Mary Miller is the marketing manager for Paper Products Corporation and she has to decide whether she should allow her largest customer to buy some of Paper Products file folders and market them under their own name (Natcom Inc. ) rather than the FILE brand used by Paper Products. Mary is afraid that if she doesnt accept the offer, the customer will find another file folder producer. Mary really only has two options; accept the offer from Natcom or refuse the offer from Natcom. There is a certain degree of risk involved with either option and she needs to decide which option is the safest for Paper Products Corporation. If Paper Products refuses the offer they are putting themselves in a position to possibly lose 30 percent of their business, approximately 12 million dollars per year.
Even if Natcom continued purchasing their other supplies from Paper Products, and only quit purchasing file folders, the business would lose approximately 4. 2 million dollars per year. If Mary decided to take the offer from Natcom, and allow them to sell Paper Products file folders with their name, she would be going against company policy and it would not be easy to change this policy. It would be very easy for Paper Products to accommodateNatcoms offer because they have excess capacity.
If they turn down the business, Natcom could go to another producer and cut into Paper Products sales at Natcom stores. Another benefit of this offer is that Paper Products would not have to spend any marketing dollars to acquire this new business. Natcom came to them with this offer and it did not cost Mary Miller, or Paper Products anything. According to the marketing concept, Mary should accept the offer from Natcom. As marketing manager, Mary should identify what the customer needs, and make Pape Products Inc. the best company at satisfying those needs for a profit.
In this case the customer is Natcom and they obviously need to market a line of file folders with their name attached. This need should be clear to Mary because her customer has now approached her three times with this request. Mary will need her expert marketing skills when she tries to sell this idea to Bob Butcher, Paper Products president. Mr. Butcher is primarily interested in the development of new products but he will most likely be interested in this proposal since it deals with his companies biggest customer. There will have to be a policy change for Paper Products Inc.
concerning the corporate policy of refusing dealer-branding requests. Paper Products implemented this policy because they wanted the success of their products to depend on the quality rather than just a low price, but only 40 percent of their file folder products are in a specialized line while the other 60 percent are relatively homogeneous shopping products. The success of the homogeneous file folders will be very dependent on the price rather than the quality, therefore this policy depending on quality rather than low price needs to be revised. Mary should also approach Mr. Butcher about using some more of the companys available money for the promotion of their existing brands. Paper Products needs to pull some of their money out of new-product development and attempt to achieve some market penetration.
Although 60 percent of the current market does sound appealing, they may be able to grab some of the remaining 40 percent with some good promotions and market penetration.