Chapter 7 ♦ Business Marketing 13
10. Zappos would agree with the statement that “some customers are more valuable than others,” which is why it is
expanding its Zappos insights program.
a. True
b. False
CASE ASSIG NMENT: IBM
Created by IBM in 2011, Watson is a supercomputer with a unique capability—it can understand and respond to natural
language. IBM showcased this amazing computing ability on the game show Jeopardy, where Watson faced Ken
Jennings, the holder of the longest winning streak in Jeopardy history, and Brad Rutter, who holds the record for the
most amount of money won on Jeopardy. It was no contest—Watson won the two-day contest by a landslide.
IBM has its sights set on two areas for Watson: healthcare and investment. In healthcare, Watson can access
millions of recent research and journal articles. What would take a doctor endless hours to read and comprehend, Watson
can do in a matter of minutes. Watson is capable of parsing patient and family histories, clinical data, and drug treatment
options, making it an invaluable asset not only when diagnosing a patient, but also in understanding the full range of
treatments available.
Citigroup became the first company to purchase Watson for financial services. Citigroup will use Watson to
analyze customer’s needs so that it can facilitate their interactions with the company’s automated banking system.
According to Citigroup executives, Watson will be deployed to present a “customer interaction solution,” which will
“assist decision makers in identifying opportunities, evaluating risks, and exploring alternatives.”
Within IBM, hopes are quite high for Watson. By strategically deploying its vast computing power, company
leaders hope that Watson will contribute a significant portion to the company’s $16 billion of revenues in analytics.
Industry analysts at CLSA, meanwhile, estimate that by 2015 Watson will contribute $2.65 billion in revenue through the
services it provides to other companies.
Doug Henschen, “IBM’s Watson Could Be Healthcare Game Changer,” InformationWeek, February 11, 2013,
www.informationweek.com/software/business-intelligence/ibms-watson-could-be-healthcare-game-cha/240148273
(Accessed March 26, 2013); Mark Hachman, “IBM’s Watson Hired by Citigroup,” PC Magazine, March 6, 2012,
www.pcmag.com/article2/0,2817,2401203,00.asp (Accessed March 26, 2013); Rachel King, “IBM’s Watson Being Put
to the Test in Healthcare,” ZDNet, September 24, 2012, www.zdnet.com/ibms-watson-being-put–to-the-test-in–
14 Chapter 7 ♦ Business Marketing
healthcare-7000004725 (Accessed March 26, 2013); Steve Lohr, “I.B.M.’s Watson Goes to Medical School,” New York
Times, October 30, 2012, http://bits.blogs.nytimes.com/2012/10/30/i-b-m-s-watson-goes-to-medical-school (Accessed
March 26, 2013).
TRUE/FALSE
1. IBM’s Watson is most likely to be sold as a consumer product.
2. Maintaining a steady dialogue between IBM and customers like Citigroup is a proven way to gain repeat business.
3. IBM is a producer, a category that encompasses more than 13 million firms in the United States.
4. IBM should expect to have far fewer customers for Watson than for its consumer-grade line of microprocessors.
5. If IBM switched its financial services provider to Citigroup in return for Citigroup purchasing the Watson computer, this
would exemplify reciprocity.
MULTIPLE CHOICE
1. Under what circumstances would Watson be considered a consumer product?
a.
The nonprofit Bill & Melinda Gates Foundation purchasing Watson to analyze global Malaria
outbreaks.
b.
IBM releasing a lower-cost version of Watson with less computational power for smaller insurance
firms.
c.
Billionaire Richard Branson purchasing Watson to install in his home for one–on-one games of
Jeopardy.
d.
Watson being brought to a health services trade show to demonstrate its computational abilities.
e.
None of these—Watson is and always will be a business product.
Chapter 7 ♦ Business Marketing 15
PTS: 1 OBJ: LO: 7-1 TOP: AACSB: Reflective Thinking
KEY: CB&E Model: Customer MSC: BLOOMS: Level II Comprehension
2. As the world’s largest customer—buying goods and services valued at more than $875 billion per year—this is a viable
target for IBM’s Watson marketing:
a.
Procter & Gamble.
b.
The European Union.
c.
Microsoft.
d.
The U.S. federal government.
e.
None of these.
3. Suppose that a hurricane damages a silicon processing plant in China, slowing the production of the microprocessors
used in Watson. This in turn delayed the production of several Watson units, exemplifying this type of demand:
a.
Derived.
b.
Inelastic.
c.
Joint.
d.
Fluctuating.
e.
None of these.
4. Among the seven categories of business products, Watson is best described as:
a.
Major equipment.
b.
Accessory Equipment.
c.
A raw material.
d.
A component part.
e.
A business service.
5. At this point, all of IBM’s Watson sales represent this buying situation:
a.
New buy.
b.
Old buy.
c.
Straight rebuy .
d.
Modified rebuy.
e.
None of these.
16 Chapter 7 ♦ Business Marketing
KEY: CB&E Model: Strategy MSC: BLOOMS: Level II Comprehension
Chapter 7 ♦ Business Marketing 17
GREAT IDEAS FOR TEACHING CHAPTER 7
James S. Cleveland, Sage College of Albany
DISCUSSION BOARD TOPICS TO ENCOURAGE PARTICIPATION
Discussion board questions provided to students to encourage them to engage in thinking and writing about the content
of the Principles of Marketing course usually take the form of a provocative statement to which students are asked to
respond. An example of this would be “All PR is good PR.”
Discussion topics such as this one are abstract and often require that the instructor provide an initial reply to show
students what is expected of them in their own replies. For students with limited work experience, this approach may be
quite appropriate. For adult students with extensive experience as employees and consumers, however, the abstract
nature of such topics can be frustrating.
I have developed, therefore, a series of discussion board questions to use with experienced, adult students. These
questions are designed to encourage them to use their experiences as employees and consumers as doorways to better
understand the course material, and to make their own responses more interesting to themselves and to the other students
in the class who will read and comment on them.
Each question has three parts:
1. First, there is a sentence or two from the students’ textbook introducing the topic. By using the text author’s
own words, students are enabled to locate relevant material in the text more easily, the text content is
reinforced, and confusion resulting from use of variant terms or expressions is minimized.
2. Second, there is a reference to text pages the student should review before proceeding. Since the goal of the
exercise is for students to apply the course content to their own experiences, reviewing the content first is
important.
3. Third, there is a request for the student to think about or remember some specific situation in their experience to
which they can apply the text material, and a question or questions for them to address in their reply.
Here are additional such discussion board questions developed for Chapter 7 of MKTG10. Each is written to fit the same
text cited above but could easily be rewritten and revised to fit another text.
Series A
1. The business market consists of four major categories of customers: producers, resellers, government, and
institutions.
2. Review these categories in section 7-4 of your text and the types of business products in section 7-7 of your
text.
3. Then describe which category your employer falls into and what sort of products it buys.
Series B
1. Business buyers behave differently from consumers. A buying center includes those persons in an organization
who become involved in the purchase decisions.
2. Review the material on buying centers and the roles in buying centers in section 7-8 of your text.
3. Then describe how you have been involved in a buying center for your employer and what role or roles you
played.
18 Chapter 7 ♦ Business Marketing
Elizabeth J. Wilson, Louisiana State University
A DECISION-MAKING EXERCISE FOR BUSINESS MARKETING
This exercise is designed to introduce undergraduate students to decision making in the context of organizational buying.
Several distinctions of organizational buying, compared to consumer buying, can be made by using this exercise. For
example, differences in decision criteria are highlighted, and individual versus group decision making can be
demonstrated.
Procedure
The three decision evaluations represent different product categories in organizational buying—office copiers, accessory
goods that do not become part of the final product; painted sheet metal, component parts; and an industrial boiler system,
major equipment or a capital installation (Lamb, Hair, and McDaniel 1992). Use of these three decisions illustrates the
wide range of products that may be procured by a buyer or purchasing agent.
Each exercise is designed so that there is no right or wrong answer. The “suppliers,” represented by the attribute
combinations, represent a pool of vendors from which the buyer can chose. The display of the nine suppliers is a
fractional factorial design that has each of the four decision variables (price, quality, delivery, service) represented in
orthogonal combinations. The expression of these attributes varies in order to be decision specific. For example, quality
for the boiler system is expressed in terms of pollution control, while quality for copiers is expressed as the number of
features available.
Part A: Individual Evaluation – A helpful class exercise is to have students role-play as organizational buyers to work
through these decisions individually. Students are instructed to read the decision context statement and then examine the
nine “vendors” described by each block. For example, in the copier decision, vendor N offers a copier that is priced at
$3,500, has the A-level feature package (see bottom of decision), requires two hours of maintenance (downtime) per
month, and can be delivered in two weeks. Students then should cross out any vendors that are not acceptable—for
whatever reason. Of the acceptable vendors, students divide 100 points to represent how they want to source the
decision. For example, one copier vendor could be given all 100 points, or the buyer (student) can use a multiple
sourcing strategy by dividing the points among several (50/50, 70/30, 40/40/20, etc.).
At this point, the decision evaluations illustrate the concepts and variables that organizational buyers use in selecting
suppliers. After completing the decision individually, students can be asked to offer their “solutions” to the buying
decision. Since there is no right or wrong way to complete the exercise, students will differ in their solutions. Discussion
of several of their solutions illustrates the concept of trade-offs in buying and the fact that organizational buyers have
different levels of expectations in buying. What is important to one buyer may not be as important to another. In
addition, evaluation of decisions in a systematic, “rational” way is sometimes different from consumer buying (e.g.,
impulse purchases).
Part B: Group Evaluation – The second part of the exercise involves group decision making. Arrange students in
groups of two to four persons and have them evaluate these decisions again, but this time they all must agree on the point
allocations among suppliers. In discussing group solutions, the instructor may ask if there was any conflict and if so, how
it was resolved. If the group’s decision was very different from an individual’s original evaluation, the students may
discuss the dynamics of the decision-making process in how preferences were changed. This part of the exercise
illustrates concepts such as a buying center, roles of members in group decisions, and conflict management and
resolution.
REFERENCE: Charles W. Lamb, Joseph F. Hair, and Carl McDaniel (1992), Principles of Marketing, Cincinnati, OH:
Southwestern Publishing.
Chapter 7 ♦ Business Marketing 19
BUYING DECISION FOR OFFICE COPIERS
Decision Context: Your firm needs a new copier to supplement current copiers already in place. Moderate volume use
(25,000 copies per month) is expected.
N ____ pts.
D ____ pts.
J ____ pts.
Price: $3,500
Price: $4,400
Price: $5,000
Feature Package: A
Feature Package: C
Feature Package: B
Maintenance Hours per Month:
2 hrs.
Maintenance Hours per Month:
2 hrs.
Maintenance Hours per Month:
2 hrs.
Delivery Lead Time: 2 weeks
Delivery Lead Time: Immediate
Delivery Lead Time: 6 weeks
C ____ pts.
W ____ pts.
T ____ pts.
Price: $3,500
Price: $4,400
Price: $5,000
Feature Package: B
Feature Package: A
Feature Package: C
Maintenance Hours per Month:
5 hrs.
Maintenance Hours per Month:
5 hrs.
Maintenance Hours per Month:
5 hrs.
Delivery Lead Time: Immediate
Delivery Lead Time: 6 weeks
Delivery Lead Time: 2 weeks
A ____ pts.
G ____ pts.
L ____ pts.
Price: $3,500
Price: $4,400
Price: $5,000
Feature Package: C
Feature Package: B
Feature Package: A
Maintenance Hours per Month:
8 hrs.
Maintenance Hours per Month:
8 hrs.
Maintenance Hours per Month:
8 hrs.
Delivery Lead Time: 6 weeks
Delivery Lead Time: 2 weeks
Delivery Lead Time: Immediate
Feature Package Key:
A. Reduction/Enlargement, 11 17 oversized documents, toner flow control.
B. Package A features plus automatic document feeder, oversized paper tray.
C. Package B features plus document sorter, automatic two-sided copying.
20 Chapter 7 ♦ Business Marketing
BUYING DECISION FOR PAINTED SHEET METAL
Decision Context: Your firm needs to consider vendors for awarding annual purchase agreements. The contract to supply
the annual requirement of painted sheet metal may be awarded to one of several vendors described below.
L ____ pts.
T ____ pts.
P ____ pts.
Quality of Paint Work*: 92%
Quality of Paint Work*: 95%
Quality of Paint Work*: 99%
Lead Time per Order: 8 weeks
Lead Time per Order: 8 weeks
Lead Time per Order: 8 weeks
In-House Vendor Service
Rating: A+
In-House Vendor Service
Rating: A
In-House Vendor Service
Rating: B
Price per piece: $25
Price per piece: $20
Price per piece: $14
F ____ pts.
M ____ pts.
S ____ pts.
Quality of Paint Work*: 92%
Quality of Paint Work*: 95%
Quality of Paint Work*: 99%
Lead Time per Order: 6 weeks
Lead Time per Order: 6 weeks
Lead Time per Order: 6 weeks
In-House Vendor Service
Rating: A
In-House Vendor Service
Rating: B
In-House Vendor Service
Rating: A+
Price per piece: $14
Price per piece: $25
Price per piece: $20
W ____ pts.
G ____ pts.
B ____ pts.
Quality of Paint Work*: 92%
Quality of Paint Work*: 95%
Quality of Paint Work*: 99%
Lead Time per Order: 3 weeks
Lead Time per Order: 3 weeks
Lead Time per Order: 3 weeks
In-House Vendor Service
Rating: B
In-House Vendor Service
Rating: A+
In-House Vendor Service
Rating: A
Price per piece: $20
Price per piece: $14
Price per piece: $25
* Percentage of pieces usable per truckload.
Chapter 7 ♦ Business Marketing 21
BUYING DECISION FOR AN INDUSTRIAL BOILER SYSTEM
Decision Context: Your company needs a boiler system for a new office building. Evaluate the alternatives in terms
of making recommendations to senior management about which vendor(s) would best meet your company’s needs.
G ____ pts.
T ____ pts.
P ____ pts.
Pollution Control (% Sulfer
retained):
Pollution Control (% Sulfer
retained):
Pollution Control (% Sulfer
retained):
Maintenance Hours per Month:
6 hours
Maintenance Hours per Month:
8 hrs
Maintenance Hours per Month:
12 hours
Price: $750,000
Price: $1,000,000
Price: $1,500,000
Manufacturing and Delivery
Lead Time: 12 months
Manufacturing and Delivery
Lead Time: 6 months
Manufacturing and Delivery
Lead Time: 9 months
R ____ pts.
J ____ pts.
F ____ pts.
Pollution Control (% Sulfer
retained):
Pollution Control (% Sulfer
retained):
Pollution Control (% Sulfer
retained):
Maintenance Hours per Month:
6 hours
Maintenance Hours per Month:
8 hrs
Maintenance Hours per Month:
12 hours
Price: $750,000
Price: $1,000,000
Price: $1,500,000
Manufacturing and Delivery
Lead Time: 12 months
Manufacturing and Delivery
Lead Time: 6 months
Manufacturing and Delivery
Lead Time: 9 months
B ____ pts.
M ____ pts.
W ____ pts.
Pollution Control (% Sulfer
retained):
Pollution Control (%Sulfer
retained):
Pollution Control (%Sulfer
retained):
Maintenance Hours per Month:
6 hours
Maintenance Hours per Month:
8 hrs
Maintenance Hours per Month:
12 hours
Price: $750,000
Price: $1,000,000
Price: $1,500,000
Manufacturing and Delivery
Lead Time: 12 months
Manufacturing and Delivery
Lead Time: 6 months
Manufacturing and Delivery
Lead Time: 9 months
22 Chapter 7 ♦ Business Marketing
Richard Turshen, Pace University
BUSINESS DOCUMENT VERSUS ACADEMIC TREATISE
The Dilemma: In order to demonstrate their knowledge of marketing principles on two learning levels—comprehension
and application—students are often asked to prepare a marketing plan for a new product. Traditionally, they are required
to produce a business document and an academic treatise simultaneously within the same written report. This
dichotomous intellectual responsibility not only creates a dilemma for the student relative to preparation, but also for the
instructor relative to evaluation.
The Solution: In order to separate the two distinct requirements, a supplemental reporting component is added to the
assignment; in effect, the plan is subdivided into two sections:
Summary: The following comparative summary is supplied to the students:
Business Subdivision
(Marketing Plan)
Academic Subdivision
(Explanatory Manual)
Business presentation for your boss
Academic presentation for your professor
Present the elements of the plan; information,
data, and strategy decisions
Present the rationale behind the strategies;
sources, derivations and explanations
Project the plan in terns of what, how, when,
where, and who
Project the plan in terms of why
Specific decisions; the result of thinking
Corresponding rationale; the process of thinking
Conclusion: The tested technique of subdivision avoids the muddled mix of applied strategic marketing decision making
and corresponding theoretical supporting rationale in a single report. Both parties, the student and instructor,
consequently gain a clearer mindset for the preparation and evaluation of the business and academic requirements of the
marketing plan assignment.
Chapter 7 ♦ Business Marketing 23
Shirine Mafi, Otterbein College
RESEARCHING A CORPORATION
Students are divided into teams of three to five members. Each team works together throughout the quarter. Teams each
select a corporation and research that company for all project assignments. The final project grade is based partially on
peer evaluations.
PROJECT ASSIGNMENT I
Through a 10–12 page paper, students become familiar with the company and the environmental forces that shape the
company and its industry. The report also entails a marketing opportunity analysis.
PROJECT ASSIGNMENT II
Based upon the findings of the marketing opportunity analysis, teams recommend one of the following options and
produce a marketing plan accordingly:
• A new marketing mix targeted to a new market
• A current marketing mix extended to a new target market
• A new or improved product/service targeted to the current market
• A combination of any of these
Each team will produce a marketing plan that includes:
• Customer and competitive situation analysis
• Marketing objectives
• Marketing strategies
• Control/evaluation procedures
Group Presentation: Each team presents its project to the class. All members participate equally. The team not only
presents its findings, but must be able to defend its plan to the class. Use of visual aids is encouraged.
Group Competition: In addition to the instructor’s evaluation, class members vote for the best group presentation. The
winning team members earn bonus points.