Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

20. Managing Marketing’s
    Link with Other Functional
    Areas

Text © The McGraw−Hill

Companies, 2002

586 Chapter 20

improvements in capacity use, it might be better for the marketing manager to lead

the firm toward other, more profitable alternatives.

Another aspect of flexibility concerns how quickly and easily a firm can adjust

the quantity of a product it produces. This can be especially important when

demand is uncertain. If a new marketing mix is more successful than expected,

demand can quickly outstrip supply. This happened to Frito-Lay when it developed

WOW! fat-free snack chips using its Olestra fat substitute. It was hard to predict

how people would react to the chips because the FDA required a warning label that

the chips might cause abdominal cramping and diarrhea. That’s not exactly the mes-

sage the brand manager wanted the package to send! Even so, diet-conscious chip

lovers were so enthusiastic about the chips that they were quickly out-of-stock at

most supermarkets.^7

This kind of problem can be serious. Promotion spending is wasted if supply can’t

keep up with demand. Further, stock-outs frustrate both consumers and channel

members. This may give a more nimble competitor the opportunity to introduce an

imitation product. By the time the original innovator is able to increase produc-

tion, consumers may already be loyal to the other brand.

Problems of matching supply and demand are likely to be greatest when a

marketing plan calls for quick expansion into many different market areas all at

once. That’s one reason a marketing manager may plan a regional rollout of a new

product. Similarly, initial distribution may focus on certain types of channels—say,

drugstores alone rather than drugstores and supermarkets. Experience with the early

stages of the implementation effort can help the marketing manager determine how

much promotion effort is required to keep distribution channels full and avoid

stock-outs.

Many firms are finding that they can satisfy customers and build profits without

doing any production in house. Instead, they look for capable suppliers to produce

a product that meets the specs laid out in the firm’s marketing plan. This is the

Slow adjustments
result in stock-outs

Scarce supply wastes
marketing effort

Staged distribution
may match capacity

Virtual corporations
may not make anything
at all

When Kellogg’s introduced Rice
Krispies Treats Squares,
production couldn’t keep up with
the unexpectedly high demand.
So Kellogg’s used advertising to
tell consumers and retailers about
the shortages and to ask them to
be patient. When the squares
were back in stock, Kellogg’s
again used advertising to
communicate with consumers.