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Chapter-by-chapter aids: Chapter 6
normal bidding procedure does not easily provide compensation for these intangibles. This is
a serious deficiency of the bidding method, but not one easily remedied because of the
possibility of favoritism entering into the letting of contracts. Not all government buyers are
following industrial purchasing agents along the "value analysis" route. Many are not trained
for the purchasing job – being political appointees with no tenure. So they should be treated
differently in marketing mix planning.
DISCUSSION OF COMPUTER-AIDED PROBLEM 6: VENDOR ANALYSIS
In this problem, an industrial buyer is evaluating different suppliers of microchips used in producing the
firm's products. The student uses the PLUS program to do a complete vendor analysis – evaluating the
total cost of buying from the suppliers taking into consideration differences in price, order quantity
discounts, delivery times, the number of defective products in an order, and other factors. The problem
focuses attention on why industrial purchasers evaluate suppliers on many criteria – and shows why the
the discussion of wholesalers in Chapters 10 or 12.
The initial spreadsheet for the problem is given below:
P L U S - SpreadSheet
Supplier 1
Supplier 2
Quantity of Chips Needed
100000
*
100000
*
COST per Chip
1.91
*
1.87
*
Cost for Total Order of Chips
191000.00
187000.00
DEFECTIVE Rate (Percent Defective)
1.000
*
2.000
*
Number of Defective Chips
1000
2000
Answers to Computer-Aided Problem 6:
a. Based on the initial spreadsheet (given above), Supplier 1 appears to be the best choice. While the
price of the needed chips is higher, the total cost of Supplier 1`s offering would be lower for
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P L U S - SpreadSheet
Supplier 1
Supplier 2
Quantity of Chips Needed
84500
*
84500
*
COST per Chip
1.95
*
1.87
*
Cost for Total Order of Chips
164775.00
158015.00
DEFECTIVE Rate (Percent Defective)
1.000
*
2.000
*
Number of Defective Chips
845
1690
c. $1.87 per chip is the highest price at which Supplier 2 will be the "lowest cost" vendor. This can be
seen from the What If data display below:
P L U S - What If Data Display
-Supplier 2-
-Supplier 2-
-Supplier 1-
COST per Chip
TOTAL COSTS
TOTAL COSTS
FOR VENDOR
FOR VENDOR
1.85
177441.55
179900.50
1.86
178332.18
179900.50
1.87
179222.81
179900.50
1.88
180113.44
179900.50
Chapter-by-chapter aids: Chapter 6
CHAPTER 6 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER.
Case 5: Polystyrene Solutions
This case can be used to show multiple buying influences – and the importance of understanding the
Case 6: Applied Steel
This case also illustrates the importance of multiple buying influence and correctly understanding the
customers' buying processes. See case discussion.
CHAPTER 6 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: Assume that you are a salesperson in a small company. For months you’ve been trying to get a
big order from a large firm. A purchasing manager at the firm casually mentions that she is trying to help
two friends find tickets for a big hockey game. Your boss has season tickets for entertaining customers,
but you know that the purchasing manager’s company strictly prohibits any gift to employees. When you
ask your boss what to do, the reply is, “Well, the tickets would be used by the friends and not the
customer firm’s employee, so you can offer them if you think you should.” What should you do? What are
the pros and cons of your decision?
It might also be useful to briefly discuss the role of the sales manager in this case. The manager leaves it
to the salesperson to decide what to do and, in doing so, puts pressure on the sales rep to do something
the rep considers inconsistent with the customer firm’s policies. Managers in organizations are role
models—and that includes being role models with respect to ethical behavior. So, in a situation like this,
CHAPTER 6 – 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. Hillside decided to focus on final consumers and their pets rather than include
organizational customers that might need veterinary care for animals. Such customers might range from
Part IV
IV-6-8 Perreault, Cannon, & McCarthy
dog breeders and farmers to animal protection shelters and law enforcement agencies that work with
dogs. Would it be easy or hard for Hillside to expand its focus to serve customers who are not final
consumers? Explain your thinking.
CHAPTER 6 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 6.1: Glass Bracelet Jewelry
Question Type: Decision generator
Exercise 6.2: Multiple Buying Influences
Question Type: Drag-and-drop
Exercise 6.3: Organizational Buyers
Question Type: Drag-and-drop
Exercise 6.4: The Timken Company
Question Type: Video case
Chapter-by-chapter aids: Chapter 7
CHAPTER 7: IMPROVING DECISIONS WITH MARKETING
INFORMATION
CHAPTER 7 – COMMENTS ON QUESTIONS AND PROBLEMS
7- 1. This question relates to the text discussion in section “Effective Marketing Requires Good
Information.” Basically, a marketing information system is an organized way of continually
gathering and analyzing data to provide marketing managers with information they need to
make decisions. It is important for marketing managers to be involved in planning the system
7- 2. A decision support system is a computer program that makes it easy for a marketing manager
to get and use information as he is making decisions. It allows the manager to "interact" with
the information. Students will provide a variety of possible examples here. The emphasis
should be on applications where it is useful to "see" some data – and then probe deeper. For
7- 3. This question can be addressed in different ways. Some students will contrast the output of an
MIS with the results that might be developed, for example, by doing a marketing survey. In
that case, the emphasis is on the extent to which the MIS focuses on recurring information
7- 4. Access to the Internet and better software search engines have simplified the "computer" part
of such an effort to search for competitive information. Even so, depending on the size and
Part IV
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significance of a competing firm, there may be enormous amounts of information that needs to
be digested and analyzed before it will make sense. A small software firm that thinks it is
going to keep up with all of the information about Microsoft, for example, is likely to have a
rude surprise. Further, much of the competitive information that is available will be old, not
very useful, or just plain wrong. There is little basis on which to check or verify the correctness
of much of the information taken from the Internet, unless the source website is considered
highly reliable. If a lot of information is available, a manager has to sort through it all and figure
out what it means and what to do with it. In a small firm there usually isn’t very much time
available for or allocated to this sort of thing. On the other hand, to the extent that marketers
are closer to the market and have a better understanding of competitors, their judgments will
be superior to those made by someone who does not have any clue what competitors are up
to. As the old saying goes, “in the land of the blind, the one-eyed man is king.”
7- 5. The key characteristics of the scientific method are its focus on being objective and orderly in
testing ideas before accepting them. This is important to marketing managers because it helps
7- 6. See section “Analyzing the Situation—Step 2.” Ideally, one step should build on another.
Otherwise, there may be duplication of effort and inefficient use of resources. For example,
7- 7. Secondary data is information that has already been collected or published. Primary data is
information that is specifically collected to solve a current problem. For example, data
published by the Census Bureau is secondary data for the marketing manager. A survey of
current customers' product preferences, on the other hand, would be an example of primary
data. See section “Analyzing the Situation—Step 2.”
7- 8. The issue here is the general point that is made in the text concerning secondary data vs.
primary data: there may be a great deal of secondary data that is useful, but often it is not as
7- 9. The Statistical Abstract (or the Census Bureau website) would be a good place to start, unless
the analyst recalls Sales and Marketing Management's "Annual Survey of Buying Power." The
Abstract would provide basic references to various types of income data.
7-10. As in Question 7-9, the Abstract would probably be the best first source. This would provide
references to reports published by the U.S. Department of the Interior (www.doi.gov).
7-11. This seems to be very illuminating for most students. They also seem to enjoy reporting what
they have found to the class – if it doesn't go on too long! (Note: If your students seem to need
7-12. The main advantage of the focus group interview approach is that it would stimulate the
Chapter-by-chapter aids: Chapter 7
personal interviews, however, so the researcher might not be able to get quite as detailed
information from each person as in a separate interview setting.
7-13. Basically, quantitative research seeks structured responses that can be summarized in
numbers – like percentages, means, and other statistics. Usually the focus of quantitative
7-14. Response rate is the percentage of people contacted who complete a question (or interview).
The response rate may affect how representative the responses are – especially if there is a
difference between customers who respond and those who do not. For example, a manager
7-15. The table on the next page provides a summary of the advantages and disadvantages of the
different types of surveys as they are discussed in the text. Note that in the text the
information does not appear in a table format, but a student should be able to extract all of the
information in this table from the textual treatment.
Part IV
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Type Survey
Advantages
Limitations
Mail and E-mail
Facilitates extensive questioning.
Completed at respondent's
convenience.
May be able to ask personal questions
(can be returned anonymously).
Economical per contact.
Easy and convenient.
Questions may not be answered
completely.
Directions/questions must be simple to
understand and follow.
Questionnaires may not be returned
(non-response problems).
Delays in getting replies.
Difficult to get open-ended replies.
Literacy limitations.
Email users may be different from
other consumers on relevant issues.
Consumer/company concerns about
email spam (and possible virus
Personal
Easier to get and keep respondent's
attention.
May be only practical approach with
business customers.
More expensive per interview than
mail or telephone.
Respondent may try to "please" the
interviewer.
7-16. A firm may want to subscribe to a shared cost data service even if the same data is available
to competitors. In fact, if competitors will definitely get some type of useful information then the
firm may have little alternative but to subscribe as well. However, just because shared cost
7-17. The free variable here is Promotion. How much can be expected from retailers and how much
ought to be sought? To find out, researchers could be sent to various stores to observe the
prominence of display and the rate of movement for similar products in various kinds of stores.
The survey method could query retailers directly on their intentions and the sales volume they
Chapter-by-chapter aids: Chapter 7
7-18. A highly experienced executive bases his judgment on his past experience, which may have
little or no relevance to the current situation. Research, then, updates his knowledge of the
market and enables him to use his experience most effectively.
7-19. This is a broad question, but even so can prompt some very useful thinking and discussion
about how one gets started searching for information about a new market opportunity,
including one that involves a foreign country. The question also serves as a way to set up and
motivate the material that is discussed in more detail in the next chapter. Students will be
7-20. See sections, “Defining the Problem—Step 1” and “Solving the Problem—Step 5.”
DISCUSSION OF COMPUTER-AIDED PROBLEM 7: MARKETING RESEARCH
In this problem, a company has done a survey to help determine the size of a market for a new industrial
product it is developing. The manager wants to see how profitable the market might be – based on
responses from a sample. The problem focuses attention on issues of interpreting marketing research
data, especially on the importance of understanding that estimates based on a sample may not be
precise. Students evaluate the sensitivity of their conclusions to small – but important – variations in
estimates from the sample respondents.
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The initial spreadsheet for the problem appears below:
P L U S - SpreadSheet
Sample
Estimate for
Total Market
Number of Firms
500
5000
*
Sample Firms as Percent of Market
10.00
Ratio of Total Market to Sample
10.00
Answers to Computer-Aided Problem 7:
a. If the total market actually consists of 5,200 firms – not Texmac's "guesstimate" of 5,000 firms, the
estimate of expected replacement machines increases from 880 units to 915 units – and that
increase results in an increase in expected profits from $3,520,000 to $3,660,000. When students
see that this "minor" error of judgment makes a "bottom line" difference of $140,000 they develop a
better understanding of why it is important for marketing managers to have good information. The
spreadsheet for this analysis appears below:
P L U S - SpreadSheet
Sample
Estimate for
Total Market
Number of Firms
500
5200
*
Sample Firms as Percent of Market
9.62
Ratio of Total Market to Sample
10.40
b. If the total market is actually 5,200 machines and the number of old machines per 500 is really 200
(not 220 as estimated from the sample), the estimate of profits is $3,328,000 – a decrease in
expected profit of $332,000 from the $3,660,000 profit expected with 220 machines per 500 firms.
Chapter-by-chapter aids: Chapter 7
Note: some students will leave the number of firms in the total market at 5,000. That is fine. The
same basic point will be made. In that case, the change from 220 machines per 500 to 200
machines per 500 results in a decrease in expected profits from $3,520,000 to $3,200,000.
The spreadsheet for this analysis (based on 5,200 firms) appears below:
P L U S - SpreadSheet
Sample
Estimate for
Total Market
Number of Firms
500
5200
*
Sample Firms as Percent of Market
9.62
Ratio of Total Market to Sample
10.40
c. The results of the What If analysis for this problem appear in the table below. Note the large
changes in the quantity estimate and the estimated profitability – depending on the relatively minor
change in the estimate developed from the responses in the sample.
The question provides a good opportunity to discuss the quality of data one can get from marketing
research – and how precise the data might be. The spreadsheet shows that it does make a
difference!
P L U S - What If Data Display
-Sample-
-Estimate for-
Total Market-
-Estimate for-
Total Market-
% Replace
Replacements
Contribution
36.00
824
3296000.00
36.80
842
3368000.00
37.60
860
3440000.00
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CHAPTER 7 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 3: NOCO United Soccer Academy
This case can be used to discuss gathering marketing information. Wesley Diekens of NOCO United
Soccer Academy appears to have relatively little factual information about his market. A discussion might
center around what type of market research he could do to fill this knowledge gap. The instructor might
show the marketing strategy planning process model (from the beginning of the chapter – or Exhibit 2-9)
and walk through each element. For example, the case gives relatively little information about
competitors. Does Wesley have this information? How could he gather such information? What does he
currently know about his customers? Wesley also has to make decisions about a marketing strategy.
What information would help him make better decisions about his marketing mix for each target market?
How could he gather that information?
Case 8: Besitti’s Restaurant
This case can be used to illustrate how our strategy planning framework can help identify the right
Case 9: Peaceful Rest Motor Lodge
This case can be used in the same way as suggested for Case 8. Both require more careful analysis of
alternative target markets. And both are small companies that probably will not be able to afford a formal
research project – so the importance of careful execution of the first two steps can be emphasized. In
fact, it is quite important that this point be made because many students feel that only "big companies"
CHAPTER 7 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: You’re the new marketing manager for a small firm that offers computer repair services. The
company’s owner approves your proposal for a telephone survey to learn more about the needs of firms
that are not current customers. You identify local firms for the sample and hire a researcher to call them.
The interviewer tells respondents that their answers will be anonymous and used only for research
purposes. About halfway through the data collection, the interviewer tells you that respondents are
confused by one of the questions and that their answers to that question are probably useless. The
question concerns the issue that is most important to your new boss. Do you admit the problem to others
in your company? If the sales manager asks for the completed questionnaires, including all the names
and responses, what would you say?
Chapter-by-chapter aids: Chapter 7
The AMA Statement – and hopefully a student’s personal code of conduct – should prohibit lying about
the quality of the research. However, the authors have certainly observed situations where research
flaws were concealed even though they cast doubt on the conclusions drawn. People are very hesitant to
take the initiative and admit things have gone poorly, especially if they think it was in part due to a
mistake of judgment on their part. But, this is itself an important issue in marketing organizations. Smart
marketers know that organizations learn from their mistakes—and hopefully improve what they do the
next time. When mistakes and problems are hidden, as they will be when a manager is constantly
looking for someone to blame, quality doesn’t improve. Thus, the culture must really reward openness
and honesty if that is what is expected.
CHAPTER 7 – 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 “Customers” and “Competitors” sections in the Situation Analysis and
consider the following questions.
a. What different types of marketing research were conducted to fill out these sections of the
marketing plan?
b. What are the strengths of the research conducted? What are the weaknesses?
c. Keeping in mind probable cost and time to complete, what additional research would you
recommend?
The strengths of the data collection were that it was done relatively quickly and at a low cost. But the
emphasis on speed and cost leads to some trade-offs. Weaknesses include the sample used for the
survey, the survey itself, and neglecting other sources of data. The convenience sample of customers
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critical of some of the questions in the survey. Note that the secondary data collected was quite limited –
additional information about local pet ownership may have been available from other sources.
CHAPTER 7 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 7.1: Interpreting the Data – Outdoor Recreation Foundation
Question Type: Comprehension case
Exercise 7.2: Plaza Pointe Grocery
Question Type: Case analysis
Exercise 7.3: Five-Step Approach to Marketing Research
Question Type: Timeline/sequencing
Exercise 7.4: Data Collection Methods
Question Type: Video case
Chapter-by-chapter aids: Chapter 8
CHAPTER 8: ELEMENTS OF PRODUCT PLANNING FOR GOODS
AND SERVICES
CHAPTER 8 – COMMENTS ON QUESTIONS AND PROBLEMS
8- 1. See section “What Is a Product?” The main emphasis here should be on the student taking a
broad view of the product concept – looking at it as the need satisfying offering of the firm and
not just as a physical good.
8- 2. This question draws on the text discussion in section “Differences between Goods and
Services. The major differences stressed in the text are highlighted below:
Tangibility of the product: Goods are tangible, and services are not. For example, a sweater is
a tangible product, but the drying cleaning service for the sweater is not.
Relation of production and marketing: With services, the person producing the product is often
directly in contact with the customer and thus is involved in the marketing process. With
physical goods, that is often not the case. For example, a bank teller produces the banking
service while interacting with the customer. A worker in a print shop that prints the person's
checks, by contrast, is unlikely to come in direct contact with the customer. This difference
means that there is often a closer link between operations and marketing in a service business
than in a business that emphasizes physical goods.
Balancing production and demand: In combination, the above differences tend to make it more
difficult to balance supply and demand with services. A store can keep shelves full of products
that meet customers' needs – but if many customers show up all at once and there is only one
check-out clerk to provide the "service" part of the product, customers will need to wait.
8- 3. A bicycle shop is selling a convenient assortment of bicycles and expert help on which bicycle
best meets the customer's needs. The shop may also assemble the bike (often not the case
Part IV
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for bikes purchased at department stores, sporting goods stores, and mass-merchandisers)
and adjust it properly for the customer. The shop may also be selling repair services and/or
"after the sale" warranty service if it is required.
A supermarket is selling not only a collection of food and related items – perhaps at low prices
– but also the convenience of a wide selection, wide aisles, and other conveniences without
the unwanted assistance of clerks. Many people truly dislike the full-service grocery store.
Self-service stores are spreading throughout the world.
A new car dealer sells automobiles. It also provides services – such as set up and inspection
of the car, warranty work after the sale. Some auto dealers also sell "insurance" –
maintenance agreements that cover work that is not covered by the manufacturer. Most new
car dealers also sell financial services – by helping to arrange financing on a new car.
8- 5. The purpose of this question is to remind students that product means the “need-satisfying
offering of a firm.” Marketing managers should understand the many factors related to a
purchase – and try to differentiate their brand as meeting the specific needs of some
customers. The following are some examples that students might identify:
• Airport branch of a rental car agency – Typically customers renting cars are looking for
speed, and may be under considerable stress and anxiety. Understanding this, the car
rental agency might install monitors in the return facility that show flight arrival and
departure times and locations. The return facility might also include computers with
Internet access and fax machines. Where security is a concern, more security guards
Chapter-by-chapter aids: Chapter 8
8- 6. Yes, there is a difference. See sections “Branding Is a Strategy Decision” and “Protecting
Brand Names and Trademarks.” A trademark can obtain the protection of the Lanham Act.
8- 7. A well-known brand is not valuable only to the owner. Some consumers may derive
satisfaction from using such a brand. Also, the wholesalers and retailers who handle the
product may find it more profitable because of the demand for it.
8- 8. There are many products that are seen as totally homogeneous substitutes (at least by most
customers) where it might not make sense to spend money to establish a brand. For example,
most consumers would have trouble naming a particular brand of paper clips, string, carrots,
8- 9. Students will think of a wide variety of brand names. It can be useful to write the brands they
list on the board. Invariably, some of the most frequently mentioned brands will be very
8-10. A family brand is a brand name that is used on two or more different products. A firm might
use the same brand name for many products if all the products are similar in type and quality.
The main benefit is that the goodwill attached to one or two products may help the others –
and money spent to promote the brand name benefits more than one product. A retailing
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8-11. Some manufacturers put a great deal of promotion effort behind their brands – to the extent
that some consumers see them as specialty brands. For products that might otherwise be
8-12. The degree of brand familiarity achieved indicates the success of past promotion (or more
generally, of the whole marketing mix). The future promotion task depends upon the degree of
familiarity desired. In a market with many weak brands, merely brand recognition may be a
substantial achievement – and all that is necessary to obtain a significant share of the market
8-13. The attitudes and preferences of current and potential customers must be considered.
Switching to dealer brands at a lower price might make this hardware store profitable.
However, it must be realized that using dealer brands at lower prices only considers two of the
8-14. a. Probably almost any products for which multiple packs (for example, a six pack) are
used or which formerly were sold in bulk (e.g., crackers). These packages tend to
reduce handling costs, deterioration, and obsolescence – and may increase the size of
the unit sale.
b. Cosmetics or any product for which an attractive package is an important part of the
product; but it should be noted that consumers may willingly pay for these extra costs.
8-15. See Exhibit 8-6 and section “Consumer Product Classes.” Place convenience and perhaps
some promotion might be important with the staple convenience product, while with a
homogeneous shopping product the consumer probably will be more concerned with price and
perhaps place convenience. Place convenience might not be too important for a specialty
8-16. Many people do not like to go to the dentist – until they have a real problem. Similarly, many
people neglect to get annual check-ups. More generally, one of the problems of marketing
health care is to get people more interested in preventive medicine (blood pressure checks,
mammograms to check for breast cancer, etc.). Some people are not interested because they
Chapter-by-chapter aids: Chapter 8
8-17. Here the instructor might attempt to draw out the functions or services that would be provided
by various kinds of stores rather than trying to get the students to use the conventional names
which are presented in the Place chapters. It is intended here that the students use logic and
1) Neighborhood grocery stores
1) Supermarkets
2) Vending machines
2) Department stores
3) Supermarkets
3) Clothing stores
4) Department stores
4) Drugstores
5) Hardware stores
5) Appliance stores
6) Drugstores
6) Jewelers
8-18. Student answers may vary for these products. That is to be expected. The same product
might be viewed as different types of products by different customers. In fact, that point can be
brought out well by asking students to explain their choices. The differences in their
recommendations can be used to highlight the importance of thinking about how different
segments might view the product when developing marketing mixes.
a. For many consumers, a watch is a heterogeneous shopping product. Differences in
style, features, warranty, and price mean that some comparison is usually required.
Getting a "just right" watch might be especially important if the watch is to be given to
b. An automobile is an important purchase for most people, and usually purchased as a
heterogeneous shopping product. On the other hand, once the search narrows down to
certain types of cars, some consumers see different cars as "basically the same" (a
homogeneous shopping product) – and price will be more important. If a car is
destroyed in an accident or stolen, the purchase may be for an emergency product.
Part IV
often sold as "impulse" purchases – but car dealers assure us that it happens quite
regularly.
8-19. Electronic data processing machines, airplanes, trucks, and most mechanical equipment. In
some cases, so much service is required that customers develop their own skilled
maintenance or service departments, e.g., airlines, bus and taxi companies, etc.
8-20. A new law office may need to use its money ("capital") for a variety of purposes other than
leasing furniture. Thus, the lease could help ease cash flow problems. In addition, from a tax
8-21. Now, with specific product classes available, the discussion can get more concrete – in
8-22. We are concerned only with business products here, but it should be mentioned that lubricating
oil, electric motors, and landscaping services might also be consumer products. The following
comments refer to business products only.
a. Maintenance or repair items, or component materials if used on the assembly line.
8-23. The many small producers of nonstandardized farm products create a major problem of
accumulating and sorting and – as will be explained in Chapters 10 and 12 – this has led to the
development of many specialized wholesalers. Inability to control the quantity in farm markets
