Marketing Analysis

Late in the evening of January 9, 2008, Charlton Bates, president of BatesManor

Furniture, Inc., called Dr. Thomas Berry, a marketing professor at a private university

in the Northeast and a consultant to the company. The conversation went as

follows:

BATES: Hello, Tom. This is Chuck Bates. I'm sorry to call you this late, but I wanted to

get your thoughts on the tentative 2008 advertising program proposed by Mike

Hervey of Hervey and Bernham, our ad agency.

BERRY: No problem, Chuck.What did they propose?

BATES: The crux of their proposal is that we should increase our advertising expenditures

by $225,000. They suggested that we put the entire amount into our

consumer advertising program for ads in several shelter magazines.1 Hervey

noted that the National Home Furnishings Collaborative has recommended

that furniture manufacturers spend 1 percent of their sales exclusively on consumer

advertising.

BERRY: That increase appears to be slightly out of line with your policy of budgeting

5 percent of expected sales for total promotion expenditures, doesn't it?

Hasn't John Bott [vice-president of sales] emphasized the need for more sales

representatives?

BATES: Yes, John has requested additional funds. You're right about the 5 percent

figure too, and I'm not sure if our sales forecast isn't too optimistic. Your

research has shown that our sales historically follow industry sales almost perfectly,

and trade economists are predicting about a 4 percent increase for 2008.

Yet, I'm not too sure.

BERRY: Well, Chuck, you can't expect forecasts to be always on the button. The money

is one thing, but what else can you tell me about Hervey's rationale for putting

more dollars into consumer advertising?

BATES: He contends that we can increase our exposure and tell our quality and

styling story to the buying public--increase brand awareness, enhance our

image, that sort of thing. He also cited industry