Additional Current Events
Related by Chapter
Last Updated: June 10, 1997
Keep up to date with happennings that affect the marketing world by selecting a chapter below:
Go to chapters 1-7
Go to chapters 8-14
Can Fleming Companies Rationalize Its Pricing?
Are Commissions on The Way Out?
[Relates to Ch. 18]
What's happening at Sears?
[Relates to Ch. 22]
[Relates to Ch. 15]
The marketing formula that produced long-term success for the Fleming
Companies has ceased working well. The full-service wholesaler of groceries and related products experience particularly serious problems with its pricing. Basically, the firm used a "cost-plus" system under which its customers, primarily independent grocers, could purchase goods at the stated cost of a product plus a small percentage markup. In turn, Fleming kept for itself discounts, rebates, and other savings provided by manufacturers.
Fleming's pricing approach even prompted a lawsuit by a former customer,
David's Supermarkets Inc. of Grandview, Texas. The supermarket chain claimed that Fleming charged it higher wholesale prices than allowed by the contract between the two parties.
Perhaps due to the lawsuit or perhaps due to a loss of customers, Fleming's is striving to revamp its pricing and other elements of its marketing mix. Starting in early 1995, the wholesaler began basing its prices on cost plus the actual expense of handling, shipping, and warehousing various products. Some customers applauded the new approach, other criticized it.
Sources: Louise Lee, "Texas Grocer's Award in Suit Reveals a Maze of
Wholesale Pricing," The Wall Street Journal, May 1, 1996, pp. A1, A6; and
Wendy Zellner, "A Warehouse Full of Woes at Fleming," Business Week, Sept. 23,
1996, pp. 94+.
[Relates to Ch. 17]
Some retailers that have long relied on a straight-commission form of compensation for sales people are looking at alternatives. Several units of
Federated Department Stores, Inc., for instance, have switched sales people in selected departments from commission to salary compensation. The
Bloomingdale's, Rich's/Lazarus, and Macy's West divisions have implemented this type of plan. The Macy's East division chose to test it in 16 of its 91 stores. Under the new plan, sales people would be eligible to earn a periodic bonus if they meet predetermined sales goals.
Areas within Federated stores that were affected range from women's fashions to housewares. Many areas, ranging from men's suits to furniture, have not been affected by the change.
Perhaps the switch will spread to the retailing of other products, where commission compensation has been the tradition. Rothman Furniture Stoes Inc. in the St. Louis area would welcome the change. One consultant, Britt Beemer of America's Research Group, says such a change is very risky. In his opinion, shoppers consider sales people who are on commission to be more knowledgeable than those on other compensation plans. He even predicted that the switch would lead to a 20 percent drop in sales for a furniture store.
Sources: Laura Bird, "Federated's Macy's East Unit Gets Rid of Some Sales
Commissions at 16 Stores," The Wall Street Journal, Aug. 5, 1996, p. B7; and
Fred Faust, "'Sales Pitch' Made to Staff," St. Louis Post-Dispatch, June 5,
1996, p. 1C.
Although we are most familiar with advertising directed at consumers, a substantial portion of print and broadcast
advertising involves businesses communicating with other businesses. The objectives are essentially the same as those
in consumer advertising--attract attention and create some change in the recipient. As one ad executive put it,
"Ultimately, you have the same human traits affecting a purchase regardless of the product."
Business-to-business ads historically have been dry and unimaginative, corresponding to the notion that business buyers
make their decisions on functionality. However, a new breed of business ads is appearing that incorporate as much
creativity and eye appeal as top-flight consumer advertising. One example is Bayer Corporation's ad campaign for
Legend insecticide for cotton. To grab cotton growers' attention, the ads depict offbeat examples of "life without
cotton." For example, one talks about what life would be like with "polyester candy" instead of cotton candy.
Others include Gravely International (landscaping equipment), Dow Chemical
(Affinity resins), and 3M Corporation (corporate image). Check the Web sites of these firms (3M's contains the ads)
for more insights into how they have tried to liven up their messages.
Primary source: Lambeth Hochwald, "It's the Sizzle that Sells," Sales &
Marketing Management, April, 1997, p. 50-52.
[Relates to Ch. 22]
Sears was recently held in violation of bankruptcy laws. According to court records, the firm continued to demand payment from bankrupt credit-card holders and threatened to repossess property even after a federal judge ruled the action should stop. On a related issue, Sears got consumers to sign reaffirmation agreements - which call for bankrupt debtors to continue making payments on debts even after they declare bankruptcy - but did not file them with the court as required by law. The filings are required so the court can review the agreements and approve them before they can be acted upon by a creditor. According to the judge in the case, Sears personnel intentionally avoided filing the agreements to prevent judicial oversight. To resolve these complaints, Sears has agreed to give consumers $100 million in refunds.
Not too long ago Sears was involved in another legal issue. Sears' auto service center personnel in several states were systematically recommending unndeeded repairs to customers' cars. They were caught is a sting operation by authorities who took cars in good working condition to service centers.
How would you react to these developments if you were a Sears' executive? a
Sears' stockholder? a Sears' customer?
Sources: Robert Berner, "Sears Debt-Collecting Policy Was Ruled Illegal
Twice by a Bankruptcy Judge," The Wall Street Journal, April 25, 1997, p.
A4. Casey Bukro and Genevieve Buck, "New Disclosures in Sears Case,"
Chicago Tribune, April 26, 1997, Section 2, page 1+. "Sears Agrees to pay
$100 Million," South Bend Tribune, June 5, 1997, p. C10.
Quaker Oats has sold the Snapple juice and iced-tea business for $300 million to Triarc, the owner of RC Cola.
That may seem like a lot of money until you realize that just 3 years ago, Quaker bought Snapple for $1.7 billion.
For Quaker, the deal represents a loss of over a $1 million a day in the sale price alone for every day it owned Snapple.
That doesn't include a last-ditch $25 million promotion in which bottles of Snapple were given away in an attempt to
breathe life into the brand. What went wrong?
Sources: "Quaker Oats to Sell Its Snapple Business," The Wall Street Journal, March 28, 1997, pp. A3+.
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