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Comments on Cases in Essentials of Marketing
One way to beat this cutthroat competition is to bring out new products continually (at a cost for dies,
promotion, etc.) and command a price premium for a short time.
Joseph O’Sullivan seems to have some new ideas, but they are untested and (as we noted in the Product
chapters, the failure rate on new product ideas is high). Actually, Joseph is placing most of his hope for
Anya's must consider the caliber of the other "new people" as well as Joseph's plans before making her
decision. After all, Anya gets only a 5 percent interest in the business and thus is not much more than an
employee. Further, a 5 percent share of a "zero-profit" business isn't worth much – even if it has modern
equipment. The lawyer (Joseph O’Sullivan) will probably keep a 51 percent interest and thus his thinking
will dominate. If he is primarily concerned with internal problems rather than with marketing problems,
One approach this company could take is to develop a complete line of products – buying from others if
necessary – to offer one-stop-shopping to wholesalers, especially small ones. Also, some companies in
this area have made money with direct-to-consumer selling. Again, these approaches would not
necessarily require buying plant and equipment. This can be done when the marketing problems are
solved – and it is clear what sales volumes they can achieve.
Note: "Optimistic" salespeople like Anya Winrow usually "bite" on Joseph's offer when this case is used in
executive training seminars!
Case 28: KCA Precision Tools (KCA)
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)
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.)
KCA 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
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
Part V
V-32 Perreault, Cannon, & McCarthy
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 KCA
should move soon – before the better specialty wholesalers have contracted with other manufacturers.
KCA 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 KCA give
Case 29: Quality Iron 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
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 actually 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.
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
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
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.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Comments on Cases in Essentials of Marketing
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
Case 30: Walker-Winkle 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 (Walker-Winkle Mills straddles the U.S./Canadian border from Minneapolis to Quebec). The basic
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 Valerie Boudreau 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
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 31: Amato Home Health (AHH)
Maribeth Amato is wrestling with an objectives problem. She would like to spend her time ensuring that
AHH does "good things" and retains its professional image – that would probably mean employing only
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."
Maribeth was trained as a nurse. Nurses are known for being primarily concerned with patients’ well-
being, – not for tracking costs. So, while one part of her mind is beginning to think like a businessperson,
Part V
V-34 Perreault, Cannon, & McCarthy
the other is thinking like a nurse. To resolve this problem, she must decide what her objectives are.
Assuming that she decides in favor of running AHH like a business (using any "profits" to take care of
patients who are not able to pay), then the appropriate strategy becomes clear fairly 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 AHH will have to meet this
Case 32: Lever, Ltd.
The regional disparities evident in the bar soap market and in Guard's regional development often occur
in a country as diverse as Canada. French-English Canadian differences are the ones most commonly
encountered.
Ideally, a "healthy" brand should have an even business development. That is, market shares should be
equal in every province. This would reflect long-standing efforts to remedy problems and shore up
underdeveloped areas by diagnosing the reasons for underdevelopment and taking appropriate corrective
action.
Typically, however, many brands, like Guard deodorant soap, have severe regional skews. The correct
course of action is to first uncover the cause for an area's underdevelopment (note that this was not
Once a hypothesis has been developed as to why a market is underdeveloped, a corrective course of
action must be planned. This may involve new advertising, higher spending levels or, in rare cases, even
changes to the product or packaging.
It would be imprudent to make any changes, particularly when they involve higher spending, without
testing in small, representative markets first. This reflects two key principles of packaged goods
Therefore, test markets would not be a waste of time. Sung Wu, the Product Manager, is wrong. Sierra
King is right in recommending tests, and furthermore should have suggested an investigation of the
causes of the Ontario underdevelopment. This may support her suggestion for a major reallocation of
promotion money based on sales volume rather than population. But, they both need more information
first!
Case 33: Kennedy & Gaffney (K&G)
Kennedy & Gaffney is 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."
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Comments on Cases in Essentials of Marketing
Instructor’s Manual to Accompany Essentials of Marketing V-35
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
Since K&G has full-time staff, however, it may want to (have to) develop different strategies for "off-
season" 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
Case 34: Chess Aluminum Worldwide (CAW)
In the U.S., Chess Aluminum Worldwide sells a variety of consumer and business products through
merchant hardware wholesalers and buying groups who have helped CAW grow (perhaps in spite of itself
if its foreign efforts illustrate its strategy planning abilities!).
In "foreign" markets, the first creditworthy firm that places an order sets CAW’s strategy in that country.
Some U. S. wholesalers sell the full line, so CAW hopes these foreign buyers will too.
CAW doesn't seem to understand strategy planning or what different kinds of wholesalers can and will do.
It has been opportunistic, illustrating typical "foreign market" export planning by U.S. firms.
Just trying to outline a "global strategy" would be useful, because CAW would have to get more explicit
about what it is doing in the U.S. This could serve as a basis for the "bigger" strategy(ies). If the same
prices). But these "channel captains" are not always available elsewhere. And CAW is not even aware of
the need for them and the desirability of identifying them and trying to get them to sell more of CAW's
product line(s).
This case can be used not only to discuss "global" issues, but also the need for developing good
strategies overall.. Start a discussion about what different wholesalers and retailers can and will do to
this decision without more careful evaluation of possible strategies and their related plans (including
sales, costs, profits, and ROI). This is a big job – and seemingly beyond CAW's managers. Your students
should be able to discuss what needs to be done at this point by now.
Part V
V-36 Perreault, Cannon, & McCarthy
Case 35: Rizzuto’s Pizzeria
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"
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 day years)**
Current
Daily
Capacity
Proposed
Daily
Capacity
Estimated
Daily
Demand*
Pizza units
144
300
320
Contribution margin/pizza
$7.50
$7.50
$7.50
Total contribution – pizza
$1,080
$2,250
$2,400
Contribution margin/beverage
$0.52
$0.52
$0.52
Total contribution – beverage
$150
$312
$333
Total contribution – pizza & beverage
$1,230
$2,562
$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.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Comments on Cases in Essentials of Marketing
Alternative
1
2
3
Potential Daily Gross Margin
$1,230
$2,562
$2,733
Daily Fixed Costs:
(0
)
Delivery Car
(5.71
)
(5.71
)
Pizza Oven
(6.43
)
(6.43
)
Incremental Labor
(84.00
)
(84.00
)
Increased lease cost
(4.57
)
One-time Moving Expense
(45.71
)
($16,000)1
______
______
______
$1,230
$2,466
$2,587
1Note: Assumes 100% of moving expense is deducted from first year profits, i.e., $16,000/350 days.
Case 36: Skyline Homebuilders
The Skyline Homebuilders 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 Skip Patterson 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 Skip has priced
the homes about 10 percent higher than comparable homes in the area. While there is growing consumer
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 Skip Patterson’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. Skip’s product does differ
these benefits?
At this point, an instructor might ask a transition question, “What value does one of Skip’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
Part V
these benefits?” and then “So what does Skip need to do?” At this point, students will realize that the
problem is two-fold: (1) Skyline Homebuilders 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 Skip Patterson 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
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
Adoption Process
AIDA Model
Informing
Awareness
Interest
Attention
Interest
Persuading
Evaluation
Trial
Desire
Reminding
Decision
Confirmation
Action
Both real estate agents and consumers are likely to need more information about the financial and
environmental benefits offered by the new Skyline homes. The case suggests customers are largely
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 Skip 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, Skip 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
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 Skip’s green homes, they can
influence their customers. Real estate agents who do not understand the potential operating cost savings
Comments on Cases in Essentials of Marketing
Instructor’s Manual to Accompany Essentials of Marketing V-39
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
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 in the case – a local newspaper may indeed be interested in highlighting Skip’s new
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
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 particular 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 particular 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
Part V
V-40 Perreault, Cannon, & McCarthy
• External market environment Different issues apply to each element:
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.
o Cultural and social environment – during a time beginning around 2006 – 2008, many
• 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 Skip’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 Skip Patterson builds high quality homes and has at least
seven years’ experience building homes. The case also suggests that Skip 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 Skip’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
• 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
• 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.
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