Assignment for Marketing

Index
2006 MKT Assignments 1-6...............................................................................................................1 Chapter 1 Defining Marketing for the Twenty-First Century..........................................................5 Chapter 2Adapting Marketing to the New Economy ..................................................................19 Chapter 3 Building Customer Satisfaction, Value, and Retention.................................................36 Chapter 4Winning Markets Through Strategic Planning, ............................................................50 Chapter 5 Understanding Markets, Market Demand, ...................................................................64 Chapter 6 Analyzing Consumer Markets and Buyer Behavior....................................................78 Chapter 7 Analyzing Business Markets and Buyer Behavior........................................................94 Chapter 8 Dealing with the Competition.....................................................................................110 Chapter 9Identifying Market Segments and Selecting Target Markets......................................128 Chapter 10Developing, Positioning, and Differentiating ..........................................................151 Chapter 11Setting Product and Brand Strategy..........................................................................173 Chapter 12Designing and Managing Services............................................................................194 Chapter 13Designing Pricing Strategies and Programs..............................................................215 Chapter 14Designing and Managing Value Networks ...............................................................234 Chapter 15Managing Retailing, Wholesaling, and Market Logistics........................................254 Chapter 16Designing and Managing Integrated Marketing.......................................................274

2006 MKT Assignments 1-6

Following assignments consist of two parts, one is essay and another is computer question. For essay, it is enough to write a paragraph through reading the textbook I tell you. For the computer question, you have to use SPSS or Excel to deal with data and give some explanation for your result.

Assignments 1
1. In a short essay, describe the buying interaction between a customer and Wal-Mart, incorporating the five conditions that must be satisfied so that exchange can happen. P.8. 2. In a short essay, describe the four levels of competition for FW-CW. P10-11. 3. In a short essay, discuss the following statement: The ultimate goal of a customer-centered organization is to maximize its customer satisfaction. P.41.

Assignments 2
1. Michael Porter proposed three generic strategies for getting ahead in the marketplace. Explain the three and give examples of a company that uses each strategy. P.67. The marketing plan is an important document that helps firms achieve their goals. It is often used as a part of an overall business plan to help raise capital for starting, continuing, or growing a business. A typical marketing plan has eight sections; discuss them in their proper order.P.71-72
Blanche du Bois has been charged with heading up a committee to create a strategic plan for the School of Communication at a Midwestern state university. She knows she must begin by defining the corporate mission. Give her advice on what questions need to be asked by the committee, then answered in the mission statement. P.59-60. As a member of a management consulting group, you have been retained by a business to business office equipment manufacturer. The companys product line consists of the five strategic business unit shown in the table. Use the Boston Consulting Group portfolio

2.

3.

4.

analysis ( as figure 3.2) to determine each SBUs relative market share and whether the company as a whole is healthy. Make recommendations as to future strategies. SBU DOLLAR NUMBER OF DOLLAR SALES SALES COMPETIEORS THE TOP3 0.5 1.6 1.8 3.2 0.5 8 22 14 5 10 0.7 1.6 1.8 3.2 2.5 0.7 1.6 1.2 0.8 1.8 0.5 1 1 0.7 1.7 OF MARKET GROWTH RATE 15% 18% 7% 4% 4%

A B C D E

Try to design the mission of Business School.

Assignments 3
1. 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, explain the three types of market research firms from which she can buy market research. Then, offer her three suggestions on ways that she can obtain less expensive market research. P89 Aubrey, Will, and Miguel were watching the Arizona Diamondbacks 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. In a short essay, discuss how their responses to the TV commercials illustrate perception? P118 calculate index number from the data below and then select the best demographic target from among those listed.(Calculate percentage first.) Show work below. Education of fruit drinkers Attended college Graduated high school Did not graduate high school Bases Population size 13238000 24295000 23798000 61331000 Number of users 1659000 2587000 1946000 6192000 Index

2.

3.

4. Calculate the BDI(Brand Development Index) and CDI( Category Development Index) of the

following two markets, and explain the implications of each index number for seeking in each market Population Seattle Toledo Total U.S. Answers: Percent of U.S. Brand Sales Seattle Toledo BDI Percent of U.S. category sales CDI Population 2841000 1824000 231000000 Brand Sales 2781000 873000 90000000 Category sales 21680000 6480000 800000000

Assignments 4
1. 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 which might be targeted by the Chinese concern. Include a brief explanation for why this segment might be a good one to consider. P175-179 Please deal with data given in SPSS and then segment the market, target your market and tell us your position.(I will provide the data to you )

2.

Assignments 5
1. Detail Aakers five levels of customer attitude toward a brand. What is brand equity and how is it related to the Aakers five levels? P.218 2. Competition in the soft drink industry is intense. In a short essay, describe a soft drink brand you are familiar withCoca-Cola, Fanta Orange, 7Up, Mountain Dew, etc.in terms of the six levels of meaning a product brand has.P217
3. Assume that you are the brand manager for the VW Jetta. You would like to know how to position your car in national advertisements. You start by measuring perceptions of your car versus the top three competitors. The data is shown below: a) table 1 presents data from research conducted to determine the attributes that consumers consider important in the purchase of an automobile. The survey research was performed with 100

subjects Table 1

Benefits Fuel Efficiency Styling & design Low maintenance Low cost of parts Good reputation

15 15 5 15 10 10 15 10 15 15

Rating 4 5 25 10 35 15 20 15 15 10 15

6 35 15 20 20 20

7 40 100 10 100 25 100 15 100 15 100

b) table 2 when asked to rate each car on each benefit, on a scale of 1 to 7 , where 7 is the highest rating, subjects gave the following table 2

Benefits Fuel Efficiency Styling & design Low maintenance Low cost of parts Good reputation

Average Ratings for each brand on each benefit Toyota VW Chevy BM Infiniti W Tercel Jetta Camaro 52 Q45 5 7 4 4 3 5 4 1 1 5 7 7 1 3 6.7 5 7 1 4 2 3 5 2 1 6.5 7

Questions 1) calculate the means and share of perception for the brands 2) Develop a semantic differential for each vehicle 3) Create a 2 dimensional map and position the vehicles in this 2 dimensional space 4) Which positions should you take to advertise your brand in the market place,? Explain 5) In terms of advertising strategy, should you attack competitors through comparative advertising,? Explain

Assignments 6
1. Diamond Machine Technology makes a tool for sharpening the blades
of pruning sheers and glass clippers. $250,000 in developing this sharpener. for the sharpener is $10,000. The company has invested This tool, which is about Fixed costs

the size of a piece of chewing gum, costs $3 to make.

The company expects to sell 100,000

sharpeners this year.

Diamond Machines markup on sales is 30 Calculate both

percent, and it wants to earn a 20 percent ROI. breakeven volume at both prices. Manufacturing use? p. 250-252

its markup price and its target-return price as well as its Which price should Diamond

2. Moonstruck Chocolates of Portland, Oregon, started out in the inventors 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? P.269

Chapter 1 Defining Marketing for the Twenty-First Century

True/False Questions
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 politicallegal 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 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 Westports 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.) McDonalds Happy Meals d.) ice cream e.) landscaping

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
8

b.) Marketers create needs. c.) A persons 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. 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 BMWs ____________. 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
9

a.) b.) c.) d.) e.)

lowering benefits and raising costs. reducing benefits. raising costs. raising benefits. (difficult) p. 8 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 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
10

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 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 womens 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 Westports 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

11

few feature articles in regional newspapers to tell people about her product. The above describes Olde Westports _______________. 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 customers 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 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
12

b.) c.) d.) e.)

product marketing

selling (moderate) p. 13 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.) naivet 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 organizations 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. 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
13

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 companys 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 64. Joseph Dinetah is leading his company into becoming a marketing-oriented company. His VP of manufacturing and VP of finance dont 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
14

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, customers 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

15

d.) outsourcing (moderate) p. 18 e.) relationship marketing

Essay Questions
70. In a short essay, discuss as many demand states as you can for bifocal contact lenses.
Answer: Since many people dont want to admit they need bifocals, there is a negative demand. When the bifocal lenses were introduced, there was no demand because people didnt know they existed. Before they were introduced, many people thought such a product would be nice but didnt 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 cant 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 marketers argument for why an organization should embrace the marketing concept.
Answer: The companys 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. Marketings 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 Fords minivansthat 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 utilitysuch as bikes, motorcycles, SUVs, pickups, etc. Lastly, in generic competition, the competition is
16

considered any company that competes for the same dollar as the Chrysler minivanthis 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. Cathys philosophy is, We started Chick-fil-A, we built it, and we own it. Yes, we have thousands of allies, friends, partners, and employees. But it we want to maintain the quality, the integrity, and the whole culture of our company, weve 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. Cathys 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-As task environment?
17

a.) b.) c.) d.) e.)

its target customers (moderate) p. 11 development of database marketing laws governing cleanliness standards in the restaurant kitchens consumer desire for low-fat food demographic trends that show the U.S. population moving south and west

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 Targets 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.

18

Chapter 2Adapting Marketing to the New Economy

True/False Questions
1. An intranet connects people within the same company. True (easy) p. 24 2. Bill has agreed to hook his suppliers and distributors into an information web, this is called m-commerce. False (moderate) p. 24 3. When Priceline.com offered its services of bringing airfare customers together with airfare sellers, this was an example of the marketplace becoming reintermediated. True (moderate) p. 25 4. Prosumers are self-producing consumers who can essentially design their own goods, enabled by the company. True (moderate) p. 25 5. In the new economy, firms should overpromise and overdeliver. False (moderate) p. 26, Table 2-1 6. E-business is the same as E-commerce. False (moderate) p. 26 7. The most frequent online item purchased (in terms of percent of online buyers saying they have purchased in the category) so far, has been music. False (difficult) p. 27 8. Business-to-business Web sites do ten to fifteen times the commerce that business-toconsumer Web sites do. True (moderate) p. 27 9. Infomediaries are third parties that create markets linking buyers and sellers. False (moderate) p. 27 10. eComplaints is an example of a C2B Internet domain. True (moderate) p. 28 11. At www.adobe.com, users can download free software that allows them to open up documents scanned in a particular format. Adobes site is considered a content site. False (difficult) p. 29

19

12. Bookseller Amazon.com is considered a search engine because of its powerful ability to find out-of-print titles. False (moderate) p. 29 13. Brick-and-click organizations are likely to have more success than pure-click companies, due to their access to greater resources. True (moderate) p. 29-30 14. The Internet site design element customization enables site-to-user, user-to-site, or twoway communication. False (moderate) p. 30 15. Web site ease of use is measured by whether a site loads quickly, is easy to understand, and is easy to navigate. True (easy) p. 30 16. Using humor on a website is one way of bringing browsers back for a second visit. True (moderate) p. 31 17. An interstitial ad is one that pops up or under when a Web site is visited. True (moderate) p. 32 18. Selling or renting your detailed customer list for extra revenue is called getting profile income. True (moderate) p. 32 19. The first step to one-on-one marketing is to customize products, services, and messages to each customer. False (moderate) p. 33 20. Database marketing is extracting information about individuals, trends, and segments from a data warehouse. False (moderate) p. 35

Multiple Choice Questions

21. Bills company has an internal e-mail and information communications network. What is this kind of connectivity called? a.) Internet b.) extranet c.) intranet (moderate) p. 24 d.) ultranet e.) m-commerce 22. Monroe is an intermediary and allows its suppliers and buyers to hook into a special information communications network. What is this kind of connectivity called? a.) Internet b.) extranet (moderate) p. 24 c.) intranet d.) ultranet e.) m-commerce
20

23. NTTs DoCoMo system in Japan is an example of ___________. a.) Internet b.) extranet c.) intranet d.) ultranet e.) m-commerce (moderate) p. 24 24. Which of the following is not considered a driver that underpins the new economy? a.) multitasking and restructurization (moderate) p. 24 b.) digitalization and connectivity c.) disintermediation and reintermediation d.) customization and customerization e.) industry convergence 25. When a bricks-only retailer is put out of business by a Web site based business that serves the consumer need better, this is an example of ___________. a.) reintermediation b.) digitalization c.) disintermediation (moderate) p. 25 d.) customerization e.) industry convergence 26. Dylan created a Web site that brought together a large international group of collectors and sellers, as well as others who have interest in Ty stuffed toys. This new approach to serving customer and supplier need is called a.) reintermediation (moderate) p. 25 b.) digitalization c.) disintermediation d.) customerization e.) industry convergence 27. Jonas is able to landscape a yard to any design a consumer brings to him. This is called ___________. a.) customization (easy) p. 25 b.) prosumerization c.) personalization d.) customerization e.) reintermediation 28. _______________ refers to the combination of operational customization and marketing customization. a.) Customization b.) Prosumerization
21

c.) Personalization d.) Customerization (moderate) p. 25 e.) Reintermediation

29. Merck makes prescriptions and nonprescription drugs, and is considering adding chemically-engineered food supplements to their product line. This new line would fall under the category of ___________. a.) cosmoneuticals b.) nutriceuticals (moderate) p. 25 c.) cosmonauticals d.) nutrichemicals e.) biogenicals 30. Which of the following is not an example of marketing in the new economy? a.) organize by customer segments b.) focus on stakeholders c.) build brands through performance d.) underpromise, overdeliver e.) focus on profitable transactions (moderate) p. 26, Table 2-1 31. Which of the following is an example of marketing in the new economy? a.) organize by product units b.) everyone does the marketing (moderate) p. 26, Table 2-1 c.) focus on customer acquisition d.) focus on shareholders e.) look primarily at financial scorecard 32. Chris does most of her buying online, rather than get out and do her shopping in person. She is an example of a ___________. a.) hybrid consumer b.) cyberconsumer (easy) p. 26 c.) superconsumer d.) traditional consumer e.) consumer activist 33. ____________ is a term that describes a companys efforts to inform, communicate, promote, and sell its products and services over the Internet. a.) E-business b.) E-commerce c.) E-purchasing d.) E-consuming e.) E-marketing (difficult) p. 26

22

34. Yacobo Pistorius builds computers in his house to sell to a growing list of local customers. He buys all his parts online and makes a nice profit on each machine he builds to order. Yacobos online supply allows him to take part in ___________. a.) e-business b.) e-commerce c.) e-purchasing (easy) p. 26 d.) e-consuming e.) e-marketing 35. Scott goes online to follow a group that discusses the Yamaha Road Star motorcycle. Most contributors on the site are owners, and they often share information about the bikes, rallies and ride opportunities, and technical information and reviews about aftermarket products. There is even a buy-sell forum where you can find parts or used bikes for sale. This is an example of a __________ Internet domain. a.) B2C b.) B2B c.) C2C (difficult) p. 27 d.) C2B e.) B2B2C 36. The Internet is most useful for ________ products when the consumer seeks greater ordering convenience, lower cost, or information about product features and prices. It is less useful for products that must be touched or examined in advance. a.) B2C (difficult) p. 27 b.) B2B c.) C2C d.) C2B e.) BCG 37. Which kind of Internet domain does by far the greatest amount of commerce? a.) B2C b.) B2B (moderate) p. 27 c.) C2C d.) C2B e.) BCG 38. Downward price pressure on undifferentiated products is increasing, because business buyers have access to more information from all the following except ___________. a.) supplier Web sites b.) infomediaries c.) market makers d.) market mavens (moderate) p. 27 e.) customer communities

23

39. DaimlerChrysler, Ford, and GM have come together to build a money-saving, Web-based procurement system called ___________. a.) eVixxion b.) DFM*B2B c.) iSite d.) Covisint (difficult) p. 27 e.) Deltronicos 40. __________ are third parties that add value by aggregating information about alternatives. a.) Supplier Web sites b.) Infomediaries (easy) p. 27 c.) Market makers d.) Market mavens e.) Customer communities 41. C2C Internet domains have also been termed _________, and are an important buying influence. a.) word of mouth b.) web of mouth c.) word of web (moderate) p. 27 d.) World Wide Web e.) mouth of web 42. Sites such as PlanetFeedback and eComplaints allow frustrated consumers to communicate their dissatisfaction with businesses and products. These types of sites have been termed _________ Internet domains. a.) B2C b.) B2B c.) C2C d.) C2B (moderate) p. 28 e.) BCG 43. You might find all of the following on a C2B Web site, except ___________. a.) a feature that allows customers to build their own products (moderate) p. 28 b.) an invitation to e-mail a question c.) a system that allows consumers to give feedback d.) a way of conveying a complaint e.) a call-me button 44. Google.com is a sophisticated tool for finding content on the Web. It is in the _________ category of pure-click companies. a.) search engine (moderate) p. 29 b.) portal
24

c.) commerce site d.) transaction site e.) content site

45. The Economist is a British weekly business newspaper, which now has a presence on the Web at www.economist.com. This is an example of a ______________. a.) portal b.) commerce site c.) transaction site d.) content site (moderate) p. 29 e.) enabler site 46. Yahoo! and other companies would like you to pick their homepage as your homepage. These types of sites are called ________________. a.) search engines b.) portals (moderate) p. 29 c.) commerce sites d.) content sites e.) enabler sites 47. All of the following are reasons many early pure-click firms failed, except ___________. a.) poorly-designed Web site b.) focus on successful business models (easy) p. 29 c.) focus on customer acquisition rather than building relationships d.) relied on buzz instead of target marketing e.) lack of infrastructure 48. ____________, now a brick-and-click company, conducted research and found that the type of customers drawn to online service did not overlap greatly with those who preferred the traditional method of buying products and services. a.) Liberty Mutual b.) Merrill Lynch c.) Schwab d.) E*Trade e.) Avon (moderate) p. 29 49. Which of the following is not one of the advantages of being a brick-and-click firm? a.) better known brand names allow less marketing to acquire new customers b.) channel conflict issues are simplified (moderate) pp. 29-30 c.) greater financial resources d.) deeper industry knowledge e.) allows service to far-flung customers

25

50. Scuba Steves has an electronic chat room linked to its site. This Web site design element allows for what Rayport and Jaworski have called ___________. a.) context b.) content c.) community (moderate) p. 30 d.) customization e.) communication 51. The degree to which a site is linked to other Web sites is called ___________. a.) community b.) customization c.) communication d.) connection (moderate) p. 30 e.) commerce 52. The layout and design of Northwest Territories Surf Shops Web site is termed the ___________. a.) context (moderate) p. 30 b.) content c.) community d.) connection e.) commerce 53. Which of the following is not a key attribute used by Web browsers to determine ease of Web site use? a.) whether the site loads quickly b.) whether the graphics slow down user surfing c.) whether the homepage is easy to understand d.) whether the site makes good use of color and sound (moderate) p. 30 e.) whether the visitor can easily navigate to other pages 54. Certain types of Web site content are effective in attracting first-time visitors and bringing them back. Which of the following is not one of these types of content? a.) deep information b.) changing news of interest c.) interesting banner ads (moderate) p. 31 d.) changing free offers e.) humor 55. Which of the following is not recommended for creating a Web site design that attracts and keeps peoples interest? a.) simple and intuitive b.) graphics that load quickly c.) informative homepage that tells the visitor what the site will do for them
26

d.) build attention slowly to keep interest (moderate) p. 31 e.) headlines, bullet points, or short bursts of text
56. On the cnbc.com portal site, there are frequently ads for financial institutions, placed in rectangular boxes near the top of the page. This type of ad is called a(n) ___________. a.) banner ad (moderate) p. 32 b.) sponsorship c.) microsite d.) interstitial e.) browser ad 57. The X-10 camera sold thousands of small units after pop-up ads appeared on popular sites such as Yahoo! and espn.com. These pop-ups are formally known as _________ ads. a.) banner b.) sponsorship c.) microsite d.) interstitial (difficult) p. 32 e.) browser 58. The Wall Street Journal was one of the first companies to buck the give it away for free trend in their early Internet days. Instead they asked readers to pay a monthly charge for access to the complete paper online. This is an example of a(n) _______________ revenue and profit model. a.) advertising income b.) sponsorship income c.) alliance income d.) membership and subscription income (moderate) p. 32 e.) profile income 59. Even though most customers are not happy when they learn it has happened to them, and there may be codes of ethics that prohibit it, nonetheless many Web sites sell information about their customers. This is an example of a(n) ________________ revenue and profit model. a.) advertising income b.) sponsorship income c.) alliance income d.) membership and subscription income e.) profile income (moderate) p. 32 60. NewsLibrary charges $1.00 to $2.00 for site visitors to download archived news stories they have searched and found. This is an example of a __________ revenue and profit model. a.) profile income b.) product and service sales income
27

c.) transaction commissions and fees d.) market research/information charges (moderate) p. 33 e.) referral income
61. Every time Edmunds.com links a buying customer to buy one of its partners, the partner pays Edmunds a fee. This is an example of a __________ revenue and profit model. a.) profile income b.) product and service sales income c.) transaction commissions and fees d.) market research/information charges e.) referral income (moderate) p. 33 62. All of the following activities will help firms improve the value of their customer base, except a.) reducing customer defections b.) increasing the life of the customer relationship c.) aggressively going after all segments (moderate) p. 33 d.) enhancing customer profit potential e.) terminating some customers 63. LaVeen styles hair at his upscale salon in Beverly Hills. He works only by appointment, and only works on three or four customers hair per day. If he were to formally adopt Peppers and Rogers four-step framework for one-to-one marketing, he would do all of the following except ___________. a.) build up his clientele to include more celebrities (moderate) p. 33 b.) not go after every customer c.) lavish more effort on his most valuable customers d.) learn more about the individual needs of his customers e.) customize his marketing efforts to each customer 64. Which of the following is part of one-to-one marketing? a.) mass distribution b.) customer attraction c.) economies of scale d.) standardized product e.) customer profile (moderate) p. 34, Table 2-2 65. Which of the following is part of mass marketing? a.) customized product offering b.) customer anonymity (moderate) p. 34, Table 2-2 c.) share of customer d.) two-way messages e.) customer retention

28

66. Every time Johnnys Formalware salespeople make a sale, they record the customers name, address, and telephone contact information. Johnnys then uses this information to send out promotional messages about upcoming sales events. Johnnys is using a ________________. a.) customer database b.) database marketing c.) customer mailing list (moderate) p. 34 d.) business database e.) data warehouse 67. Radio Shack keeps track of what each customer purchases, and in what quantities. They also tie this information to data on customers preferences and media habits, which they obtain through contests which require short surveys be filled out for entry. Radio Shack is putting together a ___________. a.) customer database (moderate) p. 34 b.) database marketing c.) customer mailing list d.) business database e.) data warehouse 68. One study of the success of CRM (customer relationship management) programs reported that 70 percent of the firms that implemented them found little or no improvement in their business as a result. Which of the following is not a likely reason for CRM failure? a.) Large investment in the system and training was not outweighed by the cost savings of repeat business. b.) Customer base is too large to make CRM useful. (difficult) p. 35 c.) Getting everyone customer-oriented and using the system is very difficult. d.) Not all customers desire a relationship beyond the transaction. e.) Keeping the data up-to-date is a challenge. 69. Datamining allows a company to do all the following except ___________. a.) identify the best prospects by sorting through a mass of responses b.) match a specific offer with a specific consumer c.) deepen customer loyalty by remembering customer preferences d.) charge more for service to those who cost less to serve (moderate) p. 35 e.) reactivate customer purchases through timely promotions 70. Jimmi prefers to use cash for all her transactions, will not give her social security number to anyone except her employer, and would like to remain anonymous for the most part. Jimmi is an example of which type of problem with successful execution of a CRM system? a.) Large investments in the system and training are not outweighed by the cost savings of repeat business. b.) Using the system is not intuitive after using a legacy system.
29

c.) Getting everyone customer-oriented and using the system is very difficult. d.) Not all customers desire a relationship beyond the transaction. (easy) p. 35 e.) Keeping the data up-to-date is a challenge. Essay Questions
71. Ralibertos is a small chain of Mexican restaurants run by Alvaro Montes. Regular customers are greeted by name and the menu is based on about 10-15 items, which can be combined into literally hundreds of dishes. Discuss how Ralibertos could use the menu and customer relationship to customize and customerize the eating experience in its restaurants. Answer: Customization means that Ralibertos can provide individually differentiated meals. The flexible kitchen and menu allow for this. Personalization is an important aspect of this process, and in Ralibertos case, this is already being done, at least for the regulars. Customerization is the combination of operational customization (the kitchen) and marketing customization (the atmosphere, the product, etc.). In a sense, Ralibertos is already practicing both the principle of customization and customerization in its current operations. (moderate) p. 25 72. Shoe and apparel maker K-Swiss came in slowly to the digital revolution. They are now a very connected and networked company. Discuss the three types of networks that a company like K-Swiss needs to stay connected with all the relevant parties. Answer: The big three are: intranets, extranets, and the Internet. a.) K-Swiss needs to allow customers to visit them virtually through providing an Internet site. The site should be well designed, interesting, and give the visitor reasons to stay and reasons to return later. b.) An intranet site allows K-Swiss to connect its employees together for internal communications purposes. c.) Extranets are closed systems that allow a company to communicate with its suppliers (rubber, leather, composites, textiles), manufacturers (mostly in Asia, due to labor costs and specialization), and reseller customers (stores like Dillards, Athletes Foot, etc.). d.) For a company the size and complexity of K-Swiss, all three types will be necessary to remain competitive. (moderate) p. 24 73. Pella Windows used to make windows in stock sizes and do very little custom work. In the last five years they have revamped their production processes and abilities in order to
30

become a new economy company. What are some of the contrasts between doing business the old economy way and doing it the new way? Answer: Students can list lots of things correctly to answer this question. Table 2-1 has 9 old economy practices and 9 new economy practices. OLD 1) organize by product unit NEW 1) organize by customer segment (individuals, retailers, builders, commercial accounts) 2) focus on profitable transactions 2) focus on customer lifetime value (bigger accounts will spend more on each order and over time) 3) look primarily at financials to measure success 3) use marketing as the measure of success (customer satisfaction, retention, etc.) 4) focus on shareholders 4) focus on stakeholders (includes customers, business allies, stockholders, employees, etc.)

31

5) marketing does the marketing employees,

5) everyone does the marketing (all especially those that come in contact with the customer, need to be aware they are part of the companys communication process whether they like it or not!) 6) build brand through performance (let the quality do the talking) 7) focus on customer retention (new cost much more to get than established customers cost to maintain) 8) measurement (customers, especially the profitable ones, need to be able to communicate their pleasure or displeasure with the firm) 9) underpromise, overdeliver (delight with more than they expected, they will feel the value and return) (moderate) p. 26, Table 2-1

6) build brand through advertising 7) focus on customer acquisition customers

8) no customer satisfaction measurement most

9) overpromise, underdeliver customers

74. Foster Grant sells its eyewear through its Web site, through distributors such as Wal-Mart, and to wholesalers who resell to chains, such as 7-Eleven and smaller stores, such as Minimarket in Piggot, Arkansas. Which of the four types of Internet domains does or should Foster Grant use to take advantage of the ability to connect in the marketplace. Answer: a.) FG already uses the Internet, as mentioned. This is a B2C channel (business-toconsumer) or domain. b.) Because they sell product to Wal-Mart, they may already be a part of a larger B2B (business-to-business) system, since Wal-Mart is quite sophisticated in their information systems management. c.) It would be a good idea for FG to at least monitor the C2C (consumer-to-consumer) activities related to their products. These needs are often filled by independent third parties, and allow consumers to talk to one another in an open forum.

32

d.) FG should consider providing a feedback option on their current Web site, making a C2B (customer-to-business) link between the company and the customers. (moderate) p. 26 75. Novell has outgrown its information system and asks you for advice about the possibility of including a CRM (customer relationship management) package in the new system they will be implementing. They seem to understand well the upside to CRM, but want you to detail the possible scenarios that would make the system not effective. Answer: a.) CRM systems are costly to buy, customize, and implement. Many of Novells customers do not do enough business (one-time or small customers, for example) to make CRM cost effective. b.) So-called legacy systems (the way we have always done it) may stand in the way of the switch-over. Even with an outdated system, employees are able to find their way around and get most things done. A new system takes training that may not seem worth the effort for years until it truly pays off.

33

c.) Novell may find that many customers do not want more contact or service than they are already getting from the company. Hence, the system is overkill for dealing with this group. d.) Though maybe less of a problem for a high-tech company than for others, the challenge of keeping records and other data up-to-date is potentially an immense one for a complex and international company like Novell. The book mentions a study that concluded that in 70 percent of the cases studied, CRMs had not paid off. That implies a big risk, and Novell should carefully consider the costs and benefits of including a CRM package in their new system. (difficult) p. 35

Mini-Cases
Mini-Case 2-1 Scuba-Doobie-Doo is a group of entrepreneurs who wish to create a full service SCUBA Web site. They plan to include SCUBA chat rooms for visitors, an ever-changing photo and story gallery where visitors can post, read, and view the adventures of others and of professional SCUBA writers. They plan to have an online store with all possible SCUBA equipment available for purchase. They plan to link the site to providers of SCUBA experience vacations. They plan to sell advertising to SCUBA companies. They even plan to give visitors free e-mail accounts in an effort to have a hardcore group use the homepage as the homepage on their personal computers. Scuba-Doobie-Doo will be a one-stop SCUBA source for enthusiasts. 76. Refer to Mini-Case 2-1. In relation to the Scuba-Doobie-Doo site, which of Rayport and Jaworskis design elements (the 7Cs) is not discussed? a.) customization (moderate) p. 30 b.) content c.) community d.) communication e.) commerce 77. Refer to Mini-Case 2-1. Allowing visitors to choose a free e-mail account with the site is an example of which of 7Cs design elements for successful Web sites? a.) context b.) content c.) community (difficult) p. 30 d.) communication e.) commerce 78. Refer to Mini-Case 2-1. If Scuba-Doobie-Doo sells its customer information as an early source of revenue, they would be including the ___________________ revenue and profit model in their business plan.
34

a.) b.) c.) d.) e.)

advertising income alliance income profile income (moderate) p. 32 transaction commissions and fees referral income

Mini-Case 2-2 Barnes and Noble hesitated to build an online presence until Amazon.coms success was too great to ignore. They originally feared that their network of hundreds of bricks-only stores would suffer sales losses due to the Web site competing with the stores. When the decision was finally made, B&N decided that the proper business model was to make a vast inventory of books and music available for market prices. They accepted little advertising on the site, preferring that visitors focus on B&Ns offerings. They did, however, allow other sites to post B&N ads and paid the owners of those sites a percent of each sale made to the referred customer. BarnesandNoble.com has never really caught up to the sales of Amazon.com, but the company feels the effort has increased overall company sales and B&N must maintain the Web presence in order to stem losses to their number one competitor. 79. Refer to Mini-Case 2-2. The B&N site allows few non-B&N ads or promotional efforts on their site, though they do allow _________________________ to be present on the site. a.) banners b.) interstitials c.) affiliate programs (moderate) p. 32 d.) browser ads e.) sponsorships 80. Refer to Mini-Case 2-2. The main revenue and profit model for the B&N online presence is _________. a.) advertising income b.) membership and subscription income c.) profile income d.) product and service sales income (moderate) p. 33 e.) transaction commissions and fees 81. Refer to Mini-Case 2-2. The risk of cannibalizing the bricks-only store network is an example of a how a bricks-and-clicks operation can cause __________________. a.) a well-known brand name to diminish b.) greater financial resources c.) deeper industry knowledge d.) channel conflict (moderate) p. 29 e.) 24-7 access

35

Chapter

Building

Customer

Satisfaction, Value, and Retention

True/False Questions
1. Total customer cost is the perceived monetary value of a bundle of economic, functional, and psychological benefits. False (moderate) p. 38 2. One way of improving a marketing offer is to increase the buyers nonmonetary costs. False (moderate) p. 39 3. Customer satisfaction is a function of perceived performance and expectations. True (moderate) p. 40 4. A cruise line that promises a 100 percent restful time is promoting complete satisfaction. True (moderate) p. 40 5. The key to delivering high customer satisfaction is to exceed customer expectations. True (moderate) p. 40 6. The value proposition is the whole cluster of benefits the company promises to deliver. True (easy) p. 40 7. The main goal of customer-centered firms is to maximize customer satisfaction. False (difficult) p. 41 8. The primary activities of the value chain include: logistics, operations, service, procurement, and human resource management. False (moderate) p. 43, Figure 3-3 9. Customers, employees, and suppliers are all considered a firms stakeholders. True (easy) p. 41 10. An example of a primary activity as identified in the generic value chain is human resources. False (moderate) p. 43, Figure 3-3 11. An example of a supporting activity in the generic value chain is operations. False (moderate) p. 43, Figure 3-3
36

12. The first step in the process of calculating the customer defection rate is to define and measure the companys customer retention rate. True (moderate) pp. 45 13. Customer churn is the rate at which a company loses customers and must replace them. True (easy) p. 45 14. An essential step in calculating the defection rate of customers is to estimate the lifetime value of a customer in order to figure the amount of profit lost when a customer defects. True (moderate) p. 45 15. The task of creating high customer retention is called ISO 9000 marketing. False (moderate) p. 45 16. Customer equity is the total revenue that all of a firms customers will provide over their buying lifetimes. True (moderate) p. 47 17. Frequency programs add social benefits and help keep customers loyal. False (moderate) p. 49 18. A companys largest customers are always its most profitable ones. False (moderate) p. 51 19. A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the firms cost stream of attracting, selling, and servicing that customer. True (easy) p. 51 20. The Malcolm Baldrige National Quality Award measures only customer satisfaction and firm leadership in making its decisions. False (moderate) p. 52

Multiple Choice Questions

21. The difference between total customer value and total customer cost is _______________. a.) satisfaction b.) value/price ratio customer perceived value (moderate) p. 38 c.) total added value d.) market cost 22. _______________ is the bundle of costs that customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering. a.) Customer perceived value b.) Total customer value c.) Absolute fixed costs d.) High product value
37

e.) Total customer cost (moderate) p. 38 23. Which of the following best describes the bundle of costs that customers expect to incur in evaluating, obtaining, using, and disposing of the product or service? a.) customer delivered value b.) total customer value (moderate) p. 38 c.) total customer cost d.) value added cost e.) total value cost 24. Rajiv is selling a $100,000 software package to a large accounting firm. As the seller, he needs to improve his offer to close the sale. How could he enhance customer delivered value? a.) Rajiv could minimize the training offered to accompany the system. b.) Rajiv could make it harder to evaluate and compare his companys product to competitors products, and thus, minimize unfavorable comparisons. c.) Rajiv could lower the value/price ratio for the customer. d.) Rajiv could explain the extraordinary quality and value of his system and then threaten to leave the customers office without allowing the customer to buy. e.) Rajiv could enhance the image of the product and offer special servicing. (difficult) p. 39 25. The main goal of the customer-centered firm is _______________. a.) to maximize customer satisfaction b.) to treat all stakeholders equally c.) to deliver the highest customer satisfaction possible within the constraints of acceptable resources (difficult) p. 40 d.) to maximize shareholder wealth e.) to retain all or most of its customers 26. Which is not considered a stakeholder? a.) a competitor (moderate) p. 41 b.) a customer c.) an employee d.) a supplier e.) a distributor 27. ______________ is a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance in relation to his or her expectations. a.) Satisfaction (easy) p. 40 b.) Culture c.) Value d.) Ethics e.) Morals
38

28. _______________ is a function of perceived performance and expectations. a.) Total customer value b.) Customer delivered value c.) Value/price ratio d.) Customer satisfaction (moderate) p. 40 e.) Customer service 29. A waterbed maker that advertises its mattress will provide you With the greatest nights sleep of your life, is aiming to provide its customers with _______________. a.) a value proposition b.) complete satisfaction (moderate) p. 40 c.) a value-delivery product d.) a superior value chain e.) total quality marketing 30. According to the consulting firm of Arthur D. Little, the four keys to the success of a highperformance business are_______________. a.) employees, management, corporate culture, and core competencies b.) stakeholders, processes, resources, and organization (moderate) p. 41 c.) core competencies, resources, customers, and intermediaries d.) intermediaries, resources, customers, and organization e.) employees, resources, organization, and customers 31. A companys core competency _______________. a.) is a source of competitive disadvantage b.) is easy to copy c.) makes no contribution to perceived customer benefits d.) is something the competitor can never take away e.) is difficult for competitors to imitate (moderate) p. 42 32. A companys _______________ consists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment. a.) organization (moderate) p. 42 b.) mission c.) vision d.) goals e.) chain of command 33. Which of the following is NOT an example of a primary activity as identified in the generic value chain? a.) human resource management (moderate) p. 43, Figure 3-3 b.) marketing and sales c.) operations
39

d.) outbound logistics e.) service 34. An example of a supporting activity in the generic value chain would be _______________. a.) inbound logistics b.) procurement (moderate) p. 43, Figure 3-3 c.) outbound logistics d.) operations e.) service 35. Nate is the Vice President of Operations for a video game manufacturer. He is responsible for making sure the games are written according to customer expectations. The function Nate performs is what part of the value chain? a.) a primary activity (moderate) p. 43, Figure 3-3 b.) the network c.) total delivered customer value d.) a logistical activity e.) a support activity 36. As the Human Resources Director, Jolene performs in which part of the value chain? a.) service b.) a primary activity c.) infrastructure d.) operation e.) a support activity (moderate) p. 43, Figure 3-3 37. The process of comparing ones own costs and performance to competitors to see how to improve ones own performance and gross margins is called _______________. a.) benchmarking (moderate) p. 44 b.) value-delivery networking c.) a value analysis d.) a flanking attack e.) a core business evaluation 38. Which of the following is NOT an example of a core business process? a.) customer service b.) customer acquisition and retention c.) promotion (difficult) p. 44 d.) inventory management e.) new-product realization 39. Allied Signal, maker of Fram oil filters, assigned three of its employees to live near and work at Checker Auto Parts headquarters to improve the speed and reduce the cost of supplying

40

Allied Signal products to Checker branch stores. Allied Signal is trying to improve its _______________. a.) total quality management (TQM) process

b.) c.) d.) e.)

value-delivery network (difficult) p. 44 quick response system inbound logistics matrix relationship with Checker

40. Blizzard Entertainment provides a whole cluster of benefits to its customers, including a game server that allows free online gaming, online and phone-based technical support, and open beta testing for valued customers. This is an example of a _______________. a.) total quality management (TQM) process b.) value-delivery network c.) value proposition (difficult) p. 40 d.) strategy to reduce the value gap e.) matrix relationship with customers 41. Customer acquisition requires substantial skills in all of the following EXCEPT: a.) lead generation b.) finding new customers c.) lead qualification d.) account conversion e.) managerial accounting (easy) pp. 44-45 42. High customer churn means a.) high customer defection. (easy) p. 45 b.) trolling for new customers. c.) moving customers around between subsidiaries. d.) qualifying customer leads. e.) customer lifetime value. 43. Which of the following is NOT a step in monitoring and reducing the customer defection rate? a.) Define and measure the customer retention rate. b.) Distinguish the causes of customer attrition and identify those that can be better managed. c.) Determine the competitive advantage that would attract customers. (difficult) p. 45 d.) Figure out how much it would cost to reduce the defection rate. e.) Estimate how much profit it loses when it loses a customer. 44. The first step in the process of calculating the customer defection rate is to _______________. a.) distinguish the causes of customer attraction b.) estimate how much profit is lost when the company loses customers c.) define the point at which the defection rate reduces profit by at least 2 percent d.) calculate the lifetime value of each customer
41

e.) define and measure the companys customer retention rate (moderate) p. 45 45. _______________ is the present value of the profit stream that the company would have realized if the customer had not defected prematurely. a.) Customer lifetime value (difficult) p. 45 b.) Customer cost trends c.) Customer value cost d.) Customer retention rate e.) Customer defection rate 46. Hee Haw Flat Glass Corporation has 42,000 customer accounts. It lost 10 percent of its accounts this year due to service-related issues. The average revenue lost was $10,000. The companys profit margin is 5 percent. How much did the company lose due to this attrition? a.) $210,000 b.) $420,000 c.) $840,000 d.) $2,100,000 (moderate) p. 45 e.) $420,000,000 47. A small scrapbook store has 1,400 retail accounts. It lost 25 percent of those accounts this year. Each loss represented $600 in revenue. The scrapbook stores profit margin is 10 percent. How much did this small company lose this year? a.) $3,500 b.) $35,000 c.) $21,000 (moderate) p. 45 d.) $210,000 e.) $6,000 48. The key to customer retention is _______________. a.) customer satisfaction (moderate) p. 45 b.) inexpensive products c.) expensive products d.) customer concern e.) customer demographics 49. Surveys of customer satisfaction _______________. a.) indicate customers will complain when they are dissatisfied b.) demonstrate that less than 5 percent of all customers will actively complain if dissatisfied (difficult) p. 45 c.) are accurate measurements of the total level of satisfaction/dissatisfaction among customers d.) use a value-gap analysis e.) are only reliable when conducted with current customers
42

50. A company should commit to reducing the customer defection rate if _______________. a.) the cost to do so is more than the potential profit b.) it is costly to find new customers c.) the cost is less than the lost profit (moderate) p. 45 d.) the economy is slow e.) the economy is strong 51. Which is a highly satisfied customer not likely to do? a.) be more aware of the competition (moderate) pp. 45 b.) be loyal longer c.) talk favorably about the product to other consumers d.) be less price sensitive e.) offer ideas for product improvements 52. L.L Beans 100 percent Guarantee includes _______________. a.) a pro-rated refund for products that do not work as they should b.) only a refund to the purchasers credit card if the product is defective c.) only the option to replace unsatisfactory merchandise d.) only provisions for goods that were bought less than one year ago e.) 100 percent satisfaction in every way (easy) p. 46 53. The task of creating strong customer loyalty is called _______________. a.) the Deming approach b.) a value-added tactic c.) guerilla marketing d.) lifetime value enhancement e.) relationship marketing (moderate) p. 46 54. Customer retention may be strengthened by _______________. a.) erecting high switching barriers (moderate) p. 46 b.) calculating the lifetime value of the customer c.) reducing the value/price ratio on products d.) eliminating affinity groups e.) enhancing the supply chain 55. After a cost analysis, a company that sells office pc networking equipment found it was spending more to attract new customers than they were worth. How could they remedy this situation? a.) decrease the company profit margin, thereby lowering costs to the customer b.) determine how it can spend less per sales calls (difficult) p. 51 c.) increase the number of sales calls per conversion of each customer d.) engage in transfer marketing e.) reduce its promotional efforts
43

56. Anyone who might conceivably buy the product or service is called _______________. a.) a suspect (moderate) p. 47 b.) a prospect c.) a customer d.) an advocate e.) a partner 57. The salesclerk at the video store takes your order and your money for a DVD rental. This is an example of _______________marketing. a.) accountable b.) basic (moderate) p. 48 c.) partnership d.) reactive e.) proactive 58. The assistant manager at Best Buy gives you his card and tells you to call him if you cant program your new DVD player. This is an example of _______________marketing. a.) reactive (moderate) p. 48 b.) basic c.) partnership d.) accountable e.) proactive 59. The physicians assistant at the clinic where you sought treatment for an ear infection calls you the next day to see if you are feeling better. He also asks you if you are satisfied with the clinics service. This is an example of _______________marketing. a.) accountable (moderate) p. 48 b.) basic c.) partnership d.) proactive e.) reactive 60. Three months after you bought your new Honda Accord Hybrid car, the salesperson that sold it to you calls to inform you that Honda has developed an electronic mobile car security system that should alleviate any concerns you might have about the car being stolen. This is an example of _______________marketing. a.) reactive b.) accountable c.) basic d.) partnership e.) proactive (moderate) p. 49

44

61. Morton Buildings, a manufacturer of agricultural out-buildings, works closely with a large hog processing plant that subcontracts to various local farmers to raise the animals it slaughters. Morton Buildings works with the processing plants research and development team to design animal housing that meets all the requirements necessary to ensure healthy livestock. This is an example of _______________marketing. a.) reactive b.) basic c.) accountable d.) partnership (moderate) p. 49 e.) proactive 62. _______________reward customers who buy frequently and/or in substantial amounts. a.) Frequency programs (moderate) p. 49 b.) Club membership programs c.) Point-of-purchase programs d.) Sampling programs e.) Trade shows 63. Frequency marketing programs _______________. a.) cheapen the company image b.) are acknowledgements that 20 percent of a companys customers probably account for 80 percent of its business (moderate) p. 49 c.) tempt customers into buying more than they can afford d.) can result in a decrease in quality as the company tries to increase its efficiency e.) seldom, if ever, become a financial burden to the companies that operate them 64. There are many levels of relationship marketing. When a company has many customers and distributors, _______________marketing produces the lowest margins. a.) basic or reactive (difficult) pp. 48 b.) basic or accountable c.) proactive or reactive d.) reactive e.) accountable or reactive 65. A _______________is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the companys cost stream of attracting, selling, and servicing that customer. a.) profitable customer (moderate) p. 51 b.) nonprofitable customer c.) prospect d.) lifetime customer e.) reactive account 66. The 80-20 rule suggests that _______________.
45

a.) every company loses money on some of its customers b.) a company could improve its profits by firing its worst customers c.) the top 20 percent of customers might generate 80 percent of the profits, half of which are lost serving the bottom 30 percent of unprofitable customers d.) midsize customers are often the most profitable e.) all of the above are suggested by the 80-20 rule (difficult) p. 50-51 67. _______________is an organization-wide approach to continuously improving the quality of the organizations processes, products, and services. a.) Customer service b.) Core competency development c.) Total quality marketing d.) Total quality management (moderate) p. 52 e.) Conformance quality 68. According to the text, a company that satisfies most of its customers needs most of the time is called a _______________. a.) quality company (moderate) p. 53 b.) performance company c.) customer company d.) profitable company e.) competitive company 69. Both Daisy and Bosch make vacuum packaging machines. If when delivered to their buyers, each brand of machine performs exactly what its salesperson promised it would, then both manufacturers are said to have delivered the same _______________. a.) total quality b.) a competitive advantage c.) performance quality d.) a core competency e.) conformance quality (moderate) p. 53 70. Many customers have the perception that a Seiko watch will outperform a Casio watch because a Seiko watch has higher _______________. a.) performance latitude b.) quality maximization c.) performance quality (moderate) p. 53 d.) substitutability e.) transferable quality

Essay Questions

46

71. ERP Delinquent Collections Services has been challenged lately by significant customer churn, customers seem to be defecting to competitors. In a short essay, discuss how ERP may be able to reduce customer defections and retain its existing customers.
Answer: There are four steps in attempting to reduce the defection rate. First, ERP must define and measure its retention rate. Second, ERP must distinguish the causes of customer attrition and identify those that can be managed better. Third, ERP needs to estimate the amount of profit it loses when it loses customers. Fourth, ERP needs to calculate the cost of reducing the defection rate. As long as the cost is less than the lost profit, the company should spend that amount to reduce the defection rate. The most effective method for reducing customer defections is simply listening to the customers. This creates loyalty and customer satisfaction and turns defecting customers into retained customers. Listening is not enough, however. ERP must also be ready to respond quickly and constructively to customer complaints. There are two ways for ERP to strengthen customer retention. One is to erect high switching costs. For ERP this could amount to free replacement liners if the customer buys all supplies from Waters Edge. The better approach is to deliver high customer service. To do this, ERP must involve every employee in delivering service and engage in relationship marketing. (difficult) Marketing Skills: Winning Back Lost Customers section p. 48

72. In 1964 Truett Cathy developed a fried boneless chicken filet, which he began selling as a sandwich under the brand name of Chick-fil-A. In 1997 the company had $800 million in sales. The company has consistently produced a satisfying product and that consistent product quality is what it has built its reputation on. In recent years, McDonalds, Burger King, Wendys and other fast-food restaurants have introduced chicken sandwiches. In a short essay, discuss what Chick-fil-A should do in the face of this new competition? Answer: Students will suggest the company expand its product lines. Some may suggest that the company offer a delivery service or change its store format. The higher quality answers will realize that the chicken sandwich sold at Chick-fil-A restaurants represents a core competency for the firm. (moderate) p. 42 73. In a short essay, discuss how the nine activities of the Porters Value Chain work together to create value for customers. Answer: Students might end up drawing and labeling the Value Chain, which demonstrates a superficial understanding. The five Primary value-creating activities are: inbound logistics, operations, outbound logistics, marketing and sales, and service. The four Support activities include: firm infrastructure, human resource management, technology development, and procurement. Stronger answers will discuss how the firm cannot do many of these activities in the absence of the others. For example, procurement is integral to the marketing and sales
47

functionyou cant sell what you do not have. (moderate) p. 43, Figure 3-3 74. In a short essay, discuss the concept of customer lifetime value and why marketers should pay attention to this concept. Answer: When a customer continues to buy from the same company over time, the profitability of that customer continues to rise. The text mentions that a loyal Taco Bell customer brings in $11,000 in revenue to the company. Contrast this with a customer who has a bad experience with a fast food provider as a teen and vows to never return to that provider again. The stream of revenue is a very important way of measuring success and a very important thing for frontline service employees to remember. (moderate) p. 45

Mini-Cases
Mini-Case 3-1 Under the management of Garrison Cox, ComfortEase Mattress Company, Inc. has been losing business for several years to its competitors. Cox was recently replaced by Fred Wilson as CEO of the 78-year-old firm. Wilson implemented a new corporate-wide focus on the customer and on quality and the new CEO began by challenging his marketing team to increase customer value through product improvement while lowering customer costs in terms of time, psychic energy, and money. His second step was to focus on his companys primary activities; logistics, operations, service, etc. He also asked for a review of the companys procurement process, technological development, and other supporting activities. Third, he wanted to know how satisfied ComfortEases customers really were. Wilson was especially interested in learning what mattress former customers were now using. After a great deal of work and a careful analysis of the information gathered, his marketing team recommended that ComfortEase implement a program offering rewards to their most profitable customers. Wilson was pleased.

76. Refer to Mini-Case 3-1. Which of the following describes the purpose of the challenge the new CEO made to the ComfortEase marketing team? a.) It was intended to implement total quality marketing. b.) It was intended to measure customer profitability. c.) It was intended to increase customer perceived value. (difficult) p. 38 d.) It was an effective way to launch a customer retention program. e.) It was an efficient way to determine the companys defection rate. 77. Refer to Mini-Case 3-1. Based on what the CEO wanted to know about his customers satisfaction, which is the best tool to use to measure it? a.) sales force surveys b.) customer satisfaction surveys c.) SWOT analysis d.) ghost shopping

48

e.) customer retention analysis (moderate) p. 45 78. Refer to Mini-Case 3-1. Since this company has been in operation for 78 years, what is the most difficult hurdle Wilson is likely to face as he tries to make the company more customercentered? a.) the retention of customers b.) the reduction of the defection rate c.) maintaining the satisfaction level of the companys stakeholders d.) changing the companys corporate culture (moderate) p. 42-43 e.) operating in a mature market
Mini-Case 3-2 Bernardo Sampson owns a sandwich shop in Bullhead City, Arizona. The recipe is a family one. He refuses to cut corners on the quality of his products and hence has had to raise the price more often than he would like. He finds that his older customers complain about the price increases and have even tried to bargain prices with him. Some customers will buy a sandwich to share and do not buy chips or sodas, but instead request water. Bernardo does not make much money on these customers. Bernardo will often take the time to explain the price-to-quality relationship in the restaurant business. Some customers are sympathetic to that argument, but some others leave angry and vow they will not patronize Bernardos shop anymore, that they intend to buy their lunch at Burger King across the street. No one has ever complained about the food itself, something that Bernardo is quite proud of.

79. Refer to Mini-Case 3-2. When Bernardo explains his logic behind price increases to a complaining customer, he may reduce _______________. a.) customer churn (moderate) p. 45 b.) customer lifetime value c.) customer retention d.) customer satisfaction e.) customer equity 80. Refer to Mini-Case 3-2. The high quality sandwiches that customers buy at Bernardos shop represent _______________. a.) Bernardos value proposition b.) Bernardos commitment to maximize customer satisfaction c.) Bernardos core competency (difficult) p. 42 d.) Bernardos value chain e.) Bernardos corporate culture 81. Refer to Mini-Case 3-2. The 20-80 Rule suggests that _______________. a.) Bernardo is losing money on some of his customers b.) Bernardo is making money on some of his customers c.) Bernardos best customers are subsidizing his worst customers d.) a, b, and c are all suggested by the 20-80 Rule in Bernardos case (difficult) p. 50-51
49

e.) none of the above are correct, related to the 20-80 Rule

Chapter 4Winning Markets Through Strategic Planning,

Implementation, and Control
True/False Questions
1. Most large companies consist of four organizational levels - the corporate, division, subdivision, and product levels. False (moderate) p. 58 2. Defining the corporate mission is the first step to corporate strategy. True (moderate) p. 59 3. A clear, thoughtful mission statement provides competitors with a shared sense of purpose, direction, and opportunity. False (moderate) p. 60 4. A strategic business unit (SBU) has its own set of competitors. True (moderate) p. 61 5. Dogs in the BCG Matrix are weak market share businesses in low growth markets. True (easy) p. 62 6. SBUs that are plotted in the high-market-attractiveness/strong-business-strength cell indicate opportunities for divestiture or harvest activities. False (moderate) p. 63 7. Critiques of portfolio models, such as the BCG or GE model, say they may lead a firm to overemphasize market share growth, or lead to neglecting current businesses. True (moderate) p. 64 8. SWOT stands for the analysis of Strengths, Weaknesses, Organizations, and Threats. False (moderate) p. 65 9. A key to analyzing a market opportunity is to ask the question, Can the company deliver the benefits better than any actual or potential competitor? True (easy) p. 66

50

10. Porters three generic strategies are: overall cost leadership, differentiation, and focus. True (moderate) p. 67 11. McKinsey&Companys 7-S framework includes 7 different strategies for corporations to succeed. False (moderate) p. 68 12. According to Peter Drucker, it is more important to do things right than it is to do the right thing. False (moderate) p. 69 13. The marketing process consists of analyzing marketing opportunities, researching and selecting target markets, designing marketing strategies, planning marketing programs, and organizing, implementing, and controlling the marketing effort. True (moderate) p. 70 14. The first section of the marketing plan is the current marketing situation. False (moderate) p. 71 15. A company does not need to update its marketing plan once it is a good one and everyone has signed off on it. False (moderate) p. 72 16. The brand management structure for organizing the marketing department can lead to conflict and frustration when product managers are not given enough authority to carry out their responsibilities effectively. True (easy) p. 73 17. In a market management organization, companies organize to understand and deal with individual customers rather than with the mass market. False (difficult) p. 74 18. Research has shown that companies with a customer focus were nearly 7 percent more productive than their competition. True (moderate) p. 75 19. Measuring profitability by product, customer, and territory is called the Efficiency Control type of marketing control. False (moderate) p. 77 20. A customer performance scorecard records how well the company is doing on such measures as new customers, lost customers, and target market awareness. True (moderate) p. 79

Multiple Choice Questions

21. Which is not an important organizational level in large corporations? a.) corporate b.) division c.) subdivision (moderate) p. 58 d.) business unit
51

e.) product 22. Within large firms, the _________ level is responsible to establish a plan covering the allocation of funds to each business unit within its area. a.) corporate b.) headquarters c.) division (difficult) p. 58 d.) business unit e.) product 23. The _________ marketing plan lays out the target markets and the value proposition that will be offered, based on analysis of the best market opportunities. a.) strategic (moderate) p. 58 b.) division c.) tactical d.) guerilla e.) corporate 24. Which of the following is not considered a part of corporate planning? a.) defining the corporate mission b.) establishing strategic business units c.) assigning resources to each unit d.) measuring stakeholder response to marketing programs (moderate) p. 59 e.) planning new businesses, downsizing, or terminating older businesses 25. The classic Drucker questions, What is our business? and Who is our customer? are part of which corporate planning activity? a.) defining the corporate mission (easy) p. 59 b.) establishing strategic business units c.) assigning resources to each unit d.) measuring stakeholder response to marketing programs e.) planning new businesses, downsizing, or terminating older 26. Bill wants to create a mission statement for his breakfast restaurant, which is located near the outlet of a busy New York subway station. Which question is not on Peter Druckers list of classic question that help businesses define their missions? a.) What is our business? b.) Who is our customer? c.) What is the value to the customer? d.) What should our business be? e.) Why do we do what we do? (moderate) pp. 59-60 27. The _____________ refers to the number of channel levels from raw materials to final product and distribution in which a company will participate.
52

a.) b.) c.) d.) e.)

industry scope products and applications scope competence scope vertical scope (moderate) p. 60 geographical scope

28. Mission Brands strives to be the best provider of outdoor-related consumer products in the American southwest is a mission statement that focuses mainly on Missions _________________. a.) industry scope b.) vertical scope c.) geometrical scope d.) vertical scope e.) geographical scope (moderate) p. 60 29. A strategic business unit that has the highest relative market share and is in a low growth rate market is termed a _________________. a.) cash cow (easy) p. 61-62 b.) hard heart c.) falling star d.) half moon e.) four-leaf clover 30. The purpose of identifying the companys strategic business units is to _________________. a.) help managers keep the company mission separated from each product line b.) develop separate strategies and assign appropriate funding to the entire business portfolio (moderate) p. 61 c.) use the companys stars to fund the dogs d.) get question marks to grow into cash cows e.) separate the business lines for accounting purposes 31. If a _______ SBU is dragging down the companys profits, selling the SBU may be the prescribed strategy. a.) star b.) starchild c.) dog (moderate) p. 62 d.) cash sow e.) cash cow 32. The ____________ strategy is appropriate when there is a need for short-term cash flow, regardless of long-term effect. a.) building b.) holding
53

c.) passing along d.) harvesting (moderate) p. 62 e.) divesting 33. The ___________ strategy is appropriate for strong cash cows if they are to continue to yield large positive cash flows. a.) build b.) hold (difficult) p. 62 c.) milk d.) harvest e.) divest 34. The GE matrix is divided into __________ cells. a.) two b.) four c.) nine (easy) p. 63 d.) sixteen e.) twenty-five 35. The GE Business Portfolio model advises that if a strategic business unit in the weakbusiness-strength/low-market-attractiveness cell, the corporation should _________________. a.) protect position b.) invest to build c.) build selectively d.) divest (moderate) p. 63 e.) protect and refocus 36. One of the reasons the portfolio process should be used with caution is that the process _________________. a.) could help managers think more strategically b.) might improve communication between business units and the corporation c.) helps identify important issues d.) may lead to too much emphasis on market share growth (moderate) p. 64 e.) strengthens investment in more promising SBUs 37. Cannondale is a master bike-making company that sought to expand its sales by leveraging their talents with the use of aluminum frame tubing. They ended up developing and marketing a line of innovative aluminum-framed motocross bikes. This is an example of which type of diversification? a.) new products with technological synergies, marketed to different customers (difficult) p. 64 b.) new products with marketing synergies, marketed to different customers

54

c.) new products that are technologically unrelated to current ones, marketed to current customers d.) new and unrelated products, marketed to different customers e.) more of the same products, marketed to the same customers 38. Cannondale Corporation introduced a line of motocross bikes that shared the aluminum frame skills of the company. The new motocross products have been well received by the critics, but have sold poorly. This failure in the marketplace may be due to a lack of ___________ to aid in Cannondales expansion attempt. a.) technological synergies b.) marketing synergies (difficult) p. 64 c.) technologically related production capabilities d.) related products in the companys lines e.) more of the same products 39. When Vivendi, then a water and utilities management company, began to buy entertainment companies, such as Universal, this was an example of which kind of diversification growth strategy? a.) new products with technological synergies, marketed to different customers b.) new products with marketing synergies, marketed to different customers c.) new products that are technologically unrelated to current ones, marketed to current customers d.) new and unrelated products, marketed to different customers (moderate) p. 65 e.) more of the same products, marketed to the same customers 40. External environment analysis includes monitoring all the following except _________________. a.) the political-legal influences b.) demographics in the relevant marketplace c.) competitors d.) suppliers e.) company strengths in marketing and finance (moderate) p. 65 41. A companys competitors are considered a part of its a.) macroenvironmental forces b.) strength and weaknesses analysis c.) microenvironment actors (moderate) p. 65 d.) 4Cs planning e.) internal environment 42. Which of the following comes earliest in the Business Strategic-Planning Process? a.) goal formulation b.) SWOT analysis (difficult) p. 65 c.) strategy formulation
55

d.) program formulation e.) feedback and control function 43. A ____________ is an area of buyer need in which the company can perform profitably. a.) marketing threat b.) marketing analysis c.) marketing goal d.) marketing opportunity (moderate) p. 66 e.) marketing benefit 44. A marketing opportunity analysis (MOA) asks all of the following question except: a.) Can the benefits be articulated to the target market? b.) Can the media be used to define the relevant consumer? (moderate) p. 66 c.) Can the target market be located and effectively reached? d.) Can the company deliver better than competitors? e.) Will the rate of return satisfy company objectives? 45. Once a SWOT has been performed, the company must set goals and consider trade-offs. Which of the following is a trade-off that must be considered in goal formulation? a.) how to arrange the goals hierarchically b.) how to correctly state the goal quantitatively and qualitatively c.) whether the goal can be realistically carried out d.) making sure the goal is consistent e.) balancing long- and short-term goals (moderate) p. 66 46. Wal-Mart focuses like a laser on the constant lowering of prices as their main attraction to consumers. This is an example of which of Porters generic strategies? a.) overall cost leadership (moderate) p. 67 b.) differentiation c.) leadership in service d.) focus e.) leadership in quality 47. If a firm desires to attain technological leadership as one of its strategic goals, it will need to formulate a program that includes all of the following except _________________. a.) strengthening their R&D efforts b.) gathering technological intelligence c.) developing leading edge products d.) using advertising to communicate the companys mission (moderate) p. 67 e.) training a technical sales force 48. In the McKinsey&Company 7-S framework for business success, how employees think and behave is termed the _________ S. a.) strategy
56

b.) c.) d.) e.)

structure style (moderate) p. 68 skills staff

49. In the McKinsey 7-S framework for business success, there are hardware and software parts of the model. Which of the following represents part of the hardware? a.) systems (easy) p. 68 b.) style c.) skills d.) staff e.) shared values 50. Peter Drucker notes that a company might lose some efficiency, but gain some effectiveness, if it chooses to _________________. a.) right things that are wrong b.) do the right thing (difficult) p. 69 c.) risk being wrong d.) do things right e.) do unto others 51. Which sequence allows for marketing to happen throughout the value creation and delivery process? a.) make the product - sell the product b.) sell the product - make the product c.) choose the value - provide the value - communicate the value (moderate) p. 69 d.) communicate the value - provide the value - value the outcome e.) make and sell the product - make a profit 52. The problem with the traditional approach to the value-delivery processthat the firm makes something and then sells itis that _________________. a.) marketing starts too early in this process b.) defining value is too difficult in this model c.) the make-it/sell-it model causes capacity problems when correctly implemented d.) marketing is only involved in the second half of the process (moderate) p. 70 e.) (there is not a problem with this view) 53. The __________ consists of analyzing opportunities, researching and selecting target markets, designing strategies, planning programs, and organizing and implementing these efforts. a.) marketing plan b.) marketing effort c.) marketing process (moderate) p. 70 d.) marketing analysis
57

e.) marketing delivery 54. The first section in a marketing plan is the ______ section. a.) current marketing situation b.) executive summary (easy) p. 71 c.) opportunity and issue analysis d.) objectives e.) financial projections 55. The final step of the marketing process is _________________. a.) managing the marketing efforts (moderate) pp. 70-71 b.) planning marketing programs c.) analyzing market opportunities d.) developing marketing strategies e.) researching the consumer segments 56. The Action Programs section of the marketing plan should answer all of the following except: a.) What will be done? b.) When will it be done? c.) Which segment will it focus on? (moderate) p. 72 d.) Who will do it? e.) How will progress be measured? 57. Managing the marketing process is made more difficult by the proliferation of media options for consumers. This adds to the phenomenon of _________________. a.) globalization b.) deregulation c.) technological advances d.) telecommunications advances e.) market fragmentation (difficult) p. 72 58. Which is not a part of the brand managers job? a.) product planning and competitive strategy b.) annual marketing plans and sales forecasts c.) working with ad agencies d.) stimulating support among sales reps e.) initiating product attitude change (moderate) p. 73 59. Which of the following is an advantage of the brand management organization system? a.) It leads to unclear authority lines, sparking creative solutions. b.) It allows the manager to concentrate their efforts on only one product or line. (difficult) p. 73

58

c.) Brand managers are given all the authority and resources they need to do their jobs well. d.) Brand managers are free to focus on market share rather than deal with customer relationships. e.) Managers are allowed to become specialists in the brand rather than becoming functional specialists. 60. A _________ supervises several market managers, who in turn draw upon functional services as needed. a.) markets manager (moderate) p. 74 b.) customer manager c.) lead manager d.) lead market manager e.) brand asset management team All of the following are alternatives to the brand management model except _________________. f.) switch to product teams g.) use a brand asset management team (BAMT) h.) assign two or more products to each remaining manager i.) introduce category management j.) divest the brand to other strategic business units (moderate) p. 74 61. Alfrey International ships about 20 percent of its production to firms in Guadalajara, Mexico. Internally, Jefe Mitchell takes care of all the necessary paperwork for this process. This is an example of a(n) ___________ global organization. a.) export department (moderate) p. 75 b.) import division c.) international division d.) worldwide operations e.) world-is-our-oyster opportunity 62. Which of the following is not something a CEO must do to create a market- and customer-focused company? a.) convince senior management to be more customer-focused b.) get outside help and guidance c.) shift resources from other functional divisions (moderate) p. 75 d.) install a modern marketing planning system e.) establish an annual marketing excellence recognition program 63. Bonoma has identified four sets of skills for implementing marketing programs. Which of the answers below is not a part of Bonomas implementation skills? a.) the ability to determine what went wrong

59

b.) the ability to determine whether problems occurred in the marketing function, the marketing program, or the marketing policy c.) the ability to budget resources, organize effectively, and motivate others d.) the ability to challenge the status quo (moderate) p. 76 e.) the ability to evaluate results 64. Strategy addresses the what and _______ of marketing activities. a.) who b.) why (moderate) p. 76 c.) where d.) when e.) how 65. The purpose of strategic control is to examine whether the company is pursuing its best opportunities with respect to markets, products, and channels. Which of the approaches below is a part of this? a.) sales analysis b.) profitability by territory c.) sales to expense ratios d.) marketing excellence review (moderate) p. 77 e.) efficiency of sales force 66. The purpose of ___________ control is to examine whether the planned results are being achieved. a.) profitability b.) efficiency c.) strategic d.) implementation e.) annual-plan (moderate) p. 77 67. Rae-Dawn wants to see how her company is doing relative to the competition. Which marketing metric should she use? a.) sales analysis b.) market-share analysis (moderate) p. 78 c.) marketing expense-to-sales analysis d.) financial analysis e.) market-based scorecard analysis 68. A ___________ records how well the company is doing on such customer-based measures as new customers, dissatisfied customers, lost customers, target market awareness and preference, and relative quality issues. a.) sales analysis scorecard b.) market-share performance scorecard c.) customer performance scorecard (moderate) p. 79
60

d.) financial analysis scorecard e.) one-to-one consumer scorecard 69. Which of the following is not examined in a marketing audit? a.) the macro- and task environments b.) marketing strategy c.) firm profitability (moderate) p. 80 d.) marketing productivity e.) the 4 Ps

Essay Questions
a.) Blanche du Bois has been charged with heading up a committee to create a strategic plan for the School of Communication at a Midwestern state university. She knows she must begin by defining the corporate mission. Give her advice on what questions need to be asked by the committee, then answered in the mission statement. (difficult) p. 59-60 72. Draw, label, and explain the Boston Consulting Group (BCG) growth-share matrix. What are the benefits and possible drawbacks of using portfolio models? Answer: Everyone should be able to get the basic model down on paper, and the better students will see how it works and why. The axes should be labeled (vertical = market growth rate; horizontal = relative market share). SBUs that are dogs should be carefully considered, particularly if they are a drag on profits. They are candidates for divestiture or harvest. Question marks require cash from other sources and it needs to be decided whether this cash-in is going to grow the SBU into a more promising star. Stars are in growing industries and have the highest market share in their competitive group. Since growth wont last forever, the hope is that a star will maintain its market share until shifting into a cash cow. Stars need resources to keep up with growth. Cash cows have great value because they provide cash to help out in other parts of the portfolio. Benefits of portfolio approaches? They help management think strategically, and to better understand the economics of a portfolio of businesses; They also allow for improvement of plan quality, and better communication between corporate and SBU leaders; They help identify weaker and stronger units, thus allowing better decisions about resource allocation. The cautions? They may lead to an overemphasis on market share and growth, versus watching over current businesses and profits. They are easy to manipulate based on the inputs. They do not allow for measurement of synergies between the business units. (moderate) pp. 61-64

61

73. Fatima sees a number of unfilled needs in her hometown and would like to start a business to take care of those needs at a profit. Help Fatima, by explaining the questions she should ask about each of her ideas to determine the attractiveness and success probability, before risking her investment. Use the Market Opportunity Analysis model. Answer: The five questions in the MOA help determine the attractiveness and the probability of success for business ideas or opportunities. In Fatimas case, the questions should be: a.) Can the benefits involved in Fatimas ideas be adequately explained to her defined target market? b.) Can Fatimas target markets be located and reached using cost-effective media and trade channels? c.) Does Fatima have access to the capabilities and resources she will need to deliver the desired customer benefits? d.) Can Fatima deliver the benefits better than existing or potential competitors? e.) Will the financial return be better than other opportunities for Fatimas intended investment? (easy) p. 66

Mini-Cases
Mini-Case 4-1 A group of frustrated students is writing up a business plan to create a second bowling alley to compete with a run-down, busy, existing competitor in their small college town. The existing alleys are old, the building smelly, and the wait is always a long one. The students want to have clean restrooms, a bar (of course), a food area, a place for a dj/live music and dancing, as well as the traditional lanes for bowling. All these areas will be managed with a separate profit/loss statement. The students want to compete on the basis of having modern facilities and forward-thinking management. 74. Refer to Mini-Case 4-1. What would be a good mission statement for this proposed venture? a.) Lumberjack Lanes - we do bowling right! b.) Lumberjack Lanes wants to compete with its cross-town rival by having a better facility. c.) Lumberjack Lanes provides high quality, bowling and bowling-related entertainment to the greater Corvallis community. (moderate) p. 59 d.) Lumberjack Lanes strives to serve its customers with the freshest food and drink, the hottest dance music, and the cleanest lanes in town. e.) Lumberjack Lanes - Try Us, Youll Like Us! 75. Refer to Mini-Case 4-1. The Lumberjack Lanes portfolio of businesses include all the following except _________________.
62

a.) b.) c.) d.) e.)

food services restrooms (easy) pp. 60-61 beverage services bowling dancing/music

76. Refer to Mini-Case 4-1. The group is proposing that the alleys compete on which of Porters generic strategies? a.) SWOT b.) cost-leadership c.) differentiation (moderate) p. 67 d.) hybrid e.) focus Mini-Case 4-2 LiveTrack (TM) has invented technology to track range cattle in real-time using GPS technology. They have been funded by venture capitalists and are finishing the testing phase. They are ready to go to market, but their backers want more specificity in the implementation and control sections. Inventor and CEO Timo Nelson agrees and tells them hell meet with the group in a week. 77. Refer to Mini-Case 4-2. Bonoma writes that there are four sets of skills needed at the implementation stage of a project. As Timo pulls out his old marketing text, he sees he must mention all of the following skill sets in his plan except which? a.) diagnostic skills b.) the ability to discern at which level the problem is occurring c.) implementation skills d.) the ability to justify costs (moderate) p. 76 e.) the ability to evaluate results 78. Refer to Mini-Case 4-2. Timo must consider the four types of control that he will need to exercise in making LiveTrack (TM) a profitable reality for himself and his investors. In particular, the investors are interested in where the product will make the most money. This is included in the __________ type of control. a.) annual-plan b.) profitability (moderate) p. 77 c.) regional plan d.) efficiency e.) strategic 79. Refer to Mini-Case 4-2. The venture capital group would like to make sure the target customers return to LiveTrack (TM) after their first purchase, and also that they tell their rancher friends, as well. This should be tracked as carefully as the animals, they say, so

63

Timo agrees to put in a customer-performance scorecard. The scorecard should measure each of the following except _________________. a.) dissatisfied customers b.) lost customers c.) target market awareness d.) relative service quality e.) location of customers (moderate) p. 79

Chapter

Understanding

Markets,

Market Demand,
and the Marketing Environment
True/False Questions
1. A marketing information system consists of the people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute information to decision makers. True (moderate) pp. 86-87 2. Marketing information systems allow managers to do a better job of choosing their markets. True (easy) p. 86 3. The systematic collection, analysis, and reporting of data relevant to specific problems is the task of marketing research. True (moderate) p. 89 4. Small companies can engage in marketing research in a number of creative and inexpensive ways, including using an online information service such as the Internet. True (easy) p. 89 5. A marketing information system (MIS) uses only internal sources of information to aid in managerial decision making. False (moderate) p. 87 6. Usually, syndicated service research firms can provide consumer-panel data at a much lower cost than if a company carried on its own panel operations. True (moderate) p. 89 7. The last step in marketing research is developing the research plan. False (difficult) p. 89 8. The second step in the marketing research process is the definition of the problem and the research objectives. False (moderate) p. 89
64

9. Primary data is generally available more quickly and at a lower cost than secondary data. False (moderate) p. 90 10. Primary data is data that was gathered for another purpose and already exists. False (moderate) p. 90 11. Researchers who use probability sampling can calculate their confidence in the accuracy of their findings. True (difficult) p. 92 12. On average, companies budget about 11-12 percent of company sales on marketing research. False (moderate) p. 89 13. If speed is of the essence for a marketing research project, one of the best contact methods is telephone. True (easy) p. 93 14. Ethos Research provides marketing research based on in-home or field in-depth interviews. The company would be considered a syndicated service research firm. False (difficult) p. 89 15. If versatility is the most important criterion for a marketing research project, the preferred contact method is personal interview. True (moderate) p. 93 16. Developing the research plan design is typically the most expensive step of the marketing research process. False (moderate) pp. 91-92 17. Market demand for a product refers to 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) p. 95 18. A sales quota is the sales goal set for a product line, company division, or sales representative. True (moderate) p. 96 19. A trend is unpredictable, short-lived, and without social, economic, and political significance. False (moderate) p. 99 20. The market-buildup method for estimating current demand is to identify all potential buyers in each market and estimate their potential purchases. True (difficult) p. 97

Multiple Choice Questions

21. 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

65

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 necessary accurate information in a timely fashion to marketers (difficult) pp. 86-87 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 22. When Mollys 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 motels _______________ system. a.) sales reporting b.) marketing research c.) experiential research data d.) accountability information system (AIS) e.) marketing intelligence (moderate) p. 87 23. Which of the following is not a step that might be used to improve the quality of a firms marketing intelligence? a.) setting up a consumer panel b.) collecting competitive intelligence by buying a competitors products c.) watching how the stock market reacts to interest rate changes (moderate) pp. 87-88 d.) motivating distributors to pass along important intelligence from the marketplace e.) purchasing information from outside suppliers 24. The systematic collection, analysis, and reporting of data relevant to specific problems is the task of _______________. a.) the sales reporting system b.) marketing research (moderate) p. 89 c.) marketing intelligence d.) the sales force e.) top management 25. 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
66

e.) using an online information service such as the Internet (moderate) p. 89 26. 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) p. 89 e.) present the findings 27. The step in the marketing research process that includes determining who will be sampled is _________________. a.) define the problem and research objectives b.) develop the research plan (moderate) p. 92 c.) collect the information d.) make decision based on the project outcomes e.) present the findings 28. The second step in the marketing research process is the _______________. a.) development of the research plan (moderate) p. 89 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 29. 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) p. 92 d.) Should a probability sample be used or not? e.) How should respondents be chosen? 30. 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 organizations 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) p. 89 d.) developing the marketing research plan that she would employ

67

e.) holding focus groups of members of similar organizations to determine whether the problems the Chamber is facing are universal or local 31. After working for a roofing contractor for ten years, Cameron Gomez finally established his own operation. Unfortunately, Camerons 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 (moderate) p. 90 b.) causal c.) secondary d.) descriptive e.) observational 32. 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) p. 91 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 33. _______________ data is data that was gathered for another purpose and already exists. a.) Primary b.) Descriptive c.) Causal d.) Secondary (moderate) p. 90 e.) Observational 34. Which of the following is an example of primary data that would be used by Topps card company to determine the popularity if its hologram baseball card series? a.) data gathered by a card collectors club b.) an article on baseball card collecting found in Parade, the Sunday magazine found in many newspapers c.) product sales figures made available by QVC d.) responses to a mail survey by National Family Opinion on how likely someone is to buy a collectible card e.) observing how individuals react to the cards when they first see them (difficult) p. 90

68

35. Which of the following is an example of primary data that would be used by the Topps card company to determine the popularity of its new hologram baseball card series? a.) input from a focus group that was put together specifically to discuss their perception of the popularity of the hologram card series (moderate) p. 90 b.) an article about the hologram cards in a recent issue of Sport Illustrated c.) sales records for baseball cards gathered by the industrys trade council d.) a survey that noted that cards were the most often collected item by males between the ages of 10 and 35 e.) data from the sales records kept by the exclusive dealers of the Topps hologram series 36. Which of the following is not typical of a focus group? a.) 14-18 participants spend a few hours together. (moderate) pp. 90-91 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. 37. 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) p. 90 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. 38. 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) pp. 90-91 b.) intermediary team c.) agent group d.) consolidated group e.) grouped dataset 39. _______________ are best suited for descriptive research such as learning about peoples knowledge, beliefs, preferences, and satisfaction, and measuring these magnitudes in the general population. a.) Observational research methods b.) Focus groups c.) Surveys (moderate) p. 91 d.) In-depth interviews e.) Qualitative research methods

69

40. 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) p. 91 41. 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) p. 91 e.) descriptive 42. A(n) _______________ consists of a set of questions presented to respondents for their answers. a.) questionnaire (moderate) p. 91 b.) focus group c.) data set d.) database e.) observation 43. _______________ prespecify all of the possible answers, so they are easy to interpret and tabulate. a.) Open-end questions b.) Closed-end questions (moderate) p. 91 c.) Galvanometers d.) Audiometers e.) Samplings 44. _______________ allow respondents to answer in their own words. a.) Open-end questions (moderate) p. 91 b.) Closed-end questions c.) Galvanometers d.) Audiometers e.) Samplings

70

45. 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 their confidence in the accuracy of their findings. (difficult) p. 92 46. The contact method that minimizes interviewer bias is _______________. a.) mail (moderate) p. 93 b.) telephone c.) intercept interview d.) focus group e.) personal interview 47. The best contact method to use to determine how many people saw the ad for the new Volkswagen Beetle that ran last night during the 6:00 p.m. news would be _______________. a.) mail b.) Internet c.) telephone (moderate) p. 93 d.) focus group e.) personal interview 48. If reducing the cost of data gathering is the most important criterion for a marketing research project, the preferred contact method to avoid is _______________. a.) intercept interview b.) telephone c.) focus group d.) personal interview (moderate) p. 93 e.) mail 49. Which is typically the most expensive step of marketing research process? a.) problem definition b.) developing the research plan c.) information collection (moderate) p. 92 d.) information analysis e.) questionnaire design 50. 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) p. 89 d.) analyze the information
71

e.) remove all jargon and technical language from the report 51. 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) p. 94 d.) available market e.) qualified market 52. 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) p. 94 e.) qualified market 53. 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) p. 96 b.) Sales quota c.) Sales budget d.) Company demand e.) Market potential 54. A _______________ is the set goal for a product line, company division, or sales representative. a.) sales quota (moderate) p. 96 b.) sales budget c.) sales potential d.) sales forecast e.) sales aggregation 55. 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) p. 96 d.) typically expressed as the companys share of market demand at alternative levels of 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

72

56. 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 (moderate) p. 96 b.) sales quota c.) sales budget d.) company demand e.) market potential 57. _______________ 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) p. 97 b.) Company sales quota c.) Company demand potential d.) Selective demand potential e.) Integrated demand potential 58. The manufacturer of the line of Grote industrial meat slicers wants to identify all of the supermarkets, delis, and restaurants that were 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) p. 97 c.) the total market potential formula d.) the market-demand breakdown e.) a multi-regression analysis 59. 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 a macroeconomic forecast (difficult) p. 98 d.) prepare an industry forecast e.) prepare a microeconomic forecast 60. 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) p. 99 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

73

61. The major macroenvironmental forces include all of the following except _______________. a.) socio-cultural b.) demographic c.) natural d.) technological e.) managerial (easy) p. 100 62. Concern with the population age mix, ethnic markets, and household patterns fall within which of the following macroenvironments? a.) demographic (moderate) pp. 100-102 b.) socio-cultural c.) competitive d.) technological e.) natural 63. 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) p. 102 c.) raw-material-exporting economies d.) industrializing economies e.) industrial economies 64. Which of the following is true regarding savings, debt, and credit availability around the world? a.) U.S. consumers tend to save more of their income than do Japanese consumers. b.) Lower-income borrowers tend to pay lower interest rates. c.) U.S. consumers have a high debt-to-income ratio. (moderate) p. 102 d.) U.S. consumers save more than 10 percent of their income. e.) Credit is not very available in the United States. 65. The U.S. Federal Food and Drug Administration must approve all drugs before they can be sold. This reflects the importance to marketers of which macroeconomic environment(s)? a.) demographic and socio-cultural b.) competitive c.) natural d.) technological and political-legal (moderate) pp. 104-105 e.) competitive and internal 66. 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
74

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) p. 105 67. _______________ lobby government officials and pressure business executives to pay more attention to consumer rights, womens rights, senior citizen rights, minority rights, and gay rights. a.) Political-action committees (moderate) p. 105 b.) Cultural-action committees c.) Environmental-action committees d.) Green marketing committees e.) Enterprising committees

Essay Questions
68. 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, explain the three types of market research firms from which she can buy market research. Then, offer her three suggestions on ways that she can obtain less expensive market research. (easy) p. 89 69. Roberto Media is a newly formed software gaming production company that is currently developing several new interactive shows for online users. It needs to know about online surfing habits and trends. It believes it can use secondary data to learn all that it needs to know before it tries to sell the ideas currently in development. In a short essay, discuss the four types of secondary data sources. Then, discuss which one the company will be able to use and which one will not be very useful in this research project?

Answer: The two sources that are of doubtful value are internal sources and government publications. Internal sources would include prior research reports, past data on what types of shows it sold previously, and how they were sold. Since this is a new enterprise, none of this type of information will be available. Government publications might provide some demographic information to help with determining what Internet portals should be targeted, but would not be worth the effort for the information gathered. Periodicals and books should be able to provide the company with information on trends and viewing habitsboth periodicals written for the industry and popular press publications. Commercial data will certainly be useful, especially from Nielsen and possibly from Simmons Market Research Bureau. (difficult) pp. 88-91

70. Suppose you are the brand manager for Do-the-Wild-Thing, an unscented deodorant shampoo aimed at X-Generation members. Sales of your product have been declining. Exploratory
75

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 is most appropriate. The questionnaire will be the appropriate instrument with some kind of closedended question. The higher quality answers will provide sample questions. The sample plan, given declining sales, should be inexpensive. Nonprobability samples would be appropriate using mail, telephone, or a combination of both. (moderate) pp. 90-93

71. Compare and contrast the various ways in which contact with respondents in a marketing research project could take place. In each case, describe the advantages and disadvantages.
Answer: This is a fairly straightforward exercise. Table 5-2 lays out the distinct advantages and disadvantages of using the mail, the telephone, the Internet, or personal interviews to contact study participants. (moderate) p. 93

72. Scott wishes to open an all-age music club in a medium-size college town in the Rocky Mountains. 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 competitions 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) pp. 97-98

Mini-Cases
Mini-Case 5-1 The owners of the 21,900 funeral homes in the United States 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 nations 2.3 million annual deaths are cremated. Funeral homes typically charge only about one-third the amount for
76

cremation that they do for a burial. It has become imperative that funeral directors invest time and money in learning about their potential consumers.

73. Refer to Mini-Case 5-1. Imagine you are a funeral home director in a rural area that is experiencing rapid growth as a result of urban spillover. You need to be aware of the latest trends in the funeral business to survive in the business. Which of the following is the most affordable and practical method for monitoring trends in the industry? a.) Hire a syndicated-service research firm. b.) Set up an internal marketing research department. c.) Use the Internet and examine competitors Web sites and locate trends. (difficult) p. 99 d.) Subscribe to newsmagazines like Newsweek and look for articles on the industry. e.) Conduct a survey of people over the age of 65. 74. Refer to Mini-Case 5-1. 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) pp. 90-91 e.) an Internet site for people who feel funerals are over-priced. 75. Refer to Mini-Case 5-1. A funeral director who watches and records data on how consumers select a casket would be engaged in _______________ research. a.) observational (moderate) p. 90 b.) experimental c.) survey-based d.) behavioral e.) database 76. Refer to Mini-Case 5-1. One new funeral product being offered to customers is a casket brightly painted with the logos of the favorite teams of the deceased. The total number of these caskets that would be purchased in the Southwestern United States during the next two years, assuming the economy stays prosperous and the death rate stays constant, would be referred to as _______________. a.) product target b.) market demand (moderate) p. 95 c.) primary demand d.) market forecast e.) company sales forecast
Mini-Case 5-2
77

Raul wants to expand his successful auto parts business into nearby Mexico. Though he speaks decent Spanish, he grew up in southern Texas and does not know the Mexican 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).

77. Refer to Mini-Case 5-2. The first thing Raul notices is a lot of older Chevys and Fords on the road. This may indicate that the ___________ environment will be extremely important to his success. a.) competitive b.) economic (moderate) p. 102 c.) political-legal d.) natural e.) technological 78. Refer to Mini-Case 5-2. Once in the country, Raul passes the mayors office and wonders about the paperwork hell 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) pp. 104-105 b.) competitive c.) natural d.) technological e.) economic 79. Refer to Mini-Case 5-2. Raul figures that he can choose his market, and his marketing mix, but that the macroenvironments of doing business in Mexico 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 uncontrollables (difficult) p. 99-100 e.) the difficulty of finding suppliers outside the United States

Chapter 6 Analyzing Consumer Markets and Buyer Behavior

True/False Questions

78

1. Whirlpool uses staff anthropologists to determine how exotic cultures do their laundry. False (easy) p. 111 2. Culture is the most fundamental determinant of a persons wants and behavior. True (moderate) p. 112 3. Social classes are relatively heterogeneous and enduring divisions in a society. False (difficult) p. 113 4. If you reject the values of a particular group, it is considered a dissociative group. True (moderate) p. 113 5. Religious, professional, and trade union groups are types of secondary reference groups. True (moderate) p. 113 6. Of the major factors influencing buying behavior, your family will exert the broadest and deepest influence. True (moderate) pp. 114-115 7. Family members constitute the most influential primary reference group. True (easy) pp. 114115 8. An opinion leader is a person who offers informal advice or information about some product category. True (easy) p. 114 9. 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) p. 113 10. Usually people from the same subculture, social class, and/or occupation have essentially the same lifestyle. False (moderate) p. 116 11. The buyers age and occupation are considered personal factors that may affect buying decisions. True (easy) pp. 115-116 12. Because human needs are universal, status symbols are the same worldwide. False (moderate) p. 117 13. VALS 2 is designed to reveal why people believe and act as they do, specifically their consumer behavior. True (moderate) p. 116 14. The VALS 2 segment Experiencers is made up of conservative, conventional, and traditional people who favor familiar products and established brands. False (moderate) p. 116

79

15. Perception involves selecting, organizing, and interpreting information inputs to create a meaningful picture of the world. True (moderate) p. 118 16. Most human behavior is learned. True (easy) p. 119 17. The buying decision process will involve the same stages regardless of whether the purchase reflects high or low involvement. False (moderate) p. 120 18. If in order to buy a computer, James visited several electronic stores, read magazine reviews, and talked to several friends, he would have exhibited high involvement in the consumer decision process. True (moderate) p. 120 19. The consumers 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) pp. 122-123 20. Post-purchase satisfaction is a function of the consumers product expectations and the products perceived performance. True (difficult) p. 124

Multiple Choice Questions

21. Consumer behavior is a challenging field because _______________. a.) while it is easy to understand consumer behavior it is difficult to interpret it b.) consumers stated needs and wants may not reflect how they act (difficult) p. 112 c.) it is so heavily dependent on the experience and intuition of experienced marketers d.) it is often difficult to convince marketers of the value of consumer behavior studies e.) the aim of marketing is to meet and satisfy customers needs and wants 22. Which factors have the broadest and deepest influence on consumer behavior? a.) personal b.) organizational c.) social d.) cultural (moderate) p. 112 e.) psychological 23. Within the United States, Germans, Mormons, and Native Americans are all examples of: a.) social classes b.) subcultures (moderate) p. 113 c.) psychographically defined groups d.) geographically defined groups e.) cultures

80

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) p. 113 d.) Demographic groups e.) Cultures 25. Lee is constantly begging his mother to buy him a Razor brand scooter because the most popular kids at his school all have one. His mother contends that hell just break something if she buys him the scooter. For Lee, the most popular kids in his school are an example of a _______________. a.) subculture b.) reference group (moderate) p. 113 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) p. 114 d.) brand monger e.) diversity marketing program 27. Marco worked in the U.S. Navy from 1995 until 1999. 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 Marco the Navy is a(n) _______________ reference group. a.) aspirational b.) secondary (moderate) p. 113 c.) dissociative d.) associative e.) primary 28. Which type of manufacturer would find reference groups to be the most useful for understanding product and brand choices? a.) automobiles (moderate) pp. 113-114 b.) wheel barrows c.) insurance d.) beer e.) clothing

81

29. Ones family of __________ is made up of ones parents and siblings. a.) preference b.) orientation (moderate) pp. 114-115 c.) invention d.) procreation e.) later life 30. _______________ are those groups a person hopes to join. a.) Aspirational groups (moderate) p. 113 b.) Dissociative groups c.) Membership groups d.) Family group e.) Professional groups 31. Which of the following types of groups consists of members whose values or behavior an individual rejects? a.) aspirational groups b.) dissociative groups (moderate) p. 113 c.) membership groups d.) family group e.) professional groups 32. Which of the following is the most influential primary reference group? a.) family (moderate) pp. 114-115 b.) social class c.) friends d.) coworkers e.) celebrities 33. When a child specifically tells a parent what cereal to buy, this is an example of _______________. a.) coercive influence b.) direct influence (moderate) p. 115 c.) unheeded influence d.) indirect influence e.) undue influence 34. 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 (moderate) p. 115 e.) none of the above

82

35. The Checker Auto Parts chain is targeting consumers who depend heavily on relatives for emotional and economic support as well as for advice. Its target market has sharp sex-role divisions and tends to believe stereotypes exist. Which social class is this firm targeting? a.) upper lower b.) lower lower c.) working d.) middle e.) working class (moderate) p. 114 36. Dr. Lucinda Willis is a college professor at New Dominion College. She got her Ph.D. at Yale University and expects her children to attend the same exclusive institution as she did. She is home-oriented and believes in buying only the best for her home. Dr. Willis is also an active member of several civic organizations. Dr. Willis is probably a member of which U.S. social class? a.) upper upper b.) lower upper c.) upper middle (difficult) p. 114 d.) middle e.) cannot be determined from the information given 37. A _______________ consists of the activities that a person is expected to perform. a.) role (moderate) p. 115 b.) value c.) culture d.) position e.) moral 38. Doug Small is married, has three kids at home between the ages of 12 and 18, and has moved up to middle management. This information tells us which stage of the __________ cycle Doug is in. a.) psychological life b.) business c.) consumer household d.) family life (moderate) p. 116 e.) socio-demographic 39. _______________ is a persons pattern of living in the world as expressed in activities, interests, and opinions. a.) Self-concept b.) Personality c.) Social class d.) Lifestyle (moderate) p. 116 e.) Demographics

83

40. Aarons 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) p. 116 e.) demographics 41. Traits like sincerity, excitement, competence, sophistication, and ruggedness are examples of what researchers have found to make up a __________. a.) brands personality (difficult) p. 117 b.) preferred consumers personality c.) timid consumers personality d.) lifestyle personality e.) variety-seeking personality 42. _______________ refers to the distinguishing psychological characteristics that lead to relatively consistent and enduring responses to the environment. a.) Personality (moderate) p. 117 b.) Self-concept c.) Self-image d.) Attitude e.) Perception 43. 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) p. 117 b.) attitude toward life c.) actual self-concept d.) others self-concept e.) biogenic motivation 44. 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) p. 118 e.) social, esteem, and self-actualization needs 45. Biogenic needs arise from _______________. a.) motivational states b.) psychogenic states
84

c.) increased intensity d.) psychological states e.) physiological states (moderate) p. 117 46. A _______________ is a need that is sufficiently pressing to drive the person to act. a.) personality b.) value c.) moral d.) motive (moderate) p. 117 e.) belief 47. On the way to work, Moe drives past at least 150 signs for businesses and hears at least 20 commercials on the radio. Yet, if you ask Moe to name a single brand or commercial he has been exposed to, he can only think of one - a humorous ad for Budweiser beer. This is an example of _______________. a.) selective attention (moderate) p. 118 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) p. 119 d.) Cue formation e.) Attention 49. 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) p. 118 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 50. 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) p. 118 c.) cognition d.) comprehension
85

e.) conviction 51. Aunt Beverly is a hard person to buy a gift for. Her birthday is about a week away, and she has hinted to her nephew Scott how nice a personal digital assistant (PDA) would be. Suddenly Tom starts seeing ads for PDAs in newspaper and magazines and on billboards. When he goes with his girlfriend to Staples he notices PDA displays that he cant recall ever noticing before. Tom is probably engaging in _______________. a.) selective attention (moderate) p. 118 b.) perceptual aggregation c.) selective distortion d.) selective retention e.) perceptual cuing 52. While watching The Howard Stern Show, Dante saw an ad for an upset stomach remedy. Although the ad was for Rolaids, Dante thought the ad was for his favorite brand - Tums. This is an example of _______________. a.) information overload b.) selective attention c.) perceptual aggregation d.) selective retention e.) selective distortion (moderate) p. 118 53. While watching Larry King Live, Grant noticed the show had a feature on Garlique, a food supplement that helps lower cholesterol. He has taken Garlique 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 Garlique works at lowering cholesterol. Due to _______________, Grant did not remember the negative comments about Garlique. a.) information overload b.) selective attention c.) perceptual aggregation d.) selective retention (moderate) p. 118 e.) selective distortion 54. _______________ involves changes in an individuals behavior that arise from experience. a.) Learning (moderate) p. 119 b.) Personality c.) Attitude d.) Perception e.) Culture 55. __________ lead people to behave in a fairly consistent way toward similar objects. a.) Attitudes (easy) p. 119
86

b.) c.) d.) e.)

Opinions Perceptions Interests Emotions

56. Because attitudes are very difficult to change, a company would be well-advised to _______________. a.) use care when trying to change peoples attitudes b.) fit its products in with existing attitudes rather than try to change peoples attitudes (moderate) pp. 119-120 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 57. A(n) _______________ is a descriptive thought a person holds about something. a.) attitude b.) conviction c.) perception d.) opinion e.) belief (moderate) p. 119 58. While shopping for groceries, Shant asks herself, What would the children really like for dinner tonight? In this case, the childrens role in the buying decision would be as _______________. a.) initiators and influencers b.) influencers and users (moderate) p. 120 c.) deciders and influencers d.) gatekeepers, influencers, deciders, and users e.) initiators, influencers, deciders, and users 59. A(n) _______________ is a persons enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. a.) attitude (moderate) p. 119 b.) perception c.) motive d.) culture e.) belief 60. If your product is in a category where consumers are likely to frequently switch brands, one way to encourage consumers to choose your product and become habitual buyers over other choices would be to a.) dominate shelf space in the category and keep shelves stocked. (difficult) p. 121 b.) run frequent reminder ads and distribute more coupons. c.) lower your prices and offer free samples.
87

d.) run ads that give reasons for switching and create deal packs. e.) all of the above will encourage habitual usage. 61. Benson believes the best way to truly escape from his humdrum life is on a sport-style motorcycle. He has almost saved enough money to buy himself one. After studying all the information he can get his hands on about motorcycles, he realizes that there are significant differences among the Yamaha R-1, Buell Thunderbolt, Honda CBR954RR, BMW R1100S, and Kawasaki Ninja 9X-ZR offerings. He makes list of the features of each, and then compares this list to his ideal list of features. After careful thought, Benson buys a Yamaha R1. Benson has engaged in _______________ behavior. a.) dissonance-reducing buyer b.) complex-buying (moderate) p. 120 c.) need-satisfying buying d.) habitual-buying e.) variety-seeking buying 62. When shopping for ramen noodles to make for his roommates, Brandons looks at the two choicesTop Ramen and Maruchu brands. As he always does, he buys the Top Ramen. Brandon is probably engaging in _______________ behavior. a.) habitual buying (moderate) pp. 120-121 b.) dissonance-reducing buyer c.) complex buying d.) variety-seeking buying e.) need-satisfying buying 63. When shopping for picnic foods for her family to eat while they go on their Sunday drive, Aurora may buy Armour hot dogs, Pringles potato chips, Fig Newton sandwich cookies, and sometimes Hostess Ding Dongs. Aurora is probably engaged in _______________ behavior. a.) habitual buying b.) dissonance-reducing buyer c.) complex buying d.) variety-seeking buying (moderate) p. 121 e.) need-satisfying buying 64. Trying to understand a consumers behavior in connection with a product has been called mapping a a.) consumption system. b.) customer activity cycle. c.) customer scenario. d.) all of the above (moderate) p. 121 e.) none of the above 65. The first step in the buying process is the _______________. a.) information search
88

b.) c.) d.) e.)

evaluation of alternatives purchase decision location of alternatives

recognition of the need or problem (moderate) p. 122

66. Normally, the consumer receives the most information exposure about a product from _______________ sources. a.) personal b.) commercial (moderate) p. 122 c.) organizational d.) public e.) experiential 67. Rhiannon is looking to buy a new computer and has narrowed her choices down to three, an Apple iMac, a Dell, and a Gateway. 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 Gateway is the cheapest, the Dell is the fastest, and the iMac is the nicest looking. Which will she buy? a.) Shell buy the Gateway because its the cheapest. b.) You need to know how important price is over the other attributes before you can answer. c.) Shell buy the iMac, if it goes on sale for cheaper. d.) What she chooses will depend on Rhiannons mood at the time. e.) With more detail you could make a decent guess, but not predict for sure, which computer Rhiannon would end up purchasing (difficult) pp. 122-124 68. Gonzalo is considering buying a new truck. Due to budget considerations, he has eliminated all brands and models priced over $25,000. He also believes strongly in buying made in America whenever possible, so he has eliminated all foreign brands from his list. The remaining cars are part of his _______________ set. a.) total b.) consideration (moderate) p. 123 c.) choice d.) awareness e.) information 69. 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) p. 124 e.) personality changes

89

70. 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) p. 125 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.

Essay Questions
71. Bobbie is a 41-year old welder, a divorcee, and a single mother of an unemployed 19-year old son Rosco who lives at home and attends a few community college classes. They share a 1991 Ford Ranger and a 1984 Toyota Corolla, both of which have high mileage and frequently break down. Bobbies income last year was $23,000. Bobbies favorite time of the week is when she gets together with friends on Friday night to play poker. In a short essay, discuss the roles and statuses, and the personal factors that are likely to influence the consumer buying patterns of Bobbies household.
Answer: Bobbie has the role of mother at home. At work, her 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 Bobbie chooses to dress, among other consumer behaviors. Bobbies personal factors that are likely to influence her buying patterns include her age, her stage in the family life cycle, her economic circumstances, her occupation, and her lifestyle. (moderate) pp. 115-119

72. Tiffany Abdul is 16 years old. She drives a VW Cabriolet convertible. She wont be seen in public without her cell phone. She hangs around with a group of people who have formed a Blink-182 (a popular power-pop punk band) fan club. She has gone to the country club every weekend since she can remember. She likes to take tennis lessons and has even tried golfing. She is co-captain of her high schools varsity cheerleading squad. Her parents would like her to join the Honor Society (his grades are good enough), but she thinks its members are losers. Her boyfriend is a starter on the basketball team. In a short essay, identify the different types of reference groups and discuss the three ways they influence behavior.
Answer: Tiffanys parents, the other cheerleaders, and the Blink-182 fan club are primary groups. The people at the country club is a secondary reference group. She sees the Honor Society group as a dissociative reference group. The boyfriends clique may be an aspirational group. Tiffanys 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) pp. 113-115

73. Aubrey, Will, and Miguel were watching the Arizona Diamondbacks on television when a Dodge truck commercial came on followed shortly by one for Toyota trucks. Will is in the
90

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. In a short essay, discuss how their responses to the TV commercials illustrate perception? p. 118

74. 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 would use when buying new carpeting.
Answer: Personal sources would include family, friends, neighbors, and acquaintances. Commercial sources would include advertising, salespeople, and store displays. Public sources include publicity pieces in print and broadcast media, including the Internet, and reports by consumerrating organizations. Experiential sources might by taking your shoes off and walking on samples at the store or feeling a friends new living room carpeting with your hands. (easy) p. 122

75. Explain how a consumer buying a car is involved in a cluster of activities, as opposed to being involved in only a single task.
Answer: The act of making a decision to buy a car is itself a complex task. But consumers engaged in such a process are generally in the market for other related goods and services at the same time. For example, after deciding which car to purchase, the consumer needs to consider car insurance providers, their premiums and service levels. Most consumers finance, rather than pay for a car outright. This involves assessing different options, such as which bank, credit union, or other source to choose, as well a comparison of the interest rates they each may charge. The consumer also may be considering whether to add on accessories, either as part of the purchase or as post-purchase additions. This is referred to as an activity cluster in the text. (moderate) p. 121

Mini-Cases
Mini-Case 6-1 Sean McMillan 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 part of his Scottish-Irish heritage. Seans 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 his two teenagers comfortably. After talking to his wife, his brother, and a few co-workers, Jim test drives a minivan but decides he likes SUVs with V-8 engines.
91

76. Refer to Mini-Case 6-1. Seans views about cars are an expression of the _______________ factors that affect consumer buying behavior. a.) cultural (moderate) p. 113 b.) social c.) organizational d.) personal e.) psychological 77. Refer to Mini-Case 6-1. McMillan is discussing his car purchase with his _______________ reference group. a.) aspirational b.) primary (moderate) p. 113 c.) associative d.) dissociative e.) secondary 78. Refer to Mini-Case 6-1. McMillan is exhibiting _______________ behavior. a.) need-satisfying buying b.) complex buying (moderate) p. 120 c.) habitual buying d.) dissonance-reducing buyer e.) variety-seeking buying 79. Refer to Mini-Case 6-1. When looking for information, McMillan used _______________ sources. a.) primary and secondary b.) public and personal c.) commercial, public, and personal d.) experiential and public e.) personal and experiential (moderate) p. 122 80. Refer to Mini-Case 6-1. Which of the following describes Hadleys consideration set? a.) an SUV with an eight-cylinder engine that will seat at least four adults (difficult) p. 123 b.) all SUVs with 8-cylinder engines c.) all SUVsno matter what size engine they have d.) any SUV that will seat four or more e.) any SUV made by Chevrolet Mini-Case 6-2 Nate Hartman has been saving up his money for a new car, and has seen the Pontiac Aztek on the road and in ads in his favorite magazine, Vibe. The cars funky shape and weird mix of form and function are attractive to Nate. Nates father, a university provost with a Ph.D. in economic history
92

has definite opinions about the Aztek and all Pontiacs, 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 Toyota Echo, or an old, restored BMW 2002? Nate has always trusted his dads advice about cars. Dr. Hartman drives a 3-year old Volvo. Nate decides to wait a little longer, and think over the Aztek, and consider cars that his father is suggesting. He really doesnt want his father to make fun of him if he chooses unwisely.

81. Refer to Mini-Case 6-2. Nates 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) p. 113 e.) membership 82. Refer to Mini-Case 6-2. The Hartman family is probably a member of which social class? a.) lower-lower class b.) upper-lower class c.) working class d.) upper-upper class e.) upper-middle class (moderate) p. 114 83. Refer to Mini-Case 6-2. Since Nates 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) p. 114 b.) charismatic leader c.) psychographic leader d.) spiritual leader e.) automobile guru 84. Refer to Mini-Case 6-2. At what stage in the consumer decision-making process is Nate at the time of the case? a.) problem recognition b.) information search (moderate) p. 122 c.) purchase moment d.) post-purchase behavior e.) pre-recognition stage 85. Refer to Mini-Case 6-2. 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?
93

a.) b.) c.) d.) e.)

lend it convert it to a new purpose create new space for it (moderate) p. 126 sell it throw it away

Chapter 7 Analyzing Business Markets and Buyer Behavior

True/False Questions
1. Organizational buying is the decision-process by which organizations establish and satisfy their needs for goods and services. True (moderate) p. 132 2. Mining, manufacturing, banking, and distribution services are all considered part of the business market. True (easy) p. 132 3. Characteristics of business markets include that there are more buyers and larger buyers. False (moderate) p. 134 4. When compared to the consumer market, the demand for goods and services in the business market is derived. True (moderate) p. 134 5. In selling to the government, the contract is always awarded to the lowest bidder. False (moderate) pp. 133-135 6. Government buyers differ from business buyers in that government buyers are monitored more closely by outside publics. True (moderate) pp. 133-135 7. Schools and prisons are considered institutional buying organizations and they tend to have captive clienteles and limited budgets. True (moderate) p. 133 8. A secretary who prevents salespersons from contacting users or deciders is playing a gatekeeper role. True (easy) p. 137 9. 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) p. 136
94

10. Interpersonal factors have almost no influence in business purchasing decisions. False (moderate) p. 138, 140 11. A new supplier is least likely to make a sale to a prospect involved in the straight-rebuy situation. True (moderate) p. 136 12. Business buyers pay close attention to numerous economic factors such as interest rates, cross-functional buying teams, and consumer spending. False (moderate) p. 138 13. The business buying process is influenced by environmental, organizational, and individual factors. True (moderate) p. 138 14. 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) pp. 141-142 15. In choosing a supplier, the relative importance of different attributes varies with the type of buying situation. True (moderate) p. 143 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) p. 143 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) p. 143 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) p. 142 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) pp. 143-144 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) p. 144

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
95

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) p. 132 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) p. 132 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) p. 132 b.) institutional market c.) consumer market d.) government market e.) specialized market 24. 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) p. 132 25. Erins secretary developed a file of visiting salespeople, but only allowed a few to actually have time on Erins calendar. Erin is frequently charged with buying expensive office equipment as part of her job. Erins secretary is playing what role in the business buying process? a.) initiator b.) user c.) decider d.) approver e.) gatekeeper (moderate) p. 137 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
96

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) pp. 134-135 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) pp. 134-135 d.) more likely to be affected by changes in price e.) all of the above 28. 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) pp. 133-135 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. 29. Business buyers _______________. a.) are geographically as diverse as consumers b.) tend to be geographically concentrated with over 1/2 of them in seven states (difficult) pp. 134-135 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 30. 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. Since 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) pp. 134-135 b.) inelastic c.) routine d.) elastic
97

e.) constant 31. 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) pp. 134-135 c.) volatile d.) accelerated e.) elastic 32. A llama and emu breeder buys much of the food she needs to feed her livestock from a local farmer. As a part of the contract between the two parties, the farmer buys all the manure the breeder can produce for its organic vegetables. This is an example of _______________. a.) direct purchasing b.) relationship marketing c.) leasing d.) systems selling e.) reciprocity (moderate) pp. 134-135 33. The institutional market is best described as having _______________. a.) low budgets and a captive clientele (moderate) p. 133 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 34. _______________ organizations typically require suppliers to submit bids. Normally, they award the contract to the lowest bidder, although they sometimes take into account a suppliers superior quality or reputation for completing contracts on time. a.) Business b.) Institutional c.) Consumer d.) Government (moderate) pp. 133, 135 e.) Specialized 35. 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) p. 135 d.) requiring minimal paperwork and having a process open to public scrutiny
98

e.) woefully lacking in specific guidelines for would-be suppliers 36. Which of the following buying situations would represent the purchase of office supplies such as reams of computer and copier paper, and computer disks? a.) straight rebuy (easy) p. 136 b.) modified rebuy c.) new task d.) routine rebuy e.) direct purchase 37. The most routine decision process undertaken by business buyers is called a _______________. a.) straight rebuy (easy) p. 136 b.) modified rebuy c.) new task d.) routine rebuy e.) direct purchase 38. 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) p. 136 e.) direct purchase 39. Angelo Weinstein is a produce buyer for Alliant, a large food supplier. He is buying lettuce, cucumbers, and tomatoes for producing pre-made salads. He orders the same number and quality of these vegetables as before but notices that his suppliers prices have increased slightly. Angelo is conducting a _______________. a.) straight rebuy (moderate) p. 136 b.) direct purchase c.) modified rebuy d.) new task buy e.) reciprocal buy 40. 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) p. 136 d.) new task buy e.) reciprocal buy

99

41. Angelo Weinstein is a produce buyer for Alliant, a large food supplier. He is buying lettuce, cucumbers, and tomatoes for producing pre-made salads. He orders the same number and quality of these vegetables as before but notices that his suppliers prices have increased slightly. If prices from his usual produce supplier continue to rise, you can expect Angelo to engage in a _______________. a.) straight rebuy b.) direct purchase c.) modified rebuy (moderate) p. 136 d.) new task buy e.) functional rebuy 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) p. 136 e.) functional rebuy 43. Robison Corp. is a ground beef processing plant. Owners William and Walker Robison 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 $185 a day in labor costs. They have contacted the company to learn more about the $53,000 grinder. The Rogers brothers are engaged in a: a.) straight rebuy b.) direct purchase c.) modified rebuy d.) new task buy (moderate) p. 136 e.) functional rebuy 44. Advertising usually has its greatest impact at the _____________ stage of new-task buying. a.) awareness (moderate) p. 136 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) p. 136 c.) trial
100

d.) evaluation e.) adoption 46. 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) p. 137 c.) administrative personnel d.) engineering department e.) production managers 47. 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 firms agricultural business unit c.) negotiating the performance specifications for new grain storage facilities d.) renewing its subscriptions to several trade journals (moderate) p. 137 e.) switching to a new vendor for satellite moisture reporting 48. 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) p. 137 b.) initiating team c.) purchasing division d.) engineering division e.) influencing center 49. In the buying center, _______________ are people who request that something be purchased, including users or others. a.) initiators (moderate) p. 137 b.) influencers c.) deciders d.) approvers e.) gatekeepers 50. 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) p. 137
101

e.) user 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) p. 137 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) pp. 137 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 Memphis 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) pp. 137 54. Interest rates, demand for products, technological change, social responsibility concerns, and consumer buying patterns are all examples of _______________ influences on business buyers. a.) environmental (moderate) p. 138 b.) interpersonal c.) organizational d.) entrepreneurial e.) individual

102

55. Which of the following is an example of an organizational influence on a business buyer for a Korean manufacturer of designer clothes? a.) Paris fashion houses have announced the colors for this season will be teal and salmon. b.) OSHA is investigating why a worker lost her life in a factory accident. c.) A new dying technology is available that reduces textile fading by 30 percent. d.) The company has issued new purchasing policies on the selection of fabric, fasteners, and threads. (difficult) p. 138 e.) Aging consumers are ignoring the fashion designers as increasingly irrelevant. 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) p. 138 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. 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) p. 138 e.) Cultural 58. Which of the following is not employed by companies that use lean production? a.) just in time (JIT) inventory b.) long lead-time supply/inputs ordering (moderate) p. 140 c.) single sourcing with early supplier involvement d.) strict quality control e.) stable production schedules 59. 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 guests 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) pp. 141-142 b.) general need description c.) product specification d.) supplier selection
103

e.) supplier search 60. _______________ 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) p. 142 b.) Customer cost analysis c.) Total quality management d.) Product reengineering e.) Marketing research 61. 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) p. 142 62. A product value analysis is conducted at the _______________ step of the procurement process. a.) problem recognition b.) general need description c.) product specification (moderate) p. 142 d.) supplier search e.) proposal solicitation 63. The routine placing of the twice-weekly order to restock a commercial kitchens freezer with meats, poultry, frozen juices, and fresh-frozen pre-mades like doughs and stuffed pastas, 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) p. 142

104

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 attended the 2002 Web-EX Trade Show 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) p. 143 e.) order-routine specification 65. The Knoll Textile Manufacturing Company is evaluating potential suppliers of zippers to be used in production of a line of childrens outerwear. The company is concerned about the delivery reliability, price, and supplier reputation. Knoll is in the _______________ phase of the business buying process. a.) supplier selection (moderate) p. 143 b.) proposal solicitation c.) product specification d.) performance review e.) order-routine specification 66. Easter Village store sells Easter-related cards and gifts year-round. The primary source for its domestic and foreign gifts is Festival Supply, but Easter Village also buys some ornaments from Pascualis Global and from Kernal Distributors. Both of the distributors continue to try to price their merchandise at prices lower than those of Festival Supply because Pascualis and Kernal Distributors are both: a.) outsuppliers (moderate) p. 144 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 American flags, four 12-foot sections of display shelving, and two gross of George W. Bush bobble-head dolls for Rikkas 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) p. 144 68. A blanket purchase contract leads to _______________. a.) buyers being less dependent upon any given supplier
105

b.) c.) d.) e.)

the rebuy process being upgraded to a new task buy each time theres a reorder

the supplier maintaining the inventory (difficult) p. 144 systems selling 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) p. 144 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) p. 144 e.) using any of the above methods

Essay Questions
71. Two sales associates, Diz Miller and Nestor Marlboro, enter a room outside the purchasing agents 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 companys machine lubricants. Marlboro 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) order-routine 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) Table 7-2 and accompanying text pages

106

72. Rhet and Julie Raymond had a larger-than-average crop of mangos last year. They decided to make some extra jars of Julies mothers 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 Julies 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 companys 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 labelsso she would definitely be an initiator. She would also by the same logic be a user. Since the decision is joint, 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 labelsso 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) pp. 137

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 purchasedsuch as audiovisual equipment or instructional or motivational books or networking software. (easy) pp. 136

107

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) pp. 143-144

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) pp. 133, 135

Mini-Cases
Mini-Case 7-1 Dr. Therese Tureks 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 immediate 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.

108

76. Refer to Mini-Case 7-1. 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) p. 137 d.) initiator and user e.) gatekeeper and initiator 77. Refer to Mini-Case 7-1. Dr. Turek played what roles in the decision to move her practice? a.) initiator, user, and gatekeeper b.) initiator, user, and approver (moderate) pp. 137 c.) only initiator d.) only approver e.) only influencer 78. Refer to Mini-Case 7-1. 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) p. 138 e.) macro
Mini-Case 7-2 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 costs $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 7.2. Most executives, including Warren Buffet, would describe the demand for corporate jets as _______________. a.) inelastic (moderate) p. 134 b.) routine c.) low-involvement d.) elastic e.) accelerated

109

80. Refer to Mini-Case 7-2. 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) p. 136 e.) systems buy 81. Refer to Mini-Case 7.2. The fear of angering shareholders is an example of a(n) _______________ influence on the buying process. a.) environmental (moderate) p. 138 b.) interpersonal c.) organizational d.) entrepreneurial e.) individual

Chapter 8 Dealing with the Competition

True/False Questions
1. According to Porter, a segment is unattractive if it already contains numerous, strong or aggressive competitors. True (easy) pp. 149-150 2. A company is more likely to be harmed by its potential competitors than by its current competitors. True (moderate) p. 151 3. Strong firms competing against companies that are just barely meeting variable costs should lower the exit barriers for the weaker competitors. True (moderate) p. 150 4. Buyers bargaining power grows as they become less concentrated and as switching costs rise. False (moderate) p. 150 5. Industries can be classified according to degree of vertical integration. True (difficult) p. 152 6. Cereal manufacturers Kellogg and Quaker operate in a differentiated oligopoly industry structure. True (moderate) p. 152 7. Jack in the Box and Chilis restaurants are engaged in monopolistic competition. True (moderate) p. 152
110

8. A firm, which acquired one of its international competitors, would be practicing vertical integration. False (moderate) p. 152 9. A strategic group is a group of firms in an industry following the same or a similar strategy along key dimensions. True (moderate) p. 154 10. At the center of a competitor map are direct and indirect competitors of the firm. False (difficult) p. 153 11. A company monitoring share of heart is concerned about the percentage of customers who can name the company when asked about the product line. False (difficult) p. 155 12. A competitor who reacts only to certain types of attacks and not others is seeking competitive equilibrium. False (moderate) p. 156 13. The first step in designing a competitive intelligence system involves identifying vital types of information and its sources, and assigning someone to manage the process. True (moderate) p. 156 14. The first step in consumer value analysis is to identify the major attributes that customers value. True (moderate) p. 157 15. A customer value analysis reveals a firms strengths and weaknesses relative to various competitors. True (moderate) p. 157 16. According to the text, a company should support its good competitors and attack its bad competitors. True (moderate) p. 157 17. The least constructive response to competition is continuous innovation. False (easy) p. 159 18. Coca-Cola set up bottling operations in India, which it abandoned years later, only to return when legal restrictions on the brand were deemed acceptable. This action is an example of a mobile defense strategy. False (difficult) p. 160 19. McDonalds introduced a line of individual pizzas to challenge high market share competitors, such as Dominos and Pizza Hut. McDonalds used a frontal attack strategy. True (moderate) p. 162 and accompanying text 20. Marlys buys Exotique perfume for $6.49 a bottle because it smells like her favorite perfume which retails at ten times the price. She is encouraging the cheaper perfume manufacturer to adopt a flanking strategy. False (difficult) p. 162 and accompanying text

Multiple Choice Questions

111

21. PURO-Veg is a small Mexican company that produces and markets frozen vegetables sold as pizza toppings. Its owner wants to expand its product mix by adding a line of precooked frozen meats for retail bagged stir-fry meals. According to Michael Porter, which of the following poses a barrier to PURO-Vegs entry into the bagged frozen dinner industry? a.) The target market for easily-prepared meals is declining. b.) The industry contains strong and aggressive competitive rivalries. (difficult) p. 149 c.) The market segment for chicken-based meals is too small to be profitable. d.) The target market for these types of meals is not well defined. e.) The prepared food industry is too fragmented. 22. Scott Buttars is marketing his wifes recipes, Mrs. Buttars Gourmet Cooking Oils. Product lines include Spicy Cranberry Grapeseed, Canola Mild Honey, and California Deep Olive oil flavors. He sells through mail order but is thinking of expanding his distribution. According to Michael Porter, which of the following would be a barrier to Buttars entry into a national market? a.) Every gourmet store and supermarket is stocked with a number of similar kinds of gourmet oils. (difficult) p. 149 b.) Oils, like all culinary products, are in a declining market because people are cooking less. c.) The target market for gourmet oils is large and widely dispersed. d.) Consumers are time-poor and are not receptive to new product promotions. e.) Various federal agencies will monitor the companys every move when the oils move from its present regional distribution to a national distribution. 23. Bernardos Italian Kitchen gets its meats from Alliant Distributors. Recently, the Alliant salesperson has mentioned that company may eliminate service to some smaller accounts in the near future. Bernardos is not a large operation and so does not have much leverage in the buying process. According to Michael Porter, what is the best defense against strong bargaining power by suppliers? a.) offer to pay more money to guarantee a constant supply b.) develop its own alternative c.) use a horizontal integration strategy build a win-win relationship with Alliant (difficult) p. 150 d.) use a combination of the above 24. A(n) _______________ is a group of firms that offer a product or class of products that are close substitutes for each other. a.) industry (moderate) p. 151 b.) market c.) segment d.) product class e.) buying class 25. Industries are classified according to _______________. a.) size of customer base
112

b.) their target market strategies c.) their organizational cultures degree of vertical integration (difficult) p. 152 d.) all of the above 26. Cinders for low-maintenance landscaping are a commodity. Cinders are created and sold by many small regional companies. It is also sold in bulk to smaller distribution companies that bag the product and sell it under a variety of brand names. Companies that produce landscaping cinders find it hard to ask more than the going price. The industry structure for the companies that produce cinder products is a _______________. a.) pure monopoly b.) monopolistic competition (moderate) p. 152 c.) pure competition d.) differentiated oligopoly pure oligopoly 27. When you are asked to name companies in the auto industry, you will probably name Ford, GM, DaimlerChrysler, Toyota, and Honda. Each of them produces vehicles such as sedans, minivans, and light truck, as well as other vehicles. Each company uses pricing, sales promotions, and advertising to distinguish itself from the others. The auto industry would be classified as a _______________. a.) pure monopoly b.) monopolistic competition c.) pure competition differentiated oligopoly (moderate) p. 152 d.) pure oligopoly 28. In _______________, a few companies offer products partially differentiated by quality, features, styling, or services. Each competitor may seek leadership in one of these attributes, attract customers seeking that attribute, and charge a price premium for that attribute. a.) pure monopoly b.) pure oligopoly c.) differentiated oligopoly (moderate) p. 152 d.) monopolistic competition e.) pure competition

113

29. In _______________, many competitors are able to differentiate their offers in whole or part (restaurants are a good example). Competitors focus on market segments where they can meet customer needs in a superior way and command a price premium. a.) pure monopoly b.) pure oligopoly c.) differentiated oligopoly d.) monopolistic competition (moderate) p. 152 e.) pure competition 30. Nike, Reebok, Adidas, New Balance, and others manufacture athletic shoes. While some may say that all athletic shoes are alike, if you want a pair of IversonsThe Answer IVsyou have to buy the Reebok brand. In this way, Reebok focuses on a particular market segment and charges a premium price. The other athletic shoe manufacturers have similar marketing strategies. The athletic shoe industry would be classified as a _______________. a.) pure monopoly monopolistic competition (moderate) p. 152 b.) pure competition c.) differentiated oligopoly d.) pure oligopoly 31. Consumers can buy lumber at lumberyards, do-it-yourself stores, and other similar places. Consumers perceive all lumber to be the same. Since they perceive no differences among the producers, consumers assume the price will be the same. In terms of consumer perception, the lumber industry is a _______________. a.) pure monopoly b.) monopolistic competition c.) pure competition (moderate) p. 152 d.) differentiated oligopoly e.) pure oligopoly 32. In _______________, many competitors offer the same product and service, so, without differentiation, all prices will be the same. a.) pure monopoly b.) monopolistic competition c.) pure competition (moderate) p. 152 d.) differentiated oligopoly e.) pure oligopoly

114

33. Which of the following is not an example of an oil company that is vertically integrated? a.) one that carries on oil exploration b.) one that refines the raw product into useful products c.) one that buys competing oil companies (difficult) p. 152 d.) one that owns gas stations e.) one that separates and markets natural gas from the raw product 34. Mountain Sports, a retailer of outdoor gear, including skis and snowboards, is struggling because for several Winters there has been very little snow at the local ski resort. The resultant decline in business threatens Mountain Sports viability as a business. Unfortunately, there still exists a large customer-base that requires expensive servicing due to a company policy of life-time free tune-ups. Mountain Sports is facing a(n) _______________ barrier. a.) cost structure b.) vertical integration c.) marketing exit (moderate) p. 152 d.) distribution 35. A manufacturer of mechanic tools sells its products through three different marketing channelsSnap-On mobile tools retailers, the NAPA Auto Parts chain, and Sears. It wants to expand its market by selling its products through mail order catalogs. A heavy duty 34-piece ratchet set weighs six pounds. A mechanics large tool box weighs 20 pounds. Which of the following statements describes the potential success of their market expansion efforts? a.) Its market expansion strategy will fail because of mobility and exit barriers. b.) Its market expansion strategy will fail because of cost structure and mobility barriers. (difficult) p. 152 c.) Because it has engaged in vertical differentiation, any expansion will fail. d.) Its market expansion strategy will fail due to the length of its distribution channel. e.) Its market expansion strategy efforts will succeed because there are no barriers to its success. 36. Echos Exotics - The Tropical Fish Source sells its products through pet stores. To help maintain the quality of the fish she sells, the owner, Echo Dillinger has purchased several of her suppliers companies. These include a small fleet of boats, an exporting concern, and a small animal veterinarian clinic based in the Caribbean. What would be a disadvantage associated with this vertical integration? a.) a smaller share of value-added stream b.) the loss of the ability to manipulate prices c.) an increase in overall variable costs d.) a loss of control over costs e.) a lack of flexibility (difficult) p. 152

115

37. In a recent promotional campaign, Kodak advertised that it sold magic because its cameras were a way to capture time. With this advertising theme, Kodak had a(n) _______________ concept of competition. a.) product b.) market (moderate) p. 152 c.) industry d.) oligopoly e.) sales 38. A(n) _______________ is a group of firms using the same marketing mix to target the same markets. a.) industry b.) market c.) pure monopoly d.) strategic group (moderate) p. 154 e.) joint venture 39. Once a company has identified its competitors and their strategies, the next step in analyzing the competition is to _______________. determine competitors objectives (moderate) p. 154 a.) analyze competitors strengths and weaknesses b.) anticipate competitors responses when their market share is attacked c.) choose which competitors to attack d.) determine whether the competition uses an offensive or a defensive strategy 40. What is the primary reason why a company should assess its competitors strengths and weaknesses? a.) An assessment of the competitors strengths will reveal its objectives. b.) The assessment will provide insight into competitors perspective on the market and their probable strategies. c.) An assessment of the competitors weaknesses will reveal how quickly it will respond to new products. d.) An assessment is a sure way to determine what competitors responses will be to the companys offensive strategy. e.) A competitors resources and capacities determine how well it will be able to accomplish its objectives. (difficult) p. 155 41. When gauging a competitors strengths, the percentage of customers who name the competitor when asked to name the first company that comes to mind in this industry is considered the _______________. a.) share of mind (moderate) p. 155 b.) share of body c.) share of market d.) share of heart
116

e.) share of soul 42. According to the text, a _______________ is a competitor that tries to buy share rather than earn it, invest in overcapacity, and upset the industrial equilibrium. a.) mediocre competitor b.) good competitor c.) bad competitor (moderate) p. 157 d.) stochastic competitor e.) reciprocal competitor 43. In monitoring its competition, the Pepsi Company might want to analyze its _______________ by asking customers to name the first candy bar that comes to mind. a.) share of market b.) market potential c.) economic potential d.) share of heart e.) share of mind (moderate) p. 155 44. In monitoring its competition, Suzuki USA might want to analyze its _______________ by asking customers who visit its showrooms what brand of economy cars they would prefer to buy. a.) share of market b.) market potential c.) economic potential share of heart (moderate) p. 155 d.) share of mind 45. According to the text, what do good competitors not do? a.) sets prices in reasonable relation to costs b.) make realistic assumptions about the industrys growth potential c.) take large risks (moderate) p. 157 d.) play by the industrys rules e.) accept the general level of their share and profits 46. What does the industry market leader not normally do? a.) lead the industry in new product instructions b.) lead the industry in price changes c.) lead the industry in promotional intensity d.) lead the industry in distribution coverage lead the industry in competitive diversification (moderate) p. 157 47. In order to maintain dominance in an industry, the leading firm should do all of the following except _______________. a.) seek to monopolize the supply side of the industry (moderate) p. 158 b.) expand total market demand
117

c.) protect its current market share through good defensive actions d.) protect its current market share through good offensive actions e.) try to further increase its market share 48. The first step in designing the competitive intelligence system is to _______________. a.) identify the vital types of competitive information and the best sources, and to assign someone to manage the process (difficult) p. 156 b.) select the process and tools for collecting the data c.) choose the number of competitive factors to track and which competitors (best of breed), or direct competitors to measure d.) check the information for validity and reliability, then interpret, organize, and distribute it e.) do a competitive analysis to determine what information is the most readily available 49. Homer Asaad owns fruit orchards and a small retail outlet where he sells fresh and dried apricots and cherries. There are several other orchards in the area that are about the same size and operate similar operations. Homer could use a(n) _______________ to identify his enterprises strengths and weaknesses in relation to his competitors. a.) share of heart, share of mind, and market analysis customer value analysis (moderate) p. 157 b.) environmental assessment c.) social audit d.) strategic group analysis 50. The first step in customer value analysis is to _______________. a.) assess how customers in a specific segment rate the companys performance against a specific competitor b.) monitor customer values for change c.) ask customers to rate the importance of different attributes related to the marketing mix d.) have customers describe the performance of the company doing the analysis and its competitors identify the major attributes that customers value (moderate) p. 157

118

51. Which of the following is NOT a typical market leader strategy? a.) a geographical-expansion strategy b.) a market penetration strategy a flanking strategy (moderate) p. 159 c.) a market broadening strategy d.) a market diversification strategy 52. The basic defensive marketing strategy is called a _______________ defense. a.) flank position (moderate) p. 159 b.) mobile c.) preemptive d.) counteroffensive 53. Invading the marketplace of a competitor who has entered your market, forcing them to defend their territory is an example of what type of defense strategy? a.) contraction position b.) mobile c.) preemptive d.) counteroffensive (moderate) p. 160 54. World Professional Wrestling (WPW) is a regional pro wrestling company that hopes to go national. In response to this and an in attempt by Turner Broadcasting to compete on a national basis with another regional wrestling troupe, the owner of WWF trademarked his wrestlers names, started licensing the use of those names on a variety of products, and used other strategies to reach the nations wrestling fans and maintain its market share. This is an example of a _______________ defense strategy. a.) flank b.) position c.) mobile preemptive (moderate) p. 160 d.) counteroffensive 55. When a new fast-food restaurant moves into an area where there is a McDonalds, company policy requires that McDonalds do nothing for the first six weeks the new establishment is open in order to let the novelty wear off. Then McDonalds defense strategy is to use heavy advertising, couponing, 2-for-1 sales, and other price reduction strategies to recapture its customers. This is an example of a _______________ defense strategy. a.) flank b.) position c.) mobile d.) preemptive
119

e.) counteroffensive (moderate) p. 160

120

56. A company that is using a market broadening strategy in which they change their product from Internet service provider to communications resource is using a _______________ defense strategy. a.) flank b.) position c.) mobile (moderate) p. 160 d.) preemptive e.) counteroffensive 57. Bills Athletic Shop began with shoes and running clothing. Then it included rock climbing equipment. This diversification is an example of a _______________ defense strategy. a.) flank b.) position c.) mobile (moderate) p. 160 d.) preemptive e.) counteroffensive 58. A strategic withdrawal is an example of a _______________ defense strategy. a.) contraction (moderate) p. 160 b.) position c.) mobile d.) preemptive e.) counteroffensive 59. Some years ago a large tobacco company purchased a large food company. It seemed a good match at the time because of similarities in distribution, but it became obvious quickly that the image of the food company was challenged by the negative association with tobacco. The tobacco concern sold the food concern as a part of a _______________ defense strategy. a.) contraction (moderate) p. 160 b.) position c.) mobile d.) preemptive e.) counteroffensive 60. Airwalk was using a(n) _______________ attack strategy when it introduced skateboarding shoes and grabbed a large portion of Vans skate shoe market share. At the time, Airwalks were perceived as a much better fitting shoe than Vans. a.) flank b.) encirclement c.) frontal (moderate) p. 162 d.) bypass e.) guerrilla

121

61. A flank attack strategy can be directed along two strategic dimensions. They are _______________. a.) geographical and segmental (moderate) p. 162 b.) functional and technical c.) consumer and competitor d.) front and side e.) offensive and defensive

122

62. Cannondale introduced a highly innovative motocross motorcycle. It was a success with the motorcycle industry magazine writers, but Cannondale has not been financially strong enough to build a market position. The makers of KTM introduced a line of equally innovative motocross products. KTM is using a(n) _______________ attack strategy in this example. a.) frontal (moderate) p. 162 b.) encirclement c.) bypass d.) guerrilla e.) flank 63. A(n) _______________ is another name for identifying shifts in market segments that are causing gaps to develop, then rushing in to fill the gaps and develop them into strong segments. a.) flanking strategy (moderate) p. 162 b.) frontal strategy c.) encirclement strategy d.) bypass strategy e.) guerrilla strategy 64. Nestle attacks the food market by distributing its wide variety of food products in every major and many minor food sales outlets and overwhelming competitors with constantly changing varieties of offerings. It makes and sells thousands of brands around the world. Nestle is using a(n) _______________ strategy. a.) frontal b.) encirclement (moderate) pp. 162-163 c.) bypass d.) guerrilla e.) flank 65. The most indirect assault strategy is the bypass. Which of the following is not a way of carrying out the bypass approach? a.) diversifying into unrelated products b.) diversifying into new geographical markets c.) going around the competitors via cost reduction and aggressive price cutting (moderate) p. 163 d.) leapfrogging into new technologies to supplant existing products e.) entering new markets through merger and acquisition activity 66. Technological leapfrogging is a(n) _______________ attack strategy. a.) frontal b.) encirclement c.) bypass (moderate) p. 163 d.) guerrilla e.) flank
123

67. A guerrilla attack strategy _______________. a.) is more expensive to implement than a frontal attack b.) is practiced by larger companies against smaller ones c.) involves all elements of the marketing mix except price d.) must be backed by a stronger attack if the challenger hopes to beat the opponent (difficult) p. 163 e.) is accurately described by all of the above 68. Ebay is an Internet auction that at any point in time has approximately a million items listed for sale. Now others including AuctionWeb.com and Amazon.com provide similar auction services on a smaller scale. What type of a follower strategy are AuctionWeb and others like it using? a.) counterfeiter cloner (moderate) p. 164 b.) imitator c.) adapter d.) modifier 69. The PA Factory in China makes SUV vehicles that look exactly like Jeep Cherokees, right down to the brand logos attached to the body. The Factory sells the SUVs in Beijing and the surrounding areas. What sort of follower strategy is the PA Factory using? a.) counterfeiter (moderate) p. 164 b.) cloner c.) imitator adapter d.) modifier 70. The companies with the greatest chance of success are those which have developed a(n) _______________ orientation. a.) industry b.) market c.) competitor d.) supplier customer (moderate) p. 166

Essay Questions
71. Draw, label, and explain what a competitor map might look like for a regional movie theater change.
Answer: The inner circle should contain reference to choosing movies, and attending, choosing, and buying refreshments. The next ring out is Direct Competition and should contain all companies that market the movie (at the theater) experience. The outer ring is the Indirect
124

Competition ring, and should contain reference to any other form of entertainment that competes for the consumers patronage. (moderate) p. 153

72. Just like any other organization, the monks at a monastery in Missouri need to support themselves. Their initial foray into the marketplace was to produce and market American Flags, with which they had reasonable success. Flag sales tended to slump in the winter. The brethren needed another source of income, so they have decided to make and market high-quality cheeses. Theyve hired you to talk about what entry and mobility barriers they might face. What would you tell them?
Answer: High capital requirements for the necessary cheese-making equipment would be a barrier. The issue of economies of scale should be discussed. Of course, legal requirements are an issue because of the number of agencies that must approve food production, etc. The availability of first-class raw materials at an affordable price and distributors of these items are also areas of potential concern. Building a reputation as a producer of gourmet cheeses may also be a barrier if the brethren cannot afford the needed promotion. In terms of mobility barriers, if the brethren wanted to diversify and sell their cheeses on supermarket shelves rather than just at the monastery, they would have to contend with the existing store delis, slotting allowances, and competition for shelf space. (difficult) p. 150

73. The antique business is a highly competitive business. Information can make an antique retailer successful; lack of information typically results in failure. An antique retailer like John Fletcher must be able to recognize and buy an unsigned Granville Redmond painting before his competitors can. Fletcher must know what the competition is doing, what the newest trends are, and potential problem areas. Fletcher has asked you to help develop a strong competitive intelligence system using what you have learned in your degree program. In a short essay, explain the four key steps in setting up such a system and how the Internet can be part of that setup.
Answer: In a small business like Fletchers, this person will more than likely be Fletcher. The next step is the collection of data on a continuous basis. The Internet is creating a vast new arsenal of capabilities. Companies place volumes of information on their Web sites, providing details to attract customers, partners, and suppliers. Fletcher can have access to this information with a touch of a mouse. Also trade associations can provide a wealth of informationespecially on trends and potential fraudulent antiques. The third stage is the evaluating and analysis of the information. The final step is disseminating and responding to the information. The information is of limited value unless Fletcher shares it with his employees. (moderate) pp. 156-157

125

74. Its important to understand the value of a market before investing the money and effort to capture it. In a short essay, explain how to conduct a customer value analysis and how it relates to the gathering of competitive intelligence.
Answer: The major steps in the customer value analysis are: (1) Identify the major attributes that customers value. (2) Assess the quantitative importance of the different attributes. (3) Assess the companys and competitors performances on the different customer values against their rated importance. This lets the customers describe how they perceive the company and its competition. (4) Examine how customers in a specific segment rate the companys performance against a specific competitor on an attribute-by-attribute basis. This step also provides important competitive intelligence. (5) Monitor customer values over time. This step allows a company to periodically redo its customer value analysis and reassess how it stands against its competitors. (moderate) p. 157

75. In a short essay, describe the process a ServiceMaster carpet cleaning franchise might use to do a customer value analysis. What would be the purpose of such an analysis?
Answer: The purpose is to reveal the companys strengths and weaknesses relative to the various competitors. The steps of the process include: First, the company asks customers what attributes and performance levels they look for in choosing carpet maintenance. Second, the company asks customers to rate the importance of these different attributes and describe where they see the companys and the competitors performances on the attributes. Third, at a more detailed level, examine how the customers in each targeted segment (commercial accounts, repeat customers, one-timers, for example) rates the companys performance against a particular competitor on an attribute-by-attribute basis. If the companys offer exceeds that of the competitor, this may allow them to charge more, or charge the same but grow market share. Last, do the process over periodically. (difficult) p. 157

Mini-Cases
Mini-Case 8-1 A consultant visited with the newly formed Vespa-USA group to help them understand the American market for motor scooters. Though there are many groups of hardcore scooter fans scattered throughout the country, those groups tend to ride classic Vespas and Lambrettas from the 1950s and 1960s. Vespas boutique approach to selling the scooters in the USA since 2001 has already resulted in some sales, but the company and the franchiser/dealers have been disappointed so far. Honda is the leading seller of motor scooters in the USA, with over 65 percent of total sales. The consultant tells the Vespa group that in his market research, he finds that Hondas name comes up 49 percent of the time when target consumers are asked to name the first company that comes to mind when you think of motor scooters. When asked who would you prefer to buy a
126

motor scooter from? 36 percent responded Honda. Only 11 percent mentioned Vespa. The consultant also tells the Vespa audience that the scooters are deemed underpowered for city use by 58 percent of those who test rode them.

76. Refer to Mini-Case 8-1. When gauging Hondas strengths and weaknesses as a competitor, Vespa now knows that _______________. a.) Hondas share of mind is 49 percent (moderate) p. 155 b.) Hondas share of heart is 49 percent c.) Hondas share of the market is 49 percent d.) Hondas share of profit is 49 percent e.) Hondas heart/mind ratio is larger than that of Vespa 77. Refer to Mini-Case 8-1. Vespas choice to sell through boutiques versus more traditional motorcycle dealerships is an example of what type of strategy? a.) frontal attack b.) lobal attack c.) encirclement attack d.) modified frontal attack e.) flank attack (moderate) p. 162 78. Refer to Mini-Case 8-1. The marketing research test rides mentioned are probably a part of what type of analysis? a.) multidimensional scale analysis b.) customer value analysis (moderate) p. 157 c.) Porters Five Forces analysis d.) cost/benefit analysis e.) guerrilla competitor analysis
Mini-Case 8-2 Guillermina sat at her desk at the end of a very tough day. Her salon was facing intense profitability problems. First, she thought, there were really too many salons in close proximity to hers. Many were selling cheap cuts and styles, making it tough to charge much more than $15 to $18, even though Guillermina was sure her quality was higher than most of her competition. Second, she reasoned, there is really nothing to opening even more businesses. All a person needs is a rent deposit, a beauticians license, and a $45 permit from the city to start a new salon. Also, she mused, patrons had many options. They could try new places and new stylists, they could put off cutting their hair, or even cut their own, if they chose. Some customers had even tried bargaining the prices for certain services with Guillermina. Finally, as a small operator, Guillermina often felt as though she was being held hostage in terms of the prices her suppliers, such as Redkin and Bed Head, charged for the most popular shampoos, conditioners, and treatments.

79. Refer to Mini-Case 8-2. Without knowing it, Guillermina has been performing what type of analysis on her business and industry?
127

a.) b.) c.) d.) e.)

multidimensional scale analysis customer value analysis Porters Five Forces analysis (moderate) p. 150 cost/benefit analysis guerrilla competitor analysis

80. Refer to Mini-Case 8-2. Which of Porters Five Forces has Guillermina not carefully considered in the case? a.) threat of intense segment rivalry b.) threat of substitute products c.) threat of new entrants d.) threat of suppliers growing bargaining power e.) Guillermina has pretty much considered all of Porters forces (moderate) p. 150 81. Refer to Mini-Case 8-2. The salon industry in Guillerminas area is probably of what industry structure type? a.) pure monopoly b.) pure oligopoly c.) pure competition d.) monopolistic competition (moderate) p. 152 e.) differentiated oligopoly

Chapter 9Identifying Market Segments and Selecting Target Markets

True/False Questions
1. Traditionally, micromarketing of a consumer product results in the largest potential market for that product. False (moderate) p. 171 2. Consumers who belong to the same market segment have identical needs and wants. False (difficult) p. 171 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) p. 171

128

4. The ultimate level of marketing segmentation is mass marketing. False (moderate) p. 171 5. There are four levels at which a firm could micromarketsegments, niches, local areas, and individuals. True (easy) p. 171 6. If everyones choice for their computer printer were an HP LaserJet 1200, there would be a heterogeneous preference segment in the computer printer market. False (moderate) p. 173 7. Mass customization means a company has the ability to prepare individually designed products to meet customer requirements. True (easy) p. 173 8. The first step in segmenting a market is to create segment story boards to test the segments viability. False (moderate) p. 174 9. Lifestyle is an example of a demographic segmentation variable. False (easy) p. 176 10. 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) p. 175 11. By and large, income is an excellent predictor of who will buy what products. False (easy) p. 177 12. Social Class is an example of a psychographic segmentation variable. False (moderate) p. 177 13. Many marketers believe behavioral variables are the best starting point for constructing market segments. True (moderate) p. 178 14. Benefits sought is an example of a behavioral segmentation variable. True (moderate) p. 178 15. When Harley Davison used the slogan Its time, and offered test rides and bargain financing on its Sportsters products, it was using geographic segmentation. False (moderate) p. 175 16. Geoclustering is a technique for segmenting markets on the basis of multiple attributes. True (difficult) p. 179 17. One reason geoclustering is increasingly popular is the falling cost of data manipulation. True (difficult) p. 179

129

18. In business market segmentation, operating variables are the most important segmentation variable. False (moderate) p. 180 19. In business markets, the segment programmed buyers is the most profitable, and relationship buyers are the least profitable. False (moderate) p. 181 20. Firms that offer tailored programs for several different market segments engage in differentiated marketing. True (moderate) p. 184 Multiple Choice Questions 21. Traditionally, mass marketing of a consumer product results in _______________. a.) the largest potential market for that product (moderate) p. 171 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. Since 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) p. 172 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) p. 172 c.) individual d.) derived e.) homogeneous 24. A southern chain of barbecue restaurants would find it advantageous to prepare a sweet pork sandwich with coleslaw inside for Mississippians, a mustard-based sauce with pork and coleslaw on the side for Carolinians, and a smoky beef sandwich with thick white bread instead of a bun for Texans. If the chain engages in _______________ marketing, it will improve the likelihood of its success. a.) local (moderate) p. 172 b.) niche c.) individual
130

d.) homogeneous e.) demographic

131

25. 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) p. 172 d.) leads to a homogenization of the market e.) solidifies a brands overall image in the marketplace because it delivers the same advertising message throughout its market 26. The ultimate level of marketing segmentation is _______________ marketing. a.) local b.) niche c.) individual (moderate) p. 173 d.) homogeneous e.) mass 27. All of the following are part of an attractive niche except _______________. a.) the niche has variety-seeking consumers (moderate) p. 172 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 28. _______________ is the ability to prepare, on a mass basis, individually designed products to meet each customers requirements. a.) Niching b.) Specialization c.) Mass customization (moderate) p. 173 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) p. 173 e.) honeycombed preferences 30. If everyones choice for a their computer printer were an HP LaserJet 1200, there would be a _______________ preference segment in the computer printer market. a.) homogeneous (moderate) p. 173 b.) heterogeneous c.) diffused
132

d.) stratified e.) clustered

133

31. Which of the following is not necessary to make a market segment useful? a.) It is measurable. b.) It is satisfied. (moderate) p. 175 c.) It is substantial. d.) It is actionable. e.) It is accessible. 32. 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) p. 174 33. The last step in segmenting a market is _______________. a.) concept testing b.) the survey stage c.) segment acid test d.) marketing mix strategy (difficult) p. 174 e.) segment identification 34. 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) p. 176 d.) customer behavior e.) market partitions 35. 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) p. 176 c.) psychological d.) personality e.) lifestyle 36. Which of the following is an example of a demographic segmentation variable? a.) generation or social class (moderate) p. 176 b.) personality c.) attitude toward the product d.) lifestyle
134

e.) user status

135

37. 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) p. 176 d.) user status e.) usage rate 38. 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) p. 177 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. 39. Which of the following is an example of a behavioral segmentation variable? a.) occupation b.) education level c.) readiness stage (moderate) p. 176 d.) lifestyle e.) family life cycle 40. The Lazy H Dude Ranch is open to people of all sizes, shapes, and belief systems. Its 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) p. 176 d.) social class e.) income 41. 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

136

musicianship. This magazine discovered its market can be segmented using _______________ variables. a.) demographic b.) social class c.) lifestyle (moderate) p. 176 d.) generation e.) geographic

137

42. Which of the following is an example of a behavioral segmentation variable? a.) generation b.) user status (moderate) p. 178 c.) personality d.) religion e.) social class 43. Since 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) p. 178 e.) psychographic 44. For years Spiral-Cut Hams have been on thousands of Easter dinner tables. Spiral-Cut 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) p. 178 45. 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) p. 178 c.) user status d.) loyalty status e.) occupation-based 46. When dealing with loyalty status, buyers can be segmented in a variety of ways. When given a choice of canned fruit at the supermarket, Barton will select either Libbys or the house brand, 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) p. 179 d.) switcher e.) splinter loyalist

138

47. 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) p. 179 b.) income c.) education d.) lifestyle e.) attitude 48. If you go to a Target store on the east side of Phoenix, you will find prayer candles but no bicycle child carriers. The Target store in Scottsdale sells trailers but does not stock portable heaters. Youd have to go to the Target store in Mesa to find heaters. Target realizes that the people in each of these neighborhoods do not have the same needs and should therefore not be offered the same products. This is an example of _______________. a.) geographic segmentation b.) geoclustering (moderate) p. 179 c.) demographic segmentation d.) behavioral segmentation e.) psychographic segmentation 49. 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 this magazines as _______________. a.) geographic segmentation b.) geoclustering (moderate) p. 179 c.) demographic segmentation d.) behavioral segmentation e.) psychographic segmentation 50. According to Bonoma and Shapiro, the most important segmentation variable for business markets is _______________. a.) demographic characteristics (moderate) p. 180 b.) operating variables c.) situational factors d.) purchasing approaches e.) personal characteristics 51. Which of the following is not a major business segmentation variable? a.) demographic b.) geographic (difficult) p. 180
139

c.) purchasing approaches d.) operating variables e.) personal characteristics

140

52. According to Rangan, Moriarty, and Swartz, buyers who see the product as not very important to their operation are often called _______________. a.) programmed buyers (moderate) p. 181 b.) relationship buyers c.) transformational buyers d.) transactional buyers e.) bargain hunters 53. The main two things to consider when selecting a target market are a.) if the segment has potential and if it fits with the companys objectives and resources (difficult) p. 181 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 segments needs and if the segment is large enough to be viable 54. According to Rangan, Moriarty, and Swartz, _______________ are buyers who regard the product as moderately important and are knowledgeable about competitive offerings. a.) programmed buyers b.) relationship buyers (moderate) p. 181 c.) transformational buyers d.) transactional buyers e.) bargain hunters 55. Sams Pizza buys raw inputs like olives, cheeses, and flour for dough and packages the to-go orders in shallow cardboard boxes. Sam continues to place routine monthly orders with Weyerhaeuser, because Weyerhaeuser provides Sam with a small discount and a modest amount of service and because Weyerhaeusers prices are in line with its competitors prices. Sams Pizza is an example of which of the following business segments? a.) programmed buyers b.) relationship buyers (moderate) p. 181 c.) transformational buyers d.) transactional buyers e.) bargain hunters 56. Northern State University buys hundreds of new desktop PCs for labs, staff, and faculty every year. The university demands a deep discount and a high level of service from its PC suppliers. It is ready to switch at the slightest dissatisfaction. NSU is an example of which of the following business segments? a.) programmed buyers
141

b.) c.) d.) e.)

relationship buyers transformational buyers transactional buyers bargain hunters (moderate) p. 181

142

57. According to Rangan, Moriarty, and Swartz, buyers who see the product as very important and demand low prices and top service are called _______________. a.) programmed buyers b.) relationship buyers c.) transformational buyers d.) transactional buyers e.) bargain hunters (moderate) p. 181 58. 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) p. 175 d.) actionable, differentiable, and substantial e.) substantial and actionable 59. A marketer wants to market beeping balls to sight-disabled softball players. 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) p. 175 e.) not quantifiable 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) p. 182 c.) full market coverage d.) market specialization e.) product specialization 61. 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) p. 183 e.) product specialization

143

62. 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) p. 183 d.) market specialization e.) product specialization 63. 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.) countersegmentation b.) undifferentiated marketing c.) differentiated marketing (easy) p. 184 d.) market specialization e.) single segment concentration 64. 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) p. 184 b.) single-segment concentration c.) undifferentiated d.) market specialization e.) product generalization 65. Firms that offer tailored programs for several different market segments engage in _______________ marketing. a.) differentiated (moderate) p. 184 b.) single-segment concentration c.) undifferentiated d.) market specialization e.) product specialization 66. 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) p. 184 67. In terms of its affect on the marketing process, undifferentiated marketing _______________.
144

a.) b.) c.) d.) e.)

increases administrative and production costs keeps down advertising and R&D costs (moderate) p. 183 increases the firms cost for product modification creates more total sales than differentiated marketing puts the company at risk of being supplanted by an entirely new technology

68. 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) p. 184 d.) blocked market e.) intersegment cooperative

145

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) p. 184 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) p. 184 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) pp. 171-173 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?
146

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) pp. 173-174 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) p. 172 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 or 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 variablespurchasing-function organization, power
147

structure of organization, nature of existing relationship, general purchase policies of buyer, and buyers 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 buyers willingness to take risks, and buyer-seller similarities could also be a viable segmentation variable in this example. (moderate) pp. 180-181 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 which might be targeted by the Chinese concern. Include a brief explanation for why this segment might be a good one to consider. pp. 175-179

Mini-Cases
Mini-Case 9-1 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 40 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. 75. Refer to Mini-Case 9-1. These university investors are using _______________ marketing to identify their target market. a.) mass b.) niche (easy) p. 172 c.) local d.) aggregated e.) individual 76. Refer to Mini-Case 9-1. The investors have identified their market through the use of _______________ segmentation variables. a.) behavioral, geographic, and demographic b.) psychographic and behavioral
148

c.) geographic and demographic d.) psychographic, behavioral, and geographic e.) demographic, psychographic, and behavioral (moderate) p. 176 77. Refer to Mini-Case 9-1. 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.) occasion b.) personality c.) values d.) benefit (moderate) p. 176 e.) lifestyle

149

Mini-Case 9-2 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. 78. Refer to Mini-Case 9-2. If the firm marketed their product in the form of white pills in a plain bottle and sold it to rural government clinics, who 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) pp. 175-179 c.) race, income, and education d.) age, awareness (readiness), and religious orientation e.) nationality, loyalty status, and stage of the family life cycle 79. Refer to Mini-Case 9-2. The firm needs to decide which of the many possible segments to target. Which of the following is not relevant as they make this decision? a.) if consumer preferences are diffused or clustered b.) if the segments are measurable, accessible, and actionable c.) whether to go into rural or urban areas of the Philippines d.) if there are sufficient women of child-bearing age in the Filipino population e.) whether Filipino businesses are more likely to be relationship or programmed buyers (moderate) p. 181 80. Refer to Mini-Case 9-2. 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) pp. 175-179 c.) race, income, and education d.) age, awareness (readiness), and religious orientation e.) nationality, loyalty status, and stage of the family life cycle

150

Chapter 10Developing, Positioning, and Differentiating

Products Through the Life Cycle
True/False Questions
1. The new product development process starts with profitability analysis of the ideas. False (moderate) p. 191 2. A product-positioning map uses selected criteria to show where a product stands in relationship to comparable products. True (moderate) p. 192 3. Less than 10 percent of new products are entirely new and innovative. True (easy) p. 189 4. An existing product that has been repositioned can be considered a new product. True (moderate) p. 190 5. In spite of the benefits of test marketing, many firms today question its value. True (moderate) p. 195 6. Concept testing is the most expensive part of the new product development process. False (moderate) p. 192 7. Some products fail because they have too much support from upper-level management True (difficult) p. 190 8. The basic strategy for managing the growth stage of the PLC is product expansion. False (moderate) pp. 198-199 9. Personal influence is most important in the awareness stage of the adoption process. False (difficult) pp. 197-198 10. Many of the best ideas for new industrial products originate with customer ideas. True (moderate) p. 191

151

11. The stage of the product life cycle characterized by low sales, heavy promotion, low profit, and minimal competition is the introduction stage. False (moderate) p. 199 12. Typically, the longest stage in the product life cycle is the maturity stage. True (moderate) p. 199 13. 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) p. 199 14. Alpha testing means testing a product within the firm, beta testing means enlisting customers to use the product and provide feedback. True (easy) p. 194 15. Differentiation is the act of designing a companys offerings and image so that they occupy a meaningful and distinct competitive position in the target customers minds. False (moderate) p. 204 16. Conformance quality refers to the level at which the products primary characteristics operate. False (moderate) p. 205 17. Ways of differentiating service offerings include customer training, ordering ease, and delivery. True (easy) p. 206 18. The firm can differentiate itself and its marketing offerings through control of its product, service, personnel, channel, and image. True (moderate). pp. 204-207 19. The way the public perceives a company and its products is the companys image. True (easy) p. 207 20. Simulated test marketing and test marketing are the same thing. False (moderate) p. 195 Multiple Choice Questions 21. 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) p. 190 e.) used a market diversification strategy 22. Mazdas 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 _____________.
152

a.) b.) c.) d.) e.)

repositioning (moderate) p. 190 the development of a new product line a market diversification strategy a product development strategy a new-to-the-world product

23. Why do new products fail? a.) Since 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) p. 190 e.) The underpricing of the product causes customers to overstock and depletes all future demand for the product. 24. One of the factors Madique and Zirger discovered that accounts for the success of new products in the electronics industry is _______________. a.) the ability to learn from competitors mistakes by introducing the product after them b.) how low the producer sets the products predicted contribution margin c.) the higher performance-to-cost ratio for the new product (difficult) p. 190 d.) a minimization of product launching expenditures coupled with the ability to offer the lowest price e.) the products development and sponsorship by a single entrepreneur with the drive to make the product successful 25. In terms of new-product development, Spam Meat Products 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) p. 191 c.) concept development d.) prototype development e.) business analysis 26. According to Hippel, the highest percentage of ideas for new industrial products comes from _______________. a.) sales representatives and intermediaries b.) scientists and engineers c.) examining competitors d.) top management
153

e.) customers (easy) p. 191 27. 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 new-product development. a.) concept development and testing (difficult) pp. 192-193 b.) business analysis c.) product development d.) idea generation e.) market testing 28. If a marketer wanted to evaluate the communicability and believability of a new bread and sandwich maker during concept testing, he might ask which of the following questions? a.) Are the benefits to be gained from the combination of bread and sandwich making clear to you? (difficult) p. 192 b.) Do you see the bread and sandwich maker as solving a problem or filling a need for you? c.) Would you definitely, probably, probably not, or definitely not buy the bread and sandwich making machine? d.) Do other products clean as well and as easily as this combination machine will? e.) Who do you see as the primary market for this machine? 29. The marketing strategy plan consists of three parts. The first part consists of describing the _______________. a.) products features, advantages, and benefits b.) target market size, structure, and the behavior of its target market (moderate) p. 193 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 products planned pricing strategy

154

30. 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) p. 193 d.) risk analysis e.) sales-wave research 31. 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 companys RPG, play it extensively, and give feedback on it. EA is using _______________ testing. a.) beta (moderate) p. 194 b.) concept c.) market d.) alpha (moderate) e.) simulated 32. 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) p. 194 d.) the buying center for the product is limited to the individual making the actual purchase e.) all of the above occur 33. Seven-Up briefly marketed a soda brand called Seven-Up Gold in medium-sized cities like Virginia Beach. The product had a spiced flavor and contained caffeine. It was never introduced nationally. Seven-Up was probably engaging in _______________. a.) full-blown test marketing b.) controlled test marketing (moderate) p. 195 c.) simulated test marketing d.) sales-wave research e.) alpha testing 34. The least expensive method of performing a market test for a new childrens over-thecounter remedy would be to use _______________. a.) simulated test marketing b.) conjoint analysis c.) controlled test marketing d.) test markets
155

e.) sales-wave research (moderate) p. 195

156

35. Suppose a marketing research firm that manages a panel of retail stores agrees (for a fee) to study a companys 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) p. 195 c.) test markets d.) conjoint market analysis e.) sales-wave research 36. 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) p. 196 e.) idea generation 37. McDonalds is preparing (yet another time) to roll out a new version of its McRib product. McDonalds is currently deciding if its new product should enter the market at the same time it knows a new Arbys 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) p. 196 38. When Vivendi-Universal premiered the movie Amelie, it first introduced it to audiences in France, Germany, and the U.K., and then in other European countries. Six months later it was shown on a limited number of U.S. screens. Vivendi-Universal used a(n) _______________ strategy for the commercialization of its new film. a.) market-skimming b.) geographic (easy) p. 196 c.) introductory market d.) market-penetration e.) timing 39. 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) p. 196 d.) to whom?
157

e.) who?

158

40. 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) p. 196 e.) a rollout plan 41. Before Dede read the article about Toyotas 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 didnt 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) p. 197 c.) awareness to evaluation d.) interest to evaluation e.) interest to trial 42. Guadalupe is thinking about buying a Handspring brand personal digital assistant (PDA). The market is constantly changing, so she has read Consumer Reports, talked to several salespeople, and avidly watched for sales. Verna has also checked her bank account to see if she can afford a PDA with a built-in wi-fi connection to allow her an Internet connection while on the road. She is in the _______________ stage of the consumer adoption process. a.) awareness b.) interest c.) adoption d.) evaluation (moderate) p. 197 e.) trial 43. Personal influence is most important in the _______________ stage of the adoption process. a.) awareness b.) interest c.) evaluation (moderate) p. 197 d.) trial e.) adoption 44. 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. Pre-packaged Rice

159

Krispy treats had a high level of _______________ when compared to the former way of obtaining this tasty dessert. a.) relative advantage (moderate) p. 198 b.) divisibility c.) communicability d.) complexity e.) comparability

160

45. Birth control pills didnt diffuse as quickly in predominately Roman Catholic countries as they did in the United States. This is an example of problems with the new products _______________. a.) relative advantage b.) compatibility (moderate) p. 198 c.) communicability d.) complexity e.) divisibility 46. 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) p. 198 e.) compatibility 47. According to the concept of the product life cycle, _______________. a.) products have a limited life (difficult) p. 198 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 products 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 48. 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) p. 198 d.) profits rise and fall at different stages e.) products require different marketing and other business strategies in each stage 49. The stage of the life cycle characterized by low sales, heavy promotion, low profit, and minimal competition is the _______________ stage. a.) introduction (moderate) p. 199 b.) growth c.) repositioning d.) maturity e.) decline 50. In the Schnaars study of 28 industries in which imitators surpassed the innovators, which of the following was not a common weakness of the failing pioneers? a.) new products that were too crude
161

b.) c.) d.) e.)

products that were improperly positioned products appeared before strong demand too many new products in the pipeline (moderate) p. 200 managerial incompetence or unhealthy complacency

162

51. In the growth stage a firm should pursue _______________. a.) new pricing and marketing strategies b.) market expansion strategies (moderate) p. 200 c.) a repositioning strategy d.) a new product strategy e.) market concentration strategies 52. 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) p. 201 e.) decline 53. 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) p. 201 54. When a firms product enters the decline stage _______________. a.) most firms dont have a plan for handling this stage (difficult) p. 202 b.) most companies drop the product immediately c.) the firm should retain the product because the costs of maintaining a weak product are relatively low d.) the firm should seek to increase sales through a marketing-mix modification strategy e.) the firm should retain the product because the costs of reintroducing the product later are higher than any maintenance costs required at this stage 55. While many swear by the product life cycle (PLC), some criticize the concept because _______________. a.) PLC doesnt 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) p. 202 d.) the product life-cycle pattern is an inevitable pattern relatively unaffected by marketing strategies e.) PLC is not applicable to any services 56. Volkswagen continued to sell its sedan (Beetle) in Brazil and Mexico for nearly 20 years after it withdrew the product from the U.S. The company reduced R&D costs for the car

163

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) p. 202 c.) maintaining d.) reducing overcapacity e.) engaging in product improvements 57. _______________ is an important product attribute to most buyers and represents the expected operating life of the product under natural and/or stressful conditions. a.) Durability (easy) p. 205 b.) Performance quality c.) Reliability d.) Efficiency e.) Conformance quality 58. Purchasers of high capacity office copying machines are concerned about the costs and lost productivity caused by breakdowns and repair time. Purchasers of these items focus on _______________ and will pay a premium for it. a.) repairability b.) durability c.) efficiency d.) reliability (moderate) p. 205 e.) performance conformance 59. Bill and his partner love to brew and drink their own beer. Bill made the purchase decision for a grain roaster based on the relative ease and speed with which it could be fixed if something went wrong. Bill bought a particular brand and type of roaster because of its _______________. a.) repairability (moderate) p. 205 b.) durability c.) reliability d.) trustworthiness e.) performance quality 60. Miss Kims nail techs and massage therapists are trained to cater to every whim of their clients. Because their needs are often met even before they realize they have them, some guests are even convinced that its employees have ESP. This is an example of _______________. a.) a basic customer value hierarchy b.) a task focus versus a relationship focus on job performance c.) personnel differentiation (moderate) p. 206 d.) a service provider concentrating on its conformance quality e.) an emphasis on service style, not service performance
164

61. A small, highly competitive Internet service provider (ISP) is working hard to identify itself as a quality, high-service organization by trying to answer all customer questions within four hours of receipt. This ISP is working on its _______________. a.) identity (moderate) p. 207 b.) service style c.) service position d.) personnel differentiation e.) perceived differentiation 62. The way the public perceives a company and its products is the companys _______________. a.) identity b.) image (moderate) p. 207 c.) position d.) style e.) atmosphere 63. Robinsons Pharmacy sponsors a kid's soccer team and an annual charity ball for the Muscular Dystrophy Foundation as part of its differentiation strategy. This small retailer is using a(n) _______________ differentiation strategy. a.) personnel b.) channel c.) service d.) image (moderate) p. 207 e.) community 64. The differences a positioning strategy is built on need to meet certain criteria to be of value in truly differentiating the companys products. The manufacturer of Chefs Fork differentiates this grill accessory by placing a meat thermometer in its handle. From this description, you know the manufacturer of this new product has satisfied the criteria of _______________. a.) distinctiveness and preemption b.) importance, distinctiveness, superiority (moderate) p. 204 c.) superiority, affordability, and importance d.) preemption and superiority e.) importance and preemption 65. If the positioning strategy offers a difference not offered by others or is offered in a sufficiently different way from others, it meets the criterion of _______________. a.) distinctiveness (moderate) p. 204 b.) importance c.) superiority d.) preemption
165

e.) profitability 66. Which of the following is not true of Treacy and Wiersemas Value Disciplines framework? a.) A firm might choose to be the product leader in their category. b.) Maintaining distance from suppliers allows the firm freedom to pursue customer value. (moderate) p. 203 c.) To succeed, a business should become the best in at least one area, and perform adequately in the others. d.) One success strategy is to become an operationally excellent firm. e.) An avenue to success is to be customer intimate. 67. Which of the following is true about positioning strategies? a.) Not all products can be differentiated. b.) A product that is not positioned as superior, distinctive, preemptive, or affordable will succeed if it is implemented correctly. c.) The end result of positioning is the successful creation of a market-focused value proposition. (difficult) pp. 203-204 d.) Positioning strategies must stress real benefits or they will fail. e.) All brand differentiation strategies are meaningful and worthwhile. 68. Which of the following is not a way of differentiating a product? a.) form b.) installation (easy) pp. 204-207 c.) style d.) design e.) repairability 69. _______________ is the totality of features that affect how a product looks and functions in terms of customer requirements. a.) Image b.) Style c.) Fashion d.) Identity e.) Design (moderate) p. 206 70. McDonalds people are courteous, IBM folks are professional, Disney associates are upbeat. These are examples of _______________. a.) product differentiation b.) service differentiation c.) channel differentiation d.) image differentiation e.) personnel differentiation (moderate) p. 206

Essay Questions
166

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 vendors 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 customers 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 Maurers 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) pp. 193-195 72. In a short essay, explain the five stages that adopters of new products and services move through. Then consider the following scenario: Seth comes back to his dorm room from a night out drinking and entertainment and is excited about a new local band he heard the Route 66 Killers. He thinks their retro surf-influenced style sounds interesting. His roommate Bridgett tells Seth 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 buying the Killers CD, and she loves their tee-shirt! A fraternity pledge, Josh, from the apartment next door, heard the band at one of the events during hell week and says he cant stand the band since hearing themnot enough punk influence for him and he hates the drummer, Animal, because Joshs girlfriend flirted with the musician. Now indicate which stage of the adoption process each of the above participants is in.

167

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 Route 66 Killers, the consumer decides to make full and regular use of the innovation. Seth 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) p. 197 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 rejuvenating a declining product. What factors determine the strategy that should be implemented? Answer: (1) Increase the firms investment so as to either dominate the market or strengthen its competitive position. (2) Maintain the firms investment level until the uncertainties about the industry are resolved. (3) Decrease the firms investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firms investment in lucrative niches. (4) Harvest the firms 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 industrys relative attractiveness and the companys competitive strength in that industry. (moderate) pp. 201-202 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 products 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
168

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) p. 202

169

75. Hokaido Specialty Racing designs and installs turbos for enhanced performance of highly-customized Japanese street racing coupes. During the summer when customers are likely to be involved in impromptu racing, if the owner of a Hokaido system wants to get maximum short-burst speed, they must manually set the turbo control for ambient temperature. In a short essay, discuss how Hokaido could use this product to differentiate its turbo systems? Answer: Hokaido could make sure customers get top speed while using the turbo. It could have a highly reliable system. Hokaido could provide more features than the competition, including an automatic temperature sensor to eliminate the need for customers to adjust for environmental changes. Hokaido could make sure the form, design, and style of the product are pleasing to the target market. It could make certain the product is bulletproof in the sense of durability and reliability, and that if breakdown does occur the product is easily repairable. Finally, Hokaido could assure that the products are tested and conform to all quality measures. (easy) p. 205

Mini-Cases
Mini-Case 10-1 In 1991, Jenny Wood was trying to figure out a way to make some extra cash. Her husband was a student, and they had two small children. She was already selling Jennys Country Kitchen gourmet cocoa mixes at local fairs and craft shows when she came up with the idea for flavored creamers for coffee. She developed nine different flavors of creamers including raspberry mocha and cherry vanilla. Response to the creamers was so good 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 the QVC shopping channel gave the business a big boost in customer awareness. 76. 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) p. 194 b.) conjoint analysis c.) risk analysis d.) an attribute listing worksheet e.) extensive concept testing 77. Refer to Mini-Case 10-1. Since her appearance on QVC, 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 flavored creamers. Jenny probably selected sales-wave research because it _______________. a.) measures the effectiveness of different sales promotions on customer trial rates
170

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) p. 195 d.) is cost-free e.) indicates the brands power to gain distribution and favorable shelf position should she decide to market to retailers

171

78. Refer to Mini-Case 10-1. A consumer who was aware of Jennys Country Kitchen flavored creamers, 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) p. 197 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 basisthat 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 Scooters. 79. 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) p. 195 80. Refer to Mini-Case 10-2. Some of the owners contacted say they have heard of Scooters idea through friends over the years. They are in what stage of the adoption process? a.) awareness (easy) p. 197 b.) interest c.) evaluation d.) trial e.) adoption 81. Refer to Mini-Case 10-2. Williams mobile service differentiates itself in the marketplace based on what? a.) ordering ease b.) delivery (moderate) p. 206 c.) customer training d.) installation e.) customer consulting
172

Chapter 11Setting Product and Brand Strategy

True/False Questions 3. A product is anything that can be offered to a market to satisfy a want or need. True (easy) p. 212 4. The most fundamental level of a customer value hierarchy is called the expected product. False (moderate) p. 212 5. A potential product is a set of attributes and conditions that buyers normally expect when they buy the product. False (difficult) p. 213 6. The fourth level of the customer value hierarchy is when the marketer prepares an augmented product that exceeds customer expectations. True (moderate) p. 213 7. Hotel guests expect a clean bed and fresh towels. This is the core benefit level of the hotel product. False (easy) p. 212 8. Nondurable goods are tangible goods that are normally consumed in one or a few uses, such as beer and soap. True (moderate) p. 214 9. Unsought goods are tangible goods that normally survive many uses, such as refrigerators. False (moderate) p. 214 10. Shopping goods are goods that consumers do not know about or do not normally think of buying, such as smoke detectors. False (moderate) p. 214 11. A persons consumption system includes the way the person performs the task of getting, using, fixing, and disposing of the product. True (easy) p. 213 12. Supplies are short-lasting goods and services that facilitate developing or managing the finished product. True (moderate) p. 214 13. The length of a product mix refers to how many variants of each product are offered. False (difficult) p. 214

173

14. Product line length refers to the total number of items in the mix. True (moderate) p. 215 15. Product line consistency refers to the total number of items in a product mix. False (moderate) p. 215 16. Stretching a product line upward runs the risk of cannibalization of the product line. False (moderate) p. 215 17. When Suzuki announces a low-priced, fully equipped sport bike to attract customers into the showroom, it is an example of a downward stretching of the product line. True (moderate) p. 215 18. The addition of jalapeo flavored kettle chips to the Lays snack line is an example of linefilling. True (moderate) p. 216 19. The most enduring meanings of a brand are its values, culture, and personality. True (easy) p. 217 20. When Coca-Cola introduced its new Vanilla Coke brand it illustrated an example of line extensions. True (moderate) p. 222 21. One way to extend a brand is through licensing the company name for use on other products. True (moderate) p. 223 22. A Dodge pickup with a Cummins diesel engine in it provides an example of multiplesponsor co-branding. False (difficult) p. 223 Multiple Choice Questions 23. An airline is considering offering Internet access and satellite-sent videos on demand in their already posh first class sections. These additions represent _______________. a.) the core benefit b.) the basic product c.) the expected product d.) the augmented product e.) the potential product (easy) p. 213 24. The most fundamental level of a customer value hierarchy is called the _______________. a.) core benefit (moderate) p. 212 b.) basic product c.) expected product d.) augmented product
174

e.) potential product 25. Which of the following is the best example of a basic product? a.) Zhou buys a used Schwinn bicycle for transportation. b.) Marlinda stays in a Marriott because she likes the nightly mint on her pillow. c.) Tate eats at Wendys because she likes the 99-cent value products. d.) Sophie gets a clean room at the Ramada Inn. (moderate) p. 212 e.) Morgan enjoys the coupons in the Sunday newspaper. 26. A(n) _______________ is a set of attributes and conditions that buyers normally expect when they buy the product. a.) core benefit b.) basic product c.) expected product (moderate) p. 212 d.) augmented product e.) potential product

175

27. Absolute Snowboard Shop offers an extended warranty on the boards it sells; a free checkup one month into the season; and even tunes up and delivers boards. In terms of the customer value hierarchy, the board shop is offering a(n) _______________ product. a.) core b.) basic c.) service-added d.) expected e.) augmented (difficult) p. 213 28. Which of the following is not a quality normally associated with services? a.) They are intangible. b.) They are variable. c.) They are perishable. d.) They are durable. (easy) p. 214 e.) They normally require more quality control. 29. Which of the following best describes the way in which the user performs the tasks of getting, using, fixing, and disposing of the product? a.) consumption system (moderate) p. 213 b.) distribution system c.) purchasing system d.) convenience system e.) shopping system 30. Which of the following is not normally true of durable goods? a.) They survive many uses. b.) They require more personal selling and service. c.) They command higher margins. d.) They require more seller guarantees. e.) They are more variable in their delivery of core needs. (moderate) p. 214 31. _______________ are tangible goods that are normally consumed in one or a few uses such as beer and soap. a.) Nondurable goods (easy) p. 214 b.) Durable goods c.) Extensive goods d.) Specialty goods e.) Unsought goods 32. Which of the following is the BEST example of nondurable goods? a.) living room furniture b.) aluminum cookware c.) watches d.) breakfast cereals (easy) p. 214
176

e.) computer monitors

177

33. Which of the following are tangible goods that normally survive many uses? a.) nondurable goods b.) durable goods (easy) p. 214 c.) extensive goods d.) specialty goods e.) unsought goods 34. Products that are bought frequently, immediately, and with little effort, such as newspapers or snack items are called _______________ goods. a.) nondurable b.) convenience (easy) p. 214 c.) heterogeneous shopping d.) staples e.) homogeneous shopping 35. Bowers will drive hours to buy an item for his Nirvana memorabilia collection. It is hard to find good and original items associated with Nirvana because there are so many collectors of this memorabilia. In terms of the consumer-goods classification, Nirvana memorabilia is an example of a _______________ good. a.) convenience b.) nondurable c.) heterogeneous shopping d.) specialty (moderate) p. 214 e.) homogeneous shopping 36. _______________ are goods that consumers do not know about or do not normally think of buying, such as smoke detectors. a.) Convenience goods b.) Shopping goods c.) Specialty goods d.) Unsought goods (moderate) p. 214 e.) Homogeneous goods 37. Unprocessed grain, cotton, iron ore, and bulk copper are all classified as _______________. a.) component materials b.) capital items c.) supplies and business services d.) raw materials (moderate) p. 214 e.) component parts 38. Computer chips, heavy duty batteries, and wiring assemblies are all examples of _______________. a.) component materials
178

b.) c.) d.) e.)

capital items supplies and business services raw materials component parts (moderate) p. 214

179

39. Long-lasting goods such as a metal stamping equipment or an industrial drill press are classified as _______________. a.) component parts b.) supplies and business services c.) capital items (moderate) p. 214 d.) component materials e.) operating supplies 40. _______________ are short-lasting goods and services that facilitate developing or managing a finished product. a.) Supplies (moderate) p. 214 b.) Commodities c.) Component parts d.) Office equipment e.) Component materials 41. The number of different product lines offered by a company is termed the product mixs _______________. a.) depth b.) length c.) flexibility d.) width (moderate) p. 214 e.) consistency 42. The __________ of a product line refers to how many variants of each product are offered. a.) depth (moderate) p. 214 b.) length c.) flexibility d.) width e.) consistency 43. Which of the following refers to the total number of items in the mix? a.) depth b.) length (moderate) p. 214 c.) flexibility d.) width e.) consistency 44. The _______________ of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or in some other way. a.) depth b.) breadth
180

c.) length d.) width e.) consistency (moderate) p. 214

181

45. When Honda added the Passport and CRV SUVs, and the Odyssey minivan to its range of automotive offerings it engaged in _______________. a.) line featuring b.) line pruning c.) line filling (moderate) p. 216 d.) line dancing e.) line modernization 46. Which of the following is a risk associated with a downward stretch strategy? a.) The new low-end item will definitely cannibalize higher-end items. b.) The downscale product may cannibalize the core brand. (difficult) p. 215 c.) The low-end item might provoke more competition as other companies move to the low end. d.) Higher-end competitors may be too firmly entrenched for the company to recoup its investment costs. e.) The professionalism of the sales force may become a problem when they are asked to serve the low end of the market. 47. The addition of jalapeo flavored kettle chips to the Lays snack line is an example of _______________. a.) a downward stretch b.) an upward stretch c.) line augmentation d.) a two-way stretch e.) line-filling (moderate) p. 216 48. The Craftsman tools is an example of the brand conveying which level of meaning? a.) attributes (moderate) p. 217 b.) values c.) features d.) benefits e.) personality 49. When the manufacturer of Snapper lawn mowers runs ads that equate its products with the power of the dependable turtle, it is conveying the _______________ of the brand. a.) attributes (moderate) p. 217 b.) features c.) values d.) benefits e.) personality 50. SecuRite alarm systems is a brand name that conveys what level of brand meaning? a.) attributes b.) values
182

c.) personality, attributes, and benefits d.) benefits (difficult) p. 217 e.) user

183

51. Animal, the drummer for the Route 66 Killers is running low on replacement drum sticks. He heads downtown to AMP Music, but finds they do not carry his favorite brand, Pro-Mark. Instead of buying other-branded sticks, Animal chooses to order online from musiciansfriend.com. This is an example of _______________. a.) brand acceptability b.) brand awareness c.) brand loyalty (moderate) p. 217 d.) brand perception e.) brand preference 52. Brand equity _______________. a.) is tied closely to specific product lines b.) is closely related to the number of customers who are devoted to the brand (difficult) p. 218 c.) reduces the amount of product management effort a company needs to expend d.) may actually hinder the launching of brand extensions e.) will be destroyed when the products manufacturer launches a premium pricing strategy 53. _________ refers to estimating the total financial value of the brand. a.) Brand loyalty b.) Brand equity c.) Brand valuation (moderate) p. 218 d.) Brand identity e.) Brand building 54. A company produces several different products and wants to avoid confusion between its different products. Its best choice for a branding strategy would be _______________. a.) store brand names b.) a blanket family name c.) brand name licensing d.) separate family names for all products (difficult) p. 221 e.) a company trade name with individual product names 55. A diet supplement product has the brand name of Mega-Mass. This is a desirable brand name because it exhibits which of the following brand name characteristics? a.) The brand name suggests something about the products benefit. (difficult) p. 221 b.) The brand name sounds like a lot of other similar muscle-enhancing products. c.) The brand name is static and suggests no action. d.) The brand name promises success. e.) The brand name emphasizes the products features.

184

56. Using an existing brand name and extending to new sizes or flavors in the existing product category is called _______________. a.) line extension (moderate) p. 222 b.) brand extension c.) multibrands d.) co-brands e.) complex brands

185

57. Mars recently tested a fudge-flavored Snickers candy. Mars is using a _______________ strategy with the Snickers brand. a.) multibrand b.) brand extension c.) new brand d.) line extension (moderate) p. 222 e.) co-brand 58. Line extensions result in _______________. a.) new excitement and commitment b.) the ability of one brand to benefit from the strength of another brand c.) a higher chance of survival for the new product (difficult) p. 222 d.) instant recognition and early acceptance e.) the guaranteed success of a premium pricing strategy 59. Many consumers now view brands as being of relatively equal value, and are therefore less loyal to a particular brand. This is called a.) brand laddering b.) brand parity (moderate) p. 220 c.) brand equity d.) brand acquisition e.) brand extension 60. When the Harley-Davidson Motor Company licensed its logo for use on special edition Ford F150 trucks, it was an example of a manufacturer using a(n) _______________ strategy. a.) innovation b.) line extension c.) brand extension d.) multibrand e.) co-brand (moderate) p. 223 61. New brand names introduced in the same product category are called ______________. a.) line extension b.) brand extension c.) multibrands (moderate) p. 223 d.) co-brands e.) complex brands 62. DaimlerChrysler markets vehicles under the brand names of Jeep, Chrysler, Mercedes, Mini Cooper, and Dodge, all targeted to different market segments. DaimlerChrysler is using a(n) _______________ strategy. a.) innovation b.) line extension
186

c.) brand extension d.) multibrand (moderate) p. 223 e.) co-brand

187

63. The King Ranches of Texas and Hawaii authorized Ford Motor Company to use their name and logo for a special edition F150 pickup. This is an example of the use of a _______________ strategy. a.) line extension b.) co-branding (moderate) p. 223 c.) repositioning d.) brand extension e.) line filling 64. Kid-oriented yogurt cups are falling from favor as moms and kids are showing a preference for drinkable forms of yogurt packaged in tubes. Manufacturers of cup-based yogurts think they still have a good product one that has nutritional benefits for consumers. Their best branding strategy would be _______________. a.) line extension b.) co-branding c.) repositioning (moderate) p. 223 d.) brand extension e.) multibranding 65. White Castle wanted to attract more health-conscious consumers by adding a grilled chicken sandwich, the Chicken Castle to its menu. This is an example of a _______________ strategy. a.) line extension b.) co-branding c.) repositioning (moderate) p. 223 d.) brand extension e.) multibranding 66. An example of a secondary package would be a _______________. a.) bag of Sunkist oranges b.) carton containing twelve cans of Pepsi (moderate) p. 224 c.) can of Libbys brand vienna sausage d.) bag of Fit N Trim dog food e.) bottle of Mountain Dew soda 67. Some companies are offering cardboard (as opposed to plastic) refill packages of liquid detergent and fabric softener to cut down on solid waste. This environmentally aware packaging is an example of a(n) _______________. a.) Self-service opportunity b.) consumer affluence c.) image repositioning d.) innovation opportunity (difficult) p. 224 e.) social perception

188

68. The green bottle that holds Quaker State motor oil contributes to Quaker States marketing effort in the sense that _______________. a.) it looks pretty b.) it aids in the self-service function c.) it helps consumers feel more affluent d.) it helps build company and brand image (moderate) p. 224 e.) it allows Quaker State to be more innovative 69. When Staples receives their order for Sharpie brand permanent markers, the case inside the shipping box is called _______________. a.) the primary package b.) the secondary package (easy) p. 224 c.) the shipping package d.) individual package e.) unit package 70. Yamaha makes engines, musical instruments, and motorcycles, among other products. If Yamaha decided to enter the farm equipment industry with the Yamaha brand, this would be an example of _______________. a.) brand dilution b.) multibranding c.) experiential brands d.) functional branding e.) brand extension (moderate) pp. 222-223 71. Amazon.com has a good brand name because the name _______________. a.) suggests something about the products benefits b.) suggests product qualities c.) tells where the company is based d.) is distinctive (moderate) p. 221 e.) is easily forgotten 72. Which of the following would be considered a line extension for the Coca-Cola Company? a.) Diet Caffeine-Free Coke (moderate) p. 222 b.) Minute Maid Orange Juice c.) Orangina Orange Soda d.) Inca Kola e.) Georgia Coffee Essay Questions

189

73. The Japanese restaurant chain Beni-Hana provides a chef that cooks the meal in an entertaining way on a large table in front of your group. List and explain the five product levels as they relate to the Beni-Hana experience. Answer: The core benefit of a visit to Beni-Hana is a full stomach. The basic product includes food, seating, and entertainment. The expected product probably includes a basic level of freshness, hygiene, and nutrition. The augmented product would be anything that goes above and beyond the diners expectations, such as a chef that tells jokes or explains about Japanese culture as he prepares the meal. The potential product could include any number of services or products added to the basic Beni-Hana experience described. Examples might be free rice wine samples, cooking participation by the diners, or embossed napkins that you can take home with you. (moderate) pp. 212-213

190

74. In a short essay, explain how a marketer can classify a product according to durability and tangibility and determine the marketing strategies for the corresponding classifications. Give examples from both the consumer market and the industrial market. Answer: Nondurable goods are tangible goods normally consumed in one or a few uses. Because these goods are consumed quickly and purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial to build preference. Examples for consumer market: beer, candy bar, and soap. Examples for industrial market: glue stick, stamps, disposable syringes, and paper towels. Durable goods are tangible goods that normally survive many uses. Durable goods normally require more personal selling and service, command a higher margin, and require more seller guarantees. Examples for consumer market: refrigerator, automobile, lawn mower, and clothing. Examples for industrial market: copying machine, computer, laser printer, walk-in freezer, and dog kennel. Services are intangible, inseparable, variable, and perishable products. As a result they normally require more quality control, supplier credibility, and adaptability. Examples for consumer market: day care, haircut, vacation cruise, and maid service. Examples for industrial market: management consulting, accounting, and an employment agency. (difficult) p. 214 75. Competition in the soft drink industry is intense. In a short essay, describe a soft drink brand you are familiar withCoca-Cola, Fanta Orange, 7Up, Mountain Dew, etc.in terms of the six levels of meaning a product brand has. Answer: (moderate) p. 217 76. Detail Aakers five levels of customer attitude toward a brand. What is brand equity and how is it related to the Aakers five levels? (moderate) p. 218 77. French Connection has a very popular clothing line brand name, FCUK. Their motto is vive le fcuk: British fashion with a French accent. Discuss how this brand name might attract the kinds of customers French Connection wants. Answer: FCUK is a very aggressive brand name which seeks to offend while making money for the company. In terms of levels of brand meaning, the name does not say much about product attributes. It does not speak to the benefits of wearing the clothes. It probably speaks to the companys values and culture (in-your-face). The personality of the FCUK brand is, again, considered aggressive, and this extends to the type of person that is attracted to a brand that is obviously meant to offend someone. One would expect that the FCUK brand would appeal to consumers with strong personalities, who want to

191

be different and dont mind showing it. They are likely to rail against the status quo and try to shock others through their behavior and clothing choices. (difficult) p. 217 Mini-Cases Mini-Case 11-1 In the processed meat industry, Sara Lee Meats (SLM) is a star. Sara Lee had almost $4.6 billion in sales last year with sales in more 140 nations. It owns and operates meat-processing plants in 40 different nations. SLMs business strategy includes product innovation, acquisitions and mergers, and market leadership in a number of different categories. Its growth strategies support an annual 6 percent growth in sales. Important U.S. brands in the Sara Lee product line are Kahns, Jimmy Dean, Hillshire Farms, Bryan, State Fair, and Bests Kosher, and Tastefuls! According to SLM executive George Chivari, We work very hard at Sara Lee on brand equity. . . . We have to make sure our new ideas are not only profitable and achieve big volume for our [retail] customers, but also that they are consistent with the quality of the brand and there is a good fit. One of SLMs recent new products that seems to have a good fit with the companys other products was Tastefuls! Tastefuls! brand is described as a lunch combination. It features two small sandwiches, chips, and dessert. The lunch combination was developed and marketed by Jimmy Dean foods, a company that prior to the introduction of this product had just made sausage. 78. Refer to Mini-Case 11-1. Given what you have read about Sara Lee Meats, you would think that its executives want you to classify the SLM products as _______________. a.) homogeneous shopping products b.) specialty products (moderate) p. 214 c.) convenience products d.) staples e.) impulse products 79. Refer to Mini-Case 11-1. When Hillshire Farms, a manufacturer of various kinds of sausages, introduced a new line of sausages made with turkey meat under the Hillshire Farms brand, it was an example of a _______________ strategy. a.) co-branding b.) brand licensing c.) line extension d.) multibranding e.) brand extension (moderate) pp. 222-223

192

80. Refer to Mini-Case 11-1. The introduction of Tastefuls! was an example of a _______________ strategy. a.) multibranding (moderate) p. 223 b.) family branding c.) co-branding d.) licensed branding e.) brand extension Mini-Case 11-2 Volkswagen plans to enter the sport-luxury car market with an upscale automobile based on the Passat platform. The new car will have all-wheel drive, a small-block V-8 engine, GPS navigation equipment, leather interior, and 18 low profile tires, among other attributes. Base prices are expected to start at $43,995, though few options are not already included. Promotion will focus on men in their 30s and 40s who are successful at their jobs, report annual incomes in excess of $100,000, and who like speed and high technology. 79. Refer to Mini-Case 11-2. A person who only views cars as a way to get from point A to point B would see this vehicle in terms of a(n) _______________. a.) potential product b.) augmented product c.) expected product d.) basic product e.) core benefit (easy) p. 213 80. Refer to Mini-Case 11-2. The Passat fully-loaded with all the bells and whistles is priced in the mid-high $30,000s. This example of VW moving upscale is called _________ and is especially risky because __________. a.) market stretching; starting a new car brand can costs millions of dollars b.) upmarket line stretching; it could cannibalize VWs core brand (difficult) p. 215 c.) brand building; awareness of the brand could be too great and cause shortages d.) cult branding; consumers might reject VW as a luxury automobile producer e.) brand dilution; consumer may stop thinking about the brand 81. Refer to Mini-Case 11-2. VW will call the car the LS8-C, which stands for Luxuriser Sport 8-Cylinder. This brand name is based on _______________. a.) the attributes of the car (moderate) p. 217 b.) the benefits of the car c.) the personality of the car d.) the driver/user of the car e.) the culture of the company

193

Chapter Services

12Designing

and

Managing

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) p. 229 2. 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) pp. 229-230 3. The quality of services depends upon the provider, location, circumstances, and time. This fact illustrates the service characteristic of variability. True (moderate) p. 230 4. When AmeriSuites 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) p. 229-230 5. The fact that services are generally consumed as they are produced describes the service characteristic of inseparability. True (moderate) p. 230 6. One way to decrease perishability of a service is to monitor customer satisfaction through a suggestion and complaint system. False (difficult) p. 230 7. Internal marketing describes the work a company does to train and motivate its employees to serve customers well. True (moderate) p. 232 8. Booms and Bitner suggest these three Ps that service providers must pay attention to: people, physical evidence, and place. False (easy) p. 231 9. Internal marketing describes the work done by the company to train and motivate its employees to serve the customers well. True (moderate) p. 232 10. A pure tangible good is an offering that may consist of the good plus some accompanying services. False (moderate) p. 229

194

11. Since 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) p. 233 12. Characteristics a buyer can evaluate before purchase are called search qualities. True (moderate) p. 233 13. Experience qualities are characteristics a buyer can evaluate after purchase. True (moderate) p. 233 14. Experience qualities are characteristics a buyer normally finds hard to evaluate even after consumption. False (moderate) p. 233 15. For a Montessori preschool, a secondary service feature could include online access for the parents as they dropped off their children. True (moderate) p. 234 16. A service company can differentiate itself by designing a better and faster delivery system. True (easy) p. 234 17. 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) p. 235 18. 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) p. 236 19. For more and more companies, the key to customer satisfaction is employee satisfaction. True (easy) p. 237 20. When a service company provides installation, training, and maintenance as a part of its product, it is offering value-augmenting services. False (difficult) p. 239

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) p. 229 b.) guarantee c.) rebate d.) offset
195

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.) a tangible good with accompanying services (moderate) p. 229 c.) a hybrid d.) a pure service e.) a major service with accompanying minor goods and services 23. Which of the following best describes the category in which the offerings 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) p. 229 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 lawn mowing 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) p. 229 e.) an amusement park 25. Mr. Tse and his family took a vacation trip to Washington D.C. While there, they bought souvenir T-shirts and hats to take home to friends who didnt have the opportunity to go. The experience of the Tses 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) p. 229 26. For $5 a day, Chlena will go to your home and feed and water your pet for you while you are on vacation. The service Chlena provides is an example of a _______________. a.) pure tangible good b.) tangible good with accompanying services c.) hybrid d.) pure service (moderate) p. 229 e.) major service with accompanying minor goods and services

196

27. State Farms theme Like a Good Neighbor, State Farm Is There is one way of managing the service characteristic of _______________. a.) intangibility (difficult) pp. 229-230 b.) inconsistency c.) inseparability d.) variability e.) perishability 28. Highway billboards advertise clean restrooms at Texaco 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) pp. 229-230 c.) inconsistency d.) perishability e.) variability 29. 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) pp. 229-230 b.) inseparability c.) inconsistency d.) variability e.) perishability

197

30. The Virginia Beach Marine Science Museum 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) pp. 229-230 b.) inseparability c.) inconsistency d.) variability e.) perishability 31. 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) p. 230 c.) inconsistency d.) variability e.) perishability 32. 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. Another reason is the beautiful weather in the places Disney has facilities. This is an example of the service characteristic of _______________. a.) intangibility b.) inseparability (moderate) p. 230 c.) reliability d.) variability e.) perishability 33. 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) p. 230 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 34. When Carlos goes into Starrs, a local restaurant that features catfish and hush puppies, he sometimes gets his food fast and hot. Other times his order is slow, and his food arrives at his table cold. If Jim wants a special order, like an extra bowl of vidalia onions in vinegar, he never knows how long hell have to wait for his food. Jim is experiencing the service characteristic of _______________.
198

a.) b.) c.) d.) e.)

intangibility inseparability variability (moderate) p. 230 autonomy perishability

35. 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) p. 230 e.) offer incentives to customers to use the service at non-peak use times 36. The quality of services depends upon the provider, location, circumstances, and time. This fact illustrates the service characteristic of _______________. a.) variability (moderate) p. 230 b.) inseparability c.) intangibility d.) consumability e.) perishability 37. 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) p. 230 c.) creating a service blueprint d.) building morale and enthusiasm among employees e.) monitoring customer satisfaction 38. 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) p. 230 39. Brighton Resort, up the canyon from Salt Lake City 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.
199

a.) b.) c.) d.) e.)

perishability (moderate) p. 230 variability inconsistency inseparability intangibility

40. 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) p. 231 e.) standardizing the service process and providing more training to service personnel 41. Echo goes to Asian Gourmet for lunch because their lunch specials are $3.75, while the same meal after 4 p.m. costs $6.50. Asian Gourmet probably uses different prices at different times as a strategy for dealing with the _______________characteristic of services. a.) perishability (moderate) p. 230 b.) variability c.) inconsistency d.) inseparability e.) intangibility 42. Booms and Bitner suggest that the Ps for the marketing of goods differs from the Ps needed for the marketing of services. The hanging of diplomas in physicians offices is an example of which of the Ps identified by Booms and Bitner? a.) people-orientation b.) physical evidence (moderate) p. 231 c.) process d.) promotion e.) positioning 43. 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) p. 231 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 44. A doctor in private practice recognizes that patients have a hard time deciding whether they got good service from a medical facility. She decides to help patients feel well cared for by always donning the white overcoat in her office, by displaying copies of her
200

diplomas in each examination room, and by providing all patients with an appointment card for their next visit. The doctor is following Booms and Bitners advice about service provision by paying attention to _______________. a.) selection of people b.) providing physical evidence (moderate) p. 231 c.) standardizing her processes d.) creating goodwill e.) promoting her practice to nonusers 45. _______________ 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) p. 232 e.) Relationship 46. Erin 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) p. 232 b.) external c.) internal d.) consultative e.) relationship 47. Characteristics a buyer can evaluate before purchase are called _______________. a.) search qualities (moderate) p. 233 b.) experience qualities c.) credence qualities d.) differentiation qualities e.) productive qualities 48. ______________ are characteristics a buyer can evaluate after purchase. a.) Search qualities b.) Experience qualities (moderate) p. 233 c.) Credence qualities d.) Differentiation qualities e.) Productive qualities 49. In the absence of noticeable and rapid healing, Sucheta 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
201

c.) credence qualities (moderate) p. 233 d.) differentiation qualities e.) productive qualities 50. 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) p. 234 51. 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) p. 233 c.) a Grand Slam breakfast at Dennys d.) a river trip with Wild West Tours e.) a day care provider 52. 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) p. 233 c.) a Grand Slam breakfast at Dennys d.) a river trip with Wild West Tours e.) a day care provider 53. A(some) solution(s) to price competition in the service industry, as suggested by the text, is(are) to _______________. a.) do more and better promotion b.) improve productivity and cost controls c.) engage in niche market segmentation d.) rely more on advertising and less on word-of-mouth e.) differentiate the offer, image, and delivery of the service (difficult) p. 234

202

54. For an adult day care provider, the primary service package includes _______________. a.) watchful care and physical facilities (moderate) p. 234 b.) aerobics and movement instruction c.) computer lessons d.) music appreciation classes e.) an on-staff hair stylist to cut the guests hair 55. For a dental office, the secondary service package would 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) p. 234 d.) bridgework e.) x-rays to detect serious decay problems 56. A situation in which a day care provider thinks that parents want better food, when in fact parents are more concerned about their childrens security is an example of a gap between _______________. a.) consumer expectation and management perception (moderate) p. 235 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. Smith was trying to register students for the new school term. Unfortunately, there was no one there to answer the phone, and Dr. Smith 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) p. 236 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 1989 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) p. 236
203

204

59. Mohamed 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 its 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) p. 236 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) p. 236 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 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 analyses (moderate) pp. 236-237 d.) service-audit teams 62. According to the text, service productivity can be improved by _______________. a.) outsourcing production to cheaper labor offshore b.) increasing quantity of service provided by surrendering some quality (difficult) p. 238 c.) increasing pay and requiring workers to work harder and longer for increased pay d.) avoiding the implementation of technology because it seems to cause more problems than it solves e.) using less expensive part-time labor to provide customer service 63. An upscale repair garage for fine European vehicles decides to drop its Fram filter contract in favor of a new filter system that can be effectively rinsed out, rather than replaced. Adopting this new technology for oil changes will save mechanics lots of time, given the quirky locations oil filters are put on European luxury cars. This is an example of increasing its productivity through _______________. a.) adopting a manufacturing approach b.) requiring service providers to work more quickly c.) increasing the quality of service provided by surrendering some quantity d.) doing away with obsolete methodology (moderate) p. 238 e.) designing a more effective service
205

206

64. When catalog retailers made it possible for customers to place orders on the Internet at the retailers Web sites, the retailers were increasing productivity through _______________. a.) designing a more effective system that maintained quality without sacrificing quantity b.) industrializing the service c.) using technology to give better customer service and make service workers more productive (difficult) p. 239 d.) making the need for human contact obsolete e.) designing a more effective system that uses a manufacturing approach to doing business 65. 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) p. 239 66. Which of the following is not listed in the text as a way of increasing service productivity? a.) have customers substitute their own labor for company labor b.) surrender some quality c.) use technology d.) lower prices to service customers (moderate) pp. 238-239 e.) use better selection and training of employees 67. When considering the purchase of a service or product, industrial customers are likely to worry about all of the following except _______________. a.) status related to the purchase (moderate) p. 239 b.) out-of-pocket maintenance costs c.) lost time d.) reliability e.) failure frequency 68. 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) p. 239 c.) service contracts d.) postsale service strategy e.) lifecycle cost

207

69. Sol 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 Sols 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) p. 239 b.) facilitating services c.) service contracts d.) postsale service strategy e.) lifecycle cost 70. Edmunds.com provides a well-organized information source about automobiles and light trucks for U.S. buyers. Consumers like the service because they can browse car reviews, study specs, even arrange for insurance, allowing them to skip or minimize visits to other car sites. This auto-related Web site service is an example of which trend in customer service? a.) more reliable and easily fixable equipment b.) modular and disposable products c.) consumer desire for dealing with only one entity for a bundle of related products and services (easy) p. 240 d.) use of call centers and Internet to deliver services e.) increasingly sophisticated consumers

Essay Questions
71. Many talented programmers in the Seattle area 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.
208

Bowers could use differential pricing, a reservation system, or cultivate requests for the service at non-peak times. (moderate) pp. 229-230 72. There are certain areas of Birmingham that are so rough that Dominos, Pizza Hut, and many other restaurant chains will not deliver to them. Homeboys Restaurant Delivery and Catering Service will deliver. With a bank of phones and two drivers, the company picks up at the restaurant of your choice and delivers to your doorstep. Its drivers use late-model inconspicuous used cars. Homeboys runs a tab at the restaurants and pays weekly for food picked up by its drivers. Customers are charged a $3 delivery price on $10 minimum orders. Its drivers hand out flyers with the Homeboy logo and the names of participating restaurants. Each driver also has the menu from those restaurants. In a short essay, discuss Homeboys in terms of the three Ps of service marketing as defined by Booms and Bitner.

209

Answer: (1) People is the first P. Obviously, people are an important ingredient for Homeboys. They are delivering in many areas deemed too dangerous by other delivery services. Its people must be smart, careful, trustworthy, and willing to take a risk. (2) Physical evidence of its service would be the flyers and the menu. Also the drivers cars are another example of the physical evidence of the service. (3) Process is the third P. The people who developed the concept of Homeboys came up with a way to capitalize on the fact that many people wanted food delivery service and were willing to pay for it if someone could figure out a way to get it to them safely. (moderate) p. 231 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) p. 232 74. 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 12-3 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
210

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 moneys worth. (moderate) p. 233

211

75. Cori gets lucky enough to be accepted as a new owner of a Krispy Kreme franchise in Rexburg, Idaho. 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 Coris new franchise: a.) Gap between consumer expectation and management perception: Cori might think that consumers want more donut flavor choices, but in fact, customers are more concerned about the freshness of the doughnuts they purchase. b.) Gap between management perception and service-quality specification: Cori 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-thandesirable state. c.) Gap between service-quality specifications and service delivery: workers might not be able to correctly make change, or get the drive-through orders right, causing unhappy by consumers. d.) 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. e.) Gap between perceived service and expected service: A customer could buy perfectly acceptable doughnuts, eat them, and feel the product was stale, causing dissatisfaction. (moderate) pp. 235-236

Mini-Cases
Mini-Case 12-1 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 12-1. The travel agency is an example of a _______________. a.) pure service b.) major service with minor goods and services (moderate) p. 229 c.) hybrid d.) pure tangible good e.) tangible good with accompanying service 77. Refer to Mini-Case 12-1. The travel agencys free gifts address the service characteristic of _______________.
212

a.) b.) c.) d.) e.)

intangibility (moderate) pp. 229-230 inseparability variability inconsistency perishability

213

78. Refer to Mini-Case 12-1. 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) p. 230 d.) inconsistency e.) perishability Mini-Case 12-2 On his return trip to Houston from Cordoba, Argentina, Gustavos 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 tomorrows flight. Gustavo reluctantly got into a cab and tried to find a nearby motel. 79. Refer to Mini-Case 12-2. 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) p. 236 d.) Gap between service delivery and external communications e.) Gap between perceived service and expected service 80. Refer to Mini-Case 12-2. 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 employees 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) p. 237 81. Refer to Mini-Case 12-2. Service recovery is critical to the cultivation of profitable returning customers. The employees did not make any service recovery efforts and Gustavo is unlikely to fly with this airline again, no matter what happens. He plans to write the companys president with his protest. If you were the recipient of Gustavos letter, which of the following would not be good advice? a.) listen carefully and tactfully ask Gustavo questions
214

b.) apologize to Gustavo, if appropriate c.) avoid an apology for legal reasons, but assure Gustavo that you understand his frustration (moderate) p. 237 d.) offer Gustavo a solution that is acceptable to the customer and fits with company objectives e.) follow through on what you decide with Gustavo

Chapter 13Designing Pricing Strategies and Programs

True/False Questions
3. Price is the only element of the marketing mix to produce revenue. True (moderate) p. 245 4. Price is one of the least flexible elements in the marketing mix. False (easy) p. 245 5. 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) p. 246 6. Nonprofits and public organizations may seek only partial cost recovery, rather than some profit level. True (easy) p. 247 7. Fixed costs are costs that do not vary with production or sales revenue. True (easy) p. 248 8. The CEOs salary is an example of a variable cost. False (moderate) p. 248 9. 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) p. 247 10. When a manufacturer varies its cost as a function of its differentiated marketing offers, the manufacturer needs to use activity-based accounting. True (difficult) p. 250 11. Target costing focuses on trying to engineer costs before a new product has been introduced. True (moderate) p. 250
215

12. 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) p. 247 13. A decline in average production costs as the firm accumulates more experience is called the learning curve. True (moderate) p. 249 14. Target costing requires determining the price consumers will pay before producing the good or service. True (moderate) p. 250 15. Going-rate pricing is especially popular if costs are difficult to measure or competitive response is certain. False (moderate) p. 253 16. A company that sells bottled water at a premium price is using a markup pricing strategy. False (moderate) p. 250 17. In going-rate pricing, the firm bases its price largely on competitors prices. True (easy) p. 253 18. Retailers that employ everyday low pricing do not run price promotions. False (difficult) p. 253 19. Psychological pricing methods give groups of buyers a deal when they combine their orders. False (moderate) p. 255 20. A shoe store that carries pumps at $32, $52, and $82, and no other prices, is engaged in product-line pricing. True (moderate) p. 260 21. When Toyota offers an Echo 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) p. 260 Multiple Choice Questions 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) p. 245 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 stores prices is to _______________.
216

a.) b.) c.) d.) e.)

determine demand estimate costs determine her target market select a pricing method select a pricing objective (moderate) p. 245

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) p. 245 c.) maximum current revenue d.) maximum sales growth e.) partial cost recovery 25. Which of the following is not a common mistake in handling the pricing P? a.) reliance on committee decisions about pricing (moderate) p. 245 b.) too cost-oriented c.) not revised often enough to reflect market opportunities d.) set independently of other marketing mix variables e.) not varied enough 26. 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) p. 246 d.) the high price communicates nothing to the potential buyers e.) competitors are not attracted to the market because there is no profit motivation

217

27. 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 calculator were probably using a _______________ pricing strategy. a.) cost-oriented b.) market-skimming (moderate) p. 246 c.) value-oriented d.) market-penetration e.) product-quality leadership 28. 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) p. 246 b.) product quality leadership c.) maximum current revenue d.) market-penetration pricing e.) maximum sales growth 29. 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) p. 246 e.) maximum sales growth 30. 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) p. 247 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 31. Demand is likely to be price elastic if _______________. a.) there are many alternatives and direct substitutes for the product (difficult) p. 248 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
218

32. _______________ are costs that do not vary with production or sales revenue. a.) Total costs b.) Average costs c.) Variable costs d.) Fixed costs (easy) p. 248 e.) Marginal costs

219

33. Which of the following is an example of a fixed cost? a.) a salespersons commission b.) the portion of your phone bill that does not include long distance charges (moderate) p. 248 c.) delivery costs of a 3-ton refrigeration unit to Kennesaw, Georgia, and another one to Jacksonville, Florida d.) cost of the hiring process to employ a new vice-president of legal e.) extra employees brought in to handle the holiday rush 34. Which of the following is an example of a fixed cost? a.) the CEOs 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) p. 248 e.) employees regular salaries as dictated by the union contract 35. _______________ consist of the sum of the fixed and variable costs for any given level of production. a.) Total costs (easy) p. 248 b.) Average costs c.) Variable Costs d.) Fixed Costs e.) Marginal Costs 36. 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) p. 249 d.) elasticity consumer exhibit for shoe prices e.) target costing principle 37. Which of the following statements describes one of the risks inherent with experiencecurve pricing strategy? a.) The aggressive pricing associated with this strategy might give the product a cheap image. (difficult) p. 249 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.

220

38. 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 (moderate) p. 250

221

39. 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) p. 250 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 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) pp. 250-251 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) pp. 250-251 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) pp. 250-251 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

222

e.) many people feel cost-plus pricing is fairer to both buyers and sellers (difficult) p. 251 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) pp. 251-252 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) pp. 251-252 e.) $45.00 46. Nixon Watch Co. (www.nixonnow.com) will incur fixed costs of $500,000 and unit variable costs of $20 on its new perpetual calendar quartz model. Nixon plans to price the model at $50. To break even, Nixon must sell _______________ units. a.) 9,876 b.) 16,667 (moderate) p. 252 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 SunCrests fixed costs. a.) $1,667 b.) $3,600 c.) $6,000 d.) $9,000 (moderate) p. 252 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
223

d.) target-return e.) perceived-value (easy) p. 253 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) p. 253 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) p. 253 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) p. 253 52. Wal-Mart does not do frequent price-related promotions in favor of keeping the prices as low as possible all the timethis is even reflected in their television advertising. This is an example of ____________ pricing. a.) everyday low (easy) p. 253 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) p. 253 d.) perceived-value e.) geographical

224

54. Baskin Robbins in Jackson Hole, Wyoming sells single-dip ice cream cones priced at roughly the same price as single-dips at the Coldstone Creamery and Monks ice cream sellers downtown. This information indicates that the Baskin Robbins store uses _______________ pricing. a.) value b.) target-return c.) going-rate (moderate) p. 253 d.) perceived-value e.) geographical 55. 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) p. 255 c.) the going-rates of competitors d.) value augmented by perception e.) an aggregated marketing plan for pricing 56. According to the research of Farris and Reibstein, how does the marketing mix influence a products price? a.) For products with high brand awareness, high advertising tends to support higher prices in the later stages of the PLC. (difficult) p. 256 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. Which of the following is not an important factor when considering the reactions of others to your prices? a.) How will competitors react? b.) Will suppliers raise their prices when they see the companys price? c.) Will the government intervene and prevent the price from being charged? d.) Will the sales force find the price motivating? e.) Will the price cover your costs and meet company objectives? (moderate) p. 256 58. 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) p. 257 b.) offset c.) compensation deal d.) buyback arrangement e.) sellback arrangement

225

59. DaimlerChrysler 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) p. 257 b.) offset c.) compensation deal d.) buyback arrangement e.) sellback arrangement 60. 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) p. 257 c.) compensation deal d.) buyback arrangement e.) sellback arrangement 61. 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) p. 258 e.) trade allowance 62. 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) p. 258 d.) distribution allowance e.) slotting allowance 63. Every August, Fat Tire Ale hosts a bike race and beer tasting festival in Taos, New Mexico. 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) p. 259 b.) seasonal discount c.) promotional allowance d.) psychological discount e.) functional discount

226

64. 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) p. 258 c.) service-form d.) captive-market e.) image 65. Passengers on a Delta Airlines flight from Charlotte, North Carolina, to Denver, Colorado, are paying several different fares, depending on when they bought their tickets. In charging these prices, Delta has engaged in _______________ pricing. a.) time (easy) p. 258 b.) functional c.) service-form d.) captive-market e.) image 66. The Dave Matthews Band plays a venue in Richmond, Virginia. The floor seats cost $48, the seats on the edges but close run $36, and the seats in the balconies are priced at $30. This is an example of __________ pricing. a.) psychological b.) image c.) value-added d.) perceived-value e.) location (moderate) p. 258 67. 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) p. 260 b.) price-quality c.) optional-feature d.) captive-product e.) customer-segment 68. Onet, 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 product-mix pricing strategy? a.) captive-pricing b.) product-line pricing c.) byproduct pricing d.) customer-segment pricing e.) two-part pricing (moderate) p. 260

227

69. 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) p. 260 e.) customer-segment 70. When renewing her subscription to Rolling Stone magazine, Guillermina was given the opportunity to purchase a subscription to Spin magazine, to get a Rolling Stone travel umbrella, and to purchase a membership in a discount music club all for one low price. The magazine publisher has engaged in _______________ pricing. a.) product-bundling (moderate) p. 260 b.) product-line c.) by-product d.) captive-product e.) two-part 71. 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 manufacturers best price adjustment strategy would be _______________. a.) adoption of delayed quotation pricing b.) use of escalator clauses (difficult) p. 262 c.) product bundling d.) unbundling goods and services e.) reduction of discounts Essay Questions 72. 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 Machines 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: (difficult) pp. 250-252 73. Goldstar, a Korean manufacturer, has decided to make and market small (125cc-250cc) motorcycles in the United States. Explain in detail the six-step procedure Goldstar should use setting the prices for their products.
228

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. a.) Goldstars early motivation might be to get a foothold in the market. This would be seeking market share. b.) Goldstar needs to determine the demand for small motorcycles in the United States. They might do this by examining public records for motorcycle registrations and enrollments in Motorcycle Safety Foundation courses. c.) 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. d.) Goldstar needs to understand the cost structures, prices charged, and offers by the competition in the marketplace. Most small motorcycles sold in the United States are made by the big four Japanese firmsHonda, Yamaha, Kawasaki, and Suzuki. e.) Goldstar may want to follow its fellow Korean companies by entering the Unites States 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. f.) Goldstar then needs to select the final prices for the bikes. The possible range is probably between $800 and $2,200, depending on all the factors above, as well as the power of the distributors in the channel. (difficult) pp. 245-256 74. 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. a.) Mattel might use barter, by offering to trade straight across 100,000 Barbies for 35,000 bolts of locally-manufactured textiles (which Mattel would then sell in another marketplace for cash). b.) 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.

229

c.) 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. d.) 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 which Mattel could then resell. (moderate) p. 257 75. A U.S. 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: American 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) p. 257 76. 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. a.) 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. b.) 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. c.) With image pricing, the seller can actually sell the same product packaged differently for different prices. This happens with tirestire-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.

230

d.) 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. e.) 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. f.) 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 doesnt exceed the additional revenue derived by discrimination; (5) customers are not antagonistic because of the differences, and; (6) the discrimination is not illegal. (moderate) pp. 257-259

231

Mini-Cases
Mini-Case 13-1 Fugazi is a punk band from Washington, DC. The leader, Ian, insists that the band not focus on the commercial aspects of making music, so the band typically charges no more than $6 for a live show, they sell no tee-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, which they sell for $10 online. 77. Refer to Mini-Case 13-1. When it comes to pricing their music, Fugazi uses the ________ method. a.) value (moderate) p. 253 b.) going-rate c.) markup d.) skimming e.) target-return 78. Refer to Mini-Case 13-1. The underlying objective or philosophy used by Fugazi in setting their prices is probably a.) survivalin this case, keeping the band alive b.) maximum current profitusing the strict definition in the book c.) maximum market sharein this case, getting as many people to listen to the band as possible (moderate) p. 246 d.) market skimmingusing the strict definition in the book e.) product-quality leadershipthe logic being that offering the best music possible will cost more than providing average-quality music 79. Refer to Mini-Case 13-1. 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) p. 249 e.) consideration of customers demand schedules Mini-Case 13-2 According to an article in the March 1935 issue of Fortune magazine, cement as we know it today first appeared in 1872. In 1890, 336,000 barrels were produced. In 1910, it was 76,500,000 barrels. By 1929, the concrete industry was producing 169,000,000 barrels annually. Cements growth was directly linked to the construction of roadways for the automobile. Because of its primary usage, there were strict regulations developed as to its content. As a result, the only way that one cement manufacturer differed from another was price.
232

While a cement maker at the time might contend that its cement was superior to the others on the market (and most of them made this contention), no cement company was able to translate this added value into price. Another distinguishing characteristic of the cement industry was the ratio between a companys selling price and its transportation costs. A barrel of cement weighed 376 pounds and cost $.42 to ship 50 miles. Fixed costs for International Cement Company (just 50 miles west of New York City) in 1935 were $64,000,000. Much of International Cements products were sold in New York City, where cement sold for $2.40 regardless of how far away it was manufactured. Variable manufacturing costs per barrel were $.70; it takes 600 pounds of ingredients to make one barrel. 80. Refer to Mini-Case 13-1. Buyers of cement were very price sensitive because _______________. a.) there were no brands that appeared to be superior to any others (difficult) p. 247 b.) there were no substitutes for cement c.) the purchase of cement was not a large part of the total cost of building a road d.) the cement can be easily compared because of the requirement that every bag of cement meets the specifications set out by the American Society for Testing Materials e.) cement can be easily stored 81. Refer to Mini-Case 13-1. Calculate the break-even volume in barrels for the International Cement Company. a.) 17,679,559 b.) 26,666,667 c.) 37,647,059 d.) 50,000,000 (moderate) p. 252 e.) 152,380,953 82. Refer to Mini-Case 13-1. What type of pricing structure was being used in the cement industry in 1935? a.) value b.) going-rate (moderate) p. 253 c.) markup d.) perceived-value e.) target-return

233

Chapter

14Designing

and

Managing

Value Networks
and 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) p. 267 2. Consumer payments flow backward in a channel. True (moderate) p. 270 3. The term supply chain suggests a sense-and respond view of the market. False (moderate) p. 267 4. Intermediaries may perform the functions of promotion, ordering, and possession, but never take title to the goods they are facilitating. False (moderate) p. 268 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) pp. 270-271 6. Backward channels recycle trash and old or obsolete products no longer used by customers. True (easy) p. 271 7. A zero-level channel involves the producer selling to the retailer. This is the baseline of channels. False (moderate) p. 270 8. 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) p. 271 9. The first step in designing a marketing channel is analyzing consumer needs for service outputs. True (moderate) p. 272 10. 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) p. 272

234

11. Agent intermediaries, such as brokers, manufacturers reps, and sales agents, seek out customers and negotiate on the producers behalf, but do not take title to the goods they are selling. True (moderate) p. 273 12. Exclusive distribution means severely limiting the number of intermediaries. True (moderate) p. 273 13. Coca-Cola is most likely to use exclusive distribution for its multi-packs. False (easy) p. 273 14. Producers of specialty products, such as Ferrari automobiles, will typically seek selective distribution. False (difficult) p. 273 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) p. 273 16. Franchise operations, such as Krispy Kreme Donuts, Papa Johns Pizza, and H&R Block, are examples of contractual VMSs. True (difficult) p. 279 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) p. 278 18. Single-channel occurs when a single firm uses two or more marketing channels to reach one or more customer segments. False (moderate) pp. 279-280 19. 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) p. 279 20. A strategy in which the seller allows only certain outlets to carry its products is called full-line forcing. False (difficult) p. 282

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) p. 267 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.
235

b.) c.) d.) e.)

They are not easily changed. Some of their functions can be eliminated. (difficult) p. 268 They represent a significant organizational commitment. 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) pp. 267-268 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) p. 269 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) p. 270 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 Amazon.coms online store, this is an example of using a a.) zero-level channel b.) one-level channel (moderate) p. 270 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) p. 271 28. Which of the following is an example of a reverse-flow channel? a.) Rhet buys a used suit at a thrift shop.
236

b.) c.) d.) e.)

Cody trades 15 large pepperoni pizzas for three 30-second commercials on KLZY. Goran uses hair he swept up from a beauty salon as a mulch. Bethanie cleans out moldy food containers from her fridge. Garn buys scrap copper he can melt down and resell. (moderate) p. 271

29. The goal of channels in the service sector is to make the service _______________. a.) available and accessible (moderate) p. 271 b.) affordable, differentiated, and easy to find c.) risk free, readily available, and differentiated d.) differentiated, targeted, and affordable e.) affordable and accessible 30. 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) p. 272 d.) waiting time e.) product variety 31. 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) p. 272 b.) service backup c.) lot size d.) waiting time e.) product variety

237

32. 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) p. 272 33. 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) p. 272 e.) product variety 34. 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) p. 272 b.) product differentiation c.) market aggregation d.) form utility e.) a narrow assortment breadth 35. Which of the following strategies of distribution means severely limiting the number of intermediaries? a.) exclusive distribution (moderate) p. 273 b.) selective distribution c.) intensive distribution d.) fragmented distribution e.) mass distribution 36. 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) p. 273 b.) mass distribution c.) intense distribution d.) mini-distribution e.) full-line forcing 37. For which of the following products is its manufacturer most likely to use exclusive distribution?
238

a.) b.) c.) d.) e.)

blue jeans hand tools bed sheets branded furniture (moderate) p. 273 Spider-Man merchandise

239

38. 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) p. 273 c.) intensive distribution d.) fragmented distribution e.) mass distribution 39. Schmaedick Corporation has developed an MP3 player - the UltraGigaMega 5000 - that will allow the user to listen to up to 24 hours 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) p. 273 b.) intensive c.) inclusive d.) exclusive e.) restrictive 40. For which of the following would a manufacturer be most likely to use selective distribution? a.) M&Ms b.) USA Today c.) souvenir tee-shirts d.) FUBU jeans (moderate) p. 273 e.) Budweiser beer 41. _______________ distribution consists of the manufacturer placing the goods or services in as many outlets as possible. a.) Selective b.) Intensive (easy) p. 273 c.) Inclusive d.) Exclusive e.) Restrictive 42. Producers of convenience goods typically seek _______________ distribution. a.) selective b.) intensive (easy) p. 273 c.) inclusive d.) exclusive e.) restrictive

240

43. For which of the following products would a manufacturer be most likely to use intensive distribution? a.) mens cologne that sells for $30 a bottle b.) combination fax/printers c.) Dr. Martins shoes d.) kitchen sinks e.) dish soap (easy) p. 273 44. McDonalds 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) p. 274 c.) sharing the risks d.) territorial rights e.) services agreed upon 45. A distributors 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) p. 274 d.) channel member parity e.) specific services to be performed by each party 46. Stuffwithastory.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 agents would charge a flat 11 percent commission on all sales. Stuffwithastory.com is using _______________ criteria to evaluate their major channel alternatives. a.) economic (moderate) p. 274 b.) qualitative c.) territorial d.) adaptive e.) control 47. Bodyshop produces a line of all-natural lotions and soaps, and is trying to choose between using its own sales force or 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 forces 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
241

b.) c.) d.) e.)

quantitative territorial adaptive control (moderate) p. 275

48. 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) p. 278 e.) a single producer using two or more marketing channels to reach different market segments

242

49. 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) p. 279 d.) multichannel marketing system e.) contractual vertical marketing system 50. Because of Coca-Colas 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) p. 279 b.) horizontal marketing system c.) corporate vertical marketing system d.) contractual vertical marketing system e.) multichannel marketing system 51. Franchise operations, such as Krispy Kreme, Papa Johns Pizza, and H&R Block, are examples of _______________. a.) administered VMSs b.) horizontal marketing systems c.) contractual VMSs (moderate) p. 279 d.) corporate VMSs e.) conventional marketing systems 52. _______________ organize groups of independent retailers to better compete with large chain organizations. a.) Wholesaler-sponsored voluntary chains (moderate) p. 279 b.) Retailer cooperatives c.) Franchise organizations d.) Catalog showrooms e.) Linked divisions 53. 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) p. 279 c.) franchise organizations d.) catalog showrooms e.) linked divisions 54. _______________ are created when a channel member called a franchisor links several successive stages in the production-distribution process. a.) Wholesaler-sponsored voluntary chains
243

b.) c.) d.) e.)

Retailer cooperatives Franchise organizations (easy) p. 279 Catalog showrooms Linked divisions

244

55. 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) p. 279 c.) contractual VMS d.) multichannel marketing system e.) corporate VMS 56. 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) p. 279 c.) contractual VMS d.) multichannel marketing system e.) corporate VMS 57. 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, and Snap-On tools to professional mechanics. This is an example of what type of system? a.) single channel marketing b.) multichannel marketing (moderate) pp. 279-280 c.) maxi-channel marketing d.) mini-channel marketing e.) direct channel marketing 58. 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) p. 280 e.) single channel 59. _______________ conflict involves conflict between members at the same level within the channel. a.) Horizontal channel (moderate) p. 280 b.) Direct channel c.) Multichannel d.) Vertical channel e.) Single channel
245

246

60. Joe Montes hand-makes guitars and sells them to retailers and also recently began to sell them to the final customer at montesguitars.com. The retailers arent 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) p. 280 d.) vertical channel e.) single channel 61. When Subway franchisers complained that their interests were not being served by the parent company, Subway Corporation allowed three of the companys 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) p. 281 d.) diplomacy, mediation, arbitration for chronic or acute conflict e.) competition 62. 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) p. 281 b.) competition c.) goal subordination d.) arbitration e.) mediation 63. _______________ takes place when each side sends a person or group to meet with its counterpart to resolve the conflict. a.) Diplomacy (moderate) p. 281 b.) Cooptation c.) Goal subordination d.) Arbitration e.) Mediation 64. 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) p. 281 e.) mediation

247

65. _______________ means having a skilled, neutral third party reconcile the two parties interests. a.) Diplomacy b.) Cooptation c.) Goal subordination d.) Arbitration e.) Mediation (moderate) p. 281 66. Which of the following is not included in the texts list of recommended characteristics to evaluate when choosing a channel member? a.) number of years in the business b.) number of employees (moderate) p. 275 c.) growth and profit record d.) solvency e.) cooperativeness 67. Which of the following is not one of the performance standards for intermediaries suggested in the text? a.) production lead times (moderate) p. 276 b.) average inventory levels c.) customer delivery time d.) treatment of damaged and lost goods e.) cooperation in promotional and training programs 68. When an intermediary is underperforming, the first intervention step should probably be _______ the intermediary. a.) counseling (moderate) p. 276 b.) retraining c.) remotivating d.) charging higher rates to e.) terminating 69. Mossimo and B.U.M. clothing were once sold exclusively at upscale department stores like Dillards, Proffits, Belk, and Dayton-Hudson. Now the brands play a prominent role in Target 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) p. 276 c.) intermediaries usually the channel leader d.) customer preferences matter less than retailer support e.) dropping a channel member is easier than adding one 70. A two-level marketing channel is comprised of _______________. a.) a channel captain and several channel lieutenants
248

b.) c.) d.) e.)

several producers and several final consumers a franchise organization an independent producer, wholesaler, and retailer (moderate) p. 271 all the players in the value chain

249

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) pp. 278-279 72. Automotive Exchange de Mexico rebuilds starters, generators, and alternators for popular U.S. automobiles, and the firm sells its goods through a 2-level channel. Discuss how AE 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 coveragethe manufacturer can add another channel to reach a customer segment its current channel cant reach. The second is lower channel costthe 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 sellingthe manufacturer can add a channel that has a selling feature that fits its customer requirements better. (moderate) p. 271 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 others 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
250

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) pp. 280-281

251

74. Moonstruck Chocolates of Portland, Oregon, started out in the inventors 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 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 someoneyou can eliminate the middleman, but you cannot eliminate their functions. (moderate) p. 269 75. Describe the five service outputs of a Toyota dealership. Answer: a.) 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. b.) 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. c.) The dealership should ideally be in a convenient location, providing consumers with spatial convenience. d.) 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. e.) 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) p. 272

Mini-Cases
252

Mini-Case 14-1 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 BellSouths 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 14-1. 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) p. 272 e.) product variety 77. Refer to Mini-Case 14-1. 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) p. 273 78. Refer to Mini-Case 14-1. 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) pp. 279-280 e.) an administered VMS approach Mini-Case 14-2 The Hanlon brothers of Minnesota decided to revive an extinct motorcycle brand, the onceproud 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,
253

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. Thus, 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 14-2. 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) p. 268 d.) ego e.) the multichannel marketing approach seemed like the best idea at the time 80. Refer to Mini-Case 14-2. The number of intermediaries suggests what type of distribution? a.) selective (moderate) p. 273 b.) intensive c.) exclusive d.) multichannel e.) hybrid 81. Refer to Mini-Case 14-2. 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 back-up (difficult) p. 272

Chapter

15Managing

Retailing,

Wholesaling, and Market Logistics

True/False Questions

254

1. Retail stores pass through a retail life cycle that parallels the product life cycle of products. True (moderate) p. 285 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) p. 285 3. Discount stores are large stores that combine the principles of supermarket, discount, and warehousing into one store. False (easy) p. 286 4. An example of a retail store positioned to offer a broad product assortment and high value added would be Wal-Mart. False (moderate) p. 286 5. The slowest growing segment of retailing is nonstore retailing. False (moderate) p. 287 6. 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) p. 285 7. A Subway sandwich store offers a narrow but deep assortment of products. True (moderate) p. 286 8. Stores with high value added and a broad product assortment tend to focus on centralized buying and advertising to keep costs low. False (difficult) p. 286 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) p. 288 10. Wholesaling includes all of the activities involved in selling goods or services to those who buy for resale or business use. True (moderate) p. 290 11. Global expansion, lower levels of competition, and selling an experience are all important trends in retailing. False (moderate) p. 290 12. Drop shippers sell bulky goods like coal and lumber from their inventory. False (difficult) p. 292 13. Some wholesalers do not take title to the goods they handle. True (easy) p. 292 14. Wholesalers rely primarily on sales promotions to achieve their promotional objectives. False (moderate) p. 293 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) p. 294
255

16. Cross-docking is the most effective way to describe a firms market-logistics objective of getting the right goods to the right places at the right time. False (difficult) p. 295 17. Fishyback, airtruck, and flyship are examples of containerization methods mentioned in the text, and each uses two modes of transportation. False (moderate) 256. 299 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) p. 298 19. A private carrier is one that is owned and controlled by the firm. True (moderate) p. 299 20. Deciding on transportation modes means shippers are choosing from private, public, and contract carriers. False (moderate) p. 299

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) pp. 285-286 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) p. 285 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) p. 285 24. Which of the following best describes the retailers that carry more shopping goods, and where customers need more information and assistance?
256

a.) b.) c.) d.) e.)

self-service self-selection limited service (moderate) p. 285 full service 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) p. 286 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) p. 286 b.) factory outlet c.) department store d.) superstore e.) combination store 27. Which of the following is the BEST example of a limited-line specialty store? a.) The Precious Moments Store stocks all currently produced Precious Moments statuettes, cards, plates, and any other items related to the Precious Moments line. b.) Welcome to My Garden carries bulbs and seeds, natural fertilizing agents, ergonomic hand and other types of tools, and patio furniture. c.) Julies Toddlers is a retail outlet that carries childrens clothing. (difficult) p. 286 d.) The Candy Store is a small store that has a deep assortment of packaged and by-thepound candies. e.) Circle K carries convenience snack foods and drinks, as well as local souvenirs. 28. McRaes is a chain of stores found primarily in Mississippi and Alabama. Each store carries several product lines, and each line is managed separately by a specialist buyer or merchandiser. McRaes offers many types of customer service, and its prices reflect that fact. McRaes is an example of a _______________. a.) specialty store b.) factory outlet c.) superstore d.) combination store e.) department store (moderate) p. 286

257

29. Every night after working the swing shift, Sierra stops by the 24-Store near her house. She often buys bread, cold cuts, and Dr. Pepper while shes there even though the prices at the 24-Store are higher than at her local supermarket. The 24-Store is an example of a _______________. a.) specialty store b.) superstore c.) warehouse store d.) convenience store (moderate) p. 286 e.) combination store 30. 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) p. 286 d.) hypermarket e.) warehouse store

258

31. The fastest growing segment of retailing is _______________. a.) nonstore retailing (moderate) p. 287 b.) chain store retailing c.) warehouse stores d.) hypermarkets e.) category killers 32. 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) p. 287 33. The citizens of North Cheshire Village, Massachusetts, got tired of having to drive 18 miles to buy gasoline and sundry items. They have decided to open their own store. All have contributed money to purchase the initial inventory and open this store, which will carry gasoline and a small amount of related accessories and lubricants. 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) p. 287 b.) retailer cooperative c.) merchandising cooperative d.) voluntary store e.) independent superspecialty store 34. A _______________ consists of a wholesaler-sponsored group of independent retailers engaged in bulk buying and common warehousing. a.) retailer cooperative b.) voluntary chain (moderate) p. 287 c.) consumer cooperative d.) retailing franchise e.) merchandising conglomerate 35. 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) p. 287
259

36. The most important retail marketing decision a retailer has to make is to _______________. a.) choose a positioning strategy b.) identify its target market (moderate) p. 288 c.) choose the service level it wants to support d.) select the product assortment e.) develop an effective store atmosphere 37. 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) p. 288 d.) store atmosphere e.) service level 38. 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) p. 288 c.) feature mostly private branded merchandise d.) offer merchandise customizing services e.) feature exclusive national brands not carried by competitors 39. Check cashing is an example of what type of service, related to the services mix of a store? a.) prepurchase b.) full-coverage c.) ancillary (moderate) p. 288 d.) postpurchase e.) profitability 40. Which of the following is NOT a part of a stores 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) p. 288 e.) the smell from potpourri containers scattered throughout the store 41. The pricing decision in retailing is _______________. a.) made independently of the product-assortment decision b.) increasingly based on sales pricing c.) key to the retailers positioning strategy (difficult) p. 289
260

d.) the least important of all the retail marketing decisions e.) not an effective tool for store differentiation 42. Jorge owns an equine sports equipment superstore, and wants to open a second store in nearby Paducah, Kentucky. He wants it to be the second anchor store at that location. He believes the stores 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) p. 289 b.) community shopping center c.) central business district d.) neighborhood shopping center e.) strip mall

261

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 retailings growth. d.) Retail life cycles are growing longer. e.) Retailers are increasingly selling an experience. (difficult) p. 290 44. _______________ 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) p. 290 c.) Bartering d.) Purchasing e.) Distributing 45. Wholesaling excludes all of the following types of companies EXCEPT _______________. a.) manufacturers b.) farmers c.) retailers d.) distributors (moderate) p. 290 e.) consumers 46. 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) p. 291 47. 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) p. 292 d.) an industrial distributor e.) a commission merchant 48. 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) p. 292 e.) Dell servers

262

49. 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) p. 292 50. _______________ 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) p. 292 b.) Industrial distributors c.) Rack jobbers d.) Producers cooperatives e.) Commission merchants 51. _______________ 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) p. 292 c.) Drop shippers d.) Commission merchants e.) Selling agents 52. A manufacturers agent would be most likely to handle _______________. a.) coal and cotton b.) books on tape and Stanley tools c.) Mars candy products and Arrow shirts d.) High blood pressure medicines and camping gear e.) wheelchairs and orthopedic braces (difficult) p. 292 53. Which of the following statements about manufacturers branches and offices is true? a.) Sales branches do not carry inventory. b.) Sales offices carry inventory. c.) Sales branches perform a role similar to one performed by agents and brokers. d.) Sales offices are prominent in the dry-goods industry. (difficult) p. 292 e.) Sales offices are not part of the manufacturers organization, while sales branches are. 54. 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) p. 293 e.) broadcast advertising
263

55. _______________ 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) p. 294 c.) Demand-driven management d.) Market logistics e.) Distribution management

264

56. 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.) involves planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use (difficult) pp. 294-295 e.) is getting the right goods to the right places at the right time 57. Integrated market logistics involves all of the following EXCEPT _______________. a.) materials management b.) material flow systems c.) physical distribution d.) information technology e.) financing (moderate) p. 295 58. Some goods arriving at Wal-Mart at a delivery dock are moved directly onto a truck going out of another dock, they are never put into inventory. This saves money and is called _______________. a.) just-in-time production b.) an intermediary swap c.) cross-docking (moderate) p. 295 d.) supplier willingness e.) dual handling 59. 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) p. 297 60. An order point of 20 means _______________. a.) orders are batched in parcels of 20s b.) reordering when the stock falls to 20 units (moderate) p. 297 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 61. If speed is a concern, the two best modes of transportation are _______________. a.) rail and truck b.) water and rail
265

c.) water and air d.) pipeline and water e.) air and truck (easy) p. 298 62. If the transportation goal is low cost, then _______________ should be used. a.) truck and rail b.) pipeline and water (easy) p. 298 c.) water and rail d.) truck and water e.) pipeline and truck 63. As Chin sat in his car waiting for the barges to pass through the drawbridge, he noticed several semi-trailers being carried on the barges. This is an example of _______________. a.) encapsulation b.) trainship distribution c.) dual distribution d.) fishyback distribution (moderate) p. 299 e.) bimodal distribution 64. People who live alongside the Mississippi River often see barges hauling rail cars. They are seeing _______________. a.) railwater distribution b.) dual distribution c.) bimodal distribution d.) piggyback distribution e.) fishyback distribution (moderate) p. 299 65. 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) p. 299 e.) freight forwarder 66. 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) p. 295 b.) demand chain planning c.) sales forecasting d.) supply chain management e.) value-added services

266

67. 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) pp. 295-296 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. 68. 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) p. 296 e.) How should goods be shipped?

267

69. The order-to-payment cycle may include all of the following except _______________. a.) order entry b.) salesperson soliciting order (moderate) p. 296 c.) customer credit check d.) order shipment e.) receipt of payment 70. Albertsons, a large western and southwestern chain of grocery stores, sometimes stocks up on Hi-Lo 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) p. 297

Essay Questions
71. 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) pp. 285-286 72. 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 (whos 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
268

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) p. 290

269

73. Whitney is thinking about opening a new high-end collectibles store along the historic Route 66, which goes through her town of Winslow, Arizona. 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. a.) Prepurchase services for the store might include telephone and mail order capabilities, advertising in travel brochures, even the stores 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. b.) Postpurchase services should include shipping assistance or assistance with delivery, gift wrapping, and a returns policy. Also possible are engraving services, installations, and alterations. c.) Ancillary services might include: check cashing, parking, credit, and rest rooms in the store. (moderate) p. 288 74. 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 locationsall of which raise costs. Most logistics systems have cost reduction as a major goal. (difficult) p. 296 75. In a short essay, discuss supply chain management. Answer: Supply chain management takes a broader perspective than physical distribution. It is concerned with the manufacturers procurement of the right inputs (raw materials,
270

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 companys 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 manufacturers costs. The drawback to the supply chain perspective is the fact that it views markets as destination points. (moderate) pp. 294-295

271

Mini-Cases
Mini-Case 15-1 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. 76. Refer to Mini-Case 15-1. What type of organization is Big Lots!? a.) voluntary chain b.) corporate chain (moderate) p. 287 c.) retailer cooperative d.) consumer cooperative e.) franchise operation 77. Refer to Mini-Case 15-1. What type of retailer is Big Lots!? a.) factory outlet b.) warehouse club c.) independent off-price retailer (moderate) p. 286 d.) superstore e.) specialty store 78. Refer to Mini-Case 15-1. 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) p. 289 Mini-Case 15-2 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 whats 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
272

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.

273

79. Refer to Mini-Case 15-2. The Home Shop will offer what level of service? a.) self-service b.) self-selection c.) limited service (moderate) p. 288 d.) full service e.) relationship service 80. Refer to Mini-Case 15-2. Elliott and Robin should join what type of retail organization? a.) retailer cooperative (moderate) p. 287 b.) voluntary chain c.) consumer cooperative d.) wholesaler-sponsored cooperative e.) merchandising conglomerate 81. Refer to Mini-Case 15-2. What would be the best location for this outlet, given Elliott and Robins perspective on their business. a.) central business district b.) regional shopping center c.) stand-alone destination site d.) strip mall (moderate) p. 289 e.) a location within a larger store

Chapter

16Designing

and

Managing

Integrated Marketing
Communications
True/False Questions
1. Marketing communications are only carried out prior to the sale to the consumer. False (moderate) p. 303 2. The sources expertise, trustworthiness, and likeability determine the level of source credibility. True (moderate) p. 307

274

3. 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) p. 308 4. One downside to using public relations and publicity is the lack of credibility. False (moderate) p. 309 5. 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) p. 309 6. 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) pp. 309310 7. When developing an advertising program, the five critical Ms are mission, money, media, message, and measurement. True (moderate) p. 312 8. Reminder advertising works best for new products. False (easy) p. 313 9. Japanese ads tend to be less direct and appeal more to the emotions, when compared to U.S. ads. True (moderate) p. 314 10. Audiences can be measured according to circulation, which is the number of physical units carrying the advertising. True (moderate) p. 316 11. The cost-per-thousand for a medium that reaches 10,000,000 people at a cost of $135,000 is $13.50. False (moderate) p. 317 12. Pulsing calls for spending all of the advertising dollars in a single period. False (moderate) p. 317 13. Pulsing is continuous advertising at low-weight levels reinforced periodically by waves of heavier activity. True (moderate) p. 317 14. Copy testing is always done before ads are run. False (easy) p. 318 15. A firm that wants to attract new triers, reward loyal customers, or increase the repurchase rate of occasional users would be best served by sales promotion. True (moderate) p. 318 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) p. 318

275

17. Although sales promotions are short-term in nature, they can be consumer franchise building if they reinforce understanding about the brand. True (moderate) p. 319 18. Public relations is an ineffective tool in the launch of a new product. False (moderate) p. 322 19. Public relations involves a variety of programs that are designed to promote or protect a companys image or its individual products. True (moderate) p. 322 20. Direct mail marketing can include the use of e-mail, voice mail, and fax mail. True (moderate) p. 325

Multiple Choice Questions

21. The first step in the development of effective communication is _______________. a.) identifying the target audience (moderate) p. 303 b.) determining the communication objectives c.) designing the message d.) setting the budget e.) selecting the communication channels 22. _______________ is the set of beliefs, ideas, and impressions that a person holds regarding an object. a.) Image (easy) p. 304 b.) Atmosphere c.) Event d.) Media e.) Message 23. An ad in Surfer Girl magazine says, Mr. Zogs 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.) cognitive d.) social e.) rational (moderate) p. 305 24. 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.) emotional (easy) p. 306 c.) social d.) discriminant
276

e.) rational

277

25. Ads that state you should buy Harley Davidson because it is made in America are using a(n) _______________ appeal. a.) moral (moderate) p. 306 b.) emotional c.) social d.) rational e.) cognitive 26. The ad says, For about the cost of a cup of coffee a day, you can make little Pablos life so much better. This is an example of a(n) _______________ appeal. a.) rational b.) practical c.) reciprocal d.) emotional (moderate) p. 306 e.) provocative 27. The headline for an ad reads, Power Bars give you all you needwhen you need it! This is an example of a(n) _______________ appeal. a.) rational (moderate) p. 306 b.) practical c.) reciprocal d.) emotional e.) provocative 28. Source credibility is a function of the sources _______________. a.) personal, social, and moral influences b.) quality of expressionboth verbal and nonverbal c.) likeability, expertise, and trustworthiness (difficult) p. 307 d.) recognizability, trustworthiness, and reputation e.) knowledge, reputation, and perceived expertise 29. A pharmaceutical drug rep giving her sales presentation to the office manager and the doctor is using a(n) _______________ communication channel. a.) personal (moderate) p. 307 b.) expert c.) advocate d.) informal e.) competent 30. 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) p. 307 c.) They are identifying influential individuals and devoting extra time to them.
278

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.

279

31. _______________ are occurrences such as news conferences and grand openings designed to communicate to target audiences. a.) Atmospheres b.) Display media c.) Events (moderate) p. 308 d.) Interactive communication channels e.) Mood enhancers 32. Newspapers, magazines, and direct mail are all examples of which of the following types of media? a.) print media (easy) p. 308 b.) broadcast media c.) electronic media d.) display media e.) intermittent media 33. 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) p. 308 d.) display media e.) intermittent media 34. 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) pp. 308-309 b.) It links sales to corporate expenditures. c.) It focuses attention on the relationship of costs and price and unit profit. d.) It encourages stability when others in the industry spend the same percentage. e.) Sales and promotional expenditures are related. 35. Ohana Surf, on the north shore of Oahu, Hawaii, is preparing its promotional budget for next year. If its first step is to forecast next years sales, then Ohana is probably using the _______________ method. a.) percentage-of-sales (difficult) pp. 308-309 b.) affordable c.) market share d.) competitive-parity e.) objective-and-task

280

36. 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) pp. 308-309 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. 37. In an ideal world, which 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) p. 309 38. If Ohana Surf, on the north shore of Oahu, Hawaii, wants to use the promotional tool that will build the long-term image of the store and give the best cost per exposure, it should use _______________. a.) direct mail b.) public relations and publicity c.) advertising (moderate) p. 309 d.) sales promotion e.) personal selling 39. 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) p. 309 c.) advertising d.) public relations e.) personal selling 40. 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) p. 310
281

41. At what stage of buyer readiness is sales promotion the most cost-effective promotional tool? a.) awareness b.) comprehension c.) conviction d.) ordering e.) reordering (moderate) p. 310 42. At what stage of buyer readiness are advertising and publicity the most cost-effective promotional tools? a.) awareness (moderate) p. 310 b.) comprehension c.) conviction d.) ordering e.) reordering 43. 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 Jacuzzis in every room, filet mignon or lobster on the menu, and afternoon teas for the new mothers and their families? a.) descriptive b.) persuasive c.) reminder d.) informative (moderate) p. 312 e.) instructive 44. 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) pp. 312-313 c.) reminder d.) informative e.) instructive 45. Advertising for Advil pain reliever shows how Advil is superior to Tylenol. This is an example of _______________ advertising. a.) descriptive b.) persuasive (moderate) p. 313 c.) reminder d.) informative e.) instructive
282

46. Abercrombie and 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) p. 313 d.) informative e.) descriptive 47. 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 companys product line (difficult) p. 313 48. 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) pp. 313-315 e.) social responsibility review 49. 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) p. 315 d.) impact e.) gross rating points 50. The qualitative value of an exposure through a given media vehicle is called _______________. a.) iteration b.) frequency c.) reach d.) impact (difficult) p. 315 e.) gross rating points 51. Assume you are advertising very expensive authentic Turkish carpets to upscale investors in Germany. Credibility and prestige are important. The best medium for your advertising message is _______________.
283

a.) b.) c.) d.) e.)

television newspapers magazine (moderate) p. 316 direct mail radio

52. The owner of a dive shop that 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 its ad high repeat exposure (difficult) p. 316 b.) provide tremendous audience selectivity c.) allow the restaurant to create very creative ads d.) not have to contend with clutter e.) provide all of the above benefits to the restaurant 53. Audiences can be measured according to _______________, which is the number of physical units carrying the advertising. a.) circulation (moderate) p. 316 b.) flighting c.) effective audience d.) effective ad-exposed audience e.) continuity

284

54. 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) p. 317 d.) effective ad-exposed audience e.) bottom-line measure 55. If a 30-second advertisement during an old Seinfeld rerun costs $160,000 and reaches 8,000,000 people, 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) p. 317 56. 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) p. 317 57. A Thai restaurant buys an ad in every issue of its small towns 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 restaurants media timing? a.) flighting b.) concentration c.) pulsing d.) bursting e.) continuity (moderate) p. 317 58. 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) p. 317 e.) flighting 59. 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
285

b.) c.) d.) e.)

continuity pulsing concentration flighting (moderate) p. 317

286

60. __________ 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) p. 317 d.) Concentration e.) Flighting 61. _______________ 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) p. 318 d.) Personal selling e.) Market segmentation 62. 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) p. 318 63. All of the following are examples of tools for consumer promotions EXCEPT_______________. a.) samples b.) coupons c.) premiums d.) prizes e.) display allowances (moderate) p. 318 64. 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) p. 318 e.) an unbiased public relations article

287

65. When a movie studio uses toys in fast food restaurant kids meals to advertise their latest movie, they are using _______________. a.) tie-in promotions (moderate) p. 320 b.) prize promotions c.) point-of-purchase promotions d.) premiums e.) promotion bundling 66. Toms used _______________ when it placed a coupon for $1.00 off any 12-pack of soda 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) p. 320 e.) promotion bundling 67. _______________ involves a variety of programs that are designed to promote or protect a companys image or its individual products. a.) Advertising b.) Public relations (moderate) p. 322 c.) Sales promotion d.) Personal selling e.) Market segmentation 68. When Virginia did its Virginia Is for Lovers campaign to help people think positively about a state they may have had 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) p. 322 c.) defending products that have encountered public problems d.) influencing specific target groups e.) building interest in a product category 69. Public relations is particularly effective in _______________. a.) building awareness and brand knowledge in new and existing products (difficult) p. 322 b.) reinforcing the buyers 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 70. The original and oldest form of direct marketing is _______________. a.) telemarketing
288

b.) c.) d.) e.)

junk mail the field sales call (moderate) p. 325 catalog marketing e-marketing

289

Essay Questions
71. 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 the different budgeting options Tom has, choose one of the forms, and justify it by discussing its pros and cons. Answer: (1) The affordable method of setting budgets simply determines the amount of budget by how much the company has available. (2) The percentage-of-sales method sets promotion expenditures at a specified percentage of sales (either current or anticipated). (3) The competitive-parity method lets companies set their promotion budget to achieve share-of-voice parity with competitors. (4) The objective-and-task method calls upon marketers to develop promotion budgets by defining specific objectives, determining the tasks that must be performed to achieve these objectives, and estimating the costs of performing these tasks. In selecting one of these methods, competitive-parity is illogical. The objective-and-task, while a sound method, is time-consuming. Of the two remaining methods, the affordable method is probably the easiest to use. It does completely ignore the role of promotion as an investment and the immediate impact of promotion on sales volume. The percentage of anticipated sales method is useful because it encourages management to think in terms of promotion cost, selling price, and profit per unit, but the question is does Tom have time to accurately predict sales? On the negative side, this method uses circular reasoning. It leads to the same thing as the affordable methoda budget based on available funds not market opportunities. Most students, if they reason through what they know about budgeting, should select affordable method given the circumstances. (difficult) pp. 308-309 72. The venture capital group 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 JoAnns 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.

290

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) p. 315

291

73. Machaca-filled burritos have long been a favorite dish at Mexican restaurants in southern Arizona. Maria Gutierrez decided to market this traditional treat regionally under the brand name Mama Gs. She sells a package of dehydrated machaca meat with a stack of flour tortillas and some envelopes of her favorite salsa. Discuss the five major decisions that she had to make when developing the advertising program for Mama Gs. Answer: The five major decisions that Gutierrez 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 products 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) p. 312 74. 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) pp. 312-313 75. Only-Documentaries.com ran an ad in Mother Jones magazines in which it announced it had nearly every video documentary in print and many no longer in printall available for rental. The advertisement cost $16,000. Since the goal of this ad was to make people aware that Only-Documentaries.com rents and sells videos, 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 Only-Documentaries.coms advertising objective, which measure would be more important? Answer:
292

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.

293

Communication-effect research is important, but given Only-Documentaries.coms objective, sales-effect research would have been more useful. Only-Documentaries.com wants to know what sales were generated by the ad. The historical approach to saleseffect 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. OnlyDocumentaries.com would be likely to use the historical approach to determine the effectiveness of its ad. (difficult) p. 318

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 longterm cardiovascular and anticancer benefits. In spite of these positive aspects to the product, a concern that aspirin might contribute to Reyes 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 youre likely to receive a Tylenol. Aspirin manufacturers are trying to educate people that simple aspirin can help keep them alive. 76. Refer to Mini-Case 16-1. Consumers who buy aspirin because the they have run out but not because they have a current need for the product are probably going through which response hierarchy sequence? a.) learn-feel-do b.) learn-do-feel (difficult) p. 304 c.) learn-feel-do-feel d.) can-do-will-to-do e.) do-feel-learn 77. Refer to Mini-Case 16-1. The headline of an Anacin advertisement reads The taking of one aspirin daily may prevent heart attacks. This ad is using a _______________ appeal. a.) moral b.) decoded c.) cognitive d.) social e.) rational (moderate) p. 305
294

78. 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) p. 322 e.) personal selling Mini-Case 16-2 Sedona Advertising is developing a marketing campaign for a Latter-Day 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 Latter-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. Latter-Day wants to link the sales of its best selling long boards to its new line of Vert-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 Latter-Day 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 owners goals within his current budget. 79. Refer to Mini-Case 16-2. What would be the most likely advertising objectives for the two products listed? a.) informative for the Vert-Riding lines; reminder for the best-selling long boards (difficult) pp. 312-313 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 80. Refer to Mini-Case 16-2. The ads for the new Vert-Rider board are using what type of appeal? a.) rational b.) emotional (easy) p. 306 c.) moral d.) casual e.) multinational

295

81. Refer to Mini-Case 16-2. The most probable way for Sedona to help Latter-Day 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) p. 322 e.) copy testing

296