. Should it be buyer (or reader) beware? For an interesting take on this, you might view (and if you have time show to your students) John Oliver’s send-up of the practice at: https://youtu.be/E_F5GxCwizc.

CHAPTER 15 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise explains a common metric used to evaluate alternative media – impressions. It helps students understand how and why some media may be more valuable than others.

Marketing Analytics in Action 15: ADVERTISING IMPRESSIONS AND MEDIA COST

1. Yelp is an app that provides customer reviews of stores—most often restaurants. It advertises as customers are actively searching to make a purchase—usually when deciding on a place to eat.

Therefore, Yelp offers highly targeted advertising when customers are close to the purchase decision (action in the AIDA model).

2. Billboard advertising typically involves generating awareness – and includes many customers who are not part of the target market. Therefore, it is much less efficient.

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3. Giles might want to consider which media the target market for his men’s clothing stores is likely to consume.

CHAPTER 15 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: •

•

Photos o Tide’s cold water detergent saves energy. o Oroweat promotes sustainably baked bread. o Adobe uses LinkedIn to promote the diversity of its employees. o Advertising campaigns by Ben & Jerry’s and Nespresso promote both their product and environmental causes. #M4BW Boxes o Brands ally with causes and advance both. AirBNB partnered with Service Year Alliance to offer two weeks of free housing for people volunteering for a national year of service. o What’s Next? Brand-nonprofit partnerships raise awareness and money

CHAPTER 15-COMMENTS ON QUESTIONS AND PROBLEMS 15-1.

The Domino’s opener case is full of examples of key terms and concepts from chapter 15.

These include, but are not limited to: • • • •

Media – advertising on sports and entertainment TV programs.

Advertising generated “awareness and interest” in its new recipe.

Sales promotion – “two medium two-topping pizzas for just $5.99.”

Franchisees offered “free samples” another form of sales promotion.

15-2.

This offers students an opportunity to show some creativity. Students should be pressed to follow the ideas laid out in the digital and mobile advertising section.

15- 3.

This is just a policing question. See Exhibit 15-1 and section “Advertising, Sales Promotion, and Marketing Strategy Planning.”

15- 4.

See sections “Advertising Objectives Are a Strategy Decision” and “Objectives Determine the Kinds of Advertising Needed.” The required illustration will provide a focus for applying the text concepts. The illustration, however, should include some reference to the target market and the rest of the proposed marketing mix in order to place the suggested advertising objectives in the right perspective.

15- 5.

In general, radio is likely to be an important media alternative in a developing nation with low per capita income and a high level of illiteracy. The low-income level may prevent some consumers from owning a radio, yet it is a form of entertainment that is quite common around the world, even in low-income households. Further, radio broadcasts and their oral communications may be the only way around the limitations of illiteracy. A potential problem is that consumers may speak different dialects and languages and it may be difficult to appeal to everyone with a radio message. Further, radio is not effective in demonstrating products and may be less effective in getting and holding attention.

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Outdoor print media – primarily signs and billboards with pictures – may also be important.

Showing the product and/or making consumers more familiar with the brand (trademark, packaging, etc.) may help stimulate demand at the point of purchase when consumers actually see the product in a store. In societies where income is low, however, there may be limited mobility and relatively few consumers may see a sign.

Specialized media – such as signs on public buses – are important in some societies where low-income consumers rely on public transportation to get around.

The key point here is to encourage students to recognize that not everyone in the world is a member of the "video generation.” Even in the U.S., many consumers are illiterate or otherwise difficult to reach with the traditional mass media.

15- 6.

One case is to convince the intermediaries that the company is following an aggressive mass selling policy that will work to their advantage. Another is to secure inquiries. Another example is the promotion by a large producer seeking to inform and to sell the trade on a new policy it is instituting – such as price guarantees.

15- 7.

"Investing" money in advertising refers to building a consumer franchise through continued advertising. Money put into institutional advertising and money expended during the introduction and market growth periods can be thought of as investments. Funds spent during the market maturity stage – especially by newcomers – probably have relatively little investment value, as these advertisers usually seek to get immediate action. The same is probably true of the bulk of weekly newspaper advertising by grocers. Of course, continued advertising of low prices by grocers may "sell" the image of low prices – which may carry on for long periods. In this sense, even the advertising in a particular week has some carry-over (investment) value.

15- 8.

The important thing here is the objectives. Almost any ad can be made to seem "good" if the objective is selected to justify what was done.

15- 9.

Again, assumptions about target customers and how they view the product are extremely important. This question provides a vehicle for discussing the advantages and disadvantages of alternate media and their importance in the light of the assumptions. This can generate a useful class discussion of the whole area – based on student feedback to other students' assumptions listed on the whiteboard.

15- 10.

The pros and cons of advertising on the Internet for a producer of sports equipment are similar to the general pros and cons of advertising on the Internet. In this regard, see the text’s discussion of digital advertising (which includes advertising on both the Internet and cell phones). See section “Digital Advertising.” It is also useful to reference the discussion of integrated direct-response promotion and customer-initiated interactive communication in Chapter 13. The major cons may be related to the ability of the Internet to reach target customers (i.e., those who want sports equipment). The “audience” does slant toward younger people and they are more likely to want to buy most types of sports equipment. Further, there is a lot of sports-related content on the web and many of the people that visit websites where that content is located might be good prospects (i.e., interested in sports). People interested in being sports fans or spectators, however, are not always interested in equipment. The Internet might have the advantage of providing more information (however much the customer wanted) compared to traditional media and it could allow use of multimedia (including sound, photos, even animation) to get and keep attention. It could also allow direct-response mechanisms and links to more detailed websites. Internet advertising can be very targeted if data on people visiting certain websites (or with certain interest profiles) is available. If the advertiser uses websites where the charges are based on some objective performance criterion (such as click through), the Internet might prove to be more economical than some traditional media. On the other hand, if that sort of tracking system is not used, it might be difficult to tell who is seeing

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the ad. Data on websites often isn’t available or very reliable, so it might be hard to determine what impact the advertising is having.

15- 11.

Testimonials may attract attention and hold interest – and if they are good enough, arouse desire and encourage action. Testimonials are especially important for products that are difficult to evaluate without extensive use. In such cases, the advice of others may be a rational product evaluation tool for potential consumers. However, for products that consumers can easily evaluate, testimonials have relatively little value except that they may be useful for gaining attention – many consumers seem to like to read other peoples' letters. Also, children seem to identify with known persons or cartoon characters – so testimonials may be useful for reaching them.

15-12.

See section “Measuring Advertising Effectiveness Is Not Easy.” There is a great deal of inefficiency in mass selling – but the increasing importance of marketing managers and use of marketing research is tending to reduce this inefficiency. The value of a particular advertisement depends upon the objectives – and marketing research can help evaluate particular ads.

15-13.

The "fairness" of ads that criticize competitors has only recently become a key issue. In the past, most advertisers avoided direct criticisms of competitors. Now, however, that has become more common. While many ads that are critical of competitors do seem "unfair,” negative advertising does seem to be effective in shaping opinions. That makes it all the more controversial. It is especially controversial when applied to competing political candidates, but it is also creating controversy in the private sector. Negative advertising gets onto shaky legal ground. There are laws that prohibit trademark disparagement. Further, substantiation may be required for comparative advertising claims. Yet there is a large "gray area" here and the debate is likely to become more heated before it is resolved. This is an area where the "rules of the game" seem to be shifting.

15-14.

Many firms are trying to better integrate their sales promotion activities with their advertising and personal selling activities – to get more "bang for the buck.” One general approach is to use a direct-response promotion to help identify specific customers, who are then targeted with other promotion. For example, an advertisement might inform customers about a sweepstakes contest that involves a give-away of the product. People who send in their names and addresses to enter the contest are probably interested in the product. They'd rather win it free, but they still are likely to be interested. So, then the company might send them mail advertisements, price-off coupons, or even have a telemarketer call them. Alternatively, the name might be passed along to a local retailer who then follows up with more promotion effort.

Another general approach is to use some a certain communication technique (say, a phrase or visual image) that spreads across several messages. For example, Mobil – the petroleum company – sells a premium synthetic oil aimed at commercial truckers. The firm’s promotion uses the tagline "the million-mile oil" – which reminds truckers that using this oil will help keep the truck's engine running for a million miles.

15-15.

(a) If the firm has developed an improved razor blade and obtained distribution, but consumers are not motivated to buy it, the firm's promotion objective should probably be to encourage trial.

Once consumers have tried the improved razor then they are likely to purchase it again. Thus, one feasible approach is to use sampling. Distribution of samples of razor blades might be expensive if it requires developing a special (small quantity) package. And without special packaging, sampling might be dangerous. Thus, another approach might be to offer consumers price-off coupons or rebates so that the price paid for the new razor is substantially less than competing brands. This approach relies on the appeal of a lower than competitive price to encourage consumers to try the product, but then, if they like it, they will repurchase when there is no coupon.

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(b) If a competitor is about to do a test market for a new brand and wants to track sales in test market areas to fine tune its marketing mix, the firm may want to use promotion that encourages consumers not only to buy the firm's brand but also to "stock up." Unfortunately, the resulting response to the test market will not be what would occur under "normal" circumstances. For example, the firm might offer a "three for the price of two" coupon.

Alternatively, if retailers were willing, a special in-store point-of-purchase display might draw special attention to the firm's brand and reduce interest in the competitor's product.

Note: It may be useful to ask students if they think that these approaches are ethical – because some will think they are not (even if they don't say so). On the other hand, some students will do a good job arguing that there is no reason that the firm should sit back and let the competitor "fine tune" its marketing strategy at the firm’s expense (when the firm has legitimate tools to prevent it). This can lead to a useful discussion, even if the professor primarily serves as the "conductor" and leaves it to the orchestra to play the various tunes. (c) The producer of the popcorn-based snack product might try sales promotion targeted at the chain (push) or at final consumers (in the hope that stimulating demand will help pull the product through the channel). For example, the producer might offer the chain credit for a free case of product for each one it sells. This effectively becomes a discount, and the retailer has the option of either passing along some of the discount to consumers – to stimulate demand and promote trial – or alternatively to simply get more profit (from larger margins) by selling at the regular price. From the producer’s standpoint, this approach has the advantage of encouraging the firm to keep the product on the shelf longer. If, alternatively, the producer just gave the chain free cases there would be less incentive for the retailer to come back to reorder. Yet, it takes most products – even ones that end up being popular – a while to catch on.

An alternative, that might also require some cooperation from the retailer, is to propose sales promotion targeted at final consumers. For example, the producer might set up a program in stores so that consumers could try the new product. The "taste trials" might help to stimulate demand.

These are just a few examples of what the producer might do. Here, however, the instructor might want to make the point that retailers increasingly are asking for "stocking allowances" (slotting fees) to give a new product space on the store's shelves – even if for only a limited time. Small suppliers may not have the money to pay such slotting fees (in a sense, "rent" for shelf space). Sometimes, however, a creative marketing mix proposed by the producer (other than just paying slotting fees) will have the effect of reducing the retailer's risk while, at the same time, doing a better job of achieving the producer's objectives.

CHAPTER 15 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. What are Hillside’s advertising objectives? b. What types of advertising and media are being proposed? Why are these types used and not others? c. What type of copy thrust is recommended? Why? d. What sales promotion activities are being planned? What are the goals of sales promotion?

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Advertising objectives can be inferred by reviewing the marketing strategy section. With customers who are not currently using HVC, one of the primary objectives should be is to increase awareness. This is especially true for people new to the area – a very important market in the fast-growing community where HVC is located. Another apparent objective is to introduce new products (e.g., the dental services and geriatric pet care packages) to specific target markets.

As with many small retail businesses, HVC’s advertising budget is limited. For HVC, traditional advertising relies completely on the Yellow Pages. The marketing plan proposes the development of a website that provides more information about service offerings. The development of a customer database will allow for email advertising. Brochures also operate as a form of advertising – with information about particular services. If the brochures are only taken by interested customers, the cost per contact would be quite low.

Chances are other forms of media – television, newspaper, and radio – would be too expensive for the clinic.

HVC’s tagline, “we treat pets like family,” reflects the clinic’s positioning and should be a key component of the copy thrust for all advertising. The Yellow Pages ad would emphasize the clinic’s most popular services and the new bundled service packages. The website and brochures would include pictures to help humanize the clinic and support its compassionate care positioning – as well as inform.

The marketing plan for HVC includes a number of sales promotion activities. Participation in the Pet Fair, Parade of Lights, and Town Wide Garage Sale all reflect events that will help stimulate interest and trial.

These events allow the clinic to distribute brochures as well as refrigerator magnets and bandanas with the HVC logo and name. Most of the sales promotion activities seem designed to build awareness or remind.

CHAPTER 15 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 18: West Thomasville Volunteer Fire Department This case allows the instructor to incorporate ideas from both Chapters 13 and 15, and perhaps Chapter 14, on personal selling. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 20: Lake Manina Marine & Camp This case can be used to discuss whether advertising can be expected to differentiate this retailer from the many others in the community who are doing more or less the same thing – but with greater emphasis on lower prices. It might be useful to discuss what advertising objectives are appropriate in this situation.

Basically, the company must develop a strategy before getting down to advertising objectives. But if they plan to continue to implement their present strategy, the objective probably should be to inform – communicating that the company carries certain brands and provides dependable service. This will permit a potential consumer who is responding to nationwide advertising to find the local retailer. This is not a very "aggressive" advertising objective, but may be all the company can afford to do and all that is needed for this strategy. Implementing this objective might include running ads in the yellow pages and in local newspapers when various products are in season, and in any other announcement-type media. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Case 31: Brian’s Sustainable Homes The Brian’s Sustainable Homes case describes a builder of semi-custom homes who recently built his first LEED-certified “green” home. The home is the first of five in a small development – and Brian Wandino will build four more “green” Homes. A LEED-certified home adds a number of energy-saving features and is built using sustainable practices. This raises a builder’s costs, so Wandino has priced the homes about 10 percent higher than comparable homes in the area. While there is growing consumer interest in “green” products, the homes are being built at a time of rising interest rates and an economic slowdown – which have increased customer price sensitivity. In addition, green homes are new to consumers and real estate agents – and the house has not sold. Brian’s Sustainable Homes’ previous promotion efforts have been minimal – listing houses on the multiple listing service to attract and inform real estate agents and customers. Now Brian must decide whether to engage in a higher level of promotional activity – and if so, what activities should be used. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 15: SALES PROMOTION A local PTA is thinking about using sales promotion to spark ticket sales for a fund-raising basketball game. The student analyzes the costs of the promotion and what results it must produce to be beneficial.

This problem helps students to see how promotion can help both business and nonprofit organizations – while making them more sensitive to the costs (and risks) of using promotion.

Because the sales promotion in this problem is being used by a nonprofit organization, the "competitive" aspect of how sales promotion is sometimes used is not an issue. Rather, the focus here is on the potential cost/benefit trade-offs of promotion. But this can provide an interesting basis for some follow-up class discussion of how this situation varies from a situation in which, for example, two competing companies are both using sales promotion to attract customers (or intermediaries). Some critics argue that sales promotion is now being overused in such situations – because it tends to stimulate short-term shifts in purchases rather than encouraging longer-term brand insistence.

The initial spreadsheet for the problem appears below: SpreadSheet

Number of Tickets at Regular Price Regular Price per Ticket Total Revenue from Ticket Sales Number of T-shirts Ordered Cost per T-shirt Cost of the T-shirt Promotion No. Extra Tickets to Pay for T-shirts Money Earned for the PTA Change in Money Earned from Promotion

No Promotion

With Promotion

300* $5.00* $1,500.00

600* $5.00* $3,000.00 500* $2.40* $1,200.00 240 $1,800.00 $300.00

$1,500.00

Answers to Marketing Analytics: Data to Knowledge, Problem 15: a.

Based on the initial spreadsheet (given above), the promotion looks like a good idea (Answer A) – if ticket sales increase as expected. Specifically, the money earned by the PTA would increase by $300.00 (from $1,500.00 to $1,800.00). But, as is developed in more detail in subsequent questions,

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that benefit depends on the extent to which the sales promotion sparks additional ticket sales. Using the t-shirt promotion has a cost – $1,200 in the initial "plan" – and thus it is possible that the promotion could result in the PTA earning less money if the promotion does not stimulate at least enough extra ticket sales to cover that cost. This is the focus of the next question. b.

The analysis for this question shows that the PTA would earn only $540 (Answer B) – not the $1,500 that might be expected without the promotion – if only 300 tickets are sold and 400 t-shirts are ordered. From the initial spreadsheet, we can see the cost of the T-shirt promotion would be $1,200 if 500 shirts are ordered – as compared to $960 if only 400 are ordered. The cost of the extra 100 tshirts ($240) represents a reduction of risk (vs. ordering 500) but if only 300 tickets are sold it represents a significant reduction in money earned (vs. not doing a promotion). It also means only the first 400 buyers will get a free shirt (vs. the first 500). The spreadsheet for this question is given below: SpreadSheet

Number of Tickets at Regular Price Regular Price per Ticket Total Revenue from Ticket Sales Number of T-shirts Ordered Cost per T-shirt Cost of the T-shirt Promotion No. Extra Tickets to Pay for T-shirts Money Earned for the PTA Change in Money Earned from Promotion c.

No Promotion

With Promotion

300* $5.00* $1,500.00

300* $5.00* $1,500.00 400* $2.40* $960.00 192 $540.00 $-960.00

$1,500.00

Arguing the other side, ticket prices could be increased to offset some of the increased cost. In this case the PTA would earn an extra $550 (Answer A). They would earn a total of $2,050.00 versus $1,500.00. The analysis is found below: SpreadSheet

Number of Tickets at Regular Price Regular Price per Ticket Total Revenue from Ticket Sales Number of T-shirts Ordered Cost per T-shirt Cost of the T-shirt Promotion No. Extra Tickets to Pay for T-shirts Money Earned for the PTA Change in Money Earned from Promotion d.

No Promotion

With Promotion

300* $5.00* $1,500.00

500* $6.50* $3,250.00 500* $2.40* $1,200.00 185 $2,050.00 $550.00

$1,500.00

The PTA would have to sell 692 tickets (Answer C) at the reduced price ($2.60) to earn about the same amount of money ($1799.20) as would be earned with the promotion ($1,800) if it works as expected.

The spreadsheet for the analysis in this problem appears next:

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SpreadSheet

Number of Tickets at Regular Price Regular Price per Ticket Total Revenue from Ticket Sales Number of T-shirts Ordered Cost per T-shirt Cost of the T-shirt Promotion No. Extra Tickets to Pay for T-shirts Money Earned for the PTA Change in Money Earned from Promotion e.

No Promotion

With Promotion

692* $2.60* $1,799.20

600* $5.00* $3,000.00 500* $2.40* $1,200.00 240 $1,800.00 $0.80

$1,799.20

If a free T-shirt was a significant motivator and 900 tickets were sold (the capacity of the gym), the PTA would earn $2,340.00 (Answer D). The spreadsheet for the analysis is below: SpreadSheet

Number of Tickets at Regular Price Regular Price per Ticket Total Revenue from Ticket Sales Number of T-shirts Ordered Cost per T-shirt Cost of the T-shirt Promotion No. Extra Tickets to Pay for T-shirts Money Earned for the PTA Change in Money Earned from Promotion

No Promotion

With Promotion

300* $5.00* $1,500.00

900* $5.00* $4,500.00 900* $2.40* $2,160.00 432 $2,340.00 $840.00

$1,500.00

MARKETING ANALYTICS DISCUSSION This question can be used to stimulate some discussion of the role of price and the role of the sales promotion here. Students may have some opinions about whether a lower price would really stimulate more ticket sales. You might ask if they think that price is really a critical issue here – or is the problem getting people interested in the idea of going to the game. If that is really the problem, the t-shirt promotion might be more effective, especially if people are interested in the t-shirt and see the $5.00 ticket price as a "deal" on the t-shirt and the game together. (Note: some students will argue that the PTA might be better off promoting interest in the game in other ways, such as with posters, word of mouth, etc. – and selling t-shirts at a marked-up price as another way to earn money.)

CHAPTER 15 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Sales Promotion at Domino’s Question Type: Case Analysis Learning Objectives: 15.10 Topic: Sales promotion AACSB: Analytic, reflective thinking Bloom’s: Remember, apply

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Question 2: Advertising Objectives Question Type: Click and Drag Learning Objectives: 15.10 Topic: Advertising AACSB: Reflective thinking Bloom’s: Remember, apply evaluate Question 3: Target Markets and Media Choice Question Type: Case Analysis Learning Objectives: 15.4 Topic: Advertising and media AACSB: Analytic, reflective thinking Bloom’s: Remember, apply evaluate Question 4: Different Types of Digital Advertising Question Type: Click and Drag Learning Objectives: 15.5 Topic: Digital and Mobile Advertising AACSB: Knowledge, application Bloom’s: Understand Question 5: Types of Advertising Question Type: Click and Drag Learning Objectives: 15.3 Topic: Advertising AACSB: Knowledge, application Bloom’s: Understand Question 6: Sales Promotion Question Type: Marketing Analytics Learning Objectives: 15.1, 15.11 Topic: Sales promotion AACSB: Analytic, technology Bloom’s: Apply, analyze Question 7: Advertising and Sales Promotion at Dominos Question Type: Case Analysis with Multiple Choice Learning Objectives: 15.1, 15.2, 15.3, 15.7, 15.9 AACSB: Reflective thinking, analytical Bloom’s: Remember, understand, apply Application-Based Activities Title: Advertising and Sales Promotion: MARKit! Type: Role-Playing Bloom’s: Apply Description: Play the role of a key member on the advertising team for MARKit!, a well-established company. You will be making decisions about a new advertising campaign.

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CHAPTER 16: Promotion Using Earned Media, Owned Media, and Social Media CHAPTER 16 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Your friend Sheila tells you that she has become a “Buzzer.” She works for Buzz Generator, a company that helps marketing managers spread the word about new products.

Buzz Generator gives Sheila samples of new products and pays her between $25 to $50 per product to use the product and share her “enthusiasm” with her friends. Buzz Generator provides her with ideas about how she can bring up the products in conversations and suggests what she might say about the products. Sheila writes a report highlighting her experience and any feedback she receives. The company asks Sheila to disclose her role as a “Buzzer” to friends when she brings up the new products, but Sheila tells you that this tends to make people not listen to her message. Plus, she thinks friends find her more credible and more of an innovator if she leaves out the part about getting the product for free and getting paid. You recall a recent time when she raved about a new frozen pizza she had tried—and now wondered if that rave was real. She asks if you want to become a “Buzzer.” Would you sign up to do this work for Buzz Generator? Why or why not? Do you think your friend is acting ethically? Why or why not?

This case is based on BzzAgent an agency that asks people to actively promote and influence other customers in the manner described here. BzzAgent has its own “Code of Conduct” (see: https://www.bzzagent.com/pg/Code-of-Conduct) which an instructor might review before initiating a discussion – and possibly share with students. Among the elements at the site are that BzzAgents should be: •

•

Open: BzzAgents always tell others they are part of a word-of-mouth program. Be proud to be a BzzAgent. When Bzzing others, you must let them know that you're involved with BzzAgent and tell them what you received as part of the campaign. If you genuinely like something (or even if you don't), it's your open, honest opinion that counts.

Honest: Bzz is only effective when it's completely honest. Bzz only works because it is honest — and that means discussing any bad with the good. People are smart, and they'll pick up on fake or dishonest Bzz. Why would you want to be misleading and risk damaging your relationships?

Your honest opinion is what matters and that's what you should share with others.

CHAPTER 16 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. This exercise helps students better understand “bounce rate” – an important measure for marketing managers. Marketing managers can often spend money bringing a customer to their site – through advertising or search engine optimization. But if a high percentage of those customers “bounce” (leave the site immediately) those efforts are wasted. The exercise helps students understand the importance of advertising to the right customers with the right message – if either is wrong, the bounce rate will be much higher.

Marketing Analytics in Action 14: BOUNCE RATE 1. While the cost-per-click is low for the Facebook ad, the bounce rate is high as compared to the Google search ads.

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2. Lower bounce rates will happen if an ad is better at targeting the right customer with the right message.

CHAPTER 16 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: •

•

Photos o St. Jude’s Children’s Research Hospital shares stories of its patients and solicits donations on its Facebook page. o Adobe reinforces purpose orientation on its LinkedIn page. o Purpose-oriented VF brands reunites Chinese workers and their families. #M4BW Boxes o What’s Next? includes examples of YouTube video that promotes safe practices around trains. o Branded service shows what engineers can do. In Peru, students at an engineering school created a billboard that produces drinking water from the humid air. o Purpose-oriented companies get favorable treatment from the press. The Lexington Surgery Center in Kentucky offers outpatient surgery at no cost one Sunday a month for uninsured or underinsured patients. o Social media spreads positive messages. Mattel’s Barbie celebrated International Women’s Day with its #MoreRoleModels campaign on social media, highlighting professions where women are underrepresented.

CHAPTER 16 – COMMENTS ON QUESTIONS AND PROBLEMS 16- 1.

Examples of key terms and concepts from this chapter include but are not limited to: • Owned media – HubSpot’s blog articles, white papers, case studies, e-books.

• Earned media – likes on Facebook, and retweets or favoriting a tweet • Search engine optimization – when HubSpot appears high on a search • Marketing automation software – HubSpot embodies this type of software • And more.

16- 2.

While HubSpot makes good use of various forms of earned, owned, and social media, the case does not list everything HubSpot does nor does HubSpot use all forms. Exhibit 16-5 as well as the sections on “Owned Media,” “Earned Media from Public Relations and the Press,” “Earned Media from Customer Advocacy,” and “Social Media” will provide plenty of options for your students to consider. This exercise can be used to encourage their creative side.

16- 3.

Answers to this question could go in many different directions – and there is no clear “right” answer. It is more important to encourage students’ thinking on this topic. (a)

(b)

A neighborhood sandwich shop might use earned media and could even develop a referral program (earned), especially if it just opened and needed to increase awareness.

A Facebook page or Twitter feed (owned social media) could be used to remind customers to come back – and could be used for sales promotion activities (for example, offering sandwich discounts on slow days). Paid media might include advertising in local newspapers.

It is difficult to think about how earned media operates for a personal care product like toothpaste. One option would be to encourage dentists to talk to patients about the

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(c)

(d)

product – perhaps by offering free samples through dentists. Owned media could be generated through an infographic that showed “10 Ways to Whiter Teeth” – this might also be passed along (earned media). Television advertising could be a form of paid media.

A hairdresser is a natural for earned media – a new hairdresser might ask customers to mention their hairdresser to friends and could encourage this by giving current customers a coupon offering discounts to new customers.

An accounting software program might advertise (paid media) in a specialty trade magazine read by accounting professionals. This type of product may not be a natural for earned media – but it might be possible to ask customers for their recommendations on LinkedIn. The company’s website (owned media) would be a natural place to learn more about the product.

16- 4.

These examples show that some types of products are naturally more likely to be “talked about” – and that even user generated content often depends on situational factors. For example, because men’s underwear is not usually observed by other men, it is not naturally brought up in conversation, nor does it seem like something someone talks about on social media. The same might be said for lumber used in home construction. On the other hand, women’s fashion jeans can be observed by other women, naturally leading to some conversation. Enthusiasm about the product might also encourage a woman to share her love of the product on social media. This might be encouraged through a contest or hash-tag campaign. A brand of salsa might be talked about while it is being eaten, but it is hard to imagine someone so excited as to post on Facebook or Instagram about their salsa.

16- 5.

Once again, this exercise challenges students’ creative thinking – many enjoy this challenge.

Encourage students to think about how a customer seeks information about each type of product: (a) Include the answer for shampoo here. (b) A customer could search for information about jeans by going from store to store. Passalong might occur through simple observation of friends or by reading online reviews.

Experience might be earned from previous ownership of the brand or by trying on the jeans at a store. (c) A real estate agent might be found through a web search for “real estate agent, your town name” or simply by observing real estate agents’ names on signs in front of houses being sold in your neighborhood. Pass-along can be generated by asking friends for their recommendations for a realtor. A branded experience might occur if a customer receives a newsletter with a real estate agent’s name and photo on each issue. (d) B2B buyers often turn to search engines to gather information. A blog, website, or white paper might all appear high in search results and pique the interest of an organizational buyer. Pass-along might occur if the buyer asked another purchasing manager for recommendations for a chemical supplier. Pass along occurs less in B2B for this type of product. (e) Customers searching for a local shoe store for the first time, might start a search by looking for particular shoe brands. If these are prominently displayed on a website, it might appear high on search results. Search advertising might also help here. Pass-along would be most likely to occur if a friend asks another for the name of a good shoe store.

A branded service could be fostered by giving away shoe horns with the store’s name on it.

16- 6.

Exhibit 16-4 provides a starting point for discussing this question. The specific context will help students think about it in a more concrete manner.

16- 7.

This exercise requires students to think a bit about cultural differences – and maybe to begin to connect the dots from other parts of the book (see chapters 5 and 6 on consumer behavior and organizational buying). It also gets them to think about whether market segmentation by country matters, as well as how and when it might be relevant.

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16- 8.

Most of our students are on Facebook quite frequently. But this exercise forces them to think about this social media tool in a different way. As many firms are still trying to figure out how to use Facebook in their promotion blend, this exercise forces students to critically evaluate just what a firm seems to be trying to do with their Facebook page. In general, a business Facebook page is not a great way to generate awareness – because it speaks primarily to customers that have already “liked” the page. Therefore, most seek to engage customers and this allows students to see specifically how some firms are doing that.

16- 9.

It is a bit of a danger writing a chapter – or exercises – about social media. These media are continuing to evolve and uses may have changed by the time you read this. Because Pinterest focuses on images, it might work best with products that have images (food or clothing or retailers of these products). Users often create pinboards around a particular “project” (a wedding, graduation party, bathroom remodel) – so products that support these activities might also naturally develop a Pinterest presence.

16-10.

This question is designed to help students think about how various forms of earned, owned, and social media might work in B2B. Students might be encouraged to look back at chapter 6 to remind themselves how organizational buying typically works. This chapter identifies a number of different owned media (company web pages, case studies, white papers) that target the business buyer – in this case likely a farmer. For the why part of the question, students should describe how they see this buyer’s decision process operating – and show how the earned, owned, or social media play into that process.

16-11.

This exercise is designed to help students see a wider set of these publicity tools – and to remind them that promotional objectives should always be at the core of any such tool.

16-12.

As with most major restaurant chains, Olive Garden has an active Facebook page. These pages are often “liked” by their most loyal customers. As of this writing, almost 6.5 million people have liked Olive Garden’s main page. Olive Garden posts a couple of times per day, usually with a big photo of one of its menu items and some commentary designed to encourage Facebook users to interact with the post. As an example, a recent post “How do you like your Alfredo?” had 7658 “likes” and generated more than 3500 comments. Olive Garden responded to almost every single post!

16-13.

This answer should follow the ideas outlined in the section titled “Strategy Planning for Social Media,” which reminds students of Exhibit 2-9: 1) understand context, customers, company, and competitors, before 2) segmenting and targeting and 3) differentiation and positioning before making marketing strategy decisions. From there, students can be asked to set specific promotion objectives and to choose the social media platform that can best achieve those objectives (see Exhibit 16-8) and describe the type of content that might be used to achieve the objectives. The four companies listed for application were designed to provide variety which may allow for comparisons. The students should be familiar with the first three contexts (LEGO is chapter opening case in Chapter 4, GEICO in Chapter 13, and a local Italian restaurant is something most students have experienced). An instructor may need to give some input to help them understand the last, B2B, context.

CHAPTER 16 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a) Identify key elements of earned and owned media that Hillside plans to use.

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b) Suggest two additional ways that Hillside Veterinary Clinic could promote earned media and two ways it could add owned media. c) How could Hillside use two additional aspects of social media?

This series of questions asks students to move from recognizing earned and owned media (a lower level Bloom’s objective of understanding and remembering) to a higher level of evaluating and creating. They might come at this from many different directions. What is important is pressing students about their objectives for any promotion tool and for an explanation about why what they are choosing helps achieve that objective.

CHAPTER 16 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 3. COLORADO United Soccer Academy Many of our students were involved in youth athletics, so this case is something they can relate to. Social media is also a natural tool for this target market. Besides the questions already included with the case, students could be asked to develop a social media plan to support COLORADO’s growth plans. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 14: Schrock and Oh Design This case offers students an opportunity to think about owned, earned and social media in the context of an interesting service business. A key “hint” in this case is Kevin’s comment about how much time they spend educating customers about design projects – showing them photos and answering questions.

Schrock and Oh might want to use their blog and website to educate customers and to position themselves as experts in contemporary design. Architecture is naturally a visual business – so a website with lots of photos of their work might do both. A question and answer page might also be helpful. For example, many customers might be interested in knowing how much a custom project costs (as compared to a prefabricated home project). They could continue to blog – but not so randomly. They should make sure that blog posts have specific objectives. The company may also want to post some white papers or case studies, to give users a better idea about how Schrock and Oh solves its customers’ problems. An instructor might start a discussion by asking – what are Schrock and Oh’s promotion objectives? We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 18. West Thomasville Volunteer Fire Department (WTVFD) The protagonist in this case is trying to get more young people to volunteer for WTVFD. Given the target market and the limited funding available for media buys, owned, earned, and social media are natural options. Ask students to develop a promotional campaign that draws on the publicity tools in this chapter.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Chapter-by-chapter aids: Chapter 16

Case 19. PlanMyWedding.com An online site like this is a natural for adding owned, earned, and social media to its promotion blend.

Students can express creativity in how to add this. Push students to have clear objectives for whatever suggestions they make. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 31. Brian’s Sustainable Homes Buyers of more sustainably built homes may need to be educated about why such a home costs more in the short-run but pays off in the long-run. An educational website might be one path that students could explore. How would customers find that page? Advertising? Search? We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 34. Working Girl Workout The Working Girls Workout is a case based on a real scenario. One of the author’s students has started an Instagram based business. The case allows an instructor to explore the role of Instagram and other social media in the marketing mix. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 36. BE Bold Electric Bikes This case deals with a distribution question that can create challenges for Promotion. The Promotion blend for BE Bold will depend on whether it goes direct or through a channel intermediary. An interesting discussion might be started by placing the class into small groups. Have on third of the groups develop a promotion blend if BE Bold sells direct, another third if it goes through Amazon, and the last groups can look at if they sell through local bike shops. Each of these channels will contribute differently to promotion.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Chapter-by-chapter aids: Chapter 16

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 16: SALES ANALYTICS In this problem, an online retailer is struggling with converting interest to sales. The manager is dealing with a common issue in ecommerce, abandoned carts. Whether those carts are abandoned due to customers changing their mind, finding better deals elsewhere, getting distracted or other reasons, the net result is lost sales potential. The manager implemented a reminder email program which helped but is now wondering if additional sales promotion might improve the number of conversions. There are many different ways to offer discounts and this exercise will explore and compare several of those.

The initial spreadsheet for the problem is given below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet

Number of carts per month Average cart value Total cart value Abandon rate Completed orders Revenue from completions Average cost per order Reminder discount value Discount redemption rate Net discount per order Net profit per order Total net profit

Email only

Discount offer

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00*

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00* $0.00* 100%* $0.00 $23.00 $8,050.00

$23.00 $8,050.00

Answers to Marketing Analytics: Data to Knowledge Problem 16: a.

The first question takes a fairly standard approach to the problem – offering a discount to incent customers to complete the transaction. By providing the 10% discount the manager expects to see the abandon rate decrease to 55%. The net result is for profit to rise to $9,000.00 (Answer D). The spreadsheet for this analysis is given below:

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Chapter-by-chapter aids: Chapter 16

SpreadSheet

Number of carts per month Average cart value Total cart value Abandon rate Completed orders Revenue from completions Average cost per order Reminder discount value Discount redemption rate Net discount per order Net profit per order Total net profit b.

Email only

Discount offer

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00*

1,000* $30.00* $30,000.00 55%* 450 $10,500.00 $7.00* $3.00* 100%* $3.00 $20.00 $9,000.00

$23.00 $8,050.00

This question asks the student to model a more aggressive discount and then see what improvement to abandon rate would be required to offset the discount offered. A 20% discount ($6) would have to achieve an abandon rate of 52% (Answer B) or better in order to achieve the same net profit as a no discount reminder. The spreadsheet for this analysis is given below: SpreadSheet

Number of carts per month Average cart value Total cart value Abandon rate Completed orders Revenue from completions Average cost per order Reminder discount value Discount redemption rate Net discount per order Net profit per order Total net profit c.

Email only

Discount offer

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00*

1,000* $30.00* $30,000.00 52%* 480 $14,400.00 $7.00* $6.00* 100%* $6.00 $17.00 $8,160.00

$23.00 $8,050.00

In this question, the manager is offering the customer free shipping. While this may feel like an entirely different approach to the customer, from an analytics perspective this is just another form of discount. In this case the discount of $5.00 results in a total net profit of $9,000.00 which is equal to the net profit received from offering a 10% off discount (Answer C).

Note that astute students may note that free shipping doesn’t really cost the retailer the face value of shipping. In most cases a markup is applied to shipping charges so the actual cost is lower. To simplify the problem, that nuance is not factored into the analysis but it might be worth discussing in the Marketing Analytics Discussion below as a reason to favor free shipping over a straight discount.

The spreadsheet for this analysis is given below:

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Chapter-by-chapter aids: Chapter 16

SpreadSheet

Number of carts per month Average cart value Total cart value Abandon rate Completed orders Revenue from completions Average cost per order Reminder discount value Discount redemption rate Net discount per order Net profit per order Total net profit

Email only

Discount offer

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00*

1,000* $30.00* $30,000.00 50%* 500 $15,000.00 $7.00* $5.00* 100%* $5.00 $18.00 $9,000.00

$23.00 $8,050.00

d. Rather than offer a discount off of the current transaction, the manager looks for ways to encourage action now and generate new business in the future. By offering a discount on future orders the retailer wins no matter what behavior the customer takes in the future. If the customer redeems the coupon in the future then the retailer gets the benefit of an additional sale. If they customer chooses not to place another order then the retailer has not lost any profit and still encouraged conversion of the current order.

The fact that not all coupons will be redeemed can provide opportunities to offer better promotions knowing that the actual impact will be less than the face value of the promotion. In this case the retailer would achieve a net profit of $9,350.00 (Answer E). The spreadsheet for the analysis is given below:

SpreadSheet

Number of carts per month Average cart value Total cart value Abandon rate Completed orders Revenue from completions Average cost per order Reminder discount value Discount redemption rate Net discount per order Net profit per order Total net profit

Email only

Discount offer

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00*

1,000* $30.00* $30,000.00 45%* 550 $16,500.00 $7.00* $10.00* 60%* $6.00 $17.00 $9,350.00

$23.00 $8,050.00

e. Another approach retailers use is to try to increase the average order size. In this case, despite the higher discount being offered, net profit actually increases over 50% from the straight email reminder – going from $8,050.00 to $12,600.00 (Answer C). Note that the average cost per order increases from $7 to $14 with the increase in cart value. The spreadsheet for the analysis is given below:

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Chapter-by-chapter aids: Chapter 16

SpreadSheet

Number of carts per month Average cart value Total cart value Abandon rate Completed orders Revenue from completions Average cost per order Reminder discount value Discount redemption rate Net discount per order Net profit per order Total net profit

Email only

Discount offer

1,000* $30.00* $30,000.00 65%* 350 $10,500.00 $7.00*

1,000* $60.00* $60,000.00 65%* 350 $21,000.00 $14.00* $10.00* 100%* $10.00 $36.00 $12,600.00

$23.00 $8,050.00

MARKETING ANALYTICS DISCUSSION Retailers have many approaches at their disposal to attempt to influence customer behavior. As we’ve seen with this exercise, although the approach may differ widely from a customer perspective, the analysis is very similar regardless of approach. It may be worth noting how different approaches can influence different perceptions customers might have. For instance, if customers could easily buy the same product locally, having to pay a shipping charge could be a disincentive regardless of what the net cost is. By offering free shipping the online retailer puts themselves on equal footing in a customer’s mind.

This question also introduced methods for not only encouraging immediate customer action but also trying to influence future action. Offering non-cumulative quantity discounts encourages more items to be added to the order. Offering a discount on future purchases encourages repeat visits and might build brand loyalty.

However, a potential downside of any of these approaches is a shift in customer segments. By creating a culture of discounts, the retailer may attract customers that are more price sensitive. Price sensitive customers tend to have lower loyalty and are only willing to make a repeat purchase if they are again presented with a discount. In the long run it may be better to have fewer customers that are more loyal and place higher value on the seller.

CHAPTER 16 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Publicity and Social Media Question Type: Click and drag Learning Objectives: 16.1, 16.2, 16.3, Topic: Publicity and social media AACSB: Analytic, reflective thinking Bloom’s: Apply, remember

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Question 2: Media and How Consumers Obtain Information Question Type: Click and drag Learning Objectives: 16.3, Topic: Customers obtain information from search, pass-along, and experience AACSB: Analytic, reflective thinking Bloom’s: Apply, remember Question 3: West Tarrytown Volunteer Fire Department Question Type: Case analysis Learning Objectives: 16.1, 16.3, 16.4, 16.5, 16.8 Topic: Earned, owned, and social media AACSB: Analytic, reflective thinking Bloom’s: Apply, remember Question 4: Social Media Metrics (iSeeIt) Question Type: Video Case Learning Objectives: 16.7 Topic: Social media AACSB: Analytic, reflective thinking Bloom’s: Remember, apply Question 5: Sales Analytics Question Type: Marketing Analytics Learning Objectives: 16.9 Topic: Software can manage, measure, and automate online media AACSB: Analytic, technology Bloom’s: Apply, analyze Question 6: Major Social Media Platforms Question Type: Drag and Drop Learning Objectives: 16.8 Topic: Social Media AACSB: Knowledge, Application Bloom’s: Understand Question 7: Media Benefits and Challenges Question Type: Click and drag Learning Objectives: 16.2 Topic: Promotional strategy AACSB: Knowledge, application Bloom’s: Understand Question 8: Paid, Earned, and Owned Media Question Type: Click and drag Learning Objectives: 16.2 Topic: Promotional strategy AACSB: Knowledge, application Bloom’s: Understand Question 9: Social Media vs. Traditional Media Question Type: iSeeIt! Video Learning Objectives: 16.7, 16.8 Topic: Social Media AACSB: Analytics Bloom’s: Understand IV-16-11 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Chapter-by-chapter aids: Chapter 16

Application-Based Activities Title: Digital Marketing: Smithville Recreation Center Type: Role-Playing Bloom’s: Apply Description: Play the role of a summer intern for the local rec center in your college town. Advise on digital marketing efforts.

Title: Public Relations: Product Backlash at Wilson's Type: Role-Playing Bloom’s: Apply Description: Play the role of an Earned Media and Media Relations Specialist. Determine the appropriate public relations response for your client, Wilson’s.

Title: Social Media Marketing: Chew-Bocce Type: Role-Playing Bloom’s: Apply Description: Play the role of a newly hired social media manager. Monitor and run social networks and drive app usage for Chew-Bocce, a popular food and entertainment venue.

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CHAPTER 17: PRICING OBJECTIVES AND POLICIES CHAPTER 17 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You are an executive at startup ride-sharing service, JustRide (an upstart Uber competitor). JustRide automatically calculates Uber’s price for any ride—and uses that information to JustRide’s price for the same destination. JustRide has gained market share by offering “the lowestpriced ride in town” (a claim made in all of its advertising)—setting prices 10 percent lower than Uber.

While JustRide is gaining market share, it is not yet profitable. In a bid to become profitable, management recently changed its pricing policies. The app identifies which of its customers do not check competitor prices (the app knows which other apps were recently used on a smartphone); those customers are then quoted prices 10 percent higher than Uber. Customers who have recently opened Uber (or another ridesharing app) receive the lower price quote. Recently, JustRide blew up on social media—for the wrong reason. Customers noticed the different price quotes. Some riders would get a quote from JustRide while a companion got one from Uber; they discovered JustRide was priced higher for the same destination.

Not exactly keeping their advertising promise. Now #JustLies and #JustHigherPrices are trending on social media—often accompanied by photos showing two different prices. Is JustRide’s pricing policy unethical? Explain your logic. How is this ethical question similar or different from Uber’s “surge pricing”?

How should JustRide respond to this immediately? And in the longer term? In your answer, consider possible changes to advertising and pricing and explain your rationale.

As artificial intelligence (AI) and dynamic pricing become more common, these types of dilemmas are more likely to emerge. AI and dynamic pricing raise interesting ethical questions. This app used AI to assure it could always have prices lower than a major competitor. Then, when it thought customers weren’t looking it used that same technology to charge higher prices. While from a legal standpoint, JustRide might be able to argue that its claim was puffery (and therefore not illegal – see Chapter 15), it raises ethical questions. The brand was built on its “lowest-priced ride in town” slogan. It was clearly not sticking to that brand promise.

The question also asks about Uber’s surge pricing—which is raised in the text immediately before the Ethical Dilemma. Surge pricing is based on supply and demand. In this second case, pricing increases when customers are perceived to have lower price sensitivity. While price sensitivity is introduced in Chapter 18, students should have an idea of the general concept. It could be introduced into this discussion.

The questions about what to do next allow students to recognize the challenges that social media can bring to marketing communications. These uncontrolled “earned media” messages are not always positive. And they can be brought about by a company’s unethical behavior. This also allows instructors to raise a point about how social media and public shaming of “bad behavior” might contribute to marketing for a better world (#M4BW).

CHAPTER 17 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER The Marketing Analytics in Action (MAiA) exercises were designed to expose students to basic (and sometimes more advanced) analytics used by marketing managers today. Ultimately, I like to tell my students that for most marketing managers, the core job is identifying what customers value and how much they value it. Then, if the marketing manager can determine if they can deliver the “what” customers value at a price customers are willing to pay. One way to look at this idea in a particular product market is by determining the relative price premium that customers pay for each brand. This is a simple calculation that can generate some powerful insights—as is shown in this MAiA. This particular exercise has the added element of being placed outside the United States while still using the Method brand discussed in the chapter opening case study.

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Marketing Analytics in Action 17: PRICE PREMIUM

1. Method has the highest price premium. Customers in the U.K. appear to place a high value on Method’s design and sustainability claims.

2. Dealer brands typically exhibit lower price premiums. They are often associated with lower quality. Dealer brands often have little promotional support and rely on lower prices to generate sales.

3. This question suggests that customers in Italy and Spain may not place as high a value on sustainability and design as compared to the U.K. Customers in Spain and Italy also have a general reputation for being more price sensitive than consumers in some other countries.

4. This question could be answered in many ways—but one way to address it is to consider the five elements of marketing strategy: • Target market – by choosing a more narrowly focused target market that might place an even higher value on Method’s points of differentiation, the company may be able to generate an even greater price premium. The tradeoff may be lower unit sales. It is already the brand with the lowest share among those shown here.

• Product – perhaps new packaging, new services, or other product features could generate more value for customers, allowing Method to command higher prices.

• Place – if Method chose to sell only through specialty stores it might command a higher price.

• Promotion – more advertising might inform more customers about the brand’s benefits and generate more sales, even at a higher price point.

CHAPTER 17 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following examples of how marketing can contribute to a better world: •

#M4BW Boxes o Benefit corporations seek a better world. A B Corp certification indicates that the corporation meets a high standard for social and environmental performance; Ben & Jerry’s, Patagonia, and Method are examples of B Corps. o Sales-oriented objectives a win for schools. Google’s low-priced Chromebook laptop provides a low-priced option to U.S. students in K-12. o Financing opens opportunities in developing markets. Customer’s in developing countries can pay for solar electricity in installments, reducing their reliance on kerosene.

CHAPTER 17 – COMMENTS ON QUESTIONS AND PROBLEMS 17-1.

The case for sustainable cleaning products company Method offers describes different pricing elements. Examples of key terms and concepts from this chapter include but are not limited to: • Allowances and stocking allowances – “National brands gave retailers price deals and advertising allowances in exchange for shelf space.”

• Coupons and promotion – “Consumer promotion debated minor differences in cleaning efficacy, with coupons and sale prices used to woo shoppers…”

• Value pricing – “Design and green proved to be powerful differentiators and allowed Method to charge a price about 20 percent higher than leading brands.”

• Pricing objectives, sales-oriented objectives – “Method, its financial backers were initially concerned with market share and sales volume rather than profitability.”

• And more.

17-2

This question references the section “Price Level Policies – Over the Product Life Cycle” and

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Chapter-by-chapter aids: Chapter 17

asks students to think about skimming versus penetration pricing strategies as well as introductory price dealing. Ideas from chapter 9, specifically Exhibit 9-4 might provide a useful point of discussion in the specific context of Method.

17- 3.

See Exhibit 17-1 and section “Price Has Many Strategy Dimensions.” Using an example, this question can be used to review the whole chapter.

17- 4

A profit-oriented objective would suggest a careful blending of the four Ps and use of a demand curve (to set the price) that reflects expected customer reaction to the total mix under consideration. Of course, the marketing mix ought to be compatible with the target market selected – that is, the whole marketing strategy should be compatible. The selection among alternate strategies would be based on their relative profitability – applying the profit-oriented objective.

A sales-oriented objective, on the other hand, would tend to orient all of the strategy planning toward sales growth. This might lead to the selection of "mass markets" and the development of appropriate marketing mixes. It might also lead the marketing people to recommend a proliferation of product lines, extravagant promotion, lower prices, and so on – in other words, anything that would expand sales.

Status quo-oriented objectives might lead to relatively static or conservative strategies – the appropriate ones depending on the nature of competition. At the very least, it is likely that price would be deemphasized – because price decisions are easily copied. Further, aggressive promotion or any major changes in the marketing mix might be avoided to preserve the status quo.

17- 5.

A one-price policy is most appropriate because there are thousands of different items and there is usually very little personal sales contact. Personal contact by a responsible party is necessary for a flexible price policy – because somebody in authority must adjust prices. In a hardware store, the cost of having enough people to negotiate the price of each item would be too high.

17- 6.

A skimming policy would probably be associated with a profit-maximizing objective. A penetration pricing policy might be also. The latter, alternately, might be associated with an expansion of market share based on some other objective that is not concerned with shortterm profitability. a.

Skimming, as there are many people in each community who wish to be “first” with such items, and price competition will follow quickly.

b.

One could argue in either direction here. In favor of penetration, there is a large potential market and probably no “elite” market (at least the short-term use of the drug is less expensive than the long-term habit of smoking). Further, competition and lower prices are likely to follow if the patents do not prohibit competition. Either way, it is likely to be important to establish the patch as “the” brand so that it is what consumers ask for and what doctors prescribe. Further, some consumers will be more inclined to try the product if they see it as a “value.” On the other hand, it’s useful to point out here that customers are not likely to purchase the product frequently. Once they quit they should only need it for a limited time. Thus, brand loyalty is not likely, per se, to be an important factor in later purchase behavior. This might be one good argument in favor of a skimming approach, especially if competitors are not expected soon.

c.

Probably skimming, as some real “fans” will value having their own DVD of the movie much more so than the general public. Over time, the price can be lowered and the market expanded. Of course, the risk of this approach is that interest in the movie may fade—and the sizeable market that might have developed at a lower price will have IV-17-3

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moved on to some other currently popular movie. Here, the potential “competition” is not necessarily with another very similar product, but rather with other, perhaps totally different, movies that capture the public’s imagination. For some products, the window of opportunity may not be very long, especially if popularity depends on the current fad. d.

Probably skimming. However, this depends on how unique the toy is, and how quickly competitors can introduce imitations. Successful new toys are usually copied very quickly. Children want the “popular brand;” thus, the demand for a hit toy tends to be quite inelastic. Once competitors start to make inroads with low prices, the price on the original hit can usually be adjusted down very quickly.

17- 7.

Usually, the term seasonal discount is applied to discounts given to encourage purchases when consumption is irregular – such as with toys and jewelry – not production. When production is irregular – as in agriculture – prices may be lower close to the production period due not to discounts but just the competitive forces of the marketplace.

17- 8.

Assume 360 days per year for simplicity: 360 a.  1% = 36% 10 b. c.

360 5

 1% = 72%

0 (there is no discount for paying early, so it is smart to wait and pay only when the bill is due).

17- 9.

See section “Most Firms Set Specific Pricing Policies—To Reach Objectives.” As the Alcoa example illustrates, intermediaries may not adhere to a manufacturer's list price. In that case, Alcoa gave its wholesalers a price reduction – but most of them did not pass it along to customers! This same problem is common with consumer products – especially if it is a "high ticket" item. The retailer may conclude that it is more profitable to sell a small quantity at the higher price and keep the additional markup. A rebate, on the other hand, is usually paid directly to the customer after the purchase has been made. That way, the producer can be certain that the price reduction gets passed along to the customer. There is a point here that is not discussed in the text, but which you might want to raise in class: when intermediaries are offered a price discount, they will almost always take it. They are in business to make a profit – and they are inclined to take advantage of special opportunities. Similarly, consumers often are motivated by a rebate to buy a product – since the rebate effectively lowers the price they pay.

Yet, experience is now accumulating in this area and it appears that many consumers do not subsequently send in the rebate request! This has surprised some firms that offered rebates – especially when sales increased but relatively few of the purchasers asked for the "refund.”

When that happens, it lowers the cost per buyer to the producer of the rebate program.

17-10.

The purpose here is to encourage students to re-think the idea that lowering price is the only way to increase customer value! It should be no surprise that many students think that way–too many executives fall into the same trap. Rather than take the time to come up with a creative marketing mix that does a better job of meeting the needs of some target market, they just imitate competitors and make the head-to-head competition (and thus price pressure) in the market worse. These are the kind of people who then look at companies like Starbucks and say, “How can they get $3.00 for a cup of coffee?” They don’t seem to realize that what Starbucks sells isn’t the same as what others are selling. Not everyone will pay the higher price, but people who want something “special” will. Students will give a variety of different examples here and it is important to emphasize that they don’t need to agree with each other’s judgment. In fact, that is an important value of class discussion: What one person values may

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or may not be what another person values. Or, looking at it another way, what one person sees as a benefit may not be a benefit to someone else.

17-11.

This is a different question from question 17-14, but it has the same purpose and can be used to make the same points or reinforce them again in a different way. This is the flipside of the coin: The customer sees price as basically the same but gives one firm its business because it views that firm as offering higher customer value.

17-12.

If all nations dropped their anti-dumping laws, it would probably have the effect of lowering the prices that consumers pay. Producers in every country wouldn't be interested in "dumping" every product. Rather, countries would tend to focus on producing products for which they had a special advantage, and this might lead to an efficient allocation of resources. On the other hand, anti-dumping laws are primarily intended to protect jobs (and consumer income).

17-13

Price comparison sites increase customers’ price sensitivity. This exercise is designed to expose students to one of these tools.

17-14.

Mandatory fixed prices would place greater importance on the development of the manufacturer's marketing mix – as less adjustment could be made to this mix by wholesalers and retailers. It would have to be right – or else sales would suffer. This would greatly reduce the freedom of the retailer, however, forcing emphasis on service, location, and promotion. The chances are that consumers would receive more service – either locational convenience or delivery service. It seems likely that many small retailers would spring up closer to consumers, as low-margin selling would be impossible unless producers only allowed a small markup – planning to sell through low-margin sellers only. As a result, consumers would have little incentive to travel very far to a store. Retailing probably would tend toward smaller scale operations.

It is possible, however, that two different methods of distribution would evolve. Some manufacturers would work with small retailers to provide convenience at higher prices and other manufacturers would work with low-margin sellers to provide lower prices and less convenience. The point here, however, is that more clear-cut decisions with respect to target markets and strategy planning would have to be made – all along the channels – and marked changes might result in our macro-marketing system.

17-15.

No discrimination would be involved if the company sold to different customers at different prices – but when the cab associations resold to the public, they were competing directly with the regular retail service stations. In one such case, the Shell Oil Company of New York was charged with illegal price discrimination for permitting such a situation to develop.

CHAPTER 17 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. A veterinary clinic located in another town gives its customers a 10 percent discount on their next vet bill if they refer a new pet owner to the clinic. Do you think that this would be a good idea for Hillside? Does it fit with Hillside’s strategy? b. The same clinic offered customers a sort of cumulative discount – an end-of-year refund if their total spending exceeded a certain level. That clinic sees it as a way of being nice to people whose pets have had numerous problems. Do you think that this is a good idea for Hillside? Why or why not?

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Arguments might be made on both sides of question a. On the one hand, referrals fit with HVC’s hometown-oriented strategy (as reflected in the many community events it supports and participates in).

With this type of positioning, the clinic would hope to get many referrals. While a discount might increase the number of referrals, there is a flipside. Customers (in small towns like HVC serves) may view referring neighbors to a good vet simply a friendly gesture. They may feel uncomfortable receiving a reward for the referral and this could reduce the value of the discount.

Question b refers to a cumulative quantity discount. These are more common in business markets than in consumer markets. Typically, these types of programs are used to encourage loyalty to a particular supplier – especially when competitors are seen as very similar. Once a customer builds a relationship with a particular veterinarian and clinic, loyalty is likely to be high even without such incentives. In addition, such a program is unlikely to encourage additional spending – since veterinary expenses are not typically optional. Thus, a cumulative discount may not have the desired effect. Instead, a customer might appreciate an end-of-year refund. However, such a refund may also serve as a reminder about the high expenses incurred in the previous year. If the primary goal is to “reward” good customers, there may be other ways to give them a “gift” – perhaps a nice bone or toy for their dog or cat.

CHAPTER 17 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 13: Pierce-Paul, Inc. (PPI) This case can be used here to illustrate the problems faced by a firm operating in a very competitive, price sensitive "commodity" market – and the use of quantity discounts and other pricing approaches. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 17: WaterWiser, Inc. See the case teaching note in section 5 of this manual, which highlight some of the pricing issues relevant to this case. The case is rich enough for a deep dive on issues of price and value. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 17: CASH DISCOUNTS In this problem, a wholesaler is thinking about changing the cash discount terms he offers his retailercustomers. The discount terms – originally set when interest rates were much higher – are now "too good" a deal for the retailers. The manager wants to evaluate the effect on his total revenue of different discount arrangements. The student analyzes changes in the cash discount period and discount rate to see how the terms might affect the total value of discounts that the wholesaler offers his customers.

Technical note: the spreadsheet uses the term "approximate" effective interest rate. Strictly speaking, a buyer would not be "borrowing" the full invoice amount, but rather the invoice amount minus the cash discount amount. Some students may raise this point – especially if they have seen it in a finance course. The text discussion does not get into this nuance – because it simply complicates the issue and does not alter the basic point. This makes it easier to understand. While it would be easy enough to program the more detailed analysis for the computer, the spreadsheet uses the analysis approach as it is

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presented in the text – for consistency and so students can "check" answers for themselves. If a student raises this distinction, you can go into the detail or not as you wish. But, either way, you can keep from getting bogged down on that issue by noting that it does not make a major difference here – and that is why the spreadsheet labels the effective interest rate as "approximate."

The initial spreadsheet for the problem is given below: NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet Situation Cash Discount Percent Days to Pay to Get Cash Discount Days to Pay Net Invoice Value Days per Year Approximate Effective Interest Rate

3.00%* 10* 30* 365* 54.75%

Average Monthly Invoice Face Amount Number of Customers Percent Who Take Cash Discount Total Face Value of Invoices (Gross Sales) Total of Monthly Cash Discounts Net Sales (Gross Sales Minus Cash Discounts) Ratio of Total Discounts to Total Face Value

$900.00* 120* 50.00% * $108,000.00 $1,620.00 $106,380.00 0.0150

Answers to Marketing Analytics: Data to Knowledge, 16: a.

The total monthly cash discount is now $2,916.00 (Answer C) – given that 90 percent of the customers take the discount. The spreadsheet for this analysis is given below: SpreadSheet Situation

Cash Discount Percent Days to Pay to Get Cash Discount Days to Pay Net Invoice Value Days per Year Approximate Effective Interest Rate

3.00%* 10* 30* 365* 54.75%

Average Monthly Invoice Face Amount Number of Customers Percent Who Take Cash Discount Total Face Value of Invoices (Gross Sales) Total of Monthly Cash Discounts Net Sales (Gross Sales Minus Cash Discounts) Ratio of Total Discounts to Total Face Value b.

$900.00* 120* 90.00% * $108,000.00 $2,916.00 $105,084.00 0.0270

If Tulkin changes the terms, the "effective interest" would be 24.33 percent (Answer B).

The spreadsheet for the analysis is given below.

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SpreadSheet Situation Cash Discount Percent Days to Pay to Get Cash Discount Days to Pay Net Invoice Value Days per Year Approximate Effective Interest Rate

1.00%* 5* 20* 365* 24.33%

Average Monthly Invoice Face Amount Number of Customers Percent Who Take Cash Discount Total Face Value of Invoices (Gross Sales) Total of Monthly Cash Discounts Net Sales (Gross Sales Minus Cash Discounts) Ratio of Total Discounts to Total Face Value

$900.00* 120* 90.00% * $108,000.00 $972.00 $107,028.00 0.0090

c.

With these terms, buyers would get a smaller discount for paying early – and if they didn't pay early they would need to pay the full amount sooner. Thus, it appears that fewer buyers would be likely to take the cash discount (Answer B).

d.

If Tulkin changes the terms to 2/10, net 30, the "effective interest" would be 36.5 percent. The change would reduce Tulkin's total monthly cash discount amount from $2,916 to $1,188 – but it would also reduce his gross sales and his net sales. Specifically, his gross sales would drop to $99,000 (Answer B) and net sales would drop to $97,812. The spreadsheet showing the current situation (in a. above) provides the point of comparison for this analysis. The spreadsheet for the 2/10, net 30 situation showing a loss of 10 customers and 60 percent of the remainder taking the discount is as follows:

SpreadSheet Situation Cash Discount Percent Days to Pay to Get Cash Discount Days to Pay Net Invoice Value Days per Year Approximate Effective Interest Rate

2.00%* 10* 30* 365* 36.50%

Average Monthly Invoice Face Amount Number of Customers Percent Who Take Cash Discount Total Face Value of Invoices (Gross Sales) Total of Monthly Cash Discounts Net Sales (Gross Sales Minus Cash Discounts) Ratio of Total Discounts to Total Face Value

$900.00* 110* 60.00% * $99,000.00 $1,188.00 $97,812.00 0.0120

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This table compares 2/10 with the current 3/10 situation.

e.

Comparison

Old: 3/10, net 30

New: 2/10, net 30

Approximate Effective Interest Rate

54.75%

36.50%

Total Invoice (Gross Sales)

$108,000

$99,000

Total Monthly Cash Discount

$2,916

$1,188

Net Sales Receipts

$105,084

$97,812

As shown above, total net sales after the change would be $97,812.00 (Answer A).

MARKETING ANALYTICS DISCUSSION While a precise answer to how this drop might affect profit would depend on his actual markup, in general it appears that the change would be negative.

CHAPTER 17 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Pricing and Legislation Question Type: Click and Drag Learning Objectives: 17.7 Topic: Legality of pricing policies AACSB: Reflective thinking Bloom’s: Remember Question 2: Pricing Objectives Question Type: Click and Drag Learning Objectives: 17.1, 17.2 Topic: Objectives should guide strategy planning for price AACSB: Reflective thinking Bloom’s: Apply, remember Question 3: Discount and Allowance Policies Question Type: Click and drag Learning Objectives: 17.5 Topic: Discount and allowance policies AACSB: Reflective thinking Bloom’s: Remember, apply, understand Question 4: Cash Discounts Question Type: Marketing Analytics Learning Objectives: 17.4 Topic: Cash discounts AACSB: Analytic, technology Bloom’s: Apply, analyze

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Question 5: Types of Pricing Objectives Question Type: Click and drag Learning Objectives: 17.2 Topic: Pricing Objectives AACSB: Knowledge, application Bloom’s: Understand, apply Question 6: Pricing Objectives and Policies at Method Question Type: Click and Drag with Multiple Choice Learning Objectives: 17.1, 17.2, 17.3, 17.5, 17.6 AACSB: Reflective thinking, analytical Bloom’s: Remember, Apply, Understand Application-Based Activities Title: Pricing Type: Mini Sim Bloom’s: Apply Description: Analyze how price impacts sales and choose the best pricing strategy to achieve your sales goals.

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CHAPTER 18: PRICE SETTING IN THE BUSINESS WORLD CHAPTER 18 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You are a pricing specialist for a large grocery store chain that has always charged the same prices in all of its stores. However, average operating costs are higher for its inner-city stores. In addition, having the store nearby is very important to low-income, inner-city consumers who have to rely on public transportation. It’s hard for them to shop around, and thus they are less price sensitive. Research indicates that these stores can charge prices that are 5 percent higher on average with little effect on sales volume. This would significantly increase profitability. Do you think the chain should charge higher prices at its inner-city stores? Why or why not? If prices were increased and antipoverty activists got TV coverage by picketing the chain, how would you respond to a TV reporter covering the story?

Research has long shown that the poor do pay more. Prices for food in the inner city are no exception.

Many supermarket chains across the country charge higher prices at their inner-city stores. Critics argue that this takes unfair advantage of and harms a vulnerable market segment. But, if the costs of serving inner-city consumers are higher, then the firms may be simply trying to cover their higher costs.

Ultimately, the retail chains have a responsibility to their customers and also to their shareholders. Many students will not think about the fact that if low prices are charged in stores with higher costs that customers in other areas will have to pay more than what their food should cost. Some students might argue that it is ok for those who are better off to pay more (as a matter of social equity). But, in the end, that line of thinking can hurt everyone. The reason is that retailers face competition in each local market.

If one retailer tries to make up for low profits in one market area by raising prices in another market area, it is at a competitive disadvantage in the market where it tries to charge high prices. Cost-conscious competitors may drive this retailer out of business. In the end, to compete, retail chains simply close the expensive inner-city stores. That is what happened in the 1970s! Only high-cost independent retail grocery stores remained and their prices were higher yet.

To what extent does it matter if the higher prices reflect the higher costs as compared to the lower price sensitivity? To keep a balanced perspective on the discussion, the instructor might ask, “What if the higher cost to serve was only 3%, but prices are increased 5%? Is this ethical?”

The scenario also outlines the possibility of cross-subsidizing within stores. For example, some students may argue that some staples – perhaps bread and milk – should not have higher prices. The lower profit margins on these products could be offset by higher margin on other products. Grocery stores typically make such adjustments as part of their pricing strategy. But, what are the ethical implications in this scenario?

The potential for negative publicity raises another dimension. The “TV Test” (explained earlier in the overview as one of three guidelines for ethical decision making) is explicit in this scenario. It certainly raises the stakes for decision makers and forces them to be sure they understand and are comfortable with the logic underlying the strategy. However, it also highlights the shortcoming of the “TV Test.” Some topics are not easy to explain in a 30-second “sound bite” on the news. Managers need to make decisions that they can defend and that will pass muster with scrutiny (by the public), but in tough situations the ethical or right decision is not always the popular one. Some people might argue that a firm should figure out a way to “subsidize” inner-city consumers with prices that do not cover the full costs of serving them, but as is discussed next that may mix up micro (managerial) marketing issues and macro marketing issues.

An individual firm in a market-directed economy has no responsibility for the macro problems of poverty, income distribution, and the sociology of the inner city. In our economic system, these problems have IV-18-1 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

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been assigned to government and to non-governmental charitable organizations. Still, some business organizations are increasingly addressing broader social issues in the communities they serve. These companies may feel beholden to the triple bottom line – people, the planet, and profit. These issues are discussed in more detail in the final chapter of the text.

CHAPTER 18 – COMMENTS ON USE OF MARKETING ANALYTICS IN ACTION QUESTIONS WITH THIS CHAPTER This exercise provides an opportunity to reinforce one of the primary learning objectives from this chapter – the importance of marginal analysis in pricing and how marginal analysis is determined. The Table below is the first step in the problem – filling out the empty cells in the exercise.

Marketing Analytics in Action 18: MARGINAL ANALYSIS

Price (P)

Quantity

Revenue (P*Q)

Total VC

Total FC

Total Cost

Profit (RevCost)

$4.00

0

$0

$0

$5,000

$5,000

($5,000)

$3.50

5,000

$17,500

$5,000

$5,000

$10,000

$7,500

$3.00

7,500

$22,500

$7,500

$5,000

$12,500

$10,000

$2.75

11,000

$30,250

$11,000

$5,000

$16,000

$14,250

$2.50

15,000

$37,500

$15,000

$5,000

$20,000

$17,500

$2.25

17,500

$39,375

$17,500

$5,000

$22,500

$16,875

$2.00

20,000

$40,000

$20,000

$5,000

$25,000

$15,000

$1.75

22,000

$38,500

$22,000

$5,000

$27,000

$11,500

1. $2.50 2. $2.25 - $2.50 looks like the optimal range.

3. Students may have reasons for going outside of the analysis conducted here—if so, they should be pressed to explain their rationale. For example, a student might suggest a skim the cream pricing strategy which would start higher than the optimal suggested here and go lower as Stan worked out the details of his strategy.

CHAPTER 18 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following examples of how marketing can contribute to a better world: •

#M4BW Boxes o Low margins, high turnover, better world. Vanguard’s low management fees are estimated to save investors more than $100 billion per year. o Drive down costs when outcomes matter. Becton, Dickinson and Company developed low-cost syringes that lock up after a single use to prevent the spread of infectious diseases in developing countries.

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Chapter-by-chapter aids: Chapter 18

CHAPTER 18 – COMMENTS ON QUESTIONS AND PROBLEMS 18-1.

Examples of key terms and concepts from this chapter include but are not limited to: • Pricing and the product life cycle – technically a concept from the previous chapter – is central to understanding the prices of televisions over time.

• Full line pricing – “Samsung offers a full line of TVs. For example, it has 55” TVs with suggested retail prices ranging from $1,599 to $4,999” • Costs, fixed costs – “Samsung’s overhead costs were 10 to 20% of sales.”

• Fixed costs – “Suppliers of LCD panels invested billions of dollars in new factories.”

• And more.

18-2.

This question fosters some deeper thinking by your students and tests how well they understand these key concepts. (a) If some customers become more price sensitive, Samsung might add some lower priced products to its product line – or offer rebates or sales to appeal to this segment. If customers are less price sensitive, they can add higher end products to appeal to this group. (b) Value-in-use pricing could be demonstrated, perhaps, by describing the money saved by not going out to the movies. (c) Reference prices are what a consumer expects to pay. By showing list prices in advertising, reference prices can be set at a higher level, making customers pleased when they come to a store and find lower prices the norm.

18- 3.

Many department stores have high costs due to the services offered. The high costs dictate higher prices. At the higher prices, turnover is much slower than in a discount house.

Therefore, department stores get into a vicious cycle – prices are high so turnover is low and therefore costs are high, causing prices to be set high, etc.

18- 4. $800.00 x.65 $520.00 x.80 $416.00 312.00 104.00 a. b.

18- 5.

Retail Price Wholesale Price Manufacturer's Selling Price Manufacturer's Factory Cost Gross Margin

$416.00, $520.00 $104.00 $416.00

 100 = 25% (on selling price)

The purpose here is for the student to see that a larger profit can be earned with a smaller markup – but more turnover – than might be earned with a higher markup but lower stock turnover. Students will give a variety of examples. But, the following answer provided by one student gives you an idea of what to expect in a careful answer: Assume that a traditional retailer charges $1.00 for a tube of toothpaste – which is a 35 percent markup (on selling price). In other words, the retailer pays $.65 per tube. If the retailer sells 1000 tubes of toothpaste a year, he earns $350.00 by selling the toothpaste.

If a mass-merchandiser purchased the same toothpaste at the same price and had the same average inventory, but was able to sell 1,500 tubes of toothpaste because he sold it at the

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lower price of $.90 a tube (a 27.7 percent markup on selling price), he would earn 1,500 x $.25, or $375.00. Expressed as a percentage: 25/350 = 7 percent more than the traditional retailer.

18- 6

Total Fixed Costs Total Variable Costs Total Costs Average Fixed Costs Average Variable Costs Average Costs

18- 7.

18- 8.

20,000 Units $200,000 $100,000 $300,000

10,000 Units $200,000 50,000 $250,000

$10.00 5.00 $15.00

$20.00 5.00 $25.00

Price really should not be determined without some assumption about demand. But, if cost-oriented approaches are used, then some estimates about the quantity to be produced, the target return expected, etc., must be made.

This question can be answered with an illustration like Exhibit 18-6.

BEP (in units) =

200,000 250 - 200

=

200,000 50

= 4,000 units

BEP (in dollars) = 4,000 units x $250/unit = $1,000,000 Expected Sales Fixed Costs Variable Costs (80% of $1,250,000) Total Costs Expected Profit

$1,250,000 $ 200,000 1,000,000 1,200,000 $ 50,000

If sales were forecast at $875,000, total variable costs would be $700,000 (.8 x $875,000).

Thus, although there would be an accounting loss of $25,000, the contribution to fixed costs of $175,000 is better than nothing; the firm should continue operations.

18- 9.

Theoretically, every customer has his own demand curve and it would be possible to treat each customer as a separate target market and attempt to maximize profits for each customer. As a practical matter, this would be complicated. To some extent, this extreme is exemplified in "farmers'" or "flea" markets or in industrial markets where each customer is negotiated with and a separate price is set for each transaction. In most U.S. markets, however, there is a possibility of violating price discrimination laws – as well as running into complications in channels (dual distribution) – and loss of goodwill among customers. As a result, marketers – especially those catering to consumer products markets – tend to aim at larger although still somewhat homogeneous groups. This is done to make the whole problem of implementing marketing plans feasible – but it does lead to some consumers obtaining a consumer surplus because they would be willing to pay a higher price than they are being charged.

18- 10.

Both can be thought of as a form of promotion and may relieve some of the pressure on other types of promotion. Some groups of customers come to recognize bait pricing, however, and so it may attract only certain target markets. Leader pricing has more general appeal, but it may be especially effective for "economic shoppers.”

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18- 11.

See section “Additional Demand-Oriented Approaches for Setting Prices.” Whether a psychological pricing policy makes sense depends on the attitudes of the potential target market(s), and therefore, again, we are involved in an evaluation of whole strategies, not just pricing.

18-12.

The comments for Question 18-11 apply here also.

18-13.

A prestige pricing policy could only be used if the product were suitable. If so, the promotion might emphasize the prestige element (e.g., more distinguished). Exclusive distribution would not be necessary, but selective distribution might be desirable (for other than convenience products) to be sure that the place fits with the prestige image of the product.

18-14.

Retailers, for example grocery stores, may use full-line pricing when they attempt to create an image of competitive or perhaps low prices through attractive price cuts on certain items. Fullline pricing is important if consumers normally buy several of the company's products and consider the "average price" of the firm's offering – rather than the price of particular items. It is also used to cater to the several markets for a general product class – offering several products at different prices. This may be especially important for satisfying those who judge quality on the basis of price. Full-line pricing is also important in those situations where fixed costs are high and there is no reliable way of allocating them. In such situations, to reach the company's profit objective, it may want to price some items very low to meet the price-oriented competition, and price others higher (where there is less competition).

CHAPTER 18 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Marketing Strategy” section. a. A veterinary clinic must have some system for dealing with emergencies that occur on weekends and at night when the clinic is closed. Individual vets usually rotate so that someone is always on call to handle emergencies. The price for emergency care is usually 50 percent higher than the price for care during normal hours. Do you think that Hillside should charge higher prices for emergency care? Does it fit with Hillside’s strategy? b. Some customers have expensive pedigree dogs and cats and are less price sensitive than others about fees for veterinary care. Do you think that it would be possible for Hillside to charge higher prices in caring for expensive pets? Why or why not?

HVC may want to charge a premium for emergency services that occur at times when the clinic is not open. This is especially important at a clinic like HVC, where there is only one vet – and she is already working long hours. Such a policy encourages customers to discern if an emergency warrants the additional expense. Clearly, there are many situations where the value of emergency services for a customer can be quite high. Under these conditions, customers should be willing to pay a premium.

Having such a program available would fit HVC’s desire to provide compassionate care – which suggests a need to be available to customers on an emergency basis.

The b questions allow for discussion of demand-oriented pricing issues, including value, price sensitivity, reference prices, price-quality relationships, and competitor prices. Owners of pedigree animals may very well be less price sensitive – and place greater value on pet care. However, consider reference prices before charging these owners more. Reference prices may come from competitors – that typically do not provide such premiums – or from HVC’s own price list. The premium prices may also make owners of non-pedigree animals wonder if they are getting inferior service – or make customers wonder if the clinic views their non-pedigree animals as less worthy. Therefore, this approach would likely fail.

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Chapter-by-chapter aids: Chapter 18

CHAPTER 18 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 17: WaterWiser, Inc. This case can be used here to illustrate the use of break-even analysis to evaluate various strategy alternatives – in this situation, a possible move to a new location. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 23: Wireway Products This case is presented as a pricing problem by the marketing manager – and some break-even analysis can be done – but it is really a much broader strategy planning problem. Students usually do not see this without class discussion. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 30. Maggiano’s Pizza Pies The teaching note in Part V of this manual applies many concepts from this chapter and chapter 17 including contribution margin, total contribution, gross margin, and more. Students can consider pricing as well as price related promotions. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Cases 32 and 33: Mallory’s Lemonade Stand (A) and (B) This case illustrates many concepts from both chapters 17 and 18 and provides a nice way to summarize concepts on pricing and price setting. Key concepts include fixed costs, variable costs, fixed-cost contribution per unit, break-even point, markup percent, average fixed cost, average variable cost, and marginal analysis. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE, PROBLEM 18: BREAK-EVEN/PROFIT ANALYSIS In this problem, the student gets hands-on experience with break-even analysis and profitability analysis.

The problem highlights how the sales quantity to break even (or reach the target profit) varies as price, fixed costs, and variable costs change. Sensitivity analysis reveals to the student what happens to profit with quantity changes above and below the break-even point.

The initial spreadsheet for the problem appears below:

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Chapter-by-chapter aids: Chapter 18

NOTE: As a general convention, when reviewing the spreadsheets for these problems, cells that the students may modify in the tool are denoted with an asterisk (*) as can be seen in the initial spreadsheet below.

SpreadSheet

Total Fixed Costs Assumed Selling Price Average Variable Cost Target Profit YOUR Estimate of Sales Quantity Unit Fixed Cost Contribution AT BREAK-EVEN (OR TARGET PROFIT): Needed Sales (Units) Needed Sales (Dollars) Total Costs Average Cost Per Unit AT YOUR ESTIMATE OF SALES QUANTITY Revenue at Your Quantity Total Cost at Your Quantity Average Cost/Unit at Your Quantity Profit at Your Quantity

Break-Even

Profit Anal.

$30,000.00* $1.20* $0.80* $0.00

$30,000.00* $1.20* $0.80* $10,000.00* 80,000* $0.40

$0.40

75,000 100,000 $90,000.00 $120,000.00 $90,000.00 $110,000.00 $1.20 $1.10 $96,000.00 $94,000.00 $1.18 $2,000.00

Answers to Marketing Analytics: Data to Knowledge, 18: a.

Increasing price by 10% ($1.32 new price) reduces the number of units needed to break-even to 57,692 (Answer A). Although price was increased only 10%, the number of units needing to be sold decreased by 23%! A comparison of the original price and new price may be found in the spreadsheet below.

SpreadSheet Break-Even Break-Even (Original) (Price Incr.) $30,000.00* $30,000.00* $1.20* $1.32* $0.80* $0.80* $0.00 $0.00

Total Fixed Costs Assumed Selling Price Average Variable Cost Target Profit YOUR Estimate of Sales Quantity Unit Fixed Cost Contribution AT BREAK-EVEN (OR TARGET PROFIT): Needed Sales (Units) Needed Sales (Dollars) Total Costs Average Cost Per Unit AT YOUR ESTIMATE OF SALES QUANTITY Revenue at Your Quantity Total Cost at Your Quantity Average Cost/Unit at Your Quantity Profit at Your Quantity

$0.40

$0.52

75,000 $90,000.00 $90,000.00 $1.20

57,692 $76,153.85 $76,153.85 $1.32

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b.

Decreasing price by 10% ($1.08 new price) increases the number of units needed to break-even to 107,143 (Answer D). Although price was decreased only 10%, the number of units needing to be sold increased by 43%! A comparison of the original price and new price may be found in the spreadsheet below. This exercise and the previous may be used as an opportunity to illustrate to students how small changes in price may result in significant changes in required sales to achieve the same profit.

SpreadSheet Break-Even Break-Even (Original) (Price Decr.) $30,000.00* $30,000.00* $1.20* $1.08* $0.80* $0.80* $0.00 $0.00

Total Fixed Costs Assumed Selling Price Average Variable Cost Target Profit YOUR Estimate of Sales Quantity Unit Fixed Cost Contribution AT BREAK-EVEN (OR TARGET PROFIT): Needed Sales (Units) Needed Sales (Dollars) Total Costs Average Cost Per Unit AT YOUR ESTIMATE OF SALES QUANTITY Revenue at Your Quantity Total Cost at Your Quantity Average Cost/Unit at Your Quantity Profit at Your Quantity

c.

$0.40

$0.28

75,000 107,143 $90,000.00 $115,714.29 $90,000.00 $115,714.29 $1.20 $1.08

A target profit of $15,000 would require unit sales of 112,500 units (Answer E). The total cost will be $120,000. The details appear in the spreadsheet analysis below: SpreadSheet

Total Fixed Costs Assumed Selling Price Average Variable Cost Target Profit YOUR Estimate of Sales Quantity Unit Fixed Cost Contribution AT BREAK-EVEN (OR TARGET PROFIT): Needed Sales (Units) Needed Sales (Dollars) Total Costs Average Cost Per Unit AT YOUR ESTIMATE OF SALES QUANTITY Revenue at Your Quantity Total Cost at Your Quantity Average Cost/Unit at Your Quantity Profit at Your Quantity d.

Break-Even

Profit Anal.

$30,000.00* $1.20* $0.80* $0.00

$30,000.00* $1.20* $0.80* $15,000.00* 80,000* $0.40

$0.40

75,000 112,500 $90,000.00 $135,000.00 $90,000.00 $120,000.00 $1.20 $1.07 $96,000.00 $94,000.00 $1.18 $2,000.00

As shown in the analysis above, a target profit of $15,000 would result in a total cost of $120,000.00 (Answer D).

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e.

If fixed costs increase by $5,000 it would take $150,000 in sales (Answer E), or 125,000 units, to cover the increased cost and still provide the desired profit of $15,000. A comparison showing the impact of the increased fixed cost may be found in the spreadsheet below.

SpreadSheet Profit Anal. (original) $30,000.00* $1.20* $0.80* $15,000.00* 80,000* $0.40

Total Fixed Costs Assumed Selling Price Average Variable Cost Target Profit YOUR Estimate of Sales Quantity Unit Fixed Cost Contribution AT BREAK-EVEN (OR TARGET PROFIT): Needed Sales (Units) Needed Sales (Dollars) Total Costs Average Cost Per Unit AT YOUR ESTIMATE OF SALES QUANTITY Revenue at Your Quantity Total Cost at Your Quantity Average Cost/Unit at Your Quantity Profit at Your Quantity

Profit Anal. (cost incr) $35,000.00* $1.20* $0.80* $15,000.00* 80,000* $0.40

112,500 125,000 $135,000.00 $150,000.00 $120,000.00 $135,000.00 $1.07 $1.08 $96,000.00 $94,000.00 $1.18 $2,000.00

$96,000.00 $99,000.00 $1.24 -$3,000.00

MARKETING ANALYTICS DISCUSSION The last scenario can be used as a framework for this discussion. It is worth noting that with this change, the estimated sales quantity of 80,000 will not be sufficient to break even, let alone provide a desired profit. This provides an opportunity to discuss with students how important it is to control and minimize fixed costs as a small cost increase can significantly increase the units needing to be sold to offset that cost. This also highlights the significance of the fixed-cost contribution per unit. A small increase in price can result in a significant increase in fixed-cost contribution per unit which can result in a much faster break even.

CHAPTER 18 – SUMMARY OF CONNECT INTERACTIVE EXERCISES AND APPLICATION-BASED ACTIVITIES Connect Interactive Exercises Question 1: Demand-Oriented Approaches for Setting Prices Question Type: Click and Drag Learning Objectives: 18.5 Topic: Price setting AACSB: Knowledge, application Bloom’s: Understand, apply Question 2: Break-Even Analysis Question Type: Case Analysis Learning Objectives: 18.2, 18.3 Topic: Break-even analysis can evaluate possible prices AACSB: Technology Bloom’s: Remember, apply

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Question 3: Tru-Pic Pricing Question Type: Case Analysis Learning Objectives: 18.1 Topic: Pricing strategies AACSB: Technology Bloom’s: Apply, remember Question 4: Demand-Oriented Pricing Question Type: Click and Drag Learning Objectives: 18.5, 18.6 Topic: Demand-oriented approaches to pricing AACSB: Reflective thinking Bloom’s: Remember, understand Question 5: Determining Costs Question Type: iSeeIt! Video Learning Objectives: 18.2, 18.3 Topic: Determining Costs AACSB: Analytic Bloom’s: Understand Question 6: Pricing Tactics Question Type: iSeeIt! Video Learning Objectives: 18.1, 18.5, 18.6 Topic: Pricing Strategy AACSB: Analytic Bloom’s: Understand Question 7: Break-Even/Profit Analysis Question Type: Marketing Analytics Learning Objectives: 18.5 Topic: Break-even analysis AACSB: Analytic, technology Bloom’s: Apply, analyze Application-Based Activities Title: Pricing: Hoops and Studs Type: Role-Playing Bloom’s: Apply Description: Play the role of a college student who has opened an online store to sell homemade jewelry.

You will work through the price-setting process to determine the right price for your products.

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Chapter-by-chapter aids: Chapter 19

CHAPTER 19: ETHICAL MARKETING IN A CONSUMERORIENTED WORLD: APPRAISAL AND CHALLENGES CHAPTER 19 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? You and a friend have developed a word-play game for smartphones.

After testing the game on friends and family, you have some data. While they all say the game is fun, 75 percent of them stopped playing it after a week. The average playtime of those still using it is just 12 minutes a day. A top programmer at a leading game developer tells you their games (which are all free to start but feature in-game purchase opportunities) added features that increased average daily gameplay from 22 to 34 minutes. She said that 15 percent of “super-users” are “totally addicted;” they average 3 hours of gameplay per day and generate 90 percent of each game’s revenue. She’ll agree to share her tips and tricks in exchange for a five percent stake in your game. You wonder if getting people “addicted” is the right thing to do? Should a company try to make its product more engaging—so customers use it more often? Is this kind a business responsibility or a consumer’s responsibility? Would you “pay” her for the advice? Why or why not?

This ethical dilemma raises a very real question around today’s technologies. Smartphones, video games, social media, and other tech products are increasingly designed to get users to spend more and more time on them. The topic is increasingly making it into the press. An instructor is encouraged to learn more about the issue before raising it as a discussion point. Isn’t the point of a product to get customers to use it more often? But is this ethical? A very valid question.

For more insight see: The Center for Humane Technology, https://humanetech.com; “Tech Dealers Now Trying to Save the Tech ‘Addicts’ They’ve Created,” Scientific American, February 19, 2018; “Technology Designed for Addiction,” Psychology Today, January 4, 2018; “Candy Crush Saga: The Science behind Our Addiction,” Time, November 15, 2013; “‘Irresistible’ by Design: It’s No Accident You Can’t Stop Looking at the Screen,” NPR Fresh Air, March 13, 2018; “Digital Addiction: How Technology Keeps Us Hooked,” The Conversation, June 12, 2018.

CHAPTER 19 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: •

Photos o Panera’s recipes include no artificial preservatives, sweeteners, flavors, and no colors from artificial sources, targeting consumers who want to eat “clean food.” o Mobile payment services in Kenya and China help make the world a better place. o Brands use ethical micro-marketing to attract customers. For example, Shieldtox NaturGard use natural ingredients to control mosquitos and Passion Lillie’s ethical fashions empower women. o Bolthouse Farms gets kids eating healthier snacks. o DSM and Seventh Generation create sustainable products. o Patagonia repairs customers clothes and Tony’s Chocolonely chocolate does not use slave labor (unlike many competitors). o Government regulation pushes Nissan and Philips to sell more sustainable products. o DuckDuckGo creates a search engine that doesn’t take your data.

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•

#M4BW Boxes o Does marketing have a responsibility to create a better world? Because consumers are becoming more vocal in their desire for products that do good, it is possible for marketing strategies to be both profitable and result in a better world. o Chinese mobile payment competition brings about a better world. A growing number of Alipay’s Ant Financial customers interest in the environment convert’s user’s green behavior into green energy—planting a real tree when users earn enough green energy. o Burger King seeks a world with less bullying. A Burger King video demonstrated that people were more likely to report a “bullied burger” than to report that a high school kid in the restaurant was being bullied.

CHAPTER 19 – COMMENTS ON QUESTIONS AND PROBLEMS 19-1.

This chapter opening case study encourages students to take a broader look at marketing and what it has brought to the world – the good (many more goods and service and a higher standard of life) and the bad (air pollution and obesity). Students can also compare the microversus macro-level aspects of marketing described in the chapter with this case.

19.2

Students might want to review many of the key topics of this section and offer their opinions about whether regulation is necessary to assure: truth in advertising and promotion, environmental sustainability, consumer privacy, social responsibility, and international competition. Does the “market” provide enough protection for consumers and workers?

Students will have different perspectives on this issue, and it might be a politically charged topic, but carefully managed as a discussion around marketing practices, both sides can be brought out and most students will realize these are difficult choices that governments must make.

19- 3.

This is basically a review question. See section “How Should Marketing Be Evaluated?” It is somewhat open-ended, however, in that the students are allowed to select their own criteria and defend their answers. Value judgments are involved here – and so many criteria could be "right.” It is their defenses that are important to discuss.

19- 4.

Basically, most economic systems seek to satisfy their members – although some are willing to put off immediate satisfaction for long-run satisfaction. Possible exceptions are military dictatorships, or colonial or imperialistic economies that are attempting to achieve objectives held by the military or other leaders. Achieving their objectives may preclude ever doing very much for consumers. Generally speaking, the objective of the American economic system is to satisfy consumers – although there are many interests vying for the use of current resources.

We feel that individual consumers should help guide the direction of the economy, but we have provided for some exceptions. The last question in this group is the most crucial, as it forces the students to decide whom the sociologists or public officials should control. Some sociologists or public officials feel everyone should be controlled (except of course themselves) Many students take for granted the relative freedom that we (Americans) have and cannot appreciate how another system might operate. A friend of one of the authors who lived under a dictatorship was strongly in favor of allowing everyone a free choice. Based on his observations (and he was well educated and intelligent), he was convinced that a group of donkeys, deciding their own destiny, might make many mistakes in the short run, but in the long run would develop a system which would be most satisfying to them. He was quite willing to tolerate all of the inefficiencies of a democratic society to obtain the advantages.

19- 5.

This is a difficult question, but it provides an opportunity to present an argument for something other than consumer satisfaction. Alternate objectives include: maximize production for distribution to underdeveloped countries (global consumer satisfaction); development of

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military might; improvement of technology; and expansion of capital products in preparation for other objectives.

19- 6.

See Question 19-4 and section “Micro-Marketing Often Does Cost Too Much.”

19- 7.

Officially granting monopolies may be going too far – as it could lead to a static economy.

There would be relatively little incentive for innovation. Some competition is necessary to encourage innovation – but then the successful innovator (not all innovations are successes) must be allowed to reap some fruits to encourage others to do likewise.

Allowing some industries to monopolize may not be too inhibiting if little innovation seems likely and substantial gains are available from elimination of duplication of effort or facilities – as with public utilities. But, in general, it probably would not be desirable to grant monopolies to businesses if a dynamic economy is to be encouraged. On the other hand, it may be desirable to permit successful competitors to win a temporary advantage – in monopolistic competition – to reward successful businesses. The history of socialized businesses competing successfully against private industry has not been very impressive. In India, for example, private enterprise industries compete very effectively against public industries. Similarly, the nationalized industries in some European countries have not done very well. And as noted in the text, the Russian economic system has moved toward profit incentives to increase output.

19- 8.

When there is an official grant of a monopoly from some administrative agency, it is likely that the choice is based upon favoritism or some noneconomic criteria. This leads to shifting of income to those favored. The effect on the economy of these grants depends upon the price policies followed by the various monopolies. If prices are set very high, too few products may be allocated to that particular industry – perhaps to the detriment of consumers. Further, if the firms are allowed monopoly profits without the offsetting tendency of attracting new firms to enter, then the monopolists may continue to enjoy their favored position – but with a subsequent contraction of the level of income and employment.

If the monopolist chooses the most profitable price (perhaps with marginal analysis), then the effect will depend somewhat on how the economy was organized before the granting of this monopoly. If there were many monopolistic competitors all maximizing profits, there may be no difference in the economy. If the monopolist has lower costs – perhaps due to economies of scale – the new price may be lower and output higher. If the monopolist sets a price below that where he would maximize profits, then more products will be allocated to this industry – perhaps with a reduction in consumer satisfaction.

If a monopoly develops just by winning out in the marketplace, then there is no assurance that the firm will be able to hold its place – unless it continues to offer a satisfactory product at a reasonable price. Economies of scale might make such a monopoly desirable, because it might be in the producer's interest to maintain a low price to maximize profits. Such a market would seem to offer a proper distribution of income and allocation of resources (based on consumer response). The short-run level of income and employment might be below that in a theoretical pure competition economy – but in the real world, a profit-maximizing monopolist (without an official grant) would probably operate in the long-run consumer interest (considering research, innovation, responsible production, and marketing behavior, i.e., not making slipshod products for a "fast buck," deceptive pricing, etc.). If, at any time, the monopolist ceased to provide satisfactory service, then he would offer competitors an opportunity to invade the market and better satisfy consumers.

19- 9.

Consumers have a great deal to do with the high cost of marketing – but inefficient management makes its contribution too.

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19- 10.

A marketing strategy consists of a target market and the associated marketing mix. Marketing plans are strategies to which time-related details have been added. See section “The Marketing Plan Brings All the Details Together.”

19-11.

See section “How Far Should the Marketing Concept Go?” In our society, we generally decide such issues by majority vote. This raises the issue whether the critics really represent the majority – and how fast change should come, if it should.

19-12.

This is a very difficult question. It probably should only be attempted with mature students – unless the instructor expects to carry the bulk of the discussion. Most students have some feelings on the matter, but relatively little "fiscal sense" about the impact on a firm's profit and loss statement. So, their answers tend to be "gut reactions" based on feelings and opinions, which may be related to their family upbringing or business experience – or more likely, the most recent "consciousness-raising" instructor they have encountered. By careful probing of various students' answers and the reasons for their feelings – and then getting others to react to these answers– it is possible to deepen the students' understanding of the difficulty of these questions. After some probing, however, business-oriented students generally conclude that each product line should be profitable in its own right. That is, deliberately losing money to do "good" does not set well with the typical business student – after the matter has been fully considered. Still, some still have nagging doubts about not serving "poor" or otherwise disadvantaged people. Some students may even suggest that is the government's responsibility to serve the poor – not the responsibility of individual firms; this seems to satisfy those with nagging doubts. If this is the way the discussion goes, then the instructor can refer back to the micro and macro levels of marketing and indicate what has just been concluded that individual firms at the micro level should pursue their own interest, but at the macro level it is necessary for the people (through their government) to see to it that the whole system works to satisfy their collective wishes.

19-13.

Not offering a product reduces consumers' freedom of choice. Offering a safer version of the product, one with a safety device, restores freedom of choice, but at a price. If the safety device is required on all such products by government action or collusion among producers, the consumer is back to being choice-less. In the first case, the firm may be giving up a profit by not offering the product – and in the second case, it is probably giving up profit by offering the product. In either case, it is not an attractive choice from a micro point of view. Different principles are involved here. In the first case, the firm is narrowing choice by imposing its own judgment on what should be offered. In the second case, it is expanding choice while narrowing the size of its potential market (assuming there are other competitors who are not going to follow its lead).

There is not yet a socially accepted "right answer" to these questions. Some people feel that businesses' responsibility is to expand freedom of choice – not reduce it. Others feel that it is not possible for consumers to fully evaluate all complex products, and therefore it is the responsibility of producers to build "good" products. This latter approach seems admirable – but if there are many competitors who do not see their responsibilities the same way, then the "socially responsible" businesses may be driven out of business. Marketers will have to wrestle with these questions for some time to come because they do contain the micro-macro dilemma.

Some firms have found "socially responsible" actions that do not contain the micro-macro dilemma. For example, deeper analysis of consumers' needs may show that adding new products to expand consumer choice will not only satisfy more consumers, but also will increase the firm's profits. Or, more attention to quality control might increase cost slightly, but so improve consumers' attitudes toward the product that demand for the firm's products may actually increase. These kinds of moves are clearly desirable, but they are also just straightforward good business practice. In the sense that businesses are supposed to operate

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efficiently to make the macro system work, this is socially responsible behavior. But this kind of profitable behavior is not what some critics have in mind. They want the firm to take action that a prudent business firm would not normally take. It is here where the micro-macro dilemma enters. Just how much money should an individual firm lose in order to satisfy some people's needs? Should any concern be given for the stockholders' interests? Just how fast should the firm's resources be drained to satisfy some "unprofitable" customers' needs? Note, in the extreme, that the firm could give away its products in the short run – perhaps satisfying some poor people – but it would be out of business and unable to satisfy others in the future. To the extent that any "socially responsible" action leads to weakening a firm, is this "socially responsible"?

19-14.

The answer will obviously vary from community to community – depending upon how dependent each one is on continued economic growth. Some businesses (for example, medical services and higher education) may continue to grow as people age and there is a growing recognition of the need for higher education. Capital products producers, on the other hand, may face bleak times if businesses are not expanding plant and equipment. All of this, obviously, will have trickle-down effects. If personal income in a community levels off, there may be a decline in discretionary income and some retailers may suffer. Further, if the retailers have been building their capacity in the expectation of continued economic growth, then it is likely that there will be excess capacity - this will put a squeeze on profits – and perhaps lead to disastrous price cutting.

This question can be used to show the impact of the uncontrollable environment on both microand macro-marketing.

CHAPTER 19 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Review the entire marketing plan. a. b. c. d.

How do the pieces fit together?

Does the marketing strategy logically follow from the target market dimensions?

Does the marketing strategy logically follow from the differentiation and positioning?

Does the plan appear reasonable given the stated objectives?

These questions require students to step back and consider the whole marketing plan. All semester they have been learning about individual pieces of the marketing plan – with only modest discussion of how the pieces fit together. While the marketing plan generally fits together pretty well, there are certainly parts to criticize. An instructor may start with the questions above but ask students who have critiques – or even compliments – how they might have done a better job. Students should be encouraged to defend their ideas by referring to information from the situation analysis. This keeps the discussion focused on best practices.

CHAPTER 19 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER At this point in the course, any of the cases may be used. However, the cases listed below provide especially good opportunities for integrative discussion and review of key concepts covered throughout the course. See the individual case discussions in Part V.

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Chapter-by-chapter aids: Chapter 19

Case 17: WaterWiser, Inc. This is a good case for students to practice evaluating a current marketing strategy and to demonstrate some creativity in developing a plan for where the firm should go. It is a very good wrap-up case for the end of the course because it is really highlights the fact that all of the elements of the marketing strategy are integrated. In that regard, the case touches on some of the ideas that the manager of the company has for how to “grow” the company. At first, many of them seem to be closely aligned with what is already being done. Yet, as the students analyze the current marketing mix, they will see that even some of the smaller changes may have big ripple effects. It’s useful to note that the case also offers the opportunity for students to support their thinking with numerical analysis as well as conceptual logic. The case discussion in Part V gives detailed notes related to a useful analysis that can be done with the numbers in the case. For example, the case gives students a good chance to develop an operating statement (as per Appendix B), to do break-even analysis (as per Chapter 18) and to look at issues such as value-in-use pricing and sales compensation. However, if students have not had much practice with that type of marketing analysis (say, by working on computer-aided problems), the instructor should not expect them to identify all of the possibilities considered in the teaching notes. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 22: Bright Light Innovations: The Starlight Stove This case can be used to illustrate a wide range of strategy issues. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 25: ABA Tools (ABA) This case brings together several issues discussed throughout the text: competition, product classes, product life cycle, wholesaling, personal selling, etc. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 27: Canadian Mills, Ltd. This international case brings together segmentation, targeting, and strategy planning issues. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 28: Kirkwood Home Health Services This case can be used for integrating the materials in the text. As compared to the full case teaching note in section IV, is that the case is in a nonprofit setting. Further, objectives must be set before or during the strategy planning – and these are still being considered. This could be an "objectives" case too. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the

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case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 35: The Norbank Baseball Club This case deals with a branding problem. It is not unlike the challenge facing the Washington Football Team (NFL), Cleveland’s major league baseball team, and many college and university mascots. It is also like two photo examples offered in this chapter – Aunt Jemima and Uncle Ben. The problem then is whether to change the team’s name, if so to what, and then the implementation issues. The case offers a nice chance to deal with the diversity, equity, and inclusion problems facing many firms today. As used in this chapter, there is an opportunity to revisit a variety of issues—including branding and promotion (what to tell fans, whether the name is changed or not). This chapter adds some frameworks that might be useful for discussion—including customer satisfaction, is marketing good or evil, and the marketing for a better world drivers in Exhibit 19-5.

We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

Case 40: Potbelly Sandwich This case summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along with the 4Ps, and features interviews with Bryant Keil, Chairman and CEO of the company. Chicago-based Potbelly Sandwich Works, Inc. is a chain of sandwich shops that competes in the Quick Serve segment of the restaurant industry. Billed as a unique and “quirky” sandwich joint, Potbelly has strong appeal to young urban professionals. The case provides an opportunity to discuss strategy planning as a wrap up. We also recommend that you review the longer teaching note for this case in Part V of this manual. The teaching note in Part V provides a more general discussion of the case, whereas these comments show how the case applies to this particular chapter. Both notes together provide a better background for a case discussion and may offer ideas for using the case across multiple chapters.

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Chapter-by-chapter aids: Chapter 19

CHAPTER 19 – SUMMARY OF CONNECT HOMEWORK EXERCISES Question 1: Marketing for a Better World Question Type: Click and Drag Learning Objectives: 19.6 Topic: Ethical marketing AACSB: Knowledge, application Bloom’s: Understand, apply Question 2: Hooters, Inc.: A Macro-Marketing Evaluation Question Type: Case Analysis Learning Objectives: 19.1, 19.2, 19.3 Topic: Macro-marketing evaluation AACSB: Reflective thinking, ethics Bloom’s: Understand, apply, evaluate Question 3: The Marketing Mix Revisited Question Type: Click and Drag Learning Objectives: 19.4 Topic: Marketing strategy planning process requires logic and creativity AACSB: Reflective thinking Bloom’s: Understand, apply Question 4: The Marketing Plan: Structure and Design Question Type: Click and Drag Learning Objectives: 19.5 Topic: The marketing plan brings all the details together AACSB: Reflective thinking Bloom’s: Understand, apply Question 5: Walker-Winkle Mills, Ltd. Question Type: Case analysis Learning Objectives: 19.4 Topic: Marketing Strategy Planning Process Requires Logic and Creativity AACSB: Reflective Thinking Bloom’s: Understand, Apply Application-Based Activities Title: Practice Marketing Simulation Type: Simulation Bloom’s: Apply Description: This simulation is challenging – and probably best done as a class capstone activity. It can pull all the course learning together. The 3D marketing simulation enables students to put their marketing skills to the test in a fun and competitive environment. Practice Marketing puts players in the role of a marketing decision maker for a small backpack company. Within the game, students discover what it takes to be an effective marketing manager. Using strategies learned in class, students must successfully launch a new product to market. Within this simulated environment, players must analyze sales results, collect competitive information, and refine their product, price, place, and promotional strategies to maximize results and become a market leader. The simulation can be played against a computer or against fellow students.

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Chapter-by-chapter aids: Chapter 19

CHAPTER 19 – “CASE-STYLE” INTEGRATIVE CROSS-CHAPTERS TEST QUESTIONS We have found that many instructors like to provide an integrative final exam – requiring students to recognize and apply the marketing concepts from across the first marketing course. To address these needs, we have created a series of “case-style” questions that integrate material across chapters. In this section, you will find five different “case-style” scenarios. Following each scenario, you will find 7-10 multiple-choice questions. These questions ask students to identify concepts from across the textbook.

Many instructors will find this format a useful way for students to demonstrate their understanding of many of the concepts presented in the book.

Because these questions cut across chapters, they do not easily fit into the EZ Test online test bank.

Therefore, we have created the questions below. For instructors looking to use these questions for a final exam, simply: 1. go to the Word version of this chapter; 2. cut and paste the material below into a separate document; 3. remove the answers and other data unrelated to the questions; 4. print the exam for your students.

A. Jewel Craft, Inc. Use the following information to answer questions that refer to the Jewel Craft case.

Jewel Craft, Inc. is a leading producer of women’s costume jewelry and accessories in the United States.

Its brands are well-known and are sold by department stores and better women's stores. Several stores in a city may carry Jewel Craft's brands because most of Jewel Craft's customers will not consider any other brand.

Jewel Craft's sales force calls on one wholesaler in each state. Gemco, Inc., of Boston, Massachusetts, is the Jewel Craft distributor in that state. Gemco stocks and sells women's accessories (noncompeting lines) for several manufacturers like Jewel Craft. Wholesalers are allowed a 20 percent markup by Jewel Craft, but pay the freight charges to their warehouses. Jewel Craft's policy of using one wholesaler per state comes from its desire to control its distribution. Jewel Craft uses national magazine advertising; further, it supports a cooperative ad program with retailers.

Jewel Craft's prices allow for a 40 percent retail markup – an attractive percent when one considers that Jewel Craft's products require little in-store selling because of their well-established reputation.

Recently, Jewel Craft was approached by a watch producer with the idea of expanding to watches under the Jewel Craft name. The watchmaker argued that although national watch sales have leveled off, Jewel Craft would enjoy growing sales for years to come because of the fine reputation the company has achieved. If watches are added, Jewel Craft will use its present policies regarding distribution, pricing, and advertising. Further, it will offer the wholesalers and retailers an attractive "package" deal as an incentive to carry Jewel Craft watches. Intermediaries will be required to carry the watches if they wish to handle the jewelry and accessories.

A-1. Given the information in the Jewel Craft case, jewelry and accessories would be in which product class?

A) Homogeneous shopping product B) Staple product C) Convenience product D) Impulse product E) Specialty product

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Answer: E AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Specialty products are consumer products that the customer really wants and makes a special effort to find. Any branded product that consumers insist on by name is a specialty product. Refer to Chapter 8.

A-2. In the Jewel Craft case, Gemco, Inc. is a: A) commission merchant.

B) selling agent.

C) manufacturers' agent.

D) merchant wholesaler.

E) manufacturer's sales branch.

Answer: D AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 12.8 Blooms: Apply Feedback: Merchant wholesalers own (take title to) the products they sell. They often specialize by certain types of products or customers. Refer to Chapter 12.

A-3. Jewel Craft's distribution policy – at the wholesale level – is: A) selective distribution.

B) direct distribution.

C) exclusive distribution.

D) intensive distribution.

E) for the wholesaler to be the channel captain.

Answer: C AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 10.6 Blooms: Apply Feedback: Exclusive distribution is selling through only one intermediary in a particular geographic area.

Refer to Chapter 10.

A-4. Jewel Craft's distribution policy – at the retail level – seems to be: A) direct distribution.

B) exclusive distribution.

C) intensive distribution.

D) selective distribution.

Answer: D AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 10.6 Blooms: Apply Feedback: Selective distribution is selling through only those intermediaries who will give the product special attention. Refer to Chapter 10.

A-5. A sales invoice sent by Jewel Craft to Gemco is MOST LIKELY to include the following item: A) F.O.B. buyer's warehouse.

B) F.O.B. seller's factory – freight prepaid.

C) F.O.B. seller's factory.

D) F.O.B. delivered.

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Chapter-by-chapter aids: Chapter 19

Answer: C AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.5 Blooms: Apply Feedback: F.O.B. seller’s factory means that the seller (Jewel Craft) pays the cost of loading the products onto some vehicle; then title to the products passes to the buyer (Gemco). The buyer pays the freight and takes responsibility for any damage in transit. Refer to Chapter 16.

A-6. When selling Jewel Craft's jewelry and accessories, a retail clerk's major role usually would be: A) missionary selling.

B) supporting selling.

C) retailing.

D) order taking.

E) order getting.

Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 14.2 Blooms: Apply Feedback: Order-taking is the routine completion of sales made regularly to target customers. It usually requires ongoing follow-up to make certain that the customer is totally satisfied. Refer to Chapter 14.

A-7. The degree of brand familiarity for Jewel Craft products – among its present consumer buyers – is: A) no brand recognition.

B) brand insistence.

C) brand preference.

D) brand rejection.

E) brand recognition.

Answer: B AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 8.4 Blooms: Apply Feedback: Brand insistence means customers insist on a firm’s branded product and are willing to search for it. Refer to Chapter 8.

A-8. Jewel Craft's selling price for an item that retails for $10 would be: A) $5.20.

B) $7.00.

C) $8.00.

D) $6.00.

E) $4.80.

Answer: E AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 18.1, Appendix B.4 Blooms: Apply Feedback: Markup (percent) refers to the percentage of selling price that is added to cost to get the dollar amount selling price. In a markup chain, a producer's selling price becomes the cost the wholesaler pays.

The wholesaler’s selling price becomes the retailer’s cost. And this cost plus a retail markup becomes the retail selling price. Each markup should cover the costs of running the business and leave a profit. Refer to Chapter 18 and Appendix B. A-9. If Jewel Craft adds the watch line, which federal law might be most directly violated if it requires

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intermediaries to handle BOTH the watches and the jewelry?

A) Robinson-Patman Act B) Clayton Act C) Sherman Act D) Wheeler-Lea Amendment E) Magnuson-Moss Act Answer: B AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 3.6 Blooms: Apply Feedback: Forcing the sale of some products with others (tying contracts) violates federal law, specifically, the Clayton Act. Refer to Chapter 3.

B. Conservo Products, Inc. Use this information to answer the following questions that refer to the Conservo Products, Inc. case.

Conservo Products, Inc. (CPI), with annual sales of $200 million, is a well-known producer of a variety of paper products, almost all of which are made from recycled materials. Picnic plates account for about 70 percent of CPI's sales. The rest of the firm's sales come from custom-designed materials – such as box liners and spacers, small boxes, and disposable products – like trays, towels, and napkins.

CPI's picnic plates are sold through sales reps to grocery wholesalers and retail grocery chains. The sales reps are paid a 5 percent commission on all sales in their assigned territories. They usually handle related – but noncompeting – lines for several other manufacturers. Along with their selling duties, the sales reps help CPI with local advertising and sales promotion efforts.

Orders for the custom products are obtained by area managers who are paid a straight salary to call on business and institutional customers. The area managers are trained paper specialists and often help their customers design the products they order.

The picnic plates are priced to give CPI a 90 percent markup on the cost of producing the product – with the cost figured by taking the total factory cost for the previous year, and then dividing it by the number of units produced and sold during that period. The firm's invoices read "F.O.B. – Delivered" and "1/10, net 30." Customers are allowed to deduct 3 percent from the face value of the invoice for buying plates in carload quantities, and another 2 percent for advertising them locally.

The custom products are sold "F.O.B. mill” – with CPI offering a price for each job. Competition is strong from many other manufacturers, who are able to offer similar products meeting the customers' specifications.

CPI forecasts that sales will increase to $250 million by 2012. However, much of this growth is tied to picnic plates – a market in which the firm has about a 7 percent market share and faces aggressive price competition from many smaller firms with greater brand familiarity. Further, CPI has been late with more than 50 percent of its plate orders due to scheduling conflicts with orders for custom products.

B-1. CPI's product line includes: A) only convenience products.

B) impulse products and natural products.

C) specialty products and supplies.

D) shopping products and raw materials.

E) staple products and component parts.

Answer: E

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AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Staples are products that bought routinely, without much thought. Component parts are finished (or nearly finished) items that are ready for assembly into the final product. Refer to Chapter 8.

B-2. CPI's picnic plates seem to be in the ______________ stage of the product life cycle.

A) market maturity B) market growth C) market introduction D) sales decline Answer: A AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 9.1 Blooms: Apply Feedback: The market maturity stage occurs when industry sales level off and competition gets tougher.

Refer to Chapter 9.

B-3. For the picnic plates, CPI seems to be facing: A) monopolistic competition approaching pure competition.

B) a pure monopoly situation.

C) pure competition.

D) monopolistic competition approaching pure monopoly.

E) an oligopoly situation.

Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 3.4, Appendix A.5 Blooms: Apply Feedback: In monopolistic competition, a number of different firms offer marketing mixes that at least some customers see as different. Most product-markets head toward pure competition, where competitors offer very similar products. In pure competition, managers just compete with lower and lower prices and profit margins shrink. Refer to Chapter 3 and Appendix A. B-4. CPI uses: A) a direct-to-customer channel system for all its products.

B) dual distribution.

C) an indirect channel system for all its products.

D) a direct-to-customer channel system for the plates and an indirect channel system for the custom products.

E) an indirect channel system for the plates and a direct-to-customer channel system for the custom products.

Answer: E AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 10.2 Blooms: Apply Feedback: Some producers handle the whole distribution job themselves—direct-to-customer, or use wholesalers, retailers, and other specialists—indirect selling. Refer to Chapter 10.

B-5. The "sales reps" who sell CPI's plates are: A) manufacturers' agents.

B) limited-function wholesalers.

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C) the firm's own order takers.

D) selling agents.

E) merchant wholesalers.

Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 12.8 Blooms: Apply Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—earning a commission on what is actually sold. Refer to Chapter 12.

B-6. For its plates, CPI uses ______________ pricing.

A) flexible B) demand-oriented C) target return D) average-cost E) penetration Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.4 Blooms: Apply Feedback: Average-cost pricing means adding a reasonable markup to the average cost of a product.

Refer to Chapter 17.

B-7. CPI offers the grocery wholesalers and retail chains: A) cumulative quantity discounts.

B) cash discounts for paying their bills quickly.

C) P.M.'s D) advertising allowances.

E) all of these alternatives are correct.

Answer: E AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.5 Blooms: Apply Feedback: Cumulative quantity discounts apply to purchases over a given period and the discount usually increases as the amount purchased increases. Cash discounts are reductions in price to encourage buyers to pay their bills quickly. PMs are given to retailers by manufacturers or wholesalers to pass on to the retailers’ salesclerks for aggressively selling certain items. Advertising allowances are price reductions given to firms in the channel to encourage them to advertise or promote the supplier’s products locally.

Refer to Chapter 17.

B-8. Regarding shipping costs in the CPI case: A) CPI pays the shipping costs for the plates, while its customers pay the shipping costs for the custom products.

B) CPI uses freight-absorption pricing.

C) all of CPI's customers take title to the products at the point of loading and pay all shipping costs themselves.

D) CPI pays the shipping costs for all its customers – keeping title to the products until delivery.

E) CPI uses zone pricing.

Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.5

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Blooms: Apply Feedback: If a firm wants to pay the freight for the convenience of customers, it uses F.O.B. delivered.

This is how CPI ships the plates. F.O.B. mill means that the seller pays the cost of loading the products onto some vehicle; then title to the products passes to the buyer, who pays the freight and takes responsibility for any damage in transit. This is how CPI ships the custom products. Refer to Chapter 17.

B-9. For the custom products, CPI uses ______________ pricing.

A) demand-backward B) penetration C) average-cost D) target-return E) bid Answer: E AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.8 Blooms: Apply Feedback: Bid pricing means offering a specific price for each possible job rather than setting a price that applies for all customers. Refer to Chapter 17.

B-10. CPI's sales forecasts for picnic plates are not likely to be achieved unless the firm can improve its: A) pioneering advertising.

B) paper coating machines.

C) below-average product quality.

D) customer service level.

E) above-the-market prices.

Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 11.2 Blooms: Apply Feedback: Customer service level is how rapidly and dependably a firm can deliver what customers want.

Refer to Chapter 11.

C. Sure Foot, Ltd. Use the following information to answer the questions that refer to the Sure Foot case.

Sure Foot, Ltd. produces high-quality shoes and boots for serious hikers. Sure Foot's shoes have suggested retail prices ranging from just under $40 to about $150. Usually, the retailer buys the shoes for about 50 percent less than the list price, and the retailer pays the freight charges from Sure Foot's plant in Maine. Sure Foot's credit terms are 2/10, net 30. Although Sure Foot's brand appears on every shoe, the firm does very little mass selling, except for a limited program of cooperative advertising and some sales promotion at walking events.

Sure Foot's shoes are carried by "better" sporting goods stores all across the nation – although usually in fairly small quantities. Its main showroom is in Boston, where two salaried salespeople handle most of the firm's large accounts. Sure Foot's products are also sold by seven independent "field reps," who are paid a 5 percent commission on all sales. Each of these field reps is responsible for a several state territory – emphasizing mostly the small stores in or near major cities. The field reps carry Sure Foot's products as a minor line – but none of their lines are competitive with each other.

The walking shoe market is supplied by 7 large firms and 50 or more smaller firms. While these firms are competitive, they do vary their materials, styles, prices, and promotion. The "high-quality" market is

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Chapter-by-chapter aids: Chapter 19

supplied by only 5 firms – Sure Foot being the largest. While these firms are also competitive, they generally offer a more limited assortment of materials, styles, and prices because the "high-quality" part of the market is not as large – and does not appear to be growing.

C-1. How are Sure Foot's shoes seen by most of its target market?

A) Impulse products B) Staple products C) Heterogeneous shopping products D) Homogeneous shopping products E) Specialty products Answer: C AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Heterogeneous shopping products are shopping products the customer sees as different and wants to inspect for quality and suitability. Refer to Chapter 8.

C-2. Assuming that Sure Foot wants to be in only the "better" stores – and mainly in large metropolitan areas – it seems to be seeking: A) selective distribution.

B) exclusive distribution.

C) intensive distribution.

Answer: A AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 10.6 Blooms: Apply Feedback: Selective distribution is selling through only those intermediaries who will give the product special attention. Only the better intermediaries are used here. Refer to Chapter 10.

C-3. Sure Foot's "field reps" are: A) selling agents.

B) missionary salespeople.

C) brokers.

D) manufacturers' agents.

E) merchant wholesalers.

Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 12.8 Blooms: Apply Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—for a commission on what is actually sold. Refer to Chapter 12.

C-4. In the Sure Foot case, the nature of competition in the hiking shoe market is: A) monopolistic competition B) monopoly C) oligopoly D) pure competition E) None of these is a good answer.

Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 3.4, Appendix A.5

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Blooms: Apply Feedback: In monopolistic competition, a number of different firms offer marketing mixes that at least some customers see as different. Each competitor tries to get control (a monopoly) in its “own” target market. Refer to Chapter 3 and Appendix A. C-5. Sure Foot's geographic terms are probably: A) F.O.B. freight allowed.

B) F.O.B. buyer's factory.

C) F.O.B. shipping point.

D) F.O.B. delivered.

E) None of these – Sure Foot uses zone pricing.

Answer: C AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.5 Blooms: Apply Feedback: F.O.B. shipping point means that the seller (Sure Foot) pays the cost of leading the products onto some vehicle; then title to the products passes to the buyer (retailer). The buyer pays the freight and takes responsibility for any damage in transit. F.O.B. shipping point simplifies the seller’s pricing, but it may narrow the market. Since the delivered cost varies depending on the buyer’s location, a customer located farther from the seller must pay more and might buy from closer suppliers. Refer to Chapter 17.

C-6. "Credit terms" of 2/10, net 30 mean that Sure Foot is offering customers a: A) functional discount.

B) quantity discount.

C) seasonal discount.

D) cash discount.

E) cooperative advertising allowance.

Answer: D AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 17.5 Blooms: Apply Feedback: Cash discounts are reductions in price to encourage buyers to pay their bills quickly. 2/10, net 30 means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days. Otherwise, the full face value is due within 30 days. Refer to Chapter 17.

C-7. Sure Foot is probably in what stage of the product life cycle in the "high quality" market?

A) Market maturity B) Market growth C) Market introduction D) Sales decline Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 9.1 Blooms: Apply Feedback: The market maturity stage occurs when industry sales level off and competition gets tougher.

Refer to Chapter 9.

D. Electech, Inc. Use this information to answer the following questions that refer to the EI (Electech Inc.) case.

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Electech, Inc. (EI) produces a line of semiconductors for electronics products manufacturers. These items range in price from $5-$100 and are components of products the buyers are producing. EI also designs and builds computer networking equipment. The prices of these items range from $5,000 to $100,000.

These are used to control production equipment. Usually, they are custom-made to the specifications of the buyer – the firm that will use the product in its own production process.

EI sells nationally through independent sales reps – paid on commission – who work in large industrial centers across the country. EI is more concerned with the quality of these reps than with the number of them. All of them also sell other lines. EI also employs five full-time salaried salespeople who work out of its corporate headquarters under a sales manager.

The home office salespeople are "technical specialists" who sell almost all the networking equipment, while the "reps" mostly sell the semiconductors. Sometimes, however, the reps will send in leads for customers who want networking equipment. EI also sells some of its semiconductors through a Los Angeles wholesaler who carries stock for West Coast customers.

There are many producers and importers of semiconductors in the U.S. – but several firms have captured large shares of the networking equipment market. EI has held its own, and in fact, over the past five years, has increased its market share of these products to over 25 percent – because of its better technical designs.

Industry-wide, prices of the more or less homogeneous semiconductors have been forced further and further down over the last seven years – as have industry profits. The price of networking equipment is set by adding a standard markup percent to the direct cost of the items – for overhead and for profit.

Following industry practice, all prices are quoted at the seller's factory.

EI publishes a catalog that is revised periodically. And it exhibits in most equipment trade shows.

D-1. What kind of products are EI's semiconductors FOR MOST CUSTOMERS? A) Supplies B) Installations C) Component parts D) Accessory equipment E) Raw materials Answer: C AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Component parts are finished (or nearly finished) items that are ready for assembly into the final product. Refer to Chapter 8.

D-2. What kind of products are EI's networking equipment?

A) Component parts B) Accessory equipment C) Installations D) Raw materials E) Supplies Answer: B AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Accessories are short-lived capital items, tools, and equipment used in production or office activities. Refer to Chapter 8.

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D-3. EI's independent sales reps are: A) selling agents.

B) rack jobbers.

C) specialty wholesalers.

D) manufacturers' agents.

E) desk jobbers.

Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 12.8 Blooms: Apply Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—for a commission on what is actually sold. Refer to Chapter 12.

D-4. What kind of distribution is EI seeking for its networking equipment?

A) Direct distribution B) Exclusive distribution C) Selective distribution D) Intensive distribution Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 10.6 Blooms: Apply Feedback: Many firms prefer to distribute directly to the final customer or consumer to serve them better.

Refer to Chapter 10.

D-5. In the EI case, what is the nature of competition for networking equipment?

A) Monopoly B) Monopolistic competition C) Pure competition D) Oligopoly Answer: B AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 3.4, Appendix A.5 Blooms: Apply Feedback: In monopolistic competition, a number of different firms offer marketing mixes that at least some customers see as different. Each competitor tries to get control (a monopoly) in its “own” target market. Refer to Chapter 3 and Appendix A. D-6. What promotion method is EI using when it publishes catalogs, and exhibits in trade shows?

A) Sales promotion B) Publicity C) Advertising D) Personal Selling Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 15.10 Blooms: Apply Feedback: Sales promotion refers to those promotion activities—other than advertising, publicity, and personal selling, that stimulate interest, trial, or purchase by final customers or others in the channel.

Refer to Chapter 15.

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D-7. EI's geographic terms are probably: A) F.O.B. delivered.

B) F.O.B. buyer's factory.

C) F.O.B. freight allowed.

D) F.O.B. shipping point.

E) F.O.B. basing point.

Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 17.5 Blooms: Apply Feedback: F.O.B. shipping point means that the seller pays the cost of loading the products onto some vehicle; then title to the products passes to the buyer. The buyer pays the freight and takes responsibility for damage in transit. Refer to Chapter 17.

D-8. In the EI case, in which stage of the product life cycle do semiconductors appear to be?

A) Market maturity B) Sales decline C) Market introduction D) Market growth Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 9.1 Blooms: Apply Feedback: The market maturity stage occurs when industry sales level off and competition gets tougher.

Refer to Chapter 9.

E. Pump Systems, Inc. Use this information to answer the following questions that refer to the Pump Systems, Inc. case.

Pump Systems, Inc. (PSI) produces two major kinds of water pumps. The smaller pumps range in price from $5-$30 and are used in drinking fountains and soft-drink machines. Most of these pumps are bought by manufacturers of these machines and built into their product. PSI also builds larger pumps for swimming pools and reservoirs. The prices of these items range from $250-$500. These are usually purchased by contractors who build the pools and reservoirs.

PSI sells nationally through sales reps located in large industrial centers. These reps handle the selling function for PSI in their geographic areas and provide market information. They usually do the same thing for 10 to 20 similar manufacturers of noncompeting products – and are paid on a commission basis.

There are no other producers of the smaller pumps in the United States because PSI has patent protection. As a result, management has decided to follow a policy of pricing high – to maximize profits while the patent lasts.

Several competitors are in the market for the larger pumps. Industry prices and profits of these pumps have dropped in the past few years because of firms trying to increase their market shares. The product design has remained fairly stable over the last few years – and one firm dropped out as it saw that it would lose more money with its "me-too" product. Industry sales are increasing – but at a very slow rate.

The price of these products is determined by adding a standard markup percentage to the variable cost of the items – to cover fixed costs and profit. For instance, pump Z has variable costs of $250 per unit, and a markup of 40 percent of this cost is added to the $250 to get its selling price. Management has estimated

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that fixed costs applicable to this product are $200,000 per year.

PSI publishes a product catalog, which is revised annually. Also, it exhibits in most trade shows. PSI follows a policy of charging the same price to all customers – so all will have the same costs at their own plants. All purchases are shipped directly from PSI's factory to its customers – and title passes at PSI's factory.

E-1. What kind of products are PSI's small pumps to most customers?

A) Supplies B) Component parts C) Raw materials D) Accessory equipment E) Installations Answer: B AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Component parts are finished (or nearly finished) items that are ready for assembly into the final product. Refer to Chapter 8.

E-2. In the PSI case, what kind of products are the small pumps for customers who use them to replace worn pumps in their own machines?

A) Component parts B) Raw materials C) Accessory equipment D) Installations E) Supplies Answer: E AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 8.7 Blooms: Apply Feedback: Supplies are expense items that do not become part of a finished product. Supplies can be divided into three types: (1) maintenance, (2) repair, and (3) operating supplies. Refer to Chapter 8.

E-3. PSI's sales reps are: A) selling agents.

B) company salespeople.

C) full-line merchant wholesalers.

D) rack jobbers.

E) manufacturers' agents.

Answer: E AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 12.8 Blooms: Apply Feedback: A manufacturers’ agent sells similar products for several noncompeting producers—for a commission on what is actually sold. Refer to Chapter 12.

E-4. What pricing policy does PSI use for its small pumps?

A) Skimming pricing B) Price lining C) Target return pricing D) Prestige pricing

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E) Penetration pricing Answer: A AACSB: Reflective Thinking Level of Difficulty: 2 Medium Learning Objective: 17.4 Blooms: Apply Feedback: A skimming price policy tries to sell the top (skim the cream) of a market, the top of the demand curve, at a high price before aiming at more price-sensitive customers. Refer to Chapter 17.

E-5. What stage in the product life cycle do PSI's large pumps seem to be in?

A) Market maturity B) Sales decline C) Market introduction D) Market growth Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 9.1 Blooms: Apply Feedback: The market maturity stage occurs when industry sales level off and competition gets tougher.

Refer to Chapter 9.

E-6. What is the contribution to fixed cost and profit of PSI's pump Z? A) $100 per unit B) $75 per unit C) $50 per unit D) $25,000 E) Cannot be determined unless you know the sales volume.

Answer: A AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 18.4 Blooms: Apply Feedback: Total fixed cost is the sum of those costs that are fixed in total—no matter how much is produced. Among these fixed costs are rent, depreciation, managers’ salaries, property taxes, and insurance. Such costs stay the same. Fixed cost (FC) contribution per unit is the assumed selling price minus the variable cost per unit. Refer to Chapter 18.

E-7. In the PSI case, what is the break-even point for pump Z IN DOLLARS? A) $200,000 B) $100,000 C) $2,000,000 D) $700,000 E) $500,000 Answer: D AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 18.4 Blooms: Apply Feedback: Break-even point (BEP) is the quantity where the firm’s total cost will just equal its total revenue. To figure the BEP (in units), divide the total fixed cost (TFC) by the fixed cost (FC) contribution per unit. In this case, divide $200,000 by $100, with a result of 2,000 units. Then, to get the BEP (in dollars) multiply the BEP in units (2,000) by the selling price of one unit ($350) to get $700,000. Refer to Chapter 18.

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E-8. What kind of promotion is PSI using when it publishes catalogs and exhibits in trade shows?

A) Advertising B) Publicity C) Sales promotion D) Personal selling Answer: C AACSB: Analytic Level of Difficulty: 2 Medium Learning Objective: 15.9 Blooms: Apply Feedback: Sales promotion refers to those promotion activities—other than advertising, publicity, and personal selling, that stimulate interest, trial, or purchase by final customers or others in the channel.

Refer to Chapter 15.

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Chapter-by-chapter aids: Bonus Chapter 1

BONUS CHAPTER 1: IMPLEMENTING AND CONTROLLING MARKETING PLANS: METRICS AND ANALYSIS BONUS CHAPTER 1 – COMMENTS ON USE OF ETHICAL DILEMMA WITH THIS CHAPTER What would you do? You are the marketing manager for a regional insurance company that specializes in auto insurance. You ask a summer intern to come up with a performance analysis to compare how profitable customers are based on where they live, the cost of their policies, and their past claims. It turns out that inner-city customers are the least profitable; the company actually loses money on many of them.

Currently, telephone salespeople from your office are calling leads from a direct-mail ad campaign—and they are having success selling policies. Your bonus and the sales reps’ commissions are based on sales of new policies, not on costs or customer profitability. What should you do in response to the information from the profitability analysis conducted by the summer intern? Should you change your marketing strategy? Should you tell salespeople not to call prospects from inner city addresses? Explain your thinking.

The situation outlined in this scenario often happens as firms conduct customer profitability analysis.

Companies may find that some key customers or certain target markets are unprofitable. And incentive systems in many organizations focus sales efforts on revenue generation – not on profitability. And, in order to motivate a sales force with a simpler measure, many firms reward salespeople based on revenue targets. In such a system, a marketing manager must adjust pricing to assure profitability. This situation outlines a tension that is common with this type of reward system. And the situation is complicated by the fact that the telephone sales group is experiencing great success with the unprofitable target segment.

A marketing manager should share this information with superiors and ask for guidance. Of course, if upper management has similar incentives, this may not solve the problem. Increasing prices to this target market – which may be out of the marketing manager’s direct control – might make these customers more profitable. The marketing manager should ask the intern to do additional analyses, to determine if some of the insurance company’s products are more profitable. If so, the telephone sales group could promote these products. The marketing manager might also limit calls to the less profitable inner-city customers.

CHAPTER BC1 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: Photo: • ConAgra Foods fights childhood hunger Sections: • Better, faster, lower cost—and saving lives o Merck partnered with a Chinese refrigeration firm to deliver a low-cost Ebola vaccine.

BONUS CHAPTER 1 – COMMENTS ON QUESTIONS AND PROBLEMS BC1- 1.

The Ben & Jerry’s case offers a number of examples of key terms and concepts from this chapter, including but not limited to: • Control – tracking the number of likes on Facebook. Tracking that Facebook users gave away 500,000 virtual cones.

• Controlling costs – cost estimates for franchisees IV-BC1-1

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• Implementation – problems with the packaging for Cherry Garcia ice cream pops • And more.

BC1- 2.

Student answers to this question will vary. The purpose is to prompt them to think about how firms use technology to improve implementation. Many consumers never think about this, especially once the "technology" becomes the normal way of doing things. Some examples that could be discussed include: credit card payment at the gas pump, self-service scanners for faster checkout in retail stores, "movies on demand" from cable companies, or copy machines that provide a message when the user does something wrong in trying to make a copy.

BC1- 3.

Clearly, it is not wise to leave it to the accountants to develop the reports. The manager should be able to add value in discussions about what should be on the reports because it is the manager who ultimately will use the information. Further, the accountants may or may not know about everyone else's job; usually it simply isn't possible for them to know everything about accounting and also about the marketing problem; some specialization makes sense.

But the specialization increases the need for a good dialogue between the marketing manager and the accounting specialist. This dialogue between the accountants and managers is critically important, but too often it doesn't happen, as it should.

BC1- 4.

Clearly, there are hundreds of examples of firms that do a good job with implementation.

However, students are likely to focus on firms in the local market. Class discussion will add the most value with this question when the instructor can "probe" students to go into more detail about what a firm does. Students will often describe some aspect of what the firm does in general terms, but often they can go into more detail when asked specific questions. The purpose of the questions is to get students thinking about all of the hundreds of ways that firms can work to do a better job implementing their strategies.

BC1- 5.

See section “Sales Analysis Shows What’s Happening.” Specifically: a.

b. c.

d.

e.

A geographic sales breakdown might reveal that the product was slipping in one part of the country before the situation became general. A comparison of sales to projected sales for swim suits, for example, might reveal early in the season that the product was not being received favorably in the South and Southwest – and that some changes in the marketing mix were desirable.

A product breakdown would show which types of products needed assistance (price cuts, greater promotion, etc.).

Analysis by customer sales volume pinpoints good customers who may bear even further cultivation – as well as poor customers who might be approached with a different marketing mix or dropped entirely.

Analysis by size of order would indicate whether a small order, high-cost situation was developing – perhaps suggesting a minimum order charge or some other device for increasing order size.

Analysis by sales rep's commission allowance might reveal that sales reps were concentrating on high-margin items only (as would probably be desired) or perhaps that they were concentrating on low-margin items only because they were easier to sell (but also of little or no profit to the company).

BC1- 6.

The major difference is that performance indexes are developed in performance analysis – to compare what actually happens against the "what ought to have happened." See section “Performance Analysis Looks for Differences.”

BC1- 7.

The iceberg principle suggests that almost any summary data may have much variation hidden within it. Therefore, the marketing manager should be wary of summary data which indicates

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everything is all right – unless someone has actually checked on how the system is behaving with respect to individual market segments, products, etc.

BC1- 8.

This question helps make the point that marketing management should look at much more than just sales when attempting to evaluate strategies. Both sales and cost and performance analyses may be helpful in evaluating alternative strategies.

The students should see that the prospects for areas D and E are not too bright – although the sales reps appear experienced and competent (their salaries suggest this). It appears that these two areas have relatively few customers, and they are widely dispersed (see total number of customers: 60 and 50, and high expense payments). Greater travel not only runs up expenses, but also decreases the number of calls possible. Area E is especially bad in this respect. The customers in these two areas may be smaller than average, or competition might be tougher, as the average order is smaller. Thus, these two sales reps might be very good, hard workers – and yet there may be little hope for improvement. Perhaps these customers should be contacted through wholesalers or by mail.

BC1-9.

Variations of 5 to 10 percent (or perhaps more) from quotas are to be expected but they should not be ignored. Rather, analysis of the data may indicate why the sales forecast was in error – and how the marketing mix might be adjusted to improve the situation. Even if sales are above forecasted level, analyses should be run. Management ought to know whether it was just luck or random variations – or whether the firm was doing something positive which could be used elsewhere with the present product or other products.

BC1-10.

Controversy seems to occur because the supporters of each approach tend to ignore the points of view of those holding the other approach. Both points of view have merit and appropriate places for use.

When making decisions where only part of the costs are relevant, the full-cost approach may fog the issue and actually lead to the wrong decision. Of course, in the long run, all costs must be covered – fixed costs cannot be ignored forever – but, nevertheless, in the short run it frequently is prudent to ignore them. Blindly following only one method (either one) cannot be supported. The full-cost approach may be most appropriate when future commitments are being considered. But once capital has been committed, then the firm must do the best it can, and the contribution margin approach may be more helpful.

BC1-11.

No. A $500 contribution to fixed costs and profit ($900 fixed cost - $400 loss = $500) would be lost (company profits would be cut by this amount) if these customers were dropped.

BC1-12.

The need for marketing audits seems to be growing now that product life cycles are accelerating, and the marketplace is becoming even more competitive. Marketing managers tend to get bogged down in operating details – and are not able to spend the time they should on seeing the "big picture." Also, they sometimes become identified with existing channel or marketing mix arrangements. Therefore, an outside observer may be able to give a more objective view of the situation. It is possible that a new kind of organization will have to develop to do this job well. The typical marketing research firm does not do this job – instead it tends to focus on running surveys or market analyses – that is, it is more directly concerned with analyzing customers rather than the internal operations of a business and its marketing strategy planning. Similarly, a CPA firm is organized for another purpose – to audit the company's internal control procedures. Few such organizations would be suitable for evaluating marketing strategy planning or its implementation. Currently, the most suitable candidates would be some management-consulting firms – but even here, great care would have to be used. Some have tended to focus on internal personnel or production problems – or operational problems rather than strategy problems. What is sorely needed for a good marketing audit is an evaluation of marketing strategy planning, alternative strategies and IV-BC1-3

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plans, and alternate marketing programs. This is a much larger and more difficult task than evaluating salespersons' compensation plans, routing sales reps, or similar "lower level" problems.

BONUS CHAPTER 1 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC EXERCISE a. Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Look through the “Implementation and Control” section. Does the plan say anything about how Hillside will handle complaints? What could Hillside do in this area? b. How could Hillside break down its sales and performance analysis? What type of analysis would you recommend? How could this be used to provide control for the marketing plan? c. What type of cost analysis should Hillside do? How could this be used to provide control of the marketing plan?

The marketing plan does not provide specific recommendations for managing complaints. An instructor might ask students why they are not included – and whether they should be. This level of detail may or may not be needed in a small business like Hillside Veterinary Clinic. It is likely that the owner of the business is handling most complaints in person – or is overseeing others who handle complaints. But it might be useful to make explicit how complaints are handled. Most importantly, customer complaints identify areas where implementation is a problem – so complaints must be recognized and addressed both with the complaining party and internally to minimize or eliminate future problems.

Sales and performance analysis may be useful – even at a small business like HVC. A sales analysis may be helpful in determining which services are growing and which may be declining. Performance analysis looks for exceptions or variations as compared to plans and may also give insight about the profitability of particular services or perhaps types of patients (animal). Dr. Hardy might develop specific sales targets for each service – and then see how sales compare to the plan.

A cost analysis may be helpful in evaluating the profitability of each service offered. The plan indicates that Dr. Hardy believes that dental services are particularly profitable – but we do not know how she made this determination. A cost analysis would be a rigorous assessment of profitability. The marketing plan includes a pro forma income statement – which might be used to assess progress toward Dr. Hardy’s long-term goals for the clinic.

BONUS CHAPTER 1 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 12: PersonalHealth.com—Custom Vitamins This case provides a detailed analysis of the potential costs of bad customer service. The case also points out how difficult it can be to implement effective customer service. This can lead to a discussion of the training and selection of customer service personnel and the use of IT systems to deliver customer service. See case discussion.

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Case 29: Kramer & Geary (K&G) This case provides some detailed sales figures that illustrate the kinds of data that would come out of a straightforward sales analysis – and subsequently help in strategy planning. See case discussion.

Case 35: Magionni’s Pizza Pies This case provides lots of "numbers" to analyze – to give some practice in comparing alternatives using sales and costs estimates. See case discussion.

BONUS CHAPTER 1 – SUMMARY OF CONNECT HOMEWORK EXERCISES Exercise BC1.1: Sales and Performance Analysis Question Type: Click and Drag Learning Objectives: BC1.3, BC1.4 Topic: Sales and performance analysis AACSB: Analytic Bloom’s: Understand, apply analyze, evaluate Exercise BC2.2: Marketing Cost Analysis Question Type: Comprehension case Learning Objectives: BC1-5 Topic: Marketing cost analysis AACSB: Analytic Bloom’s: Understand, apply analyze, evaluate

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Chapter-by-chapter aids: Bonus Chapter 2

BONUS CHAPTER 2: MANAGING MARKETING’S LINK WITH OTHER FUNCTIONAL AREAS BONUS CHAPTER 2 – COMMENTS ON USE OF ETHICAL DILEMMA QUESTIONS WITH THIS CHAPTER Situation: What would you do? Most banks grade their customers based on their assets, past banking behavior, and other personal information to decide how important or profitable the customers are. Bank employees use these grades in responding to a customer. For example, if a customer is charged a $25 fee for paying a credit card bill one day late and calls to request that the fee be waived, the customer service agent would immediately waive the fee for an A customer, firmly tell the C customer that the fee is a bank policy, and thoughtfully decide how to respond for the B customer. Similarly, the bank would assign an A customer a customer service phone number that is answered immediately by a capable rep, while the C customer would get a number where it’s possible to wait on hold for several minutes—or longer. What do you think about banks segmenting customers based on profitability? Is this fair? Why or why not?

The debate in this scenario centers on the question: What is meant by “fair”? One section of the AMA’s Statement of Ethics is titled “Honest and fair,” but fairness is not defined. There are a variety of ways in which different people, including business managers, might define fairness. However, most managers would not agree with the conclusion that fair means treating all customers alike, or that it is unethical to treat customers differently. In fact, the basic and logic of segmentation suggests that customers will be treated differently depending on what segment they belong to. Throughout the text, for example, we’ve argued that to properly focus on meeting the needs of some segment(s) a marketer may have to consciously decide to ignore the needs of people in another segment.

Banks often categorize students as “C” customers – so some students may find these practices unfair. It is useful to have students (who argue on this basis) explain the specifics of what they consider unfair. The discussion can be broadened to ask whether this practice is fair in other industries. Don’t airlines already do this with first, business, and coach class tickets? What if the best seats in movie theaters were saved for frequent customers – how would you feel? What if an amusement park—like Disney—allowed customers who pay more to cut to the front of long lines for popular rides? These alternative scenarios may raise more debate – and help address the question of what that is fair and how relates to what is ethical.

CHAPTER BC2 – COMMENTS ON MARKETING FOR A BETTER WORLD (#M4BW) This chapter includes the following photos and examples of how marketing can contribute to a better world: •

#M4BW Box o What’s Next? More bang for the buck-small loans in developing countries. o Taking care of employees who take care of customers. In Australia and New Zealand, Wesfarmers hires indigenous people and provides education and training. Marriott recently had 92% of its employees indicate they were proud to work for the company.

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BONUS CHAPTER 2 – COMMENTS ON QUESTIONS AND PROBLEMS BC 2- 1.

In the IKEA case we bring examples of key terms and concepts from this chapter that include but are not limited to: • Finance function – “One reason that IKEA has been able to grow so rapidly—without greater capital investments—is that it carefully manages its costs.”

• Production function – see paragraph 4.

• Accounting function – see paragraph 5.

• Information technology function – see paragraph 6.

• Human resources function – see paragraph 7.

• And more.

BC 2- 2.

The various ways that a firm can raise money to support a new marketing plan – and the pros and cons of each approach from the marketing manager's point of view – are discussed in section “The Finance Function: Money to Implement Marketing Plans.” Some of the key points are briefly reviewed below.

External Sources: sale of stock or debt financing The major disadvantage of selling stock is that it represents a share of the ownership of the company. Thus, the owners of the stock may want to "call the shots" about how the company is run. This is most likely to be a problem if the investors in the company have a different time horizon for results than the manager. Some investors, however, may be willing to take quite a bit of risk if they think that the plan will ultimately yield a big return.

By contrast, individuals who buy bonds and others (like banks) who loan the firm money are usually less inclined to take much risk. They want a certain return, and/or they would like to have some collateral in the event the firm doesn't pay. Usually lenders get a higher interest rate if there appears to be higher risk. When interest rates are high, the cost of borrowed money can be quite high, and ultimately this cost of capital must be covered by the firm's prices.

Internal Sources: cash assets or cash flow Firms that earn a profit usually can use (some of) that money to support a marketing plan.

The main problem with this approach is that the profit usually has to be "in hand" before the plan can be implemented. Thus, internal funding may mean that the whole strategy has to be put into motion more slowly than would be the case with external funding – again depending on the risk and availability of lenders/investors.

BC 2- 3.

Depending on the entrepreneur's objectives it might or might not be a good idea. From a positive perspective, the franchisees would provide the money (and take the risk) to build new facilities at each location. On the other hand, each franchisee would be the owner of his own franchised operation. Thus, the franchisees ultimately own the equity (value of the business) that develops because of the growth and the profitability of the idea. On the other hand, the franchisor could still make large profits – say from a percentage of total sales, from selling the franchise rights in the first place, and by buying and reselling needed materials (i.e., oil, filters, etc.).

BC 2- 4.

Investors in a stock can earn a positive return (profit) a few different ways. First, the stock can pay a dividend, which is basically a partial distribution of profits to the firm's owners. Secondly, the value of the stock can increase. Third, an investor can get a combination of these two outcomes. However, the value of stock is not likely to increase unless profits are increasing.

Thus, from an investor's standpoint, it is not as good for a firm to continue to be profitable as it would be for that profitability to increase.

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BC 2- 5.

As noted in the text, banks tend to be conservative lenders – so the bank probably would not loan the money. Lenders – especially banks – usually don't want to take on too much risk and if they do take a risk they want to have the rights to some collateral that could be sold if the loan isn't paid back with cash. In this circumstance, however, the woman has few assets. While the money spent on advertising may be an "investment" in the sense that it is spent to bring in a future income stream and profits, from the bank's standpoint it is not an investment at all.

Rather, it is an expense with no guarantee of a return. Thus, from the bank's perspective, once the money is spent on the advertising it's gone. Even if the firm becomes successful it is still largely because of the woman who set it up. The temporary people who work for her are not really an "asset," and there is not likely to be much in the way of valuable collateral for some time.

BC 2- 6.

Some publishers are already doing what they like to call "custom publishing" – and students may have seen examples in their classes. This approach can lead to some very interesting and useful products that really are custom produced to meet specific users' needs. At present, however, there tend to be many problems, especially if there is supposed to be any integration across the various "parts" of the custom whole. For example, if an instructor wants a publisher to put together a book with a set of individual cases or readings, it may be more than adequate to just reproduce them. On the other hand, simply selecting chapters from different texts doesn't provide any assurance that the chapters work together smoothly. Terms may be left undefined, the structure may be confusing, or the style of writing may be very different. Things like tables of contents and indices are usually missing.

Now, having said that, let's consider this from the perspective of mass customization. The idea behind mass customization is to use the principles of mass production to tailor products to the unique needs of individual customers. Publishers are not yet really doing that. That would require thinking ahead about what different customers might want and giving them choices to meet very specific needs. With advanced planning, needs might be met well. By contrast, most current custom publishing arrangements are simply efforts to sell what the firm has already produced. Ultimately, more publishers will work on planning – in advance – to meet the unique needs of customers. For example, the authors do that with the total package for Essentials of Marketing. We don’t offer different versions of the basic book but the text is one element in a large set of teaching materials. Thus, the instructor can select whatever units are desired from the whole set. Whichever units are selected, they are planned to be consistent and to work together in an integrated way to meet needs.

BC 2- 7.

Student answers to this question will vary substantially. The discussion in section “Production Must Be Coordinated with the Marketing Plan” provides a number of ideas about how production capacity might influence a marketing manager's choice of a marketing strategy.

While the specific examples that students give may vary, that is consistent with the purpose of the question. It encourages students to think about the various aspects of capacity and how different aspects of capacity impact strategy planning. For example, a firm with excess capacity might want to find new ways to use that capacity, might want to expand to new markets for its current products, or might want to evaluate whether the excess capacity is part of a negative trend in the industry – say, a declining market. Alternatively, a firm that is short on capacity might want to think about raising prices or perhaps selecting some conscious mechanism to allocate output to different distribution channels (say, based on how much customer satisfaction a retailer or dealer achieves – that's how many auto producers do it when they have a popular car).

BC 2- 8.

A small company's flexibility may be either increased or decreased by turning to outside suppliers to produce the products it sells. To the extent that the firm does not have a big

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Chapter-by-chapter aids: Bonus Chapter 2

investment in facilities that must be used to earn a return, it is more flexible. For example, if a new way of producing the product is developed or a new material becomes available, the firm can switch to a different supplier. On the other hand, it is less flexible in that it is likely to be more difficult to quickly make changes in specs, quality standards, etc. To the extent that the relationship between the firm and the supplier are governed by a long-term contract, the flexibility may be reduced.

BC 2-9.

A marketing manager's sales forecast for a new marketing plan might be used by: (a) a financial manager to determine how much revenue, cash, and profit the plan will produce and to decide how much capital will be required, over what period of time, and to pay various expenses associated with the plan. (b) the accountant is likely to use the forecast to estimate costs that are related to volume. For example, the average fixed cost per unit will depend on such an estimate. (c) a production manager needs a forecast to figure out how much to produce, when to produce, and where. If the forecast differs from the firm's current capacity, the production manager will also need to make plans for ways to increase capacity or, alternatively, reduce the cost of having excess capacity. At the extreme, this may even involve shutting down whole plants. (d) a human resources manager to determine how many people are needed to do what jobs and with what skills. For example, a firm that plans to double sales is likely to need more sales reps to call on more retailers, more accountants to handle billing, and more production workers to work in the factory.

BC 2-10. Natural accounts are the categories to which various costs are charged in the normal financial accounting cycle. These accounts include salaries, wages, Social Security, taxes, suppliers, raw materials, advertising, and other. By contrast, functional accounts show the purpose for which expenditures are made. Factory functional accounts include milling, grinding, maintenance, and so on. Marketing functional accounts include the costs of marketing activities such as shipping, handling, advertising, personal selling, etc. By assigning costs to functional accounts, a marketing manager is better able to estimate the costs and/or profitability of specific customers, products, territories, or other categories.

BC 2-11. The approaches to cost allocation that we discussed in this chapter most definitely can apply to a firm that produces only services. In fact, in service firms the allocation of costs is usually simpler because it can be based on the amount of time that the service providers spend on a given focus (customer, product, etc.).

BC 2-12. A marketing manager who is planning to expand sales operations from a branch office in an overseas market faces many questions and problems – and some of them may be different from what would be faced in a domestic market. In either a domestic or overseas situation, the manager would need to worry about how best to recruit, hire and train the people needed.

However, in the overseas setting there may be many aspects of these tasks that would depend specifically on the local business customs and which would, therefore, require help or guidance from knowledgeable locals. Simply assuming that the same approaches would work in another country would be risky. Sometimes it might be ok, but in other cases a real disaster could result.

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Chapter-by-chapter aids: Bonus Chapter 2

BONUS CHAPTER 2 – COMMENTS ON USE OF MARKETING PLANNING FOR HILLSIDE VETERINARY CLINIC QUESTIONS WITH THIS CHAPTER Appendix D (the Appendices follow Chapter 19) includes a sample marketing plan for Hillside Veterinary Clinic. Think about the entire marketing plan—since you have been reviewing this all along. While there are not separate departments in a small business, there are different functions. a. How can Hillside fund future growth plans? b. Can Hillside calculate the profitability of individual customers? Should it try? c. Has Hillside accounted for the local labor market in its growth plans?

The marketing plan notes Dr. Hardy’s short- and long-term growth goals. Over the short term, there is a plan to maintain longer hours and hire more personnel. These additional expenses are noted in the marketing plan and should be offset by additional revenues earned due to the increased capacity. Still, in the short-run, there may be cash flow concerns that require tapping outside resources – perhaps a line of credit at the local bank since borrowing is likely to be minimal.

Dr. Hardy hopes to move into a new location where a wider range of pet supplies can be sold, and kennel services can also be offered to clients. This may require significantly more funding – to either build a new location or renovate an existing building will be expensive. A small business like this typically does not issue stock – although it may be possible to find local investors. A bank loan may be a more likely source of funding.

Calculating the costs of individual customers requires that an organization accurately track the revenues and costs of each customer. The database proposed in the marketing plan may be helpful in accomplishing this. On the other hand, it may be difficult to assign actual costs by customer. And with a large number of customers, the costs of this exercise may not justify the benefits. Such an approach might work well for very large customers.

HVC seems to have taken into account some elements of the local labor market. As noted in the marketing plan, the local veterinary school makes it relatively easy to find vet techs. On the other hand, the growth plan seems very contingent on the availability of the part-time vet Dr. Hardy hopes to hire.

BONUS CHAPTER 2 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS CHAPTER Case 12: PersonalHealth.com—Custom Vitamins This case can be used to discuss cross-functional issues. Questions may be raised about the appropriateness of Prince Zimbalist as manager of customer service. This can prompt a discussion of the importance of human resource management in making sure that the right personnel are hired and trained.

In addition, the quality of the service delivered by DrV.com has been highly reliant on the company’s IT people. It appears that at least some of the problems with customer service relate to problems with technology. See longer case discussion in Instructor’s Manual Part V.

Case 17: WaterWiser, Inc. The comments in Instructor’s Manual Part V provide some suggestions about an approach for teaching this case with an emphasis on cross functional issues/constraints.

Case 22: Bright Light Innovations: The Starlight Stove This case can be used to illustrate the cross-functional issues of manufacturing, distributing, and financing. Bright Light Innovations will need to determine where to manufacture the products, how to

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Chapter-by-chapter aids: Bonus Chapter 2

distribute them, and how to provide financing for customers. See longer case discussion in Instructor’s Manual Part V.

Case 30: Maggiano’s Pizza Pies This case provides the opportunity to discuss how the information about costs and capacity can be treated as inputs to the strategy decisions. See longer case discussion in Instructor’s Manual Part V.

BONUS CHAPTER 2 – SUMMARY OF CONNECT HOMEWORK EXERCISES There are no Connect Homework Exercises to accompany this chapter.

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Chapter-by-chapter aids: Appendix A

APPENDIX A: ECONOMICS FUNDAMENTALS APPENDIX A – COMMENTS ON QUESTIONS AND PROBLEMS A- 1.

The key here is that economists see individuals choosing among alternatives and if the price of one of the many commodities customers can buy is raised, then economists would expect them to shift to more economical alternatives – i.e., reduce the quantity they will buy of the "high price" item.

A- 2.

It is a "picture" of a demand schedule. It is down sloping for the reasons explained in Question 1.

Some prestige or status-oriented products – like jewelry or French perfume – might not have a down sloping demand curve. For these products, part of what makes them "desirable" is the fact that they are special. If prices were too low, customers might look for something else to purchase. Similarly, some services have upsloping demand curves, at least in some price ranges, because it is difficult for the customer to tell in advance what the quality of the service will be. For example, medical services that were "too cheap" might be viewed as poor quality.

A higher price might result in perceptions of higher quality, and result in increased demand.

A- 3.

See chapter-opening section, “Products and Markets as Seen by Customers and Potential Customers.” We often talk about the annual demand for automobiles or wheat, but short-run demand curves might be relevant also – especially for operational decisions. In the automobile market, for example, it might be useful to think of relatively inelastic demand curves early in the model year, when those who are anxious to have the "newest" are evident in the market. Then, later in the year, "end-of-the-year bargain hunters" might offer more elastic demand curves. In practice, prices at both the manufacturer and retailer levels do change during the course of a model year—end-of-the-year allowances and volume discounts are offered by manufacturers, and bigger discounts may be offered to final consumers by retailers.

A- 4.

To the extent that men have substitutes for dress shoes, the dress shoe market would be more elastic than the general shoe market. However, if they have entirely different attitudes when buying dress shoes, perhaps being more interested in style, color, etc., then their demands for particular kinds of shoes might be more inelastic because they do not see that all of the different shoes are substitutes. The same ideas would apply to women's shoes. Demand might be quite inelastic, within reasonable price brackets anyway, if some manufacturers offered a distinctly different design or color. This is one reason that so much time and effort is spent trying to develop unique new products that have no direct substitutes.

A- 5.

If the perfume industry as a whole could agree to raise prices, then inelastic demand would indicate that total revenue would increase and therefore the move would seem desirable.

However, an individual producer would have to be sure that his or her own demand curve is inelastic above the present price before making the move. In determining the most profitable price, one must usually take into consideration supply curves. Marginal concepts for price determination are introduced in Chapter 18.

A- 6.

Even though the demand for shrimp is highly elastic, indicating the total revenue would increase at a lower price, the producer must also consider that his costs also increase when selling additional quantities. In this case, even more than in Question 5, costs must be considered.

A- 7.

Inelastic demand and supply are caused by different factors and therefore there is no reason why they should be found together in the same situation. Customers' attitudes and the

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Chapter-by-chapter aids: Appendix A

availability of substitutes are involved with respect to demand, while elasticity of supply is related to the suppliers' cost structures and profit objectives.

A- 8.

This question relates to the discussion of substitutes in the opening section, “Products and Markets as Seen by Customers and Potential Customers.” The text highlights the fact that elasticity of demand for a product might depend on the availability of substitutes – products that offer the buyer a choice. A marketing manager would usually prefer to offer a product that does not have close substitutes because it would mean that there would be less competition for the business of customers. Of course, the lack of close substitutes does not guarantee a profit. A company might develop a product that does not satisfy consumer needs – or which cannot satisfy needs at a profit. For example, when Du Pont originally introduced Corfam – a synthetic material that was used in making shoes – there was no direct substitute. It retained the shine on the shoes, it was water resistant, and it did not wear out. But, consumers did not like the product because it did not "breathe" like leather, and the result was dissatisfied consumers with hot, sweaty feet. Consumers stopped buying the product, and went back to buying dress shoes made of real leather. Thus, a product that does not satisfy customers' needs is unlikely to be successful – regardless of the fact that it is "all alone" in the market.

Even a product that potentially meets needs may be unprofitable in a market where there is no close substitute. For example, a really new product concept might meet needs that potential customers have, but if they don't know about the product, or don't know where to get it, or if it is not available when they want it, the whole effort may fail. A lack of close substitutes is not a guarantee of success – but in the right circumstances, it can give the marketing manager increased opportunity in the market.

A- 9.

The market's dimensions become important here. There may be little competition. Similar prices might result from using the same cost-plus pricing procedures. It could be argued that many small food retailers are outstanding examples of monopolists. They have a following of consumers who, for the most part, do no shopping elsewhere and have little knowledge of prices and selection in other stores. Further, these consumers might have no interest or desire to search out alternate sources of supply. Thus, the conditions for pure competition are not met. Examples of pure competition are very difficult to find in the real world. They are summarized below for the instructor's convenience: (1) (2) (3) (4)

A- 10.

Large number of buyers and sellers offering to buy and sell under exactly the same conditions.

Perfect knowledge about the demand and supply conditions for identical products.

Ease of market entry and exit.

Completely economic behavior, i.e., decisions motivated only by price considerations, not psychological factors. (This was not mentioned explicitly in the text, but it is assumed implicitly.)

Pure competition examples are not easy to come by. Even the (commodity) grain products sold in central markets like Minneapolis and Kansas City can be thought of as different "products.”

But the conditions of pure competition come closest to being met in such large centralized public markets.

Any kinds of products could be listed for the monopolistic competition examples.

It should be expected that the marketing mixes for some of these products will be similar, as their characteristics and their market situations are similar. This question encourages the students to begin to categorize products, anticipating the material in Chapter 8 and the subsequent material on Place and Promotion that is related to these product classes. Using the blackboard to list and organize the students' suggestions, this question can be used – like cases – to draw out principles and generalizations.

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Chapter-by-chapter aids: Appendix A

A- 11.

This question is challenging because, theoretically, the products, but more broadly the marketing mixes, of the competitors should be seen as identical. In this situation, we then would expect to find a kinked demand curve situation facing each competitor. In the real world, most firms attempt to differentiate their offering somewhat, and so it is much easier to find examples of monopolistic competition. But where competing executives really do not have confidence that they have successfully differentiated their offering, they may tend to treat pricing as though they were in an oligopoly. In other words, they will rather mechanically meet competitors' prices and hesitate to be the first to raise prices. This is probably why some competitors are willing to talk about price – and collude if possible. None of them feel confident enough about their understanding of the market and competitive activity to play the price leader role. So they are quite willing to agree with competitors about formulas or guidelines for raising prices – perhaps based on an "equitable" passing along of cost increases.

DISCUSSION OF MARKETING ANALYTICS: DATA TO KNOWLEDGE FOR USE WITH APPENDIX A There is not a Marketing Analytics: Data to Knowledge specifically for this appendix. However, Marketing Analytics: Data to Knowledge 3 (see the discussion in the notes for Chapter 3) works well with the discussion of competition in this appendix.

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Chapter-by-chapter aids: Appendix A

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Chapter-by-chapter aids: Appendix B

APPENDIX B: MARKETING ARITHMETIC APPENDIX B – COMMENTS ON QUESTIONS AND PROBLEMS B- 1.

a.

Net sales plus returns and allowances equal gross sales.

b.

Purchases at billed cost, plus transportation, less discounts, equal purchases at net cost.

B- 2.

Gross margin and gross profit are the same. Net profit occurs after subtraction of all expenses.

B- 3.

Markups usually exceed gross margin because some markdowns must be expected. Markdowns do not appear on operating statements.

B- 4.

Gross sales Less: Sales returns and allowances Net sales Cost of sales: Beginning inventory at cost Purchases at billed cost Plus: Freight-in Net cost of delivered purchases Cost of goods available for sale Less: Ending inventory at cost Cost of sales Gross margin

$1,300,000 250,000 $1,050,000

$ 150,000 $ 330,000 80,000 410,000 560,000 250,000 310,000 $ 740,000

Expenses: Rent Salaries Heat and light Net Profit

B- 5.

$ 60,000 400,000 180,000

Gross sales Returns and allowances Net sales Cost of sales: Beginning inventory Purchases Transportation Cost of goods available for sale Closing inventory Cost of sales Gross margin Expenses Net Profit

640,000 $ 100,000

$6,150,000 150,000 $6,000,000

102.5% 2.5 100.0

4,500,000 $1,500,000 1,200,000 $ 300,000

75.0 25.0 20.0 5.0

$4,070,000 1,000,000 30,000 $5,100,000 600,000

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Chapter-by-chapter aids: Appendix B

B- 6.

Gross sales Less: Returns Allowances Net Sales a.

$320,000 $40,000 + $48,000  100

b.

B- 7.

$320,000

a.

B- 9.

80,000 $320,000

= 27.5%

25, 60, 100, 200

b.

B- 8.

$400,000 $ 32,000 48,000

25, 16-2/3, approximately 28.6, 33-1/3

Cost of Sales = 100,000  $20 = $2,000,000 100% Net sales = Net Sales = $2,666,667 75% 2,000,000 The general manager of a department store might use markdown ratios to evaluate the efficiency of various departments in the store. A markdown is a retail price reduction that is required because customers didn't buy some item at the originally marked-up price. Refusal to buy typically reflects some error or problem in how the department is run – purchasing the wrong styles or sizes of clothing, damage caused by handling, the original price was too high, etc. Over time, comparing these ratios for different departments might help to identify areas where buying is not as effective or where salespeople are not doing as effective a job. But, this approach is not without limitations. For example, some departments might deal with products where buying is more difficult because demand is less predictable – for example, fashion items versus kitchenware items. For additional discussion, see section “Markdown Ratios Help Control Retail Operations.”

B-10. See section “Return on Investment (ROI) Reflects Asset Use.” The retailer would get the same results with ROI and ROA because I and A are equal.

B-11.

See section “Forecasting Target Market Potential and Sales.”

B-12.

a.

Level of national income, state of the economy, and stage of economic development would all impact the general demand for computers. During bad economic times, for example, firms are likely to cut costs and hold off on such purchases. The number of people in certain income, occupational, and educational groups would impact demand.

In addition, consumer demand is probably subject to seasonal fluctuations, with peaks before school starts in the late summer and then in late fall near the gift giving holiday season. Demand might also increase during periods when desirable new software or hardware features become available.

b.

Weather patterns and season of the year; age distribution of the population; discretionary income levels.

c.

Income in the area, number of separate housing units, and household size. Purchases might increase or decrease depending on the economic climate and consumer confidence in the economy. In times when interest rates are high, sales might decrease

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Chapter-by-chapter aids: Appendix B

because this is a larger expenditure for many customers and might depend on the availability of credit (at a reasonable cost). d.

Level of income and number of people in certain age groups. Interest in "healthy" activities. Also, seasonal factors.

e.

Amount produced and changes in government support price. Export shipments and subsidies may also lead to erratic sales fluctuations.

f.

Number of births and number of children in different age groups under three years of age; income levels; number of women working outside of the home.

g.

Depends on demand for rubber-based paints, which in turn depends on the level of income, the amount of leisure time, and use by painters. Also, seasonal factors probably will be relevant.

B-13.

The factor method of forecasting tries to forecast sales by finding a relationship between the company's sales and some other factor (or factors). For example, sales of lumber, brick and other materials used in residential construction are often related to the interest rate for home mortgages. Also, see Exhibit B-4, Sales & Marketing Management magazine’s Survey of Buying Power, and its related discussion in the text section “Forecasting Company and Product Sales by Extending Past Behavior.”

B-14.

Answering this question may be more difficult than it first appears. It does demonstrate ways in which you can work with the secondary data available. And also that sometimes you may need to manipulate secondary data to obtain useful insights.

The population of the city of Boulder (97.1 thousand) is only 65.6% of the population of Lakewood (148.0 thousand). Therefore, the effective buying power for Boulder ($2,480,204,000) compared to that for Lakewood ($3,451,207,000) is smaller as would be expected because of the population difference. But let’s take a closer look. If we go a step further and consider the effective buying power per capita in each location, we discover that (on a per capita basis) the effective buying power for a Boulder resident is actually higher than that of a Lakewood resident ($25,542.78 for Boulder versus $23,318.67 for Lakewood). We can get these numbers by dividing the EBI figure by the population figure for each city respectively. This tells us that Boulder is a more upscale community with more income and buying power per resident than Lakewood, even though fewer people live there.

It becomes clear that this sort of difference can be meaningful when we look at retail sales. In contrast to the case with EBI, the total retail sales for Boulder ($2,147,663,000) are higher than for Lakewood ($2,065,827,000), even though Boulder has the smaller population. When we consider retail sales per capita (by dividing these figures for retail spending by the respective populations of each city), we see that residents of Boulder spend significantly more ($22,118.05) on average than do residents of Lakewood ($13,958.29). Thus, taken in total, the residents of Boulder spend more than those of Lakewood. BUT individuals are on average spending 58% more. That big a difference might impact purchasing behavior for many different products, but especially ones that rely on discretionary income. (a) Prepared cereals: If we look at food sales for the two cities, we can see that Boulder’s figure of $439,133,000 is much higher than Lakewood’s figure of $297,529,000 (even though there are fewer people in Boulder doing the spending). This tells us that residents of Boulder spend significantly more for food than residents of Lakewood. If we go a step further (as above) and calculate per capita figures, we can see that Boulder residents are spending 125% more on food than Lakewood residents ($4,522.48 for Boulder versus $2,010.33 for Lakewood).

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Chapter-by-chapter aids: Appendix B

(b) Automobiles: Total automotive sales for Boulder ($447,464,000) are much lower than for Lakewood ($567,796,000). However, on a per capita basis, Boulder residents are spending more than Lakewood residents ($4,608.28 for Boulder and $3,836.46 for Lakewood). In fact, we see that Boulder residents spend 20% more than Lakewood residents for autos. (c) Furniture: If we look at furniture sales for the two cities, we can see that Boulder’s figure of $117,520,000 is less than Lakewood’s figure of $124,879,000. But (as in our auto sales discussion above) this nevertheless indicates that Boulder residents are spending more per capita on furniture than are Lakewood residents. Doing the calculations, we see that Boulder residents are spending 43% more than Lakewood residents for furniture ($1,210.30 for Boulder versus $843.78 for Lakewood).

As we surmised earlier, these differences can be explained by the income advantage in Boulder. This reinforces the idea that secondary data can be very useful, but it also shows that one should be cautious in interpreting such data. For example, one might want to look at demographic characteristics in the context of the whole competitive environment. For this reason, it might be desirable to ask students to look at data for communities nearer to their residences–to obtain a better appreciation of the kind of data that is available and the implications that can be drawn if one is more familiar with the locale.

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Chapter-by-chapter aids: Appendix C

APPENDIX C: CAREER PLANNING IN MARKETING We update Appendix C with each revision of the text. Consequently, a reader will the discussion of the latest careers within marketing and salaries we found at Salary.com should be relatively current. Many instructors find it helpful to assign this appendix so students can see the different types of career opportunities available to them in marketing.

Joe Cannon assigns his students the task of writing their own personal marketing plan. If you are interested in learning more about how he uses this assignment, he will share the assignment, grading rubric, and other materials. Contact Joe by e-mail – Joe.Cannon@ColoState.edu (please put “Personal Marketing Plan” in the subject line).

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Chapter-by-chapter aids: Appendix C

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Chapter-by-chapter aids: Appendix D

APPENDIX D: HILLSIDE VETERINARY CLINIC MARKETING PLAN Appendix D provides students with a real marketing plan for a real (but disguised) business. Many instructors find it helps students better understand concepts when they can apply those concepts. This marketing plan can be combined with questions in end-of-chapter “Marketing Planning for Hillside Veterinary Clinic” exercises. This instructor’s manual provides comments on each of those exercises in the materials for each chapter.

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Chapter-by-chapter aids: Appendix D

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Part V:

Comments on Cases in Essentials of Marketing INTRODUCTION This edition of Essentials of Marketing includes different marketing cases after Appendix D in the text.

This part of the manual provides teaching ideas and background for each of the 44 "Suggested Cases" in the text. “Suggested Cases” are listed at the end of each chapter. Thus, the chapter-by-chapter aids in Part IV of this manual also provide some brief comments about using the cases – about how each specifically relates to the chapter’s material. In addition, Part III of this manual provides general ideas about using cases in your class.

Cases The 44 cases vary: in length, in whether they are based on well-known or fictitious companies, in the amount of qualitative vs. quantitative information presented, in the type of marketing setting involved, etc.

Some cases have been retained from earlier editions of Essentials of Marketing because they have been popular with instructors – popular because they are effective vehicles for case analysis and learning. It does not make sense for instructors to have to repeat case preparations – they should take advantage of the experience gained from teaching a case several times. Such experience can often provide ideas for better ways of handling a case and lead to a more effective class discussion. Sometimes, however, students have access to "assignment files" (for example, through a fraternity or dorm) that might have copies of write-ups of cases from previous semesters. So, the cases retained from previous editions are sometimes disguised in a variety of ways, including changes in the title, changes in peoples’ names, changes in minor details, and changes in numbers and dates. Feedback from instructors around the country indicates that these changes are effective in defeating the possible effects of the student files – while preserving the advantages of proven cases.

A caveat is in order here. A case that you have used before may have been updated from an earlier edition and changed in important ways that will affect the "solution" to the case and/or class discussion.

Thus, even when you recognize the thrust of a case you liked and used before, you probably should reread the case and comments below to be certain that changes in the case have not invalidated your notes or introduced important new issues.

COMMENTS ON EACH CASE Case 1: McDonald's "Seniors" Restaurant Lisa Aham's strategy is evolving – at least with respect to her senior citizen customers. She is encouraging a friendlier "product" and her target customers are responding. If this strategy does not conflict with her other "fast-food" strategies for other customers at other times, there seems to be no problem. NOTE: Most of the seniors do leave by 11:30 am, before the noon crowd. Regarding the bingo idea, "parties" are now allowed, so this could be considered a "bingo party.” Bingo might cause some seniors to stay longer; however, if the "seniors" should come in greater numbers and stay longer, they will “crowd out" other target markets. Lisa will then have to change her evolving senior citizen strategy.

Note 1: This case is adapted from what did happen in a Detroit, Michigan McDonald's restaurant. The bingo idea was not used there, just the heavy emphasis on seniors.

Note 2: McDonald's and some other fast-food places are allowing modification of their basic strategies to suit local conditions. McDonald's allows franchisees to change exterior designs and interior decorations to “fit in" to surrounding areas.

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This case is placed first in the set of cases to help make the point that market-oriented strategy planning is not just a big manufacturer activity. Further, it can be used to show that a particular business may have to create and implement several strategies at the same time. It also can be used to emphasize that friendly personal service can be an important part of a firm's "Product."

Case 2: Guadalupe Natural Foods, Inc. Guadalupe Natural Foods is typical of the many production-oriented (volume-oriented) food processors who can be characterized as "pea-packers.” Its production facilities can only be used for a short time each year – when the crop is ripe – and so the natural focus is on producing as much as possible and then "getting rid of it" later. When there are many similar producers, however, this leads them into almost pure competition in the market price. Further, if all the other producers are trying to produce as much as they can, then the only way for a particular producer to increase revenue is to produce more. Of course, this can be self-defeating if industry demand is inelastic.

Guadalupe Natural Foods has achieved brand recognition for its various products, but its major competitors have done so as well. This suggests monopolistic competition. However, given that the intermediaries can and are willing to substitute one brand for another, the market is closer to pure competition. This helps explain why profits have almost disappeared. Unless Guadalupe Natural Foods becomes more market-oriented, it is likely that conditions will worsen. It appears that several competitors can mount more profitable efforts with substitutes, and so they will have more money for promotion or to absorb price competition. Some of its competitors' better performance may be due to production decisions (such as vertical integration). But it is also likely that some of it is due to focusing on more profitable products – such as "gourmet" vegetables and frozen dinners or entrees with vegetables – while Guadalupe Natural Foods has been volume-oriented, hitting all its major competitors head-on in the "mass market for commodities."

Now that Guadalupe Natural Foods is trying to become more profit-oriented, it may think seriously about developing profitable strategies – rather than just marketing mixes to increase sales volume. This may lead it to drop some items – and to place greater emphasis on geographic areas where competition is not as tough. Further, it might consider new products. Perhaps it would want to think about preparing parts of or whole dinners (i.e., instead of focusing only on “packing commodities”). Perhaps it ought to put more convenience into its products. Packaging a variety of TV dinners, for example, might yield a much greater return on the "peas and carrots" it has been selling as "commodities.” Unfortunately, however, others are doing this already. So, it would not be an innovator. In fact, these markets may be in or close to market maturity already, so Guadalupe Natural Foods has a tough job ahead! It should have become "marketoriented" many years ago!

Case 3: COLORADO United Soccer Academy Many companies have difficulty making the transition from a successful small company with a few employees to the next level. The case allows the instructor to discuss a variety of different topics including target market selection, customer equity, lifetime customer value, growth through acquiring customers, retaining customers, and expanding business with current customers.

The case is easily understood, as most students are familiar with sports marketing situations. In fact, to get students interested, the instructor might start the case by asking, “How many of you participated in youth sports?”

The case offers four distinct teaching options. The first option focuses on current customers and seeks to keep them involved with COLORADO United Soccer Academy longer. It can be easier to retain current customers – as opposed to acquiring new customers. But you might ask, “How easy will it be for COLORADO United Soccer Academy to keep these customers?” As kids enter high school there are more activities competing for their attention. You might ask, “Which of its current 14-15-year-old customers are most likely to remain interested in soccer training?” It seems that those kids who are the best soccer players, perhaps those seeking college scholarships, are most likely to want to continue. If that is the case, then the development of a more “elite” program, one that includes teaching them how to V-2 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

attract the attention of college coaches might appeal to this group. You could discuss Promotion, Price, and Place issues – as each of these should be adapted to the target market. A premium product might also be able to generate better margins. Promotion to this group needs to be highly targeted. Having worked with these kids, Marc Kane could talk to them and their parents directly or have targeted e-mails.

Place issues might address what times of day and times of year are most convenient for high school age participants.

The second option targets all current customers and tries to grow by increasing their use of and spending for soccer training. This may lead to a wide-ranging discussion about what other needs these athleticallyoriented kids have. Clearly, there is a need to balance the kids’ soccer needs with COLORADO United Soccer Academy’s strengths. While some students may bring up ideas like offering training in other sports, this neither appeals to Kane nor builds on COLORADO United Soccer Academy’s strengths. At this point, the instructor can point out that the needs of the company AND its customers are important in determining a marketing strategy. Still, there may be variations on Product. For example, off-season training might differ from in-season training. Other options may include some sort of quantity discount price. For example, COLORADO United Soccer Academy might offer discounts to people signing up for their third program each year. Students might suggest other variations on the loyalty/rewards theme (loyalty cards, parent partner rewards, business sponsors, etc.).

The third option focuses on customer acquisition by targeting younger kids (ages 6-9). Kids in this age group have a longer potential lifetime value, if Kane can keep most of them active in his training programs through age 15 or later. Many of these kids play in the local recreation leagues, but some parents are looking for higher quality training to give their kids an edge. A question like, “What are the likely challenges to developing a marketing mix to serve these customers?” helps students focus on how marketing mixes need to be tailored to market segments. There might also be discussion about family buying – the user of the service is likely to have little influence on whether the family initially signs up for a program. Nevertheless, if the child does not enjoy the program, they are unlikely to return.

The fourth growth opportunity focuses on acquiring customers – but in a new geographic location. “How would the marketing mix need to be adapted to increase market penetration in nearby Loveland or Greeley?” The obvious answer might be offering programs in these towns. This is accompanied by the challenge of building awareness. While COLORADO United Soccer Academy might rely on word-ofmouth, other methods might get people interested more quickly. “How would they identify their target market?” “What would their message be?”

This general overview of the COLORADO United Soccer Academy case shows that it provides an opportunity for discussing a variety of issues related to marketing strategy. We have suggested this case for use in the following chapters: • Chapter 2: customer equity • Chapter 4: market segmentation and targeting • Chapter 5: consumer behavior • Chapter 7: marketing research • Chapter 8: service element of a product

Case 4: Petosega Tech Support Emma Ettawagas failed to develop a unique marketing strategy and instead decided to compete head-on with a firmly entrenched competitor, Eric Steele. Eric is winning in this competition, and demand is probably not sufficient to support both Emma and Eric even if she gets a larger share of the business than she now has. So far, she’s not been very successful in taking business away from him, although she thinks she has better technical skills. She needs to look at this from the customer’s point of view. It may be that Eric has better people skills, even if he doesn’t have all of Emma’s technical skills. In this type of market, the service provider is also the salesperson who is in contact with the customer. Residential customers may not know or even care who has the “best” technical skills—if the person they call exhibits confidence, can solve the problem, and does it in a pleasant way at a reasonable price. Eric's reputation (brand preference or even brand insistence) leaves Emma with mainly "overflow" jobs in the residential market.

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Emma has not been able to reach her sales objective of $70,000 a year, and without changes, it is unlikely that she will. Based on the facts in the case, Emma is mainly getting business that Eric can’t handle in a timely basis. Some of that business involves short-term emergencies and some of it relates to the seasonal fluctuation in demand (a weakness in her Place decision). Petosega is where she wants to live, but the business (and strategy) she has chosen is heavily limited by the seasonal population in this resort community, especially given her emphasis on residential customers (rather than larger companies that might have more consistent needs over time). This is also a limitation of Eric’s strategy—but she ignored that and just copied what he was doing!

The seasonal nature of demand may not seem like a high-priority problem to be solved now since she doesn’t even have enough work to keep busy. But it is a basic limitation with her strategy of targeting consumers who are not there much of the year. Even if she builds her base of residential customers (takes some market share away from Eric) and develops more repeat business, the seasonal nature of demand in Petosega is a longer-term limitation. This is a service business and her “production capacity” is limited by how many computers she can service in some period. That capacity is not even stretched now, but if she becomes more successful, that will be an issue. Demand will be systematically lower during the slow winter months, and she will often have little to do. In the busy summer—and especially during the periods in early summer and early fall as people are moving in and out, she won’t be able to keep up.

Resort town markets often create a “boom or bust” situation for all kinds of businesses!

The case tells students that Emma is yielding about $200 a week, which is $10,400 a year, from the emergency business. The seasonal business might yield $9,000-$12,000, based on $150-$200 a day times 5 days a week times 12 weeks (6 weeks in the April-May period and another 6 weeks in the SeptOctober period). In combination, that is about $22,000 a year or roughly a third of her goal.

Students will see that there is little that Emma has done to differentiate her offering, and many will also argue that she probably won’t be able to offer customers a better value than they can get from Eric. What many students will miss is that even if she is successful (over time) in taking a larger share of the market away from Eric, the overall demand that the two of them split is not likely to grow rapidly. Thus, even in that “optimistic” outcome, revenue that was sufficient for Eric would simply be divided between the two of them. In that sense, while Emma’s decision to enter the market may ultimately hurt Eric (take away some of his revenue during the slower periods), it doesn’t appear that she can really win! This unpleasant outcome isn’t likely to change even if she does a better job of implementing her current strategy (perhaps by being more effective in promotion, doing things to stimulate word of mouth recommendations, giving price breaks to repeat customers, offering a service guarantee, etc.) This suggests that she needs to look for some other strategies, perhaps in combination with what she is currently doing, so that her overall marketing program is profitable even if no individual strategy, by itself, is.

In evaluating alternative opportunities (and strategies) she might set one screening criteria based on the seasonality of demand. She would be better off if she could “add” a new target market and marketing mix that would keep her busy during the slower winter months. It might be that some large business consulting work would help in that respect. The case doesn’t provide much detail about that sort of opportunity, but one does get the sense that she may have too quickly concluded that “big companies have their own experts.” Many businesses—even large ones with a permanent staff—outsource some of their work during peak load periods. For example, peak workloads for a company’s internal computer staff are likely to occur when they are making bigger one-time changes in the computer system (updating the network, installing new versions of software, replacing old computers with new models, etc.). During such times, a company’s internal staff may be overloaded and eager for short-term help from a consultant.

Emma might want to research opportunities such as this, and if the demand appears to be there, she could make some sales calls on “prospects” to tell them about her capabilities. This is not the sort of business that she is likely to get by simply sending out a flyer or advertising in the newspaper. It would require a more aggressive personal promotion effort in the beginning, but it probably could work because getting good, dependable computer help is not easy and can be expensive. Therefore, the subset of large companies that go "outside" for extra short-term help could be an appealing market.

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And this is certainly not the only possibility. Emma might look for totally new areas that could use her skills, areas where there is more potential for growth (and less competition). Consider, for example, her decision to focus on computer service as her Product. In an upscale resort community, there is likely to be interest in and demand for other Products like “high-end” home theater systems. These usually require installation, technical skills that many consumers don’t have, and even occasional service. In fact, there is a merging of technologies, such that many computer companies are now offering audio/video accessories and promoting multimedia capabilities. In many home theater and audio systems, a computer becomes the “media server.” By focusing on these needs, Emma might be able to get a large share of a growing target market. Note, however, that the case doesn’t tell us much about the competitive situation in that sub-area of the market. Emma would need a better understanding of both the demand and competition in that service arena before making any decision.

Regardless of the alternative opportunities Emma decides to pursue, she will probably need a combination of different strategies if she wants to stay in Petosega and wants to keep a partial focus on her “core” idea of providing computer services for home offices. She may be able to achieve her income objective if she chooses several targeted strategies at the same time and implements them well. For example, she may be able to count on the "emergency" business year around, get more of the seasonal resort home business during the 12-16-week summer season, develop the home theater business in the early spring (so systems are installed when residents move back to town), and work to get some large business consulting work, especially during the winter months. By combining these strategies, she may make enough to be able to reach her objective of making a living in Petosega – even if she can't reach her $70,000 objective right away.

In other words, by carefully developing several marketing strategies – rather than just one – and then implementing them alongside each other, she may be able to stay in the area. It is important to see that these strategies do not hit Eric head-on, but rather involve business that he is either not interested in or unable to handle. There may be room for two "good" technology support firms in this city – and with careful planning and implementation, Emma may be able to become as invulnerable to competition as Eric is.

Case 5: Resin Valleys A production-oriented research engineer and her company anxiously sought a market for the component materials it could already make (although it is now trying to sell an installation – note the product class change at some stage in the discussion, because this calls for different marketing mixes as long as they keep selling installations). No consideration was given to the legal environment or to potential customers' attitudes. In this case, architects' opinions should have been sought along with the probable reaction of building inspectors and fire marshals – who are required to enforce building and fire codes.

Before any further work is done, a more careful analysis of the probability of acceptance in various markets should be performed – especially in the "global markets" suggested by JZ Zhang, the young engineer who developed the product. This would be far less expensive than the trial and error (demonstration) approach that Zhang endorses, Typically, such people like to produce tangible evidence of their research efforts, but the added cost (time and money) of finding architects and building inspectors who will bother to look at the products discourages Zhang. Following some preliminary market research, it might be possible to develop one or more profitable marketing strategies, but this should be done only after some potentially attractive target markets are isolated – if there are any! [Note: aside from a few demonstration domes, this product did not find a market and is not being offered.]

Case 6: Valley Steel Valley Steel is facing oligopoly conditions in the smaller sized markets. Although price competition is sometimes avoided in such markets, here price competition from smaller and lower cost producers has been pushing prices down. In the production of flanges 24 inches or larger, USX has had a monopoly; this is the market Valley Steel is aiming at with its "new product."

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Using a typical production-oriented approach to product development, Valley Steel has introduced a "new" component material that does not meet standard specifications, so the structural fabricators will not buy (unless they are foolishly willing to use non-spec'd materials and assume all the liability that otherwise would fall on the architects). Further, it has not worked with architects to get them to write a more general set of specifications that will cover this "new" product. If sources of supply are adequate and prices are the same, it is likely that the new product will not sell at all. Sales effort should focus on gaining acceptance for the product among architects who write the specifications that the fabricators must meet.

It is interesting to note that a couple of years after this "new" product was poorly received, supply became quite tight, and Valley Steel product was readily accepted as a substitute that met the specifications! This is just another illustration of how customers' needs and attitudes must be considered.

Case 7: Lake Omarama Lodge Lake Omarama Lodge is, in some ways, a targeted operation–it certainly isn’t trying to serve a convenient local market or some sort of international mass market. It has been developed to serve a very elite, highincome clientele, with a targeted set of high-end services and experiences.

When students address the characteristics of the market segment(s) targeted by the company, they are likely to identify immediately the basic characteristics above, especially wealth. It’s useful to have students list some of the different types of people who might fall into this group. These might include politicians or others with high public visibility, corporate executives with high incomes and net worth, entertainers (from the music, TV, and movie sectors), high-profile professional athletes, and people with inherited wealth. Some needs are similar across these different types of customers. For example, they may all be seeking privacy, variety, a unique and exciting “life experience,” and food and attention of the highest caliber. They also may be seeking status, social connections, and opportunities to network with their “own kind.” That is a potential issue because some of the people from one type of group might not blend very well with people from another. A rock star might not want to be thrown in with a group of highlevel executives. Or a professional athlete might not think that being grouped with a set of political leaders was ideal. No doubt they also have different ideas about what to do with their leisure time–and that makes it challenging for the firm to cater to their individual preferences.

Expectations of the customer group will obviously be very high. Lake Omarama Lodge can’t get good word-of-mouth referrals or satisfy its current customers if everything isn’t exactly the way its customers hope it will be. In the New Zealand wild, it might be impossible to provide some of the amenities that this upscale target group takes for granted in other locales–like the big cities where most of them probably live. Lake Omarama Lodge probably needs to communicate to guests–before they arrive–what to expect.

It can highlight the lodge’s unique features, including the “escape” from some of the things it doesn’t offer.

This may be a bit of a positioning challenge, but it is not that different from the challenges faced by other service organizations. Disney, for example, focuses on a very different kind of market, but it still must cope with the fact that people who go there don’t find everything they might expect as normal (such as fast-food places with 99 cent hamburgers). Disney tourists may also get things they don’t want or expect– like a two-hour wait in a line for a popular ride. Disney tries to deal with these problems by using careful communications to manage expectations.

Most customers are likely to be foreigners rather than New Zealanders for the simple reason that Lake Omarama Lodge is more likely to be seen as interesting and exotic by someone from far away, rather than by someone who already lives in New Zealand–even if the person is quite wealthy. In part, the fact that Lake Omarama Lodge is so difficult to reach makes it attractive to people who otherwise can have or do anything they want. This sort of wealth is not concentrated in certain countries. For example, they might just as likely come from China, the Middle East, or Europe as from the U.S. or Canada. This makes it difficult to “reach” potential customers except through their personal network of friends. On the other hand, to the extent that the customers come through personal referrals, they are more likely to be a more homogeneous group and may even be more concentrated in specific locations–whether it is from Hollywood or Tokyo.

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It would be difficult for Lake Omarama Lodge to perform traditional marketing research – at least if that means quantitative surveys. Its target customer is not the kind of person who is likely to respond. On the other hand, there is probably a good opportunity to make use of secondary data and/or to do some informal qualitative research with guests who are actually there. For example, in the domain of secondary data, Lake Omarama Lodge might be able to research similar resort facilities in other parts of the world to see what they offer guests, how they handle promotion, and the like. In fact, this might lead to some opportunities for cross-promotion. Once a person has been to a fantastic and isolated resort in the Swiss Alps, they might be interested in a very different experience, like Lake Omarama Lodge (or vice-versa).

Informal questions to guests might not be viewed as research but rather as polite conversation. Either way, it could serve the same purpose. For example, the hotel manager can ask guests how they learned about the lodge, what services or features were most interesting to them, what they found lacking, and the like.

Case 8: Zefferelli’s Italian Restaurant It seems doubtful that Rita Zefferelli has a clearly defined marketing strategy. She picked a location (Place) near the intersection of major traffic routes because she felt that: "obviously the potential is here.”

This would seem to suggest that she was interested in catering to traveling people – but when the business did not develop as she had hoped, she resorted to some radio and newspaper advertising, which suggests that she was trying to cater to local people. This promotion was in desperation – suggesting that originally, she was going to rely primarily upon Place to attract customers. It seems likely that the increase in her sales was due to repeat local business coming for a good product at perhaps a reasonable price – perhaps family business from the neighborhood. Perhaps word-of-mouth advertising among travelers may account for some of the growth. In any case, she did not recognize the potential power of promotion.

If Rita were interested in attracting traveling people, it might have been wise for her to offer complimentary dinners to gas service station owners and attendants in the nearby area – to acquaint them with her place and service. Further, some roadside signs might have attracted attention. To attract local business, she might have used radio or newspaper advertising earlier – with the idea of "investing" money in advertising rather than seeing it as an expense.

Note that she had to invest an additional $3,000 for "survival purposes," which probably means to meet the ongoing expenses that were not met out of gross revenues. This is another case of "having to spend money to make money," and production-oriented people are often very reluctant to spend money on promotion to tell people what a good product they have. However, without promotion, Rita had to wait a long time before some customers found that she did have an attractive offering.

It is important to recognize that Zefferelli’s Italian Restaurant is not yet a "big success.” Rita is still not drawing a salary out of the business. Further, she is planning to invest the small "surplus" into improvements that may be necessary just to provide adequate service. Further, at $4,200 gross per week, she is still a "small business," grossing only $218,400 per year. A typical fast-food franchise would be grossing much more – without all of the care that Rita is lavishing on her business. Many McDonald's fast-food restaurants gross over $1 million, while many less successful fast-food places gross $500,000⎯$1,000,000 per year.

So, it should be clear that Rita has created a "small business" that may require her continued involvement just to break even. Without a bar or at least a liquor license, she may be doomed to working at her present level just to break even. With hard work, she may be able to make a living – but it doesn't look like she has an outstanding strategy that will cause sales to increase much more. Therefore, she might be wise to consider going with a franchise chain – to get someone else to do the strategy planning for her. It may be "too late" – given that she has "locked" into this place for 10 years and has already invested a lot of money in "improvements" that might have to be scrapped. Another possibility is to try to sell out to some other "innocent" and then go with a franchise chain – if she can sell for enough and raise (borrow from friends) some more to have enough to be able to go with a chain. This might take $200,000 to $500,000! It will also require her to accept that she is buying someone else's strategy – i.e., she will lose some of her "independence" – something she may not want to do!

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This case can be used to emphasize that it is necessary to have a good strategy to make money. Hard work alone is not enough.

Case 9: Rest Easy Motel This case describes the typical production-oriented businessperson who designs a product to satisfy himself. As a traveling businessman, Tristan Knaus had been in many motels and now has bought one that would have satisfied him as a traveling businessman. Unfortunately, most of his potential customers are tourists and vacationers, and only a few traveling businesspeople.

His motel is probably seen as an emergency product by some tourists and a homogeneous shopping product by others, both of whom are just looking for an economical place to stay. He is probably losing most of those who think of motels as heterogeneous shopping products (those who drive in and out again) and those who have reservations at preferred locations (specialty products).

If Tristan Knaus wants to continue with his present "economical traveler" strategy, he probably should consider raising prices some. There is no point in "giving away" his rooms. This will not increase the occupancy rate, but it may increase profits. Alternatively, depending upon his present customer mix, he might decide to raise prices even higher and count on the "emergency product" business. Whether this is a good alternative depends upon the mix of his present customers. If most of them come in late in the evening and stay only one night, then he might want to rely on place convenience to attract enough of these people at higher rates to make his motel profitable. To help attract more of this kind of business, he might want to invest some money in signs away from his present location. In fact, this probably would be desirable whether he goes down the emergency product route or stays with his low price-oriented approach. People must know where you are – or be able to find you – to buy – and his motel is not located in the heart of the resort area or just off the new state highway.

Affiliating with Days Inn of America, Inc. is the "next step" beyond the possibilities discussed above. The major advantage of going with Days Inn is the additional business that would be generated by the reservation service and “drive-ins” attracted by the Days Inn brand. Because no other Days Inn is nearby, it is likely that additional business would be obtained – though probably not the 40 percent suggested in the case because Tristan may already be getting some of the typical "price-oriented" customers who happen to be in the area. In addition, given that Tristan would have to pay 8 percent on the total gross room revenues (not just those generated by the reservation service), he should analyze the likely profitability with and without the reservation service. In fact, he should do this for the various alternatives discussed above as well as the two franchise alternatives he is considering. Such an analysis would probably show that the Holiday Inn alternative is less attractive than one or more of the others, because of the required improvements and the unlikely increase in sales given his poorer location (away from the resort area). In contrast, proximity to the interstate highway may improve the likely results of going with Days Inn. If being near this intersection is attractive to motel operators, he should expect to see one or more motels being constructed near his motel – but closer to the intersection with the major highway.

Then his slightly poorer location and lack of a national affiliation may turn out to be "killers.” That is, he would not be in the resort area or "just off the highway," and he would not be affiliated with any national brand. He might be in an "empty box" on the market grid for motel service, and his losses could grow.

Depending on the instructor’s objectives, it is possible to push the analysis of the numbers in this case a bit further. This doesn’t bring some clear resolution to the issues and is not intended to be a substitute for a look at the qualitative considerations, but it can help students realize that a “rough cut” at a profitability analysis can sometimes be useful even if there is a lot of missing information. For example, we know that the motel has 60 rooms and that it has a 55 percent occupancy rate. So, on average, that means Tristan is renting about .55 x 60 or 33 rooms a night. The rooms rent at about $45 a night, so the average daily sales revenue is about $1,485. If you multiply those times 365 days in a year, that means the total revenue at present is about $542,025.

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(2) the occupancy rate actually realized, and (3) the price per night that would be charged, and the fee earned by the chain (which at present is the same for either chain - 8 percent of gross revenue).

The case does not explicitly say what price Rest Easy Motel would charge per night per room if it were part of the Days Inn chain, nor does it state what occupancy rate might be achieved. However, if the occupancy rate went up to the average level for this type of hotel (68 percent), that would be an increase in occupancy of about 24 percent (that is, 68 percent average occupancy minus 55 percent current occupancy is a 13 percent increase, and 13 percent divided by the current rate of 55 percent is about 24 percent growth). Most of the expenses of running the hotel are probably fixed, and the variable cost of renting out a room is not very high (laundry, wear and tear on linens, utilities, and maid service), so it is likely that joining Days Inn would result in much higher revenue for Rest Easy Motel, even after paying the 8 percent “commission” on gross sales. An example: if the room rate per night remained the same as it is now, and the occupancy rate only went up to the industry average, Restful Night Motel’s revenue (after paying the fee) would be about $618,342. This is the result when you increase the current revenue by the 24 percent increase in occupancy (which gives you about $672,111) and then subtract 8 percent of that amount in fees (which is .08 x $672,111 = $53,768). Under this scenario, revenue would increase from about $542,025 to about $618,342, or a change of about $76,317. That extra revenue would come at a cost since there would be about an extra 8 guests per night or about 8 x 365 = 2,920 extra guest nights per year. However, if you divide the extra revenue by the extra “guest nights” you get $76,317 / 2,920 or about $26 per guest night. Since it is unlikely that it would cost this much to clean the rooms and keep them in shape, this looks like it might be a more profitable arrangement than what is happening at present. If could be quite a bit more attractive if the room rate could be higher, the occupancy rate higher, or both happened at the same time. Note that the point here isn’t to be precise so much as it is to show that one can work with little information, yet “get a handle” on the financial side of this issue.

The Holiday Inn arrangement requires more cash up front, but that is offset by higher room rates. For example, if the occupancy rate went up to the industry average (68 percent) and the rooms could rent for $75 per night on average, the total revenue would go up to about $1,027,549 (after paying the fee). This is the result of multiplying 60 rooms x .68 occupancy rate which is 40.8 rooms (on average) per night or about $3,060 per night in revenue multiplied by 365 nights per year is about $1,116,900 gross revenue, from which 8 percent ($89,352) must be subtracted for the fee. If the average occupancy rate could be achieved at the higher price, the increases in revenue in the first year would almost be equal to the cost of making the improvements to the motel. Of course, there might be associated increases in other variable costs to meet the Holiday Inn standards, but it still appears that the break-even on the investment might not take as long as it might at first appear–and after that, profits would be quite a bit higher. But this is based on the assumption that the occupancy rate would really increase significantly, and that may be unrealistic even with the Holiday Inn reservation system kicking in. The Rest Easy Motel location is a bigger disadvantage – and one he can’t easily change–if he really wants to compete against the other better-quality motels.

In short, this rough analysis suggests that either the Days Inn or Holiday Inn affiliation might be more profitable than what Tristan is achieving at present. It would take a more complete analysis, including other qualitative factors, to determine clearly which might be better. On the surface, it looks like it would be a “big leap” for Tristan to compete effectively against other higher-priced motels in the area. In that regard, the Days Inn arrangement looks like a potentially better fit.

Case 10: Anderson’s Ice Center Mark Anderson is facing a very difficult problem, one that has been "solved" by most rink operators by simply catering to the "mass market" – anyone who wants to skate in a public skating session. As explained in the case, this leads to the ice rink catering to a mixed group. Some people want exercise (physiological or personal needs). Others see it as a social situation. And the younger kids are just there for "fun," which includes skating around the other patrons and reducing their pleasure. In most rinks, ice guards try to keep some degree of order and slow down the faster skaters.

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"hockey practice" – to try to build up the more attractive weekend times (some of the weekday people might come then, anyway, if the weekday times were not available.) This might increase profits some.

It is possible that the roller skating rinks have success with their format because "that is the way it has always been done.” From their very first encounter with roller skating, customers have been exposed to some kind of "social" format rather than an "exercise" format. If this is appealing to them, they return and if it continues to appeal, they become regular patrons. Ice skating, on the other hand, has been more exercise-oriented – and those who are satisfied with this experience are the ones who return.

Mark is trying to change established customer patterns. This is a big job – perhaps an impossible one, because ice skating is more difficult to learn. The first experience is typically not enjoyable – especially compared to the first experience on roller skates. This is due to a variety of factors including poor fitting or dull ice skates, no instruction, and perhaps poor physical coordination of patrons. Roller skating, in contrast, is done on four wheels and, at the very least, the patron can just stand there and be pushed around by friends.

Mark will not be able to make a drastic change in his public skating format in the short run unless he is willing to "invest" in a new format. If he decides to go after the "couples" market, then he will have to exclude the younger patrons. At the same time, it probably will be necessary to promote aggressively to the new target market. Further, it might be desirable to offer mini-skating lessons for partners who have not skated before. Further, in the transition stage, the "dances" should be relatively easy to make it a pleasurable experience.

It is important to recognize that Anderson’s would not be catering to a strongly felt ice-related need, but rather to the "generic" need for "recreation.” Presumably, the potential customers are already satisfying this need in a variety of ways – including going to movies, dances, high school games, and so on. That is, they treat ice skating as a heterogeneous shopping product. Therefore, it will be necessary to compete against a variety of competitors – many offering something that is much easier to do – i.e., is less "active.”

This means that it is unrealistic to expect that all young people are potential customers. Moreover, identifying exactly who can be attracted is not simple – thus complicating the promotion job. Obviously, it would be desirable to use some mass media but, unfortunately, given the potential sales volume, mass media would be expensive. This forces more reliance on word-of-mouth promotion. Therefore, it is imperative that the customers who are attracted to the new format – by whatever means – have a good experience. This probably means that someone should be appointed "social director" to ensure that the proper environment is created and maintained. This will add another expense unless Mark can do the job himself.

Perhaps the marginal gain from switching strategies would not be worth the effort. An initial loss probably would have to be incurred while eliminating the younger part of the present market and attracting "couples.” But if the strategy is successful, then in the long run a loyal group of customers might develop and make the sessions very profitable. As noted in the case, this has happened in some ice skating rinks.

This is probably because of the skill and determination of the manager to make such a session go – rather than customers asking for it or just coming to the regular session and making it a social situation.

The decision is not clear-cut. Is Mark Anderson able and willing to work to create a new marketing strategy? Or would his time be better spent on other possibilities? As noted earlier, most rink operators have not tried to segment their broad market and create "social" strategies – preferring instead to try to make their public sessions as appealing as possible to anyone who comes. Given that this is what most customers have been offered and come to expect, this may not be such a bad decision. Changing people's attitudes is difficult. But staying with the present strategies (especially for Friday and Saturday nights) does not solve the profitability problem either! Maybe he'll just have to accept the present situation as the best he can do – "the grass is not always greener on the other side of the fence."

Case 11: Luciana’s Running Shop Luciana’s Running Shop is a "specialty shop" that focuses rather narrowly on Nike running shoes and some running accessories but has begun to branch out trying to find a new way to grow sales and profits.

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Unfortunately, these efforts are not working very well and Luciana Gomez, the owner, faces the classic problem of trying to retain the loyalty of her traditional customers while changing her marketing mix to appeal to new types of customers. This is complicated in a market that is reaching maturity and is generating increased competition from several competing channels. Some of these channels offer reasonably good running shoes and others are probably better at fashion and other types of “sneakers.”

So, the "happy days" of early market growth are over and Luciana is considering what to do. Her energy and risk-taking motivation of the early days have paled and in many ways, she is now just trying to “hang onto what she once had.”

The alternatives she is considering require major changes in strategy and should be carefully evaluated – including not only the pros and cons of the alternatives but some rough financial estimates of the costs to make these changes. How easily and profitably will the present store and its personnel will be able to implement each of the proposed strategies?

Probably the most basic question is whether Luciana can adapt what she is doing in such a way that she gains any sort of competitive advantage. The “custom shoe” opportunity on the surface seems to be very consistent with Luciana’s original focus, but it requires a focus and investment that is narrow compared to what she has been doing in recent years.

It is logical to expect that a shoe manufacturer would look for other shoe-market opportunities–even mass customization opportunities or the move to related sports lines – when sales fall off. Luciana’s Running Shop is not locked into one manufacturer’s product line, so Luciana has a wider range of opportunities to consider. However, she is somewhat locked into jogging-oriented retailing and must be realistic about how well she can implement "non-jogging" strategies – especially ones that take her very far into the “fashion market” or other markets with which she is not familiar. She may be able to learn and apply her skills in new ways, but a key reason for her past success was that she knew what she was doing! In the past, she could really add value and help her customers. That might still be true with the custom shoe business, but if her target market of serious runners continues to shrink, it’s pretty certain that she will see an even smaller number of people interested in expensive custom-made shoes. However, if she has exclusive distribution and her territory is large enough, she may be able to attract customers from a larger distance, especially if she can use her website effectively. On the other hand, promoting the idea of custom shoes on a website is different from doing business over the Internet. She still must get the customers into her store to make the mold—and one has to ask how much demand there will be relative to the required investment.

One alternative that she should evaluate is being satisfied with her present business. It may not be a growth business, but it might be profitable for several years while some of the other alternatives may not be profitable at all! It might also be possible for her to experiment with a variety of smaller changes rather than trying to shift the strategy all at once. For example, she might introduce the custom shoe line while at the same time adding some different types of shoes from other manufacturers in areas where she thought that Nike was particularly weak. She could also begin to add fashions or other related products that are closely related to her current customers changing interests. Then, the lines that didn’t perform well could be dropped or refined and the ideas that do work could be given greater emphasis. This would still require a strategy, but it would be based on the screening criteria that changes should be slow and evolutionary to reduce the risk of suddenly losing what she already has.

It’s not clear that the alternatives that she is considering at present really focus on a significant unsatisfied need. The firm that was previously supplying her with custom shoes may have gone out of business for a variety of reasons, but she needs to at least consider the possibility that there was not enough demand for custom shoes to justify the costs. After all, most people—even serious runners—can find a good quality shoe from an off-the shelf-assortment.

Admittedly, some of these markets (say, for general athletic shoes) seem to be quite large, and there are many other retailers who are already serving them. Further, many of her competitors are better able to compete with low prices that she can’t match, at least not easily. At the extreme, several the ideas may simply be production-oriented notions that are "logical" but wrong. Luciana's current customers may never be interested in any of these new lines.

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To get a better idea about the alternatives, Luciana should construct several P&L statements to try to estimate the likely profitability of the alternative strategies she is considering. Obviously, this will be very difficult given that she has a very poor understanding of the size and nature of some of these markets.

Some crude assumptions will help sharpen her thinking about how much new business she would need to obtain from her current customers and/or how many new customers she would need to pull in for the new product lines to justify changing strategies. This analysis will probably show that some of her customers are quite fashion-oriented; therefore, taking on additional "quality" fashion lines of both running and walking shoes might be consistent with her present image. She can then keep some of the "fashion" business that she loses to competing stores, which might be enough to enable her to continue in her present location.

Whether Luciana adds more "fashion" merchandise and aims at fashion-oriented shoppers, or moves to the new custom shoe producer, she will need to retrain her salespeople and probably move to different displays and advertising copy thrusts. With care, it may be possible to promote running and other related gear and fashions without driving away the original jogging customers. After all, many of the original "jogging" customers probably were not that serious about jogging so they may not see it as a major shift.

If the serious joggers are able to get what they want from knowledgeable salespeople, they may be satisfied too. In other words, the store would seek to implement a multiple target market approach – aiming at both the serious joggers and less serious joggers who also happen to be interested in fashions.

In the end, Luciana probably will want to continue positioning her store and its image as "serious" rather than "pure fashion.” So, retaining the Luciana’s Running Shop name along with appropriate copy will probably be desirable.

An alternative not mentioned in the case, one that probably should be dismissed very quickly, is shifting to a sporting goods store. This is far from her present operation and strengths. Such a move would require much more capital. Further, most areas already have several well-entrenched sporting goods stores and discounters fighting it out in market maturity.

Luciana knows a lot about her present market and should be able to make an informed "guesstimate" of the size of nearby markets and their likely responses to alternative marketing mixes. If she can't find something that looks attractive and builds on her personal strengths and personnel resources, then she probably should consider a much wider range of opportunities – even starting another business that moves beyond sporting goods to other areas where she thinks that she can add value.

Case 12: PersonalHealth.com—Custom Vitamins This case offers an opportunity to discuss customer service, customer retention, word-of-mouth promotion, customer satisfaction, financial analysis in marketing, and possibly cross-functional topics in the context of an Internet retailer. Customer service has proven to be a challenge for many Internet companies, so the situation may not be unusual. In fact, an instructor might start the case by asking, “Has anyone experienced problems buying online?”

This case was inspired by a real-life incident and “The Case of the Complaining Customer” (Harvard Business Review, May-June 1990, pp. 9–25). The Harvard Business Review case includes comments from four customer service experts. Some of these comments may be useful in the discussion of this case and interested instructors are encouraged to investigate this resource.

In teaching the case, the instructor might start broadly, perhaps asking “What is the problem facing PersonalHealth.com?” This question typically results in a broad variety of responses that include: (a) specific people like Maxine Slezak or Paul Zimbalist; (b) computer systems; (c) customer service procedures; and (d) whether to compensate Maxine Slezak and, if so, how much. The instructor should be prepared to take the case in several different directions. It might make sense to record different answers on the board – and then explore each individually. Arguments can be made for each: • Maxine Slezak is demanding and seems to have had a hand in the mistake. Is she asking for too much?

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• •

Paul Zimbalist does not appear to be a strong customer advocate. Should a customer service manager more strongly advocate the customer – or the company?

Internet companies often rely on computer systems to help them manage customer service. What are the strengths and weaknesses of this approach?

A more focused approach, and one we find easier to work with, is to jump to Paul Zimbalist’s assessment that some customers may not be worth the trouble. Ask the question: “Is Paul Zimbalist correct? Do you think PersonalHealth.com would be better off without a customer like Maxine Slezak?” The instructor should sense the stance of the class and be prepared to play devil’s advocate since most students find it difficult to get rid of customers. The instructor might ask, “Are some customers not worth keeping?” or “Are we setting precedents here?”

The discussion can then move on to whether to compensate Maxine Slezak and, if so, how to compensate her. By the way, another option for teaching this case is to start with the statement and question: “Maxine Slezak is asking for a free 90-day supply of vitamins plus a formal apology. Should the company compensate Maxine Slezak for her trouble? How many of you think she should be compensated? How many of you think she should not receive compensation?” Recording student votes on the board helps to commit students and get them more involved in the discussion.

Then ask of those who feel Maxine Slezak should receive something: “What should she receive?” At this point, it is useful to get a wide variety of answers on the board. Usually someone asserts that a simple apology will suffice. At the other end of the spectrum, someone usually suggests giving Slezak quite a bit more than she requests. Arraying these on the board – from lowest compensation to highest – can be useful. Leave one option – do nothing – farthest to the left. If students fear providing extreme answers, goad them – “Come on, doesn’t anyone think that we should give her even more than she is asking for?”

(Often some students feel this way but are afraid to state it publicly). The instructor can again survey the class and ask how many favor each of the responses identified above (moving from lower to higher). The instructor might even write student names next to their suggestions.

Then the instructor can ask students favoring a more modest proposal, “Why do you think this is the right option? Why aren’t you advocating something way out there like ‘[student name]’?” The instructor can then choose a student who advocates greater compensation and another with a more extreme proposal.

A variety of issues may surface here. One is that while customers often ask for hard compensation (free services or cash) – they often react best to someone simply showing they care. In fact, if Dr. Jane Chung herself were to call, thank Slezak for her concern, and promise to improve service, Slezak may forget all about compensation. On the other hand, a good argument can be made for giving Maxine Slezak financial compensation, especially when we consider her financial importance to PersonalHealth.com. A financial analysis of the value of Maxine Slezak helps to make that point.

The instructor might move the discussion along by asking, “How much is Maxine Slezak worth to the company?” Students quickly point out that she purchased almost $800 worth of products last year and, now that prices are higher, she is likely to spend closer to $1,000 this coming year. The instructor can be sure students consider actual profits by looking at contribution margin. “What type of contribution margin are vitamins likely to have?” If the contribution margin on the vitamins is 50%, the contribution might be $500 per year. Plus, if we talk about lifetime customer value, we can see that she may buy vitamins from PersonalHealth.com for many years to come. If she buys for 10 more years, this totals to $5,000 in contribution. We know that her referrals have resulted in at least 7 new customers (who noted her name in the referral program). Plus, it is likely that even more customers have been influenced by her positive word-of-mouth. If we simply assume that she brought ten customers to the company by her positive wordof-mouth, and each spent a similar amount as Maxine Slezak, and each stayed an average of five years, then her referrals would bring the company an additional $25,000 (10 customers x $500 contribution per year x 5 years). This quickly demonstrates the power of her advocacy.

If Maxine Slezak has such a strong positive influence, her anger might result in a strong negative influence. She might run around telling potential customers not to use PersonalHealth.com. In fact, studies have shown that customers are much more likely to tell friends about a negative experience than V-13 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

a positive one. Maxine Slezak’s anger might drive her to posting bad reviews of PersonalHealth.com at a website like Epinions.com. Then her reviews could be read by many Internet shoppers.

Even if the contribution margin were a very conservative 25% (and the financial analysis totaled half the numbers shown here), the numbers favor doing everything possible to save this customer’s business and her strong loyalty.

While this teaching note emphasizes the financial issues (and they should not be overlooked) it is important to spend as much or more time talking about the softer side of customer service. Customers need to know that the company cares. The financial issues show why it is important to keep this customer, but it is likely that the way the issue is handled will determine Maxine Slezak’s continued loyalty. To return the discussion to the softer issues, the instructor might ask, “Should we simply send Maxine Slezak a check? Is there anything else you might suggest?” This allows the instructor to remind students that ultimately customer service is an interpersonal experience – PersonalHealth.com must also appeal to Maxine Slezak on an emotional level.

The case may be used in several different chapters: • Chapter 2: customer equity, customer retention, or customer lifetime value • Chapter 5: customer behavior • Chapter 12: online retailing • Chapter 14: customer service

Case 13: Pierce-Paul, Inc. (PPI) Pierce-Paul, Inc. (PPI) is selling office supplies and the folder line in question appears to be in market maturity already (the margins are down to 20 percent and the president is worried about the "commodity end of the business"). Assuming that Business Center is now determined to get its own line (a reasonable assumption) then PPI must decide among several alternatives: (1) produce a dealer brand for any request, (2) produce dealer brands for "commodity" items like the folders, or (3) don't produce dealer brands. Ideally, some assumptions about likely sales, costs, and profits should be made for each alternative – and the best one selected (given AAA’s long run objectives of avoiding dependence on one customer, selling "quality" products, and profitability). Here, not enough data is presented for this, so the analysis must be subjective.

This is a "tough" decision given PPI’s objectives. It appears that this product-market is already very competitive (moving toward pure competition) and in market maturity where there will be continued price pressure. Assuming Business Center can and will buy these folders somewhere and in volume, it probably will be profitable to take the business, setting volume discounts (1) so the net return to PPI is similar or higher (when the normal "promotion and overhead costs" are backed out of the costs), and (2) so that not many other customers will want to buy their own dealer brands. (Note: the local stationers may get a buying group together and want a lower price too – but this will come regardless of what PPI does here. The market is just getting more competitive for "commodities.")

One obvious conclusion is that PPI should work harder to develop new products, using the short run profits (if any!) from dealer branding to help it avoid the inevitable continuing pressure on existing products, especially the "commodities.” This is a fact of business life and a rigid "anti-dealer branding" policy will not stop the product life cycle from moving on and profits being squeezed as competitive pressures increase on homogeneous "commodities." Most likely, production-oriented, "old-fashioned" stationers will be squeezed by the new superstore chains. In fact, PPI probably should consider selling to these chains. In the long run, they may dominate this area, just as grocery supermarkets do in their area.

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Case 14: Schrock and Oh Design This case examines a small service company – an architecture firm – that works with both businesses and consumers. The case was inspired by reading about another small architecture firm that built its business by relying heavily on various sources of owned media.

The case can be used to discuss B2B marketing for a service firm (chapter 6), segmentation and targeting (chapter 4), integrated marketing communications (chapter 13) or to explore owned media (chapter 16). One of the first issues to have students explore is who is the company’s target market. It appears that some of its leads might come from consumers and others from businesspeople (commercial buildings). Thus, step in discussion might be around the target market – and perhaps discussing if the needs of these target markets is similar or different. And what the knowledge base for each target group is.

The last lines of the case are a hint: “Our goal is to attract qualified leads. We would like to attract customers who already know they want to build a contemporary home or commercial building—and then we can use our time with them to discuss what our design firm can do.” And earlier in the case it is mentioned that customers arrived “early in the buying process.” Qualified leads for this firm emerge when the customer already has some idea of what they want. The “personal selling” that comes when meeting clients is an expensive way to educate customers – and it is inefficient for a small architecture firm. This suggests that the company’s website might help educate customers about contemporary design and its work processes. The site could include photos of the company’s previous work and perhaps some case studies that describe how they work with customers. After a customer has reviewed the site, some will lose interest, but those that contact the architecture firm will be more qualified.

It is also apparent from the case that Schrock and Oh Design is not approaching their social media campaign with a clear strategy. The blog posts described come across as scattershot. If the blogging campaign answered typical customer questions, it would educate customers and bring in more qualified leads.

If used in chapter 4, one could emphasize the different target markets. If used in chapter 6, a discussion of the organizational buying process might provide an overlay. In chapters 13 or 16, the case focuses on marketing communications. We describe some specifics for these last two chapters next.

This case offers students an opportunity to think about owned, earned, and social media in the context of an interesting service business. A key “hint” in this case is Kevin’s comment about how much time they spend educating customers about design projects – showing them photos and answering questions.

Schrock and Oh Design might want to use its blog and website to educate customers and to position itself as an expert in contemporary design. Architecture is naturally a visual business – so a website with lots of photos of their work might do both. A question and answer page might also be helpful. For example, many customers might be interested in knowing how much a custom project costs (as compared to a prefabricated home project). They could continue to blog – but not so randomly. They should make sure that blog posts have specific objectives. The company may also want to post some white papers or case studies, to give users a better idea about how Schrock and Oh Design solves its customers’ problems. An instructor might start a discussion by asking – what is Schrock and Oh Design’s promotion objectives?

Case 15: The Wabash Group Jessica Agarwal is a manufacturers' agent selling accessories in Columbus, Ohio. Agents usually expand by adding similar lines that will appeal to the same target customers. Ideally, agents should have a large number of lines, so they are not too dependent on one producer. Typically, they are continually looking for new complementary lines requiring aggressive sales effort and access to their types of customers.

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Rejecting the lift truck offer probably was wise – not just because of the low profit potential – but because different "customers" would be involved, i.e., production people rather than data processing people.

The MetalCoat Company offer does not fit with the normal expansion pattern of agents. It might be a very good offer, but it is not compatible with what she is doing now. It involves selling component materials to (probably) new customers. Further, it probably would take more time than is suggested because she will be responsible for the whole marketing effort. As a selling agent, she would become their "marketing manager" – here that amounts to almost running the whole business. As she spends more time on the solvents – in Mid-Ohio, not just in Columbus – she probably will come to neglect the other products and the "60 percent" of her business will be in jeopardy. Further, she will not have time to strengthen her manufacturers' agent business by developing new lines that might be needed by her present Columbus customers.

Jessica Agarwal must decide between whether she wants to become the "marketing manager" of one firm or stay with the agent business. She is at a crossroads and the decision is extremely important for many years to come. Not only potential income, but also her personal preferences for independence and the kind of job she wants are involved. This is somewhat like the decision students graduating from school must make – what business do they want to be in?

Case 16: Montana Company Tommy Montana is a drop-shipper. He sells lumber to lumberyards, which, in turn, sell these component materials to contractors. Some probably also sell directly to "do-it-yourselfers" who buy shopping products – perhaps even homogeneous shopping products for some types of lumber. Tommy had a geographic monopoly until about six months ago when an aggressive younger man entered and began occasional price cutting on the essentially homogeneous products. In effect, they have an oligopoly situation in the immediate area, although the buyers could buy in almost pure competition if they were willing to reach beyond the two local salesmen. It is probable that everyone is aware of this, and competition may continue to force prices down and put a continuing squeeze on profits.

The offer from Arbor Door and Window Company seems to offer "a way out," but Tommy is being asked to play a different role for the windows and accessories. He would still not handle the products, but now he would be a manufacturer's agent. Further, he would be selling a "cross-over" product (besides the homogeneous windows) that has not been accepted by all potential contractors, architects, and owners.

Instead of simply order taking on the phone for homogeneous products that have already been assembled, he will have to become an order getter and help pioneer the acceptance of the new concept – both to lumberyards and their potential "cross-over" customers and influencers. For this, he would hope to obtain a higher markup, but sales will be harder to get at first.

There is no "right" answer about what Tommy should do. The important point to recognize is that he is being asked to do something different. Tommy should seriously consider what he wants to do and whether he is able to do it. He has not had order getting experience for many years (if ever). This is a more taxing kind of work and at age 50 he may not be willing or able to take on this new responsibility. On the other hand, he may have relatively little to lose – as he would not have to invest in inventory. He could try the new "opportunity" for a while – and see how easy it is to handle and whether he enjoys this kind of work. Certainly, the future is not too bright competing directly with the new competitor. Perhaps this new opportunity will enable him to make some additional income while continuing to compete directly with the new man. If Tommy gives evidence of staying on, then the new man may move elsewhere, because two drop-shippers doing the same thing in this area may not be as profitable for either one. Tommy probably should accept this reality and either tighten his belt or plan to expand into new activities.

It would not be wise for Tommy to take the new offer and drop lumber sales completely until he can see more clearly how successful he will be, and how quickly. He will have to contact contractors and architects – something he is not now doing, and the lumberyards probably will not do! This will tend to take him away from close contact with his present customers. Ultimately, he might lose touch with them.

In the short run, however, increased telephone activity with his present target customers – as well as all

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potential "buying influences" – might keep the business coming in while he is determining whether he can sell enough windows and accessories to make a living.

Case 17: WaterWiser, Inc. This case can be used in a variety of ways: to introduce marketing strategy planning, to highlight integrative planning later in the course, or as a vehicle for students to practice "working with numbers" to support their marketing ideas with financial analysis. In these teaching notes, the focus is on using the case as the basis of an integrative analysis, including some work with "marking numbers" (discussed later in the course). However, if you use the case earlier in the course, you can just stick to basic ideas: identifying what target market(s) to serve and what the marketing mix needs to look like to serve them.

The case provides a good opportunity for students to analyze – qualitatively and/or quantitatively – the current strategy of a small but growing firm and to evaluate various opportunities for growth. On the surface, some of the opportunities for growth seem to be only minor changes in direction from what WaterWiser is currently doing. However just about any changes in the target market or one of the four Ps would have rather significant "ripple effects.” Presently the firm is doing well from a profit standpoint and there is little risk because there is little financial investment. Less experienced students may not see this or recognize its advantages. Students are likely to propose "expensive" plans that might be feasible (and even justifiable in terms of the potential return), though these plans would require additional funding – and it is not clear from the case if the company can obtain that funding. Thus, if the instructor desires, this is a good case for bringing in cross-functional links and constraints. By shifting the focus slightly, from what the marketing plan might be to what would be required to implement it, students immediately come faceto-face with the questions of financing and human resources (who is going to do what).

This case can be used several times. Perhaps a first time early in the course to focus on the idea of the target market, the 4 Ps, and the idea of marketing strategy planning. Then, later in the course, after students have developed a deeper understanding of the marketing decision areas and have been introduced to the issues of marketing cost analysis, breakeven, and the like, the case might be used with more focus on the quantitative aspects. Finally, the case might be used a second or third time to highlight cross-functional issues and how they affect the selection of a plan.

WaterWiser has several potential markets, and they are outlined in the case, but at present, its de facto target market seems to be individual homeowners. The apartment dwellers are not likely to react the same as the homeowners and selling to apartment owners/builders will require a very different kind of promotion effort. The institutional market (perhaps with the exceptions of bars/restaurants) will also require a different kind of selling, different prices, etc. Moving through retail channels will similarly require a different approach. It will probably be difficult to identify/reach owners of boats/RVs without help from intermediaries (i.e., dealers), unless secondary data is available to help target some sort of direct response promotion effort (for example, a mailing based on registration lists for boat licenses, etc.). The company has a current way of doing things that can work – but it does not have a well thought out program for developing different strategies to target different types of markets.

How is the firm doing at present? It appears that there is a good opportunity here, at least at the current prices. But the margins seem very high, and one would expect that such large profit margins would attract other competitors if the demand for filter systems grows very rapidly. Competition would drive down prices, margins, and profits. The obvious point from the data in the case is that WaterWiser is in the enviable position of having very low fixed costs. Marginal profits per unit sold are high, and most costs are on the margin as well.

How could the firm expand? What are the best opportunities? Morton Rinke could go in any number of ways. Most approaches will require more investment capital and the risk of front-end costs. It looks at first as if what he is doing is a bit haphazard because only a limited type of opportunity is being pursued. But the profitability of its current narrow focus is very good. And by expanding its efforts in that domain (i.e., with more sales reps and more new territories), Simply Pure H2O4U can leverage growth and cash flow.

With more income being generated and a broader base geographically, WaterWiser could begin to develop marketing mixes that are better suited to some of its other potential target markets – and at the V-17 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

same time seek a broader product line to protect itself against any problems with its current supplier. In the context of its current thrust, it clearly could spend more effort/money on the prospecting side with the goal of improving its sales rate. More effort to identify good prospects should be a high priority.

The material that follows provides some illustrative questions and analysis related to these broad assertions. Here again, how much you expect from students on these issues might depend not only on when the case is tackled in the course but also how much preparation you have done with respect to individual issues.

How does the PURITY II compare with other alternatives? What are its advantages and limitations relative to customer needs?

One approach to this question is to look at the economic value and/or cost to the customer. WaterWiser costs $.05 per gallon, ignoring the initial $395 cost. Since the filter costs $80 and lasts 2 years, that means that an average household uses about $80/.05 = 1600 gallons of filter water every two years, which translates to about 800 gallons a year or 800/52=15.38 gallons per week or a little over 2 gallons per day. Remember this is just the drinking water and not water for other purposes like bathing or washing clothes. The only alternative on which we have much cost data is Ozarka. At .60 cents a gallon, it would cost about $480 a year. At this rate of consumption, a customer's initial investment in the PURITY II would be paid back in about 395/480 = .823 year (i.e., less than 10 months). Thus, the PURITY II has an economic as well as a health and taste advantage over its main competitor.

The potential health benefits of the PURITY II would probably be most important to hospitals. The potential taste advantages would probably be most important to customers in geographic areas where dogs won’t even drink the water; it is probably easy to identify these areas.

A disadvantage of the PURITY II is that it requires payment "up front." This might eliminate some lower income consumers who would see it as a luxury. The price would be trivial to a bar, restaurant, or other institution that is offering beverage services. It would not be a lot of money to people who could afford a boat or an RV. However, for the current target market, some way to finance the purchase might be useful.

Another disadvantage is that it would require the drilling of a hole in the sink. This would probably reduce the market for customers who rent apartments. Even if the landlord did not object to the renter drilling a hole in the sink, most renters do not stay in an apartment for a long time and that would mean leaving the PURITY II behind. To make effective inroads with apartment dwellers would thus probably require selling to the owner of the apartment building – a job that would probably be easiest while apartments are under construction (check building permits, especially in areas with lousy water).

How much contribution to profit comes from the sale of a PURITY II and/or filter? What would happen if WaterWiser wanted to develop a different type of distribution through retailers or dealers?

The markup percent on the PURITY II is ($395-$200)/$395 = .4937. If the same markup were used on filters, the cost of a filter would be about $40.50. Thus, the contribution to expenses and profit would be about $80.00-$40.50 = $39.50. Sales reps get between 80 and 100 dollars a unit for selling a PURITY II – or about $90/$395 = 23 percent of the selling price. 23 percent of the selling price for the filter would be .23 x $80 = $18.40. The selling price minus the cost minus the sales commission would leave about $21.10 contribution to profit and overhead from the sale of each filter.

If WaterWiser sold the PURITY II to retailers, its markup would be only ($275-$200)/$275 = 27 percent. At this markup, and assuming that the filters cost WaterWiser about $40.50 (see above), WaterWiser would sell the filters to the retailers for about $55.48. If the retailers resold them at $80, they would make a markup of about 31 percent.

The retailer would need to resell the PURITY II for about $398.55 to get a 31 percent markup on it. That is close to WaterWiser’s selling price of $395, but in the latter case, the "product" includes installation service. Thus, it is unlikely that the retailer could get that high a price.

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What do we know about the firm's current costs? About its profitability?

The company has 6 sales reps who, we are told, can easily sell about 20 units a month. That would be 120 units a month, or 1,440 a year. 1,440 units x $395/unit yields $568,800 in revenue, plus whatever might come from sales of filters (unlikely to be much this early). The cost of goods sold would be 1,440 x $200 = $288,000 so the gross margin would be $568,800-$288,000 = $280,800. That would need to cover sales commissions, fixed costs, telemarketing commissions, and any advertising the firm might want to do. Sales commissions would depend on the mix of sales generated by the office and sold outright, but at the higher commission total commissions would be 1,440 x $100 = $144,000. Fixed costs are $4,500/month x 12 month = $54,000 plus investment opportunity cost (which is trivial, say 15 percent of $20,000 capitalization = $3,000) or a total of about $57,000.

So, profitability would be about $57,000 a year – ignoring revenue from sales of filters and any costs of telemarketing commissions that might be greater than what is paid directly to reps if they make their own appointments.

How much does the firm need to sell to break even? Should the firm expand into other geographic markets?

The break-even sales volume is only about $57,000/ ($395-$200-$100) = 600 units a year, or $237,000 in sales. Each unit sold contributes about $95 to profit – so profits accumulate quickly with more sales.

Under the current situation, capitalization costs are very low and almost all expenses are variable. Thus, it looks like it would be easy to grow. It would probably make sense to go ahead and start distribution in other regions (based, for example, on analysis of where water is worst). It would definitely make sense to speed up the hiring of new reps (although this would likely require adding at least one sales manager).

Let's take a closer look at the sales compensation issues.

How much does a typical salesperson make? Is it enough to attract more salespeople?

The typical salesperson can make about $21,000 a year, less expenses. This comes from 20 x 12 x $90 (average of $80 and $100) = $21,600 a year + filter commissions - expenses. Looks ok. It should be easy to recruit this type of salesperson. In fact, the one unit a day level of sales appears low. It would make sense for the company to do a better job of identifying prospects. It would also make more sense for the sales reps to spend their time selling and for WaterWiser to have installers take care of putting the filters in place. Even if all 20 sales were from office appointments (i.e., commission = $80), the sales compensation would be $19,200.

If it costs the company the same whether the product is sold based on an appointment generated by the office or a prospect identified by the sales rep, it takes 2.5 appointments to generate a sale. If half (assumption) of the sales (720 units) were based on leads from the office, the telephone people would be making 720 x 10 / 2 college students working part-time = $3,600 a year. Peanuts. Maybe that's part of the reason reps are only selling one unit a day.

What would the firm have to do differently if it were to try to sell through retailers and/or dealers (say, marine dealers)?

A completely different strategy would be required. Obviously, the thin margin would not support the current sales commissions. One or more reps would need to specialize by retail accounts. They would probably need some salary to start out – while customers are being identified – and the commissions would need to be much smaller. Inventory would be required. It is likely that retailers would expect either the producer or WaterWiser to do some advertising. WaterWiser would need to figure out how the installation would take place. Retailers would probably not be happy about having to compete for business with their supplier. Thus, a decision to move into retail distribution (i.e., through hardware stores, plumbing supply dealers, boating and RV supply dealers, etc.) would probably require that WaterWiser phase out of direct distribution. Retailers in all likelihood would want WaterWiser to hold inventory to meet their needs quickly, and this might require increase in inventory space and new transportation V-19 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

arrangements. Dealing with a larger number of retailers would require more sophisticated office procedures – for billing, responding to problems, and the like – especially if the number of retailers were large. It would probably make sense to move into the traditional retail channel only if the company expanded to other geographic areas. This way, many of the costs of serving the retailers would likely be fixed costs, and would support a larger retailer network. Serving as a wholesaler to retailers would make more sense if the firm had a broader product line to offer – to help defray the costs of calling on the retailers in the first place.

Should WaterWiser target institutional customers rather than final consumers?

Targeting other than final consumers will increase the risks of the business. At present, it has very low fixed cost and high margin. Most of the institutional customers would be volume purchasers and the company would be orienting toward a higher turnover/smaller margin operation. This could be quite profitable, but the company would need to undergo reorganization. The main problem in the very short term would be cash flow. The company would need to get the resources in place to deal with the institutional market before there were sales in place to support the effort. It could be done on a phased basis, however. For example, Morton could hire one rep on a combination salary/commission basis to try to sell large quantities of PURITY II to contractors/developers of building apartments.

What are the implications of expanding into other geographic areas?

Expanding into other geographic areas would probably be the fastest way to grow – beyond internal expansion of the sales force (see below). This could help WaterWiser lock in other markets where the potential seemed to be high. It could provide a basis for broader market development when/if the company moved to other target markets.

Should the firm increase the number of sales reps?

Since sales reps are a marginal expense, there is very real advantage from increasing the number of sales reps. However, at present they do not seem to be very effective. They are only selling one unit a day. Doing a better job of identifying prospects, improving sales presentations, etc. to get a higher unit sales rate might be even more productive. Adding sales reps would probably require additional sales management effort (perhaps a few managers on a salary). Each sales rep "contributes" about $95 per unit x 120 units per year or $22,800 a year, so the expenses could be covered easily. It would probably make sense to expand promotion of other types. For example, direct mail promotion in neighborhoods where the PURITY II had sold well (i.e., toward other people who at least in terms of geographic area and likely lifestyle, income, etc. were homogeneous with current customers). WaterWiser could encourage word of mouth among existing customers by offering an incentive for referral sales – such as a discount on a filter or a free filter or the like. Advertising could help inform customers and bring in requests for more information. However, a large-scale advertising effort would increase fixed costs and so the trade-off would need to be considered carefully.

Case 18: West Thomasville Volunteer Fire Department (WTVFD) The West Thomasville Volunteer Fire Department case allows students to explore marketing strategy planning, and more specifically Promotion planning, in a non-traditional context. The case allows for discussion of a number of different issues around Promotion, including promotion objectives, integrated marketing communications, publicity, promotion methods, and media. The context of the case allows discussion in a situation where financial resources are limited.

An instructor might start the case by asking. “Is anyone here a volunteer firefighter?” or “Do any of you know a volunteer firefighter?” This allows the discussion to become more personalized, and also lets the instructor know right away if there are students that might have personal experiences relevant to the case. Typically, at least one or two students will know a firefighter – and because the situation described here is quite common, they may validate the situation described in the case.

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An instructor wanting to cover the case very quickly might skip questions about customers, competitors, company, and context – but these provide a solid foundation for discussing the case and reminding students that marketing strategy decisions should flow from this analysis. So, we recommend at least a quick discussion of these background topics.

This might be handled with a directed question, “Before we start into the promotion issues at the heart of this case, let’s make sure we understand the market situation. Are there any issues in the external market environment?” Prompt students to assume the case takes place in the current year – making it easier for them to relate to the current environment. Attitudes toward volunteering and community service may be relevant – as the case notes a surge of interest following the terrorist attacks of 2001. In general, these values have made a bit of a comeback among the younger generation. The economy might also influence how potential recruits feel about volunteering as a firefighter.

Ask, “What competes with volunteer firefighting?” This question may help students better understand the nature of competition. The scarce resource might be time. So, anything that takes up a potential recruit’s time – other volunteer activities, school, family, social life, or a job – could be a potential competitor.

Competition might be other activities that fill the same need – serving one’s community, learning a new profession, or other thrill-providing activities.

The instructor might ask, “What do we know about our potential customers?” The case does not provide a lot of detail about West Thomasville’s firefighters – except that they come from a variety of backgrounds.

WTVFD’s firefighters include professionals, blue-collar workers, and students. The conclusion here might be that there are many different types of people who could be interested. Obviously, this affects the choice of target market. Students may be asked, “Who do you think would be most attracted to volunteer firefighting?” Perhaps young single people in their 20s might be a good target market – if they get interested, they are likely to stick with it for a long time. We might also want to find people who have community-minded values. A lively discussion might center on who these people are and where we might find them.

“What are the demands placed on firefighters? What are the qualifications for someone to do this job?” As noted in the case, there are physical demands to the job, firefighters must live or work near Whistler Township, be 18 years old with a driver’s license, and they must be able to attend WTVFD’s biweekly drills (on Tuesday evenings).

An instructor might use the following question to move discussion toward aspects of the company: “Are there any particular strengths or weaknesses for WTVFD?” WTVFD has been around for a long time and has 48 members who seem highly devoted to its cause. A couple of weaknesses include not having a long-term marketing strategy and very limited financial resources for marketing efforts.

To shift the discussion to Promotion, an instructor might ask, “What do you think Cheyne Morgan should use as promotion objectives?” The case makes it clear that awareness of WTVFD is quite low – most members of the community think that the town’s firefighters are full-time paid staff. So, the primary objective may be informing – to generate awareness that then leads to interest. “What can WTVFD do to generate awareness?” While students might jump to advertising activities, it should be noted that financial resources are limited.

Some organizations in town might support a good cause like volunteer firefighting. For example, the author has found that McDonald’s restaurants sometimes allow nonprofit organizations to use tray liners for promotional purposes. And males in their 20s are a large market for McDonald’s. Instructors should be open to suggestions, but ask the class – “Does this method work with our target market?” WTVFD might be able to get public service announcements on local radio programs – “What types of stations might work best?”

If the case is used with Chapter 15, the instructor might ask, “What copy thrust should be used?” It’s important to grab recruits’ attention, but it’s also important to set expectations so that they stick around.

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Nonprofit organizations like WTVFD can also benefit from publicity. But keep in mind, publicity can be difficult to foster and control. The instructor should make sure students realize that it still takes effort to get a story in the local newspaper or on a radio program; and that this effort may not yield the desired media coverage. It is also difficult to control the message that comes out of publicity – though when awareness is the primary goal, any kind of positive coverage could be very helpful. It is also important to remind students that promotion activities need to provide interested “customers” with a way to get in touch with WTVFD (website, phone number, contact name).

Another promotion option, alluded to in the case, is targeting current firefighters. They might be reminded that WTVFD needs more recruits – so they will talk to friends, relatives, or co-workers about what they do.

Sometimes employees need to be reminded that they can generate interest via word-of-mouth. Current firefighters could be trained to discuss their firefighting activities with other people and to sell the idea of firefighting.

The instructor might write the AIDA acronym on the board and ask the class what it stands for. The class may focus on awareness, but it should be noted that Promotion might be necessary to move potential recruits through all stages of the AIDA model – to the action step of filling out an application. Therefore, it might help to consider all four stages: awareness, interest, desire, and action.

After a smaller group of interested recruits has been identified, WTVFD should still have a process for turning interested people into volunteer firefighters. Currently these interested people come to one of WTVFD’s Tuesday night drills. It is not clear if there is an organized process for converting these interested parties into actual volunteers. Cheyne might try to recruit colleagues to take roles in helping interested parties become more educated about firefighting. Perhaps at one drill per month, there should be a focus on more active recruiting. This may bring personal selling into the promotion blend – does WTVFD have people who might be better at this activity, and can it make sure they are available?

The key here is to let students share ideas – and for the instructor to make sure that students evaluate options on sound criteria. Do they make sense given what we know about customers, competitors, the external market, and WTVFD? Do they address the promotion objectives? Are all the objectives being addressed with the promotion blend? Are WTVFD’s budget constraints being considered?

Case 19: PlanMyWedding.com Numerous aspects of this case capture student interest – and there are good lessons to be learned from analyzing the situation and coming to grips with what needs to be done.

Most students initially engage with this case because: • the central figure in the case, Sterling Bassett, is a recent college grad who wants a rewarding marketing career, • many students dream about identifying a great market opportunity and “growing” their own company, but most also live in fear of the kind of outcomes that Sterling has had so far, • they are nearing the age of getting married – likely within 5 years for many of them, • students immediately understand the needs the business is supposed to meet, and intuitively “know” that there is a market opportunity, and • many students are curious about how small businesses “make it” on the Internet.

Keen student interest in the situation works to promote good ideas and good discussion, regardless of the way in which the instructor directs the discussion. In that regard, the case is quite flexible because it can be used for some fruitful discussions of: • what the product is that Sterling is selling, • whether or not Sterling has a good strategy, • reasons why the business has not taken off, including the need for a blend of promotion methods (yes, even in this “high-tech” advertising venture), • the consumer behavior issues in shopping for wedding presents and in purchases made by young newlyweds,

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• • •

the challenges of implementing a marketing plan for a new business, especially on a tight budget, and how qualified Sterling is to do what she is trying to do, and the issues involved in “searching” for the right career in marketing.

Sterling has done a reasonably good job of thinking about target markets and striving to understand their relevant needs. Some students will not have explicitly considered the fact that this is based on her personal experience: Sterling has experience in getting married and experience in different promotionrelated jobs. It’s useful to remind students that they may be able to gain a competitive advantage in jobs when they have a real interest and relevant experience, even if it is not necessarily business experience.

Though Sterling has much going for her, the marketing mixes for her business seem to fall short, providing an opportunity for discussion of whether her business needs one strategy or several strategies that all must work together as an integrated whole. For example, a marketing mix that appeals to engaged couples is not the same as a marketing mix that appeals to the firms that pay for web pages.

The target markets include: • engaged couples (and perhaps newlyweds) for the gift registry, • companies that target newlyweds (with both goods and services) for the advertising web pages, and • “friends and family” of the couple to be married (whom the advertisers want to reach).

What may or may not be obvious at first is that there is little about this business that requires it focus only on customers or advertisers in the same city or metro area. To the contrary, remote gift-givers are inclined to get on the Internet to check a wedding registry. For the sake of convenience, they are willing to order gifts from distant firms (advertisers), especially if the firm provides special services such as gift-wrap, personalized gift cards, and delivery direct to the recipient. Even local customers respond well to mail order, catalog, and specialty retailers in distant locations when those retailers provide a value-added product. Simply focusing on retailers or service providers in the local area to generate website listings and advertising revenue may not make sense. Similarly, there is little reason that the registry service should be limited to local couples – a user of the Internet usually doesn’t know or care whether the base operation for a website is nearby or far away. To the extent that there are advantages of localizing aspects of the service, Sterling could potentially set up a segmented approach in which different parts of the website are designed to appeal to people from different areas. As a start, for example, she might think about retailers or advertisers who have facilities or base operations in her own area but who also are targeting customers in other places.

It’s useful to think about the marketing mix that Sterling offers each of these target markets. For each group: • What is the specific product (and what are its benefits)?

• What is the price of obtaining those benefits?

• How are the benefits promoted? What is Sterling’s role in the place arrangements between the advertisers and their customers?

• How does her current geographic focus come into play?

The benefits for engaged couples seem clear. The $20 price to register is not a big investment if it saves time and leads to the desired gifts rather than things that are not of interest. It is unlikely that price sensitivity should be a big concern unless other services appear that will provide the service (and/or other superior benefits) for free. And this is certainly a possibility because revenue from advertisers could pay for the services provided–if enough advertisers and customers can be attracted. It’s a chicken and egg situation in that regard.

This is typical of many products that are unsought goods. If the couple doesn’t know about the service and doesn’t know to look for it, they won’t sign up. There is also some evidence for this diagnosis because the main flurry of activity came after Sterling finally got some attention with publicity. That attention and interest simply wasn’t forthcoming from her limited advertising. Sterling should work harder to get more publicity. There also seems to be a very important role for word-of-mouth referrals here. For example, there is no explicit discussion in the case about how “friends and family” of the couple are

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supposed to learn about Sterling’s website. It would certainly make sense to develop ideas that could be shared with the registered couples about how to inform gift-givers of the website, what it is supposed to do, and how it is supposed to work.

The relationship with couples who do sign up needs to be a close one–even if for only a short time. Most couples are not going to be repeat customers! On the other hand, couples who are about to get married often know others who are at the same life stage (especially among younger “first-marrieds”). Sterling needs to think about how to stimulate word-of-mouth referrals so that people who do sign up help to bring in additional customers. Since she doesn’t have a lot of money, one way to do this is to think in terms of marginal revenue from new customers and what it might cost her to acquire those customers. It might be better and cheaper to offer couples who recommend the service to a friend a $5 or $10 “rebate” on the $20 fee – or perhaps she could enter them in a bimonthly drawing for some more substantial prize – like a honeymoon trip.

Sterling has not done a particularly good job of giving advertisers a reason to buy into her service. She is basically selling a professional service to them, but most of them can’t evaluate it in advance and they are unclear about its benefits. The comparison with the cost of a Yellow Pages ad is interesting because it provides a sort of reference price for the advertiser. Yet, the advertiser probably sees some sort of Yellow Pages listing as a “must buy.” Perhaps this sort of website advertising will become a must buy, but probably not until more of these firms’ target customers think of the web as “the” place to look for this sort of information.

Sterling is also being a bit production-oriented in the way she is thinking about her product. She designs web pages in her other job, and so she is thinking about potential advertisers who need a web page. But firms that already have a good web page might be more interested in something else, like a banner ad or button ad at her website that would allow a net surfer to “click” over to get their existing message. Firms that have already invested in a website know that they face the same problem that Sterling does–they want to attract people to the site. So, for them the value of banner ads (perhaps at a lower cost, or even with the fee based on the number of click-throughs from Sterling’s website) might be easier to see.

Sterling also might think about the pricing arrangement for advertisers. She currently bundles the price of the on-time service of preparing the web page and the ongoing online web page. She might want to charge separately for the preparation of the web page and/or allow customers to have something more elaborate than a single page.

Sterling’s service in many ways operates with the same approach as a magazine – attracting an audience and advertisers who want to reach that audience. Yet, most firms that sell advertising media time and space rely on personal selling and/or offer incentives to advertising agencies or others that refer business. Sterling hasn’t done much personal selling to advertisers, even after her “direct response” mailing didn’t work. The case offers several hints because: she didn’t like the job she had doing personal selling, and she is busy doing other things. It is likely that she is going to need to hire help for the personal selling part of her promotion blend. Since she doesn’t have a big budget, she might think about trying to find someone who would sell advertising space on her website on a straight commission basis.

That way, she would not have much expense until she had revenues. Of course, the salesperson would still need to have a good story to tell, and that might depend on having a way to establish better the link between the advertiser’s sales and visits to the websites. For example, if Sterling could convince advertisers to offer a small discount to customers who purchased because of the website, she might be more successful in getting customers to tell the advertisers that “I am a PlanMyWedding.com” customer.

While it is not hard to think about different things that Sterling could do, what is perhaps more relevant is what is she willing to do. The case portrays her as a doer not as a planner. She had an idea but doesn’t have a detailed plan for what needs to be done - she hasn’t yet really made the investment of time and money to give her idea a chance to work. What she needs to do is give up her full-time job or really cut back on her social life – and she doesn’t seem willing to do either now. This can turn into some good class discussion on the need for disciplined implementation to help turn strategies (or at least ideas!) into real opportunities – and why many small businesses fail early in the process.

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While Sterling doesn’t think that there is much competition for her idea, it is an idea that is easy to modify or copy, and there are few competitive barriers to entry. Further, if she doesn’t make a greater effort soon and start to build awareness and interest as “the” place for wedding listings, shopping, and advertising, she is likely to lose out to another competitor.

Case 20: Lake Manina Marine & Camp Rusty Steuben is in a very competitive – almost purely competitive – market situation. Some of the products he is selling are in the market growth stage – but most have reached the market maturity stage where there are relatively small differences among products and all of the producers are trying to out-promote each other and find more outlets. Lake Manina Marine & Camp happens to be one of the many outlets that have been "sold" on selling these essentially homogeneous products. Price cutting is typical in these situations and Rusty is being naïve – attempting to obtain the full price markup. He may be able to from the shoppers who are particularly attracted to his personality, service, or place convenience, but, generally, the prices in these markets are quite competitive. Most retailers do not attempt to obtain the full-suggested markup. Knowledgeable buyers are aware that deals can be had and find that it is fruitful to shop around (perhaps initially treating the product type as a heterogeneous shopping product and then becoming more price-conscious and moving into the homogeneous shopping products category).

Rusty’s new lawn mower line appears to be like all of the other products that he is carrying, and he probably cannot expect significantly different results. The manufacturer's sales rep may try to encourage him (that is his job!) and the fact that the manufacturer is willing to continue promotion support indicates that they are in a very competitive situation and must help the retailers move these essentially homogeneous products. As noted above, this is characteristic of the market maturity stage. Entry is very easy into this industry (witness how easy it was for Rusty to get in) and a continual turnover of small retailers is typical. In addition, many manufacturers of such products are continually looking for new outlets. Many of these manufacturers are very production-oriented and are continually trying to "push" more goods on their retailers. Very aggressive sales reps can be quite "successful" – because many of the retailers are relative newcomers and quite naive. "Hope springs eternal" in the minds of some new businesspeople and they eagerly take on new lines as long as they have the capital or borrowing power.

Then when things do not go well, they have "close-out" sales – or sell out to optimistic newcomers like Rusty.

The outlook need not be all black, however, because Rusty may be able to find a new product that is just going into the market growth stage. Snowmobiles, for example, helped many such retailers have a few profitable years. Similarly, the recent boom in bicycles was very profitable for some bicycle retailers who had just bumbled along for years. However, in each of these cases, other firms (producers and/or retailers) inevitably enter these markets and price cutting and declining profits follow. This is probably the case for mountain bikes, and he is properly concerned about taking on mountain bikes. It may be "too late" for him to take on mountain bikes and reap big profits – especially given the service offered by competitors.

Case 21: Gimball-Tonie International (GTI) Ford's previous approach to designing a car and specifying materials was production-oriented. But it also gave purchasing agents a great deal of power as they asked competing suppliers to bid on standard specifications. This quickly led to pure competition or oligopoly situations, depending upon how many competitors could supply the specified homogeneous products.

The "program management" approach is quite different in that it expects reliable suppliers to participate much earlier in the process, thus reducing the number of potential suppliers to those few with "serious commitment.” This may result in oligopoly conditions if all the serious suppliers can meet the same specifications. The process does raise the possibility of some suppliers developing "monopolies" if they develop superior products (goods and/or services.) Or monopolistic competition is possible if different suppliers develop slightly different systems or are stronger on some feature.

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Regardless of the nature of competition that develops, the buying situation has changed. Kenneth Shibata should develop a different promotion effort – probably a team of order getters and supporting people who can work with the multiple buying influences while products are in the design phase. This means that lead times of one to five years will become more common than order-by-order bidding in the short run. This also means that Kenneth will have to build a team and organize GTI's efforts so the company’s "serious commitment” is evident to all.

The program management approach has already led to more plastic producers' people locating in the Detroit area – for auto-related business. In addition, some firms have created auto-related research labs to facilitate ongoing commitment to the auto industry. This work may be coordinated out of the Detroit area, but it will require travel to the many "Big Three" plants across the country (and world!) and to the growing number of "foreign" U.S. producers and their influencers. This is a much bigger and more complicated promotion job! It may mean that producers like GTI will have to choose their target customers carefully to be "sure" that it will be profitable to serve them. That is, they will have to estimate the potential sales per customer and their potential share and match this against the cost of selling and serving each one. Some may be too small and/or too committed to others, and/or too remote, etc., to make it worthwhile to treat them as target customers.

Case 22: Bright Light Innovations: The Starlight Stove Bright Light Innovations is a real situation – the names, dates, and plans were correct at the time the case was written. The case is based on an award-winning business plan created by a team of students (mostly undergraduates) and faculty advisers all whose names are mentioned in the case. An instructor should be aware that students might do an online search of the company and product and discover its latest strategy. As of this writing, such a search only yields information about how the business plan fared in various competitions.

The case allows a discussion of several important issues. At a broad level, the case deals with selling a relatively technical breakthrough that could have tremendous social value in a developing country. It shows how marketing principles can be used to help a less-fortunate population.

Marketing a product in a developing country can be a real challenge. Channels of distribution are often limited. Consumer incomes are low – and the Starlight Stove might cost one third of the average annual per capita income. The selling price on the stove, which has not been set, might range from $80 - $100 or more. This is nearly unaffordable in a country where the gross average annual per capita income is only $400. The case mentions microfinancing and a 20% interest rate is typical. Broken down to $.68 per week, customers may better understand costs and benefits. The stove offers significant economic benefit by allowing owners to spend more time on education or income-generating activities.

The case may work best later in the course because it offers an opportunity to discuss many elements of the marketing strategy planning process model. Let’s briefly walk through some of these elements and possible discussion points.

•

•

•

External environment. An instructor might discuss the impact of cultural values on aid for developing countries. Traditionally, most aid to impoverished nations was in the form of grants, government relief, and/or donations. But this approach has its pitfalls – as each form dries up and tends not to motivate the recipients. More recently, many donor countries and philanthropists have moved toward the type of aid that gives people a “hand up” instead of a “hand out.” Bright Light Innovations reflects this approach.

Competition. The case provides some information about competing technologies – though the technologies are not identical. The lack of a similar technology can make the job of selling the Starlight Stove both easier and harder. While the product offers significant advantages to its target market, these consumers do not have a direct basis of comparison and may not understand how they will benefit.

Demographics. The customer market in Nepal should be discussed. An instructor might suggest that students go to Michigan State University’s globalEdge (https://globaledge.msu.edu/) to gather more information about Nepal. Ask students to imagine how these people might typically V-26

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• • • •

learn about new technology. The low literacy rate is important to discuss – suggesting the need for radio advertising, demonstrations, or personal selling.

Company resources. It can be surmised that the company does not have extensive resources – and is motivated to make at least some profit. Students might rightly question the company’s experience – which is very limited.

Marketing strategy. The target market is pretty much defined by the case, but the marketing mix is left wide open.

4 Ps. There can be a strategic discussion about pricing, margins for distributors, and how to promote more rapid adoption of the product.

Innovation. An instructor might use the case as an opportunity to expand on a topic only briefly touched on in the text – the diffusion of innovation. See the work of Everett Rogers (Diffusion of Innovations, 5th edition, 2003). Some of these ideas and their relationship to marketing strategy decisions and the Bright Light Innovations case are discussed below.

Rogers’ framework may help students to think about how to market the Starlight Stove in Nepal. Rogers notes five characteristics of an innovation that influence its speed of adoption: 1. the relative advantage it offers, 2. its compatibility with existing values and past experiences of adopters, 3. the complexity or difficulty of understanding how a new product works or how the consumer will realize value, 4. triability, or the degree to which adopters can experiment with the product, and 5. observability or the extent to which the results of the innovation can be seen by others.

An instructor could briefly introduce these five concepts and ask the class, “How does the Starlight Stove score on each of these factors?” The product appears to offer a strong relative advantage as compared to alternatives. Although the health benefits may be difficult for users to immediately appreciate, the potential economic value generated by spending less time collecting fuel and having longer working days should be more apparent. The stove’s features fit with existing values and experiences, but the production of electricity does not fit well. These closely correlate with complexity. How the product actually works and the benefits it offers may not be understood without further explanation. The product is not something with which users can easily experiment. Observability might be moderate – possibly depending upon the extent to which Nepalese invite others into their homes.

Interestingly, using these same criteria, marketing managers may be able to make the product more appealing. For example, they could provide a sample stove in the center of a village – where people could view and test it – increasing its triability and observability. This experience may also reduce confusion about how it could produce electricity. Perhaps guarantees could make it easier for people to try the product. Personal selling may be necessary to explain the benefits.

Another way to stimulate discussion would be to remind students of the adoption process introduced in Chapter 5. The six-step process involves: 1. Awareness. Would demonstrations or a traveling road show help generate awareness and interest?

2. Interest. How could BLI or its distributors stimulate interest?

3. Evaluation. Where and how do consumers evaluate how the product might help them?

4. Trial. See paragraph above 5. Adoption. Would explaining microfinancing terms help overcome objections?

6. Confirmation. How would buyers be reminded about the value of the process?

Simply putting the steps of the adoption process on the board might help to stimulate discussion about specific marketing activities that could help guide customers through these steps.

Case 23: Wireway Products This company now produces component parts, but it wants to go into the seemingly profitable consumer products market after experience with a product that it made for another company. The products they are considering would be impulse or heterogeneous shopping products. Good products coupled with V-27 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

appropriate distribution systems might be profitable. But really new items would be copied quickly, and the product life cycle would move quickly to the market maturity stage.

Wendy Keating has much more than a pricing problem. She has not even selected her target market(s).

All she has is a product. She has no idea about the demand for the product. She has no patent protection or established brands. Thus, competition can be expected if the product is at all popular – the same kind of competition she will give the firm she is copying.

Keating has not selected and "sold" any channel members, although some stationery and gift wholesalers might be willing to handle such products. No plans have been made for promotion, except her own personal selling efforts. Yet she feels the major concern is with price! A price must take into consideration the rest of the marketing mix and the nature of the potential target market – all of which are still undecided (except for one product).

The students should pass over the "pricing problem" and suggest (and evaluate) alternative strategies.

The possibilities are numerous (including door-to-door, conventional retailers, discounts to the price-conscious, etc.). The case doesn't provide any data on these possibilities, so the logic and completeness of alternative strategies should be used to evaluate their answers. Simplistic price-oriented (only) answers should be "pounced upon.” Break-even analysis can be used to evaluate some alternatives – given some assumptions about prices, markups, and marketing costs for Wireway Products.

This company had a very profitable industrial business and was completely unfamiliar with the consumer products market. This is a very common situation – that is, industrial producers wishing to invade the final consumer market because of its seeming profitability. After some experience with the high cost of operating in such markets and the difficulty of reaching final consumers, such companies frequently become disillusioned.

In the end, Wireway Products gave up its consumer products division – and devoted all its energy to developing unique ways for bending wire – after a more realistic appraisal of the likely profitability of some possible alternative strategies (which is what the students should discuss.)

Case 24: Abundant Picking A production-oriented manufacturer of staples in market maturity has been selling the bulk of its output as dealer brands (in almost pure competition) through food brokers to wholesalers and retailers outside its local area. Abundant Picking does use its own brand locally, but this is a minor part of total volume.

Declining profits have led to a "desperation" move – trying to bypass the food broker. This move helps reinforce the judgment that Abundant Picking is production-oriented, because it did not appreciate one of the important roles being filled by the brokers – that is, to combine the output of several packers (such as Abundant Picking) into sufficient volume to meet the demands of their dealer-brand customers. These food brokers are adjusting discrepancies of quantity – a function that Abundant Picking is not trying to handle (really, doesn't even understand!).

In the short run, they probably should return to working through the food brokers to buy time to determine whether there is(are) a strategy(ies) that can improve profits. Perhaps they can build their own "Abundant Picking" brand outside the local market. Perhaps they can offer price-oriented brands to massmerchandisers. Alternatively, maybe they can develop a "quality" label. Any of these moves will require new marketing personnel, however, because the present family members have no competence or interest in selling or marketing. Therefore, any decision to go beyond returning to the former food brokers should be taken very seriously. This would be a major shift in strategy for the company – and might require a major commitment of resources for several years to come. It might even require new top management! If the company chooses to follow more aggressive market-oriented strategies, then it could consider adding new brands and/or products – including convenience foods, snacks, etc. In other words, in many respects, it is similar to Case 2 about Nature’s Own Foods, Inc.

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Case 25: ABA Tools (ABA) This manufacturer of operating supplies is facing almost pure competition for its standard items. The product life cycle for these homogeneous items has reached, or is close to, the market maturity stage.

Conditions cannot be expected to improve. Recognizing this, the company has sought to develop and sell "special-purpose" operating supplies. It has decided to use its regular general merchandise (or single line) merchant wholesaler to introduce and sell these special-purpose tools. This decision makes some sense in that customers buy only small quantities, and the market is widespread. Unfortunately, some new specialty merchant wholesalers have developed in this product market – and many small producers are selling direct. The more sales effort (order getting) that they give these items – including technical assistance – cannot and will not be matched by ABA's present merchant wholesaler. It is in a different business entirely, carrying a large assortment of items, but not aggressively promoting any of them. Order taking – not order getting – is its strong point. (The reference to the large catalog should support this conclusion.)

ABA is in a difficult position. One general merchandise merchant wholesaler handles 90 percent of its output. Unfortunately, this merchant wholesaler is not suitable for the new items. Going direct will not be too practical either – given the small orders and the widespread market. Some kind of indirect system is needed – one with more aggressive personal selling than will be obtained from the present merchant wholesaler. Converting the present market researchers to supporting sales reps might help to supplement the efforts of the existing merchant wholesaler's sales reps. Alternately, ABA could try to sell to some specialty merchant wholesalers, but then the present wholesaler might drop ABA completely. If (a big if) it can find several specialty wholesalers who are willing to work with them, it may be desirable to make the switch.

The "right" answer depends on the needs and attitudes of the various cutting tool customers and the size of the various markets. If some buyers will routinely continue buying from the present merchant wholesaler – no matter what the specialty wholesalers do – then a substantial sales volume may continue to be sold through these outlets. The specialty wholesalers may already have switched all those customers they can serve profitably. On the other hand, if the "switch" is just starting, then perhaps ABA should move soon – before the better specialty wholesalers have contracted with other manufacturers.

ABA would then have no choice but to sit back and watch as its share of the market slowly diminished with the market shifting from the general merchant wholesaler to specialty wholesalers. Should ABA give up its established channel, and all the volume that flows through the channel, to position itself correctly for the future? If it makes a move now, it may lose sales in the short run, yet benefit in the long run. On the other hand, if it doesn't move now, it may lose entirely in the end.

Case 26: ZONE6 Custom Castings, Inc. Mallory Rizocki, the marketing manager, is certainly correct that the proposed hydraulic jack line would get the firm into entirely different strategies. Currently, they are selling component parts directly to manufacturers – and are relying heavily on their ability and willingness to make product changes as needed by their customers. With the proposed line, the firm would have to settle on specific product designs and then go through a variety of intermediaries. This would require the development of several channels of distribution. These channels would require high markups – more than half of the retail-selling price. Therefore, the production manager's estimate that he could produce at one-half of the current retail price is not very impressive. In fact, the company may be at a serious cost disadvantage against competitors and this "new product" seems to be a profits "loser" from the start if it must be sold at market prices (which is probably the situation). "Production costs" should be much lower to allow for sales and overhead costs and to leave some chance for profit.

It appears that the production manager is quite production-oriented. Note his feelings that he can produce better products than competitors can, although customers probably would not notice the differences! He may have higher costs than the industry average. His production flexibility may come from running a "high cost" job shop rather than a mass production operation.

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Tim Kingston, the production manager, does not appear to have any new ideas – preferring instead to try to develop a new business with "me-too" products. This will make it extremely difficult to obtain distribution. It is likely that competitors are already in market maturity and intermediaries will not be too excited about another "me-too" producer entering the market. In fact, it might be almost impossible to obtain distribution unless something unique is offered, i.e., better products, and/or lower prices.

The current proposal will probably be a costly fiasco, and Mallory should explain why to the president, rather than just arguing that she is already too busy. An effective way of communicating with a profit-oriented president would be to estimate the total cost of setting up the new distribution channels and the net return (probably negative) to ZONE6 Custom Castings after the production costs and normal markups expected by intermediaries are subtracted from the current retail prices. This will take some of the excitement out of the proposal. A stronger case would flow from estimating the potential in each market and ZONE6 Custom Castings' likely share – given the strength of entrenched competitors. These sales estimates could be matched against the cost of setting up and maintaining the necessary distribution systems to obtain desired sales. Even reasonable estimates would show how much would probably be lost by going ahead with the proposal.

The fact that the company has excess capacity is driving this situation. It will be desirable for the firm to find a way to make effective use of these resources (or sell them). The production manager’s prospect should not be the only one considered. And, given that the marketing manager shows little interest in new-product planning, the president probably should consider assigning someone else to initiate this effort – to be sure that the firm does consider all its possibilities, not just the one uncovered by accident by the production manager.

It is possible that the firm has some unique production capabilities, and these should be matched against market opportunities. Clearly, this is a job for a real marketing manager or a marketing-oriented president.

Both may be lacking in this case. So, Mallory may end up trying to sell the "new product" – and her present efforts may suffer.

Mallory should try to communicate a marketing-oriented view of the proposal and try to keep the company from making a bad mistake – but she may not succeed unless she assembles some numbers that show the implications of what is being proposed.

This case illustrates the typical situation where there is poor understanding of marketing and the manager drifts into decisions because no one has a clear understanding of where they are going or what they have been doing or could do. This case is placed near the end to provide a convenient way of showing the importance of marketing strategy planning. Not only should the marketing manager understand what's going on, but also the other top executives in the company. And this case can be used to emphasize to all business school students that it is important for everyone to understand what a firm is doing – if for no other reason than to protect their own jobs!

Case 27: Canadian Mills, Ltd. This case presents a good opportunity to discuss market segmentation, target marketing, and the three basic ways of developing market-oriented strategies (discussed in Chapter 4) – within an "international" market (Canadian Mills straddles the U.S./Canadian border from Minneapolis to Quebec). The basic question is just how different the Quebec market is. A philosophy of this book is that different marketing mixes may be needed if there are distinct submarkets within a broad market area. But it is not always easy to decide how different is "different enough" to justify developing different marketing mixes. In addition, treating Quebec as the basis for a separate strategy may lead to other submarkets of the Canadian market being better served by separate marketing mixes. Before long, Canada could be treated as a broad product-market with three or more submarkets and marketing mixes. In that event, the top management objective of achieving a global strategy would be frustrated.

Given that various people have supported the idea of treating Quebec separately over several years suggests that Adele Tremblay probably should reevaluate the company's current approach to Canada.

This is not as big a job as it might sound – although it will take some time and money. She ought to V-30 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

evaluate the profitability and return on investment of continuing to treat Canada as one market versus two markets, and perhaps three or four markets. This will require defining the alternative strategies carefully and then estimating likely sales and costs to implement alternative plans. In other words, instead of just "arguing" or "discussing" the idea or accepting "dogma" from Minneapolis, she should evaluate alternative plans and then select the plan or plans that will enable the company to reach its financial objectives – while accepting top management's objective of achieving standardization whenever possible. The case doesn't provide enough information to make this kind of analysis, so the discussion should focus on the right approach to reaching a sound decision. It can also be used to discuss the practicality of developing one global strategy.

Case 28: Kirkwood Home Health Services (KHHS) Samantha Kirkwood is wrestling with an objectives problem. She would like to spend her time ensuring that KHHS does "good things" and retains its professional image – that would probably mean employing only well-trained nurses, who only work in challenging health care situations. Yet, increasingly, she is coming to recognize that the market may want more than just nursing services – requests for “care and comfort” services are on the rise. If she and KHHS are to survive, they will have to satisfy these market needs by hiring paraprofessionals or semi-skilled aides or find themselves losing business to competitors.

Until recently, KHHS neglected "profit-oriented matters" – which accounts for its up and down history.

Now it is increasingly clear that a more business-like approach will be necessary – although she refers to earning a "surplus" rather than a "profit."

Samantha was trained as a nurse. Nurses are known for being primarily concerned with patients’ wellbeing – not for tracking costs. So, while one part of her mind is beginning to think like a businessperson, the other is thinking like a nurse. To resolve this problem, she must decide what her objectives are. If she decides in favor of running KHHS like a business (using any "profits" to take care of patients who are not able to pay), then the appropriate strategy becomes clear quickly. A full line of services – including nursing services and "care and comfort" services – will better satisfy (1) customers who have varying needs and (2) the referral agencies in hospitals. Various competitors are now offering this more complete product line and it is only a matter of time before KHHS will have to meet this competition – or face a continuing squeeze. Once this is accepted, then the problem is developing and evaluating alternative strategy plans. This will require a more careful analysis of the demands for home health-care services and the costs of providing them. This is basic strategy planning applied in a nonprofit setting – and the case can be used to show the general applicability of the principles discussed throughout the text.

Case 29: Kramer & Geary (K&G) Kramer & Gearyis selling business products (professional services) to several product markets. It appears that the "municipal market" should be split into (at least) two markets: Sophisticated and Unsophisticated.

Perhaps they could be nicknamed "Small" and "Large" to avoid offending with "Unsophisticated."

K&G's current strategy and strengths seem to fit the "Small Municipal" market and probably should be continued. In fact, the staff should be encouraged to pursue this business as aggressively as possible – deprioritizing the "price sensitive Large Municipals." Even better, the large ones could be classified by price sensitivity, and then some should be ignored because the low bids needed to get the business would lead to unprofitable jobs. Assuming there will be enough business (and alternative marketing plans should be developed and evaluated to determine this), it may be desirable to bid high enough to cover all costs and make a profit on all jobs – and ignore all product markets that won't pay these prices. This will certainly make sense for "high-season" work.

Since K&G has full-time staff, however, it may want to (need to?) develop different strategies for "offseason" work. This may include lower prices for basic accounting work, in keeping with the lower value of unspecialized advice. Better, if they have some "consultants," they can move more into "consulting" and help the firm expand the number of markets it can serve profitably. This could be very desirable – reducing K&G's vulnerability to attack in its present markets. But it must accept that "consulting" is different from basic accounting and will have to be priced and managed differently. As usual, better understanding of target markets will lead to better strategy planning. Here, they are dealing with more V-31 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

than one possible strategy – while some of the partners are seeking one "all-purpose" strategy (a very common mistake!)

Case 30: Maggiano’sMaggiano’s Pizza Pies Note: some numbers in Table 1 are rounded.

The Ann Arbor and Southfield stores seem to be doing well with home and office markets. The Flint store's future, however, seems to depend on catering to the "plant market" for delivered pizza at "lunch" breaks. No pizza competition for this market exists now. However, there are mobile food vendors, so the plant customers are not entirely dependent on pizza from the Flint store. Place is very important – while price and even product quality may not be as important.

Catering to the plant market (alternative 1) can be profitable – see Table 1 in the text. Yet, expanding capacity (alternative 2) or expanding and moving (alternative 3) can be more profitable (see below). It will be important to create a dependable production and delivery system and then promote it to the "plant market.”

Promotion ideas include: • "On time or 1/2 price" offer • "On time or free" offer • Introductory discounts – with or without coupons • Printed stickers for in-plant phones or bulletin boards - giving prices, telephone number, and speed information Longer-term ideas might include: • Delivering other items with the pizzas (e.g., sub-sandwiches, ice cream, candy, cookies, etc.)

• Setting up at plant locations with pre-prepared pizzas that could be warmed – this would make fuller use of facilities, but product would not be the same Exhibit A. Estimates of Possible Revenues per Day (350 days/year)**

Pizza units Contribution margin/pizza Total contribution – pizza Contribution margin/beverage Total contribution – beverage Total contribution – pizza & beverage

Current Daily Capacity

Proposed Daily Capacity

Estimated Daily Demand*

144 $7.50 $1,080 $0.52 $150 $1,230

300 $7.50 $2,250 $0.52 $312 $2,562

320 $7.50 $2,400 $0.52 $333 $2,733

* Which could be met with Alternative 3. **Plant demand estimates may be 10-30 percent low, and therefore, the contribution estimates may be low.

Exhibit B. Estimates of Contribution to Overhead and Profit from Plant Market

Potential Daily Gross Margin Daily Fixed Costs: Delivery Car

Alternative 1 2 $1,230 $2,562 (0

3 $2,733

) (5.71

) (5.71

)

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Pizza Oven Incremental Labor Increased lease cost One-time Moving Expense ($16,000)1 ______ $1,230

(6.43 (84.00

) (6.43 ) (84.00 (4.57 (45.71

______ $2,466

______ $2,587

) ) ) )

1

Note: Assumes 100% of moving expense is deducted from first year profits, i.e., $16,000/350 days.

Case 31: Brian’s Sustainable Homes The Brian’s Sustainable Homes case describes a builder of semi-custom homes who recently built his first LEED-certified “green” home. The home is the first of five in a small development – and Brian Wandino is building the other four, which will also be “green.” A LEED certified home contains a number of energy saving features and is built using sustainable practices. This raises a builder’s costs, so Brian has priced the homes about 10 percent higher than comparable homes in the area. While there is growing consumer interest in “green” products, the homes are being built at a time of rising interest rates and an economic slowdown – which have increased customer price sensitivity. In addition, green homes are new to consumers and real estate agents. The house has not sold. Brian’s Sustainable Homes’ previous promotion efforts have been minimal – listing houses on the multiple listing service to inform real estate agents who show his homes to prospective customers. Brian’s Sustainable Homes must now decide whether to engage in a higher level of promotional activity – and if so, what activities should be used.

This teaching note begins with a review of the discussion questions – which assume the case is being used to support chapters on integrated marketing communications and advertising. The case can also be used to provide a broader perspective of the marketing strategy planning process model that serves as a framework for this textbook.

Discussion Questions What do you think of Brian Wandino’s marketing strategy so far?

The current strategy is not clearly focused. Little effort was put into defining the target market, other than Skip’s knowledge that more customers are gaining interest in greener homes. Brian’s product does differ from other homes on the market and offers significant potential benefits to at least some customers (those seeking greener homes). There might be a possibility of using the LEED certification to aid in branding. The higher prices Brian is asking for the homes are driven primarily by his higher costs, with little consideration of customer value. Discussion of the general strategy can quickly move into the more specific issue – how do we communicate the value the home provides to a target market that cares about these benefits?

At this point, an instructor might ask a transition question, “What value does one of Brian’s new LEED certified homes provide to a new homeowner?” This can bring out the financial and “feel good” benefits of helping society. Then, “Would you think at least some customers might find this benefit offsets the higher price?” This might be followed with, “How well do you think consumers and real estate agents understand these benefits?” and then “So what does Brian need to do?” At this point, students will realize that the problem is two-fold: (1) Brian’s Sustainable Homes has failed to identify a target market that cares about the environment, and (2) it has failed to communicate the benefits of a LEED certified house to those target customers.

What promotion objectives should Brian Wandino set for his marketing strategy?

The text outlines three general types of promotion objectives – informing, persuading, and reminding.

This case scenario suggests that while some customers and real estate agents may have some general

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awareness and interest in greener homes – they are not very knowledgeable about the specific costs and benefits of these options. The AIDA model and Adoption Process track these promotion objectives – and it might be useful to remind students about this exhibit from the text.

Promotion Objectives Informing Persuading Reminding

Adoption Process Awareness Interest Evaluation Trial Decision Confirmation

AIDA Model Attention Interest Desire Action

Both real estate agents and consumers are likely to need more information about the financial and environmental benefits offered by the new Brian’s Sustainable homes. The case suggests customers are largely unaware of or don’t understand the financial benefits from Brian’s Sustainable’s green homes – only that the homes appear to cost more than similar homes. But, the financial benefits for a buyer may be immediate. For example, assuming a customer has a mortgage at 7% for 30 years, paying $25,000 more for a home would cost about $170 per month or $2,040 per year. This falls at the low end of the estimated savings from the LEED home. Customers and real estate agents must understand these benefits – or the homes will continue to appear more expensive.

In addition, customers may experience personal satisfaction from living in a “greener” home and feeling that they have a smaller environmental impact than a similar “non-green” home. This information must also be communicated to customers.

What are the advantages and disadvantages of targeting consumers instead of real estate agents?

One of the interesting questions in the case is whether to engage in more “push” or “pull” promotion. An instructor might start this part of the discussion by using this terminology – “Should Brian use more of a push or a pull approach – or both?” Pushing would direct the promotional efforts at the real estate agents – and pulling focuses on promoting directly to consumers.

Consumers By targeting consumers, Brian can be sure the message he wants to deliver reaches the ultimate decision maker. Real estate agents typically have many different potential choices to show to customers – so they may prefer to focus on houses that are lower priced instead of explaining the longerterm cost savings offered by Brian. Efforts at advertising and publicity might get consumers to ask their real estate agent to show them the Brian’s Sustainable home. Also, any promotional materials that target consumers are likely to be seen by real estate agents – or could be mailed to real estate agents to assure they see them. On the other hand, advertising can be expensive, and it may take considerable effort to get publicity through the local newspaper. Creating a brochure targeting consumers and placing signs in the home that highlight benefits also have production costs but are worth considering.

Real Estate Agents Real estate agents represent an important influence in the purchase decision. If knowledgeable and trusted real estate agents understand the benefits of Brian’s green homes, they can influence their customers. Real estate agents who do not understand the potential operating cost savings from a green home cannot communicate these advantages – and may even be reluctant to show a LEED home. While an educational seminar may be helpful to real estate agents, it is unknown whether agents would attend. Commission-based, independent salespeople are often reluctant to spend time on such activities and would rather focus on making sales. This is a risky alternative.

What would you recommend as a promotion blend?

The relatively low cost of preparing brochures and putting signage around the house suggests this as a good initial strategy. Brochures can highlight both financial benefits – and possibly through imagery – the societal benefits of a green home. The more complex financial benefits may be more easily explained in a written brochure that can be reviewed by the consumer later. Signs placed throughout the home could help to highlight the many differences between a LEED certified green home and a home built with V-34 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

traditional materials and processes. Ask students, “What should Brian use as his copy thrust in a brochure or advertisement?” This question forces students to realize they must decide which one or two benefits should receive the most attention.

Publicity, especially getting a newspaper to write about your product, can be a great way to communicate with prospects. The newspaper may be seen as a more credible source than advertising. However, getting an article published can be difficult. If green construction is relatively new to the Asheville market – as it appears to be in the case – a local newspaper may indeed be interested in highlighting Brian’s new development. The instructor might ask, “How would you do this?” It’s useful to remind students that there may be only one chance to pitch this idea to a local newspaper – so it should be taken seriously. The target market here is probably a newspaper reporter and Brian may want to learn more about the reporter’s or paper’s interests (looking at past stories published for example) to get a feel for what types of stories have appeal. Preparing a press release can make the reporter’s job much easier – and students should recognize that they need to sell an idea to the editor or reporter.

As noted previously, making real estate agents aware of the green benefits would be helpful. If agents are able to explain the benefits of relatively higher-priced homes, they will be more amenable to showing them. The posting of informative signs in the home could educate real estate agents as well as potential customers. An open house or tour for real estate agents – one that highlights the green benefits – might also be of interest. A seminar is another idea, but as the case notes, it may be difficult to get real estate agents to come to a presentation. Students might be asked, “How could they make the presentation more appealing?” For example, Brian might offer a meal or refreshments—or partner with a local real estate agency to make such a presentation part of another regularly attended meeting.

Teaching the case The case may be taught after the first promotion chapter – but is probably most effective as a wrap-up of all the promotion chapters. The case could focus on elements of promotion – for example, questions about the copy thrust or the personal selling process.

One teaching approach involves jumping to the discussion questions at the end of the case. Of course, there should be reference to other aspects of the situation analysis (customers, external market environment, competitors, and company – as well as differentiation and segmentation). Instructors should press students about why they are making recommendations – and then be sure they are referencing the situation.

Another approach, which takes up more class time, walks through the case using the marketing strategy planning process model as a guide. An instructor may want to show a slide with the marketing strategy planning process model to remind students of the different elements. Then a series of questions, for example, “What do we know about the external market environment that could influence our promotion decisions?” might be asked to draw out this information. This helps students see the usefulness and importance of the marketing strategy process planning model. Here are some of the key insights from the situation: •

External market environment. Different issues apply to each element: o Economic environment - The case notes that the new homes are being built at a time of rising interest rates. On a $275,000 home (the mid-range of Brian’s new home prices), with 20% down (leaving a $220,000 mortgage), a one percent increase in interest rates (from 6.25% to 7.25%) on a 30-year mortgage increases monthly payments by $146 (almost 11% higher monthly payment). An instructor might share these details to help students understand the dramatic impact of interest rates on the cost of buying a home. o Legal environment – the case highlights the regulatory challenges and issues that raise costs of buying a home; in particular, this green project. o Technological environment – the case highlights some of the new technologies that allow builders to produce homes that are more efficient.

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o

Cultural and social environment – during a time beginning around 2006 – 2008, many U.S. consumers became increasingly concerned about global warming, sustainability, and the environment. Brian hopes to take advantage of this trend with his new project.

•

Customers While the current trend is toward consumers having a greater concern for the environment, many consumers remain reluctant to pay a premium price. Yet the utility cost savings from Brian’s homes may offset the premium price.

•

Competitors The case provides no information about competitors; although it implies that there may be few if any other builders offering green homes in the Asheville market at this time.

•

Company The case suggests that Brian Wandino builds high quality homes and has at least seven years’ experience building homes. The case also suggests that Brian has limited marketing capabilities – mainly relying on one salesperson. Typically, he has not done any type of advertising for his homes. Local real estate agents represent a collaborator to Brian’s sales efforts. These agents bring prospective customers to his houses and, at this point, are responsible for explaining the benefits of greener construction. It certainly appears that most agents don’t have an in-depth understanding of the advantages of the latest model homes.

•

Segmentation and targeting Is the target market those customers who value the environmental benefits of owning a green home, those who want economic benefits, or an overlapping set that covers both segments? Obviously, many consumers would value both sets of benefits, but communications may choose to emphasize one message or the other.

•

Differentiation and positioning The decision about differentiation and positioning ties closely to the selection of a target market. Brian’s Sustainable Homes may want to position itself as offering green benefits, so that potential customers will feel good about buying a home that has a smaller carbon footprint. Alternatively, the company could choose to emphasize the cost savings from greener construction. Unfortunately, the actual financial savings for customers are about equivalent to the higher price they will pay – so relying strictly on this benefit may not be enough.

•

Marketing strategy The current strategy involves a differentiated product with the possibility of using the LEED certification in the branding. Pricing is about 10% higher than competing models – although this may be more than offset by the benefits. The channel of distribution, using real estate agents to assist in the selling process, is pretty much set. This leaves the builder and his agent to focus on promotion. See the discussion questions noted earlier.

Cases 32 & 33: Mallory’s Lemonade Stand (A) and (B) This case comes from Joe’s personal experience – and of course some poetic license to make the story more interesting. Most of my students had their own lemonade stand, so they can relate to the situation.

The case is designed to help students understand the concepts underlying break-even analysis, variable and fixed costs. The (A) case helps students see how changes in marketing strategy can be compared with simple break-even comparisons. So, for example, if a new sign costs $5.00 and the contribution margin is $.50 per cup of lemonade, then the sign breaks even if it helps sell 10 more cups. This type of analysis is simple, but an instructor can tell students that the same kind of analysis can be conducted by a large brand. It can help to have the spreadsheet (see following page) open in class – as this will allow you to enter students’ own assumptions – and show how quickly they can be analyzed.

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The (B) case helps students move from the small lemonade stand to a real business. The case helps students better understand average cost pricing (and its dangers) and marginal analysis.

Pricing can be one of the more challenging topics for many students – and it can be pretty dry. This case helps make pricing come alive for students. To make it even more fun, I usually bring some jugs of lemonade to class. I put stickers on the gallon jugs with the “Mallory’s Lemonade Stand Lemonade” logo (feel free to copy this image and do the same if you are so inclined). I give each student a cup and wander the room while the work on this activity – pouring lemonade and offering advice and support.

You might also find it fun to add some videos to your discussion. A search for “Family Guy Lemonade Stand” works well after (or before) discussing question A-7. Another fun video is the Verizon commercial “Verizon Small Business ‘Lemonade Stand’" which can be used to transition from the (A) case to the (B) case.

The specific learning objectives for each case, the answers to the questions, and the analysis are provided next.

Learning Objectives for (A) Case After completing the (A) case, students will be able to: • Classify costs into fixed and variable costs.

• Calculate fixed-cost contribution per unit.

• Explain why fixed-cost contribution per unit is useful to marketing managers.

• Calculate break-even point.

• Recognize the need to create value through all four Ps. Analysis of the (A) Case 1. Fixed costs = $17 a. Lemonade stand $12 b. Pitcher $5 2. Variable costs = $.40 a. Cups = $.10 b. Lemons and sugar $.30 3. Fixed cost contribution margin per unit = a. P-VC = $.75 4. Break-even = 49 cups.

5. Alternatives – see spreadsheet below 6. What other information? Estimated demand?

7. Think about all 4 Ps

Base Case Fixed Costs - Lemonade stand - Pitcher - Signage

$12.00 $5.00

Add Signage

Fancier cups

Lower price

Higher Price

$12.00 $5.00 $5.00

$12.00 $5.00

$12.00 $5.00

$12.00 $5.00

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Total fixed costs

$17.00

$22.00

$17.00

$17.00

$17.00

Variable costs per cup sold - Cups - Lemons + sugar Total variable cost/cup Price Unit contribution (P-VC)

$0.10 $0.30 $0.40 $0.75 $0.35

$0.10 $0.30 $0.40 $0.75 $0.35

$0.15 $0.35 $0.50 $0.75 $0.25

$0.10 $0.30 $0.40 $0.50 $0.10

$0.10 $0.30 $0.40 $1.00 $0.60

BE=FC/UC

48.6

62.9

68.0

170.0

28.3

Estimated demand (Q)

60

100

100

150

45

Estimated profits (Q x UC FC )

$4.00

$13.00

$8.00

-$2.00

$10.00

Learning Objectives for the (B) Case After completing the (B) case, students will be able to: • Calculate markup percent if given purchase price and selling price.

• Explain the advantages and disadvantages of average cost pricing.

• Conduct marginal analysis to estimates.

• Explain why marginal analysis is superior to average cost pricing.

Analysis of the (B) Case 1. Margin calculation 2. Average costs – see slides 3. Profits with average cost pricing

Cost calculation Fixed overhead Variable costs (co-packer $.50 each) total costs Planned profit

Planned profit of $5000 & volume of 30,000

Profit if actual sales of 15,000

$10,000 $15,000 $25,000 $5,000

$10,000 $7,500 $17,500

Total cost and planned profit Profit (or loss) Actual sales x price (1.00) less: total costs

$30,000 $30,000 $25,000

$15,000 $17,500

Profit

$5,000

-$2,500

4. What estimates maximize revenue? (see below, revenue is highest at $.77) 5. What estimates maximize profit? (see below, revenue is highest at $.85)

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Price (P) $3.00 $1.75 $1.40 $1.20 $1.00 $0.85 $0.77 $0.70

Quantity 0 10,000 15,000 20,000 30,000 45,000 51,000 55,000

Revenue (P*Q) $0 $17,500 $21,000 $24,000 $30,000 $38,250 $39,270 $38,500

Total VC $0 $5,000 $7,500 $10,000 $15,000 $22,500 $25,500 $27,500

Total FC $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000

Total Cost $10,000 $15,000 $17,500 $20,000 $25,000 $32,500 $35,500 $37,500

Profit (RevCost) -$10,000 $2,500 $3,500 $4,000 $5,000 $5,750 $3,770 $1,000

6. Ideas for price sensitivity? a. Build strong brand preference b. Unique flavor c. Channels with few competitors (sports stadiums, movie theaters)

Case 34: Working Girl Workout This case was first written by the real Tatiana Rogers (Joe’s graduate assistant) and represents her personal experience. The case gives students an idea of what it might take to start an online business. It also demonstrates a go-to-market approach only available in this new socially connected world. A number of high-profile brands, including Casper (mattresses and Glossier and KKW Beauty (makeup) have really leveraged Instagram to sell their products. More recently, smaller “specialty” products have begun to appear on Instagram trying to build a following and sell goods or services.

This case describes a startup (Working Girl Workout) in the health and fitness coaching space—where other brands are already established. Though with a growing market, opportunity may still exist. These brands typically sell workout and/or menu plans to followers. They provide just enough content on Instagram to entice followers. Working Girl Workout’s biggest competitors (cited in the case) started as websites and blogs offering fitness advice.

The case can achieve several different learning objectives. At a broad level, it shows students the universality of the marketing strategy planning process model and the four Ps. This context is different, but the analysis and principles they are learning in the course apply here. At a more micro level, the case allows students to walk through the marketing strategy planning process model and think more deeply about promotion and how to develop an online presence and business.

The case also shows students some of the real issues facing a young entrepreneur. The data on costs and potential earnings is from recent experience—though that changes quickly. The case also shows how the elements of the marketing strategy process planning model can guide decision making. A simple way to do this is to put the marketing strategy process planning model (Exhibit 2-9 guides the textbook) up on the screen and walk students through it – finishing with the key case questions around Promotion.

The following questions might help students learn from the discussion.

Does Instagram make sense as a communication channel for Working Girl Workout? Why? Why not?

Instagram makes a lot of sense here. And we can draw from our analysis of the macroenvironment to show why: • Customers—the target market for WGW is young professional women—who make up a lot of Instagram users. The case describes the target market.

• Competitors—while a business doesn’t always want to go head-to-head with competitors on their own turf, in this case it makes sense. First, Tatiana is the start-up—so she might get some quick

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Part V

• •

attention from followers of her competitors. The cost for a customer to start following Working Girl Workout is very low – simply click “follow” on Instagram. Second, she might offer more of a niche product—targeting working women—which may peel off some of her competitors’ current customers.

Company—Tatiana’s status as a busy student limits the time and money, she can put into Working Girls Workout. Consequently, a platform like Instagram offers a low-cost way for her to test the waters.

Context—with growing interest in health and fitness, and the increasing popularity of imagebased social media like Instagram, this appears to be a place well-positioned for current trends.

What customers does Working Girl Workout seem to be targeting?

The name and Tatiana’s background suggest that working women interested in health and fitness are the primary target market.

How is Tatiana seeking to differentiate and position her business?

The case does not directly talk about these decisions, but again the name of the site and looking at her major competitors suggests that her workouts may be quicker to complete, and her meals are designed to be fast and easy to prepare as compared to those of her major competitors. She is seeking to position her offering as one that best meets the needs of young working women concerned about health and fitness.

What about Place?

This is an interesting insight for many students. Working Girl Workout is a digital product that customers can download.

What is the Product Working Girl Workout offers?

Working Girl Workout is a service product. Through video and downloadable menus and workout programs WGW offers advice and insight; essentially, WGW produces personal training. Longer term, she might be able to offer a second product to another set of customers; if WGW builds a following, it could become an influencer and offer services as a media site for health care products.

What about Promotion?

Promotion is the focus of the discussion questions in the case. The case works best after students have been through Chapters 13, 15, and 16 – so they understand promotion objectives, advertising, sales promotion, earned media, owned media, and social media. The case offers an instructor the opportunity to reinforce each of these concepts through a discussion of the case. For example, an instructor might ask how does owned media apply in this context (WGW’s Instagram page – and possibly a web page – would be examples). Earned media happens when she gets a “like” on one of her posts or when others share her site with friends.

Interesting questions, and learnings, in the case can be developed around WGW’s potential use of advertising and sales promotion. When the promotion objective is to build awareness, paid media (advertising and sales promotion) may be the best options. Sales promotion, in the form of a contest, can be used to encourage customers to share WGW with friends. Students are likely to have a range of suggestions related to the questions in the case. There is no one right answer here, so it might make sense to hear out students’ promotion plans—but to make sure to ask them “Why?” after each of their recommendations. This should push them to recognize the importance of analysis of the 4 Cs – and if they don’t get that connection, they can be asked, “What does your 4 C’s situation analysis suggest about Promotion?”

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Case 35: The Norbank Baseball Club This case reflects a common problem experienced over the last few years by some professional, college, and high school sports teams which have used Native American nicknames. For many years, the use of names and mascots with Native American names was of little concern, or of concern only to a narrow segment of the population. Particularly in the last decade, this issue received more attention and turned it into a political issue that is part of a broader culture war that the United States has particularly experienced. The issue has important marketing implications as sports teams’ reputations can be harmed by keeping or changing their team name. Some fans want to stick with tradition and often argue that the team’s name does not disparage and even honors Native Americans. Many will also argue that changing the name is an example of “woke” trends they disagree with. On the other hand, some people argue that the use of such nicknames is racist and should not be allowed under any circumstances. As is often the case in these matters, whatever decision Norbank makes, it is likely to upset a relatively large portion of its fan base.

This type of case can be challenging to discuss in a marketing class. The class may be divided in its responses or students holding a minority opinion may not feel comfortable speaking up. Yet these kinds of discussions are important for our students to have in an objective manner. The case includes some financial issues, but profits should not be the whole discussion. There are three clear alternatives advocated by the three primary characters in the case study. One way to examine this case is to put all three alternatives on the board and ask for the pros and cons of each.

An instructor might also call attention to the Washington Commanders (formerly known as the Redskins), the Cleveland Guardians (formerly known as the Indians) and compare them to the Atlanta Braves and Kansas City Chiefs—two teams that have not changed their names (at least as of this writing).

This case could be taught in one or more chapters, depending on what the instructor wants to emphasize from the case: • Chapter 1 – marketing orientation, triple bottom line, purpose orientation, marketing for a better world and ethics might be different lenses that could be used to analyze this issue.

• Chapter 3 – recognize social and cultural trends in the United States (context) – which seem to be trending away from marketing actions that even appear to support racism.

• Chapter 8 – this is a brand name. The chapter includes examples of how brand names seen as having racist overtones, Aunt Jemima and Uncle Ben’s, have recently been changed.

• Chapter 13 – no matter the decision made, it will need to be communicated to Norbank’s fans and their potential donors. How can that be managed?

• Chapter 19 – this chapter returns to themes around ethics, purpose orientation, and customer satisfaction. Perhaps the discussion operates differently if this chapter is taught at the end of the semester, rather than in Chapter 1.

Case 36: BE Bold Electric Bikes The fast-growing electric bike market, five young friends, and an entrepreneurial venture combine to make this case particularly engaging for student. make this case interesting and fun for students. To make it more engaging, the company was started by five young people who are friends from cycling and/or college.

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Part V

This case was initially written to examine an issue faced by many companies today, whether to sell directto-consumer or use channel intermediaries. In this case it is sell direct or go through Amazon. Amazon brings a lot of benefits and a lot of risks and costs. Chapter 10’s coverage of the benefits of each of these distribution alternatives is the most obvious application for the case. The case discussion might start with the first questions posed after the case: What are the pros and cons of selling direct? What are the pros and cons of selling through Amazon? Either strategy has merits (and demerits), so time should be reserved for a subsequent discussion of implementation. For example, one downside of selling direct is that customers might not have an opportunity to test ride a bike before buying it (a challenge faced with the Amazon alternative as well, although not if they try to go via traditional retail channels). This might make other aspects of the marketing mix more important. Students might put forth ideas like a flexible return policy (reverse channels), videos of the bike, or a referral program to encourage bike owners to allow friends to try it out. Other creative ideas could emerge. This is where the case might be discussed with Chapter 10, but then its issues raised again in subsequent chapters: • Chapter 11 – the need for transportation and distribution of a large product like an e-bike might be challenging. Buyers may not like the idea of having to, at least partially, assemble their bike. How does BE Bold get beyond that?

• Chapter 12 – what retail formats might work well for an e-bike? Which might be less appealing?

• Chapters 13 & 16 – as noted above, consumers may be reluctant to purchase a high cost product like an e-bike without at least giving it a test ride. What could BE Bold do from a Promotion perspective to offset this risk for buyers?

Case 37: Chick-fil-A “Eat Mor Chikin” (Except on Sunday) This teaching note was prepared by Dr. J. B. Wilkinson, professor, Youngstown State University.

This case summarizes the marketing strategy of Chick-fil-A®, the second largest quick-service chicken restaurant chain in the United States, based on sales ($1.975 billion in 2005). It operates over 1,250 restaurants in 37 states and Washington, D.C. Its 2005 performance marks the 38th consecutive year of system-wide sales gain.

Chick-fil-A’s marketing strategy can be summarized along the 4Ps as follows: • Product. Quality chicken sandwiches for breakfast, lunch, and dinner six days a week along with side dishes and desserts. Recent menu additions include salads, fruit cup, premium two-blend coffee (Café Blends), and hand-spun milkshakes. Warm, friendly service in a children-friendly atmosphere also is part of the bundle of benefits offered to customers.

• Place. Chick-fil-A is growing rapidly through store openings and currently has over 1,250 restaurants in 37 states and Washington, D.C. Although the chain pioneered the placement of fast-food restaurants in shopping malls, most of the new outlets are in stand-alone locations. The chain also has licensed restaurants in nontraditional locations such as airports, corporate offices, hospitals and college campuses.

• Promotion. Chick-fil-A’s “Eat Mor Chikin” campaign is one of the longest-running advertising campaigns on the market. It started in June 1995 when the first billboard was erected in Atlanta, GA. The “Eat Mor Chickin” Cows have become cult figures with their message to “stray from the herd of beef-burger eateries and eat more chicken—at Chick-fil-A restaurants. The theme has been used as the basis of an integrated marketing campaign which encompasses billboards, instore point-of-purchase materials, promotions, radio and TV, clothing and merchandise, and the well-known cow calendars.

• Price. Price is set to cover costs, including the costs of amenities associated with a “total restaurant experience,” plus profit to grow the business. Customers are willing to pay full price for a quality meal, good service, and atmosphere.

Chick-fil-A’s approach to kid’s meals is to offer premiums that develop character and/or augment youth education. Chick-fil-A’s kid’s meals have been recognized twice by Hospitality Magazine as the “Best Kid’s Meal in America.”

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Chick-fil-A’s corporate culture derives from Truitt Cathy’s religious beliefs and Christian values. The company’s official statement of corporate purpose is “to glorify God by being a faithful steward of all that is entrusted to us and to have a positive influence on all who come in contact with Chick-fil-A.” The company’s culture is reflected in numerous ways. The most visible impact is their policy of being closed on Sunday. However, Chick-fil-A has a strong commitment to customers and employees which is reflected in community programs and employee programs. Training programs stress the need to treat others with dignity, honor, and respect. Scholarship programs help restaurant team members realize their potential. Corporate giving programs have helped many restaurant employees, foster children, and young people through the WinShape® Foundation.

Questions For Class Discussion 1. What types of marketing strategies is Chick-fil-A following? Chick-fil-A is following a growth strategy characterized by market development (new locations) and product development (menu development).

2. How would you describe Chick-fil-A’s positioning strategy? Chick-fil-A’s positioning strategy can be stated as follows: We offer quality chicken sandwiches to families in a family-friendly environment that reflects the company’s corporate culture based on Christian values.

3. Is Sunday closing a competitive advantage for Chick-fil-A? Explain. Yes. As explained in the case, focus groups have found that respondents rate the cows as one of the three things they like best about the Chick-fil-A brand—the other two being the food and the company’s policy of being closed on Sundays. Chick-fil-A’s phenomenal growth and competitive parity with McDonald’s for kid’s meals, supports this finding.

4. Should other retailers consider closing on Sunday? Why? Why not? A retailer should always consider a viable option. Retailers that do not sell “emergency” merchandise should examine their policy of being open on Sunday from a profitability perspective. The essential issue is whether they would lose business by being closed on Sunday. The costs of being open on Sunday (or any other day of the week) should be compared to the incremental sales revenue. The difficulty of the analysis is the problem of estimating incremental sales revenue since customers might have “shifted” their purchases to a different day if a retailer is closed on Sunday (or some other day of the week). From a nonprofit perspective, closing on Sunday is an attractive employee benefit. However, retailers in mall locations may not have the option of being closed on any day of the week or year that the mall is officially open.

Case 38: Bass Pro Shops (Outdoor World) This teaching note was prepared by Dr. J. B. Wilkinson, professor, Youngstown State University.

Bass Pro Shops is the nation’s leading retailer of outdoor gear. It also is regarded as a master marketer for a unique shopping experience that blends goods and services with theater and entertainment—a trend in retailing called “destination development.” Destination retailers don’t just sell a product; they create an unforgettable experience for their customers. The stores offer shoppers deep merchandise assortments in fishing, boating, hunting, outdoor gear, and camping as well as exciting décor and displays, activity areas, knowledgeable sales associates, outdoor skills workshops, restaurants, and special event promotions. Artwork and wildlife displays account for about one third the square footage in each retail store. Bass Pro Shops employs skilled craftspeople and artisans to hand-make interior and exterior store elements, including the chandeliers, lights, lanterns, wood carvings, ironwork, murals, mounted animals, displays and other features that make up each store’s unique theme-based décor.

The Bass Pro Shops brand has been expanded through the distribution of catalogues and circulars which generates orders and through its website. In addition, Bass Pro Shops operates related business such as Tracker Marine which manufactures and sells boats through Tracker dealerships and independent marine

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Part V

dealers under various brands, including Bass Tracker. Most of the Bass Pro Shops stores have an extensive boat department.

Bass Pro Shops supports a wide range of environmental, habitat conservation and youth educations programs through philanthropic efforts, such as the National Wild Turkey Federation and the Rocky Mountain Elk Foundation.

Questions For Class Discussion 1. What makes a Bass Pro Shops store different from other sporting and outdoor goods retail stores?

Competitors in this retail category range widely: large format sporting goods stores, traditional sporting goods stores, specialty sporting goods stores, and some of the mass merchandisers that have a large sporting and outdoor goods department. The closest competitor is Cabela’s—a chain of stores that have similar merchandise and décor. The Sports Authority, Dick’s Sporting Goods, Academy Sports and Outdoors, Gander Mountain, and Sportsman’s Warehouse are some of the large format competitors.

Walmart has a large sporting and outdoor goods department. Examples of specialty sporting goods stores might be golf stores, ski shops, boat dealers, gun shops, etc. Traditional mom and pop stores typically sell a small assortment across several product lines and cater to local needs: baseball, basketball, and other team sports gear, for example. Clearly, Bass Pro Shops are larger are more elaborate in terms of décor. However, another apparent difference is in customer service levels. Highly trained and skilled salespeople, customer activity areas, store amusements, workshops and events are not typically found in competitors’ stores.

2. Can other types of sporting and outdoor goods retail stores compete against Bass Pro Shops? The classic marketing strategy answer to this question is “Yes.” Many of the large format stores have lower prices (cost leadership); the specialty sporting goods stores often have location advantages (located in resort complexes, golf clubs, hunting areas, etc.) or deeper assortments (differentiation). Small mom and pop operations may have community leadership visibility and knowledge of community activities and organizational requirements (focus or intimacy). There are different paths to competitive advantage.

3. What types of trends in the socioeconomic environment increase sales at Bass Pro Shops stores?

What types of trends hinder sales? Most analysts point to the aging of the U.S. population as a positive trend for Bass Pro Shops. Aging baby boomers and retirees are likely to take up hobbies and leisure time activities in the sports and outdoor activities area: fishing, boating, camping, etc. Declines in real income for many American families have increased their interest in more modest recreational activities such as hiking, camping, fishing, etc. A term which is being used to describe this trend is “staycation,” or staying at home or near home for a vacation.

On the other hand, many analysts believe that recessions hurt sales of sporting and outdoor goods retail stores because expenditures on this type of merchandise are considered “discretionary” and “luxuries.”

Weather also can affect sales of sporting and outdoor goods retail stores. Increases in costs can have an impact. For example, recent increases in fuel costs have reduced the use of boats. Changes in laws affecting gun ownership and use would impact sales of firearms. Changes in attitudes and values for sporting and outdoor activities might adversely affect sales of sporting and outdoor products.

Case 39: Toyota Prius: The Power of Excellence in Product Innovation and Marketing In the early 90s, Toyota decided to re-invent the way automobiles are powered. Called Project G21 (Globe 21st Century), the development process began with generating ideas to achieve Toyota’s stated objective: the creation of environmentally clean, fuel-efficient vehicles. Bill Reinhart, National Manager, Toyota Advanced Technology Group, discusses the ideas considered and the criteria used to evaluate ideas: double the fuel efficiency, use of current fuels, and features and styling consumers expect in a car.

In the end, the gasoline-electric hybrid car seemed to meet these criteria best.

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Further evaluation of the idea involved concept testing and marketing research. For example, marketing research identified the characteristics of the type of buyer who would be initially interested in a gasolineelectric hybrid car: environmentally concerned (but not extremists), technology savvy, and value conscious (fuel economy, affordable service, reasonable purchase price).

During the development stage, a physical prototype was created and elements of the marketing mix were determined. The Toyota Prius hybrid concept car was presented to the public in 1995, and the Prius was introduced to the Japanese market in 1997 before being introduced to the U.S. market in 2000. First year sales were around 12,000 units and by 2004, global sales totaled 250,000 units.

The introductory marketing U.S. campaign utilized advertising, publicity (alternative limo for the academy awards ceremony), and sales promotion (“Engine of Change” tour of 15 cities). The introductory price was set at $19,995. Sales outstripped supply in the introductory year and Bill Reinhart, National Manager, Toyota Advanced Technology Group, discusses management’s disbelief of the sales forecast made by mathematical modeling—a sales forecast which turned out to be accurate!

With competitors entering the market with hybrid vehicles, Toyota has changed its strategy to differentiation—emphasizing the superiority of its Hybrid Synergy Drive. Toyota also is working to reduce the price of its hybrids. Finally, the 2004 second-generation Prius was designed to appeal to a broader market. It is larger, more powerful, with numerous technical improvements and loaded with optional hightech features like the Smart Entry/Smart Start, which allows the driver to start the vehicle without inserting a key. Base price was held at $19,995.

Toyota recently introduced a hybrid Highlander and Lexus RX400h and plans to introduce a hybrid Camry.

Questions For Class Discussion 1. In what stage of product life cycle is the Toyota Prius? Explain. The Toyota Prius is in the growth stage of product life cycle. The sales curve shows rapidly rising sales, and Toyota’s marketing strategy shifts reflect a classic growth stage prescription for marketing: product improvement, additions to the product line, and price reduction--maintaining the introductory price is a price reduction in real dollars. In addition, Toyota has shifted emphasis from gaining market acceptance through publicity and education efforts to differentiating its hybrid cars from competitors’ hybrid cars.

2. Describe the marketing strategies being followed by Toyota for the Prius. The current marketing strategy being followed by Toyota for the Prius can be described as a growth strategy: market penetration, market development (broader market appeal, appeal to buyers who want more power and luxury features), and product development (application of hybrid technology to other Toyota cars like the Highlander, Lexus RX400h, Camry, and Avalon sedan). Toyota’s differentiation strategy is the current competitive strategy being followed.

3. Do you think Toyota should convert all the cars they produce to hybrids? Why? Why not? The classic answer to this question is “No.” The automobile market is highly fragmented. Many car brands/models compete in small market segments (niche strategy) that would probably not be receptive to hybrid technology: sports cars, luxury cars, high-performance cars, and specialized vehicles (HUMMER). To compete successfully in the automobile industry, a producer must target a real market segment and satisfy the needs and wants of that segment (the marketing concept). To some extent, this question asks the age-old question, “Do you sell the buyer what he wants or what he needs or should want?” It is hard to convince buyers that what they want is not what they should buy. Most companies offer the buyer what they want, providing it is legal and profitable to the company.

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Part V

Case 40: Potbelly Sandwich Works Grows through “Quirky” Marketing This teaching note was prepared by Dr. J. B. Wilkinson, professor, Youngstown State University.

This case summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along the 4Ps and features interview footage with Bryant Keil, Chairman and CEO of the company. Chicago-based Potbelly Sandwich Works, Inc. is a chain of sandwich shops that competes in the Quick Serve segment of the restaurant industry. Billed as a unique and “quirky” sandwich joint, Potbelly has strong appeal to young urban professionals. Potbelly’s core strategy elements are: • • • •

Product: Made-to-order, toasted sandwiches, soups, homemade desserts, malts, shakes, and smoothies; quick and friendly service; live music, antique fixtures, real books, and vintage memorabilia; fun, warm, comfy décor and atmosphere.

Place: Stores averaging 2,200 square feet with indoor and outdoor seating, selected urban areas.

Promotion: Event promotion (store openings, National Sandwich Day, local charities (food banks), and community-based reading and music appreciation programs.

Price: One price point ($3.79) for sandwiches; high value (good food at good prices)

Questions For Class Discussion 1. Identify and describe Potbelly’s strategy in terms of product (present or new) and market (present or new). Potbelly is following a growth strategy that is best described as market development (present product and new markets) because of its expansion into selected cities outside its original Chicago area. However, there is an element of market penetration (present product and present market) to the strategy since Potbelly is expanded within selected cities by opening new stores in locations that are convenient to its target market: young professionals.

2. How would you describe Potbelly’s positioning strategy? Potbelly is targeting young urban professionals with a quick, tasty, made-to-order, toasted sandwich at a good price in a fun, comfy environment. Potbelly’s main competitors are other sandwich stores like Subway, Quizno’s, Cosi, Panera, Jimmy John’s, and Schiotzky’s Deli. Potbelly’s competitive strategy is niche with an emphasis on customer intimacy. Potbelly attempts to build customer loyalty through friendly customer service and good value. Good word-of-mouth communications and repeat business is very important.

3. What types of environmental opportunities and threats to you see in Potbelly’s external environment?

How might they impact Potbelly’s current strategy? There are several environmental trends that favor Potbelly’s current strategy and act as opportunities for growth of the Potbelly concept. First, the value of time for working professionals continues to be positive factor for Quick Serve restaurants. Working professionals cannot spare the time for a prolonged lunch (or perhaps even dinner). Second, many American cities are committed to urban redevelopment projects which create good locations for Potbelly stores—mixed development projects, restoration of historic areas, conversion of apartment buildings to condominium living, pedestrian malls, skyways, and other urban redevelopment concepts. Third, the trend to health eating tends to favor certain types of sandwiches. Subway has been very successful at promoting several of their sandwiches as “healthy” alternatives to burgers and fries. However, Potbelly should consider adding obvious “healthy” choices to its menu.

A couple of environmental trends negatively affect operating costs for Potbelly and other restaurant chains. For example, increased cost of labor in the form of increases in the minimum wage and increased costs of employee benefits could become a significant threat to the Potbelly concept.

Potbelly is a labor-intensive operation and requires young, friendly workers who are enthusiastic and upbeat. Liability is another issue for all restaurant chains. The costs of insuring against injury on the premises and illness or death from bad food are increasing rapidly. Potbelly could control some these costs through good management—hiring, scheduling, training, and inspection.

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Demographic diversity (Hispanics, Asians, and other growing ethnic segments) affect food preferences.

Although sandwiches appeal to mainstream America, it is not a preferred food for some ethnic groups.

Potbelly and other sandwich shop chains can probably adapt to this type of change but increasing sandwich options will increase costs.

Another concern which might be mentioned is the growing violence and civil disturbance in America which affects urban/business areas more than affluent suburban areas—e.g., terrorists, gang warfare, illegal immigrants, homeless people, customer rage/misbehavior. Potbelly stores and its customers are exposed to this growing problem. Potential store locations should be carefully evaluated against security issues.

Case 41: Suburban Regional Shopping Malls: Can the Magic Be Restored?

This teaching note was prepared by Dr. J. B. Wilkinson, professor, Youngstown State University.

This case focuses on the current problems of suburban regional and superregional shopping centers.

Southdale Center located in suburban Minneapolis is the prototype for most of the suburban regional and superregional shopping malls built during the second half of the twentieth century. Southdale opened in 1956 and featured 70 retail tenants in a 800,000 square foot enclosed, climate-controlled mall, anchored by two department stores.

The International Council of Shopping Centers has defined eight principle shopping center types: Neighborhood, Community, Regional, Superregional, Fashion/Specialty, Power, Theme/Festival, and Outlet. In 2002 there were a total of 46,336 shopping centers in the United States, of which about 1200 would be considered regional or superregional malls.

The suburban regional shopping mall and their department store anchors enjoyed great success for almost 50 years. However, in the final decade of the twentieth century, they began to experience problems: competition (direct and indirect), industry overcapacity (retail space), decline of the department store, and changes in shopping behavior. Strategies for turning around regional and superregional shopping centers include renovation, re-tenanting, entertainment, and zonal merchandising. The need to create an appealing, exciting shopping center that stimulates social activity is the key to revitalizing traditional malls. However, some suburban regional shopping centers will not survive. In fact, some have already been “decommissioned.” At the end of the segment, Rolling Acres Mall in Akron, OH, is shown as an example of a shopping center in trouble.

The case features interviews with several shopping center developers: Yaromir Steiner, CEO of Steiner & Associates, Bob Gorman, CSM, Area Manager of Greenwood Park Mall, Simon Property Group, Les Morris, Manager, Corporate Public Relations, Simon Property Group, Mike Leonard, COO. The Hogan Group, and Glen Hogan, President/CEO, The Hogan Group.

Questions for Class Discussion 1. Imagine yourself as the manager of a struggling local suburban regional shopping mall. What do you think the mall should do to improve its performance? The case suggests several strategies that could be used to revitalize already existing suburban regional shopping malls. First, a mall manager should consider the issue of appearance and space utilization. Through renovation/redecoration a mall can be “updated” in appearance and design concepts. Renovation can re-arrange space. For example, the space used for a department store anchor can be used to create entertainment space in the form of theaters, skate park, virtual reality golf course, or restaurants. Space can be created to suit the special needs of some types of mall tenants that have special appeal to shoppers, e.g., spas, tattoo parlors, or senior day care centers. Second, a mall manager should consider the issues of “exciting” and “social interaction.” A program of events and promotions which shoppers find fun or interesting can draw people to a mall. Many of the town centers have an event area that is used to stage special events (bands, auctions, etc.). Third, zonal merchandising was mentioned in the case

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as a way to improve shopping efficiency. Shoppers might be more inclined to shop at a mall that groups stores by product or by type of shopper (teen, men, family).

2. What shopping trends do you foresee over the next 10 years? How might these trends affect suburban regional shopping malls? This is a question that challenges students to relate environmental changes to strategy changes in the context of the shopping mall industry. Most students should think about population changes and their implications. Increasing numbers of older Americans, increasing ethnic diversity, and changes in the family are all major population trends that have implications for the shopping mall industry. For example, older Americans are not the target market for most suburban regional shopping malls. They are more likely to prefer neighborhood shopping centers or free-standing retailers that cater to their product needs and offer convenient parking. This suggests that neighborhood and community centers will benefit from aging trends.

Ethnic shoppers, especially Hispanics, are more likely to be price sensitive. Their larger families and middle-to-lower incomes suggest that they are likely to favor retailers with superstore or warehouse formats (Walmart, Home Depot) and/or low prices (Target, Dollar General). These types of retailers tend to prefer free-standing retail sites or power centers (strip configuration). Changes in the family (single parent households, working mothers) suggest the need for convenience, security, and services (babysitting services, U.S. Post Office, Banks,). Suburban regional shopping centers could cater to this demographic by offering higher levels of security and services that make it easier for a single parent to shop. Other environmental changes that might be mentioned are economic (lower inflation-adjusted incomes, unemployment), technological (internet shopping, online catalogs), and social (changes in attitudes and values, lifestyle). Most of the foreseeable trends spell trouble for suburban regional shopping centers that cannot change to meet these challenges.

3. What new retail concepts can you identify? How might you learn about more? What strategies do you suggest for learning about new retail concepts? There are any number of new retail concepts that could come up in class discussion: brand stores (designer or manufacturer names), open air markets, senior day care centers, pet day care centers, single price point stores (like Dollar General but not necessarily at the $1 price point), food emporiums (prepared food service stores), entertainment stores (skate parks, virtual reality sports), and do-it-yourself hobby/workshop centers (ceramics, Build-a-Bear). The way to learn about new retail concepts is to visit retail centers and observe new retailers or to peruse retail journals and trade magazines. The trade magazine for the shopping center industry is Retail Traffic (formerly Shopping Center World).

Case 42: Invacare Says “Yes, You Can!” to Customers Worldwide This teaching note was prepared by Douglas Hausknecht, The University of Akron The Invacare Corporation produces home medical equipment for the domestic market as well as select global markets. Some of the manufacturing is in USA facilities, including a factory at the main headquarters in Elyria, Ohio and the HomeFill oxygen concentrator production plant in Florida.

Invacare entered the wheelchair market as a small competitor to Everest and Jennings, the market leader. The leader had dominated the industry for years through a price leader strategy. Invacare chose to focus on product quality and innovation. In addition, a product diversification strategy enabled the company to develop strong relationships with a network of dealers/providers. Early on, the firm added patient beds, walkers, and gurneys. Through acquisition of competitors and related businesses, the company added a full line of oxygen concentrators and a variety of other home health devices consistent with the company’s goal of improving quality of life for its customers.

The US system of healthcare from the mid-twentieth to the early twenty-first century has relied on health insurance companies and government or nonprofit programs to fund patient needs for home medical equipment. With the right combination of financial support from these programs, patients have been able to acquire relatively expensive items, such as custom-built power wheelchairs and scooters. This, in turn,

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has spurred development of new features that enable product development aimed at increasing functionality and comfort for the user.

Home medical equipment markets can be segmented using an assortment of variables. Invacare, for example, uses a lifestyle segmentation to identify sports enthusiasts and other active users. Wheelchairs and other products are designed to uniquely meet their needs. Invacare has capitalized on these markets with constant innovation and total quality management. In order to provide the sophisticated integrated controls necessary for its power wheelchairs, the company acquired a manufacturer of control equipment and software.

Early in its history Invacare had begun operations outside of the United States. Production and marketing have expanded to all of North America and is currently expanding in South America. Invacare has a strong presence in Western Europe and parts of the Asia/Pacific region. Customers in foreign markets have the same basic needs, but product configurations, variety and positioning vary. U.S. distribution is through networks of dealers/providers who are accredited (by meeting standards set by Medicare) and trained to determine the features and fit required for each individual customer. Such networks seldom exist elsewhere. Medical equipment may be distributed through pharmacies, small shops or other lesscontrolled outlets.

Variation in distribution systems results in differences in pricing strategy and the price elasticity response of consumers. In health care systems where payment comes entirely from public funds, spending may be restricted or regulated. When the customer pays, price sensitivity is high and demand for expensive technology is low.

Promotional messages vary greatly across products, markets, and international markets. The most basic wheelchairs are promoted as affordable and durable; however, sports chairs are promoted on the excitement and thrill of competing in sports events. European advertisements have emphasized style (glamorous in some cases) and live for the moment, “Yes you can!” lifestyles. [You can look on the Invacare website for promotional videos and advertisements from the European divisions.] In some regions such as Brazil and other parts of South America, the markets for home medical equipment are under-developed, and products for disabled people may still be viewed as bearing a stigma. Conversely, some of the European commercials view products like wheelchairs and scooters as fashionable or even fun.

Invacare has been producing in China for some time and is beginning to distribute more products there.

The company is currently considering what might be the best entry strategy for Brazil, recognizing that tariffs are high and most of what is sold will have to be produced within the country. Both countries have the purchasing power (population and wealth) to be a very profitable market, but regulations, price competition, and distribution channels will differ greatly.

Global markets will continue to be important to the home medical equipment industry as the U.S. market adapts to changes in the payment systems for healthcare. The 2010 Health Care Reform Act has just begun to be interpreted and the implications of its implementation are uncertain. Funds from Medicare, Medicaid, and the Veterans Administration, have paid for many of the products produced by the industry.

The Reform Act has proposed changes in the financing of these products, including changes to leasing and purchase plans, but how these changes will affect demand remains to be seen.

The need for equipment to provide mobility and the desire for high-tech equipment will not go away and global demand will continue to increase as medical advances increase the survival rate of injuries and illnesses. The question will not be whether these products are wanted by the market, but who will be able to produce and deliver them most efficiently and effectively.

Questions For Class Discussion 1. How might the anticipated changes in U.S. health care coverage affect Invacare’s current marketing strategies and demand for its products? As the Health Care Reform Act of 2010 is rolled out,

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uncertainties abound. A stronger government presence in the health care reimbursement system is likely to result in more regulation which might standardize products but reduce innovation. Demand for products and services that are customized to individual needs may be reduced if customers have to pay the full price for them. Cost control will become more important if profit margins “tighten.” This typically impacts product development and innovation negatively.

The distribution channels may be narrowed if health care equipment providers must conform to more government regulation and oversight. The availability of private financing or supplements to payments for equipment may become more restricted, limiting the options under lease/purchase plans.

Invacare might address the changes with greater emphasis on standardized products or products that can be adapted in an aftermarket.

2. Conduct a S.W.O.T. analysis for Invacare. What types of opportunities and threats do you see? What types of marketing strategies are suggested by your S.W.O.T. analysis?

• Strengths: Within its markets, Invacare enjoys strong brand reputation, both within the U.S. and in its global markets. The company is vertically integrated or managed from sourcing and production to end-user dealers. There is a culture of innovation and engineering excellence. Low turnover has kept a workforce of loyal, experienced associates. Invacare’s sports chairs and power chairs are high-tech, state-of-the-art products. Its dealers are certified and provide high levels of service to customers and users. The company has entered key global markets and remains up-to-date with communication including the use of social media.

• Weaknesses: The brand name has possible negative connotations (invalid). Contact with end users is primarily indirect, through a network of dealers. There is limited brand recognition beyond current members of their target markets.

• Opportunities: New global markets are opening for home medical equipment, with a variety of payment and reimbursement plans. Globally, populations are aging, and medical improvements keep patients alive longer, creating new customers for home medical equipment • Threats: New global markets bring more competition. Standardization of products makes cost competition more important than product innovation and customization. Greater health care regulation in US and global markets creates additional regulation. Changes in reimbursement resulting from the 2010 U.S. Health Care Reform Act and increasing global competition will put more pressure on profit margins.

The marketing strategies suggested by key S.W.O.T. components are: efficiency strategies that have the potential to reduce costs and growth strategies in markets that will be less price sensitive over the foreseeable future. For example, some types of home medical equipment may enjoy less government scrutiny, either because it has fewer substitutes or because it is less visible to auditors. Some global markets may be more attractive because there is less government interference with consumer choices.

3. What have been the “keys to success” for Invacare in the past? Are these likely to change in the future? Invacare became the leader in home medical equipment through product development and quality control. Its strong dealer networks enable customization of products for customer needs.

Growth has been through acquisition of companies with related products or components. The company has expanded into niche markets that provide both profit and prestige. The future may require product adaptation to government standards, more sales to users that are not reimbursed by insurance and government programs, and greater global competitive strengths. Invacare will have to balance its strategic emphasis on engineering and quality with a greater emphasis on cost containment/reduction in order to protect profit margins.

4. What do you think will be necessary for Invacare to conduct operations successfully in Brazil? What about China? Which of these two countries is a better “fit” for Invacare’s business model? Brazil will require local manufacturing due to high tariffs on imports. The market is not yet developed for custom products and demand for these types of products will have to be developed. This may require a leaner distribution network, perhaps company-owned and/or operated stores. The story in China is

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somewhat different. It is easier to produce products in China than to sell products in its domestic market. Manufactured goods can have good quality, but achieving high quality requires tight supervision (some questions have been raised in recent years about the quality of products produced in China for other industries). Some healthcare services are modern, but the Chinese patient’s access to home health care equipment is still limited. The “one child per family” policy has reduced the size of an entire generation and may limit their ability to support private purchases of home medical equipment for the elderly.

Case 43: Segway Finds Niche Markets for Its Human Transporter Technology This case tells the Segway story and discusses the marketing strategies pursued by Segway Inc. since the introduction of the Segway® Personal Transporter (PT) on ABC’s “Good Morning America” in 2001.

The Segway story begins in 1999 when inventor Dean Kamen saw a young man in a wheelchair struggle to get over a curb and recognized a need for a better product. From that inspiration came the Independence IBOT™ Mobility system, a self-balancing wheelchair that could climb steps and roll over rough terrain. Kamen used the same breakthrough technology (Dynamic Stabilization) to design a selfbalancing machine for people with full mobility. Code named “Ginger” during the development phase, the self-balancing, electric-powered transport devise contains solid-state gyroscopes and tilt sensors that monitor a user’s center of gravity and responds to subtle shifts in weight. If you lean forward, it moves forward; lean back, it goes in reverse. It gets up to 24 miles to a single charge and has a maximum speed of 12 miles per hour.

The Segway PT was initially marketed to the commercial (manufacturing plants and warehouses) and government sectors (police, letter carriers, meter readers, park rangers). In 2002, the Segway PT went on sale to the public through Amazon.com. In 2004, the company began building a worldwide network of dealers and distributors. Dealer networks are expected to facilitate consumer sales. Most consumer buyers perceive risk associated with the purchase of an expensive innovation ($4,500 to $5,000). The ability to see the product, discuss the product, try the product, and get the product repaired is important to them.

As stated in the case, one of the hurdles that the Segway PT has had to overcome is government regulation concerning sidewalk usage. However, the product is a true innovation and is in the introduction stage of its product life cycle. According to product life cycle theories and related empirical studies on diffusion of innovations, the speed with which a product moves through its product life cycle varies according to many factors: product characteristics (relative advantage, complexity, compatibility, divisibility, and communicability), market characteristics (size, growth rate, and homogeneity), competition, and environmental trends (e.g., economic, regulatory, demographic, and technological).

In 2006 Segway introduced the second generation Segway Personal Transporter—a white space of products that includes the i2, x2 and six package configurations targeting niche market segments. The new products offer whole package solutions for consumer and commercial customers, as well as a “cooler” design and advanced technology. The package offerings enhance the utility of the Segway PT for specific user segments such as police officers, commuters and golfers. With these new products came a new marketing campaign (“Simply Moving”) which includes print and online advertising, updated brochures and point-of-sale-materials and an online product simulator that allows people to “build” their own dream machine on segway.com.

Questions for Class Discussion 1. How might Segway Inc. further develop the market for Segway technology? Hint: What types of marketing strategies are associated with sales growth? As a product enters the growth stage of product life cycle, its marketing strategy should change in the following ways: •

Product. The product should expand to meet the needs and wants of new buyers entering the market. New buyers are likely to be different from initial buyers. They may have different usage

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• •

•

situations and buying behavior. They may want different features and/or benefits. For Segway, the product line should expand to include models that appeal to the new types of buyers that may be interested in the product. For example, a model which has a seat or “fanny-rest” would appeal to older shoppers who might prefer a Segway PT to a wheelchair in shopping mall situations. A model for a child might appeal to families who have kids that walk a mile or more to school. In the new commercial/government applications, product models should reflect the application in the new commercial setting, e.g., universities, agricultural.

Price. The price should be reduced to stimulate growth. Consumer buyers tend to be price sensitive. To penetrate this market, Segway should consider reducing the price of a basic model.

Promotion. The Product Life Cycle Theory recommends increasing the promotion budget and directing it to buyers (pull strategy). Segway should consider advertising in media that reaches a broad segment of the consumer market. The advertising should show the product’s benefits, inform buyers of dealers in their area (local media), and register the brand name (selective advertising). Price promotions should be considered.

Place. The Product Life Cycle Theory recommends broadening distribution to increase market exposure and facilitate purchase. Segway could consider distribution through a mass merchandiser that has stores. Given the price level of a Segway PT, this will be a difficult problem. However, a leading consumer electronics store chain or warehouse club might be an option.

2. What would be some of the advantages and disadvantages of you using a Segway PT to get around on campus? Students will think of many advantages and disadvantages of using a Segway PT on a college campus. Here are some of the issues that they might mention.

•

Advantages. A Segway PT would carry them between dorms and classes and between classes in different buildings faster than they could walk these distances. A Segway PT could be equipped with a “package” that would hold books and other objects which, if carried in a backpack, would be quite heavy. A Segway PT could be used as personal transport to nearby places (within 5 to 8 miles), such as church, retail stores, etc. A Segway PT probably could be kept in a dorm room or apartment.

•

Disadvantages. A Segway PT must be recharged, and a college may decide not to allow use of their electricity for that purpose. A college may pass regulations on their use on sidewalks or in buildings. Theft could be an issue if the Segway PT could not be parked inside the classroom or near to the classroom (hallway). A Segway PT is expensive compared to a bike or roller skates, both of which could be used to get around a college campus.

3. What types of applications and usage situations are there for Segway PTs in your area? The answer to this question could range widely, but here are some of the possibilities. Applications: Airport security, shopping mall security, campus police, campus tour groups (parents and potential students, freshman orientation), city tour groups, local manufacturing plants and warehouses, pedestrian areas (historic districts), hospital security and personnel, zoos, farms, and other types of spaces where walking takes a lot of time.

4. What kinds of problems would the use of Segway PTs create in your area? Are there solutions for these problems? Explain. Students will probably mention the problem of congestion on sidewalks— the mix of pedestrians, bicycles, skateboards, roller skates, and other uses of sidewalks. Throw in Segway PTs on top of all that and sidewalks could become dangerous, especially on a college campus. Students may mention the need for registration of Segway PTs—maybe even licensing— and regulations concerning their use. Rules of right-of-way and conduct might be mentioned as a possible solution to solving the problem of congestion. The need for insurance might be mentioned.

Should an accident occur, and someone is injured, how would this be handled? Another problem concerns the use of public sources of electricity to recharge the Segway PT. The cost is minimal for a single vehicle but could become substantial if a lot of them are using a public electrical outlet (e.g., campus or shopping mall). What is the solution here? If electric cars had been a “hit” with U.S. consumers, the solution would be easy—commercial electrical stations. However, this did not

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happen, so the problem of how to recharge Segway PTs in the public domain is a problem without an easy solution.

Case 44: Red Light Challenge: Gigging for Growth NOTE: This case was completed after the 18th edition of Essentials of Marketing went to press. But we liked the idea so much, we include a link to it from the book and have downloadable copies you can share with your students with the instructor resources. The case can also be found in Connect Interactives.

This case describes the marketing challenges for two brothers who are musicians and formed the band Red Light Challenge. The case is real and includes links to the band’s website, a music video, and a TikTok video. The brothers were business majors in college, one was an honors student of Joe Cannon’s (author of this textbook). Your students will enjoy the music and the fun of working on a case with a product where they are the target market. While most of our students are fans of music, few think about how what they are learning in a marketing class might apply to a rock and roll band.

We utilize this case in three different Connect Interactives. The Connect Interactives focus more on lower level Bloom’s leaning objectives – assuring students understand and can apply some of the key terms and concepts in Chapters 2, 10, 13, and 16. An instructor might assign one of these interactives and then follow up with in-class discussion of the questions shown at the end of the case. These options are briefly discussed next.

Chapter 2. The Connect Interactive for Chapter 2 is a drag-and-drop activity that asks students to identify aspects of the case that represent elements of the marketing strategy planning process in Exhibit 2-9. At this stage of the course, it is important for students to recognize aspects of that model as it forms the basis for the remainder of the course. This could be assigned as class preparation and then could form the basis for discussion in the class. Given this would likely happen in the first couple of weeks of class, expecting students to develop well-thought out strategies is unlikely.

Chapter 10. This Connect Interactive assures students understand key concepts from Chapter 10, including direct/indirect distribution, discrepancies, separations, and channel specialist activities. Applying these concepts for digital and service products requires students to have a deeper level of understanding.

Chapters 13-16. This Connect Interactive focuses on having students recognize concepts in Chapter 16.

For a band that targets millennials, owned media, earned media, and social media are particularly relevant parts of the promotion blend. Again, the focus is on understanding and applying. In a class discussion, an instructor can get students to analyze, evaluate, and create by using their learning from across the course. Class discussion is best conducted after Chapters 13-16 have all been covered, as it touches on each of these chapters.

Questions at the end of the case and our thoughts follow: 1. Put together a promotion plan for each of the four promotion objectives listed in the case.

Describe the promotion media you would employ, and the copy thrust (messaging) for each.

• By December 31, our number of streams will increase by 35%. o This objective requires the band to increase awareness (which may require performing and increasing social media presence) and to use messaging that might encourage fans to stream.

• By December 31, the number of people seeing us perform live will increase by 30%. o This might require more targeted messaging at fans. Geographic targeting of messages so that people are more aware of a coming show—and perhaps even through advertising on Instagram or through Spotify. o Perhaps some type of promotion to encourage fans to bring a friend to the next show. o It will also require the band to do more live performing.

• By December 31, the number of followers on our social media accounts will increase by 50%.

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o

•

This might require the band to make more frequent and regular posts on social media. o Here some sort of sales promotion might foster new follows. o In live performances, the band could make sure that it tells fans to follow them on social media.

By December 31, we will make contact at least twice with 10 new B2B influencers. o Here we might expect personal selling to be the promotion approach of choice. Sean and/or Kyle might try to make a certain number of phone calls a week to key influencers. o They might also try to connect with other musicians and share recommendations.

2. Describe how Sean and Kyle could use the STEPPS model (see Chapter 16 What’s Next box) to increase the virality of their social media posts. o The STEPPS model is introduced in Chapter 16’s What’s Next? box. The model suggests that any message (in this case social media posts) will be more likely to be shared (and therefore possibly go viral) when they do one or more of the following: ▪ Social currency – this would require the band to stay on top of the news and be prepared to get ahead of any trend. Or it might share some inside information.

▪ Triggers – what would make a topic easy to remember? Maybe for Red Light Challenge, it might promote something around its name. The “Red Light” is something most people see every day. Could the band come up with something via social media that emphasized red (traffic) lights?

▪ Emotion – humor or love might be emotions Red Light Challenge could seek to portray. Humor always works well with young people. And of course many pop songs deal with love – or sadness related to love.

▪ Public – the group is already thinking about some very public guerilla marketing.

▪ Practical value – While not covered in the case because of limited space, the website mentions the band’s public school children’s program called “Red Light Challenge, Green Light Go.” Perhaps something promoting that program could go viral.

▪ Stories – most songs tell a story. Can Red Light Challenge create a music video with a good short story? Perhaps a story that incorporates some of the other STEPPS? o Students will enjoy getting a chance to be creative with this case study.

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