Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e
Back Matter Cases © The McGraw−Hill
Companies, 2002car—and has been able to make a good living for himself and
his family. The going prices are widely publicized in trade pub-
lications and are listed on the Internet, so the buyers can easily
check to be sure Timothy’s prices are competitive.
In the last few years, a number of Timothy’s lumberyard
customers have gone out of business—and others have lost
sales. The main problem is competition from several national
home-improvement chains that have moved into Timothy’s
market area. These chains buy lumber in large quantities di-
rect from a mill, and their low prices, available inventory, and
one-stop shopping are taking some customers away from the
traditional lumberyards. Some customers think the quality of
the lumber is not quite as good at the big chains, and some
contractors stick with the lumberyards out of loyalty or be-
cause they get better service, including rush deliveries when
they’re needed. However, if it weren’t for a boom in the con-
struction market—helping to make up for lost market
share—Timothy’s profits would have taken an even bigger hit.
Six months ago, things got worse. An aggressive young
salesman set up in the same business, covering about the same
area but representing different lumber mills. This new sales-
man charges about the same prices as Timothy but undersells
him once or twice a week in order to get the sale. On several
occasions he even set up what was basically an e-mail-based
auction to quickly sell excess wood that was not moving fast
enough. Many lumber buyers—feeling the price competition
from the big chains and realizing that they are dealing with a
homogeneous product—seem to be willing to buy from the
lowest-cost source. This has hurt Timothy financially and per-
sonally—because even some of his old friends are willing to
buy from the new competitor if the price is lower. The near-
term outlook seems dark, since Timothy doubts that there is
enough business to support two firms like his, especially if the
markup gets shaved any closer. Now they seem to be splitting
the shrinking business about equally—as the newcomer keeps
shaving his markup.
A week ago, Timothy was called on by Mr. DeBeer of Good
Timber Mfg. Co., a large manufacturer of windows, raised-
panel doors, and accessories. Good Timber doesn’t sell to the
big chains and instead distributes its quality line only through
independent lumberyards. DeBeer knows that Timothy is well
acquainted with the local lumberyards and wants him to be-
come Good Timber’s exclusive distributor (sales rep) of
residential windows and accessories in his area. DeBeer gave
Timothy several brochures on the Good Timber product lines.
He also explained Good Timber’s new support program, which
will help train and support Timothy and interested lumber-
yards on how to sell the higher markup accessories. Later, in a
lengthy e-mail, DeBeer explained how this program will help
Timothy and interested lumberyards differentiate themselves
in this very competitive market.
Most residential windows of specified grades are basically
“commodities” that are sold on the basis of price and availabil-
ity, although some premium and very low end windows are
sold also. The national home-improvement chains usually
stock and sell only the standard sizes. Most independent lum-
beryards do not stock windows because there are so many
possible sizes. Instead, the lumberyards custom order from the
stock sizes each factory offers. Stock sizes are not set by indus-
try standards; they vary from factory to factory, and some offermore sizes. Most factories can deliver these custom orders in
two to six weeks—which is usually adequate to satisfy con-
tractors who buy and install them according to architectural
plans. This part of the residential window business is well
established, and most lumberyards buy from several different
window manufacturers—to ensure sources of supply in case of
strikes, plant fires, and so on. How the business is split depends
on price and the personality and persuasiveness of the
sales reps. And given that prices are usually similar, the sales
rep–customer relationship can be quite important.
Good Timber Mfg. Co. gives more choice than just about
any other supplier. It offers many variations in^1 ⁄ 8 -inch incre-
ments—to cater to remodelers who must adjust to many
situations. Good Timber has even set up a special system on an
Internet website. The lumberyard can connect to the website,
enter the specs for a window online, and within seconds get a
price quote and estimated delivery time.
One reason DeBeer has approached Timothy Morgan is be-
cause of Timothy’s many years in the business. But the other
reason is that Good Timber is aggressively trying to expand—
relying on its made-to-order windows, a full line of accessories,
and a newly developed factory support system to help differen-
tiate it from the many other window manufacturers.
To give Timothy a quick big picture of the opportunity he
is offering, DeBeer explained the window market as follows:- For commercial construction, the usual building code
ventilation requirements are satisfied with mechanical
ventilation. So the windows do not have to operate to
permit natural ventilation. They are usually made with
heavy-grade aluminum framing. Typically, a distributor
furnishes and installs the windows. As part of its service,
the distributor provides considerable technical support,
including engineered drawings and diagrams to the own-
ers, architects, and/or contractors. - For residential construction, on the other hand, windows
must be operable to provide ventilation. Residential win-
dows are usually made of wood, frequently with
light-gauge aluminum or vinyl on the exterior. The
national chains get some volume with standard size win-
dows, but lumberyards are the most common source of
supply for contractors in Timothy’s area. These lumber-
yards do not provide any technical support or engineered
drawings. A few residential window manufacturers do
have their own sales centers in selected geographic areas,
which provide a full range of support and engineering
services, but none are anywhere near Timothy’s area.
Good Timber Mfg. Co. feels a big opportunity exists in the
commercial building repair and rehabilitation market (some-
times called the retrofit market) for a crossover of residential
windows to commercial applications—and it has designed
some accessories and a factory support program to help lum-
beryards get this “commercial” business. For applications such
as nursing homes and dormitories (which must meet commer-
cial codes), the wood interior of a residential window is
desired, but the owners and architects are accustomed to com-
mercial grades and building systems. And in some older
facilities, the windows may have to provide supplemental ven-
tilation for a deficient mechanical system. So what is needed isCases 725