Question

Case Study


Mephisto Products ‘Yet another poor year,’ reflected the senior executive of Mephisto Products Ltd. ‘Profits down by 15 per cent, sales and turnover static in a market that was reckoned to be growing at a rate of some 20 per cent per annum. It cannot go on.’ These were the thoughts of Jim Bullins, and he contended that the company would be out of business if the next year turned out to be as bad. Jim Bullins had been senior executive at Mephisto for the past three years. In each of these years he had witnessed a decline in sales and profits. The company produced a range of technically sophisticated electromechanical control devices for industry. The major customers of Mephisto were in the chemical processing industry. The products were fitted to the customer’s processing plant in order to provide safety and cut-out mechanisms, should anything untoward happen in the manufacturing process. The products were sold through a UK salesforce of some 12 people. Each represented a different area of the country and all were technically qualified mechanical or electrical engineers. Although some 95 per cent of Mephisto’s sales were to the chemical industry, there were many more applications for electromechanical control devices in a wide variety of industries. The reason that sales were concentrated in just the one industry was historical, in that the firm’s founder, James Watkinson, had some 30 years earlier married the daughter of the owner of a major detergent manufacturer. As an engineer, Watkinson had seen the potential for such devices in this type of manufacture and, with the aid of a small loan from his father-inlaw, had commenced manufacture of such devices, initially for his father-in-law’s company and later for wider application in the chemical industry. Watkinson had long since resigned from active participation in Mephisto Products, although he still held a financial interest. However, the philosophy Watkinson had brought to the business was one that still pervaded business thinking at Mephisto. The essence of this philosophy was centred on product and production excellence, backed by strong technical sales support. Watkinson had believed that if the product was right, i.e. well designed and manufactured to the highest level of quality, there would be a market. Needless to say, such a product then needed selling (because customers were not necessarily aware that they had a need for such safety mechanisms) and salespeople were encouraged to use what may be described as high-pressure salesmanship, pointing out the consequences of not having such mechanisms in a manufacturing plant. They therefore tended to emphasise the negative aspects (of not having such devices) rather than the positive aspects (of how good they were, how time-saving during a plant breakdown, etc.). Needless to say, in Watkinson’s day, such products then needed selling and, even though sales were to industrial purchasers, it was felt that such selling techniques were justified. This philosophy still pertained, and new salespeople were urged to remember that, unless they were pressed, most customers would not consider updating their control equipment. Little advertising and sales promotion was carried out by the company, although from time to time, when there was a little spare cash, the company did purchase advertising space in The Chemical Processors’ Quarterly. Pricing was done on a cost-plus basis, with total costs being calculated and a fixed percentage added to account for profits. Prices were thus fixed by the accounts department, and sales had no say in how they were established. This led to much dissent among the salespeople, who constantly argued that prices were not competitive and that if they were cut, sales could be increased substantially. Delivery times were slow compared with the industry average, there were few discounts for large order quantities, and all discounts had to be cleared with accounts before the salesperson could agree them with the customer. Again, Watkinson’s old philosophy still prevailed: If they want the product badly enough, they will wait for it. And why offer discounts for large quantities? If they did not want that many, they would not order them. During the previous five years, from being a relatively successful company, market share for Mephisto Products dropped substantially. The market became much more competitive with many new entrants, particularly from EU countries coming into the UK market, which had traditionally been supplied by UK manufacturers. Many of these new entrants had introduced new and updated products to the market, exploiting recent advances in electronics. These new products were seen by the market as being technically innovative, but the view taken by Mephisto management was that they were faddish and once the novelty had worn off, customers would come back to their superior products. Unlike many of his colleagues, Jim Bullins was worried by developments over the past five years and felt there was a need for many changes. He was aware that the more successful new entrants to the industry had introduced a marketing philosophy into their operations. Compared with ten years ago in this type of business, it was now common practice for companies to appoint marketing managers. Furthermore, he knew from talking to other people in the industry that such companies considered sales to be an integral part of marketing. At a recent meeting with his senior staff, he mentioned to the sales manager the possibility of appointing a marketing director. The sales manager, who was shortly expecting to be made sales director, was scathing about the idea. His view was that marketing was suitable for a baked bean manufacturer but not for a company engaged in the manufacture and sale of sophisticated control devices for the chemicals industry. He argued that Mephisto’s customers would not be swayed by superficial advertising and marketing ploys. Although Jim Bullins always took heed of advice from his senior managers, recent sales figures had convinced him that the time had now come to make some changes. He would start, he decided, by appointing a marketing manager in the first instance. This person would have marketing experience and would come, most probably, from the chemical industry. The person appointed would have equal status to the sales manager, and ultimately either the new appointee or the existing sales manager would be promoted to the board of directors.




Questions

1 Criticise Mephisto Products’ approach to sales and marketing.

2 Comment on the following as they exist now at Mephisto Products: (a) marketing orientation, (b) the marketing mix, (c) the product life cycle.

3 What problems can you anticipate if Jim Bullins appoints a marketing manager?

4 If appointed, what problems can you foresee for the new marketing manager?

5 What general advice can you give to the company to make it more marketing oriented?

Answer 1

1 Criticise Mephisto Products’ approach to sales and marketing.

The company Mephisto were initially leader in electromechanical controldevices in the industry.

The company has long had an edge over competitors that later entered inthe market. But Mephisto didn’t take advantage of this opportunity. The company didn’t bring innovation and has not created new products thatshe could easily sell to customers. This also enabled it to gain marketshare and maintain its leading position. The company could also offer its products to other industries as thechemical industry in which they could be used.

There is another problem. The salesmen" who are the only ones to havedirect contact with the customer" and who know their needs and expectations have not been listened to. The company did not want tochange the prices of its products while sellers suggested it for increase thesales. So" customers have turned to competition. The sales techni$ue was not suitable" too negative points and not enoughpositive points" but the company again did not listen to its salesmen.

Mephisto would have created a marketing manager as soon as it saw sales decline" at least" she should listen to its sellers.

2 Comment on the following as they exist now at Mephisto Products: (a) marketing orientation, (b) the marketing mix, (c) the product life cycle.

Marketing orientation :

The company must meet customer needs. Mephisto is completely the opposite and is striving to sell the product without worrying about the customer needs. Bullins thought that if the client wanted the product then he would wait and" whatever happens" buy it. Therefore" it even offers no special offer for small quantities. He thinks that if the customer wants the product then it will order a large quantity.

The marketing mix :

Product :

electromechanical control device for the chemical industry. At the beginning" the product was suppose to be breakthrough but later on the company lost its competitive advantage because it doesn’t innovated.

Price :

The company kept the prices fixed with respect to its competitors. The sales team constantly asked to the company to lower the price of the product but the company did not do so.

Place:

The product is only available in England.

Promotion:

Mephisto pay no attention to the promotion of its products. This is one of the reasons why Mephisto losing market share and saw its produts decline.

The product life cycle:

The product was in the product life cycle decline. The market here is slowing. Innovative products are introduced or consumer tastes evolve. The products can be increased by focusing on new products that will sell better.

3 What problems can you anticipate if Jim Bullins appoints a marketing manager?

The marketing manager will have many things to change on arriving at Mephisto. Any the business strategy has to be reviewed and the marketing strategy was non-existent so far.

So Jim Bullins will have to provide a budget for this sector. Indeed, new jobs will be created and execution of marketing techniques of the future marketing manager will have a cost.

Jim Bullins can already envisage a decrease in the selling prices of its products, and therefore a reduction of his margins. However, the new marketing director will probably find a way to avoid margin decline.

Jim Bullins must also anticipate new training for its salesmen because technical and sales procedures have to be reviewed.

4 If appointed, what problems can you foresee for the new marketing manager?

The first problem which the marketing manager is likely to cope with philosophy of Watkinson but also the vision of the Director of Sales. They will have equal status and it is against the idea that a marketing manager is necessary for the survival of the company. Close collaboration between these two positions is paramount so that everything goes well.

It will also deal with budget problems and Mephisto competitor sales force.

5 What general advice can you give to the company to make it more marketing oriented?

Initially the company should have listened its salesmen. They are the only ones to be in direct contact with the customer and to know it perfectly.

Then the company should have studied the market, if it sees its competitors come to its own market, it must pay attention, study their products, their prices, their sales technique and do everything to remain competitive.

The company should have been more visible and stand out from others through communication, promotional offers and innovation, for example.

The big mistake Mephisto has done was to be too confident in its product while the market evolved, the company was very quickly obsolete.