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                                                             Index
2006 MKT Assignments 1-6 ............................................................................................................. 1
Chapter 1 – Defining Marketing for the Twenty-First Century ........................................................ 5
Chapter 2—Adapting Marketing to the New Economy .................................................................. 18
Chapter 3 – Building Customer Satisfaction, Value, and Retention................................................ 36
Chapter 4—Winning 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 9—Identifying Market Segments and Selecting Target Markets ..................................... 128
Chapter 10—Developing, Positioning, and Differentiating .......................................................... 149
Chapter 11—Setting Product and Brand Strategy ......................................................................... 172
Chapter 12—Designing and Managing Services .......................................................................... 193
Chapter 13—Designing Pricing Strategies and Programs ............................................................ 214
Chapter 14—Designing and Managing Value Networks .............................................................. 232
Chapter 15—Managing Retailing, Wholesaling, and Market Logistics ....................................... 253
Chapter 16—Designing and Managing Integrated Marketing ...................................................... 273




                                                                                                                                      1
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.

2.   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

3.   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.

4.   As a member of a management consulting group, you have been retained by a business to
     business office equipment manufacturer. The company’s product line consists of the five
     strategic business unit shown in the table. Use the Boston Consulting Group portfolio



                                                                                                  1
     analysis ( as figure 3.2) to determine each SBU’s relative market share and whether the
     company as a whole is healthy. Make recommendations as to future strategies.


                                                                                   MARKET
                DOLLAR  NUMBER OF                         DOLLAR SALES
      SBU                                                                          GROWTH
                 SALES COMPETIEORS                         OF THE TOP3
                                                                                    RATE
       A           0.5              8              0.7        0.7        0.5          15%
       B           1.6              22             1.6        1.6         1           18%
       C           1.8              14             1.8        1.2         1            7%
       D           3.2              5              3.2        0.8        0.7           4%
       E           0.5              10             2.5        1.8        1.7           4%


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

2.   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

3.   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        Population size         Number of users          Index
     Attended college                   13238000                1659000
     Graduated high school              24295000                2587000
     Did not graduate high school       23798000                1946000
     Bases                              61331000                6192000

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

                                                                                                 2
following two markets, and explain the implications of each index number for seeking in each
market


                        Population               Brand Sales               Category sales
     Seattle            2841000                  2781000                   21680000
     Toledo             1824000                  873000                    6480000
     Total U.S.         231000000                90000000                  800000000


Answers:
                  Percent of U.S.    BDI       Percent of U.S.       CDI       Population
                  Brand Sales                  category sales
     Seattle
     Toledo




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

2.   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 )


Assignments 5

1. Detail Aaker’s five levels of customer attitude toward a brand. What is brand equity and
   how is it related to the Aaker’s 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 with—Coca-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

                                                                                                 3
consider important in the purchase of an automobile. The survey research was performed with 100
subjects

Table 1
                                                            Rating
 Benefits                             1      2       3      4    5          6       7
 Fuel Efficiency                                                25         35      40       100
 Styling & design                           15      15     10   35         15      10       100
 Low maintenance                             5      15     15   20         20      25       100
 Low cost of parts                  10      10      15     15   15         20      15       100
 Good reputation                    10      15      15     10   15         20      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
                                  Average Ratings for each brand on each benefit
                                  Toyota    VW       Chevy     BMW Infiniti
 Benefits                         Tercel    Jetta    Camaro    525 Q45
 Fuel Efficiency                         7        4         4     3            5
 Styling & design                        4        1         1     5            7
 Low maintenance                         7        1         3 6.7              5
 Low cost of parts                       7        1         4     2            3
 Good reputation                         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.                The company has invested $250,000
    in developing this sharpener.                This tool, which is about the size of
    a piece of chewing gum, costs $3 to make.                Fixed costs for the sharpener
    is $10,000.       The company expects to sell 100,000 sharpeners this year.
    Diamond Machine’s markup on sales is 30 percent, and it wants to earn
    a 20 percent ROI.        Calculate both its markup price and its target-return

                                                                                                   4
    price as well as its breakeven volume at both prices.                       Which price
    should Diamond Manufacturing use? p. 250-252
2. Moonstruck Chocolates of Portland, Oregon, started out in the
   inventor’s home as a unique chocolate product containing
   delicious alcohol-enhanced fillings. Once the product was
   perfected, the owners decided that they had no expertise in
   marketing the chocolates and looked to consultants to tell them
   what marketing intermediaries could do for them. What did the
   consultants probably explain were the key functions of marketing
   channel members? 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


                                                                                                  5
10. A market segment is the product choice the marketer chooses to sell to the public. False
    (difficult) p. 6

11. A marketing network consists of the company, all its supporting stakeholders, and others who
    have built a profitable business relationship. True (moderate) p. 10

12. The operating principle of relationship marketing is build profitable transactions and good
    relationships will follow.     False (moderate) p. 9

13. The task environment of an organization consists of the demographic environment, the
    economic environment, the natural environment, the technological environment, the
    political-legal environment, and the socio-cultural environment. False (difficult) p. 11

14. The production concept holds that consumers will prefer products that are widely available
    and inexpensive. True (moderate) p. 12

15. A value proposition is a set of benefits offered to satisfy customer needs. True (moderate) p.
    8

16. The ultimate purpose of the marketing concept is to help organizations achieve their
    objectives. True (moderate) pp. 13-14

17. The “four Cs” that correspond to the “four Ps” of the marketing mix are customer solution,
    customer confidence, convenience, and communication. False (difficult) p. 11
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
    all-purpose seasoning mix called Olde Westport’s Special Blend for adding flavor to bland
    casseroles. She mixed and packaged the product in her basement. She sold her product at
    craft fairs throughout the Midwest. Peterson was practicing _______________ marketing.
    a.) formulated
    b.) entrepreneurial (moderate) p. 4
    c.) demand
    d.) intrepreneurial


                                                                                                     6
    e.) societal

22. Which of the following is an example of an entity that marketing people market?
    a.) a Civil War novel about two sisters
    b.) an actor like Rob Lowe
    c.) the Homespun Arts & Crafts Festival
    d.) plastic
    e.) all of the above (difficult) pp. 4-5

23. Which of the following is not an entity that can be marketed?
    a.) places
    b.) events
    c.) information
    d.) persons
    e.) All of the above can be marketed. (moderate) pp. 4-5

24. Overfull demand is
    a.) where consumers avoid a product _______________.
    b.) where demand varies by season, hour, or day
    c.) where there is more demand than can be handled (moderate) p. 5
    d.) where consumers demand unhealthy products
    e.) where consumers lack interest in the product

25. Which of the following products will have the strongest negative demand?
    a.) nursing home care (moderate) p. 5
    b.) Star Wars collectible figures
    c.) McDonald’s Happy Meals
    d.) ice cream
    e.) landscaping




                                                                                      7
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 person’s need for food or shelter is a creation of marketers.
    d.) Wants become needs when they are directed at specific objects that might satisfy the
        want.
    e.) Demand strictly means desire for some object.

32. ______________ are wants for specific products backed by an ability to pay.
    a.) Demands (moderate) p. 7
    b.) Needs
    c.) Values
    d.) Morals
    e.) Exchanges

33. A brand name such as BMW carries many associations in the minds of people: speed,
    expensive, engineering, status, the BMW logo. These associations make up BMW’s
    ____________.
    a.) brand strength
    b.) customer value triad
    c.) brand image (moderate) p. 8
    d.) effective demand
    e.) value proposition

34. Which of the following is an example of a product?
    a.) a screenplay based on the life of Bill Clinton
    b.) a haircut
    c.) a seminar on time management
    d.) a carton of eggs
    e.) all of the above (difficult) pp. 4-5

35. A ______________ is an offering from a known source.
    a.) product
    b.) demand
    c.) need
    d.) brand (moderate) p. 8
    e.) service

36. _______________ is the ratio between what the customer gets and what the customer gives.
    a.) Value (moderate) p. 8
    b.) Cost
    c.) Satisfaction level
    d.) Price
    e.) Benefit

37. Marketers can increase the value of a customer offering by


                                                                                               9
    a.)   lowering benefits and raising costs.
    b.)   reducing benefits.
    c.)   raising costs.
    d.)   raising benefits. (difficult) p. 8
    e.)   not considering the competitive offering.

38. The act of obtaining a desired product from someone by offering something in return is
    known as _______________.
    a.) product valuation
    b.) the service desired of the product
    c.) an exchange (moderate) p. 8
    d.) the cost of the product
    e.) customer satisfaction

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 women’s leather purses includes the supplier of the hides and the
        tanning process.
    d.) Marketing channels connect the marketer to the target buyer.
    e.) The distribution channel is used to display or deliver the physical product or services to
        the buyer or user.

47. ______________ is the set of marketing tools that the firm uses to pursue its marketing
    objectives in the target market.
    a.) Marketing mix (moderate) p. 11
    b.) Environmental scan
    c.) Consumer behavior
    d.) Business markets
    e.) Consumer markets

48. When Anne Peterson began Olde Westport Spice and Trading Co., she had one product, an
    all-purpose seasoning mix called Olde Westport’s Special Blend for adding flavor to bland
    casseroles. She sold 6-ounce bottles of her seasoning mix for $6.95. Her only outlets were
    booths at craft fairs throughout the Midwest. She relied on word-of-mouth advertising and a



                                                                                                11
    few feature articles in regional newspapers to tell people about her product. The above
    describes Olde Westport’s _______________.
    a.) method of exchange
    b.) transaction marketing
    c.) marketing tactics
    d.) marketing mix (difficult) p. 11
    e.) transfer marketing

49. Which of the following is NOT one of the customer’s “Four Cs” as defined by Robert
    Lauterborn?
    a.) communication
    b.) customer solution
    c.) commitment (moderate) p. 11
    d.) customer cost
    e.) convenience

50. The first computers originated for home use were only sold in kit form to technical enthusiasts
    who did their own assembly. Demand was high and so were prices. At that time, the firm
    offering these kits would likely have been using the _______________ concept.
    a.) production (moderate) p. 12
    b.) market
    c.) technological
    d.) product
    e.) selling

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.)   product
    c.)   marketing
    d.)   selling (moderate) p. 13
    e.)   customer

54. In the history of the railroads, management thought that travelers wanted trains rather than
    transportation and overlooked the growing competition from airlines, buses, trucks, and
    automobiles. This was an example of marketing _______________.
    a.) vision
    b.) naiveté
    c.) far-sightedness
    d.) relationships
    e.) myopia (moderate) p. 13

55. The selling concept assumes _______________.
    a.) consumers will favor products that offer quality, performance, and innovation
    b.) a company has a social responsibility for the effects of its products
    c.) if left alone, consumers will ordinarily not buy enough of the organization’s products
        (difficult) p. 13
    d.) being more effective than competitors in integrating marketing activities will lead to
        success
    e.) consumers do not have to be compelled by promotions to buy what a company is selling

56. Which is not true about the selling concept?
    a.) It assumes that consumers must be coaxed into buying.
    b.) It always takes into account the greater societal good. (moderate) p. 13
    c.) Firms tend to practice the selling concept when they have overcapacity.
    d.) The selling concept is practiced most aggressively with unsought goods.
    e.) If focuses on the needs of the seller.

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 company’s departments work together to serve the customers’ interests, the result is
    ______________.
    a.) product management
    b.) responsive marketing
    c.) anticipative marketing
    d.) integrated marketing (moderate) p. 15
    e.) bad word-of-mouth communications

61. The tasks of hiring, training, and motivating able employees who want to serve customers
    well is part of _______________ marketing.
    a.) integrated
    b.) external
    c.) myopic
    d.) relationship
    e.) internal (moderate) p. 15

62. Master marketing companies place _______________ at the top of their organizational chart.
    a.) the marketing department
    b.) customers (moderate) p. 15
    c.) employees
    d.) management
    e.) target markets

63. In terms of private firms, the ultimate purpose of the marketing concept is _______________.
    a.) customer satisfaction at any costs
    b.) profitability and customer satisfaction (difficult) pp. 14-16
    c.) target marketing
    d.) relationship marketing
    e.) a competitive advantage
64. Joseph Dinetah is leading his company into becoming a marketing-oriented company. His
    VP of manufacturing and VP of finance don’t like the idea. They fear a diminishment of
    product quality and too much ‘free spending’ by marketers. The attitudes of the VP of finance
    and VP of manufacturing are examples of _______________.
    a.) the inability of old managers to learn new ideas
    b.) internal marketing as a passing fad


                                                                                                  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, customer’s need, and the greater societal good when
    marketing is called _______________.
    a.) the societal marketing concept (moderate) p. 17
    b.) the selling orientation
    c.) the customer concept
    d.) the value proposition
    e.) cause-related marketing

66. Which of the following is not true about cause-related marketing?
    a.) It demonstrates good corporate citizenship.
    b.) It is generally considered the same thing as the societal marketing concept.
        (moderate) p. 17
    c.) It provides an opportunity to enhance corporate reputation.
    d.) It can be used to raise brand awareness.
    e.) It may result in increased consumer loyalty.

67. Which of the following statements best represents the societal marketing concept?
    a.) We have developed a new, more convenient package.
    b.) Target Corporation chooses to eliminate cigarette sales in their stores. (moderate) p.
        17
    c.) This product saves much more time for the consumer.
    d.) Give the customers what they want.
    e.) Sell at the lowest price.

68. For each 20 kilo bag of Ole Boy High Pro dog food that is purchased, the manufacturer makes
    a donation to the American Humane Society. The terms of the donation are prominently
    displayed on the bags and included in its print ads. The manufacturer of Ole Boy is using
    _______________ marketing.
    a.) advocacy
    b.) service
    c.) nonprofit
    d.) pro bono
    e.) cause-related marketing (moderate) p. 17

69. A provider of lawn care hires a telemarketing company to find prospects for its services.
    The installer is engaged in _______________.
    a.) remarketing
    b.) demarketing
    c.) centralization



                                                                                             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 don’t want to admit they need bifocals, there is a negative
    demand. When the bifocal lenses were introduced, there was no demand because people
    didn’t know they existed. Before they were introduced, many people thought such a product
    would be nice but didn’t think it would ever exist. This is latent demand. If something
    better, such as a surgery to repair the eyes is invented, then the lens will experience declining
    demand. If the manufacturers of the lens are making all they possibly can, then there is full
    demand. With overfull demand, the manufacturers of the lens can’t make enough. Answers
    may vary.       (difficult) p. 5



71. In a short essay, describe the supply chain for denim jeans.

    Answer:      The supply chain begins with cotton growers, then on to cloth textile processors,
    cutting operations and sewing operations. Next, the jeans are sent through distribution
    channels, such as wholesalers and retailers. From there, they are purchased by consumers.
    (moderate) p. 10

72. In a short essay, discuss the marketer’s argument for why an organization should embrace the
    marketing concept.

    Answer: The company’s assets have little value without the existence of customers. The
    key company task, therefore, is to attract and retain customers. Customers are attracted
    through competitively superior offerings and retained through satisfaction. Marketing’s task
    is to develop a superior offering and deliver customer satisfaction. Customer satisfaction is
    affected by the performance of other departments. Marketing needs to influence those other
    departments to cooperate in delivering customer satisfaction.
    (moderate) pp. 13-14

73. In a short essay, describe the four levels of competition for Chrysler-made minivans.

    Answer: The four levels of competition are based on degree of substitutability. In brand
    competition, Chrysler would see its competition in Toyota, Honda, and Ford’s minivans—that
    is, moderately priced competitor brands. In industry competition, Chrysler sees its competition
    as all companies that make vehicles in the same product class, so this might include lower-end
    and higher-end minivans. In form competition, the company sees its competition in all
    companies that manufacture products that provide consumers with the same utility—such as
    bikes, motorcycles, SUVs, pickups, etc. Lastly, in generic competition, the competition is


                                                                                                   16
    considered any company that competes for the same dollar as the Chrysler minivan—this
    could include vacations, car repair services, new homes, etc. (moderate) pp. 10-11
Mini-Cases

Mini-Case 1-1
S. Truett Cathy entered the restaurant business in 1943. In 1964 he introduced his first
Chick-fil-A sandwich. In 1998 he owned 826 Chick-fil-A restaurants in 35 states and South
Africa with an additional 92 stores set to open in 1999. Cathy was never the type of entrepreneur
who wanted to run an idea up the flagpole and see who saluted it. He will not open a new
restaurant unless he is convinced the enterprise will be a success. He will not consider taking the
company public even though it would be worth an estimated three-quarters of a billion dollars if it
went public. Cathy’s philosophy is, “We started 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, we’ve got to own it.”

74. Refer to Mini-Case 1-1. When Cathy started selling Chick-fil-A sandwiches, the market was
    saturated with hamburger restaurants. Colonel Sanders was selling chicken dinners, however,
    there were no restaurants selling the fried chicken sandwich that Cathy visualized. Cathy
    recognized a(n) _______________ demand for something different to eat.
    a.) derived
    b.) latent (moderate) p. 5
    c.) elastic
    d.) irregular
    e.) declining

75. Refer to Mini-Case 1-1. Cathy’s philosophy about keeping the company private is an
    example of _______________ marketing.
    a.) relationship (difficult) p. 9
    b.) entrepreneurial
    c.) societal
    d.) environmental
    e.) transactional

76. Refer to Mini-Case 1-1. The allies, friends, partners, and employees that Cathy refers to are
    examples of _______________ with whom Chick-fil-A has built mutually profitable business
    relationships.
    a.) stockholders
    b.) transaction partners
    c.) reciprocal agents
    d.) stakeholders (moderate) p. 10
    e.) business networks

77. Refer to Mini-Case 1-1. Which of the following would be a part of Chick-fil-A’s task
    environment?


                                                                                                 17
    a.)   its target customers (moderate) p. 11
    b.)   development of database marketing
    c.)   laws governing cleanliness standards in the restaurant kitchens
    d.)   consumer desire for low-fat food
    e.)   demographic trends that show the U.S. population moving south and west

Mini-Case 1-2
A few years ago, Target Corporation (then called Dayton-Hudson) decided that it would no longer
sell
tobacco products, giving up a very profitable line for them at the time. Liability and corporate
responsibility were cited as the reasons for this move at the time.

78. Refer to Mini-Case 2-1. This decision by Target illustrates which of the following?
    a.) the marketing concept
    b.) integrated marketing
    c.) relationship marketing
    d.) societal marketing concept (moderate) p. 17
    e.) benchmarking

79. Refer to Mini-Case 2-1. Which of the external environments likely had the most impact on
    Target’s decision to delete tobacco products from its product line-up?
    a.) demographic environment
    b.) political-legal environment (moderate) p. 11
    c.) task environment
    d.) natural environment
    e.) manufacturing environment

80. Refer to Mini-Case 2-1. Even if a Target consumer wanted to buy tobacco products, no
    physical product exchange could take place. Why?
    a.) There are not two parties.
    b.) One of the parties lacks something that could be of value to the other. (moderate) p.
        8
    c.) One of the parties is incapable of communicating or delivering.
    d.) One of the parties cannot accept or reject the exchange.
    e.) One of the parties believes it is inappropriate or undesirable to deal with the other party.




Chapter 2—Adapting Marketing to the
New Economy


                                                                                                   18
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-to-consumer 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. Adobe’s site is considered a content site. False
    (difficult) p. 29

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
    two-way communication. False (moderate) p. 30




                                                                                              19
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. Bill’s 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

23. NTT’s 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?


                                                                                                 20
    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
    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


                                                                                                21
    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 company’s 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

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. Yacobo’s 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




                                                                                               22
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

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




                                                                                                23
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
    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


                                                                                            24
    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

50. Scuba Steve’s 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 ___________.


                                                                                            25
    a.)   community
    b.)   customization
    c.)   communication
    d.)   connection (moderate) p. 30
    e.)   commerce

52. The layout and design of Northwest Territories Surf Shop’s 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 people’s interest?
    a.) simple and intuitive
    b.) graphics that load quickly
    c.) informative homepage that tells the visitor what the site will do for them
    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


                                                                                              26
    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
    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


                                                                                             27
    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

66. Every time Johnny’s Formalware salespeople make a sale, they record the customer’s
    name, address, and telephone contact information. Johnny’s then uses this information to
    send out promotional messages about upcoming sales events. Johnny’s is using a
    ________________.
    a.) customer database
    b.) database marketing
    c.) customer mailing list (moderate) p. 34
    d.) business database
    e.) data warehouse


                                                                                                28
67. Radio Shack keeps track of what each customer purchases, and in what quantities. They
    also tie this information to data on customer’s 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.
    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. Raliberto’s 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 Raliberto’s could use the menu


                                                                                              29
    and customer relationship to customize and customerize the eating experience in its
    restaurants.

    Answer:
    Customization means that Raliberto’s can provide individually differentiated meals. The
    flexible kitchen and menu allow for this.
    Personalization is an important aspect of this process, and in Raliberto’s 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, Raliberto’s 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 Dillard’s, Athlete’s 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
    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                                    NEW
1) organize by product unit               1) organize by customer segment (individuals,


                                                                                               30
                                                          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                  5) everyone does the marketing (all
employees,
                                                             especially those that come in contact
                                                  with the
                                                           customer, need to be aware they are
                                                  part of the
                                                           company’s communication process -
                                                           whether they like it or not!)
6) build brand through advertising                         6) build brand through performance
                                                           (let the quality do the talking)
7) focus on customer acquisition                 7) focus on customer retention (new
customers
                                                           cost much more to get than
                                                  established
                                                           customers cost to maintain)
8) no customer satisfaction measurement          8) measurement (customers, especially the
most
                                                          profitable ones, need to be able to
                                                  communicate
                                                          their pleasure or displeasure with the
                                                  firm)
9) overpromise, underdeliver                     9) underpromise, overdeliver (delight
customers
                                                           with more than they expected, they
                                                  will feel the
                                                           value and return) (moderate) p.
                                                  26, Table 2-1

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-to-consumer) 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 Novell’s
        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
    Jaworski’s 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.)   advertising income
    b.)   alliance income
    c.)   profile income (moderate) p. 32
    d.)   transaction commissions and fees
    e.)   referral income

Mini-Case 2-2
Barnes and Noble hesitated to build an online presence until Amazon.com’s 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&N’s 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 3 – 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 buyer’s 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 firm’s 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

12. The first step in the process of calculating the customer defection rate is to define and measure
    the company’s customer retention rate. True (moderate) pp. 45


                                                                                                  36
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 firm’s 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 company’s 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 firm’s 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
    e.) Total customer cost (moderate) p. 38




                                                                                                   37
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 company’s 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 customer’s 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 person’s feelings of pleasure or disappointment resulting from
    comparing a product’s perceived performance in relation to his or her expectations.
    a.) Satisfaction (easy) p. 40
    b.) Culture
    c.) Value
    d.) Ethics
    e.) Morals

28. _______________ is a function of perceived performance and expectations.
    a.) Total customer value

                                                                                                38
    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 night’s 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
    high-performance 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 company’s 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 company’s _______________ 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
    d.) outbound logistics
    e.) service



                                                                                                   39
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 one’s own costs and performance to competitors to see how to
    improve one’s 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
    Allied Signal products to Checker branch stores. Allied Signal is trying to improve its
    _______________.
    a.) total quality management (TQM) process



                                                                                                 40
    b.)   value-delivery network (difficult) p. 44
    c.)   quick response system
    d.)   inbound logistics
    e.)   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
    e.) define and measure the company’s customer retention rate (moderate) p. 45




                                                                                                41
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 company’s 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 store’s 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

50. A company should commit to reducing the customer defection rate if _______________.
    a.) the cost to do so is more than the potential profit

                                                                                                   42
    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 Bean’s 100 percent Guarantee includes _______________.
    a.) a pro-rated refund for products that do not work as they should
    b.) only a refund to the purchaser’s 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

56. Anyone who might conceivably buy the product or service is called _______________.
    a.) a suspect (moderate) p. 47


                                                                                          43
    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 can’t
    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 physician’s 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 clinic’s 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

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 plant’s research and development
    team to design animal housing that meets all the requirements necessary to ensure healthy
    livestock. This is an example of _______________marketing.

                                                                                                    44
    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 company’s 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 company’s 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 _______________.
    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


                                                                                                 45
    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 organization’s 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

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


                                                                                                  46
    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 Water’s 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, McDonald’s, Burger
    King, Wendy’s 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 Porter’s 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
    function—you can’t sell what you do not have. (moderate) p. 43, Figure 3-3




                                                                                                     47
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
    front-line 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 company’s primary activities; logistics, operations,
service, etc. He also asked for a review of the company’s procurement process, technological
development, and other supporting activities. Third, he wanted to know how satisfied
ComfortEase’s 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 company’s 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
    e.) customer retention analysis (moderate) p. 45




                                                                                                 48
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
    customer-centered?
    a.) the retention of customers
    b.) the reduction of the defection rate
    c.) maintaining the satisfaction level of the company’s stakeholders
    d.) changing the company’s 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 Bernardo’s 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 Bernardo’s shop
    represent _______________.
    a.) Bernardo’s value proposition
    b.) Bernardo’s commitment to maximize customer satisfaction
    c.) Bernardo’s core competency (difficult) p. 42
    d.) Bernardo’s value chain
    e.) Bernardo’s 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.) Bernardo’s “best” customers are subsidizing his “worst” customers
    d.) a, b, and c are all suggested by the 20-80 Rule in Bernardo’s case (difficult) p. 50-51
    e.) none of the above are correct, related to the 20-80 Rule



                                                                                                49
Chapter 4—Winning 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

10. Porter’s three generic strategies are: overall cost leadership, differentiation, and focus.
    True (moderate) p. 67

11. McKinsey&Company’s 7-S framework includes 7 different strategies for corporations to
    succeed. False (moderate) p. 68



                                                                                                  50
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
    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


                                                                                              51
    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 Drucker’s
    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.
    a.) industry scope
    b.) products and applications scope
    c.) competence scope
    d.) vertical scope (moderate) p. 60
    e.) geographical scope



                                                                                              52
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 Mission’s
    _________________.
    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 company’s 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 company’s 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 company’s 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
    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.


                                                                                              53
    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
    weak-business-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
    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


                                                                                               54
    critics, but have sold poorly. This failure in the marketplace may be due to a lack of
    ___________ to aid in Cannondale’s expansion attempt.
    a.) technological synergies
    b.) marketing synergies (difficult) p. 64
    c.) technologically related production capabilities
    d.) related products in the company’s 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 company’s 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
    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


                                                                                             55
    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 Porter’s 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 company’s 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
    b.) structure
    c.) style (moderate) p. 68
    d.) skills
    e.) 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”?


                                                                                                  56
    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 process—that the firm
    makes something and then sells it—is 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
    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


                                                                                            57
    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 manager’s 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
    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.




                                                                                              58
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 Bonoma’s implementation skills?
    a.) the ability to determine what went wrong
    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


                                                                                             59
    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
    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


                                                                                              60
    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
    won’t 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

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 Fatima’s case, the questions should be:



                                                                                                 61
    a.) Can the benefits involved in Fatima’s ideas be adequately explained to her defined
        target market?
    b.) Can Fatima’s 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 Fatima’s 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, You’ll Like Us!

75. Refer to Mini-Case 4-1. The Lumberjack Lanes portfolio of businesses include all the
    following except _________________.
    a.) food services
    b.) restrooms (easy) pp. 60-61
    c.) beverage services
    d.) bowling
    e.) dancing/music

76. Refer to Mini-Case 4-1. The group is proposing that the alleys compete on which of
    Porter’s generic strategies?


                                                                                             62
    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 he’ll 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
    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




                                                                                               63
Chapter                 5       –       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

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




                                                                                                  64
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
    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


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22. When Molly’s parents retired, they decided they wanted to travel. They found an ideal
    job that allows them to travel for free, but the only catch is they have to stay at Holiday
    Inns. During each stay, they test all the amenities offered by the motel and evaluate
    each. The evaluation forms are sent to the motel headquarters where it becomes part of
    the motel’s _______________ system.
    a.) sales reporting
    b.) marketing research
    c.) experiential research data
    d.) accountability information system (AIS)
    e.) marketing intelligence (moderate) p. 87

23. Which of the following is not a step that might be used to improve the quality of a firm’s
    marketing intelligence?
    a.) setting up a consumer panel
    b.) collecting competitive intelligence by buying a competitor’s products
    c.) watching how the stock market reacts to interest rate changes (moderate) 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
    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



                                                                                              66
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
    organization’s secretary felt it was because there were several other professional
    organizations to which the members also belonged. If Rita wants to do research to
    determine the real reason why members do not want to run for office, she should begin by
    _______________.
    a.) determining the optimum number of meetings
    b.) evaluating the advantages the Chamber offers over other similar organizations
    c.) defining the problem (difficult) p. 89
    d.) developing the marketing research plan that she would employ
    e.) holding focus groups of members of similar organizations to determine whether the
        problems the Chamber is facing are universal or local

31. After working for a roofing contractor for ten years, Cameron Gomez finally established
    his own operation. Unfortunately, Cameron’s first six months have been disappointing.
    He decided to conduct a marketing research study to gather preliminary data to shed light
    on the nature of the problem and suggest some new ideas. He needs to conduct
    _______________ research.
    a.) exploratory (moderate) p. 90
    b.) causal
    c.) secondary


                                                                                                  67
    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

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 industry’s 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


                                                                                                 68
    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 people’s
    knowledge, beliefs, preferences, and satisfaction, and measuring these magnitudes in the
    general population.
    a.) Observational research methods
    b.) Focus groups
    c.) Surveys (moderate) p. 91
    d.) In-depth interviews
    e.) Qualitative research methods

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


                                                                                                      69
    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

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


                                                                                             70
    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
    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?


                                                                                             71
    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 company’s 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

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.



                                                                                                  72
    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

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


                                                                                              73
    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
    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, women’s 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


                                                                                                 74
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 habits—both 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
    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
    closed-ended 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.


                                                                                                 75
    (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 competition’s success for
    guidance. He could rent space and do a market test. Better answers will recognize that Scott is
    not a marketing research expert and will probably need to hire this work out. Also, some
    students will note that the report will not make the decision, but that Scott himself, as manager,
    will have to do that. (moderate) 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 nation’s 2.3 million annual
deaths are cremated. Funeral homes typically charge only about one-third the amount for
cremation that they do for a burial. It has become imperative that funeral directors invest time
and money in learning about their potential consumers.

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.


                                                                                                    76
    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
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


                                                                                                77
    e.) technological

78. Refer to Mini-Case 5-2. Once in the country, Raul passes the mayor’s office and wonders
    about the paperwork he’ll have to complete to open his new business in the city. This
    illustrates that the __________ environment will likely affect what Raul does.
    a.) political-legal (easy) 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

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 person’s 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



                                                                                                 78
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.
   114-115

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 buyer’s 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

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 consumer’s evaluation of alternatives begins with a need, progresses through analysis of
    the bundle of attributes, and results in a determination of the benefits the consumer needs to
    meet his/her needs. False (moderate) pp. 122-123




                                                                                                 79
20. Post-purchase satisfaction is a function of the consumer’s product expectations and the
    product’s 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

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 he’ll 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


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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

29. One’s family of __________ is made up of one’s 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


                                                                                                  81
    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

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



                                                                                                   82
    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 person’s pattern of living in the world as expressed in activities,
    interests, and opinions.
    a.) Self-concept
    b.) Personality
    c.) Social class
    d.) Lifestyle (moderate) p. 116
    e.) Demographics

40. Aaron’s hunting and fishing activities, his interest in military history, and his opinions about
    an all-volunteer army reflect his _______________.
    a.) self-concept
    b.) personality
    c.) social class
    d.) lifestyle (moderate) 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.) brand’s personality (difficult) p. 117
    b.) preferred consumer’s personality
    c.) timid consumer’s personality
    d.) lifestyle personality
    e.) variety-seeking personality



                                                                                                       83
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
    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


                                                                                                  84
    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
    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 can’t 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 _______________.


                                                                                                    85
    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 individual’s 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
    b.) Opinions
    c.) Perceptions
    d.) Interests
    e.) Emotions

56. Because attitudes are very difficult to change, a company would be well-advised to
    _______________.
    a.) use care when trying to change people’s attitudes
    b.) fit its products in with existing attitudes rather than try to change people’s attitudes
        (moderate) 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


                                                                                               86
    b.)   conviction
    c.)   perception
    d.)   opinion
    e.)   belief (moderate) p. 119

58. While shopping for groceries, Shanté asks herself, “What would the children really like for
    dinner tonight?” In this case, the children’s 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 person’s 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.
    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
    R-1. 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



                                                                                                   87
62. When shopping for “ramen” noodles to make for his roommates, Brandon’s looks at the two
    choices—Top 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 consumer’s 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
    b.) evaluation of alternatives
    c.) purchase decision
    d.) location of alternatives
    e.) 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


                                                                                              88
    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.) She’ll buy the Gateway because it’s the cheapest.
    b.) You need to know how important price is over the other attributes before you can answer.
    c.) She’ll buy the iMac, if it goes on sale for cheaper.
    d.) What she chooses will depend on Rhiannon’s mood at the time.
    e.) With more detail you could make a decent guess, but not predict for sure, 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

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. Bobbie’s income last year was $23,000. Bobbie’s favorite time of the week is
    when she gets together with friends on Friday night to play poker. In a short essay, discuss the



                                                                                                  89
    roles and statuses, and the personal factors that are likely to influence the consumer buying
    patterns of Bobbie’s 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. Bobbie’s 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 won’t 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 school’s 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:
    Tiffany’s 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 boyfriend’s clique may be an aspirational group.
    Tiffany’s reference groups expose her to new behaviors and lifestyles. They influence her
    attitude and self-concept. And they create pressure for conformity that might affect actual
    product and brand choices. (moderate) 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
    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


                                                                                                    90
     publicity pieces in print and broadcast media, including the Internet, and reports by
     consumer-rating organizations. Experiential sources might by taking your shoes off and
     walking on samples at the store or feeling a friend’s new living room carpeting with your
     hands.
     (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. Sean’s lifestyle can be best described as comfortable,
frugal, reflective, mature, and stable. He favors durability, functionality, and value in the products
he buys. He must have a vehicle that is large enough to hold 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.

 76. Refer to Mini-Case 6-1. Sean’s 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



                                                                                                      91
     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 Hadley’s 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 SUVs—no 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 car’s funky shape and weird mix of form and
function are attractive to Nate. Nate’s father, a university provost with a Ph.D. in economic history
has definite opinions about the 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 dad’s 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 doesn’t want his father to make fun of him
if he chooses unwisely.

 81. Refer to Mini-Case 6-2. Nate’s father sees “low-class people as a group he would not like
     his son to be a part of. This is an example of a(n) __________ reference group.
     a.) aspirational
     b.) primary


                                                                                                    92
    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 Nate’s father has more experience and plenty of opinions and
    advice for his son regarding cars, he might be considered a(n) __________ to Nate in this
    area.
    a.) opinion leader (easy) 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?
    a.) lend it
    b.) convert it to a new purpose
    c.) create new space for it (moderate) p. 126
    d.) sell it
    e.) throw it away




                                                                                                  93
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

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


                                                                                                 94
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
    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



                                                                                                      95
    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. Erin’s secretary developed a file of visiting salespeople, but only allowed a few to actually
    have time on Erin’s calendar. Erin is frequently charged with buying expensive office
    equipment as part of her job. Erin’s secretary is playing what role in the business buying
    process?
    a.) initiator
    b.) user
    c.) decider
    d.) approver
    e.) gatekeeper (moderate) 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
    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



                                                                                                    96
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
    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


                                                                                              97
    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
    supplier’s 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
    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


                                                                                               98
    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 supplier’s 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

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 supplier’s 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


                                                                                                 99
    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
    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


                                                                                               100
    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 firm’s 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
    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


                                                                                                 101
    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

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.




                                                                                                102
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 guest’s perspective when
    he noticed some Japanese beetles flying around. He made a mental note to himself that he
    had to order some Japanese beetle traps when he got back to the office. This is an example
    of which of the steps in the purchase/procurement process?
    a.) problem recognition (moderate) pp. 141-142
    b.) general need description
    c.) product specification
    d.) supplier selection
    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


                                                                                              103
    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 kitchen’s 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

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 children’s 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


                                                                                              104
    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 Pascuali’s 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 Pascuali’s 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 Rikka’s arts and crafts supply store. In addition, the salesperson agreed to have the
    items delivered in ten working days and give Rikka an 8-percent discount. Rikka and the
    salesperson are engaged in which phase of the procurement process?
    a.) supplier selection
    b.) proposal solicitation
    c.) product specification
    d.) performance review
    e.) order-routine specification (moderate) p. 144

68. A blanket purchase contract leads to _______________.
    a.) buyers being less dependent upon any given supplier
    b.) the rebuy process being upgraded to a new task buy each time there’s a reorder
    c.) the supplier maintaining the inventory (difficult) p. 144
    d.) systems selling
    e.) multiple sourcing

69. A(n) _______________ establishes a long-term relationship in which the supplier promises to
    resupply the buyer as needed at agreed-upon prices over a specified period.
    a.) blanket contract (moderate) 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


                                                                                               105
    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
    agent’s office. The purchasing agent works for a fiberglass manufacturer. Miller has sold
    to the company several times in the past. He has stopped by to see if the purchasing agent
    needs to restock any of his company’s machine lubricants. 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

72. Rhet and Julie Raymond had a larger-than-average crop of mangos last year. They decided
    to make some extra jars of Julie’s mother’s mango chutney to see if they could sell it at a local
    crafts fair. Response was very promising and demand was strong. Now Julie and Rhet own
    a company that produces gourmet chutneys under the brand name Exoti-Sauce. Working at
    the company now are Rhet, Julie, her mother Mandalee, and Rhet and Julie’s nephew Bert
    who makes deliveries and does the heavy lifting and cleaning. Rhet is in charge of
    marketing and helps out in the kitchen. There are also a number of part-time workers. A
    salesperson wants to sell them a bottle-labeling system that will speed up production by 200
    percent. It costs about $12,500. In a short essay, discuss how each of the company’s
    full-time employees might assume various roles in the buying center.

    Answer:
    Students’ answers to this question will vary, but the following are some possible answers.
    a.) Julie knows how much work it is to glue on labels—so she would definitely be an
        initiator. She would also by the same logic be a user. Since the decision is joint, she
        would be an influencer to convince the others and a decider, an approver, and a buyer



                                                                                                    106
         as part owner of the company. She could take the role of gatekeeper if she knew of a
         cheaper system but decided not to tell the others about it.
    b.) Rhet is not involved in the production part, but as part owner of the company, he would
         take the roles of decider, approver, and buyer. He could take the role of gatekeeper if
         he refused to let the salesperson present any other equipment that might be useful in the
         Exoti-Sauce kitchen.
    c.) Mandalee also knows how much work it is to place the labels—so she would definitely
         take the roles of initiator and user. Even though she has no ownership rights, she
         would also act as an influencer. She could act as a gatekeeper if she knew the building
         currently used by Exoti-Sauce was not big enough to hold the system where it could be
         used efficiently.
    d.) Bert is not involved in the production of chutneys except to help clean. Depending on
         how easy the new system is to clean, he could be an influencer. He would most likely
         play no other roles.
    (difficult) 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 purchased—such as
    audiovisual equipment or instructional or motivational books or networking software.
    (easy) pp. 136

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.



                                                                                                 107
    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 Turek’s Minnesota ear, nose, and throat practice is booming and she needs more office
space to accommodate the growth. She asks her office manager James to help decide the attributes
that will assure that a new space will be adequate for the practice now and in the 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.

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?


                                                                                                108
    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

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




                                                                                                  109
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 Chili’s restaurants are engaged in monopolistic competition. True
   (moderate) p. 152

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

                                                                                                   110
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 firm’s 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. McDonald’s introduced a line of individual pizzas to challenge high market share competitors,
    such as Dominos and Pizza Hut. McDonald’s 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

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-Veg’s 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 wife’s 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.


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    d.) Consumers are time-poor and are not receptive to new product promotions.
    e.) Various federal agencies will monitor the company’s every move when the oils move
        from its present regional distribution to a national distribution.

23. Bernardo’s 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. Bernardo’s 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
    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


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     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




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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 Iversons—The Answer
    IVs—you 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




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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
    channels—Snap-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. Echo’s 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



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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 competitor’s 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 competitor’s 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
        company’s 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 competitor’s 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


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    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 industry’s growth potential
    c.) take large risks (moderate) p. 157
    d.) play by the industry’s 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


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    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
    enterprise’s 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 company’s 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




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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 nation’s 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 McDonald’s,
    company policy requires that McDonald’s do nothing for the first six weeks the new
    establishment is open in order to let the novelty wear off. Then McDonald’s 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


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e.) counteroffensive (moderate) p. 160




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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. Bill’s 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 Van’s skate shoe market share. At the time, Airwalks
    were perceived as a much better fitting shoe than Van’s.
    a.) flank
    b.) encirclement
    c.) frontal (moderate) p. 162
    d.) bypass
    e.) guerrilla




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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




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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


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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


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    Competition” ring, and should contain reference to any other form of entertainment that
    competes for the consumer’s 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. They’ve 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 Fletcher’s, 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
    information—especially 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



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74. It’s 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 company’s 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 company’s
    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 company’s 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 company’s 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 company’s performance against
    a particular competitor on an attribute-by-attribute basis. If the company’s 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. Vespa’s 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 Honda’s 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


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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 Honda’s strengths and weaknesses as a competitor,
    Vespa now knows that _______________.
    a.) Honda’s share of mind is 49 percent (moderate) p. 155
    b.) Hondas share of heart is 49 percent
    c.) Honda’s share of the market is 49 percent
    d.) Honda’s share of profit is 49 percent
    e.) Honda’s heart/mind ratio is larger than that of Vespa

77. Refer to Mini-Case 8-1. Vespa’s 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.) Porter’s 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 beautician’s 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?


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    a.)   multidimensional scale analysis
    b.)   customer value analysis
    c.)   Porter’s Five Forces analysis (moderate) p. 150
    d.)   cost/benefit analysis
    e.)   guerrilla competitor analysis

80. Refer to Mini-Case 8-2. Which of Porter’s 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 Porter’s forces (moderate) p. 150

81. Refer to Mini-Case 8-2. The salon industry in Guillermina’s 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 9—Identifying 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

4. The ultimate level of marketing segmentation is mass marketing. False (moderate) p.
   171



                                                                                              128
5. There are four levels at which a firm could micromarket—segments, niches, local areas,
   and individuals. True (easy) p. 171

6. If everyone’s choice for their computer printer were an HP LaserJet 1200, there would be
   a heterogeneous preference segment in the computer printer market. False (moderate)
   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
   segment’s 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 “It’s 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

18. In business market segmentation, operating variables are the most important segmentation
    variable. False (moderate) p. 180



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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
    d.) homogeneous
    e.) demographic



                                                                                           130
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 brand’s 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 customer’s 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 everyone’s 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


                                                                                             131
d.) stratified
e.) clustered




                 132
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


                                                                                         133
e.) user status




                  134
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
    life-cycle 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. It’s a
    place people can go to unwind from the stress of daily life. Which of the following is an
    example of a psychographic variable the owner of the retreat could use in its marketing
    strategy?
    a.) occupation
    b.) age
    c.) lifestyle (moderate) 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



                                                                                          135
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




                                                                           136
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 Libby’s 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



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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. You’d 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


                                                                                             138
c.) purchasing approaches
d.) operating variables
e.) personal characteristics




                               139
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 company’s 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 segment’s 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. Sam’s 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 Weyerhaeuser’s prices are in line with its
    competitors’ prices. Sam’s 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


                                                                                              140
b.)   relationship buyers
c.)   transformational buyers
d.)   transactional buyers
e.)   bargain hunters (moderate) p. 181




                                          141
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



                                                                                         142
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
    _______________.


                                                                                            143
    a.)   increases administrative and production costs
    b.)   keeps down advertising and R&D costs (moderate) p. 183
    c.)   increases the firm’s cost for product modification
    d.)   creates more total sales than differentiated marketing
    e.)   puts the company at risk of being supplanted by an entirely new technology

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




                                                                                             144
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?


                                                                                               145
    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 variables—purchasing-function


                                                                                               146
    organization, power structure of organization, nature of existing relationship, general
    purchase policies of buyer, and buyer’s purchasing criteria. The one that is least likely
    is the nature of existing relationship, but it is not out of the realm of possibility that a
    company would need and buy more than one corporate jet. In terms of situational
    factors as segmentation variables, how the buyer will use the jet falls under the category
    of specific application. Personal characteristics might include buyer’s willingness to
    take risks, and buyer-seller similarities could also be a viable segmentation variable in
    this example.
    (moderate) 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


                                                                                               147
    b.)   psychographic and behavioral
    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




                                                                                         148
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




Chapter 10—Developing, Positioning, and
Differentiating

                      Products Through the Life Cycle



                                                                                                149
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

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


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15. Differentiation is the act of designing a company’s 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 product’s 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 company’s 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. Mazda’s Miata convertible originally drew the most interest from women between the
    ages of 35-55. In order to interest more potential customers in the roadster, Mazda beefed
    up the model with heavier shocks and a faster engine, then emphasized performance in its
    advertising. This is an example of creating a new product by _____________.
    a.) repositioning (moderate) p. 190
    b.) the development of a new product line
    c.) a market diversification strategy
    d.) a product development strategy
    e.) a new-to-the-world product

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.



                                                                                              151
    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 product’s 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 product’s development and sponsorship by a single entrepreneur with the drive to
        make the product successful

25. In terms of new-product development, Spam Meat Product’s annual Great Ideas for
    Spam! contest brings together Spam cooking ideas from all over the world. Each
    contestant hopes his or her idea for a new recipe will win the grand prize. For the
    makers of Spam, the contest serves as an avenue for _______________.
    a.) idea screening
    b.) idea generation (moderate) 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
    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


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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.) product’s 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 product’s planned pricing
        strategy




                                                                                           153
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 company’s 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 children’s
    over-the-counter remedy would be to use _______________.
    a.) simulated test marketing
    b.) conjoint analysis
    c.) controlled test marketing
    d.) test markets


                                                                                           154
e.) sales-wave research (moderate) p. 195




                                            155
35. Suppose a marketing research firm that manages a panel of retail stores agrees (for a fee)
    to study a company’s new candy bar-based granola product. The research firm provides
    sales results and evaluates the impact of promotion. This is an example of
    _______________.
    a.) simulated test marketing
    b.) controlled test marketing (moderate) 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. McDonald’s is preparing (yet another time) to roll out a new version of its McRib
    product. McDonald’s is currently deciding if its new product should enter the market at
    the same time it knows a new Arby’s barbeque product is coming out. The firm is
    devising its _______________ for new-product commercialization.
    a.) geographic strategy
    b.) introductory market strategy
    c.) market-penetration plan
    d.) market pricing plan
    e.) timing (moderate) 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?


                                                                                           156
e.) who?




           157
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 Toyota’s new super-efficient, low-polluting car, the
    Prius (the car is propelled by a hybrid of an electric motor and small gasoline engine), she
    had previously heard that the product existed, but didn’t know much about it. Having
    read the article, she now wants to learn even more about the new car. In terms of the
    adoption process, Dede has moved from _______________.
    a.) evaluation to trial
    b.) awareness to interest (easy) 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



                                                                                             158
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




                                                                                  159
45. Birth control pills didn’t diffuse as quickly in predominately Roman Catholic countries as
    they did in the United States. This is an example of problems with the new product’s
    _______________.
    a.) relative advantage
    b.) compatibility (moderate) 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 product’s profits are fixed throughout its life cycle
    e.) all products begin at the introductory stage and move through all the life cycles stages
        at a steady rate

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


                                                                                               160
b.)   products that were improperly positioned
c.)   products appeared before strong demand
d.)   too many new products in the pipeline (moderate) p. 200
e.)   managerial incompetence or unhealthy complacency




                                                                161
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 firm’s product enters the decline stage _______________.
    a.) most firms don’t 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 doesn’t help managers compare product performance to other similar products
    b.) PLC is an ineffective product management tool
    c.) marketers can seldom tell what stage of the PLC a product is in (difficult) 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


                                                                                            162
    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 Kim’s 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


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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 company’s
    _______________.
    a.) identity
    b.) image (moderate) p. 207
    c.) position
    d.) style
    e.) atmosphere

63. Robinson’s 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 company’s products. The manufacturer of Chef’s 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


                                                                                                164
    e.) profitability

66. Which of the following is not true of Treacy and Wiersema’s 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. McDonald’s 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

                                                                                              165
71. Maurer has developed a hermetic system for smoking meat that uses 50 percent less
    energy than industrial-sized smokers currently on the market even though it will smoke
    the same amount of meat uniformly. It also has an added advantage in that it is easy to
    clean because the hermetic system reduces tar and ash residue. In a short essay, discuss
    how Maurer would conduct a business-goods marketing test.

    Answer:
    Maurer would use alpha testing within the company and beta testing with outside
    customers. During beta testing, its vendor’s technical people will observe how test
    customers use the product, a practice that might expose unanticipated problems of safety
    and servicing and alert Maurer to the needs for customer training and servicing
    requirements. The vendor can also observe how much value the equipment adds to the
    customer’s operation as a clue to subsequent pricing. The vendor will ask the customers
    to express their purchase intention and other reactions after the test. A second common
    test method Maurer could use would be to introduce the new smoker at trade shows.
    Trade shows draw a large number of potential buyers. The vendor can observe how
    much interest buyers show in the new smoker. The smoker could also be tested in
    distributors’ and dealers’ display rooms where they may stand next to the Maurer’s other
    products and possibly competitors’ products. Maurer would come closest to using full
    test marketing if it gives a limited supply of the product to the sales force to sell in a
    limited number of areas that receive promotional support.
    (difficult) 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 Killer’s 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 can’t stand the band since hearing them—not enough punk
    influence for him and he hates the drummer, “Animal,” because Josh’s girlfriend flirted
    with the musician. Now indicate which stage of the adoption process each of the above
    participants is in.




                                                                                           166
    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 firm’s investment so as to either dominate the market or strengthen its
    competitive position. (2) Maintain the firm’s investment level until the uncertainties
    about the industry are resolved. (3) Decrease the firm’s investment level selectively, by
    dropping unprofitable customer groups, while simultaneously strengthening the firm’s
    investment in lucrative niches. (4) Harvest the firm’s investment to recover cash
    quickly. (5) Divest the business quickly by disposing of its assets as advantageously as
    possible. The appropriate decline strategy depends on the industry’s relative
    attractiveness and the company’s competitive strength in that industry.
    (moderate) 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
    better-funded competitors entered the market and their profits shrunk, they have debated
    the PLC concept. In a short essay, discuss the reasons the son seems to be so in favor of
    the PLC concept and the father seems to be so opposed to it?

    Answer:
    The PLC concept is best used to interpret product and market dynamics. As a planning
    tool, the PLC concept helps managers characterize the main marketing challenges in each
    stage of a product’s life and develop major alternative marketing strategies. As a
    control, the PLC concept helps the company measure product performance against similar
    products launched in the past. Critics of the PLC concept contend that life-cycle
    patterns are too variable in their shape and duration. PLCs lack what living organisms


                                                                                             167
have—namely, a fixed sequence of stages and a fixed length for each stage. Critics also
charge that marketers can seldom tell what stage the product is in. They charge that the
PLC pattern is the result of marketing strategies rather than an inevitable course that sales
must follow.
(moderate) p. 202




                                                                                          168
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
    “bullet-proof” 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 Jenny’s 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


                                                                                             169
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 brand’s power to gain distribution and favorable shelf position should
    she decide to market to retailers




                                                                                     170
78. Refer to Mini-Case 10-1. A consumer who was aware of Jenny’s 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 basis—that is, he will go to the motorcycle in need of repair rather than make the
biker deliver the ailing machine in the back of a truck. Scooter figures this will save on retail
space and provide added value to those with broken down motorcycles. The new company
will be called Scooter’s.

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
    Scooter’s 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


                                                                                               171
    e.) customer consulting



Chapter 11—Setting 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 person’s 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

14. Product line length refers to the total number of items in the mix. True (moderate) p. 215

                                                                                               172
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 jalapeño flavored kettle chips to the Lays snack line is an example of
    line-filling. 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
    multiple-sponsor 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
    e.) potential product



                                                                                             173
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 Wendy’s 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




                                                                                         174
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


                                                                                            175
e.) computer monitors




                        176
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


                                                                                         177
b.)   capital items
c.)   supplies and business services
d.)   raw materials
e.)   component parts (moderate) p. 214




                                          178
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 mix’s
    _______________.
    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


                                                                                               179
c.) length
d.) width
e.) consistency (moderate) p. 214




                                    180
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 jalapeño 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


                                                                                             181
c.) personality, attributes, and benefits
d.) benefits (difficult) p. 217
e.) user




                                            182
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 product’s 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 product’s 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 product’s features.




                                                                                           183
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




                                                                                         184
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


                                                                                           185
c.) brand extension
d.) multibrand (moderate) p. 223
e.) co-brand




                                   186
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 Libby’s 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



                                                                                          187
68. The green bottle that holds Quaker State motor oil contributes to Quaker State’s
    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 product’s 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




                                                                                         188
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




                                                                                             189
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 with—Coca-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 Aaker’s five levels of customer attitude toward a brand. What is brand equity and
    how is it related to the Aaker’s 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 company’s 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



                                                                                             190
      be different and don’t 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. SLM’s 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 Kahn’s, Jimmy Dean, Hillshire Farms, Bryan,
State Fair, and Best’s 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 SLM’s recent new
products that seems to have a good fit with the company’s 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




                                                                                            191
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 VW’s 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 Luxuriöser
    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




                                                                                            192
Chapter                12—Designing                         and           Managing
Services

True/False Questions

1. A service is any act or performance that one party can offer to another that is essentially
   intangible and does not result in the ownership of anything. True (easy) 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

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



                                                                                              193
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
    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 _______________.


                                                                                              194
    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 offering’s service mix is
    distinguished? “People patronize restaurants for both food and service.”
    a.) a pure tangible good
    b.) a tangible good with accompanying services
    c.) a hybrid (difficult) 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 didn’t 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

27. State Farm’s 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


                                                                                           195
    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




                                                                                           196
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 Starr’s, 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 he’ll have to wait for his food. Jim is experiencing
    the service characteristic of _______________.


                                                                                                 197
    a.)   intangibility
    b.)   inseparability
    c.)   variability (moderate) p. 230
    d.)   autonomy
    e.)   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.


                                                                                            198
    a.)   perishability (moderate) p. 230
    b.)   variability
    c.)   inconsistency
    d.)   inseparability
    e.)   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


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    diplomas in each examination room, and by providing all patients with an appointment
    card for their next visit. The doctor is following Booms and Bitner’s 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


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    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 Denny’s
    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 Denny’s
    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




                                                                                            201
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 guest’s 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 children’s 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


                                                                                            202
203
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 it’s not my fault that I had to
    travel so much this semester.” This dissatisfaction is a result of the service quality gap
    of _______________.
    a.) perceived service and expected service (moderate) 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


                                                                                            204
205
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




                                                                                             206
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 Sol’s
    budget, and will even include an extended warranty that lengthens the standard warranty
    by 2 years and lowers the deductible for some repairs. This extended warranty is an
    example of _______________.
    a.) value-augmenting services (moderate) 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


                                                                                           207
    when demand is not steady. 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 Domino’s, 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.




                                                                                         208
    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


                                                                                               209
purchase. An example is clothing or jewelry, which allow for careful inspection before it
is bought. A product with high credence qualities is one that is difficult to evaluate even
after the purchase. An example is a medical process, or auto repair for uninitiated owners.
Even after the purchase it is hard to determine if the repair was done well, or if the
consumer got her money’s worth.
(moderate) p. 233




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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 Cori’s 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-than-desirable 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 agency’s free gifts address the service characteristic
    of _______________.


                                                                                              211
a.)   intangibility (moderate) pp. 229-230
b.)   inseparability
c.)   variability
d.)   inconsistency
e.)   perishability




                                             212
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, Gustavo’s flight from Santiago,
Chile, was cancelled. It was late at night and the airline employees waved off angry customers
telling them there was nothing they could do, that the customers would have to return again
and try to see if they could get seats on tomorrow’s flight. 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 employee’s roles
         in service recovery
    b.) develop guidelines for service recovery that focus on achieving fairness and customer
         satisfaction
    c.) remove barriers that make it difficult for customers to complain, while developing
         effective response systems
    d.) maintain customer databases that allow analysis of the types of complaints voiced,
         followed by relevant policy adjustments
    e.) make and maintain strict policies about when a customer should be compensated
         for a missed flight (difficult) 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 company’s president with his protest. If you were the recipient of Gustavo’s
    letter, which of the following would not be good advice?
    a.) listen carefully and tactfully ask Gustavo questions


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    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 13—Designing 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 CEO’s 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

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


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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 store’s prices is to _______________.
    a.) determine demand
    b.) estimate costs
    c.) determine her target market


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    d.) select a pricing method
    e.) 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




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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
    Mexican-themed 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


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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




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33. Which of the following is an example of a fixed cost?
    a.) a salesperson’s 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 CEO’s bonus
    b.) occasional charitable expenses donated by the firm
    c.) mall rent based on percentage of sales
    d.) monthly $2,000 payment on loan to buy earthmoving equipment (moderate) 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
    experience-curve 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.




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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




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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



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    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 SunCrest’s 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


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    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 time—this 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



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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 Monk’s 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 product’s price?
    a.) For products with high brand awareness, high advertising tends to support
        higher prices in the later stages of the PLC. (difficult) 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 company’s 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



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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



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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



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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 manufacturer’s 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 Machine’s markup on sales is 30 percent, and it wants to earn a 20
    percent ROI. Calculate both its markup price and its target-return price as well as its
    breakeven volume at both prices. Which price should Diamond Manufacturing use?

    Answer:
     (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.


                                                                                             227
    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.) Goldstar’s 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 firms—Honda, 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.




                                                                                              228
   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 tires—tire-makers sell their own brands, and
       sell the very same tire with a different brandmark for another price, due to the
       difference in prestige of the brands offered.



                                                                                            229
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
doesn’t exceed the additional revenue derived by discrimination; (5) customers are not
antagonistic because of the differences, and; (6) the discrimination is not illegal.
(moderate) pp. 257-259




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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.) survival—in this case, keeping the band “alive”
    b.) maximum current profit—using the strict definition in the book
    c.) maximum market share—in this case, getting as many people to listen to the
         band as possible (moderate) p. 246
    d.) market skimming—using the strict definition in the book
    e.) product-quality leadership—the logic being that offering the best music possible will
         cost more than providing average-quality music

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. Cement’s 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.


                                                                                               231
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 company’s 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 Cement’s 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



Chapter               14—Designing                         and          Managing
Value Networks

                     and Marketing Channels



                                                                                           232
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

11. Agent intermediaries, such as brokers, manufacturers reps, and sales agents, seek out
    customers and negotiate on the producer’s behalf, but do not take title to the goods they
    are selling. True (moderate) 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




                                                                                             233
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 John’s 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.
    b.) They are not easily changed.
    c.) Some of their functions can be eliminated. (difficult) p. 268
    d.) They represent a significant organizational commitment.
    e.) They rank in importance on a level with engineering and manufacturing.

23. Which of the following may flow backward in a channel?
    a.) payment for the product (moderate) pp. 267-268
    b.) physical possession of a product
    c.) title to a product
    d.) advertising communications


                                                                                                 234
    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.com’s 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.
    b.) Cody trades 15 large pepperoni pizzas for three 30-second commercials on KLZY.
    c.) Goran uses hair he swept up from a beauty salon as a mulch.
    d.) Bethanie cleans out moldy food containers from her fridge.
    e.) Garn buys scrap copper he can melt down and resell. (moderate) 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


                                                                                             235
    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




                                                                                           236
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?


                                                                                           237
a.)   blue jeans
b.)   hand tools
c.)   bed sheets
d.)   branded furniture (moderate) p. 273
e.)   Spider-Man merchandise




                                            238
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



                                                                                              239
43. For which of the following products would a manufacturer be most likely to use intensive
    distribution?
    a.) men’s cologne that sells for $30 a bottle
    b.) combination fax/printers
    c.) Dr. Martin’s shoes
    d.) kitchen sinks
    e.) dish soap (easy) p. 273

44. McDonald’s franchisees get a small discount when they pay their bills for supplies within
    the first seven days (when the due date is 30 days after delivery). This is an example of
    ________ within channel relations.
    a.) price policies
    b.) conditions of sale (moderate) p. 274
    c.) sharing the risks
    d.) territorial rights
    e.) services agreed upon

45. A distributor’s concern over where and how a producer will enfranchise another
    distributor is addressed under _______________ as set out in the terms and
    responsibilities of channel members.
    a.) price policies
    b.) conditions of sale
    c.) territorial rights (moderate) 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 force’s efforts, the products emphasized, and how accounts are managed if
    it sets up its own sales force. This company is evaluating its choice on the basis of
    _______________ criteria.
    a.) economic


                                                                                           240
   b.)   quantitative
   c.)   territorial
   d.)   adaptive
   e.)   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




                                                                                           241
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-Cola’s size and power in the marketplace, they tend to dominate some
    members in the channel. This allows them to require strong cooperation from resellers
    who carry Coke products. This is an example of a(n) _______________.
    a.) administered vertical marketing system (difficult) 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 John’s 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


                                                                                        242
b.)   Retailer cooperatives
c.)   Franchise organizations (easy) p. 279
d.)   Catalog showrooms
e.)   Linked divisions




                                              243
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


                                                                                          244
245
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 aren’t happy about the
    Internet sales because they claim the direct marketing sales are adversely affecting their
    in-store sales. This is an example of _______________ conflict.
    a.) horizontal channel
    b.) direct channel
    c.) multichannel (moderate) 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 company’s board seats to be
    occupied by store owners who were elected by all franchises based on a
    one-vote-per-store 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


                                                                                              246
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 text’s list of recommended characteristics to
    evaluate when choosing a channel member?
    a.) number of years in the business
    b.) number of employees (moderate) 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 _______________.


                                                                                             247
a.)   a channel captain and several channel lieutenants
b.)   several producers and several final consumers
c.)   a franchise organization
d.)   an independent producer, wholesaler, and retailer (moderate) p. 271
e.)   all the players in the value chain




                                                                            248
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 coverage—the manufacturer can add another channel to reach a
    customer segment its current channel can’t reach. The second is lower channel
    cost—the manufacturer can add a new channel to lower the cost of selling to an existing
    customer group. Maybe, it could sell through a catalog instead of using a sales force to
    reach some of its customers. The third is more customized selling—the manufacturer
    can add a channel that has a selling feature that fits its customer requirements better.
    (moderate) 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 other’s point of view. This may work. Cooptation is an effort by one organization
    to win the support of the leaders of another organization by including them in an advisory


                                                                                              249
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




                                                                                          250
74. Moonstruck Chocolates of Portland, Oregon, started out in the inventor’s home as a
    unique chocolate product containing delicious alcohol-enhanced fillings. Once the
    product was perfected, the owners decided that they had no expertise in marketing the
    chocolates and looked to consultants to tell them what marketing intermediaries could do
    for them. What did the consultants probably explain were the key functions of marketing
    channel members?

    Answer:
    The key functions of the marketing channel members are:
    a.) to gather information about potential and current customers, competitors, and other
        parts of the marketing environment.
    b.) to develop and disseminate persuasive communications to stimulate purchasing.
    c.) to reach agreement on price and other terms so that transfer of ownership of
        possession take place.
    d.) they place orders with manufacturers.
    e.) they acquire the funds to finance inventories at different levels in the marketing
        channel.
    f.) they assume risks connected with carrying out channel work.
    g.) they provide for the successive storage and movement of the physical products.
    h.) they provide buyers’ payment of bills through banks or other financial arrangements.
    i.) they oversee the actual transfer of ownership from one organization or person to
        another.
    j.) All of these functions must be done by someone—you can eliminate the middleman,
        but you cannot eliminate their functions.
    (moderate) 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

                                                                                             251
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 BellSouth’s interactive paging service.
Unfortunately, proper product usage requires BellSouth to maintain a 24-hour customer
support line to answer the numerous questions that arise as new users familiarize themselves
with the new system as well as make sure its distributors have a thorough understanding of
the Palm VII. The Palm VII has a $600 price tag. As BellSouth chooses distributors, it is
likely to be most concerned about its ability to control its distributors and the distributors’
ability to respond quickly to strategic changes.

76. Refer to Mini-Case 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
once-proud Excelsior-Henderson. They raised millions of dollars from stock sales and got the
state to subsidize them for millions more. They spent lots of the raised money announcing the
future coming of the bike, creating high awareness at rallies and race events. In 2000, after
nearly 4 years of work, they introduced their first model , the Big X, through test rides at the
Black Hills Rally in Sturgis, South Dakota, and at the Laughlin River Run in Laughlin,


                                                                                             252
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                        15—Managing                                   Retailing,
Wholesaling, and Market Logistics

True/False Questions

1. Retail stores pass through a retail life cycle that parallels the product life cycle of
   products. True (moderate) p. 285



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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

16. Cross-docking is the most effective way to describe a firm’s market-logistics objective of
    “getting the right goods to the right places at the right time.” False (difficult) p. 295


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17. Fishyback, airtruck, and flyship are examples of containerization methods mentioned in
    the text, and each uses two modes of transportation. False (moderate) . 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-of-
    b.) 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?
    a.) self-service
    b.) self-selection
    c.) limited service (moderate) p. 285


                                                                                              255
    d.) full service
    e.) automated service

25. In which of the following retailers are salespeople ready to assist in every phase of the
    locate-compare-select process?
    a.) self-service
    b.) self-selection
    c.) limited service
    d.) full service (easy) 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.) Julie’s Toddlers is a retail outlet that carries children’s clothing. (difficult) p.
        286
    d.) The Candy Store is a small store that has a deep assortment of packaged and
        by-the-pound candies.
    e.) Circle K carries convenience snack foods and drinks, as well as local souvenirs.

28. McRae’s 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. McRae’s offers many types of customer service, and its prices reflect that
    fact. McRae’s is an example of a _______________.
    a.) specialty store
    b.) factory outlet
    c.) superstore
    d.) combination store
    e.) department store (moderate) p. 286

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 she’s there even though the prices
    at the 24-Store are higher than at her local supermarket. The 24-Store is an example of a
    _______________.


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    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




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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-and-management functions of those retailing lines and forms.
    a.) voluntary chain
    b.) retailer cooperative
    c.) consumer cooperative
    d.) retail licensing arrangement


                                                                                             258
    e.) merchandising conglomerate        (moderate) p. 287

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 store’s atmosphere?
    a.) the music played by the speakers located throughout the store
    b.) the way merchandise is displayed
    c.) the lighting system used in the store
    d.) the employee that helps you carry your purchases to your car (moderate) 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


                                                                                             259
    b.)   increasingly based on sales pricing
    c.)   key to the retailer’s positioning strategy (difficult) p. 289
    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 store’s product line needs to draw customers from 5-20 miles away to be
    successful. The best location for this retail outlet would be in a _______________.
    a.) regional shopping center (moderate) p. 289
    b.) community shopping center
    c.) central business district
    d.) neighborhood shopping center
    e.) strip mall




                                                                                         260
43. Which of the following describes a significant trend in retailing?
    a.) Competition today is increasingly intratype.
    b.) Retailers are going smaller to chase smaller target segments.
    c.) Superstores and combination stores are putting an end to nonstore retailing’s growth.
    d.) Retail life cycles are growing longer.
    e.) Retailers are 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



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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.) Producer’s 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 manufacturer’s 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


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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




                                                                                       263
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


                                                                                                264
    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



                                                                                               265
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?




                                                                                            266
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. Albertson’s, 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
    self-selection, 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
    merchandise-return 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 (who’s been there for years) be negative about the distributors the
    company uses. In a short essay, discuss the reasons a manufacturer would talk in
    negative terms about its wholesalers?

    Answer:
    Manufacturers’ major complaints about wholesalers are as follows: Wholesalers do not
    aggressively promote manufacturers’ product lines. They often act more like order
    takers. Often wholesalers do not carry enough inventory and therefore fail to fill
    customers’ orders fast enough. Wholesalers often do not provide manufacturers with


                                                                                              267
up-to-date customer and competitive information. Manufacturers believe wholesalers do
not attract high-caliber managers. Finally, manufacturers often believe wholesalers
charge too much for the services they provide.
(moderate) p. 290




                                                                                  268
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 store’s window displays and the
        way the interior looks with its displays. Whitney may accept trade-ins of other
        antiques for hers. The hours the store is open and possible events are all part of the
        list of prepurchase services Whitney might provide.
    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 locations—all 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 manufacturer’s procurement of the right inputs (raw materials,


                                                                                             269
components, and capital equipment), how the inputs are efficiently converted into
finished products, and how the finished products are dispatched to their final destination.
An even broader perspective calls for studying how the company’s suppliers themselves
obtain their inputs all the way back to the raw materials. The supply chain perspective
can be used by a company for identifying superior suppliers and distributors and helping
them improve their productivity. This process will eventually bring down the
manufacturer’s costs. The drawback to the supply chain perspective is the fact that it
views markets as destination points.
(moderate) pp. 294-295




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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 what’s available from their wholesalers. Initially, they plan to sell irregulars
and factory overruns, but they are flexible. Elliott has a real knack for spotting items others
admire. People are always telling him what good taste he has. They must, however, be
careful about how they spend the small amount of capital they have. One of their goals is to
find an inexpensive location.

Once the store is up and operational, they hope they can use their cash flow to meet expenses.
They plan to have no more than two full-time employees other than themselves and possibly


                                                                                            271
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.




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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 Robin’s 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                16—Designing                        and           Managing
Integrated Marketing

                   Communications

True/False Questions

1. Marketing communications are only carried out prior to the sale to the consumer. False
   (moderate) p. 303

2. The source’s expertise, trustworthiness, and likeability determine the level of source
   credibility. True (moderate) p. 307

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


                                                                                            273
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.
   309-310

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

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



                                                                                            274
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
    company’s 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. Zog’s sex wax gloms onto your stick better and
    longer than any other wax.” This is an example of a(n) _______________ appeal.
    a.) moral
    b.) emotional
    c.) 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
    e.) rational




                                                                                            275
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 Pablo’s 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 need—when 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 source’s _______________.
    a.) personal, social, and moral influences
    b.) quality of expression—both 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.


                                                                                             276
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.




                                                                                     277
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 year’s 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




                                                                                              278
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


                                                                                             279
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
    non-clumping 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


                                                                                             280
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 company’s 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 _______________.


                                                                                           281
    a.)   television
    b.)   newspapers
    c.)   magazine (moderate) p. 316
    d.)   direct mail
    e.)   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




                                                                                              282
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 town’s weekly newspaper, and
    two lunchtime ads every day on the local radio station. The owner has used this pattern
    of advertising for many years. Which of the following terms best describes the Thai
    restaurant’s media timing?
    a.) flighting
    b.) concentration
    c.) pulsing
    d.) bursting
    e.) continuity (moderate) 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


                                                                                             283
b.)   continuity
c.)   pulsing
d.)   concentration
e.)   flighting (moderate) p. 317




                                    284
60. __________ is a media timing approach that involves continuous advertising at
    low-weight 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



                                                                                            285
65. When a movie studio uses toys in fast food restaurant kid’s meals to advertise their latest
    movie, they are using _______________.
    a.) tie-in promotions (moderate) p. 320
    b.) prize promotions
    c.) point-of-purchase promotions
    d.) premiums
    e.) promotion bundling

66. Tom’s 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 company’s 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 buyer’s decision
    c.) developing and maintaining a long-term increase in sales
    d.) enabling companies to adjust to short-term variations in the supply and demand of
        their markets
    e.) preventing intermediaries from misusing trade promotions

70. The original and oldest form of direct marketing is _______________.
    a.) telemarketing


                                                                                             286
b.)   “ junk” mail
c.)   the field sales call (moderate) p. 325
d.)   catalog marketing
e.)   e-marketing




                                               287
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 method—a 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 JoAnn’s question in a brief essay.

    Answer:
    Reach refers to the number of different persons or households that are exposed to a
    particular media schedule at least once during a specified period.
    Frequency refers to the number of times within a specified period that an average person
    or household is exposed to the message.
    Impact refers to the qualitative value of an exposure through a given medium.



                                                                                           288
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




                                                                                        289
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 G’s. 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 G’s.

    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 product’s heritage, or some other feature? After deciding
    on her copy, pictures (if any), headlines etc., she would need to select her Media. Where
    would she run her advertisements? What combination of media would she use?
    Would she use sales promotions and public relations along with advertising? Her final
    decision would have to do with Measurement. How would she evaluate the results of
    her advertising efforts? How would she ascertain that she got value from her advertising
    expenditures?
    (moderate) 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 print—all 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.com’s
    advertising objective, which measure would be more important?



                                                                                              290
Answer:
Communication-effect research seeks to determine whether an ad is communicating
effectively by using copy testing. It would have been done before the ad was run in the
magazine. There are three ways it could be done. The direct rating method asks
consumers to rate alternative ads – all marketing the same product. A portfolio test
would have asked consumers to view a portfolio of ads. Consumers are then asked to
recall the ads and their contents. The question is, “Did our ad stand out from the
clutter?” Laboratory tests could also be used. This type of test monitors the
physiological reactions to ads.




                                                                                     291
    Communication-effect research is important, but given Only-Documentaries.com’s
    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
    sales-effect research involves correlating past sales to past advertising expenditures using
    advanced statistical techniques. Experimental design is another type of sales-effect
    research. It requires an advertiser to set up tests in which the impact of various levels of
    sales expenditures are tested to determine the sales impact of each.
    Only-Documentaries.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 long-term cardiovascular and anticancer benefits. In spite of these positive
aspects to the product, a concern that aspirin might contribute to Reye’s syndrome in children,
a disease that affects the brain and liver, has led to aspirin having an identity crisis. There is
a generation of individuals who have grown up assuming other drugs have completely
replaced aspirin. Ask someone for a aspirin these days, and you’re likely to receive a
Tylenol. 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


                                                                                              292
    e.) rational (moderate) p. 305

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-Day’s 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 owner’s 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



                                                                                              293
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



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