CHAPTER 11 Resource Manager CHAPTER 11 Resource Manager · Zollo, Peter. Wise Up to Teens: Insights...

You and your students can visit ett.glencoe.com—the Web site companion to Economics Today andTomorrow. This innovative integration of electronic andprint media offers your students a wealth of opportuni-ties. The student text directs students to the Web site forthe following options:

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Use the Glencoe Web site for additional resources. All essential content is covered in the Student Edition.

ECONOMICS

Reading for the StudentZollo, Peter. Wise Up to Teens: Insights Into Marketing

and Advertising to Teens. Ithaca, NY: New StrategistPublications, 1999. Uses real-life examples to show howproducts are marketed to American teenagers.

Multimedia MaterialMarketing Perspectives—A Series. 29 videos. Wisconsin

Foundation for Vocational, Technical, and Adult Education.

Additional Resources

Spanish Economic Concepts Transparency 5

Spanish Vocabulary Activity 11

Spanish Reteaching Activity 11

Spanish Section Quizzes for Chapter 11

Spanish Chapter 11 Audio Program, Activity, and Test

Spanish Resources

Vocabulary PuzzleMaker Software

Interactive Tutor Self-Assessment Software

ExamView® Pro Testmaker

NBR Economics & You Video Program (English/Spanish)

Presentation Plus!

Glencoe Skillbuilder Interactive Workbook CD-ROM,Level 2

Interactive Lesson Planner

MindJogger Videoquiz

Interactive Economics! CD-ROM

Audio Program (English or Spanish)

Technology and Multimedia

Assessment and Evaluation


PROCEDURE

1. Brainstorm with the class various products students might purchase in the marketplace. (food, furniture, clothing, jewelry, etc.)

2. Choose one of the products the students have mentioned and model it on the chalkboard. For example, draw a hamburger using colored chalk. Then explain each ingredient used and how the ingredient travels through theproduction process from raw goods producer (e.g., lettuce), through warehousing, to the consumer.

3. Organize the class into teams or groups of five or less, and from the list generated during the brainstormingprocess, have each group choose a product to trace through the production and distribution process. Each groupmember will select a role in producing the product. Possible roles include: raw goods producer, a manufacturer,storage and transportation middle persons, a retailer, etc.

4. Instruct the teams to illustrate the stages of the production process for their product on poster board. Teams willneed to make a group decision on the “best” place to sell their product.

5. As an enrichment activity, you may wish to have students present the production for a particular product, using aslide show or a photo essay.

Assessment

1. Have each team select a spokesperson. This individual will come to the front of the room and present thegroup’s product, using the production process poster that the team created. After each spokesperson has madethe presentation, the rest of the team will join him or her for a question and answer session from the teacherand classmates.

2. Have students write a paragraph tracing a new product from raw material to market.

▼ BACKGROUND

Moving goods from where they are producedto the consumer who buys them involveschannels of distribution. These channelsinvolve several intricate steps.

▼ MATERIALS

List of consumer goods; scissors, poster board,glue, magazines, newspapers, and catalogs

▼ OBJECTIVES

After completing this activity, students will beable to• Trace the production process from raw

materials to the consumer.• Identify the stages of the production

process and explain the difference between wholesale and retail distribution.

• Illustrate channels of distribution with respect to producers, wholesalers, and retailers including the following:a. storage and transportation processing

(warehousing)b. club warehousingc. direct marketing (catalogs)

• Decide “place to sell” and “alternative”selling place.

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T HE PRODUCTION PROCESS

Name Date Class

RUBRICSposter, oral presen-tation, a writing,slide show, or photoessay

7

Performance Assessment Activity 7

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11, A

14. The four Ps of marketing include which of the following?

a. product, promotion, and place b. principal, promotion, and pricec. price, principal, and production d. production, pricing, and promotion

15. One of the newest distribution channels is

a. rail and air freight. b. warehouse clubs.c. transporting of goods. d. pipelines.

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.

16. Finding the Main Idea Why do manufacturers use wholesalers rather than sell their goods directly to retailoutlets?

17. Determining Relevance Explain several ways a company might use market research that revealed that theprice it had planned to charge on a new product was too high.

APPLYING SKILLS

Using Charts and Tables Study the table and answer the questions below.

Demographic Profile of Shine Toothpaste Users

18. Which income groups represent the largest purchasers of Shine?

19. Which age groups represent the largest purchasers of Shine?

20. How could the producers of Shine use this information to market their product?

Percent ofCharacteristic Total

Age

15 4

15-19 28

20-30 39

31-45 23

45-64 5

65+ 1

Annual Household Income

$25,000 0

$25,000-$50,000 6

$50,000-$75,000 31

$100,000-$125,000 29

$125,000 32

Chapter 11 Test Form A

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SCORE

11, A

MARKETING AND DISTRIBUTION

RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. Direct marketing is done mainly through

a. television advertising. b. print advertising.c. catalogs. d. telemarketing.

12. Which of the following is not a form of promotion?

a. coupons b. advertisingc. celebrity product endorsements d. price

13. An example of a product that the producer sells directly to the retailer is

a. automobiles. b. greeting cards.c. fruit and vegetables. d. canned goods.

A1. product life cycle

2. promotion

3. marketing

4. e-commerce

5. test marketing

6. wholesaler

7. market research

8. channels of distribution

9. utility

10. retailer

USING KEY TERMS

Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.

Ba. conducting business transactions over the World Wide Web

b. routes by which goods are moved from producers to consumers

c. offering a product for sale in a small area for a limited periodof time to see how well it sells before offering it nationally

d. series of stages that a product goes through

e. use of advertising to inform consumers that a new orimproved product or service is available and to persuade themto purchase it

f. business that sells consumer goods directly to the public

g. satisfaction gained from a good or service

h. business that purchases large quantities of goods from pro-ducers for resale to other businesses

i. all the activities needed to move goods and services from theproducer to the consumer

j. gathering, recording, and analyzing data about the types ofgoods and services that people want

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11, B

13. Marketers use market research to

a. find channels of distribution. b. conduct market surveys.c. establish product utility. d. develop products and test different types of

packaging.

14. The purpose of marketing is to

a. increase a company’s profits. b. increase a company’s market share.c. convince consumers that a certain product or d. find a market for a product or service.

service will add to their utility.

15. Which of the following is not an example of product promotion?

a. advertising b. catalogsc. using wholesalers d. distributing cents-off coupons

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.

16. Making Predictions What effect do you think the Internet has had on marketing and competition? How isit likely to change the way companies compete in the future?

17. Evaluating Primary and Secondary Sources What primary sources do you think market researchersuse? What secondary sources do you think they use?

APPLYING SKILLS

Using Charts and Tables Study the table and answer the questions below.

Demographic Profile of Shine Toothpaste Users

18. How popular is Shine among senior citizens?

19. How popular is Shine among people who earn $50,000 or less a year?

20. How could the producer of Shine use this demographic data to market the product?

Percent ofCharacteristic Total

Age15 415-19 2820-30 3931-45 2345-64 565+ 1Annual Household Income$25,000 0$25,000-$50,000 6$50,000-$75,000 31$100,000-$125,000 29$125,000 32

Chapter 11 Test Form B

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SCORE

11, B

M ARKETING AND DISTRIBUTION

RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. Most products go from

a. manufacturers to retailers to consumers.b. manufacturers to wholesalers to retailers to consumers.c. manufacturers to wholesalers to consumers.d. manufacturers to retailers to wholesalers to consumers.

12. More and more traditional retailers are “setting up shop”

a. near full-service wholesalers. b. near wholesale clubs.c. on the World Wide Web. d. closer to computer stores.

A1. marketing

2. market survey

3. utility

4. channels of distribution

5. test marketing

6. market research

7. direct-mail advertising

8. wholesaler

9. penetration pricing

10. e-commerce

USING KEY TERMS

Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.

Ba. business that purchases large quantities of goods from pro-

ducers for resale to other businesses

b. conducting business transactions over the World Wide Web

c. gathering, recording, and analyzing data about the types ofgoods and services people want

d. all the activities needed to move goods and services from theproduct to the consumer

e. study in which researchers gather information about possibleusers of a product based on such characteristics as age, sex,income, education, and location

f. amount of satisfaction one gets from a good or service

g. offering a product for sale in a small area for a limited periodof time to see how well it sells before offering it nationally

h. routes by which goods are moved from producers to consumers

i. type of promotion using a mailer

j. selling a new product at a low price to attract customersaway from an established product

288B

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Resource ManagerCHAPTER 11Application and Enrichment

ARKETING AND DISTRIBUTION

MARKETING EXPERTS AND CONSUMER SURPLUS

Have you ever been willing to pay $60.00 for a special pair of shoes, only to find them pricedat $42.00? The $18.00 you saved is referred to as consumer surplus. Marketing experts try todevise ways to capture consumer surplus, that is, to get consumers to pay the highest pricethat they are willing to pay. Since it is illegal for companies to charge different prices for thesame product, they have devised some creative ways to charge different prices for practicallythe same item.

Directions: In the table below, first look at the example of the plane ticket. Then, for the other items, estimate the high and low price that might be paid and the marketing mechanisms being used to captureconsumer surplus. Then write the price you would be willing to pay. In the last row of the table, add anitem of your own choice and repeat the process. Finally, answer the question that follows the table.

1. What are some reasons why some people are willing to pay the higher prices?

2. When buying new cars, millionaires typically choose cars that cost only a few thousand dollars more than carschosen by Americans with average incomes. What generalization can you make about marketing’s effect on millionaires?

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Plane ticket to a $200 $1,200 $200 for vacation,distant city where a Departs 11 P.M. Departs 9 A.M. $1,200 in the eventrelative lives 14-day advance notice No advance notice of an emergency

Book

Movie

Bathroom cleaner

Pizza

Item Low Price High Price The Price You Would Pay

Enrichment Activity 11

Teaching Transparency

Application and Enrichment

Review and Reinforcement

C HAPTER 11 MARKETING AND DISTRIBUTIONDirections: Complete each sentence by filling in the blanks with vocabulary terms from Chapter 11. Thenrearrange the letters marked by ❑ in the blanks at the bottom of the page to find the hidden term.

1. ❑ is all the activities needed to move goods from the producer to the consumer.

2. A ❑ gathers information about possible users of a product.

3. ❑ means the buyer rules the market.

4. The amount of satisfaction one gets from a good or service is its ❑ .

5. ❑ offers a product for sale in a small area for a limited period

of time to see how well it sells before offering it nationally.

6. ❑ - is a kind of advertising that usually reaches a consumer at home.

7. It is ❑ that causes companies to set prices close to

what is charged by other companies selling similar products.

8. Selling a new product at a low price to attract customers away from an established product is called

❑ .

9. ❑ is a series of stages that a product goes

through from its first introduction to its withdrawal from the market.

10. ❑ are businesses that sell consumer goods directly to the public.

11. ❑ informs consumers, through advertising, of a new or improved product.

12. ❑- involves conducting business transactions over computer networks.

13. ❑ are the routes by

which goods are moved from producers to consumers.

14. ❑ purchase large quantities of goods from producers for resale to

other businesses.

Hidden term

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Economic VocabularyActivity 11

288A

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D EVELOPING MULTIMEDIA PRESENTATIONSMultimedia computer presentations combine text, video, audio, and animation to create livelyand visually appealing reports. To create a multimedia presentation on your computer, youwill need a variety of programs depending on the type of media you intend to use. Make a listof the topics you want to cover in your presentation. Then identify the forms of media youwould like to include and determine whether your computer can support them.

Directions: Design a multimedia presentation on the euro, the new currency that will replace national cur-rencies in 11 Western European countries beginning in 2002. To create your presentation, first research theeuro using library resources or the World Wide Web. Then use the panels below to sketch storyboards orseries of screenshots that outline what you will include in your presentation. For each storyboard indicatewhich media you plan to use.

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D RWING INFERENCES AND MAKING CONCLUSIONSFROM ADVERTISING

Example: Arabian Saddle Co.

offers the Sylvan G.P.

_ Soft Cushioned Seat

_ Supple English Leather

_ Unique System for Secure Girthing

The ad targets horse owners interested in comfort andsafety.

1. ZERO % financing until 2002 Save $60 on a 12-amp. canister vacuum cleaner with deluxerewind and headlight with Powermate Jr.

2. Our $48 Bear Beanbag Chair plays a lullaby everytime a child takes a seat. Chair is stain-proof, cov-ered with cotton terry, and supports up to 60pounds.

3. Variations, Dances, and Other Shorter Worksfor Solo Piano, by Joseph Haydn. Airs, capriccios,minuets, German dances, plus movements fromsonatas. 128 pp. $9.95

4. Perhaps the World’s Most Comfortable OfficeChair High-tech stretch fabric supports you moreevenly and comfortably than leather. The chair piv-ots at your ankles, knees and hips. It has all theright ergonomic adjustments. $979

5. Classic Dotted Percale Sheets Woven in lustrous310-thread count Supima cotton, these easy-caresheets feature open cutwork embroidery at thehems. Twin: $72/Queen: $98/King: $112

6. The World Changes, so should the way your students learn about it. ENCARTA Reference Suite.Includes Encyclopedia Deluxe, Virtual Globe, and360 views on either CD or DVD.

77

To draw an inference means to evaluate information and arrive at a conclusion. Readingmagazine advertisements and catalogue entries gives plenty of practice in drawing inferencesand making conclusions.

Directions: Read the following excerpts, draw inferences about the kind of consumer the advertiser is tar-geting, and write your conclusion in the blank below each excerpt.

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ARKETING AND DISTRIBUTIONWhenever you buy a new cereal or soap, remember that it is for sale because the manufacturerhas researched and tested it to be sure there is a potential market for it.

Directions: The following activity will help you to recall some of the terms you learned in Chapter 11. If youfill in all the words and terms correctly, you will spell the word for an important concept in the boxed letters.

1. The fourth stage in the development of marketing.

2. Companies began to do this to promote their goods and to attract customers.

3. These marketing strategies are also known as the marketing mix.

4. Product identification can involve a certain type of this.

5. Offering a product for sale in a small area to see how well it sells before selling it nationally.

6. They sell consumer goods directly to the public.

7. Supply and demand play a large part in determining the of a good or service.

8. The routes by which goods are moved are known by this name.

9. This kind of shopping has become a popular distribution channel.

1.

2.

3.

4.

5.

6.

7.

8.

9.

Directions: The following flow charts show channels of distribution. Fill in the empty boxes with the miss-ing labels.

Consumer Goods

10. Manufacturer

11. Retailer

12. Manufacturer

Raw Materials and Producer Goods

13. Business

14. Wholesaler

1111

M

Critical Thinking Activity 7 Reteaching Activity 11

Reinforcing Economic Skills 25

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C ATALOG SHOPPINGCatalog shopping is popular. Why? In many cases the buyer can avoid paying sales tax byordering through a catalog. But do other added costs offset the savings? A typical order blank,such as the one below, can help you to find out.

Name Date Class

7

Directions: Use the information on the order blank above to complete the exercises.

1. Suppose you live in an area of Illinois where the combined city and state sales tax is 10%. How many dollars’worth of merchandise would you need to order so that your shipping charge would be less than the tax youwould pay on the same item at a local store?

2. Suppose that Jan, who lives in Texas, filled out an order for $129.50. She would need to pay 8% in sales tax ather local store for these same items at the same prices. Will she save money by ordering these items from thecatalog? How much?

3. Eduardo lives in Indiana and pays 6% sales tax on in-store purchases. Would he save money ordering from thecatalog? Explain.

4. What is another advantage of catalog shopping? What are some disadvantages?

Item Name Price

Flannel shirt

Corduroy jumper

Sherpa coat

$34

$38

$88

Order and Services

Call 1.800.555.0233, every day8 A.M. to 12 midnight Eastern Time.

Fax orders to 1.800.555.111124 hours every day.

* Delivery in 3–5 business days.

* No extra charge for backorder shipments.

* Credit card orders not charged until they leave our warehouse.

For orders shipped to Maine, Minnesota, Kentucky, New York, and IndianaADD APPLICABLE SALES TAX

Shipping cost within the U.S.A.

up to $24 $4.50

$25 – $49 $6.50

$50 – $74 $7.50

$75 – $149 $9.00

$150 and up $10.50

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A NALYZING ADVERTISINGBusinesses have some responsibility in advertising, packaging, and product guarantees.However, it is still the consumer who must compare products, read labels, and check outadvertising claims. Read the advertisement below and answer the checklist questions.

Directions: Assume you are in the market for this product and complete the following checklist.

1. Does the ad appeal to my emotions, or are there adequate facts? Explain.

2. What are the product’s special features? Do they meet my needs?

3. What does the ad say about the products’ durability? How would I check this?

4. How does the ad’s price compare with similar products? How would I compare prices?

Name Date Class

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First in its class!YOU HAVE THE WHEELS, NOW GET THE NEW SWISHER AUTOSHINE POLISHER.

Variable speeds, light weight, durable (1-year warranty), battery or A/C operated. The polisher of choice for the new car owner, the Swisher will bring a new car shine to anyvehicle. See yourself in the shine!

WHY PAY UP TO $50 FOR SECOND BEST? Get the Swisher on sale at your local hardware.

Now only $39.99!PLUS! A free can of Swisher Gleem with your new polisher.

Economic Concepts 5

E CONOMIC INSTITUTIONS & INCENTIVESThese newspaper headlines all refer to economic institutions.

55

Economic Concepts Transparency 5

Consumer ApplicationsActivity 7

Free Enterprise Activity 4

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C OMPARING PRICES AMONG COMPETITORS

[Source: rates quoted by carriers, August, 1999]

(1) What is the cheapest rate for sending a 1-pound package? A 20-pound package?

(2) What is the most expensive rate for sending a 1-pound package?

A 20-pound package?

(3) How does speed of delivery affect the delivery price?

How does weight affect the delivery price?

(4) How much less expensive is it to send a 1-pound package by second-day service with USPS than with FedEx?

Than with UPS?

How much of a premium does each company charge for its fastest service? To find out, look at the percent of

increase in price over each company’s slowest service. Use this formula:

Percent increase � (rate for fastest � rate for slowest) � rate for slowest � 100

For example, to find the percent increase charged by UPS, apply the formula as follows:

Percent increase � (22.25 � 4.50) � 4.50 � 100 � 17.75 � 4.50 � 100 � 394%

(5) What is the percent increase for a 1-pound package with FedEx?

With USPS?

Name Date Class

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The United States Postal Service (USPS) has no competitors in the delivery of first-class mail. The Postal Service does not,however, have a monopoly over other types of delivery. Customers can choose from many options.

The table below shows what it costs to send a 1-pound and a 20-pound package from Boston, Massachusetts, toDenver, Colorado, by three carriers. The prices reflect some differences among the carriers. Federal Express (FedEx), forinstance, charges one rate for delivery anywhere in the continental United States. United Parcel Service (UPS) and USPShave different rates for different zones.

▼ DOMESTIC SHIPPING RATES

1-pound package 20-pound packageUSPS UPS FedEx USPS UPS FedEx

Next day $15.75 $22.25 $23.25 $47.05 $81.25 $64.50

Second day $3.20 $9.75 $9.75 $22.65 $61.25 $38.25

Third day $3.20 $7.30 $8.50 $22.65 $42.60 $35.25

Ground $3.20 $4.50________

$18.52 $19.60________

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EXAMINING THE CARTOON

Multiple Choice

1. What does the “rolls a little rough” statement about a rock that is obviously flat on the bottom imply about thissalesperson’s attitude toward consumers?

a. They really need this product. b. They are very gullible.c. They need encouragement to make the decision. d. They can’t afford anything better.

2. What message does the “prehistoric” setting of the cartoon convey?

a. Consumers have always been victimized. b. Transportation has always been a need.c. People have always bought and sold things. d. Civilization has made great advances.

Critical Thinking

3. Analyzing the Cartoon How do the hanging flags enhance the point of the cartoon?

4. Expressing Your Opinion Do you think this cartoon qualifies as an editorial, or is it only intended to makepeople laugh? Explain.

L ET THE BUYER BEWAREThe Latin phrase caveat emptor means “let the buyer beware” or “buy at your own risk.”Consumers are wise to keep it as their motto. After all, those who market goods are working intheir self-interest to sell them. The relationship between selfish business interests and victim-ized consumers is a favorite topic of cartoonists.

Directions: Study the cartoon below. Then answer the questions that follow.

77

THE FAR SIDE c 1987 FARWORKS, INC. Used by permission. All rights reserved.

is attempting to reverse more than two decades of declineby overhauling its restaurants in a 1950s rock ‘n’ rollimage. A&W Chairman Sidney Feltenstein, a formerBurger King Corp. marketing executive, hopes the retroappeal will help them stand out in a crowded segment.Feltenstein says McDonald’s Corp. and Burger King canfight over the kids; he’s aiming for adults. So far, themakeover appears to be working: At one redone A&W

in Dearborn, Mich., middle-age diners dominate thelunchtime crowd. “It reminds you of your youth,” sayssalesman Kirk Pettit, 38, as Beach Boys music wafts froman old Wurlitzer jukebox. Overall, sales at the remodeledstores are up 20% over 1996.

Naughton, Keith, and Bill Vlasic. “The Nostalgia Boom.”Business Week, March 23, 1998.

14 Primary and Secondary Source Readings

ANALYZING THE READING

1. What is Volkswagen’s target audience?

2. What advertising techniques does the company use to appeal to that audience?

3. How do advertisers tap consumers’ emotions to sell products? Give examples.

4. Why are so many companies using nostalgia and resurrecting images of the past in their advertising?

5. Explain why companies and advertisers need a thorough understanding of population trends and consumer tastesto design a successful advertising campaign. C

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Cooperative Learning Simulations and Problems 7

Primary and Secondary Source Reading 7

Math Practice for Economics Activity 8

Economic Cartoons Activity 7

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M ARKETING

GROUP PROJECT

Although price is certainly one major factor affecting a consumer’s decision to buy, manyother factors also influence this decision. Each company spends a great deal of time andeffort determining what these factors are and how to market its product to address them.This research can help the company develop an effective strategy that combines the “fourPs” of marketing: product, price, place, and promotion. In the activity below, your groupwill form a marketing team that develops a marketing strategy and a short advertisement for a product of your choice.

Marketing Strategy

1. Group Work Stage 1: Students work in groups ofeight or more. Choose a product that your companywill package, distribute, and market. Then assigntwo or more group members to work on each ofthe “four Ps” of marketing.

2. Paired Work Stage 2: Students work in pairs or insmall groups. Research similar products already onthe market. Use the questions in the chart above asa guide. One person on each team should recordthe research findings. Depending on the assignedtopic, prepare artwork or a written summary toexhibit or explain how the product will be packaged, how much it will cost, where it will be sold, or what advertising will be used.

3. Group Work Stage 3: Students return to originalgroups. Pairs or small groups present their artworkor summary to the group. Group members should

offer constructive feedback and attempt to solveany problems or concerns that are identified. Finally,work together to create a short TV commercial toadvertise your product to the class.

4. Group Work/Analysis Stage 4: Students work inoriginal groups. Groups should identify the “market-ing ploys” used in other groups’ commercials. As a class, discuss how the marketing ploys mightinfluence a consumer’s decision to buy.

Group Process QuestionsWere the goals of the assignment clear?

Did each member share information?

Did members respect each other’s point of view andgive helpful criticisms?

What is the most important thing you learned?

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Product Price Place Promotion

What type of packaging will Estimate your costs of How are you going to sell the How will you advertise the you use? Will you include a production, advertising, product: by mail, on the Web, product: in newspapers,warranty or rebate offer? selling, and distribution. How by phone, or door-to-door? radio announcements, TV What type of logo or much will you charge the What type of store will sell commercials, or direct-mail trademark will be used to consumer? How much profit the product? pieces? Will you rely on just identify the product? do you hope to make? one form of advertisement?

Consider offering coupons,free samples, gifts, etc.

COOPERATIVE GROUP PROCESS

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Resource ManagerCHAPTER 11

o viewers watching the ad for the new VolkswagenBeetle, it is like squinting into the past. A vague imagebegins as a small circle set against a stark white back-ground. As the picture sharpens, the circle becomes aflower—with seven daffodil-yellow New Beetles as itspetals. The cute-as-a-Bug cars drive away, and a zippyblack Beetle careens into view and skids to a stop. The tagline: “Less Flower. More Power.”

Welcome back to the ‘60s—except this time, the revolution will be televised by Madison Avenue.Volkswagen’s Flower Power commercial is only the first ina barrage of ads about to hit the airwaves as the Germanauto maker launches a new and improved version of thevenerable Beetle to America after a 20-year absence.Volkswagen’s strategy is simple: It plans to sell its back-to-the-future car by wrapping it in the symbols of thenot-too-distant past.

Volkswagen is not the only marketer mining thewarm associations of boomer youth and the Age ofAquarius to sell consumer goods. These days, nostalgiamarketing is everywhere, from almost forgotten brandssuch as Burma Shave to jingles that borrow from classicrock. Pepsi uses the Rolling Stones’ Brown Sugar, whileJames Brown’s I Feel Good helps sell SenokotLaxatives. . . .

No one, though, has as much riding on the nostalgiawave as Volkswagen. Its U.S. market share having wit-ered to less than 1%, VW is wagering $560 million that itsspunky little car can revive its fortunes. . . . The new version. . . comes with all the modern features car buyers demand,such as four air bags and power outlets for cell phones. Butthat’s not why VW expects folks to buy it. With a familiarbubble shape that still makes people smile as it skitters by,the new Beetle offers a pull that is purely emotional. . . .

Still, VW is walking softly into the market. It plans tobuild just 100,000 Beetles a year at its plant in Puebla,Mexico, with half of those targeted for the U.S. andCanada. Company execs refuse to be pinned down on the

Beetle’s target market, saying only that it is designed for“optimists.” Yet it’s clearly aiming wide. While many of itsads sport jokes targeted at the previous Beetle generation,others are aimed squarely at Gen-X.

These days, nostalgia marketing

is everywhere, from almost

forgotten brands such as Burma

Shave to jingles that borrow

from classic rock.

Like Volkswagen, others have discovered that a his-tory of warm memories is an exploitable asset thesedays. . . . Burma Shave is banking almost entirely on itsnostalgic appeal as it returns to store shelves after a 30-year absence. The shaving cream’s legendary rhymingroadside signs, last seen in 1964, will return this summer.And they may even begin showing up in the supermarketsand Wal-Marts where Burma Shave is now sold, saysbrand manager Steve Cochran. “Those signs evoke a lotof nostalgia about driving along the highway on vaca-tion,” he says. . . .

Celebrities who are dead . . . are hotter than ever incommercials. Ironically, one factor behind the wave ofdead celebs who have come back to endorse products issophisticated technology. Computer-generated imageryhas made it appear that Fred Astaire had a new dancingpartner—Dirt Devil vacuum cleaners. Lucille Ball sells dia-mond rings for Service Merchandise Co. And Ed Sullivan isback from the beyond to unveil one more phenom to theworld: the Mercedes-Benz sport-utility. . . .

If only reviving a dying brand were as easy. A&WRestaurants Inc., once famous for carhops on roller skates,

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Primary and Secondary Source Readings 13

Name Date Class

T HE NOSTALGIA BOOMSuccessful businesses have well-planned strategies to make sure their productsand services are familiar and available to target consumer groups. One of themost important elements of this marketing process is advertising. As consumersbecome increasingly savvy, businesses have responded with more sophisticatedand expensive advertising campaigns. As you read the passage below, considerhow the corporations cited might have researched and planned to appeal to their intended audience. Then answer the questions that follow.

7

T

http://ett.glencoe.com

Block Schedule

Bill NicholsThe Lovett SchoolAtlanta, Georgia

Creating AdvertisementsWorking with a partner, students will develop a product

and create an advertising campaign to sell the product.First, students must decide upon a product to sell. Theymust outline its features, why a consumer would want tobuy it, and what they think they should charge for it. Thenstudents must agree on what two media sources will beused to advertise the product. What is the target group?Students must design both a print advertisement and eithera TV or radio ad. Each group should present the advertise-ments to the rest of the class.

ACTIVITYFrom the Classroom ofACTIVITYFrom the Classroom of

Activities that are particularly suited to use within the blockscheduling framework are identified throughout this chapterby the following designation: BLOCK SCHEDULING

Block Schedule

Use Glencoe’s Presentation Plus!,a Microsoft PowerPoint® application, to teach Marketing and Distribution.With this multimedia teacher tool, you

can customize ready-made presentations. At your fingertipsare interactive transparencies, on-screen lecture notes,audiovisual presentations, and links to the Internet and toother Glencoe multimedia.

Interactive Lesson PlannerPlanning has never been easier! Organize your week, month, semester, or year with all the lesson helps you need to make teaching

creative, timely, and relevant—the way it is meant to be. TheInteractive Lesson Planner opens Glencoe’s Chapter 11resources, helps you build your schedule, and tracks yourprogress.

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


Teaching strategies have been coded for varying learning styles and abilities.L1 BASIC activities for all studentsL2 AVERAGE activities for average to above-average

studentsL3 CHALLENGING activities for above-average students

ENGLISH LANGUAGE LEARNER activitiesELL

Key to Ability Levels

Voluntary Standards Emphasized in Chapter 11Content Standard 4 Students will understand that peo-ple respond predictably to positive and negative incentives.

Content Standard 8 Students will understand thatprices send signals and provide incentives to buyers andsellers. When supply or demand changes, market pricesadjust, affecting incentives.

Resources Available from NCEE• Capstone: The Nation’s High School Economics Course• Entrepreneurship in the U.S. Economy• Focus: High School Economics• Personal Decision Making: Focus on Economics

To order these materials, or to contact your StateCouncil on Economic Education about workshops andprograms, call 1-800-338-1192 or visit the NCEE Web siteat http://www.nationalcouncil.org

Easy Planning and Preparation!

288D

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


288C

Blackline Master

Transparency

Software

CD-ROMVideodisc

Audiocassette

Videocassette

Reading Objectives Reproducible Resources Technology/Multimedia Resources

Section 1The Changing Role of Marketing• How has the role of marketing

changed in the United States?• What elements make up market

research?

Section 2The Marketing Mix• What is the importance of product

identification?• Which market strategies depend on

price?• How does a firm decide where to sell

its products?• What are four types of promotion that

a firm may use?

Section 3Distribution Channels• What is the difference between

wholesale and retail distribution?• What are two new types of distribution

channels?

Reproducible Lesson Plan 11-1Daily Lecture Notes 11-1Guided Reading Activity 11-1Reading Essentials and Study Guide 11-1Daily Focus Activity 49Section Quiz 11-1*

Reproducible Lesson Plan 11-2Daily Lecture Notes 11-2Guided Reading Activity 11-2Reading Essentials and Study Guide 11-2Daily Focus Activity 50Section Quiz 11-2*

Reproducible Lesson Plan 11-3Daily Lecture Notes 11-3Guided Reading Activity 11-3Reading Essentials and Study Guide 11-3Daily Focus Activity 51Section Quiz 11-3*Reinforcing Economic Skills 25

Daily Focus Transparency 49Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz

NBR's Economics & You*Presentation Plus!


Daily Focus Transparency 50Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!


Daily Focus Transparency 51

Economic Concepts Transparency 5Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz

NBR's Economics & You*Presentation Plus!


*Also available in Spanish

Section Resources

http://www.nationalcouncil.org

289

289Market ing and Dis t r ibut ion

Terms to Know• marketing• consumer sovereignty• utility• market research• market survey• test marketing

Reading Objectives1. How has the role of market-

ing changed in the UnitedStates?

2. What elements make upmarket research?

READER’S GUIDE

In addition to financing and producing products, which youlearned about in Chapter 10, businesses must promote andeventually sell their products and services. Marketing

involves all of the activities needed to move goods and servicesfrom the producer to the consumer. As you read this section,you’ll learn that these activities include market research, advertis-ing and promotion, and distribution.

The Development of MarketingSome economists estimate that about 50 percent of the price

people pay for an item today is for the cost of marketing. Theidea and importance of marketing in the United States have

1

marketing: all the activitiesneeded to move goods and services from the producerto the consumer

BUSINESS WEEK, JUNE 7, 1999

Too much marketing today focuses on awarenessrather than reasons to buy. In the old days, awarenessadvertising was more effective. There was less competi-tion. All you had to worry about was whether or not peo-

ple remembered your product. As technology andmore kinds of media have come about, it’s no longerenough to be remembered. The consumer has toomany choices. Your marketing has to send themessage that you are relevant. You need to besending reasons to buy.

C11-02C-82048

CHAPTER 11SECTION 1, Pages 289–294


Reproducible MastersReproducible Lesson Plan 11–1Reading Essentials and Study Guide 11–1Guided Reading Activity 11–1Section Quiz 11–1Daily Focus Activity 49Daily Lecture Notes 11–1

MultimediaDaily Focus Transparency 49Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software

ExamView® Pro TestmakerMindJogger Videoquiz

NBR’s Economics & YouPresentation Plus!

SECTION 1 RESOURCE MANAGER

OverviewSection 1 describes or explains

the development of marketing inthe United States and the elementsof market research.

Answers to the Reading Objectivesquestions are on page 294.

Preteaching VocabularyLead the class in a game of

“Marketing Lingo.” Select two orthree students to act as question-ers. Have them give short clues toeach of the Terms to Know, andhave the rest of the class try toidentify the terms.

Vocabulary PuzzleMaker

READER’S GUIDE

288

Why It’s ImportantDo you think advertisements influence your buying habits?Marketers hope so—they spend billions of dollars every year toward this purpose! This chapter will explain how businesses market and distribute their goods and services.

To learn moreabout howproducts aremarketed, view

the Economics & You Chapter17 video lesson: Marketingand Distribution

Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.com and click on Chapter 11—Chapter Overviewsto preview chapter information.

IntroducingCHAPTER11

288

Chapter OverviewOver the last 100 years, market-

ing has changed from an aspect ofproduction to a way of creating—and even predicting—demand for agiven item. Marketing research,therefore, has become ever moreimportant, and marketers havebecome more sophisticated inresponding to that research.

CHAPTER LAUNCH ACTIVITY

IntroducingCHAPTER11

Use MindJoggerVideoquiz VHS to previewChapter 11 content.

Introduce students to chaptercontent and key terms by havingthem access Chapter 11—ChapterOverviews at ett.glencoe.com

Have students imagine they have just designed a new fashion belt using discardedindustrial strapping. Ask students to describe who they think would be their main cus-tomers. If students have difficulty describing potential customers, ask them to suggestways in which they might find the customer base. Then have them list the ways thatthey might create demand for the new product. Aid students by mentioning the termpromotion. Conclude by mentioning to students that the exercise they have just com-pleted closely resembles the tasks undertaken by a company’s marketing division.

ECONOMICS & YOU

Marketing & Distribution

!8jt." Chapter 17 Disc 1, Side 2

ASK: Why has marketing andselling music on the Internetgrown so rapidly? Because ofnew recording technologies,music can be cheaply and easilydistributed over the Internetdirectly to people’s homes.

Also available in VHS.

Project Daily FocusTransparency 49 and have students answer the questions.

This activity is also availableas a blackline master.

Daily Focus Transparencies

T HE CHANGING ROLE OF MARKETING

1. What do you think is the purpose of the characters in the fourthstage of advertising?

2. What is the meaning of the example in the last row of the table?

4949

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Examples from the Stages of Marketing in America

Stage Example

I. The Early 1900s

II. The 1920s and 1930s

III. The 1950s

IV. The Late 1950s to the 1980s

V. The 1990s

• The National Biscuit Company launches the first million-dollar ad campaign. The product? The Uneeda Biscuit. The slogan? “Lest you forget, we say yet, Uneeda Biscuit.”

• Listerine mouthwash says in its ads, “Even your best friend won’t tell you.”

• The heaviest-advertised products are automobiles, largely over the new medium of television.

• Widely-recognized fictional characters are introduced, among them Tony the Tiger, the Pillsbury Doughboy, and the Jolly Green Giant.

• Direct marketing over the Internet is targeted and personalized––learning what customers like from what they buy and where they browse.

BELLRINGERMotivational Activity





291

Time utility is created by having a good or service availablewhen a consumer wants to buy it. As shown in Figure 11.2 onpage 292, a 24-hour grocery store or all-night restaurant areexamples of time utility. Catalog selling is another example ofboth time and place utility.

Ownership utility is the satisfaction one receives from simplyowning the good or service. One might purchase a fine art paint-ing for an exorbitant price to have the satisfaction of owning theobject. Luxury cars, expensive jewelry, and lawn ornaments alsoprovide ownership utility.

Market ResearchFinding out what consumers want can be difficult. It is crucial

that businesses do so, however, because many markets today arenational or even global. An increase in sales of a few percentagepoints can result in millions of dollars in profits. Therefore,

C

D The Late 1950s to the 1980sLarge national firms find stiff competition from businesses that can imitatetheir products. Firms begin to research consumer tastes before productionin order to be able to specifically satisfy their wants. Advertising focuses onan attempt to have the consumer identify with the person in the advertise-ment, rather than with the specific product being presented. The recognitionthat the consumer is ruler of the market—consumer sovereignty—returns.Firms ask consumers what they want and, in effect, fill the specific ordermuch as the local blacksmith had done in the late 1800s.

E The 1990sThe emergence of the Internetallows even the smallest offirms to advertise inexpen-sively. Large firms producingfor the masses face competi-tion from small businesses thatcan produce goods and ser-vices for small groups or evenindividuals.

Market ing and Dis t r ibut ion 291

The 1950sDuring the 1950s, firms began theprocess of creating demand. Theydid this by changing their advertis-ing to convince consumers that aspecific firm’s product, not just asimilar product, was a necessity ifthe consumer was to achieve adesired lifestyle. It was hoped thatconsumers would view the firm’sparticular product—whether it waslaundry detergent, facial tissue, orbreakfast cereal—as an importantpart of the American way of life.



Stages of Marketing

consumer sovereignty: the roleof the consumer as ruler of themarket when determining thetypes of goods and services produced

changed considerably since 1900. The development of marketingcan be traced by analyzing what it has focused on: production,sales, advertising, and consumer sovereignty—or consumer asruler. Figure 11.1 takes you on a historical “tour” of marketing.

Meeting Consumer Utility Today, marketing’s sole purposeis to convince consumers that a certain product will add to theirutility. Utility is the ability of any good or service to satisfy con-sumer wants. Utility can be divided into four major types: formutility, place utility, time utility, and ownership utility.

Form utility, created by production, is the conversion of rawmaterials to finished goods. Examples include transforming cot-ton cloth into draperies or refining crude oil into gasoline.

Place utility is created by having a good or service availablewhere a consumer wants to buy it. Locating a gas station on abusy corner is an example of this type of utility.

A The Early 1900sProducers of consumer goods and services take advantage of new tech-nologies to increase production. Finding that their amount of productionexceeds their markets, firms begin using “announcement advertising” tointroduce their goods to potential buyers statewide and even nationally.Consumers, no longer having to rely on local producers, become awareof greater choices and respond to the advertising. Less efficient localfirms, or those with inferior products, wither and leave the market.

B The 1920s and 1930sRising incomes and the increased wealth of the nation lead con-sumers to redefine their notions of necessities and luxuries. Greaternumbers of consumers can choose among goods and services

available. Producers begin toadvertise in a manner extollingthe virtues of their product com-pared to the competition.Consumers respond by favoringthose companies that presentthemselves as having the prod-uct that best fits their needs.Firms that cannot adequatelyexplain the benefits of theirproducts fail.

utility: the amount of satisfactionone gets from a good or service

290 CHAPTER 11

FIGURE 11.1FIGURE 11.1

290

Guided PracticeL2 Applying Ideas Direct students’attention to Figure 11.1 on pages290–291. Review the five historicalstages of marketing shown. Thenorganize students into five groups,and assign each group one of thefive stages of marketing. Tell groupsthat they are the marketing depart-ment for a company that makes theWonderful Widget, a multipurposetool for use around the house. Askgroups to brainstorm ways theymight market the Wonderful Widgetduring their assigned marketingstages. Remind groups to considerthe media they might use. Havegroups present and discuss theirmarketing ideas.

IndependentPracticeL2 Conducting Market ResearchHave students work in small groupsto develop their own market surveys.Point out that the surveys should bedesigned to discover what studentswant from one of the following prod-ucts: bath soap, movies, news maga-zines, athletic shoes, computergames, fast food. Then have themsurvey the school. Ask groups topresent their findings in a brief writ-ten report.

As students study the informa-tion in Figure 11.1, ask themwhich stage they think broughtthe greatest change in marketing.Encourage them to explain theiranswers.

L ECTURE LAUNCHERLIn 1962, a McDonald’s franchise owner introduced the Filet-O-Fish sandwich. He noticed hewas losing business on Fridays from Catholic customers and wanted to regain that business.What marketing activities brought the Filet-O-Fish sandwich to the consumer. What are form,place, time, and ownership utility? A typical visit to McDonald’s adds to which of these utilities?

I. The Development of Marketing

A. The sole purpose of marketing is to convince consumers that a certain product or service will add to their utility.

B. Form utility is converting raw materials into desired/needed products.

C. Place utility is providing the good/service where the customer wants it to be.

D. Time utility is providing the good/service at precisely the time the customer wants it.

E. Ownership utility is providing goods/services that people are pleased to own.

• Discussion Question

Rank the four types of consumer utility in order of importance. Explain your reason-ing. (Answers will vary, but students should be able to clearly explain why they ranked theitems in the order they did.)

11-1

PAGES 239–291

PAGES 291 294

Daily Lecture Notes 11–1

Reading Disability Students with various reading and information organization problemsmay have difficulty relating pictures, captions, and the main text. Before students readSection 1, have them study the pictures. Ask them what they think the pictures illustrate.After they have read the section, ask students to again suggest what the pictures illustrate.Then discuss why these particular pictures were included in the section.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.

Meeting Special Needs

For use with the textbook pages 289–294


FILLING IN THE BLANKS

Directions: Use your textbook to fill in the blanks using the words in the box. Some words may be usedmore than once.

consumer sovereignty time utility market researchform utility advertising marketingtest marketing market survey utility

Introduction/The Development of Marketing1 __________________________ involves all of the activities needed to move goods and services from the producer

to the consumer. These activities include 2 __________________________ , advertising and promotion, and

distribution. The development of marketing can be traced by analyzing what it has focused on: production, sales,

3 __________________________ , and consumer sovereignty. The recognition that the consumer is the ruler of the

market is 4 __________________________. The ability of any good or service to satisfy consumer wants is its

5 __________________________. There are four major types of utility: 6 __________________________ , place utility,

7 __________________________ , and ownership utility.

Market ResearchThrough 8 __________________________ a company gathers, records, and analyzes data about the types of goods

and services that people want. Some companies test their 9 __________________________ to make sure it is

attracting the market segment for which the product is designed. Market research can be done at different

Name Date Class

11-1

Guided Reading Activity 11–1

ECONOMICS & YOU



ASK: What is test marketing? amarketing technique that involvestesting a new product in a smallarea before it is made availablemore widely


Organize students into several groups, and have groups imagine that they are teams ofauthors working on a history of marketing in the United States. Tell groups that their task isto create a detailed proposal for the book to send to publishers. Suggest that they includethe following in their proposals: book title; a summary of the content; a table of contentswith a brief synopsis of each chapter; and a detailed outline of one chapter, including illus-tration ideas. Call on groups to present and discuss their book proposals.

BLOCK SCHEDULING

Cooperative Learning



293

Early market research has several purposes. It helps producersdetermine whether there is a market for their good or service andwhat that market is. It can also indicate any changes in quality,features, or design that should be made before a product isoffered for sale.

To investigate initial consumer response, market research isoften done immediately after a product is released for sale. Somecompanies even test their advertising to make sure it is attractingthe market segment for which the product was designed. Marketresearchers can also gather information about a product that hasbeen on the market for a while. They then attempt to discoverwhat should be done to maintain or increase sales.

Market Surveys The first step in market research is perform-ing a market survey, in which researchers gather informationabout who might be possible users of the product. Such charac-teristics as age, gender, income, education, and location—urban,suburban, rural—are important to a producer in deciding whichmarket a product should target.

A market survey typically involves a series of carefully wordedquestions. The questions may be administered in the form of awritten questionnaire, which is mailed to consumers. Manu-facturers of such small appliances as hair dryers and microwaveovens often put a questionnaire on the back of the warranty cardthat purchasers are to return. Another way to survey the marketis by conducting individual interviews or querying focus groups.See Figure 11.4.

Testing New Products As a final step before offering a product for national distribution, marketresearchers will often test-market a product such as a detergent or a toothpaste. Test marketing meansoffering a product for sale in a small area, perhapsseveral cities, for two months to two years to see how well it sells before offering it nationally.


market survey: information gath-ered by researchers about possi-ble users of a product based onsuch characteristics as age, gen-der, income, education, and location

test marketing: offering a prod-uct for sale in a small area for alimited period of time to see howwell it sells before offering itnationally

11.411.4

Focus Groups Members of a focus group may test and discuss what they like and dislikeabout similar, and often competing, products. Generally, the people chosen to be part of thefocus group do not know which company has hired them to test the products. The focus groupis often observed through a one-way mirror by the marketers of one of the products.



before a product is produced or a service is offered,businesses research their market. Market in thissense means the people who are potential buyers ofthe good or service.

Through market research a company gathers,records, and analyzes data about the types of goods and servicesthat people want. From automakers to producers of frozen foods,most companies producing consumer goods invest heavily inmarket research. As shown in Figure 11.3, this cost is passedon to consumers.

When Should Market Research Be Done? Marketresearch may be done at several stages of product development.It can be done at the very beginning when the first ideas abouta new product are being developed. It can be conducted againto test sample products and alternative packaging designs.

Time Utility Businesses that are open around the clock sat-isfy consumers who want to be flexible in their shopping hours—also known as time utility. What other types of utility doesmarketing address?

11.211.2

Cost of Marketing As Shoe has found out in the cartoon below, the cost ofmarketing—or “world tour”—has significantly increased the price of a cup of coffee.

11.311.3

SHOE

market research: gathering,recording, and analyzing dataabout the types of goods andservices that people want

292 CHAPTER 11

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L3 Explaining Ideas Have studentsimagine they are working on the Fre-quently Asked Questions (FAQ) pageof a market research Web site. Themost frequently asked questions are:What do market researchers do?How do market researchers gatherinformation? What is done with thisinformation? Have students conductresearch to find answers to thesequestions. Then have students writethe answers as they might appear ona FAQ page. BLOCK SCHEDULING

Answer: form utility, place utility,and ownership utility

Development of Market Research People involved in advertising made major contribu-tions to the development of market research. Advertising executive Claude C. Hopkinsinvented test marketing and coupon sampling. He explained these practices in his bookScientific Advertising (1923)—a classic study of advertising methods that is still in usetoday. Daniel Starch, a Harvard professor interested in the psychology of advertising,helped to develop advertising research. Among his many contributions was the StarchTest, a tool for evaluating the effectiveness of advertisements by measuring their impacton readers. Ad “starching” remains a key element of advertising research today.

Extending the ContentMarket Research Methods Market researchers use two approaches to gather informa-tion—quantitative research and qualitative research. Quantitative research provides num-bers. For example, it will show the percentage of the population that prefers product Xover product Y. Quantitative information is gathered by interviewing individuals using thesame set of questions. Qualitative research tries to discover the reasons behind a particu-lar situation. For example, why do so many people prefer product X over product Y?Market researchers gather qualitative data through open-ended interviews, which focus onbroad topics rather than a set series of questions, and through focus groups.

Extending the Content

Name Date Class

11, 1


Multiple Choice: In the blank at the left, write the letter of the choice that best completes the statement or answers the question. (10 points each)

6. The purpose of marketing is to convince consumers that a certain product or service will add to their

a. savings. b. investment.c. cost. d. utility.

7. What type of utility is involved in refining crude oil into gasoline?

a. time utility b. place utilityc. ownership utility d. form utility

SCORE

A1. marketing

2. consumer sovereignty

3. utility

4. market research

5. test marketing

Ba. gathering, recording, and analyzing data about the

types of goods and services people want

b. all the activities needed to move goods and servicesfrom the producer to the consumer

c. offering a product for sale in a small area for a limit-ed period of time

d. role of the consumer as the determiner of the typesof goods and services produced

e. amount of satisfaction one gets from a good orservice

Matching: Place a letter form column B in the blank in Column A. (10 points each)

Section Quiz 11–1

Meeting LessonObjectives

Assign Section 1 Assessment ashomework or an in-class activity.

Use Interactive Tutor Self-Assessment Software to review Section 1.

Economic Connectionto... TechnologyEconomic Connectionto...

Virtual Market Research Somecompanies now use computer sim-ulations in their market research.For example, they employ a virtualsupermarket to gauge consumerpreferences. Volunteer shopperswander through the supermarketon the computer screen, clickingon the items they would like to buy.Using this market researchmethod, one snack-food companydiscovered that end-of-aisle dis-plays generated more sales thanbanner advertising above theshelves where the snacks nor-mally were stocked.

SPOTLIGHT

295

SPOTLIGHT ON THE ECONOMY

Today’s teens may force marketers to tosstheir old tricks. Born during a baby bulge

that demographers locate between 1979 and1994, they are as young as 5 and as old as 20.And at 60 million strong, they’re the biggestthing to hit the American scene since the 72 million baby boomers. They go by a hostof taglines: Generation Y, Echo Boomers, orMillennium Generation.

Indeed, though the echo boom rivals its par-ents’ generation in size, in almost every other wayit is very different. This generation is more raciallydiverse: One in three is not Caucasian. One infour lives in a single-parent household. Three in

four have working mothers.“Most marketers perceive

them as kids. When you dothat, you fail to take in what

they are telling you about theconsumers they’re becoming,”

said J. Walker Smith, whospecializes in generationalmarketing. “This is notabout teenage marketing.It’s about the coming ofage of a generation.”

Smith and othersbelieve that behind theshift in Gen Y labels lies ashift in values on the partof Gen Y consumers. Themarketers that captureGen Y’s attention do so bybringing their messagesto the places these kidscongregate, whether it’s the Internet,a snowboarding tournament, or cable TV. Theads may be funny or disarmingly direct. Whatthey don’t do is suggest that the advertiserknows Gen Y better than these savvy con-sumers know themselves.

Instead, Gen Yers respond to humor, irony,and the (apparently) unvarnished truth. . . .

Marketers who don’t bother to learn the inter-ests and obsessions of Gen Y are apt torun up against a brick wall of dis-trust and cynicism.—Reprinted from February 15, 1999 issue of Business

Week by special permission, copyright © 1999 byThe McGraw-Hill Companies, Inc.

Think About It1. What market does “Generation Y”

make up?

2. According to the article, how can advertisers reach Gen Yers?

Check It Out! In this chapter, you learned how impor-tant it is for advertisers to know their market. In thisarticle, read to learn how advertisers are marketingtheir products toward your generation.

Generation YGeneration Y

295

Answers to Think About It1. the 60 million young people born between the years 1979 and 19942. Advertisers should bring the messages to the places where Generation Yers congre-

gate—such as the Internet, a snowboarding tournament, and cable TV. Also, messagesshould not suggest that the advertiser knows Generation Yers better than theseyoung people know themselves.

Point out that some companiesuse “street teams’’ to gather market-ing information. These teams ofyoung people visit clubs, parks, andmalls, talking to their peers aboutfashion, music, food, and just abouteverything else. In this way, compa-nies hope to identify trends as theydevelop. Then ask students to detailwhat they might say to “street team”members about the ways that com-panies might market clothes,music, food, and other products.Conclude by asking students howthey feel about being targeted as thenext big market.

Why are market researchersso interested in Generation Y?Teenagers—a large segment ofthat group—spend about $141billion each year. And they areextremely brand loyal.

To find up-to-date news andanalysis on the economy, busi-ness, technology, markets,entrepreneurs, investments,and finance, have studentssearch feature articles and spe-cial reports on the BusinessWeek Web site.www.businessweek.com



294 CHAPTER 11

For example, before attempting to market a newgranola cereal, a company might sell it in sev-eral selected areas where the product is mostlikely to attract the market segment that thecompany is seeking.

Researchers keep track of the units sold andtest different prices and ad campaigns withinthe test markets. If the product is successful,the company will offer it nationally. If sales aredisappointing, the company has two choices. Itcan make changes based on the data collectedin the test market. Or, rather than spend morefunds redesigning the product, the companycan abandon the idea.

Of all the new products introduced everyyear in the United States, most are not prof-itable and do not survive in the marketplace.It is the constant lure of owning a high-profititem, however, that motivates companies tocontinue developing new products.

Understanding Key Terms1. Define marketing, consumer sovereignty,

utility, market research, market survey, test marketing.

Reviewing Objectives2. Graphic Organizer Use a diagram like the

one below to make a time line tracing thechanging focus of marketing in the United States.

3. What steps are involved in market research?

Applying Economic Concepts4. Market Surveys Imagine that you have the

task of finding the market to buy a new health-food energy bar. What are five questions youwould ask consumers in a market survey?

Practice and assesskey skills with

Skillbuilder InteractiveWorkbook, Level 2.

1

Job Description■ Analyze data

on past salesto predictfuture sales

■ Design market

surveys

■ Analyze com-

petitors’ prices

and methods of

marketing

Qualifications■ Graduate

degree in eco-

nomics, busi-ness adminis-

tration, market-

ing, or statistics

■ Strong back-ground inmathematicsand consumer

behavior

—Occupational Outlook Handbook, 1998–99

Median Base Salary: $73,000

Job Outlook: Very good

CAREERS

Market ResearchAnalyst

Critical Thinking Activity5. Categorizing Information Select 10

businesses in your community. Categorizeeach business according to the type of utilityit provides.

294

ReteachHave students write five ques-

tions on the major developments inmarketing in the United States.Then pair students and have part-ners exchange, and then answer,the questions.

1. All definitions can be found in the Glossary.2. Time lines will vary but should generally state:

Early 1900s focused on production; 1920s and1930s focused on sales; 1950s promoted aproduct as a necessity; late 1950s to the 1980sfocused on consumer sovereignty; 1990sfocused on individual needs.

3. gathering, recording, and analyzing informationon a product, then test-marketing the product

4. Answers will vary. Students’ questions shouldfocus on such topics as ingredients, productsize, price, and so on.

5. Answers will vary. Have students compare their lists to note if there are any variations incategorization.

Have students write a paragraphbeginning with the following topicsentence: Market research is veryhelpful at every stage of productdevelopment.

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Name Date Class

marketing All the activities needed to move goods and services from the producer to the consumer (page 289)

consumer sovereignty The role of the consumer in determining the types of goods and services pro-duced (page 290)

utility The amount of satisfaction one gets from a good or service (page 290)

market research Gathering and analyzing data about the types of goods and services that people want(page 292)

market survey Survey in which researchers gather information about possible users of a product (page 293)

test marketing Offering a product for sale in a small area for a limited period of time to see how well itsells before offering it in the larger market (page 293)

KEY TERMS

For use with textbook pages 289–294


DRAWING FROM EXPERIENCE

When you bought a product recently did you notice the questionnaire that was part of the prod-uct’s warranty card? This was the form that asked you about your age, gender, education level,why you bought the product, and so on. Did you fill out and return the card? The manufacturerwas not merely being nosy by asking such questions. It was trying to find out what kinds of people buy its products.

This section focuses on how the practice of marketing developed and how companies find outwhat consumers want in the products they buy.

ORGANIZING YOUR THOUGHTS

Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout the four types of utility as you complete the diagram.

11, 1

Utility

converting crude oilto gasoline

Utility

opening a 24-hour supermarket

Utility

your pride in somethingyou own

Utility

locating a gas stationon a busy corner

Examplesof

Utility

Reading Essentials and Study Guide 11–1

http://www.businessweek.com

297

Additional services that accompany a product often help makea sale. Warranties are customary with many manufactured prod-ucts, but some manufacturers offer special services free or for asmall charge. For example, if you buy a camera, you may be ableto purchase from the manufacturer a 2-year extended warranty inaddition to the 1-year warranty given by the store in which youbought the camera. Automakers used to offer 1-year or 12,000-mile warranties on new cars. Today a 5-year or 50,000-mile war-ranty is a common offer.

Packaging is also an important factor in selling a product.The “right” packaging combines size, design, and color to attractpotential consumers. Compact discs, books, and food are espe-cially dependent on packaging. Such words as New and Improvedor Economy Size are used to attract customers. For economy-minded shoppers, manufacturers add cents-off coupons andrebate offers to their packages.

The Four Ps of Marketing

11.511.5

B PriceAlthough the laws of supplyand demand will ultimatelydetermine the price at whicha product sells, a new prod-uct often will be priced lowto attract customers awayfrom better-known products.

A ProductFrom the Pillsbury Dough Boyto the familiar Cheerios logo,all of these items are goodexamples of packaging thatachieves product identification.

D PromotionProduct promotionincludes the use ofadvertising to informcustomers about a newor improved product.It also dictates whereand how a product isphysically displayed.

C PlaceA marketing department must decide where itscompany’s product should be sold—whether ina specialty store, on the Internet, or through acatalog.

297



Guided PracticeL2 Analyzing Ideas Call on volun-teers to identify product slogans andjingles that they know. Note theirresponses on the board. Ask stu-dents what makes these slogans andjingles memorable. Then discuss theimportance of memorable slogansand jingles in product identification.Finally, ask students to provideexamples of other kinds of productidentification—logos, packaging,celebrity endorsements, and so on.ELL




MultimediaDaily Focus Transparency 50Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software


Presentation Plus!


296 CHAPTER 11

Terms to Know• price leadership• penetration pricing• promotion• direct-mail advertising• product life cycle

Reading Objectives1. What is the importance of

product identification?

2. Which market strategiesdepend on price?

3. How does a firm decidewhere to sell its products?

4. What are four types of pro-motion that a firm may use?

READER’S GUIDE

In today’s highly competitive world, simply producing a prod-uct and offering it for sale is not enough. Through their mar-keting departments, companies plan a marketing strategy,

which details how the company will sell the product effectively.As you read this section, you’ll learn that a marketing strategy, orplan, combines the “four Ps” of marketing: product, price, place,and promotion. Decisions about each are based on the data col-lected through the company’s market research. See Figure 11.5.

ProductMarket research helps determine what good or service to pro-

duce. It also helps a company determine what services to offerwith the product, how to package it, and what kind of productidentification to use.

THE WASHINGTON POST, FEBRUARY 1, 1999

“Tommy Hilfiger has created a mar-keting phenomenon by speaking thelanguage of teens,” says the company’svice president of worldwide marketing.“Tommy Hilfiger’s employees comb thestreets, campuses, and nightclubs tosee what teenagers are wearing. Whatteens really dislike is having someone oldertell them what to wear. There’s nothingworse than a bunch of 35- to 40-year-oldstrying to figure out what teenagers want.”

2

296

OverviewSection 2 explains or describes

the “four Ps” of marketing—product,price, place, and promotion—andthe product life cycle.


Preteaching VocabularyAsk students to write defini-

tions for the Terms to Know. Havethem check the accuracy of theirdefinitions as they work throughSection 2.


READER’S GUIDE

Have students study Figure 11.5.Ask them to identify the threemajor elements in selling a prod-uct. (what services to offer with theproduct, how to package the prod-uct, and what kind of product iden-tification to use)

L ECTURE LAUNCHERLSometimes a corporation will start a secondary business under a different name. Both companies might actually sell similar products, but be marketed to different target groups. For example, Gap, Inc. created the company Old Navy, which also sells clothing. The market-ing strategy to form two companies can almost always be traced back to the four “Ps” ofmarketing. What are the four “Ps” of marketing?

I. Product

A. What good or service should be produced?

B. What services should be offered with the product?

C. How should product be packaged? Consider size, design, color, catch phrases andcoupons or rebates.

D. How should product be identified? Consider logos, songs, celebrity endorsements, andpackaging.

E. Additional services may be provided to help make a sale.


Consider a product or service that you bought recently. Describe how the productwas marketed. (Answers will vary. Students should take into account the packaging, productidentification, additional services offered, and the target market.)

11-2

PAGES 296–298


Visual Disability Students with visual difficulties may find it helpful to use charts orgraphs whenever they present information. As a practice exercise, have students presentthe data in the Economic Connection feature on page 298 in the form of a bar graph.Assist students by suggesting that they use a scale of one inch: .100.






T HE MARKETING MIX

1. Create a new cereal name and package design that will attractconsumers.

2. Develop an advertising campaign: write a slogan, choose yourpreferred type of media, and identify the audience you wish toreach.

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299


PlaceWhere the product should be sold is another decision of the

marketing department. Should it be sold through the mail, by tele-phone, in department stores, in specialty shops, in supermarkets,in discount stores, door-to-door, or on the Internet? Usually theanswer is obvious because of past experience with similar prod-ucts. A cereal company, for example, would most likely market anew cereal in supermarkets. Another company might decide thatits goods would appeal to a limited market. Therefore, it maychoose to sell its goods only in specialty shops and on the Internet.

PromotionPromotion is the use of advertising and other methods to

inform consumers that a new or improved product or service isavailable and to convince them to purchase it. See Figure 11.6.Businesses spend billions of dollars each year to advertise throughdirect-mail pieces and in newspapers, magazines, radio, andtelevision. Increasingly, businesses are also advertising on theWorld Wide Web.

Types of Promotion The particular type of promotion that aproducer uses depends on three factors: (1) the product, (2) thetype of consumer that the company wants to attract, and (3) theamount of money the company plans to spend. Magazines andcatalogs, credit card companies, and insurance companies oftenuse direct-mail advertising. The mailer usually includes a letterdescribing the product or service and an order blank.

Other promotional efforts include free samples, cents-offcoupons, gifts, and rebates. Where and how a product is displayed

SHERMAN’S LAGOON

Promotion Product promo-tion is done in many ways,including having celebritiesendorse the product’s fine fea-tures, as Hawthorne is doing inthe cartoon below. What areother types of promotion?

11.611.6

promotion: use of advertising toinform consumers that a new orimproved product or service isavailable and to persuade themto purchase it

direct-mail advertising: type ofpromotion using a mailer thatusually includes a letter describ-ing the product or service and anorder blank or application form

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298 CHAPTER 11

price leadership: practice ofsetting prices close to thosecharged by other companies selling similar products

penetration pricing: selling anew product at a low price toattract customers away from anestablished product

Companies measure the effectiveness oftheir advertising through the advertising-

to-sales ratio. This number is calculatedby dividing the dollar amount spent onadvertising by the dollar amount of salesgenerated by that advertising. For example,if a $1 million advertising campaign gener-ated $4 million in sales, the advertising-to-sales ratio would be 0.25.

Companies also use the ratio to see whichtype of advertising—direct mail, television,

the Internet, and so on—is most effective.Below are recent advertising-to-sales ratiosfor the types of advertising most used bybusinesses. Smaller numbers indicate agreater return on each advertising dollar.

Newspapers .087Direct Mail .096Magazines .120Internet .143Radio .172Television .204 ■

Advertising-to-Sales RatioAdvertising-to-Sales Ratio

Economic Connection to... MathEconomic Connection to...

Coupons are used to persuade consumers to make a repeat pur-chase and develop the habit of buying the product.

Once a product is offered for sale, product identificationbecomes important. Product identification is meant to attract con-sumers to look at, buy, and remember a particular product. It caninvolve the use of a logo or certain colors on a package. It canalso involve a song or jingle, a certain type of packaging, or any-thing that can be associated with and identify the product.

PriceSupply and demand ultimately determine the price of a good

or service. Because of the laws of supply and demand, the priceat which a product sells may help determine whether it is suc-cessful in attracting buyers while still being profitable to itsmaker. In setting a price, a company has to consider the costsof producing, advertising, selling, and distributing the product,as well as the amount of profit it hopes to make.

Often companies sell similar goods at similar prices. Thispractice is known as price leadership. For example, one majorairline may lower its prices, which causes all of the other majorairlines to follow by lowering their fares.

Selling a new product at a low price is another marketingstrategy called penetration pricing. The low price is meant toattract customers away from an established product.

298

IndependentPracticeL2 Analyzing Ideas Have studentsselect a magazine and note the vari-ous advertisements. Next, direct stu-dents to categorize theadvertisements according to the typeof product being promoted. Thenhave students try to identify the typeof person at which each of the adver-tisements is targeted. Ask students touse their ideas to develop a profile ofthe magazine’s readership.

BLOCK SCHEDULING




Name Date Class


T HE MARKETING MIX

OUTLINING

Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer.

I. Product

A. What does market research help determine?

B. Why is packaging important for selling a product?

C. What is the purpose of product identification?

II. Price

A. What is price leadership?

B. What is penetration pricing?

III. Place—Where are various places in which products can be sold?

IV. Promotion

A Introduction Why do companies use promotion?

11-2

Guided Reading Activity 11–2

Some retailers—especiallysupermarkets—use a special kindof penetration pricing called theloss leader. A loss leader is a prod-uct priced at a very low—andsometimes negative—profit marginto attract customers away fromcompeting stores. When in thestore, customers will buy otherproducts priced at a normal profitmargin. This will make up for theloss on the loss leader.

Organize students into several groups, and tell groups they are the marketing divisionof the Zoom Toy Company. Have group members brainstorm to come up with an idea for anew toy. Then ask groups to develop a marketing program for this new toy. Remindgroups that the program should address the “four Ps”—product, price, place, and promo-tion. Suggest that groups include the following in their campaign materials: a brief reportexplaining the additional services, packaging, and production identification to be used withthe toy; pricing suggestions; ideas on where the toy should be sold; and promotion ideas.Call on groups to present their marketing programs. BLOCK SCHEDULING


After students have studiedFigure 11.6, ask them to identifythe advertising media available tobusinesses. (direct mail, newspa-pers, magazines, radio, television,World Wide Web) To dramatize thegrowing use of the Internet as anadvertising medium, tell studentsthat in 1999 American businessesspent about $2.8 billion on Webadvertising. This figure is expectedto grow to $22 billion by 2004. Answer: direct mail; newspaper,magazine, radio, and television ads;free samples; coupons; free gifts;rebates; product display and place-ment

T HE MARKETING MIX


6. Which aspect of a marketing strategy is involved in offering an extended warranty on a product?

a. price b. product c. promotion d. place

7. The use of a slogan, a jingle, or a celebrity endorsement are examples of

a. product pricing. b. direct-mail advertising.c. price leadership. d. product identification.

SCORE

A1. price leadership

2. penetration pricing

3. promotion

4. direct-mail advertising

5. product life cycle

Ba. selling a new product at a low price to attract

customers away from an established product

b. type of promotion using a mailer that describes theproduct or service and an order blank

c. practice of setting prices close to those charged byother companies selling similar products

d. use of advertising to inform customers of a newproduct or service and to persuade them to buy it

e. series of stages a product goes through from introduction to withdrawal from the market

Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Name Date Class

11, 2

Section Quiz 11–2

Product Life Cycle Marketers may use a number of techniques to extend the life of oldproducts. First, they may change the way the product looks. Packaging, labeling, and sizecan all be redesigned. Second, marketers may find new uses for the product and thenchange the advertising focus, attempting to persuade consumers that they need the prod-uct for its new uses. For example, the makers of Arm & Hammer Baking Soda extendedthe product’s life by persuading consumers that they could use it as a cleaning agent,toothpaste, first aid remedy, antacid, and refrigerator deodorizer.

Extending the Content

301

301

■ President and chiefexecutive officer ofeBay Inc., anInternet auctionhouse

■ Ranked as the rich-est woman CEO inthe world

■ Voted one of the top25 “Women on theWeb” by a leadingwomen’s Internetassociation

Margaret “Meg” Whitmanhas served as the chief

executive officer of eBay, theInternet auction house, sinceMarch 1998. She is one of thenew breed of Internet CEOswhose background is in market-ing rather than computer tech-nology. Whitman explains eBay’smarketing strategy:

“We started with commerce,and what grew out of that was acommunity. So we think of our-selves as a sort of community-commerce model. And what we’vebasically done is put in place avenue where people can be success-ful dealing and communicatingwith one another. But we also wantto expand the kinds of merchandisesold on eBay. . . .

[W]e . . . want to get into thekind of merchandise that is notnecessarily shippable because it’snot economic to ship or you wantto see it before you buy it—cars,boats, RVs, things like that. We’re

also looking at the kind of mer-chants who sell on eBay. In thebeginning, this was strictly aboutindividuals doing business withone another. What happened isthat some of those individuals actu-ally became small dealers. . . .Now, we have a lot of merchantswho keep their storefronts but infact their most profitable distribu-tion channel is eBay.

We are looking at storefronts assomething to think about. Now, allour selling on eBay is in an auctionformat. And the question is: Arethere other formats both our buy-ers and sellers would want? Thereare people who don’t necessarilylike to buy in an auction, and thereare sellers who want to sell some oftheir goods in an auction and somein a storefront . . .”Checking for Understanding

1. Whitman refers to a community-commerce model. Why do you thinkshe uses this characterization?

2. What changes in marketing strategydoes Whitman foresee for eBay?

Margaret WhitmanENTREPRENEUR (1957–)

301

BackgroundInform students that before mov-

ing to eBay, Whitman held execu-tive positions at Hasbro Inc., aleading toy company; FloristsTransworld Delivery (FTD), theworld’s largest floral products com-pany; Stride Rite Corporation, achildren’s shoe company; and theWalt Disney Company. In thesepositions, she helped to marketsuch well-known brand names asPlayskool and Keds.

Answers to Checking for Understanding1. Answers may vary. Most students will point out that eBay started out as a commer-

cial venture. However, the nature of the venture—an online auction house—helped tocreate a community where people communicated with one another.

2. Possible changes include getting into merchandise that is not necessarily shippable—large items or items that consumers want to view before buying, reviewing themethod of selling, and adding storefronts with fixed prices to the auction approach.

Ask students to identify the “fourPs” of marketing. Then ask them tosuggest how the “four Ps” might beapplied to a business like eBay—anInternet auction service. Call onvolunteers to explain their ideas.

Conclude by asking students to read the excerpt and to answerthe Checking for Understandingquestions.



300 CHAPTER 11

Understanding Key Terms1. Define price leadership, penetration pricing, pro-

motion, direct-mail advertising, product life cycle.

Reviewing Objectives2. How does packaging contribute to product

identification?

3. What two marketing strategies depend on price?

4. How does a firm decide where to sell its products?

5. Graphic Organizer Use a diagram like theone in the next column to explain four ways afirm may promote a product.

Applying Economic Concepts6. Marketing Strategy Design an advertise-

ment for a new cereal box. Keep in mind thatpackaging and product identification are two ofthe most important factors in selling a product.

Critical Thinking Activity

2

7. Distinguishing Fact From OpinionAnalyze 10 print advertisements in news-papers or magazines. Identify the facts andopinions found in each one.

Product Promotion

are important to promotion as well. Forexample, magazines are often placed next tocheckout lines where people wait.

Product Life CycleMost products go through what is known

as a product life cycle. This cycle is a seriesof stages from first introduction to completewithdrawal from the market. The four stagesof a typical product life cycle include intro-duction, growth, maturity, and decline.

People involved in marketing products need to understand thestages of each product’s life cycle because marketing programs aredifferent for each stage. A product in its introductory stage has tobe explained and promoted much differently than one in its matu-rity stage. Also, pricing can vary depending on the stage. Prices ofproducts tend to be relatively high during the growth stage.

Many marketers attempt to extend the life of old products.They may redesign the packaging or find new uses for the prod-uct. Advertisements attempt to per-suade consumers that they needthe product for its new uses.

product life cycle: series ofstages that a product goesthrough from first introductionto complete withdrawal fromthe market

Student Web Activity Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 11—Student WebActivities to see how Web marketing has becomeserious business.



300

1. All definitions can be found in the Glossary.2. Packaging attracts new customers and creates

brand identification.3. price leadership, price penetration4. by looking at past experience with similar

products5. Possible ways to promote a product: direct

mail; newspaper, magazine, radio, television,

or Internet ads; free samples; coupons; gifts;rebates; displays.

6. Advertisements will differ. Encourage studentsto share and discuss their advertisements.

7. Answers will vary. Have students compare theirfindings.

Discuss with students how themarketing of a product—the com-puter, for example—might changeover its life cycle.

Name Date Class

11, 2

price leadership Practice of setting prices close to those charged by other companies selling a similarproduct (page 298)

penetration pricing Setting a low price for a new product to attract consumers away from an establishedproduct (page 298)

promotion Use of advertising to inform consumers that a new or improved product is available and toconvince them to buy it (page 299)

direct-mail advertising Using a mailer that includes a description of the product and an order form (page 299)

product life cycle Series of stages that a product goes through from its introduction to its withdrawalfrom the market (page 300)


T HE MARKETING MIX


Suppose that you want to buy a new sweater to add to your wardrobe. Where will you look inshopping for a sweater that appeals to you? Will you go to a department store? a discount store?a specialty shop? How important a factor is price in deciding what sweater to buy? Producers tryto predict your answers to such questions as they make decisions about how to place, price, andpromote their goods and services.

This section focuses on the “four Ps” of a marketing strategy or plan: product, price, place, andpromotion.

KEY TERMS


See the Web Activity LessonPlan at ett.glencoe.com for anintroduction, lesson description,and answers to the Student WebActivity for this chapter.

ReteachHave students create logos or

symbols that represent the “four Ps”of marketing. Ask volunteers to display and explain their logos orsymbols.


303


wholesalers: businesses thatpurchase large quantities ofgoods from producers for resaleto other businesses

retailers: businesses that sellconsumer goods directly to thepublic

e-commerce: business transac-tions conducted over computernetworks, in particular the WorldWide Web

business deal, the price increases. Few goods go directly fromproducer to consumer; an example of this would be vegetablessold at a farmer’s roadside stand. See Figure 11.8 on page 304.

Wholesalers Businesses that purchase large quantities of goodsfrom producers for resale to other businesses (not to consumers)are called wholesalers. Various types of wholesalers exist. Somemay buy goods from manufacturers and sell them to retail storesthat then deal directly with consumers. Others may also buy andsell raw materials or capital goods to manufacturers.

Retailers Businesses that sell consumer goods directly to thepublic are retailers. You are probably familiar with many ofthem: department stores, discount stores, supermarkets, mail-order houses, specialty stores such as bookshops, and so on.

Traditional retailers have also “set up shop” on the WorldWide Web. More and more, there are e-commerce retailers thathave no physical store anywhere. They are “virtual companies.”You’ll read more about e-commerce in Chapter 22.

Consumer Goods

Raw Materials and Producer Goods

Consumer

ConsumerRetailer

ConsumerRetailerWholesaler

Business

Wholesaler Business

Manufacturer

Manufacturer

Manufacturer

Producer

Producer

FIGURE 11.7FIGURE 11.7 Channels of Distribution CHAPTER 11SECTION 3, Pages 302–305


Guided PracticeL2 Applying Ideas Direct studentsto list the various items they andmembers of their family have pur-chased over the last week. Next, havestudents organize listed items intocategories—food, clothing, entertain-ment, and so on. For one item fromeach category, have students dia-gram the distribution channel theproduct followed to get to them, theconsumers. Have students compareand discuss their diagrams.




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302 CHAPTER 11

Terms to Know• channels of distribution• wholesalers• retailers• e-commerce

Reading Objectives1. What is the difference

between wholesale andretail distribution?

2. What are two new types ofdistribution channels?

READER’S GUIDE

Decisions about distribution, or moving goods from wherethey are produced to the people who will buy them, isanother function of marketing. As you read this section,

you’ll learn about channels of distribution, or the routes bywhich goods are moved. Figure 11.7 shows the various distribu-tion channels for different types of goods.

Wholesalers and RetailersSome consumer goods, such as clothing and farm products,

are usually sold by a producer to a wholesaler and then to aretailer, who sells them to consumers. Other consumer goods,such as automobiles, are normally sold by the producer directlyto a retailer and then to consumers. With each transaction, or

BUSINESS WEEK, FEBRUARY 15, 1999

A rose is a rose is a rose, wrote Gertrude Stein. Butdon’t tell that to flower sellers who are trying to differen-tiate themselves from their fellow petal-pushers.

To stand out in a crowd, U.S.A. FloralProducts, the nation’s biggest flowerdistributor, is test-marketing aplan to sell flowers sporting atag telling consumers the lastdate the flowers can be sold for maximum freshness—theequivalent of a “sell by”date on a quart of milk.

3

channels of distribution: routesby which goods are moved fromproducers to consumers

302

OverviewSection 3 explains the role of

producers, wholesalers, and retail-ers in distribution; the differencebetween wholesale and retail; andvarious channels of distribution.


Preteaching VocabularyHave students demonstrate

their understanding of the Termsto Know by using each term cor-rectly in a sentence.


READER’S GUIDE

L ECTURE LAUNCHERMontgomery Ward & Company, Inc. began as a mail-order catalog in 1872. Their first catalogwas only one sheet long. Over the next few years the catalog expanded and the companybegan to offer more products. Just 16 years later, the company’s annual sales were $1 million.What are the channels of distribution used by a mail-order catalog like Montgomery Ward?Would Montgomery Ward be considered a retailer or a wholesaler?

I. Wholesalers and Retailers

A. Wholesalers sell goods to retailers, not to consumers.

B. Retailers sell goods directly to the public.

C. Full service wholesalers warehouse goods and deliver them after retailers pay for them.

D. Drop shippers are wholesalers that buy the goods under the condition that the producer will store and ship the goods after the wholesaler has sold them.

E. A cash-and-carry wholesaler sells merchandise, but buyer must pay shipping.

F. A truck wholesaler sells and delivers at the same time.


Why do you think wholesalers do not sell their products to the general public?(If wholesalers sold to the general public, they would be competing against their main cus-tomers—the other businesses. This would make the businesses look elsewhere for productsand could ultimately destroy the wholesaler’s business )

11-3

PAGES 302–303


ECONOMICS & YOU



ASK: What is distribution? themeans by which a product isdelivered to its customers


Hearing Disability Students with hearing disabilities may have trouble keeping pace inactivities requiring spoken responses to auditory clues. You may want to alter such activi-ties so that clues and responses are written rather than spoken.






D IRECT-MAIL MARKETING

1. What kinds of goods are best suited to direct-mail selling orhome-shopping television selling? What are the alternative channels of distribution?

2. Do you think the Get-A-Way Chair from the Sharper ImageCatalog is particularly well suited to direct selling? Why or whynot?

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305305


The club warehouse formula is to buy a lim-ited number of models and brands of eachproduct in such huge quantities that thewarehouse gets very favorable prices fromthe manufacturers. Some of the biggest clubwarehouses are Costco and Sam’s Club (a division of Wal-Mart).

Direct Marketing Direct marketing isdone mainly through catalogs and over theInternet. Advertising called “space ads” innewspapers and magazines is also directmarketing. Catalog shopping has become apopular distribution channel to avoid statesales taxes. The purchaser normally does notpay sales tax if the catalog company islocated in another state. The same holds truefor goods purchased through the Internet,although this may change in the future.

Shopping on the Internet has becomeincreasingly popular because of the ease with which it can bedone. Anybody with access to the Internet and a valid creditcard can order just about anything on the Web.

Understanding Key Terms1. Define channels of distribution, wholesalers,

retailers, e-commerce.

Reviewing Objectives2. What is the difference between wholesalers and

retailers?

3. Graphic Organizer Create a diagram like theone below to list and describe four distributionchannels for merchandise.

Applying Economic Concepts4. The Role of Government Research the

debate of taxing versus not taxing goods purchased through catalog orders and thosepurchased on the Internet. What issues areinvolved, and how many sales tax dollars areestimated to be lost?

3

Kmart ShoppersOn any given weekend day, 15,000 people come to

Guam’s hottest spot—Kmart. Reported to be the world’sbiggest and perhaps busiest Kmart store, its openingdrove down prices of everything from shampoo toCheerios to stereo sets with its famous discounts.

Little shops on this small island always were able tocharge high amounts, jacking up prices to cover highshipping costs into the middle of the Pacific Ocean.Shoppers are now grateful for 89-cent cans ofCampbell’s soup. They must, however, plan their dayaround getting in and out of the store. It is so big thatcustomers take cell phones so they don’t lose theircompanions in the aisles. ■



5. Summarizing Information Type e-commerce into your search engine.Research and write a paragraph on theadvantages or disadvantages of this type of retailing.

Critical Thinking Activity



ReteachTo reinforce students’ under-

standing of distribution channels,have them develop an annotatedoutline of the section.

1. All definitions can be found in the Glossary.2. Wholesalers buy large quantities of goods to

sell to other businesses. Retailers buy goods tosell directly to the public.

3. Answers may include: through wholesalers,through retailers, through club warehousestores, through the Internet, through catalogs.

4. Answers may vary. Call on volunteers to pre-sent their findings to the class. Use thesepresentations as a starting point for a classdiscussion on the issue.

5. Answers may vary. Students may wish to usetheir research findings from this section’sIndependent Practice activity.

Have students discuss how technological innovations—the jetairplane or the computer, for exam-ple—have affected distribution channels.

Name Date Class

11, 3

channels of distribution Routes by which goods are moved from producers to consumers (page 302)

wholesalers Businesses that produce large quantities of goods from producers for resale to other businesses (page 303)

retailers Businesses that sell consumer goods directly to the public (page 303)

e-commerce Conducting business transactions over the World Wide Web and other computer networks(page 303)


D ISTRIBUTION CHANNELS


What are your shopping habits? Do you buy things from catalogs? What about from those“infomercial” programs or shopping networks that you see on TV? What types of stores do youpatronize? Do you enjoy looking for bargains at club warehouses and factory outlets? Goodsreach consumers in a number of ways. You likely use several of these distribution channels to satisfy your wants and needs.

This section focuses on channels of distribution, or the routes by which goods are moved.

ORGANIZING YOUR THOUGHTS

Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout how goods traditionally reach consumers

KEY TERMS



CHAPTER 11SECTION 3, Pages 302–305 Storage and Transportation

Part of the distribution process includes storing goods forfuture sales. The producer, wholesaler, or retailer may performthis function. Most retailers keep some inventory on hand forimmediate sales. Many have a two- to three-month supply,depending on the type of merchandise.

Transportation involves the physical movement of goods fromproducers and/or sellers to buyers. In deciding the method oftransportation, businesspeople must consider the type of good,such as perishable food. The size and weight of the good are alsoimportant. Airfreighting tons of wheat is impractical, but air-freighting small machine parts is not. Speed may be necessary tofulfill a sale or to get fresh fruit to a food plant. The cost of the dif-ferent types of transportation helps determine how to ship items.

Distribution ChannelsIn the last 10 to 15 years, distribution channels have expanded

rapidly due to the growth of club warehouse stores and directmarketing.

Club Warehouse Stores A typical club warehouse storerequires a membership fee—about $35 a year for individuals andmore for businesses. Individual club members usually have to bepart of a larger group such as a teacher’s union or a credit union.

Wholesalers Versus Retailers Wholesalers add value tothe product by providing time utility and place utility. The consumer

benefits from wholesaler networks, but also ends up pay-ing for these services in the final price of the prod-

uct. In contrast, a local farmer may act as both“manufacturer” and retailer, and prices may

be lower. The trade-off is that consumersusually must go out of their way to

purchase the product.

11.811.8

304

Project Economic ConceptsTransparency 5 and have studentsdiscuss the accompanying questions.

IndependentPracticeL3 Research Paper Ask students toresearch and write a short paper onthe development of e-commerce.Suggest that they include such topicsas how e-commerce is transacted,any special features of this methodof distribution, the changing dollarvalue of e-commerce, and leading e-businesses. Call on volunteers toread their reports to the class.


RECALLING THE FACTS

Directions: Use the information in your textbook to answer the questions.

1. How are most clothing and farm products sold?

2. Who are wholesalers?

3. What are three types of wholesalers?

a. __________________________ wholesalers

b. __________________________ wholesalers

c. __________________________ wholesalers

4. How are drop shippers different from full-service wholesalers?

5. To whom do retailers sell products?

6. Where do e-commerce retailers do business?

Name Date Class

11-3

Guided Reading Activity 11–3Name Date Class

11, 3

D ISTRIBUTION CHANNELS


6. Which of the following is an example of goods going directly from producer to consumer?

a. clothing sold at a department store b. farm products sold at a grocery storec. automobiles sold at a dealership d. vegetables sold at a roadside stand

7. A wholesaler that buys merchandise and sells it without taking possession of it or storing it is called a

a. full-service wholesaler. b. drop shipper.c. cash-and-carry wholesaler. d. truck wholesaler.

SCORE

A1. channels of distribution

2. wholesalers

3. retailers

4. e-commerce

5. warehouse club

Ba. businesses that purchase large quantities of goods

from producers for resale to other businesses

b. conducting business transactions over computer networks, particularly the World Wide Web

c. distribution channel that offers members a limitedselection of goods in huge quantities at low prices

d. routes by which goods are moved from producers toconsumers

e. businesses that sell consumer goods directly to thepublic

Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Section Quiz 11–3

Organize the class into three groups, and assign each group one of the main headingsin this section—Wholesalers and Retailers, Storage and Transportation, and DistributionChannels. Have groups create brief pictorial essays, suitable for displaying on the bulletinboard, for their assigned topic. Have groups combine their essays to create a bulletin-board display titled “Channels of Distribution.” BLOCK SCHEDULINGELL





307


The Changing Role ofMarketing

• Marketing involves all of the activities needed tomove goods and services from the producer to theconsumer.

• In today’s economy, marketing’s sole purpose is toconvince consumers that a certain product or ser-vice will add to their utility.

• Utility—the ability of any good or service to satisfyconsumer wants—can be divided into four majortypes: form utility, place utility, time utility, andownership utility.

• Through market research a company gathers,records, and analyzes data about the types ofgoods and services that people want.

• The first step in market research is performing amarket survey.

• Before offering a product for national distribution,market researchers will often test-market a product.

The Marketing Mix

• A marketing plan combines the “four Ps” of mar-keting: product, price, place, and promotion.

• “Product” means determining what services tooffer with the product, how to package it, and whatkind of product identification to use.

• In setting a price, a company has to consider thecosts of producing, advertising, selling, and distrib-uting, as well as the amount of profit it hopes tomake.

• “Place” means determining where a product shouldbe sold.

• Promotion is the use of advertising and othermethods to inform consumers that a new productis currently available and to convince them tobuy it.

Distribution Channels

• Deciding what channels of distribution to use isanother function of marketing.

• Businesses that purchase large quantities of goodsfrom producers for resale to other businesses arecalled wholesalers.

• Businesses that sell consumer goods directly to thepublic are retailers.

• In the last 10 to 15 years, distribution channelshave expanded due to the growth of club ware-house stores and direct marketing, including cata-log shopping and e-commerce.

C H A P T E R

SECTION 1

SECTION 2

SECTION 3

Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 11—Chapter Overviewsto review chapter information.

11

Use the Chapter 11 Summary to preview, review, condense, orreteach the chapter.

Preview/ReviewVocabulary PuzzleMaker Soft-

ware reinforces the key terms usedin Chapter 11.

Interactive Tutor Self-Assess-ment Software allows students toreview Chapter 11 content.

CondenseHave students listen to the

Chapter 11 Audio Program (alsoavailable in Spanish) in the TCR.Assign the Chapter 11 Audio Pro-gram Activity and give students theChapter 11 Audio Program Test.

ReteachHave students com-

plete Reteaching Activity 11 in theTCR (Spanish Reteaching Activitiesare also available).

C H A P T E R 11

ECONOMICS & YOU



If you do not have accessto a videodisc player, theEconomics & You programs arealso available in VHS.

Marketing Ask students to select a product they use or are familiar with—a food product,such as breakfast cereal; CD players, training shoes, jeans, pens, computers, computergames, and so on. Ask students to monitor various media for one week and record adver-tisements for their selected product. Have them note how the product is advertised—whatfeatures are stressed, what special services are offered, what logos or other distinguishingmarks are used, and so on. Also, have them note how the price of their product varies fromadvertisement to advertisement. Tell students to use their findings to write a brief essaydescribing how businesses market their selected product.

Economics Journal

TechnologySkills

Developing MultimediaPresentations

306

Your economics teacher has assigned a presentation about the history of commercials and advertising.You want to develop a presentation that really holds your classmates’ attention.

Technology Skills

Learning the SkillA multimedia presentation involves using several

types of media, including photographs, videos, orsound recordings. The equipment can range from sim-ple cassette players, to overhead projectors, to VCRs, tocomputers, and beyond.

Multimedia, as it relates to computer technology, isthe combination of text, video, audio, and animation inan interactive computer program. You need certaintools to create multimedia presentations on a com-puter, including computer graphics tools and draw pro-grams, animation programs, and authoring systemsthat tie everything together. Your computer manual willtell you which tools your computer can support.

Practicing the SkillPlan and create a multimedia presentation on a

topic found in the chapter, such as product promotion.List three or four major ideas you would like to cover.Then think about how multimedia resources couldenhance your presentation. Use the questions listed onthe left as a guide when planning your presentation.

Application ActivityChoose an economist from the

twentieth century and create a multi-media presentation about his or hertheories. Use as many multimediamaterials as possible, and shareyour presentation with the class.

• Which forms of media doI want to include? Video?Sound? Animation?Photographs? Graphics?

• Which kinds of mediaequipment are availableat my school or locallibrary?

• What types of media can I create to enhance mypresentation?

• Which of the media forms does my computersupport?

Various equipment that can beused in multimedia presentations

306

Developing MultimediaPresentations

Encourage students to view thisskills activity as an adventure ratherthan homework or a classroomtask. A sense of adventure will helpcreate interesting presentations.Next, have students brainstorm alist of possible media that theymight use. Do not reject any suggestion—for even those that seenunusual may yield interesting possi-bilities. You might demonstrate theuse of some of these media, show-ing how they can be integrated into a presentation. You might alsoinvite a guest speaker to discuss or demonstrate the use of comput-ers in developing presentations.Then have students work throughthe Practicing the Skill andApplication Activity assignments.

Answers to Practicing the Skill

Presentations will vary. Call on volunteers to share and discuss their presentations.

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D EVELOPING MULTIMEDIA PRESENTATIONSMultimedia computer presentations combine text, video, audio, and animation to create livelyand visually appealing reports. To create a multimedia presentation on your computer, youwill need a variety of programs depending on the type of media you intend to use. Make a listof the topics you want to cover in your presentation. Then identify the forms of media youwould like to include and determine whether your computer can support them.

Directions: Design a multimedia presentation on the euro, the new currency that will replace national cur-rencies in 11 Western European countries beginning in 2002. To create your presentation, first research theeuro using library resources or the World Wide Web. Then use the panels below to sketch storyboards orseries of screenshots that outline what you will include in your presentation. For each storyboard indicatewhich media you plan to use.

Name Date Class

25


CHAPTER 11Assessment and ActivitiesCHAPTER 11

Assessment and Activities

309


2. Making Generalizations What are alterna-tive ways to extend the life of an oldproduct that is in its declining stage?

ApplyingEconomic ConceptsThe Rising Opportunity Cost of Time Whenindividuals earn higher incomes, by defini-tion the opportunity cost of their timeincreases. Economic theory says that theywill react in a predictable way—reducing theamount of time they spend shopping. Make alist of the various methods that people canuse to reduce the time they spend when theyshop for (1) presents for various holidays,Mother’s Day, birthdays, etc., (2) food, and(3) photographic and stereo equipment.

CooperativeLearning Project

Organize into six groups, with each groupchoosing a particular product from the fol-lowing categories of consumer goods: homeelectronics, food, clothing, electric steam gen-erators, automobiles, computers.

After each group has chosen one productor brand within one of the above categories,research the following:■ product packaging■ pricing strategies■ the place where the product is sold■ how the product is promoted■ the product life cycle.

Each group should write a summary of theresearch results, preferably in graphic form.When the results of each group are completed,compare and contrast the differences in thefive categories across the various products.

Reviewing SkillsDeveloping a Multimedia PresentationWorking with a partner, create an advertise-ment that you think will successfully marketa new product. Use multimedia to develop a video commercial, then show the commer-cial to the rest of the class. Based on youradvertising, would they buy the product?Why or why not? (See page 311 for moreinformation on types of advertisingappeals.)

TechnologyActivityUsing E-Mail The club warehouse phenome-non has been around the United States sincethe 1970s. E-mail 10 friends and relatives tosurvey their use of club warehouse stores.What percentage patronizes this type ofstore? What are their reasons for doing so?Did you receive any negative E-mails aboutwarehouse stores (forcing small retailers out of business, for example)? Assembleyour responses and summarize them in aparagraph.

Contact the foreign language teachers inyour school to see if they have any advertis-ing materials (print or video) showing com-mercials from other countries. (Many cabletelevision channels carry foreign stations,too.) Even without translating the languagespoken or written, can you understand thepurpose of the advertisement? Write severalparagraphs describing how marketing inother countries does or does not achievethe same goals as marketing in the UnitedStates.

Questions Whom? Where?

Applying EconomicConcepts

Answers will vary, but studentsmight identify gifts, groceries, andother items that can be purchasedthrough the mail, by telephone, oron the Internet.

CooperativeLearning Project

Encourage students to accom-pany their graphs and charts withwritten explanations.

Reviewing SkillsYou might use the video presen-

tations as the starting point for adiscussion on what makes an effec-tive advertisement.

Technology ActivityHave students collate their find-

ings to create a class study of theuse of club warehouse stores.

Analyzing theGlobal Economy

Ask students if they noted anyeffective approaches in the foreignadvertisements that are not used inAmerican ads.

ASK: What marketing toolmight a hospital use to improvecare given to patients? a marketsurvey of patients

Chapter BonusTest Question

Thinking Critically1. Answers will vary but should include

questions about customers’ needs andpast purchasing practices. People from dif-ferent age groups and backgrounds mightbe asked, and interviews might be con-ducted at malls, sport stores, and so on.

2. Answers will vary but should include find-ing new uses for the product, changingproduct packaging and labeling, andchanging the focus of advertising.

CHAPTER 11Assessment and ActivitiesCHAPTER 11

Assessment and Activities

Identifying Key TermsWrite the letter of the definition in Column Bthat correctly defines each term in Column A.

Column A1. test marketing2. penetration pricing3. price leadership4. retailer5. promotion

Column Ba. use of advertising to inform consumers

about a product and to persuade them topurchase it

b. business that sells goods directly to theconsumer

c. selling a new product at a low price toattract new customers away from an estab-lished product

d. offering a product in a small area for alimited time to see how well it sells

e. setting prices close to those of competingcompanies

Recalling Facts and IdeasSection 1

1. What is the relationship between market-ing and utility?

2. What are the historic stages in the devel-opment of marketing in the UnitedStates?

3. How is market research conducted?

Section 24. List and describe the “four Ps” of plan-

ning a marketing strategy.5. How are goods and services promoted?6. What does place mean, when referring

to marketing?7. What are the last two stages of a typical

product life cycle?

Section 38. What are distribution channels?9. How does a club warehouse store differ

from a standard retail outlet?10. Who may perform the storage function

of distribution?11. What are the factors that a business

must consider in choosing a method of transporting goods?

Thinking Critically1. Sequencing Information Suppose you

must do a market survey for a new type ofrunning shoe. Use a chart like the one inthe next column to list the questions youwould ask, and whom and where youwould ask the questions.

11

Self-Check Quiz Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 11—Self-Check Quizzesto prepare for the Chapter Test.

308 CHAPTER 11

308

Identifying KeyTerms1. d2. c3. e4. b5. a

Recalling Facts and Ideas1. Marketing involves activities that

add to the utility of a product.2. announcement advertising;

advertising the virtues or bene-fits of the product; creatingdemand through advertising;recognition of consumer sover-eignty; advertising on theInternet

3. Researchers find out what con-sumers want through surveys.Researchers conduct surveys atthe planning stage, upon cus-tomer purchase of goods, andwhen the product has been onthe market for some time.

4. Product—what product to sell,what services to offer with theproduct, how to package it, andhow to develop product identifi-cation; Price—what pricing strat-egy to use; Place—where to sell

product; Promotion—using advertisingand other methods to inform consumersof product and to persuade them to buy it.

5. through direct mail; advertisements innewspapers, magazines, radio, television,and Internet; free samples; gifts; coupons;rebates; store displays

6. Place refers to where a product is sold—mail or telephone order, departmentstores, specialty shops, supermarkets, dis-count stores, door-to-door, Internet.

7. maturity, decline8. routes by which goods are moved to the

customer9. Club warehouses offer less variety, bigger

sizes, and greater savings than standardretail stores.

10. producer, wholesaler, or retailer11. size, weight, and type of good; speed with

which delivery must be made; costs ofdifferent types of transportation

Have students visit theEconomics Today and TomorrowWeb site at ett.glencoe.com toreview Chapter 11 and take the Self-Check Quiz.

MindJogger Videoquiz

Use MindJogger to reviewChapter 11 content.


Answers to Lab Report Analysis1. Answers will vary. Ask students why they think this particular technique was the

most common.2. Answers will vary. Ensure that students offer explanations for their answers.3. Have students explain their reasoning for their choice of the most valid technique.

311

Analyze all groups’ commercials. Identifyand count the types of advertising techniquesused in each. As a class, draw a series of bargraphs showing the number of times eachtechnique was used.

After studying each group’s commercial,answer the questions below.1. Which type of advertising technique wasused most often?2. What technique(s) do you think is themost subtle? The most obvious?3. Which techniques, if any, carry the mostvalidity? Explain your answer.

Advertising Techniques

ADVERTISING TECHNIQUE DESCRIPTION

Youthful/Fun “Use our product and you’ll feel like a kidagain!”

Plain/Humble “Our product will make you feel natural and simplify your life.”

Expert Testimony “I’m a doctor, and I recommend this product.”

Famous Person [If Michael Jordan uses the product, it must be cool.]

Fear “If you don’t use this, you may regret it.”Statistics “Nine out of ten dentists use this

product.”Everyone Has One “Molly the doctor drives this car, and Joe

the student does, too.”Senses [Mouth-watering pizza, steaming hot

cocoa, sizzling burgers]Snob “It may be more expensive, but aren’t you

worth it?”Happy Family “This diaper makes Susie happy, and if

she’s happy, I’m happy.”Humor [When you’re shopping, you may remem-

ber laughing and buy the product.]New and Improved “Obviously, we made the product better

just for you!”Symbol [Majestic bald eagle, solid Rock of

Gibraltar, proud American flag]Overexposure [News clips, fast speed, quick shots]Healthy “This product is good for you.”Attractiveness “This product will make you attractive.”

Have students answer the LabReport Analysis questions.

Teacher’s Notes

Economics LabEconomics Lab

Analyzing and CreatingAdvertisementsFrom the classroom of Stephanie Felix,Glendora High School, Glendora, California

In Chapter 11 you learned about market-ing and distribution. A function of mar-

keting is product promotion—convincingconsumers to buy the product. In this lab,you will examine many advertising tech-niques used by companies. Then you willdevelop and market your own product bycreating a commercial demonstrating vari-ous types of advertising techniques.

✔ paper

✔ poster board and markers

✔ video camera (optional)

✔ props for your commercial

1. Working in groups of no more than fourpeople, come up with an idea for a prod-uct. As a group, submit a one-page typedpaper describing your product andanswering these questions:

■ What does it do?■ What is the price?

■ Who is your target market?■ How are you going to promote your

product?

2. On poster board, design the packagingof your product. Include the product’sname and any special logos or phrasesfor product identification.

3. Next, analyze the chart listingAdvertising Techniques on page 311.Select at least three techniques to incor-porate into a commercial about yourproduct.

4. Create a commercial at least 2 minuteslong. All members of your group must be included in the commercial.

5. Perform your commercial for the class,or videotape it and bring it to class forviewing.

310

310

Students are bombarded dailywith advertisements in newspapersand magazines and on radio, televi-sion, and the Internet. To be effectiveconsumers, students must be able toextract valid information from theseadvertisements. The Economics Laboffers students the opportunity toreview the various promotion tacticsused by marketers.

Economics LabEconomics Lab

Begin by ensuring that all groupspossess, or have access to, all thematerials listed in Step A. As groupswork through the procedures inStep B, offer guidance or assistancewhen needed. In Step C, ask allgroups to prepare an oral report toaccompany their tally of advertisingtechniques used.

It will take several sessions tosatisfactorily complete thisEconomics Lab. Therefore, establishset times for review of students’progress.

Advertisers have their own spe-cial award—the Clio. First awardedin 1959, the Clio recognizes adver-tising excellence worldwide in theareas of TV, Print, Outdoor, Radio,Integrated Media, Package Design,Student, and Web Sites.

Share with students the USAToday article of the Top Five adver-tisements. (This article may be foundat http://www.usatoday.com/money/index/ad249.htm) Thenhave students identify the fiveadvertisements they think are themost memorable. Have themexplain their choices.

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