Case Study 1 - 10%

Case Study 1 – 10%
Mephisto Products Ltd
‘Yet another poor year,’ reflected the senior executive of Mephisto Products. ‘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. Mephisto’s major customers 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-in-law, 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 that Watkinson had
brought to the company was one which still pervaded business thinking at Mephisto.
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The essence of this philosophy was centred on product and production excellence,
backed by strong technical sales support. Watkinson 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, time
saving in the case of plant breakdown, etc.). Needless to say, in Watkinson’s day such
products needed selling and, even though sales were to industrial purchasers, it was felt
that such selling techniques were justified. These 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, although from time to time, when
there\ was some spare cash, the company did purchase advertising space in the trade
press. 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 dissent
among the salespeople, who constantly argued that prices were not competitive and if
they were cut, sales could be increased substantially. Delivery times were slow
compared with the average in the industry and there were few discounts for large order
quantities, with the salesperson first having to clear such discounts with accounts before
agreeing to such an arrangement. 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
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market that had traditionally been supplied by UK manufacturers. Many of these market
entrants had introduced new and updated products, drawing upon 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 revert to Mephisto’s 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 beans
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. This person would have
marketing experience, and most probably come 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.
Discussion Questions
1 Criticise Mephisto Products’ approach to sales and marketing.
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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 goes ahead and appoints a marketing
manager?
4 What general advice can you give to the company to make it more marketing
orientated?
-The End-

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Case Study 1 – 10%

Mephisto Products Ltd

1 Criticise Mephisto Products’ approach to sales and marketing.

(a) marketing orientation;

(b) the marketing mix;

(c) the product life-cycle.

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