Chapter–by–chapter aids: Chapter 14
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
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 – a looki at how price–cutting by the rep affects his compensation and
Part IV
IV–14-4 Perreault, Cannon, & McCarthy
P L U S – Spreadsheet
Commission
Combination
Plan
Salary Component of Pay
0.00
15000.00
*
PRODUCT A: Price
110.00
*
110.00
*
Commission Percent (Of Sales $)
5.00
*
3.00
*
Expected Sales (Units of A)
4000
*
3600
*
Unit Cost–Product A
75.00
*
75.00
*
PRODUCT B: Price
150.00
*
150.00
*
Commission Percent (Of Sales $)
10.00
*
5.00
*
Expected Sales (Units of B)
1100
*
1250
*
Unit Cost–Product B
105.00
*
105.00
*
Total (Sales) Revenue (TR)
605000.00
583500.00
Total Compensation (TC)
38500.00
36255.00
“Profit Contribution”
151000.00
145995.00
In a 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.
c. The right column (Combination Plan) of the PLUS 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). 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 question d. next.
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Chapter–by–chapter aids: Chapter 14
Instructor’s Manual to Accompany Essentials of Marketing IV–14-5
P L U S – Spreadsheet
Commission
Combination
Plan
Salary Component of Pay
0.00
18000.00
*
PRODUCT A: Price
110.00
*
110.00
*
Commission Percent (Of Sales $)
5.00
*
3.00
*
Expected Sales (Units of A)
4000
*
3600
*
Unit Cost–Product A
75.00
*
75.00
*
PRODUCT B: Price
150.00
*
150.00
*
Commission Percent (Of Sales $)
8.00
*
3.00
*
Expected Sales (Units of B)
1000
*
1250
*
Unit Cost–Product B
105.00
*
105.00
*
Total (Sales) Revenue (TR)
590000.00
583500.00
Total Compensation (TC)
34000.00
35505.00
“Profit Contribution”
151000.00
146745.00
d. 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 14 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 12: DrJane.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 Chapter 14 of the text. See case
discussion in Part V.
Case 21: Global Chemical, Inc.
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. See case
discussion.
Case 23: Carson’s Furniture
This case can be used to illustrate the importance of understanding the company’s target market and
adjusting the personal selling effort to meet their needs. In this case, the salespeople were of a different
social class from the target customers and were not properly implementing an otherwise good marketing
strategy. See case discussion. It would also be possible to discuss sales compensation issues here.
Part IV
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Case 28: PCA Precision Tools
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. See case discussion.
CHAPTER 14 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: 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 CREATING MARKETING PLANS
QUESTION WITH THIS CHAPTER
The Marketing Plan Coach software on the text website includes a sample marketing plan for Hillside
Veterinary Clinic. Look through the “Marketing Strategy” section.
a. What personal selling tasks are performed at Hillside Veterinary Clinic and who does them?
b. If Hillside wanted to put more emphasis on “order getting” to promote growth, what ideas do you
have implementing this?
c. 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
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Chapter–by–chapter aids: Chapter 14
Instructor’s Manual to Accompany Essentials of Marketing IV–14-7
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.
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 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Question 1: Selling Emphasis and Sales Compensation
Question Type: Click And Drag
Learning Objectives: 14.1, 14.5, and 14.7
Topic: Compensating and motivating salespeople
AACSB: Analytic, technology, reflective thinking
Bloom’s: Understand, analyze
Question 2: Key Steps in the Personal Selling Process
Question Type: Click And Drag
Learning Objectives: 14.1, 14.2, and 14.8
Topic: Personal selling techniques – prospecting and presenting
AACSB: Analytic, technology, remember
Bloom’s: Understand, analyze, evaluate
Question 3: Professional Selling Video Case
Question Type: Video Case
Learning Objectives: 14.1 and 14.2
Topic: Personal selling techniques – prospecting and presenting
AACSB: Analytic, technology, remember
Bloom’s: Understand, apply, analyze
Part IV
IV–14-8 Perreault, Cannon, & McCarthy
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Chapter–by–chapter aids: Chapter 15
CHAPTER 15: ADVERTISING, PUBLICITY, AND SALES
PROMOTION
CHAPTER 15-COMMENTS ON QUESTIONS AND PROBLEMS
15– 1. This is just a policing question. See Exhibit 15–1 and section “Advertising, Publicity, Sales
Promotion, and Marketing Strategy Planning.”
15– 2. 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
15– 3. 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
may be less effective in getting and holding attention.
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,
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.
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
15– 5. “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
long periods. In this sense, even the advertising in a particular week has some carry–over
(investment) value.
15– 6. 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.
Part IV