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Cross Country, a local restaurant is experiencing a declining gross profit margin (GP) due to an increase in

the cost of meat by 10%. Meat (bacon and sausage) is of the direct variable costs of producing a meal,
that is, $1.50 of the total variable costs of $3.00. The current price for the breakfast is $5.99 and includes two
eggs, two strips of bacon or sausage, toast, and country potatoes. In order to offset the decline, a price
increase is being considered. The owner, Jay, wants GP to be restored, and therefore wants to increase
prices to cover the decline. His friend, a marketer, argues that a price increase is very likely to decrease his
current patronage of 500 a week, and therefore total revenue, as elasticity of demand is high for restaurant
meals. Jays friend/marketer suggests that there are other options to solve the GP problem, especially since
the primary competition three miles away only charges $5.99 with coffee included.

Take a position on Discussion 6.2: Where do you stand? With the owner and increased prices or with his
friend/marketer to look for alternatives? Argue your position.

I would like to go with the friend/marketer suggestion to look for alternatives and keep the
pricing at $5.99.

Reasons:

1. Increasing the prices is going to drive away his current customer base to his competitor
as he offers breakfast at a lower price point along with a coffee. This for Jay will be bad
as it will further drive down his revenues and his gross profits.

2. Price Elasticity of Demand is high for Restaurants so if a new restaurant opens up nearby
it is further going to eat into jays customer base as his service is pricey.

Alternatives to look at:

1. Negotiate with his current meat suppliers for a better pricing by getting into long term
contracts with them.
2. Try to switch to a new meat supplier for a better pricing by offering to be a long-term
customer.
3. Switch to a slightly lower grade quality of meat if options one and two dont work out.

Currently the option of rising prices wouldnt play out well for Jay, even if he could he could
only raise the price by a small delta and offer an additional item like coffee or a beverage along
with the breakfast, if he intends not to lose his customers.
Hi,

In reviewing the materials for the self-check, I was able to identify answers for all segments
except for several in chapter 10. Are these questions definitely addressed in this chapter? I've
listed concisely below, can you please confirm I am understanding these points correctly? Just
wanting to make sure I didn't miss anything:

51) If an entrepreneur discovers that her firm's market is one of diffused preferences, she can
use a ________ to expand sales while keeping costs low. (multiple-niche strategy)

53) In choosing points-of-difference, one of the primary considerations is that consumers find
points-of-difference desirable. There are three key consumer desirability criteria for points-of-
difference. What are those three criteria?

Desireability
Deliverability
Differentiability
54) Brands can be differentiated on the basis of many variables; however, three differentiation
strategies are emphasized in the text. List and briefly characterize the three differentiation
strategies.

Performance
Price
Image
55) Assume that you are the marketing manager for a large appliance manufacturer. You have
had five quarters of rapid sales growth and would like to prolong the eventual downturn that
always follows periods of high growth for as long as possible. You also know that any one of six
strategies for sustaining rapid market growth can be used to achieve your objective. What are
the six generally accepted strategies for sustaining rapid growth in a market from which you
will make your choice?

I could not identify strategies for sustaining rapid growth from this chapter- is there a section I
missed?
Allega,

Following are the answers to your questions.

QUES 51 - This question no longer applies and is not in the quiz.

51) If an entrepreneur discovers that her firms market is one of diffused preferences, she
can use a ________ to expand sales while keeping costs low.

When buyer preferences scatter evenly, it is called a diffused-preference market. The


entrepreneurs problem is to design an optimal product for this market. There are three
options:

1. mass-market strategy: design the new product for the middle of market
2. multiple-niche strategy: launch two or more products simultaneously to capture two or
more parts of the market
3. single-niche strategy: design the new product to meet the preferences on one of the
corners of the market
QUES. 53 - This question no longer applies and is not in the quiz.

53) In choosing points-of-difference, one of the primary considerations is that consumers find
points-of-difference desirable. There are three key consumer desirability criteria for points-of-
difference.

Consumer PODs: Relevance; distinctiveness; and believability.

QUES. 54) - This answer was updated and can be found on pages: 278 - 283: CHAP 10
Crafting the Brand Positioning

Brands can be differentiated on the basis of many variables; however, three differentiation
strategies are emphasized in the text. List and briefly characterize the three differentiation
strategies.

The current version 15e textbook provides the following:

Page 278: Brands can be differentiated on the basis of product form, features, performance,
conformance, durability, reliability, repairability, style, customization, and design, as well as
such service dimensions as ordering ease, delivery, installation, customer training, customer
consulting, and maintenance and repair.

Page 279: Three key considerations for differentiation are: Desirable to consumer; Deliverable
by the companies; and Differentiating from competitors

Page 283: Performance and image differentiations are discussed.


QUES. 55 -This answer is actually found in CHAPTER 12 Addressing Competition and
Driving Growth: pg 353:

To sustain rapid market share growth, a firm can:

1. Improves product quality and adds new features and improved styling.
2. Adds new models and flanker products (of different sizes, flavors, and so forth) to protect
the main product
3. Enters new market segments
4. Increases its distribution coverage and enters new distribution channels
5. Shifts from awareness and trial communications to preference and loyalty communications
6. Lowers prices to attract the next layer of price-sensitive buyers
Best,

---Suzanne