Chapter–by–chapter aids: Chapter 19
CHAPTER 19: MANAGING MARKETING‘S LINK WITH OTHER
FUNCTIONAL AREAS
CHAPTER 19 – COMMENTS ON QUESTIONS AND PROBLEMS
19– 1. The various ways that a firm can raise money to support a new marketing plan – and the pros
and cons of each approach from the marketing manager’s point of view are discussed in
section “The Finance Function: Money to Implement Marketing Plans.” Some of the key points
are briefly reviewed below.
By contrast, individuals who buy bonds and others (like banks) who loan the firm money
are usually less inclined to take much risk. They want a certain return and/or they would
like to have some collateral in the event the firm doesn‘t pay. Usually lenders get a
higher interest rate if there appears to be higher risk. When interest rates are high, the
cost of borrowed money can be quite high, and ultimately this cost of capital must be
covered by the firm’s prices.
19– 2. Depending on the entrepreneur’s objectives it might or might not be a good idea. From a
positive perspective, the franchisees would provide the money (and take the risk) to build new
19– 3. Investors in a stock can earn a positive return (profit) in one of two ways. First, the stock can
pay a dividend, which is basically a partial distribution of profits to the firm’s owners. Secondly,
the value of the stock can increase. Third, an investor can get a combination of these two
outcomes. However, the value of stock is not likely to increase unless profits are increasing.
Thus, from an investor’s standpoint, it is not as good for a firm to continue to be profitable as it
would be for that profitability to increase.
19– 4. As noted in the text, banks tend to be conservative lenders – so the bank probably would not
loan the money. Lenders – especially banks – usually don’t want to take on too much risk and
if they do take a risk they want to have the rights to some collateral that could be sold if the
Part IV
once the money is spent on the advertising it’s gone. Even if the firm becomes successful it is
still largely because of the woman who set it up. The temporary people who work for her are
not really an “asset,” and there is not likely to be much in the way of valuable collateral for
some time.
19– 5. Some publishers are already doing what they like to call “custom publishing” – and students
may have seen examples in their classes. This approach can lead to some very interesting
and useful products that really are custom produced to meet specific users’ needs. At present,
however, there tend to be many problems, especially if there is supposed to be any integration
across the various “parts” of the custom whole. For example, if an instructor wants a publisher
to put together a book with a set of individual cases or readings, it may be more than adequate
to just reproduce them. On the other hand, simply selecting chapters from different texts
doesn’t provide any assurance that the chapters work together smoothly. Terms may be left
undefined, the structure may be confusing, or the style of writing may be very different. Things
like tables of contents and indices are usually missing.
19– 6. Student answers to this question will vary substantially. The discussion in section “Production
Must Be Coordinated with the Marketing Plan” provides a number of ideas about how
production capacity might influence a marketing manager’s choice of a marketing strategy.
While the specific examples that students give may vary, that is consistent with the purpose of
19– 7. A small company’s flexibility may be either increased or decreased by turning to outside
suppliers to produce the products it sells. To the extent that the firm does not have a big
investment in facilities that must be used to earn a return, it is more flexible. For example, if a
new way of producing the product is developed or a new material becomes available, the firm
Chapter–by–chapter aids: Chapter 19
19– 8. A marketing manager’s sales forecast for a new marketing plan might be used by:
(a) a financial manager to determine how much revenue, cash, and profit the plan will produce
and to decide how much capital will be required, over what period of time, to pay various
expenses associated with the plan.
19– 9. Natural accounts are the categories to which various costs are charged in the normal financial
accounting cycle. These accounts include salaries, wages, Social Security, taxes, suppliers,
raw materials, advertising, and other. By contrast, functional accounts show the purpose for
which expenditures are made. Factory functional accounts include milling, grinding,
maintenance, and so on. Marketing functional accounts include the costs of marketing
activities such as shipping, handling, advertising, personal selling, etc. By assigning costs to
functional accounts, a marketing manager is better able to estimate the costs and/or
profitability of specific customers, products, territories, or other categories.
19–10. The approaches to cost allocation that we discussed in this chapter most definitely can apply to
a firm that produces only services. In fact, in service firms the allocation of costs is usually
simpler because it can be based on the amount of time that the service providers spend on a
given focus (customer, product, etc.).
CHAPTER 19 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
Case 12: DrJane.com—Custom Vitamins
This case can be used to discuss cross–functional issues. Questions may be raised about the
appropriateness of Prince Zimbalist as manager of customer service. This can prompt a discussion of the
importance of human resource management in making sure that the right personnel are hired and trained.
In addition, the quality of the service delivered by DrJane.com has been highly reliant on the company’s
Part IV
IV–19-4 Perreault, Cannon, & McCarthy
Case 17: Simply Pure H2O4U
Case 22: Bright Light Innovations
Case 35: Rizzuto’s Pizzeria
This case provides the opportunity to discuss how the information about costs and capacity can be
treated as inputs to the strategy decisions. See case discussion in Part V.
Video Case 6: Big Brothers and Big Sisters of America
The Invacare Corporation produces home medical equipment for the domestic market as well as select
CHAPTER 19 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: Most banks grade their customers based on their assets, past banking behavior, and other
personal information to decide how important or profitable the customers are. Bank employees use these
grades in responding to a customer. For example, if a customer is charged a $25 fee for paying a credit
card bill one day late and calls to request that the fee be waived, the customer service agent would
immediately waive the fee for an A customer, firmly tell the C customer that the fee is a bank policy, and
thoughtfully decide how to respond for the B customer. Similarly, the bank would assign an A customer a
customer service phone number that is answered immediately by a capable rep, while the C customer
would get a number where it’s possible to wait on hold for several minutes—or longer. What do you think
about banks segmenting customers based on profitability? Is this fair? Why or why not?
Chapter–by–chapter aids: Chapter 19
allows customers who pay more to cut to the front of long lines for popular rides? These alternative
scenarios may raise more debate – and help address the question of what is fair and how that relates to
what is ethical.
CHAPTER 19 – 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. Think about the entire marketing plan—since you have been reviewing this all along.
While there are not separate departments in a small business, there are different functions.
a. How can Hillside fund future growth plans?
b. Can Hillside calculate the profitability of individual customers? Should it try?
c. Has Hillside accounted for the local labor market in its growth plans?
Calculating the costs of individual customers requires that an organization accurately track the revenues
and costs of each customer. The database proposed in the marketing plan may be helpful in
accomplishing this. On the other hand, it may be difficult to assign actual costs by customer. And with a
large number of customers, the costs of this exercise may not justify the benefits. Such an approach
might work well for very large customers.
IV–19-6 Perreault, Cannon, & McCarthy
Chapter–by–chapter aids: Chapter 20
CHAPTER 20: ETHICAL MARKETING IN A CONSUMER–
ORIENTED WORLD: APPRAISAL AND CHALLENGES
CHAPTER 20 – COMMENTS ON QUESTIONS AND PROBLEMS
20– 1. This is basically a review question. See section “How Should Marketing Be Evaluated?” It is
20– 2. Basically, most economic systems are seeking to satisfy their members – although some are
willing to put off immediate satisfaction for long–run satisfaction. Possible exceptions are
military dictatorships, or colonial or imperialistic economies that are attempting to achieve
objectives held by the military or other leaders. Achieving their objectives may preclude ever
doing very much for consumers. Generally speaking, the objective of the American economic
system is to satisfy consumers – although there are many interests vying for the use of current
resources. Generally, we feel that individual consumers should help guide the direction of the
economy, but we have provided for some exceptions. The last question in this group is the
most crucial, as it forces the students to decide who should be controlled by the sociologists or
public officials. Some sociologists or public officials feel that everyone should be controlled –
except themselves, of course.
20– 3. This is a difficult question, but it provides an opportunity to present an argument for something
other than consumer satisfaction. Alternate objectives include: maximize production for
distribution to underdeveloped countries (global consumer satisfaction), development of
military might, world conquest, and improve technology and expand the capital products base
in preparation for other objectives.
20– 4. There is conflict because of the way some businesses are organized. Very frequently (in
smaller businesses) there is no such conflict, as the boss makes all the major decisions and he
knows which way he wants to go. When businesses get very large, however, the objectives
20– 5. See Question 20–4 and section “Micro–Marketing Often Does Cost Too Much.”
20– 6. Officially granting monopolies may be going too far – as it could lead to a static economy.
There would be relatively little incentive for innovation. The same is true in a purely
competitive economy, however. Some competition is necessary to encourage innovation – but
then the successful innovator (not all innovations are successes) must be allowed to reap
some fruits to encourage others to do likewise.
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IV–20-2 Perreault, Cannon, & McCarthy
Allowing some industries to become monopolized may not be too inhibiting if little innovation
seems likely and substantial gains are available from elimination of duplication of effort or
facilities – as with public utilities. But, in general, it probably would not be desirable to grant
20– 7. Any time there is an official grant of a monopoly from some administrative agency, it is likely
that the choice will be based upon favoritism or some noneconomic criteria. This will lead to
shifting of income to those favored. The effect on the economy of these grants will depend
upon the price policies followed by the various monopolies. If prices are set very high, too few
products may be allocated to that particular industry – perhaps to the detriment of consumers.
Further, if the firms are allowed monopoly profits without the offsetting tendency of attracting
new firms to enter, then the monopolists may continue to enjoy their favored position – but with
a subsequent contraction of the level of income, and employment.
If a monopoly develops just by winning out in the marketplace, then there is no assurance that
the firm will be able to hold its place – unless it continues to offer a satisfactory product at a
reasonable price. Economies of scale might make such a monopoly desirable, because it
might be in the producer‘s interest to maintain a low price to maximize profits. Such a market
opportunity to invade the market and better satisfy consumers.
20– 8. Consumers have a great deal to do with the high cost of marketing – but inefficient
management makes its contribution too.
20– 9. A marketing strategy consists of a target market and the associated marketing mix. Marketing
20–10. See section “How Far Should the Marketing Concept Go?” In our society, we generally decide
20–11. This is a very difficult question which probably should only be attempted with mature students
– unless the instructor expects to carry the bulk of the discussion. Most students have some
Chapter–by–chapter aids: Chapter 20
feelings on the matter, but relatively little “fiscal sense” about the impact on a firm’s profit and
loss statement. So, their answers tend to be “gut reactions” based on feelings and opinions
which may be related to their family upbringing or business experience – or more likely, the
most recent “consciousness–raising” instructor they have encountered. By careful probing of
20–12. Not offering a product reduces consumers’ freedom of choice – while offering a safer product
may actually increase their freedom of choice, unless it is required on all such products by
government action or collusion among producers. In the first case, the firm may be giving up a
profit by not offering the product – and in the second case, it is probably giving up profit by
offering the product. So, in either case, it is not an attractive choice from a micro point of view.
Different principles are involved here. In the first case, the firm is narrowing choice by
imposing its own judgment on what should be offered. In the second case, it is expanding
choice while narrowing the size of its potential market (assuming there are other competitors
who are not going to follow its lead).
Some firms have found “socially responsible” actions that do not contain the micro–macro
dilemma. For example, more careful analysis of consumers’ needs may show that adding new
products to expand consumer choice will not only satisfy more consumers, but also will
increase the firm‘s profits. Or, more attention to quality control might increase cost slightly, but
so improve consumers’ attitudes toward the product that demand for the firm’s products may
actually increase. These kinds of moves are clearly desirable, but they are also just
20–13. The various changes and trends summarized in Exhibit 20-5 are discussed throughout the text.
The objective of this question – at this point in the course – is to stimulate students to review
the items on the list and discuss one that is important in the local market. This is a very good
20-14. The answer will obviously vary from community to community – depending upon how
dependent each one is on continued economic growth. Some businesses (for example,
medical services and higher education) may continue to grow as people age and there is a
growing recognition of the need for higher education. Capital products producers, on the other
CHAPTER 20 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS
CHAPTER
At this point in the course, any of the cases may be used. However, the cases listed below provide
especially good opportunities for integrative discussion and review of key concepts covered throughout
the course. See the individual case discussions in Part V.
Case 17: Simply Pure H2O4U
This is a good case for students to practice evaluating a current marketing strategy and to demonstrate
some creativity in developing a plan for where the firm should go. It is a very good wrap–up case for the
end of the course because it is really highlights the fact that all of the elements of the marketing strategy
Case 22: Bright Light Innovations
This case can be used to illustrate a wide range of strategy issues. See the case comments in Part V for
more guidance on discussing the key elements of marketing planning.
Instructor’s Manual to Accompany Essentials of Marketing IV–20-5
Case 27: Advanced Molding, Inc.
This case can be used for tying all of the materials in the text together. See case discussion.
Case 28: KCA Precision Tools
Case 30: Walker–Winkle Mills
This international case brings together segmentation, targeting, and strategy planning issues.
Case 31: Amato Home Health
Case 32: Lever, Ltd.
Case 34: Chess Aluminum Worldwide
This case can be used here to discuss issues related to strategy planning for international markets. The
company is currently using very different approaches – and achieving quite different levels of success – in
different markets. The case can be used to highlight some of the difficulties of developing “global
strategies” – while at the same time making it clear that the strategy (or strategies) actually used must be
well planned and executed if they are to be successful. See case discussion in Part V.
Video Case 4: Potbelly Sandwich
This video summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along the 4Ps and
features interview footage with Bryant Keil, Chairman and CEO of the company. Chicago–based Potbelly
Video Case 6: Big Brothers and Big Sisters of America
The video explores the processes by which Big Brothers Big Sisters of America (BBBSA) developed and
implemented its strategic marketing planning process. For more than a century Big Brothers and Big
Part IV
IV–20-6 Perreault, Cannon, & McCarthy
CHAPTER 20 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: Your firm has a new strategy that will make its established product obsolete. However, it will
take a year before you are ready to implement the new strategy. If you announce your plan in advance,
profits will disappear because many customers and intermediaries will delay purchases until the new
product is released. If you don’t announce the new plan, customers and intermediaries will continue to
buy the established product as their needs dictate, but some will be stuck owning the inferior product and
won’t do business with you again in the future. How would you decide what to do?
Once such a discussion comes to the forefront, the entire marketing mix can be reexamined for ways to
adapt the strategy to minimize these concerns. For example, offering some sort of “trade–in” program that
allows customers to trade in the older product for a discount on the new product. The firm might also
CHAPTER 20 – 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. Review the entire marketing plan.
a. How do the pieces fit together?
b. Does the marketing strategy logically follow from the target market dimensions?
c. Does the marketing strategy logically follow from the differentiation and positioning?
d. Does the plan appear reasonable given the stated objectives?
CHAPTER 20 – SUMMARY OF CONNECT HOMEWORK EXERCISES
Exercise 20.1: Hooters, Inc.: A Macro–Marketing Evaluation
Question Type: Comprehension case
Chapter–by–chapter aids: Chapter 20
Exercise 20.2: The Marketing Mix Revisited
Question Type: Drag–and–drop
Exercise 20.3: The Marketing Plan: Structure and Design
Question Type: Drag–and–drop
Learning Objectives: 20-5
Topic: The Marketing Plan Brings All the Details Together
AACSB: Reflective thinking
Bloom’s: Understand, apply
CHAPTER 20 – “CASE-STYLE” INTEGRATIVE CROSS-CHAPTER TEST
QUESTIONS
We have found that many instructors like to provide an integrative final exam – requiring students to
recognize and apply the marketing concepts from across the first marketing course. To address these
needs, we have created a series of “case–style” questions that integrate material across chapters. In this
section you will find five different “case–style” scenarios. Following each scenario, you will find 7–10
multiple–choice questions. These questions ask students to identify concepts from across the textbook.
A. Jewel Craft, Inc.
Use the following information to answer questions that refer to the Jewel Craft case.
Jewel Craft, Inc. is a leading producer in the United States women’s costume jewelry and accessories
market. Its brands are well known and are sold by department stores and better women’s stores. Several
stores in a city may carry Jewel Craft’s brands because most of Jewel Craft’s customers will not consider
any other brand.
IV–20-8 Perreault, Cannon, & McCarthy
A-1. Given the information in the Jewel Craft case, jewelry and accessories would be in which product
class?
A) Homogeneous shopping product
B) Staple product
C) Convenience product
D) Impulse product
E) Specialty product
A-2. In the Jewel Craft case, Gemco, Inc. is a:
A) commission merchant.
B) selling agent.
C) manufacturers’ agent.
D) merchant wholesaler.
E) manufacturer’s sales branch.
A-3. Jewel Craft’s distribution policy—at the wholesale level—is:
A) selective distribution.
B) direct distribution.
C) exclusive distribution.
D) intensive distribution.
E) for the wholesaler to be the channel captain.
Chapter–by–chapter aids: Chapter 20
A-4. Jewel Craft’s distribution policy—at the retail level—seems to be:
A) direct distribution.
B) exclusive distribution.
C) intensive distribution.
D) selective distribution.
A-5. A sales invoice sent by Jewel Craft to Gemco is MOST LIKELY to include the following item:
A) F.O.B. buyer’s warehouse.
B) F.O.B. seller’s factory—freight prepaid.
C) F.O.B. seller‘s factory.
D) F.O.B. delivered.
A-6. When selling Jewel Craft’s jewelry and accessories, a retail clerk’s major role usually would be:
A) missionary selling.
B) supporting selling.
C) retailing.
D) order taking.
E) order getting.
A-7. The degree of brand familiarity for Jewel Craft products—among its present consumer buyers—is:
A) no brand recognition.
B) brand insistence.
C) brand preference.
D) brand rejection.
E) brand recognition.
IV–20–10 Perreault, Cannon, & McCarthy
A-8. Jewel Craft’s selling price for an item which retails for $10 would be:
A) $5.20.
B) $7.00.
C) $8.00.
D) $6.00.
E) $4.80.
A-9. If Jewel Craft adds the watch line, which federal law might be most directly violated if it carries out its
plan to require intermediaries to handle BOTH the watches and the jewelry?
A) Robinson–Patman Act
B) Clayton Act
C) Sherman Act
D) Wheeler–Lea Amendment
E) Magnuson–Moss Act
B. Conservo Products, Inc.
Use this information to answer the following questions that refer to the CPI case.
Conservo Products, Inc. (CPI), with annual sales of $200 million, is a well–known producer of a variety of
paper products, almost all of which are made from recycled materials. Picnic plates account for about 70
percent of CPI’s sales. The rest of the firm’s sales come from custom–designed materials—such as box
liners and spacers, small boxes, and disposable products—like trays, towels and napkins.
Chapter–by–chapter aids: Chapter 20
The picnic plates are priced to give CPI a 90 percent markup on the cost of producing the product—with
the cost figured by taking the total factory cost for the previous year and dividing that total cost by the
number of units produced and sold during that period. The firm’s invoices read “F.O.B.—Delivered” and
“1/10, net 30.” Customers are allowed to deduct 3 percent from the face value of the invoice for buying
plates in carload quantities, and another 2 percent for advertising them locally.
B-1. CPI’s product line includes:
A) only convenience products.
B) impulse products and natural products.
C) specialty products and supplies.
D) shopping products and raw materials.
E) staple products and component parts.
B-2. CPI’s picnic plates seem to be in the ______________ stage of the product life cycle.
A) market maturity
B) market growth
C) market introduction
D) sales decline
B-3. For the picnic plates, CPI seems to be facing:
A) monopolistic competition approaching pure competition.
B) a pure monopoly situation.
C) pure competition.
D) monopolistic competition approaching pure monopoly.
E) an oligopoly situation.
IV–20–12 Perreault, Cannon, & McCarthy
B-4. CPI uses:
A) a direct–to–customer channel system for all its products.
B) dual distribution.
C) an indirect channel system for all its products.
D) a direct–to–customer channel system for the plates and an indirect channel system for the custom
products.
E) an indirect channel system for the plates and a direct–to–customer channel system for the custom
products.
B-5. The “sales reps” who sell CPI’s plates are:
A) manufacturers’ agents.
B) limited–function wholesalers.
C) the firm’s own order takers.
D) selling agents.
E) merchant wholesalers.
B-6. For its plates, CPI uses ______________ pricing.
A) flexible
B) demand–oriented
C) target return
D) average–cost
E) penetration
B-7. CPI offers the grocery wholesalers and retail chains:
A) cumulative quantity discounts.
Chapter–by–chapter aids: Chapter 20
B) cash discounts for paying their bills quickly.
C) P.M.‘s
D) advertising allowances.
E) All of these alternatives are correct.
B-8. Regarding shipping costs in the CPI case:
A) CPI pays the shipping costs for the plates, while its customers pay the shipping costs for the custom
products.
B) CPI uses freight–absorption pricing.
C) all of CPI’s customers take title to the products at the point of loading and pay all shipping costs
themselves.
D) CPI pays the shipping costs for all its customers—keeping title to the products until delivery.
E) CPI uses zone pricing.
B-9. For the custom products, CPI uses ______________ pricing.
A) demand–backward
B) penetration
C) average–cost
D) target–return
E) bid
B-10. CPI’s sales forecasts for picnic plates are not likely to be achieved unless the firm can improve its:
A) pioneering advertising.
B) paper coating machines.
C) below–average product quality.
D) customer service level.
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IV–20–14 Perreault, Cannon, & McCarthy
E) above–the–market prices.
C. Sure Foot, Ltd.
Use this following information to answer the following questions that refer to the Sure Foot case.
Sure Foot, Ltd. produces high–quality shoes and boots for serious hikers.
The walking shoe market is supplied by 7 large firms and 50 or more smaller firms. While these firms are
competitive, they do vary their materials, styles, prices, and promotion. The “high–quality” market is
supplied by only 5 firms—Sure Foot being the largest. While these firms are also competitive, they
generally offer a more limited assortment of materials, styles, and prices because the “high–quality” part of
the market is not as large—and does not appear to be growing any more.
C-1. How are Sure Foot’s shoes seen by most of its target market?
A) Impulse products
B) Staple products
C) Heterogeneous shopping products
D) Homogeneous shopping products
E) Specialty products
C-2. Assuming that Sure Foot wants to be in only the “better” stores—and mainly in large metropolitan
areas—it seems to be seeking:
A) selective distribution.
B) exclusive distribution.
C) intensive distribution.