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Unformatted text preview: Chapter 1 – Defining Marketing for the Twenty-First Century
1. Consumers today have greater ease in interacting and placing and receiving orders than ever before. True (easy) p. 2 2. Because of the digital revolution, customers can easily compare notes with other shoppers when considering a major purchase. True (moderate) p. 2 3. The Internet allows companies to do consumer research online. True (easy) p. 3 4. The computer metamarket consists of the manufacturers of computer memory chips, monitors, keyboards, coaxial cables, modems, software, as well as those who install computers and software and who repair or upgrade computers and software. True (moderate) p. 7 5. Entrepreneurial marketing is practiced by individuals who start a company because they see a market opportunity. True (moderate) p. 4 6. A concert by Jimmy Eat World is an example of a product. True (moderate) pp. 4-5 7. A brand is an offering from a known source. True (moderate) p. 8 8. Exchange is synonymous with transaction. False (difficult) p. 8 9. A latent demand is one that cannot be satisfied with existing products. True (moderate) p. 5 10. A market segment is the product choice the marketer chooses to sell to the public. False (difficult) p. 6 11. A marketing network consists of the company, all its supporting stakeholders, and others who have built a profitable business relationship. True (moderate) p. 10 12. The operating principle of relationship marketing is build profitable transactions and good relationships will follow. False (moderate) p. 9 13. The task environment of an organization consists of the demographic environment, the economic environment, the natural environment, the technological environment, the political-legal environment, and the socio-cultural environment. False (difficult) p. 11 14. The production concept holds that consumers will prefer products that are widely available and inexpensive. True (moderate) p. 12 15. A value proposition is a set of benefits offered to satisfy customer needs. True (moderate) p. 8 16. The ultimate purpose of the marketing concept is to help organizations achieve their objectives. True (moderate) pp. 13-14 17. The “four Cs” that correspond to the “four Ps” of the marketing mix are customer solution, customer confidence, convenience, and communication. False (difficult) p. 11 1 18. External marketing refers to integrated marketing efforts directed at people outside the company. True (moderate) p. 15 19. The societal marketing concept takes the marketing concept one step further by considering long-run societal welfare. True (moderate) p. 17 20. When a company benchmarks, it looks at the worst practices in the industry and tries to avoid them. False (moderate) p. 18 Multiple Choice Questions
21. When Anne Peterson began Olde Westport Spice and Trading Co., she had one product, an allpurpose seasoning mix called Olde Westport’s Special Blend for adding flavor to bland casseroles. She mixed and packaged the product in her basement. She sold her product at craft fairs throughout the Midwest. Peterson was practicing _______________ marketing. a.) formulated b.) entrepreneurial (moderate) p. 4 c.) demand d.) intrepreneurial e.) societal 22. Which of the following is an example of an entity that marketing people market? a.) a Civil War novel about two sisters b.) an actor like Rob Lowe c.) the Homespun Arts & Crafts Festival d.) plastic e.) all of the above (difficult) pp. 4-5 23. Which of the following is not an entity that can be marketed? a.) places b.) events c.) information d.) persons e.) All of the above can be marketed. (moderate) pp. 4-5 24. Overfull demand is a.) where consumers avoid a product _______________. b.) where demand varies by season, hour, or day c.) where there is more demand than can be handled (moderate) p. 5 d.) where consumers demand unhealthy products e.) where consumers lack interest in the product 25. Which of the following products will have the strongest negative demand? a.) nursing home care (moderate) p. 5 b.) Star Wars collectible figures c.) McDonald’s Happy Meals d.) ice cream e.) landscaping 2 26. Jane and Henry produce and sell garden artwork. They are debating over a description of the potential customers for their artwork. Jane and Henry are debating _______________. a.) the definition of customer value b.) customer satisfaction c.) who their market is (moderate) pp. 6 d.) what constitutes an exchange e.) relationship marketing 27. _______________ is the societal process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products and services of value freely with others. a.) Marketing (easy) p. 6 b.) Management c.) Strategic planning d.) Ethics e.) Consumer behavior 28. Marketing ____________ is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. a.) internally b.) management (moderate) p. 6 c.) segmentation d.) training e.) integration 29. Which of the following is correct? a.) A metamediary is a physical marketplace. b.) A marketspace is a stall in a flea market. c.) A metamarket is a huge store. d.) A marketspace is a digital shopping “area.” (difficult) p. 7 e.) A megamarket includes only suppliers. 30. The computer ______________ consists of the manufacturers of computer memory chips, monitors, keyboards, coaxial cables, modems, software, as well as those who install computers and software and who repair or upgrade computers and software. a.) marketplace b.) metamarket (moderate) p. 7 c.) macromarket d.) marketspace e.) micromarket 31. Which is true? a.) Needs preexist marketers. (moderate) p. 7 b.) Marketers create needs. c.) A person’s need for food or shelter is a creation of marketers. d.) Wants become needs when they are directed at specific objects that might satisfy the want. e.) Demand strictly means desire for some object. 3 32. ______________ are wants for specific products backed by an ability to pay. a.) Demands (moderate) p. 7 b.) Needs c.) Values d.) Morals e.) Exchanges 33. A brand name such as BMW carries many associations in the minds of people: speed, expensive, engineering, status, the BMW logo. These associations make up BMW’s ____________. a.) brand strength b.) customer value triad c.) brand image (moderate) p. 8 d.) effective demand e.) value proposition 34. Which of the following is an example of a product? a.) a screenplay based on the life of Bill Clinton b.) a haircut c.) a seminar on time management d.) a carton of eggs e.) all of the above (difficult) pp. 4-5 35. A ______________ is an offering from a known source. a.) product b.) demand c.) need d.) brand (moderate) p. 8 e.) service 36. _______________ is the ratio between what the customer gets and what the customer gives. a.) Value (moderate) p. 8 b.) Cost c.) Satisfaction level d.) Price e.) Benefit 37. Marketers can increase the value of a customer offering by a.) lowering benefits and raising costs. b.) reducing benefits. c.) raising costs. d.) raising benefits. (difficult) p. 8 e.) not considering the competitive offering. 38. The act of obtaining a desired product from someone by offering something in return is known as _______________. a.) product valuation b.) the service desired of the product c.) an exchange (moderate) p. 8 d.) the cost of the product e.) customer satisfaction 4 39. Which is not necessary in order for exchange to exist? a.) at least two parties b.) satisfaction by both parties (difficult) p. 8 c.) each party is free to accept or reject the offer d.) each party believes it is appropriate or desirable to deal with the other party e.) each party has something that might be of value to the other party 40. Which of the following is an example of a transfer? a.) Mrs. King gives Bonnie a dozen cookies for walking her dog. b.) Ofra buys a sweater at a flea market. c.) Andi places the winning bid on a vase at an auction. d.) Anna donates money to the American Cancer Society. (difficult) p. 9 e.) All of the above are examples of transfers. 41. If a marketer seeks to retain customers’ long-term preference and business through a win-win business style, the marketer is engaged in _______________ marketing. a.) relationship (moderate) p. 9 b.) transaction c.) transfer d.) reciprocal e.) give-and-take 42. _______________ marketing aims to build long-term, mutually satisfying relationships with key parties -- customers, suppliers, distributors -- in order to earn and retain their long-term preference and business. a.) Network b.) Business-to-business c.) Transaction-oriented d.) Behavioral response e.) Relationship (moderate) p. 9 43. Customers, employees, suppliers, and distributors could all be considered _______________. a.) stockholders b.) stakeholders (moderate) p. 10 c.) channel members d.) part of the marketing organization e.) supply chain members 44. ______________ channels deliver messages to and receive messages from target buyers. a.) Communication (moderate) p. 10 b.) Distribution c.) Supplier d.) Delivery e.) Informal 45. Which of the following is a part of the physical distribution channel for a producer of bottled water? a.) the warehouse where empty plastic bottles are stored (moderate) p. 10 b.) the toll-free number it uses for customer orders c.) the print media that runs its advertisements d.) the bank where it borrowed the money to purchase its filtration system e.) the insurance company that insures the company in the event of litigation 5 46. Which of the following is not true? a.) The supply chain is longer than the marketing channel. b.) The supply chain includes the final customer. (difficult) p. 10 c.) The supply chain for women’s leather purses includes the supplier of the hides and the tanning process. d.) Marketing channels connect the marketer to the target buyer. e.) The distribution channel is used to display or deliver the physical product or services to the buyer or user. 47. ______________ is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. a.) Marketing mix (moderate) p. 11 b.) Environmental scan c.) Consumer behavior d.) Business markets e.) Consumer markets 48. When Anne Peterson began Olde Westport Spice and Trading Co., she had one product, an allpurpose seasoning mix called Olde Westport’s Special Blend for adding flavor to bland casseroles. She sold 6-ounce bottles of her seasoning mix for $6.95. Her only outlets were booths at craft fairs throughout the Midwest. She relied on word-of-mouth advertising and a few feature articles in regional newspapers to tell people about her product. The above describes Olde Westport’s _______________. a.) method of exchange b.) transaction marketing c.) marketing tactics d.) marketing mix (difficult) p. 11 e.) transfer marketing 49. Which of the following is NOT one of the customer’s “Four Cs” as defined by Robert Lauterborn? a.) communication b.) customer solution c.) commitment (moderate) p. 11 d.) customer cost e.) convenience 50. The first computers originated for home use were only sold in kit form to technical enthusiasts who did their own assembly. Demand was high and so were prices. At that time, the firm offering these kits would likely have been using the _______________ concept. a.) production (moderate) p. 12 b.) market c.) technological d.) product e.) selling 6 51. Intel, one of the largest producers of integrated circuit chips, puts a great deal of effort into expanding production of chips to drive down the cost and thus expand the market. This is most indicative of the _______________ concept. a.) production (moderate) p. 12 b.) product c.) customer d.) marketing e.) societal 52. Which of the following is not a level of competition for marketers? a.) employee competition (moderate) pp. 10-11 b.) brand competition c.) form competition d.) generic competition e.) industry competition 53. Producers of unsought products like burial insurance would normally employ the _______________ concept. a.) production b.) product c.) marketing d.) selling (moderate) p. 13 e.) customer 54. In the history of the railroads, management thought that travelers wanted trains rather than transportation and overlooked the growing competition from airlines, buses, trucks, and automobiles. This was an example of marketing _______________. a.) vision b.) naiveté c.) far-sightedness d.) relationships e.) myopia (moderate) p. 13 55. The selling concept assumes _______________. a.) consumers will favor products that offer quality, performance, and innovation b.) a company has a social responsibility for the effects of its products c.) if left alone, consumers will ordinarily not buy enough of the organization’s products (difficult) p. 13 d.) being more effective than competitors in integrating marketing activities will lead to success e.) consumers do not have to be compelled by promotions to buy what a company is selling 56. Which is not true about the selling concept? a.) It assumes that consumers must be coaxed into buying. b.) It always takes into account the greater societal good. (moderate) p. 13 c.) Firms tend to practice the selling concept when they have overcapacity. d.) The selling concept is practiced most aggressively with unsought goods. e.) If focuses on the needs of the seller. 7 57. The marketing concept rests on which “four pillars”? a.) customer needs, target market, integrated marketing, and profitability (moderate) pp. 14 b.) products, integrated marketing, sales volume, and competition c.) customer needs, competition, sales volume, and profit d.) product, price, promotion, and place e.) customer needs, integrated marketing, profitability, and market focus 58. All of the following represent types of needs discussed in the text EXCEPT: a.) delight needs b.) real needs c.) unreal needs (difficult) p. 14 d.) stated needs e.) unstated needs 59. If a marketer seeks to discover and create solutions to customer needs that customers did not ask for, but respond enthusiastically to, he or she is engaged in _______________ marketing. a.) relationship b.) creative (moderate) p. 14 c.) responsive d.) transaction e.) formulated 60. When a company’s departments work together to serve the customers’ interests, the result is ______________. a.) product management b.) responsive marketing c.) anticipative marketing d.) integrated marketing (moderate) p. 15 e.) bad word-of-mouth communications 61. The tasks of hiring, training, and motivating able employees who want to serve customers well is part of _______________ marketing. a.) integrated b.) external c.) myopic d.) relationship e.) internal (moderate) p. 15 62. Master marketing companies place _______________ at the top of their organizational chart. a.) the marketing department b.) customers (moderate) p. 15 c.) employees d.) management e.) target markets 63. In terms of private firms, the ultimate purpose of the marketing concept is _______________. a.) customer satisfaction at any costs b.) profitability and customer satisfaction (difficult) pp. 14-16 c.) target marketing d.) relationship marketing e.) a competitive advantage 8 64. Joseph Dinetah is leading his company into becoming a marketing-oriented company. His VP of manufacturing and VP of finance don’t like the idea. They fear a diminishment of product quality and too much ‘free spending’ by marketers. The attitudes of the VP of finance and VP of manufacturing are examples of _______________. a.) the inability of old managers to learn new ideas b.) internal marketing as a passing fad c.) the slow learning process involved in such a conversion d.) “fast forgetting” e.) resistance to the marketing orientation (difficult) p. 15 65. Taking into account profitability, customer’s need, and the greater societal good when marketing is called _______________. a.) the societal marketing concept (moderate) p. 17 b.) the selling orientation c.) the customer concept d.) the value proposition e.) cause-related marketing 66. Which of the following is not true about cause-related marketing? a.) It demonstrates good corporate citizenship. b.) It is generally considered the same thing as the societal marketing concept. (moderate) p. 17 c.) It provides an opportunity to enhance corporate reputation. d.) It can be used to raise brand awareness. e.) It may result in increased consumer loyalty. 67. Which of the following statements best represents the societal marketing concept? a.) We have developed a new, more convenient package. b.) Target Corporation chooses to eliminate cigarette sales in their stores. (moderate) p. 17 c.) This product saves much more time for the consumer. d.) Give the customers what they want. e.) Sell at the lowest price. 68. For each 20 kilo bag of Ole Boy High Pro dog food that is purchased, the manufacturer makes a donation to the American Humane Society. The terms of the donation are prominently displayed on the bags and included in its print ads. The manufacturer of Ole Boy is using _______________ marketing. a.) advocacy b.) service c.) nonprofit d.) pro bono e.) cause-related marketing (moderate) p. 17 69. A provider of lawn care hires a telemarketing company to find prospects for its services. The installer is engaged in _______________. a.) remarketing b.) demarketing c.) centralization d.) outsourcing (moderate) p. 18 e.) relationship marketing 9 Essay Questions
70. In a short essay, discuss as many demand states as you can for bifocal contact lenses. Answer: Since many people don’t want to admit they need bifocals, there is a negative demand. When the bifocal lenses were introduced, there was no demand because people didn’t know they existed. Before they were introduced, many people thought such a product would be nice but didn’t think it would ever exist. This is latent demand. If something better, such as a surgery to repair the eyes is invented, then the lens will experience declining demand. If the manufacturers of the lens are making all they possibly can, then there is full demand. With overfull demand, the manufacturers of the lens can’t make enough. Answers may vary. (difficult) p. 5 71. In a short essay, describe the supply chain for denim jeans. Answer: The supply chain begins with cotton growers, then on to cloth textile processors, cutting operations and sewing operations. Next, the jeans are sent through distribution channels, such as wholesalers and retailers. From there, they are purchased by consumers. (moderate) p. 10 72. In a short essay, discuss the marketer’s argument for why an organization should embrace the marketing concept. Answer: The company’s assets have little value without the existence of customers. The key company task, therefore, is to attract and retain customers. Customers are attracted through competitively superior offerings and retained through satisfaction. Marketing’s task is to develop a superior offering and deliver customer satisfaction. Customer satisfaction is affected by the performance of other departments. Marketing needs to influence those other departments to cooperate in delivering customer satisfaction. (moderate) pp. 13-14 73. In a short essay, describe the four levels of competition for Chrysler-made minivans. Answer: The four levels of competition are based on degree of substitutability. In brand competition, Chrysler would see its competition in Toyota, Honda, and Ford’s minivans—that is, moderately priced competitor brands. In industry competition, Chrysler sees its competition as all companies that make vehicles in the same product class, so this might include lower-end and higher-end minivans. In form competition, the company sees its competition in all companies that manufacture products that provide consumers with the same utility—such as bikes, motorcycles, SUVs, pickups, etc. Lastly, in generic competition, the competition is considered any company that competes for the same dollar as the Chrysler minivan—this could include vacations, car repair services, new homes, etc. (moderate) pp. 10-11 Mini-Cases
Mini-Case 1-1 S. Truett Cathy entered the restaurant business in 1943. In 1964 he introduced his first Chick-fil-A sandwich. In 1998 he owned 826 Chick-fil-A restaurants in 35 states and South Africa with an additional 92 stores set to open in 1999. Cathy was never the type of entrepreneur who wanted to run an idea up the flagpole and see who saluted it. He will not open a new restaurant unless he is convinced the enterprise will be a success. He will not consider taking the company public even though it would be worth an estimated three-quarters of a billion dollars if it went public. Cathy’s philosophy is, “We started Chickfil-A, we built it, and we own it. Yes, we have thousands of allies, friends, partners, and employees. But 10 it we want to maintain the quality, the integrity, and the whole culture of our company, we’ve got to own it.” 74. Refer to Mini-Case 1-1. When Cathy started selling Chick-fil-A sandwiches, the market was saturated with hamburger restaurants. Colonel Sanders was selling chicken dinners, however, there were no restaurants selling the fried chicken sandwich that Cathy visualized. Cathy recognized a(n) _______________ demand for something different to eat. a.) derived b.) latent (moderate) p. 5 c.) elastic d.) irregular e.) declining 75. Refer to Mini-Case 1-1. Cathy’s philosophy about keeping the company private is an example of _______________ marketing. a.) relationship (difficult) p. 9 b.) entrepreneurial c.) societal d.) environmental e.) transactional 76. Refer to Mini-Case 1-1. The allies, friends, partners, and employees that Cathy refers to are examples of _______________ with whom Chick-fil-A has built mutually profitable business relationships. a.) stockholders b.) transaction partners c.) reciprocal agents d.) stakeholders (moderate) p. 10 e.) business networks 77. Refer to Mini-Case 1-1. Which of the following would be a part of Chick-fil-A’s task environment? a.) its target customers (moderate) p. 11 b.) development of database marketing c.) laws governing cleanliness standards in the restaurant kitchens d.) consumer desire for low-fat food e.) demographic trends that show the U.S. population moving south and west 11 Mini-Case 1-2 A few years ago, Target Corporation (then called Dayton-Hudson) decided that it would no longer sell tobacco products, giving up a very profitable line for them at the time. Liability and corporate responsibility were cited as the reasons for this move at the time. 78. Refer to Mini-Case 2-1. This decision by Target illustrates which of the following? a.) the marketing concept b.) integrated marketing c.) relationship marketing d.) societal marketing concept (moderate) p. 17 e.) benchmarking 79. Refer to Mini-Case 2-1. Which of the external environments likely had the most impact on Target’s decision to delete tobacco products from its product line-up? a.) demographic environment b.) political-legal environment (moderate) p. 11 c.) task environment d.) natural environment e.) manufacturing environment 80. Refer to Mini-Case 2-1. Even if a Target consumer wanted to buy tobacco products, no physical product exchange could take place. Why? a.) There are not two parties. b.) One of the parties lacks something that could be of value to the other. (moderate) p. 8 c.) One of the parties is incapable of communicating or delivering. d.) One of the parties cannot accept or reject the exchange. e.) One of the parties believes it is inappropriate or undesirable to deal with the other party. 12 Chapter 2 –Examining the Infrastructure for Marketing Management
True/False Questions 1. Outsourcing means a company decides what is critical to their business and they then hire others to do the less critical, or core-mission oriented tasks. True (moderate) 2. A core competency is fairly easy for competitors to replicate in a free marketplace. False (moderate) 3. Good mission statements focus on a limited number of goals and define the company’s major competitive spheres. True (easy) 4. A strategic business unit (SBU) has its own set of competitors, distinct from other SBUs in the company. True (moderate) 5. Acquiring a supplier is a growth strategy that is achieved through integration. True (moderate) 6. Microsoft is a huge firm which nonetheless has not lost its ultracompetitive edge. The text attributes this to Microsoft’s corporate culture. True (easy) 7. Scenario analysis uses case studies of actual, historical company events and changes the assumptions related to the outcomes to improve future responses. False (moderate) 8. A proper SWOT analysis will include a market opportunity analysis, or MOA. True (moderate) 9. The SW portion of the SWOT analysis is where the external environments of the business are closely examined. False (moderate) 10. Strategy guru Michael Porter’s three “generic” strategies are: cost leadership, diversification, and focus. False (moderate) 11. Part of strategic program implementation is estimating the costs for the desired action. True (difficult) 12. The first steps in managing implementation of a strategy are to break down every program into is component activities and identify the resources required and their associate costs. True (moderate) 13. The late strategy guru Peter Drucker said that for businesses, “doing the things right” was more important than “doing the right thing.” False (moderate) 14. A marketing information system consists of the people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. True (moderate) 15. Marketing information systems are developed from internal company records, marketing intelligence, and marketing research. True (easy) 16. The systematic collection, analysis, and reporting of data and findings relevant to specific marketing situation is called marketing research. True (moderate) 17. Small companies can engage in marketing research in a number of creative and affordable ways, including using the Internet or taking advantage of local university students who need business projects. True (easy) 18. Typically, companies budget about 11–12 percent of company sales for marketing research. False (moderate) 19. The last step in marketing research is developing the research plan. False (difficult) 20. Data published by the government and data purchased from outside suppliers can improve the quality of a company's marketing intelligence efforts. True (moderate) 21. Primary data is generally available more quickly and at a lower cost than secondary data. False (moderate) 22. Primary data are data that were gathered for another purpose and already exist somewhere. False (moderate) 23. Because it is hard to track and verify, behavioral data are less reliable in understanding customer behavior than are customer statements of their behavior. False (moderate) 24. To obtain a representative sample, a probability sample of the population should be drawn. True (difficult) 25. If speed is of the essence for a marketing research project, the best contact methods are either online or telephone interviewing. True (easy) 26. The disadvantages of using the personal interview method to conduct marketing research are that it is the most expensive method and it is subject to bias and distortion. True (moderate) Multiple Choice Questions 27. In the first half the 20th century, Ford Motor Company owned rubber plantations in Brazil to supply itself with raw materials for tire making. At some point, Ford began to buy all tires from outside vendors, and put more energy and focus on making the vehicles themselves. This is an example of _________. a. the value chain b. outsourcing (moderate) c. fulfillment management d. portfolio balancing e. inbound logistics 28. A university with growing budget concerns decided to lay off all groundskeepers and hire the work out to a large, local landscaping firm. That firm hired most of the laid off workers. Most campus visitors and students were never aware of the change. This is an example of _________. a. inbound logistics b. the value chain c. outsourcing (moderate) d. open markets e. portfolio management 29. Bernardo Sampson has a restaurant in northeastern China that makes the best Chinese dumplings, according to his well-traveled customers. According to Bernardo, the key is controlling the dumpling filling preparation process and making his own dumpling wrapper from an old family recipe. Other inputs to the business, such as kitchen equipment, and in some ways, employees, are less important to creating the best dumplings. The dumpling filling preparation and homemade dumpling wrapper could be considered Bernardo’s _________. a. outsourcing genius b. less critical resources c. holistic marketing effort d. core competency (moderate) e. outbound logistics 30. Which of the following is NOT a characteristic of a core competency? a. It has applications in a wide variety of markets. b. It is a source of competitive advantage. c. It makes a significant contribution to perceived customer benefits. d. It is difficult for competitors to imitate. e. It can easily be outsourced. (easy) 31. According to Figure 2.3 Company Marketing System in the text, “Factors Influencing Company Marketing Strategy,” the center of the all marketing activity should be __________. a. publics b. suppliers c. stakeholders d. target customers (moderate) e. the marketing control system 32. Strategic planning goes on at all of the following organizational levels, EXCEPT: a. corporate level. b. retail level. (moderate) c. division level. d. business unit level. e. product level. 33. Blind Bill makes custom window treatments and sells exclusively to commercial homebuilders. CEO William Learned III often follows site finish managers around onsite to see how the customers view the products and to strengthen the partnership he feels he has with them. Learned’s goal is to improve the company’s offerings. In the holistic marketing framework, this type of activity would be called _________. a. core competency strengthening b. value exploration c. value creation (difficult) d. value fulfillment e. value delivery 34. The late business guru Peter Drucker asked all of the following questions about defining an organization’s mission, EXCEPT: a. What should the business be? b. What will the business be? c. What is the business? d. Who is the customer? e. What has the business been? (moderate) 35. A good mission statement can provide all of the following to employees, EXCEPT: a. a shared sense of purpose. b. a shared sense of company profits. (moderate) c. a shared sense of direction. d. a guide that helps geographically distant employees work independently and collectively. e. a shared sense of opportunity. 36. Good mission statements can define the company’s major competitive spheres. The vertical sphere includes __________. a. the range of products and applications the company will supply b. the type of market or customers the company will serve c. the number of channel levels from raw material to final product (difficult) d. the range of regions or countries in which a company operates e. the range of core competencies the company will master and leverage 37. Which of the following is NOT normally a part of the Strategic Planning Process? a. Corporate planning. b. Business unit planning. c. Division planning. d. Retail planning. (moderate) e. Product planning. 38. What is the proper order for the Strategic Control Process? a. measure results diagnose results take corrective action (moderate) b. diagnose results measure results take corrective action c. organize results implement results d. corporate panning division planning business planning retail planning e. planning implementing controlling 39. Blind Bill makes custom window treatments and sells exclusively to commercial homebuilders. Which of the following is NOT true of Blind Bill? a. Homebuilders are its customer group. b. Its market segment is well defined. c. Window coverage is its customer need. d. It limits its sales to metal or vinyl miniblinds. (easy) e. The various window treatment products are its technology. 40. According to Levitt, market definitions that are business-oriented rather than product-oriented are superior. Such definitions include each of the following, EXCEPT: a. customer needs. b. geographical constraints. (moderate) c. customer groups. d. technology. e. relevant target markets. 41. Carmaker Toyota has the Scion division that is aimed at providing entry-priced vehicles to new members of the Toyota “family.” Scion has independent budgeting, management direction, and profit/loss responsibility within the larger company. Scion is __________. a. only sold on the west coast b. only one market segment for Toyota, because the Camry is so popular c. a strategic business unit (moderate) d. a competitor for Lexus vehicles e. horizontally integrated with the parent company 42. Perhaps the least intuitive part of assessing growth opportunities for the company is __________. a. planning new businesses b. downsizing and/or terminating older businesses (moderate) c. deciding whether to integrate by buying a supplier or a customer d. choosing an intensive growth strategy e. employing a market penetration approach 43. Attempting to gain market share with current products in current markets is called _________. a. forward integration b. horizontal integration c. concentric diversification d. market development e. market penetration (moderate) 44. Russ Clark, a NAPA auto parts dealer, bought out a competitor’s store. This is an example of _________. a. market penetration b. backward integration c. horizontal diversification d. conglomerate diversification e. horizontal integration (moderate) 45. Many years ago, French utilities management company Vivendi decided to buy a portfolio of entertainment businesses that included theme parks and rights to a music catalog. The purpose of the acquisition was to grow company revenues and profits. This was an example of __________. a. integrative diversification b. horizontal integrative growth c. conglomerate diversification (difficult) d. market development e. concentric diversification 46. Tired of high prices and poor service, and convinced she can do better, funeral home owner Macy Mbacke-Abdullah decides to purchase the wholesaler that she has been buying caskets from. This is an example of __________. a. backward integration (moderate) b. forward integration c. diversified integration d. horizontal integration e. concentric integration 47. A company’s __________ consists of its structures, policies, and corporate culture. a. headquarters b. organization (moderate) c. sales position d. industry e. scenario 48. __________ has been defined as the shared experiences, stories, beliefs, and norms that characterize an organization. a. Corporate structure b. Corporate history c. Corporate strategy d. Corporate culture (moderate) e. Corporate organization 49. Which of the following is NOT considered to be a part of an organization’s culture? a. Experiences. b. Stories. c. Beliefs. d. Salaries. (easy) e. Norms. 50. Which of the following is NOT one of Hamel’s recommendations for crafting corporate strategy? a. Management should encourage fresh ideas. b. Employees with youthful perspectives should participate. c. Those who are new to the industry should be asked to contribute. d. The company should not forget to include ideas from those who do not work close to headquarters. e. Senior management should make and hand down strategy. (moderate) 51. Which of the following would NOT be considered a part of scenario analysis for General Motors? a. The company adopts the most probably scenario and watches for signs that confirm it. b. The CEO asks for plausible representations of the company’s future to be considered. c. Company analysts present last quarter's earnings for the board. (difficult) d. Managers consider how they will deal with a declaration of bankruptcy by a major supplier. e. Unit chiefs map out strategies in case a strike disrupts production during upcoming contract negotiations with labor. 52. Which of the following is in the correct order, as a part of the Business Unit Strategic-Planning Process? a. mission SWOT strategy formulation implementation (moderate) b. external analysis internal analysis program formulation mission statement c. program formulation strategy formulation goal formulation d. program formulation strategy formulation feedback control e. mission SWOT program formulation strategy formulation 53. SWOT refers to __________. a. semper wit omnicus terapis b. internal and external environmental analysis (moderate) c. strategy and goal formulation d. the control and feedback loop in the strategic planning process e. implementing strategy across the organization 54. SWOT refers to __________. a. semper wit omnicus terapis b. strategy with operations talent c. strategic watching of technology d. strengths, weaknesses, opportunities, threats (easy) e. strategy formulation, willingness to negotiate, operational excellence, temperament suitable to succeed 55. Marketing opportunity analysis (MOA) involves asking each of the following questions, EXCEPT: a. Does the company have access to the resources needed to deliver customer benefits? b. Can the benefits involved in the opportunity be articulated to the target customer? c. Can the company deliver the benefits at least as well as competitors? (difficult) d. Will the financial rate of return meet or exceed the company’s threshold for investment? e. Can the target market(s) be located and reached with cost-effective media and trade channels? 56. A(n) __________ is a challenge posed by an unfavorable external trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit. a. environmental threat (moderate) b. SWOT team c. outside sales investment d. marketing opportunity e. organizational weakness 57. Which of the following is NOT part of effective goals? a. Goals must be consistent. b. Goals must be realistic. c. Goals must be arranged hierarchically, from most to least important. d. Goals must be available to all organizational stakeholders. (difficult) e. Goals must be stated quantitatively whenever possible. 58. Apple Computer designs its computers and other technological products, such as the popular iPod so that they stand out in the marketplace from equally-effective, but more boring-looking competitors. This is an example of using the ________ strategy, as proposed by Porter. a. cost leadership b. differentiation (moderate) c. horizontal integration d. focus e. all-in-one 59. Costco has higher sales per square foot than powerful rival Sam’s Club (a Wal-Mart company). Costco have achieved this through a deep understanding of its highly targeted customer group. This is an example of using Porter’s __________ strategy. a. cost leadership b. differentiation c. horizontal integration d. focus (moderate) e. price and performance 60. According to McKinsey & Company, successful strategy involves seven “S” elements. Which of the following is included among the “hardware” needed to successfully implement strategy? a. Style. b. Staff. c. Systems. (moderate) d. Shared values. e. Skills. 61. Which of the following statements is in line with Peter Drucker’s notion of effectiveness? a. Do the important thing. b. Do the right thing. (moderate) c. Do things right. d. Do unto others as you would have them do unto you. e. Do the best thing. 62. A marketing information system (MIS) consists of __________. a. the set of procedures and sources used by managers to obtain everyday information and relevant developments in the marketing environment b. the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation c. an organized collection of comprehensive data about individual customers, prospects, or suspects that is currently accessible for marketing purposes d. the people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers (difficult) e. the coordination of the collection of data, systems, tools, and techniques with supporting software and hardware by which an organization gathers and interprets information from the business environment 63. When Molly’s parents retired, they decided they wanted to travel. They found an ideal job that allows them to travel for free, but the only catch is they have to stay at Holiday Inns. During each stay, they test all the amenities offered by the motel and evaluate each. The evaluation forms are sent to the motel headquarters where it becomes part of the motel’s __________ system. a. sales reporting b. marketing research c. experiential research data d. accountability information system (AIS) e. marketing intelligence (moderate) 64. Which of the following is NOT a step that might be used to improve the quality of a firm’s marketing intelligence? a. Setting up a consumer panel. b. Collecting competitive intelligence by buying a competitor’s products. c. Watching how the stock market reacts to interest rate changes. (moderate) d. Motivating distributors to pass along important intelligence from the marketplace. e. Purchasing information from outside suppliers. 65. The systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company is termed __________. a. the sales reporting system b. marketing research (moderate) c. marketing intelligence d. the sales force e. top management 66. Small companies can engage in marketing research in a number of creative and inexpensive ways, including __________. a. setting up their own Web site b. hiring an independent marketing research firm c. buying information from database companies like A.C. Nielsen d. using its own internal marketing research department e. using an online information service such as the Internet (moderate) 67. The second step in the marketing research process is the __________. a. development of the research plan (moderate) b. definition of the problem and research objectives c. survey of stakeholders to determine if problems exist d. decision regarding the research tools and target group e. collection of the available sources for needed information 68. All of the following are steps in the marketing research process EXCEPT: a. define the problem and research objectives. b. develop the research plan. c. collect the information. d. compare data to government sources. (moderate) e. present the findings. 69. The step in the marketing research process that includes determining who will be sampled is to __________. a. define the problem and research objectives b. develop the research plan (moderate) c. collect the information d. make a decision based on the project outcomes e. present the findings 70. Which of the following is NOT a consideration when preparing a sampling plan? a. Who is to be surveyed? b. How many are to be surveyed? c. How will the sample respondents be paid? (moderate) d. Should a probability sample be used or not? e. How should respondents be chosen? 71. Rita Jenkins, president of a local Chamber of Commerce, had difficulty getting members to assist in running the organization. She felt it was because of lack of commitment to the Chamber. Her vice-president felt it was due to having too many meetings. The organization’s secretary felt it was because there were several other professional organizations to which the members also belonged. If Rita wants to do research to determine the real reason why members do not want to run for office, she should begin by __________. a. determining the optimum number of meetings b. evaluating the advantages the Chamber offers over other similar organizations c. defining the problem (difficult) d. developing the marketing research plan that she would employ e. holding focus groups of members of similar organizations to determine whether the problems the Chamber is facing are universal or local 72. After working for a roofing contractor for ten years, Cameron Gomez finally established his own operation. Unfortunately, Cameron’s first six months have been disappointing. He decided to conduct a marketing research study to gather preliminary data to shed light on the nature of the problem and suggest some new ideas. He needs to conduct __________ research. a. exploratory (difficult) b. causal c. secondary d. descriptive e. observational 73. Which of the following is a type of causal research project that would be used by a company that publishes custom memory books that are used as fundraisers for churches, colleges, and civic groups? a. A study to determine the types of fundraising most commonly used by church groups. b. A survey of previous customers to see if they are interested in a new edition. c. A study to see if more people buy the custom memory book if the cover has a picture relating to the group selling it rather than just a generic cover. (difficult) d. A study to determine the price range for an average-sized cookbook. e. An industrial study of what similar publishing companies are doing to better serve their customers. 74. __________ data are data that were gathered for another purpose and already exist. a. Primary b. Descriptive c. Causal d. Secondary (moderate) e. Observational 75. Which of the following is NOT typical of a focus group? a. Approximately, 14-18 participants spend a few hours together. (moderate) b. A skilled moderator guides the discussion. c. The discussion centers on a product, service, or marketing entity. d. They can gauge consumer reaction to product features or design. e. They can give quick consumer feedback to new ideas. 76. Which of the following is an example of how ACE Crafts, a manufacturer of acrylic paints used in arts and crafts, would use observational research to gather primary data? a. Survey current users to find out ways the paint could be improved. b. Watch how members of a class learning to paint unfinished crafts use the paint. (moderate) c. Ask users of other brands of paint to list the most important attributes for acrylic paint. d. Conduct a focus group of current users to determine how ACE is positioned in their minds when it is compared to similar products. e. Include a mail survey with each bottle of paint sold. 77. A(n) __________ is a gathering of 6 to 10 people who spend a few hours with a skilled moderator to discuss a product, service, or other marketing entity. a. focus group (moderate) b. intermediary team c. agent group d. consolidated group e. grouped dataset 78. __________ are best suited for descriptive research such as learning about people’s knowledge, beliefs, preferences, and satisfaction, and measuring these magnitudes in the general population. a. Observational research methods b. Focus groups c. Surveys (moderate) d. In-depth interviews e. Qualitative research methods 79. A catalog retailer wants to know more about the buying habits of people who order more than once a month from its pages. The catalog retailer will use its database to examine __________ data. a. observation b. survey c. primary d. experimental e. behavioral (moderate) 80. The manufacturer of Babylok brand sewing sergers wants to know the effect rebates have on sales. It plans on dividing its retailers into three regions. One group will offer consumers who buy a Babylok serger a $25 cash rebate. One will offer buyers of the machine $50 worth of “free” machine accessory parts. A third region will offer buyers a $40 store credit. The results of this market research will provide Babylok with __________ data. a. observation b. survey c. primary d. experimental (difficult) e. descriptive 81. A(n) __________ consists of a set of questions presented to respondents for their answers. a. questionnaire (moderate) b. focus group c. data set d. database e. observation 82. __________ pre-specify all of the possible answers, so they are easy to interpret and tabulate. a. Open-end questions b. Closed-end questions (moderate) c. Galvanometers d. Audiometers e. Samplings 83. __________ allow respondents to answer in their own words. a. Open-end questions (moderate) b. Closed-end questions c. Galvanometers d. Audiometers e. Samplings 84. Which of the following statements about probability sampling is true? a. Probability sampling is the least expensive type of sampling to use. b. Probability sampling is the simplest and least difficult type of sampling to generate. c. Researchers who use probability sampling can choose from a judgment or quota sample. d. Probability sampling does not allow researchers to measure sampling error. e. Researchers who use probability sampling can calculate confidence limits for sampling error. (difficult) 85. The contact method that minimizes interviewer bias is the __________. a. mail (moderate) b. telephone c. intercept interview d. focus group e. personal interview 86. The best contact method to use to determine how many people saw the ad for a new Chery auto model that ran last night during the 6:00 p.m. news would be the __________. a. mail a. Internet b. telephone (moderate) c. focus group d. personal interview 87. If reducing the cost of data gathering is the most important criterion for a marketing research project, the preferred contact method to avoid is the __________. a. intercept interview b. telephone c. focus group d. personal interview (moderate) e. mail 88. Which is typically the most expensive step of marketing research process? a. Problem definition. b. Developing the research plan. c. Information collection. (moderate) d. Information analysis. e. Questionnaire design. 89. Which step is typically the most prone to error in the marketing research process? a. Problem definition. b. Developing the research plan. c. Information collection. (moderate) d. Information analysis. e. Questionnaire design. 90. The last step in the marketing research process is to __________. a. create a database using the research results b. determine the best solution to the problem c. present the findings (moderate) pp. d. analyze the information e. remove all jargon and technical language from the report Essay Questions
91. Harley-Davidson Motor Company’s mission statement reads: “We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.” In a short essay, compare Harley’s mission statement against Drucker’s classic questions. Answer: 1) What is our business? Selling branded motorcycles and related products and services that help customers fulfill their dreams. 2) Who is our customer? Motorcyclists and the general public, with some reference to market segmentation (motorcyclists who prefer U.S.–made machines, for example). 3) What is of value to the customer? The status and mystique of the brand and what the brand and the products themselves do for them—fulfilling dreams by providing an experience. 4) What will our business be? The statement allows Harley to grow in some directions but not in others. For example, unless it changes its mission statement, Harley could not get into making aircraft engines or four-wheeled vehicles. They have developed noncruiser-style bikes in the last decade (Beull sportbikes), and they could enter other motorcycle segments (large scooters, for example) without violating their current mission. 5) What should our business be? The declaration that Harley is what it is seems to be a perfect answer to this question. If the company wanted to be something else, they would probably make changes in the mission statement before they came out with products or services that were not in harmony with the current statement. (moderate) 92. Joe Leung is a machinist and owns a small factory in Changchun, Jilin Province. Leung makes parts for a Chinese auto manufacturer and does a little work for his friend’s auto repair shop. Leung hires you to help him explore ways in which he can grow his business. In a short essay, suggest at least four different strategic ways Leung could grow his business. Answer: Using Ansoff’s Product-Market Expansion Grid gives four ways to grow: 1) market penetration, in which Leung would sell more of the same machined products to his two current customers. 2) market development, in which Leung would seek other types of customers to buy the same products he now only sells to the Chinese auto manufactory and to his friend. Maybe other local auto manufacturers need machining work done for auto maintenance. 3) product development, in which Leung would create different (but probably related) products or services and attempt to sell them to his current customers. Perhaps he could get lease higher-quality equipment that allows him to shape harder alloys in addition to his steel work. 4) Diversification, in which Leung could develop new products and services and seek markets for them outside his current customer base. For example, he might start a short-haul trucking company. Leung could also grow through integration. There are three major types of integration: 1) Leung could purchase a controlling stake in one of his suppliers, such as a small lubricant company. This is called backward integration. 2) Leung could integrate forward by buying out his friend’s repair shop. 3) Leung’ final integration option is called horizontal integration, in which he buys other shops like his own to expand his sales. (moderate) 75. Perform a limited SWOT analysis for the Wal-Mart company. Answer: Strengths 1. Wal-Mart is the largest retailer in the world by sales volume. 2. Wal-Mart is focused on cutting costs. 3. Wal-Mart has plenty of cash to acquire the technology and businesses it needs. 4. Wal-Mart’s laser-like focus on offering the lowest prices. 5. Nearly one-half of Americans go to Wal-Mart each month. Weaknesses 1. Wal-Mart’s stock price has been relatively flat for the last five years, even though the company’s revenues are still growing. 2. Potential arrogance on the part of Wal-Mart leadership (see threats). Opportunities 1. Wal-Mart has only just scratched the surface of global markets. 2. Although Wal-Mart is already the largest grocery retailer in the United States, they have plenty of room to grow that business, either through acquisition or development of their own chain of a stand-alone grocery chain. 3. Wal-Mart could go upscale with a separate branding strategy. 4. Wal-Mart could acquire profitable rival Costco. Threats 1. Lawsuits aimed at Wal-Mart’s hiring practices, environmental record, and foreign sourcing. 2. Growing discomfort with Wal-Mart’s history of putting small, local competitors out of business with their aggressive pricing. 3. Potential boycotts or additional bad publicity. (moderate) ** NOTE: This question could ask for the student to do a limited SWOT analysis for any company, if there is any concern that the student does not have enough information about Wal-Mart ** 93. Walnut Hill is a company that sells everything you could possibly need to make your own candles. Before its owner expands into other craft areas, she wants to do some marketing research. She has heard of too many companies that have gone out of business as a result of inappropriate or ill-timed expansion. In a short essay, suggest ways that she can obtain market research to help her reduce uncertainty regarding an expansion. Answer:
She could use the services of a marketing research firm that will develop and conduct a research project to her specifications. Less expensive methods mentioned in the chapter for obtaining the marketing research she needs include: 1) hiring students or professors to perform the research, 2) using the Internet as a source of information, and 3) checking out what her competitors are doing. (easy)
94. Suppose you are the brand manager for Wild Thing!, an unscented deodorant shampoo aimed at the so-called “Millennial Generation” consumer. Sales of your product have been declining. Exploratory research suggests your brand is not price competitive. In a short essay, outline a research plan that would provide you with the information you need to decide what to do. Then, explain why you selected those specific methods instead of others. Answer:
Students’ answers to this question will vary considerably. All answers should consider what research approach will be used, the type of research instrument(s) if appropriate, a sampling plan, and the appropriate contact method(s). In this instance the survey approach might be appropriate with closed-end questions. The higher quality answers will provide sample questions. At a minimum, the answer should contain the process from Figure 3.1 (moderate) Mini-Cases
Mini-Case 2-1 Scuba-Doobie-Doo is owned by Filamena Barbozo, who wishes to create a full service SCUBA website. She plans to include scuba chat rooms for visitors, and ever-changing photo and story gallery where visitors can post, read, and view the adventures of others and of professional SCUBA writers. She plans to have an online store with all possible SCUBA equipment available for purchase. She plans to sell advertising to SCUBA companies. All told, Filamena wants ScubaDoobie-Doo to be a one-stop SCUBA source for enthusiasts. 95. Refer to Mini-Case 2-1. Tired of high prices and poor service, and convinced she can do better, SD-D’s owner Filamena Barbozo decides to purchase the company that provides and maintains the servers for the Web site. This is an example of __________. a. backward integration (moderate) b. forward integration c. diversified integration d. horizontal integration e. concentric integration 96. Ms. Barbozo, S-D-D’s owner, wants to concern herself and her employees with efficiency, above all other concerns. Which of the following statements is most closely associated with efficiency? a. Do the important thing. b. Do the right thing. c. Do things right. (moderate) d. Do unto others as you would have them do unto you. e. Do the best thing. Mini-Case 2-2 Amy Wong owns Mothers’, a Chinese restaurant in Chinatown in San Francisco. So far business has been very good. The restaurant features very delicious soups that use recipes Amy bought from her extended family in Guangzhou. The kitchen crew and head chef are all talented Chinese immigrants. The Chinese residents in San Francisco cannot get over how true the food is to the hometown versions, and many comment that the food actually makes them homesick. 97. Refer to Mini-Case 2-2. Amy Wong decides that her new inn selling porridge will also feature foods made with authentic old-world recipes and made with talented Chinese hands. These two business plan ingredients could be considered Amy’s __________. a. value chain derivatives. b. core competencies. (moderate) c. distinctive advantages. d. competitive positioning. e. SBU. 98. Refer to Mini-Case 2-2. Amy figures her main customers for the porridge inn will be the same customers that regularly eat at her Mothers’. This means Amy is using the __________ strategy to grow his business. a. product-development (easy) b. market development c. product research d. market penetration e. product integration Mini-Case 2-3 The owners of the 22,000 funeral homes in U.S are experiencing tremendous changes in their industry. Fewer families today are having bodies embalmed and displayed at a service. Of those who choose burial, many are shopping at retail and mail order casket dealers, not at the funeral home as, used to be the custom. Another change is the fact that many people want personal touches and quirky tributes in their funeral services. A growing number are choosing cremation rather than burial. Today almost a quarter of the nation’s 2.3 million annual deceased are cremated. Funeral homes typically charge only about one-third the amount for cremation that they do for a burial. It has become imperative that funeral directors invest time and money in learning about their potential consumers. 99. Refer to Mini-Case 3-1. Which of the following is an example of a primary data source for research about consumer attitudes toward the funeral industry? a. A 1999 study by the Federal Trade Commission on how well mortuaries were disclosing their price structures. b. A survey of funeral directors. c. A report published by the National Funeral Directors Association. d. Focus group research involving people who have experienced recent bereavement. (moderate) e. An Internet site for people who feel funerals are over-priced. 100.Refer to Mini-Case 3-1. A funeral director who watches and records data on how consumers select a casket would be engaged in ________ research. a. observational (moderate) b.experimental c. survey-based d. behavioral e. database Chapter 3 – Scanning the Marketing Environment and Capturing Markets True/False Questions 1. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined environment under a defined marketing program. True (moderate) 2. Company demand is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. False (moderate) 3. A trend is unpredictable, short-lived, and without social, economic, and political significance. False (moderate) 4. Paradoxically, toymakers have thrived in China despite its one-child policy. True (moderate) 5. According to ideas found in the concept of market evolution, as market growth slows down, the market splits into finer segments and high market consolidation occurs. False( Hard) 6. Market fragmentation is often followed by a market consolidation caused by the emergence of a new attribute that has strong appeal. True( Medium) Multiple Choice Questions 7. The __________ is the set of consumers who have a sufficient level of interest in a market offer. a. market b. target market c. potential market (moderate) d. available market e. qualified market Answer: c Level of difficulty: Medium 8. Which of the following defines the set of consumers who have interest, income, and access to a particular offer? a. Market. b. Target market. c. Potential market. d. Available market. (moderate) e. Qualified market. 9. Which of the following best describes the expected level of company sales based on a chosen marketing plan and an assumed marketing environment? a. Company sales forecast. (moderate) b. Sales quota. c. Sales budget. d. Company demand. e. Market potential. 10. A __________ is the set goal for a product line, company division, or sales representative. a. sales quota (moderate) b. sales budget c. sales potential d. sales forecast e. sales aggregation 11. A sales quota is __________. a. the expected level of company sales based on a given sales plan b. a conservative estimate of the expected volume of sales c. the sales goal set for a product line, company division, or sales representative (difficult) d. typically expressed as the company’s share of market demand at alternative levels of the marketing effort e. the percentage of total product available in the industry that each division or salesperson is supposed to sell in a given period of time 12. A __________ is a conservative estimate of the expected sales volume, and is used primarily for making current purchasing, production, and cash-flow decisions. a. company sales forecast b. sales quota c. sales budget (moderate) d. company demand e. market potential 13. __________ is the maximum amount of sales that might be available to all of the firms in an industry during a given period under a given level of industry marketing effort and given environmental conditions. a. Total market potential (moderate) b. Company sales quota c. Company demand potential d. Selective demand potential e. Integrated demand potential 14. The manufacturer of the line of Grote industrial meat slicers wants to identify all of the supermarkets, delis, and restaurants that are potential customers for its products in each of its market areas. Then it wants to estimate which model each will need to buy. What method of assessing market potential will the manufacturer need to use? a. The multiple-factor index method. b. The market-buildup method. (moderate) c. The total market potential formula. d. The market-demand breakdown. e. A multi-regression analysis. 15. Companies commonly use a three-stage procedure for preparing a sales forecast. This first step is to __________. a. project the ability of supply to meet demand b. predict consumer spending trends c. prepare an industry forecast d. prepare a microeconomic forecast e. prepare a macroeconomic forecast (difficult) 16. Spotting trends is an important task for companies that wish to sell in the future. Which of the following is NOT a part of the approach used by experts at trend-spotting? a. Searching through the trash of competitors. (easy) b. Seeing the future as an extension of the past. c. Analyzing the actions of customers and other stakeholders. d. Searching for cycles and patterns. e. Monitoring technological and social events as they unfold. 17. The “noncontrollables” include all of the following EXCEPT: a. socio-cultural. b. demographic. c. natural. d. technological. e. managerial. (easy) 18. Concern with the population age distribution and ethnic mix, educational levels, and household patterns falls within which of the following environments of business? a. Demographic. (moderate) b. Socio-cultural. c. Competitive. d. Technological. e. Natural. 19. Nations vary greatly in level and distribution of income and industrial structure. Which of the following is NOT a type of industrial structure referred to in the book? a. Subsistence economies. b. Raw-material importing economies. (moderate) c. Raw-material exporting economies. d. Industrializing economies. e. Industrial economies. 20. Core beliefs and values are passed along in societies through all of the following major social institutions EXCEPT: a. schools. b. churches. c. business. d. government. e. All of the above are all institutions that aid in passing along core beliefs and values (easy) 21. The State Food and Drug Administration of PRC must approve all drugs before they can be sold. This reflects the importance to marketers of which environment(s) of business? a. Demographic and socio-cultural. b. Competitive. c. Natural. d. Political-legal. (moderate) e. Competitive and internal. 22. Which of the following is NOT one of the purposes for business legislation? a. To protect society from unbridled business practices. b. To protect firms from unfair competition. c. To protect consumers from unfair business practices. d. To protect some competitors from being unfairly overrun by other competitors. e. To protect against too much competition. (moderate) 23. Markets are similar to products with respect to life-cycle concepts. All of the following are considered to be stages that markets pass through in market evolution EXCEPT ________. a. emergence b. growth c. decline d. maturity e. destruction (Easy) 24. A manufacturer of calculators finds when examining the calculator market that there is about an even split between customers who want a small hand calculator and those that want a large one. This type of market, in which buyer preferences scatter evenly, is called a(n) ________ market. a. emerging b. mass market c. diffused-preference (Medium) d. niche e. standardized 25. If an entrepreneur discovers that his or her firm’s market is described as being one of diffused-preferences, a ________ (e.g., the new product can be designed to meet the preferences of one of the corners of the market) can be used to expand sales. a. mass-market strategy b. multiple-niche strategy c. bipolar design strategy d. standardized niche strategy e. single-niche strategy Answer: e Level of difficulty: Hard 26. Eventually, competitors cover and serve all the major market segments and the market enters the maturity stage with respect to market evolution. As market growth slows down, the market splits into finer segments and high ________ occurs. a. market ideation b. market consolidation c. market fragmentation d. market deflation e. market escalation Answer: c Level of difficulty: Medium 27. Market fragmentation in the market evolution process is often followed by ________ caused by the emergence of a new attribute that has strong appeal. a. a market consolidation b. a market dissolution c. a market expansion d. a market abandonment e. a market harvesting Answer: a Level of difficulty: Medium 28. As an entrepreneur you have decided to launch two products simultaneously to capture two different parts of the market. Which of the following would be the best descriptive title for the strategy you are employing? a. Single-niche strategy b. Multiple-niche strategy c. Standardization strategy d. Mass-market strategy e. Adaptive strategy Answer: b Level of difficulty: Easy Essay Questions 29. Scott wishes to open an all-age music club in Guangzhou college town. He is considering several real estate options, but is unsure how much space he can actually fill with young customers. Acting as a consultant, please describe to Scott the different ways he might forecast the demand in his community for the club, thus helping him decide on the size of the venue. Answer: Scott could do a survey of buyer intentions. Scott could ask experts in the community about their expectation for demand. He could look at the competition’s success for guidance. He could rent space and do a market test. Better answers will recognize that Scott is not a marketing research expert and will probably need to hire this work out. Also, some students will note that the report will not make the decision, but that Scott himself, as manager, will have to do that. (moderate) 30. Chocolate ER is a new soft drink that has been developed by a Chinese beverage maker. The company has extensive, well-developed convenience store distribution agreements up and down the east coast of China for its other non-alcoholic beverages. Describe the methods the company could use to forecast sales for Chocolate ER. Answer: A sales forecast is the expected level of company sales with a particular marketing plan in an assumed marketing environment. Because the company knows the beverage market in which they serve, they have some advantages from the start. The five major ways to forecast are survey of buyers’ intentions; composite of sales force opinions; expert opinions, past sales analysis, and; the market test method. (moderate) 31. Like products, markets evolve through four stages. What are those four stages? Characterize each stage of a market’s evolution. Suggested Answer: The four stages are: (1) emergence—before a market materializes, it exists as a latent market (when a product is launched that addresses the latent needs, the emergence stage begins); (2) growth—if the new product sells well, new firms will enter the market, ushering in a market-growth stage; (3) maturity—eventually, the competitors cover and serve all the major market segments and the market enters the maturity stage; and, (4) decline—eventually, demand for the present products will begin to decrease, and the market will enter the decline stage. For additional details, see the chapter section. Level of difficulty: Hard 32. Competitors often compete on the basis of product attributes. One of the problems is, however, determining what new attributes the product may have or be perceived to have. There are four approaches that a marketing manager might try to discover more information about attributes. What are those four (4) approaches? Suggested Answer: The four approaches are: (1) a customer-survey process; (2) an intuitive process; (3) a dialectical process; and, (4) a needs-hierarchy process. Level of difficulty: Hard 33. In a needs-hierarchy process, what would one predict the first automobiles and the later automobiles to provide? Suggested Answer: The first automobiles provide basic transportation and be designed for safety. Later, automobiles would start appealing to social acceptance and status needs. Still later, automobiles would be designed to help people “fulfill” themselves. Level of difficulty: Hard Mini-Cases Mini-Case 3-1 Raul wants to expand his successful auto parts business into nearby Guangzhou. Though he speaks Cantonese, he grew up in Hong Kong and does not know the Guangzhou market well. Raul is trying to consider all the issues that will be important to him as he begins the new venture. He grabs his laptop, jumps in his car, and heads for the border (just 5 minutes away). 34. Refer to Mini-Case 3-1. The first thing Raul notices is a lot of Mercedes and BMWs on the road. This may indicate that the __________ environment will be extremely important to his success. a. competitive b. economic (moderate) c. political-legal d. natural e. technological 35. Refer to Mini-Case 3-1. Once in Guangzhou, Raul passes the mayor’s office and wonders about the paperwork he’ll have to complete to open his new business in the city. This illustrates that the __________ environment will likely affect what Raul does. a. political-legal (easy) b. competitive c. natural d. technological e. economic 36. Refer to Mini-Case 3-1. Raul figures that he can choose his market, and his marketing mix, but that the macro environments of doing business in Guangzhou will not let him choose certain things about how business is conducted. This reflects __________. a. the difficulty of selling auto parts b. the difficulty of marketing in Mexico c. the difficulty of choosing a product line for export d. the difficulty of dealing with the “noncontrollables” (difficult) e. the difficulty of finding suppliers outside the United States Chapter 4 – Creating Customer Value and Customer Relationship True/False Questions 1. The task of any business is to deliver customer value at a profit. True (easy) 2. Companies that subscribe to the traditional view of marketing have the bets chance of succeeding in markets where the consumer faces abundant choice. False (moderate) 3. According to the value chain, every firm is a synthesis of activities performed to design, produce, market, deliver, support, and recycle its products. False (difficult) 4. 4. The core business process called market sensing consists of all activities involved in gathering marketing intelligence, disseminating it within the firm, and acting on it. True (moderate) 5. The question “How can a company use its capabilities to deliver value offerings more efficiently?” is part of the Value Creation portion of the Holistic Marketing Framework. False (moderate) 6. Customer perceived value is defined as the difference between the prospective customer’s evaluation of all the benefits of an offering and the perceived alternatives. True (easy) 7. Product value, service value, and image value are all determinants of total customer cost. False (moderate) 8. Business and organizational customers always choose the highest delivered value when making an industrial product purchase. False (moderate) 9. Loyalty is defined as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future, even in the face of situational or marketing influences with the potential to cause switching behavior. True (moderate) 10. Experts have defined quality in different ways. True (moderate) 11. A product can have conformance quality without having performance quality. True (moderate) 12. The 20-80-30 rule suggests that a company makes 80 percent of its profit from just 20 percent of its customers, about 30 percent of the time. False (difficult) 13. Figuring out your average customer lifetime value is one step toward understanding long-term customer profitability. True (moderate) 14. The more loyal the customers, the higher the customer equity. True (moderate) 15. Brand equity is the customer’s tendency to stick with the brand, above and beyond the objective and subjective assessment of its worth. False (difficult) 16. Developing one-to-one marketing through a CRM program might include not pursuing all customers. True (moderate) 17. According to some marketing experts, it is no longer enough to produce satisfied customers. True (moderate) 18. About 60 percent of dissatisfied customers don’t complain. False (moderate) 19. The customer development process begins with first-time customers. False (moderate) 20. The highest level of investment in customer relationship building is called partnership marketing. True (moderate) 21. The first step to reducing customer defection is to distinguish the causes of customer irritation and identify those that can be managed better. False (moderate) 22. American Airlines pioneered frequent flier programs to get more loyalty from its customers. Frequency marketing is an acknowledgement that a minority of customers provides a majority of profits. True (moderate) 23. Database marketing is the process of building, maintaining, and using a customer mailing list. False (moderate) 24. Data warehousing involves the use of sophisticated statistical and mathematical techniques to extract meaning from large customer data sets. False (moderate) 25. One problem with CRM programs is that not all customers want a “relationship” with the marketer. True (easy) Multiple Choice Questions 26. The traditional view of marketing is that a firm makes something and then sells it. In this view, marketing takes place in the second half of the process. Companies that subscribe to this view have the best chance of succeeding __________. a. in highly competitive markets b. in economies marked by goods shortages where customers are not fussy about quality (moderate) c. where consumers have plenty of choices of high quality and competitively-priced goods d. against competitors who carefully define their target markets and position their offerings accordingly e. in a marketplace where many micro niche products are available 27. The value delivery model of marketing focuses on which of the following? a. Making and selling products. b. Having and holding customers. c. Finding and communicating with the customer. d. Placing marketing at the beginning of the process. (moderate) e. Serving the profitable mass market. 28. In the value creation and delivery system, the first phase involves “choosing the value.” In this strategic marketing process, the firm must do the marketing homework of __________. a. segmenting the market, targeting a customer group, and positioning the offering (difficult) b. understanding the customer through market research c. providing the proper product mix to the relevant retailers d. measuring success or failure and feeding that knowledge back to the planners e. setting a price that provides the proper perceived value to the final consumer 29. In the Value Creation and Delivery Sequence, tactical marketing follows strategic marketing, and includes all of the following EXCEPT: a. product development. b. sales promotion. c. value positioning. (moderate) d. advertising. e. sourcing and making. 30. In the traditional process of value creation, making the product precedes selling the product, and includes all of the following EXCEPT: a. product design. b. procurement of inputs to make the product. c. procurement of resources to make the product. d. actually making the product. e. distribution of the product. (moderate) 31. The third task in the Value Creation and Delivery Sequence is called __________. It involves utilizing the sales force, advertising, sales promotion, and other tools to announce and promote the product. a. choosing the value b. communicating the value (moderate) c. entering the consumer’s zone d. doing the homework e. providing the value 32. Within the five core business processes identified, __________ involves researching, developing, and launching high-quality offerings quickly and within budget. a. the market sensing process b. the new offering realization process (moderate) c. the customer acquisition process d. the customer relationship management process e. the best in class practices 33. Within the five core business processes identified, __________ involves receiving and approving orders, shipping goods on time, and collecting payments. a. the market sensing process b. the new offering realization process c. the customer benchmarking process d. the customer relationship management process e. the fulfillment management process (moderate) 34. The __________ involves nine strategically relevant activities that create value and cost for the organization. a. Core Business Process b. Value Creation and Delivery Sequence c. Generic Value Chain (moderate) d. Traditional Marketing Model e. Guide for Strategic Thinking 35. Which of the following is NOT considered a support activity in Porter’s Value Chain? a. Firm infrastructure. b. Human resource management. c. Procurement. d. Technology development. e. Outbound logistics. (difficult) 36. Which of the following is NOT considered a primary activity in Porter’s Value Chain? a. Inbound logistics. b. Service. c. Marketing. d. Human resource management. (easy) e. Operations. 37. __________ integrates the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders. a. Holistic marketing (moderate) b. A distinctive capability c. A core competency d. Outsourcing e. The Value Chain 38. In the Holistic Marketing Framework, when the key management question of how to deliver value is applied to the company’s core competencies, the major resulting activity should be a focus on _________. a. the customer’s cognitive space b. strengthening business partnerships c. managing customer relationships d. managing internal resources (difficult) e. increasing customer benefits 39. __________ is the difference between the prospective customer’s evaluation of all the benefits and costs of an offering and the perceived alternatives. a. Total customer cost b. Customer perceived value (moderate) c. Customer delivered value d. Customer relationship management e. Total customer value 40. Which of the following is not a component part of total customer value? a. Product value. b. Services value. c. Psychic value. (moderate) d. Personnel value. e. Image value. 41. About a year ago, Echo began renting her movies from Netflix. She perceived Netflix to be a better source because of the enhanced selection, the responsive customer service emails she has received in answer to her online queries, better pricing, and less effort compared to renting from the store in her town. Netflix has offered Echo better __________ than the local competition. a. total customer cost b. customer perceived value c. customer delivered value d. total customer value (moderate) e. customer relationship management 42. Lowe’s home improvement stores strive to have nicer, more knowledgeable salespeople, a better product selection, and to maintain an impeccable image. These are all part of improving the offer via __________. a. reducing the buyer’s nonmonetary costs b. living up to the Lowe’s pledge c. reducing the product’s monetary costs to the buyer d. increasing the service value e. increasing total customer value (moderate) 43. __________ has been defined as a deeply held commitment to re-buy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. a. Loyalty (easy) b. Satisfaction c. Value-delivery d. “Deep” satisfaction e. Delight 44. The __________ includes all the experiences the customer will have on the way to obtaining and using the marketing offering. a. value proposition b. value-delivery system (moderate) c. psychic cost d. rational buying process e. customer proclivity to purchase 45. Buyers of Harley-Davidson motorcycles are promised more than just a vehicle, they also are assured that the motorcycles will work well, and maintain good re-sale value. Additionally, the Harley-Davidson brand represents “freedom” to many customers and potential customers. This latter idea is related to Harley’s __________. a. warranty b. brand promise c. core positioning (moderate) d. guarantee of complete satisfaction e. value proposition 46. Which of the following is true? a. If marketers raise expectations too high, it won’t attract enough customers. b. If the company sets expectations too low, the buyer is likely to be disappointed. c. If the company sets expectations too low, exceeding buyer expectations becomes difficult. d. If marketers raise expectations too high, the buyer is likely to be disappointed. (moderate) e. If marketers raise expectations too high, they will soon have many copycat offerings competing in the marketplace. 47. What are highly satisfied customers NOT likely to do? a. Stay loyal longer. b. Talk favorably about the brand. c. Be less price sensitive. d. Upgrade their service. e. Cost a bit more to serve. (moderate) 48. Which is NOT a difficulty of measuring customer satisfaction? a. Measurement tools are not sophisticated enough to measure satisfaction reliably. (difficult) b. Customers may report some level of satisfaction for very different reasons. c. Different customers may define the term “satisfied” in very different ways. d. Completely satisfied could mean the same as very satisfied. e. Customer satisfaction may be strongly related to loyalty—but not always. 49. McDonald’s restaurants rank high in the quick service industry on getting orders right, something that is highly valued by quick service customers. This is an example of __________. a. conformance quality b. performance quality c. the “freedom from variation” standard d. none of the above e. More than one answer could be correct. (easy) 50. Communication of customer satisfaction results should be done internally (inside the company or organization) for which of the following reasons? a. Communicating satisfaction findings externally would have little marketing value. b. You should not communicate satisfaction findings internally for ethical reasons. c. To highlight good news and act on bad news. (moderate) d. To satisfy upper management that all is going well. e. More than one of the above reasons is a correct reason for communicating satisfaction results internally. 51. The new BMW K1200 motorcycle is fast and smooth and pricy, when compared to the Suzuki SV650. The Suzuki is a competent, budget motorcycle which costs less than half the price of the BMW, has about half the horsepower, and has a “buzzy” ride above 95 miles per hour (the BMW will go 170+!). Both bikes deliver what their customers expect. Based on these facts, which is true? a. The Suzuki delivers higher performance quality. b. The BMW delivers higher conformance quality. c. German engineering is superior to Japanese engineering. d. Both bikes deliver conformance quality. (difficult) e. Both companies participate in total quality management programs. 52. Which of the following is NOT true, when speaking of quality? a. Higher quality supports higher prices. b. Quality that raises customer satisfaction is generally related to higher profits. c. High quality can lower costs. d. Total Quality Management is an organization-wide program stressing continuous improvement. e. There is no correlation between relative product quality and company profitability. (moderate) 53. Marketers play all of the following roles in helping their companies define and deliver high-quality goods and services to target customers, EXCEPT: a. providing customer data to marketers with non-competing offers. (moderate) b. correctly identifying customer needs. c. correctly filling customer orders. d. ensuring customer satisfaction. e. communicating customer needs to designers. 54. Which of the following is true of the customers? a. You should never “fire” your worst customers. b. The best hotel/motel customers outspend others by a ratio of 5 to 1. (moderate) c. For every 20 customers, a company will make 80 percent more profit. d. The number of unprofitable customers is equal to the number of profitable ones. e. The best customers outspend others by a ratio of 5 to 1 in retailing. 55. A __________ is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the marketer’s cost stream of attracting, selling, and servicing that person, household, or company. a. good customer b. sales customer c. profitable customer (easy) d. strong customer e. marketing accountant 56. What are the two solutions to unprofitable customers? a. Lower fees; reduce service. b. Lower fees; increase service. c. Raise fees; increase service. d. Raise fees; reduce service. (moderate) e. There is only one solution to unprofitable customers—fire them! 57. __________ is best conducted with the tools of an accounting technique called __________. a. Activity-based costing; LIFO inventory management b. Serving unprofitable customers; customer profitability analysis c. Sensitivity analysis; activity-based costing d. LIFO inventory management; the Poisson distribution e. Customer profitability analysis; activity-based costing (moderate) 58. Which is true of competitive advantage? a. companies that hope to endure must continually invent new advantages. (moderate) b Benjamin Franklin .first talked about by it. c. A customer advantage can be a customer advantage, even if customers do not value it. d. it is the ability to copy the best practices of other companies. e. being the fastest to the market guarantees competitive advantage, according to Porter’s Five Forces. 59. Taco Bell estimates that a loyal customer might be worth $11,000 to the company. This number stems from something called __________. a. (NPV)*(ROI) b. customer lifetime value (moderate) c. the competitive present value of loyalty model (CPVLM) d. repeat purchase analysis e. brand equity 60. The more loyal the customers, the higher the customer equity. Which of the following is NOT a driver of customer equity? a. Brand equity. b. Relationship equity. c. Lifetime equity. (moderate) d. Value equity. e. All of the above are drivers of customer equity. 61. __________ is the customer’s objective assessment of the utility of an offering based on perceptions of its benefits relative to its costs. a. Add-on selling equity b. Brand equity c. Acquisition equity d. Value equity (moderate) e. Relationship equity 62. When Ping An insurance fields a call from a new or existing customer, the salespeople will often suggest additional services to meet the needs of the customer. This is related to which component of customer equity? a. Acquisition. b. Value equity. c. Retention. d. Relationship equity. e. Add-on selling. (moderate) 63. __________ is the process of managing detailed information about individual customers and carefully managing all customer “touch points” to maximize customer loyalty. a. Customer relationship management (easy) b. Prospect identification c. Growing value equity d. Add-on selling e. Mass customization 64. In the morning, Moreno’s Restaurant is full of locals who seek inexpensive warm breakfasts. By lunchtime, the locals are all gone and the place fills with tourists who are hot, hungry, and thirsty after a day on the local beach. Owner Omar Moreno understands the dichotomy and has read about customer relationship management—he wants to serve both groups profitably. Omar is probably at what stage of the Peppers and Rogers’ framework for serving customers? a. Identifying his prospects and customers. b. Differentiating customers by need. c. Differentiating customers by their value to the restaurant. d. Interacting with individual customers to improve his knowledge about their needs and to build stronger relationships. e. Customizing products, services, and messages for each customer. (difficult) 65. Omar Moreno’s restaurant has a very different type of customer, depending on time of day and time of year. Omar is looking to re-vamp the menus to make more profit. What is probably the most important first customer relationship management step he can take toward his goal? a. Identify his prospects and customers. (moderate) b. Differentiate customers by need. c. Differentiate customers by their value to the restaurant. d. Interact with individual customers to improve your knowledge about their needs and to build stronger relationships. e. Customize products, services, and messages for each customer. 66. Attracting, retaining, and growing customers is more difficult these days, for all of the following reasons EXCEPT: a. customers are smarter. b. customers are more demanding. c. customers are less forgiving. d. customers are approached by fewer and fewer competitive offers. (moderate) e. it is no longer enough to “produce” satisfied customers. 67. Fidelity Investments puts through certain customers’ calls more quickly than others as a strategy for improving the value of the company’s customer base. While on the phone, the longer-waiting customers hear messages encouraging them to complete their transactions via the company Web site. This is an example of which kind of strategy? a. Reducing customer defection rate. b. Increasing the longevity of the customer relationship. c. Enhancing the potential growth potential of each customer. d. Managing phone queues via illegal and discriminatory practices. e. Making low-profit customers more profitable. (moderate) 68. Verizon loses about one-fourth of its customers a year to competitors. Verizon’s competitors suffer similar customer losses. What is this phenomenon called? a. Customer churn. (moderate) b. The burnout rate. c. Sperm-to-worm conversion. d. The return phenomenon (TRP). e. Net loss analysis. 69. The best thing a company can do is make it __________ to complain. a. very difficult b. easy (easy) c. moderately difficult d. a two-step process e. None of the above. Since complaints are not positive, companies should discourage them altogether. 70. Which of the following is NOT part of either of the two main ways to strengthen customer retention? a. Make switching involve high search costs. b. Deliver high customer satisfaction. c. Make leavers forfeit all future customer opportunities. (moderate) d. Make leavers lose their loyal-customer discounts or other privileges. e. Make leaving expensive financially. 71. Which is true in the customer-development process? a. A disqualified prospect is the same as an inactive customer. b. The ultimate customer is the one termed the “repeat” customer. c. Some partners go on to become members. d. Clients move on to become members and advocates if they remain active. (difficult) e. The best customers never convert to inactive or ex-customers. 72. Which is true in the customer-development process? a. A disqualified prospect is the same as an inactive customer. b. The ultimate customer is the one termed the “repeat” customer. c. Some partners go on to become members. d. Advocates are the same as clients. e. A client becomes a member by joining a program that offers benefits. (moderate) 73. Which is true in the customer-development process? a. The two types of pre-customers are called suspects and prospects. (moderate) b. The ultimate customer is the one termed the “repeat” customer. c. Some partners go on to become members. d. First-time customers may convert to prospects. e. The best customers never convert to inactive or ex-customers. 74. Which is NOT one of the five levels of investment in customer relationship building? a. Basic marketing. b. Retroactive marketing. (moderate) c. Accountable marketing. d. Proactive marketing. e. Partnership marketing. 75. Which statement is probably the most important when considering customer retention? a. The impact of customer defection rate varies by industry. b. Reducing customer defection can be costly. c. Customer profit rate tends to increase over the life of the retained customer. (difficult) d. Customer retention management is often the job of the marketing department. e. Repeat customers are easier to understand than are first-time customers. 76. Which is the first step to reducing customer defection? a. Define and measure the retention rate. (easy) b. Distinguish among the cause of attrition and identify those that can be better managed. c. Estimate lost profits that result from lost customers. d. Figure out how much it would cost to reduce the defection rate. e. Listen to customers. 77. Which is the probably the most important step when trying to reduce the customer defection rate? a. Define and measure the retention rate. b. Distinguish among the cause of attrition and identify those that can be better managed. c. Estimate lost profits that result from lost customers. (difficult) d. Figure out how much it would cost to reduce the defection rate. e. Listen to customers. 78. Wal-Mart has a high number of customers and sells mostly low-margin goods. Their level of relationship marketing is probably __________. a. accountable b. proactive c. partnership d. unresponsive e. basic or reactive (moderate) 79. Independent bread route truck drivers sell their products to a limited number of retail outlets, such as convenience stores, and make frequent, personal deliveries of the goods. Their level of relationship marketing is probably __________. a. partnership (moderate) b. accountable c. reactive d. proactive e. basic 80. Which airline started enhancing their marketing first with frequent flier programs? a. Hooters b. American (difficult) c. Virgin d. Jet Blue e. Southwest 81. Frequency programs acknowledge that __________ of a company’s customers might account for __________ of its business. a. 30 percent; 50 percent b. most; most c. 20 percent; 80 percent (moderate) d. less than 5 percent; nearly all e. 75 percent; a slight majority 82. Increasing the customer’s proclivity to repurchase can be accomplished by doing each of the following, EXCEPT: a. creating structural ties with the customer. b. creating long-term contracts. c. charging less for ongoing purchases. d. building in escalator clauses on pricing. (moderate) e. turning the product into a long-term service. 83. A mental part supplier in China maintains its competitive edge with contracts against large competitors by knowing all his customers’ names and how their businesses are doing. This is an example of forming strong customer bonds through __________. a. adding financial benefits b. adding frequency programs c. adding structural ties d. adding long-term contracts e. adding social benefits (moderate) 84. __________ is an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. a. A customer database (easy) b. Database marketing c. A data “mine” d. A data warehouse e. A customer mailing list 85. All of the following are good uses of databases that companies compile, EXCEPT: a. identifying good prospects. b. drawing inferences about customer lifestyles. (moderate) c. deepening customer loyalty by remembering preferences. d. reactivating through reminder promotional efforts. e. avoiding sending the same customers two similar offers but with varying prices. 86. Which would be a reason to invest in a customer relationship management system? a. When the product is a once-in-a-lifetime purchase, such as a grand piano. b. Where customers for the product show little brand loyalty. c. Where satisfied customers can convert into partners. (easy) d. Where the product has a very small unit-sale amount, as with a candy bar. e. Where the cost of gathering data is high. 87. Which of the following is NOT a downside of database marketing and CRM? a. It requires a large, upfront investment. b. It is difficult to get all employees customer-oriented. c. Not all customers want a “relationship” with the company. d. Skilled CRM professionals are easily found in a marketplace full of underemployed information systems specialists. (moderate) e. The assumptions underlying CRM may not always hold. Essay Questions 88. In a short essay, discuss how the Traditional view of marketing differs from the Value Creation and Delivery Sequence (VCDS). Answer: The traditional view was that all the marketer had to do was create a product and then find a set of customers to buy it. Marketing followed the design and production process. The VCDS begins with customers, by identifying potential customers, selecting certain customers to serve, and positioning the marketing offering at that group. These steps (collectively called “choose the value”), are followed by the steps of product and service development, pricing decisions, sourcing and making the offering, and getting it into customer hands, including necessary service provision. These steps are collectively called “provide the value.” The final efforts by the marketer are to “communicate the value” to customers through the sales force, advertising, and other marketing communications efforts. The most important difference is where consideration of the customer comes into the process. Traditionally, customers were not considered integral to the marketing process. The VCDS pushes consumers to the forefront of marketers’ minds, by choosing and understanding them even before the offering is designed or delivered. (moderate) 89. Monica begins thinking strategically about her online scrapbooking store after a friend mentions that there are five core processes involved in successful business practice. In a short essay, relate the five core business processes to Monica’s business. Answer: 1) The marketing sensing process for Monica might involve doing some customer surveys about the types of materials they use and the direction they think their scrapbooking is going. This would be followed by Monica taking some action related to her new knowledge. 2) The new offering realization process might involve Monica attending a regional scrapbooking trade show for ideas about new products to offer or produce herself, then taking the necessary actions to introduce the new offerings. 3) The customer acquisition process could involve a redefinition of her target customers and attempting to attract new customers, perhaps through paid search engine advertising. 4) The customer relationship management process involves cultivating a deeper understanding of her best customers, such that the offerings on Monica’s site are extremely and profitably tailored to their scrapbooking needs. 5) The fulfillment management process for Monica’s business is probably a daily visit by or to UPS or FedEx of the United States Post Office. She might collect money from clients via a thirdparty service such as PayPal that allows microbusinesses to accept credit cards for a fee. (moderate) 90. What do the concepts “total customer value” and “total customer cost” mean and how are they related? Use examples to illustrate your answer. Answer: Total customer value is the perceived monetary value of the bundle of economic, functional, and psychological benefits that customers expect from a given market offering. Although answers will differ, a meal at a restaurant nicely illustrates the idea: the purchased meal at one level provides the customer with calories (functional benefit), a nice experience out in which they are treated well (psychological benefit), and to the extent that the meal provides a reasonably good value for the money, the economic cost was acceptable too (economic benefit). Total customer cost is the bundle of costs that the customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering. An example might be a car purchase, in which the customer spends time and energy resources evaluating the possibilities (evaluating costs), spends time and financial resources purchasing (obtaining costs), time, energy, and financial resources driving the car (using resources), and time and energy resources selling the car once it is no longer desired (disposing costs). The difference between total customer value and total customer cost (value minus costs) is called both the “customer perceived value” and the “customer delivered value” in the text. This is basically a benefits minus costs model (or cost-benefit analysis). (moderate) 91. Rhys runs a 10-room bed and breakfast on the Cardiff Bay Walk in Cardiff, Wales. If Rhys stresses having high customer satisfaction, how might he be rewarded by the B&B’s customers? Answer: Highly satisfied customers do a number of things that reward the marketer who takes the time. For example in the lodging industry, customers tend to stay longer (buy more), upgrade (get the better room), talk with other potential customers positively about the product (good word of mouth), and be less sensitive to pricing than other customers. Additionally, highly satisfied customers are less costly to serve (less towel service or other room maintenance, lower marketing costs, etc.), and may feel more comfortable offering quality suggestions to Rhys. All of these would tend to help Rhys’ business be more profitable. (moderate) 92. Happy Days seafood restaurant in Sanya of Hainan Province has just been bought by a young and rich Chinese businessman. The new owner wants to make Happy Days stand out among the many competitors by being the highest quality restaurant. Explain at least five ways Happy Days quality could be measured. Answer: There are many answers, here are some possibilities: 1. Freedom from variation: Happy Days’ seafood could be considered to have high quality if they were all made to order (so many ounces of meat, cheese, condiments, etc.). 2. Conformance to requirements: Happy Days service could be considered to have high quality if they always had the order ready within an expected time. 3. Satisfies stated or implied needs: Happy Days customers might define quality by great tasting food that never disappoints. 4. Satisfies stated or implied needs: Happy Days customers might define quality by how often the orders are correct. 5. Exceeds customer expectations: Happy Days customers might consider that the food being good, plus the owner learning their name goes beyond what they think they’re paying for, and hence feel they have experienced quality. (moderate) 93. Why would you ever want to “fire” a customer? What are the other options? Answer: Some customers cost the company more then they produce in profits. A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer. This cannot be determined by just one transaction, normally, note that the definition includes a stream of revenue (so, many transactions over time). An unprofitable customer is actually a profit drag on the company. If a marketer identifies a customer as unprofitable, they could avoid “firing” that customer by raising prices (for example, charging more fees or strongly encouraging more ATM use on bank accounts for smaller customers), or by trying to get that customer to purchase other products that boost their profitability, or by reducing the level of service support for certain customers (as airlines do with less-frequent fliers). (moderate) 94. Rhys is manager of a large, privately held, luxury oceanfront hotel on the Cardiff Bay Walk in Cardiff, Wales. His bosses (the investor group) recently met with Rhys and conveyed their desire to implement a customer relationship management program. Rhys is sent to a CRM conference and comes home with a software product that is completely compatible with the hotel’s existing IT system. The software tracks customer “touch points.” Explain the idea of touch points and what they might be for a luxury hotel. Answer: A customer touch point is any occasion on which a customer encounters the brand or product—from actual experience to personal or mass communication to casual observation. For a hotel, customer touch points might include: making reservations; checking in or out; room service; the athletic center and pool; the business center; restaurants; etc. (easy) Mini-Cases Mini-Case 4-1 Arno owns a fast food chain that is set to go from six shops to twelve over the next year. Because Arno’s stores will double and he is still just one person, he decides it’s time to get some kind of technological help with understanding and serving his customers better. 95. Refer to Mini-Case 4-1. At a foodservice trade show in Shanghai, Arno finds an affordable software-based system that will help him create an Arno’s Discount Club, by managing detailed information about individual customers, such as their zip code and buying patterns. Arno’s new system is an example of __________. a. customer relationship management (easy) b. prospect identification c. growing value equity d. add-on selling e. mass customization 96. Refer to Mini-Case 4-1. An independent produce supplier who provides Arno with all his vegetables would like to grow her business along with Arno. Arno and the produce supplier would be characterized as having the __________ level of relationship marketing. a. partnership (moderate) b. accountable c. reactive d. proactive e. basic 97. Refer to Mini-Case 4-1. With the information Arno is able to gather about his customers, he might profitably use his customer database for all of the following EXCEPT: a. matching offers to a specific customer. b. drawing inferences about customer lifestyles. (moderate) c. deepening customer loyalty by remembering preferences. d. reactivating through reminder promotional efforts. e. avoiding sending the same customers two similar offers but with varying prices. Mini-Case 4-2 Ahn’s antiques business has been greatly affected by her move to an online store two years ago. Her sales have quadrupled and she has been able to hire a full-time, online customer liaison that helps her with both buying and selling, as well as Web site maintenance, and is in her own right, an antiques expert. 98. Refer to Mini-Case 4-2. Long-time customer Bunny began preferring Ahn’s Online store and now makes most of her purchases through that channel. She perceived Ahn’s Online to be a better source because of the enhanced selection, the responsive emails she has received in answer to her queries, better pricing, and less effort compared to the travel involved in “old school’ antiquing. Ahn’s Online has offered Bunny a better __________ than did the prior channel. a. total customer cost b. customer perceived value c. customer delivered value d. total customer value (moderate) e. customer relationship management 99. Refer to Mini-Case 4-2. Ahn’s __________ includes all the experiences her customers have on the way to obtaining and using the antiques. a. value proposition b. value-delivery system (moderate) c. psychic cost d. rational buying process e. customer proclivity to purchase 100. Refer to Mini-Case 4-2. As a result of being highly satisfied, what is Bunny NOT likely to do? a. Stay loyal to Ahn’s. b. Talk favorably about Ahn’s with her antique friends. c. Be less sensitive to Ahn’s prices. d. Buy more products from Ahn. e. Cost a bit more for Ahn to serve. (moderate) Chapter 5 – Analyzing Consumer Markets True/False Questions 1. Nike sponsored the Brazilian national football team in order to “authenticate” the brand. True (easy) 2. Culture is the most fundamental determinant of a person’s wants and behavior. True (moderate) 3. Social classes are relatively heterogeneous and enduring divisions in a society. False (difficult) 4. If you reject the values of a particular group, it is considered a dissociative group. True (moderate) 5. Religious, professional, and trade union groups are types of secondary reference groups. True (moderate) 6. An opinion leader is a person who offers informal advice or information about some product category. True (easy) 7. The value of the social class concept to marketers is that members of a given class tend to share similar values, interests, and behavior. True (moderate) 8. Usually people from the same subculture, social class, and/or occupation have essentially the same lifestyle. False (moderate) 9. One’s family of orientation and one’s family of procreation are the same thing for most people. False (moderate) 10. Family members constitute the most influential primary reference group. True (easy) 11. The buyer’s age and occupation are considered personal factors that may affect buying decisions. True (easy) 12. Perception involves selecting, organizing, and interpreting information inputs to create a meaningful picture of the world. True (moderate) 13. Most human behavior is learned. True (easy) 14. A brand’s mental map is meant to illustrate consumers’ memory retrieval. False (moderate) 15. The buying decision process will involve all the same stages sequentially regardless of whether the purchase reflects high or low involvement. False (moderate) 16. If in order to buy a computer, James visited several electronic stores, read magazine reviews, and talked to several friends, we would say he faced a highly involving purchase. True (moderate) 17. The consumer’s evaluation of alternatives begins with a need, progresses through analysis of the bundle of attributes, and results in a determination of the benefits the consumer needs to meet his/her needs. False (moderate) 18. Post-purchase satisfaction is a function of the consumer’s product expectations and the product’s perceived performance. True (difficult) 19. Marketers can use post-purchase communications to reduce order cancellations. True (moderate) 20. Consumer product disposal is of little interest to marketers. False (moderate) Multiple Choice Questions 21. Each of the following is considered consumer behavior, EXCEPT: a. selection of a product. b. production of a concert. (difficult) c. use of public transit. d. acceptance of a political idea. e. disposal of trash. 22. Which factors have the broadest and deepest influence on consumer behavior? a. Personal. b. Organizational. c. Social. d. Cultural. (moderate) e. Psychological. 23. Within China, Tibetans, Buddhists, and the Han Chinese are all examples of: a. social classes. b. subcultures. (moderate) c. psychographically defined groups. d. geographically defined groups. e. cultures. 24. __________ are relatively homogeneous and enduring divisions in society, and may exhibit distinct product, brand, and media preferences. a. Subcultures b. Reference groups c. Social classes (moderate) d. Demographic groups e. Cultures 25. Lee is constantly begging his mother to buy him an iPod because the most popular kids at his school all have one. His mother contends that he’ll just break or lose the music player if she buys it for him. For Lee, the most popular kids in his school are an example of a __________. a. subculture b. reference group (moderate) c. social class d. demographic group e. culture 26. A(n) ________ is likely to offer informal advice and information about a product or product category. a. primary reference group b. aspirational reference group c. opinion leader (moderate) d. brand monger e. diversity marketing program 27. Li Ming worked in the Chinese Navy from 1994–2001. He still holds fast to the values he learned while a sailor and even has contact with some of his Navy buddies sporadically. His allegiance to the Navy affects his opinions about many facets of life. For Li Ming the Navy is a(n) _______________ reference group. a. aspirational b. secondary (moderate) c. dissociative d. associative e. primary 28. _______________ are those groups a person hopes to join. a. Aspirational groups (moderate) b. Dissociative groups c. Membership groups d. Family group e. Professional groups 29. Which of the following types of groups consists of members whose values or behavior an individual rejects? a. Aspirational groups. b. Dissociative groups. (moderate) c. Membership groups. d. Family group. e. Professional groups. 30. One’s family of __________ is made up of one’s parents and siblings. a. preference b. orientation (moderate) c. invention d. procreation e. later life 31. Which of the following is the most influential primary reference group? a. Family. (moderate) b. Social class. c. Friends. d. Coworkers. e. Celebrities. 32. A person might have a role and its related status in which of the following? a. Their family. b. Their church. c. Their bridge club. d. All of the above. (easy) e. None of the above. 33. A _______________ consists of the activities that a person is expected to perform. a. role (moderate) b. value c. culture d. position e. moral 34. Which of the following would NOT be considered a personal factor that might influence consumer buying behavior? a. Age. b. Economic circumstances. c. Personality. d. Values. e. All of the above are all personal factors that might influence consumer buying behavior. (moderate) 35. David Zhou is married, has one kid at home at the ages of 12, and has moved up to middle management. This information tells us which stage of the __________ cycle David is in. a. psychological life b. business c. consumer household d. family life (moderate) e. socio-demographic 36. Traits like sincerity, excitement, competence, sophistication, and ruggedness are examples of what researchers have found to make up a __________. a. brand’s personality (difficult) b. preferred consumer’s personality c. timid consumer’s personality d. lifestyle personality e. variety-seeking personality 37. Jeep Wranglers are considered to have personality. Which of the following is NOT a brand personality trait mentioned in the text? a. Sincerity. b. Ideal self-concept. (difficult) c. Competence. d. Sophistication. e. Excitement. 38. _______________ refers to the distinguishing psychological characteristics that lead to relatively consistent and enduring responses to the environment. a. Personality (moderate) b. Self-concept c. Self-image d. Attitude e. Perception 39. Monique is designing a shoe advertisement for use in a magazine. The ad will try to show how the typical wearer of these shoes would like to see herself. If his ad is successful, Monique will have targeted their _______________. a. ideal self-concept (difficult) b. attitude toward life c. actual self-concept d. others self-concept e. biogenic motivation 40. Aaron’s hunting and fishing activities, his interest in military history, and his opinions about an all-volunteer army reflect his _______________. a. self-concept b. personality c. social class d. lifestyle (moderate) e. demographics 41. _______________ is a person’s pattern of living in the world as expressed in activities, interests, and opinions. a. Self-concept b. Personality c. Social class d. Lifestyle (moderate) e. Demographics 42. Which of the following needs, as identified by Abraham Maslow, could also be described as biogenic motives? a. Social and esteems needs. b. Psychological and physiological needs. c. Self-actualization and esteem needs. d. Physiological and safety needs. (moderate) e. Social, esteem, and self-actualization needs. 43. Biogenic needs arise from __________ of tension, such as hunger, thirst, and discomfort. a. motivational states b. psychogenic states c. increased intensity d. psychological states e. physiological states (moderate) 44. __________ assumed that the psychological forces shaping people’s behavior are largely at the subconscious level and that people cannot fully understand their own motivations. a. Dr. Phil b. Sigmund Freud (moderate) c. Frederick Herzberg d. Abraham Maslow e. Philip Kotler 45. A _______________ is a need that is sufficiently pressing to drive the person to act. a. personality b. value c. moral d. motive (moderate) e. belief 46. According to the work of Frederick Herzberg _______________. a. a person moves from stated instrumental motivation to terminal ones b. people are driven by particular needs at particular times c. polite store clerks will not necessarily be a satisfier for a consumer, but impolite ones would be a dissatisfier (difficult) d. a bottle of Estee Lauder perfume arouses a different set of motives in consumers than an Avon perfume e. marketers can use laddering to determine the appropriate appeal to be used in their ads 47. On the way to work, Jason drives past at least 150 signs for businesses and hears at least 20 commercials on the radio. Yet, if you ask Jason to name a single brand or commercial he has been exposed to lately, he can only think of one—an ad for his favorite beer brand, Tsingtao Beer. This is an example of _______________. a. selective attention (moderate) b. selective distortion c. selective retention d. selective memory e. selective disposal 48. __________ refers to when a person learns to recognize differences in similar sets of stimuli and adjust responses accordingly. a. Learning b. Generalization c. Discrimination (moderate) d. Cue formation e. Attention 49. The process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world is called _______________. a. impression b. perception (moderate) c. cognition d. comprehension e. conviction 50. Aunt Marry is a hard person to buy a gift for. Her birthday is about a week away, and she has hinted to her nephew Peter how nice a digital camera would be. Suddenly, Peter starts seeing ads for digital cameras in newspaper and magazines and on billboards. When he goes with his girlfriend to one of GOME Electronic Appliance stores, he notices digital camera displays that he can’t recall ever noticing before. Peter is probably engaging in __________. a. selective attention (moderate) b. perceptual aggregation c. selective distortion d. selective retention e. perceptual cuing 51. While watching “Super Girls”, Yanling saw an ad for an upset stomach remedy. Although the ad was for Yunnan Baiyao, Yanling thought the ad was for her favorite brand—Tongrentang. This is an example of __________. a. information overload b. selective attention c. perceptual aggregation d. selective retention e. selective distortion (moderate) 52. While watching “Meet on the Road of Health,” Grant noticed the show had a feature on Huakang, a food supplement that helps lower cholesterol. He has taken Huakang for the last year and is convinced it is the only reason he is able to keep his cholesterol numbers in check. The feature began with a description of how the product works and concluded with a discussion of its potential negative side effects. Grant called his brother to tell him how the feature supported his belief in how well Huakang works at lowering cholesterol. Due to _______________, Grant did not remember the negative side effects associated with Huakang use. a. information overload b. selective attention c. perceptual aggregation d. selective retention (moderate) e. selective distortion 53. _______________ involves changes in an individual’s behavior that arise from experience. a. Learning (moderate) b. Personality c. Attitude d. Perception e. Culture 54. _____________ consist of all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, and attitudes that become linked to a brand node in the associative network of a person’s long-term memory. a. Encoded information b. Decoded information c. Liminal associations d. Brand associations (moderate) e. Subliminal associations 55. What type of information cannot be stored in a consumer’s memory network? a. Verbal. b. Visual. c. Abstract. d. Contextual. e. All of the above may all be stored in a consumer’s memory network. (moderate) 56. A researcher calls Don on the phone and asks him if he can recall any ads he has watched that evening on television. Don has been surfing channels all night, and remembers that he’s seen lots of ads. But without any prompting, Don can only specifically tell the researcher about an Allstate ad regarding fraud. He feels like the rest of the commercials are on “the tip of his tongue,” but is unable to give more. In this case, the forgotten ads are __________, but may not be __________ without additional cues. a. accessible; encodable b. available; accessible (difficult) c. retrievable; available d. refreshing; contemporary e. encoded; decoded 57. The first step in the buying process is the __________. a. information search b. evaluation of alternatives c. purchase decision d. location of alternatives e. recognition of the need or problem (moderate) 58. Usually, the consumer receives the most information exposure about a product from __________ sources. a. personal b. commercial (moderate) c. organizational d. public e. experiential 59. When marketers try to identify the circumstances that trigger a particular need, they are more likely to do it when the consumer is in which stage of the consumer buying process? a. Assessment of alternative options. b. Buyer’s remorse. c. Problem recognition. (easy) d. Information evaluation. e. Post-purchase dissonance. 60. __________ are a person’s enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward an object of idea. a. Attitudes (easy) b. Opinions c. Perceptions d. Interests e. Emotions 61. A(n) __________ is a descriptive thought a person holds about something. a. attitude b. conviction c. perception d. opinion e. belief (moderate) 62. Benson’s computer has broken. He decides to buy a new one. After studying all the information he can get his hands on about computers, he realizes that he likes the following brands: Levono, IBM and Dell. After more research, Benson decides that IBM will be the best for him. The Levono and the Dell make up Benson’s __________. a. awareness set b. total set c. choice set (moderate) d. consideration set e. aspiration set 63. Kim Gao is considering buying a new truck. Due to budget considerations, he has eliminated all brands and models priced over 300,000. He also believes strongly in buying “made in China” whenever possible, so he has eliminated all foreign brands from his list. The remaining vehicles make up his __________ set. a. total b. consideration (moderate) c. choice d. awareness e. information 64. Because attitudes are very difficult to change, a company would be well advised to __________. a. use care when trying to change people’s attitudes b. fit its products in with existing attitudes rather than try to change people’s attitudes (moderate) c. avoid all consumers who have negative attitudes d. use aggressive campaigns to influence trusted opinion leaders e. seek only consumers who are positively predisposed to its products 65. Rhiannon is looking to buy a new computer and has narrowed her choices down to three, an Apple iMac, a Dell, and a Lenovo. Her most important attributes for the new machine are (in order of importance) price, speed, physical appearance, and compatibility. As she does a little research online, Rhiannon decides that the Lenovo is the cheapest, the Dell is the fastest, and the iMac is the nicest looking. Which will she buy? a. She’ll buy the Lenovo because it’s the cheapest. b. You need to know how important price is over the other attributes before you can answer. c. She’ll buy the iMac, if it goes on sale for cheaper. d. What she chooses will depend on Rhiannon’s mood at the time. e. With more detail you could make a decent guess, but not predict for sure (difficult) 66. Personal computer maker HP decides it will try to create laptops that have higher perceived value in the marketplace. A complete redesign is ordered. This is an example of __________. a. real repositioning (difficult) b. psychological repositioning c. competitive depositioning d. shifting buyer ideals e. social positioning 67. The sudden loss of a job, a rainstorm, an encounter with a rude sales clerk, and forgetting to go by the cash machine are all examples of __________ that can change the outcome of a consumer buying situation. a. perceived risk b. others’ attitudes c. motivational modifications d. unanticipated situational factors (moderate) e. personality changes 68. One way of helping your customer feel more satisfied after purchasing your product is to _________. a. raise their expectations of the product in advance of the purchase b. understate performance levels in your advertising (difficult) c. make sure your product falls short of expectations d. communicate the pros and cons of the purchase before you let them buy it e. lower the price to the next customer who buys 69. Customer win-back is based on the premise that __________. a. reasons for customer dissatisfaction are normally well understood b. it can cost less to win back a lost customer than to attract a new customer (moderate) c. real repositioning is stronger than competitive depositioning d. a company do not like to embarrass outgoing customers with surveys e. customers cannot usually give good reasons for not continuing with a brand Essay Questions 70. Tiffany Abdul is 16 years old. She won’t be seen in public without her cell phone. She hangs around with a group of people who have formed a Coldplay (a popular powerballad rock band) fan club. She has gone to the country club every weekend since she can remember. She likes to take tennis lessons. She is a member of her high school’s varsity dancing team. Her parents would like her to join the Student Union (her grades are good enough), but she thinks its members are losers. Her boyfriend is a player on the basketball team. In a short essay, identify the different types of reference groups that might influence Tiffany and discuss three ways they might influence her consumer behavior. Answer: Tiffany’s parents, the other dancing team members, and the Coldplay fan club are primary groups. The people at the country club represent a secondary reference group. She sees the Student Union group as a dissociative reference group. The boyfriend’s clique may be an aspirational group. Tiffany’s reference groups expose her to new behaviors and lifestyles. They influence her attitude and self-concept. And they create pressure for conformity that might affect actual product and brand choices. (moderate) 71. Deng Wei is a 41-year-old welder, a divorcee, and a single father of an unemployed 19-year-old son Jimmy who lives at home and attends a few community college classes. Deng’s income last year was 7,500. Deng’s favorite time of the week is when he gets together with friends on Friday night to play Mah-Jong. In a short essay, discuss the roles and statuses, and the personal factors that are likely to influence the consumer buying patterns of Deng’s household. Answer: Deng has the role of father at home. At work, his role is as an employee. Welders have more status than unskilled workers, but less than workers in professional jobs. These roles and status indicators will probably affect the way Deng chooses to dress, among other consumer behaviors. Deng’s personal factors that are likely to influence his buying patterns include her age, his stage in the family life cycle, his economic circumstances, his occupation, and his lifestyle. (moderate) 72. Aubrey, Will, and Miguel were watching the Loess Plateau in Northern China on television when a Dodge truck commercial came on followed shortly by one for Toyota trucks. Will is in the market for a new truck, so he paid close attention to both commercials. Aubrey saw the same commercial and wondered why anyone would want to run a shiny new truck through all that mud. If you had to drive it in the mud, then a truck was not for her. Miguel used to have a Toyota truck and decided that if his experience were any indicator, the Toyota truck truly is “the mayor of Truckville.”(which was actually used in Dodge ads). In a short essay, discuss how their responses to the TV commercials illustrate perception? Answer: Perception is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world. The key word is individual. It is common for an individual to see the same thing and interpret it in a completely different way from another person. That is what happened with Will, Aubrey, and Miguel. Because Will is interested in buying a truck, he carefully watched the ads. Aubrey used selective attention. She did not notice the fun the people in the truck were having because she was concerned with the mud. In fact, when she determined that you had to drive the truck in the mud, she was actively engaging in selective distortion. She twisted the information supplied by the ad. Miguel used selective retention to remember the mayor of Truckville image used in Dodge ads. He used selective attention when he transposed the mayor imagery to his old Toyota. (moderate) 73. The information search in the buying decision process involves gathering information from a number of sources. In a short essay, name the four different sources and give examples of each source an individual could use when buying new carpeting. Answer: Personal sources would include family, friends, neighbors, and acquaintances. These people have varying amounts of experience with carpeting and varying abilities to pass along good information. Commercial sources would include advertising, salespeople, and store displays. Ads in the paper and in the phone directory help the customer find stores that sell carpeting. Carpeting is not a well-understood category for most consumers and so often requires the help of a salesperson. Public sources include publicity pieces in print and broadcast media, including the Internet, and reports by consumer-rating organizations. Publications like Consumer Reports will often review product categories like carpeting, and because the magazine accepts no advertising many consumers see it as a highly credible source of information. Experiential sources might by taking your shoes off and walking on samples at the store or feeling a friend’s new living room carpeting with your hands. Hands-on experience can be very helpful in making decisions as subjective as carpeting, where objective measures of quality can be difficult to obtain. (moderate) 74. Explain how the high-involvement consumer task of buying a vehicle might look, using the Five-Stage Model of the Consumer Buying Process. Answer: (Answers will vary greatly in detail, but should include the five steps. Below are some ideas of what students might include.) Buying a vehicle begins with the recognition of the problem or need, triggered by internal or external stimuli. The consumer’s current vehicle may not be working well, or marketing communications may have influenced the consumer that the current vehicle is otherwise inadequate. The consumer will next begin to gather information about vehicles from either their own experiences or from others. Family and friends may contribute to the pool of information, as may marketers, via Web sites or magazine ads, for example. As the information is gathered, the consumer evaluates the alternative options available. There may be a formal evaluation, using criteria and cut-offs. A more likely approach is that the consumer will do some “mental” accounting to make comparisons among the choices that are being considered. The consumer then decides to purchase a particular vehicle from a particular source at a particular price and at a particular time. They may finance all or most of the price, committing themselves to years of monthly payments. At the last minute, the finance manager may talk them into purchasing additional insurance or warranty protection. Postpurchase, the consumer may do a number of things. Frequently, the consumer see another, better deal on the exact same vehicle they have just purchased, and this is followed by consumer disappointment. The vehicle may not perform as anticipated, causing similar feelings. (moderate) Mini-Cases Mini-Case 5-1 Yao Fei is shopping for a new car. He is very concerned about receiving value for his money. He believes cars are transportation and should be driven until they fall apart. He does not understand how people can trade in their car for a new one every few years. This view of cars is very much a part of his Chinese heritage. Yao’s lifestyle can be best described as comfortable, frugal, reflective, mature, and stable. He favors durability, functionality, and value in the products he buys. He must have a vehicle that is large enough to hold him, his wife, and his two teenagers comfortably. After talking to his wife, his brother, and a few co-workers, Yao test drives a minivan but decides he likes SUVs with V-8 engines. 75. Refer to Mini-Case 5-1. Yao’s views about cars are an expression of the __________ factors that affect consumer buying behavior. a. cultural (moderate) b. social c. organizational d. personal e. psychological 76. Refer to Mini-Case 5-1. Yao is discussing his car purchase with his __________ reference group. a. aspirational b. primary (moderate) c. associative d. dissociative e. secondary 77. Refer to Mini-Case 5-1. When looking for information, Yao used __________ sources. a. primary and secondary b. public and personal c. commercial, public, and personal d. experiential and public e. personal and experiential (moderate) 78. Refer to Mini-Case 5-1. Which of the following describes Yao’s consideration set? a. An SUV with an eight-cylinder engine that will seat at least four adults. (difficult) b. All SUVs with 8-cylinder engines. c. All SUVs—no matter what size engine they have. d. Any SUV that will seat four or more. e. Any SUV made by Chevrolet. 79. Which of the following vehicle attributes do NOT seem to play a role in Yao’s alternative evaluation? a. Price. b. Passenger capacity. c. Reliability. d. Style. (moderate) e. Engine size. Mini-Case 5-2 Nate Hartman has been saving up his money for a new car, and has seen the Honda Element on the road and in ads in his favorite magazine, Vibe. The car’s funky shape and weird mix of form and function are attractive to Nate. Nate’s father, a university provost with a Ph.D. in economic history has definite opinions about the Element, “Just look at all that cheapo plastic molding, you can see this is a car aimed at low-class people who think lots of bumps are somehow classy - yuck!! You should consider something that is cool in a stealthier sort of way, what about a Scion tC, or an old, restored BMW 2002?” Nate has always trusted his dad’s advice about cars. Dr. Hartman drives a 3-year-old Volvo. Nate decides to wait a little longer, and think over the Element, and consider cars that his father is suggesting. He really doesn’t want his father to make fun of him if he chooses unwisely. 80. Refer to Mini-Case 5-2. Nate’s father sees “low-class people as a group he would NOT like his son to be a part of. This is an example of a(n) __________ reference group. a. aspirational b. primary c. secondary d. dissociative (easy) e. membership 81. Refer to Mini-Case 5-2. Because Nate’s father has more experience and plenty of opinions and advice for his son regarding cars, he might be considered a(n) __________ to Nate in this area. a. opinion leader (easy) b. charismatic leader c. psychographic leader d. spiritual leader e. automobile guru 82. Refer to Mini-Case 5-2. At what stage in the consumer decision-making process is Nate at the time of the case? a. Problem recognition. b. Information search. (moderate) c. Purchase moment. d. Post-purchase behavior. e. Pre-recognition stage. 83. Refer to Mini-Case 5-2. The Honda Element is no longer a part of Nate’s _______ set. a. total set b. awareness set c. consideration set d. choice set e. More than one of the answers above could be correct. (moderate) 84. Refer to Mini-Case 5-2. When Nate finally makes his choice and buys another car, he will need to do something with his current transportation, a 1979 Mustang II with 181,000 miles on it. It seems like the car needs about $150 a month just to keep it on the road. Which of the following is NOT a way that consumers like Nate dispose of a product they no longer want? a. Lend it. b. Convert it to a new purpose. c. Create new space for it. (moderate) d. Sell it. e. Throw it away. Chapter 6 – Analyzing Business Markets True/False Questions 1. SAP is a German software company that helps businesses automate their finance and management systems. True (easy) 2. Organizational buying is the decision-process by which organizations establish and satisfy their needs for goods and services. True (moderate) 3. Mining, manufacturing, banking, and distribution services are all considered part of the business market. True (easy) 4. Schools and prisons are considered institutional buying organizations and they tend to have captive clienteles and limited budgets. True (moderate) 5. Characteristics of business markets include that there are more buyers and larger buyers. False (moderate) 6. When compared to the consumer market, the demand for goods and services in the business market is derived. True (moderate) 7. In selling to the government, the contract is always awarded to the lowest bidder. False (difficult) 8. A new supplier is least likely to make a sale to a prospect involved in the straightrebuy situation. True (moderate) 9. A new supplier is least likely to make a sale to a prospect involved in the straightrebuy situation. True (moderate) 10. A “straight rebuy” is a more complex process than a “new task” because the firm is limited to an approved list of vendors. False (moderate) 11. One key thing to keep in mind when marketing across cultural boundaries is that all people are NOT basically alike. True (moderate) 12. A secretary who prevents salespersons from contacting users or deciders is playing a gatekeeper role. True (easy) 13. Interpersonal factors have almost no influence in business purchasing decisions. False (moderate) 14. The business buying process is influenced by environmental, organizational, and individual factors. True (moderate) 15. Reading an advertisement about a new business service in a trade magazine to which the purchasing agent subscribes would be an example of how a problem might be recognized in an organizational setting. True (moderate) 16. Even if a supplier firm has the capacity to deliver a business product or service, that supplier might NOT be allowed to submit a proposal in the buying process. True (difficult) 17. When responding to a request for a written proposal, a business marketer should remember the document is primarily a technical document explaining the features of the product. False (moderate) 18. Product value analysis can involve determining which components can be made cheaper through redesign or standardization, while keeping the same performance level of those components. True (moderate) 19. In the negotiation process, if the potential supplier is faced with the lower price of a competitor, he or she should always lower his/her price. False (moderate) 20. A blanket contract or stockless purchase plan establishes a long-term relationship in which the buyer promises to buy all the stock of a particular seller at agreed-upon prices. False (moderate) Multiple Choice Questions 21. The business market differs from the consumer market in that __________. a. more mass media are used to communicate with the business market b. it is a much larger market with many more buyers than the consumer market c. it is a much smaller market in dollar volume than the consumer market d. more product customization takes place in the consumer market e. it acquires goods or services in order to use them for another purpose, as opposed to acquiring goods or services for personal consumption (difficult) 22. Organizational buying is __________. a. the process by which organizations recognize their needs for goods and services b. a way a company can produce a greater variety of high-quality products at lower cost, in less time, with less labor c. the decision-making process by which organizations establish and satisfy their needs for goods and services (difficult) d. the practice of establishing of strategic partnerships between manufacturers and their suppliers e. the practice of buying a total solution for a problem from one seller 23. The __________ consists of all of the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to other customers. a. business market (moderate) b. institutional market c. consumer market d. government market e. specialized market 24. The institutional market is best described as having __________. a. low budgets and a captive clientele (moderate) b. demand elasticity and geographically concentrated suppliers c. contract negotiations and fluctuating demand d. derived demand, geographically concentrated suppliers, and budgetary constraints e. demand that is elastic, derived, and fluctuating 25. All of the following are major industries making up the business market EXCEPT: a. agriculture, forestry, fisheries. b. manufacturing, mining. c. construction, transportation. d. banking, finance. e. governments, institutions. (moderate) 26. Business buying behavior differs from consumer buying behavior in that __________. a. the buyers for the business market are typically more geographically dispersed than those for the consumer market and the demand for products and services in the consumer market is unaffected by price fluctuations b. fewer people typically participate in or influence business buying decisions than in the consumer market c. businesses buy products to accomplish a single goal, which varies by industry and business d. the demand for business goods and services is derived from consumers’ final demand (moderate) e. businesses buy through longer channels with more intermediaries 27. When compared to the consumer market, the demand for goods and services in the business market is _________. a. far more elastic b. significantly more constant c. derived (moderate) d. more likely to be affected by changes in price e. all of the above 28. Business buyers _________. a. are geographically as diverse as consumers b. tend to be geographically concentrated with over half of them in seven states (difficult) c. are largely concentrated in the southwestern United States d. tend to be found in smaller communities and rural areas in the Midwest e. use geographical dispersion to keep shipping costs low 29. 3M has developed a new type of plastic film used for shipping security. It is more durable than any other form of film on the market. The first year after the product was introduced its sales totaled $435 million. Analysts have predicted an annual growth of 30 percent as businesses like transportation companies discover how well the film protects their products. Because the demand for the new 3M film is dependent on the demand for the products transported within it, the demand for the film is __________. a. derived (moderate) b. inelastic c. routine d. elastic e. constant 30. The buying department for a nursing home is informed the price of the ibuprofen used for patient medication has increased by 15 percent. He orders a new supply anyway because he knows he can pass the increase on to the clients. This is an example of business products having __________ demand. A. routine b. inelastic (moderate) c. volatile d. accelerated e. elastic 31. Which of the following is true of the U.S government as a market? a. The U.S. government is the largest customer in the world. (moderate) b. Most purchases by the U.S. government are in the billions of dollars, usually for technology. c. The U.S. government will always award the contract to the lowest bidder. d. A comprehensive bid proposal might take as much as a few days to prepare and “weigh in” at a few dozen pages. e. Cost minimization is the driving force behind buying decisions made by the U.S. government. 32. __________ organizations typically require suppliers to submit bids. Normally, they award the contract to the lowest bidder, although they sometimes take into account a supplier’s superior quality or reputation for completing contracts on time. a. Business b. Institutional c. Consumer d. Government (moderate) e. Specialized 33. Suppliers describe governmental organizations as ________. a. always selecting quality over price when buying products and/or services b. avoiding opting for the bottom-line perspective c. sometimes considering quality or reputation but primarily rewarding contracts on the basis of price (difficult) d. requiring minimal paperwork and having a process open to public scrutiny e. woefully lacking in specific guidelines for would-be suppliers 34. Which of the following buying situations would represent the purchase of office supplies such as reams of computer and copier paper, and computer DVDR? a. straight rebuy (easy) b. modified rebuy c. new task d. routine rebuy e. direct purchase 35. The most routine decision process undertaken by business buyers is called a __________. a. straight rebuy (easy) b. modified rebuy c. new task d. routine rebuy e. direct purchase 36. A new supplier is least likely to make a preliminary sale to a prospect involved in which of the following buying situations? a. new task b. modified rebuy c. functional rebuy d. straight rebuy (moderate) e. direct purchase 37.Ping Leung is a produce buyer for Hongxing, a large food supplier. He is buying apples, banana, pears and so on for producing soft drinks. He orders the same number and quality of these fruits as before but notices that his supplier’s prices have increased slightly. Ping is conducting a __________. a. straight rebuy (moderate) b. direct purchase c. modified rebuy d. new task buy e. reciprocal buy 38. The __________ is a situation in which the buyer wants to modify product specifications, prices, delivery requirements, or other terms. a. straight rebuy b. direct purchase c. modified rebuy (easy) d. new task buy e. reciprocal buy 39.Ping Leung is a produce buyer for Hongxing, a large food supplier. He is buying apples, banana, pears and so on for producing soft drinks. He orders the same number and quality of these fruits as before but notices that his supplier’s prices have increased slightly. If prices from his usual produce supplier continue to rise, you can expect Ping to engage in a __________. a. straight rebuy b. direct purchase c. modified rebuy (moderate) d. new task buy e. functional rebuy 40. Purchasing department personnel for a corporate farm would have the most influence when the organization is __________. a. buying marketing materials for its booth at a national agricultural trade show b. purchasing farm equipment for the firm’s agricultural business unit c. negotiating the performance specifications for new grain storage facilities d. renewing its subscriptions to several trade journals (moderate) e. switching to a new vendor for satellite moisture reporting 41. Which of the following has the most influence in straight rebuy and modified rebuy situations in a multinational corporation? a. finance department b. purchasing agents (difficult) c. administrative personnel d. engineering department e. production managers 42. The __________ is a buying situation in which a purchaser buys a product or service for the first time. a. straight rebuy b. direct purchase c. modified rebuy d. new task buy (moderate) e. functional rebuy 43. The Chens Corp. is a ground beef processing plant. Owners Dawei and Dashan Chen attended a trade show and saw a meat grinding machine that operates at a capacity of 9,000 pounds per hour and requires only one employee. Until the show, the brothers had no idea such a product existed. As far as they have learned only one company is manufacturing such a machine. They have calculated that such a machine could save them up to 250 a day in labor costs. They have contacted the company to learn more about the 100,000 grinder. The Chen brothers are engaged in a __________. a. straight rebuy b. direct purchase c. modified rebuy d. new task buy (moderate) e. functional rebuy 44. Advertising usually has its greatest impact at the __________ stage of new-task buying. a. awareness (moderate) b. interest c. trial d. evaluation e. adoption 45. Salespeople usually have their greatest impact at the ________ stage of new-task buying. a. awareness b. interest (moderate) c. trial d. evaluation e. adoption 46. __________ is(are) where a single supplier provides the buyer with all required maintenance, repair, and operating supplies, resulting in lower costs to the buyer. a. Missionary sales b. A turnkey solution c. Project engineering d. Systems contracting (moderate) e. Prime contracting 47. The _________ is composed of “all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions.” a. buying center (moderate) b. initiating team c. purchasing division d. engineering division e. influencing center 48. In the buying center, __________ are people who request that something be purchased, including users or others. a. initiators (moderate) b. influencers c. deciders d. approvers e. gatekeepers 49. Office manager Billie has signatory authority for organizational purchases under $2,500. She delegates the task of finding five new acceptable fax machines to a trusted subordinate, Jules. If Billie does not involve herself further in the buying process, other than to sign off on what Jules presents to her, her role is limited to that of __________. a. gatekeeper b. decider c. influencer d. approver (moderate) e. user 50. Erin’s secretary developed a file of visiting salespeople, but only allowed a few to actually have time on Erin’s calendar. Erin is frequently charged with buying expensive office equipment as part of her job. Erin’s secretary is playing what role in the business buying process? a. Initiator. b. User. c. Decider. d. Approver. e. Gatekeeper. (moderate) 51. Which of the following best describes the buying center role in which people have the power to prevent sellers or information from reaching members of the buying center? a. Initiators. b. Influencers. c. Deciders. d. Approvers. e. Gatekeepers. (moderate) 52. The owner of a mulch plant is planning to purchase a $41,000 trailer for hauling bulk product to a distribution company where the mulch will be packaged into 2 cubic feet bags, and sold at gardening supply stores. The operator of the distribution company would probably assume the roles of __________ in the buying center. a. user and gatekeeper b. approver and influencer (difficult) c. initiator, gatekeeper, and decider d. decider, user, and influencer e. influencer and gatekeeper 53. With the help of the yard operations manager, the owner of Yuanfan Logistics is planning on buying a sophisticated loader to move merchandise from trucks onto rail cars. It will be replacing an obsolete piece of equipment which the yard operations manager describes as hard to operate and potentially dangerous. In terms of the buying center, the yard operations manager who will be responsible for the overseeing the employees who operate and maintain the dumper has the roles of __________. a. gatekeeper and decider b. influencer, user, and approver c. buyer, influencer, initiator, and gatekeeper d. decider, user, and buyer e. initiator, influencer, and decider (difficult) 54. Which of the following is LEAST likely to be a useful question to ask when considering selling to industrial customers who are of a culture other than one’s own? a. What is their preferred mode of business communication? b. How do they perceive time? c. In what time zone is their headquarters? (moderate) d. How do they make decisions? e. Do they value consensus? 55. Because Dante is new at her job as company buyer, she is very cautious in her buying decisions even when engaged in straight rebuys. __________ influences have the greatest effect on Dante as she performs her job. a. Environmental b. Interpersonal c. Organizational d. Individual (moderate) e. Cultural 56. Which of the following is NOT an example of an organizational influence that might affect the purchasing agent for a multinational conglomerate? a. Many of the tasks formerly done by the purchasing agent are now being performed by a centralized purchasing department. b. The conglomerate has adopted just-in-time production in two of its divisions. c. The purchasing agent has a “want-the-best” attitude when it comes to buying component parts. (difficult) d. The organization is negotiating more long-term contracts than in previous years. e. The company is doing much of its purchasing through the Internet. 57. For the _________ type of business customer, low prices are desired, but they will respond to arguments about lower cost or more dependable supply and/or service. a. price-oriented b. solution-oriented (moderate) c. silver-standard d. gold standard e. strategic-value 58. The gardener in charge of maintaining the beautiful grounds at an amusement park was strolling through the park looking at the flowers and bushes from a guest’s perspective when he noticed some Japanese beetles flying around. He made a mental note to himself that he had to order some Japanese beetle traps when he got back to the office. This is an example of which of the steps in the purchase/procurement process? a. problem recognition (moderate) b. general need description c. product specification d. supplier selection e. supplier search 59. Which of the following is NOT a major part of the product specification process? a. Determining the item’s general characteristics. b. Setting desired quantities. c. Mandating terms for delivery. (moderate) d. Defining quality levels. e. Defining pricing. 60. Which of the following buy phases would definitely be included in a modified rebuy situation? a. Problem recognition. b. General need description. c. Supplier selection. d. Supplier search. e. Product specification. (moderate) 61. The routine placing of the twice-weekly order to restock a commercial kitchen’s freezer with meats, poultry, frozen juices, and fresh-frozen “pre-mades” like dumplings, definitely includes which of the following stages in the business buying process? a. Problem recognition. b. General need description. c. Order-routine specification. d. Supplier search. e. Product specification. (moderate) 62. __________ is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production. a. Product value analysis (moderate) b. Customer cost analysis c. Total quality management d. Product reengineering e. Marketing research 63. A product value analysis is conducted at the __________ step of the procurement process. a. problem recognition b. general need description c. product specification (moderate) d. supplier search e. proposal solicitation 64. An online retailer of outdoor equipment was looking for some help with its Web site maintenance so as to be more user-friendly and convenient. The owner consulted to a name list of computer service providers and asked several of her colleagues for recommendations. She is in the __________ phase of business buying. a. problem recognition b. general need description c. product specification d. supplier search (moderate) e. order-routine specification 65. The Guangming Textile Manufacturing Company is evaluating potential suppliers of zippers to be used in production of a line of children’s outerwear. The company is concerned about the delivery reliability, price, and supplier reputation. Guangming is in the __________ phase of the business buying process. a. supplier selection (moderate) b. proposal solicitation c. product specification d. performance review e. order-routine specification 66. Happy Gifts store sells birthday cards and gifts year-round. The primary source for its domestic and foreign gifts is Festival Supply, but Happy Gifts also buys some ornaments from Aobao Global and from Xinghui Distributors. Both of the distributors continue to try to price their merchandise at prices lower than those of Festival Supply because Aobao and Xinghui Distributors are both: a. outsuppliers. (moderate) b. outsourcing agents. c. second-tier suppliers. d. value-added suppliers. e. subordinate suppliers. 67. As Rikka and the salesperson talked, they agreed Rikka would buy six pallets of world flags, four 12-foot sections of display shelving, and two gross of super-hero, bobble-head dolls for Rikka’s arts and crafts supply store. In addition, the salesperson agreed to have the items delivered in ten working days and give Rikka an 8-percent discount. Rikka and the salesperson are engaged in which phase of the procurement process? a. Supplier selection. b. Proposal solicitation. c. Product specification. d. Performance review. e. Order-routine specification. (moderate) 68. A blanket purchase contract leads to __________. a. buyers being less dependent upon any given supplier b. the rebuy process being upgraded to a new task buy each time there’s a reorder c. the supplier maintaining the inventory (difficult) d. systems selling e. multiple sourcing 69. A(n) __________ establishes a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed-upon prices over a specified period. a. blanket contract (moderate) b. specialized contract c. over-run contract d. purchase order contract e. superior order contract 70. A company can review the performance of a supplier by __________. a. using a buyflow map b. developing a supplier-attribute positioning map c. using financial data from Dun and Bradstreet d. aggregating the cost of poor performance to come up with an adjusted cost of purchase, including price (difficult) e. using any of the above methods Essay Questions 71. Two sales associates, Diz Miller and Nestor Marlbrough, enter a room outside the purchasing agent’s office. The purchasing agent works for a fiberglass manufacturer. Miller has sold to the company several times in the past. He has stopped by to see if the purchasing agent needs to restock any of his company’s machine lubricants. Marlbrough will try to convince the purchasing agent to buy a machine for extracting and trimming glass fibers that will reduce waste by 13 percent and costs $44,000. The furniture company currently does this by employing skilled laborers who use hand tools. Classify the products being sold in terms of buyclass. What buy phases are associated with each buyclass? In what buy phase do you think the purchasing agent is now? Answer: The lubricants will be a straight rebuy. The only two buy phases for the purchasing agent are product specification and performance review. The machine sold by Marlboro would be a new task buy and would require the purchasing agent to go through all the stages of the buy phase—1) problem recognition, 2) general need description, 3) product specification, 4) supplier search, 5) proposal solicitation, 6) supplier selection, 7) orderroutine specification, and 8) performance review. The agent is in the product specification phase with the adhesives. Given the way the question is written, he is most likely in the supplier search phase for the new task buy. (difficult) 72. Rhet and Julie Raymond had a larger-than-average crop of mangos last year. They decided to make some extra jars of Julie’s mother’s mango chutney to see if they could sell it at a local crafts fair. Response was very promising and demand was strong. Now Julie and Rhet own a company that produces gourmet chutneys under the brand name Exoti-Sauce. Working at the company now are Rhet, Julie, her mother Mandalee, and Rhet and Julie’s nephew Bert who makes deliveries and does the heavy lifting and cleaning. Rhet is in charge of marketing and helps out in the kitchen. There are also a number of part-time workers. A salesperson wants to sell them a bottle-labeling system that will speed up production by 200 percent. It costs about $12,500. In a short essay, discuss how each of the company’s full-time employees might assume various roles in the buying center. Answer: Students’ answers to this question will vary, but the following are some possible answers. a) Julie knows how much work it is to glue on labels—so she would definitely be an initiator. She would also by the same logic be a user. Because the decision is jointly made, she would be an influencer to convince the others and a decider, an approver, and a buyer as part owner of the company. She could take the role of gatekeeper if she knew of a cheaper system but decided not to tell the others about it. b) Rhet is not involved in the production part, but as part owner of the company, he would take the roles of decider, approver, and buyer. He could take the role of gatekeeper if he refused to let the salesperson present any other equipment that might be useful in the Exoti-Sauce kitchen. c) Mandalee also knows how much work it is to place the labels—so she would definitely take the roles of initiator and user. Even though she has no ownership rights, she would also act as an influencer. She could act as a gatekeeper if she knew the building currently used by Exoti-Sauce was not big enough to hold the system where it could be used efficiently. d) Bert is not involved in the production of chutneys except to help clean. Depending on how easy the new system is to clean, he could be an influencer. He would most likely play no other roles. (difficult) 73. Imagine you are a salesperson for a company that sells office supplies to buyers in different buying situations. In a short essay, develop three scenarios that illustrate each of the three situations. Answer: Students’ answers will vary. The straight rebuy could occur when the buyer has bought from you previously and is simply restocking its shelves. The modified rebuy could occur when the buyer wants to modify delivery schedules or payment plans. New task buying would occur if the buyer were purchasing something it had not previously purchased— such as audiovisual equipment or instructional or motivational books or networking software. (easy) 74. In a brief essay, explain how an organizational buyer might decide whether a potential supplier is qualified and whether a proposal should be solicited and/or accepted from that supplier. How can the supplier improve their odds in the process? Answer: Some buyers require that suppliers have external certifications, such as ISO 9000. Better answers would tell why this is a helpful indicator. Attaining “trusted adviser” status through expertise also helps a company stand out to the potential buyer. “Out-suppliers” may have to fight harder for a piece of the business by finding ways to overcome the status quo (e.g., the usual suppliers get all the new contracts). Some bidders do not have the needed capacity to actually fulfill the contract, and buyers should carefully consider track records of reliability and potential for bidders who are not well known. (moderate) 75. Explain how the governmental procurement process differs from the business market purchase process. Answer: Government organizations are major buyers of goods and services. Government organizations typically require suppliers to submit bids and normally they award the contract to the lowest bidder. Governments will also buy on a negotiated contract basis, primarily in the case of complex projects involving major R&D costs and risks and in cases where there is little competition. Government organizations tend to favor domestic suppliers over foreign ones. Because their spending decisions are subject to public review, government organizations require considerable paperwork from suppliers. Just as companies provide government agencies with guidelines on how best to purchase and use their products, governments provide would-be suppliers with detailed guidelines describing how to sell to the government. (easy) Mini-Cases Mini-Case 6-1 Dr. Therese Turek’s Minnesota ear, nose, and throat practice is booming and she needs more office space to accommodate the growth. She asks her office manager James to help decide the attributes that will assure that a new space will be adequate for the practice now and in the future. James asks all the employees for their input as to what is needed in a new office. After much research, James recommends that the office move to a new medical complex, where office space is priced 30 percent higher. The new space has an on-site, out-patient surgery center, better wiring for more sophisticated machinery, and covered parking. James does not include information about more affordably-priced and available office space in the same complex because he would like a shorter commute to work. Dr. Turek is impressed with James’ recommendations and announces to staff and patients that the practice will be relocating in 60 days. 76. Refer to Mini-Case 6-1. In the case, James had what roles in the buying process for new office space? a. Initiator and decider. b. User and approver. c. Influencer and gatekeeper. (moderate) Initiator and user. Gatekeeper and initiator. 77. Refer to Mini-Case 6-1. Dr. Turek played what roles in the decision to move her practice? a. Initiator, user, and gatekeeper. b. Initiator, user, and approver. (moderate) c. Only initiator. d. Only approver. e. Only influencer. 78. Refer to Mini-Case 6-1. When James withheld information about the closer office possibilities, this was an example of which type of influence on the buying process? a. Environmental. b. Organizational. c. Interpersonal. d. Individual. (moderate) e. Macro. Mini-Case 6-2 Billionaire investor Warren Buffet once called his jet “The Indefensible,” referring to its high price tag. Later, however, he named it “The Indispensable.” Others share this sentiment because many corporations today own corporate jets to support efficient schedules and to reach remote locations. Given the increasingly global nature of business, corporate aircraft makes sense. The GulfStream V, one of the top of the line executive jets cost Buffet $38 million. Its speed is nearly 600 miles per hour. A nonstop flight between New York and Tokyo takes about 13 hours and 40 minutes on the Gulfstream V and about an hour and ten minutes longer on a commercial jet. Major manufacturers of corporate jets are Gulfstream, Cessna, the Beech Division of Raytheon Co., and Dessault Aviation of France. The largest manufacturer in terms of sales is Bombardier, which makes the Learjet. 79. Refer to Mini-Case 6-2. Most executives, including Warren Buffet, would describe the demand for corporate jets as __________. a. inelastic (moderate) b. routine c. low-involvement d. elastic e. accelerated 80. Refer to Mini-Case 6-2. Considering how shareholders have felt about the ownership of corporate jets in general, now when a company considers buying a corporate jet, they will engage in a(n) _________. a. functional buy b. modified rebuy c. indirect purchase d. new task buy (moderate) e. systems buy Chapter 7 – Identifying Market Segments and Targets True/False Questions 1. Traditionally, micromarketing of a consumer product results in the largest potential market for that product. False (moderate) 2. Consumers who belong to the same market segment have identical needs and wants. False (difficult) 3. Target marketing requires marketers to take three major steps: 1) identify and profile distinct groups, 2) select one or more segments to enter, and 3) predict the consumer behavior of the segments. False (moderate) 4. There are four levels at which a firm could micromarket—segments, niches, local areas, and individuals. True (easy) 5. The ultimate level of marketing segmentation is mass marketing. False (moderate) 6. If everyone’s choice for their computer printer were an HP LaserJet 1200, there would be a heterogeneous preference segment in the computer printer market. False (moderate) 7. Mass customization means a company has the ability to prepare individually designed products to meet customer requirements. True (easy) 8. The first step in segmenting a market is to create segment “story boards” to test the segment’s viability. False (moderate) 9. Geoclustering is a technique for segmenting markets on the basis of multiple attributes. True (difficult) 10. One reason geoclustering is increasingly popular is the falling cost of data manipulation. True (difficult) 11. One of the reasons demographic variables are the most popular variables for segmenting the consumer market is because usage rates are often associated with demographic characteristics. True (moderate) 12. Lifestyle is an example of a demographic segmentation variable. False (easy) 13. By and large, income is an excellent predictor of who will buy what products. False (easy) 14. Social Class is an example of a psychographic segmentation variable. False (moderate) 15. Many marketers believe behavioral variables are the best starting point for constructing market segments. True (moderate) 16. “Benefits sought” is an example of a behavioral segmentation variable. True (moderate) 17. When Harley Davidson used the slogan “It’s time,” and offered test rides and bargain financing on its Sportsters products, it was using geographic segmentation. False (moderate) 18. In business market segmentation, operating variables are the most important segmentation variable. False (moderate) 19. Single-segment concentration, one of five patters of target market selection, means serving just one market segment with one product. True (moderate) 20. Firms that offer tailored programs for several different market segments engage in differentiated marketing. True (moderate) Multiple Choice Questions 21. Traditionally, mass marketing of a consumer product results in __________. a. the largest potential market for that product (moderate) b. increased product prices due to the lack of differentiation and decreased competition c. easier channel selections d. fewer competitors because there are fewer markets e. lower profit margins 22. Bentley produces fine automobiles with price tags in the $300,000 and above range. Because the number of people with sufficient income to purchase a Bentley is relatively small, we might say Bentley is engaged in __________ marketing. a. local b. aggregated c. individual d. niche (easy) e. derived 23. A(n) __________ market is characterized by a fairly narrowly defined market with a complete and distinct set of needs, and a willingness to pay a premium to meet those needs. a. local b. niche (easy) c. individual d. derived e. homogeneous 24. All of the following are part of an attractive niche EXCEPT: a. the niche has variety-seeking consumers. (moderate) b. consumers in the niche have distinct needs. c. the niche is not likely to attract heavy competition. d. the niche can specialize and therefore realize certain economies. e. the niche has growth potential. 25. A southern chain of Chinese restaurants would find it advantageous to prepare a salt pork soup for Guangdong people, a spicy soup for Sichuan people and a heavy flavor for the northeasterners. If the chain engages in __________ marketing, it will improve the likelihood of its success. a. local (moderate) b. niche c. individual d. homogeneous e. demographic 26. An argument against local marketing is that it __________. a. makes it difficult to be profitable because of the small size of the market b. makes it difficult to select a proper distribution channel c. drives up marketing and manufacturing costs by reducing economies of scale (difficult) d. leads to a homogenization of the market e. solidifies a brand’s overall image in the marketplace because it delivers the same advertising message throughout its market 27. The ultimate level of marketing segmentation is __________ marketing. a. local b. niche c. individual (moderate) d. homogeneous e. mass 28. __________ is the ability to prepare, on a mass basis, individually designed products to meet each customer’s requirements. a. Niching b. Specialization c. Mass customization (moderate) d. Concentrated marketing e. Clustered marketing 29. A consumer preference pattern in which all the dots are spread out and no pattern emerges is called __________. a. clustered preferences b. homogeneous preferences c. concentrated preferences d. diffused preferences (moderate) e. honeycombed preferences 30. If everyone’s choice for their computer printer were an HP LaserJet 4100, there would be a ________ preference segment in the computer printer market. a. homogeneous (moderate) b. heterogeneous c. diffused d. stratified e. clustered 31. A marketer facing a market segment with natural market segments is dealing with a market with __________ preferences. a. diversified b. stratified c. heterogeneous d. diffused e. clustered (moderate) 32. If a food company segments a market on the basis of demographic and/or psychographic information, its basis for segmentation is __________. a. customer responses b. preference segments c. customer characteristics (moderate) d. customer behavior e. market partitions 33. If you go to a national electronic appliance chain store in China, you will find more air conditioners but fewer heaters in southern China where it is hot. A chain store in northeastern China where it is cold, however, sells more heaters but fewer air conditioners. The Chinese chain store realizes that the people in each of these areas do not have the same needs and should therefore not be offered the same products. This is an example of __________. a. benefits segmentation b. geoclustering (moderate) c. demographic segmentation d. behavioral segmentation e. psychographic segmentation 34. When the parent company introduced Southern Belles magazine, it was described as “a new publication that covers female style and southern life.” From this statement, you should be able to describe the segmentation strategy used for the magazines as __________. a. benefits segmentation b. geoclustering (moderate) c. demographic segmentation d. behavioral segmentation e. psychographic segmentation 35. The Lazy H Dude Ranch is open to people of all sizes, shapes, and belief systems. It’s a place people can go to unwind from the stress of daily life. Which of the following is an example of a psychographic variable the owner of the retreat could use in its marketing strategy? a. occupation b. age c. lifestyle (moderate) d. social class e .income 36. A segmentation study of people who would be interested in subscribing to a music and entertainment magazine discovered three distinct groups of potential subscribers: 1) those who wanted reviews of the latest music releases, 2) those who wanted to know behind the scenes gossip about the stars, and 3) those who sought to improve their own musicianship. This magazine discovered its market can be segmented using __________ variables. a. demographic b. social class c. lifestyle (moderate) d. generation e. geographic 37. Because two-thirds of the sales of new motorcycle policies at Dairyland Insurance Company are to current policyholders, it should use a __________ segmentation strategy. a. education-based b. benefit c. demographic d. behavioral (moderate) e. psychographic 38. While studying consumer-buying patterns for malt liquor, Joan has learned that more of the product is consumed in ethnic neighborhoods on a per capita basis than in less homogeneous areas. She is studying __________ data. a. geographic b. demographic (easy) c. psychological d. personality e. lifestyle 39. Which of the following is an example of a demographic segmentation variable? a. Generation or social class. (moderate) b. Personality. c. Attitude toward the product. d. Lifestyle. e. User status. 40. Perrigo Corporation makes One-Source Mature, a high potency, multivitamin for active men and women over 50. This is an example of __________ segmentation. a. gender b. generation c. age and life-cycle (moderate) d. user status e. usage rate 41. Which of the following statements best describes the difference between age and lifecycle segmentation and generational segmentation? a. Age and life-cycle segmentation is rigid and unchanging over time while generational segmentation changes with each decade. b. Age and life-cycle segmentation assumes people are influenced by where they are in life, and generational segmentation assumes they are influenced by what they grew up with. (difficult) c. Age and life-cycle segmentation is a relatively straightforward segmentation strategy while generational segmentation is much harder to implement. d. Age and life-cycle segmentation assumes the effect of time, and generational segmentation is based on the effects of economic and social status. e. There are no differences between age and life-cycle segmentation and generational segmentation. 42. For years Fuyuan’s toasted pigs have been mostly ordered on Tomb-sweeping Day in China. Fuyuan now is working hard to implement other segmentation strategies beyond the limited __________ strategy it used in the past. a. user rate b. lifestyle c. family life-cycle d. benefit e. occasion (moderate) 43. Research by Voicestream Wireless revealed that it serves two different kinds of consumers: chatterboxes who seemed to live on the phone and those that make lots of short calls. Based on this research, it should use a(n) __________ segmentation strategy. a. age-based b. usage rate (moderate) c. user status d. loyalty status e. occupation-based 44. Which of the following is NOT true of the VALS framework? a. VALS uses date of birth to help determine market segment membership. (difficult) b. Over 80,000 new surveys a year are added to the VALS data. c. SRI identifies eight primary VALS segments in the United States. d. The Innovators segment has high resources. e. The experiencers segment is primarily motivated by self-expression. 45. Which of the following is an example of a behavioral segmentation variable? a. Generation. b. User status. (moderate) c. Personality. d. Religion. e. Social class. 46. When dealing with loyalty status, buyers can be segmented in a variety of ways. When given a choice of milk drinks at the supermarket, Barton will select either Mengniu’s or Yili’s, and no other brand. He makes his selection based on which brand first catches his eye. Barton is an example of a __________. a. hardcore loyal b. split loyal c. shifting loyal (difficult) d. switcher e. splinter loyalist 47. Which of the following is an example of a behavioral segmentation variable? a. Occupation. b. Education level. c. Readiness stage. (moderate) d. Lifestyle. e. Family life cycle. 48. Ninety percent of all sales made by GEICO Insurance Company are initiated by the buyer rather than commissioned agents. Before purchasing insurance, buyers had typically researched and compared GEICO to other providers; they felt that GEICO best satisfied their needs. Given this information, GEICO should develop a strategy around which of the behavioral segmentation strategies? a. Buyer-readiness. (difficult) b. Income. c. Education. d. lifestyle. e. Attitude. 49. According to Bonoma and Shapiro, the most important segmentation variable for business markets is __________. a. demographic characteristics (moderate) b. operating variables c. situational factors d. purchasing approaches e. personal characteristics 50. Which of the following is NOT a major business segmentation variable? a. Demographic. b. Geographic. (difficult) c. Purchasing approaches. d. Operating variables. e. Personal characteristics. 51. A company’s power structure and the nature of its existing relationships with suppliers are all related to which of the major business market segmentation variables? a. Demographic. b. Operating variables. c. Purchasing attributes. (moderate) d. Situational factors. e. Personal characteristics. 52. A company’s size and physical location are all related to which of the major business market segmentation variables? a. Demographic. (moderate) b. Operating variables. c. Purchasing attributes. d. Situational factors. e. Personal characteristics. 53. Which of the following is NOT necessary to make a market segment useful? a. It is measurable. b. It is satisfied. (moderate) c. It is substantial. d. It is actionable. e. It is accessible. 54. A sports car manufacturer considered marketing to a market segment made up of individuals separated from their spouses but not yet divorced. However, investigation of the segment showed that this group of individuals could not be reached by any specific media. In effect, this group was not a(n) _________ market. a. accessible and substantial b. measurable, differentiable, and accessible c. accessible, differentiable, and actionable (difficult) d. actionable, differentiable, and substantial e. substantial and actionable 55. A marketer wants to market Braille books to sight-disabled readers This market segment is __________ even if it meets none of the other characteristics needed for a market segment to be useful. a. immeasurable b. substantial c. accessible d. differentiable (moderate) e. not quantifiable 56. _________ are business buyers who are starting their purchasing relationship, and want easy-to-comprehend instructions, hotlines for questions, lots of training, and knowledgeable sales reps. a. First-time prospects b. High-maintenance c. Sophisticates d. Fringe account companies e. Novices (moderate) 57. Which type of business buyer is most likely to want to deal with a company salesperson instead of a catalog or online purchasing environment? a. First-time prospects. (moderate) b. Innovators. c. Sophisticates. d. Fringe account companies. e. Novices. 58. The main two things to consider when selecting a target market are: a. if the segment has potential and if it fits with the company’s objectives and resources. (difficult) b. if the segment is easily communicated with and if it is different enough from other segments. c. if it is easy to define the needs of the segment and if economies of scale are possible with the segment. d. if the segment is actionable and if the consumers in it are action-oriented. e. if the firm can provide a flexible market offering to fulfill the segment’s needs and if the segment is large enough to be viable. 59. The last step in segmenting a market is __________. a. concept testing b. the survey stage c. segment “acid test” d. marketing mix strategy (difficult) e. segment identification 60. A marketer who selected a __________ segmentation strategy would find this segmentation strategy to possess the greatest amount of risk. a. selective specialization b. single-segment concentration (moderate) c. full market coverage d. market specialization e. product specialization 61. Research shows that sports cards appeal to 6- to 17-year-old boys, 24- to 54-year-old men, and professional collectors. Because these groups’ only exploitable similarity is their interest in sports cards, this would be an example of a(n) __________. a. interrelated segment b. market niche c. supersegment (moderate) d. blocked market e. inter-segment cooperative 62. A manufacturer of disposable, patterned, paper placemats that decided it was only going to sell to sit-down restaurants would have adopted a __________ segmentation strategy. a. selective specialization b. single-segment concentration c. full market coverage d. market specialization (moderate) e. product specialization 63. For years, Sears used the slogan, “Sears Has Everything.” Which of the following strategies does this slogan most likely support? a. differentiated marketing. b. Single-segment concentration. c. Undifferentiated marketing. (moderate) d. Market specialization. e. Product specialization. 64. Ford Motor Company sells Ford, Mercury, Volvo, Lincoln, and Jaguar brands, each having appeal to a select segment of the market. This is an example of __________. a. counter-segmentation b. undifferentiated marketing c. differentiated marketing (easy) d. market specialization e. single segment concentration 65. The Gap caters to buyers seeking classic clothing at mid-range prices. It also owns other retailing chains including Banana Republic (catering to more affluent buyers) and Old Navy (which sells value-priced jeans, tee-shirts and khakis). The Gap is practicing __________ marketing. a. differentiated (moderate) b. single-segment concentration c. undifferentiated d. market specialization e. product generalization 66. Firms that offer tailored programs for several different market segments engage in __________ marketing. a. differentiated (moderate) b. single-segment concentration c. undifferentiated d. market specialization e. product specialization 67. In terms of its affect on the marketing process, differentiated marketing __________. a. lowers total sales, which increases profits by increasing the margin on each sale b. significantly decreases manufacturing costs c. keeps advertising costs low d. reduces inventory costs e. increases administrative and production costs (difficult) 68. In terms of its affect on the marketing process, undifferentiated marketing __________. a. increases administrative and production costs b. keeps down advertising and R&D costs (moderate) c. increases the firm’s cost for product modification d. creates more total sales than differentiated marketing e. puts the company at risk of being supplanted by an entirely new technology 69. When companies encounter blocked markets, the best approach to those markets is to __________. a. use a segment-by-segment invasion plan b. use a megamarketing approach (moderate) c. forget the blocked market and approach easier to enter markets d. study intersegment cooperation and use it to enter the blocked markets e. find an exploitable similarity and create a megamarket 70. __________ is strategic coordination of economic, psychological, political, and public-relations skills to gain the cooperation of a number of parties in order to enter and/or operate in a given market. a. Segment-by-segment invasion planning b. Market niching c. Megamarketing (moderate) d. Intersegment cooperation e. Turbomarketing Essay Questions 71. Markets can be segmented at four levels. In a short essay, describe each level and explain the benefits associated with segmenting the market at each of the four levels. Answer: 1) Segment marketing consists of a large identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. With segment marketing, the marketer can create a more fine-tuned product or service offering than with mass marketing. The product can be priced appropriately for its target audience. The choice of distribution and communication channels becomes easier. The company also faces fewer competitors in the segment. 2) A niche is a more narrowly defined group, typically a small market whose needs are not well served. With niche marketing, a marketer finds customers with a distinct set of needs that will pay premium prices to the firm that best satisfies that need. The niche is not likely to attract other competitors. The niche gains certain economies through specialization, and the niche has size, profit, and growth potential. 3) Tailoring marketing programs to the needs and wants of local customer groups (trading areas, neighborhoods, and even individual stores) is called local marketing. National advertising could be wasteful because it often fails to address local needs. 4) The ultimate level of segmentation is individual marketing. Marketers benefit from increased sales and profits by realizing that their customers want to express their individuality. (difficult) 72. Suppose potato chip buyers are asked how much they value price, taste, crunchiness, and nutritional content as product attributes. In a short essay, describe the three different preference patterns that should emerge from this research? Answer: The attributes would reveal three basic-market preference graphs. 1) The term homogeneous preferences describes a market where all the consumers have roughly the same preferences for value and nutritional content. The market shows no natural segments. Potato chip brands would cluster around the center of the scale. 2) The term diffused preferences is at the other extreme. Consumer preferences vary greatly. The first brand to enter the market is likely to position itself in the center to appeal to the most people. A brand in the center minimizes the sum of total customer dissatisfaction. A second competitor could locate next to the first and fight for market share, or locate in the corner to attract those not satisfied with the center brand. 3) Clustered preferences occur when the market reveals distinct preference clusters called natural market segments, like if a group preferred a crispier chip with more nutritional content. The first firm would have three options. It might position itself in the center, hoping to appeal to all groups. It might position itself in the largest marketing segment. It might develop several brands, each positioned in different segments. If the first firm developed only one brand, then competitors would enter and introduce brands in the other segments. (moderate) 73. In a short essay, discuss niche marketing and explain the phrase “guerrillas against gorillas” as it relates to marketing to niche segments. Give an actual or made-up example of a niche market and the firms that compete there. Answer: The phrase refers to the fact that large firms (the gorillas) often lose small pieces of their market share to highly focused competitors (the guerrillas). A niche is a narrowly defined group that seeks a distinct set of benefits. They will often pay a premium to the firm that better satisfies their needs. Niches are small enough that they do not attract as much competition as do segments with larger potentials. The examples students give will vary according to their knowledge and experiences. (moderate) 74. As multinational companies look for ways to improve their efficiency, one solution is the purchase of executive jet planes. It is quite often necessary for management to fly to other operations around the world. Having a corporate jet removes time constraints from these trips. In a short essay, discuss which major segmentation variables for business markets a manufacturer of corporate jets can use. Answer: Students will answer this question in a variety of ways. The following is a possible answer: Industry and location of industry are both potential demographic variables than can be used. Businesses can be segmented according to heavy or light usage of air travel; this would be an example of an operating variable. All five of the purchasing approaches would be applicable as segmentation variables—purchasing-function organization, power structure of organization, nature of existing relationship, general purchase policies of buyer, and buyer’s purchasing criteria. The one that is least likely is the nature of existing relationship, but it is not out of the realm of possibility that a company would need and buy more than one corporate jet. In terms of situational factors as segmentation variables, how the buyer will use the jet falls under the category of specific application. Personal characteristics might include buyer’s willingness to take risks, and buyer-seller similarities could also be a viable segmentation variable in this example. (moderate) 75. A Chinese manufacturer of small and inexpensive motorcycles (125cc to 250cc engines, probable retail prices $1,200 to $2,100) decides to enter the U.S. market, as they see very little competition in that power range. You are asked to help them decide how to segment the U.S. marketplace for small motorbikes. Using the Major Segmentation Variables for Consumer Markets, discuss three or four possible segments that might be targeted by the Chinese concern. Include a brief explanation for why this segment might be a good one to consider. Answer: Better answers will include more than income and age (demographics), although these are the easiest and may work just fine. Other segmentation variables to use would include lifestyle (psychographics), benefits sought (behavioral), and city size (geographic). The proposed segments and the explanations for why they might work will obviously vary, but here are some examples of viable market segments: high school and college students (education, income, and occupation within the Demographic heading—they are on a budget); city dwellers (in the Geographic heading—parking and traffic might spur this group); sports enthusiasts (lifestyle variable under the Psychographic heading—the bikes might seem like a fun and sporty way to get around); commuters (benefits sought under the Behavioral heading—their needs may be similar to the city dweller group and also the budget issue). (moderate) Mini-Cases Mini-Case 7-1 A group of investors are starting a for-profit college to be called Haven University. They have identified a small segment of society that is displeased with the high cost of college and is willing to forego all social and sporting extracurricular activities in order to get an inexpensive, quality education in four years. The university investors will advertise nationally. Its target audience is individuals between 22 and 30 years of age who have either not started earning a college degree or who did not finish one they began in the last ten years. The investors want to attract students who are currently working at a job with which they are dissatisfied. Haven will only offer three degree programs, which cannot be modified to individual student needs. Research has shown that these are degrees that this market segment repeatedly seeks. Students can earn their degrees over the Internet and only have to attend a one-week seminar on campus twice a year. 76. Refer to Mini-Case 7-1. These university investors are using __________ marketing to identify their target market. a. mass b. niche (easy) c. local d. aggregated e. individual 77. Refer to Mini-Case 7-1. The investors have identified their market through the use of __________ segmentation variables. a. behavioral, geographic, and demographic b. psychographic and behavioral c. geographic and demographic d. psychographic, behavioral, and geographic e. demographic, psychographic, and behavioral (moderate) 78. Refer to Mini-Case 7-1. The investors discovered there was a segment of the population who was being passed over for promotions because they lacked a college degree. These people had always assumed getting a degree was impossible because they did not have the time to attend classes. What kind of segmentation variable would be used to identify this segment? a. Usage. b. Personality. c. Values. d. Benefit. (moderate) e. Lifestyle. Mini-Case 7-2 A large international pharmaceutical firm decides to enter the Philippines with a new oral birth control product. The Filipino population varies greatly in terms of levels of age, education, rural versus urban population, income, ethnicity, sexual activity rates, awareness about the availability and uses of birth control, religious orientation, access to health care, and other variables that might influence consumption patterns for birth control. 79. Refer to Mini-Case 7-2. If the firm marketed their product in the form of white pills in a plain bottle and sold it to rural government clinics, which subsidized it to the consumers, the target segment most prominently includes which variables? a. Religion, age, sexual activity, and city size. b. Income, access to health care, and city size. (moderate) c. Race, income, and education. d. Age, awareness (readiness), and religious orientation. e. Nationality, loyalty status, and stage of the family life cycle. 80. Refer to Mini-Case 7-2. If the firm decides to sell pastel colored pills at higher than the competitors’ prices, and sell through pharmacies in the capital, Manila, the target segment most prominently includes which variables? a. Religion, age, sexual activity, and city size. b. Income, access to healthcare, and city size. (moderate) c. Race, income, and education. d. Age, awareness (readiness), and religious orientation. e. Nationality, loyalty status, and stage of the family life cycle. Chapter 8– Creating Positioning and Dealing with Competition True/False Questions 1. Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market. True (easy) 2. Points of parity (POP) are attributes or benefits consumers strongly associate with a brand, and which they believe that they could not find to the same extent with a competing brand. False (moderate) 3. In choosing points of difference (PODs) for the firm’s positioning, it is important that consumers find those PODs desirable. True (moderate) 4. One of the key deliverability criteria for points of difference (PODs) is feasibility— meaning that the firm must be able to actually create the POD. False (moderate) 5. Form product differentiation refers to the characteristics that supplement the product’s basic function. False (moderate) 6. Differentiating your offering in the channel could refer to coverage, expertise, or performance issues. True (easy) 7. One way of differentiating a service is through customer training. True (moderate) 8. Strong style can create product distinctiveness that is difficult to copy, however strong style does NOT always mean strong performance. True (moderate) 9. Michael Porter’s “Threat of Entry” force (from the five forces) suggests that the most attractive segment has high entry and exit barriers. False (moderate) 10. According to Porter’s Five Forces model, a segment is unattractive if buyers possess or will possess strong bargaining power. True (moderate) 11. In monopolistic competition, only one firm provides a certain offering in a specific area. False (moderate) 12. Integrating your business backward or forward in the value chain is also called vertical integration. True (moderate) 13. A group of firms following the same strategy in a given target market is called a strategic group. True (easy) 14. Share of heart is defined as the percentage of customers who name the company when asked, “Name the first company that comes to your mind in the industry.” False (moderate) 15. The acknowledged market leader in an industry has the largest share of the relevant product market and usually leads the others in price changes, new product introductions, distribution coverage, and promotional intensity. True (easy) 16. Part of a market leader’s strategy to defend market share is to consider which segments to defend (even at a loss) and what segments to surrender. True (difficult) 17. Fighting for market share makes sense because, for example, in the soft drink market, a one-share-point gain is worth over $100 million in revenue. True (moderate) 18. The meaning of a frontal attack against a market challenger is to identify shifts in market segments that cause gaps and then fill those gaps. False (moderate) 19. Levitt argued that product imitation might be as profitable as product innovation. True (moderate) 20. Logitech makes computer mouse products of every possible description. This extreme specialization is an example of a niche strategy. True (easy) Multiple Choice Questions 21. A good brand positioning helps the firm and consumer by doing all of the following EXCEPT: a. helps competitors understand where NOT to compete. (moderate) b. helps clarify the brand’s essence. c. helps consumers understand what the brand will help them achieve. d. helps consumers maximize the benefits of the brand. e. helps guide marketing strategy. 22. A __________ is a cogent (logical or sound) reason why the target market should buy the product. a. market niche service agreement b. customer-focused value proposition (moderate) c. price/benefit analysis d. marketing campaign e. differentiation plan 23. __________ includes the products or sets of products with which a brand competes and which function as close substitutes. a. The evoked set b. Brand choice c. Category membership (moderate) d. The inept set e. The competition set 24. What acronym is associated with the following definition—“attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe that they could NOT find to the same extent with a competitor brand”? a. WOM b. WOW c. POD d. POP (moderate) e. POS 25. What type of points-of-parity is related to association’s consumer view as necessary to be a legitimate offering within a certain category? a. Head-to-head. b. Competitive. c. Word-of-mouth. d. Membership. e. Category. (moderate) 26. Which of the following is NOT a major way of conveying a brand’s category membership? a. Relying on word of mouth among zealous consumers. (moderate) b. Announcing category benefits. c. Using the brand name of the product to explain the offering’s benefits. d. Comparing to exemplars. e. Relying on a product descriptor. 27. The preferred positioning approach is to inform consumers of a brand’s __________ before stating its __________. a. POPs; PODs b. membership; point-of-difference (moderate) c. category benefits; comparisons to exemplars d. membership; value proposition e. point-of-difference; positioning 28. XM Satellite Radio, the brand name, is a perfect example of using which strategy to convey the brand’s category membership? a. Relying on word of mouth among zealous consumers. b. Comparing to exemplars. c. Relying on the product descriptor. (moderate) d. Announcing category benefits. e. Explaining the value proposition. 29. One criterion for points-of-difference (POD) is the feasibility criterion, which means __________. a. the positioning must be preemptive, defensible, and difficult to attack b. the POD must be personally relevant and important to target consumers c. target customers must find the POD believable d. the firm must be able to actually create the POD (moderate) e. the brand must substantiate that it can deliver the desired benefit 30. One criterion for points-of-difference (POD) is the communicability criterion, which means __________. a. the positioning must be preemptive, defensible, and difficult to attack b. the POD must be personally relevant and important to target consumers c. target customers must find the POD believable d. the firm must be able to actually create the POD e. the brand must substantiate that it can deliver the desired benefit (difficult) 31. Which of the following brand position sets would NOT be difficult to pull off in the same campaign? a. Classy; tasteful. (moderate) b. Good tasting; low calorie. c. Inexpensive; high quality. d. Sophisticated; discount retailer. e. Positive; negative. 32. __________ refer(s) to the product’s size, shape, or physical structure. a. Form (moderate) b. Features c. Performance quality d. Conformance quality e. Durability 33. __________ is(are) the level(s) at which the product’s primary characteristics operate. a. Form b. Features c. Performance quality (moderate) d. Conformance quality e. Durability 34. __________ is(are) the degree to which all of the produced units are identical and meet promised specifications. a. Form b. Features c. Performance quality d. Conformance quality (moderate) e. Durability 35. Which of the following is NOT a way of differentiating the product offering? a. Form. b. Features. c. Conformance. d. Style. e. Expertise. (moderate) 36. Which of the following is a way of differentiating a marketing offering via personnel? a. Responsiveness. (moderate) b. Ordering ease. c. Coverage. d. Events. e. Conformance. 37. Which of the following is a way of differentiating a marketing offering via the surrounding services? a. Reliability. b. Installation. (moderate) c. Design. d. Quality. e. Expertise. 38. A product’s __________ is a measure of the probability that a product will NOT malfunction or fail within a specified period. a. repairability b. style c. reliability (difficult) d. design e. durability 39. A product’s __________ refers to the work done to make a product operational in its planned location. a. ordering ease b. design c. maintenance and repair d. installation (moderate) e. reliability 40. __________ describes the product’s look and feel to the buyer. a. Positioning b. Design c. Distinctiveness d. Uniqueness e. Style (moderate) 41. Which of the following is NOT a main service differentiator? a. Ethical personnel. (moderate) b. Ordering ease. c. Delivery. d. Installation. e. Customer consulting. 42. When a(n) __________ cannot be differentiated easily, the key to competitive success may lie in adding valued __________ and improving their quality. a. idea; creativity b. product; services (moderate) c. service; products d. value proposition; creative responses e. idea; styling 43. Which is NOT a way of differentiating an offering via the channel of distribution? a. Wider coverage. b. Expertise. c. Communication. (moderate) d. More exclusive coverage. e. Performance. 44. Which does NOT add to a segment’s unattractiveness, according to Porter’s five forces model? a. Numerous competitors. b. Growing plant capacity. c. High exit barriers. d. The segment is growing. (moderate) e. High fixed costs. 45. Which of the following is a likely outcome during tough economic time if there are low barriers to entry and high exit barriers? a. Stable returns. b. More firms coming online. c. High profits. d. Firms easily dropping out of that business. e. Chronic overcapacity. (moderate) 46. Which is NOT one of Porter’s five forces that determine market attractiveness? a. Internal resources. (moderate) b. Potential entrants. c. Buyer power. d. Supplier power. e. Threat of substitutes. 47. Which of Porter’s five forces depends heavily on industry entrance and exit barriers? a. Segment rivalry. b. Potential entrants. (easy) c. Buyer power. d. Supplier power. e. Threat of substitutes. 48. Which is NOT a reason that buyers’ power might grow or concentrate? a. Undifferentiated product. b. Price sensitivity. c. Product represents an insignificant portion of buyers’ costs. (difficult) d. Low switching costs. e. Upstream integration possibilities. 49. Which is NOT a reason that suppliers’ bargaining power might grow? a. When there are few substitutes. b. When the supplied product is an important input. c. When downstream integration possibilities exist. d. When sellers are price sensitive. (moderate) e. When they are well organized. 50. In which type of industry competition do many competitors offer the same product or service? a. Pure monopoly. b. Oligopoly. c. Monopolistic competition. d. Differentiated oligopoly. e. None of the above. (moderate) 51. The U.S. auto industry is an example of which form of competition? a. Differentiated oligopoly. (moderate) b. Pure monopoly. c. Pure competition. d. Monopolistic competition. e. Pure oligopoly. 52. Which of the following is NOT a way in which industries are classified? a. Degree of product differentiation. b. Publicly versus privately held. (difficult) c. Number of sellers. d. Cost structure. e. Degree of globalization. 53. Which is NOT an exit barrier? a. Moral obligations to employees. b. High vertical integration. c. Scarce raw materials. (difficult) d. Low asset salvage value. e. Emotional barriers. 54. Which is NOT an entry barrier? a. Economies of scale. b. Scarce locations. c. High capital requirements. d. Abundance of distributors. (moderate) e. Reputation requirements. 55. An oil producer that refines the product and owns gasoline filling stations has integrated __________. a. backward b. horizontally c. diagonally d. crosswise e. forward (moderate) 56. Due to exit barriers or for other reasons, many firms will stay in an industry as long as they cover their __________ and some or all of their __________. This results in lowered profits for everyone in that industry. a. variable costs; fixed costs (moderate) b. losses; gains c. losses; variable costs d. capital costs; materials costs e. fixed costs; losses 57. On the competitor map proposed by Rayport and Jaworski, __________ part of the model shows consumers’ behavior. a. the diagonal correlations b. the center (difficult) c. the outside the box (thinking) d. the outer-most ring e. the wheel of retailing 58. Which measure is the percentage of consumers saying a particular brand when asked, “Name the company from which you would prefer to buy (such-and-such) product”? a. share of mind. b. share of pocketbook. c. share of heart. (moderate) d. share of market. e. share of wrap-up. 59. Which of the following represents the idea of share of mind? a. The percentage of the target market the brand has. b. The percentage that says the brand is the one they think of first. (moderate) c. The percentage that refuses to answer the survey. d. The percentage that says the brand is their preference. e. The percentage that says the competition’s brand first. 60. Which is a characteristic of a good competitor? a. They try to buy share. b. They take large risks. c. They invest in overcapacity. d. They upset the industry’s equilibrium. e. They limit themselves to a segment of the industry. (moderate) 61. Which is a characteristic of a “bad” competitor? a. They take large risks. (moderate) b. They set prices in relation to costs. c. They limit themselves to a segment of the industry. d. They accept the general level of share and profits. e. They invest in capacity-lowering measures. 62. Which of the following is NOT a characteristic of the market leader in an industry? a. They lead in the share of relevant product market. b. They lead in distribution coverage. c. They lead others in price changes. d. They lead in promotional intensity. e. All of these are characteristics of the market leader. (moderate) 63. A __________ defense involves building superior brand power, making the brand almost impregnable. a. flank b. counteroffensive c. position (moderate) d. contraction e. mobile 64. The aim of __________ strategy is to reduce the probability of attack, divert attacks to less threatening areas, and lessen their intensity. a. looking-back b. innovation c. counteroffensive d. defensive (moderate) e. development 65. When a company cannot properly defend all of its (business) territory, which of the following is a suggested course of action? a. Strategically withdraw. b. Execute a contraction defense. c. Give up weaker territories. d. All of the above. (easy) e. None of the above. 66. The __________ type of defense in which the leader stretches its domain over new territories that can serve as future centers for defense and offense, using market broadening and market diversification. a. flank b. mobile (moderate) c. counteroffensive d. contraction e. preemptive 67. Which is NOT a market-challenger attack option? a. Frontal. b. Flank. c. Preemptive. (difficult) d. Encirclement. e. Bypass. 68. __________ is another name for identifying shifts in market segments that cause gaps to develop, then filling the gaps and developing them into strong segments. a. A frontal attack b. An encirclement attack c. A bypass attack d. A flanking strategy (moderate) e. Guerilla warfare 69. In which specialized niche role, does the firm customize its products for individual customers? a. End-user specialist. b. Channel specialist. c. Service specialist. d. Specific-customer specialist. e. Job-shop specialist. (difficult) Essay Questions 70. What are PODs and POPs? Give examples of each. Answer: Points-of-difference are attributes and benefits consumers strongly associate with a brand. They are positively evaluated by consumers, who believe these attributes or benefits cannot be found to the same extent in competing offerings. An example of a point of difference is the “mystique” surrounding Harley-Davidson ownership. No other maker can match this authentic, extraordinary quality. Points-of-parity are associations that are not unique to the brand, but may be shared with other brands. They may be necessary for the brand to be considered, but they are probably not sufficient to make the consumer choose a brand. An example, Samuel Adams is available on tap at some bars, and a certain consumer may only consider on-tap brands, but there is no guarantee the consumer will choose Sam based only on that availability. (moderate) 71. What are the three main ways of conveying to consumers that a brand is rightfully in a certain category? Provide examples of each. Answer: 1) Announcing category benefits—this reassures consumers that the brand will deliver on the fundamental reason for using a category of product. An LG refrigerator might show that it belongs in the consumer’s kitchen by announcing that it produces filtered-water ice cubes in huge quantities and has room for four gallons of milk in the door. 2) Comparing to exemplars—early reviews of Coldplay music compared the singer’s voice and the songwriting to those of U2. If the band felt this was positive, they could include the reviews in their ads. 3) Relying on the product descriptor—in other words, using brand naming as a device to announce what the product does. An example is Scotch Super Strength Packaging Tape that leaves no one confused about that the product is for and in what category it rests. (moderate) 72. Computer mouse maker Logitech has established itself among its customers via many points-of-difference. The book mentions six key criteria for points-of-difference, split into the categories of consumer desirability and deliverability. Describe how Logitech has or could use the criteria to stand out in the marketplace. Answer: Consumer Desirability Criteria 1) Relevance—Logitech must be on the cutting edge in offering the latest styles and features in their mouse line, and consumers must be aware of and care about those styles and features. 2) Distinctiveness—mouse buyers must be convinced that the products produced and marketed by Logitech are different and more interesting than those offered by other firms. 3) Believability—when describing how its products are superior in ads, potential and actual Logitech customers must find the claims credible. Deliverability Criteria 1) Feasibility—Logitech must be able to remain innovative and create aestheticallypleasing designs. 2) Communicability—consumers need to know about and believe that Logitech products are great. 3) Sustainability—Logitech must keep creating new ways of helping PC and Mac users to conduct their business with screen-movement tools such as mice, touchpads, etc. (moderate) 73. Lowe’s Home Improvement has tried to distinguish itself from the largest player in the category, The Home Depot, by choosing and training floor personnel in such as way as to be “better” than the competition. The book lists six important ways that a company might differentiate its offering through personnel. What are they? Answer: 1) Competence—Lowes floor associates are likely to know the products they are recommending, either through training or because they were hired for their particular expertise and experience in certain areas. 2) Courtesy—Lowe’s floor associates will often take the time to walk with you to find what you are looking for and may spend several minutes working through your project with you without seeming to be rushed. They are also very woman-friendly, a plus in a normally male-oriented commercial environment. 3) Credibility—because associates are competent, they are perceived as more trustworthy. 4) Reliability—also dependent on associate competence, this measures consistency and accurateness in floor workers’ behavior and advice. 5) Responsiveness—associates should react quickly to customer questions and problems. 6) Communication—this is related to the associates’ ability to understand customer problems and requests, and to be able to clearly respond to them. (moderate) 74. Nearly every consumer electronics maker recognizes Apple Computer’s iPod as the gold standard for personal music devices. Apple has by far the largest market share and its players are elegantly designed. The company prices competitively and yet still makes huge profits on this line of products. If a company considers Apple as its “opponent” and the objective is to take away market share, what are five general market-challenger attack options? Answer: 1) A frontal attack would consist of matching Apple point for point with their marketing mix. The hardest part of this strategy is that others’ players have not been seen by consumers as “as good” as the iPods are. And, many would-be competitors do not have the resources necessary to compete head-to-head with a giant like Apple. 2) A second attack strategy would be to chip away at Apple where it is weak or in some way underperforming—this is called a flank attack. Sony might introduce their competitive player to the Chinese market, where Apple does not have such a stronghold. Or perhaps Aiwa could make quite aesthetically pleasing and colorful players that are in contrast to iPods white and black color choices. 3) Encirclement entails launching a simultaneous campaign against the chosen competitor on many fronts. This takes lots of resources, both financial and managerial. The purpose is to “break the opponent’s will.” 4) The most indirect strategy is to bypass the competitor completely and go after easier markets or competitors. 5) Guerilla warfare uses small, intermittent attacks to “harass and demoralize” the competitor of choice. This might be done with aggressive price-cutting or intense promotional efforts. This form of attack is useful to smaller companies because it can be done cleverly with fewer resources. (moderate) Mini-Cases Mini-Case 8-1 A growing university in Guangdong, China is seeking additional institutional recognition and awareness among potential target students and financial donors. Few outside the immediate area have heard of it. Over the last several years they have raised their profile by inviting famous guests to give public lectures. 75. Refer to Mini-Case 8-1. The president and the marketing director for the university want to greatly increase the number of people who respond with the university’s name when asked the following question: “Name the university in Guangdong at which you would prefer to study international relations.” What type of share are the president and the marketing director seeking to increase? a. Share of mind. b. Share of pocketbook. c. Share of heart. (moderate) d. Share of market. e. Share of wrap-up. 76. Refer to Mini-Case 8-1. Along with international visitors on campus, the admissions group has been actively seeking international students and “bulking up” its offerings in the international arena. Other parts of the university have been growing at a steadier pace, unaided by special programs or dollar incentives. How is the university exhibiting the characteristics of a good competitor, based on the scenario presented? a. They are trying to buy share. b. They are taking large risks. c. They are making investments in overcapacity. d. They are upsetting the local education “industry’s” equilibrium. e. They are limiting themselves to a segment of the industry. (moderate) Mini-Case 8-2 Samsung has made a very slim, very aesthetically pleasing phone that it sells through Sprint and other mobile communications providers. The phone has enough flash memory to store and play 500 songs in its MP3 player. It has built-in software that allows users to load their own music or other sound segments as ringtones. It has a “finder” feature for when it is misplaced. As far as the marketing people at Samsung can tell, the phone meets and exceeds every potential user’s expectation for what a phone should be. 77. Refer to Mini-Case 8-2. Samsung’s U.S. advertising agency is refining their __________ for the phone, which is a cogent (logical or sound) reason they will put in the advertising campaign for why the target market should buy the product. a. market niche service agreement b. customer-focused value proposition (moderate) c. price/benefit analysis d. marketing campaign e. differentiation plan 78. Refer to Mini-Case 8-2. Samsung’s new phone is more than a phone with its additional features. The advertising agency wants to position the product in the minds of the consumer as belonging to the most elite and up-to-date phones on the market, and at the same time, show consumers how great the additional features are over the competitive phones. This is the right approach, because the preferred positioning process is to inform consumers of a brand’s __________ before stating its __________. a. POPs; PODs b. membership; point-of-difference (moderate) c. category benefits; comparisons to exemplars d. membership; value proposition e. point-of-difference; positioning 79. Refer to Mini-Case 8-2. The Samsung phone will come encased in scratchproof shiny plastic, similar to how Apple’s iPod exteriors are. This interesting choice will attract more attention in a marketplace where most phones are in metallic or dull plastic finishes. This innovative product exterior is part of the product’s __________. a. form (moderate) b. features c. performance quality d. conformance quality e. durability Chapter 9 – Building Brand Equity True/False Questions 1. A brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. True (easy) 2. Brand loyalty can create barriers to entry for competitors. True (moderate) 3. A brand is said to have a positive industrial-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified as compared to when it is not. False (moderate) 4. A brand promise is the product, service, and all accompanying marketing activities and supporting marketing programs. False (moderate) 5. Name-research procedures used when developing brand elements include association tests and memory tests. True (moderate) 6. The brand elements of protectable, adaptable, and transferable are considered brand building elements. False (difficult) 7. The three key themes in designing brand-building marketing programs are personalization, integration, and externalization. False (moderate) 8. Brand bonding occurs when customers experience the company as delivering on its brand promise. True (easy) 9. It is possible to “borrow” from other brands or ideas by linking your offering to consumers’ knowledge of those brands. True (moderate) 10. A brand audit is a means of understanding where, how much, and in what ways brand value is being created. False (moderate) 11. A brand audit is a consumer-focused exercise that involves a series of procedures to assess the health of the brand and uncover its sources of brand equity. True (moderate) 12. The only way to reverse a fading brand’s fortune is to “returns to its roots” and restore lost sources of brand equity. False (moderate) 13. The stronger the brand equity and corporate image, the more likely it is that the firm can successfully emerge from a serious brand crisis. True (easy) 14. Snickers Cruncher, a crispy rice bar, with honeyed peanuts, caramel and coated in chocolate would be considered a brand extension. True (moderate) 15. Snickers Cruncher, a crispy rice bar, with honeyed peanuts, caramel and coated in chocolate would be considered a branded variant. False (moderate) 16. The Harley-Davidson version of the Ford F150 truck is an example of co-branding. True (easy) 17. A Granturismo, made by Italian scooter maker Vespa, is an example of the subbranding strategy. True (moderate) 18. By using brand extensions, marketers can cut the cost of new product introductions. True (moderate) 19. When Apple introduced the iPod Nano model, it simultaneously took its most popular model, the Mini, off the market. This is an example of preemptive cannibalization. True (moderate) 20. A “flanker” brand is the same as a “fighter” brand that is the same as a “flagship” brand. False (moderate) Multiple Choice Questions 21. Which of the following is NOT part of the strategic brand management process? a. Building and conveying brand history. (moderate) b. Identifying and establishing brand positioning. c. Planning and implementing brand marketing. d. Measuring and interpreting brand performance. e. Growing and sustaining brand value. 22. A(n) __________ is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. a. logo b. brand (easy) c. trademark d. copyright e. intellectual property 23. Which is NOT true of brands? a. Consumers learn of brands through experiences. b. Good brands simplify consumers’ decision making. c. Consumers use savings cues more than brand cues. (moderate) d. Consumers learn of brands through marketing. e. Good brands reduce consumer risk. 24. Which of the following is NOT a benefit of brand loyalty? a. Loyalty provides predictability. b. Loyalty allows for company security of demand. c. Loyalty can translate into consumer willingness to pay a higher price. d. Loyalty is easily matched by competitors. (moderate) e. Loyalty can create barriers to entry for other firms. 25. __________ is endowing products and services with the power of a brand. a. Brand equity b. Consumer risk reduction c. Loyalty d. Marketing infusion e. Branding (easy) 26. All the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand are known as __________. a. brand knowledge (moderate) b. brand equity c. inelastic consumer response to the brand d. brand perceptions e. brand loyalty 27. Which is NOT a marketing advantage of strong brands? a. Improved perception of product performance. b. Higher vulnerability to competitive marketing actions. (moderate) c. Greater loyalty. d. Larger margins. e. Less vulnerability to marketing crises. 28. __________ can be defined as the differential effect that brand knowledge has on customer response to the marketing of that brand. a. Brand power b. Brand knowledge c. Customer-based brand equity (moderate) d. Brand freedom e. Brand differentials 29. Which is NOT a marketing advantage of strong brands? a. Additional brand extension opportunities. b. Possible licensing opportunities. c. Increased marketing communications effectiveness. d. Lower margins. (moderate) e. Improved perceptions of product performance. 30. A(n) __________ is the marketer’s vision of what the brand must be and do for consumers. a. brand’s equity b. brand mission c. guarantee d. implicit warranty e. brand promise (moderate) 31. ___________ are trademarkable devices that serve to identify and differentiate the brand. a. Brand elements (moderate) b. Brand equities c. Consumer knowledge bases d. Intellectual properties e. Brand promises 32. Consumers’ brand knowledge dictates, to some degree, all of the following, EXCEPT: a. what they think about the brand. b. how they expect the brand to react to competitor brands. (moderate) c. what they feel about the brand. d. whether they will “grant” or “deny” permission to a particular marketing action or program. e. where they believe the brand should go. 33. Which is the name of the research procedure associated with the question “What images come to mind?”? a. Preference tests. b. Learning tests. c. Association tests. (moderate) d. Memory tests. e. Retention tests. 34. The name-research procedure associated with the question “How well is the name remembered?” is __________. a. preference tests b. learning test c. restoration tests d. memory tests (easy) e. association tests 35. What question is associated with name-research tests of association? a. What images come to mind? (moderate) b. How easily is the name pronounced? c. How well is the name remembered? d. Which names are preferred? e. How much would you pay? 36. All of the following are criteria for choosing brand elements, EXCEPT: a. noncontroversial. (moderate) b. memorable. c. meaningful. d. adaptable. e. transferable. 37. __________ is about making sure that the brand and its marketing are as relevant as possible to as many customers as possible. a. Target marketing b. Personalizing marketing (difficult) c. Permission marketing d. Integrating marketing e. Internal branding 38. __________ is about mixing and matching marketing activities to maximize their individual and collective effects. a. Eclectic marketing b. “Salad tossing” c. Integrating marketing (moderate) d. Personalizing marketing e. Synergy marketing 39. A __________ is any information-bearing experience a customer or prospect has with the brand, the product category, or the market that relates to the marketer’s product or service. a. brand brush-up b. loyalty builder c. loyalty inducer d. brand contact (moderate) e. “hook” or “handle” 40. Which of the following is a key theme in designing brand-building marketing programs? a. Depersonalization. b. Integration. (moderate) c. Externalization. d. All of the above. e. None of the above. 41. Informing and inspiring employees about the brand through various activities and processes is called __________. a. internal branding (moderate) b. employee coaching c. motivational training d. indoctrination e. none of the above 42. __________ occurs when customers experience the company as delivering on its brand promise. a. Internal branding b. Brand bonding (moderate) c. Personalization branding d. Brand image e. Brand building 43. Which of the following is NOT one of the ways Jones Soda created a successful “cult” brand? a. Recruited people on the street and provided samples. b. Invited customers to submit photos of unusual product uses. c. Agreed to large slotting fees to get good shelf placement. (moderate) d. Made the soda in unusual and bright colors. e. Initially, sold the product through nontraditional outlets, like surf shops. 44. Which is NOT a secondary source of brand knowledge for consumers? a. Country of origin information. b. Other brands. c. Third-party endorsements. d. Things. e. Library research. (moderate) 45. The indirect approach to measuring brand equity __________. a. assesses the actual impact of brand knowledge on consumer response to different aspects of the marketing b. is the same as measuring sales outcomes related to marketing communications c. is preferred by CEOs d. assesses potential sources of brand equity by identifying and tracking consumer brand knowledge structures (moderate) e. All of the above are correct answers. 46. A(n) __________ is a consumer-focused exercise that involves a series of procedures to assess the health of the brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity. a. brand audit (easy) b. portfolio analysis c. brand inventory d. association test e. equity examination 47. Which of the following is NOT part one of the functions of the brand audit? a. Assess the health of the brand. b. Inventory public awareness of brand equity. (moderate) c. Uncover sources of brand equity. d. Suggest ways to improve the brand’s equity. e. Suggest ways to leverage the brand’s equity. 48. With well-known companies, brand value is typically over __________of the total market capitalization. a. one-tenth b. one-fourth c. one-half (moderate) d. three quarters e. There is no numerical average available to answer this question. 49. The brand audit can be used to set the strategic direction for the brand. Questions that are answered include all of the following EXCEPT: a. Are the current sources of brand equity satisfactory? b. Do certain brand associations need to be strengthened? c. Does the brand lack uniqueness? d. What kinds of advertising would highlight the brand? (moderate) e. What brand opportunities exist? 50. In which country do companies NOT list brand equity on their balance sheets? a. The United Kingdom. b. Hong Kong. c. The United States. (moderate) pp. d. Australia. e. Businesses in all these countries list brand equity on their balance sheets. 51. Brand equity is reinforced by marketing actions that consistently convey the meaning of the brand to consumers in terms of all of the following EXCEPT: a. what products the brand represents. b. what core benefits the brand supplies. c. what needs the brand satisfies. d. which strong, favorable, and unique brand associations exist in the consumers’ minds. e. how brand fans accept less-than-perfect performances. (moderate) 52. Unless there is some environmental change, there is little reason to deviate from __________. a. vigorous preservation of brand “status quo” b. successful brand positioning (moderate) c. last year’s brand advertising d. the practices that produce dwindling brand leadership e. All of the above answer the question correctly. 53. Reversing a fading brand’s fortunes may require __________. a. relinquishing lost sources of brand equity b. establishing new sources of brand equity c. a “return to its roots” d. only two of the above (moderate) e. a, b, and c 54. Which of the following is NOT on the list of corporate resources that would help a firm weather a brand crisis? a. Strong brand equity. b. Strong corporate image. c. Strong credibility. d. Good lawyers. (moderate) e. High trustworthiness. 55. What two words best describe how to execute successful brand crisis management? a. Fast and furious. b. In and out. c. Credibility and trustworthiness. d. Fess up and settle. e. Swift and sincere. (moderate) 56. Which is NOT part of devising a branding strategy? a. Discovering brand elements. (moderate) b. Deciding the nature of new brand elements. c. Deciding the nature of existing brand elements. d. Applying brand elements to new products. e. Applying brand elements to existing products. 57. Which of the following is NOT one of the approaches for improving or “refreshing” a brand’s equity? a. Expand the breadth of brand awareness. b. Expand the depth of brand understanding. (moderate) c. Improve consumer recall of the brand. d. Improve the uniqueness of brand associations that make up brand image. e. Improve consumer recognition of the brand. 58. Using a parent brand to enter a different product category from that currently served by the parent is a __________. a. brand extension b. sub-brand c. category extension (moderate) d. parent brand e. line extension 59. An existing brand that “gives birth” to a brand extension is a __________. a. family brand b. brand line c. brand mix d. parent brand (moderate) e. branded variant 60. The definition of a sub-brand is __________. a. using an established brand to launch a new product b. all products sold under a particular brand c. the set of all brand lines that a firm offers to buyers d. the company’s brand assortment e. combining a new brand with an existing brand (moderate) 61. BMW, maker of the Mini Cooper brand is using what kind of brand strategy with its Mini products? a. Individual names. (moderate) b. Blanket family names. c. Separate family names. d. Corporate names. e. Generic names. 62. Toyota, maker of the Scion brand is using what kind of brand strategy with Scion products? a. Separate family names. b. Blanket family names. c. Individual names. (moderate) d. Corporate names. e. Generic names. 63. There is a special edition King’s Ranch Ford F150 truck. This is an example of what type of co-branding? a. Same-company co-branding. b. Multiple-sponsor co-branding. c. Joint-venture co-branding. (moderate) d. Ingredient co-branding. e. Retail co-branding. 64. Dell laptop computers have a permanent sticker attached to the top of each machine proclaiming “Intel Inside.” This is an example of what type of co-branding? a. Multiple-sponsor co-branding. b. Same-company co-branding. c. Retail co-branding. d. Ingredient co-branding. (moderate) e. Joint-venture co-branding. 65. A __________ is when the parent brand is used on a new product targeting a new market segment within a category currently served by the parent. a. joint-venture co-brand b. same-company co-brand c. category extension d. multiple-sponsor co-brand e. line extension (moderate) 66. Which of the following is NOT an advantage of co-branding? a. Might contribute to overexposure of the brand. (moderate) b. Helps position new products. c. Generates additional sales from the existing target market. d. Provides more opportunities with new consumers. e. Can open up new channels for the marketer. 67. __________, a potential downside of too much brand extension, occurs when consumers no longer associate a brand with a specific product or highly similar products and start thinking less of the brand. a. Brand death b. Brand dilution (moderate) c. Brand maturity d. Brand decline e. All of the above are correct responses. 68. When Apple introduced its popular iPod Nano model, it dropped its Mini iPod at the same time. The Mini was at the time the most popular mp3 player in the marketplace. This is an example of __________. a. corporate insanity b. CEO Steve Jobs’ large ego c. preemptive cannibalization (moderate) d. a brand shake-out e. product maturity 69. Brands can play a number of specific roles within a company’s brand portfolio. For example, a __________ is positioned with respect to competitors’ brand so that more important and profitable brands retain their desired positioning. a. cash cow b. low-end, entry level brand c. high-end, prestige brand d. flanker (moderate) e. mid-market brand 70. Brands can play a number of specific roles within a company’s brand portfolio. For example, a __________ may be retained despite dwindling sales because it still appeals to a sufficient number of customers and remains profitable with virtually no marketing support. a. low-end, entry level brand b. high-end, prestige brand c. fighter brand d. flanker e. cash cow (easy) Essay Questions 71. What are the three main sets of brand equity drivers? Give examples in each category. Answer: Brand elements or identities making up the brand. This could include brand names and other identifiers, such as logos, spokespeople, and slogans. A brand element for McDonald’s is the “I’m Lovin’ It, Late” campaign slogan. The product and service and all accompanying marketing activities and supporting marketing programs. This one is fully self-explanatory. An example would be all the financial and customer services offered by Fidelity Investments. Other associations indirectly transferred to the brand by linking it to some other entity. Outback Steakhouse cues diners of an Australian steak-eating experience with old signs, menus that feature Kangaroos, and menu items suggesting ties to the country/continent. (moderate) 72. The brand elements chosen when building a brand should differ from those employed when defending a brand. What are the different criteria for choosing brand elements, based on these differences? Answer: For building the brand: 1) The element should be easily recalled and recognized, in other words it should be memorable. 2) The element should be meaningful, so that it suggests how it will provide benefits. 3) And it should be likeable, meaning it is appealing to see or say or look at. For defending the brand: 1) The image or element should be transferable, allowing it to add value to other categories. 2) It should be adaptable, allowing for updates and freshness. 3) It should legally protectable and not easily copied. (moderate) 73. What is a brand audit? Why is it done? Answer: A brand audit is a consumer-focused exercise that involves a series of procedures to assess the health of a brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity. It can help set the strategic direction for the brand. It asks these kinds of questions: Are the current sources of brand equity satisfactory? Do certain brand associations need to be strengthened? Does the brand lack uniqueness? What brand opportunities exist and what potential challenges exist for brand equity? From the perspective of the firm, it is necessary to understand exactly what products and services are currently being offered to consumers and how they are being marketed and branded. (moderate) 74. Explain four general strategies for choosing brand names. Give an example of each. Answer: Individual names: The Mini Cooper automobile is made and marketed by BMW, but the Mini brand has no obvious relationship with BMW. Blanket family names: Most universities have schools or colleges that have not been sponsored or endowed by a benefactor. Thus, the business school at the University of Texas at Brownsville, is called the UTB School of Business. Separate family names for all products: The Ford Motor company owns the Volvo, Mercury, Lincoln, Jaguar, Land Rover, and Aston Martin brands, in addition to the Ford nameplate. Each of these brand families has a line-up of vehicles of its own. Corporate name combined with individual product names: The Ford Fusion automobile has its own name (Fusion), but is also called a Ford. (moderate) 75. What are some of the different roles played by different brands in a brand portfolio? Give an example of each. Answer: Examples will, of course, vary. But the four types of roles described in the text are: Flanker brands, also called “fighter” brands, are positioned so as to allow flagship brands prime positioning in the marketplace. The book’s example is Procter & Gamble’s budget-priced diapers Luvs, which do not take away sales from the premium diaper product Pampers, but help establish another price/quality tier in the minds of the consumer. Cash cows are brands that still generate plenty of sales, and do so without much need for marketing efforts, such as promotion. For example, the Bic Twin brand of shaver continues to sell in healthy numbers with virtually no consumer marketing effort. The profits may be spun off to help develop other Bic brands, which are newer or less established, in the marketplace (new pens or lighters, for example). Low-end entry-level brands introduce the brand to new or younger consumers. Toyota recently added a line of cars under the Scion name that are aimed at young people. Young Americans are not familiar with the Toyota brand and so this allows them into the Toyota family, where they will hopefully experience satisfaction and move up to higher priced/higher quality Toyota products. High-end prestige brands allow some of the extra good perceptions to spill over onto other brands in the lineup. The new Pontiac Solstice is stylish and attractive and, if it turns out to be a credible product, may bring new buyers into the Pontiac family. (moderate) Mini-Cases Mini-Case 9-1 Players from the 1990s alternative band Dan Quayle’s Children are considering a reunion tour. The plan is to play dozens of their old haunts from Athens, Georgia in the south to Boston in the north. The band flamed out very suddenly in 1996 when their drummer XMan was very publicly thrown in jail for an Internet child pornography conviction. The band did not know how to deal with the crisis and for about a month they just sort of went into “hiding.” After that response, they could never really get booked for any gigs, and after about 6 months the remaining Children took day jobs and went on with their lives. 76. Refer to Mini-Case 9-1. If Dan Quayle’s Children is to reverse their fading brand’s fortunes, it will require which of the following? a. Relinquishing lost sources of brand equity, such as well-known songs and logos. b. Establishing new sources of brand equity, such as new songs, styles, and stage antics. c. A “return to its roots,” such as playing old crowd favorites and telling stories of the road onstage. d. Two of the above could help the band reverse the band’s fortunes.(moderate) e. A, b, and c are all ways the band could reverse its fortunes. 77. Refer to Mini-Case 9-1. For the band to have better weathered the 1996 “brand crisis,” they could have used all of the following EXCEPT: a. strong brand equity. b. a strong organizational image. c. strong credibility. d. good lawyers. (moderate) e. high trustworthiness. 78. Refer to Mini-Case 9-1. Lead singer “Loser Bubba” is also the band’s leader and spokesperson. What two words best describe how the band might have better executed successful brand (band) crisis management? a. Be fast and furious in your response. b. Get in and out of the problem quickly. c. Increase credibility and trustworthiness. d. Fess up and settle. e. Be swift and sincere in addressing the problem. (moderate) Mini-Case 9-2 Chocolate maker Hershey is looking for growth opportunities, and has considered launching a few new products it has developed and acquired. Hershey has traditionally used blanket family brand names such as Hershey’s Milk Chocolate Bar, or individual names such as Mr. Goodbar, their chocolate with peanuts bar. 79. Refer to Mini-Case 9-2. Hershey has a new product that is almond and caramelbased, covered with chocolate. The California Almond Growers Association want to create a tie-in with their products, by calling the new product the Hershey California Almond Express. This is an example of what type of co-branding? a. Same-company co-branding. b. Multiple-sponsor co-branding. c. Joint-venture co-branding. (moderate) d. Ingredient co-branding. e. Retail co-branding. 80. Refer to Mini-Case 9-2. If Hershey created Mr. Goodbar nibbles, basically a chocolate-covered nut product for eaters who are on the run or who wish for greater portion control, this would be considered a __________. a. joint-venture co-brand b. same-company co-brand c. category extension d. multiple-sponsor co-brand e. line extension (moderate) Chapter 10 – Setting Product Strategy True/False Questions 1. A famous marketer once said his company was selling hope, not make-up. If this is true, hope would be considered the core benefit of the product category make-up. True (easy) 2. A radon gas detection system for homes would be considered a specialty good in the consumer-goods classification scheme. False (moderate) 3. The depth of a product mix refers to how many variants of each product are offered. True (moderate) 4. In the industrial-goods classification scheme, raw materials are long-lasting goods that facilitate developing or managing the finished product. False (moderate) 5. All sellers are legally responsible for fulfilling the buyer’s normal or reasonable expectations. True (Easy) 6. An existing product that has been repositioned can be considered a new product. True (moderate) 7. The new product development process starts with profitability analysis of the ideas. False (moderate) 8. Many of the best ideas for new industrial products originate with customer ideas. True (moderate) 9. A product-positioning map uses selected criteria to show where a product stands in relationship to comparable products. True (moderate) 10. Concept testing is the most expensive part of the new product development process. False (moderate) 11. Alpha testing means testing a product within the firm, while beta testing means enlisting customers to use the product and provide feedback. True (easy) 12. Simulated test marketing and test marketing are the same thing. False (moderate) 13. In spite of the benefits of test marketing, many firms today question its value. True (moderate) 14. Personal influence is most important in the awareness stage of the adoption process. False (difficult) 15. The stage of the product life cycle characterized by low sales, heavy promotion, low or negative profits, and minimal competition is the introduction stage. True (moderate) 16. Typically, the longest stage in the product life cycle is the maturity stage. True (moderate) 17. Increasing usage, frequency of use, or variety of use are all acceptable product modification strategies for a product in the maturity stage of the life cycle. False (moderate) 18. The appropriate decline strategy for a company depends on the industry’s relative attractiveness and the company’s competitive strength. True (moderate) 19. The basic strategy for managing the growth stage of the PLC is product expansion. False (moderate) 20. One criticism of the Product Life-Cycle concept is that it is not always clear what stage a product is in—it may appear to be mature when in fact it is in a plateau and has further potential. True (moderate) Multiple Choice Questions 21. Which of the following is NOT a reason that Steinway pianos command a premium price in the marketplace? a. They manufacture more affordable brands, such as Boston and Essex. (moderate) b. The pianos take nine months to build. c. To build the piano requires 12,000 parts. d. The piano is the most popular among composers and musicians. e. Steinway can only produce only a few thousand concert pianos per year. 22. All of the following could be considered products, EXCEPT: a. physical goods. b. distribution channels. (moderate) c. events. d. persons. e. ideas. 23. Marketers plan their market offerings at five levels. What is the correct order of the levels, going from the most fundamental level to the level with the most benefits? a. basic—expected—augmented—core—potential b. expected—potential—basic—augmented—core c. core—basic—expected—augmented—potential (moderate) d. potential—augmented—expected—core—basic e. basic—core—augmented—potential—expected 24. Painting and consulting are considered industrial goods, because __________. a. they are specialty goods b. they are considered “component materials” c. most firms do not seek them directly d. they facilitate developing and managing the finished product (moderate) p. 180 e. they are nondurables 25. In 2003, Toyota introduced its Scion brand, with the aim of bringing younger buyers into the “family.” This was a classic example of __________. a. line modernization b. line featuring c. line cannibalization d. line padding e. line stretching (difficult) 26. When SAP software added a Windows-style “back” button to its industrial invoice management software, the new product __________. a. used a repositioning strategy b. introduced a new product line c. added to an existing product line d. improved upon an existing product (easy) e. used a market diversification strategy 27. Mazda’s Miata convertible originally drew the most interest from women between the ages of 35–55. In order to interest more potential customers in the roadster, Mazda beefed up the model with heavier shocks and a faster engine, then emphasized performance in its advertising. This is an example of creating a new product by ¬¬¬¬__________. a. repositioning (moderate) b. the development of a new product line c. a market diversification strategy d. a product development strategy e. a new-to-the-world product 28. __________ are formal statements of expected product performance by the manufacturer. a. Open pricing statements b. Promotional statements c. Warranties (moderate) d. General guarantees e. Specific guarantees 29. Why do new products fail? a. Because most products today have a longer product life, there is less need for new products. b. Social and governmental deregulations have made new-product development costs more expensive, and therefore, producers avoid new product ventures. c. Marketers tend to underestimate the market size and underestimate demand, which results in lost customers. d. New-product development costs are higher than anticipated, and competitors respond more effectively than predicted. (difficult) e. The underpricing of the product causes customers to overstock and depletes all future demand for the product. 30. What is NOT listed in the text as a reason products fail? a. Too much demand. (moderate) b. Ignoring or misinterpreting marketing research. c. Ineffective advertising. d. Overestimating market size. e. Poor design. 31. In terms of new-product development, Spam Meat Product’s annual Great Ideas for Spam! Contest brings together Spam cooking ideas from all over the world. Each contestant hopes his or her idea for a new recipe will win the grand prize. For the makers of Spam, the contest serves as an avenue for __________. a. idea screening b. idea generation (moderate) c. concept development d. prototype development e. business analysis 32. Which of the following is(are) an acceptable source of or opportunity to find new product ideas? a. Interactions with consumers. b. Reversing normal assumptions. c. Employee-submitted ideas. d. A, B, and C are all acceptable ways of getting new product ideas. (easy) e. The only acceptable idea source is internal research and development (R&D) under controlled conditions. 33. A potential marketer of new combination bread and sandwich maker machine asks consumers, “Do you understand how the machine can benefit you?” and “Would this type of machine solve a need for you?” This marketer is in the __________ stage of newproduct development. a. concept development and testing (difficult) b. business analysis c. product development d. idea generation e. market testing 34. A product idea can be turned into several elaborated versions by asking questions such as: Who will use the product? What primary benefit will it provide? When will people use or consume it? The elaborated versions of the product idea are called __________. a. product positions b. brand concepts c. product concepts (moderate) d. brand positions e. marketing audits 35. The marketing strategy plan is comprised of three parts. The first part consists of describing the __________. a. product’s features, advantages, and benefits b. target market size, structure, and the behavior of its target market (moderate) c. planned price, distribution strategy, and marketing budget d. long-run sales, profit goals, and marketing mix strategy e. target market composition, its long-run sales goals, and the product’s planned pricing strategy 36. Neelim is trying to decide how many people will buy her new scrapbooking software and the accompanying printer accessories only once, how many will buy it more than once, but only infrequently, and how many will become frequent purchasers of her scrapbooking product line. She is engaged in __________. a. estimating costs and profits b. marketing strategy development c. estimating total sales (moderate) d. risk analysis e. sales-wave research 37. Scotto Giordinello is trying to launch a franchise version chain of his sandwich shops. He has successfully done a concept test with target consumers. Now he is writing up his three-part preliminary marketing strategy in order to interest investors. What should be in the final section of the document? a. Descriptions of the target market’s size, structure, and behavior. b. A description of the marketing budget for the first year. c. Descriptions of the planned pricing and distribution for the product. d. A description of the rapid-prototyping used to inform the architects. e. Descriptions of the long-term sales, profit goals, and marketing-mix strategy over time. (difficult) 38. EA, a gaming software products company has developed a role-playing game (RPG) incorporating ideas supplied by some of the most famous game writers in the world. The company asked about one hundred people to download the company’s RPG, play it extensively, and give feedback on it. EA is using _________ testing. a. beta (moderate) b. concept c. market d. alpha e. simulated 39. What is the first thing entrepreneurs should know when moving to the product development stage of the New Product Development Decision Process described in the text? a. This is the stage where risk analysis is performed to see if it is worth it to proceed. b. In this stage, alpha testing is carried out with actual consumers. c. This stage involves a jump in investment that dwarfs the costs incurred in the earlier stages. (moderate) d. The communication between engineering and marketing is likely to be natural and effective by the time you have made it to this stage. e. Making it to this stage guarantees eventual success of the product. 40. As a part of new-product development, beta testing is most useful when __________. a. the potential customers are homogeneous b. the company is quite knowledgeable on the potential applications of the product c. opinion leadership from early adopters is sought (difficult) d. the buying center for the product is limited to the individual making the actual purchase e. all of the above occur. 41. A Chinese beverage company briefly marketed a juice brand called in medium-sized cities like Zhongshan in China The product had a sweet flavor and contained fruit pulps. It was never introduced nationally. The company was probably engaging in _________. a. full-blown test marketing b. controlled test marketing (moderate) c. simulated test marketing d. sales-wave research e. alpha testing 42. Suppose a marketing research firm that manages a panel of retail stores agrees (for a fee) to study a company’s new candy bar-based granola product. The research firm provides sales results and evaluates the impact of promotion. This is an example of __________. a. simulated test marketing b. controlled test marketing (moderate) c. test markets d. conjoint market analysis e. sales-wave research 43. Which of the following is the most expensive part of the new product development process? a. Concept testing. b. Business analysis. c. Product development. d. Commercialization. (moderate) e. Idea generation. 44. Market testing is beneficial when creating business products, but the process may vary somewhat from that of testing consumer products because __________. a. there is no good way of alpha testing business products b. there is no good way of beta testing business products c. conjoint analysis has limited value for testing industrial customers’ product affinity d. business product market tests are always more expensive than consumer products market tests e. trade shows and distributor display rooms are crucial for assessing customer acceptance (moderate) 45. McDonald’s is preparing (yet another time) to roll out a new version of its McRib product. McDonald’s is currently deciding if its new product should enter the market at the same time it knows a new KFC’s barbeque product is coming out. The firm is devising its _________ for new-product commercialization. a. geographic strategy b. introductory market strategy c. market-penetration plan d. market pricing plan e. timing (moderate) 46. If a firm learns that a major competitor is nearing the end of its product development work, it may choose a number of approaches. Which of the following correctly describes a market timing approach? a. First entry—includes locking up important distributors and gaining reputation early. (moderate) b. First entry—which guarantees early dominance and ongoing market leadership. c. Parallel entry—means launching the exact same product simultaneously to the competitor’s launch. d. Late-entry—has the disadvantage of bearing the financial brunt of educating the consumer about the new category. e. Secondary entry—involves purposely coming into the marketplace the week after the primary entrant and seeking the niche customers only. 47. During commercialization, a company must develop an action plan for the rollout. The action plan answers the commercialization question of __________. a. What? b. Where? c. How? (moderate) d. To whom? e. Who? 48. During the implementation of the introductory marketing strategy, a marketer could use _________ to show the simultaneous and sequential activities that must take place to launch the new product. a. a Gantt chart b. a PERT table c. a position map d. critical path scheduling (moderate) e. a rollout plan 49. Before Dede read the article about Toyota’s new super-efficient, low-polluting car, the Prius (the car is propelled by a hybrid of an electric motor and small gasoline engine), she had previously heard that the product existed, but didn’t know much about it. Having read the article, she now wants to learn even more about the new car. In terms of the adoption process, Dede has moved from __________. a. evaluation to trial b. awareness to interest (easy) c. awareness to evaluation d. interest to evaluation e. interest to trial 50. Guadalupe is thinking about buying an iPod Nano music player. The market is constantly changing, so she has consulted information on the Internet, talked to several salespeople, and avidly watched for sales. Guadalupe has also checked her bank account to see if she can afford the personal music and video player. She is in the __________ stage of the consumer adoption process. a. awareness b. interest c. adoption d. evaluation (moderate) e. trial 51. Personal influence is most important in the __________ stage of the adoption process. a. awareness b. interest c. evaluation (moderate) d. trial e. adoption 52. Which of the following groups is the largest group of adopters? a. The innovative majority. b. The opinion leaders. c. The early adopters. d. The divisibility majority. e. The early majority. (easy) 53. Pre-made Rice Krispy treats were a huge success because they were perceived as much easier than making the recipe yourself—which required consumers to melt marshmallows, use large mixing bowls, and stir for just the right amount of time. Prepackaged Rice Krispy treats had a high level of __________ when compared to the former way of obtaining this tasty dessert. a. relative advantage (moderate) b. divisibility c. communicability d. complexity e. comparability 54. Birth control pills didn’t diffuse as quickly in predominately Roman Catholic countries as they did in the United States. This is an example of problems with the new product’s __________. a. relative advantage b. compatibility (moderate) c. communicability d. complexity e. divisibility 55. When a new product innovation is relatively difficult to understand or use, the characteristic of __________ slows the adoption rate of the new product. a. relative advantage b. divisibility c. communicability d. complexity (moderate) e. compatibility 56. According to the concept of the product life cycle, __________. a. products have a limited life (difficult) b. products spend a predetermined amount of time in each stage of the life cycle; this time span is determined by the product category c. most products require the same level of marketing throughout their life cycle d. a product’s profits are fixed throughout its life cycle e. all products begin at the introductory stage and move through all the life cycles stages at a steady rate 57. Which of the following is NOT an underlying assumption of the product life cycle? a. Products have a limited life. b. Products pass through distinct stages with different challenges to the marketer. c. Services do not pass through life-cycle stages like products do. (moderate) d. Profits rise and fall at different stages. e. Products require different marketing and other business strategies in each stage. 58. Which of the following is NOT generally true of the product life cycle? a. Profits are negative in the introduction stage. b. Profits decline in the decline stage. c. Profits reach their highest point during the maturity stage. d. As the product passes through different stages, marketing adjustments are required. e. Sales peak in the maturity stage. (moderate) 59. The stage of the life cycle characterized by low sales, heavy promotion, low profit, and minimal competition is the _________ stage. a. introduction (moderate) b. growth c. repositioning d. maturity e. decline 60. Which of the following is NOT one of the factors Tellis and Golder say underpin long-term market leadership? a. Niche market dominance. (moderate) b. Relentless innovation. c. Asset leverage. d. Vision of a mass market. e. Persistence. 61. Most products are in the __________ stage of the product life cycle. a. introduction b. growth c. pre-maturity d. maturity (moderate) e. decline 62. The stage in the product life cycle in which the marketing objective is to maximize profit while defending market share is the __________ stage. a. introduction b. growth c. rejuvenation d. maturity (moderate) e. decline 63. Volkswagen continued to sell its sedan (Beetle) in Brazil and Mexico for nearly 20 years after it withdrew the product from the United States. The company reduced R&D costs for the car to virtually nothing during that time, and did no advertising. In product life cycle terms, VW was __________ with the Beetle. a. divesting b. harvesting (moderate) c. maintaining d. reducing overcapacity e. engaging in product improvements 64. When psychological persuasion is NOT as effective as financial persuasion, marketers tend to use which form of sales stimulation technique? a. Advertising. b. Word of mouth (WOM). c. Sales promotion. (moderate) d. Product quality improvement. e. Product style improvement. 65. Which is NOT a possible characteristic of harvesting a product in a declining industry? a. Reducing market participation. (moderate) b. Reducing product quality. c. Reducing sales force size. d. Reducing advertising expenditures. e. Reducing investment in R&D. 66. Price reductions, promotion cutbacks, and competitor dropout characterize the __________ stage of the life cycle. a. introduction b. growth c. stable maturity d. decaying maturity e. decline (easy) 67. Pricing changes are necessary across the product life cycle. Which of the following represents a correct match of PLC stage to price strategy? a. Cutting prices in the introduction stage. b. Pricing to penetrate the market in the growth stage. (moderate) c. Matching competitors’ pricing in the decline stage. d. Charging cost-plus pricing in the decline stage. e. Pricing to best competitors in the introduction stage. 68. Distribution changes are necessary across the product life cycle. Which of the following represents a correct match of PLC stage to distribution strategy? a. Phasing out unprofitable outlets in the growth stage. b. Phasing out unprofitable outlets in the introduction stage. c. Building more intensive distribution in the maturity stage. (moderate) d. Being selective about distribution in the growth stage. e. Building selective distribution in the decline stage. 69. Although many swear by the product life cycle (PLC), some criticize the concept because __________. a. PLC doesn’t help managers compare product performance to other similar products b. PLC is an ineffective product management tool c. marketers can seldom tell what stage of the PLC a product is in (difficult) d. the product life-cycle pattern is an inevitable pattern relatively unaffected by marketing strategies e. PLC is not applicable to any services Essay Questions 70. Marketers plan their market offering at five levels, each adding customer value. Consider Apple’s iPod—what might be included in each of the product’s levels? Answer: The five levels are depicted in the concentric circles model in Figure 10.2. Core Benefit—The fundamental service or benefit that the iPod buyer is really buying. This could be an ability to listen to music while “on the go,” or the opportunity to store lots of music in one place. The core benefit for some users might be considered as fashion. Basic Product—The way the core benefit it turned into a product. This is the physical product, the white or black plastic, or brushed metal colors, the control “wheel,” the headphones, the hard drive inside, etc. Expected Product—Buyers normally expect a certain set of attributes and conditions when they purchase an iPod. For example, the iPod needs to work, store reserve power for hours of listening, find songs you want to hear, deliver a certain amount of audio quality, etc. Augmented Product—These are the pluses iPod tries to deliver, if Apple is “too good” at it, these may become expectations. Ease is a big plus for iPod, once users get the hang of the machine, they come to take for granted how easy it is to create playlists, add and delete music, etc. Apple could easily add value by sending users a free download every once in awhile, which would add unexpected but real value to users without much cost to the company. Potential Product—All the possible augmentations and transformations possible. iPod could add a phone or PDA function, allow text or email transmission, or be available in truly tiny sizes in the future. There are many, many potential possibilities. (difficult) 71. Maurer has developed a hermetic system for smoking meat that uses 50 percent less energy than industrial-sized smokers currently on the market even though it will smoke the same amount of meat uniformly. It also has an added advantage in that it is easy to clean because the hermetic system reduces tar and ash residue. In a short essay, discuss how Maurer would conduct a business-goods marketing test. Answer: Maurer would use alpha testing within the company and beta testing with outside customers. During beta testing, its vendor’s technical people will observe how test customers use the product, a practice that might expose unanticipated problems of safety and servicing and alert Maurer to the needs for customer training and servicing requirements. The vendor can also observe how much value the equipment adds to the customer’s operation as a clue to subsequent pricing. The vendor will ask the customers to express their purchase intention and other reactions after the test. A second common test method Maurer could use would be to introduce the new smoker at trade shows. Trade shows draw a large number of potential buyers. The vendor can observe how much interest buyers show in the new smoker. The smoker could also be tested in distributors’ and dealers’ display rooms where they may stand next to the Maurer’s other products and possibly competitors’ products. Maurer would come closest to using full test marketing if it gives a limited supply of the product to the sales force to sell in a limited number of areas that receive promotional support. (difficult) 72. In a short essay, explain the five stages that adopters of new products and services move through. Then consider the following scenario: Burke comes back to his dorm room from a night out drinking and entertainment and is excited about a new local band he heard—the R & K. He thinks their retro surf-influenced style sounds interesting. His roommate Bridgett tells Burke the band will play again at another local nightspot on Friday. A friend that has dropped by mentions that she has listened to nothing else since watching the R & K’s performance, and she loves their T-shirt! The chairman of Student Union, Tony, from the apartment next door, once heard the band play at a music club and says he can’t stand the band since hearing them—too noisy for him and he hates the drummer, “Molotova,” because his morality is questionable. Now indicate which stage of the adoption process each of the above participants is in. Answer: The consumer adoption process focuses on the mental processes through which an individual passes from first hearing about an innovation to final adoption. 1) Awareness. The consumer becomes aware of the innovation but lacks information about it. 2) Interest. The consumer is stimulated to seek information about the innovation. 3) Evaluation. The consumer considers whether to try the innovation. 4) Trial. The consumer tries the innovation to improve his or her estimate of its value. 5) Adoption. In the case of the R & K, the consumer decides to make full and regular use of the innovation. Burke is in the interest stage. Bridgett is in the evaluation stage. The fraternity pledge reached the trial stage and stopped. The “friend” is in the adoption stage. (moderate) 73. The decline stage of the product life cycle (PLC) has its own special challenges for marketers. In a short essay, define the five strategies that a marketer can use for dealing with a product in the decline stage. What factors determine the strategy that should be implemented? Answer: 1) Increase the firm’s investment so as to either dominate the market or strengthen its competitive position. 2) Maintain the firm’s investment level until the uncertainties about the industry are resolved. 3) Decrease the firm’s investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches. 4) Harvest the firm’s investment to recover cash quickly. 5) Divest the business quickly by disposing of its assets as advantageously as possible. The appropriate decline strategy depends on the industry’s relative attractiveness and the company’s competitive strength in that industry. (moderate) 74. A father-and-son team owns a company that hand-makes customized high-quality guitars for famous musicians. The son is convinced that such guitars are in the maturity stage of the product life cycle (PLC) and wants to implement strategies that will stimulate sales. The father is critical of the whole PLC concept. Over the years, as more and betterfunded competitors entered the market and their profits shrunk, they have debated the PLC concept. In a short essay, discuss the reasons the son seems to be so in favor of the PLC concept and the father seems to be so opposed to it. Answer: The PLC concept is best used to interpret product and market dynamics. As a planning tool, the PLC concept helps managers characterize the main marketing challenges in each stage of a product’s life and develop major alternative marketing strategies. As a control, the PLC concept helps the company measure product performance against similar products launched in the past. Critics of the PLC concept contend that life-cycle patterns are too variable in their shape and duration. PLCs lack what living organisms have— namely, a fixed sequence of stages and a fixed length for each stage. Critics also charge that marketers can seldom tell what stage the product is in. They charge that the PLC pattern is the result of marketing strategies rather than an inevitable course that sales must follow. (moderate) Mini-Cases Mini-Case 10-1 In 1991, Jenny was trying to figure out a way to make some extra cash. Her husband was a student, and they had a five-year-old child. She had a small shop selling Chinese tea. One day she came up with the idea of flower tea packages, which mixed several kinds of dried flowers for tea-making. She developed nine different types of flower tea packages. Response to the packages was so good that she decided to rent a small manufacturing facility. Her continued success brought her to the attention of some national retailers who were interested in carrying her product. National exposure on some online shopping websites gave the business a big boost in customer awareness. 75. Refer to Mini-Case 10-1. Because this is a small operation, Jenny and her husband would have most likely used __________, the simplest method of evaluating the merit of her new product idea. a. break-even analysis (easy) b. conjoint analysis c. risk analysis d. an attribute listing worksheet e. extensive concept testing 76. Refer to Mini-Case 10-1. Since her appearance on some online shopping websites, Jenny has started a mail-order business. She has used sales-wave research to estimate trial, first repeat, and customer level of satisfaction with the flower tea packages. Jenny probably selected sales-wave research because it __________. a. measures the effectiveness of different sales promotions on customer trial rates b. does not in any way expose the product to the scrutiny of competitors c. can be implemented quickly and can be conducted with a fair amount of security (difficult) d. is cost-free d. indicates the brand’s power to gain distribution and favorable shelf position should she decide to market to retailers 77. Refer to Mini-Case 10-1. A consumer who was aware of Jenny’s flower tea packages, but who did not know where or how to purchase them, their cost, or their contents and was stimulated to seek information about the product, would be in the __________ stage of the new product adoption process. a. interest (moderate) b. trial c. diffusion d. adoption e. evaluation Mini-Case 10-2 Scooter Williams has devoted his life to all things motorized and on two wheels. He is currently working for a Honda dealership, but would like to start his own motorcycle repair company. For years he has been making plans to go independent by offering the service on a mobile basis—that is, he will go to the motorcycle in need of repair rather than make the biker deliver the ailing machine in the back of a truck. Scooter figures this will save on retail space and provide added value to those with broken down motorcycles. The new company will be called Scooter’s. 78. Refer to Mini-Case 10-2. Scooter plans to ask about 30 motorcycle owners about their preferences regarding commercial motorcycle maintenance, including showing them his ad materials and asking about acceptable pricing levels. Scooter is engaged in __________. a. controlled test marketing b. full-blown test marketing c. sales-wave research d. covert test marketing e. simulated test marketing (difficult) 79. Refer to Mini-Case 10-2. Some of the owners contacted say they have heard of Scooter’s idea through friends over the years. They are in the ¬¬__________ stage of the adoption process. a. awareness (easy) b. interest c. evaluation d. trial e. adoption 80. Refer to Mini-Case 10-2. In general, the core customer benefit of motorcycle repair work is __________. a. door-to-door delivery of the bike b. the rider can keep riding (difficult) c. the changing of the nuts and bolts and parts by the mechanic d. the advice the mechanic gives on extended warranties e. the satisfaction Scooter will feel when he has a happy customer Chapter 11 – Designing and Managing Services True/False Questions 1. A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. True (easy) 2. A pure tangible good is an offering that may consist of the good plus some accompanying services. False (moderate) 3. Characteristics a buyer can evaluate before purchase are called search qualities. True (moderate) 4. The fact that services are used or consumed at the time of their creation is an example of the service characteristics of intangibility. False (moderate) 5. Because products are generally higher in experience and credence qualities than services, consumers will generally rely more on word of mouth than on service firm advertising. False (moderate) 6. Experience qualities are characteristics a buyer can evaluate after purchase. True (moderate) 7. Experience qualities are characteristics a buyer normally finds hard to evaluate even after consumption. False (moderate) 8. The quality of services depends upon the provider, location, circumstances, and time. This fact illustrates the service characteristic of variability. True (moderate) 9. When a Chinese hotel chain leaves cards on its check-in desk for consumers to comment on the service they received, it is an example of one way to deal with service intangibility. False (difficult) 10. The fact that services are generally consumed as they are produced describes the service characteristic of inseparability. True (moderate) 11. Hiring part-time employees to meet peak demand is a demand-side strategy for improving the match between service demand and supply. False (moderate) 12. Billing errors constitute a core service failure that can lead to customer switching behavior. True (moderate) 13. Internal marketing describes the work a company does to train and motivate its employees to serve customers well. True (moderate) 14. A service company can differentiate itself by designing a better and faster delivery system. True (easy) 15. If a day care provider thinks that the parents want better food, when in fact the parents are more concerned about security, the provider will likely be subject to a gap between customer perception and management perception of service quality. False (moderate) 16. When the economy is strong, many low-end service workers in the fast-food industry are less motivated to do a good job because they can quickly find another job. If such a worker has poor people skills or cannot count the amount of change to return correctly, the company will experience a gap between service-quality specifications and service delivery. True (moderate) 17. When deciding whether they have received good service, customers are most likely to compare their expected service ideas with what the service they perceive they actually received. True (easy) 18. For more and more companies, the key to customer satisfaction is employee satisfaction. True (easy) 19. When a service company provides installation, training, and maintenance as a part of its product, it is offering value-augmenting services. False (difficult) 20. Providing post-sale services to property buyers is not the main responsibility of real estate companies. False (easy) Multiple Choice Questions 21. A(n) __________ is any act or performance that one party can offer to another that is essentially intangible and does NOT result in the ownership of anything. a. service (easy) b. guarantee c. rebate d. offset e. intangible 22. Best Buy will often try to sell a buyer of a high-end television monitor an extended warranty. This is an example of selling a __________. a. pure tangible good b. tangible good with accompanying services (moderate) c. hybrid d. pure service e. major service with accompanying minor goods and services 23. Which of the following best describes the category in which the offering’s service mix is distinguished? “People patronize restaurants for both food and service.” a. A pure tangible good. b. A tangible good with accompanying services. c. A hybrid. (difficult) d. A pure service. e. A major service with accompanying minor goods and services. 24. Which of the following is the best example of pure service? a. A garden maintenance service b. A car repair shop. c. A weight loss clinic that provides the consumer with its own brand of food. d. A movie theater. (moderate) e. An amusement park. 25. Mr. Xie and his family took a vacation trip to Beijing. While there, they bought souvenir T-shirts and hats to take home to friends who didn’t have the opportunity to go. The experience of the Xie is an example of which offering category? a. A pure tangible good. b. A tangible good with accompanying services. c. A hybrid. d. A pure service. e. A major service with accompanying minor goods and services. (moderate) 26. For 50 a day, Chen Yuan will go to your home and dust, clean and keep an eye on your house for you while you are on vacation. The service Chen Yuan provides is an example of a __________. a. pure tangible good b. tangible good with accompanying services c. hybrid d. pure service (moderate) e. major service with accompanying minor goods and services 27. Characteristics a buyer can evaluate before purchase are called __________. a. search qualities (moderate) b. experience qualities c. credence qualities d. differentiation qualities e. productive qualities 28. __________ are characteristics a buyer can evaluate after purchase. a. Search qualities b. Experience qualities (moderate) c. Credence qualities d. Differentiation qualities e. Productive qualities 29. In the absence of noticeable and rapid healing, Su Le is not sure whether she got good service by her physician. Medical services are a good example of this type of difficulty— __________—where the consumer finds hard to evaluate even after consumption. a. search qualities b. experience qualities c. credence qualities (moderate) d. differentiation qualities e. productive qualities 30. Because services are generally higher in experience and credence qualities than products, consumers __________. a. generally rely more on advertising than on word-of-mouth b. are generally not loyal to service providers, regardless of satisfaction level c. make their service selection based on low price d. expect brand name services to offer service parity e. use personnel and physical cues to judge service quality (difficult) 31. On the continuum of evaluation of service, which of the following would be highest in credence quality? a. A nail fill-in job. b. Removal of your wisdom teeth. (moderate) c. A breakfast at Mcdonald’s. d. A river trip with China Travel Service. e. A day care provider. 32. On the continuum of evaluation of service, which of the following would be highest for search quality? a. A nail fill-in job. b. Clothing. (moderate) c. A breakfast at KFC. d. A river trip with China Travel Service. e. A day care provider. 33. State Farm’s theme “Like a Good Neighbor, State Farm Is There” is one way of managing the service characteristic of __________. a. intangibility (difficult) b. inconsistency c. inseparability d. variability e. perishability 34. Huaxia billboards advertise clean restrooms at SINOPEC gasoline stations, with the idea that clean restrooms imply the entire operation is clean, safe, and customer-oriented. Advertising a clean restroom is one method used to manage the service characteristic of __________. a. inseparability b. intangibility (moderate) c. inconsistency d. perishability e. variability 35. Holdsworth Contracting operates on the exclusive northwest side of the city. Holdsworth has all employees wear clean khaki uniforms on the job. Clean khaki uniforms imply that since the company cares about how its employees look, it will also do the job with careful attention to details for the clients. This is one way to deal with the characteristic __________ of service. a. intangibility (moderate) b. inseparability c. inconsistency d. variability e. perishability 36. A museum in China has a hands-on section where guests can feed horseshoe crabs, touch hermit crabs, and try their hand at catching “sand fleas.” The hands-on section of the museum is a good way to deal with the __________ characteristic of service. a. intangibility (moderate) b. inseparability c. inconsistency d. variability e. perishability 37. The fact that services are used or consumed at the time of their creation is an example of the service characteristic of __________. a. intangibility b. inseparability (moderate) c. inconsistency d. variability e. perishability 38. Disney advertises a number of reasons why you should frequent its resorts and amusement parks. One reason is the excellent service provided by its “cast.” This is an example of the service characteristic of __________. a. intangibility b. inseparability (moderate) c. reliability d. variability e. perishability 39. The service characteristic of inseparability severely limits service providers’ ability to provide service and increase profits. One way to deal with this problem is to __________. a. use more sales promotions such as coupons, contests, and sweepstakes (difficult) b. invest in good human resource selection and training c. provide a tangible cue through its physical setting, communications, or choice of symbols d. standardize the service process e. offer incentives to customers to use the service at peak use times 40. When Liang Dashan goes into Yummy Yummy, a local restaurant that features fresh vegetables and good rice, he sometimes gets his food fast and hot. Other times his order is slow, and his food arrives at his table cold. If Wang Zetian wants a special order, like an extra plate of stir-fried mixed vegetables, he never knows how long he’ll have to wait for his food. Wang is experiencing the service characteristic of __________. a. intangibility b. inseparability c. variability (moderate) d. autonomy e. perishability 41. The service characteristic of variability can have a significant impact on customer satisfaction. One way to deal with this problem is to __________. a. require employees to work more quickly b. provide a tangible cue through its physical setting, communications, or choice of symbols c. hire more service providers d. standardize the service process (difficult) e. offer incentives to customers to use the service at non-peak use times 42. The quality of services depends upon the provider, location, circumstances, and time. This fact illustrates the service characteristic of __________. a. variability (moderate) b. inseparability c. intangibility d. consumability e. perishability 43. Which of the following is NOT a prescribed way of dealing with the variable nature of service provision? a. Careful employee recruiting. b. Making pricing consistent at all outlets. (moderate) c. Creating a service blueprint. d. Building morale and enthusiasm among employees. e. Monitoring customer satisfaction. 44. A resort up the mountains from Guilin City in Southwest China has begun to market summer vacation packages to people who like to take nature hikes and enjoy the mountain vistas. This is one way to deal with the __________ characteristic of service. a. perishability (moderate) b. variability c. inconsistency d. inseparability e. intangibility 45. Hotels can try to influence demand for their products and control the perishability characteristic of service by __________. a. creating a slogan that focuses on service reliability b. restructuring their physical plant to reinforce their service objective c. maintaining clean and inviting lobbies d. using differential pricing (difficult) e. standardizing the service process and providing more training to service personnel 46. Tang goes to Chinese Gourmet for lunch because their lunch specials are 12.00, although the same meal after 4 p.m. costs 20.00. Chinese Gourmet probably uses different prices at different times as a strategy for dealing with the __________ characteristic of services. a. perishability (moderate) b. variability c. inconsistency d. inseparability e. intangibility 47. Making the people portion of a service offering work involves careful attention to all of the following EXCEPT: a. above-industry pay for employees. (moderate) b. selection and training of employees. c. competence of the employees. d. goodwill and a caring attitude among employees. e. employees that take the initiative. 48. Perishability is a problem for service providers. One way to deal with this is to __________. a. use a constant pricing strategy b. provide a tangible cue through physical setting, communications, or choice of symbols c. standardize the service process d. eliminate any complementary services so that all workers can be focused on delivering the primary service e. offer incentives to customers to use the service at non-peak use times (difficult) 49. Which of the following is NOT a demand-side strategy for improving the match between service demand and supply? a. Use differential pricing to shift demand. b. Cultivate off-peak demand to build sales. c. Introduce peak-time efficiency to focus employee activity. (moderate) d. Develop complementary services to provide alternatives for waiting customers. e. Install reservation systems to manage demand levels. 50. Which of the following is NOT a supply-side strategy for improving the match between service demand and supply? a. Introduce peak-time efficiency to focus employee. b. Develop complementary services to provide alternatives for waiting customers. (moderate) c. Hire part-time employees to meet peak demand. d. Plan facilities for future demand. e. Share services with other providers. 51. __________ marketing describes the work done by the company to train and motivate its employees to serve the customers well. a. Interactive b. External c. Consultative d. Internal (moderate) e. Relationship 52. Zhao is great at providing needed assistance on the phone with students in her online degree program. This is an example of _________ marketing. a. interactive (moderate) b. external c. internal d. consultative e. relationship 53. For an adult day care provider, the primary service package includes __________. a. watchful care and physical facilities (moderate) b. aerobics and movement instruction c. computer lessons d. music appreciation classes e. an on-staff hair stylist to cut the guest’s hair 54. For a dental office, the secondary service package might include __________. a. cleanings for children b. emergency dental surgery in the event of an accident c. a Lego table in the reception area to keep younger patients occupied while waiting (moderate) d. bridgework e. x-rays to detect serious decay problems 55. Cintas, a professional uniform provider, has a distinctively lettered logo, their delivery trucks feature the slogan “The Service Professionals,” and their contracts come on distinctive, color-coordinated stationary. This attention to detail and consistency is a part of Cintas’s attempt to improve recognition of the company through __________. a. establishing image dimensions b. devising a branding strategy c. positioning against competitors d. carefully choosing brand elements (difficult) e. differentiation 56. A situation in which a day care provider thinks that parents want better food, when in fact parents are more concerned about their children’s security is an example of a gap between __________. a. consumer expectation and management perception (moderate) b. management perception and service quality perception c. service quality specifications and service delivery d. consumer expectations and service delivery e. service delivery and external communications 57. Dr. Li was trying to register students for the new school term. Unfortunately, there was no one there to answer the phone, and Dr. Li spent more time taking messages for the other faculty members than she would have liked. Several students were disgruntled by their long wait in line. This is an example of a gap between __________. a. consumer expectation and management expectation b. management perception and service quality perception c. service quality specifications and service delivery (moderate) d. consumer expectations and service delivery e. service delivery and external communications 58. Rent-A-Wreck rents older cars for much lower rates than the competitors charge to rent their newer cars. The brochures for Rent-A-Wreck show cars that look clean and no more than 5 years old, but Pascal is disappointed to find that they provide him with a dinged-up 1998 Toyota Camry when he orders a mid-size. This is an example of a gap between __________. a. consumer expectation and management expectation b. management perception and service quality perception c. service quality specifications and service delivery d. consumer expectations and service delivery e. service delivery and external communications (moderate) 59. Wu Long is a part-time, night MBA student who works for an international shipping firm. He is disappointed when he gets a “B” in his international marketing course, and in a confrontation with the professor, tells him, “you know it’s not my fault that I had to travel so much this semester.” This dissatisfaction is a result of the service quality gap of __________. a. perceived service and expected service (moderate) b. service delivery and internal communications c. management perception and service-quality perception d. service-quality specifications and service delivery e. service delivery and external communications 60. The best-managed service companies are characterized by __________. a. a history of top management commitment to quality (easy) b. annual performance reviews of all employees c. a wide gap between expected performance standards and actual performance d. never having any customer complaints e. high employee turnover 61. Which “gap” in the Service-Quality Model (Parasuraman, Zeithaml, and Berry), causes unsuccessful service delivery is solely in the eyes of the consumer? a. The gap between consumer expectation and management perception. b. The gap between expected service and perceived service. (difficult) c. The gap between management perception and service-quality specification. d. The gap between service-quality specifications and service delivery. e. The gap between service delivery and external communications. 62. Zheng’s dry-cleaning establishment has been receiving complaints about the speed of its service to customers. Ms. Zheng tells all front-of-store workers that they must speed up their work to improve the situation. The complaints do not stop. This is an example of unsuccessful service delivery due to __________. a. the gap between consumer expectation and management perception b. the gap between management perception and service-quality specification (moderate) c.. the gap between service-quality specifications and service delivery d. the gap between service delivery and external communications e. the gap between expected service and perceived service 63. Which of the following is NOT a method typically used by a service provider to monitor how consumers perceive its service quality? a. Comparison shopping. b. Customer surveys. c. SWOT analysis. (moderate) d. Service-audit teams. e. Secret shoppers. 64. Which of the following is NOT true about dissatisfied customers, according to the text? a. Consumers generally complain because they feel it will be worth their effort. (moderate) b. Customers are dissatisfied with their purchases about 25 percent of the time. c. Only about 5 percent of dissatisfied customers actually complain to the company. d. The average dissatisfied customer complains to eleven people. e. When consumers complain to companies, they only feel they had the problem resolved satisfactorily about half the time. 65. Which of the following is NOT true of customer complaints and repurchasing? a. Of customers who register a major complaint, 34 percent will buy again from the company if the complaint is resolved. b. Of customers who register a minor complaint, 52 percent will buy again from the company if the complaint is resolved. c. If their major complaint is resolved quickly, 52 percent of customers will buy again from a company d. Because only 5 percent of consumers actually complain, responding to them is not an effective use of company resources. (moderate) e. If their minor complaint is resolved quickly, 95 percent of customers will buy again from a company. 66. Service missteps can hurt customer relationships. When something goes wrong, the company should listen to the customer, apologize when appropriate, offer a solution, and follow up. These are major steps in __________. a. the “12-step” program for better service b. meeting company goals c. good service recovery (moderate) d. making the sale e. after-sale service 67. When a service company provides installation, training, and maintenance as part of its product, it is offering __________. a. value-augmenting services b. dependability services c. core services d. a warranty e. facilitating services (moderate) 68. When considering the purchase of a service or product, industrial customers are likely to worry about all of the following EXCEPT: a. the status related to the purchase. (moderate) b. out-of-pocket maintenance costs. c. lost time. d. reliability. e. failure frequency. 69. Sears sometimes offers promotional free delivery and set-up for appliances that cost more than $750. This is an example of __________. a. value-augmenting services b. facilitating services (moderate) c. service contracts d. post-sale service strategy e. lifecycle cost 70. Sun decides he can afford a $200 monthly car payment. The saleswoman steers him toward a new 2-door Hyundai Accent and tells him she can do the deal within Sol’s budget, and will even include an extended warranty that lengthens the standard warranty by 2 years and lowers the deductible for some repairs. This extended warranty is an example of __________. a. value-augmenting services (moderate) b. facilitating services c. service contracts d. post-sale service strategy e. lifecycle cost Essay Questions 71. Many talented programmers in Zhongguancun Science Park of Beijing do not have the requisite social or grooming skills to work closely with their busy and more formal managers. Bowers Employee Success Service teaches a four-hour class on grooming and dress-for-success. Use the four characteristics of service to describe this teaching service and provide one method that can be used to reduce the problems associated with each characteristic. Answer: Student answers to how the service provider can deal with the various service characteristics will vary. The following is a suggested answer: 1) The service is offering a product that cannot be seen, tasted, felt, heard, or smelled before it is purchased. Testimonial letters from satisfied corporations can be used to reduce this intangibility. The way the teacher carries out the class can also reduce and even overcome intangibility. 2) The grooming and dress-for-success class is consumed at the same time it is produced. One method the owner of Bowers can use to overcome this problem with inseparability is to hire and train more grooming and dress-for-success instructors. 3) Because the training depends on who is providing it and when and where it is provided, this service could be highly variable. Bowers can invest in good human resources selection and training. Recruiting the right person is very important for this service. 4) Services cannot be stored. The perishability of services is a problem when demand is not steady. Bowers could use differential pricing, a reservation system, or cultivate requests for the service at non-peak times. (moderate) 72. Draw, label, and explain the Continuum of Evaluation for Different Types of Products. What is a product that is high in search qualities and why? What is a product that is high in experience qualities and why? What is a product that is high in credence qualities and why? Answer: Figure 11.1 provides the springboard for this answer. the key dimensions are the horizontal “Easy” and “Difficult” to evaluate, along with the overlapping normal-type curves that represent “most goods” and “most services.” The three other labels are provided in the question and deal with the credence, experiential, and search qualities. Students should also recognize that “product” includes services. On the second set of questions, answers will vary, but in general, a product that has high experience qualities is one that is better evaluated after the product or service has been purchased. An example would be a meal at a restaurant. It cannot be evaluated until it has been experienced. A product that has high search qualities can be evaluated prior to the purchase. An example is clothing or jewelry, which allow for careful inspection before it is bought. A product with high credence qualities is one that is difficult to evaluate even after the purchase. An example is a medical process, or auto repair for uninitiated owners. Even after the purchase it is hard to determine if the repair was done well, or if the consumer got her money’s worth. (moderate) 73. In a short essay, define internal marketing, external marketing, and interactive marketing in terms of a dog grooming service. Answer: External marketing describes the normal work to prepare, price, distribute, and promote the service to customers. For the dog grooming service, this would involve gathering the tools needed, finding a location, pricing the service for big dogs compared to small dogs and promoting the service to its target market. Internal marketing describes the work to train and motivate employees to serve customers well. In terms of the dog grooming service, this would include figuring out ways to get the employees to greet the dog and owner pleasantly and to motivate employees to provide the highest possible customer satisfaction. Interactive marketing describes the employees’ skill in serving the client. In terms of the dog grooming service, this would refer to the groomer being able to give a terrier cut and a poodle cut and make the cuts correct to the dog but distinctive from each other. (easy) 74. Kang gets lucky enough to be accepted as a new owner of a Pizza Hut franchise in Changsha, Hunan Province. Explain five gaps that could cause unsuccessful service delivery at her new store. Answer: These are the gaps and how they might play out with Kang’s new franchise: Gap between consumer expectation and management perception: Kang might think that consumers want more pizza flavor choices, but in fact, customers are more concerned about the freshness of the pizza they purchase. Gap between management perception and service-quality specification: Kang might tell her employees to make sure the bathrooms are really clean, but without clear detail on what that means, an employee might leave the bathroom in a less-than-desirable state. Gap between service-quality specifications and service delivery: Workers might not be able to correctly make change, or get guest orders right, causing unhappy by consumers. Gap between service delivery and external communications: Ads for the new store may show beautifully photographed products that do not live up to the actual product one ends up with when buying a dozen. Gap between perceived service and expected service: A customer could buy perfectly acceptable pizza and eat them, yet feel the product was stale, causing dissatisfaction. (moderate) 75. A Chinese auto agent is looking to enhance its reputation for providing excellent service. Ma Cheng, Marketing Manager advises how to provide the company with excellent product support services—because selling cars is more than “moving metal,” it also involves providing customers with a service bundle. Answer: (may vary) To design the best service support program, a company must identify the services its customers value most. With car owners, the auto’s reliability probably tops the list. Service on cars can be complicated and customer worries might involve issues of how often the car needs service (failure frequency), how long the dealership needs the car during maintenance (downtime duration), how well the mechanics diagnose and fix problems (service dependability), and the costs of repair and maintenance for the vehicle (out-of-pocket costs). There may also be some consideration of the life-cycle cost of owning an auto agent —the purchase price plus the cost in time and money to keep it running properly. All these suggest that the agent should ensure that repairs and other warranty work, along with maintenance, makes it easy for the consumer (can they pick up their best customers’ cars at work in the morning and return them before the day is out?). Also, the agent should make certain that the costs involved in the maintenance and repair work are easily understood in advance so that there are no surprises when it comes to payment. And probably most importantly, the mechanic crew at the agent should be highly qualified and reliable at what they do. This involves ongoing training for mechanics and managers, and funds to constantly update equipment. (moderate) Mini-Cases Mini-Case 11-1 Horizons Unlimited is a medium-sized travel agency that wants to become larger. Its slogan is, “You dream. We deliver. We plan. You play.” Currently, it offers customers travel bags, personal electronic organizers, and city maps as ancillary products to the trips it arranges. The staff dresses informally. A gregarious soft-spoken receptionist takes incoming calls and greets each caller like a long-lost friend. The travel agency makes every single arrangement for the traveler down to the slightest detail, and even provides travelers with a cellular phone to call the agency if they have any problems on their trip. 76. Refer to Mini-Case 11-1. The travel agency is an example of a __________. a. pure service b. major service with minor goods and services (moderate) c. hybrid d. pure tangible good e. tangible good with accompanying service 77. Refer to Mini-Case 11-1. The travel agency’s free gifts address the service characteristic of __________. a. intangibility (moderate) b. inseparability c. variability d. inconsistency e. perishability 78. Refer to Mini-Case 11-1. For some trips it plans, the agency agrees to pay $200 to you the customer if the dream it has planned for you turns out to be a nightmare. This is one way the agency can deal with the __________ characteristic of service. a. intangibility b. inseparability c. variability (moderate) e. inconsistency e. perishability Mini-Case 11-2 On his return trip to Houston from Cordoba, Argentina, Gao’s flight from Santiago, Chile, was cancelled. It was late at night and the airline employees waved off angry customers telling them there was nothing they could do, that the customers would have to return again and try to see if they could get seats on tomorrow’s flight. Gao reluctantly got into a cab and tried to find a nearby motel. 79. Refer to Mini-Case 11-2. This service delivery breakdown is most closely associated with which of the following service delivery failure gaps? a. Gap between consumer expectation and management perception b. Gap between management perception and service-quality specification c. Gap between service-quality specifications and service delivery (moderate) d. Gap between service delivery and external communications e. Gap between perceived service and expected service 80. Refer to Mini-Case 11-2. Which of the following would not be an effective way for the airline to resolve the types of complaints that result from service delivery failures? a. Develop hiring criteria and training programs that take into account employee’s roles in service recovery. b. Develop guidelines for service recovery that focus on achieving fairness and customer satisfaction. c. Remove barriers that make it difficult for customers to complain, while developing effective response systems. d. Maintain customer databases that allow analysis of the types of complaints voiced, followed by relevant policy adjustments. e. Make and maintain strict policies about when a customer should be compensated for a missed flight. (difficult) 81. Refer to Mini-Case 11-2. Service recovery is critical to the cultivation of profitable returning customers. The employees did not make any service recovery efforts and Gao is unlikely to fly with this airline again, no matter what happens. He plans to write the company’s president with his protest. If you were the recipient of Gao’s letter, which of the following would not be good advice? a. Listen carefully and tactfully ask Gao questions. b. Apologize to Gao, if appropriate. c. Avoid an apology for legal reasons, but assure Gao that you understand his frustration. (moderate) p. 211 d. Offer Gao a solution that is acceptable to him and fits with company objectives. e. Follow through on what you decide with Gao. Chapter 12 – Developing Pricing Strategies and Programs True/False Questions 1. Price is the only element of the marketing mix to produce revenue. True (moderate) 2. Price is one of the least flexible elements in the marketing mix. False (easy) 3. If a firm chooses the objective of current profit maximization, it essentially is ignoring the effect of other elements of the marketing mix. True (moderate) 4. When a consumer compares a product’s price with a posted “regular retail price,” the customer is employing a reference price. True (easy) 5. Market skimming pricing makes sense when a company is plagued with overcapacity, intense competition, or changing consumer wants. False (moderate) 6. Consumers are likely to be more price sensitive when the cost is being borne by another party, and when the product cannot be stored. False (moderate) 7. One way of estimating the demand curve for your product is simply ask consumers how many units they would buy at different proposed prices. True (moderate) 8. A decline in average production costs as the firm accumulates more experience is called the learning curve. True (moderate) 9. Fixed costs are costs that do not vary with production or sales revenue. True (easy) 10. The CEO’s salary is an example of a variable cost. False (moderate) 11. When a manufacturer varies its cost as a function of its differentiated marketing offers, the manufacturer needs to use activity-based accounting. True (difficult) 12. Target costing focuses on trying to engineer costs before a new product has been introduced. True (moderate) 13. Target costing requires determining the price consumers will pay before producing the good or service. True (moderate) 14. The three Cs in pricing are: customers’ demand schedule, cost function, and competitors’ prices. True (moderate) 15. A company that sells bottled water at a premium price is using a markup pricing strategy. False (moderate) 16. Going-rate pricing is especially popular if costs are difficult to measure or competitive response is certain. False (moderate) 17. In going-rate pricing, the firm bases its price largely on competitors’ prices. True (easy) 18. Retailers that employ everyday low pricing do not run price promotions. False (difficult) 19. A shoe store that carries pumps at $32, $52, and $82, and no other prices, is engaged in product-line pricing. True (moderate) 20. When Toyota offers a Corolla model that includes air, automatic transmission, a CD player, and custom paint at a price below what the individual options would be priced at, it is an example of product-bundle pricing. True (moderate) Multiple Choice Questions 21. When customers buy on the basis of a reference price or because the price conveys a particular quality image to them, they are being influenced by __________. a. value pricing b. the psychology of pricing (moderate) c. the going-rates of competitors d. value augmented by perception e. an aggregated marketing plan for pricing 22. A common mistake in pricing is __________. a. setting prices according to demand b. revising prices too often c. considering price and price competition as a key problem in marketing d. ignoring costs when setting prices e. setting prices independently of the rest of the marketing mix (difficult) 23. Scotty is in the process of opening Suburban Legends SK8S to sell boards, wheels, trucks, clothing, videos, and skateboarding related collectibles. The first thing Scotty should do when setting the store’s prices is to __________. a. determine demand b. estimate costs c. determine her target market d. select a pricing method e. select a pricing objective (moderate) 24. A __________ pricing objective is suitable for a company that has overcapacity, intense competition, and changing customer needs. a. maximum current profit b. survival (moderate) c. maximum current revenue d. maximum sales growth e. partial cost recovery 25. The introduction of a new product to the market using market-penetration pricing is most likely to be successful when __________. a. the unit costs of producing a small volume of the product are high b. there must be no existing demand for the product c. the market is highly price sensitive (difficult) d. the high price communicates nothing to the potential buyers e. competitors are not attracted to the market because there is no profit motivation 26. When introduced in the late 1970s, personal computers had large initial demand. People were interested in buying them to make writing and editing easier. The earliest simple PCs were initially priced at around $2,500. The manufacturers of the first PCs were probably using a __________ pricing strategy. a. cost-oriented b. market-skimming (moderate) c. value-oriented d. market-penetration e. product-quality leadership 27. A market segment has a large number of buyers. High initial price does not attract competitors to the market, but it communicates superior product image. In this segment a __________ is the best strategy. a. market-skimming pricing (difficult) b. product quality leadership c. maximum current revenue d. market-penetration pricing e. maximum sales growth 28. In 1991, Taco Bell began offering a 59-79-99 cents pricing strategy for its Mexicanthemed fast food. It did this by eliminating kitchens and having workers assemble food rather than cook it. Its costs fell as it became more efficient, and the 59-79-99 pricing allowed to Taco Bell to take market share from leaders McDonalds and Burger King. Taco Bell was using a __________ pricing strategy. a. market-skimming b. product quality leadership c. maximum current revenue d. market-penetration (moderate) e. maximum sales growth 29. Buyers are more price sensitive when __________. a. the product is significantly more distinctive than others on the market b. the expenditure is a small part of the total cost of the end product c. they are more aware of substitutes for the product (difficult) d. they cannot easily compare the quality of substitutes for the product e. the product is perceived to have more quality than others on the market 30. Demand is likely to be price elastic if __________. a. there are many alternatives and direct substitutes for the product (difficult) b. buyers do not readily notice price changes c. buyers are slow to change their purchasing habits d. buyers think a higher price is justified by quality differences e. the buyers can use normal inflation to explain the price increase 31. __________ are costs that do not vary with production or sales revenue. a. Total costs b. Average costs c. Variable costs d. Fixed costs (easy) e. Marginal costs 32. Which of the following is an example of a fixed cost? a. A salesperson’s commission. b. The portion of your cell phone bill that does not include charges for additional minutes. (moderate) c. Delivery costs of a 3-ton refrigeration unit to Guangzhou, Guangdong Province, and another one to Xiamen, Fujian Province. d. Cost of the hiring process to employ a new vice-president of legal. e. Extra employees brought in to handle the holiday rush. 33. Which of the following is an example of a fixed cost? a. The CEO’s bonus. b. Occasional charitable expenses donated by the firm. c. Mall rent based on percentage of sales. d. Monthly $2,000 payment on loan to buy earthmoving equipment. (moderate) e. Employees’ regular salaries as dictated by the union contract. 34. __________ consist of the sum of the fixed and variable costs for any given level of production. a. Total costs (easy) b. Average costs c. Variable costs d. Fixed costs e. Marginal costs 35. Every time Nike doubles the total number of shoes it has sold, its marketing cost structure falls by a predictable percentage. This is an example of the __________. a. leverage effect b. activity-based pricing concept c. experience curve (moderate) d. elasticity consumer exhibit for shoe prices e. target costing principle 36. Which of the following statements describes one of the risks inherent with experience-curve pricing strategy? a. The aggressive pricing associated with this strategy might give the product a cheap image. (difficult) b. This strategy is an offensive strategy against strong competitors that typically respond quickly to its implementation. c. The strategy assumes competitors will respond with an even lower price. d. The strategy leads to expensive innovation, which might not payoff in the long run. e. The strategy is most efficient in industries where there is little growth potential. 37. When a manufacturer varies its cost as a function of its differentiated marketing offers, the manufacturer needs to use __________ accounting. a. standard cost b. value-added c. LIFO d. FIFO e. activity-based cost (moderate) 38. When a firm is analyzing competitors in order to set its own prices, it needs to __________. a. select its pricing method prior to that analysis b. benchmark its own costs against competitors (difficult) c. never set its price to be the same as its competitors d. know the benefits its target market wants e. assume its competitors will not change their prices 39. Which of the following is NOT true for marketers considering pricing strategies? a. Costs set a “floor” on the price a company can set. b. Competitors’ prices serve as an orienting point for setting prices. c. Customers’ assessment of unique product features serves as an orienting point for setting prices. d. A too-low price can result in no demand. (moderate) e. The price of substitutes serves as an orienting point for setting prices. 40. A maker of generic skateboard decks (blanks) for shops to customize incurs a variable cost of $12 per blank and fixed costs of $500,000. To earn a 20 percent markup on selling price, the manufacturer would charge __________ for each of the 100,000 blanks it expects to sell. a. $14.40 b. $20.40 c. $21.25 (difficult) d. $37.50 e. $33.33 41. Lucinda is a maker of wine charms (small, decorative jewelry loops put on wineglass stems to set your glass apart from those of other partiers), and has a variable cost of $4.50 per set of six and fixed costs of $16,000. To earn a 25 percent markup on selling price, Lucinda should charge __________ for each of the 4,000 sets of charms she expects to sell. a. $5.63 b. $6.38 c. $8.63 d. $9.63 e. $11.33 (difficult) 42. Jane Yellowhair makes small woolen handbags out of Pendleton blankets, and has fixed costs of $30,000. She expects to sell 6,000 bags for $17.50. This price will give her a 20 percent markup. Calculate the variable costs. a. $5.00 b. $6.00 c. $8.50 d. $9.00 (moderate) e. $10.00 43. Markup pricing is popular because __________. a. sellers can determine demand more easily than they can determine costs b. it motivates manufacturing to find ways to cut costs c. it works especially well with product positioning strategies d. it considers the effects of current demand, perceived value, and competition on price e. many people feel cost-plus pricing is fairer to both buyers and sellers (difficult) 44. If an entrepreneur commits to her venture capitalists a goal of earning a 30 percent return on equity, it would most likely use a __________ pricing approach to setting price. a. markup b. psychological c. target-return (moderate) d. going-rate e. perceived-value 45. Burlingvale Coats produces winter wear for Target. Their recently designed parkas for the northern stores cost about $30 to produce, and Burlingvale wishes to earn a 15 percent return on an investment of $5 million. If 75,000 parkas will be sold to Target, the appropriate price per item is __________. a. $30.00 b. $37.50 c. $35.00 d. $40.00 (moderate) e. $45.00 46. Nixon Watch Co. will incur fixed costs of $500,000 and unit variable costs of $20 on its new perpetual calendar quartz models. Nixon plans to set the wholesale price of the model at $50. To break even, Nixon must sell __________ units. a. 9,876 b. 16,667 (moderate) c. 18,333 d. 20,000 e. 25,000 47. SunCrest Gardening Supply Company wants to sell a polystyrene window planter for $30. Its variable costs for each planter are $12. To break even, SunCrest needs to sell 500 planters. Calculate SunCrest’s fixed costs. a. $1,667 b. $3,600 c. $6,000 d. $9,000 (moderate) e. $15,000 48. The price setting method most closely corresponding to the concept of product positioning is __________ pricing. a. markup b. psychological c. going-rate d. target-return e. perceived-value (easy) 49. A company that sells bottled water at a premium price is using a __________ pricing strategy. a. markup b. target-return c. perceived-value (moderate) d. going-rate e. demographic 50. __________ pricing is a method in which the company charges a fairly low price for a high-quality offering. a. Markup b. Psychological c. Target-return d. Perceived-value e. Value (easy) 51. When a wireless company advertises a low list price that includes free roaming, free weekends, and free long distance as additions to the regular 400 monthly minutes for $35, it is using a __________ pricing strategy. a. markup b. psychological c. target-return d. perceived-value e. value (moderate) 52. Wal-Mart does not do frequent price-related promotions in favor of keeping the prices as low as possible all the time—this is even reflected in their television advertising. This is an example of ________ pricing. a. everyday low (easy) b. high-low c. going-rate d. auction-type e. value 53. In __________ pricing, the firm bases its price largely on competitors’ prices. a. value b. target-return c. going-rate (moderate) d. perceived-value e. geographical 54. A suburban Chinese inn sells a bowl of chicken soup priced at roughly the same price as those at KungFu fast food restaurant chain downtown. This information indicates that the Chinese inn uses __________ pricing. a. value b. target-return c. going-rate (moderate) d. perceived-value e. geographical 55. On eBay, the prices are set by the potential buyers who view the details of the offer and make bids declaring how much they are willing to pay. When the time runs out, the highest bidder wins the auction and gets the right to purchase the product at the agreedupon price. This is an example of a(n) __________ auction. a. sealed-bid b. Portuguese c. Dutch d. English (moderate) e. descending-bid 56. According to the research of Farris and Reibstein, how does the marketing mix influence a product’s price? a. For products with high brand awareness, high advertising tends to support higher prices in the later stages of the PLC. (difficult) b. High expenditures in advertising have little effect on the sales of a high-quality product. c. Consumers are willing to pay premium prices for unknown but quality products. d. The distribution element of the marketing mix has a significant impact on the price. e. The personal selling element of the marketing mix has little impact on price. 57. The form of countertrade that involves the direct exchange of goods, with no money and no third party involved is called a(n)__________. a. barter agreement (moderate) b. offset c. compensation deal d. buyback arrangement e. sellback arrangement 58. Daimler Chrysler gives technical advice on motor manufacturing to a Chinese firm, and in exchange the firm provides DaimlerChrysler with natural rubber for gaskets and seals. This is an example of a(n) __________. a. barter agreement (moderate) b. offset c. compensation deal d. buyback arrangement e. sellback arrangement 59. In which of the following forms of countertrade would the seller receive full payment if the seller agrees to spend a substantial amount of that money in that country within a stated time period? a. Barter agreement. b. Offset. (moderate) c. Compensation deal. d. Buyback arrangement. e. Sellback arrangement. 60. If a chipmaker gives personal computer makers a 2.5 percent discount for paying for their orders within seven days instead of the standard 30 days, the chipmaker is providing them with a __________. a. functional discount b. quantity discount c. promotional price d. cash discount (moderate) e. trade allowance 61. A manufacturer of picture frame kits that expects its retailers to provide storage space for the kits would likely offer a __________. a. cash discount b. quantity discount c. functional discount (difficult) d. distribution allowance e. slotting allowance 62. Every August, there is an International Beer Festival in the city of Qingdao. During the festival, local retailers offer __________ pricing to entice people who come for the festival to come into their stores and buy their merchandise. a. special-event (moderate) b. seasonal discount c. promotional allowance d. psychological discount e. functional discount 63. Professors and other professional members of the Association for Consumer Policy pay a different membership renewal rate than student members. The Association for Consumer Policy uses __________ pricing. a. time b. customer-segment (moderate) c. service-form d. unfair e. image 64. Passengers on a China Southern Airlines flight from Guangzhou, Guangdong Province, to Wuhan, Hubei Province, are paying several different fares, depending on when they bought their tickets. In charging these prices, China Southern Airlines has engaged in __________ pricing. a. time (easy) b. functional c. service-form d. captive-market e. image 65. Lang Lang plays a venue in Xian, Shangxi Province. The floor seats cost seats on the edges but close run 2008, the 1280, and the seats in the balconies are priced at 480. This is an example of __________ pricing. a. psychological b. image c. value-added d. perceived-value e. location (moderate) 66. While shopping at Parisian Department Store, you notice all of the neckties are priced at $18.50, $25.00, or $45.00. Parisian is using __________ pricing. a. product-line (moderate) b. price-quality c. optional-feature d. captive-product e. customer-segment 67. O*Net, an Internet service provider (ISP), charges a membership fee and then a per hour usage charge for access to the Internet. This is an example of which type of productmix pricing strategy? a. Captive-pricing. b. Product-line pricing. c. Byproduct pricing. d. Customer-segment pricing. e. Two-part pricing. (moderate) 68. You can buy inexpensive printers from Hewlett Packard with many different features, but when you go to buy the toner cartridge refills, the price is often much higher than you expected. This example describes __________ pricing. a. product-line b. price-quality c. optional-feature d. captive-product (moderate) e. customer-segment 69. When renewing her subscription to China Daily, Meimei was given the opportunity to purchase a subscription to China Business Weekly, to get a China Daily travel umbrella, and to purchase a membership in a discount gymnastic club all for one low price. The magazine publisher has engaged in __________ pricing. a. product-bundling (moderate) b. product-line c. by-product d. captive-product e. two-part 70. A manufacturer of industrial drill equipment needs to make a price adjustment. The firm is concerned about the volatility of the price of industrial diamonds and forged steel that go into making its products. This manufacturer’s best price adjustment strategy would be __________. a. adoption of delayed quotation pricing b. use of escalator clauses (difficult) c. product bundling d. unbundling goods and services e. reduction of discounts Essay Questions 71. Diamond Machine Technology makes a tool for sharpening the blades of pruning sheers and glass clippers. The company has invested $250,000 in developing this sharpener. This tool, which is about the size of a piece of chewing gum, costs $3 to make. Fixed costs for the sharpener is $10,000. The company expects to sell 100,000 sharpeners this year. Diamond Machine’s markup on sales is 30 percent, and it wants to earn a 20 percent ROI. Calculate both its markup price and its target-return price as well as its breakeven volume at both prices. Which price should Diamond Manufacturing use? Answer: $3 (variable costs) + $10,000 (fixed costs)/100,000 (unit sales) = $3.10 unit cost $3.10 (unit cost)[1- .30] = $4.43 (markup price) [$3.10 (unit cost) + $50,000 (desired return on invested capital]/100,000 (unit sales) = $3.60 (target-return price) Break-even with markup price = $10,000 (fixed costs)/[$4.43 - $3 (variable costs)] = 6,994 units Break-even with target-return price = $10,000/($4.60 - $3) = 6,250 units If the company chose the target-return price, it would have both the desired ROI and markup on sales. (difficult) 72. Goldstar, a Korean manufacturer, has decided to make and market small (125cc– 250cc) motorcycles in China. Explain in detail the six-step procedure Goldstar should use setting the prices for their products. Answer: The six steps are: 1) selecting the price objective; 2) determining demand; 3) estimating costs; 4) analyzing competitors’ costs, prices, and offers; 5) selecting a pricing method; and 6) selecting the final price. Each of these can be expanded upon, for example, there are five major objectives listed in the text: survival, maximum current profit, seeking market share, market skimming, and product-quality leadership. 1) Goldstar’s early motivation might be to get a foothold in the market. This would be seeking market share. 2) Goldstar needs to determine the demand for small motorcycles in China. 3) Goldstar must estimate its own costs to produce and move the motorcycles through the distribution channel. This is effectively a “floor” to the price Goldstar can charge. 4) Goldstar needs to understand the cost structures, prices charged, and offers by the competition in the marketplace. 5) Goldstar may want to follow its fellow Korean companies by entering China with a value pricing strategy. There are certainly other options, including “going-rate” pricing and markup pricing. A value strategy implies that the bikes would be of equal quality at lower prices than the competition. 6) Goldstar then needs to select the final prices for the bikes, depending on all the factors above, as well as the power of the distributors in the channel. (difficult) 73. Mattel wishes to sell Barbie dolls in an area of the world where local currency cannot be converted and local distributors are forbidden to hold any outside currencies. Explain the four ways in which this challenge might be taken care of by Mattel using countertrade methods. Answer: The four methods are: barter, compensation deal, buyback arrangement, and offset. 1) Mattel might use barter, by offering to trade straight across 100,000 Barbies for 35,000 bolts of locally-manufactured textiles (that Mattel would then sell in another marketplace for cash). 2) Mattel might use a compensation deal, wherein they accept some local currency to be used when Mattel executives travel in the country, and the rest of the deal is paid in products, such as the textiles mentioned above. 3) Mattel might use a buyback arrangement, in which they fund a small production facility in the country, and agree to be paid back over time in dolls produced there, rather than in currency. 4) Mattel could use the offset method, by accepting full payment in the nonconvertible currency and then immediately or over time spending that currency in the country for other exportable goods that Mattel could then resell. (moderate) 74. A Chinese condiment manufacturer wants to market its product internationally, but its marketing director is concerned about countertrading. What you can tell her about countertrading? Which forms should she expect to have to deal with if she plans on selling her products to Eastern Europe? Answer: Chinese companies are often forced to engage in countertrading if they want to do business in certain countries. Countertrades may account for 15 to 20 percent of world trade and take the following forms: 1) Barter is the direct exchange of goods with no money and no third-party involvement. 2) In a compensation deal, the seller receives some percentage of the payment in cash and the rest in products. 3) In a buyback arrangement, the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment. 4) In an offset, the seller receives full payment in cash but agrees to spend a substantial amount of that money in the buying country within a stated period of time. The marketing director can expect to deal with all of the above except a buyback arrangement. (moderate) 75. Provide an explanation and examples of the ways in which a firm might use discriminatory pricing. When does price discrimination work? Answer: The text provides examples of six ways in which discriminatory pricing could be carried out: customer-segment pricing, product-form pricing, image pricing, channel pricing, location pricing, and time pricing. 1) Customer-segment pricing means that the customer groups have something different about them, such as charging less for senior citizens at movies versus what the general public has to pay. 2) Product-form pricing means that you price different forms of the same product differently. For example, you might charge more per ounce for laundry detergent, depending on the total amount purchased. 3) With image pricing, the seller can actually sell the same product packaged differently for different prices. This happens with tires—tire-makers sell their own brands, and sell the very same tire with a different brandmark for another price, due to the difference in prestige of the brands offered. 4) Distributing product at different locations is another opportunity to discriminate in pricing. As an example, popcorn sold at the movies is priced much higher than popcorn sold at a school fair. 5) Using different channels affords the opportunity to charge different prices. A bottle of beer at the grocery store might cost $1, whereas when the same amount of beer is sold either in a bottle or on tap at a bar, the price might double or even triple. 6) Airlines use time pricing to discriminate in prices to different customers. They vary the price according to day of the week and time of day, as well as using other factors to help them fill the maximum amount of seats. Discrimination works when: 1) the market is segmentable and different segments have different levels of demand; 2) those who qualify for the lower costs cannot resell to those that do not; 3) competitors cannot undersell the higher prices; 4) the cost of segmenting doesn’t exceed the additional revenue derived by discrimination; 5) customers are not antagonistic because of the differences, and; 6) the discrimination is not illegal. (moderate) Mini-Cases Mini-Case 12-1 Fugazi is a punk band from Washington, D.C. The leader, Ian, insists that the band not focus on the commercial aspects of making music, so the band typically charges less than $10 for a live show, they sell no T-shirts or other Fugazi gear, and they will only play in all-ages venues. To increase creative and financial control, Ian and other members of the band package and sell their self-produced CDs that they sell for $10 online. 76. Refer to Mini-Case 12-1. Every time Fugazi tours, they are able to pick up more ideas about how to minimize the costs of going on tour, in order to make a fair and increasing return for their efforts. This is an example of __________. a. total costs falling b. activity-based accounting c. target costing d. the learning curve (moderate) e. consideration of customers’ demand schedules 77. Refer to Mini-Case 12-1. When it comes to pricing their music, Fugazi uses the __________ method. a. value (moderate) b. going-rate c. markup d. skimming e. target-return 78. Refer to Mini-Case 12-1. The underlying objective or philosophy used by Fugazi in setting their prices is probably __________. a. survival—in this case, keeping the band “alive” b. maximum current profit—using the strict definition in the book c. maximum market share—in this case, getting as many people to listen to the band as possible (moderate) d. market skimming—using the strict definition in the book e. product-quality leadership—the logic being that offering the best music possible will cost more than providing average-quality music Chapter 13 – Designing and Managing Integrated Marketing Channels True/False Questions 1. Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. True (easy) 2. The term supply chain suggests a “sense-and respond” view of the market. False (moderate) 3. Consumer payments flow backward in a channel. True (moderate) 4. Forward channels refer to situations where one channel level acquires a level forward in the channel, such as Texaco owning its service stations. False (moderate) 5. A two-level channel consists of a manufacturer selling directly to the final customer through Internet selling, door-to-door sales, home parties, mail order, telemarketing, TV selling, and manufacturer-owned stores. False (moderate) 6. Backward or reverse-flow channels recycle trash and old or obsolete products no longer used by customers. True (easy) 7. A zero-level channel involves the producer selling to the retailer. This is the baseline of channels. False (moderate) 8. The first step in designing a marketing channel is analyzing consumer needs for service outputs. True (moderate) 9. The service output that refers to the degree to which the marketing channel makes it easy for customers to purchase the product is called spatial convenience. True (moderate) 10. Agent intermediaries, such as brokers, manufacturer’s reps, and sales agents, seek out customers and negotiate on the producer’s behalf, but do not take title to the goods they are selling. True (moderate) 11. Exclusive distribution means severely limiting the number of intermediaries. True (moderate) 12. Intermediaries may perform the functions of promotion, ordering, and possession, but never take title to the goods they are facilitating. False (moderate) 13. Coca-Cola is most likely to use exclusive distribution for its multi-packs. False (easy) 14. Producers of specialty products, such as Ferrari automobiles, will typically seek selective distribution. False (difficult) 15. Moving from exclusive to selective to intensive distribution could hurt long-term performance of a product that differentiated itself on the basis of its high quality construction. True (moderate) 16. A strategy in which the seller allows only certain outlets to carry its products is called full-line forcing. False (difficult) 17. Once the difficult process of setting up a successful channel is complete, marketing management does not need to revisit the channel issue again. False (moderate) 18. Franchise operations, such as McDonald’s, KFC and Pizza Hut are examples of contractual VMSs. True (difficult) 19. Single-channel occurs when a single firm uses two or more marketing channels to reach one or more customer segments. False (moderate) 20. When 50 independent hardware stores cooperated to form HWI as their own wholesale network, this was an example of a wholesaler-sponsored voluntary chain. False (difficult) Multiple Choice Questions 21. ___________ are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. a. Marketing channels (easy) b. Retailer chains c. Wholesalers d. Distributors e. Consumers 22. Which of the following is NOT true about marketing channels? a. They normally take years to build. b. They are not easily changed. c. Their functions can be eliminated. (difficult) d. They represent a significant organizational commitment. e. They rank in importance on a level with engineering and manufacturing. 23. Which of the following may flow backward in a channel? a. Payment for the product. (moderate) b. Physical possession of a product. c. Title to a product. d. Advertising communications. e. Consumer promotions. 24. Which of the following is NOT a key function of marketing channel members? a. They gather information about potential customers. b. They disseminate persuasive communications to stimulate purchases. c. They “dig out” the channel to make it more efficient. (moderate) d. They assume risks. e. They oversee transfer of ownership. 25. A zero-level channel ___________. a. may also be called a backward channel b. is the same as a direct marketing channel (difficult) c. has only one intermediary between producer and consumer d. has three members e. refers to intensive distribution channels where there are an indeterminate number of channel members 26. Penguin sells books through Taobao.com’s online store, this is an example of using a __________. a. zero-level channel b. one-level channel (moderate) c. two-level channel d. three-level channel e. reverse-flow channel 27. Which of the following types of channels recycle trash and old or obsolete products no longer used by customers? a. Zero-level channel. b. One-level channel. c. Two-level channel. d. Three-level channel. e. Reverse-flow channel. (moderate) 28. A two-level marketing channel is comprised of ___________. a. a channel captain and several channel lieutenants b. several producers and several final consumers c. a franchise organization d. an independent producer, wholesaler, and retailer (moderate) e. all the players in the value chain 29. Which of the following is an example of a reverse-flow channel? a. Rhett buys a used suit at a thrift shop. b. Cody trades 150 bags of frozen dumplings for three 30-second commercials on FM98.2 Radio Station. c. Zidane uses hair he swept up from a beauty salon as a mulch. d. Bethanie cleans out moldy food containers from her fridge. e. Garn buys scrap copper he can melt down and resell. (moderate) 30. The goal of channels in the service sector is to make the service ___________. a. available and accessible (moderate) b. affordable, differentiated, and easy to find c. risk free, readily available, and differentiated d. differentiated, targeted, and affordable e. affordable and accessible 31. A marketing channel intermediary knows its customers want to be able to buy in large quantity, so it needs to be especially concerned about the ___________ it provides to customers. a. spatial convenience b. service backup c. lot size (difficult) d. waiting time e. product variety 32. The service output that refers to the degree to which the marketing channel makes it easy for customers to purchase the product is called ___________. a. spatial convenience (moderate) b. service backup c. lot size d. waiting time e. product variety 33. Home Depot carries an extensive line of tools, including many brands, quality levels, and price ranges. This is an example of a marketing channel providing ___________. a. spatial convenience b. waiting time c. lot size d. service backup e. product variety (moderate) 34. If a manufacturer is concerned with the breadth of the assortment its distributor can provide customers, the manufacturer is expressing a concern about the ___________ the distributor provides. a. spatial convenience b. waiting time c. lot size d. service backup (moderate) e. product variety 35. A company that is developing a national chain of dealerships to sell used recreational vehicles at fixed prices needs to be concerned about providing its customers with which of the following services desired by customers? a. A high level of spatial convenience. (difficult) b. Product differentiation. c. Market aggregation. d. Form utility. e. A narrow assortment breadth. 36. Which of the following strategies of distribution means severely limiting the number of intermediaries? a. Exclusive distribution. (moderate) b. Selective distribution. c. Intensive distribution. d. Fragmented distribution. e. Mass distribution. 37. A firm might choose __________ when it wants to maintain control over the service level and service outputs offered by the resellers. a. exclusive distribution (moderate) b. mass distribution c. intense distribution d. mini-distribution e. full-line forcing 38. For which of the following products is its manufacturer most likely to use exclusive distribution? a. Blue jeans. b. Hand tools. c. Bed sheets. d. Branded furniture. (moderate) e. Spider-Man merchandise. 39. The distribution strategy that involves the use of more than a few but less than all of the intermediaries who are willing to carry a particular product is called ___________. a. exclusive distribution b. selective distribution (moderate) c. intensive distribution d. fragmented distribution e. mass distribution 40. Schmaedick Corporation has developed an MP3 player—the UltraGigaMega 5000— that will allow the user to listen to up to six days’ worth of different music without needing additional batteries or drive space. The user can categorize the music in up to 50 categories if he or she chooses. Obviously, this product would sell best with better than average selling effort. However, since the players have been around a little while and the product has clear relative advantages, aggressive selling is not needed. The best form of distribution would be ___________ distribution. a. selective (moderate) b. intensive c. inclusive d. exclusive e. restrictive 41. For which of the following would a manufacturer be most likely to use selective distribution? a. M&Ms. b. China Daily. c. Souvenir T-shirts. d. Disney products. (moderate) e. Budweiser beer. 42. ___________ distribution consists of the manufacturer placing the goods or services in as many outlets as possible. a. Selective b. Intensive (easy) c. Inclusive d. Exclusive e. Restrictive 43. Producers of convenience goods typically seek ___________ distribution. a. selective b. intensive (easy) c. inclusive d. exclusive e. restrictive 44. For which of the following products would a manufacturer be most likely to use intensive distribution? a. Men’s cologne that sells for $30 a bottle. b. Combination fax/printers. c. Li Ning shoes. d. Kitchen sinks. e. Safeguard soap. (easy) 45. McDonald’s franchisees get a small discount when they pay their bills for supplies within the first seven days (when the due date is 30 days after delivery). This is an example of __________ within channel relations. a. price policies b. conditions of sale (moderate) c. sharing the risks d. territorial rights e. services agreed upon 46. A distributor’s concern over where and how a producer will enfranchise another distributor is addressed under ___________ as set out in the terms and responsibilities of channel members. a. price policies b. conditions of sale c. territorial rights (moderate) d. channel member parity e. specific services to be performed by each party 47. LeadOrLeave.com is trying to decide on whether to use a company employee or a sales agent to help it expand to the UK market. Establishing a sales office would cost $100,000. The sales employee would be paid $30,000 plus a 7.5 percent commission. An agent would charge a flat 11 percent commission on all sales. LeadOrLeave.com is using ___________ criteria to evaluate their major channel alternatives. a. economic (moderate) b. quantitative c. territorial d. adaptive e. control 48. Bodyshop produces a line of all-natural lotions and soaps, and is trying to choose between using its own sales force and hiring manufacturers’ representatives to sell its products to non-Bodyshop distributors. Bodyshop has come to the realization that it can more easily direct its sales force’s efforts, the products emphasized, and how accounts are managed if it sets up its own sales force. This company is evaluating its choice on the basis of ___________ criteria. a. economic b. quantitative c. territorial d. adaptive e. control (moderate) 49. Which of the following is NOT included in the text’s list of recommended characteristics to evaluate when choosing a channel member? a. Number of years in the business. b. Number of employees. (moderate) c. Growth and profit record. d. Solvency. e. Cooperativeness. 50. When an intermediary is underperforming, the first intervention step should probably be _________ the intermediary. a. counseling (moderate) b. retraining c. remotivating d. charging higher rates to e. terminating 51. Some Chinese apparel brands were once sold exclusively at upscale department stores like Grandbuy and Tianhe Shopping Mall in Guangzhou. Now the brands play a prominent role in Carrefour Stores’ fashion line-up. This is an illustration of the fact that ___________. a. retailers have a definite product life cycle b. no marketing channel remains effective over the entire product life cycle (moderate) c. intermediaries usually the channel leader d. customer preferences matter less than retailer support e. dropping a channel member is easier than adding one 52. A vertical marketing system is comprised of ___________. a. an independent producer, independent wholesaler(s), and independent retailer(s) b. two or more producers joining resources or programs to exploit opportunities c. channel members all acting as equal members of a unit d. the producer, wholesaler(s), and retailer(s) acting as a unit (difficult) e. a single producer using two or more marketing channels to reach different market segments 53. The ___________ combines successive stages of production and distribution under single ownership. a. horizontal marketing system b. conventional marketing system c. corporate vertical marketing system (moderate) d. multichannel marketing system e. contractual vertical marketing system 54. Because of Coca-Cola’s size and power in the marketplace, they tend to dominate some members in the channel. This allows them to require strong cooperation from resellers who carry Coke products. This is an example of a(n) ___________. a. administered vertical marketing system (difficult) b. horizontal marketing system c. corporate vertical marketing system d. contractual vertical marketing system e. multichannel marketing system 55. Franchise operations, such as McDonald’s, KFC and Pizza Hut, are examples of ___________. a. administered VMSs b. horizontal marketing systems c. contractual VMSs (moderate) d. corporate VMSs e. conventional marketing systems 56. ___________ organize groups of independent retailers to better compete with large chain organizations. a. Wholesaler-sponsored voluntary chains (moderate) b. Retailer cooperatives c. Franchise organizations d. Catalog showrooms e. Linked divisions 57. When 50 independent hardware stores formed a new business entity to provide them with the services of the wholesaler, this was an example of ___________. a. wholesaler-sponsored voluntary chains b. retailer cooperatives (moderate) c. franchise organizations d. catalog showrooms e. linked divisions 58. ___________ are created when a channel member called a franchisor links several successive stages in the production-distribution process. a. Wholesaler-sponsored voluntary chains b. Retailer cooperatives c. Franchise organizations (easy) d. Catalog showrooms e. Linked divisions 59. In a(n) ___________, two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. a. administered VMS b. horizontal marketing system (moderate) c. contractual VMS d. multichannel marketing system e. corporate VMS 60. GEICO Insurance agreed to include H&R Block advertising materials as a part of all their communications with their customer base, and H&R Block, in turn, will arrange for their customers to get information on auto insurance as a part of the tax preparation process. This is an example of a(n) ___________. a. administered VMS b. horizontal marketing system (moderate) c. contractual VMS d. multichannel marketing system e. corporate VMS 61. A single manufacturer produces high-end tools for three different customer segments and sells the identical tools under different brand names through three different retailers – Sears Craftsman tools for the home fix-it crowd, NAPA quality tools for the “shade-tree” mechanic market segment, and Snap-On tools to professional mechanics. This is an example of what type of system? a. Single channel marketing. b. Multichannel marketing. (moderate) c. Maxi-channel marketing. d. Mini-channel marketing. e. Direct channel marketing. 62. When a producer has a conflict with its wholesalers, the producer is experiencing ___________ conflict. a. horizontal channel b. multichannel c. direct channel d. vertical channel (moderate) e. single channel 63. ___________ conflict involves conflict between members at the same level within the channel. a. Horizontal channel (moderate) b. Direct channel c. Multichannel d. Vertical channel e. Single channel 64. Joe Montes hand-makes guitars and sells them to retailers and also recently began to sell them to the final customer at www.montesguitars.com. The retailers aren’t happy about the Internet sales because they claim the direct marketing sales are adversely affecting their in-store sales. This is an example of ___________ conflict. a. horizontal channel b. direct channel c. multichannel (moderate) d. vertical channel e. single channel 65. When Subway franchisers complained that their interests were not being served by the parent company, Subway Corporation allowed three of the company’s board seats to be occupied by store owners who were elected by all franchises based on a one-vote-perstore system. This is an example of using __________ to manage channel conflict. a. adoption of superordinate goals b. exchange persons between channel levels c. cooptation (moderate) d. diplomacy, mediation, arbitration for chronic or acute conflict e. competition 66. Which of the following describes an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, boards of directors, and trade associations? a. Cooptation. (moderate) b. Competition. c. Goal subordination. d. Arbitration. e. Mediation. 67. ___________ takes place when each side sends a person or group to meet with its counterpart to resolve the conflict. a. Diplomacy (moderate) b. Cooptation c. Goal subordination d. Arbitration e. Mediation 68. Which of the following is NOT a method of managing channel conflict listed in the text? a. Diplomacy. b. Cooptation. c. Goal subordination. d. Confrontation. (moderate) e. Mediation. 69. ___________ means having a skilled, neutral third party reconcile the two parties’ interests. a. Diplomacy b. Cooptation c. Goal subordination d. Arbitration e. Mediation (moderate) 70. The Internet is most useful as a channel of distribution, for all of the following situations EXCEPT: a. when shoppers seek more ordering convenience. b. when products must be touched or examined in advance of purchase. (moderate) c. when consumers are looking for lower cost. d. when the customer wants more information about the product’s features. e. when shoppers seek information about pricing. Essay Questions 71. If a marketer chooses to use a vertical marketing system, she has three versions from which to choose. In a short essay, describe the three types of VMSs. Answer: A corporate VMS combines successive stages of production and distribution under single ownership. An administered VMS coordinates successive stages of production and distribution through the size and power of one of the members. Manufacturers of a dominant brand are able to secure strong trade cooperation and support from resellers. A contractual VMS consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone. Wholesaler-sponsored voluntary chains, retailer cooperatives, and franchises are all examples of contractual VMSs. (moderate) 72. A Chinese manufacturer who rebuilds starters, generators, and alternators for popular Chinese automobile sells its goods through a two-level channel. Discuss how it would benefit from the addition of another level to its channel of distribution. Answer: By adding more channels, the manufacturer can gain three important benefits. The first is increased market coverage—the manufacturer can add another channel to reach a customer segment its current channel can’t reach. The second is lower channel cost—the manufacturer can add a new channel to lower the cost of selling to an existing customer group. Maybe, it could sell through a catalog instead of using a sales force to reach some of its customers. The third is more customized selling—the manufacturer can add a channel that has a selling feature that fits its customer requirements better. (moderate) 73. Through a problem with goal inconsistency, a manufacturer of cooking utensils is having a disagreement with a retail chain that carries its product line. The disagreement is new and has not reached the stage where it requires third-party intervention. What method(s) can be used to settle this conflict? What method(s) are likely to work? Answer: One important mechanism for settling conflict is the adoption of a superordinate goal. The retail chain and the manufacturer could agree on the fundamental goal they are jointly seeking, whether it is survival, market share, high quality, or customer satisfaction. But this method is unlikely to work in this case because it is more commonly used when the channel faces an outside threat. A useful mechanism is to exchange employees between the retail chain and the manufacturer. That way each could learn to appreciate the other’s point of view. This may work. Cooptation is an effort by one organization to win the support of the leaders of another organization by including them in an advisory council, boards of directors, and the like. As long as the initiating organization treats the leaders seriously and listens to their opinions, this method has a good chance of working. Much can be accomplished by encouraging joint membership in trade associations. Each gets to consider the issues most strongly affecting the other. This method, too, would be useful in settling this conflict. (difficult) 74. Moonstruck Chocolates of Portland, Oregon, started out in the inventor’s home as a unique chocolate product containing delicious alcohol-enhanced fillings. Once the product was perfected, the owners decided that they had no expertise in marketing the chocolates and looked to consultants to tell them what marketing intermediaries could do for them. What did the consultants probably explain were the key functions of marketing channel members? Answer: The key functions of the marketing channel members are: a.) To gather information about potential and current customers, competitors, and other parts of the marketing environment. b.) To develop and disseminate persuasive communications to stimulate purchasing. c.) To reach agreement on price and other terms so that transfer of ownership of possession can take place. d.) They place orders with manufacturers. e.) They acquire the funds to finance inventories at different levels in the marketing channel. f.) They assume risks connected with carrying out channel work. g.) They provide for the successive storage and movement of the physical products. h.) They provide buyers’ payment of bills through banks or other financial arrangements. i.) They oversee the actual transfer of ownership from one organization or person to another. j.) All of these functions must be done by someone—you can eliminate the middleman, but you cannot eliminate their functions. (moderate) 75. Describe the five service outputs of a Toyota dealership. Answer: 1. Consumers typically buy cars in a lot size of one, though the dealer may do some fleet sales to local businesses or governments, in which case, a larger lot size is required by the customer. 2. Except in the case of a special order vehicle, most consumers would like to find the car they want on the sales lot that day, so that waiting time is minimized. 3. The dealership should ideally be in a convenient location, providing consumers with spatial convenience. 4. Because there are many consumer preferences for car styles, colors, and accessory levels, the dealership will want to have plenty of product variety in inventory. 5. Service backup will be a critical factor for many buyers. They expect that the dealership will be able to take care of cars that need servicing, and that the dealership will provide warranty coverage for the new cars purchased. (moderate) Mini-Cases Mini-Case 13-1 In 1999, BellSouth Wireless Data introduced Palm VII, a palm-sized personal computer that has the ability to connect to the Internet. The Palm VII signals can be uploaded and downloaded by the same network used for BellSouth’s interactive paging service. Unfortunately, proper product usage requires BellSouth to maintain a 24-hour customer support line to answer the numerous questions that arise as new users familiarize themselves with the new system as well as make sure its distributors have a thorough understanding of the Palm VII. The Palm VII has a $600 price tag. As BellSouth chooses distributors, it is likely to be most concerned about its ability to control its distributors and the distributors’ ability to respond quickly to strategic changes. 76. Refer to Mini-Case 13-1. In analyzing its customer service requirement, BellSouth has determined that ___________ requires the most input from its channel members. a. lot size b. waiting time c. spatial convenience d. service backup (moderate) e. product variety 77. Refer to Mini-Case 13-1. Which of the following methods for distribution is most appropriate for BellSouth to use when marketing the new Palm VII? a. Restrictive distribution. b. Direct marketing. c. Intensive distribution. d. Selective distribution. e. Exclusive distribution. (moderate) 78. Refer to Mini-Case 13-1. If BellSouth chooses to sell the product through several competing wireless plans, as well as through its own Web site, this would be an example of ___________. a. restrictive distribution b. horizontal marketing systems c. the push strategy d. multichannel marketing (moderate) e. an administered VMS approach Mini-Case 13-2 The Hanlon brothers of Minnesota decided to revive an extinct motorcycle brand, the once-proud Excelsior-Henderson. They raised millions of dollars from stock sales and got the state to subsidize them for millions more. They spent lots of the raised money announcing the future coming of the bike, creating high awareness at rallies and race events. In 2000, after nearly 4 years of work, they introduced their first model , the Big X, through test rides at the Black Hills Rally in Sturgis, South Dakota, and at the Laughlin River Run in Laughlin, Nevada. Interested buyers were shown maps with a small network of about 80 U.S. dealers who had agreed to stock the bikes, and the Hanlons promised more to come. However, purchasers who had interest and the money to purchase hesitated about the quality and stability of the proposed dealership network and the bike never sold enough units to keep the company alive. Within months the company went bankrupt, probably not due to a lack of good product, but rather due to a lack of good distribution. 79. Refer to Mini-Case 13-2. Which of the following is a reason the Hanlons tried to build a network of dealers rather than create their own dealerships? a. Direct marketing is not feasible for motorcycles. b. To be more efficient with consumers’ time and energy. c. They lacked the financial resources to carry out direct marketing. (moderate) d. Management ego. e. The multichannel marketing approach seemed like the best idea at the time. 80. Refer to Mini-Case 13-2. The number of intermediaries suggests what type of distribution? a. Selective. (moderate) b. Intensive. c. Exclusive. d. Multichannel. e. Hybrid. 81. Refer to Mini-Case 13-2. The major problem with the Excelsior-Henderson dealership network probably had to do with _________ problems, as perceived by potential buyers. a. lot size b. waiting time c. spatial convenience d. product variety e. service backup (difficult) Chapter 14 – Managing Retailing, Wholesaling, and Logistics True/False Questions 1. Retail stores pass through a retail life cycle that parallels the product life cycle of products. True (moderate) 2. It does not matter how or where goods are sold, it is considered retailing if it is sold to the final consumer. True (difficult) 3. The wheel-of-retailing hypothesis is that as current store types go up the scale in price and service offerings, they create an opportunity for new, low-price, low-service competitors. True (moderate) 4. Discount stores are large stores that combine the principles of supermarket, discount, and warehousing into one store. False (easy) 5. An example of a retail store positioned to offer a broad product assortment and high value added would be Wal-Mart. False (moderate) 6. The slowest growing segment of retailing is nonstore retailing. False (moderate) 7. Stores with high value added and a broad product assortment tend to focus on centralized buying and advertising to keep costs low. False (difficult) 8. Starbucks store offers a narrow but deep assortment of products. True (moderate) 9. Some manufacturers feel threatened by Direct Product Profitability (DPP) because it gives retailers a powerful argument for selecting or rejecting existing or new products. True (moderate) 10. Global expansion, lower levels of competition, and selling an experience are all important trends in retailing. False (moderate) 11. Wholesaling includes all of the activities involved in selling goods or services to those who buy for resale or business use. True (moderate) 12. Drop shippers sell bulky goods like coal and lumber from their inventory. False (difficult) 13. Some wholesalers do not take title to the goods they handle. True (easy) 14. Wholesalers rely primarily on sales promotions to achieve their promotional objectives. False (moderate) 15. A supply chain management perspective leads to ideas for improving productivity versus the more traditional view of wholesaling as a demand chain. False (difficult) 16. The order-to-payment cycle is the elapsed time between an order’s receipt, delivery, and payment. True (easy) 17. Fishyback, airtruck, and trainship are examples of containerization methods mentioned in the text, and each uses two modes of transportation. False (moderate) 18. The optimal inventory ordering quantity can be determined by observing how order processing costs and inventory carrying costs sum up at different order levels. True (moderate) 19. A private carrier is one that is owned and controlled by the firm. True (moderate) 20. Deciding on transportation modes means shippers are choosing from private, public, and contract carriers. False (moderate) Multiple Choice Questions 21. Which of the following is NOT one of the four levels of retail service mentioned in the text? a. Staffed service. (moderate) b. Self-service. c. Self-selection. d. Limited service. e. Full service. 22. A concept in retailing that helps explain the emergence of new retailers is called the __________ hypothesis. a. retail life cycle b. wheel-of-retailing (moderate) c. service-assortment d. product life cycle e. retail profitability 23. Convenience goods, such as snack foods, are sold through __________ retailing. a. the wheel-ofb. self-selection c. limited-service d. full-service e. self-service (moderate) 24. Which of the following best describes the retailers that carry more shopping goods, and where customers need more information and assistance? a. Self-service. b. Self-selection. c. Limited service. (moderate) d. Full service. e. Automated service. 25. In which of the following retailers are salespeople ready to assist in every phase of the locate-compare-select process? a. Self-service. b. Self-selection. c. Limited service. d. Full service. (easy) e. Automated service. 26. Best Buy stores carry a deep assortment of the latest electronics gadgets. They offer buyers a great deal of assistance and advice in making selections. Best Buy would be an example of a __________. a. specialty store (moderate) b. factory outlet c. department store d. superstore e. combination store 27. Grandbuy is a chain of stores found primarily in southern China. Each store carries several product lines, and each line is managed separately by a specialist buyer or merchandiser. Grandbuy is an example of a __________. a. specialty store b. factory outlet c. superstore d. combination store e. department store (moderate) 28. Every night after working the swing shift, Sierra stops by the 7-Eleven store near her house. She often buys bread and drinks while she’s there even though the prices at the 7Eleven store are higher than at her local supermarket. The7-Eleven store is an example of a __________. a. specialty store b. superstore c. warehouse store d. convenience store (moderate) e. combination store 29. When Cyler goes to do his grocery shopping for the week, he also likes to drop off his finished rolls of film and visit the bank at the same time. He would also like the idea of having a package-mailing service to use while he is shopping. Cyler would enjoy doing his grocery shopping at a __________. a. combination store b. category killer c. superstore (moderate) d. hypermarket e. warehouse store 30. The fastest growing segment of retailing is __________. a. nonstore retailing (moderate) b. chain store retailing c. warehouse stores d. hypermarkets e. category killers 31. A businesswoman has agreed to buy the right to use a process and a system from a company that also sells the same thing to other businesspeople. The woman is a __________. a. wholesaler b. member of a voluntary chain c. corporate chains store d. franchiser e. franchisee (moderate) 32. The residents in a Chinese remote village got tired of having to walk miles to the town to buy daily commodities. They have decided to open their own store. All have contributed money to purchase the initial inventory and open this store, which will carry daily commodities like soaps, tooth brushes and so on. Each participant will have a vote in store policy, will elect someone to operate the store, and will receive dividends based on any profits. They are engaged in a(n) __________. a. consumer cooperative (difficult) b. retailer cooperative c. merchandising cooperative d. voluntary store e. independent superspecialty store 33. A __________ consists of a wholesaler-sponsored group of independent retailers engaged in bulk buying and common warehousing. a. retailer cooperative b. voluntary chain (moderate) c. consumer cooperative d. retailing franchise e. merchandising conglomerate 34. A __________ is a free-form corporation that combines several diversified retailing lines and forms under central ownership, along with integration of distribution-andmanagement functions of those retailing lines and forms. a. voluntary chain b. retailer cooperative c. consumer cooperative d. retail licensing arrangement e. merchandising conglomerate (moderate) 35. The most important retail marketing decision a retailer has to make is to __________. a. choose a positioning strategy b. identify its target market (moderate) c. choose the service level it wants to support d. select the product assortment e. develop an effective store atmosphere 36. Josie is choosing the mix of products and determining how many product lines she will carry in her teacher supply store. Josie is making the __________ decision. a. target market b. market segmentation c. product-assortment (moderate) d. store atmosphere e. service level 37. Which of the following product differentiation strategies would NOT allow retailers to significantly distinguish themselves from others? a. Feature the latest or newest merchandise before any other retailer can. b. Offer a broad merchandise assortment. (moderate) c. Feature mostly private branded merchandise. d. Offer merchandise customizing services. e. Feature exclusive national brands not carried by competitors. 38. Which of the following is NOT a part of a store’s atmosphere? a. The music played by the speakers located throughout the store. b. The way merchandise is displayed. c. The lighting system used in the store. d. The employee that helps you carry your purchases to your car. (moderate) e. The smell from potpourri containers scattered throughout the store. 39. The pricing decision in retailing is __________. a. made independently of the product-assortment decision b. increasingly based on sales pricing c. key to the retailer’s positioning strategy (difficult) d. the least important of all the retail marketing decisions e. not an effective tool for store differentiation 40. Experience marketing at Starbucks includes which of the following senses? a. Smell. b. Sound. c. Feel. d. Look. e. All of the above are sense-oriented marketing cues at Starbucks. (easy) 41. A __________ is a location option for retailers that normally has high rent and is in the oldest and most heavily trafficked part of the city. a. regional shopping center b. community shopping center c. general business district (moderate) p. 265 d. neighborhood shopping center e. strip mall. 42. Jorge owns a sports equipment superstore, and wants to open a second one. He wants it to be the second anchor store at the location he selected. He believes the store’s product line needs to draw customers from 5–20 miles away to be successful. The best location for this retail outlet would be in a __________. a. regional shopping center (moderate) b. community shopping center c. general central business district d. neighborhood shopping center e. strip mall 43. Which of the following describes a significant trend in retailing? a. Competition today is increasingly intratype. b. Retailers are going smaller to chase smaller target segments. c. Superstores and combination stores are putting an end to nonstore retailing’s growth. d. Retail life cycles are growing longer. e. Retailers are experimenting with limited-time stores called “pop-ups” (moderate) 44. Which of the following is NOT described by the text authors as a significant trend in retailing? a. Competition between store-based and non-store-based retailers. b. Growth of middle market retailers. (moderate) c. Growth of giant retailers. d. Global presence of major retailers. e. Growing investment in technology. 45. Trader Joe’s is a high-end grocer. From on the shelves, from bags of pecans and popcorn, to moderately-priced wines, everything seems to be Trader Joe’s brand. This is an example of __________. a. acquiring brands from outside b. encouraging slotting fees c. private label branding (moderate) d. creating customer preferences by offering few choices e. generic branding 46. __________ includes all of the activities involved in selling goods or services to those who buy for resale or business use. a. Retailing b. Wholesaling (easy) c. Bartering d. Purchasing e. Distributing 47. Wholesaling excludes all of the following types of companies EXCEPT: a. manufacturers. b. farmers. c. retailers. d. distributors. (moderate) e. consumers. 48. Which of the following is NOT a function of wholesalers? a. Bulk-breaking. b. Selling and promoting. c. Transportation. d. Risk bearing. e. Final customer segment selection. (moderate) 49. Which of the following is an example of a merchant wholesaler? a. A mail-order wholesaler. b. A food broker. c. A drop shipper. (moderate) d. An industrial distributor. e. A commission merchant. 50. Which of the following products would be most likely handled by a drop shipper? a. Fresh tulips. b. Paperback books. c. Snack foods. d. Coal. (moderate) e. Dell servers. 51. Which of the following products would a rack jobber most likely handle? a. Dell servers. b. Eggs and dairy products. c. Industrial shelving. d. Fresh tulips. e. Magazines. (moderate) 52. __________ do not carry inventories, are paid by the party who hired them, and their chief function is bringing buyers and sellers together. a. Brokers (moderate) b. Industrial distributors c. Rack jobbers d. Producer’s cooperatives e. Commission merchants 53. __________ have long-term relationships with buyers and make purchases for them. These wholesalers often receive, inspect, warehouse, and ship merchandise for their buyers. a. Brokers b. Purchasing agents (moderate) c. Drop shippers d. Commission merchants e. Selling agents 54. A manufacturers’ agent would be most likely to handle __________. a. coal and cotton b. books on tape and Stanley tools c. Kraft snacks and Giordano shirts d. High blood pressure medicines and camping gear e. wheelchairs and orthopedic braces (difficult) 55. Which form of marketing communications is most likely to be used by wholesalers? a. Print advertising. b. In-kind promotions. c. Sales promotions. d. Personal selling. (moderate) e. Broadcast advertising. 56. __________ logically looks at the creation of a product. It begins with the examination of the procurement of inputs and raw materials and then examines how suppliers obtain their inputs. It sees the market as a destination point for the manufactured goods. a. Physical distribution b. Supply chain management (moderate) c. Demand-driven management d. Market logistics e. Distribution management 57. Marketing logistics __________. a. is the process of getting goods to customers b. includes all the activities involved in the selling of goods and services directly to final customers c. is also called materials management d. means planning the infrastructure to meet demand, then implementing and controlling physical flows of materials and final goods from points of origin to points of use to meet customer needs at a profit (difficult) e. is getting the right goods to the right places at the right time 58. Integrated logistics systems (ILSs) involves all of the following EXCEPT: a. materials management. b. material flow systems. c. physical distribution. d. information technology. e. financing. (moderate) 59. Planning the infrastructure to meet demand, then implementing and controlling physical flows of materials and final goods from place to place to meet customer needs at a profit is called __________. a. market logistics (moderate) b. demand chain planning c. sales forecasting d. supply chain management e. value-added services 60. Which is true of market-logistics systems? a. So-called cross-docking systems are likely to add costs and value. b. They cannot simultaneously maximize customer service and minimize distribution cost. (moderate) c. As long as a logistics strategy is in place, no specific tactics are necessary. d. Voluntary value chains tie distribution to production. e. Transportation is a part of logistics, but storage is not. 61. Which of the following is NOT one of the major decisions related to market logistics? a. How should orders be handled? b. Where should stocks be located? c. How much stock should be held? d. Should a particular line be carried? (moderate) e. How should goods be shipped? 62. The order-to-payment cycle may include all of the following EXCEPT: a. order entry. b. salesperson soliciting order. (moderate) c. customer credit check. d. order shipment. e. receipt of payment. 63. By definition, a(n) __________ warehouse receives goods from various company plants and suppliers and moves them out as soon as possible. a. storage b. automated c. field d. common e. distribution (moderate) 64. An order point of 20 means __________. a. orders are batched in parcels of 20s b. reordering when the stock falls to 20 units (moderate) c. order processing costs rise greatly when ordering more than 20 items d. there is a 20 percent cost increase in out-of-stock costs when the order point is not complied with e. inventory turns 20 times per year 65. A small Taiwan-owned chain of grocery stores in northeastern China, sometimes stocks up on some brand paper products when the prices are extremely low. They are likely to store these products in _________ warehouses. a. distribution b. cross-docking c. antiquated d. central e. storage (moderate) 66. If speed is a concern, the two best modes of transportation are __________. a. rail and truck b. water and rail c. water and air d. pipeline and water e. air and truck (easy) 67. If the transportation goal is low cost, then __________ should be used. a. truck and rail b. pipeline and water (easy) p. 275 c. water and rail d. truck and water e. pipeline and truck 68. A __________ provides services between predetermined points on a schedule and is available to all shippers at standard rates. a. private carrier b. contract carrier c. drop shipper d. common carrier (moderate) e. freight forwarder Essay Questions 69. Retailers can position themselves at four levels of service. In a short essay, list and describe those levels. Answer: 1) Self-service is the cornerstone of all discount operations. Many customers are willing to carry out their own locate-compare-select process to save money. 2) With selfselection, customers find their own goods although they can ask for assistance. Customers complete their transactions by paying a salesperson for the item. 3) With limited service, the retailers carry more shopping goods, and customers need more information and assistance. The store also offers services such as credit and merchandisereturn privileges. 4) With full-service, salespeople are ready to assist in every phase of the locate-compare-select process. (moderate) 70. Patty Allegro has a summer intern job at a manufacturing company that makes guitar strings. Patty works in the shipping department. All summer she has heard her immediate boss (who’s been there for years) be negative about the distributors the company uses. In a short essay, discuss the reasons a manufacturer would talk in negative terms about its wholesalers. Answer: Manufacturers’ major complaints about wholesalers are as follows: Wholesalers do not aggressively promote manufacturers’ product lines. They often act more like order takers. Often wholesalers do not carry enough inventory and therefore fail to fill customers’ orders fast enough. Wholesalers often do not provide manufacturers with up-to-date customer and competitive information. Manufacturers believe wholesalers do not attract high-caliber managers. Finally, manufacturers often believe wholesalers charge too much for the services they provide. (moderate) 71. Whitney is thinking about opening a new high-end collectibles store in Xian, a historic city of China. She knows that the services mix she offers will be a key tool for differentiating her store from others in the area. She hires you to advise her on the services mix possibilities. What do you tell her? Answer: The three main types of services are: prepurchase services, postpurchase services, and ancillary services. 1. Prepurchase services for the store might include telephone and mail order capabilities, advertising in travel brochures, even the store’s window displays and the way the interior looks with its displays. Whitney may accept trade-ins of other antiques for hers. The hours the store is open and possible events are all part of the list of prepurchase services Whitney might provide. 2. Postpurchase services should include shipping assistance or assistance with delivery, gift wrapping, and a returns policy. Also possible are engraving services, installations, and alterations. 3. Ancillary services might include: check cashing, parking, credit, and rest rooms in the store. (moderate) 72. When considering logistics and the ways to minimize the associated costs, the text gives the following equation: M = T + FW + VW + S, where the goal is to minimize M. Explain the model, and what trade-offs are associated with marketing logistics objectives. Answer: M = total market-logistics cost of proposed system T = total freight cost of proposed system FW = total fixed warehouse costs of proposed system VW = total variable warehouse cost (including inventory) of proposed system S = total cost of lost sales due to delays in the system The variables on the right need to be minimized in order to minimize M. As the text says, “no market-logistics system can simultaneously maximize customer service and minimize distribution cost.” Maximum customer service implies large inventories, fast transportation, and multiple warehouse locations—all of which raise costs. Most logistics systems have cost reduction as a major goal. (difficult) 73. In a short essay, discuss supply chain management. Answer: Supply chain management takes a broader perspective than physical distribution. It is concerned with the manufacturer’s procurement of the right inputs (raw materials, components, and capital equipment), how the inputs are efficiently converted into finished products, and how the finished products are dispatched to their final destination. An even broader perspective calls for studying how the company’s suppliers themselves obtain their inputs all the way back to the raw materials. The supply chain perspective can be used by a company for identifying superior suppliers and distributors and helping them improve their productivity. This process will eventually bring down the manufacturer’s costs. The drawback to the supply chain perspective is the fact that it views markets as destination points. (moderate) p. 270 Mini-Cases Mini-Case 14-1 Big Lots! sells a wide variety of goods that have been clearanced to them (close-out merchandise, products that represent overruns in production, etc.). Although consumers never know what will be on the shelves at Big Lots!, they know that the prices are typically 40 percent to 75 percent less than what those goods go for elsewhere. Big Lots! Corporation owns all the stores. They like to house the stores along major thoroughfares of large cities, clustered with other stores in long buildings. They have had good success with this business model since the beginning. 74. Refer to Mini-Case 14-1. What type of organization is Big Lots!? a. Voluntary chain. b. Corporate chain. (moderate) c. Retailer cooperative. d. Consumer cooperative. e. Franchise operation. 75. Refer to Mini-Case 14-1. What type of retailer is Big Lots!? a. Factory outlet. b. Warehouse club. c. Independent off-price retailer. (moderate) d. Superstore. e. Specialty store. 76. Refer to Mini-Case 14-1. Big Lots! tends to favor what type of retail location? a. General business district. b. Regional shopping center. c. Community shopping center. d. Location within larger operation. e. Strip mall. (moderate) Mini-Case 14-2 Elliott and Robin want to open a store and call it The Home Shop. They have decided that it will feature household items such as decorative vases and planters, sheets and towels, bathroom accessories, and pictures. Their offerings will change from week to week depending on what’s available from their wholesalers. Initially, they plan to sell irregulars and factory overruns, but they are flexible. Elliott has a real knack for spotting items others admire. People are always telling him what good taste he has. They must, however, be careful about how they spend the small amount of capital they have. One of their goals is to find an inexpensive location. Once the store is up and operational, they hope they can use their cash flow to meet expenses. They plan to have no more than two full-time employees other than themselves and possibly some part-time help as the need arises. Customers will be allowed to make their own selections, but either Elliott or Robin will be there if they request some advice. Elliott and Robin plan on letting their customers use credit cards. They also feel it is important to have a generous merchandise return policy. Because Elliott and Robin are retailing novices, they want to join a retail organization for advice and support and to share the costs of promotions. Elliott and Robin think that word-of-mouth will be their most powerful advertising tool. They expect to attract customers that appreciate the merchandise found at major department stores and mall specialty stores, but who would like the lower prices. 77. Refer to Mini-Case 14-2. Elliott and Robin should join what type of retail organization? a. retailer cooperative. (moderate) b. voluntary chain. c. consumer cooperative. d. wholesaler-sponsored cooperative. e. merchandising conglomerate. 78. Refer to Mini-Case 14-2. The Home Shop will offer what level of service? a. Self-service. b. Self-selection. c. Limited service. (moderate) d. Full service. e. Relationship service. 79. Refer to Mini-Case 14-2. Given Elliott and Robin’s perspective on their business, what would be the best location for this outlet? a. Central business district. b. Regional shopping center. c. Stand-alone destination site. d. Strip mall. (moderate) e. A location within a larger store. Chapter 15 – Designing and Managing Integrated Marketing Communications True/False Questions 1. Marketing communications are only carried out prior to the sale to the consumer. False (moderate) 2. Marketing communications can be done either directly or indirectly. True (moderate) 3. Personal selling is face-to-face interaction with prospective purchasers for the purpose of making presentations, answering questions, and procuring orders. True (easy) 4. Brand equity includes brand awareness, brand relationships, and brand advertising. False (moderate) 5. Direct marketing can include voice mail. True (moderate) 6. The receiver of a marketing message decodes it. True (moderate) 7. When GM provides 0 percent loans to help dealers sell more vehicles, this is an example of a sales promotion. True (moderate) 8. The learn-do-feel sequence is appropriate when the intended target market audience has high involvement in a product category perceived to have high differentiation. False (difficult) 9. Marriott Hotels’ image is the set of beliefs, ideas, and impressions that its customers and non-customers hold regarding the company and its offerings. True (moderate) 10. The first step in developing effective marketing communications is establishing the budget. False (difficult) 11. The source’s expertise, trustworthiness, and likeability determine the level of source credibility. True (moderate) 12. Word of mouth, or “buzz,” is completely unmanageable by the firm. False (moderate) 13. Qualities like candor, humor, and naturalness make a celebrity endorser more attractive. True (easy) 14. Viral marketing on the Web has been called “word of mouse.” True (moderate) 15. The percentage-of-sales method is a promotional budgeting method that forces management to spell out assumptions about the relationship among dollars spent, exposure levels, trial rates, and regular usage. False (difficult) 16. CompuTopia paid for the Seniors Awards Dinner for a business school. This is an example of using nonpersonal marketing communications to reach a target audience. True (moderate 17. One downside to using public relations and publicity is the lack of credibility. False (moderate) 18. The objective-and-task method for budgeting requires management to spell out its assumptions about the relationship among dollars spent, exposure levels, trial rates, and regular usage. True (moderate) 19. Bill owns a fast food restaurant in Guangzhou. He tries to spend an amount on promotional efforts that is in line with what other, similar restaurants in town seem to be spending, a Kungfu and a KFC. This is an example of using your budget to seek share-ofvoice parity with competitors. True (moderate) 20. When a buyer is ready to order, the most cost-effective communication tool is either advertising or publicity. False (moderate) Multiple Choice Questions 21. __________ are the means by which firms attempt to inform, persuade, and remind customers about the products and brands that they sell. a. Marketing communications (easy) b. Sales promotions c. Mass communications d. Brand images e. Broadcast media 22. Which of the following is NOT a major mode of communications in the marketing communications mix? a. Advertising. b. Satellite radio. (moderate) c. Sales promotion. d. Events and experiences. e. PR. 23. For companies, marketing communications are a way to link brand to which of the following? a. People. b. Places. c. Feelings. d. A, b, and c. (moderate) e. None of the above, marketing communications are a way to link brands to sales. 24. This is the use of mail, telephone, fax, email, or the Internet to communicate directly with or solicit a response or dialogue from specific customers or prospects. a. Personal selling b. Viral marketing c. Brand building d. Direct marketing (moderate) e. Sales promotion 25. Which of the following does NOT build brand equity? a. Brand awareness. b. Brand image. c. Brand responses. d. Brand relationships. e. All of the above build brand equity. (moderate) 26. Which of the following would NOT be considered part of a marketing communications program? a. A brand contact. (difficult) b. A sales promotion. c. An event sponsorship. d. Personal selling. e. Advertising. 27. Which is NOT a major communications function in the communications process? a. Encoding. b. Decoding. c. Noise. (difficult) d. Feedback. e. All of the above are major communications functions in the communications process. 28. Which is correct about “noise” in the communications process? a. It is controllable. b. It has only one source. c. It mostly happens during the decoding stage. d. It interferes with intended communications. (easy) e. It is never associated with feedback from the receiver. 29. The first step in the development of effective communication is __________. a. identifying the target audience (moderate) b. determining the communication objectives c. designing the message d. setting the budget e. selecting the communication channels 30. AIDA stands for __________. a. always in deep attitude. b. attitude, interest, doing (behavior), aftermath. c. attention, intention, direction, attrition. d. adoption, innovation, deprivation, altitude. e. attention, interest, desire, action. (moderate) 31. According to the text, which of the following comes last when developing effective communications? a. Establishing the budget. (difficult) b. The behavior stage. c. Determining objectives. d. Identifying the target audience. e. Selecting the channels. 32. __________ is(are) the set of beliefs, ideas, and impressions that a person holds regarding an object. a. Image (easy) b. Atmosphere c. An event d. Media e. A message 33. Home Inns’ __________ is(are) the set of beliefs, ideas, and impressions that its customers and non-customers hold regarding the company and its offerings. a. perception b. image (moderate) c. brand awareness d. message strategies e. confirming attributes 34. Which of the following is NOT one of the possible objectives for marketing communications, according to Rossiter and Percy? a. Category need. b. Brand awareness. c. Brand viability. (moderate) d. Brand attitude. e. Brand purchase intention. 35. When defining marketing communications to achieve a certain response, the creative strategy is most closely related to which of the following? a. What to say. b. To whom should it be said. c. How to avoid noise. d. How to say it. (moderate) e. Who should say it. 36. Which of the following is NOT a negative orientation a consumer might have toward a relevant brand need? a. Sensory gratification. (difficult) b. Problem removal. c. Normal depletion. d. Problem avoidance. e. Incomplete satisfaction. 37. An ad in Surfer Girl magazine says, “Mr. Zog’s Sex Wax gloms onto your stick better and longer than any other wax.” This is an example of a(n) __________ appeal. a. moral b. emotional c. transformational d. social e. informational (moderate) 38. Michelin Tires has commercials featuring diaper-clad babies sitting in Michelin tires. A voiceover tells you the tires are more expensive than many brands but that what is riding on them is priceless. This is an example of a(n) __________ appeal. a. moral b. transformational (easy) c. social d. informational e. rational 39. Ads that state you should buy Lenovo because it is made in China are using a(n) __________ appeal. a. transformational (moderate) p. 284 b. emotional c. social d. informational e. cognitive 40. The headline for an ad reads, “Power Bars give you all you need—when you need it!” This is an example of a(n) __________ appeal. a. informational (moderate) p. 284 b. practical c. transformational d. emotional e. provocative 41. Source credibility is a function of the source’s __________. a. personal, social, and moral influences b. quality of expression—both verbal and nonverbal c. likeability, expertise, and trustworthiness (difficult) p. 284 d. recognizability, trustworthiness, and reputation e. knowledge, reputation, and perceived expertise 42. A pharmaceutical drug rep giving her sales presentation to the office manager and the doctor is using a(n) __________ communication channel. a. personal (moderate) b. expert c. advocate d. informal e. competent 43. Which of the following is NOT a part of a communications source’s likeability? a. Candor. b. Humor. c. Naturalness. d. Specialized knowledge. (moderate) e. All of the above make up the source’s likeability. 44. Companies can stimulate personal influence channels to work on their behalf in several ways. Which of the following is NOT one of the ways listed in the text? a. Identify influential individuals and devote extra effort to them. b. Develop advertising that is higher in budget than the competition’s. (moderate) c. Create opinion leaders by supplying certain people with the product on attractive terms. d. Work through community influentials such as local disk jockeys, class presidents, and presidents of women’s organizations. e. Use influential or believable people in testimonial advertising. 45. How are professionals using the personal influence channel when they encourage their clients to recommend their services to others? a. They are creating opinion leaders. b. They are using word-of-mouth referral channels. (difficult) c. They are identifying influential individuals and devoting extra time to them. d. They are using believable people in testimonial advertising. e. They are communicating through community influentials, such as local talk show hosts and organizational presidents. 46. Companies can stimulate personal influence channels to work on their behalf in several ways. Which of the following is NOT one of the ways listed in the text? a. Develop advertising that has high “conversational” value. b. Develop word-of-mouth referral channels to build business. c. Provide discounts for products in the early stages of the product life cycle. (difficult) d. Establish and electronic forum. e. Use viral marketing. 47. __________ are occurrences such as news conferences and grand openings designed to communicate to target audiences. a. Atmospheres b. Display media c. Events (moderate) d. Interactive communication channels e. Mood enhancers 48. Newspapers, magazines, and direct mail are all examples of which of the following types of media? a. Print media. (easy) b. Broadcast media. c. Electronic media. d. Display media. e. Intermittent media. 49. Which of the following types of media best describe audiotape, videotape, CD-ROM, DVD, and Web pages? a. Print media. b. Broadcast media. c. Electronic media. (easy) d. Display media. e. Intermittent media. 50. Which of the following is NOT used as a supporting argument when considering the percentage-of-sales promotional budget setting method? a. It makes sales the determiner of promotion. (moderate) b. It links sales to corporate expenditures. c. It focuses attention on the relationship of costs, price, and unit profit. d. It encourages stability when others in the industry spend the same percentage. e. Sales and promotional expenditures are related. 51. A Chinese beverage corporation is preparing its promotional budget for next year. If its first step is to forecast next year’s sales, then this company is probably using the __________ method. a. percentage-of-sales (difficult) b. affordable c. market share d. competitive-parity e. objective-and-task 52. Which of the following is a weakness of the percentage-of-sales method of establishing the promotion budget? a. The percentage-of-sales method of establishing the promotion budget assumes the competition knows what it is doing. b. The percentage-of-sales method of establishing the promotion budget is a complicated, time-consuming process. c. The percentage-of-sales method of establishing the promotion budget leads to a budget that ignores market opportunities. (difficult) d. The percentage-of-sales method of establishing the promotion budget ignores the role of promotion as an investment in the business. e. The percentage-of-sales method of establishing the promotion budget discourages promotional wars. 53. A Chinese auto agent likes to motivate its salespeople with contests that award prizes like trips to Hong Kong Disneyland for those selling the most automobiles in a time period. These kinds of sales promotions are common for big-ticket salespeople, and would be classified as what type of marketing communications? a. Sales contests do not constitute marketing communications. b. Paid media, nonpersonal. c. Free media, personal. d. Public relations. e. Sales promotions. (difficult) 54. In an ideal world the __________ is the preferred method of setting a promotion budget. a. percentage-of-sales method b. arbitrary allocation c. affordable method d. competitive-parity method e. objective-and-task method (easy) 55. If A Chinese beverage corporation, wants to use the promotional tool that will build the long-term image of the corporation and give the best cost per exposure, it should use __________. a. direct mail b. public relations and publicity c. advertising (moderate) d. sales promotion e. personal selling 56. The three distinct benefits of __________ are its ability to communicate, its ability to act as an incentive, and its invitation to consumers to buy now. a. direct mail b. sales promotion (moderate) c. advertising d. public relations e. personal selling 57. Proponents of the competitive-parity methods for setting a promotional budget argue that competitors’ spending reflects the collective wisdom of the industry and that this level of spending prevents promotional “wars.” Which of the following is NOT a counterargument? a. Company “share of voice” differs too much to make the competitive parity method valid. (moderate) b. Company reputations differ too much to make the competitive parity method valid. c. There is no evidence that competitive parity spending prevents promotion wars. d. Company opportunities differ too much to make the competitive parity method valid. e. All of the above are valid counterarguments against using the competitive parity method to set promotional budgets. 58. The appeal of public relations and publicity is based on three qualities: __________. a. long-term image forging, quick sales triggering, and easy measurement of effectiveness b. high credibility, ability to catch buyers off guard, and dramatization (difficult) c. communication, incentive ability, and invitation quality d. reputations, resources, and objectives e. exposure levels, trial rates, and regular usage 59. If the director of marketing for a textile firm is concerned with the buyer-readiness stages of his customers, the best promotional tool for him to use would be __________. a. direct mail b. public relations and publicity c. sales promotion d. advertising e. personal selling (moderate) 60. At the __________ stage of buyer readiness is sales promotion the most cost-effective promotional tool. a. awareness b. comprehension c. conviction d. ordering e. reordering (moderate) 61. At what stage of buyer readiness are advertising and publicity the most cost-effective promotional tools? a. Awareness. (moderate) b. Comprehension. c. Conviction. d. Ordering. e. Reordering. 62. __________ is(are) the most effective tool at later stages of the buying process. a. Direct marketing b. Events and experiences c. Personal selling (moderate) d. Sales promotion e. Advertising 63. Personal selling is effective in consumer markets because it allows all of the following EXCEPT: a. persuasion of dealers to stock more product. b. persuasion of dealers to display more stock. c. build dealer enthusiasm. d. All of the above are advantages that personal selling provides in the consumer market. (moderate) e. None of the above is related to consumer markets. 64. When promoting to customers in the __________ buyer-readiness stage, the costeffectiveness of sales promotions and personal selling are about the same. a. awareness b. reorder c. conviction d. order e. comprehension (difficult) 65. After the communications plan has been implemented, which of the following is a behavioral measure of the audience’s response? a. How many people bought the product. (easy) b. Whether audience members recognize the brand. c. How many times the target saw the ad. d. Current and previous attitudes toward the brand among audience members. e. Number of points recalled from the campaign. 66. Quite simply, __________ is marketing communications planning that recognizes the added value of a comprehensive plan. a. strategic marketing planning b. integrated marketing communications (moderate) c. a promotional campaign d. advertising e. relationship marketing 67. In which stage of the product life cycle does the following take place: sales promotion continues strong, advertising and publicity are reduced, and salespeople give the product minimal attention? a. Maturity I. b. Growth. c. Decline. (moderate) d. Introduction. e. Pre-introduction. 68. __________ is powerful as a promotional process because it allows the firm to reach the right customers with the right messages at the right time and in the right place. a. Strategic marketing planning b. Advertising c. A promotional campaign d. Integrated marketing communications (moderate) e. Relationship marketing Essay Questions 69. What are the six major modes of communications in the marketing communications mix? Answer: 1. Advertising is a paid form of nonpersonal presentation of ideas, goods or services by a known sponsor. 2. Sales promotion is a short-term incentive for customers to buy. 3. Events and experiences are company-sponsored activities designed to create brand-related interactions. 4. Public relations and publicity are programs designed to promote or protect company and product images. 5. Direct marketing is direct communications used to solicit responses or dialogue with customers, and includes telemarketing, direct mail, and electronic contact. 6. Personal selling uses face-to-face encounters to make presentations, answer questions, and procure orders. (moderate) 70. Draw and explain the elements of the communications process, as it is employed by McDonald’s. Answer: Students should draw a boxes-and-arrows diagram similar to the one shown in Figure 15.2. The modifications should be that the “sender” is McDonald’s, the “message” is a current campaign message (such as “I’m Lovin’ It!”), the “media” could be anywhere McDonald’s puts their advertising (TV, radio, billboards, etc.), the “receiver” should be the fast food buyer. Students generally will have trouble changing the encoding/decoding components of the model. Noise could be things like bad drivers around you (if the ad was on a billboard, for example), clicking to another channel (if on TV), etc. Better students may mention the response/feedback loop that would include purchasing food from McDonald’s as a result of being exposed to an ad. (moderate) 71. The owner of Honesty Used Cars in Shanghai has always hated advertising that is “fake” or uses emotional appeals to get people to buy. In his business, he favors using an informational appeal to sell the products. What is an informational appeal and how is it different from a transformational appeal? What kinds of informational appeals might a used car store use? Answer: Informational appeals market products by focusing on tangible features and benefits, rather than on using distracting humor or expressive music. Examples of informational appeals include: problem-solution ads, product demonstration ads, and product comparison ads. Car dealerships frequently offer solution-based appeals to get customers to buy. For example, used car places often advertise that they will “pay off your car no matter how much you owe,” or “get you back on the road again!” These are very utilitarian things, and within a certain budget, very attractive to customers. (moderate) 72. Kenny McKinney wants to get more customers into his new Paintball City store. Kenny is new at owning a business and has to decide how much to spend on his marketing communications efforts (he calls everything advertising because he never had a marketing class, which is fairly common among highly successful entrepreneurs). Explain the different ways Kenny could decide on how much to budget for Paintball City, then recommend one and explain why it is the best approach. Answer: The affordable method—as the title says, this is to budget what you can afford. The method is inferior because it doesn’t take into account what the marketer is trying to accomplish with the money allocated. In lean times, owners of small businesses might be tempted to say to themselves, “I can’t afford to do ANY advertising this year” that may contribute to business failure. The percentage of sales method—the marketer chooses a number, say, 5 percent of sales (expected or past-period) and decides that is going to be how much money should be spent. A criticism of the method is that in tough sales years, money for advertising and other promotions falls, when they should probably be raised. The logic of this choice is that it is easy to understand and easy to implement. It is commonly used by small businesspeople like Kenny. The competitive parity method¬—the marketer tries to emulate, on a proportional scale, the promotional spending of the competition. The main logic associated with this choice is that it somehow may reflect a collective wisdom in the industry. The negative on this method is that no two companies have the exact same resources, opportunities, resources, or objectives, so spending proportional amounts of money on promotional efforts makes little sense. The objective and task method—the marketers decides what she or he wants to accomplish and then works the budget out based on what it will cost to create and implement the communications needed to make that happen. The logic is obvious, and this is the best way of going about setting a promotional budget. (moderate) 73. Explain how advertising and publicity, sales promotion, and personal selling are differentially cost-effective across the various stages of buyer-readiness. Answer: The answer for this closely related to Figure 15.4. Generally, the relationship is that in early stages, advertising and publicity are more effective uses of the marketing communications budget. In later stages, personal selling becomes more important and effective, as does sales promotion. (moderate) Mini-Cases Mini-Case 15-1 Zhang Yuan plans on opening a new, high-end deli in Guangzhou called the Ya Ya. The major product line will be spicy stewed duck necks from his hometown, Wuhan. He has a business plan that he has shown to potential investors. He has not done much yet in the way of figuring out how he will make the store successful through marketing. 74. Refer to Mini-Case 15-1. Just as other entrepreneurs must do, Zhang Yuan will have to draw up some kind of __________ plan that will include the means by which the Ya Ya will attempt to inform, persuade, and remind its customers about the products and brands that they sell. a. marketing communications (moderate) b. sales promotions c. mass communications d. brand images e. broadcast media 75. Refer to Mini-Case 15-1. There is not a strong spicy stewed duck necks tradition in Guangzhou, which might be challenging, because the stewed duck necks cost a little expensive. One way for Zhang Yuan to make it work is to make the store quite classy in its appearance, both inside and out. This will help establish the company’s __________ that is the set of beliefs, ideas, and impressions that customers will hold regarding the store. a. image (easy) b. atmosphere c. event d. media e. message 76. Refer to Mini-Case 15-1. One thing Zhang Yuan has begun to do is to visit with local chefs and wait staffs to educate them about the stewed duck necks and how they might be included in recipes and how they might be sold to restaurant patrons looking for something interesting. How is Zhang Yuan using the personal influence channel when he encourages the chefs and wait staffs to recommend the cheeses to others? a. He is creating opinion leaders. b. He is using word-of-mouth referral channels. (difficult) c. He is identifying influential individuals and devoting extra time to them. d. He is using believable people in testimonial advertising. e. He is communicating through community influentials, such as local talk show hosts and organizational presidents. Mini-Case 15-2 Carlo is a successful author who has had trouble getting a publisher to agree to buy his next book. He has an established and loyal group that reads everything he writes, most of which is of the mystery genre. Carlo has enough money to launch a small publishing house of his own, and he also has decades of connections that will help him effectively distribute the books. He has never taken a business class, having graduated with a degree in creative writing. He figures with a good Web site and blog, and $50,000 to get the message out, he should do fine. 77. Refer to Mini-Case 15-2. One problem with Carlo’s plan is that, according to the text, which of the following comes last when developing an effective communications plan? a. Establishing the budget. (difficult) b. The behavior stage. c. Determining objectives. d. Identifying the target audience. e. Selecting the channels. 78. Refer to Mini-Case 15-2. If Carlo’s main customers are to be his loyal fans, the book would suggest that he should use sales promotion instead of advertising. This is because the buyers are at the __________ stage of buyer readiness. a. awareness b. comprehension c. conviction d. ordering e. reordering (moderate) Chapter 16 – Managing Mass Communications True/False Questions 1. Any paid form of nonpersonal promotion of ideas, goods, or services where the originator of the promotion is known is called public relations and publicity. False (easy) 2. When developing an advertising program, the five critical Ms are mission, money, media, message, and measurement. True (moderate) 3. Reminder advertising works best for new products. False (easy) 4. When deciding on an advertising budget, management should consider the product’s substitutability. True (moderate) 5. The size and age of the China listening audience, along with its expense, make radio a poor choice for advertising. False (moderate) 6. “Junk mail image” is a disadvantage of choosing magazines as the media delivery tool for a marketing message. False (moderate) 7. A limitation of newspapers as a medium for delivering marketing communication is that it has a small pass-along audience. True (easy) 8. Frequency is measured by the number of times within a specific period that an average person or household is exposed to the marketing message. True (moderate) 9. A count for media planners is cost per thousand understandings. False (moderate) 10. The effective ad-exposed audience is the number of people with target audience characteristics who actually saw an advertisement. True (moderate) 11. Pulsing calls for spending all of the advertising dollars in a single period. False (moderate) 12. Pulsing is continuous advertising at low-weight levels reinforced periodically by waves of heavier activity. True (moderate) 13. Copy testing is always done before ads are run. False (easy) 14. A firm that wants to attract new consumers, reward loyal customers, or increase the repurchase rate of occasional users would be best served by sales promotion. True (moderate) 15. Sales promotions may devalue the product in the buyers’ minds. True (moderate) 16. A coupon is a type of consumer promotion that provides a price reduction after the purchase rather than at the retail store. False (easy) 17. A sweepstake calls for consumers to submit an entry to be examined by judges who will select the best entries. False (moderate) 18. Hui Wong buys a suit in a department store. They charge him 1,000 but tell him to keep his paperwork and send it with a coupon and he’ll receive a check for $2,00 back from the store. This is an example of a cash refund offer. True (difficult) 19. Sell-in time begins with the launch of a sales promotion and ends when about 95 percent of the deal merchandise is in the hands of consumer. True (moderate) 20. Marketing public relations plays an important role in defending products that have encountered public problems. True (moderate) Multiple Choice Questions 21. Which of the following is NOT one of the five Ms of advertising? a. Management. (moderate) b. Mission. c. Money. d. Measurement. e. Media. 22. “How should results be evaluated?” is the question related to which of the five Ms of advertising? a. Mission. b. Measurement. (moderate) c. Media. d. Message. e. Money. 23. Hospitals are engaged in intense competition to fill their maternity beds. What type of advertising would hospitals most likely use for advertising their new amenities like televisions in every room, seafood on the menu, and late night snacks for the new mothers and their families? a. Descriptive. b. Persuasive. c. Reminder. d. Informative. (moderate) e. Instructive. 24. Within the last couple of years several cosmetics manufacturers have introduced nonclumping mascara. Revlon was one of those manufacturers. Revlon should use ___________ advertising to increase selective demand for its non-clumping mascara. a. descriptive b. persuasive (moderate) c. reminder d. informative e. instructive 25. Advertising for Tongrentang medicine shows how Tongrentang is superior to Yunnan Baiyao. This is an example of _____________ advertising. a. descriptive b. persuasive (moderate) c. reminder d. informative e. instructive 26. Abercrombie & Fitch could use _____________ advertising to reduce the cognitive dissonance experienced by someone who recently purchased its brand of high-fashion, high-priced clothing and wonders if they got the value for their money. a. persuasive b. comparative c. reinforcement (moderate) d. informative e. descriptive 27. When setting the advertising budget, management should consider all of the following factors EXCEPT: a. product life cycle stage. b. market share and consumer base. c. competition and clutter. d. product substitutability. e. width of the company’s product line. (difficult) 28. In developing a creative strategy, advertisers follow all of the following steps EXCEPT: a. message generation. b. message evaluation and selection. c. message execution. d. subliminal implementation. (difficult) e. social responsibility review. 29. Public policy makers have developed a substantial body of laws and regulations to govern advertising. For this reason, an important step in developing an advertising campaign is __________. a. asking network censors what to cut out of the communication b. the creative development of the message c. the social responsibility review (moderate) d. preparing a copy strategy statement e. deciding on R-F-I measures that make sense 30. Zhao is advertising her import-export business and wants to find the most costeffective way of delivering the desired number and types of message exposures to his target audiences. Zhao is considering her __________. a. marketing plan b. creative development and execution c. plan of attack d. media selection (moderate) e. effective appeal 31. The number of different persons exposed to a particular media schedule at least once during some specified time is the _____________ of an advertisement. a. iteration b. frequency c. reach (moderate) d. impact e. gross rating points 32. The qualitative value of an exposure through a given media vehicle is called _____________. a. iteration b. frequency c. reach d. impact (difficult) e. gross rating points 33. Assume you are advertising very expensive authentic Turkish carpets to upscale investors in China. Credibility and prestige are important. The best medium for your advertising message is ___________. a. television b. newspapers c. magazine (moderate) d. direct mail e. radio 34. The owner of a dive shop, which provides its customers with scuba training and sells dive equipment and accessories, would like to advertise. He is considering outdoor advertising. Outdoor advertising would ___________. a. give his ad high repeat exposure (difficult) b. provide tremendous audience selectivity c. allow the dive shop to create very creative ads d. not have to contend with clutter e. provide all of the above benefits to the dive shop 35. Audiences can be measured according to _____________, which is the number of physical units carrying the advertising. a. circulation (moderate) b. flighting c. effective audience d. effective ad-exposed audience e. continuity 36. Audience size can be measured according to how many people with the right target characteristics are exposed to the ad. This is called ___________. a. circulation b. audience c. effective audience (moderate) d. effective ad-exposed audience e. bottom-line measure 37. Daisy has formed a company that markets ad space inside elevators. Her first clients are antacids, a dog-walking service, and the local museum’s new exhibit. This is an example of what type of alternative advertising form? a. Point-of-purchase advertising. b. Anti-zipping/zapping advertising. c. Increased intensity advertising. d. Captured attention advertising. e. Place advertising. (moderate) 38. If a 30-second advertisement during an episode of Gilmore Girls costs $160,000 and reaches 8,000,000 viewers, the cost per thousand for a Coca-Cola ad would be _____________. a. $2.00 b. $5.00 c. $12.50 d. $15.00 e. $20.00 (moderate) 39. The media-timing pattern in which advertising is run evenly throughout a given period is called _____________. a. flighting b. concentration c. pulsing d. bursting e. continuity (moderate) 40. A Thailand food restaurant in Hong Kong buys an ad in every issue of its town’s weekly newspaper, and two lunchtime ads every day on the local radio station. The owner has used this pattern of advertising for many years. Which of the following terms best describes the Thai restaurant’s media timing? a. Flighting. b. Concentration. c. Pulsing. d. Bursting. e. Continuity. (moderate) 41. Which of the following calls for spending all of the advertising dollars in a single period? a. Bursting. b. Continuity. c. Pulsing. d. Concentration. (moderate) e. Flighting. 42. An advertiser on a limited budget that schedules media so that a heavy dose of advertising is followed by a period of no advertising is using a pattern called _____________. a. bursting b. continuity c. pulsing d. concentration e. flighting (moderate) 43. __________ is a media timing approach that involves continuous advertising at lowweight levels, reinforced periodically by waves of heavier activity. a. Bursting b. Continuity c. Pulsing (moderate) d. Concentration e. Flighting 44. ___________ is a key ingredient in many marketing campaigns and consists of a diverse collection of incentive tools, mostly short term, designed to stimulate trial, or quicker or greater purchase, of particular products or services by consumers or the trade. a. Advertising b. Public relations c. Sales promotion (moderate) d. Personal selling e. Market segmentation 45. Pepsi is using a sales promotion campaign for AMP, its new energy drink based on its popular Mountain Dew recipe. Pepsi is running coupons in magazines aimed at teenagers and college students, offering refund offers for multiple purchases, and mailing samples to homes in selected zip codes. All of the methods that Pepsi is using are types of _____________. a. intermediary promotional activities b. trade promotions c. public relations activities d. functional promotions e. consumer promotions (moderate) 46. All of the following are examples of tools for consumer promotions EXCEPT: a. samples. b. coupons. c. premiums. d. prizes. e. display allowances. (moderate) 47. A firm that wants to attract new prospects, reward loyal customers, or increase the repurchase rate of occasional users would be best served by _____________. a. personal selling b. direct marketing c. advertising d. sales promotion (moderate) e. an unbiased public relations article 48. What is the final step in the formula for measuring the sales impact of advertising? a. Share of market. (difficult) b. Share of heart. c. Share of mind. d. Share of voice. e. Share of expenditures. 49. Which is NOT true of sales promotions? a. One challenge is balancing long- versus short-term objectives when using sales promotions. b. Promotions may not be used to drive sales of complementary categories. (moderate) p. 303 c. Sales promotion may devalue the product in the eyes of the consumer. d. A price promotion is different from a value-add promotion. e. Putting a well-known brand on promotion more than 30 percent of the time is risky to the brand. 50. Which of the following is a sales promotion objective used to get retailers to participate? a. Encouraging purchase of larger-size units. b. Attracting switchers. c. Building trial among nonusers. d. Gaining entry into new outlets. (easy) e. All of the above are sales promotion objectives used to get retailers to participate. 51. When a movie studio uses toys in fast food restaurant kid’s meals to advertise their latest movie, they are using _____________. a. tie-in promotions (moderate) b. prize promotions c. point-of-purchase promotions d. premiums e. promotion bundling 52. Tom’s used _____________ when it placed a coupon for a 80% discount for any twelve bottles of cola on packages of its Hot Fries snacks. a. a price pack b. a prize promotion c. a point-of-purchase promotion d. a cross-promotion (moderate) e. promotion bundling 53. A supermarket chain store had a promotion in which customers spending over could pay 60 20 in exchange for a very nice windproof and waterproof jacket that sported 100. an embroidered the store logo. The jacket had an actual market value of about This is an example of what type of consumer promotion? a. Coupons. b. Frequency programs. c. Prizes. d. Patronage awards. e. Premiums. (moderate) 54. Which of the following is NOT a reason trade promotions are used? a. The ease of administration. (moderate) b. To persuade intermediaries to carry a product. c. To persuade intermediaries to carry more units of a product. d. To induce retailers to promote the brand by display or price reduction. e. To stimulate salespeople to push a particular product. 55. Ricolini’s Italian Deli has a program that gives you your 10th sandwich free. What type of consumer sales promotion is Ricolini’s using? a. Free trials. b. Frequency programs. (moderate) c. Cross-promotions. d. Samples. e. Coupons. 56. When Brooks Pharmacy puts Hershey products in its weekly advertising flier, Hershey repays Brooks for half of the cost of that part of the ad. This is what kind of trade promotion? a. Free goods b. Price-off c. Advertising allowance (moderate) d. Display allowance e. Cross-promotion 57. Which of the following is NOT something marketers need to consider when developing sales promotions programs? a. Size of the incentive. b. Conditions of participation. c. Distribution vehicle. d. Advertising budget. (difficult) e. Timing. 58. Some nights, the FIFA Women's World Cup China 2007 was viewed by less television watchers than a popular national hip hop dancing contest. Which of the following reasons for sponsorship, for both events, was most likely a driving decision for the companies to be there? a. Trying to identify their product or company with a particular target market or lifestyle. (moderate) b. Creating experiences to evoke brand feelings. c. Expressing commitment to a community. d. Showing support for a social cause. e. Entertaining key clients. 59. Of the following reasons why do marketers report they do NOT sponsor events? a. Increasing brand or company awareness. b. Identifying with a particular target market. c. Enhancing corporate image. d. Expressing community support. e. Unpredictability of events is attractive. (moderate) 60. Entertaining key clients, creating merchandising opportunities, and enhancing corporate image are all reasons marketers find __________ activity attractive. a. trade promotions b. advertising c. consumer promotions d. event sponsorship (moderate) e. coupon campaigns 61. An ideal marketing-sponsored event might have all of the following characteristics, EXCEPT: a. audience matches target market. b. has few or no other sponsors participating. c. generates favorable attention. d. reflects or enhances the corporation’s image. e. draws undifferentiated attendance from the general population. (moderate) 62. __________ is(are) key skill(s) for publicizing fund-raising drives for nonprofit organizations. a. Event creation (moderate) b. Designing sponsorship programs c. Supply-side sponsorship measurement d. Entertaining key clients e. Creating awareness through sampling/tasting events 63. ___________ involves a variety of programs that are designed to promote or protect a company’s image or its individual products. a. Advertising b. Public relations (moderate) c. Sales promotion d. Personal selling e. Market segmentation 64. When Virginia did its “Virginia Is for Lovers” campaign to help people think positively about a state they may have had neutral or negative feelings about, this was an example of what type of marketing public relations? a. Assisting the launch of new products. b. Assisting in repositioning a mature product. (moderate) c. Defending products that have encountered public problems. d. Influencing specific target groups. e. Building interest in a product category. 65. Public relations are particularly effective in _____________. a. promoting or protecting a company’s image (moderate) b. reinforcing the buyer’s decision c. developing and maintaining a long-term increase in sales d. enabling companies to adjust to short-term variations in the supply and demand of their markets e. preventing intermediaries from misusing trade promotions 66. Which of the following is NOT a typical function of public relations departments? a. Press relations. b. Legal vetting of ads. (moderate) c. Product publicity. d. Corporate communication. e. Lobbying. 67. Which of the following is NOT normally considered an important tool in marketing public relations? a. Publications. b. Events. c. Hiring. (moderate) d. Speeches. e. Identity media. 68. What is the last step in a marketing public relations campaign? a. Establishing campaign objectives. b. Choosing vehicles for message delivery. c. Determining meaningful messages. d. Evaluating the campaign’s success. (moderate) e. Implementing the campaign. Essay Questions 69. Tom Elrich is responsible for setting the promotional budget for a microwave dish that cooks bacon on a rack over a drip pan. It is a new product for the market and for the small plastics manufacturer that Tom works for. Tom has only a very limited amount of time to set the budget. In a short essay, explain what factors managers like Tom should consider when setting the advertising budget. Answer: 1. Product life cycle stage—newer products tend to need higher budgets to gain consumer awareness and acceptance. 2. Market share and consumer base—small-share brands like the one Tom has created require a higher budget to gain awareness. 3. Competition and clutter—brands must be marketed heavily and cleverly to rise above the fray. 4. Advertising frequency—it generally takes many exposures to get consumers to pay attention to the marketing message, budget accordingly. 5. Product substitutability—because there are few products that do exactly what Tom’s does, he won’t have to spend as much trying to convince consumers his product is different. (moderate) 70. Mock VC Panel has just given a small publishing house $2.1 million to help the publisher continue to grow. The managers/owners decide they need to spend about $500,000 on getting the word out about the company. JoAnn remembers from a marketing class she took in college something about “reach, frequency, and impact” when it comes to choosing your media for a promotional effort. She asks you, a friend, if you remember these words and what they might mean for how she chooses to spend her promotional budget. Respond to JoAnn’s question in a brief essay. Answer: Reach refers to the number of different persons or households that are exposed to a particular media schedule at least once during a specified period. Frequency refers to the number of times within a specified period that an average person or household is exposed to the message. Impact refers to the qualitative value of an exposure through a given medium. When planning her media, JoAnn should realize that there will be trade-offs among these elements. Reach is most important when launching new products, but frequency is most important when there are strong competitors and a complex story to tell. It generally takes several exposures to get a person to pay attention to an ad and remember it, so JoAnn will need to take that into account when planning her media usage. (moderate) 71. Noodles with fired brown sauce paste have long been a favorite dish at Chinese restaurants in Beijing. Jane Yang decided to market this traditional treat regionally under the brand name Yummy!. She sells a package of dehydrated noodles with a bag of “premade” fired brown sauce paste. Discuss the five major decisions that she had to make when developing the advertising program for Yummy!. Answer: The five major decisions that Yang had to make are known as the five Ms. First, she had to decide on Mission—what were her advertising objectives? Second, she had to create primary demand for her product in the area of the country that was unfamiliar with it. Then she had to determine a sales level that she wanted to accomplish with a specific audience in a specific period of time. Her next issue was Money. How much should she spend on budget? How should she determine that amount? Then she needed to consider her Message. What message should be sent? Should she focus on the good taste, the nutritional value, the product’s heritage, or some other feature? After deciding on her copy, pictures (if any), headlines etc., she would need to select her Media. Where would she run her advertisements? What combination of media would she use? Would she use sales promotions and public relations along with advertising? Her final decision would have to do with measurement. How would she evaluate the results of her advertising efforts? How would she ascertain that she got value from her advertising expenditures? (moderate) 72. In a short essay, discuss the three types of advertising objectives in terms of their impact on product life cycle. Answer: Informative advertising would be most likely used in the introductory stage when the advertiser needs to create primary demand. As the competition heats up in the growth stage, advertisers rely heavily on persuasive advertising. With mature products, some advertisers rely on reminder advertising. In the decline stage, the advertising budget is typically decreased. Sometimes there is no advertising at all for products in the decline stage. More commonly reminder advertising is used to let the consumer know the product is still available, or persuasive advertising such as “ Try it Again” is used. (moderate) 73. Dangdang.com ran an ad in a Chinese magazine in which it announced it had nearly all sorts of books.. Because the goal of this ad was to make people aware that Dangdang.com sells books, it would want to measure the effectiveness of the ad. How could it measure the communication effect of the ad? How could it measure the sales effect of the ad? Given Dangdang.com’s advertising objective, which measure would be more important? Answer: Communication-effect research seeks to determine whether an ad is communicating effectively by using copy testing. It would have been done before the ad was run in the magazine. There are three ways it could be done. The direct rating method asks consumers to rate alternative ads—all marketing the same product. A portfolio test would have asked consumers to view a portfolio of ads. Consumers are then asked to recall the ads and their contents. The question is, “Did our ad stand out from the clutter?” Laboratory tests could also be used. This type of test monitors the physiological reactions to ads. Communication-effect research is important, but given Dangdang.com’s objective, saleseffect research would have been more useful. Dangdang.com wants to know what sales were generated by the ad. The historical approach to sales-effect research involves correlating past sales to past advertising expenditures using advanced statistical techniques. Experimental design is another type of sales-effect research. It requires an advertiser to set up tests in which the impact of various levels of sales expenditures are tested to determine the sales impact of each. Dangdang.com would be likely to use the historical approach to determine the effectiveness of its ad. (difficult) Mini-Cases Mini-Case 16-1 Aspirin is so potent that many in the health professions contend that if it were invented today, it would be only available by prescription. In 1897, Felix Hoffman chemically concocted the first synthetic aspirin compound, known as acetylsalicylic acid. At the time he was working for the Bayer Company. In 1899 Bayer Aspirin was introduced. It was the first tablet ever to be marketed as a water-soluble pill. Fifty billion aspirins are consumed worldwide annually. A variety of painkillers line the store shelves today, but only aspirin is proven to have long-term cardiovascular and anticancer benefits. In spite of these positive aspects to the product, a concern that aspirin might contribute to Reye’s syndrome in children, a disease that affects the brain and liver, has led to aspirin having an identity crisis. There is a generation of individuals who have grown up assuming other drugs have completely replaced aspirin. Ask someone for a aspirin these days, and you’re likely to receive a Tylenol or an ibuprofen-based tablet of some kind. Aspirin manufacturers are trying to educate people that simple aspirin can help keep them alive. 74. Refer to Mini-Case 16-1. Aspirin brands like Bayer and Excedrin struggle to get or maintain dominance in the marketplace and require relatively higher promotional spending than do brands like Viagra, the prescription erectile dysfunction medicine. The aspirin makers have to spend more to stand out or differentiate because of which factor used to set advertising budgets? a. Consumer base. b. Product substitutability. (moderate) c. Market share. d. Advertising frequency. e. Product life cycle. 75. Refer to Mini-Case 16-1. What type of communication should the aspirin industry use if its goal is to promote the benefits of aspirin in a manner that it seems to allow the industry to have little or no control over the message content? a. Advertising. b. Direct marketing. c. Sales promotion. d. Public relations and publicity. (moderate) e. Personal selling. Mini-Case 16-2 Sedona Advertising is developing a marketing campaign for a Last-Days Skates, a skateboard manufacturer. The greatest emphasis has been placed on the design of a series of ads featuring the riders using their boards in thrilling, extreme riding situations. The agency has pretested the recall of these print ads. As part of the ad evaluation process, the agency determined the Last-Days’ share of voice is 6 percent and its share of market is 4.4 percent for its last ad campaign during which it spent $35,000. As part of this integrated marketing campaign, Sedona is also designing sales promotion activities. LastDays wants to link the sales of its best selling long boards to its new line of VRT-Rider specialty boards without cannibalizing sales of the established product. This is the first ever line of skateboards designed with vertical riding in mind. As Sedona gears up for this campaign, the owner of Last-Days Skates announces he really wants to build community awareness of what the company does, especially its charitable work. This new promotional task is being added after most of the budget has already been allocated. Sedona Advertising is searching for a way to meet the owner’s goals within his current budget. 76. Refer to Mini-Case 16-2. What would be the most likely advertising objectives for the two products listed? a. Informative for the VRT-Rider lines; reminder for the best-selling long boards. (difficult) b. Persuasive for both. c. Persuasive for the new product; reminder for the best-selling long boards. d. Informative for both products. e. Persuasive for the new product; informative for the best-selling long boards. 77. Refer to Mini-Case 16-2. Selecting the proper media will influence Sedona’s budget for the project. Which of the following is the most important to consider when selecting the media for a promotional campaign? a. The social responsibility review. b. Reach, frequency, and impact. (moderate) c. The copy strategy statement. d. Visibility of the ad agency. e. Effective audience. 78. Refer to Mini-Case 16-2. The most probable way for Sedona to help Last-Days Skates get the word out about their charitable work and still stay within the budget is to use _____________. a. direct selling b. sales promotions techniques c. outdoor advertising d. public relations (moderate) e. copy testing Chapter 17 – Managing Personal Communications True/False Questions 1. Direct marketing is the use of direct channels to reach and deliver goods and services to marketing middlemen. False (moderate) 2. A direct marketing campaign’s success is judged by the response rate. True (easy) 3. Telesales, telecoverage, and teleprospecting are all forms of telemarketing. True (moderate) 4. Some important benefits of interactive marketing are that it is highly accountable and that its effects can be easily traced. True (moderate) 5. It has been estimated that over half of all online searches are for products and services. False (moderate) 6. One important guideline for email marketing is to make it easy for customers and potential customers to “unsubscribe.” True (moderate) 7. Closing a sale typically requires four calls, and the total cost to complete a sale can be as high as $1,200. True (moderate) 8. A salesperson who relies on creative methods for selling tangible products or intangibles is called an order taker. False (easy) 9. When drug reps (pharmaceutical salespeople, also called “detailers”) call on physicians to inform them of new prescription products and help the doctors keep up on the latest research on the use of drugs in medical treatments, they are performing in the role of missionary salesperson. True (moderate) 10. A technician sales representative is one who has a high level of technical knowledge about the product being sold. True (moderate) 11. Companies often specialize their sales forces along industry or customer lines in a market type of sales force structure. True (moderate) 12. One-third of companies use a combination of base salary plus commission in compensating their sales force. False (moderate) 13. Companies may use mathematical models to determine the size of their sales force. True (easy) 14. A fixed sales force compensation plan works best when individual initiative is high and product sales are cyclical. False (moderate) 15. Straight salary should be emphasized more in sales jobs with a high ratio of nonselling duties to selling duties. False (moderate) 16. If all other factors are equal, sales representatives on straight commission need less supervision than those on straight salary. True (easy) 17. A sales force with many new hires is less productive. True (moderate) 18. A time-and-duty analysis is a planning tool that helps salespeople understand how they spend their time and how they might increase their productivity. True (moderate) 19. The time for the salesperson to learn as much about a potential customer as possible is in the approach stage of the personal selling process. False (moderate) 20. Once a salesperson has identified a hot prospect, she is now ready to enter the approach stage of the personal selling process. False (difficult) Multiple Choice Questions 21. Which of the following is a customer benefit of direct marketing? a. Ability to customize the message. b. Ease of segmentation through mailing lists. c. Time savings. (moderate) d. Ability to test messages. e. Ease of measuring campaign results. 22. Ying Yin Corp. sells DVDs of animated and dramatized Buddhist stories. The company has had a direct mail program for years. With a current campaign, they chose to send the offer to 10,000 possible customers. Half on the list received the offer in a pale yellow envelope with a slightly crooked first class stamp. The other half of the list received an identical offer, but in an envelope that was a bolder yellow and the stamp was an obviously machine-applied, and bulk-rate. Ying Yin Corp. management is probably __________ for the campaign? a. setting the objectives b. choosing the target markets and prospects c. deciding on offer elements d. testing the elements (moderate) e. measuring the success 23. Euli Chaves wants to sell difficult-to-find Korean grocery items to Chinese customers, via a mailed catalog. He has read that a 2 percent response rate is considered good. He decides that he wants 4 percent of those who receive the catalog to make a purchase. At what stage of the direct mail campaign is Chaves? a. Objectives. (moderate) b. Target markets and prospects. c. Offer elements. d. Testing elements. e. Measuring success. 24. In direct mail, the __________ consists of five elements—product, offer, medium, distribution method, and creative strategy. a. offer strategy (moderate) b. R-F-M formula c. marketplace conditions d. break-even response rate e. order response rate 25. Inbound telemarketing is used to perform which kind of telemarketing? a. Telesales. (difficult) b. Telecoverage. c. Teleprospecting. d. More than one of the above. e. None of the above. 26. Outbound telemarketing is used to perform which kind of telemarketing? a. Telesales. b. Telecoverage. c. Teleprospecting. d. More than one of the above. (moderate) e. None of the above. 27. With broadband Internet connections becoming more common, marketers can do more communicating online with customers. Which is NOT really associated with this growing ability to market? a. Better animation possibilities. b. Direct-to-customer video. c. Increased sophistication in sound. d. Stronger strategic thinking. (moderate) e. Ability to interact with the customer. 28. When evaluating Web sites, which is a part of the “ease of use” quality? a. Individual pages are clean looking. b. Typefaces are very readable. c. Site makes good use of color. d. First page easy to understand. (difficult) e. Individual pages are not overly crammed with content. 29. __________ is an element of effective Web design, and is the degree to which a Web site is linked to other related sites. a. Context b. Content c. Community d. Customization e. Connection (easy) 30. __________ is an element of effective Web design, and is the site’s capability to enable commercial transactions. a. Commerce (easy) b. Context c. Content d. Community e. Customization 31. Mo’ Crunk Den U makes specialty wheels for high-end cars. Mo’s new product is a 26” platinum rim with blacked-out highlights and optional jewel-topped lug nuts. Mo’ is considering the Web for advertising the introduction of this 2-SixP line. But the Web has all sorts of advertising options, from banners to sponsorships, and more. Which fact might be most important in helping Mo’ narrow down his options for online ads? a. Banner ads cost more if they are on popular Web sites. b. Thirty-five percent of all web searches are for products and services. (difficult) c. Connection is the term for the degree to which a site is linked to other sites. d. Layout and design of a Web page is critical to its “stickiness.” e. Yahoo! charges more than Ask.com. 32. Which of the following is NOT an important guideline for those that market using email? a. Give the customer a reason to respond. b. Personalize the email content. c. Only use email with customers who have agreed to receive it. (moderate) d. Offer something the customer could not get via direct mail. e. Make it easy to “unsubscribe.” 33. Wong drives a bread truck from the Zhonghua Food Corp. to grocery stores and convenience stores all over the northeast quadrant within China. He stocks the racks, gives the managers their bills, and collects the money. Wong is a(n) __________. a. demand creator b. deliverer (moderate) c. missionary d. solution provider e. order taker 34. A salesperson standing behind the counter or the soap salesperson calling on the supermarket manager is called a(n) __________. a. deliverer b. order taker (easy) c. missionary d. demand creator e. solution vendor 35. Which of the following best describes the engineering salesperson who is primarily a consultant to client companies? a. Deliverer. b. Order taker. c. Technician. (moderate) d. Demand creator. e. Solution vendor. 36. Which of the following best describes a salesperson whose expertise lies in solving a customer’s problem, often with a system of the firm’s goods and services? a. Deliverer. b. Order taker. c. Technician. d. Demand creator. e. Solution vendor. (moderate) 37. Amanda Tso is a sales representative for Scünci hair products. She visits independent grocery and drug stores several times a year and encourages them to use the company’s display material in their stores. Tso is a(n) __________. a. demand creator b. deliverer c. missionary salesperson (moderate) d. order taker e. solution provider 38. The first step in designing a sales force to sell Tupperware industrial storage shelving to warehouse operators is to __________. a. select a sales force strategy b. decide on sales force size c. decide on sales force structure d. set sales force quotas e. set sales force objectives (moderate) 39. A(n) __________ sales force consists of full- or part-time paid employees who work exclusively for the company. a. direct (easy) b. indirect c. expansive d. parallel e. targeted 40. Which of the following is NOT a generally a part of the salesperson’s job? a. Using. (moderate) b. Targeting. c. Communicating. d. Information gathering. e. Servicing. 41. Which of the following is NOT part of the job expected of a salesperson who is a major account manager? a. Acting as a single point of contact between buyer and seller. b. Looking for ways to add value through solving customer problems. c. Negotiating contracts with customers. d. Prospecting for new major accounts. (moderate) e. Providing customized customer service. 42. The workload approach method of determining sales force size includes all the following steps EXCEPT: a. grouping customers into size classes. b. determining the number of sales calls a rep can make in a year. c. establishing call frequencies. d. multiplying the number of calls needed by the number of current sales reps. (moderate) e. dividing the total annual calls required by the average number a rep can make. 43. __________ enable sales reps to meet the expenses involved in travel, lodging, dining, and entertaining. a. Expense allowances (easy) b. Benefits c. Straight-salary plans d. Straight-commission plans e. Combination compensation 44. __________ receives more emphasis in jobs with a high ratio of nonselling to selling duties and when the selling task is technically complex and involves teamwork. a. Fixed compensation (moderate) b. Variable compensation c. Demand compensation d. Supply compensation e. Combination compensation 45. __________ receives more emphasis in jobs where sales are cyclical or depend on individual initiative. a. Fixed compensation b. Variable compensation (moderate) c. Demand compensation d. Supply compensation e. Mixed compensation 46. Moisés sells Gibson and Epiphone guitars. He is a self-starter. He spends at least 80 percent of his time in selling activities and, at most, 20 percent of his time on nonselling activities such as filling out paperwork, placing orders, and managing territories. Which sort of compensation would most likely appeal to Moisés? a. Straight commission. (moderate) b. Salary and quarterly bonuses. c. Expense allowance and salary. d. Salary and commission. e. Annual bonus and salary. 47. Ethel Cantu a salesperson for a company that makes moisture monitoring equipment for corporate farms. She spends about 20 percent of her time actually selling the product, and about 80 percent of her time installing the computer systems, training customers in their use, and generally troubleshooting. Which sort of compensation would keep Cantu satisfied with her job? a. A commission and quarterly bonuses. b. Base plus commission. c. Benefit package and a commission. d. Straight salary. (moderate) e. Profit sharing, annual performance bonuses, and a commission. 48. Which of the following does NOT support the importance of careful recruiting and selecting sales representatives? a. In one study, the top 27 percent of the sales force accounted for over 52 percent of the sales. b. Hiring the wrong people for the job can be quickly remedied through termination. (moderate) p. 323 c. A sales force with many new hires is less productive, so avoiding excessive turnover is an important issue. d. The cost of finding and training a new rep is expensive. e. Turnover leads to lost sales. 49. A(n) __________ is a planning tool that helps salespeople understand how they spend their time and how they might increase their productivity. a. time-and-motion study b. call report c. territory marketing plan d. time-and-duty analysis (moderate) e. activity plan 50. Which of the following is NOT one of the ways salespeople generally spend their time? a. Producing products. (moderate) b. Traveling to appointments. c. Waiting for clients. d. Selling. e. Planning. 51. Which of the following types of salespeople provide technical information and answers to customers’ questions? a. Technical support people. (moderate) b. Sales assistants. c. Telemarketers. d. Market researchers. e. Interviewers. 52. __________ provide clerical backup for the outside reps by confirming appointments, carrying out credit checks, following up on deliveries, and answering customers’ questions. a. Technical support people b. Sales assistants (moderate) c. Telemarketers d. Market researchers e. Interviewers 53. The most-valued reward to motivate a salesperson has been determined to be __________. a. pay (moderate) b. promotion c. respect d. security e. recognition 54. Lin was hired to answer Chinese customers’ questions at the Service Hotline Center of China Mobile in Beijing. He would be considered a(n) __________. a. telemarketer b. sales assistant c. inside salesperson d. technical support person (moderate) e. agent sales rep 55. Bajneesh takes care of the clerical needs of her companys sales force while they are on the road. She would be considered a(n) __________. a. telemarketer b. sales assistant (moderate) c. inside salesperson d. technical support person e. agent sales rep 56. Judith “cold calls” prospective clients to make appointments for the sales force in order to help them use their time more efficiently. Judith would be considered a(n) __________. a. telemarketer (moderate) b. sales assistant c. inside salesperson d. technical support person e. agent sales rep 57. Which of the following is one of the least valued rewards by salespeople? a. Pay. b. Promotion. c. Personal growth. d. Sense of accomplishment. e. Respect. (moderate) 58. Which of the following is one of the most valued rewards by salespeople? a. Liking. b. Respect. c. Security. d. Personal growth. (difficult) e. Recognition. 59. Which of the following is NOT true about sales quotas? a. You can fail to make the quota and the company can still make its sales forecast. b. Sales quotas can be established for regions. c. If all of a company’s sales force missed their quota, the company could not meet its overall sales forecast. (moderate) d. An individual’s quota is normally derived by dividing up the total area’s quota. e. Sales quotas can be established for territories. 60. Researchers in motivation have discovered that __________. a. pay is the greatest motivator for all categories of salespeople b. the newer the sales representative, the more importance he or she attaches to financial rewards c. older and more experienced sales representatives value higher-order rewards, such as recognition and respect, more than financial rewards d. financial rewards are more important to older, longer-term sales representatives than to newer salespeople (difficult) e. motivation is largely unnecessary because salespeople are self-starting and selfmotivated 61. Management can obtain information about sales reps in all of the following ways EXCEPT: a. sales reports b. personal observation c. customer letters and complaints d. customer surveys e. territory management (moderate) 62. The __________ approach to selling trains salespeople in customer problem solving in which the rep learns to listen and ask questions in order to identify customer needs and come up with sound product solutions. a. customer-oriented b. relationship marketing (moderate) c. sales-oriented d. transformational marketing e. negotiation-based 63. Once a salesperson has identified a hot prospect, she is now ready to enter the __________ stage of the personal selling process. a. preapproach (moderate) b. qualifying c. approach d. presentation e. canvassing 64. Orlando Solis is a successful Nissan salesman. He is the type of salesperson who has many regular customers return and buy their next car with him. His ability to retain customers would lead you to believe that Orlando is effectively performing the __________ stage of the personal selling process. a. prospecting b. closing c. presenting d. demonstrating e. follow up (moderate) 65. Jordan sells network systems for small businesses, and spends lots of time nurturing all his accounts, answering their concerns, and spending time making sure they know how everything works. Jordan is most likely selling the product on what type of basis? a. Short-term marketing. b. Relationship marketing. (moderate) c. Global marketing. d. Quick-hit marketing. e. B2C marketing. Essay Questions 66. Amanda Webber has established a new company to sell vehicle parts and accessories. She sees three distinct target audiences for her company’s products—mechanics for installation, agricultural fleets, and government clients. Which of the four basic sales force structures should she use and why? Discuss the advantages and limitations of the structure that is most appropriate for her company. Answer: Given the three distinct target markets, Webber should use the market sales force structure. This way her salespeople can specialize in that type of business. It will make it easier to set up long-term relationships with customers who feel the salesperson knows as much about their industry as they do and is attuned to their specific needs. The major disadvantage is that customers are spread out requiring more travel. (moderate) 67. Rick Greene has established a new company to sell lawn and garden products nationwide. Discuss why Greene’s sales managers should worry about motivation. How can they motivate his salespeople to be as productive as they possibly can? Answer: The sales manager should understand how frustrating a field sales job can be. Research shows that the higher the salesperson’s motivation, the greater his or her effort. Greater effort will lead to greater performance; greater performance will lead to greater rewards. Greater rewards will lead to greater satisfaction, and greater satisfaction will reinforce motivation. The reward with the highest value is pay, followed by promotion, personal growth, and sense of accomplishment. The least-valued rewards were liking and respect, security, and recognition. (moderate) 68. Discuss the types of raw data that sales managers might use to monitor the sales performance of their sales force. Answer: There are nine types of measures listed in the text. Most sales managers are likely to use some combination of these: 1) The manager could calculate and compare the average number of sales calls made per day. 2) The manager could compare the average time spent with a client during a sales call. 3) The manager could look at the average revenue produced per sales call. 4) The manager could examine the average cost to make a sales call. 5) The manager could see how much is being spent for entertainment during sales calls. 6) The manager could calculate what percentage of sales calls produces a sale. 7) The manager could evaluate the number of new customers obtained during a certain period. 8) The manager could also make note of the number of customers lost during a certain time period. 9) Finally, the manager could look at the ratio of sales costs to total revenue produced by those sales. (moderate) 69. How could the creation of an inside sales force help a paper products company that has been losing major accounts because its outside sales force had to spend so much time dealing with smaller accounts and following up orders? Answer: To reduce time demands on their outside sales force, many companies have increased the size and responsibilities of their inside sales force. There are three types of inside salespeople—technical support people, who provide technical information and answer customers’ questions; sales assistants, who provide clerical backup for outside salespeople; and telemarketers, who use the phone to find new leads, qualify them, and sell to them. The inside sales force frees the outside reps to spend more time selling to major accounts. The inside salespeople spend more time checking inventory, following up orders, and phoning smaller accounts. (moderate) 70. CINTAS provides industrial uniform services to businesses of many types. The CINTAS sales force is under constant pressure to find new customers. Once the customer signs up for the service, the salesperson turns the account over to the fulfillment group and goes on to find more new customers. In a brief essay, explain the relevant steps to effective selling for a CINTAS salesperson. Answer: The steps would include 1) Prospecting and qualifying new clients—this could be through the use of telephone, in-person visits, or asking current customers for referrals. 2) The preapproach—here, the CINTAS salesperson would try to learn all about the prospect company and with that information, set an objective to make the sale. 3) The approach—this will set the tone for the sales call, so it must be carefully thought out in advance. 4) The core of the visit will be the presentation or demonstration—here the CINTAS salesperson will “tell the service’s story.” This may be a “canned” or memorized approach, or a less formal and memorized presentation. The features, advantages, and benefits of the offer are conveyed here. 5) The salesperson will then attempt to overcome objections on the part of the prospect—this is done by trying to clarify the objection, minimizing it, or asking questions to help clients answer their own objections. 6) The close—here is where the sales rep asks for the order. They may offer inducements or use psychology by asking whether the client wants A or B, or focusing on less important issues such as what color to order. 7) From the description, we know that the CINTAS salesperson does not do any follow up or maintenance. (moderate) Mini-Cases Mini-Case 17-1 Adam Wetzel manages sixteen salespeople in a territory that covers an area including eastern China over to western China. They market payroll systems for small, independent companies. Adam’s salespeople vary in their earnings from 36,000 per year to over 100,000 per year. They are all provided with a mobile phone, but only make more than 2,000 per month if they sell a minimum number of systems in the measured period. 71. Refer to Mini-Case 17-1. Adam’s sales force is paid on what type of compensation plan? a. Fixed amount. b. Expense allowances. c. Combination salary and commission. (moderate) d. Straight commission. e. Straight salary. 72. Refer to Mini-Case 17-1. If Adam’s salespeople are like most, they are most motivated by what kind of reward? a. Personal growth. b. Authority. c. Security. d. Pay. (moderate) e. Sense of accomplishment. Mini-Case 17-2 Bjorn Landis is the sales manager for an established plastic manufacturer. The sales force is older, experienced, loyal, productive, and highly resistant to technology. An earlier effort to get sales representatives to use computers, faxes, and voice mail failed miserably. The company wants to emphasize selling, hold down sales costs, attract highperforming salespeople, and weed out low performers. Landis has discovered that his sales force is only spending about 20 percent of its time in face-to-face selling because the sales representatives spend most of their time completing paperwork related to the orders, customers forgetting appointments and having to reschedule, and following up on deliveries. Once Landis finished evaluating the sales force as a whole, he began to look at the performance of individual salespeople. Supriya “Super” Satpathy is one of the older sales representatives of the company and has the longest tenure, having started when the owner began the company 20 years ago. She has balanced a career and is raising five children. 73. Refer to Mini-Case 17-2. Given the number of different uses for plastic, what would be the best sales force structure for this company to use? a. Territorial. b. Product. c. Market. (moderate) d. Matrix. e. Major account. 74. Refer to Mini-Case 17-2. Landis is concerned about the amount of time sales representatives spend on paperwork. Given the circumstances of the problem and the nature of the sales force, what would be the best solution? a. Use sales automation. b. Institute a fixed compensation plan. c. Hire telemarketers. d. Hire more technical support people. e. Hire sales assistants. (difficult) 75. Refer to Mini-Case 17-2. If Landis wants to help Super become more productive, he could encourage her to do a(n) __________. a. expense-activity report b. territory marketing plan c. time-and-duty analysis (moderate) d. call report e. workload plan Chapter 18 –Managing Transformation Marketing True/False Questions 1 Empowering is encouraging and empowering personnel to produce more ideas and take more initiative. Answer: True Level of difficulty: Easy 2 The four types of marketing controls are annual-plan, profitability, efficiency, and strategic. Answer: False Level of difficulty: Hard 3 A marketing audit is a comprehensive, systematic, internal, and periodic examination of a company’s or business units’ marketing environment. Answer: False Level of difficulty: Medium 4 The four characteristics of a marketing audit are comprehensive, systematic, independent, and periodic. Answer: True Level of difficulty: Medium 5 Top management has recognized that past marketing has been highly effective and is pleased with the accountability from marketing. Answer: False Level of difficulty: Medium 6 A set of measures that helps firms to quantify, compare, and interpret their marketing performance is called marketing metrics. Answer: True Level of difficulty: Medium 7 A stakeholder-performance scorecard tracks the satisfaction with the company and its products and services among such entities as suppliers, banks, and stockholders. Answer: True Level of difficulty: Medium 8 Sales-variance analysis measures the relative contribution of different factors to a gap in sales performance. Answer: True Level of difficulty: Easy 9 All the buyers who are able and willing to buy a company’s products or services are called the overall market share. Answer: False Level of difficulty: Medium 10 The key ratio to watch in annual-plan control to make sure that the company is not overspending to achieve sales goals is the marketing expense-to-sales ratio. Answer: True Level of difficulty: Medium 11 The return on net worth is the product of two ratios: the company’s return on assets and its asset turnover ratio. Answer: False Level of difficulty: Hard 12 Gross margin minus (-) expenses equals (=) net profit. Answer: True Level of difficulty: Medium 13 Direct costs are common costs whose allocation to the marketing entities is highly arbitrary. Answer: False Level of difficulty: Easy 14 Especially popular with such companies as Procter & Gamble, marketing-mix modeling is used to allocate or reallocate expenditures. Answer: True Level of difficulty: Medium 15 The production department is responsible for preparing sales forecasts because they have the most data about production schedules and the ability to meet orders. Answer: False Level of difficulty: Easy 16 Among all factors in marketing pattern, the predominant one is the marketing motivations determined by marketing concepts. Answer: True Level of difficulty: Medium 17 More than ever, senior managers are holding marketers accountable for marketing investments and asking that marketing expenditures be justified. Answer: True Level of difficulty: Easy 18 Marketing-profitability analysis is a broader version of activity-based cost accounting (ABC) to quantify the true profitability of different activities Answer: False Level of difficulty: Medium 19 To build a creative marketing organization is to build a capability in strategic innovation and imagination. Answer: True Level of difficulty: Easy 20 The contribution of activity-based cost accounting (ABC) is to refocus management’s attention away from using actual costs of supporting individual products, customers, and other entities toward using only labor or material standard costs to allocate full costs. Answer: False Level of difficulty: Medium 21 Marketing accountability means that marketers can more precisely estimate the effects of different marketing investments. Answer: True Level of difficulty: Easy 22 Only managers at the front-line level need to be personally involved in knowing, meeting, and serving customers. Answer: False Level of difficulty: Easy 23 To create a market- and customer- focused company, a CEO can take many steps, such as to shift a process-outcome focus to a department focus. Answer: False Level of difficulty: Easy 24 Marketing management effectiveness describes whether an organization’s output meets its goal or expectations reflecting an organization’s marketing management capacity and deficiency. Answer: True Level of difficulty: Medium 25 The marketing audit only focuses on marketing weaknesses and trouble spots. Answer: False Level of difficulty: Medium 26 A summary set of relevant internal and external measures can be assembled in a marketing dashboard for synthesis and interpretation. Answer: True Level of difficulty: Easy 27 Marketing-mix model is more effective at assessing how different marketing elements work in combination. Answer: False Level of difficulty: Easy 28 To improve marketing management efficiency is to measure and control marketing implementation. Answer: True Level of difficulty: Easy 29 A strategic marketing plan can be successful even without marketing implementation. Answer: False Level of difficulty: Easy 30 An effective dashboard is to improve integrated marketing communications, and reveal where marketing investments are paying off and where they aren’t. Answer: False Level of difficulty: Medium Multiple Choice Questions 31 A Brand-asset management team (BAMT) ________. a. concerns itself with the brand only during the marketing audit b. consists of key brand managers from other companies c. consists of management personnel from other departments d. consists of top evel mangers reviewing the brand during an audit e. consists of key representatives from major functions affecting the brand’s performance Answer: e Level of difficulty: Hard 32 _________ is a comprehensive systematic, independent, and periodic examination of a company’s or business unit’s marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company’s marketing performance. a. Marketing plan b. Marketing management c. Marketing audit d. Marketing intelligence e. Marketing metrics Answer: c Level of difficulty: Easy 33 The four characteristics of a marketing audit are ________. a. product orientation, market orientation, innovation orientation, productivity orientation b. comprehensive, systematic, independent, periodic c. comprehensive, systematic, periodic, corporate d. systematic, as needed, comprehensive, independent e. compartmentalized, systematic, periodic, independent Answer: b Level of difficulty: Hard 34 Four areas for efficiency control that firms must evaluate are ________. a. personnel efficiency, distribution efficiency, advertising efficiency, brand profitability b. sales force efficiency, profitability efficiency, brand efficiency, distribution efficiency c. sales force efficiency, brand margin efficiency, distribution efficiency, advertising efficiency d. sales force efficiency, advertising efficiency, sales promotion efficiency, distribution efficiency e. sales force efficiency, advertising efficiency, brand profitability, distribution efficiency Answer: d Level of difficulty: Medium 35 The control process includes the following ________. a. goal setting, performance measurement, performance diagnosis, corrective action b. goal setting, brand review, marketing audit, corrective action c. brand audit, control review, efficiency control, corrective action d. management scorecard, goal setting, marketing audit, corrective action e. efficiency control, strategic control, goal setting, corrective action Answer: a Level of difficulty: Medium 36 One of the cardinal rules in conducting the marketing audit is ________. a. it has to be independent b. do not rely solely on company managers for data and opinions c. it has to be conducted periodically and comprehensively d. a “short version” of a marketing audit is satisfactory e. a marketing audit is not necessary except when the company is in trouble Answer: b Level of difficulty: Hard 37 Going forward there are a number of imperatives to achieving marketing excellence. Marketing must be “holistic” and less departmental. Marketers must achieve larger influence in the company if they are to be the main architects of business strategy. In addition, marketers must ________. a. create new ideas if the company is to prosper in a hypercompetitive market b. marketers must strive for customer insight and treat customers differently but appropriately c. marketers must build strong brands through performance, more than through promotion d. marketers must go electronic and win through building superior information and communications systems e. all of the above Answer: e Level of difficulty: Hard 38 Your firm has had three quarters of declining sales. You have traced the problems to distribution efficiency shortcomings. Which of the following should you track to ensure that the firms distribution efficiency is maximized? a. Logistics as a percentage of sales. b. Percentage of sales sold on deal. c. Before and after measures of the product’s performance. d. Number of lost customers per quarter. e. Costs per inquiry. Answer: a Level of difficulty: Medium 39 Sales managers need to monitor the following key indicators of efficiency in their territories that include ________. a. average number of calls per salesperson per day b. average sales call time per contact c. average revenue per sales call d. average cost per sales call e. all of the above Answer: e Level of difficulty: Easy 40 Marketers are increasing being held accountable for their ________ and must be able to justify marketing expenditures to senior management. a. product quotas b. employees c. own training d. investments e. personal character traits Answer: d Level of difficulty: Medium 41 Two complimentary approaches to measure marketing productivity are ________ and marketing-mix modeling to estimate casual relationships and how marketing activity affects outcomes. a. quality ratios b. salesperson satisfaction scales c. marketing metrics to assess marketing effects d. distributor satisfaction surveys e. end-user samples Answer: c Level of difficulty: Hard 42 ________ is(are) the set of measures that helps firms to quantify, compare, and interpret their marketing performance. a. Marketing diagnostics b. Psychographics c. Demographics d. Marketing intelligence e. Marketing metrics Answer: e Level of difficulty: Easy 43 A ________ records how well the company is doing year after year on customer-based measures (e.g., percentage of new customers to average number of customers). a. customer-performance scorecard b. stakeholder-performance scorecard c. mission/objectives scorecard d. variance scorecard e. management scorecard Answer: a Level of difficulty: Medium 44 If a company actively tracks the performance of its suppliers, banks, and distributors, it is using what is called a ________. a. customer-performance scorecard b. stakeholder-performance scorecard c. mission/objectives scorecard d. variance scorecard e. management scorecard Answer: b Level of difficulty: Easy 45 ________ consists of measuring and evaluating actual sales in relation to goals. a. ROI analysis b. Demand c. Sales analysis d. Performance reviews e. Trend lines Answer: c Level of difficulty: Easy 46 Which of the following ways to measure market share would be seen as the company’s sales expressed as a percentage of total market sales? a. Overall market share b. Served market share c. Relative market share d. Delayed market share e. Designed market share Answer: a Level of difficulty: Hard 47 If Dell computer was seen as having a 120 percent market share and a close competitor was seen as having 90 percent market share, the market share analysis (measurement) would expressed as ________. a. overall market share b. served market share c. relative market share d. dual market share e. top dog market share Answer: c Level of difficulty: Medium 48 All of the following are components of a method (formula) that can analyze market share movements EXCEPT ________. a. customer penetration b. competitor penetration c. customer loyalty d. customer selectivity e. price selectivity Answer: b Level of difficulty: Hard 49 Annual-plan control requires making sure that the company is not overspending to achieve sales goals. The key ratio to watch is the ________. a. marketing profitability ratio b. marketing sales ratio c. share of mind ratio d. marketing expense-to-sales ratio e. marketing deliverables ratio Answer: d Level of difficulty: Medium 50 A ________ can be used to track period-to-period fluctuations in each ratio (e.g., marketing expense-to-sales ratio) used assist in annual-plan control. a. Gantt chart b. Likert scale c. control chart d. time chart e. profitability chart Answer: c Level of difficulty: Medium 51 According to the financial model of return on net worth, return on assets times (X) financial leverage equals (=) ________. a. profit margin b. asset turnover c. sales expenses d. rate of return on net worth e. the acid test ratio Answer: d Level of difficulty: Hard 52 Net profits divided by net sales equals (=) ________. a. asset turnover b. profit margin c. return on assets d. financial leverage e. rate of return on net worth Answer: b Level of difficulty: Medium 53 If a company’s profit and loss statement showed that sales for the month were $60,000 and cost of goods sold were $39,000, what would be the gross margin? a. $99,000 b. $21,000 c. 65 percent d. 153.84 percent e. Would be unable to calculate given the problem’s figures. Answer: b Level of difficulty: Medium 54 A manager observes that his last month’s salaries were $9,300, rent was $3,000, and supplies used by the company were $3,500. Considering that his company’s gross margin was $21,000, what would be his net profit for the period? a. $36,800 b. $60,000 c. $5,200 d. $10,400 e. Would be unable to calculate given the problem’s figures. Answer: c Level of difficulty: Hard 55 Which of the following would be considered to be a direct cost? a. Rent. b. Corporate image expenditures. c. Public relations expenditures. d. Leasing of business space. e. Sales commissions. Answer: e Level of difficulty: Hard 56 A useful way to analyze market share movements is in terms of four components where overall market share equals (=) customer penetration times (X) customer loyalty times (X) customer selectivity times (X) ________. a. promotion sensitivity b. price selectivity c. brand loyalty d. cultural affinity e. distribution opportunities Answer: b Level of difficulty: Hard 57 One of the essential components of a model for calculating return on net worth is financial leverage. In this context, financial leverage is equal (=) to ________. a. net profits divided by net sales b. net sales divided by total assets c. total assets divided by net worth d. net profits divided by total assets e. net profits divided by net worth Answer: c Level of difficulty: Hard 58 Sally is reviewing how to re-figure a variety of expenses and costs associated with a recent marketing effort. Her first task is to identify the direct costs associated with that effort. Which of the following would be the best example of a direct cost associated with a marketing effort? a. Rent b. Public relation’s image c. Top management salaries d. Sales commissions e. Interest on debt Answer: d Level of difficulty: Medium 59 The marketing excellence review of best practices includes as “excellent” firms that are or have changed to become _________. a. market-driven b. niche orientated and customer orientated c. value-driven d. core-competency orientated e. all of the above Answer: e Level of difficulty: Easy 60 A number of “deadly sins” signal that the marketing program is in trouble. With the following signs, identify the “sin.” “Poor identification of market segments, poor prioritization of market segments, no market segment managers, employees who think that it is the job of marketing and sales to serve customers, no training program to create a customer culture, no incentives to treat the customer especially well.” a. The company is not sufficiently market-focused and customer-driven. b. The company does not fully understand its target markets. c. The company’s marketing planning process is deficient. d. The company’s brand building and communications are weak. e. The company needs to better define and monitor is competitors. Answer: a Level of difficulty: Hard 61 a. b. c. d. To improve profitability, managers have the following options BUT ___. Reduce the resources required to perform various activities Market the researches more productive Acquire resources at lower cost Raise prices on products that consumer least amount of support resources. Answer: d Lever of difficulty: Medium Marketing-mix models analyze data from a variety of sources BUT: Retailer scanner data Company shipment data Market share data Pricing, media, and promotion spending data Answer: c Lever of difficulty: Medium The customer-oriented organization pyramid set ________ at the top Management 62 a. b. c. d. 63 a. b. c. d. Front-line people Customers Share holders Answer: c Lever of difficulty: Easy 64 Apart from marketing metrics, another complementary approaches to measure marketing productivity is: a. Marketing audit b. Marketing-mix modeling c. Marketing metrics d. Customer-based measures Answer: b Lever of difficulty: Medium 65 a. b. c. d. e. A higher level of employee satisfaction could lead to: Higher effort Higher quality products and services Higher customer satisfaction More repeat business All of the above Answer: e Lever of difficulty: Easy Essay Questions 66 Outline and explain the four steps of marketing control process needed by companies, and the overall purpose of the controls. Suggested Answer: There are four steps : (1) goal setting-what do we want to achieve; (2)performance measurement-what is happening;(3)performance diagnosis- why is it happening; (4)corrective action-what should we do about it. Figure 18.4 outlines these controls. Strategy addresses the what and why of marketing activities; implementation addresses the who, where, when, and how. They are closely related: One layer of strategy implies certain tactical implementation assignments at a lower level. At its heart is management by objectives. Level of difficulty: Medium 67 Define the four components of a marketing audit. Suggested Answer: A marketing audit should be: (1)comprehensive—the marketing audit covers all the major marketing activities of a business; (2) systematic—the marketing audit is an orderly examination of the organization’s macro and micromarketing environments, marketing objectives, and strategies, marketing systems, and specific activities; (3) independent—a marketing audit can be conducted in six ways: self-audit; audit from across, audit from above, company auditing office, company task force audit, and outsider audit; and (4) periodic—marketing audits are initiated only after sales have turn down, sales force morale has fallen, and other problems have occurred. Level of difficulty: Hard 68 List four external marketing metrics that will be useful for the marketing researcher. Suggested Answer: The text lists ten external marketing metrics (see chapter 18 , page541). They are: awareness, market share (volume or value), relative price (market share value/volume), number of complaints (level of dissatisfaction), consumer satisfaction, distribution/availability, total number of customers, perceived quality/esteem, loyalty/retention, and relative perceived quality. Students may choose any of the above. Level of difficulty: Hard 69 Sales analysis uses two specific tools for measuring and evaluating actual sales in relation to goals. What are those two tools? Suggested Answer: The two tools are: (1) sales-variance analysis and (2) microsales analysis. Level of difficulty: Medium 70 Annual-plan control requires making sure that the company is not overspending to achieve sales goals. What key ratio is watched closely? How are fluctuations of this ratio tracked? Suggested Answer: The key ratio to watch is the marketing expense-to-sales ratio. This ratio is tracked using a control chart. Level of difficulty: Medium 71 Describe and summarize the characteristics of a great marketing company. Suggested Answer: Table 18.2 and Table18.3 describes the characteristics of a great marketing company. It selects its target markets in which it enjoys superior advantage; the company’s employees are customer- and market-minded; good working relationship between marketing and other departments; incentives to lead to the right behaviors; the company continuously tracks customer satisfaction and loyalty; manages a value-delivery system; skilled at building its brand names; flexible in meeting customer’s varying requirements. Level of difficulty: Hard Chapter 19 –Managing Marketing in the New World True/False Questions 1. A global firm is one in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions. False (moderate) 2. One factor drawing companies into the global arena is that some foreign markets offer more profit opportunities than the domestic market does. True (easy) 3. The second major decision in international marketing is deciding which market(s) to enter. True (moderate) 4. The mode of entry into international markets with the highest level of commitment, risk, control, and profit potential is the joint venture. False (moderate) 5. Indirect exporting involves working with independent intermediaries that sell the product. True (moderate) 6. A drawback of joint ventures is that the partners might disagree over marketing policies. True (moderate) 7. Making no product changes and no communications changes when moving into an international market is termed “dual adaptation.” False (moderate) 8. A straight extension means introducing the product in the foreign market without any change. True (easy) 9. Backward invention is reintroducing later product forms that are well adapted to a foreign country’s needs. False (moderate) 10. Bill sells Fram-branded auto parts in Guangzhou and Foshan. He sells the exact products the same way, using Cantonese-language radio advertising. This is an example of a straight extension. True (moderate) 11. Gray markets refer to selling to older consumers in countries with aging populations, such as Japan. False (moderate) 12. Internal marketing requires that everyone in the organization buy into the concepts and goals of marketing. True (easy) 13. The functional form of a marketing organization is the most common form. True (moderate) 14. A drawback of the product manager organization is that while these managers are expert in the product, they rarely achieve functional expertise. True (difficult) 15. When customers fall into different user groups with distinct buying preferences and practices, a matrix-management organization is desirable. False (moderate) 4. Some important benefits of interactive marketing are that it is highly accountable and that its effects can be easily traced. True (moderate) 5. It has been estimated that over half of all online searches are for products and services. False (moderate) 6. One important guideline for email marketing is to make it easy for customers and potential customers to “unsubscribe.” True (moderate) Multiple Choice Questions 21. A model for international marketing is Avon, who has __________ representatives (the company’s sales force) in more than __________ countries. a. 5 million; 120 (moderate) b. 1 million; 50 c. 500,000; 40 d. 300,000; 30 e. 100,000; 25 22. A(n) __________ operates in two or more countries and captures advantages (in R&D, production, and other areas) in its costs and reputation that are NOT available to purely domestic competitors. a. backyard economy b. global firm (moderate) c. NiMBy d. GPS e. Ethernet 23. What is NOT a reason a firm might be drawn to international markets? a. a foreign market may provide higher profits b. selling more allows for better economies of scale c. following a large customer abroad d. reducing dependence on any one market—the portfolio approach e. all of the above are reasons (moderate) 24. What is NOT an important risk to consider when making the decision to market abroad? a. Foreign customer preferences are not easily understood b. Foreign business culture is challenging c. The regulations in other countries will likely be confusing and costly to deal with d. Domestic customers will resist following the company abroad (moderate) e. Finding managers with talent could be challenging 25. Which is the first major decision in international marketing? a. Deciding how to enter the market. b. Deciding on the marketing organization. c. Deciding on the marketing program. d. Deciding which markets to enter. e. Deciding whether to go abroad. (easy) 26. Ayal and Zif argue that going into fewer countries is advisable when __________. a. population, income size, and growth are high in the initial countries chosen (moderate) b. population, income size, and growth are low in the initial countries chosen c. population is low, and income size and growth are high in the initial countries chosen d. population and income size are high, and population growth is low in the initial countries chosen e. Ayal and Zif recommend always going into more countries over choosing to go into less countries 27. Which is the last major decision in international marketing? a. Deciding how to enter the market. b. Deciding on the marketing organization. (moderate) c. Deciding on the marketing program. d. Deciding which markets to enter. e. Deciding whether to go abroad. 28. The American owners of StrongBad comics have been approached by a Japanese entrepreneur who wants to sell StrongBad stuffed animals and cell phone ringtones. If the owners agree they are entering into a(n) __________ agreement with the entrepreneur. a. indirect exporting b. direct exporting c. licensing (moderate) d. joint venture e. direct investment 29. Which of the following entry modes has the most financial risk and profit potential? a. Indirect exporting. b. Direct exporting. c. Licensing. d. Joint venture. e. Direct investment. (moderate) 30. Which type of exporting requires the highest the highest degree of investment? a. Indirect. b. Lateral. c. Self. d. Import. e. Direct. (easy) 31. A(n) __________ is where foreign investors join with local ones to create a company in which they share ownership and control. a. joint venture (moderate) b. lateral arrangement c. direct investment d. overseas audit e. none of the above 32. When a Chinese company buys existing cigarette factories in Southeast Asia, it is an example of why type of international entry mode? a. Joint venture. b. Direct investment. (moderate) c. Lateral arrangement. d. Embracing overseas opportunities. e. Direct export of management practices. 33. Making a direct investment on international soil can lead to cost economies in each of the following ways, EXCEPT: a. cheaper labor. b. cheaper raw materials. c. easier advertising. (moderate) d. government incentives. e. freight savings. 34. Making a direct investment on international soil can lead to deeper relationships with all of the following important constituencies, EXCEPT: a. government. b. customers. c. local suppliers. d. distributors. e. All of the above are important constituencies that direct investment can improve. (easy) 35. When a company does a straight extension into a foreign marketplace, they __________ the communications, and __________ the product. a. adapt; adapt b. adapt; do not change c. do not change; adapt d. do not change; do not change (moderate) e. do not change; develop a new version of 36. Which is NOT a way of doing communications adaptation when taking a market offering abroad? a. Use the very same message everywhere. (moderate) b. Use the same message everywhere, varying language, name or colors. c. Use the same theme globally, but adapt the copy. d. Develop a global pool of ads and let local managers pick the most appropriate for their market. e. Create an entirely country-specific program. 37. Which is NOT a contributor to price escalation? a. Transportation costs. b. Retailer give-backs. (moderate) c. Importer margin. d. Currency fluctuation. e. Tariffs. 38. Haagen-Dazs created its popular dulce de leche flavor based on a common dessert from which country? a. France b. Italy c. Argentina (easy) d. Romania e. Switzerland 39. McDonald’s worldwide Big Mac prices are published annually in the Big Mac Index in the Economist magazine. The sandwiches run from around a $1 to over $5, depending on the country and what other food costs there. This is an example of setting a __________ price in the markets served. a. uniform b. within-tolerance c. variable d. market-based (moderate) e. cost-based 40. Fiat sends the metal-stamping equipment and molds for its Series 2 small car to Yugoslavia. The car is no longer sold in Western markets, but will be made and marketed in this eastern region at a low price compared to other offerings in the market. This is an example of __________. a. product translation b. straight extension c. forward invention d. forward vertical integration e. backward invention (moderate) 41. To get soap products to consumers in Japan, Procter & Gamble products must go through __________ intermediaries. a. five-six (moderate) b. one-two c. a big, crazy, inefficient number d. the same number as in America e. the same number as in Europe 42. In the __________, branded products are diverted from normal or authorized distribution channels in the country of product origin or across international borders. a. trading docks b. gray market (moderate) c. black market d. stock market e. distribution channels 43. Which of the following is NOT a part of developing your distribution channels in a new country? a. Choosing the right distributors. b. Contacting potential distributors. c. Seeking pricing advice from distributors. (moderate) d. Investing in your distributors. e. Setting up performance goals for your distributors. 44. Which is the most common form of marketing organization? a. Geographic. b. Product management. c. Hedonic. d. Functional. (moderate) e. Aesthetic. 45. Which type of organization makes sense if the company’s products are quite different or if there is a huge number of products? a. Geographic. b. Functional. c. Area-market specialists. d. Utilitarian. e. Product management. (moderate) 46. Which is NOT a disadvantage of the functional organization structure? a. Administrative simplicity. (moderate) b. Inadequate planning for specific products. c. Inadequate planning for specific markets. d. Functional groups competing for the same budget. e. Difficult coordination problems. 47. Which is an advantage of the product-management organization structure? a. Plenty of authority to carry out responsibilities. b. Can react quickly to market changes. (difficult) c. Very little conflict or frustration. d. Short-term thinking that allows for strong brand building. e. Product managers developing functional expertise 48. When customers fall into different user groups with distinct buying preferences and practices__________, is the most desirable type of organization. a. product management b. brand management c. market management (moderate) d. category management e. matrix management 49. Which of the following is NOT a disadvantage of using a matrix-management organization? a. The system is costly. b. It creates conflict. c. Questions about authority. d. Doesn’t work in flat, lean team organizations. (moderate) e. Questions about responsibility. 50. Advocates of the matrix-management organization say that all of the following are organizational attributes that make this organizational style work, EXCEPT: a. a flat organization (few management levels from top to bottom). b. a lean organization (efficient and effective budgeting). c. a team-oriented organization. d. an organization focused around business processes that cut horizontally across functions. e. a bottom-up organization (innovations come from lower-level employees). (difficult) 51. Certain activities must occur within the organization in a top-down fashion. According to Weber, the role of marketing at the corporate level includes all of the following, EXCEPT: a. promoting a culture of customer orientation. b. assessing market attractiveness in terms of customer needs. c. promoting a culture of trust in leadership. (moderate) d. assessing market attractiveness in terms of competitive offerings. e. developing the overall value proposition to deliver superior value to customers. 52. With broadband Internet connections becoming more common, marketers can do more communicating online with customers. Which is NOT really associated with this growing ability to market? a. Better animation possibilities. b. Direct-to-customer video. c. Increased sophistication in sound. d. Stronger strategic thinking. (moderate) e. Ability to interact with the customer. 53. When evaluating Web sites, which is a part of the “ease of use” quality? a. Individual pages are clean looking. b. Typefaces are very readable. c. Site makes good use of color. d. First page easy to understand. (difficult) e. Individual pages are not overly crammed with content. 54. __________ is an element of effective Web design, and is the degree to which a Web site is linked to other related sites. a. Context b. Content c. Community d. Customization e. Connection (easy) 55. __________ is an element of effective Web design, and is the site’s capability to enable commercial transactions. a. Commerce (easy) b. Context c. Content d. Community e. Customization 56. Mo’ Crunk Den U makes specialty wheels for high-end cars. Mo’s new product is a 26” platinum rim with blacked-out highlights and optional jewel-topped lug nuts. Mo’ is considering the Web for advertising the introduction of this 2-SixP line. But the Web has all sorts of advertising options, from banners to sponsorships, and more. Which fact might be most important in helping Mo’ narrow down his options for online ads? a. Banner ads cost more if they are on popular Web sites. b. Thirty-five percent of all web searches are for products and services. (difficult) c. Connection is the term for the degree to which a site is linked to other sites. d. Layout and design of a Web page is critical to its “stickiness.” e. Yahoo! charges more than Ask.com. 57. Which of the following is NOT an important guideline for those that market using email? a. Give the customer a reason to respond. b. Personalize the email content. c. Only use email with customers who have agreed to receive it. (moderate) d. Offer something the customer could not get via direct mail. e. Make it easy to “unsubscribe.” 58. The Internet is most useful as a channel of distribution, for all of the following situations EXCEPT: a. when shoppers seek more ordering convenience. b. when products must be touched or examined in advance of purchase. (moderate) c. when consumers are looking for lower cost. d. when the customer wants more information about the product’s features. e. when shoppers seek information about pricing. Essay Questions 59. Before making a decision to market abroad, what are the risks the company must consider? Answer: 1) Understanding consumer preferences and behavior in another market is probably the greatest challenge. 2) Understanding the business culture in another market is another critical challenge. 3) It is easy to underestimate how business regulations will affect marketing abroad. 4) It is unlikely that the firm has all the needed managerial talent, so buying or developing that is a risky process. 5) The political climate in the chosen country might suddenly change, as could the value of either country’s currency, making investments more risky. (moderate) pp. 332–333 60. Explain how the different, major modes of entering into foreign markets carry with them different levels of risk, commitment, control, and reward for the firm. Answer: 1) Direct investment is where the company buys or develops a business entity “on the ground” in the foreign country. This type of entry carries with it the highest risk potential, as well as the highest potential for profit. It is the entry option that gives the company the most control and it requires the highest level of commitment by the firm out of all the entry methods. 2) Indirect exporting is basically where the company sends its products out to foreign markets via other marketers or intermediaries. Their involvement ends once the product is shipped. This entry mode carries with it the lowest degree of risk, reward potential, control, and amount of company commitment. 3-5) Direct exporting, licensing, and joint ventures have intermediate levels of risk and reward, and intermediate levels of control and commitment. (moderate) pp. 334–335 61. Keegan has suggested five strategies for adapting product and communications to a foreign market. They involve changes, adaptations, or new creations of products and marketing communications. What are the five strategies and what changes, adaptations or newly-created product or communications do each require? Answer: Straight extension: is where the marketer brings the same product and the same marketing communications to the new market, with no appreciable adaptation. Product adaptation: as the name says, the product is adapted to the new consumer marketplace, but the marketing communications are not changed. Communication adaptation: as the name says, the marketing communications are adapted to the new marketplace, but the product is not changed. Dual adaptation: both the product and the communications are adapted for the new marketplace. Product invention: a new product is created for the market, requiring new communications as well. (moderate) pp. 335–336 Mini-Cases Mini-Case 19-1 Excellent Extenders in Zhejiang, China makes pickup truck bed-extension devices. The company started out with owner Wu Hao making a few extenders a day in his cousin’s garage, and the early customers were local custom shops. As the extenders caught on, regional truck dealerships began to request the products, and production moved to a freestanding facility with four full-time employees. A Brazilian friend told Anthony that truck extenders present a large potential in his homeland. After some research and a few faxes, Wu Hao decides that indeed Brazil is a huge market for his products. 62. Refer to Mini-Case 18-1. One Brazilian entrepreneur in Sao Paolo contacts Wu Hao and suggests that he be allowed to manufacture Excellent Extenders in his country to avoid shipping costs. The entrepreneur will pay Wu Hao a royalty in exchange for being allowed to use the Excellent Extenders name and design. If the two businesspeople in this story agree on the deal, they are entering into a(n) __________ agreement. a. indirect exporting b. direct exporting c. licensing (moderate) p. 334 d. joint venture e. direct investment 63. Refer to Mini-Case 18-1. Wu Hao is skeptical about the entrepreneur, but not about the idea of selling his products in Brazil. He does more research about entering foreign markets. Which of the following entry modes would have the most financial risk and profit potential for Excellent Extenders? a. Indirect exporting. b. Direct exporting. c. Licensing. d. Joint venture. e. Direct investment. (moderate) p. 334 64. Refer to Mini-Case 18-1. In the end, Wu Hao decides that exporting his Excellent Extenders products makes the most sense. He finds another entrepreneur who will “work” the other end, in terms of the marketing. All Wu Hao needs to do is ship the product and receive the wholesale price. Which type of exporting has Wu Hao decided to do? a. B2B. b. Lateral. c. Self. d. Indirect. (easy) p. 334 e. Direct. Mini-Case 19-2 Stephen Alan found an interesting drink when he was in Prague last summer, Pivo Energie, a tea-based beer. The product appears to only be a local brew. It has slightly higher alcohol levels than regular beer and also contains some caffeine due to the presence of a black tea base. The color is greenish-brown, but not opaque (you can still see through the bottle). It is traditionally sold in 1-liter amber glass bottles. The taste is strong, but not unpleasant and the aftertaste is minimal. Local advertising is executed in English, the theme being how Pivo Energie (power beer) helps keep the party going. Stephen found the drink so interesting that he found the maker and started the relationship necessary to bring the product to the market in the United States. 65. Refer to Mini-Case 18-2. Stephen’s first thought is that he should do a “straight extension” of the Czech product into the U.S. marketplace. This would involve __________ the communications, and __________ the product. a. adapting; adapting b. adapting; not changing c. not changing; adapting d. not changing; not changing (moderate) p. 335 e. not changing; developing a new version of 66. Refer to Mini-Case 18-2. After more consideration, Stephen decides to adapt the marketing communications in the U.S. market. Which of the following would NOT be a way of Stephen doing communications adaptation when entering into the United States? a. Use the very same message everywhere. (moderate) p. 336 b. Use the same message, but vary the language, name or colors. c. Use the same theme, but adapt the copy. d. Make the product, bottle, and label colors more U.S.-friendly. e. Create an entirely U.S.-specific program. ...
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