Use Key Term Marketing Return on Investment here.
Use Chapter Objective 5 here.
Use Marketing by the Numbers here.
Use Figure 2.8 here.
Marketing ROI measures the profits generated by investments in marketing activities.
A company can assess return on marketing in terms of standard marketing performance
measures, such as brand awareness, sales, or market share.
Marketing dashboards—meaningful sets of marketing performance measures in a single display
used to monitor strategic marketing performance.
Marketers are using customer-centered measures of marketing impact, such as customer
acquisition, customer retention, and customer lifetime value.
END OF CHAPTER MATERIAL
Discussion and Critical Thinking
Discussion Questions
2-1. Define strategic planning and briefly describe the four steps that lead managers and the
firm through the strategic planning process. Discuss the role marketing plays in this process.
(AASCB: Communication)
Answer:
Strategic planning is the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities. At the
corporate level, the company starts the strategic planning process by defining its overall
Marketing plays a key role in the company’s strategic planning in several ways: (1) it
provides a guiding philosophy—the marketing concept—that suggests that company strategy
2-2. Name and define the four product/market growth strategies. (AACSB: Communications;
Reflective Thinking)
Answer:
The four product/market growth strategies are:
1. Market penetration – making more sales in its current product lines and markets. It
3. Product development—offering modified or new products to current markets.
2-3. Define each of the four Ps. What insights might a firm gain by considering the four As
rather than the four Ps? (AACSB: Communication; Reflective Thinking)
Answer:
The four Ps of marketing are: product, price, place, and promotion. Product means the
From the buyer’s viewpoint, in this age of customer value and relationships, the four Ps
might be better described as the four As:
Four Ps Four As
Product Acceptability
Under this more customer-centered framework, acceptability is the extent to which the product
exceeds customer expectations; affordability the extent to which customers are willing and able
2-4. How are marketing departments organized? Which organization is best? (AACSB:
Communication, Reflective Thinking)
Answer:
Modern marketing departments can be arranged in several ways. The most common form of
marketing organization is the functional organization. Under this organization, different
marketing activities are headed by a functional specialist—a sales manager, an advertising
For companies that sell one product line to many different types of markets and customers
who have different needs and preferences, a market or customer management organization
might be best. A market management organization is similar to the product management
organization. Market managers are responsible for developing marketing strategies and plans
2-5. Why must marketers practice marketing control, and how is it done? (AACSB:
Communication)
Answer:
Because many surprises occur during the implementation of marketing plans, marketers must
practice constant marketing control—evaluating the results of marketing strategies and
Critical Thinking Exercises
2-6. Form a small group and conduct a SWOT analysis for your school, a group that you are a
member of, a publicly traded company, a local business, or a nonprofit organization. Based on
your analysis, suggest a strategy from the product/market expansion grid and an appropriate
marketing mix to implement that strategy. (AACSB: Communication; Reflective Thinking)
Answer:
Students’ analyses and recommendations will vary, but they should be aware of the elements
of a marketing plan. A SWOT analysis evaluates an organization’s overall strengths (S),
weaknesses (W), opportunities (O), and threats (T) (see Figure 2.7). Strengths include
2-7. The Boston Consulting Group (BCG) Matrix is a useful strategic tool. Another classic
portfolio planning method useful to marketers is the GE/McKinsey Matrix (see
www.quickmba.com/strategy/matrix/ge-mckinsey/). How is the GE/McKinsey Matrix similar to
and different from the BCG matrix? (AACSB: Communication; Reflective Thinking)
Answer:
The GE/McKinsey Matrix (see www.quickmba.com/strategy/matrix/ge-mckinsey/) is similar
to the BCG matrix because it maps SBUs on a grid and uses similar but different variables to
plot the units. Whereas BCG uses market growth rate on the vertical axis, the GE matrix
2-8. Create a mission statement for a nonprofit organization you would be interested in
starting. Have another student evaluate your mission statement while you evaluate the other
student’s statement, suggesting areas of improvement. (AACSB: Communication; Reflective
Thinking)
Answer:
Some organizations define their missions myopically in product or technology terms, but
mission statements should be market oriented and defined in terms of satisfying basic
customer needs—even for non-profit organizations. For example, a nonprofit organization
Minicases and Applications
Online, Social Media, and Mobile Marketing: Google’s Mission
Founded in 1998 as an Internet search engine, Google’s mission statement remains the same to
this day: to “organize the world’s information and make it universally accessible and useful.”
Google is certainly successful, with revenues growing from $3.2 billion in 2002 to $66 billion in
2014, 90 percent of which comes from advertisers. Google is expanding rapidly into other areas
well beyond its search engine, such as self-driving cars, smart contact lenses that measure a
person’s blood sugar levels, Internet-bearing balloons to create Internet hotspots anywhere on
earth, and even magnetic nanoparticles to search for disease within the human bloodstream.
Google has been on a buying frenzy recently, purchasing security, biotech, and robotic
companies in a quest to capitalize on the Internet of Things (IoT) phenomenon. Experts predict
there will be 25 million connected devices in our homes and workplaces by 2020. Google
recently announced its new IoT operating system, dubbed Brillo (after the Brillo scrubbing pad
because it is a scrubbed-down version of its Android operating system), targeted to developers of
smart products connected to the Internet, such as ovens, thermostats, and even toothbrushes. It
has also developed Weave, the corresponding IoT language that will allow smart products to
speak to each other. Perhaps one day you will be sitting in your Google self-driving car,
streaming the news, checking your blood sugar, and cooling your home by turning down your
thermostat on the way home from work.
2-9. Conduct research on Google to learn more about its products and services. Some say the
time has come for Google to create a new mission statement. Do you agree? Explain. (AACSB:
Communication; Reflective Thinking)
Answer:
For a list of Google’s current products, see www.google.com/about/products/. Another
source lists Google’s products as well as discontinued products:
Students could argue that even though Google’s products have expanded to tangible
2-10. Create a new mission statement for Google that will take it through the rest of this
century. (AACSB: Communication; Reflective Thinking)
Answer:
Marketing Ethics: Family Feud
Otsuka Kagu, a well-known furniture store in Japan, made news recently because of an ugly
family feud between the founding father and his daughter. Mr. Otsuka started the store in 1969
and built it into one of Japan’s leading furniture retailers, now a publicly traded company. Mr.
Otsuka’s business model focused on high-end customers using a membership system, large
showrooms, customer advisors, and strong relationships with a wide range of suppliers. This
strategy worked until the 2008 worldwide financial crisis, when the company started
experiencing losses as customers sought out lower-priced rivals like IKEA. As a result, Mr.
Otsuka put his daughter in charge as president of the company. Ms. Otsuka cut prices, renovated
stores, and created a line of lower-priced walk-in stores, bringing the company back to
profitability. Although customers apparently approved of Ms. Otsuka’s actions, her father and
many employees did not. So Mr. Otsuka fired his daughter and reverted to the company’s
original strategy. Mr. Otsuka even went so far as to call his daughter a “bad child” and label her
marketing actions “terrorism.” When the company’s profitability once again suffered,
shareholders voted to bring back Ms. Otsuka as president of the company.
2-11. Do you think Mr. Otsuka’s demands to continue focusing on high-end customers are
reasonable? (AACSB: Communication; Ethical Reasoning)
Answer:
Students’ responses will vary. Mr. Otsuka can do whatever he wants if the company was not
publically traded. But since Otsuka Kagu is shareholder owned, he needs to consider
management’s responsibility to investors’ concerns. Companies need to conduct a SWOT
2-12. Discuss an example of a company that successfully changed its marketing strategy.
(AACSB: Communication; Reflective Thinking)
Answer:
Students can search “changing marketing strategy” and several articles highlighting how
companies changed focus and succeeded result. For example, read about PayPal, Gap,
Marketing by the Numbers: Apple versus Microsoft
In 2014, Apple reported profits of more than $50 billion on sales of $182 billion. For that same
period, Microsoft posted a profit of almost $30 billion on sales of $88 billion. So Apple is a
better marketer, right? Sales and profits provide information to compare the profitability of these
two competitors, but between these numbers is information regarding the efficiency of marketing
efforts in creating those sales and profits. Appendix 3, Marketing by the Numbers, discusses
other marketing profitability measures beyond the return on marketing investment (marketing
ROI) measure described in this chapter. Review the Appendix 2 to answer the questions using the
following information from the two companies’ incomes statements (all numbers are in
thousands):
Apple Microsoft
Sales $182,795,000 $86,833,000
Gross Profit $70,537,000 $59,899,000
Marketing Expenses $8,994,750 $15,474,000
Net Income (Profit) $52,503,000 $27,759,000
2-13. Calculate profit margin, net marketing contribution, marketing return on sales (or
marketing ROS), and marketing return on investment (or marketing ROI) for each company.
Which company is performing better? (AACSB: Communication; Use of IT; Analytic Thinking)
Answer:
Profit
Profit Margin = —————
Net sales
Net Marketing Contribution (NMC) = net sales cost of goods sold marketing expenses
Because Gross Profit = net sales cost of goods sold, students just need to subtract
marketing expenses from gross profit:
net marketing contribution
Marketing ROS = ———————————
net sales
net marketing contribution
Marketing ROI = ———————————
marketing expenses
Although Apple has larger absolute sales, gross profits, expenses, net marketing contribution,
2-14. Go to Yahoo! Finance (http://finance.yahoo.com) and find the income statements for two
other competing companies. Perform the same analyses for these companies that you performed
for the previous question. Which company is doing better overall and with respect to marketing?
For marketing expenses, use 75 percent of the company’s reported “Selling General and
Administrative” expenses, as not all of the expenses in that category are marketing expenses.
(AACSB: Communication; Analytic Reasoning; Reflective Thinking)
Answer:
Students’ answers will vary. The information used in the previous question can be found at:
Apple: http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual; and Microsoft: