Exam 21: Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

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 comes from custom-designed materials--such as box liners and spacers, small boxes, and disposable products--like trays, towels and napkins. CPI's picnic plates are sold through "sales reps" to grocery wholesalers and retail grocery chains. The sales reps are paid a 5 percent commission on all sales in their assigned territories. They usually handle related--but noncompeting--lines for several other manufacturers. Along with their selling duties, the sales reps help CPI with local advertising and sales promotion efforts. Orders for the custom products are obtained by area managers who are paid a straight salary to call on business and institutional customers. The area managers are trained paper specialists and often help their customers design the products they order. 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. The custom products are sold "F.O.B. mill"--with CPI offering a price for each job. Competition is strong from many other manufacturers who are able to offer very similar products which meet the customers' specifications. CPI forecasts that sales will increase to $250 million by 1999. However, much of this growth is tied to picnic plates--a market in which the firm has about a 7 percent market share and faces aggressive price competition from many smaller firms with greater brand familiarity. Further, CPI has been late with more than 50 percent of its plate orders due to scheduling conflicts with orders for custom products. -Regarding shipping costs in the CPI case:

The future poses many challenges for marketing managers because:

Which of the following is NOT a current trend affecting marketing strategy planning?

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. Jewel Craft's sales force calls on one wholesaler in each state. Gemco, Inc., of Boston, Massachusetts, is the Jewel Craft distributor in that state. Gemco stocks and sells women's accessories (noncompeting lines) for several manufacturers like Jewel Craft. Wholesalers are allowed a 20 percent markup by Jewel Craft--but pay the freight charges to their warehouses. Jewel Craft's policy of using one wholesaler per state comes from its desire to control its distribution. Jewel Craft uses national magazine advertising and also supports a cooperative ad program with retailers. Jewel Craft's prices allow for a 40 percent retail markup--an attractive percent when one considers that Jewel Craft's products require little in-store selling because of their well-established reputation. Recently, Jewel Craft was approached by a watch producer with the idea of expanding to watches under the Jewel Craft name. It was argued that although national watch sales have leveled off, Jewel Craft could enjoy growing sales for several years because of the fine reputation the company has achieved. If watches are added, Jewel Craft will use its present policies regarding distribution, pricing, and advertising. Further, it will offer the wholesalers and retailers an attractive "package" deal as an incentive to carry Jewel Craft watches. Intermediaries will be required to carry the watches if they wish to handle the jewelry and accessories. -Jewel Craft's selling price for an item which retails for $10 would be:

Using total quality management to implement marketing plans is one way to improve a marketing mix.

Which of the following statements about future trends in marketing is True?

Many important changes are affecting marketing strategy planning. For example, the introduction and growing use of smart phones is illustrative of changes in the area of:

As a product moves through its product life cycle stages:

A S.W.O.T. analysis can help a marketing manager:

As consumers shift their support to firms that do meet their needs,

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 basis. There are no other producers of the smaller pumps in the United States--because PSI has patent protection. As a result of this, management has decided to follow a policy of pricing high--to maximize profits--while the patent lasts. Several competitors are in the market for the larger pumps. Industry prices and profits of these pumps have dropped in the past few years as a result of firms trying to increase their market shares. The product design has remained fairly stable over the last few years--and one firm dropped out as it saw that it would lose more money with its "me-too" product. Industry sales are increasing--but at a very slow rate. The price of these products is determined by adding a standard markup percentage to the variable cost of the items--to cover fixed costs and profit. For instance, pump Z has variable costs of $250 per unit, and a markup of 40 percent of this cost is added to the $250 to get its selling price. Management has estimated that fixed costs applicable to this product are $200,000 per year. PSI publishes a product catalog which is revised annually. Also, it exhibits in most trade shows. PSI follows a policy of charging the same price to all customers--so all will have the same costs at their own plants. All purchases are shipped directly from PSI's factory to its customers--and title passes at PSI's factory. -What is the contribution to fixed cost and profit of PSI's pump Z?

In the United States, the basic objective of our market-directed economic system has been to satisfy consumer needs as they, the consumers, see them.

When evaluating marketing, it is best to evaluate micro-marketing and macro-marketing separately.

Consumer satisfaction:

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 form $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. EI sells nationally through independent sales reps--paid on commission--who work in the large industrial centers across the country. EI is more concerned with the quality of these reps than with the number of them. All of them also sell other lines. EI also uses five full-time salaried salespeople who work out of its corporate headquarters under a sales manager. The home office salespeople are "technical specialists" who sell almost all the networking equipment, while the "reps" mostly sell the semiconductors. Sometimes, however, the reps will send in leads to customers who want networking equipment. EI also sells some of its semiconductors through a Los Angeles wholesaler who carries stock for West Coast customers. There are many producers and importers of semiconductors in the U.S.--but several firms have captured large shares of the networking equipment market. EI has held its own, and in fact, over the past five years has increased its market share of these products to over 25 percent--because of its better technical designs. Industry-wide prices of the more or less homogeneous semiconductors have been forced further and further down over the last seven years--as have industry profits. The price of networking equipment is set by adding a standard markup percent to the direct cost of the items--for overhead and for profit. Following industry practice, all prices are quoted at the seller's factory. EI publishes a catalog which is revised periodically. And it exhibits in most equipment trade shows. -What kind of products are EI's networking equipment?

Micro-marketing may cost too much because:

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 comes from custom-designed materials--such as box liners and spacers, small boxes, and disposable products--like trays, towels and napkins. CPI's picnic plates are sold through "sales reps" to grocery wholesalers and retail grocery chains. The sales reps are paid a 5 percent commission on all sales in their assigned territories. They usually handle related--but noncompeting--lines for several other manufacturers. Along with their selling duties, the sales reps help CPI with local advertising and sales promotion efforts. Orders for the custom products are obtained by area managers who are paid a straight salary to call on business and institutional customers. The area managers are trained paper specialists and often help their customers design the products they order. 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. The custom products are sold "F.O.B. mill"--with CPI offering a price for each job. Competition is strong from many other manufacturers who are able to offer very similar products which meet the customers' specifications. CPI forecasts that sales will increase to $250 million by 1999. However, much of this growth is tied to picnic plates--a market in which the firm has about a 7 percent market share and faces aggressive price competition from many smaller firms with greater brand familiarity. Further, CPI has been late with more than 50 percent of its plate orders due to scheduling conflicts with orders for custom products. -For the custom products, CPI uses ______________ pricing.

The monopolistic competition that is typical of the U.S. economy

Which of the following is NOT a trend affecting marketing strategy planning in the area of Sales Promotion?

A marketing plan should be developed for a: