Case Discussion

Bob Merita, manager of Showtime Media, is looking for ways to increase profits. But he’s turning cautious after the poor results of his last effort during the previous Christmas season. Showtime Media is located along a busy cross-town street about two miles from the downtown of a metropolitan area of 1 million and near a large university. It sells a wide variety of products used for its different types of multimedia presentations. Its lines include high-quality video and digital cameras, color scanners for use with computers, flat-panel monitors, teleprompters and projection equipment, including video-beam overhead projectors, and electronic projectors that produce large-screen versions of computer output. Most of the sales of this specialized equipment are made to area school boards for classroom use, to industry for use in research and sales, and to the university for use in research and instruction.
Showtime Media also offers a good selection of production-quality video media, specialized supplies (such as the large-format acetates used with backlit signs), video and audio editing equipment, and a specialized video editing service. Instead of just duplicating videos on a mass production basis, Showtime Media gives each video editing job individual attention—to add an audio track or incorporate computer graphics as requested by a customer. This service is really appreciated by local firms that need help producing high-quality DVDs—for example, for training or sales applications.
To encourage the school and industrial trade, Showtime Media offers a graphics consultation service. If a customer wants to create a video or computerized presentation, professional advice is readily available. In support of this free service, Showtime Media carries a full line of computer software for multimedia presentations and graphics work. Showtime Media has four full-time store clerks and two outside sales reps. The sales reps call on business firms, attend trade shows, make presentations for schools, and help both current and potential customers in their use and choice of multimedia materials. Most purchases are delivered by the sales reps or the store’s delivery truck. Many repeat orders come in by phone or mail, but e-mail and electronic file exchange have become common.
The people who make most of the over-the-counter purchases are (1) serious amateurs and (2) some professionals who prepare videos or computerized presentation materials on a fee basis. Showtime Media gives price discounts of up to 25 percent off the suggested retail price to customers who buy more than $2,000 worth of goods per year. Most regular customers qualify for the discount.
In recent years, many amateur photo buffs have purchased digital cameras to capture family pictures. Frequently, the buyer is a computer user who wants to use the computer as a digital darkroom—and the cameras now available make this easy. Showtime Media has not previously offered the lower-priced and lower-quality digital models such buyers commonly want. But Bob knew that lots of such digital cameras were bought and felt that there ought to be a good opportunity to expand sales during the Christmas gift-giving season. Therefore, he planned a special pre-Christmas sale of two of the most popular brands of digital cameras and discounted the prices to competitive discount store levels—about $129 for one and $189 for the other. To promote the sale, he posted large signs in the store windows, gave the sale a lot of space on the home page of Showtime’s website, and ran ads in a Christmas gift-suggestion edition of the local newspaper. This edition appeared each Wednesday during the four weeks before Christmas. At these prices and with this promotion, Bob hoped to sell at least 100 cameras. However, when the Christmas returns were in, total sales were five cameras. Bob was extremely disappointed with these Page 620results—especially because trade experts suggested that sales of digital cameras in those price and quality ranges were up 300 percent over last year—during the Christmas selling season.
Evaluate what Showtime Media is doing and what happened with the special promotion. 
What should Bob Merita do to increase sales and profits?

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