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Chapter-by-chapter aids: Chapter 14
P L U S - SpreadSheet
Commission
Combination
Plan
Salary Component of Pay
0.00
18000.00
*
PRODUCT A: Price
110.00
*
110.00
*
Commission Percent (Of Sales $)
5.00
*
3.00
*
d. If Welles' marketing plan for Nanek calls for increased sales push on Product B, that goal isn't
addressed by the rep's proposal to take the same commission on both A and B. Because sales reps'
time is a scarce resource, the rep's proposal leaves open the "easy way out" – keep selling Product
A. Of course, this is ignored if one accepts the assumption that unit sales for the two products would
stay the same. Students may come up with ideas on how to meet the rep's concerns and still keep
the focus on Product B. But the main point reinforced throughout this problem is that it is important
for the reward structure to be consistent with the firm's goals as well as the salesperson's needs.
CHAPTER 14 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 12: DrJane.com—Custom Vitamins
This case directly addresses a customer service issue. It emphasizes the important role played by
customer service in handling customer problems and building customer loyalty. The case discussion in
Part V details the potential financial implications of poor customer service.
Case 21: Global Chemical, Inc.
This case can be used to discuss the need for adjusting the personal selling effort when target customers'
Case 23: Carson’s Furniture
This case can be used to illustrate the importance of understanding the company's target market and
IV-14-6 Perreault, Cannon, & McCarthy
Case 28: PCA Precision Tools
This case can be used to discuss the different kinds of personal selling efforts one would expect from
general merchandise wholesalers and specialty wholesalers. Further, it gives practice in identifying
different kinds of salespeople. See case discussion.
CHAPTER 14 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: Assume that you are a sales rep and sell costly electronic systems used in automated factories.
You made a sales presentation to a customer, but he didn’t place an order—and then wouldn’t take your
calls when you tried to inform him that your company was coming out with a more reliable model at the
same price. Months later, he faxes a purchase order for immediate delivery on the model you originally
discussed. You have the old model in stock, and it will be difficult to sell once the new model arrives in
two weeks. In fact, your company has doubled the usual commission rate to clear out the old model. Do
you try to contact the customer again to tell him about the new model, or do you do what he has
requested and immediately fill the order with the old model? Either way, if you make the sale, the
commission will pay for your upcoming vacation to the Caribbean. Explain what you would do and why.
CHAPTER 14 – 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.
a. What personal selling tasks are performed at Hillside Veterinary Clinic and who does them?
b. If Hillside wanted to put more emphasis on “order-getting” to promote growth, what ideas do you
have for how to do it?
c. Based on the situation analysis, target markets, and intended positioning, recommend some
ways that Hillside could actively work to improve its reputation for customer service.
Chapter-by-chapter aids: Chapter 14
perform order getting, order taking, and customer service. The supporting task may be performed by the
receptionist – who may also help with ordering taking and customer service.
HVC might provide commissions or bonuses to encourage its staff to talk about certain services – for
example, the dental services package.
CHAPTER 14 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 14.1: Selling Emphasis and Sales Compensation
Question Type: Drag-and-drop
Exercise 14.2: Key Steps in the Personal Selling Process
Question Type: Drag-and-drop
Exercise 14.3: Professional Selling Video Case
Question Type: Video case
IV-14-8 Perreault, Cannon, & McCarthy
Chapter-by-chapter aids: Chapter 15
CHAPTER 15: ADVERTISING, PUBLICITY, AND SALES
PROMOTION
CHAPTER 15-COMMENTS ON QUESTIONS AND PROBLEMS
15- 1. This is just a policing question. See Exhibit 15-1 and section “Advertising, Publicity, Sales
Promotion, and Marketing Strategy Planning.”
15- 2. See sections “Advertising Objectives Are a Strategy Decision” and “Objectives Determine the
Kinds of Advertising Needed.” The required illustration will provide a focus for applying the text
15- 3. In general, radio is likely to be an important media alternative in a developing nation with low
per capita income and a high level of illiteracy. The low-income level may prevent some
consumers from owning a radio, yet it is a form of entertainment that is quite common around
the world, even in low-income households. Further, radio broadcasts and their oral
15- 4. One case is to convince the intermediaries that the company is following an aggressive mass
selling policy that will work to their advantage. Another is to secure inquiries. Another
example is the promotion by a large producer seeking both to inform and sell the trade on a
new policy it is instituting – such as price guarantees.
15- 5. "Investing" money in advertising refers to building a consumer franchise through continued
advertising. Money put into institutional advertising and money expended during the
introduction and market growth periods can be thought of as investments. Funds spent during
15- 6. The important thing here is the objectives. Almost any ad can be made to seem "good" if the
objective is selected to justify what was done.
IV-15-2 Perreault, Cannon, & McCarthy
15- 7. Again, the assumptions about target customers and how they view the product are extremely
important. This question provides a vehicle for discussing the advantages and disadvantages
15- 8. The pros and cons of advertising on the Internet for a producer of sports equipment are
basically similar to the general pros and cons of advertising on the Internet. In this regard, see
the text’s discussion of digital advertising (which includes advertising on both the Internet and
cell phones). See section “Digital Advertising.” It is also useful to reference the discussion of
integrated direct-response promotion and customer-initiated interactive communication in
15- 9. Testimonials may attract attention and also hold interest – and if they are good enough, arouse
desire and encourage action. Testimonials are especially important for products that are
difficult to evaluate without extensive use. Here, depending upon the advice of others may be
a rational approach for consumers. However, for products which consumers can easily
evaluate, testimonials have relatively little value except that they may be useful for gaining
attention – many consumers seem to like to read other peoples' letters. Also, children seem to
identify with known persons or cartoon characters – so testimonials may be useful for reaching
them.
15-10. This question is unstructured, and how students react to it will vary substantially. However, the
question can serve as a very good basis for some class discussion. It is also a good "vehicle"
for some in-class presentations. The question simply asks the student to find a magazine ad
that "does a very good job" communicating to the target audience, and to indicate if the ad
Chapter-by-chapter aids: Chapter 15
communicates effectively with the target audience. Rather than considering the likely
effectiveness of the ad, they will instead focus on some aspect of the ad that they like (the
photo, a humorous headline, etc.). When one of these aspects surfaces, it is useful to point
out the potential hazards of marketing managers selecting ad campaigns that they like, but
which are unlikely to appeal to the real target market.
15-11. As noted in the text, the large agencies have an advantage with certain types of accounts,
especially ones for which international connections and expertise are important. However,
small agencies can give more personalized attention and better service – especially to a client
15-12. See section “Measuring Advertising Effectiveness Is Not Easy.” There is a great deal of
inefficiency in mass selling – but the increasing importance of marketing managers and use of
marketing research is tending to reduce this inefficiency. The value of a particular
advertisement depends upon the objectives – and marketing research can help evaluate
particular ads.
15-13. The "fairness" of ads that criticize competitors has only recently become a key issue. In the
past, most advertisers avoided direct criticisms of competitors. Now, however, that has
become more common. Further, many ads that are critical of competitors do seem "unfair."
15-14. This question has no right or wrong answer – the goal is to simply get students to think about
the issues. Some answers are more obvious – a company’s target customers should be on
15-15. This question also has no right or wrong answer, but is designed to get students to think about
different forms of publicity. These customers are likely to want information that will help them
15-16. This question is a serious concern for many local newspapers. In recent years, many retailers
have moved toward use of "free-standing inserts" rather than regular newspaper advertising.
At first, the inserts were used because they provided an economical way to get two-color or
four-color advertising printed, and they were distributed as "inserts" in the paper. Now,
however, many retailers – including many supermarkets – have found that they can get the ads
Part IV
IV-15-4 Perreault, Cannon, & McCarthy
profitability. Further, since many people are interested in the ads, subscriptions and
readership also fall when the advertisers switch.
15-17. The basic concern here is that many short-term promotions (including most trade promotions)
have an effect similar to a short-term price discount. Thus, they are thought to increase price
sensitivity and brand switching rather than contribute to increased brand loyalty and higher
brand equity. There are other negative side effects as well. For example, a buy-one, get-one-
15-18. Many firms are trying to better integrate their sales promotion activities with their advertising
and personal selling activities – to get more "bang for the buck." One general approach is to
use a direct-response promotion to help identify specific customers who are then targeted with
other promotion. For example, an advertisement might inform customers about a sweepstakes
contest that involves a give-away of the product. People who send in their names and
addresses to enter the contest are probably interested in the product. They'd rather win it free,
but they still are likely to be interested. So, then the company might send them mail
advertisements, price-off coupons, or even have a telemarketer call them. Alternatively, the
name might be passed along to a local retailer who then follows up with more promotion effort.
15-19. (a) if the firm has developed an improved razor blade and obtained distribution, but consumers
are not motivated to buy it, the firm's promotion objective should probably be to encourage trial.
Once consumers have tried the improved razor then they are likely to purchase it again. Thus,
one feasible approach is to use sampling. Distribution of samples of razor blades might be
expensive if it required developing a special (small quantity) package. And without special
packaging, sampling might be dangerous. Thus, another approach might be to offer
consumers price-off coupons or rebates so that the price actually paid for the new razor is
substantially less than competing brands. This approach relies on the appeal of a lower than
competitive price to encourage consumers to try the product, but then, if they like it, they will
repurchase when there is no coupon.
Chapter-by-chapter aids: Chapter 15
(b) if a competitor is about to do a test market for a new brand and wants to track sales in test
market areas to fine tune its marketing mix, the firm may want to use promotion that
encourages consumers not only to buy the firm's brand but also to "stock up" so that their
(c) the producer of the popcorn-based snack product might try sales promotion targeted at the
chain (push) or at final consumers (in the hope that stimulating demand will help pull the
product through the channel. For example, the producer might offer the chain credit for a free
case of product for each one it sells. This effectively becomes a discount, and the retailer has
the option of either passing along some of the discount to consumers – to stimulate demand
and promote trial – or alternatively of trying to simply get more profit (from larger margins) by
selling at the regular price. From the producer’s standpoint, this approach has the advantage
of encouraging the firm to keep the product on the shelf longer. If, alternatively, the producer
just gave the chain free cases there would be less incentive for the retailer to come back to
reorder. Yet, it takes most products – even ones that end up being popular – a while to catch
on.
15-20. There are a variety of reasons that the producer of a shampoo might offer consumers a price-
off coupon rather than simply lower the price of its product. Most of these deal with the
administration of pricing in the channel of distribution. Specifically, the law typically prohibits a
manufacturer from requiring a retailer to charge consumers a certain price. Thus, if the
15-21. The point here is that advertising media and advertising specialists compete – just as
companies in other lines of business compete. Demand for media advertising is affected by
Part IV
IV-15-6 Perreault, Cannon, & McCarthy
the cost. Thus, if firms continue to shift toward other methods of promoting products it is likely
that there will be downward pressure on media prices. In the same vein, advertising agencies
will put more emphasis on developing skills in managing sales promotion – to serve that need
among clients. Actually, both of these trends are already well underway.
DISCUSSION OF COMPUTER-AIDED PROBLEM 15: SALES PROMOTION
A local PTA is thinking about using sales promotion to spark ticket sales for a fund-raising basketball
game. The student analyzes the costs of the promotion and what results it must produce to be beneficial.
This problem helps students to see how promotion can help both business and nonprofit organizations –
while making them more sensitive to the costs (and risks) of using promotion.
The initial spreadsheet for the problem appears below:
P L U S - SpreadSheet
No Promotion
With Promotion
Number of Tickets at Regular Price
300
*
600
*
Regular Price per Ticket
5.00
*
5.00
*
Number of Tickets at Special Price
0
*
Answers to Computer-Aided Problem 15:
a. Based on the initial spreadsheet (given above), the promotion looks like a good idea – if ticket sales
increase as expected. Specifically, the money earned by the PTA would increase by $300.00 (from
$1,500.00 to $1,800.00). But, as is developed in more detail in subsequent questions, that benefit
depends on the extent to which the sales promotion sparks additional ticket sales. Using the t-shirt
promotion has a cost – $1,200 in the initial "plan" – and thus it is possible that the promotion could
result in the PTA earning less money if the promotion does not stimulate at least enough extra ticket
sales to cover that cost. This is the focus of the next question.
Chapter-by-chapter aids: Chapter 15
P L U S - SpreadSheet
No Promotion
With Promotion
Number of Tickets at Regular Price
300
*
300
*
Regular Price per Ticket
5.00
*
5.00
*
Number of Tickets at Special Price
0
*
c. The PTA would have to sell 692 tickets at the reduced price ($2.60) to earn about the same amount
of money ($1799.20) as would be earned with the promotion ($1,800) if it works as expected.
This question can be used to stimulate some discussion of the role of price and the role of the sales
promotion here. Students may have some opinions about whether a lower price would really
stimulate more ticket sales. You might ask if they think that price is really a critical issue here – or is
the problem getting people interested in the idea of going to the game. If that is really the problem,
the t-shirt promotion might be more effective, especially if people are interested in the t-shirt and see
the $5.00 ticket price as a "deal" on the t-shirt and the game together. (Note: some students will
argue that the PTA might be better off promoting interest in the game in other ways, such as with
posters, word of mouth, etc. – and selling t-shirts at a marked-up price as another way to earn
money.)
The spreadsheet for the analysis in this problem appears next:
P L U S - SpreadSheet
No Promotion
With Promotion
Number of Tickets at Regular Price
692
*
600
*
Regular Price per Ticket
2.60
*
5.00
*
Part IV
IV-15-8 Perreault, Cannon, & McCarthy
CHAPTER 15 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 18: Whistler Township Volunteer Fire Department
This case allows the instructor to incorporate ideas from both Chapters 13 and 15, and perhaps Chapter
14 on personal selling. See case discussion.
Case 20: Blue Lagoon Marine & Camp
This case can be used to discuss whether advertising can be expected to differentiate this retailer from
the many others in the community who are doing more or less the same thing – but with greater emphasis
Case 36: Skyline Homebuilders
The Skyline Homebuilders case describes a builder of semi-custom homes that recently built his first
LEED-certified “green” home. The home is the first of five in a small development – and Skip Patterson is
building the other four which will also be “green.” A LEED certified home adds a number of energy-saving
CHAPTER 15 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: A software company offers its useful program as a free download. Few downloaders ever read
the license agreement, but it states that the program is paid for by advertising; specifically, it explains that
when the program is installed, another “adware” program is also installed that helps advertisers serve up
targeted ads. Assume that you own a small online flower business that is struggling to get started. A firm
with an adware system like the one described above contacts you about buying Internet ads. You pay
only when someone clicks-through to your site from an ad. You try the ads for a month and your online
sales triple. But you also get complaints from many people who don’t understand why your pop-up ads
constantly appear in their browsers. Would you continue to use this “contextual advertising”? Why or why
not?
This scenario was inspired by an article in Fortune magazine, “Flowers That Pop” (December 1, 2003).
The article can be found with a Google search on the title. This scenario raises interesting questions. It
Chapter-by-chapter aids: Chapter 15
CHAPTER 15 – 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.
a. What are Hillside’s advertising objectives?
b. What types of advertising and media are being proposed? Why are these types used and not
others?
c. What type of copy thrust is recommended? Why?
d. What sales promotion activities are being planned? What are the goals of sales promotion?
Advertising objectives can be inferred by reviewing the marketing strategy section. With customers that
are not currently using HVC, one of the primary objectives should be is to increase awareness. This is
especially true for people new to the area – a very important market in the fast growing community where
HVC is located. Another apparent objective is to introduce new products (e.g., the dental services and
geriatric pet care packages) to specific target markets.
CHAPTER 15 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 15.1: Sales Promotion at Domino’s
Question Type: Comprehension case
IV-15-10 Perreault, Cannon, & McCarthy
Exercise 15.2: Advertising Objectives
Question Type: Drag-and-drop
Exercise 15.3: It’s the Cheese
Question Type: Video case
Exercise 15.4: Target Markets and Media Choice
Question Type: Case analysis
Exercise 15.5: Publicity and Social Media
Question Type: Drag-and-drop
Chapter-by-chapter aids: Chapter 16
CHAPTER 16: PRICING OBJECTIVES AND POLICIES
CHAPTER 16 – COMMENTS ON QUESTIONS AND PROBLEMS
16- 1. See Exhibit 16-1 and section “Price Has Many Strategy Dimensions.” Using an example, this
question can be used to review the whole chapter.
16- 2. A profit-oriented objective would suggest a careful blending of all the four Ps and use of a
demand curve (to set the price) which reflects expected customer reaction to the total mix
being planned. Of course, the marketing mix ought to be compatible with the target market
selected – that is, the whole marketing strategy should be compatible. The selection among
price would be de-emphasized – because price decisions are easily copied. Further,
aggressive promotion or any major changes in the marketing mix might be avoided to preserve
the status quo.
16- 3. A one-price policy is most appropriate because there are thousands of different items and
there is usually very little personal sales contact. Personal contact by a responsible party is
16- 4. A skimming policy would probably be associated with a profit-maximizing objective. A
penetration pricing policy might be also. The latter, alternately, might be associated with an
expansion of market share based on some other objective that is not concerned with short
term profitability.
a. Skimming, as there are many people in each community who wish to be “first” with such
items and price competition will follow quickly.
Part IV
IV-16-2 Perreault, Cannon, & McCarthy
c. Probably skimming, as some real “fans” will value having their own DVD of the movie
much more so than the general public. Over time, the price can be lowered and the
market expanded. Of course, the risk of this approach is that interest in the movie may
fade—and the sizeable market that might have developed at a lower price will have
moved on to some other currently popular movie. Here, the potential “competition” is not
necessarily with another very similar product, but rather with other, perhaps totally
different, movies that capture the public’s imagination. For some products, the window
of opportunity may not be very long, especially if popularity depends on the current fad.
16- 5. Differences in exchange rates might make it difficult for a firm to charge the same price in
different markets. In a sense, the greater the fluctuations in the exchange rates among
different markets, the greater the need for flexible pricing. Otherwise, customers in a country
where prices are (relatively) low may make excess purchases (perhaps obtaining greater
quantity discounts in the process and then sell the extra inventory in other countries where
prices are "artificially" high. This can lead to unauthorized (and unexpected) channels of
distribution – sometimes referred to as gray channels.
16- 6. Usually, the term seasonal discount is applied to discounts given to encourage purchases
when consumption is irregular – such as with toys and jewelry – not production. When
production is irregular – as in agriculture – prices may be lower close to the production period
due not to discounts but just the competitive force of the marketplace.
16- 7. Assume 360 days per year for simplicity:
a.
36%1%
10
360 =×
16- 8. See section “Most Firms Set Specific Pricing Policies—To Reach Objectives.” As the Alcoa
example illustrates, intermediaries may not adhere to a manufacturer's list price. In that case,
Alcoa gave its wholesalers a price reduction – but most of them did not pass it along to
Chapter-by-chapter aids: Chapter 16
that is not discussed in the text, but which you might want to raise in class. When
16- 9. She could sell on an F.O.B. delivered basis and be sure that the lowest possible transportation
rates were included in her delivered price. Perhaps she could even negotiate for transportation
by contract carriers. Other suppliers might be able to meet her delivered price, but the buyer's
convenience of not having to handle the freight bill or loss or damage in shipment could
become a major plus. Some buyers are not equipped to handle all these details or would
rather not. The seller who is willing to do so may get business she would not otherwise obtain.
16-10. Again, the assumptions are extremely important here, including assumptions about the
company's pricing objective and other pricing policies. The geographic pricing policy ought to
be compatible with the total price structure. Competitors' practices and customs in the industry
also are important.
16-11. Such a producer might lose heavily by such a ruling – as many small producers might locate in
outlying areas and be able to undercut his delivered price which by law would have to include
all transportation costs. They might have few or no economies of scale, but still be able to
offer a lower delivered price than he could. From a macro point of view, this production-
distribution arrangement might be quite inefficient (i.e. high cost in terms of resources used,
etc.).
16-12. The purpose here is to encourage students to give more serious thought to the idea that a
lower price is not the only way to increase customer value! It should be no surprise that a lot of
students think that way–too many executives fall into the same trap. Rather than take the time
Part IV
IV-16-4 Perreault, Cannon, & McCarthy
looking at it another way, what one person sees as a benefit may not be a benefit to someone
else.
16-13. This is a different question from question 16-12, but it has the same purpose and can be used
16-14. The objective of this question is as much to prompt the student to really think about what the
idea of a "market price" means as it is for the student to actually come up with a true example
of a firm that continuously (i.e., profitably) sells "above the market." As is emphasized in the
16-15. Pure competition or oligopoly.
16-16. If all nations dropped their anti-dumping laws, it would probably have the effect of lowering the
prices that consumers pay. Producers in every country wouldn't be interested in "dumping"
every product. Rather, countries would tend to focus on producing products for which they had
a special advantage, and this might lead to an efficient allocation of resources. On the other
hand, anti-dumping laws are primarily intended to protect jobs (and consumer income).
16-17. Mandatory fixed prices would place greater importance on the development of the
manufacturer's marketing mix – as less adjustment could be made in it by wholesalers and
retailers. It would have to be right – or else sales would suffer. This would greatly reduce the
freedom of the retailer, however, forcing emphasis on service, location, and promotion. The
16-18. No discrimination would be involved if the company sold to different customers at different
prices – but when the cab associations resold to the general public, they were competing
Chapter-by-chapter aids: Chapter 16
DISCUSSION OF COMPUTER-AIDED PROBLEM 16: CASH DISCOUNTS.
In this problem, a wholesaler is thinking about changing the cash discount terms he offers his retailer-
customers. The discount terms – originally set when interest rates were much higher – are now "too
good" a deal for the retailers. The manager wants to evaluate the effect on his total revenue of different
discount arrangements. The student analyzes changes in the cash discount period and discount rate to
see how the terms might affect the total value of discounts that the wholesaler offers his customers.
The initial spreadsheet for the problem is given below:
P L U S - SpreadSheet
Situation
Cash Discount Percent
3.00
*
Days to Pay to Get Cash Discount
10
*
Days to Pay Net Invoice Value
30
*
Days per Year
365
*
Approximate Effective Interest Rate
54.75
Answers to Computer-Aided Problem 16:
a. The total monthly cash discount is now $2,916.00 – given that 90 percent of the customers take the
discount. The spreadsheet for this analysis is given below:
Part IV
IV-16-6 Perreault, Cannon, & McCarthy
P L U S - SpreadSheet
Situation
Cash Discount Percent
3.00
*
Days to Pay to Get Cash Discount
10
*
Days to Pay Net Invoice Value
30
*
Days per Year
365
*
Approximate Effective Interest Rate
54.75
The spreadsheet for the analysis is given below.
P L U S - SpreadSheet
Situation
Cash Discount Percent
1.00
*
Days to Pay to Get Cash Discount
5
*
Days to Pay Net Invoice Value
20
*
Days per Year
365
*
Approximate Effective Interest Rate
24.33
