Unit 1

New Product Development

1) Which of the following is most closely related with the organic growth of an organization?
A) acquiring a product or service brand
B) entering new market places
C) increasing the operational profitability
D) increasing productivity of employees
E) developing new products from within
Answer: E

2) New-to-the-world products are ________.

A) low-cost products designed to obtain an edge in highly competitive markets
B) new product enhancements that supplement established products
C) new versions of an existing product that has been less successful
D) new products that create an entirely new market
E) existing products that are targeted to new geographical markets
Answer: D

3) Which of the following firms is most likely to seek radical innovation?

A) a traditional publishing company
B) a small scale FMCG company
C) a firm that procures and markets wheat
D) a high-tech firm in telecommunications
E) a firm that sells mineral water
Answer: D

4) Most new-product activities are devoted to ________.

A) changing the target markets
B) developing new-to-the-world products
C) introducing backward integration
D) improving existing products
E) changing the existing market dynamics
Answer: D

5) Which of the following is the best example of a new-to-the-world product?

A) Walmart, the retail giant, opens new stores in an underdeveloped African country.
B) Pestorica, a publishing company, decides to launch a new sports magazine.
C) Tata Motors, an Indian automobile company, acquires Jaguar to extend its business.
D) An Asian company licenses a U.S. apparel brand name though the brand is not familiar in
Asia.
E) Kids-Med, a company that produces childcare products, launches a non-contact
thermometer.
Answer: E
6) Most established companies focus on ________ innovation when they aim to enter new
markets by tweaking existing products, or they want to stay one step ahead in the market by
using variations on a core product.
A) incremental
B) continuous
C) spontaneous
D) radical
E) competitive
Answer: A

7) It has been observed that most new products have shorter product life cycles. What is the
reason for this?
A) Most new products do not use technology.
B) Most new products are not backed by a marketable idea.
C) New products do not get adequate management support.
D) Social and governmental constraints lead to this failure.
E) Rivals quickly copy products that are successful.
Answer: E

8) Which of the following strategies for new-product development incorporates the buyers'
preferences in the final design of the product?
A) customer-driven engineering
B) market leadership
C) cost leadership
D) incremental innovation
E) disruptive technology
Answer: A

9) Pager, a simple personal device for short messages, became famous in the 1990s. Troveron
Communications launched a pager in the early twenty-first century. Due to the introduction
of mobile phones and text messaging, the pager industry was on a decline. The company's
innovations were not well received by the market and the product became a failure. Which of
the following is the most likely reason for the product's failure in this case?
A) poor launch timing of the product
B) a small and fragmented target market
C) high cost of development
D) social and economic constraints
E) hasty product development
Answer: A

10) After creating a product prototype, a company tests it within the firm to see how it
performs in different applications. The company refines the prototype to correct the mistakes
found in in-house testing. What should be the next step?
A) commercializing the product
B) performing concept testing
C) conducting beta testing with customers
D) creating a marketing strategy for the product
E) performing business analysis
Answer: C

11) Identify a shortcoming of giving the responsibility of new product development to the
product managers of a company.
A) They would not be familiar with the industry standards.
B) Product managers would not have an operational focus.
C) Product managers are often busy managing existing lines.
D) They will find it difficult to gain support from employees.
E) Product managers are less likely to use participative management.
Answer: C

12) ________ teams are cross-functional groups charged with developing a specific product
or business.
A) Virtual
B) Venture
C) Fundamental
D) Elemental
E) Transitory
Answer: B

13) Intercom, Inc. together with its subsidiaries, primarily engages in the generation,
transmission, and distribution of electric power in the United States. The company observes
that its growth has stagnated over a period of two years. In an attempt to promote growth, it
considers adding new features to the existing products and introducing a few new products.
The company forms a committee consisting of three top executives, one of the production
mangers, a few operational managers, and a representative of the HR department to generate
ideas. This team is called a(n) ________.
A) virtual team
B) venture team
C) fundamental team
D) elemental team
E) transitory team
Answer: B

14) A team formed at Intercom, Inc. to generate ideas for new products, conducts frequent
meetings and engages in activities such as mind mapping and brainstorming. Most of the
meetings are conducted at informal locations away from office. These workplaces are called
________.
A) skunkworks
B) idea funnels
C) research centers
D) stage gate systems
E) contextual bases
Answer: A
15) The ________ used by companies divides the innovation process into stages, with a
checkpoint at the end of each stage.
A) reverse assumption analysis technique
B) skunkworks system
C) stage-gate system
D) spiral development process
E) new-product department technique
Answer: C

16) ________ are informal workplaces, sometimes garages, where intrapreneurial teams
attempt to develop new products.
A) Stage-gate systems
B) Skunkworks
C) Funnels
D) Opportunity spaces
E) Research centers
Answer: B

17) Which of the following questions is answered during the business analysis of ideas?
A) Will this product meet our profit goals?
B) Have we got a technically and commercially sound product?
C) Can we find a cost-effective, affordable marketing strategy?
D) Can this product meet sales expectations?
E) Can we find a good concept consumers say they would try?
Answer: D

18) During which of the following stages in new product development decision making do
managers analyze if they can find a good thought consumers say they would try?
A) idea generation
B) idea screening
C) business analysis
D) concept development and testing
E) product development and testing
Answer: D

19) ________ process recognizes the value of returning to an earlier stage to make
improvements before moving forward.
A) Spiral development
B) Reactive development
C) Market testing
D) Proactive development
E) Concept testing
Answer: A

20) The ________ uses observational, anthropological, and ethnographic methods or

consumer self-reports to map consumer needs, wants, and even beyond.
A) business analysis
B) demand landscape
C) opportunity space
D) strategic blueprint
E) internal design analysis
Answer: B

21) To ensure success of new products, which market segment should be targeted initially?

A) Early majority.
B) Early adopters.
C) Laggards.
D) Late majority.
E) Innovators.
Answer: E

22) The type of newness (new to the company, new to the market) may be explained by
which of the following?

A. A me-too product.
B. A radical new product with innovation.
C. The core product is familiar to the market.
D. Innovative me-too product, new to the market.
E. The core product is familiar with innovation.
Answer: B

23) When companies identify a small number of test sites and cities to conduct a full
marketing campaign to ascertain the response of the consumer to the new product, this
process is referred to as:

A. simulated test marketing.

B. controlled test marketing.
C. niche testing.
D. Standard test marketing
E. all of the above.

Answer: D

24) ________ means inviting the Internet community to help create content or software, often
with prize money or a moment of glory involved.
A) Stage-gating
B) Cocreation
C) Microstocking
D) Buzzing
E) Crowdsourcing
Answer: E
25) Surgeons and ER nurses would be considered ________ for surgical equipment.
A) venture agents
B) internal customers
C) buzz agents
D) lead users
E) connectors
Answer: D

26) Many believe that customer focus does not help to create better or new products. This
belief rests on which of the following ideas?
A) Such new product developments decrease the chances of success.
B) Customers do not consider the cost of design when suggesting.
C) Customers are at times unaware of what they really want.
D) It increases the cost of testing a product or service.
E) Having too much customer focus leads to a negative brand image.
Answer: C

27) The ________ technique for stimulating creativity lists all the characteristics of an object
and then modifies each to try to arrive at a new idea.
A) reverse assumption analysis
B) lateral marketing
C) attribute listing
D) forced relationship
E) morphological analysis
Answer: C

28) The ________ technique used for stimulating creativity identifies a problem and then
considers the dimension, the medium, and the power source.
A) attribute listing
B) reverse assumption analysis
C) mind mapping
D) lateral marketing
E) morphological analysis
Answer: E

29) In an attempt to improve the product, a company that manufactures screwdrivers

discusses the modification of each attribute, such as replacing the wooden handle with
plastic, providing torque power, adding different screw heads, and so on. This creativity
technique is called ________.
A) attribute listing
B) mind mapping
C) morphological analysis
D) lateral analysis
E) reverse analysis
Answer: C
30) Electro Locomotors (EL), Inc. engages in the manufacture, distribution, and marketing of
custom vehicles in Brazil. Bono, a hybrid car brand that the company produces, is a market
leader in the hybrid vehicles segment. With the increased global focus on nature friendly
vehicles and governmental subsidies for companies that manufacture hybrid vehicles,
competition has increased for flex-fuel cars like Bono. The heads of the R&D team at EL is
in a creative session to generate ideas for improvements to Bono. They consider each part of
the car and discuss the possibilities of improvements in each of them. Identify the creativity
technique used here.
A) attribute listing
B) forced relationship analysis
C) morphological analysis
D) reverse assumption analysis
E) mind mapping
Answer: A

31) ________ works by listing all the normal assumptions about an entity and then turning
them around.
A) Lateral marketing
B) Attribute listing
C) Reverse assumption analysis
D) Forced relationships
E) Morphological analysis
Answer: C

32) The ________ creativity technique begins in a thought that is written down, then
proceeds to develop other thoughts that are linked to the first thought, and finally materializes
a new idea by associating all the thoughts.
A) mind mapping
B) contextual analysis
C) attribute listing
D) reverse assumption analysis
E) morphological analysis
Answer: A

33) Increasingly, new-product ideas arise from ________ that combines two product concepts
or ideas to create a new offering.
A) reverse assumption analysis
B) lateral marketing
C) attribute listing
D) forced relationships
E) morphological analysis
Answer: B

34) A group of college graduates decide to start a business. Though they are knowledgeable
in various business domains, they are unable to arrive at a valuable business idea. They
decide to search for ideas in a structured manner. They meet together and start discussing
everyone's ideas. Each idea is recorded and then the thoughts that come up in relation to the
ideas are written down and discussed. This process helps them to finalize a business plan.
What technique is used here?
A) morphological analysis
B) forced relationship analysis
C) reverse assumption analysis
D) attribute listing
E) mind mapping
Answer: E

35) Morboro Energy, Inc. is a large chain of fuel stations in Europe. The company decided to
expand its business by incorporating restaurants and automobile service stations as a part of
its fuel outlets. This is an example of ________.
A) lateral marketing
B) brand extension
C) market development
D) internal marketing
E) brand personification
Answer: A

36) A ________ error occurs when the company dismisses a good idea.
A) probability
B) performance
C) double counting
D) DROP
E) GO
Answer: D

37) A(n) ________ is a possible product the company might offer to the market.
A) test brand
B) alpha product
C) beta version product
D) product idea
E) product concept
Answer: D

38) A(n) ________ is an elaborated version of a product idea expressed in consumer terms.
A) test brand
B) alpha product
C) beta product
D) business schedule
E) product concept
Answer: E

39) ________ means presenting the product concept to target consumers, symbolically of
physically, and getting their reactions.
A) Perceptual mapping
B) Brand-positioning mapping
C) Brand attribute mapping
D) Concept development
E) Concept testing
Answer: E

40) Modern firms use the ________ concept testing tool to design products on a computer
and then produce rough models to show potential consumers for their reactions.
A) morphological analysis
B) rapid prototyping
C) concept testing
D) perceptual mapping
E) conjoint analysis
Answer: B

41) Brown & Smith, Inc. engages in the design, development, making, and retail of designer
jewelry in North America. Before approving a new design of jewelry the company draws it
on a computer and then produces models to show potential consumers for their reactions.
This allows the company to analyze the possible customer reaction. Identify the concept
testing method used here.
A) conjoint analysis
B) perceptual mapping
C) virtual reality testing
D) rapid prototyping
E) digital fabrication
Answer: D

42) Consumer preferences for alternative product concepts can be measured through
________, a method for deriving the utility values that consumers attach to varying levels of
a product's attributes.
A) concept testing
B) perceptual mapping
C) gap level analysis
D) conjoint analysis
E) morphological analysis
Answer: D

43) With ________, respondents see different hypothetical offers formed by combining
varying levels of the attributes, then rank the various offers.
A) gap level analysis
B) conjoint analysis
C) perceptual mapping
D) concept testing
E) morphological analysis
Answer: B

44) Universal Services, Inc. provides communication services to residential and business
customers in rural and small urban communities primarily in northern England. The company
offers services such as local and long distance voice, data, and Internet and broadband
product offerings. The company, in an attempt to increase the attractiveness of its offerings,
decides to provide special voice and data packages to its customers. The company designs
eight different packs that offer varying voice and data benefits to customers. The company
then asks a few of its customers to rank the packs in order to choose two best packs. Which of
the following testing methods is being used in the above scenario?
A) virtual reality testing
B) conjoint analysis
C) perceptual mapping
D) product fabrication
E) rapid prototyping
Answer: B

45) The trade-off approach may be easier to use when there are/is ________.
A) many variables
B) only a few alternatives
C) observers that are biased
D) possible offers that are limited
E) only one highly desirable solution
Answer: A

46) ________ is a "hybrid" data collection technique that combines self-explicated

importance ratings with pair-wise trade-off tasks.
A) Sales wave analysis
B) Simulative data testing
C) Adaptive conjoint analysis
D) Business analysis
E) Exponential data collection
Answer: C

47) ________ exhibit replacement cycles dictated by physical wear or obsolescence

associated with changing style, features, and performance.
A) Frequently purchased products
B) High-moving goods
C) Inexpensive products
D) Commodity products
E) Infrequently purchased products
Answer: E

48) To estimate replacement sales, management must research the product's ________, the
number of units that fail in year one, two, three, and so on.
A) survival-age distribution
B) lifecycle ratio
C) obsolescence rate
D) business turnover ratio
E) product-performance usage
Answer: A

49) For a frequently purchased new product, the seller estimates repeat sales as well as first-
time sales. A high rate of repeat purchasing means customers ________.
A) value price more than differentiation
B) do not support innovation on brands
C) value differentiation more than price
D) prefer personalized products rather than standard ones
E) are satisfied with the product
Answer: E

50) ________ contribution lists the changes in income to other company products caused by
the introduction of a new product.
A) Supplementary
B) Dragalong
C) Gross
D) Cumulative
E) Net
Answer: A

51) The highest loss a project can create is called ________.

A) rapid prototyping income
B) payback income
C) maximum investment exposure
D) incremental yearly exposure
E) cannibalized income
Answer: C

52) The job of translating target customer requirements into a working prototype is helped by
a set of methods referred to as ________.
A) quality function deployment
B) quality control processes
C) rapid prototyping
D) marketing control
E) control system formation
Answer: A

53) Which of the following methodologies takes the list of desired customer attributes (CAs)
generated by market research and turns them into a list of engineering attributes (EAs) that
engineers can use?
A) quality control processes
B) quality function deployment
C) rapid prototyping
D) marketing control
E) control system formation
Answer: B

54) ________ is a customer test that involves placing the product within the firm to see how
it performs in different applications.
A) Beta testing
B) Research testing
C) Sales-wave testing
D) Alpha testing
E) Simulated testing
Answer: D

55) In consumer-goods market testing, the company seeks to estimate four variables. These
four variables are: trial, first repeat, adoption, and ________.
A) guaranteed response
B) price sensitivity
C) purchase frequency
D) usage convenience
E) preferential treatment
Answer: C

56) A large FMCG company decides to test market Kora, a new brand of face cleanser, to be
launched soon. The company initially distributes a few free samples to some prospective
consumers. Later it offers the product to the customers at a discounted price and observes that
not only more than seventy percent of the customers are purchasing it but the same number
are also satisfied using it. The company keeps using this process 3-4 times to obtain a correct
count of the number of people purchasing the product repeatedly. Which of the following
testing methods is being used here?
A) simulated testing
B) controlled testing
C) full test marketing
D) parallel testing
E) sales-wave research
Answer: E

57) Which of the following is an advantage of sales-wave research?

A) It gives surprisingly accurate results on advertising effectiveness.
B) It allows the brand to gain favorable shelf position.
C) It guarantees immediate brand recognition and high sales volume.
D) It can be implemented quickly with a fair amount of security.
E) It easily creates a buzz in the minds of customers.
Answer: D
58) Which of the following is usually referred to as a full-blown test market?
A) an internal focus group
B) a discussion group
C) a country
D) a city or a few cities
E) a laboratory
Answer: D

59) Which of the following products is most likely to undergo alpha and beta testing?
A) food products
B) industrial goods
C) consumer products
D) commodities
E) FMCG products
Answer: B

60) During ________, the company's technical people observe how customers use the
product, a practice that often exposes unanticipated problems of safety and servicing and
alerts the company to customer training and servicing requirements.
A) beta testing
B) research testing
C) sales-wave testing
D) alpha testing
E) simulated testing
Answer: A

61) Poga International, a multinational beverage corporation identifies that one of its
competitors is launching an apple flavored drink. The company decides to launch an apple
flavor brand along with its competitor. What timing strategy is used here?
A) first entry
B) blunt entry
C) parallel entry
D) late entry
E) exchange entry
Answer: C

62) Some firms might delay the launch of their products until after the competitor has borne
the cost of educating the market. Such an entry is called ________ entry.
A) strategic pay off
B) parallel
C) balancing
D) late
E) compensating
Answer: D
63) A(n) ________ is any good, service, or idea that is perceived as new, no matter how long
its history.
A) commodity
B) innovation
C) adoption
D) invention
E) novel product
Answer: B

64) Adopters of new products move through five stages. These stages begin with ________
and follow with interest, evaluation, trial, and adoption.

A) awareness
B) investigation
C) trial
D) innovation
E) diffusion
Answer: A

65) Identify the stage in the consumer adoption process in which the customer is stimulated
to seek information about the innovation.
A) awareness
B) adoption
C) interest
D) evaluation
E) trial
Answer: C

66) Robert has heard about the latest cell phone from LG electronics that features Wi-Fi
hotspot technology. Wi-Fi hotspot is a technology that allows users to share mobile internet
with other Wi-Fi enabled devices. Robert visits the company's Web site to read more about
the phone. Robert is in the ________ stage of consumer-adoption process.
A) interest
B) awareness
C) evaluation
D) trial
E) adoption
Answer: A

67) Armordo is a famous vacuum cleaner brand in Africa. Clara has heard of Armordo and
she knows that the product is a success. She has started considering whether or not to buy the
vacuum cleaner. What stage of the consumer-adoption process is Clara in?
A) awareness
B) adoption
C) evaluation
D) trial
E) interest
Answer: C

68) Which of the following is the mental step in consumer-adoption process where the
customer starts considering whether to try the innovation?
A) adoption
B) trial
C) awareness
D) evaluation
E) interest
Answer: D

69) People who are technology enthusiasts, venturesome, and who enjoy tinkering with new
products and mastering their intricacies are called ________.
A) innovators
B) early adopters
C) early majority
D) investigators
E) experimenters
Answer: A

70) Troma Inc., is a famous manufacturer of cookware, that follows a traditional distributor-
retailer system to distribute its products. The company abstains from the use of automated
supply chain management (SCM) system mainly due to the fear of unknown. However,
rapidly escalating operational costs and inefficiencies have made it absolutely necessary for
the company to implement an SCM system. The company goes for a big-bang installation of
SCM system to become more competitive and cost effective. Identify the adopter group to
which Troma belongs.
A) innovator
B) early adopter
C) early majority
D) laggard
E) late majority
Answer: D

71) Which of the following characteristics is closely associated with late majority adopter
groups?
A) superior technological knowledge
B) low price sensitiveness
C) opinion leadership
D) deliberate pragmatism
E) high risk aversion
Answer: E
72) Joseph, a student of the Columbia University, finds many of his classmates have
purchased the I-pad tablet PC from Apple Computers. I-pad, launched a few months before
has been identified as a very useful product and many students in the U.S. have rated it
highly. Considering all these, Joseph also decides to purchase an I-pad. Which of the
following is the adopter group to which Joseph belongs?
A) early adopter
B) innovator
C) late majority
D) laggard
E) early majority
Answer: E

73) Five characteristics influence the rate of adoption of an innovation. One of these is
________.
A) marketing expertise
B) relative advantage
C) packaging attractiveness
D) government regulations
E) place of value exchange
Answer: B

74) ________ is the effect one person has on another's attitude or purchase probability.
A) Sharing power
B) Collaborative power
C) Market influence
D) Brand power
E) Personal influence
Answer: E

75) Relative advantage of an innovation refers to the degree to which ________.

A) it matches the values and experiences of the individuals
B) it is difficult to understand or use
C) it can be tried on a limited basis
D) it appears superior to existing products
E) the benefits of use are observable or describable to others
Answer: D

76) The degree to which the beneficial results of an innovation's use are observable or
describable to others is called ________.
A) divisibility
B) communicability
C) compatibility
D) relative advantage
E) plainness
Answer: B

77) Which of the following terms refers to the degree to which the innovation can be tried on
a limited basis?
A) compatibility
B) relative advantage
C) divisibility
D) communicability
E) complexity
Answer: C

Branding

78) The first step in the strategic brand management process is ________.
A) measuring consumer brand loyalty
B) identifying and establishing brand positioning
C) planning and implementing brand marketing
D) measuring and interpreting brand performance
E) growing and sustaining brand value
Answer: B

79) The American Marketing Association defines a ________ as "a name, term, sign, symbol,
or design, or a combination of them, intended to identify the goods or services of one seller or
group of sellers and to differentiate them from those of competitors."
A) copyright
B) trademark
C) slogan
D) brand
E) logo
Answer: D

80) Branding is ________.

A) all about creating unanimity between products
B) the process of performing market research and selling products or services to customers
C) endowing products and services with the power of a brand
D) the process of comparing competing brands available in the market
E) use of online interactive media to promote products and brands
Answer: C

81) Brand ________ is the added value endowed to products and services.
A) loyalty
B) equity
C) preference
D) identity
E) licensing
Answer: B

82) ________ is the differential effect that brand knowledge has on consumer response to the
marketing of that brand.
A) Mission-driven brand equity
B) Customer-based brand equity
C) Product-driven brand equity
D) Service-driven brand equity
E) Function-based brand equity
Answer: B

83) Adam wants to buy a washing machine and is looking for something that is not too
expensive. When he goes to make the purchase, he finds there are two options that meet his
requirements. One is an IFB Bosch product, while the other is a newly imported South
Korean brand. Adam is not very familiar with the latter and does not hesitate in choosing
Bosch. This example implies that ________.
A) the imported brand will not survive the competition from Bosch
B) Bosch has a positive customer brand equity
C) the South Korean company has a low advertising budget
D) the imported brand is unreliable
E) the Bosch washing machine has better features than the imported brand
Answer: B

84) When a consumer expresses thoughts, feelings, images, experiences, and beliefs
associated with the brand, the consumer is expressing ________.
A) brand knowledge
B) ethnocentric bias
C) self-serving bias
D) cognitive dissonance
E) brand identity
Answer: A

85) The challenge for marketers in building a strong brand is ________.

A) ensuring that customers have the right type of experiences with their products and
marketing programs to create the desired brand knowledge
B) pricing the product at a point that maximizes sales volume
C) minimizing the number of people to whom the product is targeted in order to provide
consumers with a personalized experience
D) minimizing the impact of customer brand equity
E) avoiding the usage of an established brand to introduce a new product in the market
Answer: A

86) Which of the following is a marketing advantage of strong brands?

A) no vulnerability to marketing crises
B) more elastic consumer response to price increases
C) guaranteed profits
D) additional brand extension opportunities
E) more inelastic consumer response to price decreases
Answer: D
87) When a marketer expresses his or her vision of what the brand must be and do for
consumers, they are expressing what is called ________.
A) a brand promise
B) a brand personality
C) a brand identity
D) a brand position
E) a brand revitalization
Answer: A

88) Identify the four pillars of brand equity, according to brand asset valuator model.
A) relevance, performance, bonding, and advantage
B) presence, performance, advantage, and bonding
C) energized differentiation, relevance, esteem, and knowledge
D) brand salience, brand feelings, brand imagery, and brand performance
E) energized differentiation, esteem, brand feelings, and brand salience
Answer: C

89) From a marketing management perspective, there are three main sets of brand equity
drivers. Which of these drivers was most applicable when McDonald's decided to use the
"golden arches" and Ronald McDonald as symbols of their brand?
A) the product and all accompanying marketing activities and supporting marketing programs
B) the service and all accompanying marketing activities and programs
C) the initial choices for the brand elements or identities making up the brand
D) associations indirectly transferred to the brand by linking it to some other entity
E) the profitability associated with brand development
Answer: C

90) Red Bull enlisted college students as "Red Bull student brand managers" to distribute
samples, research drinking trends, design on-campus product promotion activities, and write
stories for student newspapers. From a marketing management perspective, which of the
following brand equity drivers is most applicable in the given scenario?
A) the profitability associated with brand development
B) associations indirectly transferred to the brand by linking it to a person
C) the product and all accompanying marketing activities and supporting marketing programs
D) the initial choices for the brand elements or identities making up the brand
E) associations indirectly transferred to the brand by linking it to a place
Answer: C

91) ________ are devices that can be trademarked and serve to identify and differentiate the
brand.
A) Brand elements
B) Brand value propositions
C) Brand perceptions
D) Brand images
E) Brand extensions
Answer: A

92) If a brand element can be used to introduce new products in the same or different
categories, the brand element is said to be ________.
A) memorable
B) meaningful
C) likeable
D) transferable
E) adaptable
Answer: D

93) If consumers can easily recall and recognize a brand element, the brand element is said to
be ________.
A) meaningful
B) protectable
C) adaptable
D) transferable
E) memorable
Answer: E

94) Which of the following is a defensive criterion for choosing brand elements?
A) adaptable
B) memorable
C) meaningful
D) likeable
E) significance
Answer: A

95) With respect to powerful brand elements, ________ is an extremely efficient means to
build brand equity. This element functions as a useful "hook" or "handle" to help consumers
grasp what the brand is and what makes it special.
A) the tangibility of a product
B) a product's shape
C) a slogan
D) a patent
E) a copyright
Answer: C

96) A ________ can be defined as any information-bearing experience a customer or

prospect has with the brand, the product category, or the market that relates to the marketer's
product or service.
A) brand value
B) brand personality
C) brand trait
D) brand character
E) brand contact
Answer: E

97) The traditional "marketing-mix" concept and the notion of the "four Ps" may not
adequately describe modern marketing programs. ________ is about mixing and matching
marketing activities to maximize their individual and collective effects.
A) Personalized marketing
B) Mass customization
C) Globalized marketing
D) Relationship marketing
E) Integrated marketing
Answer: E

98) Brand equity can be built by ________, which create(s) equity by linking the brand to
other information in memory that conveys meaning to customers.
A) internal marketing
B) brand transferability
C) secondary associations
D) customer alignment
E) brand auditing
Answer: C

99) Mark feels that Shell delivers on its promises to supply the best gasoline possible to the
public. His experiences with Shell have always been good resulting in positive brand contact.
Mark is most likely experiencing ________.
A) brand alliance
B) brand essence
C) brand harmonization
D) brand parity
E) brand bonding
Answer: E

100) ________ consists of activities and processes that help inform and inspire employees
about brands.
A) Internal branding
B) Personal branding
C) Individual branding
D) External branding
E) Co-branding
Answer: A

101) AT&T's business campaign not only helped to change public perceptions of the
company, it also signaled to employees that AT&T was determined to be a leader in
telecommunication services. Which principle of internal branding does this example portray?
A) choosing the right moment to capture employees' attention and imagination
B) furnishing energizing and informative internal communication
C) bringing the brand alive for employees
D) linking internal and external marketing
E) understanding how brand communities work
Answer: D

102) A ________ is a specialized group of consumers and employees whose identification

and activities focus around the brand.
A) brand community
B) brand channel
C) brand association
D) brand personality
E) brand cluster
Answer: A

103) ________ is the job of estimating the total financial worth of the brand.
A) Brand tracking
B) Brand auditing
C) Brand equity
D) Brand valuation
E) Brand harmonization
Answer: D

104) Apple's ipod shuffle is an example of ________.

A) a sub-brand
B) a parent brand
C) family brand
D) a brand mix
E) an umbrella brand
Answer: A

105) When a firm uses an established brand to introduce a new product, it is called a
________.
A) brand harmonization
B) brand valuation
C) brand extension
D) brand positioning
E) brand parity
Answer: C

106) A parent brand that is associated with multiple products through brand extensions is also
called a(n)________.
A) category brand
B) subbrand
C) extension brand
D) family brand
E) line brand
Answer: D

107) The introduction of diet coke by the Coca Cola Company is an example of ________.
A) line extension
B) brand harmonization
C) category extension
D) brand dilution
E) co-branding
Answer: A

Packaging, Labeling
108) We define packaging as all the activities of designing and producing the container for a
product. This includes up to three levels of material: primary package, secondary package,
and ________.
A) retailer package
B) design package
C) shipping package
D) consumer package
E) supplier package
Answer: C

109) Sales of luxury goods such as perfumes, colognes, and aftershaves depend heavily upon
their initial response by the consumer. A well-designed package can create convenience and
promotional value. It has been called the "silent salesman." Which of the three levels of
packaging is this "silent salesman"?
A) retailer
B) consumer
C) shipping
D) secondary
E) primary
Answer: E

110) Which of the following factors is one of the contributors to the growing use of
packaging as a marketing tool?
A) consumption aid
B) consumer affluence
C) consumer influence
D) conformance qualities
E) brand identification
Answer: B
111) ________ are formal statements of expected product performance by the manufacturer.
A) Insurance
B) Warranties
C) Bonds
D) Invoices
E) Balance sheets
Answer: B

112) Many sellers offer either general or specific guarantees. Guarantees reduce the buyer's
________ risk.
A) actual
B) perceived
C) real
D) implied
E) stated
Answer: B

113) Guarantees are most effective in two situations. The first is when the company or
products are not well known and the second is when the product's quality is ________ to
competition.
A) not known
B) different
C) inferior
D) equivalent
E) superior
Answer: E

114) A new product is advertised on the "infomercials" as being "the best cleaner money can
buy" and "if not completely satisfied, return the product for a full refund, including shipping."
The strategy of using a strong guarantee in this instance is sound because ________.
A) it is an example of a misleading or false advertising and is illegal
B) the product is so superior to competition that there will be no claims for refunds
C) it is just "advertising fluff" and the manufacturer has no intentions of refunding money
D) for a product that is not too well known, it is "good advertising" because the claims will
be a small percentage of sales
E) for a product that is not too well known it reduces the buyer's risk in purchasing
Answer: E

Product Life Cycle

115) ________ is the period of slow sales growth and nonexistent profits.
A) Growth
B) Decline
C) Maturity
D) Introduction
E) Stagnancy
Answer: D

116) Campbell Soups is a newly established company that specializes in preparing healthy
but tasty food for children under the age of 5. It is incurring huge productions costs,
nonexistent profits, and slow sales growth. The company is in the ________ phase of its life
cycle.
A) stagnancy
B) introduction
C) maturity
D) decline
E) growth
Answer: B

117) ________ is a period of rapid market acceptance and substantial profit improvement.
A) Stagnancy
B) Introduction
C) Maturity
D) Decline
E) Growth
Answer: E

118) A dance school in the Bronx teaches professional hip-hop and salsa. It is experiencing
an increase in student admissions, which is leading to substantial improvement in profits. The
school is going through the ________ phase of its life cycle.
A) decline
B) stagnancy
C) growth
D) introduction
E) maturity
Answer: C

119) ________ is a slowdown in sales growth because the product has achieved acceptance
by most potential buyers.
A) Obsolescence
B) Introduction
C) Growth
D) Decline
E) Maturity
Answer: E

120) A music school in Boyles Height, LA, specializes in teaching the guitar and the violin.
After a spurt in growth and a few successful years, the school is experiencing a slowdown in
sales and stability in its profits due to an increase in competition. The school is in the
________ stage of its life cycle.
A) introduction
B) growth
C) decline
D) maturity
E) obsolescence
Answer: D

121) During the ________ stage of a product's life cycle, sales show a downward drift and
profits erode.
A) introduction
B) growth
C) decline
D) obsolescence
E) maturity
Answer: C

122) After a couple of years of successful business, an experimental theatre company based
in Aurora is unable to sell tickets for its theatre shows. They have been using profits from
previous shows to run the business. The company is in the ________ phase of its life cycle.
A) maturity
B) obsolescence
C) introduction
D) growth
E) decline
Answer: E

123) According to Peter Golder and Gerald Tellis, a(n) ________ is the first to develop a
working model of the product.
A) developer
B) creative pioneer
C) market pioneer
D) product pioneer
E) inventor
Answer: D

124) One of the ways to change the course of a brand is to modify the product. Under product
modification, ________ adds size, weight, materials, supplements, and accessories that
expand the product's performance, versatility, safety, or convenience.
A) feature improvement
B) quality improvement
C) style improvement
D) size improvement
E) technological improvement
Answer: A
125) An alternate way to increase sales volume is to expand the number of users. This can be
done by ________.
A) having consumers use the product on more occasions
B) having consumers use more of the product on each occasion
C) having consumers use the product in new ways
D) remaining in the current market segment
E) attracting competitors' customers
Answer: E

126) An alternate way to increase sales volume is to increase the usage rate among users.
This can be done by ________.
A) converting nonusers
B) having consumers use less of the product on each occasion
C) having consumers use the product on more occasions
D) attracting competitors' customers
E) entering new market segments
Answer: C

127) ________ is a distribution strategy that can be effectively used during the growth stage
of the product life cycle.
A) Building product awareness
B) Phasing out unprofitable outlets
C) Building selective distribution
D) Building intensive distribution
E) Stressing on brand differences
Answer: D

128) Which of the following strategies should be adopted by marketers during a recession?
A) increase investment on marketing existing products
B) focus on expanding the customer base and not on the retention of existing customers
C) focus primarily on price reductions and discounts
D) concentrate on communicating the brand value and product quality to consumers
E) stick to the budget allocations adopted during the preceding years
Answer: D

129) Benz & Frendz Corp., a manufacturer of high end consumer durables, experienced a
sluggish sales growth in most of its product categories during three consecutive quarters of
2009. However, market analysis revealed that its competitors' sales had also slackened during
this period. Analysts pointed out that when all firms are losing sales, it is extremely important
to adopt strategies that are aimed at retaining customers. This led the firm to reduce operation
costs while maintaining product quality. They also revamped their marketing strategy to
focus on the values created by their products. Which of the following can be inferred from
the strategies adopted by the firm?
A) The company was trying to protect its market share and continue to operate as a market
leader.
B) The company was focusing on geographical expansion.
C) The company was aiming to capture a new market segment.
D) The company was marketing its products amidst an economic downturn.
E) The company was focusing on market penetration.
Answer: D
 Unit 2

Price

1) When consumers examine products, they often compare an observed price to an internal
price they remember. This is known as a(n) ________ price.
A) markup
B) reference
C) market-skimming
D) accumulated
E) target
Answer: B

2) ________ price refers to what the consumers feel the product should cost.
A) Fair
B) Typical
C) Usual discounted
D) List
E) Maximum retail
Answer: A

3) While shopping at the mall, Jane was asked by one of the sales representatives at the
cosmetics counter to try out a new lipstick that her company was test marketing. The
company representative asks her how much she would be willing to pay for the lipstick. After
trying it out, Jane is of the opinion that $5 is just the right price for it. What type of a
reference price is Jane using?
A) usual discounted price
B) fair price
C) maximum retail price
D) last price paid
E) historical competitor price
Answer: B

4) The reservation price or the maximum that most consumers would pay for a given product
is known as the ________ price.
A) expected future
B) usual discounted
C) upper-bound
D) typical
E) historical competitor
Answer: C

5) A company decided to conduct a market survey for its new MP3 player which it had priced
at $150. However, in the survey, 95 percent of the participants said that the maximum they
would pay for the MP3 player is $100. This is an example of which of the following possible
consumer reference prices?
A) historical competitor price
B) expected future price
C) usual discounted price
D) upper-bound price
E) last price paid
Answer: D

6) The minimum price that most consumers would pay for a given product is known as the
________ price.
A) everyday low
B) usual discounted
C) fair
D) typical
E) lower-bound
Answer: E

7) A company has developed the prototype of a mobile phone which it plans to launch in the
next few months. The phone comes equipped with the most advanced technological features.
As part of its test marketing efforts, it allows customers to examine and use the prototype and
also gathers feedback regarding product features and price. The results of this test marketing
effort show that customers are willing to pay at least $500, considering the phone's various
features. As such, the company has found out about the customers' ________.
A) last paid price
B) expected future price
C) lower-bound price
D) upper-bound price
E) typical price
Answer: C

8) Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent
because the perfume is from a well-known brand. What kind of a pricing is the company
depending on?
A) going-rate pricing
B) image pricing
C) market-skimming pricing
D) target pricing
E) markup pricing
Answer: B

9) Pricing cues such as sale signs and prices that end in 9 are more influential ________.
A) when customers have substantial knowledge about prices
B) when customers purchase the particular item regularly
C) when product quality is standardized
D) when product designs vary over time
E) when prices do not vary from time to time
Answer: D

10) Which of the following is the first step in setting a pricing policy?
A) selecting a pricing method
B) selecting the pricing objective
C) determining demand
D) estimating cost
E) analyzing competitors' costs, prices, and offers
Answer: B

11) After determining its pricing objectives, what is the next logical step a firm should take in
setting its pricing policy?
A) It should analyze its competitors' costs, prices, and offers.
B) It should select its pricing method.
C) It should select its final price.
D) It should determine the demand for its product.
E) It should estimate the cost of its product.
Answer: D

12) A firm that is plagued with overcapacity, intense competition, or changing wants would
do better if it pursues ________ as its major objective.
A) market skimming
B) product-quality leadership
C) survival
D) profit maximization
E) market penetration
Answer: C

13) After estimating the demand and costs associated with alternative prices, a company has
chosen to price its product in such a way that it gains the highest rate of return on its
investment. The company is looking to ________.
A) maximize its market share
B) skim the market
C) become a product-quality leader
D) survive in the market
E) maximize its current profit
Answer: E

14) Companies who believe that a higher sales volume leads to lower unit costs and higher
long-run profits are attempting to ________.
A) maximize their market share
B) skim the market
C) become a product-quality leader
D) merely survive in the market
E) maximize their current profits
Answer: A

15) A company that is looking to maximize its market share would do well to follow
________ pricing.
A) markup
B) market-penetration
C) market-skimming
D) survival
E) target-return
Answer: B

16) A market-penetration pricing strategy is most suitable when _______.

A) a low price slows down market growth
B) production and distribution costs fall with accumulated production experience
C) a high price dissuades potential competitors from entering the market
D) the market is characterized by inelastic demand
E) a low price encourages actual competition
Answer: B

17) When a company introduces a product at a very high price and then gradually drops the
price over time, it is pursuing a ________ strategy.
A) market-penetration pricing
B) market-skimming pricing
C) value-pricing
D) switching cost
E) loss-leader pricing
Answer: B

18) When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the
maximum amount of revenue from the various segments of the market. Two months after the
introduction, the price has come down to $399. What kind of a pricing did Apple adopt?
A) loss-leader pricing
B) market-penetration pricing
C) market-skimming pricing
D) target-return pricing
E) value pricing
Answer: C

19) Market skimming pricing makes sense under all the following conditions, EXCEPT
________.
A) if a sufficient number of buyers have a high current demand
B) if the unit costs of producing a small volume are high enough to cancel the advantage of
charging what the traffic will bear
C) if the high initial price does not attract more competitors to the market
D) if consumers are likely to delay buying the product until its price drops
E) if the high price communicates the image of a superior product
Answer: D

20) Companies that aim to ________ strive to be affordable luxuries.

A) survive in the market
B) partially recover their costs
C) maximize their market share
D) pursue value pricing
E) be product-quality leaders
Answer: E

21) Starbucks, Aveda, and BMW have been able to position themselves within their
categories by combining quality, luxury, and premium prices with an intensely loyal
customer base. These companies are employing a ________ strategy.
A) market-skimming
B) market-penetration
C) survival
D) market share maximization
E) product-quality leadership
Answer: E

22) The first step in estimating demand is to ________.

A) analyze competitors' cost
B) select a pricing method
C) understand what affects price sensitivity
D) calculate fixed costs
E) decipher the experience curve
Answer: C

23) Consumers are less price sensitive ________.

A) to high cost items
B) when they frequently change their buying habits
C) when there are more substitutes
D) when there are more competitors
E) when they do not readily notice higher prices
Answer: E

24) Consumers are less price sensitive when ________.

A) price is only a small part of the total cost spent on the product over its lifetime
B) they perceive the higher prices to be unjustified
C) they change their buying habits regularly
D) there are many substitutes and competitors in the market
E) they are buying high-cost items
Answer: A
25) If demand hardly changes with a small change in price, the demand is said to be
________.
A) strained
B) marginal
C) inelastic
D) flexible
E) unit elastic
Answer: C

26) If demand changes considerably, with a small change in price, the demand is said to be
________.
A) unit elastic
B) elastic
C) inelastic
D) marginal
E) strained
Answer: B

27) If consumers were largely indifferent to a $0.5 increase in the price of a gallon of milk,
the price rise is said to fall within customers' ________.
A) price indifference band
B) experience curve
C) arm's-length price
D) learning curve
E) net price index
Answer: A

28) Which of the following is true regarding price elasticity?

A) The higher the elasticity, the lesser is the volume growth resulting from a 1 percent price
reduction.
B) Within the price indifference band, price changes have little or no effect on demand.
C) If demand is elastic, sellers will consider increasing the price.
D) Price elasticity does not depend on magnitude and direction of the contemplated price
change.
E) When demand is inelastic, sellers should lower prices in order to increase total revenue.
Answer: B

29) Costs that do not vary with production levels or sales revenue are known as ________.
A) overhead costs
B) variable costs
C) average costs
D) opportunity costs
E) total costs
Answer: A
30) A company must make payments each month for rent, heat, interest, and salaries. These
are ________.
A) total costs
B) fixed costs
C) variable costs
D) opportunity costs
E) target costs
Answer: B

31) Costs that differ directly with the level of production are known as ________.
A) fixed costs
B) overhead costs
C) opportunity costs
D) target costs
E) variable costs
Answer: E

32) ________ consist of the sum of the fixed and variable costs for any given level of
production.
A) Total costs
B) Average costs
C) Opportunity costs
D) Learning costs
E) Target costs
Answer: A

33) ________ is the cost per unit at that level of production.

A) Target cost
B) Average cost
C) Marginal cost
D) Opportunity cost
E) Fixed cost
Answer: B

34) The decline in the average cost of production with accumulated production experience is
called the ________.
A) demand curve
B) supply chain
C) learning curve
D) value chain
E) indifference curve
Answer: C

35) Experience-curve pricing ________.

A) assumes competitors are weak followers
B) allows products to project a high quality image
C) is applicable only to manufacturing costs
D) focuses on reducing fixed costs
E) is generally risk-free
Answer: A

36) Deducting the desired profit margin from the price at which a product will sell, given its
appeal and competitors' prices, is known as ________.
A) overhead costing
B) target costing
C) activity based costing
D) benefit analysis
E) estimate costing
Answer: B

37) Competitors are most likely to react to a price change, when ________.
A) the firm has a weak value proposition
B) the firm enjoys a monopoly
C) there are few competing firms
D) the product is heterogeneous
E) buyers have limited information
Answer: C

38) Which of the following is the most elementary pricing method?

A) value pricing
B) going-rate pricing
C) markup pricing
D) target-return pricing
E) perceived-value pricing
Answer: C

39) Despite its weaknesses, markup pricing remains popular for which of the following
reasons?
A) Sellers can determine demand much more easily than they can estimate costs.
B) By tying the price to cost, the pricing task becomes more sophisticated.
C) When all firms in the industry use markup pricing, price competition flourishes.
D) Sellers take advantage of buyers when the latter's demand becomes acute.
E) Many people feel that cost-plus pricing is fairer to both buyers and sellers.
Answer: E

40) A manufacturer has invested $750,000 in a new product and wants to set a price to earn a
15 percent ROI. The cost per unit is $18 and the company expects to sell 50,000 units in the
first year. Calculate the company's target-return price for this product.
A) $20.25
B) $18.23
C) $18.10
D) $20.70
E) $25.50
Answer: A

41) An umbrella manufacturing company's fixed costs are $275,000. The variable cost per
unit is $5 and each umbrella is sold at $10. How many units should the firm sell in order to
break even?
A) 18000
B) 5500
C) 27500
D) 55000
E) 1819
Answer: D

42) ________ pricing takes into account a host of inputs, such as the buyer's image of the
product performance, the channel deliverables, the warranty quality, customer support, and
attributes such as the supplier's reputation, trustworthiness, and esteem.
A) Perceived-value
B) Value
C) Going-rate
D) Auction-type
E) Markup
Answer: A

43) The key to perceived-value pricing is to ________.

A) reengineer the company's operations
B) deliver more unique value than competitors
C) adopt subtle marketing tactics compared to competitors
D) deliver more value but at a lower cost
E) invest heavily in advertising in order to convey superior value
Answer: B

44) ________ pricing is a matter of reengineering the company's operations to become a low-
cost producer without sacrificing quality.
A) Value
B) Going-rate
C) Auction-type
D) Markup
E) Perceived-value
Answer: A

45) A retailer who holds on to a(n) ________ policy charges a constant low price with little
or no price promotions and special sales.
A) everyday low pricing
B) high-low pricing
C) low cost
D) going-rate pricing
E) auction-type pricing
Answer: A

46) Matt's retail store offers all its products at $2 lesser than its competitors throughout the
year. The store never runs any promotional campaigns or offers any additional special
discounts. Matt's retail store is following a(n) ________.
A) auction-type pricing policy
B) target-plus pricing policy
C) everyday low pricing policy
D) high-low pricing policy
E) going-rate pricing policy
Answer: C

47) Everyday low pricing is most suitable if ________.

A) consumers are willing to perform activities such as clip coupons to avail of discounts
B) consumers tend to associate price with quality
C) customers are insensitive to changes in price
D) the cost of conducting frequent sales and promotions is high
E) consumers have sufficient time to find the best prices
Answer: D

48) In ________, the firm bases its price largely on competitor's prices.
A) going-rate pricing
B) auction-type pricing
C) markup pricing
D) target-return pricing
E) perceived-value pricing
Answer: A

49) Which of the following auctions is characterized by one seller and many buyers?
A) Walrasian auctions
B) ascending bid auctions
C) closed auctions
D) sealed-bid auctions
E) reverse auctions
Answer: B

50) In which of the following auctions does the auctioneer first announce a high price for a
product and then slowly decreases the price until a bidder accepts?
A) a Dutch auction with one buyer and many sellers
B) an English auction with one seller and many buyers
C) an ascending bid auction
D) a sealed-bid auction
E) a Dutch auction with one seller and many buyers
Answer: E

51) In a(n) ________, the buyer announces something he or she wants to buy, and potential
sellers compete to offer the lowest price.
A) Dutch auction with one buyer and many sellers
B) English auction with one buyer and many sellers
C) English auction with one seller and many buyers
D) sealed-bid auction
E) ascending auction
Answer: A

52) ________ let would-be suppliers submit only one bid; they cannot know the other bids.
A) Descending bid auctions
B) Sealed-bid auctions
C) English auctions
D) Dutch auctions
E) Reverse auctions
Answer: B

53) In which of the following forms of countertrade do buyers and sellers directly exchange
goods, with no money and no third party is involved?
A) buyback arrangements
B) offsets
C) barter
D) sealed bids
E) compensation deals
Answer: C

54) A Japanese firm is ready to sell its recent technological innovation to the U.S.
government. But it has asked for 80 percent in cash and the rest in mica. The Japanese firm is
looking to enter into a(n) ________ with the U.S. government.
A) functional discount
B) compensation deal
C) buyback arrangement
D) offset agreement
E) barter deal
Answer: B

55) Armac Ltd., is a sluice-box manufacturer based in China. A sluice-box is used for gold
prospecting. Armac is interested in selling a few of its machines to an American mining
company, but it wants 95 percent of the machines' price in gold and the rest in ores recovered
by using the machines. This is an example of a ________.
A) buyback arrangement
B) functional discount
C) barter deal
D) compensation deal
E) sealed bid
Answer: A

56) ROC Engineering, a Chinese shipbuilding company, agrees to build a fleet of submarines
for the Sri Lankan navy, for which it will be paid in the local Sri Lankan currency. As per the
agreement, ROC must also spend a substantial amount of the money it generates through this
deal within the country. In accordance with the contract, ROC buys Sri Lankan tea at a
reduced rate. This is an example of which of the following forms of countertrade?
A) descending bid
B) offset
C) barter
D) compensation deal
E) buyback arrangement
Answer: B

57) ________ are offered by a manufacturer to trade-channel members if they will perform
certain functions, such as selling, storing, and record keeping.
A) Consumer promotions
B) Quantity discounts
C) Functional discounts
D) Seasonal discounts
E) Trade-in allowances
Answer: C

58) When hotels, motels, and airlines offer discounts in slow selling periods, they are said to
be offering ________.
A) trade discounts
B) quantity discounts
C) functional discounts
D) seasonal discounts
E) trade-in allowances
Answer: D

59) A(n) ________ is an extra payment designed to gain reseller participation in special
programs.
A) seasonal discount
B) allowance
C) discount
D) quantity discount
E) functional discount
Answer: B
60) ________ are granted for turning in old item when buying a new one.
A) Promotional allowances
B) Quantity discounts
C) Functional discounts
D) Seasonal discounts
E) Trade-in allowances
Answer: E

61) ________ reward dealers for participating in advertising and sales support programs.
A) Functional discounts
B) Trade discounts
C) Promotional allowances
D) Rebates
E) Quantity discounts
Answer: C

62) When supermarkets and department stores drop the price on well-known brands to
stimulate store traffic, they are said to be following ________.
A) value pricing
B) loss-leader pricing
C) special event pricing
D) high-low pricing
E) everyday low pricing
Answer: B

63) When Alan bought his car, the bank gave him 24 months to repay his car loan. But when
Alan made a request to increase the time frame to 36 months, the bank granted the extension.
The bank was willing to offer Alan a ________.
A) longer payment term
B) warranty contract
C) service contract
D) special customer price
E) special event price
Answer: A

64) In ________, the seller charges a separate price to each customer depending on the
intensity of his or her demand.
A) second-degree price discrimination
B) third-degree price discrimination
C) psychological discounting
D) special-customer pricing
E) first-degree price discrimination
Answer: E

65) In second-degree price discrimination, the seller charges ________.

A) less to buyers of larger volumes
B) different prices depending on the season, day, or hour
C) a separate price to each customer depending on the intensity of his or her demand
D) different prices for different versions of the same product
E) different prices for the same product depending on the channel through which it is sold
Answer: A

66) In ________, the seller charges different amounts to different classes of buyers.
A) perceived value pricing
B) third-degree price discrimination
C) first-degree price discrimination
D) second-degree price discrimination
E) psychological discounting
Answer: B

67) When museums charge a lower admission fee to students and senior citizens, then this
form of price discrimination is known as ________.
A) location pricing
B) channel pricing
C) customer-segment pricing
D) special-customer pricing
E) loss-leader pricing
Answer: C

68) Madame Tussaud's wax museum is a popular tourist attraction in London. The museum
charges higher entry rates for tourists compared to locals. This form of price discrimination is
known as ________.
A) customer-segment pricing
B) image pricing
C) location pricing
D) special customer pricing
E) special event pricing
Answer: A

69) When Coca-Cola carries a different price depending on whether the consumer purchases
it in a fine restaurant, a fast-food restaurant, or a vending machine, then this form of price
discrimination is known as ________.
A) product-form pricing
B) loss-leader pricing
C) special event pricing
D) channel pricing
E) location pricing
Answer: D

70) The price of tickets to the opera vary depending on where the person would like to be
seated–in the gallery or in the stalls. This is an example of ________.
A) channel pricing
B) time pricing
C) image pricing
D) product-form pricing
E) location pricing
Answer: E

71) When hotels drop their rates on the weekends, then this form of price discrimination is
known as ________.
A) channel pricing
B) image pricing
C) product-form pricing
D) time pricing
E) location pricing
Answer: D

72) The airline and hospitality industries use ________, by which they offer discounted but
limited early purchases, higher-priced late purchases, and the lowest rates on unsold
inventory just before it expires.
A) special-customer pricing
B) yield pricing
C) cash rebates
D) location pricing
E) customer-segment pricing
Answer: B

73) ________ refers to selling below cost with the intention of destroying competition.
A) Bid rigging
B) Loss-leader pricing
C) Predatory pricing
D) Price discrimination
E) Price penetration
Answer: C

74) For price discrimination to work ________.

A) the market must be segmentable and the segments must show similar intensities of
demand
B) members in the lower-price segment must be able to resell the product to the higher-price
segment
C) competitors must be able to undersell the firm in the higher-price segment
D) the practice must not breed customer resentment and ill will
E) the extra revenue derived from price discrimination must not exceed the cost of
segmenting and policing the market
Answer: D
75) A low price buys market share but not market loyalty. The same customers will shift to
any lower-priced product that may come along. This is called the ________.
A) low-price trap
B) relative-market-share trap
C) shallow-pockets trap
D) target-market-share trap
E) fragile-market-share trap
Answer: E

76) When higher-priced competitors match the lower prices but have longer staying power
because of deeper cash reserves, it leads to a(n) ________.
A) low-quality trap
B) fragile-market-share trap
C) price war trap
D) escalator trap
E) shallow-pockets trap
Answer: E

77) A company does not set a final price until the product is finished or delivered. This is
known as ________.
A) delayed quotation pricing
B) an escalator clause
C) special-event pricing
D) time pricing
E) the shallow-pockets trap
Answer: A

78) When a company requires the customers to pay today's price and all or part of any
inflation increase that takes place before delivery, it is known as ________.
A) special-customer pricing
B) an escalator clause
C) delayed quotation pricing
D) unbundling
E) time pricing
Answer: B

79) When a company maintains its price but removes or prices separately one or more
elements that were part of the former offer, such as free delivery or installation, it is known as
________.
A) escalating
B) differentiation
C) unbundling
D) reverse discounting
E) delayed quotation pricing
Answer: C
80) In markets that are characterized by products that are highly homogeneous, how should a
firm react to a competitor's reduction in price?
A) shrink the amount of the product available
B) substitute expensive materials or ingredients
C) reduce product features
D) reduce product services
E) augment the product
Answer: E