Exam 18: Ethical Marketing in a Consumer-Oriented World: Appraisal and Challenges

Use this information to answer the following question 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 pricing policy does PSI use for its small pumps?

Which of the following statements about marketing's impact on the economy is False?

Good marketing managers put themselves in the customer's position.

The best way to improve the operation of our MACRO-marketing system--given the current objectives of our society--is:

A marketing manager who is willing to spend enough on persuasive promotion can usually get consumers to buy anything the company chooses to produce.

Use this information to answer the following question 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. PSI's sales reps are:

In the United States, the aim of the economic system has been to satisfy consumers' needs as they--the consumers--see them.

The future poses many challenges for marketing managers because:

There are many reasons for business failures including products that do not create value in the eyes of the customer, improperly identifying the target market, or lack of innovative thinking.

In the United States, the basic objective of the market-directed economic system has been:

According to your text, critics of advertising

Which of the following is NOT a trend affecting marketing strategy planning in the area of Channels and Logistics?

Use this following information to answer the following question that refer to the Sure Foot case. Sure Foot, Ltd. produces high-quality shoes and boots for serious hikers. Sure Foot's shoes have suggested retail prices ranging from just under $40 to about $150. Usually, the retailer buys the shoes for about 50 percent less than the list price, and the retailer pays the freight charges from Sure Foot's plant in Maine. Sure Foot's credit terms are 2/10, net 30. Although Sure Foot's brand appears on every shoe--the firm does very little mass selling, except for a limited program of cooperative advertising and some sales promotion at walking events. Sure Foot's shoes are carried by "better" sporting goods stores all across the nation--although usually in fairly small quantities. Its main showroom is in Boston, where two salaried salespeople handle most of the firm's large accounts. Sure Foot's products are also sold by seven independent "field reps" who are paid a 5 percent commission on all sales. Each of these field reps is responsible for a several state territory--emphasizing mostly the small stores in or near major cities. The field reps carry Sure Foot's products as a minor line--but none of their lines are competitive with each other. 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. "Credit terms" of 2/10, net 30 mean that Sure Foot is offering customers a:

Regarding our MACRO-marketing system:

A good business manager should adhere to the idea "if it ain't broke, don't fix it."

Regarding timing, a marketing plan:

Environmental problems pose a major hazard to society and they are a particular threat to many firms working in the environmental engineering and management industry.

Use this information to answer the following question 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. 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 2012. 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. CPI's picnic plates seem to be in the ______________ stage of the product life cycle.

Use this information to answer the following question 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. 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 2012. 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.

As a product moves through its product life cycle stages: