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Chapter-by-chapter aids: Chapter 12
Instructor's Manual to Accompany Basic Marketing IV-12-3
However, as a practical matter, opportunities for retailers in international markets are probably
more limited than for producers. A key issue here is the extent to which a producer can pursue
opportunities in international markets – perhaps by simply working with international
intermediaries to export the company's existing products – without a major investment (and
thus without significant longer term risk). To expand into international markets, a retailer must
set up and operate facilities in a foreign nation, perhaps with inadequate knowledge of
uncontrollable factors in the marketing environment that may impact success.
12- 9. Wholesalers are now relying heavily on computers to help control inventory levels and to
manage warehousing activities – including use of computers in automatic order picking
systems. Many wholesalers are now using computer-to-computer hookups with their
customers – so orders can be placed immediately and accurately. Computer programs are
used to help in routing delivery trucks. Computers are also used to maintain better information
about sales – among other reasons, so that the wholesaler can systematically review its
12-10. This is not an easy question. However, in this chapter we argue that wholesalers must adapt
to meet the needs of their suppliers and customers – or disappear. We explain many of the
changes taking in place in wholesaling, including some changes that have been brought on by
the changes in retailing (which are also discussed in some detail). Thus, students should think
about and organize what they have read.
The changes taking place in wholesaling are less visible to students (and consumers in
general) than the changes taking place in retailing. However, some of the trends discussed in
the text include: (1) growing use of the Internet to expand markets and improve
communications with and promotion to distant customers; and (2) increased use of technology
Part IV
expanded their operations and facilities (paralleling the move to retail chains in the retail
sector).
"Traditional retailers" are being squeezed by retailers who have adopted the mass-
merchandising concept. That means that the wholesalers who have focused on serving these
traditional retailers have been squeezed as well. This gets at the idea that it is not just
12-11. Wholesalers very definitely need to constantly reevaluate the product lines they handle. As
with other members of the channel, wholesalers have a variety of potential opportunities and
they must decide how they are going to use their resources (warehouse space, promotion
effort, etc.). As market needs change, a wholesaler must adapt. For example, if retailers
being served by a wholesaler are scrambling their lines, then the wholesaler must also
scramble its lines – or lose business to some competitor. Further, producers are constantly
12-12. It is likely that the retailer would want to quickly (1) find another brand of washing machine to
sell, and then (2) stop selling the Maytag brand. Otherwise, the retailer would face the problem
of “free riders”–consumers who would come to the store to check out the washer and ask
questions of salespeople. In general, consumers would take advantage of the retailer’s
investment in people and facilities, but then buy from the website – presumably at a lower
price. If consumers could not buy directly from Maytag at a lower price, why would they be
interested in this approach?
12-13. Risks assumed include product deterioration, obsolescence, theft, fire, damage, and price
changes over time. Risk is not constant – it depends upon the product. There would be much
more risk for fresh strawberries than for kegs of nails.
Chapter-by-chapter aids: Chapter 12
12-14. It might wish to offer more technical service than the established wholesalers could or would
provide. Also, sales branches might be set up in large cities only – where large sales volumes
and greater profits could be obtained.
12-15. The marketing mix for an agent wholesaler usually focuses on promotion. This is because he
does not own the products he sells. The agent may be able to alter his product line by
representing more or different producers – but basically the producer is the one who makes the
12-16. Manufacturers' agents (one type of agent wholesaler) usually handle only noncompeting
products for different producers because they are, basically, acting as salespeople for the
producers. How they are paid is relevant here. They typically sell on a commission basis. A
12-17. The firm might try to establish direct distribution, but that is likely to require significant
investment and also to be risky. Another alternative is to work with agent wholesalers who
specialize in international trade. Merchant wholesalers may be important if they provide
financing for customers and/or invest in inventory so that it is available when customers want it.
However, the firm may be able to find a bank or other financial specialist who would be willing
to handle the financial functions of the channel and to rely on an agent for buying and selling
functions, information functions, and the like. A public warehouse and/or transportation
12-18. Low-margin retailing requires large sales volumes – and this clearly implies larger retailers.
Thus, many wholesalers will be less essential, except to the many small retailers whom they
will have to help compete against the larger low-margin sellers. For these smaller retail
customers, the wholesaler’s management services probably will be invaluable. In selling to the
larger retailers, and especially to more professional retail managers, wholesalers will have to
present even more economic proposals and proven propositions. Wholesalers may have
Part IV
IV-12-6 Perreault, Cannon, & McCarthy
probably be basically a physical-handling activity because these large, low-margin retailers will
have less need for the wholesaler's advice and special management services.
DISCUSSION OF COMPUTER-AIDED PROBLEM 12: SELECTING CHANNEL
INTERMEDIARIES
A producer of glass gift items wants to expand into a new territory – and is trying to decide whether to use
a merchant or agent wholesaler to reach gift shop retailers. The agent requires less investment, but the
merchant wholesaler may provide access to more gift shops. The student analyzes the trade-offs
between the two alternatives under different conditions, including different levels of demand for the
product. This problem highlights the differences in various types of wholesalers – and why the
differences can have a dramatic effect on profits.
P L U S - SpreadSheet
Merchant
Agent
Expected Quantity by Merchant Wholesaler
4500
*
Percent of Quantity Agent Could Sell
75.00
*
Agent's Commission Percent
8.00
*
Quantity Agent Could Sell
3375
Art Glass Selling Price
12.00
*
14.00
*
TOTAL Revenue
54000.00
47250.00
Profit Contribution at Above Quantity
17568.80
17568.24
Answers to Computer-Aided Problem 12:
a. Given the expected sales quantity (4,500 units by the merchant wholesaler, or 3,375 units for the
agent wholesaler), the merchant contributes more to profit: $19,900 vs. $19,170 for the agent. See
the initial spreadsheet above.
Chapter-by-chapter aids: Chapter 12
P L U S - SpreadSheet
Merchant
Agent
Expected Quantity by Merchant Wholesaler
3000
*
Percent of Quantity Agent Could Sell
75.00
*
Agent's Commission Percent
8.00
*
Quantity Agent Could Sell
2250
Art Glass Selling Price
12.00
*
14.00
*
TOTAL Revenue
36000.00
31500.00
c. If the merchant sells more than (about) 4,100 units, he will earn more profit. At demand less than
that level, the agent would earn more. This pattern of a "switch-over" point is common with agents.
Since they usually work on a commission basis, there is no "fixed" cost unless they sell something.
But, their percentage is often high relative to other ways of distributing the product at higher levels of
demand. This is one reason that agents are often used in opening new markets for products. But,
P L U S - What If Data Display
-Merchant-
-Merchant-
-Agent-
-Agent-
Quantity-Merchant
Profit
Quantity-Agent
Profit
Contribution
Contribution
3500
13700.00
2625
14910.00
3600
14320.00
2700
15336.00
3700
14940.00
2775
15762.00
CHAPTER 12 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 11: Running Room
Part IV
IV-12-8 Perreault, Cannon, & McCarthy
Case 12: DrJane.com—Custom Vitamins
This case can be used to discuss some pros and cons of online retailing. The instructor might compare
and contrast DrJane.com with a brick-and-mortar competitor like Vitamin Shoppe or GNC. Why would a
customer go to DrJane.com versus one of these other stores? Which company can offer better customer
service – an online retailer or a brick-and-mortar store? The answers to these questions are not clear cut,
Case 14: Digital Universe
This case can be used here to illustrate the need for retailers to aim at clearly defined target markets and
Case 15: The Buckeye Group
This case can be used here to illustrate what a manufacturers' agent does and why it is important to have
Case 16: J&J Lumber Supply
This case can be used to illustrate the functions of a drop-shipper. It is also possible to discuss what
merchant wholesalers (and retailers) do—Jimmy Olson's customers in this case. But the major emphasis
should be on the fact that Jimmy is considering a change in the wholesaling functions he will provide. He
would become a manufacturers' agent – and for a producer with a "really new idea" which will require
some (probably difficult) pioneering work. This would be a major change for him. See case discussion.
Video Case 2: Bass Pro Shops
Bass Pro Shops is the nation’s leading retailer of outdoor gear. It also is regarded as a master marketer
for a unique shopping experience that blends goods and services with theater and entertainment—a trend
Video Case 5: Suburban Regional Shopping Malls
This video focuses on the current problems of suburban regional and superregional shopping centers.
Southdale Center located in suburban Minneapolis is considered to be the prototype for most of the
suburban regional and superregional shopping malls built during the second half of the twentieth century.
Chapter-by-chapter aids: Chapter 12
CHAPTER 12 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: Farmers in poor countries get very little money for crops—such as coffee, cocoa, and
bananas—that they grow for export. Some consumers in prosperous nations are willing to pay retailers
higher prices for “fair trade” goods so that the farmers receive greater compensation. But critics question
whether fair trade works as it should. For example, Sainsbury’s is a popular British food retailer. It was
charging $2.74 per pound for “fair trade” bananas versus only $.69 per pound for regular bananas.
Farmers, however, only got $.16 extra from that $2.05 price premium. Critics charge that Sainsbury’s
makes more from the “fair trade” promotion than the farmers it is supposed to help. Many retailers have
similar programs. Do you think that Sainsbury’s is acting ethically? What do you think Sainsbury’s and
other similar retailers should do? Why?
This scenario was written based on a Wall Street Journal article, “What Price Virtue? At Some Retailers,
‘Fair Trade’ Carries a Very High Cost,” (June 8, 2004). A Google search should lead to a copy of the
The AMA Statement of Ethics does not directly address this type of issue. Some people think that it is
incumbent on the retailers to make sure customers know how much of the premium they pay actually
makes it to the farmers; on the other hand, based on observation it seems that most retailers feel that it is
sufficient to respond to consumer interest in “fair trade” products without providing information that many
customers don’t request.
CHAPTER 12 – 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 kind of retail operation is the vet clinic? Does it fit any of the types described in this
chapter?
b. How could Hillside make use of a website?
c. The marketing plan notes future plans to offer kennel (boarding) services and pet supplies. How
will this change Hillside’s current strategy? Does the marketing plan provide a good sense of
what needs to be done? Do you have other recommendations for Hillside?
Part IV
IV-12-10 Perreault, Cannon, & McCarthy
The addition of kennel services to HVC’s product offering should be pursued with care. There are clearly
operational issues, but from a marketing standpoint it would be extremely important that the kennel
services be consistent with the clinic’s current positioning (which focuses on “compassionate care”). This
could require more service and staff than many kennels now provide – and that could raise costs and
prices. As long as HVC feels there is a large enough local target market that is less price sensitive and
more interested in service, the kennel could be a success.
CHAPTER 12 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 12.1: Amazon and the Wheel of Retailing
Question Type: Drag-and-drop
Exercise 12.2: Jack and Amy’s Pet Supplies
Question Type: Case analysis
Exercise 12.3: Rollie Johnson, Inc.
Question Type: Case analysis
Exercise 12.4: Limited Function Wholesalers
Question Type: Drag-and-drop
Chapter-by-chapter aids: Chapter 13
CHAPTER 13: PROMOTION – INTRODUCTION TO INTEGRATED
MARKETING COMMUNICATIONS
CHAPTER 13 – COMMENTS ON QUESTIONS AND PROBLEMS
13- 1. See section “Which Methods to Use Depends on Promotion Objectives” for a discussion of the
three methods.
13- 2. Integrated marketing communications concerns the intentional coordination of every
communication from a firm to a target customer to convey a consistent and complete message.
13- 3. The basic promotion objectives are to inform, persuade, and remind – while the four tasks are
getting attention, holding interest, arousing desire, and obtaining action. An example helps to
make this more concrete, but basically the four tasks (with shifting degrees of emphasis) are
needed to accomplish any one of the objectives.
13- 4. Again, a specific example helps make the discussion more concrete. In the case of the
security system, it probably would be useful to discuss the difficulty of communicating with the
various influences in the purchasing decision. For example, the people who work in that area
might be concerned about how easy it was for authorized personnel to enter the area – and the
13- 5. There is no way for a firm to be absolutely certain that its communications won't be
misinterpreted – by at least some consumers – regardless of the country in which it is
communicating. However, many of the communication problems that arise can be avoided –
perhaps even easily avoided – if "locals" were involved in developing, evaluating and criticizing
the communications. An ad agency in a distant country may be able to get the correct
translation or the ad might show people in the correct dress, but that doesn't mean that cultural
issues relevant to the target market have been addressed.
13- 6. The highly persuasive advertising in the market maturity and sales decline stages is probably
the culprit. Most of the products are essentially the same, but competition often centers on
Part IV
13- 7. The use of direct-response promotion often involves a "building up" process. For example, the
direct response may simply be an expression of interest (rather than, say, a purchase).
However, given the expression of interest by the consumer, the seller might send mail
advertising or brochures and then follow up with personal selling. The idea is to focus the
promotional effort on customers/prospects who are interested and who might be likely to go "to
the next step."
13- 8. This question asks the student to think about a topic that is discussed in more depth in Chapter
15 along with a number of other issues related to digital advertising). Students may give a
variety of answers, but they are likely to take the hint concerning the Internet and mention that
the information provided by the firm can be made available (say, by a link to a website) at the
13- 9. The support supplied for each answer is extremely important here. This will get at the
assumptions that have been made about the target market(s) and the nature of the product.
Some of these products (digital tape recorder, car batteries, and perhaps castings for truck
engines) could be both consumer and business products – and require several intermediaries
in their channels of distribution. Students should be lead to see the importance of their
assumptions by having them answer pointed questions about why another blend was not used.
These questions can be especially revealing when the student has not carefully supported his
answers. It might be useful to have several students place their blends (and supports) on the
board. Then discussion can focus on why the blends are different – if they are – and if not,
how similar the supports are. Then it might be fruitful to discuss how the blends would change
if the assumptions changed.
Chapter-by-chapter aids: Chapter 13
13-10. Student answers here will vary, but don't be surprised if they come up with some creative and
interesting ideas. For example, the firm might give free samples to TV retailers – along with a
13-11. a) Almonds. A few years ago, there might have been some skepticism about the possibility of
promotion increasing the general demand for almonds. An attention-getting ad campaign from
almond growers, however, might stimulate increased interest in almonds and – at least
temporarily–increase demand. The California Raisin Growers did do this with raisins, and
people in the dairy business claim that the “got milk” campaign has helped stimulate demand
for milk.
b) Air travel. Promotion for air travel might increase demand, especially if the promotion
convinced people that there were benefits to air travel relative to other modes of transportation
that they might be considering. For example, some people might think that airfares are higher
than they really are, or may not realize that convenient, direct flights are available to a
destination of interest. In such a case, the general demand for air travel might increase. Note
that people would probably not increase their travel because of the promotion alone, but rather
would probably be switching from one mode of travel to another.
c) Golf clubs. Promotion for golf clubs might be effective in increasing general demand. Some
people may not know much about golf, or may not view it as something of interest. Effective
promotion might change that – prompting some people to pick up the game, and that might
increase demand for clubs.
13-12. Adapting the promotion blend to the adoption process is not a simple thing. For example, with
respect to digital tape recorders, the adoption process may extend over a long period of time.
Some mass advertising might be used to gain awareness and interest but then personal selling
and point-of-purchase displays might be valuable for helping in the evaluation and trial
process. Many consumers will be skeptical that the new product is superior – and they will
want a demonstration by the salesperson. Subsequently, mass advertising might be helpful to
Part IV
IV-13-4 Perreault, Cannon, & McCarthy
13-13. The firm might want to target promotions specifically at the opinion leaders as part of an effort
to stimulate word-of-mouth communication. Also, see section “Adoption Processes Can Guide
Promotion Planning.”
13-14. This discussion should focus on finding a way to obtain acceptance by others than the
innovators – who might be willing to try the product for their own pleasure or business use.
The innovators are likely to see technical announcements and publicity releases in specialty
13-15. A marketing manager who uses the task method to budget for marketing promotion isn’t
ignoring competitors' promotion spending levels. To the contrary, the "task" that a firm needs
13-16. The basic conflict arises because each of the promotion managers has at least some capacity
to accomplish the tasks which the other managers can do or are doing. If the firm happens to
have developed a poor promotion blend, a rearrangement of the blend might be much more
efficient, but it would require shifting of tasks among the promotion managers. This would
normally be resisted by those who would lose responsibility – as each one's status and
compensation may be related to responsibility.
DISCUSSION OF COMPUTER-AIDED PROBLEM 13: SELECTING A
COMMUNICATIONS CHANNEL
In this problem, the owner of a chain of retail stereo stores is deciding what media to use in promoting a
new store. The different media reach different audiences, require different "front end" costs for preparing
ads, and yield different results in terms of customer awareness and purchases. The student analyzes the
data and decides what media to use. The problem emphasizes the importance of ads being targeted to
reach the market, and with evaluating the strengths and weaknesses of different media.
The initial spreadsheet for the problem is given below:
Chapter-by-chapter aids: Chapter 13
P L U S – SpreadSheet
FM Station
Magazine
Total Audience Size (People)
100000
*
200000
*
Audience Percent in Income/Age Group
70.00
*
60.00
*
Percent of Audience Local Residents
95.00
*
65.00
*
Number of "Prospects" in Audience
66500
78000
Preparation Cost for Ad
200.00
*
2000.00
*
Answers to Computer-Aided Problem 13:
a. Based on the initial spreadsheet (given above), FM radio appears to be the more cost-effective
medium. The cost per buyer for radio is $8.65 vs. $13.67 for the magazine.
The problem description and spreadsheet imply that either media plan would achieve the objective
(expressed in terms of the percent of "prospects" who are aware of the new store). This issue is
b. Given the data on the spreadsheet (see below), the agency's proposal does not appear to be good
idea. Although the number of ad insertions would be lower, the high front-end cost of developing the
ad would increase the total cost per buyer of the effort to $9.12 per buyer, up from $8.65 per buyer
on the initial spreadsheet.
P L U S - SpreadSheet
FM Station
Magazine
Total Audience Size (People)
100000
*
200000
*
Audience Percent in Income/Age Group
70.00
*
60.00
*
Percent of Audience Local Residents
95.00
*
65.00
*
c. The What If data display below shows the effects of different levels of awareness on the two kinds of
costs for the radio ad. The point here is that the cost-effectiveness of the ad varies significantly
Part IV
IV-13-6 Perreault, Cannon, & McCarthy
depending on how well the ad stimulates awareness – and ultimately converts "aware" prospects to
buyers. For example, if only 50 percent of the prospects become aware, the cost per buyer is
$14.59. This poor a result would make the magazine ad more cost effective (at $13.67 cost per
buyer). However, if as high as 70 percent awareness is achieved, the cost per buyer is reduced to
$10.42. This would be less expensive than the magazine ad.
P L U S - What If Data Display
-FM Station-
-FM Station-
-FM Station-
Objective
Cost per
Cost per Buyer
Prospect
50.00
0.292
14.586
52.00
0.281
14.017
54.00
0.270
13.510
56.00
0.260
13.020
CHAPTER 13 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 18: Whistler Township Volunteer Fire Department
When this case is used with Chapter 13, less emphasis would be placed on some of the issues not raised
until Chapter 15 – like copy thrust and types of advertising. But most of the rest of the case discussion in
Part V applies here.
Case 19: MyPerfectWedding.com
This case can be used here to discuss the need to develop the right blend of promotion methods–
including personal selling – even though the business in the case is a website advertising service. The
case stimulates substantial student interest and good discussion of a wide variety of issues related to
promotion, while it also sheds some light on some of the issues related to how website advertising works.
CHAPTER 13 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Chapter-by-chapter aids: Chapter 13
number of unfavorable, anonymous reviews. You also notice that there are about 30 very upbeat reviews
of the competing restaurant. Your friend wants you to help give the competitor “what he deserves” and
write some negative reviews about that restaurant. Would you do what he asks? Why or why not? What
else could you do?
A discussion of the topic could go in many different directions. While students should view the practice as
unethical, it prompts the broader question – what if the competition does it? Does this open the door for a
firm to engage in unethical practices as well? Students should recognize that this type of practice could
lead both firms down a dangerous ethical path. What would employees think about the management of
the restaurant? How might this influence their ethical behavior – for example, would it make them more
likely to steal from the restaurant?
CHAPTER 13 – 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 promotion objectives? How do they differ for the various goods and services
the company offers?
b. Do the promotion activities recommended in the plan fit with the promotion objectives? Create a
Part IV
IV-13-8 Perreault, Cannon, & McCarthy
Good/Service
Promotion Objective
Promotion Activities
The clinic in general
Informing – awareness
in particular
Attending community events (e.g., Easter Egg
Hunt, Town-Wide Garage sale, Pet Fair, etc.)
and giving away swag (magnets, bandanas,
signs, etc.)
Puppy/kitten care packages
Informing – awareness
in particular
Noted in Yellow Pages ad and in-clinic
signage
Students may be able to generate many additional ideas for promotion. An instructor might use some of
the conceptual organizers in the book to demonstrate how they can prompt ideas. For example, remind
the class of the three types of promotion: 1) personal selling and customer service, 2) mass selling with
advertising and publicity, and 3) sales promotion. Exhibit 13-2 lists a number of promotion activities that
may be directed at consumers.
CHAPTER 13 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 13.1: Oscar Mayer Talent Search – Using the Tools of IMC
Question Type: Comprehension case
Exercise 13.2: Blue Sky Creative: Next Generation Marketing
Question Type: Video case
Exercise 13.3: Adoption of Products: Consumer Technology
Question Type: Drag-and-drop
Exercise 13.4: Effective Communication: The Traditional Way
Question Type: Drag-and-drop
Chapter-by-chapter aids: Chapter 14
CHAPTER 14: PERSONAL SELLING AND CUSTOMER SERVICE
CHAPTER 14 – COMMENTS ON QUESTIONS AND PROBLEMS
14- 1. See Exhibit 14-1. The reason they should be made by the marketing manager is that personal
selling is only a part of Promotion – which is only one of the four Ps. All of these must be
interrelated to have an effective marketing strategy. Leaving these decisions to a sales
manager would commonly result in the personal selling area being run as an autonomous unit
14- 2. As with all questions of this type, it is extremely important to specify the target customers, the
nature of the product, and now, the place policies. Without some assumptions, it is almost
14- 3. See the answer to Question 14-2.
14- 4. This would usually call for a fairly high-caliber order getter, who may be very useful in the early
stages of the product life cycle. Then when the product is fairly well accepted, the marketing
14- 5. Those specialty shops which can retain good order takers or even order getters – or who are
owned by some – may grow in sales as customers who desire special service may have no
alternative but to patronize these shops. If mass selling develops strong brand familiarity,
however, then lower caliber order takers or perhaps even vending machines may be able to
complete the transactions. For the majority of heterogeneous shopping products, this does not
seem too likely, however. And these are the products specialty shops have emphasized.
14- 6. This is a review question – see section “Supporting Sales Force Informs and Promotes in the
Channel.”
Part IV
IV-14-2 Perreault, Cannon, & McCarthy
instructor might ask, “Can anyone describe a particularly good customer service experience?”
and “What does this company do right?” This experience reinforces and extends the text’s
discussion of customer service. The series of examples help to demonstrate the importance of
good customer service and some tactics that work.
14- 8. Few college campuses have a position of customer service rep – or something similar.
Students will likely advocate for such a position. Most have had at least some problems with
14- 9. Many firms have used this type of incentive for their customer service reps (CSRs) – usually to
the detriment of service quality. Such programs give CSRs an incentive to quickly get a
customer off the phone. This increases the likelihood of transferring a problem to another CSR
14-10. Have two different pay scales – one for the experienced salespeople with much higher
incentives, perhaps a straight commission and another with almost straight salary but enough
incentive to encourage rapid learning on the job. After a training period, the new person could
be shifted to the commission plan.
14-11. The intention here is to have students compare actual sales presentations they have
14-12. Students today are very aware of many forms of presentation technology. And, of course, the
low cost of portable presentation technology – typically available on a laptop – makes its use
14-13. The comments for Question 14-12 apply here. The only difference is that here the focus is on
the consultative selling sales presentation.
14-14. It is possible to conceive of a static society that had little or no need for personal salespeople.
The channels and relationships that had been established by previous promotion efforts could
continue serving the consumer satisfactorily – as long as preferences did not change and no
Chapter-by-chapter aids: Chapter 14
(answer questions). But once some personal selling effort is allowed, then it would be almost
impossible to regulate equitably – as there are so many different types of selling situations. It
would be difficult for legislative bodies to correctly anticipate and evaluate all of these
situations (most business managers cannot do this too well for their business).
DISCUSSION OF COMPUTER-AIDED PROBLEM 14: SALES COMPENSATION
In this problem, a sales manager is trying to decide between a commission plan and a combination plan
The initial spreadsheet for the problem is given below:
P L U S - SpreadSheet
Commission
Combination
Plan
Salary Component of Pay
0.00
15000.00
*
PRODUCT A: Price
110.00
*
110.00
*
Commission Percent (Of Sales $)
5.00
*
3.00
*
Expected Sales (Units of A)
4000
*
3600
*
Answers to Computer-Aided Problem 14:
a. From the initial spreadsheet (above), at the planned volumes for Products A and B, the rep would get
the highest compensation ($36,255) under the Combination Plan and Nanek would get the highest
Profit Contribution under the straight Commission Plan ($151,000 vs. $145,995).
b. If increase in unit sales per se is the objective, it might be reasonable to do what the sales manager
has in mind since unit sales will increase from $590,000 to $605,000. But it does not appear to make
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IV-14-4 Perreault, Cannon, & McCarthy
P L U S - SpreadSheet
Commission
Combination
Plan
Salary Component of Pay
0.00
15000.00
*
PRODUCT A: Price
110.00
*
110.00
*
Commission Percent (Of Sales $)
5.00
*
3.00
*
In class discussion of commission rates it is worth noting two points. First, "Expected Sales" for one
product (in this case, Product B) is not endlessly elastic. Purchasers may be reluctant to try large
quantities of a new product no matter how hard the rep pushes it. Second, substantially different
commissions between product lines may lead reps to ignore the firm's "tried and true" product line or,
worse yet, actively discourage sales of low commission items and encourage customers to devote
limited dollars to highly commissioned products.
