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Would you recommend that the company make additional funds for advertising available? Do you think that the company should increase the hours available for the sales effort?

Would you recommend that the company make additional funds for advertising available? Do you think that the company should increase the hours available for the sales effort?

Principles Of Marketing
Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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SORad Communications manufactures portable, solar powered radio systems that can be used for two-way communications. The company's new product, which has a range of up to 25 kilometres, is particularly suitable for use in a variety of business and personal applications. The distribution channels for the new radio are as follows: 1. Marine distributors 2. Business distributors 3. Retail stores 4. Direct mail Because of differing distribution and promotional costs the profitability of the product will vary with the distribution channel. In addition, the advertising cost and personal sales effort required will vary with the distribution channels. The table below summarises the contribution to profit, advertising cost and personal sales effort data: Profit per unit Advertising cost per Personal Sales Effort per unit (hours) 2 unit (Rand) Distribution Channel Marine distributors (Rand) 90 10 Business distributors 84 8 3 Retail stores 70 9 3 Direct mail 60 15 None The company has set the advertising budget at R5 000 and a maximum of 1 800 hours of sales force time is available for allocation to the sales effort. Management has also decided to produce exactly 600 units for the current production period. Finally, an ongoing contract with the national chain of retail stores requires that at least 150 units be distributed through this distribution channel. SORad is now faced with the problem of establishing a strategy that will provide for the distribution of the radios in such a way that overall profitability of the new radio production will be maximized. Decisions must be made as to how many units should be allocated to each of the four distribution channels, as well as how to allocate the advertising budget and the sales force effort to each of the distribution channels. Would you recommend that the company make additional funds for advertising available? Do you think that the company should increase the hours available for the sales effort?
Transcribed Image Text:SORad Communications manufactures portable, solar powered radio systems that can be used for two-way communications. The company's new product, which has a range of up to 25 kilometres, is particularly suitable for use in a variety of business and personal applications. The distribution channels for the new radio are as follows: 1. Marine distributors 2. Business distributors 3. Retail stores 4. Direct mail Because of differing distribution and promotional costs the profitability of the product will vary with the distribution channel. In addition, the advertising cost and personal sales effort required will vary with the distribution channels. The table below summarises the contribution to profit, advertising cost and personal sales effort data: Profit per unit Advertising cost per Personal Sales Effort per unit (hours) 2 unit (Rand) Distribution Channel Marine distributors (Rand) 90 10 Business distributors 84 8 3 Retail stores 70 9 3 Direct mail 60 15 None The company has set the advertising budget at R5 000 and a maximum of 1 800 hours of sales force time is available for allocation to the sales effort. Management has also decided to produce exactly 600 units for the current production period. Finally, an ongoing contract with the national chain of retail stores requires that at least 150 units be distributed through this distribution channel. SORad is now faced with the problem of establishing a strategy that will provide for the distribution of the radios in such a way that overall profitability of the new radio production will be maximized. Decisions must be made as to how many units should be allocated to each of the four distribution channels, as well as how to allocate the advertising budget and the sales force effort to each of the distribution channels. Would you recommend that the company make additional funds for advertising available? Do you think that the company should increase the hours available for the sales effort?
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