END OF CHAPTER MATERIAL
Discussion and Critical Thinking
Discussion Questions
16.1. What is sustainable marketing? Explain how the sustainable marketing concept differs
from the marketing concept and the societal marketing concept. (AASCB:
Communication)
Answer:
Sustainable marketing calls for meeting the present needs of consumers and businesses while
The marketing concept recognizes that organizations thrive from day to day by determining
the current needs and wants of target group customers and fulfilling those needs and wants
Whereas the societal marketing concept identified in Figure 16.1 considers the future welfare
16.2. What is planned obsolescence? How do marketers respond to this criticism? (AACSB:
Communication; Reflective Thinking)
Answer:
Critics have charged that some companies practice planned obsolescence, causing their
products to become obsolete before they actually should need replacement. They accuse
some producers of using materials and components that will break, wear, rust, or rot sooner
16.3. How can marketers respond to the criticism that marketing creates false wants and
encourages materialism? (AACSB: Communication)
Answer:
Marketers respond that such criticisms overstate the power of business to create needs. They
claim people have strong defenses against advertising and other marketing tools. Marketers
are most effective when they appeal to existing wants rather than when they attempt to create
On a deeper level, our wants and values are influenced not only by marketers but also by
family, peer groups, religion, cultural background, and education. If Americans are highly
materialistic, these values arose out of basic socialization processes that go much deeper than
16.4. How can marketing practices create barriers to entry that potentially harm other firms?
Are these barriers helpful or harmful to consumers? (AACSB: Communication;
Reflective Thinking)
Answer:
Critics have charged that marketing practices bar new companies from entering an industry.
Large marketing companies can use patents and heavy promotion spending or tie up suppliers
Students’ options regarding the effect on consumers will vary. While large corporations may
make it more difficult for competitors to enter a market, the cost savings realized by large
companies are often passed on to consumers. For example, Walmart is the low-cost leader
16.5. What is environmental sustainability? How should companies gauge their progress
toward achieving it? (AACSB: Communication)
Answer:
Simply put, environmental sustainability is about generating profits while helping to save the
Figure 16.2 shows a grid that companies can use to gauge their progress toward
environmental sustainability. It includes both internal and external greening activities that
will pay off for the firm and environment in the short run, and beyond greening activities that
Critical Thinking Exercises
16.6. The chapter discusses McDonald’s responses to social responsibility criticisms. Find
other examples of how marketers have responded to social criticisms of their products or
marketing practices. (AACSB: Communication; Reflective Thinking)
Answer:
Students’ answers will vary. One example similar to the McDonald’s example in the chapter
regarding the rise of obesity is Coca-Cola’s anti-obesity campaign. Coca-Cola is offering
16.7. Deceptive advertising hurts consumers and competitors alike, and the Federal Trade
Commission has stepped up efforts to combat it. Discuss a recent example of deceptive
advertising investigated by the FTC and one investigated by the industry self-regulatory
body, the National Advertising Division (NAD). (AACSB: Communication; Use of IT;
Reflective Thinking)
Answer:
Students’ examples will vary. FTC example: One recent example of an investigation
conducted by the FTC concerned Sony and its advertising agency for falsely advertising
Self-regulatory (NAD) example: CenturyLink challenged a claim that Comcast stated that
CenturyLink does not deliver the speed it promises, which the NAD found to be an
16.8. In a small group, discuss each of the morally difficult situations in marketing presented in
Table 16.1. Which ethics philosophy is guiding your decision in each situation? (AACSB:
Communication; Ethical Reasoning)
Answer:
Students’ responses will vary, but they should demonstrate an understanding of the two
ethical philosophies. One philosophy is that ethical issues are decided by the free market and
Minicases and Applications
Online, Mobile, and Social Media Marketing: Teens and Social Media
Facebook changed its policy and now allows teens’ posts to become public. Before the change,
Facebook would allow 13-17-year-old users’ posts to be seen only by their “friends” and “friends
of friends.” Now, however, their posts can be seen by anyone on the network if the teen chooses
to make their posts “public.” Twitter, another social medium gaining popularity with teens, has
always let users, including teens, share tweets publicly. But because of Facebook’s vast reach,
privacy advocates are very concerned about this latest development, particularly when it comes
to children’s safety. Online predators and bullying are real safety issues facing youth. Other
criticisms of Facebook’s decision boil down to money—some argue that the change was just
about monetizing kids. Facebook can offer a younger demographic to advertisers wanting to
reach them. Facebook defended its actions saying the change in policy is due to teenagers
wanting the ability to post publically, primarily for fundraising and promoting extracurricular
activities such as sports and other school student organizations. Facebook has added precautions,
such as a pop-up warning before teens can post publically and making “seen only by friends” as
the default that must be changed if the teen desires posts to be public.
16.9. Is Facebook acting responsibly or merely trying to monetize kids as critics claim?
(AACSB: Communication; Ethical Reasoning)
Answer:
16.10. Come up with creative ways marketers can reach this demographic on Facebook without
alienating their parents. (AACSB: Communication; Reflective Thinking)
Answer:
Marketing Ethics: Pricey Deal?
Kmart offers a Lease-to-Own program targeted to low-income consumers and is taking some
heat over it. Rent-to-own is not new—chains such as Aaron’s and Rent-A-Center have been
around for years—but it is new that a mainstream retailer has moved into this market. Kmart’s
parent corporation, Sears Holdings, launched a similar program, and according to a company
executive, it is satisfying the unmet needs of new customers. Some critics say that it is just
encouraging instant gratification and exploiting disadvantaged consumers. These types of
customers don’t qualify for credit and don’t have enough cash to purchase desired products
outright, such as televisions and other big ticket items. However, a $300 TV purchased through
Kmart’s program ends up costing consumers $415 if purchased at the end of the lease. If
customers make just minimum payments over the course of the lease, one expert calculated, that
it is equivalent to charging a 117 percent annual interest rate. Sears’ spokespeople defend their
service as being better for consumers compared to other rent-to-own options because the retailer
does not markup the price of the product beyond the normal retail markup and limits the lease
period to 18 months, whereas other national rental chains’ prices are much higher and leases can
run two to four years.
16.11. Are Sears and Kmart exploiting disadvantaged consumers? Explain why or why not.
(AACSB: Communication; Ethical Reasoning)
Answer:
Student’s responses will vary. Some may support the criticism that the retailer is encouraging
instant gratification and encouraging consumers to purchase products they don’t necessarily
16.12. Low-income consumers often don’t have bank accounts and credit cards. Describe how
some financial institutions are trying to meet the needs of these “unbanked” consumers.
(AACSB: Communication; Reflective Thinking)
Answer:
Almost 10 million households don’t have a bank account – many because they can’t open
one because of poor financial history. Some banks, such as Wells Fargo, PNC Bank, and
BBVA Compass, offer “second chance checking” programs that turn into traditional accounts
Marketing by the Numbers: The Cost of Sustainability
Kroger, the country’s leading grocery-only chain, added a line of private label organic and
natural foods call Simple Truth to its stores. If you’ve priced organic foods, you know they are
more expensive. For example, a dozen conventionally farmed Grade-A eggs at Kroger costs
consumers $1.70, whereas Simple Truth eggs are priced at $3.50 per dozen. One study found
that, overall, the average price of organic foods is 85 percent more than that of conventional
foods. However, if prices get too high, consumers will not purchase the organic options. One
element of sustainability is organic farming, which costs much more than conventional farming,
and those higher costs are passed on to consumers. Suppose that a conventional egg farmer’s
average fixed costs per year for conventionally-farmed eggs are $1 million per year, but an
organic egg farmer’s fixed costs are three times that amount. Further assume that the organic
farmer’s variable costs of $1.80 per dozen are twice as much as conventional farmer’s variable
costs. Refer to Appendix 3, Marketing by the Numbers, to answer the following questions.
16.13. Most large egg farmers sell eggs directly to retailers. Using Kroger’s prices, what is the
farmer’s price per dozen to the retailer for conventional and organic eggs if Kroger’s
margin is 20 percent based on its retail price? (AACSB: Communication; Analytical
Reasoning)
Answer:
price cost
Markup percentage on price = ——————
price
so,
Cost at each level = price (price markup%)
16.14. How many dozen eggs does a conventional farmer need to sell to break even? How many
does an organic farmer need to sell to breakeven? (AACSB: Communication; Analytical
Reasoning)
Answer:
total fixed costs
Breakeven volume = ————————
contribution per dozen
Where contribution per dozen = price – variable cost
Thus, the organic farmer would have to sell 826,086 dozen more than a conventional farmer
to break even.