978-0077861049 Chapter 2 Solution Manual Part 1

Chapter–by–chapter aids: Chapter 1

CHAPTER 1 – COMMENTS ON USE OF CREATING MARKETING PLANS

Chapter–by–chapter aids: Chapter 2

Instructor’s Manual to Accompany Essentials of Marketing IV-2-1

marketing mix. So a marketing mix is only part of a marketing strategy.

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

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

2- 3. 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

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

2- 4. 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

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

satisfy, and retain customers. A firm that has a specific target market will be able to fine tune

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.

Marketing Mixes for Target Markets.”

2- 6. This question is designed to get the students thinking more seriously about what should be

included in a marketing strategy – that is, to get them beyond a superficial definition of

marketing strategy. Ideally, a strategy should include policy statements with respect to how

each of the four Ps should be handled. If these are spelled out completely, then there are

concerned with operational (not strategy) matters. The discussion here should not leave the

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IV-2-2 Perreault, Cannon, & McCarthy

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

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

2- 8. 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

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).

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

years. A marketing program would be the blending of all of the marketing plans into one

workable program. Developing the program might require some adjusting of the plans of some

2-10. 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.

This exercise can easily lead into an interesting discussion of marketing strategy planning and

all of 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 of 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.

Chapter–by–chapter aids: Chapter 2

Instructor’s Manual to Accompany Essentials of Marketing IV-2-3

The next step would be to analyze the product in the light of the consumers’ image of

toothbrushes and the ritual of toothbrushing. 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

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

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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,

Chapter–by–chapter aids: Chapter 2

Part IV

that the customer was partly at fault? Is the customer really always right? Can a firm afford to

satisfy everyone?

By the end of the discussion, the instructor can highlight the fact that the underlying tension in

implementing the marketing concept is; it is difficult to make a profit and satisfy customers at

2-13. 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

2-14. 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

simply to get students to see that there are opportunities all around them. .

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

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

2-16. 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.

2-17. 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.”

2-18. 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;

Chapter–by–chapter aids: Chapter 2

(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

(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

2-19. The main purpose of this question is to encourage students to think about all of the products

that they buy/use/consume that come from foreign producers. The reasons that they give for

purchasing a specific product will vary dramatically – ranging from economic–oriented issues

(low cost, good reliability) to emotional reasons (the status of French perfume, the “in” styling

of an Italian designer). Regardless of the purchase reasons, students will usually conclude that

there was a good opportunity for a domestic firm to get their business – often because there is

really no barrier to prevent a domestic producer from competing. This will come out in the

explanation or the “why or why not” part of the answer. After considering the “foreign”

competition from that perspective, it’s useful to turn things around and ask whether or not

domestic firms have similar opportunities in foreign markets. This discussion might require a

short digression on trade barriers (quotas, tariffs, etc.), but it also can highlight the fact that

firms from all over the world are competing to “capture” customers wherever they may be.

DISCUSSION OF COMPUTER-AIDED 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 the market, costs of blending a marketing mix to reach the

market, and revenue and profit relationships.

The initial spreadsheet for the problem appears below:

P L U S – Spreadsheet

Targeting

Mass Marketing

PRODUCT: Production Cost per Unit

8.00

*

7.50

*

PLACE: Distribution Cost per Unit Sold

2.00

*

2.50

*

PROMOTION: Total Promotion Cost

12000.00

*

60000.00

*

PRICE: Selling Price per Unit

16.00

*

14.00

*

Overhead Costs

10000.00

*

20000.00

*

Number of People in the Market

25000

*

275000

*

Percent of People Who Will Buy

80.00

*

40.00

*

Firm’s Percent (share) of Purchases

50.00

*

20.00

*

Quantity Sold (Units)

10000

22000

Total Revenue (Price times Quantity)

160000.00

308000.00

Total Cost (Sum of Above Costs)

122000.00

300000.00

Total Profit (Revenue minus Costs)

38000.00

8000.00

Answers to Computer–Aided Problem 2:

a. The numbers needed to answer this question are given on the initial spreadsheet (above). Students

will approach the calculations in different ways, but an example approach is given below:

Part IV

Many students will compute profit by simply subtracting costs from revenue. At this point, that is fine.

But, it may be useful to go through the type of detail given above in class – or provide the information

as a hand–out. The idea here is to encourage students to think carefully about the numbers on the

spreadsheet – about what they mean and how they relate. Developing skill in this area is important to

marketing managers – and attention is focused on this throughout the whole computer–aided problem

set.