New Cases

In the new 2000 printing of the textbook we have included 6 new cases.

Chapter 1 — Case 1.1
Saturn:"A Different Kind of Company, a Different Kind of Car"

Chapter 4 — Case 4.1
Coca-Cola Company: Managing in a Global Market

Chapter 8 — Case 8.1
Molson Inc.: 100 Percent Molson; 100 Percent Canadian

Chapter 12 — Case 12.2
TD Waterhouse: Canada's Best Discount Broker

Chapter 18 — Case 18.1
Microsoft: Crafting Image through Public Relations

Chapter 19 — Case 19.1
NetActive Inc.: Relationship Marketing through Sales Promotion

Additional Web Cases

Chapter 1 - Case 1.1

"A Different Kind of Company, a Different Kind of Car"

In 1982, after years of losing sales to Japanese firms, General Motors decided to start a new company as a "laboratory" to find better ways to manufacture and market cars. From the beginning, GM wanted Saturn Corporation to be "a different kind of company, a different kind of car." To achieve this goal, GM made Saturn an independent, wholly owned subsidiary rather than a division like Chevrolet or Buick. To remove Saturn from the traditional auto-building mentality in Detroit, GM located Saturn's manufacturing facilities in Spring Hill, Tennessee. The latest and most efficient manufacturing technology was built into the high-quality cars. The company forged an unparalleled relationship with the United Auto Workers (UAW) union by signing a separate contract that established Saturn workers as partners with management and that involved them in all decision-making aspects of the organization. GM even involved Saturn's advertising agency in key marketing decisions from the very beginning. Thus, GM viewed strategic partnerships - between labour and management, between company and supplier, and between company and advertising agency — as a key element of Saturn's future, with everyone sharing the risks and rewards.

During the 1980s, General Motors executives had been dismayed to learn from a survey by J.D. Power & Associates that 42 percent of new-car shoppers did not even look at a GM car, often buying Hondas and Toyotas instead. One of Saturn's greatest tasks, then, was to sell 80 percent of its cars to drivers who would not otherwise have bought a GM car. Saturn's strategy focused on college-educated men and women, aged 25 to 49, who preferred Japanese automobiles because of their perceived higher quality and value. A survey conducted among Saturn owners later confirmed that 72 percent of them would not consider a car from any other GM division; many would still choose Japanese cars as their second choice.

When Saturn rolled the first cars off the assembly line in 1990, it offered just four products: the SC1 and SC2 coupes and the SL1 and SL2 sedans. In 1993, the company introduced two station wagons (SW1 and SW2) and an entry-level coupe (SC). These were followed in 1996 by the EV1 (a limited-production electric car), and in 1999 by the LS (mid-size car) and LW (mid-size wagon). The company plans to launch a small sport utility vehicle in 2002. The cars' simple appellations are the result of a decision made by a panel of ad agency representatives, employees, and dealers, who felt more descriptive names (such as "Chevrolet Camaro") would weaken the Saturn concept. Even the colour descriptions are simple, with names like "red" rather than "raspberry red."

In keeping with its "different" philosophy, Saturn planned its distribution system very carefully. Saturn dealers are given large territories so that each competes with rival brands rather than each other. There is generally just one Saturn dealership in a metropolitan area. The company set up the first dealerships in areas where sales of imported cars are high; most were located on the East and West Coasts. Saturn was particularly careful to select dealers who know how to appeal to imported-car buyers. Dealers work to provide a relaxed, inviting showroom environment. Salespersons generally avoid high-pressure sales tactics, offering advice only when customers seek it.

The Saturn concept also included an innovative pricing strategy. Base prices are competitive with prices of imported cars; they range from $14,143 for the SL to $21,678 for the SC2, but optional features can raise prices to nearly $27,000. With few exceptions, there are no rebates or promotions, no dealing or haggling. A price tag of $14,143 means that a customer pays $14,143, period. Because of legal considerations, Saturn cannot set prices or insist that dealers adhere to its fixed-price policy. However, because of tight profit margins and the high-integrity sales approach that is part of Saturn's marketing strategy, dealers have been very supportive of the pricing policy. Potential buyers can obtain pricing information at www.gmcanada.com (then hit the Saturn brand name, and select vehicle model), where they can configure their own Saturn, starting with a base car and adding options. The Web site also allows customers to estimate monthly payments, choose financing options, and even explore the option of leasing rather than purchasing a Saturn.

The role of promotion is particularly integral to the Saturn concept. Along with the low-pressure sales approach used by dealers, advertising plays a key role in creating a tightly focused image for Saturn. The advertising agency adopted a straight-talk, people-oriented philosophy, stressing Saturn, the company, rather than Saturn, the car. To create awareness of the Saturn concept, initial ads concentrated on Saturn employees, and how Saturn's management and the UAW had set aside their long-standing differences to cooperate in building the best car they could. After the first cars rolled off the assembly line, print ads and television commercials featured stories about Saturn customers and highlighted themes that Baby Boomers hold dear, such as safety, utility, and value. One commercial showed a Saturn representative travelling to Alaska to fix a Saturn owned by Robin Millage, an actual customer who had ordered her car sight unseen from a dealer in the continental United States.

Saturn's methods have revolutionized the way cars are produced and sold in North America. First-day sales were tremendous, and the cars have continued to sell well. Although sales declined somewhat in the late 1990s, the company's new mid-size models and planned sport utility vehicle should help it compete strongly against comparable imports and regain sales momentum. Saturn plans to expand plant capacity and take over an additional facility, add new dealerships, and upgrade existing models and develop new ones to satisfy customers. Responsibility for increasing sales rests with the new chair and president, Cynthia Trudell, the first woman to ever head a fully integrated subsidiary of a North American car manufacturer. Trudell, whose father was a sales manager at several car dealerships in Saint John, N.B. while she was growing up, received her Ph.D. in chemistry at the University of Windsor, and has been working in the industry since then. Saturn's goal is to achieve sales of 500,000 cars per year, although Trudell's dream is to eventually sell 1,000,000 cars annually. Sales in 1999 were 232,570 units, indicating she ceryainly has a challenge. However, GM's experiment to develop "a different king of company, a different king of car" seems positioned for growth.

Questions for Discussion

1. Describe the target market for Saturn cars.
2. Describe the marketing mix — product, distribution, promotion, and price — for Saturn Corporation.
3. Does Saturn appear to be implementing the marketing concept? Explain your answer.

Sources

O.C. Ferrell, "Saturn," in O.C. Ferrell, Michael D. Hartline, George H. Lucas, Jr., and David Luck, Marketing Strategy (Ft. Worth, TX: Dryden Press, 1999), pp. 187-193; "A Different Kind of Company," Jan. 28, 1999; Keith Bradsher, "GM Announces Two Steps to Streamline Its Operations," New York Times, Mar. 11, 1997, p. D4; "FAQ," , Jan. 28, 1999; Randolph Heaster, "Cooperation Pays Off, Saturn Executive Says," Kansas City Star, July 27, 1997, p. B1; Susan Karlin, "Musing for Fun and Profit," Working Woman, Feb. 1997, p. 45; Michelle Maynard, "Saturn Gets Its Star Back," USA Today, Nov. 9, 1998, p. 9B; "Road Hazard," Advertising Age, May 5, 1997, p. 30; David Rouse, "O'Toole, Jack," Booklist, Sep. 1, 1996, pp. 45-46; Ian Austen, "Problem child," Canadian Business, Mar. 26, 1999, pp. 22-31; Elizabeth Church, "Trudell leads Saturn mission to reignite sales," Globe and Mail, March 30, 2000, p. B13; "Saturn Pricing," Mar. 31, 2000.

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Chapter 4 - Case 4.1

Coca-Cola Company: Managing in a Global Market

Coca-Cola Company, based in the U.S., is the global soft-drink industry leader. The company and its subsidiaries sell products in nearly 200 countries; approximately 70 percent of volume and 80 percent of profit come from global markets. Coca-Cola has approximately 21 percent market share of the non-alcoholic, ready-to-drink beverage market in both Canada and the U.S.

Coca-Cola Japan operates in one of the world's most competitive soft-drink markets. Approximately 500 manufacturers offer more than 7000 different soft drinks, and introduce about 1000 new ones annually. Coca-Cola manages more than 25 brands and 60 flavours. The company and its Japanese partners maintain 930,000 vending machines, as this method of distribution accounts for more than 50 percent of all soft drink sales there. Some years, Japan has provided as much as 20 percent of the company's global profit. However, the company's most popular product in Japan is not its flagship brand, but is a milky sweet drink called Georgia coffee.

Operating globally often requires flexibility as Japan illustrates, and it also sometimes creates special problems. In Britain, for example, the largest supermarket chain, J. Sainsbury PLC, took a major shot at Coca-Cola in an attempt to get some of that company's 60 percent share of the £670-million cola market. Sainsbury introduced its own private label cola, manufactured by Toronto-based Cott Corp., the company that also produced private label brands for Wal-Mart in the United States, and President's Choice drinks for Loblaw Cos. Ltd. in Canada.

The Sainsbury cola was packaged in red-and-white cans, as was Coca-Cola. Where Coca-Cola was written vertically down the can, Sainsbury had Cola written in a similar but slightly more silvery red script. The Sainsbury brand also had the word "Classic" on the can, along with "Original American Taste." Sainsbury stocked the competing products side-by-side, but priced its private label brand 25 percent less than the "real thing."

While Coca-Cola might have sued, it is questionable whether it could have won. The cola giant would have had an easier time almost anywhere else in Europe where many countries have a general concept of unfair competition, a concept missing from British law which focuses on a narrow definition of trademark. Sainsbury likely checked with its legal counsel before launching the look-alike product.

Global markets will continue to provide opportunities for future growth. In 2000, Coca-Cola elected Doug Daft chairman and chief executive officer. Born in Australia where he joined the company in 1969, Mr. Daft has extensive experience with Coca-Cola in Asia, Africa, and the Middle East. He is a global man with the challenge to manage a truly global company.

Questions for Discussion

1. What environmental forces are most important for Coca-Cola Company to monitor as it operates in global markets?
2. In marketing soft drinks around the world, what marketing-mix decision variables would Coca-Cola have to alter? Explain.
3. What alternative actions can Coca-Cola take with respect to J. Sainsbury PLC?

Sources

The Coca-Cola Company 1999 Annual Report. Betsy McKay and Nikhil Deogun, "Coke world wonders if Douglas Daft is it," The Wall Street Journal, in Globe and Mail, December 8, 1999, p. B10. The Coca-Cola Company, "Our Profile," http://www.thecoca-colacompany.com/tccc/profile.htm, March 31, 2000. The Coca-Cola Company, "Profiles," http://www.thecoca-colacompany.com/world/world.html, March 31, 2000. Marina Strauss, "Coca-Cola fights private labels," Globe and Mail, April 26, 1994, p. B11. Madelaine Drohan, "British await Coke's reply to grocer's look-alike cola," Globe and Mail, April 29, 1994, p. B5.

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Chapter 8 - Case 8.1

Molson Inc.: 100 Percent Molson; 100 Percent Canadian

Molson is North America's oldest beer brand. Molson, established in Montreal in 1786, now employs 3,650 people and operates seven breweries across Canada. It became Canada's largest brewer following its merger with Carling O'Keefe Breweries in 1989. A subsequent alliance with Miller Brewing Company in 1993 made Molson the sixth-largest brewer in North America. It was at one time partly owned by Foster's Brewing Group which held a 50 percent share. However, Molson bought back 100 percent control in 1998, including Foster's share in Coors Canada, giving it 49.9 percent interest in that business.

In 1999, Molson's market share increased to 45.3 percent of all beer sold in Canada, including imported beer. It was a tough battle, and the increase was only 0.1 percent over 1998. That, however, is a lot of beer, and a lot of money, in the 20.4-million hectolitre Canadian beer market. Molson's largest market is Ontario where it holds 51.4 percent market share; it holds 52.6 percent in Newfoundland. Molson Canadian is the leading brand in Ontario and Coors Light is the leading light brand. In Quebec, Molson has 48.9 percent market share; Molson Dry is its leading brand there. In Western Canada, Molson has 41.4 percent market share, where Molson Canadian continues to gain market share.

Molson understands that many beer drinkers are avid sports and music fans, and it continues to affiliate itself with highly visible sports and music events. Molson owns the Montreal Canadiens hockey club, and sponsors hockey events across Canada at all levels: professional, amateur, and local. On its Website (www.iam.ca), visitors can play the I AM. A Hockey Millionaire Fantasy Challenge, a free hockey pool where contestants can win more than $72,000 in prizes, and have a shot to win $1,000,000. Molson also sponsors the Air Canada Grand Prix in Montreal, and promotes the Molson Indy in Toronto, and Vancouver. Nearly 3-million Canadians attend Molson music events annually. Again, at its Website, visitors can get information about and even hear samples from many of Canada's promising new musicians.

Molson continues to fight for market share with Labatt Brewing, Canada's other giant brewery. They have both had to face increasing competition from many microbreweries which cater to the special needs in various local markets (for example, Island Breweries in Charlottetown, Sleeman Breweries in Guelph, and Great Western Brewing in Saskatoon). An additional challenge has been the drop in per capita beer consumption over the past twenty years. Per capita consumption has dropped nearly 20 percent to approximately 67 litres, a decrease attributed at least partly to an aging population and concerns about health and fitness.

Responding to these challenges, Molson has introduced dozens of new products over the past ten years, has adopted the "no preservatives" policy of the microbreweries, and has been agressively promoting its core brands, particularly Molson Canadian. Visitors to the Molson Website can go to the Pub Chat, where they can "share a pint" with other Canadians.

Questions for Discussion

1. What type of general targeting strategy should Molson use?
2. Which segmentation variables should Molson use?
3. Evaluate the market position of the microbreweries in relation to Molson.

Sources

Molson Inc. 1999 Annual Report; April 5, 2000. Molson Inc.; April 5, 2000. Brewers Association of Canada; April 5, 2000.

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Chapter 12 - Case 12.2

TD Waterhouse: Canada's Best Discount Broker

It's not often that a company finds business so good it must stop advertising, but that's the position TD Waterhouse found itself in following the rapid growth of investment trading through discount brokers. In early 2000, the company managed $50-billion in assets for approximately 750,000 Canadian investors, making it the market leader in an industry estimated to manage as much as $80-billion. Vice-chairperson, John See, says, "There's no sense going out there and marketing your services if you're having difficulty servicing to an acceptable degree your existing clientele."

Canadian Business tested 11 Canadian discount brokers in 1999 and ranked TD Waterhouse the best. It offered 24-hour order confirmation, account balances, real-time stock quotes, and many on-line tools to help clients make investment decisions. One thing that set it apart was TalkBroker, an automated phone system that understands spoken words, allowing customers to conduct business without having to remember stock ticker symbols or long sequences of numbers. When clients do need to talk to one of the company's customer service representatives, the conversation is sometimes monitored by one of a team of industrial psychologists hired to help employees improve communications skills. TD Waterhouse has 1100 salespeople employed in six call centres across Canada, and is planning to hire 500 more to work from new centres soon to be opened in Edmonton, Alberta and Markham, Ontario. Two of the call centres in Toronto are located on the same subway line, but are on different telephone grids. If telephone services go down at one centre, employees can be sent quickly to the other so there is minimal disruption to customer service.

TD Waterhouse had operated its call centres partly empty, hoping to have room for growth as business increased. However, the average waiting period to talk to a broker went from 30 seconds during the 1999 rating by Canadian Business to 30 minutes or more before and following RRSP season in 2000. During that busy period, TD Waterhouse opened an average of 500 new accounts each day, and waiting periods for new accounts were sometimes 5 to 10 days. It became impossible to manage demand during that period of rapid growth.

"We're treating it as crisis management," says John See. "It's our biggest failing at this point."

Questions for Discussion

1. Discuss the six service characteristics shown in Table 12.1 as they relate to the services provided by TD Waterhouse.
2. Using the categories in Table 12.2, classify the services provided by TD Waterhouse.
3. Describe TD Waterhouse's attitude toward the service quality issue.

Sources

Derek DeCloet, "The good, the bad, and the ho-hum," Canadian Business, September 24, 1999, pp. 74-78. "How they stack up," Canadian Business, September 24, 1999, pp. 82-84, 101-105. Karen Howlett, "Swamped TD cuts brokerage ads," Globe and Mail, March 25, 2000, pp. B1, B3. Karen Howlett, "TD shopping for U.S. bank to marry bricks, clicks," Globe and Mail, March 30, 2000, pp. B1, B2.

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Chapter 18 - Case 18.1

Microsoft: Crafting Image through Public Relations

A monopoly and a bully, or a champion of free enterprise and high-tech innovation? Different people have different images of Microsoft, the largest and most successful software company in the world, and of Bill Gates, its founder. And image is important to Microsoft, which operates in a highly competitive, high-stakes industry. That's why the company has a team of 150 managers and outside experts dedicated to public relations. Their role is to shape and protect the image of Microsoft and its products, including the Windows operating system, the Internet Explorer Web browser, and a cornucopia of software programs for business and personal use.

Microsoft applies well-honed public relations skills to maintain favourable relationships with its publics and to support new-product introductions. For example, in the weeks leading up to the launch of every major update of Windows, computer users are bombarded by media coverage in newspapers, magazines, television, and radio; many also receive newsletters and brochures in the mail or pick these up at local computer stores. These carefully timed, well-orchestrated public relations campaigns are designed to generate excitement in advance of the actual product launch. By the time the new product finally arrives on store shelves — accompanied by special launch-day events — the enormous anticipatory buzz has created pent-up demand that boosts early sales and generates considerable word-of-mouth communication.

Giving Microsoft a good-guy image is another key public relations objective. Targeting students, the company has stepped up giveaways to get its products into schools and post-secondary institutions around the globe. In 1999, Microsoft Canada contributions, through its KidReach program, totalled more than $4.5 million. In 2000, Microsoft launched the Microsoft Encarta World English Dictionary, a free, online dictionary that even talks to users with audio pronunciations (available at www.encarta.com). Another Canadian educational initiative is College of e, a joint venture alliance between Microsoft Canada and Humber College that offers five post-graduate E-commerce diploma programs. While this is its first E-Commerce Centre of Excellence, Microsoft Canada is hoping to identify additional opportunities for other regional alliances. Such arrangements allow Microsoft to display its strong support for education publicly while simultaneously building brand equity. As the general manager of Microsoft's education consumer unit has observed, "Today's fifth-grader is tomorrow's business leader. The sooner we have them using our software, the more they carry that brand name forward."

Over time, Microsoft has developed a reputation for extremely aggressive competitive tactics. This combative behaviour has long been under regulatory scrutiny, culminating in a lawsuit for antitrust activities brought against the company in the United States. Well before the trial began, Microsoft had its public relations experts thinking about how to present the company's side most effectively and contain the damage to its image. In addition to increasing its use of political lobbyists, the company explored ways of countering public perception of Microsoft and its founder as tough and arrogant.

To begin with, top Microsoft executives travelled extensively, making personal appearances and meeting with reporters. Taking a "kinder, gentler" approach, they downplayed the company's competitive strengths and stressed the message that Microsoft favoured technological innovation and wanted consumers to have more software choices. Brandishing the results of opinion polls, they also announced that consumers and computer users were giving Microsoft its highest ratings ever.

As the richest man on the planet, Bill Gates is a natural magnet for media attention, and the company started using this celebrity to its advantage. In the past, Gates had courted publicity about company matters but insisted on keeping his private life out of the media spotlight. Now, however, he agreed to talk more about his family life during media interviews. He scheduled visits to schools and made other public appearances, where he talked about Microsoft products and mingled a bit with audiences. This higher visibility gave Microsoft a chance to show Gates's human side and allowed him to air his forward-looking views on computer technology and other topics.

In addition, Microsoft conducted research to determine its standing with business decision makers and information technology professionals, two important publics that influence Microsoft purchases. Then, through informational ads in major newspapers, the company communicated its message that the antitrust case against Microsoft would only stifle innovation and dampen free choice in the marketplace. "At Microsoft, the freedom to innovate for our customers is more than a goal, it is a principle worth standing up for," stated the ads.

Even as these activities gained momentum, however, Microsoft came under fire after word leaked out about a proposed multimillion-dollar public relations plan targeting twelve states, including those where the company was under investigation. The proposal called for compiling media lists, identifying potential supporters in the academic world, and having people write opinion pieces and letters for placement in local newspapers. A Microsoft spokesperson said the company would probably implement some but not all of the tactics. "I wouldn't be doing my job if I weren't looking for ways to make Microsoft more visible with the local press," he said. "We are particularly interested in telling our story in states where there have been questions about Microsoft."

While it is too early to assess the effectiveness of its public relations activities, Judge Thomas Penfield Jackson, in a 45-page landmark verdict issued in April 2000, found Microsoft guilty of three of the four charges brought against it. Almost immediately after the decision, Bill Gates appeared on NBC's Today Show, where he stated, "When a consumer looks at what's happened with PCs and the Internet… I think that they can understand that the marketplace is working for them the way that it ought to work." As Microsoft continues to introduce new products and pursue its marketing goals, its executives remain well aware of the power of public relations. They remain committed to using that power to polish the company's image among its publics - keeping the Microsoft brand one of the best known in the computer industry. Their ability to manage public opinion in the coming months may prove pivotal during future litigation.

Questions for Discussion

1. What major public relations tools does Microsoft use?
2. Who are the publics that Microsoft wants to reach with its public relations efforts?
3. How should Microsoft evaluate the results of its public relations programs?
4. How do you think Microsoft should have used public relations to communicate its views during the antitrust trial? How should it use public relations to its advantage following Judge Jackson's verdict? Explain.

Sources

Rick Tetzeli and David Kirkpatrick, "America Loves Microsoft," Fortune, Feb. 2, 1998, pp. 80+; Steve Hamm, "I'm Humble, I'm Respectful," Business Week, Feb. 9, 1998, pp. 40-42; Greg Miller and Leslie Helm, "Microsoft Plans Stealth Media Blitz," Los Angeles Times, Apr. 10, 1998, p. A1; Thomas W. Haines, "Lesson Plan: Microsoft Hits the Hallways, because Today's Fifth Grader is Tomorrow's Software Buyer," Seattle Times, Apr. 12, 1998, p. F1; Bradley Johnson, "Microsoft Eyes Ads in Antitrust Struggle with Justice Dept.," Advertising Age, Apr. 13, 1998, p. 39; David Bank and John Simons, "Microsoft is on Defensive over Media Strategy," Wall Street Journal, Apr. 13, 1998, p. B8; Amy Cortese, "Emperor of High Tech, Sultan of Spin," Business Week, May 18, 1998, p. 37; Geoffrey James, "Image Making at Mighty Microsoft," Upside, June 1998, pp. 81-86; Susan B. Garland, "A Tough Sell, but Not Impossible," Business Week, Jan. 18, 1999, p. 44; and Mike France and Susan B. Garland, "Microsoft: The View at Halftime," Business Week, Jan. 25, 1999, pp. 78-82; Microsoft Press Centre, "Alliance Offers Canadians A Real-World Solution To E-Commerce Skills Gap," Mar. 31, 2000; Microsoft PressPass, "Online Dictionaries Face New Competition as Microsoft Launches Free Online Version of Encarta World English Dictionary," Mar. 31, 2000; Microsoft Press Centre, "Canadian Profile," Mar. 31, 2000. Barrie McKenna, "Microsoft appeals to loyal software users," Globe and Mail, April 5, 2000, pp. B1, B6.

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Chapter 19 - Case 19.1

NetActive Inc.: Relationship Marketing through Sales Promotion

NetActive Inc. (www.netactive.com), formerly Channelware Inc., is the world leader in using rich digital content for relationship marketing to mass audiences. Based in Nepean, Ontario, NetActive is the first successful spinoff of Nortel Networks. NetActive has developed an unique technology that allows software to come with an expiry date. This technology provides a great opportunity to deliver software to consumers on a pay-per-use basis, or for manufacturers and other companies to give software away for trial or as sales promotions.

In 2000, NetActive teamed with Activision and General Mills to offer a remarkable PC game premium. The 1980s classic arcade game, Asteroids, and an exciting new skill testing game, Extreme Mountain Biking, were given away with 1.75 million boxes of General Mills Trix and Cinnamon Toast Crunch. Consumers could load the CD-ROM in their PCs and play either game for up to two hours each. At the end of that time, they could extend their playing time for two additional days for a small fee, or could purchase rights online for unlimited usage.

For Activision, this is a new channel of distribution. It is a means of getting a sample of its popular games into the hands of members of its target market who might not otherwise think about buying the product. The company has been successful in attracting many new users through this promotion. For General Mills, a leading manufacturer and marketer of consumer foods, the promotion offers an unique chance to build relationships with its consumers by "connecting" better with them. When the promotional CD-ROM loads, users see the General Mills logo. When visitors "hit" the logo, they are brought to the company's Web site for kids, "You Rule School" (www.youruleschool.com). According to Dave Best, a marketing manager for these General Mills products, "It's important to us to use other venues to bring kids to the site. This NetActive CD program is the first time we've been able to trigger a link to the Web site from a real-world product." In a previous promotion, General Mills and Disney/Pixar teamed with NetActive to deliver the NetActivated Toy Story 2 program on 5 million boxes of Frosted Cheerios and Cinnamon Toast Crunch. Consumers have made hundreds of thousands of online activations of the game as a result of this promotion.

NetActive technology is also being employed by Computec Media U.S.A., Inc. Among the magazines published by this company are two "incite" magazines: incite PC Gaming and incite Video Gaming, the most successful new magazines recently launched in the U.S. These publications target 16-to-34-year-old gaming males. A two-year agreement between NetActive and Computec Media will see new game CDs distributed with the magazines each month, all using the new technology. For example, the April 2000 issue of incite PC Gaming included a full version of Railroad Tycoon II Gold, which consumers could play for four hours. This game won recognition from a number of game reviewers, including "Editor's Choice," "Strategy Game of the Year," and "PC Game of the Year." Here, NetActive technology adds value for readers, the publisher, and the game maker.

There appears to be tremendous opportunity for NetActive in the new millennium. Its technology provides a platform for several companies to co-operate for their mutual benefit, and to bring their products through a single channel to similar target markets. This is happening just as the demographics of online consumers are broadening. More consumers are buying online everyday, and they are beginning to provide potential for companies who wish to mass-market to them on the Internet. Speaking about this new method of bringing digital content to consumers to support customer loyalty programs and sales promotions, Jeff Dodge, president and chief executive officer of NetActive, says, "We're wrapping in a number of interested parties, all piggybacking onto the consumer interests. We connect their content to the Web, control that interaction and call that 'audience management'."

Questions for Discussion

1. Are the sales promotion methods described here consumer or trade sales promotion methods? Explain.
2. What types of sales promotion methods are used here: by Activision? by General Mills? by Disney/Pixar? by Computec Media?
3. How could other types of sales promotion be tied in with this new technology?

Sources

NetActive Inc., "Activision, General Mills and NetActive take you back to the arcade with classic game hit "Asteroids" and a hot new title "Extreme Mountain Biking." ; April 5, 2000. "NetActive Inc. partners with incite PC Gaming to put Asteroids on the magazine rack," ; April 5, 2000. NetActive Inc., "Full Railroad Tycoon II Gold game comes with incite PC Gaming magazine," ; April 5, 2000. Christopher Guly, "NetActive aims to milk cereal sales," The Ottawa Citizen, accessed; April 5, 2000.

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Addition Web Cases

Ponderosa Steak House Competes Through Value Pricing

In recent years, customers have been deserting moderately priced family restaurants for fast-food giants like McDonald’s, Taco Bell, and Burger King. Others, such as Ponderosa Steak House, a family restaurant that caters to the mid-range family dining segment, has been using value pricing as part of its overall strategy to regain market share from its fast-food competitors.

The first Ponderosa Steak House in Atlantic Canada opened in Moncton, New Brunswick, in 1974. There are now three locations in New Brunswick, two in Nova Scotia and Ontario, one in Newfoundland, and over 1300 corporate and franchise locations throughout the world. Customers who dine at any of the Canadian locations expect a value-priced menu with excellent variety. Lunch specials are priced from $3.99 to $4.69, and diners can choose among hamburgers, fried chicken or fish sandwiches, and hot dogs. Each comes with fries or a baked potato. The dinner menu frequently attracts large crowds of value-conscious diners. Dinner specials usually include "all-you-care-to-eat" soup and salad, but there are attractive prices on many other items as well. The "all-you-care-to-eat" soup and salad bar selection has been offered alone for $4.99, with a chop steak for $5.99, with a rib steak for $6.99, and with "all-you-care-to-eat" shrimp for $7.99 per person. "All-you-care-to-eat" ice-cream sundaes are sometimes included at these prices. The salad bar adds considerable value to most meals as both cold and hot items are included. One special even allows up to two children to dine free when accompanied by an adult who buys a regular-priced meal.

Dave Coady, who owns the six Ponderosa Steak House locations in Atlantic Canada, recognizes that his strength is in providing family value dining, and he takes care to ensure that customers have an enjoyable experience. Every diner who comes to Ponderosa Steak House gets a visit at their table by either the restaurant manager or shift supervisor within five minutes after being served, to ensure that their food has been prepared to their satisfaction. In addition, customer survey cards are available and question customers on all aspects of their dining experience. The surveys are carefully analyzed, and reports are issued to each restaurant location. If problems are identified, action reports must be prepared explaining how the problems have been addressed. All diners who complete a survey and indicate dissatisfaction receive a written response from president Dave Coady, often getting meal cards that can be redeemed for free meals.

Although few family restaurants are going head-to-head with Ponderosa Steak House, many are countering with similar value-oriented promotions. By reinforcing its commitment to serving quality food at low prices, Ponderosa Steak House has solidified its reputation among its many loyal customers as the family dining segment’s value leader.

Source: Coady-AC Enterprises Ltd., personal interview with President Dave Coady, June 30, 1997.

Study Questions

1. What are the major benefits of value pricing? The major drawbacks?
2. In what ways are Ponderosa’s marketers assessing the chain’s target market’s evaluation of price?
3. What type of pricing method does Ponderosa primarily use?

Power & Motion Industrial Supply Inc.¹

It was 7:00 P.M. on Sunday evening when Hal Maybee returned to his office. He had spent the afternoon golfing with one of his customers, and he now had to decide what he was going to tell head office on Monday morning with regard to new salaries for the sales staff at his branch.

Hal had just been appointed Atlantic Region District Manager for one of Canada's largest industrial distributors. His appointment was made only two weeks before, following the sudden death of Fergie McDonald who, at 48 years old, had been in charge of the company's most profitable branch. About 70 percent of the sales in Atlantic Canada, including the four most profitable product lines, were for manufacturers that the company did not represent on a national basis. There were many manufacturers in Ontario and Quebec that served central Canada with their own sales forces, and used distributors for the east and west coasts due to the distances from their head offices and the geographical dispersion of customers in those regions. Although Power & Motion had sales agreements with over 400 North American manufacturers, only about 100 manufacturers were involved in 80 percent of the sales.

It was a complete surprise to Hal when he was promoted, and he knew there were people at the branch who expected they deserved it more. Exhibit 1 shows the performance evaluations that Fergie had completed on the six sales people just before he died. Head office had intended to send only five forms to Hal, but one of the secretaries mistakenly included Fergie's evaluation of Hal as well.

Nearly three weeks previously, Fergie and Hal were making some joint calls on some pulp mills in Northern New Brunswick, the territory that Fergie kept for himself, even though head office wanted him to stop selling and spend more time on sales administration. During the trip, Fergie told Hal that he was given six percent of the total sales staff salary to be divided among them for the coming year. This was the customary way of giving salary increases at the branches as it gave head office the discretion to decide the total increase in the salary expense, but it gave the district managers responsibility for allocating salary increases. Fergie was told that nationally, sales increases would average about three percent, but his branch was among the lowest paid in the company and had been the best performing branch for several years.

Hal did not want to express his opinions as he knew he and Fergie would disagree. However, he did allow Fergie to express his own thoughts on the staff. There were two salespeople that Fergie had a real problem with. He viewed Jim Stanley as his biggest problem. Jim actually had seniority at the branch. He had been hired as shipper, orderdesk salesperson, and secretary when the branch was only large enough to support one person other than Bob Laird, the first salesperson the company had in Atlantic Canada. Bob and Jim operated the branch for almost two years when Bob decided to hire Fergie as a salesperson to help develop the territory. When Bob retired, Jim thought he would get the position as District Manager as he had seniority, and he had experience with all aspects of the business including managing the office and warehouse which had grown to include seven people. He was very disappointed when head office gave the position to Fergie as he had no experience other than sales.

Within a year, Jim decided he wanted to get into sales. He was finally resigned to the fact that office management was a deadend job, and the only possibility for advancement was through sales. Now, after five years, Jim was not performing as well as he should. In fact, he hated selling and spent an increasing amount of time drinking while away from home. He hinted that he wanted to get back into the office. However, when these rumours started to spread, the staff let it be known that they did not want to work under Jim again if there were any alternatives.

Fergie was thinking about giving Jim a good salary increase. First, it might make him appreciate his job more and maybe he would put more effort into selling. Second, it would make the position more attractive than a possible return to the office as he would not want to take a tremendous salary cut.

The other problem was Arne Olsen, the other senior salesperson. As the territory developed quickly, the branch hired a secretary just after Fergie was hired. A month later, a warehouseman was hired and Jim was promoted to Office Manager. Jim immediately hired Hal Maybee as an orderdesk salesperson. Within a year, another salesperson, Arne, was hired, along with a second secretary. The branch growth slowed, but was steady from that point on. Arne was always an average salesperson. He never really had much motivation to perform, but he always did whatever he had to do so that he was never in any serious trouble as far as his job was concerned. Lately, he was starting to slip a bit, and rumour had it that he was having at least one affair. He also recently bought a Mazda Miata that he drove on weekends as he was not allowed to drive anything but the company car through the work week.

Dave Edison was with the company for just under one year. If he had a few more years with the company, Hal knew he would have probably been the new District Manager. He came to the company from the life insurance industry, and rumour had it that he was slated for a national sales manager position within the next year as the company was rumoured to be taking on a new line of capital equipment from Europe that would be sold nationally, but would have one person at head office responsible for national sales.

Tanya Burt was also in sales for only a year. She had been hired as a secretary, but it soon became apparent that she had exceptional telephone skills. She was promoted to order desk salesperson within a year, and three years later, she requested and was given an outside sales territory. There was some concern with her product knowledge, but no concern with her attitude or sales ability. Tanya was the first and only woman to be promoted to one of the company's eighty outside sales positions.

Buck Thompson had a very solid, established territory. He needed little direction as he was doing most things very well. Fergie was a bit concerned that he was not making enough sales calls, but he certainly was performing well.

As Hal reviewed the performance evaluations, he agreed that Fergie had been very thorough and accurate in his assessment of each of the individuals. Hal wondered about the amount of salary increase he should give to each person. While he had to make this decision immediately, Hal realized there were other important decisions he would have to make soon. He recognized some of the problems Fergie had trying to decide salary increases, and these were more important for Hal as he had to get the support of the sales staff before he could hope to overcome some of these problems. He also had to start thinking about hiring another salesperson to cover Newfoundland and northern New Brunswick as head office was determined that he give up responsibility for all accounts in the region. He would, however, be allowed and encouraged to call on customers with the sales staff.

Study Questions

1. Evaluate each salesperson and determine the amount of salary increase you would give them.
2. Which salesperson should have been promoted to District Manager?
3. What would you do with Jim Stanley and Arne Olsen?

Evaluation of Salespersons

Select link above to download the evaluations (Word 7.0) file

¹ Copyright © 1994 by H. F. (Herb) MacKenzie. This case was prepared as a basis for class discussion and is not intended to illustrate effective or ineffective handling of a management situation. All names in the case have been disguised. Reprinted with permission.