Chapter–by–chapter aids: Chapter 8
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.
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 must analyze the potential benefits and limitations of the
customer’s proposal – and evaluate 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 this 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.
Part IV
b. Wholesteen profits would drop to $109,700 if it turns down the proposal and if FoodWorld reduced its
order by 10,000 units (i.e., if it used another supplier for its dealer brand.) Note that this is $28,200
less than it would make if it accepts the “losing” proposal.
It gets worse if FoodWorld takes all of its business to another supplier. That would reduce
Wholesteen’s sales to 80,000 units, and profits would drop to $76,400.
These analyses can be done with either column of the spreadsheet, as is shown in the two
spreadsheets below. The first spreadsheet is for the situation in which FoodWorld cuts its order by
10,000 cases.
P L U S – Spreadsheet
Current
Proposed
WHOLESTEEN Brand – Total Number of Cases
90000
*
90000
*
Price per Case
8.88
*
8.88
*
Cost to Produce a Case–WHOLESTEEN
5.30
*
5.30
*
Advertising Allowance per Case
0.25
*
0.25
*
FOODWORLD Brand – Total Number of Cases
0
*
Price per Case
7.40
*
Basic Cost to Produce a Case
5.30
*
Less Savings per Case on Cans
0.24
*
Less Savings per Case on Labels
0.48
*
Cost per Case
4.58
COSTS: Overhead Cost
120000.00
*
120000.00
*
Promotion Cost
70000.00
*
70000.00
*
Total WHOLESTEEN Ad Allowances
22500.00
22500.00
Cost of WHOLESTEEN Cases
477000.00
477000.00
Cost of FoodWorld Cases
0.00
TOTAL of Above Costs
689500.00
689500.00
REVENUE from WHOLESTEEN Brand
799200.00
799200.00
Revenue from FoodWorld Brand
0.00
TOTAL Revenue
799200.00
799200.00
TOTAL PROFIT
109700.00
109700.00
The next spreadsheet is for the analysis if Wholesteen loses all of FoodWorld’s business.
Chapter–by–chapter aids: Chapter 8
Part IV
IV-8-10 Perreault, Cannon, & McCarthy
d. There is not a single “correct” answer to this question. From the previous analyses, students 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
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
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 NOCO United’s customers become more proficient in soccer, their
needs change. It would be useful for NOCO United to have a product line that manages its customers’
transitions through these changing needs. See case discussion in Part V.
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. In the video, Bill Reinhart, National
Manager of Toyota Advanced Technology Group, discusses the ideas considered and the criteria used to
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter–by–chapter aids: Chapter 8
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. This case can be
used to discuss how consumers view a similar product differently. For more details, see the Video
Instructor’s Manual on the Instructor’s Resource CD or the instructor side of the Online Learning Center
(www.mhhe.com/fourps).
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’s
product line provides one avenue for discussion tied to the chapter. For more details, see the Video
Instructor’s Manual on the Instructor’s Resource CD or the instructor side of the Online Learning Center
(www.mhhe.com/fourps).
Situation: 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. It does exceed the specs in the contract,
but barely. Throwing the concrete away 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
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
CHAPTER 8 – 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.
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
Part IV