WHAT IS MANAGEMENT - McGraw Hill Educationnovella.mhhe.com/olc2/dl/572538/dias1_im_ch10_FINAL1.doc · Web viewDefine logistics and supply chain management. What is the difference?

10

MARKETING: PLACE AND PROMOTION

Other Teaching Tools 10.3

Video Notes 10.4

Brief Chapter Outline and Learning Goals 10.5

Lecture Outline and Lecture Notes 10.7

Career and Study Skills Notes 10.15

CAREER DEVELOPMENT: Make an Impression that Counts 10.15

STUDY SKILLS: The Importance of Study Partners 10.16

Lecture Links 10.17

LECTURE LINK 10-1 What Intermediaries to Use When Going 10.17International

LECTURE LINK 10-2 Utilities Created by Marketing 10.17

LECTURE LINK 10-3 When the Supply Chain Breaks 10.19

LECTURE LINK 10-4 Evaluating Modes of Transportation 10.20

LECTURE LINK 10-5 Wal-Mart to the Rescue 10.22

LECTURE LINK 10-6 The Cost of Violating the 10.22“Do Not Call” Registration Law

LECTURE LINK 10-7 Party On 10.24

LECTURE LINK 10-8 Measuring Web Traffic 10.24

LECTURE LINK 10-9 Desktop Distribution 10.25

LECTURE LINK 10-10 Promotional Bits 10.26

A. Effective Advertising: Celebrity Voice-Overs

B. Outdoor Advertising: Watch the Phone Booth

C. Creative Promotion: Wrap Your SUV

D. Advertising: Measuring the Television Audience in the Age of the DVR

E.Event Marketing: Times Square’s Appeal

F.Viral Marketing: The Subservient Chicken

10.1

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APT

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Bonus Internet Exercises 10.30

BONUS INTERNET EXERCISE 10-1 Careers in Distribution 10.30

BONUS INTERNET EXERCISE 10-2 Top 100 Retailers 10.31

BONUS INTERNET EXERCISE 10-3 Internet Auctions: Bypassing the 10.33Retailer

BONUS INTERNET EXERCISE 10-4 Advertising on Google 10.34

BONUS INTERNET EXERCISE 10-5 Ethics in Advertising 10.35

BONUS INTERNET EXERCISE 10-6 Protecting Competition and 10.36Consumers

Critical Thinking Exercises 10.37

CRITICAL THINKING EXERCISE 10-1 Distribution Channels 10.37

CRITICAL THINKING EXERCISE 10-2 Retail Distribution Strategy 10.38

CRITICAL THINKING EXERCISE 10-3 Designing a Website 10.39

CRITICAL THINKING EXERCISE 10-4 Advertising Appeals 10.41

CRITICAL THINKING EXERCISE 10-5 Identifying Product Placement 10.43

Bonus Cases 10.44

BONUS CASE 10-1 Multilevel Marketing 10.44

BONUS CASE 10-2 Greater Chicago Food Depository: Feeding the 10.46Poor of Chicago (Video Case)

BONUS CASE 10-3 Starting an Online Business 10.48

BONUS CASE 10-4 Wieden & Kennedy: Experimental Promotions 10.51

BONUS CASE 10-5 Night Agency (Video Case) 10.53

BONUS CASE 10-6 Guerrilla Marketing 10.55

10.2 INTRODUCTION TO BUSINESS: Instructor’s Resource Manual

OTHER TEACHING TOOLS

For a description of each of these valuable teaching tools, please see the Preface in this manual.

Student Learning ToolsStudent Online Learning Center (OLC) www.mhhe.com/diasbusinessStudent Study GuideSpanish Translation Glossary (OLC)Spanish Translation Quizzes (OLC)

Instructor Teaching ToolsAnnotated Instructor’s Resource ManualIRCD (Instructor’s Resource Manual, Test Bank, PowerPoints, EZtest)Asset Map Online Learning Center (OLC) www.mhhe.com/diasbusinessPageOutPowerPoint Presentations (on IRCD and OLC)Test Bank Business Videos on DVD Enhanced Cartridge optionSpanish Translation Glossary (OLC)

CHAPTER 10: Marketing: Place and Promotion 10.3

http://www.mhhe.com/diasbusiness

http://www.mhhe.com/diasbusiness

VIDEO NOTES

Twenty videos are available, geared to individual chapter topics. The teaching notes for these videos are also included in the Video Notes section of this Instructor’s Resource Manual, beginning on page V.1.

VIDEO 10: “Night Agency”

Night Agency is a marketing agency focusing on cutting-edge promotional tac-tics, such as viral marketing and product placement. The video shows how the agency uses promotions such as online interactive games to reach today’s technology-savvy cus-tomers.

(BONUS CASE 10-6, “Night Agency” on page 10.53 of this manual relates to this video.)

ALTERNATIVE: “Greater Chicago Food Depository: Feeding the Poor of Chicago”

The Greater Chicago Food Depository (GCFD) distributes more than 40 million pounds of food per year to outlets such as food pantries, soup kitchens, and churches. This video discusses the distribution channels GCFD uses and the importance of logis-tics.

(BONUS CASE 10-2, “Greater Chicago Food Depository: Feeding the Poor of Chicago” on page 10.46 of this manual relates to this video.)


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BRIEF CHAPTER OUTLINE AND LEARNING GOALS

CHAPTER 10

Marketing: Place and Promotion

I. INTRODUCTION TO PLACE AND PROMOTIONLEARNING OBJECTIVE 1Explain place and how it pertains to marketing.

II. THE 4Ps OF MARKETING: PLACEA. Merchant WholesalersB. Agents and BrokersC. Retail Intermediary

III. LOGISTICS AND TRANSPORTATIONLEARNING OBJECTIVE 2Describe logistics and different transportation modes.

IV. RETAILINGLEARNING OBJECTIVE 3Describe the types of retail competition and dis-tribution.

A. Method of Competition in Retailing1. Price Competition2. Service Competition3. Location Competition4. Selection Competition5. Entertainment Competition

B. Retail DistributionC. Other Types of Retailing

V. THE 4Ps OF MARKETING: PROMOTIONLEARNING OBJECTIVE 4Understand the five types of promotion.

A. AdvertisingB. Personal Selling


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C. Steps in the Selling ProcessD. Public RelationsE. Sales PromotionF. Other Types of Promotion

VI. IMC: PUTTING PROMOTIONS TOGETHERLEARNING OBJECTIVE 5Define integrated marketing communication and its role in promotion.

VII. SUMMARY


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LECTURE OUTLINE AND LECTURE NOTES

CHAPTER OPENING PROFILEThe Sunny Window (Text pages 316-318)

Nancy Engel took the last $30 of her welfare check and purchased assorted spices. She then mixed the spices together and called it her “Italian spice mix.” The next day she took her mixes to a flea market and sold out. Her $30 investment earned her $200. By reinvesting her profits and carefully ex-panding, her business, The Sunny Window, became a $250,000 venture. Engel’s story is an excellent ex-ample of how, with nothing but an idea and $30, a successful business can be created.

LECTURE OUTLINE LECTURE NOTES

I. INTRODUCTION TO PLACE AND PROMOTION

LEARNING OBJECTIVE 1Explain place and how it pertains to marketing. (Text pages 318-323)

A. The final two “P”s of the marketing mix are place and promotion.

B. PLACE is the process of getting products to the places where they will be sold, or distribution, and how to determine the ac-tual locations where the products are sold.

C. Promotion consists of five areas: 1. advertising; 2. sales promotion; 3. direct marketing; 4. public relations; 5. personal selling.

POWERPOINT 10-1Chapter Title(Refers to text page 316)

POWERPOINT 10-2Learning Objectives(Refers to text page 317)

II. THE 4Ps OF MARKETING: PLACEA. There are hundreds of thousands of mar-

keting intermediaries whose job it is to help move goods through the distribution net-work from producer to customers.

B. MARKETING INTERMEDIARIES are or-

POWERPOINT 10-3The 4Ps of Marketing: Place (Refers to text pages 318-319)


LECTURE OUTLINE LECTURE NOTESganizations that assist in moving goods and services from producer to business and consumer users (often called middle-men).

1. These are organizations in the middle of a series of organizations that distrib-ute goods from producer to consumer.

2. A CHANNEL OF DISTRIBUTION is the whole series of marketing interme-diaries, such as agents, brokers, wholesalers, and retailers, which join together to transport and store goods in their path (or channel) from produc-ers to consumers.

3. AGENTS/BROKERS are marketing in-termediaries who bring buyers and sellers together and assist in negotiat-ing an exchange, but do not take title to the goods (don’t own the goods at any point in the process).

4. A WHOLESALER is a marketing inter-mediary that sells to other organiza-tions.

5. A RETAILER is an organization that sells to ultimate consumers.

6. Channels of distribution keep commu-nication, the exchange of currency, and the title of the goods flowing openly among the parties.

C. MERCHANT WHOLESALERS are inde-pendently-owned firms that take title to the goods that they handle.1. Full-service wholesalers perform all of

the distribution functions.2. Limited-function wholesalers perform

TEXT REFERENCE Real World Business Apps(Box in text on page 319)Wei Zhang is the owner of a small retail store that sells ethnic foods, such as spices and packaged foods. Wei wants to expand his business and bring more paying cus-tomers into the store.

TEXT FIGURE 10.1 Examples of Distribution Channels for Consumer and Industrial Goods (Box in text on page 320)

CRITICAL THINKING EXERCISE 10-1Distribution ChannelsThis exercise asks students to identify the channels of dis-tribution of manufacturers in their areas. (See complete ex-ercise on page 10.37 of this manual.)

TEXT FIGURE 10.2Intermediaries Create Ex-change Efficiency (Box in text on page 321)

POWERPOINT 10-4Merchant Wholesalers(Refers to text pages 319-323)


LECTURE OUTLINE LECTURE NOTESonly selected functions, but try to do them especially well.

3. RACK JOBBERS furnish racks or shelves full of merchandise to retail-ers, display products, and sell on con-signment.

4. CASH-AND-CARRY WHOLE-SALERS serve mostly smaller retail-ers with a limited assortment of prod-ucts (example: Office Depot).

5. DROP SHIPPERS solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer.

D. Agents and Brokers 1. Agents and brokers bring buyers and

sellers together and help negotiate an exchange, but they never own the products.a. They earn commissions or fees

based on a percentage of the sales revenues.

b. Agents maintain long-term rela-tionships with the people they rep-resent.

c. Brokers are usually hired on a temporary basis.

2. Agents who represent producers are known as manufacturer’s agents or sales agents.a. Manufacturers’ agents may repre-

sent several manufacturers in a specific territory.

b. Sales agents represent a single producer in a larger territory.

LECTURE LINK 10-1What Intermediaries to Use When Going InternationalWhat intermediaries are needed to reach the interna-tional customer? (See com-plete lecture link on page 10.17 of this manual.)

TEXT REFERENCE Study Skills: Importance of Study Partners (Box in text on page 322) An additional exercise and discussion is available on page 10.16 of this manual.

LECTURE LINK 10-2Utilities Created by MarketingSix types of utilities are cre-ated when products are made available to consumers—form, time, place, possession, information, and service. PPT 10-5 below can be used with this lecture link. (See complete lecture link on page 10.17 of this manual.)

POWERPOINT 10-5Utilities Created by Intermediaries (Refers to LL 10-2 above and text pages 323-325)


LECTURE OUTLINE LECTURE NOTES 3. Brokers have no continuous relation-

ship with the buyer or seller.E. Retail Intermediaries 1. For customers, the most useful inter-

mediary is the retailer. 2. These are the firms who bring goods

and services to neighborhoods and make them available to consumers.

SELF CHECK QUESTIONS (Text page 323)1. What are marketing intermediaries? Why are they use-

ful?2. What is the difference between a merchant wholesaler

and an agent/broker?

BONUS INTERNETEXERCISE 10-1Careers in DistributionThis Internet exercise asks students to research a career in distribution. (See complete exercise on page 10.30 of this manual.)

BONUS CASE 10-1Multilevel MarketingMultilevel marketing often gets a bad rap. But when multilevel marketing compa-nies succeed, their growth can be astonishing. (See complete case, discussion questions, and suggested an-swers on page 10.44 of this manual.)


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III. LOGISTICS AND TRANSPORTATIONLEARNING OBJECTIVE 2Describe logistics and different transportation modes. (Text pages 323-325)

A. A key issue in marketing is determining the most effective and efficient methods of de-livering goods.

B. SUPPLY CHAIN MANAGEMENT is the process of moving goods and materials from one place to another.

1. The supply chain (or value chain) is the sequence of linked activities that must be performed by various organi-zations to move goods from the sources or raw materials to ultimate consumers.

2. The supply chain is longer than the channel of distribution.

C. LOGISTICS is planning, implementing, and controlling the physical flow of materials, goods, and related information from points of origin to points of consumption.

1. The amount of time a product spends in transit and the associated costs are factors to consider when choosing transportation.

a. Bringing goods by water is inex-pensive, but very slow.

b. Trucks are good for small ship-ments and can be used to reach remote locations.

c. Trains are good for large ship-ments, but not practical for remote locations.

d. Air transportation is speedy, but very expensive.

POWERPOINT 10-6Logistics and Transporta-tion (Refers to text pages 323-325)

LECTURE LINK 10-3When the Supply Chain BreaksThe unexpected closure of a key player in the supply chain can create chaos in the market. (See complete lec-ture link on page 10.19 of this manual.)

TEXT FIGURE 10.3The Supply Chain and Channels of Distribution (Box in text on page 324)

TEXT FIGURE 10.4Comparison of Transporta-tion Modes (Box in text on page 324)

LECTURE LINK 10-4Evaluating Modes of TransportationAll transportation modes can be evaluated on basic service criteria: cost, speed, depend-ability, flexibility, frequency, and reach. (See complete lec-ture link on page 10.20 of this manual.)

BONUS CASE 10-2Greater Chicago Food De-pository: Feeding the Poor of Chicago (Video Case)This bonus case ties in with


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IV. RETAILINGLEARNING OBJECTIVE 3Describe the types of retail competition and dis-tribution. (Text pages 325-333)

A. A retailer is a middleman that sells to con-sumers.1. The U.S. has about 2.3 million retail

stores, not including websites. 2. These firms generate $3.8 trillion sales

annually.3. About 15.3 million people work for re-

tail organizations.B. Method of Competition in Retailing

1. There are five major ways in which re-tailers compete for customers.

2. Price competitiona. Discount stores such as Wal-Mart,

Target, and Kmart succeed by of-fering low prices.

b. Service organizations, such as Southwest Airlines and H&R Block, also compete on price.

c. Price competition is getting fiercer as Internet firms help consumers find the best prices.

3. Service competitiona. Service in retailing involves putting

the customer first and providing follow-up service.

b. Consumers are frequently willing to pay a little more if the retailer offers outstanding service.

c. The benchmark companies in-clude Home Depot, The Men’s Warehouse, Southwest Airlines,

POWERPOINT 10-7Retailing (Refers to text pages 325-329)

BONUS INTERNETEXERCISE 10-2Top 100 RetailersThis Internet exercise asks student to use the Internet to research the top ten U.S. re-tailers. (See complete exer-cise on page 10.31 of this manual.)

LECTURE LINK 10-5Wal-Mart to the RescueAfter Hurricane Katrina dev-astated Waveland, Missis-sippi, Wal-Mart store man-ager Ron Cox contacted the retailer and arranged for a temporary replacement. (See complete lecture link on page 10.22 of this manual.)


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V. THE 4Ps OF MARKETING: PROMOTION

LEARNING OBJECTIVE 4Understand the five types of promotion. (Text pages 334-349)

A. The final “P” is promotion. 1. Promotion is an effort by marketers to

inform and remind people in the target market and about products and to per-suade them to participate in the ex-change.

a. The marketer must:i. define the target audience;ii. select methods to reach the

audience;iii. design the right message for

the audience;iv. make sure the audience gets

the message. b. Many companies chose to hire ad-

vertising agencies to:i. develop the target market;ii. create advertisements and

promotional plans;iii. implement these plans.

c. The combination of promotional tools, or its PROMOTIONAL MIX, includes advertising, personal sell-ing, public relations, and sales promotion.

2. INTEGRATED MARKETING COM-MUNICATION (IMC) combines all the promotional tools into one comprehen-sive and unified promotional strategy.

a. Companies use all the promo-

POWERPOINT 10-10The 4Ps of Marketing: Pro-motion (Refers to text pages 334-337)

TEXT FIGURE 10.6The Promotion Mix (Box in text on page 335)

TEXT FIGURE 10.7Steps in a Promotion Cam-paign (Box in text on page 335)


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VI. IMC: PUTTING PROMOTIONS TOGETHER

LEARNING OBJECTIVE 5Define integrated marketing communication and its role in promotion. (Text pages 349-352)

A. Each target group calls for a separate pro-motion mix.

1. All the promotions are part of one con-certed effort.

2. An integrated marketing communica-tions (IMC) promotional approach is a method of uniting all promotional ef-forts and making them more consis-tent.

3. IMC includes public relations and pro-motional efforts such as jingles, pack-aging, Internet communications, and interactive tools.

B. There is often little coordination across pro-motional efforts.

1. Customers can receive conflicting messages.

2. Small businesses can use IMC by en-suring that any signage, letterheads, and ads carry the same message.

SELF CHECK QUESTIONS (Text page 352)1. Explain why IMC is beneficial to businesses.2. What are two items that are important to remember

when developing a program of IMC?

POWERPOINT 10-13IMC: Putting Promotions Together (Refers to text pages 349-351)

TEXT FIGURE 10.12Integrated Marketing Communication (Box in text on page 349)

TEXT REFERENCE Career Spotlight: So, You Want to Be … in Logistics(Box in text on page 350)

VII. SUMMARY


CAREER AND STUDY SKILLS NOTES

CAREER DEVELOPMENT BOX:

Make an Impression That Counts! (Text page 347)

Instructor’s Notes for Text Box Ten:(Objectives to consider and implement to increase students’ knowledge, usage, and understanding of the concepts).

STUDENT EXERCISES:Have students practice the basics of entering a room or class and meeting their instructor, class-

mates or other college personnel. Make sure you have a form for evaluation of the positives and negatives of each student’s performance. Practice this exercise until students are comfortable with clear “impres-sion” objectives and a sense of confidence that they can make that first good impression on a regular ba-sis.


STUDY SKILLS BOX:Importance of Study Partners (Text page 322)

Instructor’s Notes for Text Box Ten:(Objectives to consider and implement to increase students’ knowledge, usage, and understanding of the concepts).

What has your experience been with a study partner? There are many benefits a study partner can bring to your educational experience that can help you outside the classroom. A good study partner can fill in the gaps in areas where you lack a clear understanding of any given subject, engage in conversa-tions that help you reinforce what you do understand, and usually can inspire you to explain what you have learned back to your study partner.

The advantages of study partners is that they help you schedule and participate in study time, keep you focused on the right amount of study time, and they allow you the security of help when you need to learn difficult subject areas. The disadvantages occur when study partners become less interested in maintaining a study schedule or when they have issues with the instructor or other students in the class and spend more time discussing non-study materials; these distractions can lead to unproductive use of time.

All things considered, study partners have greater value in your educational than not and are worth the investment in most cases. Just beware of the pitfalls that come, sometimes unexpectedly, and learn how to take the lead when it appears your study partner is getting off course.

STUDENT EXERCISES:Put student in groups of two that create study partners. Put a series of words on the board and let

each group discuss and write down the definitions of each word. Give each group five minutes. Have each group exchange papers and grade them by reading correct answers. Afterwards, have the students notice how much more fun and helpful it was to have a partner to discuss and share ideas and potential answers. Also mention how easy it is to use a study partner’s work. Allow for discussions on the benefits and po-tential problems of working together.

Sample words for this exercise:

Adroit Concourse Extricate Brine Emulate Effigy Animate Saturated Convergence Colossal Manifest Liquidate


LECTURE LINKS

LECTURE LINK 10-1

What Intermediaries to Use When Going InternationalIt’s one thing to decide to sell a product internationally; it’s something else again to try to imple-

ment such a program. How are you going to reach the consumer? You could, of course, send sales repre-sentatives to contact people directly, but that would be costly and risky. How can you get your product into foreign markets at a minimum cost and still have wide distribution?

Use brokers. As explained in the chapter text, a broker is an intermediary who keeps no inventory and takes no risk. A broker can find distributors for you. Brokers sell for you and make a commission on the sale. This is the least expensive way to enter foreign markets, but you still assume the risks of transportation.

Use importers and exporters. Importers and exporters take all the risks of business and sell your prod-ucts to international markets. Their commission is much higher than that of brokers, but they do much more for you. They may find you distributors or do the selling to ultimate consumers them-selves.

Call on distributors directly. You can bypass exporters and brokers and call on distributors yourself. In that case, you actually become your own exporter and deliver directly to distributors, but again you assume the risks of transportation.

Sell direct. The most costly and risky way to sell internationally is to set up your own distribution system of wholesalers and retailers. On the other hand, this maximizes potential profits in the long run. Many firms start out selling through importers and exporters and end up setting up their own dis-tribution system as sales increase.

Use third-party logistics (3PL) providers. This new kind of company will distribute goods worldwide for you. The U.S. market leader is Ryder Integrated Logistics. Ryder designs, implements, and manages the whole system for delivering goods in the United States and overseas.

LECTURE LINK 10-2

Utilities Created by Marketing

Utility, in economics, is the want-satisfying ability, or value, that organizations add to goods or services when the products are made more useful or accessible to consumers than they were before. Six utilities are added: form, time, place, possession, information, and service. Although some utilities are performed largely by producers, most are performed by marketing intermediaries. We shall explore all the utilities next and describe how intermediaries provide each. (POWERPOINT 10-5, “Utilities Created by Intermediaries” presents these six utilities.)

FORM UTILITY

Traditionally, form utility has been provided mostly by producers rather than by intermediaries. It consists of taking raw materials and changing their form so that they become useful products. Thus, a farmer who separates the wheat from the chaff and the processor who turns the wheat into flour are creat-ing form utility. Retailers and other marketers sometimes perform form utility as well. For example, retail butchers cut pork chops from a larger piece of meat and trims off the fat. The servers at Starbucks make coffee just the way you want it. Dell assembles computers according to customers’ wishes.


TIME UTILITY

Intermediaries, such as retailers, add time utility to products by making them available when they’re needed. For example, Devar Tennent lives in Boston. One winter evening while watching TV with his brother, Tennent suddenly got the urge for a hot dog and Coke. The problem was that there were no hot dogs or Cokes in the house. Devar ran down to the corner delicatessen and bought some hot dogs, buns, Cokes, and potato chips. He also bought some frozen strawberries and ice cream. Devar was able to get these groceries at midnight because the local deli was open 24 hours a day. That’s time utility. You can buy goods at any time on the Internet, but you can’t beat having them available right around the cor-ner when you want them. On the other hand, note the value that an Internet company provides by staying accessible 24 hours a day.

PLACE UTILITY

Intermediaries add place utility to products by having them where people want them. For exam-ple, while traveling through the badlands of South Dakota, Juanita Ruiz got hungry and thirsty. There are no stores for miles in this part of the country. Juanita saw one of many signs along the road saying that Wall Drug with fountain service was up ahead. Lured by the signs, she stopped at the store for refresh-ments. She also bought some sunglasses and souvenir items there. The goods and services provided by Wall Drug are in a convenient place for vacationers. Throughout the United States, 7-Eleven stores re-main popular because they are usually in easy-to-reach locations. They provide place utility. As more and more sales become global, place utility will grow in importance.

POSSESSION UTILITY

Intermediaries add possession utility by doing whatever is necessary to transfer ownership from one party to another, including providing credit. Activities associated with possession utility include de-livery, installation, guarantees, and follow-up service. For example, Larry Rosenberg wanted to buy a nice home in the suburbs. He found just what he wanted, but he didn’t have the money he needed. So he went with the real estate broker to a local savings and loan and borrowed the money to buy the home. Both the real estate broker and the savings and loan are marketing intermediaries that provide possession utility. For those consumers who don’t want to own goods, possession utility makes it possible for them to use goods through renting or leasing.

INFORMATION UTILITY

Intermediaries add information utility by opening two-way flows of information between mar-keting participants. For example, Jerome Washington couldn’t decide what kind of TV set to buy. He looked at various ads in the newspaper, talked to salespeople at several stores, and read material at the li-brary and on the Internet. He also got some booklets from the government about radiation hazards and consumer buying tips. Newspapers, salespeople, libraries, websites, and government publications are all information sources made available by intermediaries. They provide information utility.

SERVICE UTILITY

Intermediaries add service utility by providing fast, friendly service during and after the sale and by teaching customers how to best use products over time. For example, Sze Leung bought a personal computer for his office at home. Both the computer manufacturer and the retailer where he bought the computer continue to offer help whenever Leung needs it. He also gets software updates for a small fee to keep his computer up-to-date. What attracted Leung to the retailer in the first place was the helpful, friendly service he received from the salesperson in the store. Service utility is rapidly becoming the most important utility for many retailers because without it they could lose business to direct marketing (e.g., marketing by catalog or on the Internet).


LECTURE LINK 10-3

When the Supply Chain Breaks

The supply chain is only as strong as its weakest link. The unexpected closure of Clark Foam in December 2005 clearly illustrates this. Clark, a Laguna Niguel, California, company, mass-produced foam blocks used to create customized surfboards. Gordon Clark pioneered the technology in 1961. The foam blanks, which cost between $50 and $90, are bought by custom surfboard makers. The boards are first smoothed and shaved with sandpaper and shavers. Painters then add color and design before the board is covered in fiberglass.

Clark enjoyed a virtual monopoly on the blocks (called “blanks”). It supplied unshaped blanks for about 90% of all custom-made boards purchased worldwide. Before the Clark closure, custom-made boards sold for between $300 and $800. Suddenly manufacturers were scrambling to purchase the last supplies of the polyurethane blanks. The price for a classic longboard rose from $100 to $1,000 shortly after Clark closed.

Clark Foam closed because California’s Orange County Fire Authority had repeatedly reported Clark Foam to other government agencies, including the EPA. The government agency cited the company for its continued use of the toxic chemical toluene diisocyanate, which can cause severe and chronic lung problems.

Clark finally shut down the facility of his own volition, rather than face the legal fallout. The me-dia attention on Clark’s closure focused light on this and other environmental problems associated with the production of surfboards, such as the use of polyester-based resins, which are harmful to the worker and emit noxious fumes. Most of the industry, long silent on the fact that manufacturing a surfboard is a dirty process, was poised for change.

In the weeks following Clark’s closure, board builders scrambled to find the remaining Clark blanks. They were even available on eBay. Bidding for blanks went as high as $50,000. Scraps of Clark Foam were even being sold as pieces of history, starting at $1.

Before the closure, Clark had churned out about 1,000 blanks a day. Gradually smaller producers like JustFoam in San Clemente began to ramp up production. JustFoam was able to increase daily produc-tion from 24 to 350.

But Clark’s closure may turn out to be the best thing to happen to the sport. Surfers have been forced to find a new ride. A handful of small companies had already been working, some for up to twenty years, on cleaner surfboard-making technologies that would cost the same as the dirtier ones. But they couldn’t find a hole in Clark’s monopoly to successfully introduce a product. Among the contenders was Homeblown U.S., an independently-owned six-employee foam producer that had developed a foam pro-duction system that was similar to Clark’s but was safer to workers because it didn’t emit volatile fumes.

Homeblown started in Britain in the late 1980s and held a 50% share of the market for blanks there. But Clark had such a dominant position in the market that it wasn’t practical for Homeblown to open in the U.S. until the Clark factory closed.

Today, Homeblown has gained a toehold in the U.S. market—though it still produces only 75 to 100 foam blanks a day, compared to Clark’s 1,000 a day production. It is ramping up its efforts to bring more sustainable surfboards into the market. The end of Clark’s monopoly in surfboard blanks has paved the way for cleaner ways of making surfboards, with independent businesses taking the lead.

Companies like California’s Firewire Surfboards and France’s Salomon have caught the attention of high-ranking pro surfers by bringing innovative materials and construction methods to surfboards, something that already worked for skis, snowboards, and the wings of Boeing jetliners. The buzzword is “flex memory,” the way a board snaps back into its original shape in a turn or maneuver, something that


conventional polyurethane boards simply could not do. The new materials have a memory of the original curve, and they return to that curve very quickly.

The new composites are crafted from foams of varying densities as well as fiberglass, resins, car-bon fibers, and wood in various configurations, some devised with sophisticated computer modeling. These materials have allowed designers to tinker with the board’s outline, giving more or less curve, and fins, the design element critical for responsiveness and control.

Salomon, a brand famous for its skis and snowboards, introduced an “S-Core” design that creates a shock-absorber-like effect using foam stringers in a hollow carbon core, covered by a foam shell—an airplane wing on the water. High-ranking surfers love the new boards—they can be custom shaped, are 20% lighter, and last up to ten times as long as foam boards.i

LECTURE LINK 10-4

Evaluating Modes of Transportation

All transportation modes can be evaluated on basic service criteria: cost, speed, dependability, flexibility, frequency, and reach.

TRAINS ARE GREAT FOR LARGE SHIPMENTS

The largest percentage of goods in the United States (by volume) is shipped by rail. Railroad shipment is best for bulky items such as coal, wheat, automobiles, and heavy equipment. For the past 20 years or so, railroads have handled about 35 to 40% of the total volume of goods in the United States. In piggyback shipping, a truck trailer is detached from the cab; loaded onto a railroad flatcar; and taken to a destination where it will be offloaded, attached to a truck, and driven to the customer’s plant. As a result of practices such as piggyback shipments, railroads should continue to hold better than a 38% share of the market. Railroad shipment is a relatively energy-efficient way to move goods and could therefore experi-ence significant gains if energy prices continue to climb.

However, smaller manufacturers or marketers that don’t ship enough products to fill a railcar or truck can get good rates and service by using a freight forwarder. A freight forwarder can put many small shipments together to create a single large shipment that can be transported cost-effectively, by truck or train, to the final destination. Some freight forwarders also offer warehousing, customs assistance, and other services along with pickup and delivery. You can see the benefits of such a company to a smaller seller. A freight forwarder is just one of many distribution specialists that have emerged to help marketers move goods from one place to another.

TRUCKS ARE GOOD FOR SMALL SHIPMENTS TO REMOTE LOCATIONS

The second largest surface transportation mode is motor vehicles (trucks, vans, and so forth). Such vehicles handle a little over 25% of the volume. Trucks reach more locations than trains. Trucks can deliver almost any commodity door-to-door. You could buy your own truck to make deliveries, but for widespread delivery you can’t beat trucking specialists. Like freight forwarders, they have emerged to supply one important marketing function—transporting goods. Railroads have joined with trucking firms to further the process of piggybacking. The difference lately is that the new 20-foot-high railroad cars,

i Sources: The Associated Press, The Clarion-Ledger, December 10, 2005; Robert Whitfield, “Clark Foam Surf-board Blanks on eBay,” The Orange County Register, December 15, 2005; Nancy Luna, “Former Clark Foam Em-ployees Say They’ve Formed a New Foam-Making Factory,” The Orange County Register, March 4, 2005; Nancy Luna, “Buyers Flood Clark Foam Auction,” The Orange County Register, March 9, 2006; and Coco Masters, “Surf-ing’s New Wave.,” Time, July 17, 2006.


called double stacks, can carry two truck trailers, one on top of the other. The cost of trucking goes up when fuel prices rise. That forces trucking companies to look for ways to cut costs.

WATER TRANSPORTATION IS INEXPENSIVE BUT SLOW

When sending goods overseas, often the least expensive way is by ship. Obviously, ships are slower than ground or air transportation, so water transportation isn’t appropriate for goods that need to be delivered quickly. Ships move a greater volume of goods than you might expect. Over the past 20 years, water transportation has carried 15 to 17% of the total. Water transport is local as well as interna-tional. If you live near the Mississippi River, for example, you’ve likely seen towboats hauling as many as 30 barges at a time, with a cargo of up to 35,000 tons. On smaller rivers, about eight barges can be hauled, carrying up to 20,000 tons—that’s the equivalent of four 100-car railroad trains. Thus, you can see the importance of river traffic. Add to that Great Lakes shipping, shipping from coast to coast and along the coasts, and international shipments, and water transportation takes on a new dimension as a key transportation mode. When truck trailers are placed on ships to travel long distances at lower rates, the process is called fishyback (see the explanation of piggyback). When they are placed in airplanes, by the way, the process is called birdyback.

PIPELINES ARE FAST AND EFFICIENT

One transportation mode that’s not readily visible to the average consumer is movement by pipe-line. About 21% of the total volume of goods moves this way. Pipelines are used primarily for transport-ing water, petroleum, and petroleum products—but a lot more products than you may imagine may be sent by pipeline. One company, for example, sent coal by pipeline by first crushing it and mixing it with water.AIR TRANSPORTATION IS FAST BUT EXPENSIVE

Today, only a small part of shipping is done by air. Nonetheless, air transportation is a critical factor in many industries. Airlines carry everything from small packages to luxury cars and elephants, and are expanding to be a competitive mode for other goods. The primary benefit of air transportation is speed. No firms know this better than FedEx and UPS. As just two of several competitors vying for the fast-delivery market, FedEx and UPS have used air transport to expand into global markets.

The air freight industry is starting to focus on global distribution. Emery has been an industry pio-neer in establishing specialized sales and operations teams aimed at serving the distribution needs of spe-cific industries. KLM Royal Dutch Airlines has cargo/passenger planes that handle high-profit items such as diplomatic pouches and medical supplies. Specializing in such cargo has enabled KLM to compete with FedEx and UPS.

INTERMODAL SHIPPING

Intermodal shipping uses multiple modes of transportation—highway, air, water, rail—to com-plete a single long-distance movement of freight. Services that specialize in intermodal shipping are known as intermodal marketing companies. Today, railroads are merging with each other and with other transportation companies to offer intermodal distribution.

You can imagine such a system in action. Picture an automobile made in Japan for sale in the United States. It would be shipped by truck to a loading dock, and from there it would be moved by ship to a port in the United States. It may be placed on another truck and then taken to a railroad station for loading on a train that will take it across country to again be loaded on a truck for delivery to a local dealer. No doubt you have seen automobiles being hauled across country by train and by truck. Now imagine that all of that movement was handled by one integrated shipping firm. That’s what inter-modal shipping is all about.ii


LECTURE LINK 10-5

Wal-Mart to the Rescue

Hurricane Katrina leveled most of Waveland, Mississippi, a community of 7,000 on the Missis-sippi Gulf coast. The wind and water wiped out nearly every home and business within a half-mile of the beach, including the Wal-Mart that served the area around Waveland, Pearlington, and Bay St. Louis, Mississippi.

For weeks Wal-Mart store manager Ron Cox watched friends and neighbors receive supplies from an emergency distribution point that offered only the basics. The only store in Waveland still selling food and drink was a gas station convenience store. Cox wanted to do something for the community. “They need meat. They need bread. In this part of the country, those are luxuries,” he said.

So Cox contacted Wal-Mart headquarters and arranged for a temporary replacement. Three weeks after the storm, he and his crew erected a miniature version of the largest retail store in the nation—in a 16,000 square foot Wal-Mart tent. Cox set up across the parking lot from the old building, damaged by 12 feet of filthy floodwater.

A crew of 25 staffed the tent store, down from 431 pre-Katrina. They sold canned vegetables, soda, power drinks, crackers, and bug spray. Cox stocked peroxide, alcohol, Germ-X, and over-the counter drugs. He also set up a pharmacy trailer with a computer to find prescriptions for people with no ID.

Cox thinks that the mini-Wal-Mart served another need. “Let’s face it: Wal-Mart is a place people come to socialize.” The store helped “get some normalcy going again.”iii

LECTURE LINK 10-6

The Cost of Violating the “Do Not Call” Registration Law

The National Do Not Call Registry was established in 2002 to let consumers opt out of telemar-keting attempts. The registry now contains 148 billion numbers. The success of the registry is one reason that marketers are moving to other medias, such as direct-mail and e-mail. Since then, telemarketing spending has remained essentially flat at $46 billion. In contrast, direct-mail spending increased from $24 billion to $32 billion from 2001 to 2006. Similar jumps occurred with catalogs and Internet marketing.

The cost of violating the Do Not Call listing is steep—up to $11,000 per call. One company, Craftmatic Beds, was fined nearly $4.5 million for violating the rule. Telemarketers for Craftmatic called hundreds of thousands of people, even though many of them were on the national list. Some companies fooled consumers into giving them their telephone numbers. Craftmatic, for example, obtained numbers b asking people, who filled out entry forms to win a free bed, to include their phone numbers, which would be their contest entry number. But nowhere on the form did it give the company permission to call them, which is why the bed maker was slapped with the second largest fine every imposed.

But an even bigger debacle is looming in the next few years. Few people realized that the 2002 law came with a five-year expiration date. Those first registry entries in 2002 began expiring in 2007. To remain on the do-not-call listing, the consumer must renew their entries or begin receiving irritating, but legal, telemarketing calls. Nearly half of the numbers were registered in 2003, which means they started falling off the list in 2008.

The five-year limit was set in place to purge the list of Americans who invariably move or change numbers. But for telemarketers, a lack of awareness about the expiration date signals a new opportunity. Tim Searcy, CEO of the American Teleservices Association, argues that the “mass expiration” will also


let customers decide whether they want to opt out. Searcy thinks that new offers might entice consumers after the 5-year hiatus.

In 2007 the state of Pennsylvania began a public-service campaign to alert consumers of the ap-proaching deadline. By late 2007, however, less than 690,000 people had renewed their listing. iv


LECTURE LINK 10-7

Party OnThe days of the neighborhood Tupperware parties are over, but other types of home selling are

making a rebound. Twenty years ago, most home-party purchasers were friends of the hostess and could be counted on for sales anyway. The new generation product parties are lively gatherings guided by a consultant who doesn’t necessarily know the partygoers.

Pampered Chef embraced the home shopping party. The company, which offers kitchen-supply parties, was so successful that Warren Buffet purchased it in 2002. The same year, Crayola introduced its Big Yellow Box program, bringing kids and parents together to make crafts. Tommy Tools attracts women customers with woman-friendly products such as lightweight toolboxes and scaled down hack-saws.

Lane Nemeth’s house parties feature special seat belts, chewable rubber toys, and venison-jerky treats. Her products are targeted at the parents of a new breed of child: pets. Petlane, her pet-products company, reached $1 million sales in 2005, up from $300,000 the year before. Her sales team of 225 “pet advisors” in 12 states and expanding every year.

She is banking on American’s increasing obsession with their pets, which is fueling the 6% an-nual growth in the $34 billion pet-care industry. “Pets are the new kids,” she says, noting that young cou-ples see pets as a parenting test run. Her sales people teach pet care to their customers. Nemeth’s obses-sion is teaching pet owners how pets communicate.

Nemeth is no stranger to success in direct sales. Inspired in 1978 to find stimulating toys for her daughter, she started Discovery Toys. The educational-toy company grew from a $5,000 garage-based enter-prise into an international direct sales company with $100 million in revenues by 1997, when she sold it to Avon.v

LECTURE LINK 10-8

Measuring Web Traffic

As marketers continue to move their advertising campaigns onto the Internet, it is becoming more and more important to know exactly which sites are most popular. Like the TV Nielsen ratings, several Web research companies now publish rankings for the “top” websites.

How many people visited Yahoo!® in June 2007? The answer is critical for companies wanting to optimize their Web spending. Companies want proof that the $20 billion they spend to advertise online is worth it. According to Nielsen//NetRatings, 108 million people visited Yahoo! in that month. However, according to ComScore, another Web measurement company, about 133 million people visited. The dif-ferent is 25 million people, hardly a rounding error.

In the last months of 2006, the problems with the online numbers game were starkly illustrated. According to ComScore Networks, a third Web measurement firm, the top Web space was MySpace.-com®, with 38.7 billion page views, beating long-time champ Yahoo! (38.1 billion). However, Nielsen//NetRatings still had Yahoo! leading page views, 33.4 billion versus 29 billion for MySpace. The discrep-ancy illustrates the complications of measuring Web traffic.

MySpace.com’s meteoric rise in popularity took marketers by surprise. In 2004, social network-ing site represented 0.1% of U.S. Internet visits, according to Hitwise. By 2006, MySpace had 4.5% of all U.S. Internet domain name visits, according to the metrics company. In other words, the company in-creased its market share by 4,300% in two years. But did it top Yahoo!?


Counting page views and unique visitors is confusing. ComScore ranks websites based on unique audience members. Thus, a Web surfer who visits eBay® four times in a week is counted as only one au-dience member. Hitwise also monitors Web traffic among more than 500,000 websites. Unlike Com-Score, Hitwise measures individual visits to each site, so-called “hits.” Also complicating the equation are widgets, cookies, and a technology called “Ajax.” Most Web users toggle between several windows, making exact measurement of “hits” difficult. Also, not all Web pages are created equal. New technolo-gies like Ajax, Real Simple Syndication (RSS), and widgets make some pages more valuable than others because they let people watch videos, read news articles, or make purchases on multiple websites.

Today ComScore and Nielsen//NetRatings hold the majority of the Net rating market. They use a series of global panels of thousands of volunteers to measure Web visits, a method carried over from TV ratings measurements. The companies know they have a consistency problem and are introducing new services to address it. ComScore is rolling out a new set of enhancements: measuring widgets, counting video downloads, and expanding search categories to include sites like Amazon.com and eBay. Nielsen//NetRatings is also unveiling improvements. The company recently began measuring how much time consumers spend on sites.

HitWise is trying to gain market share by dumping the panel approach in favor of tagging Web pages with small pieces of code, called cookies. When users visit a site, the server logs them in. But as many as 30% of Web users regularly delete their cookies. Another start-up company, Quantcast, uses both a panel and Web tracker, creating mathematical models to arrive at audience measurements.

Before marketers will be able to accurately measure the effectiveness of Internet advertising cam-paigns, they must decide which rating method best measures Internet activity—number of visitors or number of hits, panels, or cookies. And with more and more Web traffic moving to cell-phones, the de-bate will only intensifyvi

LECTURE LINK 10-9

Desktop Distribution

There’s an enticing distribution method used by software companies today—the PC desktop. Companies such as AOL® and EarthLink® routinely pay to have trial offers installed on soon-to-be pur-chased PCs. Until recently, Dell™ and Google™ also had an agreement to install Google software on new Dell PCs.

PC makers see the trial software as a new source of revenue to boost their profit margins. They are scrambling to sell little pieces of the desktop not already controlled by Microsoft®. The value of that real estate is soaring. Dell alone reaches around 37 million people a year. Big software and Internet com-panies, such as EarthLink, are willing to pay for the privilege of appearing on those systems. They believe that if customers use the trial software and like it, they will purchase the full version when the trial ex-pires.

Not all customers are delighted with the trend. Geek Squad founder Robert Stevens says that complaints about “crapware” are mentioned prominent in discussion forums and blogs. PlumChoice, an online PC services company, estimates that 90% of the complaints its online PC technicians receive about slow-running PCs can be fixed by deleting unneeded programs.

Customers who purchase PC through Best Buy have another option. They can take their systems to the Geek Squad counter and, for a fee, let the technicians go through every piece of software that comes on a new PC and make recommendations as to what should stay and what should go.

But Dell has reconsidered using trialware. According to its own research, Dell found that small-business users overwhelmingly viewed trialware as an irritant, not a benefit. That research led Dell to axe the extras from its Vostro line of small-business desktop PCs and laptops in 2007. For now, the company


will keep the trialware on the machines it sells for personal use. Dell says that these consumers do express interest in preloaded trialware, but small-business owners have different needs.vii

LECTURE LINK 10-10

Promotional BitsA. EFFECTIVE ADVERTISING: CELEBRITY VOICE-OVERS

Good news for the actors who moonlight doing voice-overs for television commercials. Accord-ing to the Journal of Consumer Research, celebrity voice-overs are effective in reaching consumers. But voice-overs are most effective when people recognize the voice—but can’t quite put a name to it. Re-searchers studied reactions to TV commercials with actors David Duchovny, Donald Sutherland, David Hyde Pierce, and Willem Dafoe doing voice-overs for Sprint, Volvo, Lipton, and Quest. The commercial watchers’ prior attitudes toward the celebrity influenced how much they liked or disliked the brand, but the celebrity endorsements created stronger feelings for the brand when viewers weren’t sure to whom the familiar voice belonged.

According to researcher Mark Forehand, who ran the study, “When they [viewers] recognize the celebrity, it seems potentially manipulative, and they wind up overcompensating. But when they don’t recognize the celebrity, they generalize over to the brand.”viii

B. OUTDOOR ADVERTISING: WATCH THE PHONE BOOTH

Even in the age of cell phones, Blackberries, and Bluetooth® headsets, you can still find a pay phone in New York City. There’s a reason for their survival. Public telephones are one of the stranger cash cows in New York City’s finance. Not because of the coins that are fed into them, but rather because of the million of dollars companies are willing to pay to put ads on them.

The phone booths generate $62 million in advertising revenue annually, and the city gets about a quarter of the take. In 2006, income from ads was triple what the city earned from phone calls.

Over all, the number of pay phones in New York is falling, as it is throughout the country. But the New York phones are more valuable than ever, thanks to the intense competition among advertisers. “One of the top buys in New York right now, and it has been for the last couple of years, is phone kiosks,” said Keith Steward, vice president of Generation Outdoor, which places outdoor advertising. “We’re able to spend a fraction of what we would for other outdoor formats. With kiosks, I can blanket the city.”

Phone companies say that pay phones are still necessary and point to the 2003 blackout, when people lined up to use them. But it is the phone booth’s desirability to advertisers that is driving their pop-ularity. The phones are plentiful, and advertising on them is cheap. That drives pressure on the city for permission to install new phones in choice locations.

Since 2003, every new phone the city has authorized has been put at the curb, the only spot where city regulations permit advertising. The city has also approved moving 465 pay phones from alongside buildings to the curb. The phones are a source of frustration to some neighborhood and community groups, who say the city is giving precious sidewalk space over to Madison Avenue marketers. Phone booths alongside buildings, rather than at the curb, are disappearing. They don’t permit advertising. ix

C. CREATIVE PROMOTION: WRAP YOUR SUV

Some companies pay millions to have their logos on Dale Earnhardt Jr.’s racecar, but others pre-fer to pay $500 to put their ads on cars of everyday citizens such as Brian Katz of Manhattan. Katz is one


of tens of thousands of motorists who have signed up to have their cars and trucks wrapped in advertise-ments in exchange for a monthly stipend.

These offers are becoming so popular that car owners have been willing to limit where they shop and abide by a code of conduct while they are behind the wheel. People whose cars were wrapped with ads for two Coca-Cola products—Planet Java and Vault—were cautioned against sipping Pepsi products behind the wheel or parking at restaurant chains like KFC or Pizza Hut that serve Pepsi exclusively.

Vehicle wrapping started in 1993 when PepsiCo bought the rights to paint six Seattle city buses with its logo. Pepsi planned to put the buses in a paint shop for six weeks, but Louis Hoffman, general manager for a Seattle printing company called SuperGraphics, persuaded Pepsi to have the buses wrapped instead. Wrapping, using a vinyl material made by 3M, could be applied in less than two days. 3M uses an adhesive similar to the one on its Post-It notes that makes the “wrap” possible. Far from hurting the paint job, the wrap preserves it.

Brian Katz has had his car wrapped for several companies, including Jamba Juice and Verizon Wireless. Katz says the experience has been great, although he often has to roll down his window to an-swer strangers’ questions about Verizon’s calling plans.

Katz was matched with his advertisers by FreeCar Media, a Los Angeles ad agency that has a database of more than a million car owners who say they will wrap their cars for a fee, says Drew Liv-ingston, president of the company. According to Livingston, companies like Procter & Gamble believe the wrap advertising is a low-cost, effective way to reach the demographic they desire. For example, the target market for a new version of Tide detergent could be defined as “stay-at-home moms with two-plus children who live in selected markets.” Livingston’s company would then find drivers in that demo-graphic. “We feel that when you can wrap a mom’s car and get it to her P.T.A. meeting or Curves gym, you are getting the acceptance from her social circle.”

Another FreeCar participant, Jerome Harris, was in his junior year at Temple University when he had his Nissan Altima wrapped for a promotion for Trolls dolls. He earned $500 a month while his car was wrapped. In addition, he was required to hand out Trolls pens to fellow students during finals week.

The vehicle ad technique seems to pay off. Brian Morris, owner of We Fix Ugly Pools, a pool re-pair company in Phoenix, wrapped more than 30 vehicles in his fleet in ads for his company. He says he has earned more than $1 million in revenue over a year from people seeing one of his trucks in a drive-way. Or in traffic. Morris advises his drivers to find the slowest lane in rush hour traffic and “sit in it.” He pays for the time and the gas. “The people behind you can’t help but sit and stare.”x

D. ADVERTISING: MEASURING THE TELEVISION AUDIENCE IN THE AGE OF THE DVR

The prevalence of the digital video recorder (DVR) in the homes of television watchers is begin-ning to skew the ratings of Nielsen Media Research, the company that provides audience figures for net-work television shows. An estimated 25% of the nation’s 110 million homes with televisions now have DVRs. Television viewing can easily be time shifted and, even more alarming, enables watchers to zip through commercials. This technology is changing what and how people watch and has the potential to disrupt a multimillion-dollar business.

Until recently, Nielsen has bypassed these DVR homes when it signs up the estimated 9,000 fam-ilies that make up its national sample of homes. The Nielsen sample families provide the basis for its rat-ings, which make a show a hit or a flop. In 2006, these DVR homes were added to the Nielsen sample.

It took this long to include DVR watchers because the Nielsen “people meters” that record what families are watching weren’t equipped to handle DVRs. The company was finally able to create new “active/passive meters” that could. With the help of a code embedded in a program by the television net-works, Nielsen can tell when something that has been recorded is actually watched. They even know when people fast-forward through commercials.


Nielsen anticipated that the new measurements would show that the top-rated television shows have a higher audience with a significant amount of playback. In testing, the company discovered that popular shows like CSI: Crime Scene Investigation and Desperate Housewives were the most likely to be taped and watched later. The DVR measuring meters may also help smaller, cult favorites. Tests showed that the WB’s Smallville was watched at double the rate in DVR homes than in homes without the device.

Nielsen gives its clients—mostly TV networks, advertisers, and ad agencies—a weekly list of how many people watch each program each week. Now Nielsen will offer three lists: the number of peo-ple who watch a show live; the number who watch it live or within 24 hours; and the number of people who watch it live or within a week.

Network executives are beginning to worry. If these figures show that viewers skip over the ads—something that 90% of people claim to do—it could cost them dearly. Advertisers may look for lower prices if they have evidence of how many commercials are skipped.xi

E. EVENT MARKETING: TIMES SQUARE’S APPEAL

The billboards along Times Square in New York have always been important venues for advertis-ing, with companies paying hundreds of thousands of dollars for space on the blazing video screens. But recently companies have discovered new, innovative ways to use the landmark site.

Take for instance, the 2006 display of public toilets set up by Charmin bathroom tissue. It was used by thousands in Times Square and viewed by 7,400 Web users on one site alone. Or NASCAR’s dis-play of racecars. Videos of the event were viewed on YouTube more than 1,800 times. More than 60 peo-ple wrote about the event on the blogs and 60 more spread the word—and pictures—on the Flickr web-site. As a result of the growing popularity of consumer-generated pictures, videos, and e-mail messages on Internet sites like YouTube and MySpace, advertisers are getting consumers to essentially do their jobs for them.

Times Square is becoming, in a way, a publishing platform. On sites like Flickr and YouTube, an army of tourists and residents are spreading advertisers’ messages well beyond Manhattan, using their cell phones and video cameras as they walk through the square. Consumer brand companies are taking advan-tage of that by hosting elaborate events, fully aware that those events are great fodder for footage. Hosting events in Times Square, advertisers say, is like buying product placement in a TV show or a movie, ex-cept the cameras are held by consumers and the placement is on the Internet.

Experiential marketing, as the trend is called, is intended to give people something they can try out and photograph. People around the world recognize Times Square in photos and videos online and are more likely to view them.

Charmin’s bathrooms generated traditional coverage with more than 100 articles published about the fancy toilets. But consumer videos posted on YouTube alone have been viewed more than 7,400 times.

It is difficult to count exactly how many people pass through Times Square each day, but foot traffic, by some estimates, has nearly doubled. In 1997, the Times Square Business Improvement District counted 8,702 people an hour passing through the most crowded parts of Times Square during the busiest times of the year. In 2006, the Alliance found that number nearly doubled—more than 15,000 people passed the Virgin Megastore on Broadway during busy hours.

General Electric recently rented nine digital billboards in Times Square and displayed photos of people passing by. People on the street photographed themselves standing below the billboards when their images appeared. Soon, those images were circulating online.

The costs of the experiential marketing are generally kept private by the companies, but GE mar-keters said the total expenses came out surprisingly low compared with other forms of marketing. Mayor


Bloomberg’s office said permits to use Times Square areas start at $25,000, but can often cost $50,000 or more for a day.

In another event, Walt Disney World sent Hans Florine, the X-games gold medal climber, scaling up a billboard to promote Expedition Everest, a new Animal Kingdom Park ride. Mickey Mouse was also there, but he stayed on the ground.xii

F. VIRAL MARKETING: THE SUBSERVIENT CHICKEN

To reach potential customers on the Internet requires creativity, research, and a little irreverence. When Burger King introduced a new chicken sandwich, the Bacon Cheddar Ranch, in February 2005, the company turned the marketing campaign over to Crispin Porter + Bogusky ad agency. The original con-cept had been to have Dolly Parton belt out the tune “Big Rock Candy Mountain” on a surreal fantasy ranch. But at a staff meeting to plan the launch, creative executive Andrew Keller scrubbed the plan and threw the subject open for suggestions. By the end of the meeting, Dolly Parton had been replaced by the Subservient Chicken. Not a television campaign—a website.

The website involved a man, a dingy apartment, a chicken suit, and a garter belt. The “chicken” hung out in front of his Webcam all day—at least that was the illusion—and happily accommodated al-most any request a user could think to type in. (Suggestions for lewd acts were met with a “naughty naughty” shake of the wing.)

Website creator Jeff Benjamin came up with an exhaustive list of commands and a film crew to shoot the chicken performing. The trick was to structure the website so that the chicken could simultane-ously carry out millions of demands in real time.

The film crew grabbed a friend’s apartment and shot the chicken doing 200 different actions. When the site neared completion, Benjamin e-mailed the URL to several people in the agency asking them to send the link out to friends to test. From that single e-mail, the Subservient Chicken site ended the day with 1 million total hits. The site eventually attracted more than 385 million hits, with visitors spend-ing an average of six minutes asking the chicken to perform various stunts. Burger King’s ad director, Andy Bonaparte, bragged that the site helped “sell a lot, a lot, a lot of chicken sandwiches.”xiii


BONUS INTERNET EXERCISESXIV

BONUS INTERNET EXERCISE 10-1

Careers in DistributionPURPOSE:

To use the Internet to explore possible careers in distribution, the education requirements, job du-ties, and career potential.

EXERCISE:What would a career in distribution involve? What are the educational requirements? The future

job prospects?The Bureau of Labor Statistics publishes the Occupational Outlook Handbook, a comprehensive

analysis for thousands of careers. The handbook is available online at the Bureau’s website (www.bls.-gov/oco). (Sometimes the Web address for a location changes. You might need to search to find the exact location mentioned.)

Choose a career in one of the distribution-related fields, such as retail sales representative, whole-sale sales representative, or manufacturing sales representative. Summarize the information given in the Handbook below.

1. Describe the nature of the work for this career.

2. What are the working conditions?

3. What training and qualifications are needed?

4. How many jobs are available in this career area?

5. What is the job outlook for the next decade?

6. What is the median annual salary for this career?


http://www.bls.gov/oco

http://www.bls.gov/oco


Top 100 Retailers

PURPOSE:To use the Internet to identify the top 100 retailers, ranked by revenue.

EXERCISE:The National Retail Foundation’s (NRF) website (www.nrf.com) contains numerous resources

for retailers and people interested in a retailing career. The site also provides links to other sites related to retailing. (Sometimes the Web address for a location changes. You might need to search to find the exact location mentioned.)

NRF publishes an online magazine, Stores, that contains stories about successful retail stores, unique promotions, and retail statistics. They also publish a listing of the year’s top 100 retailers. Go to the Stores’ website (www.stores.org), navigate to the list of recent articles, and find the current listings for the Top 100 Retailers. Use the information presented there to fill in the information below.

1. Which retailer has the highest revenue for the current year? _____________________________

(a) Where is the headquarters?

(b) Give the current year’s revenue figure.

(c) Is this an increase or decrease from the previous year? By what percentage?

(d) Give the current year’s earnings.

(e) How many stores does the company have?

2. Choose two other retail companies that you are familiar with and answer the same questions.

Company 1: ______________________________________________






(f) Why did you choose this company?


http://www.stores.org/

http://www.nrf.com/

Company 2: ______________________________________________






(f) Why did you choose this company?



Internet Auctions: Bypassing the Retailer

PURPOSE:To explore how online auction sites are changing the channels of distribution for consumer

goods.

EXERCISE:The traditional method for consumers to purchase goods is through a retail outlet. Even electronic

retailing involves an intermediary, the online retail store. But small sellers are now finding a new chain of distribution—direct to consumers through online auction sites such as eBay and Amazon.com. Go to the website for eBay (www.eBay.com). Search the site for fax machines offered for sale. (Sometimes the Web address for a location changes. You might need to search to find the exact location mentioned.)

1. Open two listings for fax machines: the least expensive offered and the most expensive. Choose items that have approximately 24 hours before expiration. Write down the description and current price bid. Why do you think sellers of the lower priced item are asking such a low price?

2. Check the eBay website after 8 to 24 hours. How have the bids changed?

3. What type of payment is accepted for each of these items? How do these payment types differ from payment options at brick and mortar stores? Why?

4. What type of business would be able to use an online auction site effectively to sell its products?

5. eBay also offers an option for businesses to establish non-auction “eBay stores” to sell products through the website. What would be the advantages to a small business of establishing such a store rather than a brick and mortar stores? Would there be any disadvantages? Explain.


http://www.ebay.com/


Advertising on Google

PURPOSE:To explore online advertising practices and pricing.

EXERCISE:One of the most popular types of online advertising involves buying an ad-link on search engines

like Google, Yahoo, MSN Search, or Ask.com. Advertisers can narrowly target potential customers by buying an ad that will be placed next to the search results for a specific term. For instance, if you used Yahoo search engine and typed in “spaghetti,” you would get 13 million results, ranging from spaghetti recipes, to encyclopedia references, to a link for the “Church of the Flying Spaghetti Monster.” In the right column are “sponsored results”—ads for spaghetti cookbooks, pasta making equipment, and several distributors of spaghetti sauce.

Each search engine’s advertising system is unique, but you can get a basic understanding of the process by investigating Google’s system, called “AdWords.” Go to the AdWords website (https://ad-words.google.com), and answer the questions below. If the link does not work, you can start at www.-google.com and click on “advertising programs” to get to the AdWords site.

1. Explain how the price of an ad on Google is calculated.

2. When purchasing search term advertising, a critical decision is identifying as many possible key terms to describe your product as possible. Suppose you were an online organic food store and you wanted to advertise your vegetarian spaghetti sauce on Google. What specific keywords would you want to include? (Hint: Use the “keyword tool.”) List the best prospects.

3. Assume your daily advertising budget is $50. What would be the best combination of key terms and cost per click to reach your target audience?


http://www.google.com/

http://www.google.com/

https://adwords.google.com/

https://adwords.google.com/


Ethics in Advertising

PURPOSE:Use the Internet to research the ethical code for the advertising industry.

EXERCISE:The professional organization representing the major advertising agencies is the American Asso-

ciation of Advertising Agencies (AAAA). The AAAA website explains the organization’s mission and standards of practice. Go to the AAAA site (www.aaaa.org) and use the information you find there to an-swer the following questions. (Sometimes the Web address for a location changes. You might need to search to find the exact location mentioned.)

1. Give a brief summary of the organization’s history, purpose, and membership.

2. What is the mission of the AAAA?

3. Find the AAAA’s Standards of Practice. What does this document say about the basic beliefs or codes of conduct for advertisers?

4. What advertising practices are specifically excluded on ethical grounds?


http://www.aaaa.org/


Protecting Competition and Consumers

PURPOSE:Research how the Federal Trade Commission enforces federal laws affecting consumers and

competition.

EXERCISE:The Federal Trade Commission (FTC) deals with issues that touch the economic lives of most

Americans. The FTC has a dual purpose. The agency is charged with maintaining a competitive market-place for both consumers and businesses. When the FTC was created in 1914, its purpose was to prevent unfair methods of competition in commerce as part of the battle to “bust the trusts.” Over the years, Con-gress passed additional laws giving the agency greater authority to police anticompetitive practices.

Go to the FTC website (www.ftc.gov) and use the information there to answer the following questions. (Sometimes the Web address for a location changes. You might need to search to find the exact location mentioned.)

1. What are the major provisions of the Wheeler-Lea Amendment (1938)? How does this law affect marketing?

2. What are the major provisions of the Magnuson-Moss Act? How does this law affect marketing?

3. What are the functions of the Bureau of Consumer Protection?

4. What are the functions of the Division of Advertising Practices?

5. What are the functions of the Division of Marketing Practices?

6. How does the FTC prevent anticompetitive business practices?


http://www.ftc.gov/

CRITICAL THINKING EXERCISES

CRITICAL THINKING EXERCISE 10-1

Distribution Channels

Let’s find out about the kinds of distributions channels used by manufacturers in your area. Call or visit five manufacturers in your area and ask them the following questions. Record your answers on the chart below.

1. What is your main product?

2. How do you distribute your product to consumers? Do you use a direct channel (straight from you to consumers) or an indirect channel (through intermediaries)?

3. If you use wholesalers, what kind?

MANUFACTURERMAIN

PRODUCTDISTRIBUTION CHANNEL

DIRECT OR INDIRECT WHOLESALERS



Retail Distribution Strategy

The text discusses three categories of retail distribution—intensive distribution, selective distribu-tion, and exclusive distribution. For each of the categories, summarize the distribution strategy and give three examples of each that are NOT included in the text discussion.

INTENSIVE DISTRIBUTION

Summarize the strategy:

Example 1: _____________________________________

Example 2: _____________________________________

Example 3: _____________________________________

SELECTIVE DISTRIBUTION


Example 1: _____________________________________

Example 2: _____________________________________

Example 3: _____________________________________

EXCLUSIVE DISTRIBUTION


Example 1: _____________________________________

Example 2: _____________________________________

Example 3: _____________________________________



Designing a Website

A well-designed website is one of the most important promotional tools for a company. The site should be designed to present a consistent message in a way that appeals to visitors.

The information below is a guide to designing a simple website. The Microsoft Office website has a wealth of information on creating websites. Go to http://office.microsoft.com/en-us/assistance/HA010429391033.aspx. If the link is broken, you can go to the Office website (http://office.microsoft.-com) and follow the links below.

Assistance > FrontPage > Creating web pages > Piecing together the Web page puzzle.

EXERCISE:You are the director of promotion for a new restaurant. Design a simple Web page to promote the

restaurant. Choose one of the restaurant suggestions below or develop your own. Think through the mes-sage you wish to convey to consumers. Consider the structure of your site—what subpages would be ap-propriate (for example “menus,” “about us,” etc.)? Then use the blank template on the next page to unveil the website for your company.

(a) Shell-Fish Shuck: baked, broiled, and blackened seafood cuisine.(b) Very Vegetarian: a vegetarian restaurant(c) The Cajun Platter: specializing in South Louisiana cuisine.(d) Blues Bistro: Southern cooking with great music

1. Site identifier – lets visitors know where they are, may include logo, name, or other graphics.

2. Navigation bar – shows visitors the structure of your website, helps them find content.

3. Main content – the page title, headings, text, and images is what your visitors actually come to see.

4. Secondary content – may include advertising, announcements, news, links.

5. Identification bar – copyright, last updated, contact information, security/privacy links, and name of Web developer.


http://office.microsoft.com/

http://office.microsoft.com/

http://office.microsoft.com/en-us/assistance/HA010429391033.aspx

http://office.microsoft.com/en-us/assistance/HA010429391033.aspx

CRITICAL THINKING EXERCISE 10-3 (continued)


Advertising Appeals

Advertising is not a collection of homogeneous commercials. Each company and even different brands within the company use different advertising appeals. Humor works best for some commercials; honesty for others.

Watch television for several days and identify commercials that use the following appeals. Then decide what TV commercial shown in the last year you remember best, and which commercial irritated you the most.

1. Identify television commercials that use the following appeals:

(a) Honesty:

(b) Fear:

(c) Emotion:

(d) Sex:

(e) Humor:

(f) Irritation:

(g) Cost-comparison:

2. What TV commercial in the last year do you remember best? Why do you remember it?

3. What is the most obnoxious, irritating, or disgusting TV advertisement you have seen recently? Why do you remember it?


NOTES ON CRITICAL THINKING EXERCISE 10-4

1. Identify television commercials that use the following appeals: honesty, fear, emotion, sex, hu-mor, irritation, and cost-comparison.Honesty. Ads featuring children are perceived by the public as more honest than those featuring

adults. Children project an innocent, honest image. To an extent, celebrity testimonials try to use honesty as an appeal, but may not work.

Fear. Fear is a powerful advertising hook. Life insurance companies have used it for decades to sell their product. Products as varied as smoke detectors, mouth wash, deodorant, and insect sprays use fear to develop sales.

Emotion. One of the pioneers in using emotional appeals to sell products is Hallmark Cards. For years, wives have been shown presenting the perfect card to doting husbands and grandmothers crying over a cherished Christmas card.

Sex. The old Madison Avenue adage “Sex sells” is still true. Marketers of perfume use little else. Automobiles are shown driven by seductive women or well-dressed, elegant men. Cosmetics makers and perfume companies tout the advantages to one’s social life of their brand of eye shadow or cologne.

Humor. Used judicially, humor can be very effective. Each year the new Bud Lite advertisement, unveiled during the Super Bowl, is anticipated almost as much as the game itself.

Irritation. These are the commercials we as consumers generally hate. They irritate us with repe-tition or stupidity, but we remember them. One pain relief product advertises “Head-On, applied directly to the forehead. Head-On, applied directly to the forehead …” ad infinitum. The commercial is irritating, but gets the message across. Charmin bathroom tissue scored big several decades ago with its “Mr. Whip-ple” commercials. One survey showed that more elementary school kids could identify Mr. Whipple than could identify the president of the U.S.

Cost-comparison. Cost comparison commercials appeal to the logical and rational side of us. In-ternet service providers frequently use cost comparisons to differentiate their services.

2. What TV commercial in the last year do you remember best? Why do you remember it?This will change with the whims of Madison Avenue.

3. What is the most obnoxious or irritating or disgusting TV advertisement you have seen recently? Why do you remember it?This, also, will vary. There are some truly disgusting advertisements on the air at any given time.

Feminine hygiene products, adult diapers, and local furniture companies and automobile dealers usually top the list. Late night ads for dial-a-porn, personal injury lawyers, and herbal performance enhancers de-serve a category all their own.



Identifying Product Placement

Your assignment is to watch prime time television. Not a bad assignment, right? Watch at least two hours of prime time programming. Try to include one drama, one comedy, and one reality program. Watch closely and try to identify brand name products that are featured. Record the name of the program and the television channel. Then analyze the effect of the product placement and whether the placement is positive or negative.

Program Name NetworkProductsFeatured

Is the placement effect positive or negative? Why?

Drama

Comedy

Reality


BONUS CASES

BONUS CASE 10-1

Multilevel Marketing

Multilevel marketing often doesn’t get the respect it deserves in marketing literature. When mul-tilevel marketing companies succeed, their growth is often unbelievable. At least six multilevel marketing companies have reached the $500 million level in sales.

Multilevel marketing companies work like this: The founders begin by recruiting a few good peo-ple to go out and find managers to sell their products and to recruit other supervisors. These supervisors then recruit additional salespeople. That is, 20 people recruit 6 people each. That means 120 salespeople. Those people then recruit 6 people each, and you have 720 salespeople. If in turn those people all recruit 6 people, you then have almost 5,000 salespeople. All supervisors earn commissions on what they sell as well as on what everyone under them sells. When you get thousands of salespeople selling for you, com-missions can be quite large. One company promotes the fact that 1% from 100 salespeople is as good as 100% from one successful salesperson. Companies often add new products or expand to other countries to keep a continuous growth pattern.

Distribution under multilevel marketing is relatively easy. Often the salespeople will carry inven-tory in their own homes and deliver products as ordered. Many companies also offer direct shipping to customers using UPS or other delivery firms.

Marketers cannot ignore the success of this sales and distribution strategy. Nu Skin (a seller of health and beauty products) alone will soon have $1 billion in sales. Looking for more growth, the com-pany started a new division, Interior Design Nutrition, to make and sell vitamins and weight-control prod-ucts. Amway, perhaps one of the most well-known multilevel marketers, has chosen the international route for growth; recently, its sales of home and personal care products increased by over $1 billion in one year.

DISCUSSION QUESTIONS FOR BONUS CASE 10-1

1. Amway and others have been successful in Japan. To what other countries could you lead such companies so that you could become a top earner?

2. What will happen as multilevel marketing distributors begin selling and recruiting others using the latest in technology such as the Internet?

3. Why do you suppose multilevel marketing hasn’t received the same acceptance as other retail in-novations such as catalog sales? What could the companies do to improve their image?

4. If multilevel marketing works so well for beauty and health care products, why not use the same concept to sell other products?

ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 10-1

1. Amway and others have been successful in Japan. To what other countries could you lead such companies so that you could become a top earner?


Many developing countries would have the consumer purchasing power for network marketing to be successful. Central and Southern American countries come to mind, as do the Eastern European coun-tries formerly a part of the Soviet Union.

2. What will happen as multilevel marketing distributors begin selling and recruiting others using the latest in technology such as the Internet?

It will be interesting to see what answers your students come up with. So much of network mar-keting is dependent on personal sales that impersonal Internet selling does not seem feasible. Many net-work marketers use telemarketing rather than in-home visits. There may be other possibilities.

3. Why do you suppose multilevel marketing hasn’t received the same acceptance as other retail in-novations such as catalog sales? What could the companies do to improve their image?

Unfortunately, many multilevel marketing schemes have been little more than fraud. The term “pyramid sales” still evokes the image of unscrupulous marketers and risky investments. In order to make multilevel marketing more acceptable, salespeople will need to convince customers of the value of their product. One easy way to start would be to offer a money back guarantee in writing.

4. If multilevel marketing works so well for beauty and health care products, why not use the same concept to sell other products?

Any product with a high profit margin is a possible candidate for multilevel marketing. There are some products that people would rather buy in the store (for example, feminine hygiene products) and don’t want to face a human. Others have a high time utility, and the distribution lag would be a problem. Americans, however, are very creative in their approach to competition, so anything is possible.


BONUS CASE 10-2

Greater Chicago Food Depository: Feeding the Poor of Chicago (Video Case)

(NOTE: This case can be used with the Video on DVD for this chapter.)

Every business, both for-profit and not-for-profit, needs to understand the basic principles of mar-keting. This video highlights one of the most important marketing functions—distribution. Like all mar-keting challenges, the Greater Chicago Food Depository began by “finding a need and filling it.”

Here is the need: Often the many caterers, restaurants, hotels and hospitals in the Chicago area prepare too much food for their customers. It seems like a waste to just throw the food away, but the food is perishable and can’t be saved for long. While these businesses have too much food, there are thousands of poor people in the Chicago area who have too little or no food.

Here is the solution: The Greater Chicago Food Depository (CGFD) gathers the food from those with too much and gives it to those with too little. While this may sound simple, consider that the CGFD distributes more than 40 million pounds of food a year to 600 retail outlets (soup kitchens, food pantries and the like). Its warehouse is 268,000 square feet (the size of six football fields).

Middlemen (intermediaries) play an important role in the CGFD distribution system. It must have people who are willing and able to gather and prepare the food from these various sources and help dis-tribute the food to groups and individuals. It has to have a warehouse where food can be stored, sorted, and then distributed where needed. It has to have retail outlets where people can easily get to the food. And it has to have suppliers who will keep the channel of distribution full of the foods needed.

The smooth working of this system involves the cooperation of businesses (restaurants, hotels, and so on), nonprofit agencies of all kinds, and the government. It is important to recognize that other stakeholders are involved. Taxpayers, for example, would want to know how you choose what people get the free food and what people do not. The local community would be interested in the location of food distribution centers. Keeping all stakeholders happy is a major concern of the Greater Chicago Food De-pository as it is with all organizations.

Once a food distribution center has been established, the next step, as in all such organizations, is to make the system more efficient. Using capital items like the Producemobile to gather produce is just one example. Naturally, such a system calls for a leader who has some experience running a large organi-zation. Such experience does not have to be in logistics, necessarily. It could be in management or IT or similar areas of business. The exciting thing about working for the Greater Chicago Food Depository and the various organizations that work with it is the feeling one has of making a direct major contribution to society.


1. When you compare the food distribution system being used to feed the poor with the distribution system used by supermarkets in your area, what other technologies, systems, techniques, or strategies might you recommend for making the logistics of food distribution to the poor more ef-fective and efficient?

2. There are literally billions of poor people throughout the world who need food and other staples. Can you envision a distribution system that would become more global in scope? Would that be a good idea? Why or why not?


3. After reviewing this video, do you see the opportunities such organizations provide for applying business skills you are learning in this class? Do you see yourself volunteering for such an orga-nization? What might you do for them?


1. When you compare the food distribution system being used to feed the poor with the distribution system used by supermarkets in your area, what other technologies, systems, techniques, or strategies might you recommend for making the logistics of food distribution to the poor more ef-fective and efficient?

This is a great discussion starter. Students need to brainstorm ways of reaching the poor. Could restau-rants provide food from the back door? Could supermarkets leave leftover food in a convenient pick-up spot? What are the best ways for keeping food hot or cold? How could food be delivered to people out in the coun-try? What challenges do older people make to the system, for example, if they cannot travel?

2. There are literally billions of poor people throughout the world who need food and other staples. Can you envision a distribution system that would become more global in scope? Would that be a good idea? Why or why not?

Distributing food overseas is a major challenge. There is the need for identifying needs, finding stor-age facilities, getting government and local permission, and more. This again is a challenging and interesting discussion starter. It should include the many efforts now being made to do this.

3. After reviewing this video, do you see the opportunities such organizations provide for applying business skills you are learning in this class? Do you see yourself volunteering for such an orga-nization? What might you do for them?

Students should learn that their skills can be used in a variety of settings, including volunteer work. Many hands make for light work. Students don’t tend to focus on volunteering until later in their careers. Why not start now? What skills could they use? Where? Another great discussion starter.


BONUS CASE 10-3

Starting an Online Business

When Joseph Cohen’s parents left for a week-long trip out of town, the 14-year-old Brooklynite didn’t plan a big parents-free party. He called a cab, collected the money he had saved up working for his dad, and drove into Manhattan. He returned with $3,000 worth of Christmas decorations, toys, and lights. Joseph put the goods online, adopting the name of his family’s hardware store, Polsteins.

For about $1,000 a month, Joseph opened a Yahoo store account to handle online payments. He also signed onto some Web ad services to generate traffic. Every time someone keyed “Christmas lights” into a Web search engine, Joseph paid 10¢ to 50¢ for a link to Polsteins.com. By the time his parents re-turned, he had doubled his money and bought more goods to sell.

Soon after selling out the Christmas items, he put a $50 battery-operated Pinocchio doll on his site; 1,000 orders came in. Another early success was a $10 animated kung fu hamster that 2,000 people ordered. Within three years, Joseph’s operation was selling $1.9 million worth of goods annually.

iii Source: “Tent Offers Critical Supplies,” The Clarion-Ledger, The Associated Press, September 23, 2005.

iv Sources: Kurt Soller, “Dial and Tribulation,” Newsweek, September 10, 2007; and “Companies Fined for Violat-ing Do Not Call Rules,” ABC News, November 7, 2007.

v Sources: Coco Masters, Let’s Pawty!” Time Inside Business, May 2005; and Alyssa Danigells, “Party One,” Fast Company, May 2006.

vi Sources: “Top Websites,” ZDNet Research, July 23, 2006; K.C. Jones, “MySpace Soars; Hitwise Defends Fig-ures,” Tech Web, July 14, 2006; Bill Tancer, “MySpace Moves Into #1 Position for All Internet Sites,” www.hit-wise.com, July 11, 2006; Catherine Holahan, “Did MySpace Really Beat Yahoo?” BusinessWeek.com, December 15, 2006; “Web Numbers: What’s Real?” BusinessWeek.com, October 23, 2006; and Jessi Hempel, “The Online Numbers Game,” Fortune, September 3, 2007.

vii Sources: Tom Krazit, “Trial Software Trying PC Users’ Patience,” ZDNet Tech News, May 31, 2006; and Melissa J. Perenson, “Dell Gives Trialware the Heave-Ho,” PCWorld.com, August 23, 2007.

viii Source: Barbara Kiviat, “Voice Lessons,” Time Inside Business, June 2005

ix Source: Jo Craven McGinty, “As Billboards, Public Phones Always Work,” The New York Times, August 17, 2007.

x Source: Andrew Adam Newman, “Your Ad Here, on My S.U.V.? And You’ll Pay?” The New York Times, August 27, 1007.xi

? Source: David Bauder, “Company That Measures TV Viewing Targets DVR Habits,” The Clarion-Ledger, The Associated Press, December 22, 2005

xii Source: Louise Story, “Hottest Ad Space in Times Square May Be on Tourists’ Cameras,” The New York Times, December 11, 2006.

xiii Source: Ryan Underwood, “Ruling the Roost,” Fast Company, April 2005

xiv The Internet is a dynamic, changing information source. Web links noted in this manual were checked at the time of publication, but content may change over time. Please review the website before recommending it to your stu-dents.


http://www.hitwise.com/

http://www.hitwise.com/

Despite his entrepreneurial ability, Joseph is still a teenager and still has to attend school. He runs his online enterprise out of his office/warehouse after school. He does admit to taking “sick days” from school when business is heavy.

He has made some mistakes, however. The summer he turned 15, Joseph took his eye off the business, doing what kids do during the summer. He went to travel camp, visiting a different North Amer-ican city each week. At the time, Polsteins was selling a 50-foot rolled flat hose for $20. While he was away for six weeks, thousands of orders poured in and were automatically put on back order.

When he returned from camp, Joseph rushed out the $30,000 worth of back orders, only to dis-cover that the hoses were defective. Once they were returned, he had to repay customers, while applying for refunds from the manufacturer. And because no one had been minding the online store in his absence, the hoses had been left on the site all summer, running up $43,000 in ad charges, built up every time someone clicked on “garden hose.” He stopped the ads, negotiated discounts on shipping, and spent the next three months paying off his debts and rebuilding his store.

A surprise best seller: mason jars for canning. These jars had become hard to find, and Joseph was able to sell thousands to people canning summer fruits and vegetables. Polsteins.com is now the largest customer for Ball and Kerr jars.

Recently Polsteins.com established a partnership with its giant former rival Amazon.com. The company also changed its name to HomeandBeyond.com and announced the introduction of a home shopping catalog filled with household tips and recipes to be called @Home. Cohen, who is now com-pany CEO, said, “Changing our name from Polsteins.com to HomeandBeyond.com allows us to better brand our site as one dedicated to home shopping.”xv


1. If you were to start an online business, what kind of products would you be interested in selling? What would you anticipate to be your biggest problem?

2. What do you see as the advantages of starting an online store vs. a bricks and mortar store?

3. What are the advantages and disadvantages of starting an online business while you are still in school?


1. If you were to start an online business, what kind of products would you be interested in selling? What would you anticipate to be your biggest problem?

Students may enjoy hearing the ideas of other students about what could be sold online. In fact, almost anything can be sold online, including houses, cars, and more. Often the biggest problem is learning the best way to ship products. Ensuring payment is another.

2. What do you see as the advantages of starting an online store versus a bricks and mortar store?

Advantages include the ease of startup, including start-up fees. It is easier to sell a wide variety of things online; there is almost no limit. Hours of operation are 24/7, but you don’t have to work all of that time. In short, there is the potential for more free time. When lots of people want to buy at the same time, you don’t experience long lines, but can answer orders one at a time. Students may come up with more and more creative answers.


3. What are the advantages and disadvantages of starting an online business while you are still in school?

Students may enjoy brainstorming this answer. They should consider things like lower grades in school because of less study time, less free time for socializing, more responsibility and stress, less desire for advanced degrees, and more.


BONUS CASE 10-4

Wieden & Kennedy: Experimental Promotions

You may not know the name Dan Wieden, but you are likely to have seen his work. He is the per-son who created the “Just Do It” slogan for Nike. His company, Wieden and Kennedy (W&K), is known as one of the most creative advertising agencies in the United States.

One of the most controversial Nike ads from W&K featured a streaker running around a stadium during a soccer game. The filming was so realistic that many people thought that they were witnessing an actual event. In fact, the people in the stands were extras who were hired for the shoot. The commercial took five days to create in near freezing weather. It’s no wonder the man in the commercial ran so fast! With the tagline “MoreGo,” the commercial promoted Nike’s ShoxNZ.

W&K was started in Portland, Oregon, in 1982 with Nike as its sole client. By the 1990s, Nike ads featuring Michael Jordan, Spike Lee, and Tiger Woods were being hailed as industry leaders. Wieden was credited with bringing in a new, postmodern school of advertising that blended influences from the popular culture, the art scene, independent film, and rock and rap music. For example, rapper Snoop Dogg was featured in a disco Nike ad. W&K now has many other clients, including ESPN and Miller Brewing.

As an independent ad agency, W&K is more free to experiment and take risks than traditional agencies are. Part of that risk-taking is to move the agency into entertainment as well as advertising. For example, W&K is putting together a Broadway musical about basketball that is set to a hip-hop beat. Its Tokyo office is launching a record label. You might also see documentary films, a weekly TV series, and MTV music videos coming out of the agency. W&K’s first piece of self-funded entertainment was a book about dogs in Portland. It hit the bestseller lists overseas. You can see the appeal of the book by looking at the cover. It says, “Cat Spelled Backward Doesn’t Spell God,” an obvious dig at cat owners.

Why is an advertising agency getting involved in so many other ventures? Part of the answer is that the ad business was battered by the recession in early 2000, hurt tremendously by the fall of dot-coms, and threatened by new technology. In the early 2000s, companies wishing to promote their prod-ucts began looking for ways of promotion more creative than the typical 30-second TV commercial. Companies feared, for one thing, that many consumers, armed with TiVo and other digital recorders, would simply skip watching commercials on TV by programming their recorders to avoid them.

Pop-up ads on the Internet have proved too annoying to be a powerful promotional tool. Nonethe-less, many companies are using websites packed with product information, entertainment, and branding messages. Promoters tend toward using a variety of promotional companies rather than one huge agency that promises to do it all for them. That means that companies are hiring public relations firms, Internet specialists, media buying specialists, and international specialists to provide them with variety and exper-tise. That includes, of course, hiring an agency like W&K to come up with creative ads that people don’t soon forget.xvi


1. What are your favorite commercials or magazine ads? What makes them special to you?

2. What celebrities’ endorsements have attracted you to buy a product? Which have turned you away from such a purchase?


3. If you were to obtain a job in advertising, what would you enjoy doing the most: creative, writing ad material, creating art, selling advertising to businesses, analyzing markets, shooting commer-cials, buying media, or something else?


1. What are your favorite commercials or magazine ads? What makes them special to you?

This is a great discussion starter. You may be amazed at the different reasons for enjoying com-mercials. What medium is mentioned the most? Is that a surprise? What kinds of products are featured?

2. What celebrities’ endorsements have attracted you to buy a product? Which have turned you away from such a purchase?

This question opens up the whole area of celebrity endorsements and their value to advertisers. Do students respond as favorably to celebrities such as Tiger Woods as you would expect from their wide use? Which celebrities are most attractive to students? Why?

3. If you were to obtain a job in advertising, what would you enjoy doing the most: creative, writing ad material, creating art, selling advertising to businesses, analyzing markets, shooting commer-cials, buying media, or something else?

A great chance to talk about the variety of jobs in advertising, including (surprisingly) account-ing.


BONUS CASE 10-5

Night Agency (Video Case)

(NOTE: This case can be used with the Video on DVD for this chapter.)

Students today are witnessing a major revolution in promotion. They have seen radio change from standard broadcasting to commercial-free satellite radio. They have watched families blank out TV commercials with TiVo and other DVR recording devices. Students spend less time reading newspapers and magazines and more time talking on the phone, playing video games, and listening to their iPods. There are more entertainment options available today and more distractions from traditional promotional tools.

Today’s students also have a wonderful opportunity to reinvent promotion, changing it from a one-way stream of sales pitches to an interactive dialogue among promoters and consumers. Traditional promotional tools—selling, advertising, public relations, and sales promotion—have always provided fun and interesting careers. Creating funny and captivating ads for TV has been a real challenge. Selling to businesses and consumers has always been challenging and interesting to those with the needed skills and desire. Public relations has been critical to all kinds of organizations and individuals (think of politicians, Hollywood stars, sports stars and others). And who has not been tempted by cents-off coupons and other sales promotion tools?

The challenge today is to create promotions for the new realities of the marketplace. That means, for one thing, creating advertising and other promotions on the Internet. One of the cutting edge advertis-ing agencies in this regard is Night Agency. The Night Agency has become an integral part of the market-ing process for the firms it serves. It does everything from helping in the design of the product to working with the company to develop a winning brand name, effective packaging, and fast distribution.

A company like Night Agency has to promote itself to other businesses. Like most firms, Night Agency relies heavily on word-of-mouth to spread its name. Word-of-mouth and other promotional ef-forts have succeeded in making this agency stand out from the others. Publicity in the form of articles written about the company is another powerful promotional tool. Night Agency teaches other firms how to use public relations and publicity to educate the public about the good that the firms do and to give the firm’s side of controversies. Think of the public relations challenge that oil companies have had over high gas prices at the pump.

Often promotional efforts begin inside of a company. Salespeople, clerks, and other customer-contact people (and that means almost everyone in the firm because they all contact other people) often don’t understand everything they need to know about the products they make and sell. A worker in a firm making watches, for example, should be able to talk with people on the street about the quality and value the watches provide. That means using internal promotions to keep employees informed. That may take the form of videos, brochures, meetings, charts, and more. Full function advertising agencies get involved in such internal promotions as well as the more traditional external promotions you and I are more used to seeing.

One of the more innovative products from Night Agency is interactive Web games and demon-strations. Such promotions get potential customers more deeply involved in promotions than they have been in the past. But such promotions need to be measured like any other promotional tools to make sure they are seen, remembered, and followed.

The Darfur Digital Activist Contest is one of the more memorable of their efforts. It was designed to increase awareness of the desperate need for aid among the people in Darfur, Sudan. It is exciting and rewarding to use promotional tools to make a difference in the world, and doing what you can to end world hunger, poverty, disease, and war is part of that challenge.



1. What kind of promotions have led to you to buy the things that you have purchased lately? That includes the school you attend (what prompted you to go there?), the clothes you have bought, the music you listen to, the restaurants you go to, and so on.

2. What differences did you notice between what Night Agency does and what you are used to see-ing in promotions, if anything?

3. What has been your reaction thus far to Internet promotions? Do you pay any attention to them? Are they getting better? If so, in what way?


1. What kinds of promotions have led you to buy the things that you have purchased lately? That in-cludes the school you attend (what prompted you to go there), the clothes you have bought, the music you listen to, the restaurants you go to, and so on.

This question gets at the heart of promotion: what works and why. Students should have much to contribute to the discussion. Different promotional efforts are effective in selling different products. For example, publicity is often effective in political campaigns. Students can provide the examples. The same is true in promoting music videos, TV shows, clothes, shoes, and everything else students buy.

2. What differences did you notice between what Night Agency does and what you are used to see-ing in promotions, if anything?

The promotions that your students remember have broken through the advertising clutter. The fact that students notice them means the ads are achieving a key objective—getting the audience’s atten-tion.

3. What has been your reaction thus far to Internet promotions? Do you pay any attention to them? Are they getting better? If so, in what way?

The most effective Internet promotions are often those that students are not even aware of. How much time do they spend online? Are they aware of the advertisements on the various websites? This is a chance not only to discuss what is, but what could be with Internet advertising.


BONUS CASE 10-6

Guerrilla Marketing

Many a student sits with a can of Red Bull next to him or her when preparing for a big exam. Red Bull, Monster, and Full Throttle are all energy drinks with giant doses of caffeine in them.

Dietrich Mateschitz is the man who introduced Red Bull to the U.S. market. Mateschitz graduated from the Vienna University of Economics and Business Administration. His major was world trade, and for a while he worked on the marketing of Procter & Gamble’s Blendax toothpaste. He also did some marketing for Unilever and Jacobs Coffee. In 1987, he founded Red Bull with two Thai partners. Now he is a billionaire.

Mateschitz is an example of a billionaire who did not invent a wonderful new product. Instead, he made his money through creative marketing. Mateschitz bought a Thai company that already had an en-ergy drink called Krating Daeng (red water buffalo). He changed the ingredients and the name (a little) and added carbonation. Red Bull is not known for tasting great. Furthermore, the name isn’t very appeal-ing and the price is high. So what made it so popular? For one thing, Red Bull has a lot of wake-up power, including 80 milligrams of caffeine. It also has mysterious ingredients such as taurine and glu-curonolactone.

But the secret to Red Bull’s success is something called guerrilla marketing. Guerrilla (not go-rilla) marketing means studying the market for your product very carefully and then going after that mar-ket using nontraditional promotional means such as sponsoring sports events and creating word-of-mouth with sometimes outrageous promotions. Event marketing began with the sponsorship of mountain biking, paragliding, snowboarding, and hang-gliding competitions.

Mateschitz also sponsors Red Bull’s Flutag (flying day) contest, in which competitors fly home-made contraptions over water. All together, Red Bull supports about 500 world-class extreme sports ath-letes. It also sponsors parties on various university campuses.

In addition to sponsoring extreme sports, Mateschitz sponsors the World Stunt Awards. He bought the Formula I Team Jaguar Racing from Ford and renamed it Red Bull Racing. In other words, the brand Red Bull has become closely associated with those who live large and are not afraid to take chances, including drinking something that has a lot of kick.

The success of Red Bull led to the introduction of more than 100 competitors, including Monster, whose slogan is “Unleash the Beast.” There are lots of energy drinks available today, but Red Bull still stands out in the crowd because of its unusual promotions. This chapter is about effective promotional techniques. You will explore traditional promotional tools such as advertising, selling, and public rela-tions. But you will also delve into some nontraditional promotional tools.xvii


1. In this case of Red Bull, is it a success because of the producer discovering a real market need or is it strictly an example of all marketing hype and very little product substance? Could it be a combination of both factors?

2. If you were to define the marketing demographics of the target customer for Red Bull, what would they be? How has their success created more products that are similar in the marketplace?

3. How has the entire marketing efforts of the Red Bull product been different then some of the tra-ditional marketing efforts or other drink products? Describe what is meant by “guerrilla market-ing.”


4. How much do you see the success of Red Bull to market timing or marketing perseverance? Ex-plain.


1. In this case of Red Bull, is it a success because of the producer discovering a real market need or is it strictly an example of all marketing hype and very little product substance? Could it be a combination of both factors?

Red Bull is successful both because of the product image and target market demographics. The fact that it has more caffeine that other products makes it somewhat unique, but it is only a more caf-feinated version of sodas like Mountain Dew that have already proved successful. As a result, the success of Red Bull is probably a combination of a newly designed product and savvy marketing campaigns.

2. If you were to define the marketing demographics of the target customer for Red Bull, what would they be? How has their success created more products that are similar in the marketplace?

Red Bull should market to a young crowd looking to identify with a contemporary and cool prod-uct. The punch of the caffeine is the hook.

3. How has the entire marketing efforts of the Red Bull product been different then some of the tra-ditional marketing efforts or other drink products? Describe what is meant by “guerrilla market-ing.”

Because of the age group (primarily college students and other similar young adults), the com-pany should probably put more emphasis on event marketing and other non traditional marketing tools like pod casting and blogging. This age group tends to have more free time and is easily encouraged to participate in product promotional events designed for their age group. Guerrilla marketing is best defined by more local, event-planned marketing campaigns as opposed to more traditional print, magazine, and billboard media advertising mediums.

4. How much do you see the success of Red Bull to market timing or marketing perseverance? Ex-plain.

It appears Red Bull is successful because its young audience was ready to move on from soda and other caffeinated drinks. Market timing and successful marketing have both contributed to the product’s success.

xvi Sources: Warren Berger, “Just Do It. Again,” Business 2.0, September 2002, pp. 77–84; and Gerry Khermouch, “The 5 Rules of the Ad Game,” Business Week, January 20, 2003, pp. 12–13.

xvii Sources: Kerry A. Dolan, “The Soda with Buzz,” Forbes , March 28, 2005; Christopher Palmeri, “Hansen Natu-ral,” BusinessWeek , June 6, 2005; Wikipedia, (online encyclopedia); Gwendolyn Bounds, “Move Over, Coke,” The Wall Street Journal , January 30, 2006, pp. R1 and R3; and Andrew Murr, “Monster vs. Red Bull,” Newsweek, March 28, 2006.


http://www.homeandbeyond.com/

http://www.polsteins.com/

ENDNOTES

ii Sources: Michael Aneiro, “Shipping Woes Boost Freight Co-Ops,” Inc., March 2005; and Robert Wright, “Grow-ing Ships,” Financial Times, May 23, 2005.

xv Sources: Phyllis Berman, “The Merchant of Bay Ridge,” Forbes, December 27, 2004; “Polsteins.com to Operate Under New Name: HomeandBeyond.com,” PRWeb, October 17, 2005; “Polsteins.com Announces Partnership with Amazon.com, www.polsteins.com, October 17, 2005; and www.homeandbeyond.com/.


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