Chapter–by–chapter aids: Chapter 20
C-3. Sure Foot’s “field reps” are:
A) selling agents.
B) missionary salespeople.
C) brokers.
D) manufacturers’ agents.
E) merchant wholesalers.
C-4. In the Sure Foot case, the nature of competition in the hiking shoe market is:
A) monopolistic competition
B) monopoly
C) oligopoly
D) pure competition
E) None of these is a good answer.
C-5. Sure Foot’s geographic terms are probably:
A) F.O.B. freight allowed.
B) F.O.B. buyer’s factory.
C) F.O.B. shipping point.
D) F.O.B. delivered.
E) None of these—Sure Foot uses zone pricing.
IV–20–16 Perreault, Cannon, & McCarthy
C-6. “Credit terms” of 2/10, net 30 mean that Sure Foot is offering customers a:
A) functional discount.
B) quantity discount.
C) seasonal discount.
D) cash discount.
E) cooperative advertising allowance.
C-7. Sure Foot is probably in what stage of the product life cycle in the “high quality” market?
A) Market maturity
B) Market growth
C) Market introduction
D) Sales decline
D. Electech, Inc.
Use this information to answer the following questions that refer to the EI (Electech Inc.) case.
Electech, Inc. (EI) produces a line of semiconductors for electronics products manufacturers. These items
range in price from $5–$100 and are used in products the buyer is producing. EI also designs and builds
computer networking equipment. The prices of these items range from $5,000 to $100,000. These are
used to control production equipment. Usually, they are custom–made to the specifications of the buyer—
the firm which will use the product in its own production process.
Chapter–by–chapter aids: Chapter 20
D-1. What kind of products are EI’s semiconductors FOR MOST CUSTOMERS?
A) Supplies
B) Installations
C) Component parts
D) Accessory equipment
E) Raw materials
D-2. What kind of products are EI’s networking equipment?
A) Component parts
B) Accessory equipment
C) Installations
D) Raw materials
E) Supplies
D-3. EI’s independent sales reps are:
A) selling agents.
B) rack jobbers.
C) specialty wholesalers.
D) manufacturers’ agents.
E) desk jobbers.
D-4. What kind of distribution is EI seeking for its networking equipment?
A) Direct distribution
Part IV
B) Exclusive distribution
C) Selective distribution
D) Intensive distribution
D-5. In the EI case, what is the nature of competition for networking equipment?
A) Monopoly
B) Monopolistic competition
C) Pure competition
D) Oligopoly
D-6. What promotion method is EI using when it publishes catalogs, and exhibits in trade shows?
A) Sales promotion
B) Publicity
C) Advertising
D) Personal Selling
D-7. EI’s geographic terms are probably:
A) F.O.B. delivered.
B) F.O.B. buyer’s factory.
C) F.O.B. freight allowed.
D) F.O.B. mill.
E) F.O.B. basing point.
Chapter–by–chapter aids: Chapter 20
D-8. In the EI case, which stage of the product life cycle do semiconductors appear to be?
A) Market maturity
B) Sales decline
C) Market introduction
D) Market growth
E. Pump Systems, Inc.
Use this information to answer the following questions that refer to the PSI case.
Pump Systems, Inc. (PSI) produces two major kinds of water pumps. The smaller pumps range in price
from $5–$30, and are used in drinking fountains and soft–drink machines. Most of these pumps are bought
by manufacturers of these machines and built into their product. PSI also builds larger pumps used in
swimming pools and reservoirs. The prices of these items range from $250–$500. These are usually
purchased by contractors who build the pools and reservoirs.
PSI sells nationally through sales reps located in the large industrial centers. These reps handle the
selling function for PSI in their geographic areas and provide market information. They usually do the
same thing for 10 to 20 similar manufacturers of noncompeting products—and are paid on a commission
E-1. What kind of products are PSI’s small pumps to most customers?
A) Supplies
B) Component parts
C) Raw materials
D) Accessory equipment
E) Installations
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E-2. In the PSI case, what kind of products are the small pumps for customers who use them to replace
worn pumps in their own machines?
A) Component parts
B) Raw materials
C) Accessory equipment
D) Installations
E) Supplies
E-3. PSI’s sales reps are:
A) selling agents.
B) company salespeople.
C) full–line merchant wholesalers.
D) rack jobbers.
E) manufacturers’ agents.
E-4. What pricing policy does PSI use for its small pumps?
A) Skimming pricing
B) Price lining
C) Target return pricing
D) Prestige pricing
E) Penetration pricing
E-5. What stage in the product life cycle do PSI’s large pumps seem to be in?
A) Market maturity
Chapter–by–chapter aids: Chapter 20
B) Sales decline
C) Market introduction
D) Market growth
E-6. What is the contribution to fixed cost and profit of PSI’s pump Z?
A) $100 per unit
B) $75 per unit
C) $50 per unit
D) $25,000
E) Cannot be determined unless you know the sales volume.
E-7. In the PSI case, what is the break–even point for pump Z IN DOLLARS?
A) $200,000
B) $100,000
C) $2,000,000
D) $700,000
E) $500,000
E-8. What kind of promotion is PSI using when it publishes catalogs and exhibits in trade shows?
A) Advertising
B) Publicity
C) Sales promotion
D) Personal selling
IV–20–22 Perreault, Cannon, & McCarthy
Chapter–by–chapter aids: Appendix A
APPENDIX A: ECONOMICS FUNDAMENTALS
APPENDIX A – COMMENTS ON QUESTIONS AND PROBLEMS
A- 1. The key here is that economists see individuals choosing among alternatives and if the price of
A- 2. It is a “picture” of a demand schedule. And this is downsloping for the reasons explained in
Question 1.
Some prestige or status–oriented products – like jewelry or French perfume – might not have a
A- 3. See section “Products and Markets as Seen by Customers and Potential Customers.” We
often talk about the annual demand for automobiles or wheat, but short–run demand curves
might be relevant also – especially for operational decisions. In the automobile market, for
A- 4. To the extent that men have substitutes for dress shoes, the dress shoe market would be more
elastic than the general shoe market. However, if they have entirely different attitudes when
buying dress shoes, perhaps being more interested in style, color, etc.; then their demands for
particular kinds of shoes might be more inelastic because they do not see that all of the
different shoes are substitutes. The same ideas would apply to women’s shoes. Demand
might be quite inelastic, within reasonable price brackets anyway, if some manufacturers
offered a distinctly different design or color. This is one reason that so much time and effort is
spent trying to develop unique new products that have no direct substitutes.
A- 7. Inelastic demand and supply are caused by different factors and therefore there is no reason
why they should be found together in the same situation. Customers’ attitudes and the
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IV-A-2 Perreault, Cannon, & McCarthy
A- 8. The question relates to the discussion of substitutes in section “Products and Markets as Seen
by Customers and Potential Customers.” The text highlights the fact that elasticity of demand
for a product might depend on the availability of substitutes – products that offer the buyer a
choice. A marketing manager would usually prefer to offer a product that does not have close
A- 9. The market’s dimensions become important here. There may be little competition. Similar
prices might result from using the same cost–plus pricing procedures. It could be argued that
many small food retailers are outstanding examples of monopolists. They have a following of
consumers who for the most part do no shopping elsewhere and have little knowledge of
prices and selection in other stores. Further, these consumers might have no interest or desire
to search out alternate sources of supply. Thus, the conditions for pure competition are not
met. Examples of pure competition are very difficult to find in the real world. They are
summarized below for the instructor‘s convenience:
A- 10. Pure competition examples are not easy to come by. Even the (commodity) grain products
sold in central markets like Minneapolis and Kansas City can be thought of as different
“products.” But the conditions of pure competition come closest to being met in such large
centralized public markets. Any kinds of products could be listed for the monopolistic
competition examples.
Chapter–by–chapter aids: Appendix A
competitor. In the real world, most firms do attempt to differentiate their offering somewhat,
and so it is much easier to find examples of monopolistic competition. But where the
competing executives really do not have any confidence that they have successfully
DISCUSSION OF COMPUTER-AIDED PROBLEM FOR USE WITH APPENDIX A
There is not a computer–aided problem specifically for this appendix. However, Computer–Aided Problem
3 (see the discussion in the notes for Chapter 3) works well with the discussion of competition in this
appendix.
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Chapter–by–chapter aids: Appendix B
APPENDIX B: MARKETING ARITHMETIC
APPENDIX B – COMMENTS ON QUESTIONS AND PROBLEMS
B- 1. a. Net sales plus returns and allowances equal gross sales.
b. Purchases at billed cost, plus transportation, less discounts, equal purchases at net cost.
B- 2. Gross margin and gross profit are the same. Net profit occurs after subtraction of all expenses.
B- 3. Markups usually exceed gross margin because some markdowns must be expected. Markdowns
do not appear on operating statements.
B- 4
Gross sales
$1,300,000
Less: Sales returns and allowances
250,000
Net sales
$1,050,000
Cost of sales:
Beginning inventory at cost
Purchases at billed cost
Plus: Freight–in
Net cost of delivered purchases
410,000
Less: Ending inventory at cost
250,000
Cost of sales
310,000
Gross margin
Rent
Salaries
400,000
Heat and light
180,000
640,000
Net Profit
B- 5
Gross sales
$6,150,000
102.5%
Returns and allowances
150,000
2.5
Net sales
$6,000,000
100.0
Cost of sales:
Beginning inventory
Purchases
Transportation
Cost of goods available for sale
Closing inventory
Cost of sales
Net Profit
5.0
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B- 6
Gross sales
$400,000
Less: Returns
$ 32,000
Allowances
48,000
80,000
Net Sales
$320,000
a. $320,000
b.
B- 9. The general manager of a department store might use markdown ratios to evaluate the efficiency
of various departments in the store. A markdown is a retail price reduction that is required
because customers didn’t buy some item at the originally marked–up price. Refusal to buy
B-10. See section “Return on Investment (ROI) Reflects Asset Use.” The retailer would get the same
results with ROI and ROA because I and A are equal.
B-11. See section “Forecasting Target Market Potential and Sales.”
B-12. a. Level of national income, state of the economy, and stage of economic development
would all impact the general demand for computers. During bad economic times, for
example, firms are likely to cut costs and hold off on such purchases. The number of
people in certain income, occupational, and educational groups would impact demand.
Also, consumer demand is probably subject to seasonal fluctuations, with peaks before
Chapter–by–chapter aids: Appendix B
because this is a larger expenditure for many customers and might depend on the
availability of credit (at a reasonable cost).
B-13. The factor method of forecasting tries to forecast sales by finding a relationship between the
company’s sales and some other factor (or factors). For example, sales lumber, brick and
other materials used in residential construction are often related to the interest rate for home
mortgages. Also, see the discussion of the Sales & Marketing Management Survey of Buying
Power and related discussion in section “Forecasting Company and Product Sales by
Extending Past Behavior.”
B-14. Answering this question may be more difficult than it first appears. It does demonstrate ways
in which you can work with the secondary data available. And also that sometimes you may
need to manipulate a secondary data to obtain useful insights.
The population of the city of Boulder (97.1 thousand) is only 65.6% of the population of
It becomes clear that this sort of difference can be meaningful when we look at retail sales. In
contrast to the case with EBI, the total retail sales for Boulder ($2,147,663,000) are higher than
for Lakewood ($2,065,827,000), even though Boulder has the smaller population. When we
consider retail sales per capita (by dividing these figures for retail spending by the respective
populations of each city), we see that residents of Boulder spend significantly more
($22,118.05) on average than do residents of Lakewood ($13,958.29). Thus, taken in total, the
residents of Boulder spend more that those of Lakewood. BUT individuals are on average
spending 58% more. That big a difference might impact purchasing behavior for many different
products, but especially ones that rely on discretionary income.
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(b) Automobiles: Total automotive sales for Boulder ($447,464,000) are much lower than for
Lakewood ($567,796,000). However, on a per capita basis, Boulder residents are spending
more than Lakewood residents ($4,608.28 for Boulder and $3,836.46 for Lakewood). In fact,
we see that Boulder residents spend 20% more than Lakewood residents for autos.
(c) Furniture: If we look at furniture sales for the two cities, we can see that Boulder’s figure of
$117,520,000 is less than Lakewood’s figure of $124,879,000. But (as in our auto sales
DISCUSSION OF COMPUTER-AIDED PROBLEM FOR USE WITH APPENDIX B
There is not a computer–aided problem specifically for this appendix.
Instructor’s Manual to Accompany Basic Marketing V-1
Part V:
Comments on Cases in Basic Marketing
INTRODUCTION
This edition of Basic Marketing includes two different types of marketing cases: 8 video cases and 36
traditional cases (after Appendix C in the text). This part of the manual provides ideas and suggestions
for each of the 36 traditional cases. “Suggested cases” are listed at the end of each chapter in the text.
Traditional Cases
The 36 traditional cases vary in length, in whether or not they are based on a well known company, in the
amount of numerical information presented, in the type of marketing setting involved, etc. Some cases
have been retained from earlier editions of Basic Marketing because they have been popular with
instructors – popular because they are effective vehicles for case analysis and learning. It does not make
sense for instructors to have to constantly start over in their case preparation – and therefore not be able
Video Cases
All of the cases offer students the opportunity to evaluate marketing concepts at work in a variety of real–
world situations. However, the video cases add a multimedia dimension because we have produced a
special video segment to accompany each of the written cases.
V-2 Perreault, Cannon, & McCarthy
Because a complete discussion of each of the videos is provided in the separate Instructor’s Manual for
the Videos and Video Cases, we will not repeat all of that detail here. However, as an overview, the
video cases include:
1. Chick-fil-A: “Eat Mor Chikin” (Except on Sunday)
2. Bass Pro Shops (Outdoor World)
COMMENTS ON EACH OF THE TRADITIONAL CASES
Case 1: McDonald’s “Seniors” Restaurant
Lisa Aham‘s strategy is evolving – at least with respect to her senior citizen customers. She is
encouraging a friendlier “product” and her target customers are responding. As long as this strategy does
not conflict with her other “fast–food” strategies for other customers at other time periods, there seems to
be no problem. NOTE: Most of the seniors do leave by 11:30 am, before the noon crowd. Regarding the
bingo idea, “parties” are now allowed, so this could be considered as a “bingo party.” Bingo might cause
some seniors to stay longer, however, and, if the “seniors” come in greater numbers and/or stay longer
and begin to “crowd out” other target markets, then she may have to change her evolving senior citizen
strategy.
Case 2: Golden Valley Foods, Inc.
Golden Valley Foods is typical of the many production–oriented (volume–oriented) food processors who
can be characterized as “pea–packers.” Its production facilities can only be used for a short time each
year – when the crop is ripe – and so the natural focus is on producing as much as possible and then
“getting rid of it” later. When there are many similar producers, however, this leads them into almost pure
Comments on Cases in Basic Marketing
Foods becomes more market–oriented, it is likely that conditions will worsen because it appears that
several competitors are able to mount more profitable efforts, and so will have more money for promotion
or to absorb price competition. Some of its competitors’ better performance may be due to production
decisions (such as vertical integration). But it is also likely that some of it is due to focusing on more
profitable products – such as “gourmet” vegetables and frozen dinners or entrees with vegetables – while
Golden Valley Foods has been volume–oriented, hitting all of its major competitors head–on in the “mass
market for commodities.”
Case 3: NOCO United Soccer Academy
Many companies have difficulty making the transition from a successful small company with a few
employees to the next level. The case allows the instructor to discuss a variety of different topics
including: target market selection, customer equity, lifetime customer value, growth through acquiring
customers, retaining customers, and expanding business with current customers.
The case teaches easily as most students are familiar with sports marketing situations. In fact to get
students interested, the instructor might start the case by asking “How many of you participated in youth
sports?”
The second option targets all current customers and tries to grow by increasing their use of and spending
for soccer training. This may lead to a wide ranging discussion about what other needs these more
athletically–oriented kids have. But clearly there is a need to balance the kids’ soccer needs with NOCO
United’s strengths. While some students may bring up ideas like offering training in other sports, this is
not likely to appeal to Diekens or build on NOCO United’s strengths. This allows the instructor to point
out that the needs of both the company and its customers are important in determining a marketing
strategy. Still, there may be variations on Product. For example, off–season training might differ from in–
season training. Other options may include some sort of quantity discount price. For example, NOCO
United might offer discounts to people signing up for their third program in a given year. Students might
suggest other variations on the loyalty/rewards theme (loyalty cards, other types of quantity discounts).
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V-4 Perreault, Cannon, & McCarthy
The fourth growth opportunity focuses on acquiring customers – but in a new geographic location. “How
would the marketing mix need to be adapted to increase market penetration in nearby Loveland or
Greeley?” The obvious answer might be offering programs in these towns. But there is also the
challenge of building awareness. NOCO United might rely on word–of–mouth, but there are other
methods that might help to more quickly get people interested. “How would they identify their target
market?” “What would their message be?”
Case 4: Hometown Tech
Wendy Woo failed to develop a unique marketing strategy and instead decided to compete head–on with
a firmly entrenched competitor, Eric Steele. Eric is winning in this competition, and demand is probably
not sufficient to support both Wendy and Eric even if she gets a larger share of the business that he now
has. So far, she’s not even very successful in taking business away from him, in spite of the fact that she
Wendy has not been able to reach her sales objective of $60,000 a year, and without changes it is
unlikely that she will. Based on the facts in the case, Wendy is mainly getting business that Eric can’t
handle in a timely basis. Some of that business involves short–term emergencies and some of it relates
to the seasonal fluctuation in demand (that is a weakness in her Place decision). Petoskey is where she
wants to live, but the business (and strategy) she has chosen is heavily limited by the seasonal
population in this resort community, especially given her emphasis on residential customers (rather than
larger companies which might have more consistent needs over time). This is also a limitation of Eric’s
strategy—but she ignored that and just copied what he was doing!