TEST BANK for Marketing, 5th Edition by Charles W Lamb, Joseph F Hair, C McDaniel. 19 Chapters by ACADEMIAMILL

Chapter 1—An Overview of Marketing MULTIPLE CHOICE 1. What is the definition of marketing? a. planning sales campaigns b. selling c. advertising and promotion activities d. a philosophy that stresses customer satisfaction ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 4

2. A business is concerned with many day-to-day activities. Some of the most important are the planning and conception of the product or service, its pricing policy, and the distribution strategy. What are these activities part of? a. human resources b. production c. marketing d. accounting ANS: C This description contains three of the four main activities included in the marketing function. Many students may mistakenly believe that marketing is concerned only with promotion. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 4

3. Which of the following is a set of activities used to implement a management orientation that stresses customer satisfaction? a. a control system b. customer management c. planning strategy d. marketing ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 4

4. Marketing is an organizational function and a set of processes for creating, communicating, and delivering which one of the following to customers? a. sales b. benefits c. satisfaction d. value ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 4

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5. The idea that people give up something in order to receive something that they would rather have is a key ingredient in marketing. What is this called? a. exchange b. synergy c. reciprocity d. promotion ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 4

6. What must happen in order for exchange to occur? a. Each party must have something of value to the other party. b. A profit-oriented organization must be involved. c. Organized marketing activities must also occur. d. Money or other legal tender is required. ANS: A Exchange involves the trade of items of value, but does not necessarily involve formal organizations, profit, or money/legal tender. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 4

7. For an exchange to take place, what must happen? a. At least one person must have something of value. b. Each party must feel obligated to accept the offer. c. Money must be present. d. There must be at least two parties. ANS: D REF: p. 4

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

8. Why is the concept of exchange important to marketing? a. Marketing activities help to create exchange. b. Money is the only medium of exchange for business marketers. c. Exchange provides money to marketers. d. Marketing activities are a requirement for exchange to take place. ANS: A Marketing activities help the exchange to take place, but marketing can occur without an exchange. PTS: 1 OBJ: 1

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DIF: Comprehension BLM: Remember

REF: p. 4

9. Kurt Meyer wants to sell a Model T Ford that he inherited from his grandfather. A preliminary investigation has shown many people would be interested in this type of automobile. He has taken out an advertisement in his local auto trade paper and provided customers with a toll-free number to make an appointment to drive the car. He has also read in the auto trade papers that similar cars to the one that he owns are selling for about $4,000. Before selling his Model T, what else should Meyer find out? a. whether the car can meet the demands of potential customers b. how to promote the car to generate significant visibility for the ad c. where the car should be located to secure optimum drive-up business d. how to price the car so that customers will seek out his vehicle ANS: A For an exchange to take place, each party must have something the other values, the parties must be able to communicate, and each party must believe that it is appropriate to deal with the other. PTS: 1 DIF: Application BLM: Higher order

REF: p. 4

OBJ: 1

10. If the local chapter of the Canadian Diabetes Association (CDA) sponsors a free lifesaving course, city residents will not have to pay to take the class. Why will an exchange take place? a. The CDA does not have to communicate with class participants. b. People who take the course have to give nothing of value in return. c. Both the CDA and the people taking the course will trade something of value. d. People can decide the course has no value. ANS: C If the course has no value, then an exchange cannot occur. Without communication, the exchange of knowledge for time and energy cannot occur. In an exchange, each participant has something of value to the other. For an exchange to occur, each party must believe it is desirable. PTS: 1 DIF: Application BLM: Higher order

REF: p. 4

OBJ: 1

11. Four competing philosophies strongly influence the role of marketing and marketing activities within an organization. Which if the following is a marketing management philosophy? a. accounting orientation b. sales orientation c. profitability orientation d. social networking orientation ANS: B REF: p. 5

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

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12. Firms with which of the following orientations focus on the internal capabilities of the firm rather than on the desires and needs of the marketplace? a. production b. customer c. marketing d. sales ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 5

13. A company that sets its goals and strategies based on what the current plant equipment can produce, what products engineering can design, and what the company itself can do best, has which of the following types of orientation? a. exchange b. sales c. market d. production ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 5

14. Researchers at PPG Industries spent considerable time, effort, and money developing a bluish windshield that would let in filtered sunlight but block out heat. Little market research was done, but the scientists were convinced that this new product would be significantly better than existing windshields even though they were more expensive and of a different colour than the current models on the market. What type of orientation does PPG most likely have? a. sales b. customer c. production d. promotion ANS: C The questions asked before starting their new product were “What can we do best?” and “What can we make with the equipment we already own?” This is a production orientation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

15. The owner of a company that produces copy paper once said, “People buy whatever copy paper is the cheapest, so I spend my time trying to find ways I can cut my price.” What kind of orientation toward marketing does this owner have? a. production b. sales c. discount d. customer ANS: A A focus on lowering costs and prices is typical of a production orientation. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 5

OBJ: 2

16. In which of the following situations is a firm with a production orientation most likely to survive? a. when supply for the product it produces exceeds demand b. when demand for the product it produces exceeds supply c. when there are many small competitors in the marketplace d. when needs of the marketplace are shifting ANS: B The production orientation can survive in the short term under a variety of conditions; however, if market needs change, long-term survival is difficult. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 5

17. Which of the following orientations to marketing fails to consider whether what the firm produces most efficiently also meets the needs of the marketplace? a. customer b. production c. market d. product ANS: B The production orientation forces a company to build whatever it builds best, that is, whatever it has the experience and expertise in doing. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 5

18. Mimi Couturier is a design company that specializes in formalwear for women. The company’s fashion innovators use computer-assisted design software to create what they think women should wear. The company regularly hires industry experts to examine construction work areas to find waste and inefficiencies that can be eliminated. However, for the last two years Mimi Couturier has lost money, and it has had to lay off some of its work force. What should the company do to avoid this occurrence in future? a. increase its sales force to find more potential customers for the firm b. hire more retail efficiency experts to trace down any production problems c. have someone to study its target market to see what needs and wants should be met by Mimi Couturier d. cut prices so that its prices are at least 10 percent below those of its competitors ANS: C Mimi Couturier has been production oriented. It should develop a marketing orientation, which means the firm will produce only those items needed by its target market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

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19. Which orientation assumes that people are resistant to buying products that are not absolutely necessary? a. sales b. marketing c. customer d. production ANS: A The sales orientation assumes that aggressive selling is what is needed to increase demand. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 5

20. Which orientation of people will buy more goods and services if aggressive marketing techniques are used? a. sales b. production c. customer d. marketing ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 5

21. Lawler Landscaping Company sells all kinds of ornamental plants. Lawler’s management believes that its customers will buy more plants if its salespeople use aggressive marketing techniques because ornamental plants are nonessential items for most homeowners. What type of orientation does Lawler have? a. production b. marketing c. sales d. customer ANS: C Only the sales orientation assumes that aggressive sales techniques will sell more product, regardless of customer desires and needs. PTS: 1 DIF: Definition BLM: Higher order

REF: p. 5

OBJ: 2

22. If a company uses a sales orientation, what will consumer complaints most likely result in? a. attempts to cut production costs b. product reinvention c. continuous market research d. a modification of the sales presentation ANS: D The sales orientation relies on aggressive sales techniques to fuel business. PTS: 1 OBJ: 2

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DIF: Comprehension BLM: Remember

REF: p. 5

23. Which of the following statements about a typical sales-oriented business is true? a. The company directs its products to specific groups of people. b. The company is in business to satisfy customers’ wants and needs and deliver superior value. c. The company invests the majority of its resources in promoting its products and services. d. The primary goal of the company is profit through customer satisfaction. ANS: C REF: p. 5

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

24. For many years, Procter & Gamble (P&G) viewed its Ivory soap as just plain old soap—and not as a cleansing product that could provide other benefits as well. When it came to Ivory soap, P&G focused on how well it made the soap and not on what customers wanted from a bar of soap. What sort of orientation did P&G have? a. customer b. product c. sales d. market ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

25. Because organizations that sell unsought products, such as cemetery plots, are marketing products that most people do not want, which sort of orientation might the companies adopt? a. product b. customer c. marketing d. sales ANS: D Aggressive selling is sometimes used by companies that sell products their customers do not want to buy. PTS: 1 BLM: Remember

DIF: Application

REF: p. 5

OBJ: 2

26. For years, the slogan used in all the advertising done by British Airways was “Putting people first.” In this short phase, what did British Airways capture the idea of? a. the marketing concept b. the societal concept c. Maslow’s hierarchy of needs d. the sales orientation philosophy ANS: A The marketing concept justifies a company’s existence by its ability to satisfy customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

OBJ: 2

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27. When a homeowner visited The Home Depot to buy what he thought he needed to fix a leaking toilet, he gathered up materials totalling almost $70. One his way to checkout, an employee asked him what was he trying to fix. After some discussion, the employee convinced the homeowner that a $5.99 replacement part would fix the problem better than the materials he thought he needed and with less trouble. This sort of discussion between employees and customers is commonplace at The Home Depot. What sort of orientation does the retail store have? a. market b. sales c. production d. product ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

28. World Wrestling Entertainment (formerly the World Wrestling Federation) is very focused on what its fans want in terms of product licensing and, more importantly, in terms of plot lines and character development. All of the company’s activities are integrated so that no employee ever loses sight of the company’s desire to satisfy its fans. What sort of orientation does World Wrestling Entertainment have? a. sales b. production c. product d. market ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

29. What does achieving a market orientation involve? a. implementing actions to provide satisfaction for employees b. determining how to deliver superior customer value c. doing research on suppliers and competitors d. establishing and maintaining mutually satisfying relationships with suppliers ANS: B REF: p. 6

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

30. Walmart has become the leading discount retailer in Canada and the world by focusing on the customer’s needs and wants. This philosophy is at the heart of which orientation? a. production b. market c. sales d. retail ANS: B OBJ: 2

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PTS: 1 BLM: Remember

DIF: Application

REF: p. 6

31. What do the marketing concept and market orientation recognize? a. Sales depend predominantly on an aggressive sales force. b. What the customer thinks he is buying is what is important. c. Price is the most important variable for customers. d. Selling and marketing are essentially the same thing. ANS: B The perceived product and perceived value are what the customer is buying, and the marketing concept and market orientation have attempted to understand those perceptions. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 6

32. What does a company do if it has a market orientation and adheres to the marketing concept? a. integrate all the activities of the firm to satisfy customer wants b. differentiate a firm’s current products from its past products c. focus on consumer complaints d. fuel sales growth through the application of aggressive sales techniques ANS: A Integrating all the firm’s activities around the marketing concept is essential to its success. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 6

33. The statement “Marketing should be introduced at the beginning rather than the end of the production cycle and integrated into each phase of the business” is consistent with which orientation? a. market b. sales c. enterprise d. production ANS: A Understanding the competitive arena and competitors’ strengths and weaknesses is a critical component of market orientation. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 6

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34. The manufacturer of Rossignol brand skis has a market orientation and adheres to the marketing concept. What would the company most likely do first when reacting to consumer dissatisfaction? a. hire more salespeople b. increase the number of sporting goods stores that carry Rossignol skis c. increase its advertising to underserved markets d. conduct research to determine if its customers’ needs have changed ANS: D A marketing concept and market-oriented philosophy is based on the consumer’s wants and needs, and the organization will focus its activities on satisfying these customers by listening to them and revising strategies as necessary. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 6

35. What does the marketing concept involve? a. selling as much product as possible under the assumption that people will buy more goods and services if aggressive selling techniques are used b. satisfying management’s needs and wants with the idea of maximizing profits in the short run c. focusing on customers’ wants so that the organization can distinguish its product (or products) from the competitors’ products d. selling as much as possible under the assumption that consumers will buy more at lower prices ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 6

36. What is the main focus of a marketing-oriented firm? a. outward upon the wants and needs of customers b. inward upon the abilities to deliver goods and services c. outward upon societal responsibilities d. inward upon the organization’s needs ANS: A Marketing-oriented firms are focused outward toward their customers. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

REF: p. 6

37. Which of the following is a viable method a company can use to become more marketing oriented? a. Implement employee-only meetings. b. Make sure all employees are customer oriented. c. Train employees to focus on profit maximization. d. Train employees in the latest aggressive selling techniques. ANS: B The marketing orientation relies on customer satisfaction rather than the latest sales techniques. PTS: 1 OBJ: 3 1-10

DIF: Comprehension BLM: Remember

REF: p. 6

38. Which of the following measures would be the best indicator of whether your organization’s personnel have a customer orientation? a. Test employees on their knowledge of customer service techniques. b. Assess each employee’s impact on the profitability of the firm. c. Ask each employee’s boss if that person is customer oriented. d. Survey customers on how oriented the organization’s personnel are to customer needs and desire. ANS: D The key to assessing how customer-oriented a firm’s personnel are is to ask the customer. Only the customer can provide this type of information. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 6

39. The marketing concept includes a goal orientation to remind managers of which of the following? a. The only reason for any business to exist is to make a profit. b. Achieving long-term organizational goals is as important as satisfying customers. c. The objective is to find a target market that differs from that of the competition. d. Customers must be satisfied no matter what the organizational costs. ANS: B The goal orientation refers to the company’s goals, such as profit, growth, service, and survival. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 6

40. The marketing concept stresses that the social and economic justification for an organization’s existence is the satisfaction of customer needs and wants while doing which of the following? a. simultaneously meeting organization objectives b. applying scientific management techniques to improve efficiency c. producing a good or service at the lowest possible cost d. constantly increasing sales volumes ANS: A The marketing concept holds that the needs and wants of both the customer and the firm must be served. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 6

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41. You are in charge of the marketing program at Cedarstream, a manufacturer of recreational vehicles, and have been asked to create a company that acts in compliance with the marketing concept and has a market orientation. What will you most likely do as your first action? a. hire new salespeople to find new customers for Cedarstream vehicles b. create cross-functional entrepreneurial teams to overcome the difficulty of getting people from different functional areas to work together in developing new products. c. reorganize the company and make marketing the most important department d. expand the advertising budget so that potential customers will be more aware of Cedarstream’s products ANS: B Market-oriented companies are successful in getting all business functions working together to deliver customer value. PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

OBJ: 2

42. Suppose an organization believes that it exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve or enhance individuals’ and society’s long-term best interests. What type of orientation does it have? a. sales orientation b. marketing orientation c. focused target market strategy d. societal orientation ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 7

43. Most companies become sensitized to community issues after they’ve done enough damage to draw the locals’ anger. Dofasco, Inc., a highly successful steel company in Ontario, tries to get ahead of business and community issues by annually bringing together representatives from the local area and deciding what projects to improve the local environment will be implemented. What type of orientation does Dofasco have as indicated by this annual community-wide meeting? a. sales b. societal marketing c. production d. product ANS: B Societal marketing orientation is the idea that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve individuals’ and society’s long-term best interest. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 7

OBJ: 2

44. Kinko’s copy shops use the equivalent of 10.5 square miles of forest to produce all of the paper needed by the corporation annually. While the company is committed to making a profit, it is also committed to preserving the environment. In 1997, Kinko’s wrote an environmental vision in which it committed the company to conserving natural resources. With this 1997 environmental vision, what sort of orientation did Kinko’s adopt? a. sales b. product c. societal marketing d. production ANS: C Societal marketing orientation is the idea that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve individuals’ and society’s long-term best interest. PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

OBJ: 2

45. Which of the following statements about the societal orientation is true? a. Companies that protect the environment by using all-natural materials in their products are showing a societal marketing orientation. b. The societal marketing concept is very different from the market concept. c. Marketers try to deliver all benefits sought by customers even if that results in a negative effect on the environment. d. Organizations have either a social or economic justification for their existence. ANS: A REF: p. 7

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

46. Due to consumer concerns about skin cancer and other negative outcomes associated with sun exposure, the trend in sun-care products throughout most of the 1990s was in favour of higher-SPF sunscreens. This seems to be changing now, at least for some target segments. In response to the latest trends of teenagers using baby oil, Crisco, and even motor oil to enhance tanning effects, Coppertone and Hawaiian Tropic have introduced new low-UV-protection products. While giving customers want they want indicates a market orientation, creating a potential problem (an increase in skin cancer fatalities) shows a potential absence of which type of orientation? a. sales b. production c. societal marketing d. market ANS: C Other sun-product companies may be concerned with other market segments and society’s longterm interests (societal orientation). PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

OBJ: 2

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47. Levi Strauss developed a Naturals line of jeans that do not use any chemical dyes to colour the pants. Consumers liked the look of the pants, and Levi’s use of all-natural dyes is good for the environment. What type of orientation would the production of the Naturals line be consistent with? a. societal marketing b. supplier c. sales d. production ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

48. Jewellery stores want to provide their customers with the highest quality of diamonds available at the lowest possible prices. Unfortunately, the lowest-priced diamonds these days are sold by African rebels who use the profits to engage in genocide. Human rights organization have asked jewellers to buy diamonds that are “conflict-free,” that is from South Africa, Australia, or Canada. LeeBrant is one retail jewellery store that sells only diamonds that are certified to be from these countries. One could say that LeeBrant has a societal marketing orientation. Which type of orientation do jewellers that are willing to sell the higher priced non-conflict diamonds have? a. production b. product c. market d. sales ANS: C The other jewellers that continue to sell diamonds purchased from the rebels are more interested in satisfying their customers’ desire for lower prices than in serving society. PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

OBJ: 2

49. Which of the following is the ratio of benefits to the sacrifice necessary to obtain those benefits? a. marketing utility b. opportunity cost c. market quality d. customer value ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 8

50. Canada Post argues that its express service is comparable to that offered by FedEx and that its prices are much lower. Yet FedEx dominates with more than a 45 percent share of the expressdelivery market. Which of the following statements most accurately describes this situation? a. Canada Post should lower its prices even further to increase market share. b. FedEx is perceived as offering greater customer value. c. Customer value is not an issue in deciding which express-delivery service to use. d. Canada Post is perceived as offering greater customer value. ANS: B OBJ: 3

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 8

51. What does Xerox emphasize by replacing at its own expense any dissatisfied customer’s equipment 57.What can marketers interested in offering customer value do? a. offer organization-wide commitment to service and after-the-sale support b. offer unrealistic pricing c. offer products that perform up to legal safety standards d. give consumers only what they expect ANS: A REF: p. 8

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

52. What is created when customer expectations regarding product quality, service quality, and valuebased price are met or exceeded? a. expectation satisfaction b. planning excellence c. customer satisfaction d. a value line ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 9

53. Canada Post argues that its express service is comparable to that offered by FedEx and that its prices are much lower. Yet FedEx dominates with more than a 45 percent share of the expressdelivery market. Which of the following statements most accurately describes this situation? a. FedEx is perceived as offering greater customer value. b. Customer value is not an issue in deciding which express-delivery service to use. c. Canada Post is perceived as offering greater customer value. d. Canada Post should lower its prices even further to increase market share. ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 8

54. What does Xerox emphasize by replacing at its own expense any dissatisfied customer’s equipment 87.Canada Post argues that its express service is comparable to that offered by FedEx and that its prices are much lower. Yet FedEx dominates with more than a 45 percent share of the express-delivery market. Which of the following statements most accurately describes this situation? a. Canada Post should lower its prices even further to increase market share. b. Canada Post is perceived as offering greater customer value. c. FedEx is perceived as offering greater customer value. d. Customer value is not an issue in deciding which express-delivery service to use. ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 8

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55. Canada Post argues that its express service is comparable to that offered by FedEx and that its prices are much lower. Yet FedEx dominates with more than a 45 percent share of the expressdelivery market. Which of the following statements most accurately describes this situation? a. Customer value is not an issue in deciding which express-delivery service to use. b. FedEx is perceived as offering greater customer value. c. Canada Post is perceived as offering greater customer value. d. Canada Post should lower its prices even further to increase market share. ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 8

56. What does Xerox emphasize by replacing at its own expense any dissatisfied customer’s equipment? a. direct selling b. transactional marketing c. management–customer synergy d. customer satisfaction ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 9

57. Networkcar.com sells a plug-in device that connects to computer diagnostic ports that are standard on cars. The device beams signals to dealers who can remotely diagnose or spot trouble. The device allows car dealerships to maintain a closer bond with their customers by offering maintenance before a problem leaves customers with an inoperable or possibly dangerous car. With the device, what can dealers better engage in? a. relationship marketing b. management–customer synergy c. transactional marketing d. direct selling ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 10

58. Which of the following strategies entails forging long-term partnerships with customers? a. commitment selling b. transactional marketing c. relationship marketing d. market engineering ANS: C OBJ: 3

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 10

59. Frequent-flyer programs are an example of financial incentives to customers in exchange for their continuing patronage. After flying a certain number of miles or flying a specified number of times, the frequent-flyer program participant earns a free flight or some other award such as free lodging. What are airlines that use frequent-flyer programs practising? a. relationship marketing b. transformational marketing c. commitment selling d. marketing engineering ANS: A The strategy that entails forging long-term partnerships with customers is called relationship marketing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 10

OBJ: 3

60. Greenberg Smoked Turkey, Inc., is a nationwide mail-order business that operates without any advertising. It does not accept credit cards and has no toll-free number. The hopelessly oldfashioned company is also a very profitable with thousands of devoutly loyal customers—some of whom have ordered Greenberg smoked turkeys every year for the last 50 years. Greenberg more than likely uses which of the following to maintain these long-term ties to its customers? a. reactive marketing b. relationship marketing c. management empowerment d. a sales orientation ANS: B Relationship management is a strategy that entails forging long-term partnerships with customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 10

OBJ: 3

DIF: Definition

REF: p. 10

61. What is one-to-one marketing a form of? a. societal marketing b. a sales orientation c. relationship marketing d. a marketing network ANS: C OBJ: 3

PTS: 1 BLM: Remember

62. What is the objective of one-to-one marketing? a. to reduce customer satisfaction b. to build and maintain customer loyalty c. to decrease revenue d. to increase costs ANS: B REF: p. 10

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

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63. What gives customers the feeling that their concerns are being addressed and gives employees the feeling that their expertise matters? a. empowerment b. management–employee synergy c. a hierarchically responsive organization d. delegation ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 11

64. Many companies are jazzing up plant tours and making store visits more exciting to increase customer loyalty. For example, at the Crayola Factory, kids watch how crayons are made and then play with their favourite colours in a 20,000 square-foot discovery centre. Which of the following would be necessary for a visit to the Crayola Factory to increase customer loyalty? a. customer empowerment b. customer-oriented personnel c. reciprocal exchange d. a societal marketing orientation ANS: B Customer-oriented personnel strengthen the positive image of an organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 11

OBJ: 3

65. Taxi companies in many large metropolitan areas are requiring newly licensed taxi drivers to undergo a two-day training seminar during which they learn basic etiquette and acquire a familiarity with common landmarks and street names. What is the purpose of this training? a. to increase employment levels b. to promote company image by increasing public awareness c. to improve customer service d. to reduce the need of empowerment ANS: C Leading marketers recognize the role of employee training in customer service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 11

OBJ: 3

66. Some marketing-oriented firms give employees expanded authority to solve customer problems on the spot. What is this known as? a. mediating b. deregulation c. training d. empowerment ANS: D OBJ: 3

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 11

67. The management at Canadian Pacific (CP) Hotels has authorized its hotels’ staffs to provide whatever amenity—such as a special magazine or a hypoallergenic pillow—their frequent stayers request as quickly as possible. What is this an example of? a. commissioning b. empowerment c. training d. deregulation ANS: B CP management gave employees expanded authority to solve customer problems on the spot. PTS: 1 DIF: Application BLM: Higher order

REF: p. 11

OBJ: 3

68. As part of instituting an empowerment program, what should a marketing director do? a. create a customer-service department and place a key staff person in charge of the department b. train the company’s staff to judge of the quality of the products the firm produces c. allow all non-management employees to resolve problems on their own without prior approval from their immediate supervisors d. hire 30 new university graduates who have the latest training in marketing management techniques ANS: C Empowerment refers to firms that give employees expanded authority to solve customer problems on the spot without having to get management’s permission first. PTS: 1 DIF: Application BLM: Higher order

REF: p. 11

OBJ: 3

69. What is the collaborative effort of people to achieve common objectives? a. empowerment b. effort training c. teamwork d. mediation ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 11

1-19

70. What is the effect of redefining the business mission of a mattress manufacturer as “a good night’s sleep,” rather than stating the mission as “the manufacture of high-quality mattresses”? a. It stifles creativity in discovering opportunities to serve customers. b. It is too broad a statement to be of any real use in serving customers. c. It helps ensure that the firm retains its focus on consumers and does not become preoccupied with its products and internal needs. d. It ensures that the core products will be retained. ANS: C The broader business mission of “a good night sleep” will stimulate innovation and creativity because not all sleep aids are mattresses. It will lead the company to further growth. PTS: 1 DIF: Application BLM: Higher order

REF: p. 12

OBJ: 3

71. One of the reasons given for the decline of the passenger rail industry in Canada is the fact the industry defined its mission as trains and not as transportation sources. What did the railroad industry fail to do? a. empower the consumer b. ignore the marketing concept of serving customer needs and wants c. define its mission in terms of the benefits its customers seek d. have a sales orientation ANS: C A market-oriented firm defines its business in terms of the benefits its customers seek. Because of the limited way the railroad industry defined its business, it missed an opportunity to define itself in terms of the benefits customers were seeking. PTS: 1 DIF: Application BLM: Higher order

REF: p. 12

OBJ: 3

72. When light bulbs were first introduced, manufacturers offered one size for all light fixtures. Today you can buy light bulbs in different shapes, different wattages, and different colours. They also differ as to how much electricity they use and their duration. Which of the following BEST describes light bulb manufacturers? a. They are aiming at a goal of profit through maximum sales volume. b. They are sales-oriented companies. c. They miss sales by not concentrating on the average customer. d. They recognize that different customer groups have different needs and wants. ANS: D One way to implement the marketing concept is to concentrate on a specific group of customers’ needs. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 13

OBJ: 3

73. One way to identify the orientation of a firm is to examine its primary goal. If a firm sells to achieve profitability through sales volume, what would it probably be? a. sales oriented b. retail oriented c. production oriented d. price oriented ANS: A REF: p. 13

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

74. What is the primary tool used by a sales-oriented organization to achieve its corporate goals? a. price b. product design c. place (distribution) d. promotion ANS: D A sales-oriented organization seeks to generate sales volume based upon intensive promotional activities. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 13

75. For a market-oriented organization, what is the primary tool used to achieve its goals? a. a blend of product, place, promotion, and pricing decisions b. price c. promotion d. place (distribution) ANS: A A market-oriented organization seeks to generate sales volume based on serving customer needs and wants, utilizing all of the elements of the marketing mix to do so. PTS: 1 DIF: Application BLM: Higher order

REF: p. 13

OBJ: 3

76. The manufacturer of MaMa Haman’s peach salsa knows marketing can make her company a success. She wants to rely solely on promotion as the technique for attracting customers. She advertises extensively in cooking magazines, offers coupons, and provides retailers who carry her product with attractive displays. From this information, what type of orientation does the business have? a. sales b. production c. product d. market ANS: A A sales-oriented organization views promotions as the primary tool used to achieve its goals. PTS: 1 DIF: Application BLM: Higher order

REF: p. 13

OBJ: 3

1-21

77. Which of the following is NOT a good reason to study marketing? a. Marketing plays an important role in society, coordinating the huge numbers of transactions needed to provide goods and services. b. Marketing teaches businesses how to sell products that people do not need. c. Marketing is the key function in business. d. Marketing affects part of your life as a consumer. ANS: B REF: p. 14

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

78. Wilson is an agriculture and dairy science major at a university. After graduation, he hopes to modernize and expand his family’s dairy farm in a scientific and efficient manner. His adviser at school has suggested that he take a marketing course in the school of business as an elective. Wilson thinks this is an absurd idea. You are his friend and a marketing major. What do you advise? a. Marketing knowledge will help Wilson to understand that he must satisfy wholesalers, retailers, and consumers. b. More biology and agriculture classes will be most useful for Wilson. c. The main reason to take marketing is to teach Wilson how to advertise milk. d. Marketing is not relevant for a business such as a family dairy farm. ANS: A Marketing is an important conceptual base that will help Wilson to assess the needs and wants of his various business contacts and customers. Marketing is a key component of every business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 14

OBJ: 4

79. Jamie owns a small moving company in Winnipeg. She has decided to take a few night school business courses because her company is growing quickly and there are many things she does not understand. Should Jamie enroll in a marketing course? a. No, because Jamie can hire an ad agency and will not need firsthand marketing knowledge. b. Yes, because marketing is synonymous with selling, and Jamie will want to learn aggressive sales techniques to continue the growth of the company. c. Yes, because marketing helps businesses sell products that people don’t need. d. Yes, because the concept of marketing will help Jamie to better satisfy her customers. ANS: D The marketing concept stresses the commitment to satisfying customer needs and wants with an entire range of marketing tools, not just selling or advertising. PTS: 1 DIF: Application BLM: Higher order

1-22

REF: p. 14

OBJ: 4

80. In a buyer’s market where production exceeds demand, some businesses are most likely to adopt what type of orientation? a. market b. sales c. profit d. production ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 5

81. What type of management sees marketing as the vehicle to move products out of a company’s warehouse to avoid excessive inventory charges? a. production orientation b. societal marketing orientation c. sales orientation d. market orientation ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 5

82. Which of the following statements about a sales-oriented company is FALSE? a. “We are interested in innovative, unique ways of advertising our services to customers.” b. “We usually hire aggressive, goal-oriented sales people.” c. “We are interested in new coupon campaigns to promote our products to customers.” d. “We are constantly asking customers for ways to improve our products.” ANS: D REF: p. 5

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

83. According to the text, which of the following statements is true? a. A market orientation for a business indicates that what it produces for that market is of primary importance to its long-run success. b. A sales orientation is based on the ideas that people will buy more goods and services if aggressive sales techniques are used and that high sales result in high profits. c. Market orientation refers to the fact that sales depend in large part on aggressive sales force efforts to capture large sectors of the market. d. Societal marketing states that an organization exists only to preserve society’s best interests in the long run. ANS: B OBJ: 2

PTS: 1 DIF: Conceptual BLM: Higher order

REF: p. 5

84. What does delivering customer value mean? a. promising to deliver customers everything they want at a price that even they cannot believe b. offering customers the lowest price imaginable c. beating the competition’s price and delivery time d. paying attention to customer feedback ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 8

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85. What is customer satisfaction? a. a service best handled by the company’s customer service department staffed with qualified customer complaint handlers b. your customers’ evaluation of your goods and services in terms of whether those goods and services are of the highest quality possible c. your customers’ evaluation of your goods and services in terms of whether they have met the customers’ expectations of the best price possible d. your customers’ evaluation of your goods and services in terms of whether they have met the customers’ needs and expectations ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 9

86. What does one-to-one marketing entail? a. utilizing customer information to build long-term, personalized, and profitable relationships with customers b. having the company spend vast sums of money to enable every customer to direct what kind of goods and services she would like the company to build for her c. having the company hire a marketing consultant to perform one-to-one interviews with all of the company’s customers in order to build high-quality products and services d. utilizing company resources to ensure that each customer is put into direct contact with another company customer in order to build favourable word-of-mouth endorsements ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 9

87. Which of the following describes a market-oriented organization? a. It recognizes the benefits inherent in listening to customer feedback and then carefully calculating the average customer need and building a good or service to satisfy that average need. b. It always achieves profitability through sales volume of its goods and services sold in the market. c. It recognizes that different customer groups want different features or benefits; therefore, it may be necessary to develop different goods, services, and promotional appeals. d. It carefully analyzes the marketplace and divides it into groupings of people who buy the company’s goods and services and groupings of people who do not buy the company’s goods and services. ANS: C OBJ: 3

PTS: 1 DIF: Conceptual BLM: Higher order

REF: p. 6

88. Why is a production-oriented company deficient? a. It may not have sufficient production facilities to keep up with heavy market demand for its goods and services. b. It has spent too much time and effort developing low-quality and low-priced products to satisfy a subset of the marketplace. c. It has not invested wisely in the widest variety of products to cover the marketplace. d. It does not consider whether the goods and services it produces most efficiently meet the needs of the marketplace. ANS: D OBJ: 2 1-24

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 5

89. What does the marketing concept include? a. focusing on competitors’ offerings to the marketplace and developing items of equal quality but at a lower price for its customers b. focusing on competitors’ offerings to the marketplace and developing higher quality offerings for customers c. achieving short-run profit goals for the organization in order to keep prices as low as possible for its customers d. integrating all of the organization’s activities, including production, to satisfy customer wants ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Conceptual

REF: p. 6

90. What is the baseline (minimum) requirement for offering customer value? a. Give customers more than they expect. b. Offer products that perform. c. Give the buyer facts. d. Offer organization-wide commitment to service and after-sales support. ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Conceptual

REF: p. 8

91. What does empowerment refer to? a. the company’s delegation of authority to its employees to solve customer problems on the spot b. the company’s profit picture improvement as a result of employing a market-oriented philosophy through all of its activities c. the power gathered by a company as a result of combining relationship marketing and personal selling d. the marketing department of a large corporation ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 11

92. Why should firms answer the question, “What is our business?” a. to maximize profits while keeping the employees happy b. to ensure that the firm stays on track and focused on its highest quality goods and services offered to the marketplace c. to ensure that the firm keeps focusing on its goods and services and on the organization’s internal needs while avoiding becoming preoccupied with customers d. to encourage innovation and creativity by reminding people that there are many ways to satisfy customer wants ANS: D OBJ: 3

PTS: 1 DIF: Conceptual BLM: Higher order

REF: p. 12

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A problem facing the timber industry is the absence of any effective way to prove that rain forest timber was legally logged from places like Indonesia, where as much as 80 percent is the product of illegal logging. Companies such as The Home Depot do not want to sell timber from illegally logged forests even though the demand is great for timber from rain forests. 93. Refer to Timber Industry. Why will exchanges between The Home Depot and companies that are selling illegally logged timber not occur? a. One party believes it is inappropriate to deal with the other party. b. Only one party is free to accept the exchange offer. c. Neither party has something of value to bring to the exchange. d. Neither party sees the exchange as producing value. ANS: A For an exchange to occur, two or more parties must be involved. Both parties are free to accept or reject the exchange. If The Home Depot believes the timber was illegally logged, then it will not want to deal with the loggers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 4

OBJ: 1

94. Refer to Timber Industry. Indonesian logging companies harvest the rain forests for timber and assume that a market exists for their products. What type of orientation does the typical Indonesian logging company have? a. sales b. production c. exchange d. product ANS: B The logging companies do not focus on the needs and desires of the marketplace. PTS: 1 BLM: Remember

DIF: Application

REF: p. 5

OBJ: 2

95. Refer to Timber Industry. To prove an interest in preserving rain forests, two Indonesian logging companies have developed a bar coding system, which proves the timber was legally acquired. This focus on customers’ needs indicates what type of orientation? a. supplier b. sales c. production d. marketing ANS: D OBJ: 2

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

Fujifilm Computer Products has improved the efficiency and productivity of its plant, which manufactures printing technology. For the new fiscal year, the company projects a production increase of 25 percent, and has instructed its sales force to aggressively distribute and promote the product. The CEO is sure that the market will absorb more product if the sales force is determined and assertive. 96. Refer to Fujifilm Computer Products. What sort of orientation does Fujifilm appear to have? a. sales b. customer c. production d. marketing ANS: A A sales orientation is based on the belief that customers resist buying items that are not essential, and that people will buy more goods and services if aggressive sales techniques are used. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

97. Refer to Fujifilm Computer Products. Which of the following BEST describes FujiFilm? a. It is in the business of satisfying customers. b. It directs its products to specific groups of people. c. It seeks its goals primarily through the use of intensive promotion. d. It profits through customer satisfaction. ANS: C FujiFilm definitely has a sales orientation. See Review Learning Objective 3 for a table showing the differences between a market orientation and a sales orientation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 13

OBJ: 3

Rose is a telephone order taker for Brylane, a catalogue retailer of furnishings for bedrooms and baths. A customer called and asked if the sea green in a bedspread that she had purchased matched the green in a lamp that was being offered in the newest Brylane catalogue. Rose got the potential customer’s phone number, went out to the warehouse, located the items, determined they did not match, and called the potential customer to tell her that information. 98. Refer to Brylane. Which orientation did Rose show? a. production b. market c. societal d. sales ANS: B A market-oriented philosophy is based on the consumer’s wants and needs, and the dealer satisfied these needs by providing excellent customer service, PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

OBJ: 2

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99. Refer to Brylane. What was the most likely result of Rose’s efforts? a. management empowerment b. customer satisfaction c. transactional marketing d. retailer-customer synergy ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 9

Jacques Torres Chocolate is a factory and retail store in St. Boniface. Its owner is willing to try to produce new products when his customers suggest them—such as chili pepper–laced chocolate candy. His only condition is that when he adds new products, his customers have the final say on whether the product is of any value. According to Torres, “If something doesn’t move, that’s the last time you see it.” 100. Refer to Jacques Torres Chocolate. By focusing on customers’ wants, what type of orientation does the company show? a. production b. product c. market d. sales ANS: C Torres understands that a sale occurs because a customer makes a decision to buy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

OBJ: 2

101. Refer to Jacques Torres Chocolate. What is the primary goal of Jacques Torres Chocolate? a. to make a profit while providing customer satisfaction b. to achieve profitability through sales volume c. to convince potential customers to buy d. to build exchange relationships with its stakeholders ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 13

102. Refer to Jacques Torres Chocolate. What marketing tools does the organization use to achieve its goals? a. aggressive promotion b. the marketing mix c. advertising and personal selling only d. production, promotion, and pricing ANS: B Jacques Torres Chocolate has a market orientation. A company with a market orientation has to make decisions in all four areas of the marketing mix. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 13

OBJ: 3

103. Refer to Jacques Torres Chocolate. Which of the following BEST describes the company? a. It seeks its goals primarily through the use of intensive promotion. b. It profits through customer satisfaction. c. It has an inward focus on the organization’s needs. d. It is in the business of selling chocolate. ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 13

Shoppers at an Ingles supermarket can request Smart Partner cards. Before their purchases are rung up at the checkout, customers give the cards to the checkout person, who swipes the cards. Then a percentage of the amount of money each shopper spent is given to a school the customer has chosen. The more money customers spend, the larger the donation to local educational institutions. 104. Refer to Ingles Supermarket. Ingles uses the Smart Partner cards as a part of which of the following? a. its retailer-customer synergy b. its commitment selling c. its transaction marketing d. its relationship marketing ANS: D The strategy that entails forging long-term partnerships with customers is called relationship marketing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 10

OBJ: 3

105. Refer to Ingles Supermarket. By instituting the Smart Partner program to help local schools, what type of orientation has Ingles shown? a. production b. sales c. societal marketing d. philanthropic ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

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When planning a funeral, the most expensive item typically is the casket. Funeral homes commonly show customers only three caskets, with people almost invariably choosing the middle-priced one, which tend to cost around $2,200. Many funeral directors describe the lowest-priced model as the “welfare” casket although it is just as serviceable as the more expensive ones. 106. Refer to Funeral Caskets. Some funeral directors actually paint less expensive caskets ugly colours to lessen the probability they will be purchased. What type of orientation do these funeral directors have? a. societal marketing b. social c. sales d. production ANS: C This example describes a business that is not customer focused and is not interesting in relationship marketing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

107. Refer to Funeral Caskets. What should a retail casket outlet that wishes to offer customer value do? a. provide customers with only a few choices and a minimum of information on what services and caskets are available b. use aggressive marketing techniques to sell pre-burial plans c. tell customers that funeral homes like having competition d. charge $300 for a pine casket instead of the inflated price of $1,000 charged by many funeral homes ANS: D A business interested in offering customer value should give customers more than they expect. PTS: 1 DIF: Application BLM: Higher order

REF: p. 8

OBJ: 3

Dofasco, Inc. is a Canadian steel manufacturer. According to its CEO, “People can make a phenomenal difference if you stop telling them to come to work, put their brains in a box, and do whatever the supervisor says. We let our employees work in teams.” 108. Refer to Dofasco, Inc. This quote implies that, by using teamwork, Dofasco does which of the following? a. operates using a production orientation b. provides its customer with a high level of satisfaction c. has a high employee turnover rate d. has a sales orientation ANS: B Teamwork is one way that a company with a market orientation creates customer satisfaction. PTS: 1 DIF: Application BLM: Higher order 1-30

REF: p. 11

OBJ: 3

109. Refer to Dofasco, Inc. How does teamwork benefit Dofasco? a. by enhancing employee performance b. by creating managerial entropy c. by refining the definition of customer value d. by doing away with the need for empowerment ANS: A Enhanced employee performance leads to improved customer satisfaction. PTS: 1 DIF: Application BLM: Higher order

REF: p. 11

OBJ: 3

In 1995, the Chrysler Corporation launched the first complete remake of its minivan category since the firm invented the vehicle category in 1984. The minivans were designed with more curves on the outside and more space on the inside. One of Chrysler’s goals for remaking the minivan was to broaden the minivan’s appeal beyond the traditional buyer base of practical families. Advertising showed minivans being used to cart everything from senior citizens to canoes. “A minivan is for any time, any place, everyone,” was one of the promotional slogans used. To reach other customer groups, Chrysler developed a sports version and a short-wheelbase version of the upscale Town and Country model for sophisticated buyers. Chrysler hoped the $2.6 billion vehicle development cost would pay off as the market expanded. However, competitors also began to offer a wider range of sophisticated models, and competition has become fierce. 110. Refer to Chrysler Minivans. When Chrysler first launched the minivan, the company offered only one version and was focused on generating sales volume through intensive advertising. This approach suggests that the company had which type of orientation? a. production b. sales c. promotional d. marketing ANS: B Sales-oriented organizations seek to generate sales volume based on intensive advertising, while market-oriented organizations recognize that promotion is only one of four basic marketing tools. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

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111. Refer to Chrysler Minivans. The minivans were developed through an extensive investment in research and development to completely redesign the minivans and provide customers with new and updated features. This effort is designed to better meet consumer’s wants and needs, and suggests that the company has adopted which sort of orientation? a. sales b. market c. production d. retail ANS: B A market-oriented philosophy is based on consumers’ wants and needs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 6

OBJ: 2

112. Refer to Chrysler Minivans. In an established organization such as Chrysler, recognizing minivan buyer needs and wants and switching to a customer-driven corporate culture probably required which of the following? a. the implementation of effective coaching programs b. an emphasis on creating customer value c. establishing strong short-term relationships with customers d. teamwork with suppliers ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 8-11

113. Refer to Chrysler Minivans. By introducing sporty, value-priced, and upscale minivans, Chrysler hoped to forge a long-term relationship with customers as they replace their older minivan. What is Chrysler engaged in? a. customer valuation b. empowerment c. primary goal making d. relationship marketing ANS: D Relationship marketing seeks to forge long-term partnerships with customers. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 10

OBJ: 3

114. Refer to Chrysler Minivans. Chrysler set up a team of special customer-service representatives to assist minivan buyers. The representatives are authorized to solve problems immediately. What were these employees given? a. teamwork b. empowerment c. customer value giving d. authority training ANS: B Delegation of authority to employees is empowerment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 11

OBJ: 3

As recently as 20 years ago, circuses came to town with tents, animals, clowns, and other performers. An advance man arrived about two weeks before the circus actually arrived, covered the community with posters, and gave out free tickets to school children. If the advance man had done a good job, when the circus arrived and opened its tent doors, 300 to 600 people would fill its seats. When the largest circus organizations merged, the newly formed Ringling Bros. and Barnum & Bailey’s Greatest Show on Earth began performing in 4,000-seat arenas. Attendance, however, has stagnated in recent years. People have stopped going to the circus because they miss the circus tent and the close intimate atmosphere it created. The newest thing in circuses is a return to the tent atmosphere with an emphasis on the types of entertainment that were popular years ago. Antique circus wagons, calliope music, and cotton candy are replacing the exotic animals and the prima donna performers. To satisfy the needs of this new audience, the tent circus sells lattes and wine. 115. Refer to Circuses. The aggressive promotions used by advance men indicate that the circuses two decades ago probably had what sort of orientation? a. market b. product c. production d. sales ANS: D Sales-oriented organizations achieve their sales goals primarily through intensive promotion. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

116. Refer to Circuses. Now circuses are trying to satisfy customers’ needs and wants and to profit through customer satisfaction. They have adopted what type of orientation? a. societal b. retail c. selling d. market ANS: D A market-oriented philosophy is based on consumers’ wants and needs. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 6

OBJ: 2 1-33

117. Refer to Circuses. To exhibit a societal marketing orientation, what could circuses do? a. empower their employees to satisfy customer wants b. donate a percentage of their profits to local educational institutions c. use relationship marketing d. emphasize customer value ANS: B The philosophy called the societal marketing orientation states that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve or enhance individuals’ and society’s long-term best interests. PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

OBJ: 2

118. Refer to Circuses. One of the tent venues is called Barnum’s Kaleidoscope, and it is in a permanent location with hopes that people who see the show will want to return and see it again as well as bring their friends and relatives to the production. Which of the following techniques would most likely advance this strategy of referrals and repeat business? a. a sales orientation b. relationship marketing c. transactional marketing d. empowerment ANS: B Relationship marketing is a strategy that entails forging long-term partnerships with customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 10

OBJ: 3

119. Refer to Circuses. The circuses’ goal of redesigning the circus experience is being completed through the coordination of many marketing activities, such as value pricing, a product that includes exciting performances, tent venue locations, and promotion. What do these activities make up for the circuses? a. target market b. value of marketing c. marketing environment d. marketing mix ANS: D Marketing mix elements include product, place, promotion, and price. PTS: 1 DIF: Application BLM: Higher order

1-34

REF: p. 13

OBJ: 3

During the 1940s, World War II figured just as predominantly in cartoons as bad puns and wisecracking animals that could tap dance and warble opera. While real soldiers did battle in the European and Pacific theatres, the North American public was watching war-themed cartoons in theatres with names like Bijou and Majestic. While kids particularly enjoyed the cartoons, the cartoonists who developed them did not make these cartoons for kids—they made them for themselves. If one of them came up with an idea that all of them thought was funny, it was made into a cartoon. 120. Refer to Wartime Cartoons. What was the purchase of a movie ticket in the 1940s to see a cartoon and a feature film an example of? a. an exchange b. the use of the entire marketing mix c. a valuation d. a transformation ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 4

121. Refer to Wartime Cartoons. Since the cartoonists were authorized by the production companies they worked for to do what they did best, it is obvious that the movie cartoon industry acted as if it had which of the following orientations? a. production b. market c. sales d. customer ANS: A Using hard-sell techniques describes a sales orientation. Caring about customer satisfaction and doing research to determine customer preferences describe a market orientation. The cartoonists had a production orientation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

122. Refer to Wartime Cartoons. What did the wartime cartoon industry do? a. It succeeded because what it did best happened to be what North Americans wanted. b. It used hard-sell techniques. c. It cared about customer satisfaction. d. It did much research on what kind of cartoons movie patrons wanted. ANS: A There was a focus on the creativity of the cartoonists—what they did best. PTS: 1 DIF: Application BLM: Higher order

REF: p. 5

OBJ: 2

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123. Refer to Wartime Cartoons. Wartime cartoons have been described as positive propaganda because they created a spirit of cohesiveness and the message that all North Americans could participate in the war effort. By enhancing the long-term best interests of countries at war, the wartime cartoonists actually showed what sort of orientation? a. societal marketing b. distribution c. promotion d. product ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 7

TRUE/FALSE 1. Marketing is defined as producing, promoting, and selling products. ANS: F Marketing means more than just producing, promoting, and selling products. It is a philosophy that stresses customer relationships as well as benefiting the organization and its stakeholders. PTS: 1

DIF: Definition

REF: p. 4

OBJ: 1

2. Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 4

3. An exchange cannot take place unless each party in the exchange has something that the other party values. ANS: T REF: p. 4

PTS: 1 OBJ: 1

DIF: Comprehension

4. Natural Bakery spent considerable money and time developing a crustless bread. The company has not conducted market research among its customers, but it was confident that its science and technology department had produced a successful new product. Based on this example, Natural Bakery is a good example of a production-oriented company. ANS: T OBJ: 2

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PTS: 1

DIF: Application

REF: p. 5

5. Encyclopedia Britannica marketed full sets of encyclopedias that cost a minimum of $1,500, weighed 118 pounds, and required four and a half feet of shelf space. For many years, the company had successfully sold its products door-to-door and defined its business as a book publisher. Encyclopedia Britannica had a market orientation. ANS: F A sales orientation would be a more appropriate description for a firm that does not research consumer needs and wants but rather relies on a strong sales effort and has a goal of collecting money. PTS: 1

DIF: Application

REF: p. 5

OBJ: 2

6. Both production and sales orientations are focused inward on the organization’s needs. ANS: T REF: p. 5

PTS: 1 OBJ: 3

DIF: Comprehension

7. The marketing concept states that the social and economic justification for an organization’s existence is the satisfaction of customer’s wants and needs while meeting organizational objectives. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 6

8. The societal marketing concept considers society’s long-term best interests along with the satisfaction of customers’ wants and needs. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 7

9. Customer value is calculated as the ratio of company profits to company costs. ANS: F Customer value is the ratio of benefits to the sacrifice necessary to obtain those benefits. PTS: 1

DIF: Definition

REF: p. 8

OBJ: 3

10. Firms try to achieve customer satisfaction and value by ensuring that customer expectations are met or exceeded. ANS: T REF: p. 9

PTS: 1 OBJ: 3

DIF: Comprehension

11. 3D Systems is a company that uses computers to generate new product prototypes. It has generated loyal business clients by providing the best customer support in the industry. The company also provides direct sales consultation that gives its salespeople intimate knowledge about exactly what its customers want. This partnership entails relationship marketing. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 10

1-37

12. Only a firm’s salespeople need to be customer oriented. ANS: F All employees need to be customer oriented because, in the customer’s eyes, the employee is the firm and may be the only firm representative the customer ever sees. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 11

13. Retailers who give their sales clerks the authority to handle customer complaints without having to get approval from a supervisor are using empowerment. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 11

14. Sales-oriented organizations do not seek to generate sales volume through intensive promotional activities. ANS: F Sales organizations exercise intensive personal selling and advertising campaigns to generate sales volume. PTS: 1

DIF: Definition

REF: p. 12

OBJ: 3

15. While most marketing organizations rely on various forms of promotion to succeed, sales-oriented organizations make the most effective use of their marketing mix. ANS: F Sales-oriented firms usually rely more heavily on promotion alone than do marketing-oriented firms. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 12

16. A marketing-oriented firm defines its business in terms of the benefits it offers to its customers. ANS: F A marketing-oriented firm defines its business in terms of the benefits its customers seek. PTS: 1

DIF: Definition

REF: p. 13

OBJ: 3

17. A market-oriented organization targets its products to the average customer. ANS: F The sales-oriented organization targets its products to everybody or to the average customer. PTS: 1 OBJ: 3

1-38

DIF: Comprehension

REF: p. 13

18. In the early 1920s, Ford promised its customers any colour that they wanted as long as it was black. Ford’s management assumed that anyone buying a car would accept the colour black, so it made products affordable by offering only one variety in large quantities. Ford is an example of a market-oriented firm. ANS: F By offering one variety of colour, not offering choices in quantity, and not segmenting the market, Ford exemplified a sales-oriented firm. PTS: 1

DIF: Application

REF: p. 13

OBJ: 3

19. The ultimate goal of most marketing-oriented firms is profitability that results from satisfying the wants and needs of its consumers. ANS: T REF: p. 13

PTS: 1 OBJ: 3

DIF: Comprehension

20. Salespeople who work for market-oriented organizations are generally perceived by their customers to be order takers. ANS: F Salespeople who work for market-oriented organizations are generally perceived by their customers to be problem solvers. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 13

21. Marketing is a job that should be handled by marketers. People in management, accounting, and finance should focus on their own specialties. ANS: F People in all business areas, regardless of specialization or responsibility, should be familiar with the fundamentals of marketing. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 14

ESSAY 1. Marketing has two components or facets. Name and describe each of these two facets. ANS: The first facet of marketing is its philosophy. This philosophy is an attitude, perspective, or management orientation that stresses the importance of customer satisfaction. The second facet of marketing is the set of activities used to implement this philosophy. These activities include (but are not limited to) planning, pricing, promotion, distribution, selling, advertising, and inventory management. PTS: 1

DIF: Application

REF: p. 4

OBJ: 1 1-39

2. What is the text’s definition of marketing? ANS: “Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” PTS: 1

DIF: Application

REF: p. 4

OBJ: 1

3. Exchange is the key concept in the definition of marketing. What is the concept of exchange? What are the five conditions of exchange that must be satisfied for marketing to occur? ANS: The concept of exchange simply means that people give up something in order to receive something that they would rather have. Money, goods, or services may be the medium of exchange. The five conditions of exchange are the following: 1. There must be at least two parties. 2. Each party has something that might be of value to the other party. 3. Each party is capable of communication and delivery. 4. Each party is free to accept or reject the exchange offer. 5. Each party believes that it is appropriate or desirable to deal with the other party. PTS: 1

DIF: Application

REF: p. 4

OBJ: 1

4. There are five conditions that must be satisfied for an exchange to take place. However, even if all of these conditions are met, exchange may not necessarily take place. Give an example of a situation in which all conditions are met, but exchange does not take place. Can marketing occur, even if an exchange does not take place? Why or why not? ANS: Many selling situations satisfy all five conditions for exchange, but unless a purchase or trade actually takes place, exchange does not occur. The five conditions are necessary but not sufficient for final exchange. The text provides the example of advertising a used auto in the classified ads. Marketing can occur even if an exchange does not take place. Many of the activities of marketing (product development, planning, promotion, pricing, distribution, and so on) can take place without a final exchange. PTS: 1

DIF: Application

REF: p. 4

OBJ: 1

5. What is the marketing concept? On what is this philosophy based? ANS: The marketing concept is a simple and intuitively appealing philosophy. It states that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting organizational objectives. It is based on an understanding that a sale does not depend on an aggressive sales force but rather on a customer’s decision to purchase a product. PTS: 1 1-40

DIF: Application

REF: p. 6

6. Four competing philosophies strongly influence the role of marketing and marketing activities within an organization. Name and briefly describe each of these four philosophies. ANS: Production orientation. This orientation focuses firms on their internal production capabilities rather than the desires and needs of the marketplace. Sales orientation. This orientation assumes that buyers resist purchasing items that are not essential, and that buyers will purchase more of any item if aggressive selling techniques are used. Again, this orientation does not address the needs and wants of the marketplace. Market orientation. This orientation is the foundation of contemporary marketing philosophy. It recognizes that a sale is dependent on the customer’s decision to purchase a product and provides increased responsiveness to customer needs and wants. To marketing-oriented firms, marketing means building relationships with customers. Societal orientation. This orientation refines the marketing orientation by stating that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting the organization’s objectives and preserving or enhancing both individuals’ and society’s long-term best interests. PTS: 1

DIF: Application

REF: p. 5-7

OBJ: 2

7. If a firm has a production orientation, what types of questions does management ask after assessing its resources? How would these questions differ for a service organization? ANS: With a production orientation, management focuses on the internal capabilities of the firm. Management might ask: “What can we do best?”, “What can engineering design?”, and/or “What is economical and easy to produce with our equipment?” Managers of a service organization might ask, “What services are most convenient for the firm to offer?” and/or “Where do our talents lie?” PTS: 1

DIF: Application

REF: p. 5

OBJ: 2

8. The engineer entrepreneur that has set up a company to manufacture and market all-terrain vehicles has decided that a sales orientation would suit his new company the best. What are important considerations for this firm when it adopts this orientation? What are potential pitfalls of this orientation? ANS: The most important component for a sales orientation is an aggressive sales force. The sales force can push intermediaries to carry products, or push consumers to purchase. However, despite a high-quality sales force, even aggressive salespeople cannot convince people to buy goods and services that are neither wanted nor needed. PTS: 1

DIF: Application

REF: p. 5

OBJ: 2

1-41

9. A market-oriented organization may choose not to deliver the benefits sought by customers because these benefits are not in the best interest of the individual or society. This is termed the societal orientation. What does this concept mean in terms of organizational justification? List three current issues where the societal orientation concept may need to be applied. ANS: The societal orientation refines the market orientation by stating that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting the organization’s objectives and preserving or enhancing both the individual’s and society’s long-term best interests. Societal issues could include environmental protection, smoking in public places, promotion of high sugar–content foods to children, seat belt laws, alcohol marketing, gun sales, and purchasing drugs that have not been approved by Health Canada and others. PTS: 1

DIF: Application

REF: p. 6

OBJ: 2

10. Describe a real company that has a societal marketing orientation. ANS: Students’ answers to this question will vary depending upon what commercials, advertisements, and publicity they have been exposed to. All should select a company that exists not only to satisfy customers’ wants and needs and to meet organizational objectives but also to preserve or enhance individuals’ or society’s long-term best interests. PTS: 1

DIF: Application

REF: p. 7

OBJ: 2

11. What is the philosophy of the marketing concept and market orientation? What three key areas does the marketing concept and market orientation involve? ANS: The philosophy of the marketing concept states that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting organizational objectives. Market orientation requires top management leadership, a customer focus, competitive intelligence, and interfunctional coordination to meet customer wants and needs and deliver superior value. It also entails establishing and maintaining mutually rewarding relationships with customers. The marketing concept and market orientation involves: • Focusing on consumer wants so the organization can distinguish its product(s) from competitors’ offerings. • Integrating all the organization’s activities, including production, to satisfy these wants. • Achieving long-term organization goals by satisfying customer wants and needs legally and responsibly. PTS: 1

1-42

DIF: Application

REF: p. 6

OBJ: 2

12. What is customer value? How can marketers make sure customers perceive them as sources of value? ANS: Customer value is the ratio of benefits to the sacrifice necessary to obtain those benefits. Marketers who want to be perceived by their customers as offering value can (1) offer products that perform as they are expected to, (2) give customers more than they expect, (3) avoid unrealistic pricing, and (4) give the buyer facts. PTS: 1

DIF: Application

REF: p. 8

OBJ: 3

13. Discuss the differences between sales and market orientations using the following five characteristics as guidelines: (1) the organization’s focus, (2) business the organization is in, (3) people to whom the product is directed, (4) the organization’s primary goal, and (5) tools used to achieve that goal. ANS: Organization’s focus. With a sales orientation, the firm’s focus is inward upon the firm’s own needs. With a market orientation, the focus is outward on the wants and preferences of customers. In particular, marketing-oriented firms create customer value, maintain customer satisfaction, and build long-term relationships. Business. A firm with a sales orientation is in the business of selling goods and services. A firm with a market orientation is in the business of satisfying consumer wants and needs. Customers. A sales orientation directs the firm’s output at everybody, while a market orientation directs goods toward specific groups of people. Primary goal. The primary goal of a firm with a sales orientation is to make profit through maximizing sales volume. The primary goal of a firm with a market orientation is to seek profit through customer satisfaction. Tools for goal achievement. A sales orientation seeks to achieve goals primarily through intensive promotion. A market orientation achieves goals through coordinated use of a set of marketing activities. See Review Learning Objective 3. PTS: 1

DIF: Application

REF: p. 13

OBJ: 3

14. Is the following statement true: “A production orientation is always harmful to relationship marketing”? Explain your answer. ANS: A company with a production orientation concentrates on what it can do best—its internal capabilities. Sometimes what the company produces is exactly what the customer wants. It is possible for a company to engage in relationship marketing (a strategy that entails forging longterm partnerships with customers) and still have a production orientation. PTS: 1

DIF: Application

REF: p. 5

OBJ: 2 | 3

1-43

15. Defining the company’s business in terms of the benefits customers seek, instead of in terms of goods and services, has three important advantages. List them. ANS: (1) It ensures that the firm keeps focusing on customers and avoids becoming preoccupied with goods, services, or the organization’s internal needs. (2) It encourages innovation and creativity by reminding people that there are many different ways to satisfy customer wants. (3) It stimulates an awareness of changes in customer desires and preferences so that product offerings are more likely to remain relevant. PTS: 1

DIF: Application

REF: p. 11

OBJ: 3

16. There are several important reasons to study marketing. Name three of these reasons. ANS: 1. 2. 3. 4.

Marketing plays an important role in society. Marketing is important to businesses. Marketing offers outstanding career opportunities. Marketing affects your life every day.

PTS: 1

DIF: Application

REF: p. 14

OBJ: 4

17. How is marketing important to business? ANS: Marketing contributes directly to the achievement of business objectives, including survival, profits, and growth. Marketing is concerned with assessing the wants and satisfactions of customers, designing and managing product offerings, determining prices, developing distribution strategies, and communicating with customers. These activities are vital to business organizations. A fundamental understanding of marketing is important to all businesspeople so that an organization can operate cohesively. PTS: 1

DIF: Application

REF: p. 14

OBJ: 4

18. How does marketing affect your everyday life? How will marketing enable you to be a better consumer? ANS: Every person participates in the marketing process as a consumer of goods and services. Approximately 50 cents of each dollar spent pays for marketing costs. By developing an understanding of marketing, one can better understand the buying process, negotiate more effectively with sellers, and demand corrective action when products do not meet performance standards. PTS: 1

1-44

DIF: Application

REF: p. 15

OBJ: 4

Chapter 2—Strategic Planning for Competitive Advantage MULTIPLE CHOICE 1. Compaq Computer’s decision to charge customers for phone technical support to reduce the high cost of phone support and encourage customers to read documentation was a failure because consumers like the human touch. Customer rebellion forced Compaq to rethink this policy. As a result, Compaq decided to focus its resources on reaching the inexpensive home computer market segment through enhanced customer service. What is Compaq engaging in? a. control and evaluation b. the search for a differential advantage c. strategic planning d. alternative selection ANS: C Strategic planning provides a long-term vision and thus guides long-term commitment of resources. PTS: 1 DIF: Application BLM: Higher order

REF: p. 22

OBJ: 1

2. What do strategic plans require? a. changes in prices b. long-term resource commitments c. the addition of new personnel d. a change in organizational structure ANS: B Strategic plans are long-range plans that involve developing, organizing, and controlling marketing activities. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 22

3. What is the managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities? a. functional planning b. tactical management c. environmental scanning d. strategic planning ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 22

2-1

4. What is the process of anticipating events and determining strategies to achieve organizational objectives? a. portfolio evaluation b. forecasting c. planning d. implementation ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 22

5. Marketing plans should be written to do which of the following? a. control all the elements of the external marketing environment b. create common goals for employees and suppliers to work toward c. allow managers to enter the marketplace with an awareness of all possibilities and problems d. compare actual and expected performance ANS: D Marketing environment variables cannot be controlled. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 22

6. According to the text, which of the following statements about a marketing plan is true? a. The marketing plan should be viewed as a series of sequential steps. b. A marketing plan is created so an organization can share its marketing objectives. c. Marketing plans usually exist as oral traditions. d. All marketing plans have exactly the same content. ANS: A Several steps of the marketing plan can be done at the same time. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 22-23

7. Which of the following is one of the elements of the marketing plan? a. a business values statement b. a five-year marketing strategy c. a situation analysis d. an advertising cost analysis ANS: C See Exhibit 2.1. PTS: 1 BLM: Remember

2-2

DIF: Definition

REF: p. 22-23

OBJ: 1

8. Managers at Bolsum Aerospace Company recently attended several special meetings where issues such as the creation of marketing objectives, a situation analysis, a target market strategy, and modifying components of the marketing mix were discussed. What is Bolsum Aerospace engaging in? a. a financial analysis b. the development of a marketing plan c. re-engineering d. strategic contingency planning ANS: B See Exhibit 2.1. All the listed activities are part of the marketing planning process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 22-23

OBJ: 1

9. What answers the question, “What business are we in and where are we going?” a. the strategic plan b. the situation analysis c. the market strategy d. the mission statement ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 24

10. In its stockholders’ report, PepsiCo. states “... our business is to increase the value of our shareholder’s investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity ...” Which of the following describes this statement? a. a mission statement b. a market segmentation strategy c. a statement of economic potential d. a marketing mix strategy ANS: A A mission statement answers the question, “What business are we in?” PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 2

11. What should the focus of an organization’s mission statement be on? a. the market it wishes to serve b. its social responsibilities c. the products it wishes to sell d. the desires of top management ANS: A The choice of the market to serve determines the product and technology decisions. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 24

2-3

12. By defining its business as “making movies” instead of “entertainment,” what would a Hollywood movie studio have experienced? a. nonspecific strategic planning b. market harvesting c. market synergy d. marketing myopia ANS: D “Making movies” focuses on one product, rather than a broad range of opportunities as found in “entertainment.” PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 2

13. Railroads often offer their customers a trucking service for local delivery or trailers for piggybacking loads to their final destination. Which of the following statements justifies the addition of these services to the railroads’ strategic plans? a. Owning trucks is probably cheaper and easier than using a local carrier. b. Their mission statements reflect their belief that they are transportation companies, not just railroads. c. New business units are needed to continue growth. d. Diversification is needed to survive. ANS: B A broad mission statement would recognize that the firm’s business is total transportation service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 2

14. What occurs when a business is defined in terms of goods and services rather than by the benefits customers seek from it? a. a reactive focus b. marketing myopia c. a market barrier entry d. unempowerment ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 24

15. A popular technique for managing a large organization with different technologies and markets is to divide it into which of the following? a. different technologies b. strategic target markets c. strategic business units d. tactical segments ANS: C OBJ: 2

2-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 24

16. What does the acronym SBU refer to? a. standard business utilization b. stock in business units c. strategic business unit d. samples by units ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 24

17. What does an SBU do? a. has strategic planning performed back at corporate headquarters b. competes with the same companies as the other SBUs in the family c. usually benefits from the combined corporate raw materials purchases d. controls its business independently of other SBUs in the organization ANS: D SBUs have separate business functions from one another and have their own mission statements, markets, and planning. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 24

OBJ: 2

18. General Electric has a security division that builds equipment for screening passenger luggage checked in at airports. This division comprises InVision Technologies, which manufactures CT scanners, and Ion Track, which measures luggage for trace element drugs and explosives. What is GE’s security division an example of? a. a strategic business unit b. an organizational level c. a business sales unit d. a secure business unit ANS: A An SBU is a subgroup of a single business or collection of related businesses within a larger organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 3

19. What results when an organization creates a marketing mission that is too broad? a. sustainable competitive advantage b. directional marketing c. marketing synergy d. marketing myopia ANS: D Marketing myopia defines a business in terms of goods and services rather than in terms of benefits customers seek. See Review Learning Objective 2. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 24

OBJ: 2

2-5

20. One of the divisions of Procter & Gamble (P&G) manufactures and markets health and beauty aids. It handles products such Olay lotions and Old Spice fragrances. This part of the business has its own accounting, engineering, manufacturing, and marketing departments, separate from the rest of the organization. This division also has its own mission statement, target markets, and planning committees. What is this segment of P&G called? a. a product market niche b. a strategic alliance c. a diversified division d. a strategic business unit ANS: D An SBU usually has its own mission statement, target markets, and separate functional departments. PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 2

21. Which of the following is a formal study conducted by an organization to assess its current status and capabilities and its future expectations? a. a strategic alternative selection b. a situation analysis c. a marketing audit d. a competitive advantage audit ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 25

22. Baths From the Past is a small company that sells reproduction sinks, bathtubs, toilets, and faucets. The company’s management is currently conducting a formal study of its current strengths and weaknesses by looking at the company’s profit and sales histories and searching for opportunities and threats by studying consumer trends. What is Baths From the Past conducting? a. a SWOT analysis b. a market differentiation scan c. a marketing audit d. an environmental scan ANS: A A SWOT analysis attempts to ascertain the present situation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

OBJ: 4

23. The SWOT acronym refers to a firm’s analysis of which of the following? a. strategies, willingness to change, objectives, and trends b. strengths, weaknesses, opportunities, and threats c. sales, width of product mix, observations, and technology d. service levels, willingness to spend, organizational culture, and total revenues ANS: B OBJ: 4

2-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 25

24. Hustler Turf Equipment is a Saskatchewan-based company that makes landscaping equipment. The company is looking at customer trends, its competitors, and the economy to see if there are any threats or opportunities on the horizon. It has also examined its production policies and sales histories to determine its strengths and weaknesses. What is Hustler Turf Equipment conducting? a. a competitive advantage search b. a situation analysis c. a trend analysis d. a market audit ANS: B A situation analysis contains the SWOT components. PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

OBJ: 4

25. A Canadian drink company conducting a SWOT analysis of market potential in India should be aware that which of the following are potential threats? a. a high gross national profit b. government openness to foreign businesses c. religious differences that could lead to terrorist acts d. a high demand for Canadian-made products ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

26. What is the collection and interpretation of information about forces, events, and relationships that may affect the organization? a. environmental scanning b. an internal audit c. opportunity analysis d. stakeholder analysis ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 25

27. All the following are environmental forces a B.C. fruit grower with both orchards and a packaging/shipping facility might consider when making marketing decisions. What factor is LEAST likely to impact its marketing decisions? a. changes in provincial laws concerning pollution control, waste disposal, and use of pesticides b. inflation and interest rates c. the number of employees of a Florida state fruit grower d. the increase in foreign shipments to Canada of a similar product ANS: C The number of employees of a non-key competitor has the least impact on a marketing decision. PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

OBJ: 4

2-7

28. What would Revlon use to identify the fact that its brand names (Revlon, Almay, and Flex) had developed a poor image with both its customers and its retailers? a. strategic analysis b. environmental scanning c. environmental control d. marketing control ANS: B Environmental scanning is the collection and interpretation of information gathered from the external environment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

OBJ: 4

29. Which of the following could the manufacturers of video games for Xbox and PlayStation2 do through the use of environmental scanning? a. learn why they needed to use a team management structure b. periodically divest themselves of low-margin products c. determine why the market for video games is slowing d. benefit from experience curves ANS: C Environmental scanning is the collection and interpretation of information gathered from the external environment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

OBJ: 4

30. After management agrees on a mission statement, it must set objectives. Which of the following is a characteristic of a good objective? a. It is realistic. b. It is unmeasurable. c. It is independent. d. It is profitable. ANS: A Good objectives are not necessarily stated in terms of profit. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 26

OBJ: 3

31. Which of the following is a statement of what is to be accomplished through marketing activities? a. a marketing objective b. a mission statement c. a business plan d. a marketing criteria ANS: A OBJ: 3

2-8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 26

32. Which of the following is an appropriate use for carefully specified marketing objectives? a. as a way to force executives to develop their marketing skills b. as a method for developing standards to gauge performance c. as a motivational tool for those charged with achieving the financial objectives d. as a method to appeal to all market segments ANS: B Marketing objectives should be stated for each target market. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

REF: p. 26

33. For marketing objectives to be realized, which of the following criteria must they meet? a. be extremely challenging b. be attainable with a short time frame c. be set within a one-year time frame d. be consistent with organization objectives ANS: D There is no one-year time frame restriction for marketing objectives although specifying a particular time frame makes an objective more clear and precise. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

REF: p. 26

34. Lori Dyer works for Star Creek, an Australian wine-producing company. She has been asked to submit recommendations for marketing objectives for the upcoming strategic planning period. Which of the following marketing objectives would be most appropriate for the company? a. Star Creek wants to be recognized as an international winery. b. Star Creek wants to be number one in the marketplace for all Australian wines within one year. c. Star Creek wants 30 percent of the market for Australian wines within 24 months of the launching of its new advertising campaign. This effort will be supported by a $20 million commitment from the company’s owner and president. d. Star Creek seeks to sell more bottles of wine than its competitors during the next strategic planning period. ANS: C Marketing objectives should be consistent with organization objectives, should be measurable, and should specify a time frame. Objectives also should be carefully specified. PTS: 1 DIF: Application BLM: Higher order

REF: p. 26

OBJ: 3

2-9

35. Tracey Read is designing a series of marketing activities to help her new catering company achieve its growth objectives in a highly competitive industry. What is Tracey engaged in? a. strategic activation b. evaluation c. resource commitment d. marketing planning ANS: D Marketing planning is designing activities relating to objectives and the marketing environment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 26-27

OBJ: 1

36. Through re-engineering, Bayer hopes to increase its profit margins, improve inventory turnover, and make itself more attractive to investors. Which of the following advantages is Bayer planning on creating by restructuring and selling off SBUs that do not complement its primary product lines? a. marketing competitive advantage b. brand name advantage c. cost competitive advantage d. niche competitive advantage ANS: C Re-engineering is one of the methods in which costs are reduced to create a cost competitive advantage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

OBJ: 5

37. There are many different kinds of cheese. According to its ads, only Jarlsberg Lite has 50 percent less fat, 60 percent less cholesterol, and 100 percent of the taste of other kinds of cheese. What does this advertising statement describe? a. Jarlsberg Lite’s mission statement b. Jarlsberg Lite’s tactical strength c. Jarlsberg Lite’s competitive advantage d. Jarlsberg Lite’s strategic edge ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

38. Which of the following companies has a competitive advantage? a. Netcentives is trying to acquire the patent on a software that allows merchants to distribute loyalty points on-line. b. Mildred’s Café makes the world’s best pecan pie according to one survey. c. DeBeers diamonds used to control 90 percent of the world’s diamond mines. d. World Wrestling Entertainment (formerly the World Wrestling Federation) holds the trademark on the names of the wrestlers who participate in the company’s wrestling matches. ANS: D OBJ: 5

2-10

PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

39. Which of the following show costs declining at a predictable rate as experience with a product increases? a. liquidity growth curves b. supply/demand curves c. breakeven analyses d. experience curves ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 27

40. Which of the following is a source of a cost competitive advantage? a. production reinvention b. experience curves c. inefficient labour d. breakeven analyses ANS: B REF: p. 27

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Remember

41. Everyone knows the brand name Kleenex. Kleenex is what many consumers think of when they think of tissues. What is this widely recognized brand name a source of? a. a cost advantage b. market augmentation c. a niche competitive advantage d. a product differentiation competitive advantage ANS: D The brand name is unique and has a valued impression. PTS: 1 DIF: Application BLM: Higher order

REF: p. 28

OBJ: 5

42. Arizona Tea is marketed by Vultaggio & Sons. Vultaggio & Sons took a basic drink and put it into unusual bottles with elaborate designs. The wide-mouthed, long-necked bottles are now considered to be trend-setters in the new age beverage industry, and customers often buy the tea just for the bottle. What is the success of Arizona Tea based on? a. re-engineering b. a heterogeneous marketing strategy c. a product differentiation competitive advantage d. supply-demand curves ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 28

2-11

43. Fujisawa is Japan’s seventh-largest pharmaceutical company. It sells drugs taken by organ transplant patients to increase the probability that the new organ will operate efficiently and not be rejected. Currently, the only products that Fujisawa makes are these organ transplant drugs, which it sells worldwide. Its patents protect it from competitors. What does Fujisawa have? a. a marketing competitive advantage b. a niche competitive advantage c. a cost competitive advantage d. a brand name strategy ANS: B A niche competitive advantage is the advantage achieved when a firm seeks to target and effectively serve a small segment of the market; in this case, people who need organ transplant drugs. Its advantage is not sustainable because patents expire. PTS: 1 DIF: Application BLM: Higher order

REF: p. 29

OBJ: 5

44. Yuengling is the oldest brewery in the United States. It was founded in 1827 in a time when small breweries dotted the nation. It has survived by severely limiting sales of the beer and creating a mystique about the brand. In areas where the beer is sold, its brand name is used the same way Kleenex is used by many to represent all types of tissues. Although its competitors all wanted to expand their markets. Yuengling’s strategy was “To do nothing.” For over 170 years, what has this strategy given the brewery? a. a brand name strategy b. a sustainable competitive advantage c. a niche competitive advantage d. a marketing competitive advantage ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 29

45. Technol Medical Products makes specialty face masks to shield health care workers from infection. Because it focuses on this narrow market, it is able to outsell its primary competitors, 3M and Johnson & Johnson. What does Technol Medical products have? a. a niche competitive advantage b. a heterogeneous target marketing c. a demarketing focus d. an aggregated positioning strategy ANS: A OBJ: 5

2-12

PTS: 1 DIF: Application BLM: Higher order

REF: p. 29

46. Bentley automobiles are extremely expensive and are designed to appeal to consumers who equate value and quality with price. What type of competitive advantage has the manufacturer of Bentley automobiles created? a. value enhanced b. mass marketing c. niche d. social class oriented ANS: C A niche competitive advantage seeks to target and effectively serve a single segment of the market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 29

OBJ: 5

47. Until the patent expires, what do patents on allergy relief medications such Allegra and Claritin give the pharmaceutical companies that own the patents? a. targeted market position b. sustainable competitive advantage c. opportunistic privilege d. situational strength ANS: B A sustainable competitive advantage is one that cannot be copied by the competition; in this case, at least until the patent expires. PTS: 1 DIF: Application BLM: Higher order

REF: p. 29

OBJ: 5

48. What is a strategy of increasing market share for present products in existing markets? a. diversification b. market development c. product development d. market penetration ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 30

49. Knorr, manufacturer of soup, dip, and gravy mixes, printed on-package recipes, gave out coupons to existing customers, and created a recipe booklet that could be ordered with three UPC codes from three different Knorr products. All of these activities would be representative of what type of strategy? a. product development b. diversification c. market development d. market penetration ANS: D Selling more of the same product to existing markets is market penetration. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 30

OBJ: 6

2-13

50. American Express offers customers a Cobaltcard, a pre-loaded credit card, to 13- to 22-year-olds looking to make on-line purchases. While American Express had previously supplied credit cards to adults, this younger group was a market that was not being served. The Cobaltcard program is an example of which type of strategy? a. market penetration b. market development c. product development d. product penetration ANS: B Market development finds new uses for a product to stimulate sales among new customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

51. What strategy attracts new customers to existing products? a. market penetration b. product development c. market development d. diversification ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 30

52. The company that manufactures Molson beer simultaneously launched Arctic brand in Ontario and Tornade brand in Quebec with the intention of gaining a share of the rapidly expanding alcoholic lemonade segment of the beverage industry. The separate launch strategies for the products are due to different market conditions in the two Canadian provinces. What type of strategy did Molson use to reach existing markets with its new product? a. product development b. market development c. market penetration d. product penetration ANS: C Molson has developed a new beer for people who are already drinkers of Molson’s other products. PTS: 1 DIF: Application BLM: Higher order

2-14

REF: p. 30

OBJ: 6

53. The television network HBO produced the drama The Sopranos about a New Jersey mob family. It also published The Sopranos Family Cookbook: As Compiled by Artie Bucco, a collection of southern Italian–style recipes. Bucco is the name of a fictional restaurateur in the show. The creation of the cookbook to appeal to fans of the show is an example of what type of strategy? a. diversification b. product development c. product penetration d. market development ANS: D HBO has created new products for existing viewers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

54. Research has shown that people below the age of 15 prefer using other colours than the familiar red ketchup. To capture this market, Heinz markets blue-, purple- and green-coloured ketchups. The ketchups have an exotic look, which Heinz hopes will appeal to this market. It still tastes like the red variety. Since this is not really a new product, just an attempt to reach a new target market, what type of strategy does it exemplify? a. product development b. product expansion c. market development d. market penetration ANS: C Market development is the introduction and sale of present products to new markets. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

55. To market its ice cream to Chinese consumers, Unilever entered into a joint venture with Sumstar, a state-owned Chinese investment company. Unilever provided the product know-how, and Sumstar helped Unilever gain all the approvals needed from a complex Chinese bureaucracy. What type of strategy did Unilever use to reach the Chinese market? a. product development b. diversification c. market penetration d. market development ANS: D Unilever wanted to sell an existing product (ice cream) to a new market (China). PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

2-15

56. In the following examples, when does market penetration occur? a. when a Mexican distillery offers rebates to its current customers b. when a hosiery manufacturer begins manufacturing wigs c. when a Canadian-based company begins to sell its products in South America d. when a supermarket chains adds another brand of ice cream to its inventory ANS: A Market penetration is the marketing of the same product to current customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

57. In order to expand its sales into the U.S. market, BRL, an Australian-based winemaker, agreed to a merger with a U.S.–based wine distribution company. According to Ansoff’s strategic opportunity matrix, what type of strategy would BRL be implementing? a. product penetration b. product development c. diversification d. market development ANS: D Market development refers to the attracting of new markets (U.S. consumers) to existing products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

58. Anbac Financial Group, Inc. is the second-largest insurer of municipal bonds in the world. Anbac is expanding its insurance services from governmental accounts to include private developers of sports stadiums and similar large multi-use facilities. According to Ansoff’s strategic opportunity matrix, what type of strategy would Anbac be implementing? a. market development b. product development c. product penetration d. diversification ANS: A Market development refers to the attracting of new markets (U.S. consumers) to existing products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

59. Which of the following is a type of strategic alternative that matches products and markets? a. vertical integration b. market redevelopment c. product development d. international diversification ANS: C OBJ: 6

2-16

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 31

60. Procter & Gamble has a website, www.pg.com, that is designed to help customers with product questions. While at the website, readers can request free samples of Olay Radiance, Pert Plus, and Folgers Latte, all new P&G products. The site also offers “More Than a Card,” a feature that allows customers to buy an assortment hamper of new P&G products for less than $25. This is an example of how a company can implement which of the following strategies? a. product penetration b. product development c. market penetration d. diversification ANS: B Product development is the introduction of new products to the present market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

OBJ: 6

61. Clay Market began as a retailer of terra cotta pots and garden figures imported from Turkey and Mexico. It has since added Turkish rugs and fabrics, leather-trimmed purses, and a line of women’s clothes for its customers. This activity is indicative of which type of strategy? a. diversification b. market penetration c. market development d. product development ANS: D Product development stimulates new sales to existing markets. PTS: 1 BLM: Remember

DIF: Application

REF: p. 31

OBJ: 6

62. Which strategy creates new products for present markets? a. diversification b. market penetration c. product development d. product penetration ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 31

63. Which strategy increases sales by introducing new products into new markets? a. diversification b. market penetration c. product penetration d. market development ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 31

2-17

64. Due to recent hurricanes, orange growers in Florida have lost millions of dollars. As a result, some growers have decided to bulldoze their orange groves and put in freshwater lakes for raising shrimp, a popular product that is more weather-resistant. What type of strategy are former orange growers who are now raising shrimp pursuing? a. product development b. diversification c. market development d. market penetration ANS: B Diversification is defined as selling a new product to a new market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

OBJ: 6

65. Hallmark was inspired by the popularity of Jan Karon’s best-selling novels about Mitford, a fictional town in the mountains of North Carolina, to develop a new line of products for Hallmark Gold Crown Stores. Hallmark created hundreds of Mitford-inspired products that authentically bring “the little town with the big heart” into tangible reality. The products include greeting cards, partyware and gift wrap, mugs, and puzzles for Hallmark’s existing customers. What type of strategy did Hallmark use? a. market development b. product development c. product penetration d. market penetration ANS: B Hallmark created new Mitford-based items for its regular customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

OBJ: 6

66. Juniper Group, which operates film distribution, health care, and Internet businesses, purchased shoemaker Tags Golf (Tags makes Bobby Jones–brand golf shoes) to create its sports division. What type of strategy did Juniper Group use? a. product development b. market development c. diversification d. product penetration ANS: C Juniper entered a new market with a new product. PTS: 1 DIF: Application BLM: Higher order

2-18

REF: p. 31

OBJ: 6

67. Tootsie Roll Industries has been in the candy business for over 100 years. Each year it produces 37 million Tootsie Roll candies and 16 million Tootsie Pop candies. During its 100+ years of operation, it has bought out 17 different candy brands. What type of strategy was it implementing? a. market development b. product development c. diversification d. integrative growth ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

68. Blockbuster rents and sells DVDs. When the retailer entered into the music retailing business, what type of strategy did it implement? a. market penetration b. market development c. product development d. diversification ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

69. Shortly after the start of the new century, Wrigley, the largest chewing gum manufacturer in the world, bid $12 billion for Hershey chocolate. Wrigley was unable to acquire Hershey, but its acquisition attempt would have expanded Wrigley’s product lines to include many forms of baking and eating chocolate. Since Wrigley did not produce any chocolate at the time of the takeover bid, this acquisition would be an example of which of the following? a. segment development b. diversification c. target marketing d. divestment ANS: B Wrigley makes chewing gum but would also be making chocolate, a completely different product. Also, the market for chocolate differs significantly from the market for chewing gum. PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

OBJ: 6

70. In 1969, Alberto-Culver in Canada, a hair care products company, entered the food product industry and introduced Sugar Twin, currently the best-selling sugar substitute in the Canadian marketplace. This product introduction was an example of which type of growth strategy? a. diversification b. integrative c. market penetration d. market development ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

2-19

71. Brickheads Ltd., located in Newmarket, Ontario, is the leading building materials manufacturer specializing in the manufacture of bricks for housing in the greater Toronto market. Tracey Dyer, Brickheads’ Vice President Marketing, remarked to a board meeting that “Brickheads wished that it had an operation in lower mainland BC to capitalize on the housing boom currently being experienced there. But the overall profit picture here for us is excellent despite a slow and steady market.” Brickheads would be classified by the BCG model as which of the following? a. a star b. a cash cow c. a problem child d. a dog ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 32

72. Vendarama, a specialty manufacturer of DVD and CD vending machines located in Hamilton, Ontario, has experienced meteoric growth over the past couple of years. Demand for its innovative and unique vending machines has been strong in major urban areas of the country and internationally. Vendarama has approached TJ Associates for a business loan to assist with expansion. According to the BCG model, how would TJ view Vendarama? a. as a dog b. as a star c. as a problem child d. as a cash cow ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 32

73. Wacker Ltd. a large profitable manufacturer of mouse pads located in Moose Jaw, Saskatchewan, has been the sole supplier of mouse pads for 10 large corporations in the United States. However, recent developments have included several lost contracts for business in the United States and the entrance of more large Asian specialty manufacturers specializing in producing computer peripherals and supplies. Looking at Wacker’s strategic position from a potential investor’s position, and according to the BCG, what is Wacker? a. a problem child b. a dog c. a star d. a cash cow ANS: B OBJ: 6

2-20

PTS: 1 DIF: Application BLM: Higher order

REF: p. 32

74. Bee-Clean Industries is a start-up company specializing in office building janitorial services in Victoria. Bee-Clean has experienced rapid growth of clients and has been rapidly hiring new employees to service this new business. As most employees are new to their tasks, their productivity has been below industry standard. As a result, the company’s profit picture has not been pretty. According to the BCG, what would Bee-Clean be classified as? a. a cash cow b. a question mark c. a star d. a dog ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 32

75. CentralPulse is Europe’s largest manufacturer of hip and knee replacement joints. Which of the company’s strategies would identify the surgeons and hospitals as two market segments on which CentralPulse will focus its marketing efforts? a. strategic business unit b. marketing sample c. sales unit d. target market ANS: D A target market is one or more market segments on which a company focuses. PTS: 1 DIF: Application BLM: Higher order

REF: p. 34

OBJ: 7

76. Which of the following terms would be used to describe Hispanic males between the ages of 12 and 19? a. exchange mixers b. a diversified market c. a market segment d. a sustainable market ANS: C A market segment is a group of individuals or organizations that share one or more characteristics. PTS: 1 DIF: Application BLM: Higher order

REF: p. 34

OBJ: 7

2-21

77. Fit, a health and fitness magazine, describes its readers as being female, 18 to 25 years of age, single, high school graduates, and earners of above-average income. What would have identified this market segment? a. the magazine’s target market strategy b. the magazine’s market development strategy c. the magazine’s environmental audit d. the magazine’s statement of purpose ANS: A The target market strategy identifies the market segment on which to focus. PTS: 1 DIF: Application BLM: Higher order

REF: p. 34

OBJ: 7

78. What describes and estimates the size and sales potential of market segments of interest to the firm, and assesses key competitors in these market segments? a. market opportunity analysis b. environmental scan c. marketing mix audit d. target market strategy ANS: A OBJ: 7

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 34

79. What is the unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market? a. marketing mix b. product line c. product mix d. market portfolio ANS: A OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 35

80. ConAgra Foods, Inc. has decided to sell all of its meat-processing plants and get out of its meat-processing business in order to raise the company’s net profits. Which of the following statements describes how the sale of the processing plants will affect ConAgra’s marketing mix? a. It will have no effect on ConAgra’s marketing mix. b. It will not affect the promotion or distribution elements of the ConAgra marketing mix. c. It will affect all of ConAgra’s marketing mix elements, either directly or indirectly. d. It will affect only the product element of ConAgra’s marketing mix. ANS: C The sale will directly change the company’s product mix and indirectly affect its promotion, pricing, and distribution elements. The emphasis of its promotion will change because it will no longer need to advertise its meat products. Its distribution will change because it will no longer need the freezer trucks to transport frozen meat. It is reducing its losses by dumping an inefficient unit. If it wants to, it can lower prices temporarily to keep its distributors, who will need to change their ordering methods, happy. PTS: 1 DIF: Application BLM: Higher order 2-22

REF: p. 35

OBJ: 9

81. What is the starting point of any firm’s marketing mix? a. the development of the good or service to be sold b. the determination of the product’s price, enabling future revenues and budgets to be estimated c. the design of the promotion campaign to be used for the product d. the selection of the places through which the good or service will be sold ANS: A The product is the starting point for any marketing mix. Without it, pricing, distribution, and promotion are irrelevant. The production capacity can be changed to fit the proposed product. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Remember

REF: p. 35

82. Solitude Nurseries is a retailer that helps homeowners create backyard sanctuaries for pondering the wonders of nature. Its owner believes he maintains the loyalty of the store’s customers by stocking only the highest quality merchandise and offering a customer satisfaction guarantee. With which element of the marketing mix is the manager most concerned? a. price b. personalization c. product d. promotion ANS: C The product element of the marketing mix includes guarantees and quality. PTS: 1 DIF: Application BLM: Higher order

REF: p. 35-36

OBJ: 8

83. Ocean Spray’s development of Craisins (sweetened dried cranberries) to compete against raisins most directly affected which element of the company’s marketing mix? a. production b. product c. distribution d. place ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 35-36

84. Which of the marketing mix strategies is the most flexible? a. publicity b. product c. pricing d. promotion ANS: C The only element that is often subject to quick and easy change is price. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Remember

REF: p. 35-36

2-23

85. Canadian discount retail giant Zellers hopes to strengthen its position as one of the country’s leading sellers of infant products with a 60-page catalogue that offers buyers the ability to purchase products via the phone or Internet. This new strategy reflects a change in which element of its marketing mix? a. target market b. production c. product d. distribution ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

86. Channels of distribution is just another way of describing which of the following elements of the marketing mix? a. place b. price c. promotion d. product ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Application

REF: p. 36

87. For an automotive manufacturer such as BMW, deciding who will be an authorized retailer in Canada for the company’s vehicles is part of which of the following marketing mix elements? a. place b. product c. promotion d. price ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

88. You are the owner-operator of a small business and your best friend suggests that you offer your company’s products for sale on the Internet. What type of decision is this? a. profit b. consumer c. place d. business ANS: C OBJ: 8

2-24

PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

89. Golden Valley Microwave Foods, Inc. is the manufacturer of ACT II popcorn. In its early years, the company had trouble financing the development and marketing of products for the microwave, so it chose to participate in a financial arrangement in which it agreed that it would not sell ACT II popcorn in supermarkets or grocery stores. Which element of the marketing mix was most influenced by this arrangement? a. promotion b. place c. product d. price ANS: B Where a product is sold is part of the place (distribution) element of its marketing mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

OBJ: 8

90. Making sure products are available when and where customers want them is the job of which element of the marketing mix? a. production strategies b. product strategies c. distribution strategies d. promotion strategies ANS: C Distribution strategies make products available when and where customers want them. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 36

OBJ: 8

91. The promotion strategy of the marketing mix deals exclusively with which of the following? a. personal selling and advertising b. personal selling and purchased mass media time or space c. advertising, publicity, and pricing d. personal selling, advertising, sales promotion, and public relations ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 36

92. SoBe nutritional beverages uses twin lizards on every bottle of its products and in all of its promotion efforts. It even has its own Team Lizard—made up of skateboarders, mountain bike riders, and in-line skaters—that it sponsors. The lizard is used to remind consumers of the product and its benefits. To which of the four Ps does this strategy relate? a. publicity b. price c. product d. promotion ANS: D Promotion covers a wide range of communication vehicles. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 36

OBJ: 8

2-25

93. DaimlerChrysler discovered that many of its 2002 Prowlers automobiles had faulty fuel systems that could cause the vehicles to stall in traffic. Which one of the marketing mix strategies should the auto manufacturer use to alert buyers to this problem? a. pricing b. production c. product d. promotion ANS: D Promotion includes all actions a firm takes to bring about mutually satisfying exchanges with target markets by informing, educating, persuading, and/or reminding them about the organization’s offerings. PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

OBJ: 8

94. There is an overabundance of apartments in Toronto. Post Properties, the owner of the metropolitan area’s largest apartment complexes, has reduced its rent so it can fill vacant apartments. Which of the following types of strategies did Post Properties use to create more demand for its apartments? a. price strategies b. production strategies c. distribution strategies d. product strategies ANS: A The best chance Post Properties has for increasing sales should be from altering pricing strategies. It is often the only element of the marketing mix that is capable of quick and easy change. PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

OBJ: 8

95. What is the process that turns marketing plans into action assignments and ensures that these assignments are executed in a way that accomplishes the plans’ objectives? a. strategic planning b. strategic analysis c. strategic design d. implementation ANS: D OBJ: 9

2-26

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 36-37

96. Argosy Arts Institute is a small private technological college with declining enrollment. It has put together a committee to put into action marketing plans that were developed by a consulting company. The goal of the committee is to increase enrolments at the college and attract donations. What is the committee involved in? a. mechanistic organization b. strategic diversification c. implementation d. product planning ANS: C Implementation involves all the steps listed in the question. PTS: 1 DIF: Application BLM: Higher order

REF: p. 36-37

OBJ: 9

97. John R. Harland Company is best known for printing cheques. Its Financial Solutions division develops software for finance companies. This division is currently not producing at the desired level of profitability, but Harland plans to turn the division into a success by acquiring other companies that develop similar software. What will turn this marketing plan into action assignments in a manner that accomplishes the company’s stated objectives? a. market strategizing b. entrepreneurship c. implementation d. marketing plan control ANS: C OBJ: 9

PTS: 1 DIF: Application BLM: Higher order

REF: p. 36-37

98. Enzo Fierro has just finished constructing the marketing plan for a new line of low-carb salad dressings. After selecting his target market and specifying the elements of the marketing mix, what should he do next? a. set marketing objectives that are realistic and scheduled b. examine similar manufacturers in the area to determine baseline productions c. get employees to do the work necessary to put the marketing strategy into action d. plan every action program and contingency plan ANS: C After construction of a marketing plan, implementation takes place, including gaining compliance from employees. PTS: 1 DIF: Application BLM: Higher order

REF: p. 37

OBJ: 9

2-27

99. After an organization implements its strategic plan, which of the following occurs? a. Management must track results, monitor the external environment, and adjust the plan as necessary. b. Management can stop work on this strategic plan, take a rest, and begin work on the next one. c. Management can be assured that the plan will work for the time frame specified. d. Management must make sure no part of the plan is changed, lest the plan fail. ANS: A Because the strategic environment continually changes, plans must be monitored and altered. PTS: 1 OBJ: 9

DIF: Comprehension BLM: Remember

REF: p. 37

100. What is the process of gauging the extent to which marketing objectives have been achieved during a specified time period? a. heuristic measurement b. control c. evaluation d. implementation ANS: C OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 37

101. What provides the mechanism for evaluating marketing results in light of the marketing plans’ goals and for correcting actions that do not help the marketing organization reach these objectives within the budget guidelines? a. budgeting b. planning c. implementation d. control ANS: D OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 37

102. Which of the following is a common reason that companies fail to achieve a marketing objective? a. appropriate marketing strategy b. lack of capital c. realistic marketing objectives d. good implementation ANS: C Lack of capital is a common reason for small business failure as companies often don’t budget enough money or have enough to meet their objectives. PTS: 1 OBJ: 9

2-28

DIF: Comprehension BLM: Remember

REF: p. 37

103. What should an international company that needs to develop a way to compare its actual marketing results with planned results engage in? a. external market research b. comparative analyses c. planning d. control ANS: D Control involves the mechanism for correcting actions in the planning and implementation phases. PTS: 1 OBJ: 9

DIF: Comprehension BLM: Higher order

REF: p. 37

104. A planning manager visiting a company’s health and beauty aids division discovers that the division has no effective method for allocating resources, nor for evaluating actual results against planned results. According to the text, what would he suggest the division should prepare? a. market share analysis b. marketing audit c. series of tactical evaluations d. service audit ANS: B A marketing audit is a thorough, systematic, periodic evaluation of the goals, strategies, organization, and performance of the marketing organization. A marketing audit will evaluate the past, present, and future performance of all aspects of the marketing department. PTS: 1 DIF: Application BLM: Higher order

REF: p. 37

OBJ: 9

105. What is a marketing audit? a. an evaluation of pricing strategies across all the relevant competitors in an industry b. a financial examination of the firm’s marketing performance c. a thorough, systematic, periodic evaluation of the goals, strategies, organization, and performance of the marketing organization d. an evaluation of the effectiveness of advertising ANS: C OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 37

2-29

106. According to the text, which of the following statements BEST describes marketing audits? a. Marketing audits simply examine the external environment in which a company operates. b. The main purpose of the marketing audit is to develop a full profile of a company’s marketing effort. c. Marketing audits need to be performed only once. d. The marketing audit should be performed only by outside accounting firms ANS: B Marketing audits should be performed periodically by an inside or outside party that is independent enough to have top management’s confidence and to be objective. Marketing audits examine all facets of an organization’s internal and external marketing environments. PTS: 1 OBJ: 9

DIF: Comprehension BLM: Remember

REF: p. 37

107. Which of the following BEST describes the marketing audit? a. It is a good tool with which to implement marketing plans. b. It looks at only potential threats that the organization has identified. c. It is a rather restricted, specialized tool for marketing managers. d. It is an excellent way to raise the level of marketing consciousness within an organization. ANS: D A marketing audit can be performed by internal employees as well as an external organization. A marketing audit is systematic and looks at all facets of the organization. The marketing audit is a control tool—not implementation. PTS: 1 OBJ: 9

DIF: Comprehension BLM: Remember

REF: p. 37

108. According to the text, which of the following statements BEST describes strategic planning? a. Effective strategic planning creates plans that are unaffected by environmental changes. b. It allows a firm to replace creativity with careful analysis. c. Top-management participation in and commitment to strategic planning is essential. d. It is a real time-saver for marketing managers because once it has been completed, the plan can be left unchanged for years. ANS: C This chapter emphasizes that strategic planning is an ongoing process that needs buy-in from top-management. PTS: 1 OBJ: 10

2-30

DIF: Comprehension BLM: Remember

REF: p. 38

109. What does effective strategic planning require? a. a stringent and narrow mission statement for the creation of effective guidelines b. a BCG portfolio matrix c. a designated single time frame during the year d. the planner to challenge existing company assumptions ANS: D Planners need to stretch their imaginations and search for creative solutions to problems. Planning is a constant process and should include top management. PTS: 1 OBJ: 10

DIF: Comprehension BLM: Remember

REF: p. 38

110. Bee-Dove Pottery used to sell finished pots and figurines by local artists when its owner noticed that many of her customers were asking if there were any way that they could make and personalize their own pieces. Now she sells pottery blanks, and customers create pieces that exactly suit their needs. What is this an example of? a. strategic planning based on creativity b. the use of a BCG portfolio matrix c. planning with the intent to challenge existing company assumptions d. a designated single time frame during the year ANS: A Managers and owners should challenge assumptions about the firm and the environment and establish new strategies. PTS: 1 DIF: Application BLM: Higher order

REF: p. 38

OBJ: 10

Compass is a United Kingdom–based catering company that has developed a marketing plan designed to make it the largest caterer in China within the next two decades. It has begun serving meals on trains that run between Shanghai and Beijing. 111. Refer to Compass. What is this activity part of? a. its marketing strategy b. its marketing control c. its marketing policy d. its marketing implementation ANS: D Implementation is the process that turns marketing plans into action assignments. PTS: 1 DIF: Application BLM: Higher order

REF: p. 36-37

OBJ: 9

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112. Refer to Compass. To evaluate how successful its efforts have been at the end of the first decade, what could Compass use? a. a SWOT analysis b. a comprehensive sales analysis c. a marketing audit d. an environmental scan ANS: C A marketing audit is a thorough, systematic, periodic evaluation of the objectives, strategies, structure, and performance of a marketing organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 37

OBJ: 9

In 2004, Giorgio Armani, the Italian fashion group, announced plans to launch a $1 billion international luxury hotel chain containing ten hotels and four resorts before the end of 2015. 113. Refer to Giorgio Armani. Which of the following describes the taking advantage of an international trend toward luxury lifestyle consumerism and allowing the company to achieve its growth objectives? a. horizon planning b. contingency plans c. marketing implementation d. strategic planning ANS: D Strategic planning is the managerial process of creating and maintaining a fit between the organization’s objectives and evolving market opportunities. PTS: 1 DIF: Application BLM: Higher order

REF: p. 22

OBJ: 1

114. Refer to Giorgio Armani. In terms of its situation analysis, the trend toward luxury lifestyle consumerism would be an example of which of the following? a. an advantage because it gives Armani growth opportunities b. a strength because it is part of Armani’s external environment c. an opportunity because it is part of Armani’s external environment d. a weakness because Armani cannot control the growth of the trend ANS: C A SWOT analysis looks at opportunities and threats (external to the organization) and strengths and weaknesses (internal to the organization). PTS: 1 DIF: Application BLM: Higher order

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REF: p. 25

OBJ: 4

115. Refer to Giorgio Armani. Since this was Armani’s first venture into the hotel industry, what would it be an example of? a. product penetration b. product development c. market development d. diversification ANS: D Diversification is a strategy of increasing sales by introducing a new product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

OBJ: 6

116. Refer to Giorgio Armani. By conducting which of the following could Armani identify a large and growing segment of the market that wanted a luxury lifestyle? a. market audit b. market opportunity analysis c. niche analysis d. social audit ANS: B An MOA is the description and estimation of the sales and size of potential market segments that are of interest to the firm. Armani produces luxury goods; therefore, luxury hotels seem to have excellent potential. PTS: 1 DIF: Application BLM: Higher order

REF: p. 34

OBJ: 7

Aldi is a no-frills grocery chain. It sells grocery staples right out of crates and boxes with emphasis on low-priced, private-label brands. Aldi stores are typically about one-third the size of traditional supermarkets. By controlling expenses, Aldi customers can expect to save 30 to 50 percent compared to Safeway customers. Aldi targets bargain hunters who are willing to rent a cart and bag their own groceries. 117. Refer to Aldi. What does Aldi have? a. a profit-enhanced advantage b. a cost competitive advantage c. a revenue-based competitive advantage d. a market-homogeneous focus ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

118. Refer to Aldi. What does Aldi use to create its competitive advantage? a. demand and supply curves b. no-frills goods and services c. re-engineering d. production innovation ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

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As the head of Eastman Kodak Co., George M.C. Fisher devised a plan to save Kodak from being trapped in the slow-growth photography industry, hobbled by huge debts, a dysfunctional management culture, and a dispirited workforce. At the time of his takeover of Kodak, the product development and sales functions for the company were scattered among divisions, and the business mission was ill focused. Fisher envisioned a long-term strategy in which Kodak focused on its core competencies. By evaluating the pros and cons associated with its various businesses, Fisher decided that imaging was the key to the future. He then sold Kodak’s health and household-products arms. He also assembled most of the corporate talent into one division and hired an experienced computer marketing executive to head it. Further, by stressing accountability, quality, and cycle time, Fisher began to transform Kodak’s slow-moving culture. Fisher believes Kodak could double its growth rate in photography, a tough challenge in a slow-growing market, by becoming more global and by challenging Fujifilm in China. 119. Refer to Eastman Kodak Co. As Kodak actively redefined its business mission, organization culture, and global strategy, what was it engaged in? a. market planning b. strategic contingency planning c. the strategic planning processes d. writing the mission statement ANS: C All the listed activities are part of the strategic planning process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 22

OBJ: 1

120. Refer to Eastman Kodak Co. By redefining the business to focus on imaging technology, what did Fisher create? a. a new strategic plan b. a new situational analysis c. a new market strategy d. a new mission statement ANS: D Kodak’s mission statement answers the question, “What business are we in?” PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 2

121. Refer to Eastman Kodak Co. Fisher evaluated Kodak’s current status based on core capabilities and future expectations. What is this evaluation process called? a. an environmental scan b. a situation analysis c. a profit and loss assessment d. a market audit ANS: B When a company pursues a formal study to ascertain its current status and capabilities and its future expectations, it is conducting a situation analysis. PTS: 1 DIF: Application BLM: Higher order 2-34

REF: p. 25

OBJ: 4

122. Refer to Eastman Kodak Co. By pruning product lines and assembling the corporate talent into one division, what did Fisher engage in? a. reverse engineering b. production diversification c. re-engineering d. augmented production ANS: C Re-engineering is used to make firms more efficient. Reverse engineering is the process of disassembling a product piece by piece to gain an understanding of its components. PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

OBJ: 5

123. Refer to Eastman Kodak Co. Fisher realized the market for photography is growing slowly, so he planned to expand into China. Which growth strategy is Fisher practising? a. market penetration b. market development c. product development d. diversification ANS: B Market development stimulates new sales by expanding into new markets. PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

OBJ: 6

Patricia Curtis has been running the Ferrets First Rescue and Shelter (FFRS) since 1996. FFRS is in the business of ferret pickup and rescue, as well as ferret boarding and training, and education for ferret owners. She would like to expand her operations, and has been asked to write a marketing plan in order to apply for a bank loan. Curtis knows she can better serve ferrets and ferret owners if she can expand her target audience to schools, animal control officers at city facilities, and pet stores. To do this, she must increase marketing communications. 124. Refer to FFRS. “Serving ferrets and their owners in a five-region area” would be an example of a. a mission statement b. a strategic plan c. a situation analysis d. a market strategy ANS: A This mission statement answers the question, “What business are we in?” PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

OBJ: 2

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125. Refer to FFRS. Curtis is short of capital and labour and overcrowded with ferrets because they are not adopted fast enough. She also knows she has superior ferret knowledge and an excellent facility for housing ferrets, and hopes to increase her capacity to 100 ferrets. What is this assessment process in which she learned this about her environment? a. a market audit b. an environmental scan c. a profit and loss assessment d. a situation analysis ANS: D When a company pursues a study to ascertain its current status and capabilities and its future expectations, it is conducting a situation analysis. PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

OBJ: 4

126. Refer to FFRS. The fact the FFRS is the only shelter of its kind in Ontario to have a “no-kill” policy, to offer pickup services in a five-region area, and to have exclusive rights in the region to market Totally Ferret Food makes up which of the following? a. the company’s marketing alliance b. the company’s penetration strategy c. the company’s competitive advantage d. the company’s comparative edge ANS: C These facets could be a competitive advantage or sustainable competitive advantage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

OBJ: 5

127. Refer to FFRS. By marketing her existing ferret services to people who work with ferrets (such as educators, city officers, and pet store managers) in addition to ferret owners, what would FFRS be engaged in? a. product development b. diversification c. market penetration d. market development ANS: D Market development entails marketing current products to new target markets. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 30

OBJ: 6

128. Refer to FFRS. Curtis will be exploring aspects of what her service offers, her central location and mobile pickup offering, the price of ferret adoptions, and promotions to increase awareness and expand donations. These elements in the marketing plan make up which of the following? a. the service’s situation analysis b. the service’s environmental audit c. the service’s target marketing plan d. the service’s marketing mix ANS: D Product/service, place/distribution, price, and promotion make up the marketing mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 35

OBJ: 8

129. Refer to FFRS. Curtis should know that effective strategic planning for the Ferrets First Rescue and Shelter requires which of the following? a. marketing information systems b. sound planning based on financial measurements c. continual environmental scanning d. top management’s support and participation ANS: D Top management support is essential for any strategic planning. PTS: 1 DIF: Application BLM: Higher order

REF: p. 38

OBJ: 10

Masco is a company that is well recognized in the construction industry. It produces cabinetry, furniture, lighting, and plumbing fixtures for the upper-end homeowner and builder. One of the divisions of Masco is the Delta Faucet Company, which is the leader in the faucet industry. Since its founding in 1955, Delta has developed a legacy based on well-crafted, high-quality products. Since the 1970s, the company has focused its energies on building loyalty with the builder marketplace. Research in 2002 showed that while builders respect the Delta faucet for its quality, durability, and dependability, household consumers were not enamored with Delta products. Due to the number of new magazines and television programs devoted to home style, homeowners wanted faucets that were chic and stylish. This was not the image of the Delta faucet. To change its image, Delta began a marketing program in which it committed itself to developing new products to appeal to homeowners. It adopted a new slogan, “Beautifully Engineered.” 130. Refer to Delta Faucet. The marketing program, which Delta designed to develop new products to appeal to homeowners, is an example of which of the following? a. a mission statement b. tactical planning c. strategic planning d. mass marketing ANS: C OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 22

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131. Refer to Delta Faucet. How would Delta Faucet most likely have gathered the information about how homeowners perceive its products? a. through an economic forecast b. through a situation analysis c. through a sales potential assessment d. through a break-even analysis ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 25

132. Refer to Delta Faucet. The reputation Delta faucet has for its quality, durability, and dependability among builders is an example of which of the following? a. a competitive advantage b. a tactical threat c. an experience curve d. a market differentiator ANS: A OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 27

133. Refer to Delta Faucet. Since Delta was already marketing to homeowners (although not very successfully), its development of new styles of faucets to appeal to this underserved market would be an example of what type of strategy? a. product penetration b. product development c. product diversification d. market penetration ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 31

134. Refer to Delta Faucet. Delta’s decision to make more stylish faucets represents a change in which element of its marketing mix? a. promotion b. production c. distribution d. product ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 35

135. Refer to Delta Faucet. Delta’s development of a new slogan represents a change in which element of its marketing mix? a. product b. place c. promotion d. distribution ANS: C OBJ: 8

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 36

136. Refer to Delta Faucet. Which of the following is the Delta Faucet Company? a. a target market of Masco b. a transactional division of Masco c. a situational business usage of Masco d. a strategic business unit of Masco ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

Thermo Electron Corp., the biggest maker of measurement instruments for medical laboratories, agreed to buy the radiation-monitoring-products unit of Compagnie de Saint-Gobain for $30 million to gain European customers. 137. Refer to Thermo. Saint-Gobain (of France) is Europe’s number-one1 distributor of building materials, and its radiation monitoring unit did not support the company’s mission statement. What does this mean? a. Thermo Electron’s mission statement was incomplete. b. Saint-Gobain’s mission statement was too broad. c. Saint-Gobain’s mission dealt with providing building materials to its customers, not radiation-monitoring equipment. d. Thermo Electron does not have a mission statement. ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

138. Refer to Thermo. What did Saint-Gobain sell? a. one of its strategic alliances b. one of its strategic business units c. one of its transactional units d. one of its synergistic divisions ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 24

139. Refer to Thermo. What type of strategy did Thermo Electron engage in? a. penetration b. building c. market development d. diversification ANS: C OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 30

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TRUE/FALSE 1. The manufacturer of Revlon cosmetics was implementing a strategic plan when it provided its retailers with display units promoting its new shades of summery lipsticks. ANS: F Such a short-range decision is typically a tactical plan or operating decision, not a strategic plan. PTS: 1 DIF: Application REF: p. 22 OBJ: 1 2. The marketing plan is a written document that acts as a guidebook of marketing activities for a marketing manager. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 22

3. A firm’s mission statement should answer the question, “What products do we produce best?” ANS: F Mission statements should not focus on specific product offerings but on the market or markets served. PTS: 1

DIF: Definition

REF: p. 24

OBJ: 2

4. Marketing objectives should be consistent with organization objectives, be measurable, and specify the time frame during which they are to be achieved. ANS: T REF: p. 26

PTS: 1 OBJ: 3

DIF: Comprehension

5. The company’s objective is to spend 10 percent of this fiscal year’s sales revenue on research and development in an effort to introduce at least five new products in the next fiscal year. This is an example of a well-stated objective. ANS: T This objective is measurable and has a specific time frame. PTS: 1

DIF: Application

REF: p. 24

OBJ: 3

6. A situation analysis is a small part of the more all-encompassing SWOT analysis. ANS: F A common way to conduct a situation analysis is to perform a SWOT analysis, which means examining the company’s environments for strengths, weaknesses, opportunities, and threats. PTS: 1

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DIF: Definition

REF: p. 25

OBJ: 4

7. A marketing audit is limited to the collection and analysis of information about factors that may affect the organization as well as the identification of market opportunities and threats. ANS: F This is the definition of environmental scanning. PTS: 1

DIF: Definition

REF: p. 25

OBJ: 4

8. A competitive advantage is some unique aspect of a firm’s offering, or of the firm itself, that causes target customers to patronize the firm rather than its competition. ANS: T OBJ: 5

PTS: 1

DIF: Definition

REF: p. 27

9. Diamonds that come from rebel African troops trying to get money for weapons are much cheaper than diamonds from countries that are not in conflict. A diamond retailer that ignores the pleas of human rights organizations not to sell the cheaper diamonds is creating a cost competitive advantage for itself. ANS: T Having a cost competitive advantage means being the low-cost competitor in an industry while maintaining satisfactory profit margins. PTS: 1

DIF: Application

REF: p. 27

OBJ: 5

10. Niche competitive advantages are quite common. ANS: T The text lists several examples of how companies have created niche competitive advantages. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 29

11. If the Pillsbury Company started a major promotional campaign for its Green Giant frozen vegetables with aggressive advertising and cents-off coupons to existing customers, it would be following a market development strategy. ANS: F It would exemplify a market penetration strategy. PTS: 1

DIF: Application

REF: p. 30

OBJ: 6

12. When the Internet auction company www.ebay.com opened a version of the company it called ebayfrance.com for the French market, it was an example of market penetration. ANS: F Market penetration is the strategy of selling more to existing customers. PTS: 1

DIF: Application

REF: p. 30

OBJ: 6

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13. Maple Foods Nutrition has just developed a new line of all-natural cold medications that further meet the needs of its current customers. This is an example of product development. ANS: T OBJ: 6

PTS: 1

DIF: Application

REF: p. 31

14. When a florist shop begins to sell burial caskets to its customers, it is engaged in product development. ANS: T Product development is the offering of new products to current markets. PTS: 1

DIF: Application

REF: p. 31

OBJ: 6

15. Andre wanted to rent a limousine for the weekend; then he learned the rental company offered lower daily rates if he rented it for seven days. The rental company was using a market development strategy. ANS: F In this case, the pricing strategy does not determine the strategic alternative used. PTS: 1

DIF: Application

REF: p. 30

OBJ: 6

16. Thomas Office Supply has developed a clipboard design that will better fulfill the needs of not only its customers in the hospital market, but also potential new customers in the educational market. This is an example of diversification. ANS: F This is an example of product development to the hospital market. One might argue that it is market development to the educational market, but unless the product is radically new to the company, it would not exemplify diversification. PTS: 1

DIF: Application

REF: p. 31

OBJ: 6

17. Marketing strategy involves the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets. ANS: T OBJ: 7

PTS: 1

DIF: Definition

REF: p. 34

18. The development of a target market strategy begins with a market opportunity analysis (MOA). ANS: T REF: p. 34

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PTS: 1 OBJ: 7

DIF: Comprehension

19. The four Ps of the marketing mix are product, planning, promotion, and price. ANS: F The four Ps are product, place, promotion, and price. PTS: 1

DIF: Definition

REF: p. 35

OBJ: 8

20. Typically, the development of the marketing mix starts with the identification of potential target markets. ANS: F The development of the marketing mix begins with the product. PTS: 1

DIF: Definition

REF: p. 35

OBJ: 8

21. A marketing audit is a control device and is used primarily by large corporations to study past performance. ANS: F A marketing audit is not preoccupied with past performance but instead looks to the future allocation of marketing resources. PTS: 1 OBJ: 9

DIF: Comprehension

REF: p. 37

22. Strategic planning is most effective when managers view it as an annual exercise. ANS: F Strategic planning requires creativity and an ongoing commitment, not just going through the motions once a year. PTS: 1 OBJ: 10

DIF: Comprehension

REF: p. 38

23. The most critical element in successful strategic planning is the development of a sustainable competitive advantage. ANS: F The most critical element to successful strategic planning is top management’s support and participation. PTS: 1 OBJ: 10

DIF: Comprehension

REF: p. 38

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ESSAY 1. What is the difference between planning, strategic planning, and marketing planning? ANS: Planning is the process of anticipating future events and determining strategies to achieve organizational objectives in the future. Strategic planning is the managerial process of creating and maintaining a fit between the organization’s objectives and resources and the evolving market opportunities. The goal of strategic planning is long-run profitability and growth. Thus, strategic decisions require long-term commitments of resources. Marketing planning involves designing activities relating to marketing objectives and the changing marketing environment. Marketing planning is the basis for all marketing strategies and decisions. Issues such as product lines, distribution channels, marketing communications, and pricing are all delineated in the marketing plan. PTS: 1

DIF: Application

REF: p. 22

OBJ: 1

2. What is marketing myopia? If a movie theatre company had a myopic orientation, how might it state its business purpose? If the movie theatre company avoided a myopic orientation, how would its business purpose change? ANS: Defining a business in terms of goods and services rather than in terms of the benefits customers seek is called marketing myopia, which implies a narrow, short-term orientation. This orientation can threaten the survival of an organization. If a movie theatre company had a myopic orientation, it might state its business as “selling tickets to movies.” A better business statement for the theatre would be “to provide convenient entertainment.” PTS: 1

DIF: Application

REF: p. 24

OBJ: 2

3. What is an SBU? If properly created, what characteristics should an SBU have? ANS: SBU is an acronym for strategic business unit. A popular technique for managing large, heterogeneous organizations is to divide the firm into strategic business units. When properly created, an SBU will have the following characteristics: • • • • • •

A distinct mission and a specific target market Control over its own resources Its own competitors A single business or collection of related businesses Plans independent of other businesses of the total organization Its own basic business functions

PTS: 1 2-44

DIF: Application

REF: p. 24

4. What is a marketing objective? Name three criteria for good marketing objectives, and give a specific example of an objective. ANS: A marketing objective is a statement of what is to be accomplished through marketing activities. For marketing objectives to be realized, they must meet several criteria. They must: • Be consistent with organizational objectives • Be measurable • Specify the time frame during which they are to be achieved • Be attainable and challenging The example objective should fulfill the above criteria, and be stated in terms of actions expected by the target consumers. PTS: 1

DIF: Application

REF: p. 26

OBJ: 3

5. What is a SWOT analysis? How does it relate to strategic planning? ANS: The SWOT acronym represents the four components of a situation analysis, the second step in strategic business planning. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal components of the organization that should be analyzed, while opportunities and threats are characteristics of the external environment that should be analyzed. With the SWOT analysis, the company is determining its present status, its current capabilities, and its future expectations. PTS: 1

DIF: Application

REF: p. 25

OBJ: 4

6. What is environmental scanning? Name four environmental forces that affect marketing decision making. ANS: Environmental scanning is the collection and interpretation of information about external forces, events, and relationships that may affect the future of the organization. It helps identify market opportunities and threats and provides guidelines for the design of marketing strategy. Important forces include: • • • • • • PTS: 1

Social forces Demographic forces Economic forces Technological forces Political and legal forces Competitive forces DIF: Application

REF: p. 25

OBJ: 4

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7. Hazel’s Gourmet Spreads & Preserves is located in Nova Scotia. Its owner, Hazel Mintz, sells her products at arts and crafts shows and through mail order. The company has been in operation since 1994. Hazel has 15 employees and sells 47 different products. She packages her products in reusable glass containers that feature a four-colour screen-printed label. Discuss how this company can establish or maintain at least one of the three types of competitive advantage. ANS: Student answers to this question will vary. Answers should include a cost competitive advantage, which can be achieved through no-frills goods and customer service, efficient labour, production innovations (such as new products not currently on the market), and the experience curve. A product differentiation competitive advantage might be achieved by the use of the value impression (this possibility is implied in the description of the containers). The company might also try selling an augmented product offering; perhaps a bread mix bundled with the spreads. The niche competitive advantage is probably not appropriate for this company. Some students may suggest targeting gourmets or some other single market. PTS: 1

DIF: Application

REF: p. 27

OBJ: 5

8. What is a competitive advantage? What makes a competitive advantage sustainable? ANS: A competitive advantage is defined as one or more unique aspects of an organization that cause target consumers to patronize that firm rather than competitors. Seeking a competitive advantage over other firms in the market is an excellent means of examining opportunities. A sustainable competitive advantage is one that cannot be copied by the competition. Without this, a competitive advantage could be easily copied and the advantage lost. PTS: 1

DIF: Application

REF: p. 27

OBJ: 5

9. One method for conceptualizing alternative strategic opportunities is through the use of a strategic opportunity matrix. Fill in the matrix below with the appropriate names of alternatives. For each of the four opportunity alternatives, also give a specific example of a firm following that strategy. Present Product

New Product

Present Product Market Penetration

New Product Product Development Diversification

Present Market New Market

ANS: Present Market New Market

Market Development

Text examples given for the four alternatives are as follows:

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Market penetration. Kraft General Foods using heavy promotional expenditures in the form of aggressive advertising and cents-off coupons for Maxwell House coffee. Market development. McDonald’s opening restaurants in Russia, China, and Italy; colleges and universities expanding to executive development and continuing education. Product development. Nike introducing ergonomic running watches, a high-altitude wrist compass, and a portable heart-rate monitor. Diversification. LTV entering the monorail business; Sony’s acquisition of Columbia Pictures; Coca-Cola manufacturing water treatment equipment. PTS: 1

DIF: Application

REF: p. 30-31

OBJ: 6

10. After developing strategic alternatives, the marketing manager must select one of the alternatives. Evaluation of the alternatives will result in different selections based on two factors. What are these factors, and how do they affect the selection of a strategic alternative? ANS: A corporation’s philosophy (market share versus profit) and its corporate culture affect strategic alternative selection. Short-term goals of profitability and market share are usually incompatible. Depending on which goal is given highest priority, different strategic alternatives may be selected. If market share is desired, market penetration and market development may be chosen. If profitability is desired, each alternative must be carefully evaluated according to expected payoffs. Corporate culture also plays a role in selecting a strategic alternative. Corporate culture determines how the firm reacts to problems and opportunities and how risk is handled in the external environment. Corporate culture also designates the internal environment of the firm and would affect selection of alternatives by individual workers. PTS: 1

DIF: Application

REF: p. 31

OBJ: 6

11. An essential part of marketing strategy is target market strategy. Selection of target market(s) drives marketing objectives and selection of the marketing mix (the four Ps). What are the three general strategies for selecting target markets? ANS: The strategies are to: • • • PTS: 1

Appeal to the entire market with a single marketing mix Concentrate on only one segment of the market Appeal to multiple market segments using multiple marketing mixes DIF: Application

REF: p. 34

OBJ: 7

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12. Describe the three key activities of a market opportunity analysis. ANS: Market opportunity analysis entails: Describing market segments. Criteria commonly used to describe consumer markets are geographic location of potential customers, their demographic characteristics, their psychological characteristics, benefits sought, and purchase volume. Criteria commonly used to describe business markets are geographic location, size, purchasing criteria, purchase strategies, structure of the decision-making unit, and personal characteristics of decision makers. Estimating market segment size and sales potential. This involves estimating the number of potential customers in a market segment, market segment sales potential, and company sales potential. This results in a company sales forecast. Analyzing key competitors. An analysis of other firms that target the same markets with similar products or substitutes takes place. Key competitor analysis includes identification of competitors’ strengths and weaknesses, assessing their current marketing strategies, and predicting their future actions. PTS: 1

DIF: Application

REF: p. 34

OBJ: 7

13. The marketing mix refers to a unique blend of marketing variables known as the four Ps. Name and briefly describe each of the four Ps. ANS: Product. The firm’s product offerings are the heart of the marketing mix. The Product P includes product development, production assistance, packaging, warranties, servicing, branding, company image, and other components in addition to the physical unit. Place (or distribution). Distribution strategies make products available when and where customers want them. Products move through a channel of distribution that may include wholesalers and retailers. Physical distribution (stocking and transportation logistics) is also part of the Place P. Promotion. Promotion includes personal selling, advertising, sales promotion, and public relations. Promotion serves to inform, educate, persuade, and remind target markets about product benefits. Price. Price strategies are an important competitive weapon. Pricing is an important component of the marketing mix because it is flexible and allows revenue to be estimated and measured. PTS: 1

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DIF: Application

REF: p. 35

OBJ: 8

14. Perhaps the broadest control device available to marketing management is the marketing audit. Describe this tool and its characteristics. ANS: A marketing audit incorporates both financial and nonfinancial reporting, is mainly futuristic in nature, and is largely strategy oriented. The marketing audit is designed to aid management in allocating marketing resources efficiently. It may be defined as a thorough, systematic, periodic evaluation of the goals, strategies, organization, and performance of the marketing organization. The marketing audit looks to the future allocation of marketing resources. All companies should use the audit system to uncover potential weaknesses and identify cost-cutting opportunities. The marketing audit should be comprehensive, systematic, independently conducted, and run periodically. PTS: 1

DIF: Application

REF: p. 37

OBJ: 9

15. Bronco Pallet Company is unaware of all the many tools available to marketers that can examine a firm’s processes, and identify potential areas for improvement. This firm wants to examine all of its goals, strategies, and structure, to ensure it is on the right track and doing things well. Bronco Pallet has hired you as an outside consultant to recommend a plan of action. What do you suggest, and why? ANS: Perhaps the broadest control device available to marketing management is the marketing audit. A marketing audit is a thorough, systematic, periodic evaluation of the goals, strategies, structure, and performance of the organization. This would address all of the issues this firm wants more information about. PTS: 1

DIF: Application

REF: p. 37

OBJ: 9

16. Name and describe the three requirements for effective strategic planning. ANS: Continual process. Strategic planning should be an ongoing process because the environment is continually changing and the firm’s resources and capabilities are continually evolving. Creativity. Sound planning is based on creativity. Existing assumptions about the firm and the environment should be challenged, and new rules of the game should be established. Developing unique and visionary strategies that defy conventional wisdom also prevents managers from locking into static and predictable options. Management commitment. Perhaps the most critical element of successful strategic planning is top management’s support and participation. Without the involvement of top management, no strategic plan can be effectively implemented. PTS: 1

DIF: Application

REF: p. 38

OBJ: 10

2-49

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2-50

Chapter 3—Ethics and the Marketing Environment MULTIPLE CHOICE 1. What is the concern of business for the long-range welfare of both the company and its relationships to the society within which it operates? a. consumerism b. conventional morality c. corporate social responsibility d. environmental consideration ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 52

2. Hewlett Packard is currently investing $1 billion to bring tele-medicine and e-learning to 1,000 villages in the developing world that have only limited medical facilities and educational opportunities. This is not only good business, but also shows it is which of the following? a. unrelated to any ethical motivation b. environmental marketing c. socially responsible d. demonstrates a lack of concern for diversity ANS: C Social responsibility is the duty that business feels for the welfare of society. By helping developing nations, Hewlett Packard is helping to meet the needs of society. PTS: 1 DIF: Application BLM: Higher order

REF: p. 52

OBJ: 1

3. What does sustainability refer to? a. the ability of a company to maintain high profits despite cutting prices b. the ability of a company to outperform competitors via generating higher profits over the long term c. the ability of a company to perform in the marketplace without generating profits d. the ability of a company to outperform competitors by focusing on social problems ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 52

4. What is the definition of corporate social responsibility? a. the rules by which social rewards are attained b. the coordination of social programs for publicity purposes c. the concern for social welfare by businesses d. the development of inclusive codes of ethics ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 52

3-1

5. The pyramid of corporate social responsibilities contains all of the following components EXCEPT which one? a. legal responsibilities b. ethical responsibilities c. cultural responsibilities d. the coordination of social programs for publicity purposes ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 52

6. Which of the following BEST describes corporate social responsibility? a. It is unaffected by environmental changes. b. It may not always result in profit and growth. c. It requires companies to sacrifice economic performance for the sake of their stakeholders. d. It is mandated by federal law. ANS: B REF: p. 52

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

7. For every home built by Habitat for Humanity, Whirlpool Corporation has given and continues to give free kitchen appliances to the deserving family. What does this donation of appliances show? a. the company’s multiculturalism b. the company’s corporate social responsibility c. the company’s duty to engage in cause marketing d. the company’s right to engage in social marketing ANS: B Corporate social responsibility is a business’s concern for society’s welfare; in this case, it involves deserving families selected by the Habitat organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 52

OBJ: 1

8. Which of the following statements about corporate social responsibility is true? a. Marketers universally agree on the importance of corporate social responsibility. b. Skeptics of the concept of corporate social responsibility believe in the importance of sustainability. c. Corporate social responsibility can derive from a situational analysis. d. According to marketers, corporate social responsibility is successful because it focuses solely on economic performance. ANS: C There are skeptics and proponents of corporate social responsibility. Skeptics believe that corporate social responsibility does not focus on economic performance. Proponents of the theory believe in sustainability. Corporate social responsibility encourages companies to view social needs as opportunities; these are revealed through situational analyses. PTS: 1 OBJ: 1

3-2

DIF: Comprehension BLM: Remember

REF: p. 52

9. What is the idea that socially responsible companies will outperform their peers by focusing on the world’s social problems and viewing them as opportunities to build profit and help the world at the same time? a. sustainability b. cause marketing c. philanthropy d. international ethics ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 52

10. Which of the following statements about the theory of sustainability is true? a. Sustainability is the idea that socially responsible companies will outperform their peers when they focus on the world’s problems as marketing opportunities. b. Sustainability is an internal process in which companies match resources and objectives. c. Sustainability is successful only if it focuses on organizational strengths. d. According to the theory of sustainability, a company cannot be socially responsible without a code of ethics and managerial support of that code. ANS: A Sustainability is the idea that socially responsible companies will outperform their peers by focusing on the world’s social problems and viewing them as opportunities to build profit and help the world at the same time. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 52

11. What are the four components of the pyramid of corporate social responsibility? a. sustainability, legality, creativity, and competition b. economic, legal, ethical, and philanthropic responsibilities c. sustainability, creativity, profit, and culture d. organizational, financial, social, and cultural responsibilities ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 52

12. For a period of months in 2004, Birch Telecommunications donated $10 to the Humane Society on behalf of each new business customer that signed with the service. This sort of program indicates the company was operating at which responsibility level? a. ethical b. philanthropic c. cultural d. economic ANS: B By supporting the efforts of the Humane Society, the company was being a good corporate citizen. PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

OBJ: 1

3-3

13. According to the text, which of the following statements BEST describes ethics? a. Morals are a foundation for corporate behaviour. b. Ethical values are important only to individuals. c. Ethics are the moral principles or values that generally govern the conduct of a corporation. d. Ethics is the standard of behaviour by which conduct is judged. ANS: D REF: p. 54

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

14. Which of the following sayings best describes how people with conventional morality act? a. Don’t count your chickens before they hatch. b. When in Rome, do as the Romans do. c. A rolling stone gathers no moss. d. Don’t put all of your eggs in one basket. ANS: B REF: p. 55

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

15. Argus Finnian is a calculating, self-centred salesperson. He never engages in relationship marketing. He looks on any sales situation as a “win-lose” situation, and he believes that any legal method he can use is justified when he wins. Which stage of ethical development is Finnian most likely at? a. transformationalism b. basic morality c. preconventional morality d. egocentrism ANS: C Preconventional morality is the most basic level of morality. PTS: 1 DIF: Application BLM: Higher order

REF: p. 55

OBJ: 2

16. Fred Farkle works for Fedlayer Powder Corporation. Fred takes great pride in the fact that he has a reputation for being a “good company man.” What does Fred subscribe to? a. conventional morality b. postconventional morality c. preconventional morality d. premeditated morality ANS: A OBJ: 2

3-4

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 55

17. Treena Chobotar is a sales manager for Viennese, a company that sells classic high-end children’s apparel through party plans. She is very concerned about making sure her salespeople understand the importance of treating each customer fairly and developing long-term relationships with them. She asks that before a sale is made, the salesperson should make sure customers can afford the clothing and are not buying due to social pressures. Which stage of ethical development is Treena most likely at? a. preconventional morality b. transformationalism c. postconventional morality d. conventional morality ANS: C Postconventional morality is that of the mature adult. At this level, the individual is more concerned about others than about himself or herself. PTS: 1 DIF: Application BLM: Higher order

REF: p. 55

OBJ: 2

18. According to the text, which of the following BEST describes ethical decision making? a. It can be influenced by middle managers. b. It depends on who is making the decision. c. It is influenced by the probability of harmful outcomes. d. It does not depend on the number of people to be affected. ANS: C REF: p. 55

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

19. Like many other businesses, 3M Corporation has developed a formal, written guideline to help marketing managers and employees make better ethical decisions. What is this document? a. a moral ruling b. a behavioural practice c. a code of ethics d. a principled regulation ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 56

20. Which of the following is an advantage of creating ethics guidelines for companies? a. The guidelines help employees avoid confusion when determining whether their actions are ethical. b. The guidelines enable effective external control on employee behaviour. c. The guidelines eliminate discussion among employees about what is right and wrong. d. The guidelines enable the company legal staff to successfully litigate nonconforming employees. ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 56

3-5

21. Which of the following statements about the creation of a code of ethics is true? a. A written code helps employees avoid confusion when determining whether their decisions are ethical. b. The process of formulating the code facilitates discussions that ultimately create worse decisions. c. A code confuses employees about what their firm recognizes to be acceptable business practices. d. A code can be an effective external control on behaviour. ANS: A REF: p. 56

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

22. A human resources manager is creating a code of ethics for the employees of the stable she works for. Which of the following is an ethics principle she needs to keep in mind as she creates this code? a. The principles should upset current barn workers and future job applicants. b. Any decisions should be fair to all concerned: barn workers, riders, instructors, and horses. c. Principles can deviate from common practices because of the prestigious nature of the facility. d. She should have to pull rank or use coercion to implement her ethics code. ANS: B An unethical code would presume that the company is an exception to a common practice in the industry. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 56

23. Which of the following factors tends to influence ethical decision making and judgments? a. level of multiculturalism b. number of people to be affected c. potential magnitude of the decision d. probability of a beneficial outcome ANS: B REF: p. 56-57

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

24. What is a defined group that managers feel is most likely to buy a firm’s product? a. target market b. consumer cluster c. demographic sample d. buying centre ANS: A OBJ: 3

3-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 57

25. Which of the following statements BEST describes the typical target market? a. A target market will remain stable over time, with the same group of consumers. b. Target markets change over time as consumers drop in or out of the market, and as tastes change. c. Target markets are not strongly affected by changes in the external environment. d. Target markets cannot be specifically defined according to age, income, or location because these factors are continually changing. ANS: B Target markets are defined and described, but they are always changing in response to environmental changes. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 57

26. Colourific is a relatively new competitor for Crayola colouring products. What is the term for people buying school supplies in September? a. Colourific’s target market b. Colourific’s aggregated demography c. Colourific’s buying centre d. Colourific’s consumer sample ANS: A A target market is a defined group that managers feel is most likely to buy its products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 57

OBJ: 3

27. Assume you are in charge of the politically mandated process of converting the economy of a developing African nation from state-controlled to market-driven business ventures. Which of the following will you need to control to most likely determine the future success of the country and its government? a. technology b. marketing c. the culture d. the competitive environment ANS: B Marketing is concerned with managing controllable variables (the marketing mix) within an uncontrollable environment. Because there has been a politically mandated process of economic change from state controlled to market driven, marketing issues would be of paramount concern. PTS: 1 DIF: Application BLM: Higher order

REF: p. 57-59

OBJ: 3

3-7

28. Cigarette manufacturers have had to eliminate the use of vending machines due to the machines’ inability to check the buyers’ ages. A cigarette manufacturer has developed a vending machine that operates only after the user inserts a card verifying his or her age. Which of the following has the cigarette manufacturer engaged in by modifying its external environment through the use of technology? a. technology diversity b. environmental management c. synergistic research and development d. re-engineering ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 58

29. Although they can at times influence it, marketing managers cannot control one of the following. Which one? a. how products are priced b. where advertising is placed c. the sales force d. the external environment ANS: D The external environment is basically uncontrollable, but the other four answers are part of the marketing mix. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 58

30. As technology continues to offer more methods for shopping on the Internet, manufacturers and traditional retailers are finding themselves in direct competition with each other. In this case, manufacturers and retailers cannot intelligently plan for the future unless marketing managers understand one of the following. Which one? a. how consumers are researching new technology b. their competitors’ strategies c. changing social attitudes towards ethics d. the economic conditions that influence the growth of countries ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 58

31. What is the most difficult external variable for marketing managers to forecast, influence, or integrate into marketing plans? a. economic conditions b. competition c. technology d. social ANS: D REF: p. 58-59

3-8

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

32. Which of the following BEST describes the external environment? a. It does not change over time. b. It cannot be influenced by marketing managers. c. It must be continually monitored by marketing managers. d. It can be controlled in much the same manner as the internal marketing mix. ANS: C REF: p. 58

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

33. The external environment is a strong influence on a target market. For the marketing manager, what can it be a source of? a. threats and strengths b. opportunities and threats c. product myopia d. opportunities and weaknesses ANS: B The external environment can provide opportunities to serve new and changing needs, as well as warnings about changes that could threaten the current position of the firm. Students will need to remember what a SWOT analysis is to answer this question. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 58

34. When a company implements strategies that attempt to shape the external environment in which it operates, what is it engaging in? a. reactive management b. market control c. environmental management d. transactional management ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 58

35. The Newfoundland Legislature tried to pass a bill requiring concert promoters and venue operators to print parental warnings on tickets and advertisements for concerts and shows by performers whose recordings have already been given content advisory labels. Promoters and venue operators prevented the passage of this bill that would have required them to make value judgments that they felt ill equipped to make. What did the concert promoters and venue operators engage in? a. corporate espionage b. internal marketing c. illegal practices d. environmental management ANS: D Attempting to influence external environmental factors is known as environmental management. PTS: 1 DIF: Application BLM: Higher order

REF: p. 58

OBJ: 3

3-9

36. Consumers are increasingly asking about the source of the products they are buying and not buying wood that is from a nation that is destroying its environment. Approximately 80 percent of the lumber produced in Indonesia is illegally logged. Two logging companies in Indonesia are putting computerized bar codes on their logs to show they were legally harvested. What do the companies hope this coding will provide evidence of? a. downsizing b. proactive evaluation c. transactional control d. environmental management ANS: D Attempting to influence external environmental factors is environmental management. PTS: 1 DIF: Application BLM: Higher order

REF: p. 58

OBJ: 3

37. Which of the following factors is concerned with the changes in people’s values, lifestyles, and family roles? a. political b. competitive c. demographic d. social ANS: D REF: p. 59

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

38. Many people in Canada choose to drink light beer because Canadians value thin and fit bodies. In Europe, light beers have had little success because flavour is valued more highly. For international beer manufacturers, what does this difference illustrate? a. how cultural factors influence marketing b. how competition influence marketing c. how economic conditions influence marketing d. how social factors influence marketing ANS: D Values are an example of social factors and influence what products people buy. PTS: 1 DIF: Application BLM: Higher order

3-10

REF: p. 59

OBJ: 4

39. What is the most difficult external variable for marketing managers to forecast or influence? a. social factors b. economic factors c. demographic factors d. political factors ANS: A Social factors and changes are difficult to foresee, because they are usually slow and/or small changes. Also, it is very difficult for one company to affect social factors in any appreciable manner. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 59

40. Terrorist activities in the United States on 9/11 forced many Americans to rethink their vacation plans even though measures were taken to protect airplane passengers. Vacation destinations in Florida particularly suffered a decline in business. For the U.S. tourist industry, what was the decline in tourism due to? a. macroeconomic conditions that made Florida destinations non-competitive relative to other U.S. vacation spots b. social forces that changed the attractiveness of alternative vacation options c. a shift in regulatory controls from the public sector to the private sector d. competitive forces in the northern regions of the United States that induced Americans to stay home as a way to better enjoy their vacations ANS: B Changes in a population’s values can have a dramatic effect on marketing strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 59

OBJ: 4

41. In Asia, Procter & Gamble (P&G) discovered that consumers like to experiment with different brands of shampoos, so most shoppers shy away from the family-size bottles so popular with Americans. Now most of the shampoo the company sells in the Far East is packaged in single-use sachets. What type of factors did P&G respond to when it changed its Asian packaging? a. competitive b. demographic c. social d. technological ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 59

3-11

42. Coolsavings.com is one of the largest on-line distributors of in-store coupons, sales announcements, and mail-in rebates offered by national retailers and Internet commerce sites. Its marketing department keeps track of current external environmental changes. Although some information is relatively easy to collect, analyzing and forecasting one type of trend is extremely difficult, and it is the most important factor for a company to understand. What is the trend? a. social b. technological c. economic d. demographic ANS: A Managers have the least amount of information available about social trends. PTS: 1 DIF: Application BLM: Higher order

REF: p. 59

OBJ: 4

43. Consumer preference for low-carb diets has greatly modified the way food is being marketed. What is this concern with health issues an example of? a. demographic factors b. political and legal factors c. social factors d. economic factors ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 59

44. Quaker Oats and other cereal manufacturers have developed what they call “breakfast-with-one-hand” products, which are breakfast bars and drinks that can be consumed on the way to work without leaving any mess. This type of food that can be eaten on the go is largely the result of changes in what type of factors? a. social b. technological c. political d. demographic ANS: A The food items were developed in response to time poverty. PTS: 1 DIF: Application BLM: Higher order

REF: p. 59

OBJ: 4

45. What has the growth of dual-income families resulted in? a. decreased discretionary income b. decreased GNP c. increased purchasing power d. a sense of entitlement ANS: C OBJ: 4

3-12

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 60

46. What is the practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle? a. demographically defined lifestyle b. targeted lifestyling c. psychographic mode of living d. component lifestyle ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 60

47. More and more Canadian citizens are enjoying a piecing together of a variety of interests, products, and services, and are not conforming to traditional stereotypes. What is this called? a. modular market mixes b. conformity and cohesiveness c. simple multipurpose products d. component lifestyles ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 60

48. Ephenia Moore is a lawyer in Victoria. She is also a certified scuba diver, published poet, and single parent. Her other interests include sewing, scrap booking, and square dancing. How would marketers categorize Moore? a. as not belonging to any target market b. as a member of the typical accountant target segment c. as fitting into a single parent segment d. as having a component lifestyle ANS: D A component lifestyle pieces together products and services that fit a variety of interests and needs, and does not conform to a certain stereotype. PTS: 1 DIF: Application BLM: Higher order

REF: p. 60

OBJ: 4

49. Why has the component lifestyle of many of today’s consumers proven to be such a challenge to marketers? a. A consumer is defined by his or her lifestyle, which is defined by level of education attained and occupation. b. The needs of people with component lifestyles are in constant flux. c. There are no specialized magazines that reach small segments of markets. d. Communication with people who have component lifestyles is very difficult. ANS: D Communication with complex and diverse consumers is the challenge presented by component lifestyles. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 60

3-13

50. Which of the following events has had a greater effect on marketing than any other social change? a. the increasing number of working women b. the growing number of one-child families c. a growing number of people of retirement age who are continuing work d. the growing number of people on the Internet ANS: A REF: p. 60

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

51. Ruth is a mother of two, loves to travel, is a member of a book club, enjoys jogging, likes to wear the latest fashions, and is a police officer. All of these diverse needs and interests influence her choice of the goods and services she buys. What does Ruth have? a. a component lifestyle b. a segmented buying process c. a multicultural demography d. a fragmented market orientation ANS: A A component lifestyle is the practice of choosing goods and services that meet one’s diverse needs and interests rather than conforming to a single, traditional lifestyle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 60

OBJ: 4

52. What is the study of people’s vital statistics, such as their ages, births, deaths, and locations? a. psychometrics b. demography c. ecology d. cultural sociology ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 61

53. Ashley Kreeger is the director of marketing for a company that operates several assisted-living centres. The company is developing a marketing plan that must cover the next five years of business. Which of the following will Kreeger consider uncontrollable factors in her plan? a. pricing for repair and maintenance services b. demographic factors c. media buying factors d. inventory factors ANS: B All but demographic factors are controllable factors. PTS: 1 DIF: Application BLM: Higher order

3-14

REF: p. 61

OBJ: 5

54. Which of the following is a demographic characteristic of a population? a. age at graduation b. education c. values d. place of birth ANS: B Values are a social factor. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 61

55. Field Entertainment was given the task of compressing75 years of Disney Magic into a two-hour show. While the task was formidable, the company described the results as multigenerational (meaning that the newly created show appeals to children, parents, and grandparents). What type of factors did Field Entertainment rely heavily on to develop a new show that would be appreciated by potential audiences? a. competitive b. demographic c. cultural d. technological ANS: B Age is a demographic characteristic. PTS: 1 DIF: Application BLM: Higher order

REF: p. 61

OBJ: 5

56. According to the text, which of the following statements about Generation Y is true? a. Its members are people who were born between 1965 and 1978. b. It is more than three times as large as Generation X. c. The members of Generation Y don’t mind indulging themselves with restaurant meals, clothing, and electronic items. d. Members of Generation Y are the first generation of latchkey kids. ANS: B The other descriptions are of Generation X. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 63

57. Which group is strongly attached to technology, tends to be skeptical consumers, and demands the latest fashion trends in record time? a. Generation Yers b. the baby-bridging generation c. the baby boomer generation d. Generation Xers ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 63

3-15

58. Carissa Ty designs and sells clothes for young working women. She has recently been told that unless she starts designing more to suit the style of the Gen Y market, she is likely to be in financial trouble soon. Why would someone tell her that? a. Gen Y-ers are easily swayed by traditional promotion media. b. Gen Y-ers don’t have a style that they prefer. c. Baby boomers provide all of the disposable income for Gen Y members. d. Demographically, Gen Y-ers are an extremely large group of consumers. ANS: D The size of this group is what makes them especially important to all marketers. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 63

59. Which group is formed by consumers born between 1965 and 1978? a. yuppies b. Generation X c. baby boomers d. America’s mass market ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 64

60. You are a marketing consultant to a firm that would like to target members of Generation X. What do you advise? a. Clearly state to the audience that Generation X is the intended target of all marketing communications. b. Emphasize freedom from work and commitment. c. Develop a personal service that will appeal to these time-poor consumers. d. Avoid topics dealing with materialistic possessions. ANS: C This is a generation notoriously difficult to market to because they are so cynical and savvy. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 64

61. According to the text, which of the following statements about Generation X is true? a. The members of Generation X do not mind indulging themselves. b. Gen Xers are more likely to buy investment properties rather than clothing or electronic items. c. The children of Generation X were the first latchkey kids. d. The members of Gen X consider individualism to be the most important characteristic defining their generation. ANS: A Baby boomers are strong on individualism, and it was their generation that produced the first latchkey kids. Baby boomers are more likely to buy investment properties. Gen Xers tend to be more materialistic than previous generations but with little hope of achieving their goals. PTS: 1 OBJ: 5 3-16

DIF: Comprehension BLM: Higher order

REF: p. 64

62. What is the large group of people in Canada, who were born between 1946 and 1964? a. gray markets b. Generation Xers c. baby boomers d. the baby bust generation ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 65

63. Keily Royale is opening a decorating service in an affluent Toronto neighbourhood. Market research reveals that most of her customers are baby boomers with above-average incomes (because they are often dual-career couples). Royale appears to be aware of how this group cherishes which of the following? a. aging b. budgets c. their homes d. fashion trends ANS: C Home remodelling is a common activity for baby boomers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 65

OBJ: 5

64. Given Canadian demographic trends, which of the following “near future businesses” should experience the greatest growth? a. high-performance sports car dealers b. baby food manufacturers c. on-line and offline travel services d. in-home child care services ANS: C OBJ: 5

PTS: 1 DIF: Conceptual BLM: Higher order

REF: p. 65

65. What is currently the largest age demographic in Canada? a. women aged 32–45 b. women aged 40–64 c. men aged 32–45 d. men aged 16–31 ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 65

66. In Canada today, what percentage of the total population do seniors make up? a. 38 percent b. 58 percent c. 18 percent d. 78 percent ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 65

3-17

67. Many marketers have created enduring stereotypes about older adults. According to the text, which of the following statements MOST accurately describes older consumers? a. Older consumers are sick or ailing. b. Older consumers do not buy many fresh fruits and vegetables. c. Older consumers are sedentary. d. Older consumers vacation often and eat out often. ANS: D REF: p. 66

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

68. What does the text state about older consumers in Canada? a. They are light TV viewers. b. They are more likely to experience selective retention than any other demographic group. c. They are more likely to shop for low prices than for value. d. They typically have chronic health problems. ANS: A REF: p. 66

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

69. What is a multicultural society characterized by? a. a population of recent immigrants that are closely related by custom and tradition b. even distribution of all ethnic groups in a geographic region c. a conglomeration of small and large ethnic groups that have little in common d. one large dominating racial or ethnic group in a geographic area ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 67

70. What percentage of all Canadians are visible minorities? a. 2.3 percent b. 50.1 percent c. 15.7 percent d. 31.2 percent ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 67

71. A Toronto neighbourhood where all the residents are either Asian or white and who can trace their ancestors’ arrivals in the community back at least four generations is an example of which of the following? a. a market aggregation b. a psychographic target market c. a multicultural society d. a metropolitan statistical area ANS: C Multiculturalism occurs when all major ethnic groups in an area are roughly equally represented. PTS: 1 DIF: Application BLM: Higher order

3-18

REF: p. 67

OBJ: 6

72. A furniture retailer that specializes in selling entire rooms of furniture has hired you to identify 25 geographic target markets that can be described as multicultural societies. What types of locations should you offer this firm? a. unindustrialized areas b. regions that are dominated by one ethnic group and that have multiple smaller ethnic groups c. cities that historically have had low immigration rates d. locations in which all major ethnic groups in the area are equally represented ANS: D Multicultural societies are not defined by geography, history, or products produced, but by the racial and ethnic composition of the population. PTS: 1 DIF: Application BLM: Higher order

REF: p. 67

OBJ: 6

73. According to the text, which of the following statements about ethnic and cultural diversity is true? a. The four P’s of marketing are not as useful as they used to be because there are no longer mass markets to be targeted. b. Now, more than ever, marketers can use each of the four Ps to customize marketing mixes for unique segments of the population. c. Marketers can no longer realize any economies of scale because target markets are so fragmented and difficult to define. d. Most immigrants readily embrace North American branded products, and so mass marketing is still the best approach for most products. ANS: B The increasing cultural diversity of Canada indicates that mass marketing is not appropriate for many products, as homogeneous mass markets are difficult to find. The increasing cultural diversity means that Canadian citizens will demand more types of products, some from their homelands. Marketers must customize marketing mixes for various target markets, while still reaching markets that are large enough to meet the manufacturer’s own objectives. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 67

74. What has to be higher for you to have higher purchasing power? a. disposable income b. social class c. cost of living d. gross income ANS: A Purchasing power is measured by comparing income to the relative cost of a set standard of goods and services. It is aligned with net income, or income minus a standard set of expenses. Assuming a constant income, the higher the cost of living (the expenses), the lower the purchasing power. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 70

3-19

75. What are interest rates, inflation, and consumer income that influence the marketing environment? a. sociodemographic factors b. political factors c. government factors d. economic factors ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 70

76. What is the average median household income in Canada today? a. about $98,000 b. about $78,000 c. about $38,000 d. about $58,000 ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 70

77. What is discretionary income? a. consumer income spent on nonessential items b. what is left to the consumer after tax deductions c. the money spent on utilities, food and groceries, transportation, clothing, and other expenses d. by the average salary of all Canadian consumers ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 70

78. What is measured by comparing the relative cost of a standard of goods and services in different geographic areas? a. relative pricing b. price escalation c. purchasing power d. gross individual profit ANS: C OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 70

79. When income is high relative to the cost of living, what happens? a. Consumers begin anticipating a period of price deceleration. b. Consumers have more discretionary income. c. Consumers anticipate price escalation by stockpiling. d. Consumers have significantly less disposable income. ANS: B REF: p. 70

3-20

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

80. What is a general rise in prices of goods and services that results in decreased purchasing power? a. a recession b. a consumer break-even c. a depression d. inflation ANS: D OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 71

81. When planning marketing strategies during times of inflation, marketers must be aware that inflation causes consumers to do what? a. put more money into savings accounts because prices are too high b. decrease their brand loyalty to products they have traditionally used c. buy in small quantities until inflation is over d. purchase more goods and services to support their psychological selves, such as counselling and stress management training ANS: B In times of inflation, consumers are more price conscious and less brand-loyal. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 71

82. What is a period of economic activity when income, production, and employment tend to fall, reducing overall demand? a. inflation b. price escalation c. stagnation d. a recession ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 71

83. The main product for Zamperla Industries is gondola cars for amusement park rides and ski lifts. Its marketing department constantly monitors trends in the external environment that might affect the firm. Which economic factor may pose a major new threat to this company? a. technological improvements that are automating production of cars b. existing legislation requiring licensing of all amusement park rides c. a decline in disposable income d. few competitors in this industry ANS: C Amusement parks and ski resorts rely on their customers having disposable income. A decline in business for them will produce a decline in demand for the gondola cars. PTS: 1 DIF: Application BLM: Higher order

REF: p. 71

OBJ: 7

3-21

84. Starkbrutal fashion boutique has responded to economic trends by placing an emphasis on improving the quality of merchandise it offers, improving customer service, and reducing its cost of goods sold. Which level of economic activity is Starkbrutal apparently dealing with? a. stagnation b. recession c. depression d. inflation ANS: B All the described techniques are used to counter the effects of reduced demand during recession. PTS: 1 DIF: Application BLM: Higher order

REF: p. 71

OBJ: 7

85. Which of the following strategies is appropriate for a marketer to use during a time of economic recession? a. Offer products that are expensive. b. Promote product quality. c. Emphasize bottom-of-the-line products in promotions. d. Maintain and improve customer services. ANS: D REF: p. 71

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

86. Which of the following is sometimes an effective weapon for fighting inflation and recession? a. introducing product-line extensions b. reducing R&D expenditures c. technology d. line extensions ANS: C OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 71

87. Which type of research attempts to expand the frontiers of knowledge rather than solving a specific, pragmatic problem? a. applied research b. experiential research c. basic research d. reactive research ANS: C OBJ: 8

3-22

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 72

88. The scientists at Motorola want to create Iridium, a constellation of 66 satellites that will offer telephone service anywhere on the globe. What is this an example of? a. basic research b. applied research c. transactional research d. synergistic research ANS: B Applied research attempts to develop new or improved products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 72

OBJ: 8

89. Scientists are researching the possibility of computer-aided telekinesis with the idea that someday your brain will be linked with a computer, similar to the brain-plug interfaces used in The Matrix. Because scientists are not engaged in solving any specific, pragmatic problem, what is this an example of? a. applied research b. transactional creativity c. technological diversity d. basic research ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 72

90. When Universal Studios Japan opened in March 2001, health inspectors discovered that the theme park had piped industrial-use water not suitable for drinking into its drinking fountains. The problem was unanticipated and costly to repair. This is primarily an example of how what type of factors can cause a business to incur unexpected costs? a. social b. cultural c. political and legal d. economic ANS: C OBJ: 9

PTS: 1 DIF: Application BLM: Higher order

REF: p. 74

91. Laws and regulations of various governments and their ongoing development and change are part of all organizations’ external environment and an example of which factors? a. competitive b. economic investment c. political and legal d. research and development ANS: C OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 74

92. What does the Competition Bureau of Industry Canada enforce? a. the Textile Labelling Act b. the Immigration Act c. the Charter of Rights d. the Criminal Code Copyright © 2012 Nelson Education Limited

3-23

ANS: A OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 74

93. What is the federal government agency charged with enforcing regulations against selling and distributing adulterated, misbranded, or hazardous products of a specific type? a. Competition Bureau b. Canadian Marketing Association c. Better Business Bureau d. Combines Investigation Commission ANS: A OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 74

94. In Quebec, which of the following requires that French be the primary language in all promotional and advertising activities in that province? a. self-regulation b. Bill 101 c. the Canadian Code of Advertising Standards d. the Competition Bureau ANS: B OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 75

95. Which of the following established the Canadian Code of Advertising Standards? a. Canada’s largest advertising agencies b. the Canadian Broadcasting Corporation c. irate Canadian citizens d. the federal government ANS: A OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 76

96. The number of firms a company must face, the relative size of these firms, and the degree of interdependence within the industry are all part of what? a. the company’s competitive environment b. the company’s political environment c. the company’s demographic environment d. the company’s economic environment ANS: A OBJ: 10

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 76

97. Frito-Lay is considered the king of the salty snack industry with its distribution network of 42 plants, 12,800 delivery people, and more than 900 tractor trailers formed into a retail delivery powerhouse. Smaller manufacturers of salty snacks find that monitoring the activities of Frito-Lay is an effective way to monitor which of the following factors within their external environments? a. competitive b. demographic c. social d. marketing mix ANS: A OBJ: 10 3-24

PTS: 1 DIF: Application BLM: Higher order

REF: p. 76

98. When many consumers think of adhesives, they think of 3M because it makes so many types of adhesives used in the home. However, the world’s largest adhesive producer is Henkel Consumer Adhesive, maker of Loctite and duct tape. What are 3M and Henkel part of? a. each other’s competitive environment b. each other’s social environment c. each other’s marketing mix environment d. each other’s economic environment ANS: A OBJ: 10

PTS: 1 DIF: Application BLM: Higher order

REF: p. 76-77

99. In the past, foreign firms penetrated Canadian markets by concentrating on price, but what has the emphasis been switched? a. product price b. product promotion c. product quality d. product value ANS: C REF: p. 77

PTS: 1 OBJ: 10

DIF: Comprehension BLM: Higher order

100. As described in the text, what has been the real genius of Tide’s competitive market strategy? a. price decisions b. place decisions (distribution) c. product decisions d. promotion decisions ANS: C OBJ: 10

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 77

Kristen Clingan’s boyfriend had never even mentioned marriage when she received an e-mail announcing her boyfriend had e-impregnated her. The e-mail from www.bunintheoven.com included a positive pregnancy “test” and was followed by a half dozen subsequent messages, including the audio file of the baby’s heartbeat and the ultrasound image. The whole process took three months and cost $29.95. At the end of the virtual pregnancy, she received a mug bearing the newborn’s photograph. Virtual impregnation is the brainchild of Adam Corsi. He sees the virtual impregnation as a good conversation starter for topics that may not have been broached by a couple before. 101. Refer to Virtual Impregnation. Virtual Impregnation is designed for people who are in long-term relationships that seem to be either evolving slowly or not at all. What does this group represent? a. the company’s consumer cluster b. the company’s demographic sample c. the company’s buying centre d. the company’s target market ANS: D A target market is a defined group that managers feel is most likely to buy a firm’s product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 57

OBJ: 3

3-25

102. Refer to Virtual Impregnation. The willingness of couples to participate in this virtual pregnancy results from a fear of making a mistake and not being ready for a baby. What environmental factors are most responsible for the company’s success? a. economic factors b. demographic factors c. social factors d. competitive factors ANS: C Fear of making a mistake is a social factor. PTS: 1 DIF: Application BLM: Higher order

REF: p. 59

OBJ: 4

103. Refer to Virtual Impregnation. Describing couples who participate in a virtual pregnancy as professionals between the ages of 25 to 34 who earn at least $50,000 annual income uses what type of characteristics? a. geographic b. psychographic c. demographic d. sociologic ANS: C Vital statistics, such as age and income, are demographic characteristics. PTS: 1 DIF: Application BLM: Higher order

REF: p. 61

OBJ: 5

104. Refer to Virtual Impregnation. Innovations in which environment are most responsible for the success of Corsi’s website? a. economic b. government c. technological d. competitive ANS: C Without technology, virtual impregnation could not occur. PTS: 1 DIF: Application BLM: Higher order

3-26

REF: p. 72

OBJ: 8

105. Refer to Virtual Impregnation. One problem facing Corsi was the potential that one of the women who received the e-mail would sue the sender as well as the website for sexual harassment. Such concerns are part of which environment? a. competitive b. demographic c. political and legal d. economic ANS: C Sexual harassment is an issue that is carefully watched by federal agencies. PTS: 1 DIF: Application BLM: Higher order

REF: p. 74

OBJ: 9

Thani Jambulingham wants to open a restaurant that features the finest in Indian and middle-eastern delicacies. To determine the feasibility of his restaurant, he hired FoodFacts marketing research consultants. The experts at FoodFacts studied all the market information available and determined that consumers aged 30 to 45 who love spicy cuisine were most interested in the proposed restaurant. In examining the restaurant environment, FoodFacts researchers found the west side of the city offered the best options for opening the restaurant. Jambulingham was told the biggest obstacle in opening the restaurant related to obtaining the necessary permits from the city and province. 106. Refer to Indian Restaurant. What is the group of consumers identified by FoodFacts as most likely to visit the new restaurant? a. a buying centre b. a target market c. a demography d. a consumer cluster ANS: B A defined group of consumers that is most likely to buy a firm’s product is a target market. PTS: 1 BLM: Remember

DIF: Application

REF: p. 57

OBJ: 3

107. Refer to Indian Restaurant. Jambulingham is developing a marketing plan that will cover the first five years of the restaurant’s business. He must be sure to consider which of the following uncontrollable factors in his plan? a. place or distribution factors b. demographic factors c. pricing for services d. dining area layout factors ANS: B All but demographic factors are controllable marketing mix factors. PTS: 1 BLM: Remember

DIF: Application

REF: p. 61

OBJ: 5

3-27

108. Refer to Indian Restaurant. Describing the market for Jambulingham’s new restaurant in terms of ages of the members of its target market is referring to what type of characteristics? a. demographic b. geographic c. sociological d. psychographic ANS: A Vital statistics, such as age, race, income, and location, are demographic characteristics. PTS: 1 BLM: Remember

DIF: Application

REF: p. 61

OBJ: 5

109. Refer to Indian Restaurant. What is the success of Jambulingham’s restaurant most closely related to? a. the changing values of Generation X members b. a lack of disposable income that would favour cheap food offerings c. the growing importance of multiculturalism in Canada d. a huge increase in the Indian immigrant population expected during the next decade ANS: C Increased multiculturalism is the most promising trend for Jambulingham. PTS: 1 DIF: Application BLM: Higher order

REF: p. 67

OBJ: 6

110. Refer to Indian Restaurant. The uncontrollable environmental factors Jambulingham faces in terms of obtaining permits for the new restaurant represent what type of factors? a. economic b. political and legal c. demographic d. cultural ANS: B The laws and regulations of various governments represent uncontrollable political and legal factors. PTS: 1 DIF: Application BLM: Higher order

3-28

REF: p. 74

OBJ: 9

In their desire to boost ratings, television news programs have done just about anything. One famous example is the Dateline NBC segment about General Motor’s 1973–1987 pickup trucks, which was entitled “Waiting to Explode?” The 15-minute segment contained a short, dramatic portion that featured two side-impact tests that NBC had run to purportedly demonstrate what could happen when the GM pickup trucks are struck in the side. GM sued NBC, alleging defamation and damage to its reputation. GM argued that the Dateline segment was an unscientific demonstration, was inappropriate, and does not support the position that GM’s trucks are defective. NBC admitted that the crash was rigged and apologized to GM and Dateline viewers. 111. Refer to Dateline NBC and GM. NBC executives have to be concerned with the long-range welfare of the network and its relationships to viewers. What is this concern called? a. corporate social responsibility b. ethical dilemma c. environmental consideration d. conventional morality ANS: A Corporate social responsibility is the concern of business for social welfare. This concern is demonstrated by managers considering the long-range best interests of the company and its relationships to the society within which it operates. PTS: 1 DIF: Application BLM: Higher order

REF: p. 52

OBJ: 1

112. Refer to Dateline NBC and GM. By admitting its error and providing a formal apology, which level of the pyramid of corporate social responsibility did NBC achieve? a. moral b. ethical c. philanthropic d. legal ANS: B By apologizing, NBC did what was right. PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

OBJ: 1

113. Refer to Dateline NBC and GM. When people tune in to a television news show, they expect to be told the truth about events covered on the news. What are the moral principles or values that should generally govern the conduct of the news media? a. governances b. social responsibility c. ethics d. legal standards ANS: C Ethics refers to moral principles or values generally governing the conduct of an individual or group. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 54

OBJ: 2 3-29

114. Refer to Dateline NBC and GM. NBC felt that it had an obligation to its viewers to warn them about the possible defects in GM pickup trucks. What level is NBC operating on? a. conventional morality b. postconventional morality c. consumerism d. preconventional morality ANS: A NBC is operating on a level of conventional morality because the company is concerned with the expectations of society. Loyalty and obedience to the organization and the consumer become paramount. PTS: 1 DIF: Application BLM: Higher order

REF: p. 55

OBJ: 2

115. Refer to Dateline NBC and GM. NBC apologized and concluded that “unscientific demonstrations should have no place in hard news stories at NBC. That’s our new policy.” Where should this new policy be incorporated? a. into NBC’s governances b. into NBC’s code of ethics c. into NBC’s legal standards d. into NBC’s consumerism ANS: B A code of ethics is a guideline to help managers and employees make better and ethical decisions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 56

OBJ: 2

Zimmer Centralpulse is the world’s largest producer of replacement hips and knees for orthopaedic surgery. 116. Refer to Orthopedic Joints. Zimmer Centralpulse is particularly interested in controlling the market in the Southwestern United States, where a large aging population lives. Which external environmental element most directly influences its continued growth? a. culture b. economic conditions c. social forces d. demography ANS: D Demography considers the age of the target market. PTS: 1 DIF: Application BLM: Higher order

3-30

REF: p. 61

OBJ: 5

117. Refer to Orthopaedic Joints. Zimmer Centralpulse has developed a new sturdier joint that will extend the life of the average replacement joint by five years. What did this longer-lasting joint result from? a. value-added research b. demographically oriented research c. applied research d. basic research ANS: C Applied research is an attempt to develop new or improved products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 72

OBJ: 8

One of the favourite foods in Thailand is shark fin soup. A San Francisco–based organization claimed the soup made by Thailand’s leading producer contained mercury poison. 118. Refer to Shark Fin Soup. The leading producer of shark fin soup wanted to continue selling the soup because it believes it has a responsibility to its investors to be profitable. This indicates that the soup manufacturer was operating at which responsibility level? a. ethical b. legal c. cultural d. economic ANS: D The company believed that its mission was to be profitable. PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

OBJ: 1

119. Refer to Shark Fin Soup. The popularity of this soup in Thailand represents a social factor. Claims of mercury poisoning relate to lax enforcement of environmental protection and consumer protection regulations by the Thai government represent which factor? a. economic b. technological c. cultural d. political and legal ANS: D Food preferences are a cultural issue, and the lax enforcement of environmental protection laws is a legal/political factor. PTS: 1 DIF: Application BLM: Higher order

REF: p. 59-74

OBJ: 4 and 9

3-31

In the future, electrical power may come from quantum nucleonics, a form of nuclear power that produces no residual radiation. The ability to use this form of power will require equipment adaptations, but it will solve the world’s need for clean and efficient power. 120. Refer to Nucleonics. Companies that replace inefficient sources of power with quantum nucleonics only after they are required to by federal agencies are operating at which responsibility level? a. ethical b. philanthropic c. legal d. economic ANS: C OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

121. Refer to Nucleonics. Companies that replace inefficient sources of power with quantum nucleonics before any government mandates to do so will be operating at which responsibility level? a. economic b. legal c. ethical d. philanthropic ANS: D The change will be made to save resources and to improve the quality of life. PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

OBJ: 1

122. Refer to Nucleonics. When quantum nucleonics is developed, it will be an example of one of the following factors can affect an organization. Which one? a. competitive b. economic c. technological d. cultural ANS: C OBJ: 8

3-32

PTS: 1 DIF: Application BLM: Higher order

REF: p. 72

Girls between the ages of 8 and 15 are one of the growing markets for high-end shoe manufacturers, and podiatrists say the trend is leading to many stylish young girls with grown-up foot problems. 123. Refer to High-End Shoes. Which responsibility level are shoe manufacturers operating at when they develop and market shoes to this group? a. social b. ethical c. philanthropic d. economic ANS: D The shoes are not improving the girls’ quality of life. PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

OBJ: 1

124. Refer to High-End Shoes. Young women who now are experiencing problems because they wanted to be fashionable when they were much younger are members of which group? a. the baby bridging generation b. Generation X c. Generation Y d. the cohort generation ANS: C Generation Y members were born between 1979 and 1994. PTS: 1 DIF: Application BLM: Higher order

REF: p. 63

OBJ: 5

Japanese law prohibits more than 22 kilos of explosive to be stored at any site in the nation. Every night Universal Studios Japan hosts a fireworks display. The theme park recently came under government investigation when allegations were made that the park was detonating more than 22 kilos of explosives in its nightly fireworks displays. 125. Refer to Fireworks. If the allegations are true, then Universal Studios Japan is operating at which responsibility level? a. philanthropic b. illegal c. economic d. cultural ANS: B Universal Studios Japan is not obeying the letter of the law. PTS: 1 DIF: Application BLM: Higher order

REF: p. 54

OBJ: 1

3-33

126. Refer to Fireworks. Discovering a way to produce grand fireworks displays with smaller amounts of explosives would require which of the following? a. technological diversity b. synergistic research c. basic research d. applied research ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 72

TRUE/FALSE 1. Tyson Foods, Inc. was fulfilling its philanthropic responsibility when it donated 10 million pounds of food to fight hunger. ANS: T OBJ: 1

PTS: 1

DIF: Application

REF: p. 52

2. The foundation for the pyramid of corporate social responsibility is philanthropic responsibility. ANS: F The foundation of the pyramid is economic responsibility. PTS: 1

DIF: Definition

REF: p. 52

OBJ: 1

3. Morals are rules people develop as a result of cultural values and norms. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 54

4. Most businesspeople exhibit preconventional morality. ANS: T Fortunately, most businesspeople have progressed beyond the self-centred and manipulative actions of preconventional morality. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 55

5. Many companies have found that issuing a policy on ethical behaviour is the only action necessary to ensure that employees will comply with expected standards. ANS: F Simply issuing such a policy is only the beginning; marketing managers must then put the policy into action. PTS: 1 OBJ: 2

3-34

DIF: Comprehension

REF: p. 56

6. When writing codes of ethics, businesses must ensure their codes deal with every possible situation. ANS: F Codes that are too detailed encourage employees to substitute rules for judgment. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 56

7. Marketers can control the external environment in which their organizations operate. ANS: F Although marketers can control the marketing mix, they cannot control the external environment in which their organizations operate. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 58

8. While a single firm cannot control the elements in the external environment, a firm can sometimes influence that environment. ANS: T REF: p. 58

PTS: 1 OBJ: 3

DIF: Comprehension

9. Social factors in the marketing environment influence the products people buy, the prices paid for products, the effectiveness of specific promotions, and how, where, and when people expect to purchase products. ANS: T REF: p. 59

PTS: 1 OBJ: 4

DIF: Comprehension

10. Consumers today do not necessarily fit into traditional stereotypes, but may instead choose products and services that meet a variety of needs. Such diverse purchasing habits reflect component lifestyles. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 60

11. The phenomenon of working women has probably had a greater effect on marketing than has any other social change. ANS: T REF: p. 60

PTS: 1 OBJ: 4

DIF: Comprehension

12. Psychography is the study of people’s vital statistics such as their ages and locations. ANS: F Demography is the study of such vital statistics. PTS: 1

DIF: Definition

REF: p. 61

OBJ: 5 3-35

13. Marketers can best reach Generation Y members through television and magazine advertising. ANS: F Gen Y-ers respond best to ads in nontraditional media. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 63

14. Because the Lifetime Movie Network is targeting young women with its new movie Latch-key Kids on the Run, its movie is obviously directed toward cohort generations. ANS: F The movie is obviously targeted at Generation X women. Female Gen X-ers are more likely to go to the movies than female baby boomers. Additionally, Generation X-ers were often latch-key children. PTS: 1

DIF: Application

REF: p. 63

OBJ: 5

15. Business people find it impossible to pursue the older consumer market because it is so diverse. ANS: F Businesspeople who want to actively pursue the older consumer market must understand it. Aging consumers create some obvious opportunities. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 66

16. By 2017, Canada’s visible minority population will account for slightly over 2 percent of Canada’s total population. ANS: F REF: p. 67

PTS: 1 OBJ: 6

DIF: Comprehension

17. Multiculturalism occurs when all major ethnic groups in an area are roughly equally represented. ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 67

18. Inflation is a general rise in prices with a corresponding increase in wages, which results in decreased purchasing power. ANS: F Inflation is characterized by a general rise in prices without a corresponding increase in wages. PTS: 1

DIF: Definition

REF: p. 71

OBJ: 7

19. Recession is a period of economic activity characterized by negative growth with increased demand for goods and services. ANS: F REF: p. 71 3-36

PTS: 1 OBJ: 7

20. Champion Lyte is a sugar-free sports drink. In developing the new product, its manufacturer thoroughly studied the legal restrictions on the drink’s ingredients, packaging, manufacturing, and labeling and has abided by all such restrictions. In this way, the manufacturer of Champion Lyte drinks conducted its examination of all political and legal factors that might affect the product’s marketing. ANS: F Legal restrictions govern decisions in all areas of the marketing mix, not just in the areas the manufacturer checked. PTS: 1

DIF: Application

REF: p. 74

OBJ: 9

21. Marketers need a thorough understanding of the laws established by the federal government, provincial governments, and regulatory agencies. ANS: T REF: p. 74

PTS: 1 OBJ: 9

DIF: Comprehension

22. The competitive environment of a business encompasses the number of competitors the firm must face, the relative size of the competitors, regulatory agencies, and the degree of interdependence within the industry. ANS: F Regulatory agencies are part of the political and legal factors. PTS: 1 OBJ: 10

DIF: Comprehension

REF: p. 76

23. Champion Lyte is a sugar-free sports drink designed to replenish electrolytes lost during activity or illness. Gatorade and Powerade are part of Champion Lyte’s competitive environment. ANS: T OBJ: 10

PTS: 1

DIF: Application

REF: p. 76

24. An obese man in New York sued McDonald’s, Burger King, Wendy’s, and KFC because he claims the fast-food giants caused his diabetes and other health problems. The suit is an example of a problem caused by competitive factors. ANS: F This problem is the result of political and legal factors. PTS: 1

DIF: Application

REF: p. 74-76

OBJ: 10

25. Canadian marketing managers must consider foreign corporate entities as threats to their domestic markets. ANS: T REF: p. 77

PTS: 1 OBJ: 10

DIF: Comprehension

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ESSAY 1. According to Celia Moore, an IBM corporate manager, corporate social responsibility is “a core business issue for IBM.” What does she mean by this statement? ANS: Corporate social responsibility is the concern of business for social welfare. This concern is demonstrated by managers who consider the long-range best interests of the company and the company’s relationship to the society within which it operates. Moore simply means that all IBM managers realize that acting socially responsible is good business, and all are committed to this mission. PTS: 1

DIF: Application

REF: p. 52

OBJ: 1

2. For every home built by Habitat for Humanity, Whirlpool Corporation has given and continues to give free kitchen appliances to the deserving family. After giving the appliances with no promotion, Whirlpool began using the donation in its advertising campaigns. Is this unethical behaviour according to the pyramid of social responsibility? ANS: Students’ answers to this question may vary, but the better students will understand that economic performance is the foundation of the pyramid. If its advertising of its donations increases profit, than it is not wrong. The company has not abandoned its efforts to improve the quality of life. PTS: 1

DIF: Application

REF: p. 54

OBJ: 1

3. You are going to give a lecture on corporate social responsibility to the managers of an aircraft manufacturing firm. You will be using the pyramid of corporate social responsibility as your guide. Briefly outline your lecture, including a description of the pyramid theory and its components. ANS: The pyramid of corporate social responsibility portrays four kinds of responsibility: economic, legal, ethical, and philanthropic. Economic performance is the foundation for the structure, because if the company does not make a profit, then the other three responsibilities are moot. While maintaining a profit, business is expected to obey the law, do what is ethically right, and be a good corporate citizen. • • • •

Philanthropic responsibilities are to be a good corporate citizen, contribute resources to the community, and improve the quality of life. Ethical responsibilities are to be ethical; do what is right, just, and fair; and to avoid harm. Legal responsibilities are to obey the law, which is society’s codification of right and wrong, and play by the rules of the game. Economic responsibilities are to be profitable, because profit is the foundation on which all other responsibilities rest.

PTS: 1

3-38

DIF: Application

REF: p. 54

OBJ: 1

4. A recent study of marketing professionals found their ethical judgments were influenced by several factors. List four of these factors. How do these factors contribute to the ethical environment of a marketing organization? ANS: Ethical judgments were influenced by these factors: 1.

3. 4. 5.

The extent of ethical problems within the organization The healthier the ethical environment, the greater the likelihood that marketers will take a strong stand against questionable practices. Top-management actions on ethics Top management can have a profound influence on the ethical behaviour of marketing professionals by performing actions that encourage ethical behaviour or discourage unethical behaviour. Setting an example communicates an ethical philosophy. Potential magnitude of the consequences The greater the harm, the more likely the action is unethical. Social consensus A greater degree of agreement among other marketers determines ethics. Probability of harmful outcomes Higher probabilities of harmful outcomes mean higher probabilities of ethics violations. Length of time between the decision and the onset of consequences The shorter the time frame between the action and the onset of negative consequence, the more likely the marketer is to realize it was unethical. Number of people to be affected The more people affected by a negative outcome, the less ethical the decision.

PTS: 1

DIF: Application

REF: p. 56

OBJ: 2

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5. You are an ethics consultant, and a group of managers have asked you for some guidelines to determine the ethicality of a decision. You tell the managers that one cannot guarantee the rightness of a decision, but a checklist can improve the chances of a decision being ethical. What are six questions you would tell the managers to put on this checklist? ANS: Students’ answers may vary. Here are questions found in the text in Exhibit 3.2. • Does my decision treat me or my company as an exception to a common practice or convention? • Do I think I have the authority to break a rule? • Would I offend customers by telling them about my decision? • Would I offend qualified job applicants by telling them about my decision? • Have I made this decision without input from others, so that important issues might be overlooked? • Does my decision benefit one person or group but hurt or not benefit other individuals or groups? • Will my decision create conflict between people or groups in the company? • Will I have to pull rank (use coercion) to enact my decision? • Would I prefer to avoid the consequences of this decision? • Did I avoid truthfully answering any of the above questions by telling myself that I could get away with it? PTS: 1

DIF: Application

REF: p. 56

OBJ: 2

6. Marketing managers create a marketing mix of product, place, promotion, and price strategies aimed at a target market. While managers can control the mix, they cannot control the elements in the external environment that continually mould and reshape the target market. List six variables of the external environment that are not directly under the control of marketing managers. ANS: • • • • • •

Demographics Technology Competition Social Change Economic Conditions Political and Legal Factors

PTS: 1

3-40

DIF: Application

REF: p. 59

OBJ: 3

7. How can managers understand the external environment? Give an example of an opportunity and a threat that environmental scanning might identify for a suntan lotion company. ANS: Environmental scanning occurs when a company creates a team of specialists to collect and evaluate environmental information. This process allows marketing managers to understand the external environment so that plans for the future can be made. The objective of gathering environmental data is to identify future market opportunities and threats. Threats that might be identified for a suntan lotion company include fear of skin cancer by sunbathers, other health concerns, or lack of leisure time to spend in the sun. Opportunities might include the need for sun-blockers, waterproof formulas, or children’s skin protection products. Another opportunity might be the status element associated with a tan. PTS: 1

DIF: Application

REF: p. 58

OBJ: 3

8. An organization is not completely at the mercy of the external environmental. Give an example how a whiskey distillery might use environmental management. ANS: When a company implements strategies that attempt to shape the external environment within which it operates, it is engaging in environmental management. For example, extensive political lobbying may influence laws that affect domestic legal restrictions, international competition, or product acceptance. Working together in trade associations would allow the company to influence the competitive environment. Developing new drinks might modify its social environment. Students’ answers will of course vary. PTS: 1

DIF: Application

REF: p. 58

OBJ: 3

9. What is a component lifestyle? Describe how a college or university student follows a component lifestyle, and cite specific examples. ANS: Component lifestyles mean that Canadian citizens are choosing products and services that meet diverse needs and interests rather than conforming to traditional stereotypes. Component lifestyles increase the complexity of consumers’ buying habits. Although the stereotypical student adopts a “student lifestyle” and makes purchases related to this lifestyle (textbooks, school supplies, pizzas, and so on), each student may also purchase according to alternative lifestyles. These may include hobbies, outside jobs, a family situation, or other interests. The student may also be a gourmet cook, fitness enthusiast, skier, or computer buff. PTS: 1

DIF: Application

REF: p. 60

OBJ: 4

3-41

10. What is Generation X? How do Generation X values influence marketing? What are the two subgroups of baby boomers? How do baby boomer values influence marketing? ANS: The group born between 1966 and 1977 is the first generation of latchkey children, products of dual-career households, or of divorced and separated parents. This important marketing group is known as Generation X. They are at that stage in life when suddenly a host of demands are competing for their time and their budgets. Gen X spending is quite diffuse. Time is at a premium, so they outsource the tasks of everyday life. They also spend less than any other group on housekeeping supplies. Baby boomers are defined as people born between 1946 and 1964. The two subgroups are Younger Boomers, whose spending is still directed by their children and Older Boomers, who are in their empty-nest years. Spending on the children has the strongest influence on the marketing habits of Younger Boomers. Older Boomers are directing their funds to upgrading their homes in small ways. Older Boomers also spend more on clothes than other groups. They are also more likely to take vacations. PTS: 1

DIF: Application

REF: p. 64

OBJ: 5

11. Define multiculturalism and discuss its impact on the marketing function. ANS: A multicultural society is characterized by two or more large racial and ethnic groups as opposed to one dominant racial or ethnic group. Multiculturalism occurs when all ethnic groups in an area are roughly equally represented. It means that various ethnic groups can no longer be expected to assimilate into existing national culture. This means that marketers must create specialized programs to target specific ethnic groups. From a marketing perspective, multiculturalism increases the complexity of the marketing function. Demand for goods and services will often be culture driven. Within the large ethnic markets, the marketing mix will be further complicated by many submarkets. PTS: 1

DIF: Application

REF: p. 67

OBJ: 6

12. One component of the external environment that marketing managers must understand and react to is the economic environment. Briefly describe the four economic areas of greatest concern to Canadian marketers and the marketing implications of trends in these four areas. ANS: Rising incomes. Incomes are rising in Canada, primarily due to dual-income families. Increases in disposable and discretionary income allow families and individuals to afford the “good life.” Marketers can now concentrate efforts on higher-quality, higher-priced goods and services. Purchasing power. This is also known as the cost of living. When income is higher than the cost of living, people have more discretionary income to spend on non-essential items. Inflation. In recent years, Canada has not experienced high inflation; instead, prices do not rise quickly, employment levels are high, and purchasing power is up. Again, this allows marketers to concentrate efforts on higher-priced goods and services. During periods of inflation, marketers should be aware that brand loyalty decreases and consumers stock up on bargain products; consequently, pricing strategies should be monitored carefully. 3-42

Recession. This period of economic activity is when income, production, and employment fall, which reduces demand. Marketers can counter these effects with value-improved products, customer service, replacement parts, and price freezes. PTS: 1

DIF: Application

REF: p. 70-71

OBJ: 7

13. Describe inflation and recession. Present a marketing strategy that would allow a company to continue operating in an inflationary period and in a recessionary period. ANS: Inflation is a general rise in prices resulting in decreased purchasing power. Marketers should be aware that brand loyalty will decrease, and consumers will tend to stock up. This means that short-term promotions (coupons and sales) will be effective. Additionally, marketers should carefully evaluate pricing strategies because consumers will try to make the most economical purchases possible. A recession is a period of economic activity when income, production, and employment tend to fall, all of which reduce demand. Marketers can try to improve existing products, because a recession increases demand for products and services that (1) are economic and efficient, (2) offer value, (3) help organizations streamline practices/procedures, and (4) improve customer service. Marketers can also offer replacement parts to postpone purchasing new equipment and materials. Finally, marketers should stabilize prices and promote the product’s value. PTS: 1

DIF: Application

REF: p. 71

OBJ: 7

14. Miracle Sealant Company is a business that makes and sells environmentally safe products to preserve the beauty of tile and stone used on floors, in bathrooms, and for kitchen countertops. Assume Miracle Sealant is operating in an economic recession. What three marketing strategies can it use to survive this decline in economic activity? Give examples of specific actions the company can take for each of the strategies. ANS: Students’ examples will vary. (1) Miracle Sealant can improve its existing products by offering promotional videos for do-it-yourselfers. It can add new products to its product lines, such as grout, brushes, and paint specifically designed for use on tile and stone. (2) The company can maintain and expand its customer service by offering financial incentives to its retailers to order more or by extending more credit. (3) The company can emphasize top-of-the-line products and promote product value. It can emphasize the fact that its products are not harmful to the environment. PTS: 1

DIF: Application

REF: p. 71

OBJ: 7

3-43

15. You are a young entrepreneur who has recently received a multi-million dollar research grant for improving life in Canada. Discuss the difference between basic and applied research, and give specific examples of each type of research your new company will conduct. ANS: Basic research (or pure research) attempts to expand the frontiers of knowledge but is not aimed at a specific, pragmatic problem. This type of research would explore broad issues of defining the good and bad points of life in Canada. This research could also explore values as well as social or demographic change, or issues in any of the variables of the external environment. Applied research attempts to develop new or improved products. Students could provide specific examples of products that can help improve life in Canada, such as solar cars, energy-efficient or nonpolluting motors, products that work faster to save time, or nonfat products to save calories. Many products would be high tech in nature. PTS: 1

DIF: Application

REF: p. 72

OBJ: 8

16. Older consumers wants and needs are important to identify for marketers. List a summary of core wants and needs for these mature consumers. ANS: • • • • •

They take frequent vacations. They eat out often both in high-end and fast-food restaurants. They own computers and use them for a broad range of purposes. They are light viewers of television. Two out of five say marketers do only a fair to poor job in considering their needs when they develop packaging. • Almost half of all mature consumers feel that advertisers and their agencies ignore them in preparing their campaigns.

PTS: 1

DIF: Application

REF: p. 65

OBJ: 5

17. Moral character within individuals: Ethical development can be tthought of as having three levels. List each and briefly describe. ANS: Preconventional morality. The most basic level is childlike. It is calculating, self-centred, and even selfish, based on what will be immediately rewarded or punished. Conventional morality. Moves from an egocentric viewpoint toward the expectations of society. Loyalty and obedience to the organization (or society) become paramount. At this level, an ethical marketing decision would be concerned only with whether it is legal and how others will view it. Postconventional morality. Represents the morality of the mature adult. At this level, people are less concerned about how others might see them and more concerned about how they see and judge themselves over the long run. PTS: 1

3-44

DIF: Application

REF: p. 55

OBJ: 2

18. The changing roles of families and working women. List a number of environmental demand changes as a result of the entrance of full-time working women into the North American workforce. ANS: • Time poverty—an increasing demand for timesaving devices and products particularly for the kitchen. Greater household income—apparel industry changes: working women’s clothing sales. • Automotive industry—women are the principle buyers for over 40 percent of all cars and trucks sold in North America. • More males are actively involved in cooking and housework today than in the past; more women are involved in home repairs. • In dual-income households, women are actively involved in so-called big-ticket-item purchase decisions. PTS: 1

DIF: Application

REF: p. 60

OBJ: 3

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3-46

Chapter 4—Consumer Decision Making MULTIPLE CHOICE 1. What is the name for the processes individuals use when making a purchase decision? a. consumerism b. marketing c. consumer behaviour d. perceptual mapping ANS: C Consumer behaviour describes how consumers make purchase decisions. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 90

OBJ: 1

2. Marketers often study the processes used and the factors that influence the consumer when making purchase decisions. What are these called? a. psychographics b. consumer behaviour c. perceptual mapping d. consumerism ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 90

3. What are the steps of the consumer decision-making process in order? a. need positioning, stimulus response reactions, evaluation of alternatives, purchase decision, postpurchase behaviour b. need recognition, information search, evaluation of alternatives, purchase, and postpurchase behaviour c. information search, need positioning, evaluation of alternatives, product trial, purchase decision, postpurchase satisfaction d. need recognition, alternative aggregation, re-evaluation, purchase decision, postpurchase behaviour ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 90

4. After Gina saw a documentary on Egypt, she scheduled a visit there for this coming summer. What did the documentary act as? a. an internal stimulus b. a purchase outcome c. an external stimulus d. a state of cognitive dissonance ANS: C The documentary was a stimulus that was not physiological. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 90

OBJ: 2

4-1

5. It’s a 10-hour car trip from Ming’s home in Saskatchewan to her new job in B.C. After driving eight hours toward B.C., Ming became very sleepy. As a result, she found an inexpensive motel to spend the night. The fact Ming became sleepy is an example of which of the following? a. an internal stimulus b. need recognition c. a state of cognitive dissonance d. an external stimulus ANS: A Sleepiness is a physiological indication of the need to rest. PTS: 1 DIF: Application BLM: Higher order

REF: p. 90

OBJ: 2

6. Blair Bagnall loves cola and is always on a diet. He will drink only Diet Coke. When offered a Diet Pepsi one afternoon as an alternative, he refused to even consider it as part of his evoked set even though he generally drinks a soft drink about the time of day the offer was made. What does this illustrate? a. that Blair is satisfying a need b. that Blair has a need motivator c. that Blair has a physiological drive d. that Blair is satisfying a want ANS: D A want is often brand specific, whereas a need is something an individual depends on to function efficiently. A person may need food but wants specific brands. PTS: 1 DIF: Application BLM: Higher order

REF: p. 90

OBJ: 2

7. Which of the following is the BEST example of an internal stimulus that would create need recognition? a. an invitation to a wedding for which you need a gift b. a headache c. a billboard promotes a new national Internet service provider d. a radio station runs an ad for a used-book sale ANS: B Aches and pains are generated internally by your body without outside inputs from anything or anyone. PTS: 1 DIF: Application BLM: Higher order

4-2

REF: p. 90

OBJ: 2

8. After a need or want is recognized, a consumer may be motivated to clarify the options available and generate an evoked set of brands. Which step is this in the consumer decision-making process? a. product identification b. evaluation of alternatives c. information search d. consideration stage ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 92

9. What types of products are typically purchased by people using only an internal search? a. frequently purchased, high-cost items b. infrequently purchased, high-cost items c. frequently purchased, low-cost items d. infrequently purchased, low-cost items ANS: C Information about frequently purchased, low-cost items is stored in an individual’s memory and is sufficient knowledge for the purchase decision. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 92

10. Which of the following products would most likely require the purchaser to use only an internal information search? a. a daycare facility for a two-month-old infant b. a box of tissue c. a rental apartment d. a new car ANS: B Internal information search is used with frequently purchased, low-cost items; the only item on the list that meets this criterion is the box of tissue. PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

OBJ: 2

11. When is an external information search especially important? a. when there is little risk of making an incorrect decision b. when there is a high risk of making an incorrect decision c. when the cost of gathering information is high d. when buying frequently purchased, low-cost items ANS: B If a consumer perceives a purchase to involve high risk (financial, social, etc.), an external search will lower the risk by providing more information. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 92

4-3

12. For which of the following products is the purchaser most likely to rely on an external information source? a. a package of light bulbs b. a copy of TV Guide c. a principles of marketing text d. a memo pad ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

13. Pierre has been shopping for a new lawn mower. He has visited several sites on the Internet and has read articles in Consumer Reports on mowers. Pierre has also asked several of his friends for recommendations. What has Pierre been using? a. internal search sources b. secondary data sources c. nonmarketing-controlled information sources d. marketing-controlled information sources ANS: C Public sources of information such as magazines and consumer rating organizations are known as nonmarketing-controlled information sources. PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

OBJ: 2

14. Which of the following is an example of a marketing-controlled information system? a. Hot Pockets brand mini pizzas b. a television ad for Mayfield ice cream c. an article in Bicycling magazine about the newest Shimano brand shoes d. a NASCAR automobile ANS: B The article in Bicycling would not have originated with the Shimano organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

OBJ: 2

15. You are thinking about purchasing a new bike. If the first thing you do is ask a bike-riding buddy for his input on top brands available on the market, what are you doing? a. seeking a marketing-controlled information source for information b. evaluating purchase alternatives c. realizing an unfulfilled need d. seeking a nonmarketing-controlled information source for information ANS: D OBJ: 2

4-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 92

16. As Grace looks for a mystery book to read this weekend, she will consider only buying books written by Joan Hess, Dorothy Cannell, or Tamara Meyers. What is this group of authors? a. her evolved set b. her evoked set c. her involvement set d. her evaluative set ANS: B An evoked set is the set of brands a consumer recalls and would consider as possible purchase choices. PTS: 1 DIF: Application BLM: Higher order

REF: p. 94

OBJ: 2

DIF: Definition

REF: p. 94

17. What is another name for evoked set? a. induced memory b. consideration set c. reminder induction d. reminder assortment ANS: B OBJ: 2

PTS: 1 BLM: Remember

18. When do people tend to be more satisfied with a purchase? a. if they feel less competent in their daily lives b. if an information search was involved c. if there is inconsistency among opinions and values d. if there is no further contact with the seller ANS: B An information search tends to reduce cognitive dissonance and increases satisfaction. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 96

19. Frank has just made it to the checkout point on amazon.ca and he has a shopping basket full of DVDs and books. As he alternately stares at his virtually bulging shopping basket and his credit card, Frank begins to feel apprehensive. What is Frank experiencing? a. self-actualization involvement b. perceptual disharmony c. cognitive dissonance d. temporal distortion ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

4-5

20. Ruby is a student and spent $150 on a pair of Oakley Pro-M sunglasses for her boyfriend, Hudson. When she got home with the sunglasses, she experienced a high level of anxiety about whether she made the right purchase decision. What did Ruby experience? a. selective retention b. self-actualization involvement c. cognitive dissonance d. perceptual disharmony ANS: C Cognitive dissonance is the term for postpurchase tension and anxiety. PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

OBJ: 3

21. Miller just purchased a new Allez A1 Specialized bicycle for $1,000. Miller realizes that the Allez A1 costs more than most bikes, and even at that price doesn’t come with a set of pedals. Even though other brands of bicycle cost much less than the Allez A1, Miller feels that the Allez A1 is more comfortable and has greater durability than most road bikes. As Miller wonders if he made the right purchase decision, what is he experiencing? a. attribute remorse b. evaluation distortion c. cognitive dissonance d. perceptual disharmony ANS: C Cognitive dissonance involves the realization of the advantages and disadvantages of the purchased product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

OBJ: 3

22. What is the amount of time and effort a buyer invests in the search, evaluation, and decision processes of consumer behaviour? a. involvement b. economic value c. opportunity cost d. perceived level of personal risk ANS: A OBJ: 4

4-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 98

23. When Li goes to the grocery store each week, he buys the same brands of bread, luncheon meat, breakfast bars, and orange juice. What is this type of buying behaviour called? a. routine response behaviour b. limited decision making c. situational convenience d. extensive decision making ANS: A The buying of frequently purchased, low-cost goods is typically routine response behaviour. PTS: 1 DIF: Application BLM: Higher order

REF: p. 98

OBJ: 4

24. Which of the following activities is most likely to be an example of routine response behaviour? a. the first-time purchase of a new pickup truck b. the purchase of a funeral casket c. a painter’s purchase of a 20-foot extension ladder for $600 d. the purchase of a replacement light bulb ANS: D Only the light bulb is an example of a low-involvement purchase. PTS: 1 DIF: Application BLM: Higher order

REF: p. 98

OBJ: 4

25. What is characterized by low involvement, a short time frame, an internal-only information search, and low costs? a. temporally limited behaviour b. limited decision making c. routine response behaviour d. emotional buying ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 98

26. Jackson has moved to a new community and can no longer attend his old church. He is currently visiting churches to make a decision about which one best serves his needs. In making his decision, what type of consumer decision making will Jackson engage in? a. habitual b. limited c. routine d. extended ANS: B Jackson is familiar with churches and the services they provide, but he is unfamiliar with the ones in his new community. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

4-7

27. The electricity for lighting outdoor billboards is powered by transformers. The operator of a company that installs and manages billboards has purchased many such transformers. Today he plans to buy a replacement for one that was destroyed by a recent hurricane. Before making this purchase, he will look at cost and to see if he can find one that is more weatherproof. He wants to make sure he buys the best signal for the job and that he does not pay more money than he should. In other words, which type of decision making will he engage in? a. classical b. extended c. routine d. limited ANS: D The billboard operator is familiar with the product, but he is not immediately knowledgeable about the products currently on the market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

28. Which process does a consumer often use when purchasing an unfamiliar, expensive product or an infrequently bought item such as a burial plot or life insurance? a. strategic behavioural b. cognitive harmonizing c. stimulus discrimination d. extensive decision making ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 99

29. Nellie’s boss sells merchandise through Internet auctions. He needs to mail a $1,500 hexagonal antique picture frame. He has instructed Nellie to buy packaging that will make sure the oddly shaped frame arrives at its new owner undamaged, but he has not told her how or where she will find such packaging. Given that she frequently has to purchase packaging supplies, what kind of purchase decision process would Nellie most likely employ? a. extensive decision making b. limited decision making c. routine response behaviour d. low-involvement decision making ANS: B She will most likely use limited decision making because she is familiar with packaging products, but not with one that meets the exact size and protective criteria. PTS: 1 DIF: Application BLM: Higher order

4-8

REF: p. 99

OBJ: 4

30. In late 2000, Honda Motors introduced Insight, a new hybrid electric-gasoline car. The car was rated at an incredible 5 litres/100 kilometres of driving. Before buying such an environmentally friendly car, a buyer will have to evaluate product attributes such as size of engine, riding space, ease of maintenance, and costs as well as his or her own feelings about environmental protection. What will the purchase of this type of car most likely involve? a. limited decision making b. low-involvement problem solving c. low-involvement decision making d. extensive decision making ANS: D Customers practise extensive decision making when purchasing an unfamiliar or infrequently used product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

31. Which of the following is most likely to be an example of limited decision making? a. a new lawnmower purchase b. a new set of wheels and tires for your old truck c. a replacement shampoo for your favourite brand that has been discontinued d. your first Valentine’s gift for your new girlfriend/boyfriend ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

32. When would a marketing manager expect his or her product to be a high-involvement product for most consumers? a. if it has low social visibility b. if it has not been purchased before c. if it is a product that is a new innovation d. if it requires substantial financial investment ANS: D REF: p. 99

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

33. All of the following factors directly influence consumers’ level of involvement in the purchase process EXCEPT which one? a. consumer level of education b. social visibility of the purchased item c. previous experience with the product d. perceived risk of negative consequences as a result of the purchase ANS: A REF: p. 99

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

4-9

34. Your best friend has sought your advice on what type of clothing she should buy for a job interview. If she gets the job, she will be assistant to the producer of her favourite television program. She really wants this job and considers it a once-in-a-lifetime opportunity. By asking your help with her wardrobe, what is your friend most likely trying to do? a. increase the chances of selective exposure b. increase the motivation involved in the decision c. reduce perceived risk of negative consequences d. eliminate cognitive dissonance ANS: C What is being sought is a reduction in the anxieties felt, because the best friend cannot anticipate the outcomes, but believes there may be negative consequences. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

35. What might a salsa manufacturer do to reduce the likelihood customers would switch from its brand to a competitor’s? a. offer incentives to get buyers to repeatedly purchase its brand until they do it out of habit b. switch distribution to different outlets c. increase the social visibility of the product category of its brand d. raise the price of its brand relative to competitors’ to reduce the level of consumer involvement ANS: A Repeated exposure to a brand or product will make subsequent purchase become routine. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99-100

OBJ: 4

36. When Kate went to purchase a birthday card for her new boyfriend, she went to three stores and spent four hours reading over 500 cards before selecting the perfect one. Why is this card (which cost $2.25) properly designated a high-involvement product? a. because of trial investment b. because of cognitive dissonance c. because of brand loyalty d. because of situational factors ANS: D Because of the situational factors (high emotional risk), this low-cost card is a high-involvement item in this case. PTS: 1 DIF: Application BLM: Higher order

4-10

REF: p. 100

OBJ: 4

37. Why does Marc approaches the purchase decision of underwear with a much lower level of human involvement than the purchase of a motorcycle? a. due to situational factors b. due to the financial risk c. due to the social visibility of the two products d. due to the fear of cognitive dissonance ANS: C Involvement increases as social visibility of a product increases. PTS: 1 DIF: Application BLM: Higher order

REF: p. 100

OBJ: 4

38. Marketing managers often use in-store promotions to stimulate sales of which of the following? a. high-priced products b. low-involvement products c. high-involvement products d. technical products ANS: B Because a low-involvement product has low potential risk for the consumer, it is easier to influence the consumer at the point of purchase. Marketing managers can use attention-getting devices to induce trial purchases. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 100

39. What is the set of values, norms, attitudes, and other meaningful symbols that shape human behaviour and is transmitted from one generation to the next? a. customerization b. socialization c. culture d. lifestyle ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 101

40. Which of the following terms accurately describes a culture? a. dysfunctional b. selective c. static d. learned ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 101-102

4-11

41. The fact mothers in Japan feed their babies freeze-dried sardines and rice and most mothers in Canada would not eat freeze-dried sardines, much less feed them to their babies, indicates how which of the following influences the consumer decision-making process? a. reference group membership b. family life-cycle stage c. perception d. culture ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 101-102

42. Culture is the chief shaper and transmitter of which of the following? a. class stratification b. self-concepts c. individual differences d. values ANS: D Human interaction from one generation to the next shapes the values held by society. This shaping of societal values is culture. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 102

OBJ: 5

43. What is an enduring belief that a specific mode of conduct is personally or socially preferable to an alternative mode of conduct? a. lifestyle b. attitude c. value d. self-concept ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 102

44. What are homogeneous groups within a culture that share elements of the overall culture as well as have elements that are unique to that group? a. normative groups b. dissociative groups c. autonomous personal units d. subcultures ANS: D OBJ: 5

4-12

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 104

45. According to the text, which of the following statements about culture as an influence on consumer buying behaviour is true? a. Core values remain the same for all cultures. b. Language is an important aspect of culture. c. Some fear the proliferation of the Internet will decrease cultural heterogeneity. d. A firm that understands the culture it is selling to has just as great a probability of selling its product as a firm that has no understanding of the culture. ANS: B Without understanding a culture, a firm has little chance of selling its products in it. Some fear widespread use of the Internet will increase cultural homogeneity. Core values differ among cultures. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 104

46. Which of the following is LEAST likely to be described as a subculture? a. residents of Richmond, B.C. b. electrical engineers c. college students d. Vietnamese Canadians ANS: B Electrical engineers are a professional group and do not share demographic characteristics (as do most college students). Geographic regions (residents of Richmond, B.C.), religious beliefs (Hutterites), or ethnic background (Vietnamese Canadians) are all considered possible bases for subcultures. PTS: 1 DIF: Application BLM: Higher order

REF: p. 104

OBJ: 5

47. Approximately what percentage of the visible minorities in Canada live in the four major metropolitan areas of Toronto, Vancouver, Montreal, and Calgary/Edmonton? a. 75 percent b. 5 percent c. 50 percent d. 25 percent ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 104-105

48. Which of the following is a group of people who are considered nearly equal in community esteem, who regularly socialize among themselves both formally and informally, and who share behavioural norms? a. procreational family b. subculture c. social class d. extended family ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 105

4-13

49. According to the text, which of the following statements about the social class system in Canada is true? a. The upper class is the best target market in Canada. b. The social class system in Canada is determined solely on the basis of educational level achieved. c. The middle class is the largest social class in Canada. d. The social class system in Canada results in groupings that are about the same size. ANS: C Vocation and educational level achieved are only two of the determinants of social class. For some products, the upper class is the best target market, but not for all as implied in this statement. The sizes of the classes are different. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 106

50. If you were developing a promotional campaign for vocational classes to appeal to the working class, which of the following alternatives might you use? a. a campaign that shows family and community members participating in vocational classes to improve their lives b. a campaign appealing to self-actualization needs c. a campaign showing participants in the vocational classes with the time and money to vacation in faraway and exotic places d. a campaign emphasizing that those who participate in vocational classes will look better to others ANS: A The working-class person depends on relatives and community for economic and emotional support. PTS: 1 DIF: Application BLM: Higher order

REF: p. 106

OBJ: 5

51. Which of the following BEST describes social class as a marketing tool in Canada? a. It offers few insights concerning consumer behaviour. b. It is useful for lifestyle distinctions between groups. c. It has demonstrated that all classes of consumers shop in the same stores. d. It is just a simple measure of income level. ANS: B Lifestyles do differ between the existing classes in Canada, offering useful insights for marketers. PTS: 1 OBJ: 5

4-14

DIF: Comprehension BLM: Higher order

REF: p. 106-107

52. According to the text, which of the following statements about reference groups is true? a. Reference groups serve as information sources and influence perceptions. b. A person can belong to only one reference group. c. Reference groups stimulate, but do not constrain, consumption behaviour. d. Reference groups have a strong influence on all brands and product purchases. ANS: A Reference groups directly influence consumer behaviour and provide signals (information) for appropriate behaviour. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 107

53. What is a primary reference group composed of? a. only friends, neighbours, and relatives b. people an individual aspires to be like c. face-to-face membership groups that touch people’s lives directly d. role models on television and in the movies ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 107-108

54. Social influences on consumer buying decisions include which of the following? a. reference groups, opinion leaders, and family b. personality, lifestyle, and reference groups c. lifestyle, reference groups, and family d. reference groups, society, opinion leaders, and family ANS: A Lifestyle and personality are individual influences. Culture and society are cultural factors. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 107-110

OBJ: 6

55. Elliott loves to compete in mountain biking. He subscribes to all the bicycling magazines and reads them as soon as they arrive each month. Champion bikers such as Golden Brainard, Chris Sheppard, and Carl Swenson are often used in the product advertisements in these magazines. The ads convince Elliott to buy these products because these champions are which type of group for Elliott? a. direct reference b. primary reference c. aspirational d. secondary reference ANS: C Aspirational groups are those groups someone would like to join but of which he or she is currently not a member. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

4-15

56. Nigel overheard a conversation in which he was referred to as “overstuffed, stuffy, and conservative.” Taking exception to this, he decided on a “extreme makeover.” After watching The Fast and the Furious, Nigel purchased a fast car and joined a gym. What did the characters in the movie represent to Nigel? a. an aspirational reference group b. opinion leaders c. a nonaspirational reference group d. a reference group ANS: A OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

57. Mohammed believes the only type of consumers who would live in the Meadow Lake subdivision where the houses sell for a half million dollars or more are wasteful and materialistic, and he would never consider owning one of these houses himself. The people who typically live in that neighbourhood are in what group for that type of purchase? a. Mohammed’s aspirational group b. Mohammed’s direct reference group c. Mohammed’s nonaspirational group d. Mohammed’s membership group ANS: C A nonaspirational group is a group the consumer attempts to maintain distance from and does not want to imitate in purchase behaviour. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

58. Who are opinion leaders? a. easy to locate and target b. people who influence others c. experts on all high-involvement consumer goods d. wealthy, well-educated individuals ANS: B An opinion leader can influence the purchasing behaviour of others in the reference group. However, opinion leaders are not always influential, not the same for all social classes, and not always wealthy or well educated. Opinion leaders rapidly change and are a casual, often inconspicuous, phenomenon. PTS: 1 BLM: Remember

4-16

DIF: Definition

REF: p. 108

OBJ: 6

59. You are the brand manager for a new line of allergy relief drugs. Which of the following methods might you use to influence opinion leadership/reference groups to help stimulate demand for your products? a. Drop the price of your new products to the point where customers will note they are getting a bargain. b. Develop a promotional campaign that emphasizes safety and security needs being fulfilled by these health care products. c. Develop a promotional campaign that tells customers they “deserve to use” these products. d. Use a series of ads showing different health care associations and societies endorsing the use of these health care products. ANS: D The endorsements use the sanctioning or referral power of sources possessing high credibility. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

60. Crystal tends to buy the same brands of detergent, dishwasher soap, and cleaning products as which of the following? a. her psychographic group b. her subculture c. her social class d. her family ANS: D The family is the most important social institution for many consumers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 110

OBJ: 6

61. Because her mother went to the supermarket only once a month, this is how Moniq prefers to do her grocery shopping. One of the reasons Moniq is such an efficient shopper is that, like her mother, Moniq believes, “Waste not, want not.” What is the passing down of norms and values to Moniq an example of? a. consumerism b. the roles opinion leaders play in business decision making c. the socialization process d. the role of society in consumer decision making ANS: C The socialization process is the passing down of cultural values and norms to children. PTS: 1 DIF: Application BLM: Higher order

REF: p. 110

OBJ: 6

4-17

62. Madison announced to her family last night that she wanted a pair of inline skates. Her sister Bailey said that she thought it was a stupid idea. Their mother Wanda said Madison deserved a special treat for winning the science fair. By the fact her father Ned said nothing, Madison knew she was not getting any skates. In terms of the roles played by family members in the consumer decision-making process, which of the following is correct? a. Madison was the initiator, and Bailey had no role at all. b. Madison was an influencer, and Wanda was the decision maker. c. Madison was the initiator, and Ned was the decision maker. d. Madison was the initiator, and Ned had no role at all. ANS: C Madison suggested the purchase and was the initiator. Wanda and Bailey both tried to influence the purchase. Ned was the decision maker. PTS: 1 DIF: Application BLM: Higher order

REF: p. 110-111

OBJ: 6

63. A pet food manufacturer has introduced a new cat food and spent a large amount of money on the packaging, nationwide television advertising, coupons, and store displays. After a successful introduction period with sales higher than expected, sales suddenly dropped off dramatically. Subsequent research revealed that cats tired quickly of the food and refused to eat it. The pet food manufacturer forgot that cats can also play an important role in the family decision process. What are cats in this case? a. purchasers b. selectors c. consumers d. decision makers ANS: C Here consumer is used to denote the user of the good or service. This question emphasizes how wide a difference there can be between consumer and purchaser. PTS: 1 DIF: Application BLM: Higher order

REF: p. 111

OBJ: 6

64. Women account for about 50 percent of the luxury car market. Male car designers at Cadillac are going about their work with paper clips on their fingers to simulate what it feels like for women with long fingernails to operate buttons, knobs, and other interior features. What type of influences on consumer buying decisions are they responding to? a. physiological b. individual c. cultural d. social ANS: B Gender is an individual influence on consumer buying decisions. PTS: 1 DIF: Application BLM: Higher order

4-18

REF: p. 111

OBJ: 7

65. All of the following are examples of individual factors that affect the decision-making process for consumers EXCEPT which one? a. reference groups b. learning c. personality d. perception ANS: A Reference groups are a social influence. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 112

OBJ: 7

66. What is an orderly series of stages in which consumers’ attitudes and behavioural tendencies change over time? a. acculturation b. the family life cycle c. lifestyle consumption d. socialization ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 112-113

67. What is a composite of psychological makeup and environmental forces that provides consistency to an individual’s reactions to situations? a. an individual’s acculturation b. an individual’s personality c. an individual’s socialization d. an individual’s attitude ANS: B Autonomy is a common personality trait. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 114

OBJ: 7

68. What is the term describing how consumers perceive themselves in terms of attitudes, perceptions, beliefs, and self-evaluations? a. behaviour b. personality c. normalization d. self-concept ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 114

4-19

69. Evan knows that if he had been allowed to audition to be a contestant on Canadian Idol, he would have won. He feels as if his singing ability and his stage presence are as least as good as the contest’s winner, Reuben Studly. Since Evan really admires Reuben, he has adopted Reuben’s mannerisms. He carefully selects clothes like Reuben wore on the television show. He is hoping his new look will enhance his chances of getting selected for future Canadian Idol shows. What does Evan’s new look reflect? a. his ideal self-image b. his superego c. his real self-image d. his socialization process ANS: A Ideal self-image represents the way an individual would like to be. PTS: 1 DIF: Application BLM: Higher order

REF: p. 114

OBJ: 7

70. Jeison’s purchase behaviour is influenced by his love of mountain bike riding, his fascination with extreme sports, his interest in rap music, and his belief that politics is for old people. All of these things are part of which personal influence on the consumer decision-making process? a. attitude b. lifestyle c. beliefs d. personality ANS: B Lifestyle is defined by one’s activities, interests, and opinions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 115

OBJ: 7

71. Studies of how consumers relate to Internet entertainment classify them into nine different groups. One category is “Mouse Potatoes,” who spend most of their time on-line, want the most current gadgets, and believe that the world pictured in the cartoon The Jetsons will someday exist. These describe which of the following? a. the self-image of “Mouse Potatoes” b. the lifestyle of “Mouse Potatoes” c. the demographics of “Mouse Potatoes” d. the socialization process of “Mouse Potatoes” ANS: B Lifestyles are defined by activities, interests, and opinions. PTS: 1 DIF: Application BLM: Higher order

4-20

REF: p. 115

OBJ: 7

72. To analyze consumer lifestyles, what do marketers look at? a. consumers’ activities, interests, and opinions b. consumers’ behaviour, personality, and social class c. consumers’ activities, personality, and demography d. consumers’ income, gender, and life objectives ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 115

73. What analytical technique is used to examine consumer lifestyles and categorize consumers? a. an acculturation analysis b. psychographics c. demography d. socialization ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 115

74. Several years ago, Procter & Gamble added bleach to its laundry detergent Oxydol, but people didn’t believe it was different because it looked the same. So P&G added blue beads to the normally white detergent. While the blue beads had nothing to do with the bleaching action, consumers could “see” the difference. In this case, consumers were interpreting stimuli into a meaningful picture called which of the following? a. perception b. exposure c. cognition d. selection ANS: A The process of selecting, organizing, and interpreting the stimuli that are bombarding consumers daily is called perception. Colour is a cue that plays a key role in consumer’s perception. PTS: 1 DIF: Application BLM: Higher order

REF: p. 116

OBJ: 8

75. Chad was excited about buying his first car. He was considering a Ford Mustang and began noticing that there were quite a few of these on the road between his apartment and his office. What is Chad experiencing? a. selective attribution b. selective retention c. selective distortion d. selective exposure ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 116

4-21

76. On any given day, a person may be subjected to over 2,500 advertising messages but may be aware of only 10 to 20 of them. What is this called? a. sporadic reinforcement b. selective learning c. selective exposure d. selective distortion ANS: C Consumers use selective exposure to decide which stimuli to select (attend to) and which to ignore. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 116

77. What is it called when consumers change or distort information that conflicts with their feelings or beliefs? a. intermittent reinforcement b. cultural c. selective distortion d. selective retention ANS: C OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 117

78. Manning bought a Schwinn Circuit bike for $1,300. After the purchase, he read an article about bicycles made by the Giant Bicycle Company, which makes a bike with most of the same features as the Schwinn Circuit. Manning processed this newly received information to make it more consistent with his prior opinion that the Schwinn is better than the Giant bike. What did Manning engage in? a. selective distortion b. selective exposure c. intermittent reinforcement d. selective retention ANS: A Selective distortion occurs when consumers change or distort information that conflicts with their feelings or beliefs. PTS: 1 DIF: Application BLM: Higher order

4-22

REF: p. 117

OBJ: 8

79. Families of police officers often alter information they hear about officers who die in the line of duty. This allows them to live and function without constant anxiety while their loved one is engaged in a potentially dangerous job. What is this process? a. faulty selectivity b. selective distortion c. selective retention d. selective exposure ANS: B Selective distortion involves changing or distorting the communication message to make the message seemingly agree with preconceived opinion. PTS: 1 DIF: Application BLM: Higher order

REF: p. 117

OBJ: 8

80. Brant had been researching BMW automobiles for months with an intention of purchasing one of the models. Over coffee in the morning he remarked to one of his coworkers at the office, “And like the commercial said on TV last night, BMW X-drive is superb for driving on icy roads.” Which marketing principle is Brant demonstrating? a. selective distortion b. selective retention c. selective exposure d. selective learning ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 118

81. Neava Locke is developing an advertising campaign targeted to the same young audience that watched the X Games (a week-long competition in a variety of extreme sports) on television. Which of the following actions might Locke take to help enhance the chances her targeted customers will pay attention to her ads? a. Use neutral sounds and colours that are similar to the programs the ads follow, so there is not much difference between the program and the ads. b. Create ads that emphasize the least crucial attributes of the brand to get customers to think about the ads. c. Create sexy ads to break through the ad clutter. d. Use elderly celebrity spokespersons to endorse the products as a grandparent would. ANS: C Research has indicated that sexier ads are more memorable among this young audience. PTS: 1 DIF: Application BLM: Higher order

REF: p. 118

OBJ: 8

4-23

82. What occurs when consumers remember only information that supports their personal feelings or beliefs? a. faulty selectivity b. selective retention c. selective distortion d. selective exposure ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 118

83. Cassandra, an accounting major, read an article stating that accounting graduates are receiving the highest starting salary offers for business majors. The article also stated that marketing majors start with lower salaries but surpass all other majors’ salaries within 10 years. Cassandra doesn’t remember reading this last part of the article, just the first part. What is this an example of? a. selective exposure b. selective distortion c. selective retention d. selective socialization ANS: C Selective retention is the process whereby a consumer remembers only that information which supports personal feelings or beliefs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 118

OBJ: 8

84. An ad for KidsCentre calls it “the positive place for kids” and shows a sample membership card. To which of Maslow’s needs does this ad most likely appeal? a. self-actualization b. esteem c. safety d. social ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 119

85. Ranked from the lowest to the highest level, what does Maslow’s hierarchy of needs model include? a. psychological, safety, economic, self-esteem, and social b. physiological, social, self-esteem, economic, and self-actualization c. safety, economic, social, self-esteem, and self-development d. physiological, safety, social, self-esteem, and self-actualization ANS: D OBJ: 8

4-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 119

86. According to Maslow’s hierarchy of needs model, what are the first needs most people try to satisfy? a. safety b. physiological c. economic d. esteem ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 119

87. Qwest is a company that markets software to protect computer files from computer hackers and other unauthorized users. Its ad shows a large evil-looking monster gobbling up data, and asks, “Are these your files?” What are these advertisements designed to appeal to? a. customers’ economic needs b. customers’ social needs c. customers’ safety needs d. customers’ self-esteem needs ANS: C The software selling point is the safety it provides from unauthorized users. PTS: 1 DIF: Application BLM: Higher order

REF: p. 119

OBJ: 8

88. A local garment manufacturer designs a line of outerwear and uses the slogan, “Because you want to be one of the gang” as the centrepiece of its ad campaign. Which level of Maslow’s hierarchy of needs is being addressed here? a. social b. self-actualization c. esteem d. safety ANS: A OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 119

89. Advocacy groups lobbying for support money may be inflating the number of people who suffer or die from particular maladies such as AIDS, types of cancer, and Alzheimer’s. These groups are using fear as a marketing tool to specifically target which needs in Maslow’s hierarchy? a. social b. physiological c. safety d. self-esteem ANS: C These fear appeals target safety needs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 119

OBJ: 8

4-25

90. If an advertiser wanted to create ads for a restaurant that stimulate the self-actualization motivation, what would the ads do? a. show people enjoying others’ company while eating in the restaurant b. emphasize that only those people who want to tell others that they have risen to the top of their profession use the restaurant c. inform consumers about the cleanliness of the food preparation areas and procedures d. indicate that eating in the restaurant is what “you have earned and deserve” ANS: D Self-actualization needs are those that stress self-fulfillment and self-expression, or reaching the point in life at which “people are what they feel they should be.” PTS: 1 DIF: Application BLM: Higher order

REF: p. 120

OBJ: 8

91. Loren saw an advertisement for an Internet bank that does not charge any service fees. He immediately went on-line and moved his chequing and savings account to the Internet bank. What is the process that created changes in Loren’s immediate behaviour? a. perception b. learning c. acculturation d. consumer decision making ANS: B Learning is the process that creates changes in behaviour. The question implies Loren learned from the ad. PTS: 1 DIF: Application BLM: Higher order

REF: p. 121

OBJ: 8

DIF: Definition

REF: p. 121

92. What process creates changes in behaviour? a. learning b. attitude adjustment c. selective adaptation d. behaviour normalization ANS: A OBJ: 8

PTS: 1 BLM: Remember

93. Manufacturers of consumer goods often give away trial sizes of new products to encourage which of the following? a. conceptual learning b. selective perception c. continuous reinforcement d. experiential learning ANS: D Trial behaviour reinforces experiential learning, often leading to repeat behaviour. PTS: 1 OBJ: 8

4-26

DIF: Comprehension BLM: Higher order

REF: p. 121

94. Starbucks coffee company introduced four premium flavours of Starbucks ice cream, hoping consumers would transfer their love of Starbucks coffee to ice cream. With only a little publicity and a one-time limited outdoor campaign, quarts of Starbucks coffee ice cream flew off the shelves. What did Starbucks use to promote its new frozen product? a. stimulus generalization b. stimulus discrimination c. selective retention d. product reinforcement ANS: A Stimulus generalization occurs when one response (positive attitude for a product) is extended to a second, similar stimulus (new product, same brand). PTS: 1 DIF: Application BLM: Higher order

REF: p. 121

OBJ: 8

95. Kent Longino is the marketing vice-president for Andersen, one of the largest manufacturer of windows in the world. He is directing the introduction of a glass-encased sunroom that can be assembled in a weekend. He wants to capitalize on Andersen’s success with its windows. Which learning method should he attempt to stimulate when introducing the new product? a. stimulus generalization b. experiential learning c. conceptual learning d. stimulus discrimination ANS: A Marketers often use a successful, well-known brand name for a family of products because it provides consumers familiarity with and knowledge about each product in the brand family. PTS: 1 DIF: Application BLM: Higher order

REF: p. 121

OBJ: 8

96. TAG Heuer is a prestigious brand of watch that is sold as a luxury product. It has a reputation based on quality and attention to detail. When the company introduces new timepieces, why can it can count on a well-established market already existing for the new product? a. due to perceptual discrimination b. due to stimulus generalization c. due to stimulus discrimination d. due to perceptual generalization ANS: B This is an example of selective generalization. Its consumers assume that any product with the TAG Heuer brand is worth purchasing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 121

OBJ: 8

4-27

97. What learned behaviour is the ability to differentiate between similar objects such as packages of different brands of aspirin? a. incentive discrimination b. stimulus generalization c. selective generalization d. stimulus discrimination ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 122

98. Jerome Kee holds the opinion that Vision bicycles are usually more expensive and faster than comparable bikes. He also thinks that Vision’s basic design protects the rider better than other similar bikes. What is this a description of? a. his valuations about Vision bicycles b. his attitudes about Vision bicycles c. his motives about Vision bicycles d. his beliefs about Vision bicycles ANS: D A belief is often developed about the attributes of a product. Attitudes, however, are more complex and encompass values. PTS: 1 DIF: Application BLM: Higher order

REF: p. 122

OBJ: 8

99. Connors Bros., a maritime seafood products manufacturer, plans to market its sardines to Ontario consumers through a campaign pushing the little fish as a positive food choice. The campaign aims to nullify the notion that sardines are boring by stressing their health benefits and their savory qualities. What is Connor Bros. trying to do? a. create new beliefs toward changed product attributes b. change negative beliefs about product attributes c. discover attitudes toward its product’s attributes d. strengthen existing positive beliefs about product attributes ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 122

100. Which of the following tend to be more enduring and complex than beliefs, because they consist of clusters of interrelated beliefs? a. attitudes b. perceptions c. lifestyles d. cultures ANS: A OBJ: 8

4-28

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 122

101. According to the text, which of the following BEST describes an attitude toward a product? a. It is easy to change. b. It is a person’s point of view about the product. c. It is the same as “intention to buy.” d. It is of short duration. ANS: B “Point of view” is a simpler way to state “learned tendency to respond consistently.” Both denote an opinion, which can change over time. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 122

102. Why are marketers interested in attitudes? a. Attitudes do not relate to brand image. b. Attitudes are learned tendencies to respond in a consistent manner. c. Attitudes create a social influence on consumer decision making. d. Attitudes can be used to predict buying behaviour. ANS: B Attitudes are learned tendencies to respond consistently toward a given object such as a brand. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 122

103. Many consumers consider Post Grape-Nuts cereal as a product their grandfathers ate. This makes it unacceptable to a large part of the consumer market. Without changing the product, Post ran a series of Grape-Nuts ads that described the sweet, nutty taste of the cereal and encouraged people to try it as a topping on yogurt for something good to eat. What is Post trying to do? a. appeal to existing beliefs about product attributes b. create new beliefs toward changed product attributes c. add new beliefs about product attributes d. strengthen existing positive beliefs about product attributes ANS: C Existing negative beliefs about product attributes are the most firmly entrenched and difficult to change. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 122

4-29

104. In 2000, several deaths and car wrecks were blamed on Firestone tires, and sales of the tires declined rapidly as the media publicized these accidents. A large group of Firestone distributors ran a series of ads in which they confirmed their faith in the quality of the Firestone tires with headlines such as, “I wouldn’t let my children ride on any other tire but a Firestone.” What is this an illustration of? a. efforts to discover consumer needs about product attributes b. efforts to reinforce current beliefs about product attributes c. efforts to add new beliefs about product attributes d. efforts to change beliefs about product attributes ANS: D The companies were attempting to change beliefs about a product attribute from negative to positive. PTS: 1 DIF: Application BLM: Higher order

REF: p. 122

OBJ: 8

105. With its launch of easyPAY, its fast-pay option, Shell Canada tackled the prevailing sentiment that “all fuel brands are the same” with a time-saving service for its customers. What was Shell Canada trying to do? a. strengthen existing positive beliefs about product attributes b. create new beliefs about the product attributes c. create new beliefs toward changed product attributes d. appeal to existing beliefs about product attributes ANS: B Shell Canada is trying to make customers see that it is different from other brands of fuel. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 122

OBJ: 8

Zena has been promoted to vice-president at a management consulting firm. Her new status has led her to consider the need for a new car. Her trusty little Volkswagen Beetle has over 100,000 kilometres on it and no longer seems appropriate. Susanne, another vice-president, has suggested that Zena consider a car produced in Canada because the consulting firm she works for has a policy of supporting Canadian businesses. Zena began her quest for a new car by visiting several car dealers and obtaining pamphlets on the models she is considering. She also made a trip to the library to study Consumer Reports magazine and other consumer rating publications to see what the experts think. Finally, after evaluating all options, Zena decided to purchase a new Chrysler. She believes the car is a good fit with her new image and position in her company. However, now that she has purchased the car, she has seen more advertisements touting its features then she had ever noticed before. She also noticed many models of her car on the road. Zena views the fact so many others are driving the same model car as proof that she made a good decision. 106. Refer to New Car Purchase. Zena’s visits to the dealers and to the library best represent which step of the consumer decision-making process? a. need recognition b. evaluation of alternatives c. postpurchase behaviour d. information search ANS: D These activities best represent information search. Zena must first collect the information before she can begin evaluating alternatives. PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

OBJ: 2

107. Refer to New Car Purchase. In noticing similar cars on the road and advertising supporting her decision, Zena is reducing feelings of inner tension. What are these feelings called? a. cognitive dissonance b. postpurchase action c. response attitudes d. selective retention ANS: A Cognitive dissonance is the term for postpurchase tension and anxiety. PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

OBJ: 3

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108. Refer to New Car Purchase. Which type of consumer buying decision does Zena’s purchase represent? a. motivational response b. extensive decision making c. routine response d. limited decision making ANS: B Consumers practise extensive decision making when purchasing unfamiliar, expensive products or an infrequently bought item. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

109. Refer to New Car Purchase. Zena spent a considerable amount of time and effort on her new car purchase. This suggests the car is what type of product for Zena? a. nondurable b. low involvement c. high involvement d. routine response ANS: C A consumer who deliberately searches for information about products and brands in order to evaluate them thoroughly is most likely engaging in high-involvement decision making. PTS: 1 DIF: Application BLM: Higher order

REF: p. 98

OBJ: 4

110. Refer to New Car Purchase. Susanne has influenced Zena’s choice of a new automobile. In this instance, what is Susanne acting as? a. a gatekeeper b. a purchase catalyst c. a social reference d. an opinion leader ANS: D Susanne is acting as an opinion leader in that she represents the reference group that Zena is now a part of. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 108

OBJ: 6

111. Refer to New Car Purchase. If you evaluate Zena’s choice of a Chrysler based on Maslow’s needs hierarchy, which needs was the car bought to meet? a. self-actualization b. social c. security d. safety ANS: B Zena purchased the car to meet social needs. The car provides Zena with a sense of belonging in her new position. PTS: 1 DIF: Application BLM: Higher order

REF: p. 120

OBJ: 8

It is almost 35 degrees outside, and Ed is on his way to the supermarket to buy groceries. His air conditioner is broken, so he is hot and thirsty. Ed notices a billboard featuring an ice-cold Coca-Cola. Ed remembers that he is out of Coke. Once in the store, Ed heads straight for the soft-drink aisle and picks up a six-pack of Coke. 112. Refer to Coca-Cola. In this case, what is the billboard ad? a. a problem recognition b. an external stimulus c. an internal stimulus d. a purchase outcome ANS: B The advertisement is a stimulus that comes from an outside source. It causes Ed to recognize a problem, but it is not problem recognition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 90

OBJ: 2

113. Refer to Coca-Cola. Ed’s Coke purchase best represents which type of consumer buying decision? a. situation convenience b. routine response behaviour c. motivational response d. extensive decision making ANS: B The fact that Ed is out of Coca-Cola suggests it is a frequently purchased product, typically routine response behaviour. PTS: 1 DIF: Application BLM: Higher order

REF: p. 98

OBJ: 4

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114. Refer to Coca-Cola. Ed knows Olympic and world champion kayaker Adam Van Koeverden drinks Gatorade, and he remembers he can be more like Van Koeverden if he drinks it. Because Ed very much wants to be like Van Koeverden, he purchases Gatorade in addition to Coke. In this example, Van Koeverden is acting as which of the following? a. cultural icon b. purchase catalyst c. opinion leader d. dissociative reference ANS: C An opinion leader is a person who influences others. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

115. Refer to Coca-Cola. According to Maslow’s hierarchy of needs model, which need was Ed trying to satisfy? a. physiological b. safety c. esteem d. social ANS: A Thirst is a physiological need on Maslow’s hierarchy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 120

OBJ: 8

Fiona is considering a daycare facility for her five-week-old daughter, Kate. She has been visiting daycare centres for the past two weeks and has interviewed caregivers at eight different centres. It is extremely important to Fiona that Kate be stimulated intellectually and fed according to schedule. After considering all eight daycare centres, Fiona chose PerfectCare. While she is quite pleased with her choice, she does continue to wonder if she made the correct decision. 116. Refer to Daycare. Fiona’s visits to the daycare centres and interviews with the caregivers represent which step of the consumer decision process? a. stimulus b. evaluation of alternatives c. postpurchase behaviour d. need recognition ANS: B These activities best represent evaluation of alternatives. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 94

OBJ: 2

117. Refer to Daycare. What are Fiona’s uncertainty about whether she made the correct decision and the feelings that go along with this uncertainty called? a. postpurchase action b. cognitive dissonance c. perceptual distortion d. routine response ANS: B Cognitive dissonance is the term for postpurchase tension and anxiety. PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

OBJ: 3

118. Refer to Daycare. Fiona spent a significant amount of time and effort in selecting the daycare centre for Kate. This suggests the centre is which type of product for Fiona? a. low involvement b. high involvement c. impulse d. routine response ANS: B A consumer who deliberately searches for information about products and evaluates alternatives thoroughly is most likely engaging in high-involvement decision making. PTS: 1 DIF: Application BLM: Higher order

REF: p. 98

OBJ: 4

119. Refer to Daycare. Fiona’s selection of a daycare facility represents which type of consumer buying decision? a. routine response b. motivational response c. limited decision making d. extensive decision making ANS: D Consumers practise extensive decision making when purchasing products that are extremely important to them. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

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120. Refer to Daycare. Shannon, Fiona’s best friend, recommended PerfectCare because she takes her daughter there. Shannon is acting as which of the following? a. a gatekeeper b. a dissociative reference c. an opinion leader d. a family member ANS: C An opinion leader is a person who influences others. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

Interface, a manufacturer of floor-covering products, has recently entered into an agreement with Cargill, Inc. and Dow Chemical Co. to develop a carpeting manufactured from corn fibre, rather than the traditional nylon. Interface hopes to develop a biodegradable floor tile that will be sold to the public at prices only slightly higher than nylon carpet tiles. Interface’s CEO has repeatedly said that the mission of his company is to look for manufacturing materials that are renewable and not petroleum dependent. 121. Refer to Interface. A consumer in the market for floor covering would be most likely to locate information on the biodegradable floor tiles during which stage of the consumer decision-making process? a. evaluation of alternatives b. external information search c. need recognition d. internal information search ANS: B The information would come from an outside source since it is a new product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

OBJ: 2

122. Refer to Interface. Which of the following is the BEST example of a nonmarketing-controlled information source for floor tiling? a. a discussion with coworkers about the best floor tiles to buy b. a salesperson at a store that specializes in floor coverings c. an ad in Better Homes & Gardens for floor tiles d. a store display showing the various colours of tiles available ANS: A Any kind of word-of-mouth advertising or discussion about a product are examples of nonmarketing-controlled information sources. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 92

OBJ: 2

123. Refer to Interface. Interface could include a letter in every box of corn-fibre carpet tiles congratulating the buyer on helping to protect the environment. What would this reduce? a. potential cognitive dissonance b. potential buyer repentance c. potential consumer cognition d. potential affective dissonance ANS: A Postpurchase messages are one way marketing managers can reduce cognitive dissonance. PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

OBJ: 2

124. Refer to Interface. Interface is hoping its sales will be driven by the enduring belief that people should protect our environment for our children. This belief is an example of how which of the following influences consumer buying decisions? a. individuality b. culture c. society d. family ANS: B This belief that people should protect and save the environment is an example of a cultural value. PTS: 1 DIF: Application BLM: Higher order

REF: p. 101

OBJ: 5

Between 1987 and 2000, the market for women’s athletic wear increased by more than $3 billion while the market for men’s athletic wear remained unchanged. Women are no longer satisfied with sporting goods stores that act as if they were serving the women’s needs by carrying sports bras and biking shorts, and assuming that women can use male gear. Like men, women want a product that will increase their performance, but they also want something else—a product that will be in tune with their bodies. 125. Refer to Women’s Athletic Wear. One of the biggest differences between men and women consumers is the fact that men tend to stay store loyal. Women are much more ready to shop around—perhaps because they demand more from their products than men. Andrea wants to start jogging, but she has been told she needs to find a well-fitting sports bra. Andrea is at the first stage of which of the following? a. selective perception b. product differentiation c. product positioning d. the consumer decision-making process ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 90

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126. Refer to Women’s Athletic Wear. Andrea purchased a copy of Fit magazine because it contained an article about selecting the right sports bra. The acquiring of the magazine indicates that Andrea is engaged in which of the following? a. avoiding problems with selective retention b. locating an external information source c. finding an external information source d. deciding whether she has a want or a need ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

127. Refer to Women’s Athletic Wear. Andrea has decided that she will buy either a Nike or a Reebok bra because these brands are designed to offer the greatest support for women athletes. What would these two brands be? a. her comparative set b. her evoked set c. her perceptual favourites d. her cognitive choices ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 94

128. Refer to Women’s Athletic Wear. One of the problems in the past with women’s athletic wear was the fact the clothing was not designed to fit the female anatomy. Women would buy the clothing needed to enjoy a sport and learn about its inadequacies after they had worn the item for a while. In other words, what did many women in years past experience? a. elapsed motivation b. perceptual inaptitude c. evoked dissatisfaction d. cognitive dissonance ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 96

129. Refer to Women’s Athletic Wear. The enduring belief that it is a person’s responsibility to take good care of his or her body and engage in regular exercise to ensure well-being is an example of what? a. perceptual dilemma b. cognitive attitude c. value d. marketing-information source ANS: C OBJ: 5

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 102

130. Refer to Women’s Athletic Wear. The use of tennis stars Venus and Serena Williams in Nike ads indicates how marketers use the concept of which of the following to promote products to women? a. situational influences b. personal influences c. lifestyle definition d. opinion leaders ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

131. Refer to Women’s Athletic Wear. To capture the female market for sports attire, sporting goods retailers are sprucing up their stores, brightening interiors, and setting up women’s sections in the fronts of the stores. What are the retailers trying to change? a. customers’ cognitions about the stores b. customers’ evoked attitudes toward the stores c. customers’ subliminal interactions with the stores d. customers’ perceptions of the stores ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 116

132. Refer to Women’s Athletic Wear. The fact many women do not develop store loyalty and perceive all athletic clothes retailers to be similar indicates a tendency to engage in which of the following? a. generalized learning b. selective distortion c. stimulus generalization d. stimulus discrimination ANS: C OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 121

133. Refer to Women’s Athletic Wear. To reach the women’s market, Nike has created Nike Goddess stores that it hopes will offer the atmosphere and merchandise to attract and keep female athletes coming back. What is Nike trying to cause its women customers to use? a. stimulus generalization b. selective distortion c. stimulus discrimination d. subliminal perception ANS: C OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 122

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While Robinson was looking at the CDs at Walmart, he was trying to remember the name of the group that sang a song he liked on last night’s episode of Smallville. 134. Refer to CDs. Robinson wanted to buy a CD by that group. What is this part of the consumer decision-making process called? a. internal information search b. external information search c. alternative evaluation d. need recognition ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 92

135. Refer to CDs. Since recording companies pay to have their CDs promoted on television shows that air on the WB, what is the source of information Robinson is trying to recall? a. nonmarketing-controlled b. a credible consideration set c. marketing-controlled d. unitary data ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 93

Zoran wants to buy a new pair of sunglasses that he can wear when he is biking competitively. He has narrowed the brands he is considering down to Dragon Optical, Oakley, Abriko, and Zeal Optics. 136. Refer to Sunglasses. What do these four brands of sunglasses represent for Zoran? a. his discretionary discriminators b. his dedicated decision c. his evaluative criteria d. his evoked set ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 94

137. Refer to Sunglasses. Zoran wants sunglasses with a rubberized nose piece and built-in anti-fogging technology, and that can block light from all angles. What do the criteria for his decision appear to be based on? a. product attributes b. evoked set finalists c. marketing-controlled information sources d. routine response behaviour ANS: A Physical characteristics and traits used in decision making are called product attributes. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 95

OBJ: 2

Sixty percent of drinkers of whisky in Great Britain are over 50. The dangers associated with an aging market are obvious. Whisky manufacturers have taken staid traditional symbols of their whisky and placed them in incongruous situations to appeal to a youthful market. 138. Refer to Whisky. Which psychological influence on consumers’ purchase of whisky are whisky manufacturers trying to change? a. perception b. reference group c. age d. personality ANS: A Only perception is an example of a psychological influence. In addition, the manufacturers are trying to change how young consumers perceive whisky as an alcoholic beverage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 116

OBJ: 8

139. Refer to Whisky. If young consumers saw these attempts to influence their purchasing behaviour as ridiculous because they believe whisky is an old person’s drink, they would miss the advertising message the manufacturers hoped to send. What would have occurred? a. selective distortion b. stimulus generalization c. perceptual generalization d. stimulus discrimination ANS: A Young consumers would miss the intended meaning of the communications because they would distort its meaning based on their beliefs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 117

OBJ: 8

A few years ago, Toro introduced a small, lightweight snow blower called the Snow Pup. Even though the product worked well, sales failed to meet expectations because consumers perceived the name to mean the Snow Pup was a toy or too light to do any serious snow removal. Toro took the Snow Pup off the market and reintroduced it as the Snow Master. Sales surpassed expectations with the new name. 140. Refer to Toro. The poor sales under one name and the excellent sales under another is one reason that marketers need to study which of the following prior to introducing a new product? a. consumer behaviour b. heterogeneous marketing c. the socialization process d. autonomous marketing ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 90

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141. Refer to Toro. The poor sales under one name and the excellent sales under another is an example of how marketers must be attuned to which of the following? a. the consumer’s lifestyle b. the consumer’s reference groups c. the consumer’s perception d. the consumer’s personality ANS: C OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 116

142. Refer to Toro. What is influencing the consumer decision-making process? a. selective distortion b. selective exposure c. lifestyle dissonance d. asocialization ANS: A Researchers have found that cues such as brand names influence consumers’ perception of products and brands. See also the Ford example in text. PTS: 1 DIF: Application BLM: Higher order

REF: p. 117

OBJ: 8

Ralph played mediocre golf for 20 years. The he retired and vowed to improve his golf game by buying one of the new golf clubs that promise increased distance and have a $700 price tag. 143. Refer to Golf. Which of the following factors has determined Ralph’s level of involvement in the purchase of a new technologically advanced golf club? a. desire for positive consequences b. self-concept and perceived risk of positive consequences c. situation and self-concept d. interest and previous experience ANS: D The text lists previous experiences, interests, perceived risk of negative consequences, situation, and social visibility as factors that determine the level of consumer involvement. PTS: 1 DIF: Application BLM: Higher order

REF: p. 99

OBJ: 4

144. Refer to Golf. According to Maslow’s hierarchy of needs, which needs is Ralph most likely trying to satisfy? a. social b. self-actualization c. psychological d. safety ANS: B Ralph is engaged in a self-improvement process. PTS: 1 DIF: Application BLM: Higher order 4-42

REF: p. 120

OBJ: 8

Callaway manufactures golfing equipment—primarily golf clubs. The company has hired Bill Gates and Celine Dion to promote its clubs as “a brand that is something one can aspire to own.” 145. Refer to Golf Clubs. Callaway hopes that in this advertising communications, Gates and Dion would be seen as which of the following? a. early instigators b. opinion leaders c. innovators d. aspirational adopters ANS: B Callaway is hopeful that Dion and Gates will influence others to buy Callaway golfing equipment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

146. Refer to Golf Clubs. What learning theory is Callaway relying on with this advertising claim? a. stimulus discrimination b. selective retention c. stimulus generalization d. selective generalization ANS: A Stimulus discrimination occurs when consumers learn to differentiate among similar products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 122

OBJ: 8

147. Refer to Golf Clubs. Callaway hopes that in this advertising communications, Gates and Dion would be seen as which of the following? a. innovators b. opinion leaders c. early instigators d. aspirational adopters ANS: B Callaway is hopeful that Dion and Gates will influence others to buy Callaway golfing equipment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 108

OBJ: 6

TRUE/FALSE 1. If consumer behaviour is not well understood, a marketer will have difficulty creating an appropriate marketing mix. ANS: T REF: p. 90

PTS: 1 OBJ: 1

DIF: Comprehension

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2. A weekend artist would likely experience a need recognition for a new painting smock when she spilled a couple of drops of black paint on the one she always wore when she painted. ANS: F Need recognition occurs when there is a felt imbalance between actual and desired state. The artist would not be concerned about needing a new smock when the old one worked just fine for her purposes. PTS: 1

DIF: Application

REF: p. 90

OBJ: 2

3. A stimulus is a unit of input from either an external or internal source that can affect sight, smell, taste, touch, or hearing. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 90

4. When Bianca buys underwear, she makes her selection from the following brands: Bali, Playtex, and Hanes. These brands make up Bianca’s consideration set. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 94

5. Once an individual’s evoked set has been established, evaluation of those alternatives will determine what information must be obtained during the information search. ANS: F The information search yields an evoked set and precedes evaluation of alternatives. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 94

6. While marketing managers would like to think they play a role, only consumers can actually reduce their cognitive dissonance. ANS: F Marketing managers can also reduce dissonance. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 96

7. The purchase of products such as soft drinks, cleaning products, and gasoline always exemplify routine response behaviour. ANS: F The introduction of new products in any of these categories can easily move the purchase decision to a different type of decision-making process. PTS: 1 OBJ: 4

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DIF: Comprehension

REF: p. 98

8. Mary has taught high school driver’s education for almost two decades. She found a new device for getting students to understand why it is important to not drink and drive, and considered buying it. Mary was engaged in extensive decision making. ANS: F Acquiring information about an unfamiliar brand in a familiar product category is called limited decision making. PTS: 1

DIF: Application

REF: p. 99

OBJ: 4

9. Gordon perceives the purchase of a tattoo to be a socially risky decision because he thinks people will judge him unfairly if he has a tattoo. Madison, however, does not perceive getting a tattoo as particularly risky behaviour. As a result, purchasing a tattoo will be a high-involvement activity for Gordon, but not for Madison. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 98

10. Detailed, informative advertisements are most effective for high-involvement products because consumers actively search for additional information prior to making their decisions. ANS: T REF: p. 98

PTS: 1 OBJ: 4

DIF: Comprehension

11. Unlike some other countries, Canada does not have a status structure or social class system. ANS: F Canada has a social class system. PTS: 1

DIF: Definition

REF: p. 105-106

OBJ: 4

12. A newly hired employee at a advertising agency chose the clothes she purchased for work by observing the clothes she saw worn in The Apprentice, a popular television reality show. In this example, the women hoping to work for Donald Trump served as primary reference groups. ANS: F RATL The newly hired employee is not interacting with the apprentices face-to-face. PTS: 1

DIF: Application

REF: p. 108

OBJ: 6

13. Opinion leaders are often the first to try new products and services out of pure curiosity. ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 107-108

14. The socialization process involves adopting the values of the culture in which a person was raised and is usually strongly influenced by the family. ANS: T REF: p. 110

PTS: 1 OBJ: 6

DIF: Comprehension

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15. Most family-oriented advertising is effective precisely because it targets the homogeneous wants and needs of the family’s members. ANS: F Because families are made up of distinct personalities, often with wide age variations, individual wants are unique. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 111

16. A person’s buying decisions are influenced by personal characteristics such as gender, age, subculture, personality, and self-concept. ANS: F Subculture is not a personal characteristic. PTS: 1

DIF: Definition

REF: p. 111

OBJ: 7

17. Mai Jing perceives herself as reasonably intelligent, sociable, and well liked by her peers. This is her ideal self-image. ANS: F Because this is how Mai Jing perceives herself, this is her real self-image, not her ideal self-image. Her ideal self-image would represent the way she would like to be. PTS: 1

DIF: Application

REF: p. 114

OBJ: 7

18. While lifestyle research is useful for describing individual consumers, it is not useful for segmenting consumer groups and measuring the size of those groups. ANS: F Lifestyle analysis, unlike personality research, has proven valuable in segmentation and targeting. PTS: 1

DIF: Definition

REF: p. 115

OBJ: 7

19. Selective exposure occurs when consumers change information that conflicts with their feelings or beliefs. ANS: F Selective distortion occurs when consumers change information that conflicts with their feelings or beliefs. PTS: 1

DIF: Definition

REF: p. 117

OBJ: 8

20. Maslow’s hierarchy of needs categorizes human needs into five levels: physiological needs, safety needs, social needs, esteem needs, and self-actualization. ANS: T OBJ: 8

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PTS: 1

DIF: Definition

REF: p. 119

21. Reading about the experience of Canadian soldiers in Afghanistan is an example of experiential learning. ANS: F Reading about the experiences of others, not undergoing the experience yourself, is an example of conceptual learning. PTS: 1

DIF: Definition

REF: p. 121

OBJ: 8

22. If the product element of the four Ps provides no reinforcement (positive or negative), activity in some other aspect of the marketing mix may be required to encourage further consumption. ANS: T REF: p. 121

PTS: 1 OBJ: 8

DIF: Comprehension

23. By keeping the blue triangle in the corner and the Nabisco name on several similar Nabisco snack products, Nabisco is attempting to capitalize on stimulus discrimination. ANS: F Keeping a common design on several different products would more appropriately be an example of stimulus generalization. PTS: 1

DIF: Application

REF: p. 121

OBJ: 8

24. Although beliefs and attitudes are separate concepts, they are closely interrelated. ANS: T REF: p. 122

PTS: 1 OBJ: 8

DIF: Comprehension

ESSAY 1. Why do marketers study consumer behaviour? ANS: A marketer must understand consumer behaviour to develop a proper marketing mix. A thorough knowledge of consumer behaviour can assist the marketer in selecting the proper target market according to values, lifestyles, and demographic and social characteristics. Furthermore, the understanding of culture and personality variables can also reduce uncertainty when creating a marketing mix. PTS: 1

DIF: Application

REF: p. 90

OBJ: 1

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2. Assume that your current $69.99 portable television has developed wavy lines across the screen and makes the people in your favourite programs sound like they are using cheap walkie-talkies. Therefore, you have decided to work all summer to save money for the ultimate $1,200 flat-screen television with surround sound. Trace the steps of your decision process for purchasing your new television. ANS: For this high-involvement decision process, you would use extensive decision making and go through the following steps: 1. 2.

5. 6.

Need recognition. Your present television has wavy lines and poor sound quality, and you desire a new television set. Information search. You check both internal and external sources of information such as your own knowledge, opinions of peers, information from magazines, and the advice of television sales personnel. Evaluation of alternatives. You consider product attributes of various television brands and models in an evoked set. These attributes might include sound quality, looks, price, warranty, brand name reputation, components, and so on. Purchase. You buy the flat-screen television after judging alternatives. Postpurchase behaviour. You are satisfied with your purchase, which was the result of extensive decision making. Alternatively, you are dissatisfied with your purchase, return the television, and begin the process again.

PTS: 1

DIF: Application

REF: p. 90-95

OBJ: 2 | 3

3. How do marketers distinguish between a need and a want? ANS: A need is anything an individual depends on to function efficiently. Needs cause behaviour patterns; motivation is the driving force that causes a person to satisfy a need. A want exists when someone has an unfulfilled need and has determined that a product or service will satisfy it. Finally, a marketing manager cannot create needs but can create wants. PTS: 1

DIF: Application

REF: p. 90-91

OBJ: 2

4. Assume you have decided to purchase a new flat-screen television with surround sound. Describe your internal information search. Then name the two types of external information sources. For each source, give two specific examples of information sources you might use. ANS: An internal information search is the process of recalling past information stored in memory. This stored information would come from previous experience with television sets. By searching your memory, you could remember good and bad features—such as weight, sound quality, picture quality, etc.— you have seen on other sets. Marketing-controlled information sources could include mass media advertising about flat-screen televisions (radio, television, newspaper, or direct mail); sales promotion (contests, sweepstakes, displays, premiums, etc.); salespeople at electronics stores; and finally, product labels and warranties for televisions.

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Nonmarketing-controlled information sources could include personal experience (trying out or observing television sets); personal sources (family, friends, acquaintances, and coworkers); and public sources (Underwriters Laboratories, Consumer Reports, or other consumer-rating organizations). PTS: 1

DIF: Application

REF: p. 92

OBJ: 2

5. Assume you have decided to purchase a mobile telephone. List and briefly describe three factors that may affect the extent of your information search. ANS: Students will determine numerous factors that will affect the extent of an information search. Some possible examples follow: Perceived risk. Because the decision to purchase a mobile phone may be relatively risky due to high cost, the consumer may spend more time searching for alternatives or gathering information. Social risks may also cause the consumer to be more careful in the search because the mobile telephone is an example of “conspicuous consumption” and is socially visible. Also, it takes effort and time to gather information. At a certain point, the consumer may decide that the value of additional information about mobile phones is not worth the effort to obtain the information. Knowledge. If the consumer knows little about the product, a more extensive information search would be necessary to give the consumer enough knowledge to feel confident about making a decision. People lacking confidence about information will continue an information search even if they are extremely knowledgeable. Prior experience with the product. If the consumer has already had experience with a certain brand of mobile telephone, the information search will be limited because brand preferences may have already been established, and the perceived risk will be lower. Interest. How important is the mobile telephone in solving a problem or satisfying needs and wants? If the mobile phone is simply “neat to have” and the consumer has other phones, the information search might not be as extensive as the one for a consumer who finds a mobile phone vital to his or her job. More interested consumers spend more time searching for information and alternatives. Involvement level. A mobile telephone may be a high-involvement product for a student and a low-involvement product for an executive. The higher the level of involvement, the more extensive the information search is likely to be. Other items that students might mention include confidence in one’s decision-making abilities, prior experience with the product class, and influence of reference groups and other motivations. PTS: 1

DIF: Application

REF: p. 93

OBJ: 2

4-49

6. How can marketers and consumers reduce cognitive dissonance? ANS: Cognitive dissonance can be reduced by both consumers and marketers. Consumers will be more satisfied if they feel competent in everyday life and/or if the information search was lengthy. Consumers can also take steps to reduce dissonance by obtaining new information that reinforces their positive ideas about the product and by avoiding information that contradicts the purchase decision. Finally, consumers can choose to return the product. Marketers can help consumers reduce dissonance by communicating with them. Postpurchase letters, dissonance-reducing statements in instructions, and advertising that displays superiority over competing brands can all relieve dissonance. PTS: 1

DIF: Application

REF: p. 96

OBJ: 3

7. Assume that you and some of your fellow students have decided to dine at a five-star restaurant upon successfully completing this marketing class. What type of consumer decision making will take place? Why did you choose this type? ANS: Acquiring information about an unfamiliar brand in a familiar product category is called limited decision making. In this case, limited decision making will take place for the following reasons: • • • •

The student will seek information about alternative restaurants. The student may rely on the advice of other students to help decide on the restaurants, which may take more time. An extensive amount of effort in terms of information seeking is not reasonably possible. The costs and risks involved are moderate.

PTS: 1

DIF: Application

REF: p. 99

OBJ: 4

8. Assume that you have gone to the corner convenience store to pick up another bar of your usual brand of deodorant soap. What type of decision making will take place? How would this differ from the decision making that would take place if the store was out of your regular brand? ANS: With a low-involvement product such as bars of soap, routine response behaviour would take place, because the product is low priced and the same brand is frequently purchased. The purchase would be habitual. If the store were out of the regular brand, limited decision making would take place. Acquiring information about an unfamiliar brand in a familiar product category (such as soap) is called limited decision making. Some effort would have to be expended on evaluating alternatives or comparing prices if the consumer were price sensitive. PTS: 1

4-50

DIF: Application

REF: p. 99

OBJ: 4

9. What is extensive decision making? When would a person use extensive decision making? Name two products that would require extensive decision making when purchased for the first time and would require limited decision making in subsequent purchases. ANS: A consumer practises extensive decision making when purchasing an unfamiliar, expensive product or an infrequently bought item. This process is the most complex type of decision making because the buyer uses many criteria for evaluating alternative brands and spends much time seeking information. Buying a car, an appliance, a stereo system, or other expensive, durable item would require extensive decision making for the first purchase. However, as the purchase is repeated, the buyer may feel experienced in decision making and may step back to limited decision making. For example, a person who has bought several cars may resort to the saying, “I have always bought Fords and have been satisfied, so my next car will be a Ford.” PTS: 1

DIF: Application

REF: p. 99

OBJ: 4

10. Assume you have been invited to join a social club whose members typically wear leather bomber jackets. You have never bought or worn a leather jacket before. List and briefly describe four factors that could influence your level of involvement in the purchase of the leather jacket. How involved will you be in this purchase and why? ANS: The factors that affect involvement level are previous experience, interest, perceived risk of negative consequences, situation, and social visibility. Previous experience. Because there is no previous experience with the product, level of involvement will be higher because of unfamiliarity with the product. Interest. Areas of interest vary by individual. The student may or may not be interested in leather jackets. However, purchasing the leather jacket indicates an interest in the social group and probably a high level of involvement. Perceived risk of negative consequences. Several types of risks are involved in the purchase. With an expensive jacket, loss of purchasing power and opportunity costs result in financial risk. A social risk is taken, because wearing a leather jacket may cause a positive or negative reaction from other peer groups. For example, animal rights activists might criticize the purchase of a leather jacket, or other peer groups might view the purchase as frivolous. Finally, there is a psychological risk involved in the form of anxiety or concern about whether the “right” jacket has been purchased and is acceptable to other members of the social club. Situation. The circumstances of the social club make the leather jacket a high-involvement purchase. Social visibility. Because a leather jacket is a social and public display, wearing the jacket makes a statement about the individual. This would also make the purchase a high-involvement one. PTS: 1

DIF: Application

REF: p. 99-100

OBJ: 4

4-51

11. Most consumer decision making is in a low-involvement setting; therefore, a consumer is often not seeking many of the products marketers are trying to sell. What tactics can a marketer use to increase sales of a low-involvement product? ANS: Because problem recognition for low-involvement purchases rarely occurs until the consumer is in the store, the marketer must use attention-getting devices in the store. These include attractive packaging and in-store displays. Marketers can also provide incentives in the form of sales promotions, including coupons, cents-off deals, rebates, and two-for-one offers. Finally, marketers can link a product to a higher-involvement issue. For example, toothpaste can be promoted as a product that fights plaque and cavities. Breakfast cereal can be promoted as a health food that reduces the risk of cancer. PTS: 1

DIF: Application

REF: p. 100-101

OBJ: 4

12. What is the difference between culture and subculture? Why do marketing managers need to understand culture and subculture? ANS: Culture is the set of values, norms, attitudes, and other meaningful symbols that shape human behaviour and the products of that behaviour as they are transmitted from one generation to the next. Culture is environmentally oriented and dynamic. It also gives order to society by establishing common expectations. Subcultures are subdivisions of culture on the basis of such things as demographic characteristics, geographic regions, political beliefs, religious beliefs, and national and ethnic backgrounds. Subcultures are homogeneous groups that share elements of the overall culture as well as unique elements. Within subcultures there are even greater similarities in people’s attitudes, values, and actions than within the broader culture. Without understanding culture, a firm has little chance of effectively penetrating the market. As more companies expand their operations globally, the need to understand the cultures of foreign countries becomes more important. Marketers should become familiar with the culture and adapt to it, or marketers can attempt to bring their own culture to other countries. Marketers should also identify subcultures and then design special marketing programs to serve their needs. PTS: 1 OBJ: 5

4-52

DIF: Application

REF: p. 101 | p. 104

13. List and briefly describe all informal and formal reference groups that affect your consumer purchase decision-making process. ANS: Reference groups can be divided into two categories: direct and indirect. Direct reference groups involve face-to-face membership groups that directly touch the life of the person. Indirect groups are nonmembership groups. Direct groups have two subcategories: primary and secondary reference groups. Primary membership groups include all groups with which the student would interact regularly in an informal, face-to-face manner, such as family, friends, and fellow students or employees. Secondary membership groups are less consistent and more formal. These might include clubs, fraternities/sororities, religious groups, or professional groups. Indirect groups have two subcategories: aspirational and nonaspirational. Aspirational groups are those of which students are currently not a member but would like to be. These might include fraternities, sororities, campus groups, or other clubs of which the student wishes to be a member. Nonaspirational groups are those from which the student wishes to maintain a distance. These might include competing fraternities or sororities, failing students, unsuccessful workers, or those that are mentally ill. PTS: 1

DIF: Application

REF: p. 107-108

OBJ: 6

14. List and briefly describe the five different roles various family members can play to influence the purchase decision-making process for a new houseboat. ANS: The initiator would be the person who initiates or suggests the purchase process. The influencer would be a person whose opinion is valued in the decision-making process. The decision maker is the person or persons who actually make the decision to buy. The purchaser is the individual who actually exchanges money for the product. The consumer is the user of the houseboat either as a passenger or as captain. PTS: 1

DIF: Application

REF: p. 110-111

OBJ: 6

4-53

15. The activities, values, and goals of reference groups directly influence consumer behaviour. What are reference groups? What are the three important implications reference groups have for marketers? ANS: Reference groups are a group in society that influences an individual’s purchasing behaviour. Those implications are: (1) they serve as information sources and influence perceptions, (2) they affect an individual’s aspiration levels, and (3) their norms either constrain or stimulate consumer behaviour. PTS: 1

DIF: Application

REF: p. 107-108

OBJ: 6

16. Define self-concept. Choose a product, and use that product to illustrate how a marketer would apply the idea of self-concept to market the product. ANS: Self-concept is an individual’s attitudes, perceptions, beliefs, and evaluations about himself or herself. Through self-concepts, consumers gain identity of who they are, which in turn provides for consistent behaviour. Self-concept is a combination of the ideal self-image and the real self-image. For any product chosen, the marketer would promote the product as a match to real self-image or a support for attaining the ideal self-image. The concept of self is important to marketers because it helps explain the relationship between individuals’ perceptions of themselves and their consumer behaviour as expressed through their personalities. For examples, marketers of deodorant develop promotional ads linking use of the product with success and popularity. PTS: 1

DIF: Application

REF: p. 114

OBJ: 7

17. Name and briefly define the three types of selective perception. ANS: Selective exposure occurs when consumers decide to notice some messages and ignore others. The consumer is exposed only to those messages that he or she wishes to process. Usually these chosen messages are ones that are consistent with the consumer’s attitudes and/or beliefs. Selective distortion occurs when consumers change or distort information that conflicts with their feelings or beliefs. The information may be interpreted incorrectly by the consumer. Selective retention is the process whereby a consumer remembers only that information that supports personal feelings or beliefs. PTS: 1

4-54

DIF: Application

REF: p. 116

OBJ: 8

18. Assume a consumer is inspecting the package of a new cereal. The label on the box is packed with fact-filled nutrition information. Give specific examples of what might occur during the selective perception process, including selective exposure, distortion, and retention. ANS: Selective exposure occurs when consumers decide to notice some messages and ignore others. The consumer will be exposed to some of the messages on the cereal box. For example, the consumer might read parts of the nutrition information but ignore the muffin recipes. Selective distortion occurs when consumers change or distort information that conflicts with their feelings or beliefs. The information may be interpreted incorrectly by the consumer. For example, the consumer may look at the nutrition label and note that the cereal is very nutritious. He or she may also read the ingredients but miss the fact that the primary ingredient is sugar. Selective retention is the process whereby a consumer remembers only that information that supports personal feelings or beliefs. When shopping for more cereal a week later, the consumer may have forgotten the price of the cereal and some of the relevant nutrition information. However, the consumer may specifically remember that the cereal is high in fibre. PTS: 1

DIF: Application

REF: p. 116-118

OBJ: 8

19. Define each level of Maslow’s hierarchy of needs. For each of the five levels, briefly describe a marketing message appealing to this need level. ANS: Physiological needs are the most basic level of human needs. These needs include food, water, and shelter. Text examples include thirst-quenching Gatorade or satisfying hunger by eating a hamburger. Safety needs include security and freedom from pain and discomfort. Examples include safety features in cars such as air bags, antilock brakes, and reinforced construction as well as home security systems. Social needs involve a sense of belonging and love. Examples could include any messages advertising that the use of the product will bring love. These products might include cosmetics, clothes, jewellery, vacation packages, and perfume. Self-esteem needs include self-respect, feelings of accomplishment, prestige, fame, and recognition. Examples include messages about Brooks Brothers clothiers, BMW and Lexus cars, and The Bay stores. Self-actualization is the highest human need. It refers to self-fulfillment and self-expression. Examples are the message from a police force to “serve and protect” and American Express advertisements. PTS: 1

DIF: Application

REF: p. 119-120

OBJ: 8

4-55

20. How do marketers differentiate between beliefs and attitudes? ANS: Both beliefs and attitudes are closely linked to values. A belief is defined as an organized pattern of knowledge that individuals hold to be true about their world. Consumers form beliefs about products based on knowledge, faith, or hearsay. Sets of beliefs form the basis for an attitude. An attitude is a learned tendency to respond consistently toward a given object. Attitudes tend to be more enduring and complex than beliefs. Attitudes also encompass an individual’s value system, which represents personal standards of good and bad, right and wrong, and so forth. PTS: 1

DIF: Application

REF: p. 122

OBJ: 8

21. Apply the three methods of changing attitudes or beliefs about brands to possibilities for the marketing activities of Kellogg’s Corn Flakes (or another breakfast cereal you are more familiar with). ANS: Changing beliefs about attributes. Kellogg’s could work to promote the image of a family cereal by changing consumers’ beliefs about children’s cereals. Any negative beliefs or misconceptions should also be changed. For example, consumers may believe the cereal is high in sugar, when actually it is not. Changing the importance of beliefs. Kellogg’s could start emphasizing certain attributes that already exist. These might include environmental concerns (a package made of 100 percent recycled materials), or consumer preferences (the favourite choice of all consumers). Adding new beliefs. Kellogg’s could try to expand the consumption habits of consumers by stating, “Corn flakes is not just for breakfast anymore.” Kellogg’s could also emphasize additional attributes to the ones already in use, such as more nutrients (100 percent of Daily Value), cancer prevention (high fibre), or patriotism (a Canadian family and a red and white package). PTS: 1

DIF: Application

REF: p. 122-123

OBJ: 8

22. Define stimulus generalization and stimulus discrimination, and give an example of how each is used. ANS: Stimulus generalization occurs when one response is extended to a second stimulus similar to the first. Any product-line extension will be a satisfactory example. Stimulus discrimination occurs when consumers learn to differentiate among similar products. There are many examples of stimulus discrimination. Students’ examples should indicate how superficial differences are emphasized in promotions. PTS: 1

4-56

DIF: Application

REF: p. 121-122

OBJ: 8

Chapter 5—Business Marketing MULTIPLE CHOICE 1. A product is defined as a business product rather than consumer good on the basis of which of the following? a. its tangible attributes b. its intended use c. its physical characteristics d. its price ANS: A REF: p. 132

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

2. Layton Bay, Inc. sells playground equipment to private schools and daycare centres, provincial and city governments, and families with preteen children. Layton Bay’s marketing task is to sell products that are classified as which of the following? a. business products only b. consumer goods only c. supplies d. both business and consumer goods ANS: D Products are classified as either business or consumer goods, based on the intended use of the product. Obviously, some of the computer products are sold for business use and some for personal use. PTS: 1 DIF: Application BLM: Higher order

REF: p. 132

OBJ: 1

3. Which of the following is the best example of a sale that could take place only in the business market? a. A university controller is ordering more computers for classroom labs. b. A park ranger is purchasing an azalea bush for her garden. c. A dentist is buying postage stamps to mail invitations to his son’s birthday party. d. A music store owner is ordering the newest Faith Hill CD for her mother. ANS: A When professionals buy items for personal use, these purchases are part of the consumer market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 132

OBJ: 1

5-1

4. Business marketing includes which goods and services? a. those that are used for personal consumption b. those that advertise to consumers c. those that become part of another product d. those that are used to target consumers ANS: C Intended use is the key factor in the classification of a business versus a personal good. Use for personal consumption classifies the good or service as a consumer product. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 132

5. Since GE began accepting bids via the Internet, the length of the bidding process in GE’s lighting division has been reduced from 21 days to 10. Since requesting the bids is easier, purchasing agents approach more potential vendors. The ability to locate more vendors has lowered the cost of goods by 5 to 15 percent. What does GE’s experience illustrate? a. how the Internet increases efficiency in data exchange b. how business marketing is using the Internet to become more efficient c. how using the Internet increases competition d. how the use of the Internet has influenced consumer markets to become larger and more powerful than business markets ANS: B Business markets will continue to be larger and more powerful than consumer markets with the use of the Internet. PTS: 1 DIF: Application BLM: Higher order

REF: p. 133

OBJ: 2

6. Which of the following is a benefit businesses experience from buying and selling their goods and services on the Internet? a. access to around-the-clock ordering b. a smaller selection of products and vendors c. higher prices due to increased competition d. less customer service ANS: A The need for customer service does not decrease even though the Internet may change the form in which it is provided. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 133

7. What is a cooperative agreement between business firms? a. a joint contract b. a strategic alliance c. a co-marketing effort d. a global partner development strategy ANS: B OBJ: 3 5-2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 136-137

8. Subaru and GM have been working together on the design for the new Chevy Borrego, a sporty combination of a truck and a car. Subaru allowed Chevy to use its all-wheel drive platform to build the vehicle, and the two car manufacturers worked together to develop the car’s turbo-charged, four-cylinder engine. In this example, Subaru and GM’s working together is an example of which of the following? a. a co-marketing effort b. a global partner development strategy c. a shared capital contract d. a strategic alliance ANS: D A strategic alliance is a cooperative agreement between business firms. PTS: 1 DIF: Application BLM: Higher order

REF: p. 136-137

OBJ: 3

9. Why do businesses typically enter into strategic alliances? a. to gain access to global markets b. to achieve economies of scale c. to facilitate entry of new products to old markets d. to share political risks ANS: B REF: p. 137

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

10. What is a keiretsu? a. a form of relationship marketing that is illegal in Canada b. a type of strategic alliance commonly found in Japan c. an Internet site that offers its customers access to various languages which they can use to conduct their business d. a method of business e-commerce found in Asia ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 138

11. In Japan, reciprocity and personal relationships contribute to the development of which of the following? a. an independent network of small retailers b. agricola c. amae d. keiretsu ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 138

DIF: Definition

REF: p. 139

12. What is another name for producers? a. component networks b. original equipment manufacturers c. installers d. product providers ANS: B OBJ: 4

PTS: 1 BLM: Remember

5-3

13. What is an OEM? a. an installer of original materials b. an originator of electronic merchandise c. a producer d. an organizational system used for inventory control ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 139

14. What does OEM stand for? a. Original Equipment Manufacturers b. Organization of Electronic Manufacturers c. Organization of Environmental Monitoring d. Organization of Equipment Manufacturers ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 139

15. Ranjit works for the Government of Ontario as an advocate of provincial growth and development. He devises ways to encourage businesses to relocate to the province. In other words, Ranjit is involved in business marketing. He has compiled a list of potential businesses that might be willing to relocate to Ontario. Which of the following possible clients should he include in his list? a. companies that have growing sales b. any family that takes an annual vacation c. newlyweds d. families that enjoy hiking ANS: A The other “clients” are end-user consumers, not business customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 139

OBJ: 4

16. A particular segment of the business market includes those individuals and organizations that purchase goods and services for the purpose of making a profit. They achieve this goal by using purchased goods and services to make other goods, to become part of other goods, or to facilitate the daily operations of the organization. In which segment of the business market is this group? a. reseller b. wholesaler c. producer d. institution ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 140

17. What are businesses that buy finished goods and sell and distribute them for a profit? a. business facilitators b. resellers c. inventory carriers d. distribution networks ANS: B OBJ: 4 5-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 140

18. Rice Epicurean in London, Ontario, is an exclusive outlet for Honey Baked brand hams and See brand candies. In the spring, it markets Easter baskets and all the makings for personalized Easter baskets. How would Rice Epicurean best be classified? a. as a producer b. as an inventory carrier c. as a distribution network d. as a reseller ANS: D Rice Epicurean purchases finished goods and resells them; it does not produce the goods or change their form. PTS: 1 DIF: Application BLM: Higher order

REF: p. 140

OBJ: 4

19. Hensley Poultry is a wholesaler that buys poultry food and health products from Provini, Inc.; feeding systems from Big Dutchman, Inc.; and incubation systems from Copca Corp.; which it then sells to poultry producers and farmers’ cooperatives in Alberta. How is Hensley Poultry best classified? a. as a reseller b. as a producer c. as an inventory carrier d. as a distribution network ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 140

20. What percentage of the entire Canadian workforce is employed by the retail sector? a. 52 percent b. 72 percent c. 32 percent d. 12 percent ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 140

21. What does MASH stand for? a. Municipal Academic Social and Hospitals b. Manufacturer and Stakeholder c. Manufacturing Aggregate Services Holdings d. Municipal Accreditation Services Handling ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 140

5-5

22. What is the largest single category in retail sales in Canada? a. consumer electronics sales b. sporting goods sales c. food sales d. apparel sales ANS: C Food sales in Canada are over $30 billion annually. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 140

OBJ: 4

23. One segment of the business market has primary goals that differ from the ordinary business goals such as profit, market share, or return on investment. This segment includes many schools, religious institutions, and civic clubs. What is it called? a. the service market b. the reseller market c. the institution market d. the provider market ANS: C Institutions such as schools, religious institutions, and hospitals have service or activity goals, but not profit goals, yet are an important business market. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 141

OBJ: 4

24. Which of the following is the BEST example of an institution market? a. a company that does not trade its stock on an international stock exchange b. Tau Kappa Epsilon fraternity c. the Canadian Real Estate Association d. a company that sells exclusively on the Internet ANS: B Institutions include schools, religious institutions, and hospitals have service or activity goals, but not profit goals. PTS: 1 DIF: Application BLM: Higher order

5-6

REF: p. 141

OBJ: 4

25. Organon Teknina sells inexpensive equipment to detect E. coli, listeria, or salmonella bacteria in food. The company serves not-for-profit institutions that need to regularly check food quality. Organon Teknina would be LEAST likely to sell to which of the following? a. Montgomery municipality school system b. a large paediatric hospital c. a chain of Mexican restaurants d. a chain of religious institution–sponsored retirement homes ANS: C The only example of a for-profit organization in the list is restaurants, and they would not be a customer of an institutional-only food supplier. To answer this question, students will have to remember that institutions are not operated for profit. PTS: 1 DIF: Application BLM: Higher order

REF: p. 141

OBJ: 4

26. Which type of customer do business marketers serve? a. teenagers b. farmers’ markets c. private consumers d. institutions and nonprofits ANS: D Intended use, either for business or personal consumption, determines if a customer is a business customer. Private consumer signals personal or family consumption. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 142

OBJ: 4

27. What would a Canadian company that manufactures the lighted signs used by various governmental departments of highways on the sides of roads, at outdoor sports arenas, for restaurant promotion, and in amusement parks use to facilitate its market segmentation and targeting if it wanted data that was readily available and usable? a. the North American Industry Classification System b. a large amount of marketing research, including scanner data and focus groups c. other competing firms as a strategic alliance referral service d. derived demand ANS: A NAICS codes enhance companies’ marketing efforts. PTS: 1 DIF: Application BLM: Higher order

REF: p. 142

OBJ: 5

5-7

28. The government uses a system called NAICS to classify North American business establishments. What does NAICS stand for? a. Non-American Industrial Corporation System b. North American Institution Code System c. North and South American Institutional Coding Services d. North American Industry Classification System ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 142

29. Imagine you are the research director of a major industrial marketing firm. You need to select an NAICS code that defines the most homogenous group of companies in a particular group of highly competitive companies . Which of the following codes might you use? a. 7 b. 532 c. 19 d. 7432 ANS: D The more digits in a code, the more homogenous the group will be. PTS: 1 DIF: Application BLM: Higher order

REF: p. 142

OBJ: 5

30. NAICS data are helpful for analyzing, segmenting, and targeting markets. Who developed the system? a. the North American Free Trade Association partners b. large manufacturers in the United States and Canada that produce similar goods c. the Canadian government d. Brazil, Chile, Argentina, Canada, and the United States working together in a joint venture ANS: A NAICS is an industry classification system that replaced the standard industrial classification system in 1997 for the North American Free Trade Association. The partnership included the United States, Canada, and Mexico. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 142

OBJ: 5

31. What can managers use the NAICS data to do? a. identify potential new customers b. classify consumer behaviour c. eliminate risk d. determine purchase motives ANS: A When compared from year to year, NAICS data can pinpoint which industries are growing and, it is hoped, identify market opportunities. PTS: 1 OBJ: 5

5-8

DIF: Comprehension BLM: Higher order

REF: p. 142

32. The demand for consumer goods often affects the demand for business products. What is this characteristic of business markets called? a. inelastic demand b. derived demand c. elastic demand d. fluctuating demand ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 143

33. The demand for polyethylene film used to wrap meat ready for sale is dependent on consumers’ demand for meat. This is an example of what type of demand? a. derived b. inelastic c. elastic d. joint ANS: A Derived demand for a business product comes from the original consumer demand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 143

OBJ: 6

34. When the demand for packaged beer fell by 8 percent in one year, why did the demand for aluminum beer cans and glass beer bottles also fall? a. because the demand for beer containers is an example of elastic demand b. because the demand for beer containers is an example of fluctuating demand c. because the demand for beer containers is an example of inelastic demand d. because the demand for beer containers is an example of derived demand ANS: D The demand for beer containers is driven by the consumer demand for beer; therefore, the containers have a derived demand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 143

OBJ: 6

35. Bábolina Tetra is a Hungarian company that has genetically created a chicken guaranteed to produce uniform brown eggs with strong shells. The company breeds and sells young chicks to farmers all over Europe who want to sell eggs in local markets. When consumers began to worry about cholesterol content and stopped eating as many eggs, the demand for the Tetra hen also declined. This is an example of what type of demand? a. multiplying b. inelastic c. derived d. elastic ANS: C Demand for hens is derived from consumers’ demands for eggs, which has declined. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 143

OBJ: 6

5-9

36. When will an increase or decrease in the price of a product not significantly affect demand for the product? a. when demand for a product is elastic b. when demand for a product is responsive c. when demand for a product is derived d. when demand for a product is inelastic ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 144

37. Lanover Manufacturing supplies windshield wiper blades to General Motors and Ford. A sudden jump in the price of rubber and its substitutes has forced Lanover and other wiper blades manufacturers to double the price of the wiper blades. Sales volume for wiper blades has not been affected by this increase in price. Why did the price not change? a. because demand for windshield wiper blades is secure b. because demand for windshield wiper blades is elastic c. because demand for windshield wiper blades is resistant d. because demand for windshield wiper blades is inelastic ANS: D A change in price has not really made a change in quantity demanded; therefore, the good is price inelastic. PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

OBJ: 6

38. Due to rapidly rising overhead costs and increases in raw material prices, Framarx Corporation was forced to raise the price of its waxed and coated paper by 35 percent. (The paper is used between frozen hamburger patties to keep the patties from freezing together.) Framarx is the leading manufacturer in this industry, and its competitors will follow suit. While the sales force for Framarx believes the price increase will result in a drop in sales, its marketing manager disagrees because the demand for the waxed and coated paper is more than likely which of the following? a. derived b. resistant c. inelastic d. elastic ANS: C A good is price inelastic if a change in price causes little or no change in demand. Paper used in packaging such as between hamburger patties is a fairly insignificant cost item in the production of hamburger and might even be considered a necessity item. PTS: 1 DIF: Application BLM: Higher order

5-10

REF: p. 144

OBJ: 6

39. During the first years of this century, the number of packages arriving at households has more than doubled. An increase in the price of the cardboard boxes in which these packages are shipped will have little effect on the amount of shipping done; the demand for the boxes will continue to increase. Therefore, what is the demand for the cardboard boxes? a. bundled b. elastic c. derived d. inelastic ANS: D A product is price inelastic if a change in price causes little or no change in demand. Boxes are a fairly insignificant cost item in the overall costs of a product and might even be considered a necessity item. PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

OBJ: 6

40. Although the price of a chemical added to paint to protect surfaces from mould and mildew has almost doubled, the price of paint only rose an average of 5 percent, and the demand for both paint and the chemical that eliminates mould and mildew remained stable. What is the demand for this chemical? a. derived b. elastic c. change-resistant d. inelastic ANS: D A good is price inelastic if a change in price leads to a small change in quantity demanded or does not significantly affect demand for the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

OBJ: 6

41. When two or more items are used in combination to produce a final product, they are said to have what type of demand? a. inelastic b. elastic c. joint d. derived ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 144

5-11

42. A decline in the availability of bicycle handle bars will decrease Huffy Bicycle Company’s production of bicycles. Why does decreased production in turn reduce Huffy’s demand for bicycle seats? a. because the products in this situation have derived demand b. because the products in this situation have joint demand c. because the products in this situation have inelastic demand d. because the products in this situation have elastic demand ANS: B When two or more items are used in combination in the final product, they have joint demand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

OBJ: 6

43. Which of the following pairs of products BEST illustrates the concept of joint demand? a. a grandfather clock pendulum and a grandfather clock case b. chocolate and vanilla ice cream c. a thermometer and a barometer d. a pumpkin and the set of tools used to carve it ANS: A When two or more items are used in combination in the final product, they have joint demand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

OBJ: 6

44. A small increase or decrease in consumer demand can produce a much larger change in demand for the facilities and equipment needed to manufacture the consumer product. What is this a result of? a. the demand fluctuation principle b. the multiplier effect c. the joint demand principle or division effect d. the inelastic demand effect ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 144

45. In the six months following the September 11, 2001, terrorist attacks, consumer demand for large American flags saw a 200 percent increase, but the Eagle Manufacturing Company had a 500 percent increase in orders for the special machine that mass produces the larger flags. What is this dramatic increase due to? a. the joint demand principle or division effect b. the accelerator principle c. the demand fluctuator principle d. the inelastic demand effect ANS: B Increased consumer demand leading to an increase in manufacturing equipment demand to make the consumer product is known as the multiplier effect of demand or as the accelerator principle. PTS: 1 DIF: Application BLM: Higher order 5-12

REF: p. 144

OBJ: 6

46. A small change in consumer demand can produce a much larger change in demand for the facilities and equipment needed to make the consumer product. How do economists refer to this phenomenon? a. as the multiplier effect b. as latent demand c. elastic demand d. as joint demand ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 144

47. Which of the following is an example of an advantage business marketers have because they usually have fewer customers than consumer marketers? a. the fact the majority of sales can come from one customer b. the ability to keep track of customers’ satisfaction levels c. ease of identifying prospective suppliers d. the inability to monitor customers’ needs ANS: B If the majority of sales come from one or a very few customers, the company is always at risk of losing a major portion of the business very quickly if it loses even only one customer. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 144

48. Business marketers usually have far fewer customers than consumer marketers. What is the chief disadvantage of this situation for business marketers? a. the effort required to service existing customers b. each customer becomes crucial c. identification of prospective buyers d. the effort required to monitor current customer needs ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 144

49. Compared to buyers in the consumer market, buyers in the business market tend to do which of the following? a. be much more geographically concentrated b. purchase in much smaller quantities c. use reciprocity less d. buy products that have a reduced probability of being affected by derived demand ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 145

50. Which of the following BEST describes the distribution structure in business marketing? a. It typically uses retail distributors. b. It typically includes at least one wholesaler. c. It typically is complex and multistage. d. It typically is direct. ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 145 5-13

51. Kate Lui developed bread mixes that she could use to make bread for her diabetic daughter. She initially sold the bread mixes to friends and friends of friends, but she has gradually changed her customer base. Her bread mixes are now sold to a catalogue retailer that markets her mixes nationwide. With this change in customers, what should Lui expect? a. a greater reliance on advertising to gain new customers b. derived demand issues to emerge c. a smaller order size d. a more formal purchase process ANS: D Lui is leaving the consumer market and entering the business market. Businesses tend to be more formal in purchasing procedures and perform more paperwork and more analysis. PTS: 1 DIF: Application BLM: Higher order

REF: p. 145

OBJ: 6

52. What is the bargaining between buyers and sellers on product specification, delivery dates, payment terms, and other pricing matters that is commonplace in business marketing? a. purchase arbitration b. customerization c. disintermediation d. negotiation ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 146

53. If a business needs a particular good or service and decides to look among its own customers for a provider of that good or service, what is the business doing? a. acting unethically b. practising reciprocity c. opening itself up to prosecution for illegal activities d. working to create purchase arbitration ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 146

54. When the owner of a security company decided he wanted to buy new office furniture, he checked his customer list first for office furniture retailers. He discovered that four companies that sold office furniture were regular customers. He chose to buy his furniture from the retailer that was his largest account. What is this purchase? a. unethical by all standards b. an example of an illegal influence c. a normal business practice called circular buying d. a normal business practice called reciprocity ANS: D Reciprocity is the normal business practice of using customers as suppliers of goods or services. PTS: 1 DIF: Application BLM: Higher order

5-14

REF: p. 146

OBJ: 6

55. What occurs when a carpet cleaning service decides to buy its detergents and spot cleaners from a manufacturer that regularly uses its cleaning services? a. derived demand b. reciprocity c. elastic demand d. joint demand ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 146

56. Ellis is trying to sell laser detection equipment to a large Brazilian mining company. Ellis discovered this prospect when he went looking for customers who use laser equipment similar to what his company manufactures. Which of the following questions would be the LEAST important to answer prior to visiting the mining company’s headquarters? a. What are the buying objectives of the mining company? b. What role does each member play in the mining company’s buying centre? c. Who are the major people involved in making the decision within the mining company? d. What kind of reciprocity will be demanded by the mining company? ANS: D There is no concern for reciprocity because there is no reason to believe there is any interest on the part of the laser equipment firm to buy from the mining company. PTS: 1 DIF: Application BLM: Higher order

REF: p. 146

OBJ: 6

57. Oscar sells printing presses ranging in price from $29,000 to $500,000 to sign manufacturers. He wants to stimulate business among some of his customers who cannot afford to buy his printing presses, but who would like to be able to use one of these printing presses in their sign businesses. Which of the following actions is most appropriate in this example? a. Create full and complete reciprocity to ensure customer cash flow. b. Set up a straight-rebuy ordering system. c. Develop leasing options for business customers. d. Manage derived demand to keep the customers’ demand at the highest possible levels. ANS: C Leasing allows firms to do business with customers that cannot afford to buy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 146

OBJ: 6

5-15

58. What is the primary promotional method for the sale of all business products? a. personal selling b. advertising c. trade promotions d. direct mail ANS: A Business sales tend to be large in dollar amounts and quantities, may require negotiation, and may rely heavily on the salesperson’s ability to communicate and work with the customer. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 146

59. Why is personal selling pervasive in organizational markets? a. Most of the situations involve fairly low-cost items. b. Organizational salespeople seldom speak the language of their customers. c. Many organizational products are complex and require expertise on the salesperson’s part. d. There are few avenues for effective advertising of organizational goods. ANS: C While it is true that personal selling is expensive, and many specialized technical publications and other advertising vehicles are available, other forms of promotion are not as effective as personal selling. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 146

60. Eilene Tifinio is the marketing manager for a manufacturer of refrigeration equipment. She must develop a marketing strategy for the upcoming year. Which of the following marketing actions is Eilene LEAST likely to employ? a. increase the size of her sales force so new companies will have a salesperson to call upon them b. work closely in new product development with OEMs to be sure the components produced fit their needs c. lower the prices of her equipment to keep competitors from entering the field d. emphasize advertising in the company’s promotion strategy to ensure that she persuades potential buyers of the superiority of her company and its products ANS: D Rarely does advertising play a key role in the promotion strategy of OEM component part manufacturers or other business firms. PTS: 1 DIF: Application BLM: Higher order

5-16

REF: p. 146

OBJ: 6

61. What are finished items ready for assembly or products that need very little processing before they become a part of some other product? a. processed materials b. supplies c. accessory equipment d. component parts ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 147

62. Which of the following is the BEST example of an installation? a. original artwork b. a display cabinet c. a parking garage d. accounting software ANS: C An installation, also called major equipment, is expensive and large. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

63. Parking garages, $500,000 printing presses, privately owned warehouses, and oil-well drilling platforms are depreciated over time rather than expensed in the year they are purchased. How are they classified? a. as component parts b. as installations c. as accessory equipment d. as processed materials ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

64. Because they are not expensive, have short useful lives, and are frequently purchased from local distributors, store mannequins, notebook computers, fax machines, and grocery carts are typically classified as which of the following? a. component parts b. accessory equipment c. processed materials d. mobile equipment ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

5-17

65. Which of the following is the BEST example of accessory equipment? a. car batteries b. light bulbs c. a parking lot d. a store display rack ANS: D Accessory equipment is generally less expensive and short lived than major equipment and is used in the conducting of business. Accessory equipment also tends to be purchased by a widely dispersed market. Light bulbs are supplies. Shock absorbers would be classified as MRO. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

66. Products such as diamonds, iron ore, peaches, and beef that become part of finished products are examples of which of the following? a. supplies b. processed materials c. raw materials d. component parts ANS: C OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

67. One brand of tomato sauce advertises that the tomatoes it uses are processed within 24 hours of being picked to ensure product freshness. The fresh tomatoes it buys from growers are examples of which of the following? a. supplies b. OEM parts c. processed materials d. raw materials ANS: D Tomatoes are an agricultural product. Agricultural products are a type of raw material. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

68. Within the business market, handlebars purchased by bicycle manufacturers are examples of which of the following? a. processed materials b. supplies c. accessory equipment d. component parts ANS: D OBJ: 7

5-18

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

69. Manufacturers of computer storage media such as 3M or Sony sell their products to software developers, such as Microsoft, to be used to store software programs. What would Microsoft be considered? a. a processed materials market b. an OEM market c. an accessory equipment market d. a provision market ANS: B As the manufacturer of the finished software that gets stored on the computer diskettes, Microsoft is a good example of an OEM market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

70. A company that installs and maintains signs along the highways has a truck that has a 50-metre crane on it that is capable of lifting up to 15 tonnes. The company’s accountant depreciated the value of the vehicle over several years. What type of business product is the truck with crane? a. fabricating item b. component part c. accessory equipment d. major equipment ANS: D OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

71. Because they are shown as expenses on the yearly accounting statements, for a police department, revolvers, computers, printers, fax machines, and patrol vehicles are all examples of which of the following? a. component parts b. accessory equipment c. supplies d. mobile installations ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

72. Which of the following is the best example of accessory equipment? a. a desktop computer b. sheet metal c. pencils d. spark plugs ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 147

5-19

73. Parrish Farms provides organic grocers with fruits and vegetables that have been grown without the use of pesticides or chemical fertilizers. What is Parrish Farms a supplier of? a. raw materials b. accessory parts c. supplies d. processed materials ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

74. What are capital goods? a. finished items ready for assembly b. unprocessed extractive or agricultural products c. portable tools and office equipment d. large expensive machines ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 147

75. Why is it important that marketers understand the classification of the business product they are selling? a. Distribution channels are almost always direct for all business selling. b. OEM markets often act just like the consumer markets. c. Personal selling is the most important promotional strategy for all business marketing classifications. d. Promotion and distribution strategies tend to vary depending upon the classification. ANS: D Some products such as raw materials rely more heavily on personal sales and direct distribution. Others such as supplies need advertising and wider distribution. Knowing the classification of the product is important so the marketer can understand which strategies will fit the product. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 147-148

76. At Garbino Metalware Welding, the shop foreman orders cutting oil, special hand cleaner, and sanding paper almost every month. How are these items classified? a. as replacement parts b. as accessory equipment c. as supplies d. as OEM parts ANS: C Supplies are consumable, inexpensive items that do not become part of the final product, and are routinely bought. PTS: 1 DIF: Application BLM: Higher order

5-20

REF: p. 148

OBJ: 7

77. What are consumable, inexpensive, and often standardized items that do not become part of the final product? a. accessory equipment b. supplies c. processed materials d. replacement parts ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 148

78. What is another name for business supplies such as pens, paper, and computer diskettes? a. accessories b. MRO items c. OEM parts d. components ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 148

79. What are products that have had some processing, are used directly in the production of other products, and do not retain their identity in the final product? a. raw materials b. processed materials c. component parts d. supplies ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 148

80. A baker purchases pre-sifted flour that she then bakes into cakes and pastries. Flour made from wheat is an example of which of the following? a. a component part b. a processed material c. an OEM product d. raw material ANS: B Processed materials are used in the manufacture of another product and usually lose their original identity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 148

OBJ: 7

5-21

81. Metalcrafter Enterprise manufactures stamped brass door plates, brass numbers, and other decorative brass trim for homes. Every month Metalcrafter purchases sheets of brass. How are they classified? a. as component parts b. as processed materials c. as raw materials d. as replacement parts ANS: B Processed materials are used in the manufacture of another product and usually lose their original identity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 148

OBJ: 7

82. What does the acronym MRO stand for? a. Manufacturing Research Organization b. Manufacturing Recycling Organization c. Maintenance, Repair, and Operating supplies d. Marketing Recycling Operations ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 148

83. What are business services? a. They are expense items. b. They typically become part of the finished product. c. They are capital items. d. They are not used in reciprocity arrangements. ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 149

84. An employment agency specializes in providing nannies. The agency hired a management consulting firm to research how it can reduce its employee turnover and make more efficient use of customer referrals. What did this consulting firm provide the employment agency with? a. accessory services b. business services c. service supplies d. processed services ANS: B OBJ: 7

5-22

PTS: 1 DIF: Application BLM: Higher order

REF: p. 149

85. BidFair.com is an Internet company where nurses who want to work extra shifts can list their names, credentials, experience, and salary requirements. Hospitals and assisted living centres can use this site to locate temporary nursing staff. Hospitals pay a small fee each time they hire a nurse from this site. What is BidFair.com an example of? a. a job source b. a component service c. a business service d. an extended service ANS: C OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 149

86. According to the text, which of the following statements about buying centres is true? a. No one individual should assume more than two buying centre roles. b. The most efficient buying centres have no more than five members. c. While the composition of buying centres varies among industries, they are basically the same for each company within a particular industry. d. Buying centres are clearly labelled on all organizational charts. ANS: C Buying centres can have more than five members. They are not shown on organizational charts. One person may assume all of the buying centre roles. Even within industries, the composition of buying centres varies. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 149

87. What is the set of all persons in an organization who become involved in the purchasing process? a. the buying centre b. the ad hoc purchasing staff c. the comptroller’s staff d. the stakeholder committee ANS: A OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 149

88. Which of the following BEST describes a buying centre? a. It regularly generates formal announcements of who is in the buying centre. b. It is typically on the formal organizational chart under the vice-president for operations. c. It refers to all those organizational members who become involved in the purchasing process. d. It will be composed of the same decision makers as long as the purchasing process lasts. ANS: C The buying centre is not a formal, well-defined group. It is simply all the people who become involved in the purchasing process within the company, no matter what their department or position. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 149

5-23

89. Which of the following is one of the roles found within a buying centre? a. executives b. suppliers c. customers d. board of directors ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 149

90. In buying centres, who is the person with the formal or informal power to approve the selection of the supplier? a. the purchaser b. the initiator c. the decider d. the influencer ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 149-150

91. After getting advice from the company mechanic on how to get better gas mileage, the owner of Lincoln Cab Company decided to have the mechanic install Cherry Bomb glasspack mufflers in all of his cabs to increase the cars’ fuel efficiency. In terms of the buying centre, what did the mechanic fill the role of? a. decider and gatekeeper b. initiator and influencer c. user and decider d. user, influencer, and gatekeeper ANS: B One person can fill multiple roles in a buying centre. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

92. Which member of the buying centre regulates the flow of information? a. gatekeeper b. decider c. purchaser d. influencer ANS: A OBJ: 8

5-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 150

93. LeAnn sells advertising in regional travel magazines to small motel chains and independent motels. She often talks to several different people before she locates someone who can give her a purchase order or a refusal. In terms of the buying centre, she has the most trouble identifying which of the following for her merchandise? a. decider b. purchaser c. gatekeeper d. influencer ANS: A The person who has the formal or informal power to approve the buying decision is often difficult to locate. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

94. When Tim was calling on a potential customer, he found that the school principal he wanted to see was too busy to meet with him. The principal’s secretary offered to look through Tim’s product brochures and pass them on to the principal if Tim’s product was potentially useful. Which role in the buying centre does the secretary have? a. user b. purchaser c. gatekeeper d. buyer ANS: C A gatekeeper is anyone who regulates the flow of information in a purchasing situation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

95. Business buyers use a variety of criteria to evaluate alternative products and suppliers. What are usually the three most important criteria, in order of importance? a. service, quality, and reputation b. reputation, price, and capability c. price, delivery time, and product reliability d. quality, service, and price ANS: D REF: p. 150

PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

96. In terms of how business buyers evaluate products and suppliers, what is the most important criterion? a. reciprocity b. personal relationships c. price d. quality ANS: D REF: p. 150

PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

5-25

97. The Great Plains Printing Press Company has been purchasing all of its small machined shafts and gears from a machine shop for about $130,000 annually. If Great Plains buys two lathes, a drill press, and a milling machine, it could produce these parts itself. The equipment, materials, and two machinists would cost the company $450,000 over five years, a savings of $200,000. Should Great Plains pursue this option? a. Yes, because it is cheaper to make rather than to buy. b. No, because it is cheaper to buy these parts than make them. c. No, because the best solution would be to spend the money on research and development to eliminate the shafts and gears in the printing presses. d. Yes, but only if this is the best use of the company’s resources and the money cannot be used to increase profit even more with some other project. ANS: D A make-or-buy decision is always a trade-off with no clear solution. PTS: 1 DIF: Application BLM: Higher order

REF: p. 151-152

OBJ: 8

98. What does the acronym PMAC stand for? a. Procurement Mediators’ Association of Canada b. Purchasing Management Association of Canada c. Professional Manufacturing Association of Canada d. Production and Management Association of Canada ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 151

99. Every Friday afternoon, the beer distributor delivers to Big Fun Bar 12 cases of ultra premium beer, 28 cases of premium beer, and 20 cases of light beer. This basic order is always the same because, through years of experience, the owner of Big Fun Bar knows what sells on weekends. What is this an example of? a. a modified rebuy b. a reseller sourcing c. a straight rebuy d. an institution buy ANS: C OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

100. The purchasing contract is one common instrument used in which situations? a. straight rebuy b. new buy c. modified rebuy d. extended rebuy ANS: A Purchasing contracts are used with products that are bought often and in high volume. PTS: 1 OBJ: 8

5-26

DIF: Comprehension BLM: Higher order

REF: p. 152

101. Which of the following is a situation requiring the purchase of a product for the first time? a. a straight rebuy b. a value buy c. a new buy d. a modified rebuy ANS: C OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 152

102. What does a new-buy situation refer to? a. purchase of a product or service when a new demand arises b. establishment of a new buying centre c. setting of new standards for current vendors d. search for replacement vendors for standard, currently used parts ANS: A A new need (new demand) signifies that this is a new-buy situation. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 152

103. A small police department wants to buy a machine with which it can perform alcohol breath tests. It has never had this capability before but feels it is an essential tool as the community grows. The machine costs about $5,000, which is almost 75 percent of the department’s entire supply budget. This purchase would be an example of which type of situation? a. low-involvement buying b. extensive buying c. modified rebuy d. new buy ANS: D Because this a new product line, it requires careful vendor analysis to ensure the right supplier is found; hence, a new buy process will be employed. PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

OBJ: 8

5-27

104. A school system has been given a grant to purchase computers for its visually handicapped students. The computers will convert students’ spoken language to words on the computer monitor that can be saved to a disk. With a tap on the mouse, the computer will read to the student whatever is on its screen. Since the school has never had such a system before, what will the purchase of these computers be? a. a new buy b. a value engineering task c. a straight rebuy d. a modified rebuy ANS: A Because this a new product line, it requires careful vendor analysis to ensure the right supplier is found; hence, a new buy process will be employed. PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

OBJ: 8

105. Which of the following is the best example of a modified-rebuy situation? a. the purchase of three large-screen monitors to replace smaller screens b. the monthly updating of computer virus protection c. bidding on a new high school multipurpose gymnasium to replace one built in 1963 d. the annual purchase of calendar refills for the desks of all company executives ANS: A When a previously purchased item needs to be reordered, but with changes or additions, it is a modified-rebuy task. PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

OBJ: 8

106. Which buying situation is normally less critical and less time consuming than a new-buy situation? a. a straight rebuy b. a value buy c. a make or buy d. a modified rebuy ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 152

107. What is a routine purchasing situation in which the purchaser is not looking for new information or at other suppliers? a. a modified rebuy b. a make-or-buy c. a value buy d. a straight rebuy ANS: D OBJ: 8

5-28

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 152

108. The elementary school teacher sent the following memo to his school’s principal for her authorization: Will: Please order another two cases of construction paper, and twelve more glue sticks from our supplier. I’ll need this by next Thursday. Thank you. —Heather How should this buying situation be described? a. as a new buy b. as a straight rebuy c. as a value buy d. as a modified rebuy ANS: B A straight rebuy is a simple repurchase of items (no changes) without seeking a new supplier. PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

OBJ: 8

109. What do business marketers increasingly recognize the importance of as a major component of marketing strategies? a. competitive advertising b. the divider effect c. customer service d. price collusion ANS: C Customer service has become the focus, rather than products or other aspects of the marketing mix, for successful marketing strategies. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 153

Since it has been medically proven that watching fish reduces anxiety, many physicians’ offices have installed large fish tanks in their waiting rooms. There has been a tank in Dr. McKinnon’s office for six years. Yesterday, his receptionist went to the pet store and purchased three replacement goldfish after a patient commented on the fact there were no living fish in the aquarium. 110. Refer to Goldfish. Which of the following statements correctly describes the buying centre? a. The patient was an initiator and an influencer. b. The receptionist was a gatekeeper. c. The patient was the decider. d. The patient was the gatekeeper. ANS: A The patient noticed the absence of fish and by bringing it to the office staff’s attention caused them to buy more fish. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

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111. Refer to Goldfish. Yesterday, the receptionist went to the pet store and purchased three replacement goldfish for $3.30. This purchase was most likely an example of what type of buying situation? a. a rebuy sourcing b. a straight rebuy c. a limited rebuy d. a need-related buy ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

Etruscan Railing Company makes railing that is used in sports arenas, nursing home corridors, amusement parks, and many other places that are not as obvious. Its railing is moulded into bicycle racks. Governments use the railing to make walkways over ravines and creek banks safer for pedestrian traffic. Hospitals use the railing in their physical therapy departments, to keep the lines straight in the hospital cafeteria, and to prevent patients from falling out of hospital beds. 112. Refer to Etruscan Railing Company. What does Etruscan Railing sell? a. consumer and business products b. business products c. consumer products d. supplies ANS: B Each market discussed in the scenario is a business market, based on the intended use of the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 132

OBJ: 1

113. Refer to Etruscan Railing Company. When Etruscan sells railing to contractors to use in making loading docks safer in accordance with federal government regulations, which of the following is it selling to? a. producers b. resellers c. institutions d. consumers ANS: A Producers use the products to facilitate their daily operations. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 139

OBJ: 4

114. Refer to Etruscan Railing Company. When Etruscan sells railings to refurbish a university’s football stadium, which of the following is it selling to? a. a reseller b. a consumer c. an institution d. a producer ANS: C Institutions are nonprofit organizations like universities. PTS: 1 DIF: Application BLM: Higher order

REF: p. 139

OBJ: 4

115. Refer to Etruscan Railing Company. Etruscan has experienced a strong increase in railing sales as a result of the growth of university football. What is the name for this increase in the demand for railings as a result of the demand for new football stadiums? a. joint demand b. derived demand c. elastic demand d. inelastic demand ANS: B Demand for railing is driven by the growth of university football. PTS: 1 DIF: Application BLM: Higher order

REF: p. 143

OBJ: 6

116. Refer to Etruscan Railing Company. Companies that make bicycle racks for bike safekeeping in public places receive the railing as 10-metre lengths of pipe. For these companies, what is Etruscan railing? a. an installation b. accessory equipment c. processed material d. supplies ANS: C Processed materials are products used directly in manufacturing other products. They have had some processing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 148

OBJ: 7

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Jason Lee, the warehouse manager for a small manufacturer of valves used in heating and cooling systems, wants all of the company’s sales force to record each sale on a laptop computer and send the information to the office at the end of each workday. This use of technology will make the processing of orders quicker. Lee has suggested his idea to the salespeople at a quarterly meeting, and they concur that the plan is excellent. Lee then discussed this option with the company president, Wilson Arno, who agreed to buy laptops for all the salespeople. Arno contacted the company’s purchasing agent Ron Talbot and authorized the purchase. 117. Refer to Laptop Computers. Lee, Arno, Talbot, and the company’s sales force were all involved in the decision-making process for the laptop computer purchase. What do these people represent? a. a purchasing group b. a purchasing department c. a buying centre d. a decision board ANS: C A buying centre includes all those persons in an organization who become involved in the purchasing process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 149

OBJ: 8

118. Refer to Laptop Computers. What role did Lee play in the laptop computer purchase? a. initiator b. influencer c. decider d. gatekeeper ANS: A The initiator is the person who first suggests making the purchase. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

119. Refer to Laptop Computers. Which roles are the salespeople playing in the decision-making process for the computer laptops? a. purchasers b. initiators c. gatekeepers d. users ANS: D The sales force will use the laptop computers. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 150

OBJ: 8

120. Refer to Laptop Computers. Which role is Arno playing in the decision-making process? a. gatekeeper b. initiator c. decider d. purchaser ANS: C Arno made the final decision and authorized the purchase of the laptop computers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

121. Refer to Laptop Computers. Which role is Talbot playing in the decision-making process? a. purchaser b. initiator c. influencer d. decider ANS: A Talbot actually negotiated the purchase of the laptop computers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

Because Telus wanted to become a big player in the booming market for outsourcing computer services, it set up Lucent Technologies to manage corporate clients’ worldwide computer networks. Lucent Technologies assists corporations in global network and computer management by drawing on Telus’s worldwide digital network and its computer hardware and software businesses. It also relies on the expertise of technicians at Bell Laboratories. 122. Refer to Lucent Technologies. What does Lucent Technologies sell? a. installations b. supplies c. consumer products d. business products ANS: D Based on the intended use of the product, the market is a business market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 132

OBJ: 1

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123. Refer to Lucent Technologies. Lucent Technologies depends on Telus, but also has found it necessary to form cooperative partnerships with other technology, telecommunications, and software firms, such as Lotus Development. What has Lucent found it necessary to form? a. market groupings b. strategic alliances c. relationship contracts d. outsourcing vendor liaisons ANS: B Cooperative relationships are strategic alliances. PTS: 1 DIF: Application BLM: Higher order

REF: p. 136

OBJ: 3

124. Refer to Lucent Technologies. CIBC, one of Telus’s customers, claims the new network helped the bank win a huge contract from the Bank of Canada. For classification purposes, CIBC would be which type of customer? a. reseller b. government c. producer d. institution ANS: C Businesses that purchase goods and services for the purpose of making a profit are producers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 139

OBJ: 4

125. Refer to Lucent Technologies. Consumers using CIBC to purchase Canada Savings Bonds will affect the demand for and use of the Telus network computer system capabilities. What is this called? a. inelastic demand b. joint demand c. elastic demand d. derived demand ANS: D The demand for consumer goods often affects the demand for business products. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 143

OBJ: 6

126. Refer to Lucent Technologies. Telus requires its customers to purchase all the necessary technology to run the network. This requires expensive machinery that will be purchased and then depreciated over time. What is the machinery classified as? a. accessory equipment b. installations c. component parts d. processed materials ANS: B Installations (major equipment) is expensive and depreciated over a long period of time. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

Dirt is not dirt when it comes to baseball fields. About two-thirds of the pro baseball fields get their dirt from a dirt farm in New Jersey called Partac Peat. The company markets a secret mix for the infield (resilient), the warning track (extra crunchy), and the pitcher’s mounds (firm). Mounds come in red, brown, orange, and gray. Roger Bossard, the Blue Jays head groundskeeper, scouted nationwide for dirt before settling on the mix provided by Partac Peat. (He uses sand under the grassy areas of the playing field.) 127. Refer to Baseball Dirt. Some of the dirt sold by Partac Peat goes to make clay tennis court surfaces. As the number of people playing tennis increases, so does the demand for new clay courts and, therefore, the demand for Partac Peat clay. Why does this occur? a. because the demand for Partac Peat is intangible b. because the demand for Partac Peat is elastic c. because the demand for Partac Peat is inelastic d. because the demand for Partac Peat is derived ANS: D As consumers demand more space to play tennis, the demand for the materials to make new tennis courts increases. PTS: 1 DIF: Application BLM: Higher order

REF: p. 143

OBJ: 6

128. Refer to Baseball Dirt. An increase in the price of Partac Peat will not affect the demand for the product because many groundskeepers believe there is no substitute for the product. Thus, what is demand for Partac Peat? a. elastic b. heterogeneous c. intangible d. inelastic ANS: D Inelastic demand means an increase or a decrease in price will not significantly affect product demand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

OBJ: 6

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129. Refer to Baseball Dirt. Because Partac Peat is a business product, what is the primary promotional method used for its sale? a. publicity b. personal selling c. advertising in consumer magazines d. trade promotions ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 146

130. Refer to Baseball Dirt. What type of business product would Partac Peat be since it is used in the making of baseball fields? a. component parts b. accessory equipment c. processed materials d. equipment ANS: A The dirt is purchased from Partac Peat because it needs to be used in the construction of the baseball fields. The dirt receives no further processing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

131. Refer to Baseball Dirt. Roger Bossard, the Blue Jays head groundskeeper, most likely did NOT assume which of the following buying centre roles since he has the authority to buy whatever is needed to make the baseball field the best playing surface possible? a. evaluator b. gatekeeper c. influencer d. initiator ANS: B Since he occupies most of the roles himself, he would not be restricting the flow of information to himself. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

132. Refer to Baseball Dirt. The first time Roger Bossard purchased Partac Peat, it was most likely an example of which type of buying situation? a. modified rebuy b. habitual buying decision c. new buy d. straight rebuy ANS: C OBJ: 8

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

One common Christmas tradition in many households is the Claxton fruitcake. The fruitcake bakery in Claxton, Georgia, makes about 6 million pounds of fruitcake annually and has $12 million in sales. One fruitcake batch weighs 375 pounds. About 70 percent of that weight is fruits and nuts. A single batch is divided into 34 loaf pans that hold 11 pounds each. Loaves are cooked for 100 minutes at 375 degrees. The bakery can cook 6,000 pounds at a time. During the baking season (August–December), the bakery uses a tractor-trailer load of raisins each day. The suggested retail price of a one-pound Claxton fruitcake is $3.69. 133. Refer to Claxton Fruitcakes. Because demand for raisins to bake into the fruitcakes does not change on the basis of the price fluctuations of dried fruits, Claxton’s demand for raisins is an example of what type of demand? a. derived b. elastic c. inelastic d. joint ANS: C OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

134. Refer to Claxton Fruitcakes. In terms of business-to-business products, the large ovens in which the cakes are baked are examples of which of the following? a. specialty equipment b. component parts c. processed supplies d. installations ANS: D The ovens are examples of installations, just like an assembly line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

OBJ: 7

135. Refer to Claxton Fruitcakes. In terms of business-to-business products, the raisins used in fruitcakes are examples of which of the following? a. processed supplies b. accessory supplies c. OEM supplies d. installations ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 148

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136. Refer to Claxton Fruitcakes. In December, many corporations give Claxton fruitcakes to their customers as a way of thanking them for their business. In terms of the buying centre, which of the following is true? a. The person who decides that gifts would be appropriate is be the gatekeeper. b. The person who prevents other members of the buying centre from seeing promotional material from other companies selling similarly priced gift ideas is an example of a gatekeeper. c. The person who has the formal authority to select Claxton fruitcakes as the appropriate gift is the initiator. d. The salespeople who remind management how much their customers enjoyed Claxton fruitcake last year are examples of deciders. ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

137. Refer to Claxton Fruitcakes. Any company that purchased Claxton fruitcakes to give to its customers would treat this purchase like any other purchase and evaluate the cake and the company in terms of which of the following? a. customer relationships, costs, and ethical behaviour b. time requirements, order speed, and customer reactions c. order time and delivery time d. quality, service, and price ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

138. Refer to Claxton Fruitcakes. For a corporation that has been giving its key customers Claxton fruitcakes since 1950, placing the order for cakes to be delivered this year would be an example of what type of situation because some negotiation about price and quantity must occur each year? a. a straight rebuy b. a situational buy c. a contingency buy d. a modified rebuy ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

Laminators, Inc. manufactures outdoor signs for business customers in less than one hour using SpecTar equipment and supplies. 139. Refer to Outdoor Signs. What is Laminators an example of? a. an original equipment manufacturer b. a product provider c. an installer d. a fabricator ANS: A OBJ: 4

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 139

140. Refer to Outdoor Signs. Laminator would be part of which sector of the business market? a. producer b. distributor c. reseller d. channel ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 140

White Wave is a small company that manufactures several flavours of soy milk coffee creamers for people who are lactose intolerant. 141. Refer to Soy Products. White Wave typically places large orders for soy to manufacture its creamer. This order size would give White Wave an advantage over other buyers of soy and is an example of which of the following? a. sales volume b. joint demand c. fluctuating demand d. purchase volume ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 144

142. Refer to Soy Products. For White Wave, what is unflavoured soy milk, which was made from soybeans? a. integrated material b. processed material c. fabricating material d. accessory equipment ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 148

PAS Systems has developed a club-like flashlight alcohol detector. The flashlight readings are inadmissible in court but are used by officers to decide whether to hold someone for a sobriety test. Each one costs $600. The manufacturer assembles a breathalyser from one supplier with a slightly modified flashlight case from another supplier to make the new product. 143. Refer to Alcohol Detector. What are the breathalyser and the flashlight case examples of? a. component parts b. accessory equipment c. major equipment d. integrated parts ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 147

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144. Refer to Alcohol Detector. Batteries for the flashlights would be an example of which of the following? a. accessory equipment b. component parts c. major equipment d. supplies ANS: D OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 148

145. Refer to Alcohol Detector. After seeing a prototype brought back by one of its employees from a highway safety convention, the Ontario Provincial Police decided to equip every officer with one. In this example, the individual who attended the convention had which roles in the buying centre? a. buyer and decider b. initiator and decider c. decider and user d. gatekeeper and influencer ANS: D As an influencer, the person brought the flashlight to the attention of his or her office. As a gatekeeper, the person determined whether to show the flashlight or keep the information private. PTS: 1 DIF: Application BLM: Higher order

REF: p. 150

OBJ: 8

Grote manufactures a slicing machine for any boneless food. The machine will cut up to 1,200 slices per minute and is portable in that it can be rolled out of the work area when it is not in use. The wheels are specially made to meet federal safety requirements. 146. Refer to Slicers. A decline in the availability of the specialized wheels will slow down the production of the slicing machines and in turn reduce the sales of the blades that fit in the machine. What type of demand exists? a. joint b. developmental c. functional d. bundled ANS: A Joint demand occurs when two or more items are used together in a final product. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 144

OBJ: 6

147. Refer to Slicers. A company that uses a Grote brand meat slicing machine typically buys a replacement blade once a year and has done so for the last five years. A new company is offering a $200 blade for the Grote machine that is less expensive than buying one from Grote (a savings of about $50). It is time to buy a new blade, and Sara is in charge of the purchase. What will she most likely be engaging in? a. a derived rebuy b. a straight rebuy c. a modified rebuy d. a new task ANS: C When a previously purchased item needs to be reordered, but with changes or additions, it is a modified-rebuy task. PTS: 1 DIF: Application BLM: Higher order

REF: p. 152

OBJ: 8

148. Refer to Slicers. You are assistant marketing research director of Grote. How can you find out who is in the buying centre at Walrose, a company that makes heat-and-serve meals that feature sliced chicken and/or turkey? a. Look at the formal organization chart of Walrose. b. Contact the operators of the meat processing equipment used at Walrose, and probe them as to who was involved in the purchase of their present equipment. c. Wait for Walrose to make a formal announcement of who will be placed on the Buyer Centre Committee. d. Get a copy of Walrose’s phone directory, where all buying centre members are listed. ANS: B There is no formal buying centre structure. It changes from decision to decision, as well as at different stages of the decision-making process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 149

OBJ: 8

TRUE/FALSE 1. Nelson Education sells its business textbooks to college bookstores, which in turn sell the books to students. Nelson Education is engaged in business marketing. ANS: T Nelson Education sells to a reseller. PTS: 1

DIF: Application

REF: p. 132

OBJ: 1

2. For a product to be called a business product, it must be used to manufacture other products, become part of another product, facilitate the normal operations of a firm, or be acquired for resale with no substantial change in form. ANS: T REF: p. 132

PTS: 1 OBJ: 1

DIF: Comprehension

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3. More business buying and selling is done on the Internet than off-line. ANS: F Despite the growth of e-commerce, most business buying and selling is still done off-line. PTS: 1

DIF: Definition

REF: p. 132

OBJ: 2

4. The Internet provides a powerful tool for conveying information, conducting transactions, delivering innovative services, building customer and supplier relationships, gathering marketing data, and reducing costs and prices. ANS: T REF: p. 133

PTS: 1 OBJ: 2

DIF: Comprehension

5. The emergence of the Internet has made buying and selling in the business market a process that is efficient only for the largest producer to pursue. ANS: F Even the smallest businesses are finding that they are able to compete successfully with their largest competitors as a result of the Internet. See Exhibit 5.1. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 133

6. Several of the world’s largest telecommunications equipment manufacturers are working together to build devices that will speed global Internet communications. This is an example of a strategic alliance. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 136-137

7. A keiretsu is an example of how strategic alliances can make efficient use of relationship marketing. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 137

8. Any firm that purchases goods and services to make a profit by using them to produce other goods is part of the producer segment of the business market. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 140

9. The reseller market is the same as the retailer market. ANS: F The reseller market includes both retailers and wholesalers. PTS: 1 OBJ: 4 5-42

DIF: Comprehension

REF: p. 140

10. The government sector (federal, provincial, and municipal) is not considered a business segment. ANS: F Government is a major segment of the business market. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 139-140

11. The Internet has eliminated the need for distributors. ANS: F This has not occurred although many experts thought it would. Relationships with knowledgeable distributors have remained important. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 139

12. NAICS is an industry classification system used by most nations of the world. ANS: F As its name indicates, NAICS (North American Industry Classification System) has been adopted only by Mexico, Canada, and the United States. PTS: 1

DIF: Definition

REF: p. 142

OBJ: 5

13. One useful aspect of NAICS data is that it helps organizations identify potential new customers. ANS: T REF: p. 142

PTS: 1 OBJ: 5

DIF: Comprehension

14. If DuPont runs advertisements encouraging people to buy shoes that contain Lycra (a DuPont product), this would be an attempt to influence derived demand. ANS: T OBJ: 6

PTS: 1

DIF: Application

REF: p. 143

15. A decline in the availability of tungsten will slow production of light filaments, which will in turn reduce the demand for light bulbs. This is an example of fluctuating demand. ANS: F Joint demand occurs when two or more items are used together in a final product. PTS: 1

DIF: Application

REF: p. 144

OBJ: 6

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16. While consumer and business markets differ in many ways, the volatility of demand for products is about the same for each type of market. ANS: F The demand for business products tends to be more unstable than the demand for consumer products. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 144

17. Unlike consumer product channels of distribution, which usually have one or more intermediaries, channels of distribution for business products are often direct. ANS: T REF: p. 145

PTS: 1 OBJ: 6

DIF: Comprehension

18. Most business marketers emphasize personal selling as their primary communications tool. ANS: T REF: p. 146

PTS: 1 OBJ: 6

DIF: Comprehension

19. Another commonly used term for accessory equipment is installations. ANS: F Another commonly used term for major equipment is installations. PTS: 1

DIF: Definition

REF: p. 147

OBJ: 7

20. Individual producers of raw materials have great flexibility in pricing their products. ANS: F Prices of raw materials are set by the market, and individual producers have little pricing flexibility. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 147

21. Items that are ready for assembly and that retain their identities when incorporated into another product are called component parts. ANS: T OBJ: 7

PTS: 1

DIF: Definition

REF: p. 147

22. Consumable items that do not become part of the final product are called supplies. ANS: T OBJ: 7

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PTS: 1

DIF: Definition

REF: p. 149

23. Because formal committees are often established to purchase business products, members of buying centres can be readily identified on formal organizational charts. ANS: F Buying centres do not appear on formal organizational charts. No formal announcements are made about the changing membership of buying centres. PTS: 1 OBJ: 8

DIF: Comprehension

REF: p. 149

24. Shannon is the receptionist for a law firm. As receptionist, Shannon determines which vendors are seen by the lawyers for whom she works. Shannon is acting as a gatekeeper. ANS: T OBJ: 8

PTS: 1

DIF: Application

REF: p. 151

25. For several years, the Association of Pistachio Growers (APG) has purchased decorative tins for shipping its products from Decorative Arts, Inc. APG likes the attractiveness of the Decorative Arts tins but wants to have metal dividers added to the tins it buys. This would be an example of a new buy. ANS: F Adding features is an example of a modified rebuy. PTS: 1

DIF: Application

REF: p. 153

OBJ: 8

26. Although customer service has in the past been an important factor in business buyer–seller relationships, its importance has been waning in the last decade. ANS: F Business marketers are increasingly recognizing the importance of customer service. PTS: 1 OBJ: 8

DIF: Comprehension

REF: p. 153

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ESSAY 1. What is business marketing? What basic types of goods and services are marketed between businesses? ANS: Business marketing is defined in the text as “the marketing of goods and services to individuals and organizations for purposes other than personal consumption.” The differentiating factor between business marketing and consumer marketing is the intended use of the product or service, not physical characteristics. Goods and services marketed between businesses include those products (1) that are used to manufacture other products, (2) that become part of another product, (3) that facilitate the normal operations of a firm, or (4) that are acquired for resale without any substantial change in form. PTS: 1

DIF: Application

REF: p. 132

OBJ: 1| 4

2. What is a strategic alliance? How is it linked to relationship marketing? ANS: A strategic alliance, sometimes called a strategic partnership, is a cooperative agreement between business firms—often in the business market, between supplier and customer. Frequently, strategic alliances such as licensing or distribution agreements, joint ventures, research and development consortia, and partnerships involve multinational partnerships. The two key features that characterize most successful strategic alliances are carefully chosen partners and a situation in which both parties benefit from the relationship. Strategic alliances are therefore connected to relationship marketing, which is defined as a strategy that entails seeking and establishing long-term partnerships with customers. PTS: 1

DIF: Application

REF: p. 136-137

OBJ: 3

3. How would you answer the following question, “Are strategic alliances a purely North American business phenomenon?” Be sure to explain your answer. ANS: Students should use the existence of keiretsu in Japan as an argument against strategic alliances being a purely North American phenomenon. Like other strategic alliances, the keiretsu is a network of interlocking corporate affiliates that work together in cooperative efforts for the betterment of all members. PTS: 1

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DIF: Application

REF: p. 137

OBJ: 3

4. Briefly describe the four major categories of customers in business marketing. Give examples of companies or organizations in each category. ANS: Producers include individuals and organizations that purchase goods and services for the purpose of making a profit by using them to produce other goods, to become part of other goods, or to facilitate the daily operations of a firm. Examples include General Motors, Coca-Cola, and IBM. Resellers include those wholesale and retail businesses that buy finished goods and resell them for a profit. Examples could include any grocery store or retail clothing store. Government organizations include a large number of buying units that purchase goods and services. The federal government as well as provincial and municipal governments are all examples. Institutions are nonprofit organizations that have different primary goals from ordinary businesses. This category includes schools, religious institutions, hospitals, clubs, foundations, and labour unions. PTS: 1

DIF: Application

REF: p. 139-141

OBJ: 4

5. Describe the reseller market. Why do businesses use the services of business product distributors? ANS: The reseller market includes retail and wholesale businesses that buy finished goods and resell them for a profit. Retailers sell to final consumers, and wholesalers sell to retailers and other organizational customers. Business product distributors are wholesalers that buy business products and resell them to business customers. They often carry plenty of stock and have sales forces that call on business customers. Businesses that wish to purchase items typically buy from these local distributors rather than from large manufacturers. PTS: 1

DIF: Application

REF: p. 139-140

OBJ: 4

6. A major segment of the business market is made up of institutions. Marketers should be aware of the differences between institutions and other businesses. Name and briefly describe two of these differences. ANS: Institutions seek to achieve goals that differ from ordinary business goals such as profit, market share, or return on investment. The institutional market also is characterized by great diversity. Institutional organizations include schools, hospitals, colleges and universities, religious institutions, labour unions, civic clubs, foundations, and so on. These diverse organizations have vastly different needs and buying behaviours. PTS: 1

DIF: Application

REF: p. 141

OBJ: 4

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7. A Brazilian manufacturer of solar cells used as a renewable source of energy in all types of structures would like to begin distribution and sales in the United States, Canada, and Mexico. The manufacturer has hired you to investigate NAICS data for such products in North America. What is the NAICS system? What other helpful kinds of information can be found in this source? ANS: The North American Industry Classification System (NAICS) is a set of numerical codes assigned by the U.S., Mexican, and Canadian governments to classify business and government organizations according to primary economic activity. The system assigns numbers to economic divisions, industry groups, and product classifications. This system replaced the previously used standard industry code system (SIC) when the North American Free Trade Agreement was signed. Businesses and individuals can use (NAICS) data for market analysis, segmentation, and targeting. The NAICS system will provide the requested sales volume information at an industry level as well as information on the number of firms, number of employees, and geographic breakdowns of the industry. PTS: 1

DIF: Application

REF: p. 142

OBJ: 5

8. Name and briefly describe six of the major differences between business and consumer markets. ANS: Demand. There are several differences between organizational and consumer demand. Organizational demand is derived from the demand of consumer products, tends to be price inelastic, has joint demand with related products used in combination with the final product, and tends to fluctuate more than consumer demand. Purchase volume. Business customers buy in much larger quantities (both in single orders and in total annual volume) than do consumers. Number of customers. Business marketers tend to have far fewer customers than consumer marketers. Location of buyers. Unlike consumer markets, business customers tend to be geographically concentrated. Distribution structure. Channels of distribution tend to be much shorter in business marketing. Direct channels are also more common. Nature of buying. Business buying is usually more formalized with responsibility assigned to buying centres or purchasing agents. Nature of buying influence. More people are involved in business purchasing decisions than in consumer purchases, because many levels and departments of the firm are involved in the purchase. Use of reciprocity. Business purchasers often buy from their customers, and vice versa.

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Use of leasing. Businesses often lease equipment, unlike consumers who more often purchase products. Primary promotional method. Personal selling is often emphasized in business marketing, while advertising is emphasized in consumer marketing. PTS: 1

DIF: Application

REF: p. 143-146

OBJ: 6

9. Business customers have different wants and needs than consumers, based on the characteristics of business purchases. Name three different needs of business-to-business customers. Are there any ways that business purchasing behaviour is similar to consumer buying behaviour? If so, describe the similarities. ANS: Business customers prefer to buy in large amounts from more direct sources (fewer middlemen). Business buyers tend to be fewer and more geographically concentrated than consumer buyers. Business customers usually approach purchasing more formally. Professionally trained purchasing agents are often used because negotiations are typically complex. Finally, business customers may prefer reciprocity and lease options. There are several similarities between both types of buying behaviour. First, both types of buyers use a decision process to make choices, although the steps can be different. Additionally, the personal makeup of individual buyers in a business-to-business purchasing situation continues to influence the purchase. Finally, both types of buyers react to environmental and situational factors when making a purchasing decision, including the influences of other role players (household members versus other organization members), influence of culture (either subcultures or organizational culture), or other environmental conditions (lifestyle or work style). PTS: 1

DIF: Application

REF: p. 144-146

OBJ: 6

10. Explain the four ways demand in business markets differs from demand in consumer markets. ANS: Derived demand. The demand for business-to-business products is derived from the demand for consumer products. This is because organizations buy products to be used directly or indirectly in the production of consumer products. Therefore, firms must carefully monitor demand patterns in final consumer markets. Inelastic demand. The demand for business-to-business products tends to be price inelastic. This means that changes in price will not significantly affect demand for the product (unlike consumer markets). Joint demand. Most business products involve the combination of many components into a final product. Joint demand occurs when two or more items are used in combination in a final product. The text provides an example of microcomputer disk drives and memory chips. Joint demand is much more common in business markets.

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Fluctuating demand. The demand for business products tends to be more unstable than the demand for consumer products. The multiplier effect explains how a slight change in consumer demand can result in a significant change in demand for business products. PTS: 1

DIF: Application

REF: p. 143-144

OBJ: 6

11. What is reciprocity? Is it illegal or unethical? Why or why not? ANS: Reciprocity is when business purchasers choose to buy from their customers. The practice is neither unethical nor illegal unless one party coerces the other into the reciprocal purchasing arrangement and the result is unfair competition. Reciprocity is generally considered to be a reasonable business practice, because it makes sense to patronize firms that help you achieve your sales and profit goals. PTS: 1

DIF: Application

REF: p. 146

OBJ: 6

12. Briefly define and describe five categories of business goods and services. Give two specific examples of goods or services that fit into each category. ANS: Major equipment (or installations) consists of capital goods that are depreciated over time. These goods are often custom designed and therefore often sold by personal selling and distributed directly. Text examples include large machinery, mainframe computers, blast furnaces, generators, airplanes, and buildings. Accessory equipment is shorter lived than major equipment and is often charged as an expense in the year it is purchased. Advertising and local distributors play a role in the sale of accessory equipment. Text examples include portable power tools, word processors, and fax machines. Raw materials are unprocessed extractive or agricultural products that are used as “ingredients” in other finished goods. Personal selling, direct channels, and price inflexibility characterize the marketing of raw materials. Text examples include mineral ore, lumber, wheat, and fish. Component parts are either finished items ready for assembly or products that need little processing to become part of another product. Component parts sometimes retain their identity, often need replacement in the final product, and are marketed through OEM and replacement markets. Text examples include spark plugs, motors, and automobile tires. Processed materials are used directly in the manufacturing of other products and do not retain their identity in the final product. Text examples include sheet metal, plastics, corn syrup, lumber, and specialty steel. The materials may be custom processed, so price and service are important in vendor selection. Supplies (or MRO items) are consumable items that are not part of the final product. They are relatively inexpensive and have a short life. Text examples include lubricants, cleaning supplies, pencils, and paper.

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Business services are expense items that are not part of the final product. When it is cost effective, firms often retain outside companies to provide services. Text examples include janitorial, advertising, legal, consulting, research, and maintenance services. PTS: 1

DIF: Application

REF: p. 147-148

OBJ: 7

13. Two important markets for many component parts are the OEM market and the replacement market. What does OEM stand for? Contrast characteristics of the OEM market to the replacement market. ANS: The original equipment manufacturer (OEM) market is characterized by most of the features found in business markets, including inelastic and joint demand, large purchase volumes, few customers, geographically concentrated customers, direct distribution, professional buying, complex negotiation, deep price discounting, and heavy emphasis on personal selling. Profit margins for OEMs are often small, but high volumes allow for substantial profits. The replacement market is characterized by firms that purchase component parts to replace worn-out parts. Replacement markets tend to exhibit more characteristics of consumer markets such as small purchase volumes, geographically dispersed customers, and an emphasis on advertising. PTS: 1

DIF: Application

REF: p. 147

OBJ: 7

14. Assume you are the vice-president of marketing in a medium-sized company that includes the following departments: marketing, finance, purchasing, data processing, and production. The sales force manager has mentioned to you that one of the salespersons thought laptop computers would help the sales force become more efficient. The sales manager requests that 10 laptops be purchased. Illustrate the six buying decision roles that would take place for the purchase of these laptops. ANS: The initiator of the buying decision could be identified as the salesperson who identified the need but more likely would be the sales force manager who suggested the purchase be made. Influencers/evaluators might include the finance office (which would control the amount of money available for spending), members of the sales force (who might provide information about laptops competitors are using), and the data-processing department (which would have a good knowledge of alternative laptop models). Gatekeepers could include the data-processing department (which would approve of only certain laptop models that are compatible with existing systems) and the purchasing department (which would recommend matches with likely vendors). The decider might be the president of the company, the vice-president of marketing, or the sales force manager; the decider is the person with the power to approve the brand of laptop.

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The purchaser will be the purchasing agent in the purchasing department who will negotiate the terms of the sale. Users will include all sales force members who will use the laptops. PTS: 1

DIF: Application

REF: p. 150

OBJ: 8

15. What is a buying centre? What are some implications of buying centres to the marketing manager? ANS: A buying centre includes all those persons in an organization who become involved in the purchasing process. Membership varies from company to company. Marketers must identify the players in the decision-making unit so that interaction can take place. Once the members of the buying centre are identified, the marketer should identify the role(s) played by each member and their relative influence. This determines where sales efforts should be concentrated. Finally, a marketer should identify each member’s evaluative criteria to focus on correct attributes in a sales presentation. PTS: 1

DIF: Application

REF: p. 149-150

OBJ: 8

16. Business buyers use a variety of criteria to evaluate alternative products and suppliers. Name and define specific aspects of the three most important criteria. ANS: The three criteria, in order of importance, are quality, service, and price. Quality. Quality refers to technical suitability. Evaluation of quality also applies to the salesperson and the company: The salesperson should be reputable and the company should be financially responsible. Service. Buyers seek to buy satisfactory service as well as satisfactory products. Services may include needs assessment analyses, installation, training, maintenance, and repair. Service also entails delivering exactly what was ordered when it is scheduled to be delivered. Buyers also welcome services that help them sell their finished products. Price. Business buyers usually want to buy at the lowest prices, as long as the product quality and service requirements are met. PTS: 1

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DIF: Application

REF: p. 150

OBJ: 8

l 17. Cascade Landscaping Service (CLS) has decided to purchase computer-assisted-design (CAD) software for landscape design. Describe the conditions under which each of the three business buying situations would take place. ANS: New buy. A new buy is a situation requiring the purchase of a product or service for the first time. In this case, CLS has no experience buying such software or has not established any relationship with a vendor of the CAD software. CLS may be a new or small company that currently does not have any type of CAD software. Alternatively, CLS may be value engineering and finding a less expensive alternative than drawing the designs by hand. Modified rebuy. In this case, CLS would have experience with CAD software in general and an established relationship with software vendors. The focus would be on the new need of more structured plans to show customers. Straight rebuy. In this case, the purchase of CAD software would be a routine purchase decision or a reorder of previously ordered software from the same vendor. Perhaps CLS is a reseller of supplies for landscaping including software.. PTS: 1

DIF: Application

REF: p. 151-152

OBJ: 8

18. Why is customer service an important factor in business marketing? ANS: Business marketers are increasingly recognizing the importance of customer service as a major component of successful marketing strategies. Customer service is often a critical factor used in vendor analysis and can be a key differentiating factor in vendor choice. Core service skills offered with a product can be more important than the product itself. PTS: 1

DIF: Application

REF: p. 153

OBJ: 8

19. You overhear a salesperson saying, “I don’t do anything with my straight-rebuy customers because they don’t expect any service.” Comment on his statement. ANS: Suppliers and their sales staff must remember not to take straight-rebuy relationships for granted. Retaining existing customers is much easier than attracting new ones. The salesperson’s statements indicates that unless he changes his attitude, his buyers may go purchase from another source. PTS: 1

DIF: Application

REF: p. 151-152

OBJ: 8

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Chapter 6—Segmenting and Targeting Markets MULTIPLE CHOICE 1. What is a group of people or organizations that has wants and needs that can be satisfied by particular product categories, has the ability to purchase these products, and is willing to exchange resources for the products? a. a firm b. a market c. a buyer d. a target ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 162

2. A group of high schoolers stop by an electronics store. The store has just received a new line of high-end flat-screen televisions. The televisions range in price from $2,000 to $7,000. All of the students want this new style of TV, but none has the means to buy one. Is this group of consumers a potential market for the flat-screen televisions? a. Yes, they are a market because this group shares relatively similar product needs and purchasing characteristics. b. No, they do not have the ability to purchase at this time. c. Yes, they are a potential market since they are all about the same age. d. No, to qualify as a market, they must need the product. ANS: B A market is a group of people or organizations that has wants and needs that can be satisfied by particular product categories, has the ability to purchase these products, and is willing to exchange resources for the products. There is no ability in this case. PTS: 1 DIF: Application BLM: Higher order

REF: p. 162

OBJ: 1

3. A market is people or organizations that have which of the following? a. needs and wants and an ability and willingness to buy b. the ability, willingness, and power to buy c. a medium of exchange and products they desire d. unmet needs or wants and products or services that satisfy those unmet needs or wants ANS: A A market is defined as having four imperative characteristics: people or organizations, needs and wants, ability, and willingness to buy. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 162

OBJ: 1

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4. What is a subgroup of individuals or organizations sharing one or more characteristics that cause them to have relatively similar product needs? a. a market segment b. a segmentation base c. a market universe d. a population sample ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 162

5. What is the process of dividing a market into meaningful groups that are relatively similar and identifiable? a. positioning b. market segmentation c. market sampling d. perceptual mapping ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 162

6. What is the purpose of market segmentation? a. to group a large number of markets together enabling a company to serve them simultaneously b. to enable the marketer to tailor marketing mixes to meet the needs of one or more specific groups c. to reduce the market down to a specific size that the firm can handle d. to divide the market into equal size and profit regions for sales territories ANS: B The purpose of segmentation is to group similar consumers and to serve their needs with a specialized marketing mix. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 162

7. What does market segmentation help businesses do? a. more effectively choose suppliers b. better evaluate their performances c. more accurately create a business plan d. define customer needs and wants less precisely ANS: B REF: p. 163

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PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

8. The process of market segmentation involves breaking down a heterogeneous market into homogeneous and identifiable segments. If this process is carried to its extreme, what could one logically claim? a. Every individual in the world is a market segment. b. All individuals have the same needs in spite of cultural DIF:ferences. c. Everyone belongs to the same segment. d. This is the reason segmentation cannot be used by small firms. ANS: A The ultimate segmentation would have each individual occupying his or her own segment, because everyone has somewhat Different needs. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 164

9. According to one criteria, a selected segment must be large enough to warrant developing and maintaining a special marketing mix. Serving the specific needs of this segment must be commercially viable, even if the number of potential customers is small. Which criteria is being referenced? a. accountability b. substantiality c. accessibility d. responsiveness ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 164

10. The marketing researcher for Chickadee, a manufacturer of designer clothing for infants and toddlers, has submitted a report on potential segments for expansion of its marketing efforts. She noted an increase of professional women over the age of 35 who are leaving their jobs to have their first babies. She described this segment as having substantiality. What does this mean? a. This segment exhibits a response rate to marketing variables Different from the rates of other segments. b. This segment has enough special stores, magazines, and other outlets that it will be possible to direct advertisements at this group. c. This segment is large enough to permit a profitable market effort toward its members. d. This segment will be DIF:ficult to develop a product for. ANS: C Substantiality means the selected segment will be large enough to warrant developing and maintaining a special marketing mix. Serving the specific needs of this segment must be commercially viable, even if the number of potential customers is small. PTS: 1 DIF: Application BLM: Higher order

REF: p. 164

OBJ: 3

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11. DCS Corporation is a company that makes barbecue grills. It has expanded into high-priced, multipurpose grills for people who want to be able to cook all their food outside. Facing little competition, DCS designed an excellent line of specialty grills, had good distribution, used effective promotion with this market, and within four years had a respectable market share. Yet financial losses every year have caused DCS to decide to drop this line. The reason could be that this market segment, relative to the resources devoted to it, lacked which of the following? a. causality b. substantiality c. identifiability and measurability d. accessibility ANS: B Substantiality means the selected segment is large enough to warrant developing and maintaining a special marketing mix. Serving the specific needs of this segment must be commercially viable. Based on four years of losses, this one apparently was not. PTS: 1 DIF: Application BLM: Higher order

REF: p. 164

OBJ: 3

12. United Social Service Agency wants to identify segments by their readiness to participate in a drug and alcohol program or in prenatal care. The agency will need to gauge whether there are enough people to justify setting up the service. What is likely to be the first segmentation criterion problem for this proposal? a. responsiveness b. accessibility c. responsibility d. identifiability and measurability ANS: D Identifiability and measurability is the first problem: how many people are willing, inDifferent, or unwilling to participate? The agency needs this number to gauge if there are enough of them. If there are enough of them, they would probably be responsive to a special program. PTS: 1 DIF: Application BLM: Higher order

REF: p. 164

OBJ: 3

13. The city of Blossom Valley has a job training program for the homeless but has had a DIF:ficult time reaching this group with information about the program even though radio and television stations have provided public service advertisements free of charge. This illustrates a segmentation problem with which of the following? a. substantiality b. accountability c. accessibility d. identifiability and measurability ANS: C Accessibility is the ability to communicate information about the product offering to the segment. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 164

OBJ: 3

14. Which of the following is one of the four criteria identified in the text for successful market segmentation? a. substantiality b. unmeasurability c. accountability d. inaccessibility ANS: C The four criteria are substantiality, identifiability and measurability, accessibility, and responsiveness. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 164-165

OBJ: 3

15. A manufacturer of lenses used in microscopes, binoculars, and telescopes has segmented its market into scientific equipment manufacturers, sporting equipment manufacturers, and retailers who sell replacement lenses. In order for this segmentation scheme to be successful, all of the following criteria must be met EXCEPT which one? a. responsiveness b. substantiality c. complexity d. accessibility ANS: C Complexity is not a criterion; simplicity would be preferred. PTS: 1 DIF: Application BLM: Higher order

REF: p. 164-165

OBJ: 3

16. To be useful, a segmentation scheme must produce segments that meet four basic criteria. What are they? a. reliability, flexibility, tangibility, and accessibility b. substantiality, identifiability and measurability, accessibility, and responsiveness c. segmentable, targetable, reliability, and homogeneity d. tangibility, flexibility, causality, and accessibility ANS: B REF: p. 164-165

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

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17. SRD Research Firm has conducted marketing research on the market for concrete siding for homes. The research firm has determined there are thousands of homeowners who want the security, safety, warmth, and stability provided by concrete siding. These homeowners are generally married and between 25 and 54 years of age. They tend to live in suburban neighbourhoods, and most subscribe to lifestyle magazines. If you were interpreting these results, what might you suggest? a. that SRD conduct a follow-up analysis to determine if the segments it might choose would respond Differently from other segments to its marketing strategy b. that SRD examine the research report again to see if it can determine segment accessibility c. that SRD not segment the concrete siding market because the only market for siding is contractors who build the homes d. that SRD conduct additional research because it has no idea about the measurability of its segments ANS: A The only criterion SRD has not determined is market responsiveness. PTS: 1 DIF: Application BLM: Higher order

REF: p. 164-165

OBJ: 3

18. Market researchers estimate thousands of Canadians have high blood pressure and do not know it because they do not have annual medical exams. A pharmaceutical company that has developed a medicine to reduce blood pressure should not count on this group to be a good target market because the group lacks which of the following? a. substantiality, identifiability, and measurability b. both accessibility and substantiality c. both reliability and responsiveness d. both accessibility and responsiveness ANS: D Marketers cannot reach someone who does not know he or she has a problem and if he or she is reached, there will be no response. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 164-165

OBJ: 3

19. Every six months or so, some manufacturer introduces a fancy new shape or colour for the boxes that house the hardware to run PCs. These companies contend that beige is boring, and that people are ready for “something fun.” These manufacturers ignore the fact that Canadians like their technology in plain wrappers—look at how few coloured cell phones you see. These bright colours and odd shapes have failed because the market segment to which they are targeted lacks which of the following? a. substantiality b. accessibility c. responsiveness d. identifiability and measurability ANS: C It is not difficult to locate the large market for PCs—they are readily identifiable and accessible for other computer products. They are just not responsive to the oddball designs and colours. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 3

20. Hildy Webb and LaTishe Brown own Creative Catering and would like to improve customer satisfaction and increase repeat business. When you ask them to describe a typical customer, they say it is impossible and explain that with corporate functions, family affairs, and fundraisers, they do not have a typical customer. Why do you suggest it is time for market segmentation? a. This will position the company in the minds of their consumers as compared to their competitors. b. Creative Catering needs to learn how to group these markets together into one market to serve all of them adequately. c. It will help develop a generalized definition of the market as a whole and reveal the optimal marketing mix for this market. d. It will enable them to build an accurate description of customer needs by group and to design a marketing mix to fit each segment. ANS: D The purpose of segmentation is to group similar consumers and to serve their needs with a specialized marketing mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 1

21. Market segmentation can assist marketers to do all of the following EXCEPT which one? a. evaluate where and why demand is falling b. identify where new opportunities are emerging c. identify which variable base should be used for segmenting d. develop more precise definitions of customer needs and wants ANS: C Market segmentation itself does not signal which base should be used, but it will define needs and wants, how they are changing, where there are opportunities, and where and why demand is changing. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 165

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22. What is meant by the requirement that a market segment be responsive? a. The segments identified by a marketer should DIF:fer in how they respond to the marketing mix when compared to another segment confronted with the same mix. b. All the segments identified by a marketer should respond to the marketing mix. c. The segments identified by a marketer should not DIF:fer in the level of their responsiveness to the marketing mix. d. Over half of the consumers in the identified segment will be actively interested in the product. ANS: A The target segment should respond differently to the market mix compared to other segments. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 165

23. If a market segment is especially motivated by coupons in newspapers, which segmentation success criterion is most influential in the success of this program? a. functionality b. accessibility c. responsiveness d. identifiability and measurability ANS: C Responsiveness is in force when a target segment responds differently (more positively, it is hoped) to the marketing mix than other segments. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 165

24. The Middleton Health Club has a new fitness program for expectant mothers. After placing flyers at the offices of area obstetricians, Middleton’s class filled up within two days. Which segmentation success criterion was most influential in the success of this promotion? a. identifiability b. causality c. measurability d. responsiveness ANS: D Responsiveness is in force when a target segment responds differently (more positively, it is hoped) to the marketing mix than other segments. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 165

OBJ: 3

25. What is the term for the characteristics of individuals, groups, or organizations that marketers use to divide a total market into segments? a. Differentiation guides b. segmentation bases c. responsiveness quotients d. accessibility quotients ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 165

26. Listerine Essential Care toothpaste is designed to reduce plaque and to prevent gingivitis. Its ads state, “After age 35, 3 out of 4 adults have some form of gum disease.” The toothpaste is targeted to the market segment over the age of 35. This age variable that has been used to distinguish the market for this toothpaste is an example of which of the following? a. Differentiation guide b. segmentation base c. perceived variable d. accessibility quotient ANS: B A segmentation base is the characteristic used to segment the market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 4

27. Alexa Ling, the new owner of a stationary shop, understands the need to segment her market. Available marketing research indicates there is much demand in the community for personalized gifts. Ling has few resources and cannot engage in intensive consumer research to precisely identify a segment. Which of the following strategies would you suggest she employ? a. use a single-variable strategy because it offers an inexpensive alternative that would not require much experience to employ b. develop an undifferentiated strategy, because it is not a large community and she could create a single marketing mix that would serve the entire community c. use a multiple-variable segmentation strategy because it is easier to use than single-variable segmentation d. employ a macro segmentation strategy because the data needed for such a strategy is both easy to get and fits her needs exactly ANS: A Though less precise, single-variable segmentation has the advantage of being simpler and easier to use than multiple variable segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 4

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28. Which of the following is the term for the segmenting of markets based on the region of the country or the world, market size, market density (number of people within a certain unit of land), or climate? a. demonstratable regionalization b. geographic segmentation c. community segmentation d. geodemographic segmentation ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 165

29. You would expect to find more stores targeting hunters in Alberta than in Nova Scotia because hunting is a more popular pastime in western Canada than it is in the maritime provinces. A national chain of stores targeted to hunters would likely use which of the following segmentation when stocking merchandise in a particular store? a. benefit b. demographic c. economic d. geographic ANS: D The most logical base for segmentation on a product that is used more in one area than another is geographic. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 4

30. A manufacturer of blankets knows heavy 100 percent wool blankets sell better in Winnipeg where the winters are harsh and that lighter-weight blankets sell better in Victoria where mild winters require fewer and lighter covers for the bed. Segmenting the market according to climate is an example of which of the following types of segmentation? a. psychographic b. demographic c. lifestyle d. geographic ANS: D Geographic segmentation includes segmenting markets by climate. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 165

OBJ: 4

31. Almost all cell phones sold in North America are black. Almost all cell phones sold in Europe are colourful, and very few black phones are sold. A cell phone manufacturer knowing this information could use what type of segmentation when selling its phones internationally? a. economic b. geographic c. benefit d. demographic ANS: B Geographic segmentation includes segmenting markets by region of the country or world. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 4

32. Which of the following do marketers use to segment markets because the information is widely available and factors such as age and gender are often related to consumer purchasing and consumption behaviour? a. demographics b. benefits c. psychographics d. usage rates ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 166

33. Income, ethnic background, gender, and age are all examples of which type of segmentation bases? a. demographic b. geodemographic c. socioeconomic d. psychographic ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 166

34. Elle magazine is targeted to women under 30 years of age. The magazine’s segmentation plan is based on which type of segmentation? a. psychographic b. demographic c. geodemographic d. sociocultural attributes ANS: B Age and gender are demographic variables for segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166

OBJ: 4

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35. Finding that having to pester mom to take them to get their film processed inhibited children from taking pictures, Kodak introduced a camera set that included a single-use camera packaged with an envelope to mail the film back to Kodak for developing. What type of segmentation did Kodak’s segmentation plan use? a. age b. gender c. ethnicity d. occupation ANS: A Attracting children is a popular strategy for companies that hope to instill brand loyalty early. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166

OBJ: 4

36. For the launch of its new 1-series sports coupe in North America, BMW has targeted young urban male professionals with income in excess of $50,000 per year. BMW is basing its segmentation on which variable? a. Demographic b. Psychographic c. usage occasion d. geographic ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 166

37. In 2004, T.D. Waterhouse tied one of its promotional campaigns to the Chinese New Year. The slogan used for the campaign was “Plan Now for Success during the Upcoming Year of the Monkey.” Postcards were mailed to Asian-Canadians all over Canada. What was the segmentation base used for this strategy? a. psychographic b. Demographic c. Geographic d. Geodemographic ANS: B Ethnicity is a demographic factor. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166

OBJ: 4

38. Which of the following segmentation dimensions constitutes “demographic”? a. household income b. area of city lived in c. Personality d. rate of use ANS: A OBJ: 4

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 166

39. General Mills, Inc., is the owner of the Betty Crocker brand. The Betty Crocker catalogue sells cooking equipment and tableware and was initially targeted to women 45 and older. In 2001, General Mills decided to revamp the catalogue to reach women between the ages of 25 and 45. What demographic variables did General Mills use to segment its market? a. gender and age b. gender, age, benefit, and family life cycle c. benefit and age d. benefit and gender ANS: A Lifestyle and benefit are not demographic variables. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166-169

OBJ: 4

40. Women have been treated as second-class citizens by the sporting goods industry, but in 2002, sporting goods manufacturers and retailers began aggressively pursuing this market. Nike opened two women-only boutiques called Nike Goddess to test how receptive women are to its new merchandising concepts. Which type of demographic segmentation is Nike using? a. usage rate b. gender c. Benefit d. Lifestyle ANS: B Gender is a demographic variable—benefit and lifestyle are not. PTS: 1 DIF: Application BLM: Higher order

REF: p. 169-170

OBJ: 4

41. In Toronto, a radio station starts broadcasting in Russian for two hours daily to reach the 300,000 Russian-speaking people who live in Southern Ontario. What type of segmentation is the radio station using? a. Geographic b. Ethnic c. usage rate d. Socioeconomic ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 170

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42. The Canuck Insurance Company has developed a website for Chinese Canadians. The site is written in both Mandarin and Cantonese and reflects the Chinese culture with its use of the traditional colours of red and gold. According to the text, why would Canuck have developed a site specifically targeted to Chinese Canadians instead of the Asian Canadian market? a. The Asian Canadian market is homogeneous. b. While Asian Canadians have substantial buying power, average household income is substandard. c. Canuck Life has targeted one of the Asian Canadian submarkets. d. Asian Canadians comprise the largest minority in Canada. ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 170

43. The demographic factors of gender, age, and income often do not sufficiently explain why consumer buying behaviour varies. Frequently, DIF:ferences in consumption patterns among people of the same age and gender result from their being in Different stages of which of the following? a. the family life cycle b. Internalization c. perceptual positioning d. Segmentation ANS: A REF: p. 170

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

44. Which of the following businesses would be most likely to use family life-cycle segmentation? a. wedding planners, couples-only resorts, and daycare centres b. businesses that produce and market computer software and hardware c. fast-food restaurants d. business-to-business marketers ANS: A People in Different stages of the family life cycle would be most likely getting married, going on a couples-only trip, or need the services of a daycare. PTS: 1 DIF: Application BLM: Higher order

REF: p. 170

OBJ: 4

45. Which segmentation is based on personality, motives, and lifestyle? a. Demographic b. Psychographic c. family life cycle d. character ANS: B OBJ: 4

6-14

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 171

46. Ten Thousand Villages is a nonprofit retail store that sells gift items made by artisans from over 30 Different countries. This store provides employment to craftspeople in developing nations and markets their handiwork at a fair price. The store defines its market segment as people who believe in helping others and who feel good about helping others whenever possible. What type of segmentation does the store use? a. Geodemographic b. Psychographic c. Demographic d. Ethnic ANS: B Psychographic segmentation is based on motives, personality, and lifestyle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 171-173

OBJ: 4

47. NASCAR racing fans are some of the most diverse and loyal fans in the world. They will stand in the pouring rain, the freezing cold, or the blistering heat for hours to shake the hand and get the autograph of a NASCAR driver. These fans are not concentrated in any one area, but are dispersed throughout North America. A website designed to market NASCAR memorabilia would be most likely to be successful if it used which type of segmentation to determine its target market? a. Geodemographic b. Psychographic c. Demographic d. family life cycle ANS: B Since the audience is diverse, demographic segmentation would not be nearly as useful as psychographic segmentation that emphasized the fans’ lifestyles. PTS: 1 DIF: Application BLM: Higher order

REF: p. 171-173

OBJ: 4

48. What is a segmentation approach that groups consumers based on their values, attitudes, and beliefs? a. Behavioural b. usage occasion c. Psychographic d. Geodemographic ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 171-173

6-15

49. What type of segmentation do magazines such as Martha Stewart Living, Better Homes & Gardens, and other magazines targeted to people who are interested in improving their personal spaces rely on? a. Psychographic b. family life cycle c. usage rate d. Demographic ANS: A These magazines are aimed at helping people achieve a certain lifestyle. They emphasize the motive variable. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 171-173

OBJ: 4

50. Which of the following is an example of a psychographic variable? a. Personality b. Age c. Ethnicity d. income ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 171-173

51. Renegades Inc. is a startup company selling specialty sporting outerwear. The company has hired you, ace marketing consultant, to determine who their best target audience might be. Your research has determined that a prime target market for Renegades is people who enjoy bungee jumping, skydiving, and mountain climbing. What type of target market segmentation is this? a. Behavioural b. Demographic c. lifecycle d. Psychographic ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 171-173

52. The James Hardie Siding Company sells concrete siding. It was having little luck targeting contractors because concrete siding is DIF:ficult to install and shows every flaw if a house is incorrectly framed. So Hardie decided to target homeowners who wanted the security of knowing their siding that was guaranteed not to rot or crack for 50 years. In terms of psychographic segmentation, which variable did the siding company use? a. Motive b. Benefit c. Demographic d. Lifestyle ANS: A OBJ: 4

6-16

PTS: 1 DIF: Application BLM: Higher order

REF: p. 173

53. What divides individuals into groups according to the way they spend their time, the importance of items in their surroundings, their beliefs, and socioeconomic characteristics? a. macrosegmentation b. life-cycle segmentation c. lifestyle segmentation d. Microsegmentation ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 173

54. In Saskatoon, Saskatchewan, everyone who is anyone in society can’t wait to get a copy of Soiree magazine. The magazine is targeted to the upper middle and upper classes in Saskatoon and features articles on how they work and play. What type of segmentation is the editor of Soiree magazine relying on? a. Socioeconomic b. Geodemographic c. Benefit d. income ANS: B Income and social class are demographic variables. What people do is a psychographic variable. The fact the magazine is targeted to Saskatoon is geographic segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 173

OBJ: 4

55. You are an advertising manager for a company that sells health and fitness equipment to upscale professionals between the ages of 25 and 45. Your firm advertises during drive time on easy listening radio stations and on A&E and the Discovery Channel. On which of the following are you most likely to segment this market? a. Usage b. stage of family life cycle c. gender d. Lifestyle ANS: D Lifestyle segmentation in this instance is the right choice because the spending of leisure time is key when the advertising is employed. PTS: 1 DIF: Application BLM: Higher order

REF: p. 173

OBJ: 4

56. Which method clusters potential customers into neighbourhood lifestyle categories and is a combination of geographic, demographic, and lifestyle segmentation? a. Microsegmentation b. geodemographic segmentation c. lifestyle segmentation d. sociocultural clustering ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 173

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57. Kraft Foods plans to tailor different ads for different neighbourhoods in the same region. For example, viewers watching a cable show in a black neighbourhood in Toronto would see different ads during the same commercial breaks as whites living in a different neighbourhood. What type of segmentation does Kraft’s strategy best exemplify? a. systematic geographic b. geodemographics c. sociocultural d. Lifestyle ANS: B Geodemographic segmentation clusters potential customers into neighbourhood lifestyle categories. It combines geographic, demographic, and lifestyle segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 173

OBJ: 4

58. If you wanted to introduce a magazine devoted to providing information on how to live off the land in Canada, you would be likely to target Western Canadian men who have a strong need for individualism and limited government regulations. What type of segmentation would you probably use? a. Sociocultural b. situational c. Attitudinal d. Geodemographic ANS: D Location is a geographic variable. Gender is a demographic variable. A strong need for individualism is a psychographic variable. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 173

OBJ: 4

59. ThermaCare air-activated heat wraps are meant to be wrapped around sore muscles and joints. The product is advertised as a powerful pain reliever and a source of deep muscle relaxation. Its soothing warm can work at night while you sleep to restore your body. What type of segmentation is the manufacturer of ThermaCare heat wraps using? a. Benefit b. Functional c. Geodemographic d. Socioeconomic ANS: A OBJ: 4

6-18

PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

60. The Grief Store sells keepsake urns, cremation urns, funeral jewellery, and books on how to cope with the grief caused by a loved one dying. Demographically, the Grief Store is probably using which type of segmentation? a. Benefit b. family lifestyle c. Lifestyle d. Motive ANS: A The benefit sought at the store is a way to cope with the death. PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

OBJ: 4

61. What is the process of grouping customers into market segments according to the different needs and wants sought from the product? a. psychographic segmentation b. Macrosegmentation c. lifestyle segmentation d. benefit segmentation ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 174

62. There are many furniture manufacturers. Tall Paul’s Tall Mall is the only one that makes furniture to meet the needs of people who are over 6'6" tall. These people find furniture designed for average-sized people to be cramped and uncomfortable. What type of segmentation does Tall Paul’s use? a. Demographic b. Psychographic c. benefit d. Geodemographic ANS: C The consumers are described by the type of benefit they seek. PTS: 1 BLM: Remember

DIF: Application

REF: p. 174

OBJ: 4

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63. Reader’s Digest magazine plans to send millions of people with different medical conditions, such as high blood pressure, or high cholesterol, a booklet filled with articles and prescription-drug ads, all about the very condition each subscriber has. Reader’s Digest is applying benefit segmentation. Which of the following BEST describes benefit segmentation? a. It is developed on the basis of what a product will do for the customer rather than on buyer characteristics. b. It means simply choosing the most economical and beneficial demographic variable as a segmentation variable, to keep company costs low. c. It does not permit marketing managers to build consumer profiles. d. It is the strategy of building a competitive advantage over the competition. ANS: A Customer profiles can be developed by examining demographic information associated with people seeking certain benefits. PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

OBJ: 4

64. When asked to name a brand of sports drink, most people will answer Gatorade, and some will respond with Powerade also. But people with diabetes who still need to replenish electrolytes lost during activity or illness cannot drink these sports drinks because they are high in sugar. As a result, a manufacturer has developed Champion Lyte, which contains no sugar. What type of segmentation has the manufacturer of Champion Lyte used to identify its market? a. Demographic b. benefit c. Geodemographic d. Psychographic ANS: B The consumers can be described by the type of benefit they seek. PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

OBJ: 4

65. An 18-year-old student might be a “party animal” living in a dorm. Another 18-year-old student might be a husband with a small child and a full-time job. If you were in charge of a marketing program aimed at these men, what segmentation technique would be the easiest to employ that might help you to distinguish between them? a. age cohort analysis b. gender c. benefit d. concentration ANS: C Because each is likely to pursue different benefits from their respective purchases, benefit segmentation is the only method for distinguishing between them. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 174

OBJ: 4

66. The public transportation system in a major city conducted a survey that revealed respondents could be assigned to one of four categories: (1) people who never used mass transit, (2) people who used mass transit in the past but not now, (3) people who used mass transit occasionally, and (4) people who used mass transit regularly. These groups have significantly different perceptions about transportation alternatives. What type of segmentation is this? a. benefit b. demographic c. usage-rate d. economic ANS: C Segmenting users by amount purchased or consumed is usage-rate segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

OBJ: 4

67. Why are many retail firms interested in customer loyalty cards and programs? a. Sales are equally divided among heavy, medium, and light users, but they all need slightly different products. b. Roughly 20 percent of a firm’s customers purchase 80 percent of the sales volume of the product. c. Roughly 80 percent of the profit comes from 20 percent of the sales. d. Roughly 80 percent of a firm’s customers are repeat business. ANS: B The 80/20 principle proposes that a minority of a firm’s customers purchase a majority of the volume of the product. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 174

68. Ever since Hunter got his new Shell credit card, which gives him a 5 percent rebate on all purchases of Shell gas, he will buy gas only at stores that sell Shell gas. Shell introduced its credit card plan as a means of implementing what type of segmentation? a. usage-rate b. personality c. lifestyle d. motive ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

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69. General Mills offers a deal where its cereal users can collect box tops and submit them to General Mills to earn money for their children’s schools. This program, called the Box Tops for Education Program, is a means of changing light users into heavier users. In other words, it is a form of what type of segmentation? a. personality b. demographic c. lifestyle d. usage-rate ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

70. Hotels that cater to frequent business travellers are using what type of segmentation? a. psychographic b. benefit c. geographic d. usage rate ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

71. Which of the following proposes that a minority of a firm’s customers purchase a majority of the volume of the product? a. the equity fallacy b. the majority fallacy c. the cannibalization rule d. the 80/20 principle ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 174

72. Train collectors Jack McCoy and Sandro Dias have decided to open a store that sells train memorabilia—everything from toy train sets to full-sized railroad signs. After 18 months in business, they have noticed that most of their sales are to the same small group of customers (about 40 people) even though they have records to show there are over 200 active train collectors within a 50-mile radius of their store. Their retailing experience is supportive of which of the following? a. the rule of demand b. the 80/20 principle c. the optimizer principle d. the min-max rule ANS: B The 80/20 principle proposes that a minority of a firm’s customers purchase a majority of the volume of the product. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 174

OBJ: 4

73. Which type of segmentation is Aeroplan, Air Canada’s flyer loyalty program, based on? a. lifestyles b. usage rate c. personality d. motives ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

74. Business marketers focus on four broad market segments. Which of the following is one of those segments? a. sellers b. raw material suppliers c. households d. institutions ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 176

75. Manufacturers of instant potato flakes sell to resellers, institutional food services, and movie production companies. (Instant potato flakes are typically used in movies when the scene calls for falling snow.) The manufacturers of instant potato flakes would most likely segment their market according to which of the following? a. company characteristics b. customer relationship objectives c. financial terms d. length of distribution channel ANS: A Each of the buyers of potato flakes has distinct characteristics to be met. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 176

76. Tower Fasteners developed a commanding position in the fastener industry by carrying in stock over 150,000 different types of fasteners. Tower’s primary market is defined as companies with a need for specialized fasteners. All of the following are characteristics of the buying organization that Tower can use for segmentation EXCEPT which one? a. company size b. psychographic variables c. geographic location d. the method the company uses to make purchases ANS: B Psychographic variables are used in the consumer market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 176-177

OBJ: 5

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77. Firms can be categorized by the type of purchasing strategy they use. Which of the following usually contact familiar suppliers and place an order with the first that can meet product and delivery requirements? a. optimizers b. experiencers c. satisficers d. actualizers ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 177

78. Terri LaVoile operates a plumbing and electrical supply store. He has categorized its business customers by their purchasing strategy. LaVoile has found it much easier to serve and satisfy one group who usually recontact familiar suppliers and place an order immediately if product and delivery requirements are acceptable. What is this group? a. adaptors b. adopters c. satisficers d. innovators ANS: C Satisficers use a simple, quick purchasing strategy of looking for the first available adequate supplier. PTS: 1 DIF: Application BLM: Higher order

REF: p. 177

OBJ: 5

79. Which of the following consider numerous, even unfamiliar, suppliers and solicit and analyze options? a. satisficers b. innovators c. actualizers d. optimizers ANS: D OBJ: 5

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 177

80. Llewelyn Trucking Company finds one group of firms the most DIF:ficult to provide service for. This group considers numerous, even unfamiliar, suppliers; solicits bids; and carefully analyzes options. As a result, it requires a higher level of customer service and follow-up on quotations. What is the group? a. actualizers b. strivers c. early adopters d. optimizers ANS: D Firms that use an optimizer purchase strategy consider many suppliers and carefully analyze options. PTS: 1 DIF: Application BLM: Higher order 6-24

REF: p. 177

OBJ: 5

81. After dividing his catering customers into three segments based on income range and selecting segmentation descriptors, Kai Stein wrote out a description of each segment’s size, expected growth, frequency of parties, and overall profit potential. What did Kai engage in? a. Differentiating his market segments b. positioning his products to his market segments c. profiling and analyzing his segments d. concentrating his marketing mix on the most profitable marketing segments ANS: C See Review Learning Objective 6. PTS: 1 DIF: Application BLM: Higher order

REF: p. 178

OBJ: 6

82. The debate over gay marriages caused a great deal of furor, but it has done little to deplete the importance of the affluent gay market to businesses. Pacific Clothing and Mitchell Gold are two companies that have implemented and maintained marketing mixes designed to meet the needs of lesbians and gays. To these companies and others, what are lesbians and gays? a. a desirable perceived market b. a desirable market base c. a desirable target market d. a desirable market sample ANS: C A target market is a group of people for which an organization designs, implements, and maintains a marketing mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 178

OBJ: 7

83. After selecting a market for study, and choosing a basis for segmenting that market, what is the next step? a. Design a marketing mix. b. Implement and maintain a marketing mix. c. Select target markets. d. Select segmentation descriptors. ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 178

84. What is a group of people or organizations for which another organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges? a. a heterogeneous segment b. a target market c. an undifferentiated target d. an aggregated market ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 178

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85. The Hudson Company manufactures and installs above-ground swimming pools. When the company began in 1989, it completed a thorough examination of its business customers. It grouped the customers into three segments based on size, geographic region, and benefits sought. Would you recommend a new segmentation analysis this year? a. Yes, I would recommend one be done regularly because of the rapidly changing nature of most markets. b. Yes, a new analysis would be in order, but it should use Different bases to get some variety. c. No, once every 20 years is about average. d. No, consumer markets are not rapidly changing or developing like business goods markets. ANS: A The rapidly changing nature of markets dictates a regular re-examination of the segmentation process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 178

OBJ: 6

86. Sure Fit Inc. has begun a rebranding strategy to let customers know that it no longer only produces slipcovers, but also carries a line of rugs, windows treatments, and bedding. In this scenario, what are women with average annual household incomes of $60,000 or more? a. its target market b. its aggregated market c. its market Differentiation d. its market audience ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 178

87. John Sichner, editor and publisher of Beverage Digest, a trade journal for beverage producers, wrote, “In this day and age, one product can’t be the answer for all consumers.” What was Sichner opposing the use of? a. repositioning b. re-engineering c. undifferentiated targeting d. niche marketing ANS: C REF: p. 178-179

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

88. Hampton Rojas produces and markets Orangeville peach preserves. He views the world as one big market with no individual segments and tries to reach it with only one marketing mix. His essentially mass-market philosophy indicates that he probably uses which strategy? a. product Differentiation b. undifferentiated targeting c. concentrated targeting d. universal product ANS: B OBJ: 7

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 178-179

89. A mass marketer, such as Walmart, targets the entire consumer market with a common marketing mix. What is Walmart’s approach to segmenting? a. differentiated b. undifferentiated c. targeted d. concentrated ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 178-179

90. A mobile home manufacturer has decided to add concession food trailers to its product line. If all the current competitors in that market use a Differentiated product market strategy, which strategy would make the LEAST sense for the manufacturer to implement? a. multisegment targeting strategy b. concentrated targeting strategy c. undifferentiated targeting strategy d. product Differentiation strategy ANS: C An undifferentiated strategy would give the company no product advantage against entrenched competitors. PTS: 1 DIF: Application BLM: Higher order

REF: p. 178-179

OBJ: 7

91. Your firm is producing a car battery that is safe to discard in normal household trash. All other batteries on the market contain chemicals that are harmful and that can pollute underground water supplies and should be discarded with caution. Which of the following marketing segmentation options might you choose? a. Differentiated b. undifferentiated c. strategic demand d. concentrated ANS: B This approach is used for developing a single marketing mix aimed at the entire market. It often is used by firms having no discernable competition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 178-179

OBJ: 7

92. Which strategy entails selecting one segment of a market to target, and focuses on understanding the needs, motives, and satisfactions of the members of that segment, as well as on developing a highly specialized marketing mix? a. universal product b. concentrated targeting c. market development d. product development ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 180

6-27

93. Tall Paul’s Tall Mall designs and sells household furniture and furnishings to people who are over 6'6" tall—a rather small target market. Which targeting strategy does Tall Paul’s Tall Mall use? a. universal product code b. benefit c. undifferentiated d. concentrated ANS: D The company has established people taller than 6'6" as its niche. PTS: 1 DIF: Application BLM: Higher order

REF: p. 180

OBJ: 7

94. What happens when a firm uses a concentrated targeting strategy? a. It can concentrate on one generalized product to fit the mass market, maximizing sales volume. b. It can offer a highly specialized marketing mix. c. It can reach customers in two or more segments that might otherwise be missed. d. It can avoid the danger of putting all resources in one micromarket. ANS: B Concentrated targeting focuses on one target market and develops a highly specialized mix. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 180

95. BigTime Productions Ltd. is an ambitious company with a tiny marketing budget. It has decided to spend its small-time budget on a niche market segment in the hopes of winning a big contract. Which strategy is BigTime practising? a. concentrated b. differentiated c. mass d. undifferentiated ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 180

96. Which of the following old sayings do companies that adopt a concentrated marketing strategy violate? a. You can’t bake a pie without breaking some eggs. b. Don’t count your chickens before they hatch. c. Don’t put all of your eggs in one basket. d. A rolling stone gathers no moss. ANS: C REF: p. 180

6-28

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

97. Stouffer’s offers gourmet entrees for one segment of the frozen dinner market, and Lean Cuisine for another segment that wants both good taste and low calories. When Stouffer’s chose to serve two well-defined market segments and develop distinct marketing mixes for each, which of the following was it implementing? a. multisegment targeting b. market integration c. concentrated targeting d. heterogeneous positioning ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 181

98. Pharmaceutical firms market many brands of cold remedies with highly similar ingredients. The primary difference among the brands is their promotions that emphasize that various brands will treat different symptoms, such as runny noses, headaches, and fever. This is one way to practise which of the following? a. multiple-use product marketing b. multisegment targeting c. concentrated segmenting d. integrated targeting ANS: B Different promotional appeals rather than completely different marketing mixes may be used as the basis for a multisegment strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 181

OBJ: 7

99. You are the president of a new, capital-rich firm and you must decide on your firm’s targeting approach. Three large subgroups exist in your market that have never had their unique needs served. If you don’t act now, others will seize the opportunity. What should you use? a. a concentrated or niche targeting strategy b. a multisegment strategy c. a single product with a concentrated strategy d. an undifferentiated strategy ANS: B Producing different products for different segments is worthwhile in this case because it serves customer needs better and gives the firm a preemptive position in all three segments. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 181

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100. With multisegment targeting, a company could benefit from all of the following EXCEPT which one? a. higher profits b. economies of scale in manufacturing c. greater sales volume d. greater product design and management cost ANS: D Creating and supporting different marketing mixes requires more company resources than just designing one mix. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 181

101. What is one of the potential disadvantages associated with a multisegment strategy? a. inadequate demand b. cannibalization c. loss of synergy d. lower profits ANS: B REF: p. 182

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

102. Abercrombie & Fitch opens a new store 20 km away from your house. You really like their clothes so you’re happy to drive 20 km to shop there. Then another new Abercrombie & Fitch opens up right by your house so you don’t have to drive as far to shop there. The A&F that was 20 km away has essentially lost a repeat customer—you—and likely others in your neighbourhood. What is the first A&F store likely experiencing? a. inadequate demand b. demarketing c. loss of synergy d. cannibalization ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 182

103. Pharmaceutical firms have introduced new over-the-counter antacids that block the production of stomach acids while still marketing traditional antacids. Traditional antacids treat heartburn by neutralizing stomach acid. If sales of the new acid blockers reduce sales of the traditional antacids, what has occurred? a. undifferentiation b. cannibalization c. perceptual confusion d. demarketing ANS: B OBJ: 7

6-30

PTS: 1 DIF: Application BLM: Higher order

REF: p. 182

104. When Procter & Gamble (P&G) introduced Liquid Tide to a new segment, consumers in the traditional powdered detergent segment switched to the liquid product. Rather than real sales growth, P&G simply experienced the shifting of existing customers to a new product. This exemplifies a drawback of multisegment targeting strategy. What is it? a. undifferentiation b. demarketing c. market repositioning d. cannibalization ANS: D Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 182

OBJ: 7

105. Mirage Resorts in Las Vegas has a system that allows hotel clerk’s instantaneous access to a client’s gambling history to determine what sort of room or complimentary services will provide the guests with the highest level of service. What is the resort practising? a. spamming b. one-to-one marketing c. transactional marketing d. wireless marketing ANS: B The service is personalized. PTS: 1 DIF: Application BLM: Higher order

REF: p. 183

OBJ: 8

106. The difference between one-to-one marketing and customer relationship marketing can be compared to the difference between which of the following? a. drawing circles and drawing squares b. eating with your fingers and eating with a fork c. firing a rifle and firing a shotgun d. night and day ANS: C REF: p. 183

PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

107. What is the basic goal of one-to-one marketing? a. to reduce costs through customer retention and increase revenue through customer loyalty b. to eliminate the use of mass media for promotion and locate a direct communications channel c. to increase the market for the product category to new and current customers d. to reduce the number of company employees and increase overall sales ANS: A REF: p. 183

PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

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108. All of the following environmental forces influence one-to-one marketing EXCEPT which one? a. the increasing diversity of the Canadian population b. greater use of robotic technology to lower production costs c. new media alternatives d. decreasing brand loyalty ANS: B REF: p. 183-184

PTS: 1 OBJ: 9

DIF: Comprehension BLM: Higher order

109. What is the development of a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general, and is related to the place a product occupies in consumers’ minds relative to competing offerings? a. positioning b. diversification c. market aggregation d. market Differentiation ANS: A OBJ: 11

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 184

110. Which of the following is the result of the continuing rise in the number of women in the workforce, the increase in working mothers, and the rise in single-parent households mostly headed by women? a. time-poor consumers b. new media acceptance c. decreasing brand loyalty d. the demand for accountability ANS: A REF: p. 184

PTS: 1 OBJ: 9

DIF: Comprehension BLM: Higher order

111. What is product positioning? a. the process of pricing the product to be at a competitive level with other brands on the market b. the process of finding the correct location for retail outlets to sell a product category c. the process of finding the right channel of distribution for a product d. the process of creating the desired image of the firm’s product with respect to its competition ANS: D OBJ: 11

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 184

112. Everyone tends to go through periods where they feel a need to partake in some kind of exercise, and they buy the equipment needed. When they stop the exercise program, the equipment can gather dust or be sold to a store in the Play It Again Sports retail chain. The chain carries all kinds of sports equipment at much lower prices than the typical sporting goods store. Typically, merchandise sold in the store has little, if any, wear. By being both a way for people to get rid of unwanted equipment and a source of new-to-you equipment, what is Play It Again Sports emphasizing? a. positioning b. the family life cycle c. an integrated targeting strategy d. public relations ANS: A Product position is the potential customers’ overall perception of a brand, product line, or organization in general, and refers to the place a product occupies in consumers’ minds relative to competing offerings. PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

OBJ: 11

113. Chander Kumar owns two antique stores. One is in an upscale neighbourhood, and its merchandise is artfully arranged and priced to indicate product rarity. The other is in a run-down strip mall and contains some of the same type of merchandise, but the items are left in open boxes and placed haphazardly on shelves. Customers of either store have entirely different perceptions of the stores and would be surprised to know that Kumar operates each of them. Why? a. because he uses such differing market integration strategies b. because he uses such differing segmentation strategies c. because he uses such differing market combination strategies d. because he uses such differing positioning strategies ANS: D Product position is the potential customers’ overall perception of a brand, product line, or organization in general, and refers to the place a store occupies in consumers’ minds relative to competing offerings. PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

OBJ: 11

114. Products such as bleaches, aspirin, unleaded regular gasoline, and some soaps are distinguished by minor differences, such as brand names, packaging, colour, smell, or “secret” additives. With these products, marketers attempt to convince customers that their product is significantly different from the others and should therefore be demanded over competing brands. What are these marketers using? a. product differentiation b. cannibalization c. perceptual mapping d. psychographic targeting ANS: A OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

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115. For years, fryer chickens sold in grocery stores were perceived to be a rather generic product—one brand of chicken was much like another. Then Frank Perdue began an advertising campaign to tell consumers his brand of chicken was more tender and a better choice. What did Perdue bring to the marketing of fryer chickens? a. cannibalization b. psychographic targeting c. product Differentiation d. perceptual mapping ANS: C Product differentiation strategy is a positioning strategy that firms use to distinguish their products from those of competitors. PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

OBJ: 11

116. In a study by General Motors, consumer perceptions of the five GM automobile divisions (Buick, Cadillac, Chevrolet, Oldsmobile, and Pontiac) were plotted to show the locations of products in the minds of present or potential customers. What were they plotted on? a. a perceptual map b. a product Differentiation graph c. a target market chart d. a predictive model ANS: A OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

117. What could Jell-O use to determine if consumers perceive a void in snacks that are easy to handle and wholesome and if customers thought Jell-O Pudding Pops would fill that void? a. product positioning b. an internal marketing audit c. a perceptual map d. predictive modelling ANS: C The attributes of “easy to handle” and “wholesome” would be perceived as significant attributes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

OBJ: 11

118. What does it mean when two brands on a perceptual map are close together? a. they are more objectively alike b. they are more similarly perceived by consumers c. the more likely an undifferentiated marketing strategy is in effect d. their prices are closer ANS: B If two products are close on a perceptual map, then consumers are perceiving them to be similar, even if the products actually are not. PTS: 1 OBJ: 11 6-34

DIF: Comprehension BLM: Higher order

REF: p. 185

119. The advertisements for Torengos tortilla chips that come in cans like Pringles deliberately compares the product to Frito-Lay’s Tostitos tortilla chips and asks if you really prefer broken chips. What is Torengos being positioned by? a. attribute b. product class c. competitor d. use or application ANS: C Torengos is compared to its competition, Tostitos. PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

OBJ: 11

120. Hudson’s Bay Company has Canada’s largest reward program—HBC Rewards. This program enables members to earn points at the Hudson’s Bay family of stores, including The Bay, Zellers, Home Outfitters, and hbc.com. Consumers can redeem points for over 600 rewards in the HBC Rewards catalogue, including travel, leisure, and entertainment items; Air Miles reward miles; or Bay and Zellers gift certificates. Which of the following provides the most likely reason Hudson’s Bay Company implemented this reward program? a. to lessen the importance of customer service b. to make sure the 80/20 rule is not influencing its activities c. to reduce problems associated with cultural diversity d. to retain loyal customers ANS: D The HBC Rewards program is a loyalty program. The text uses the example of a loyalty program to reinforce brand loyalty. PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

OBJ: 9

121. The Pontiac Piranha was billed as a combination sports coupe and sports utility vehicle. The car operated by responding to a coded minichip card the driver carried to identify himself or herself as the car’s owner and operator. General Motors designed this car to appeal to an individual who likes to have the latest in gadgets but also has family needs. What positioning base did General Motors use? a. competitor b. price and quality c. product user d. product class ANS: C The positioning focuses on the personality and type of user. PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

OBJ: 11

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122. For an engagement ring, Linda would rather have a diamond than a cubic zirconium because the diamond is marketed as the only way to show someone that you really love her and are sincere about your commitment to her. What is the diamond positioned by? a. product class b. product user c. price and quality d. product use ANS: D Stressing the communication skills of a diamond as a way to prove true love is positioning by use. PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

OBJ: 11

123. Ad campaigns by Aleve pain reliever emphasize the fact that to get the same relief offered by one Aleve you would need to take six aspirin or Tylenol and four Advil. What position base are these promotions using? a. product class b. competitor c. product merits d. product user ANS: B Positioning against competitors is a positioning strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

OBJ: 11

124. To be successful, most businesses focus on customer service. However, the cable industry has a history of poor customer service. Cable companies are facing competition for TV customers who once had no choice but cable if they wanted to see more than local programs. In the face of this competition from direct broadcast satellites, cable companies are trying to use which type of strategy to show that they have become customer oriented? a. product Differentiation b. repositioning c. targeting d. segmentation ANS: B Repositioning is changing consumers’ perception of a brand in relation to its competitors. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 186

OBJ: 11

125. Which of the following statements about consumer privacy concerns is true? a. There is a widespread understanding among consumers about existing privacy laws and regulations. b. Europe has developed some of the strictest legislation regarding the collection and use of consumer data. c. The popularity of the Internet for direct marketing, consumer data collection, and as a repository for sensitive consumer data does not concern many consumers. d. Most consumers are aware of how personal information is collected, used, and distributed. ANS: B REF: p. 186

PTS: 1 OBJ: 10

DIF: Comprehension BLM: Higher order

126. Mattel is trying several Different strategies to sustain brand growth in slow markets. It has developed a line of high-fashion clothes to be sold under the Barbie label as well as a perfume for preteen girls. In another move, it announced that Barbie would “spend some time apart” from Ken, her long-term male doll companion. In addition, Mattel has developed a line of women’s clothing under the Barbie label. Sales of Barbie were flat in 2003 and falling in 2004. What is Mattel doing to the Barbie brand in order to grow? a. repositioning b. reverse engineering c. demarketing d. mass marketing ANS: A Repositioning is changing consumers’ perceptions. Mattel wants the Barbie brand viewed as a variety of products—not just the doll and its accoutrements. PTS: 1 DIF: Application BLM: Higher order

REF: p. 186

OBJ: 11

127. The Southern Company is the largest provider of utilities in the southwestern Ontario. It has also been accused of being the biggest source of industrial air pollution in the area. The Southern Company is trying to change consumer perception of the company by sponsoring a series of television programs on how to preserve our environment. The Southern Company is hoping that the programming will lead to which of the following? a. demarketing b. repositioning c. one-to-one marketing d. undifferentiated targeting ANS: B OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 186

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128. For many people, www.travelocity.com was simply a seller of airline tickets. In 2002, the Internet company spent $40 million to convince customers that it also offered many other useful travel services. What did www.travelocity.com use? a. undifferentiated targeting b. niche marketing c. repositioning d. demarketing ANS: C OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 186

When Ford Motor Company launched an on-line effort to market its F-Series trucks, it used its database capabilities to capture valuable data on car buyers. Ford cross-referenced new F-series owners with the database generated from this on-line campaign to see how many names were duplicated. 129. Refer to Ford. What did Ford engage in once it created profiles of customers who responded to its on-line campaign and determined how to individualize its promotions? a. traditional mass marketing b. one-to-one marketing c. e-commerce d. market aggregation ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 183

130. Refer to Ford. Which of the following trends can Ford’s activities mostly likely be traced to? a. increasing demand for accountability and the emergence of new media alternatives b. growing demand for accountability and fewer time-poor consumers c. the emergence of strong mass media channels and a decrease in brand loyalty d. decreasing diversity and increasing brand loyalty ANS: A OBJ: 9

PTS: 1 DIF: Application BLM: Higher order

REF: p. 184-185

131. Refer to Ford. What is one potential problem with the use of Ford’s database? a. if the database is used to generate focus groups b. whether media alternatives are eliminated from promotional campaigns c. whether customers perceive it as an invasion of privacy d. how marketing researchers conduct experimental research ANS: C Privacy concerns are a very important issue to consumers. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 186

OBJ: 9

Ayres Corp. makes airplanes. It sells about 50 planes a year to be used as crop dusters. It sells another 75 a year to delivery companies. In addition, it manufactures another dozen or so that are used for fire fighting and about six a year that are sold for military transport purposes. 132. Refer to Airplanes. What type of variable does Ayres Corp. use? a. company characteristics b. usage rate c. demographic d. benefit ANS: A Company characteristics include type of company and product use. PTS: 1 DIF: Application BLM: Higher order

REF: p. 176-177

OBJ: 5

133. Refer to Airplanes. What type of targeting strategy is Ayers using? a. unDifferentiated targeting b. multisegment targeting c. market Differentiation d. concentrated targeting ANS: B Ayers has chosen at least four well-defined markets to target. PTS: 1 DIF: Application BLM: Higher order

REF: p. 181

OBJ: 7

Sara Lee Bakery Group introduced Iron Kids Crustless bread (to save parents the time and effort of slicing the crusts off sandwiches). 134. Refer to Sara Lee. By doing this, what was it using? a. a target market chart b. product Differentiation c. geodemographic segmentation d. unDifferentiated segmentation ANS: B The purpose of product Differentiation is to distinguish one firm’s products from another’s. PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

OBJ: 11

135. Refer to Sara Lee. By catering to finicky children, what is Sara Lee using a positioning strategy based on? a. use or application b. product class c. competitor d. product user ANS: D OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

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Around the beginning of fall each year, about 2.7 million turkey hunters all over North America start looking at catalogues for the perfect item to guarantee that this year they will kill a wild turkey, the most elusive game bird on the North American continent. The devoted turkey stalker can stock up on everything from camouflaged turkey hunting socks, turkey licence plate holders, vests with huge pockets for toting dead birds, and hunting videos to turkey decoys, turkey earrings, and turkey callers. Neil Cost is considered the best manufacturer of turkey callers in the world. That is his only product, and each is highly prized by turkey hunters. It is not unusual for a turkey hunter to pay $5,000 for one of Cost’s callers. 136. Refer to Turkey Hunting Equipment. How would wild turkey hunters be defined? a. as a segmentation base b. as a consumer position c. as a retail position d. as a market segment ANS: D A group of individuals sharing one or more characteristics (in this case, love of wild turkey hunting) that cause them to have relatively similar product needs is called a market segment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 162

OBJ: 1

137. Refer to Turkey Hunting Equipment. Given that the wild turkey hunters number approximately 2.7 million, the group meets the segmentation criterion of which of the following? a. substantiality b. functionality c. reliability d. accessibility ANS: A The segment is large enough to warrant developing and maintaining it as a target market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 164

OBJ: 3

138. Refer to Turkey Hunting Equipment. Segmenting a market based on the fact that people who enjoy hunting typically exhibit a particular lifestyle is an example of what type of segmentation? a. psychographic b. geographic c. benefit d. demographic ANS: A Psychographic segmentation is based on lifestyle as well as personality and motive. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 171

OBJ: 4

139. Refer to Turkey Hunting Equipment. What kind of strategy does Neil Cost use to select his target market? a. repositioned b. undifferentiated c. concentrated targeting d. multisegment ANS: C Cost targets one segment in the market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 180

OBJ: 7

140. Refer to Turkey Hunting Equipment. Primos Hunting Calls is another company that manufactures wild turkey callers. It claims that each of its callers is able to cluck, shriek, and kee-kee (three sounds that have been known to attract the wild turkey). If you buy one of Cost’s callers, you are limited to one sound. In this way, Primos has implemented what type of strategy? a. multisegment b. target market c. repositioning d. product Differentiation ANS: D Product Differentiation is used to distinguish one company’s products from another’s. PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

OBJ: 11

Market research has shown that 6- to 17-year-old males, 18- to 24-year-old females, and 18- to 44-year-old males are most likely to watch a televised professional wrestling event or to attend a live match. Wrestling events are regularly broadcast in 120 Different countries. Merchandise licensed by World Wrestling Entertainment (formerly known as the World Wrestling Federation) can be purchased at Walmart. Clothes for adults are used to reach markets that may not buy action figures, video games, and novelty candy, but who are still proud to sport World Wrestling Entertainment (WWE) trademarks. 141. Refer to Wrestling Merchandise. The groups identified above as strong wrestling fans can be described as which of the following? a. market segments b. organizational buyers c. microsegments d. market positions ANS: A A group of individuals sharing one or more characteristics that cause them to have relatively similar product needs is called a market segment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 162

OBJ: 1

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142. Refer to Wrestling Merchandise. Marketing research reveals that which type of segmentation can be used to identify the biggest fans of professional wrestling? a. demographic b. geodemographic c. benefit d. psychographic ANS: A Age is a demographic variable for segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166

OBJ: 4

143. Refer to Wrestling Merchandise. Since the WWE must use different methods to reach its three largest target markets, what must it use? a. undifferentiated targeting b. multisegment targeting c. repositioning d. concentrated or niche targeting ANS: B A firm that chooses to serve two or more well-defined market segments and develops distinct marketing mixes for each is practising multisegment targeting. PTS: 1 DIF: Application BLM: Higher order

REF: p. 181

OBJ: 7

144. Refer to Wrestling Merchandise. Prior to the 1990s, professional wrestling tried to compete as a legitimate sport just like football and baseball. Now it uses the term “sports entertainment” when talking about what it is marketing to its fans. This is an example of the implementation of what type of strategy? a. undifferentiated marketing b. multisegment c. product Differentiation d. repositioning ANS: D Repositioning is the changing of consumers’ perceptions in relation to the competition. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 186

OBJ: 11

For many years, if car owners wanted to make sure that they would not be stranded if their car were to break down, they became members of the Canadian Automobile Association (CAA). Its members also received discounts at CAA-affiliated motels as well as access to maps and a trip planning service. Recently, a new company offering the same services as CAA has come on the market. Better World Travellers Club (BWTC) is competing against CAA by offering the same roadside assistance as CAA and at the same time pitching a go-green philosophy. The company is diligently courting the environmentally conscious traveller. BWTC has agreed to donate 1 percent of club revenues to environmental organizations that seek to reduce the use of fossil fuel and fight global warning. In addition, its members receive discounts on travel to remote wilderness retreats, world-class eco-resorts, and “green” hotels (ones that utilize energy efficient practices). 145. Refer to Better World Travellers Club. Which of the following describes environmentally conscious travellers? a. They are BWTC’s undifferentiated market. b. They are BWTC’s aggregated market. c. They are BWTC’s market sample. d. They are BWTC’s market segment. ANS: D A group of individuals sharing one or more characteristics that cause them to have relatively similar product needs is called a market segment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 162

OBJ: 1

146. Refer to Better World Travellers Club. In deciding to target the environmentally conscious traveller, BWTC had to be sure that this group would react to its marketing mix differently from other groups. In other words, it hoped that this group met which criterion? a. identifiability and measurability b. accessibility c. responsiveness d. reliability ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

147. Refer to Better World Travellers Club. BWTC’s design of travel packages that would appeal to people who liked hiking and camping and packages that appealed to those who liked resorts indicates the company was using what type of base? a. benefit segmentation b. geodemographics c. demographic d. psychographic ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 171

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148. Refer to Better World Travellers Club. BWTC’s appeal to those who want to help preserve the environment indicates that the company was using which type of base? a. socioeconomic b. benefit segmentation c. geodemographic d. demographic ANS: B Its target market is expected to use the product because it benefits the environment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

OBJ: 4

149. Refer to Better World Travellers Club. Because BWTC has chosen to concentrate its efforts on environmentally conscious travellers, it can be said to have done which of the following? a. targeted everyone who drives b. found a market niche c. adopted a market aggregation strategy d. targeted everyone who owns a car ANS: B BWTC is using a concentrated targeting strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 180

OBJ: 7

150. Refer to Better World Travellers Club. BWTC’s donation to organizations that seek to reduce the use of fossil fuel is a strategy for which of the following? a. repositioning b. multisegmentation c. mass marketing d. product Differentiation ANS: D Its donations will differentiate BWTC’s service from the service offered by CAA. PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

OBJ: 11

151. Refer to Better World Travellers Club. What base has BWTC selected for its positioning strategy? a. product use b. attribute c. product life cycle d. product class ANS: B BWTC wants consumers to associate the organization with saving the environment (a benefit). PTS: 1 DIF: Application BLM: Higher order

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REF: p. 185

OBJ: 11

Clearing Skies Press published a book by Robert Ruark entitled Keeping the Baby Alive Till Your Wife Gets Home. It is an advice book for new fathers. 152. Refer to Clearing Skies. What demographic variables have been used to define the market for this book? a. gender and family life-cycle stage b. benefit and gender c. age, gender, and personality d. benefit and lifestyle ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 166-171

153. Refer to Clearing Skies. What is the book positioned on the basis of? a. product class b. family-life cycle c. use or application d. product user ANS: D OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 185

E&V Bridal Studios is a wedding consulting business designed to appeal to East Asians. At one time, it used the same marketing mix for all of its customers, but it has discovered that it needs a Different marketing mix to appeal to its ethnic customers. For example, Chinese brides want an elaborate red gown, and Vietnamese brides wear a brocaded gown with long sleeves and a Mandarin collar. 154. Refer to E & V Bridal Studios. What procedure does E&V Bridal Studios use to divide its large market? a. perceptual mapping b. micromarketing c. positioning d. market segmentation ANS: D Dividing one large market into divisions based on a variable such as size is called market segmentation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 162

OBJ: 1

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155. Refer to E&V Bridal Studios. It accommodates the various cultures by providing services to appeal to Koreans, Vietnamese, Chinese, and Japanese customers. E&V Bridal Studios markets its services to its customers by using ethnicity to divide its customers into segments. In this case, what is ethnicity? a. E&V Bridal Studios’ primary segmentation variable b. E&V Bridal Studios’ primary environmental control c. E&V Bridal Studios’ primary Differentiation guide d. E&V Bridal Studios’ primary accessibility quotient ANS: A A segmentation base is the characteristic used to segment the market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 165

OBJ: 4

156. Refer to E&V Bridal Studios. It accommodates the various cultures by providing services to appeal to Koreans, Vietnamese, Chinese, and Japanese customers. Which segmentation variable does E&V Bridal Studios rely on to identify its market? a. sociocultural b. socioeconomic c. geographic d. demographic ANS: D Ethnicity is a demographic variable. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166

OBJ: 4

157. Refer to E&V Bridal Studios. What form of demographic segmentation does the company use? a. ethnic b. lifestyle c. geographic d. benefit ANS: A Only ethnic segmentation is a demographic variable. PTS: 1 DIF: Application BLM: Higher order

REF: p. 170

OBJ: 4

158. Refer to E&V Bridal Studios. What type of segmentation strategy does the company use? a. concentrated targeting b. undifferentiated targeting c. multisegment marketing d. limited demand ANS: A E&V Bridal Studio concentrates on the Eastern Asian segment who want a traditional wedding. PTS: 1 DIF: Application BLM: Higher order 6-46

REF: p. 180

OBJ: 7

ProtecTV is a product that selectively mutes words and phrases that some people find objectionable. It can be connected to a television, VCR, DVD player, or satellite TV system. The manufacturer of ProtecTV targeted parents who did not want their children exposed to what they consider to be offensive language. 159. Refer to Censoring Programs. What is the primary market segment for ProtecTV? a. educators b. parents with preteens in their households c. all those interested in screening out offensive language d. all parents ANS: B OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 162

160. Refer to Censoring Programs. What demographic segmentation variable has its manufacturer used to identify its target market? a. family life cycle b. benefit c. ethnic d. gender ANS: A The segment is a family with young children. PTS: 1 DIF: Application BLM: Higher order

REF: p. 166

OBJ: 4

161. Refer to Censoring Programs. By helping parents who want to protect the innocence of their children, what type of segmentation is ProtecTV using? a. geodemographic b. usage rate c. benefit d. demographic ANS: C ProtecTV is designed to satisfy parents’ needs to protect their children. PTS: 1 DIF: Application BLM: Higher order

REF: p. 174

OBJ: 4

162. Refer to Censoring Programs. ProtecTV is the only product of its kind that has an expandable dictionary. What type of strategy does ProtecTV use? a. undifferentiated targeting b. repositioning c. product Differentiation d. market integration ANS: C OBJ: 11

PTS: 1 DIF: Application BLM: Higher order

REF: p. 184

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TRUE/FALSE 1. AkPharm, Inc. has developed Cat-Sip, a lactose-free milk designed to be digestible by cats. The market for this product is cats. ANS: F Animals are not able to make purchases and therefore cannot be called a market although the animals’ owners would constitute a market. PTS: 1

DIF: Application

REF: p. 162

OBJ: 1

2. Allyson has a small business that creates personalized gift baskets and is now in the process of identifying groups of buyers that have relatively similar product needs. She is engaged in the process of market segmentation. ANS: T OBJ: 1

PTS: 1

DIF: Application

REF: p. 162

3. One reason marketers use market segmentation as a tool is that, once completed, the process need not be repeated. ANS: F Market segmentation is an ongoing process. Because external forces may change something in the marketer’s environment, marketers must be able to react to those changes as they occur. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 162

4. A market segment is deemed to have substantiality if it contains large numbers of potential customers. ANS: F Substantiality of a segment refers to a segment being large enough to warrant developing and maintaining a special marketing mix. This does not necessarily require large numbers of potential customers. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 164

5. A segmentation plan must produce segments that exhibit responsiveness. In other words, if all customers are equally concerned about protecting the environment, there is no need to offer regular and all-natural versions to the segment. ANS: T REF: p. 164

PTS: 1 OBJ: 3

DIF: Comprehension

6. Geography, psychographics, and benefits sought are examples of possible segmentation variables used by marketers. ANS: T OBJ: 4 6-48

PTS: 1

DIF: Definition

REF: p. 165-166

7. Maple Leaf paint manufacturers traditionally use different formulas for developing paint to be used in the milder West, the frigid North, and the humid Maritimes. This is an example of how demographic segmentation is used. ANS: F Regional marketing is an example of using geographic segmentation variables. PTS: 1

DIF: Application

REF: p. 165-166

OBJ: 4

8. Elefanten is a manufacturer of high-priced designer shoes for children up to the age of 12. Its target market is parents with annual incomes greater than $75,000. Elefanten uses demographic segmentation variables. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 166

9. Clearing Skies Press published a book by Robert Ruark entitled Keeping the Baby Alive Till Your Wife Gets Home. It is an advice book for new fathers. This is an example of the use of demographic segmentation variables. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 166

10. Clearing Skies Press published a book by Robert Ruark entitled Keeping the Baby Alive Till Your Wife Gets Home. It is an advice book for new fathers. An appropriate market segment for this book could be family life cycle. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 170-171

11. When Schlitz beer advertised its product with the slogan “You only go around once in life, so you might as well reach for the gusto,” it was relying on demographic segmentation. ANS: F This is more reflective of psychographic segmentation. There is no use of any of the segmentation variables associated with demographic. PTS: 1

DIF: Application

REF: p. 171

OBJ: 4

12. An HGTV television show called Designing for the Sexes obviously relies on psychographic segmentation. ANS: F Gender is a demographic segmentation variable. PTS: 1

DIF: Definition

REF: p. 166-171

OBJ: 4

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13. Reality-based television shows are targeted to people who like to believe that they could become a part of such a show and find their way to fame and fortune. This is an example of psychographic segmentation. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 171

14. Faze magazine is a magazine targeted to Canadian teenagers. Its publisher most likely uses geodemographic variables for segmentation. ANS: F Geodemographics combines geographic, demographic, and lifestyle segmentation. There is no lifestyle segmentation in this example. PTS: 1

DIF: Application

REF: p. 173

OBJ: 4

15. Reader’s Digest magazine sent millions of subscribers with different medical conditions, such as high blood pressure or high cholesterol, a booklet filled with articles and prescription-drug ads, all about the very condition each person has. Reader’s Digest’s segmentation plan used benefit segmentation variables. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 174

16. 7-Eleven Stores learned that 25 percent of its shopping base is responsible for a substantial majority of its revenue. This is the general idea posited by the 80/20 principle. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 174

17. Clorox targets individuals who buy lots of cleaning products (heavy users). Some of these users are mainly interested in cleaning bathrooms, while others are more concerned with kitchen cleanliness. Clorox doesn’t approach these two groups differently but addresses both types of people as heavy users. This is an example of how companies use benefit segmentation. ANS: F Because Clorox does not segment based on benefits sought but only on usage, this is an example of usage rate segmentation. PTS: 1

DIF: Application

REF: p. 174

OBJ: 4

18. The business market consists of four broad segments. They are producers, resellers, governments, and regions. ANS: F The four segments are producers, resellers, institutions, and governments. PTS: 1

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DIF: Definition

REF: p. 176

OBJ: 5

19. Segmentation by customer relationship occurs when business marketers segment their markets by income, occupation, and educational variables. ANS: F Segmentation by customer relationships allows business marketers to segment their markets according to the type of relationship they have with their customers. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 177

20. Once a marketer is aware of all possible segmentation variables, choosing which variables to use is a simple, scientific process. ANS: F Selecting segmentation variables is never simple or scientific; it is a creative process, limited primarily by the marketer’s imagination. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 178

21. Munson Jams & Jellies is a small company in Manitoba. Its owner has been heard to say that she engages in mass marketing. Marketers would call her strategy an undifferentiated targeting strategy. ANS: T OBJ: 7

PTS: 1

DIF: Application

REF: p. 178

22. Pitkin Enterprises produces animal figurines for children and young adults. For children, it makes hard-to-break figurines that are promoted and distributed in the same manner as the delicate, porcelain ones made for young adults. Pitkin engages in multisegment targeting. ANS: T OBJ: 7

PTS: 1

DIF: Application

REF: p. 181

23. The difference between one-to-one marketing and the traditional mass marketing approach is difficult to articulate. ANS: F The text compares the difference between one-to-one marketing and the traditional mass marketing approach to shooting a rifle and a shotgun. PTS: 1 OBJ: 8

DIF: Comprehension

REF: p. 183

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24. One of the forces influencing the growth of one-to-one marketing is more demanding and time-poor consumers. ANS: T Other influences include a more diverse society, a declining brand loyalty, the explosion of new media alternatives, and demand for marketing accountability. PTS: 1 OBJ: 9

DIF: Comprehension

REF: p. 183

25. Most consumers understand the existing privacy laws and regulations. ANS: F There is a widespread misunderstanding among consumers about the existing privacy laws and regulations. PTS: 1 OBJ: 10

DIF: Comprehension

REF: p. 186

26. To position a product, a manufacturer must develop a marketing mix to influence potential consumers’ overall image of that product. ANS: T OBJ: 11

PTS: 1

DIF: Definition

REF: p. 186

27. President’s Choice dry dog food is sold at minimal cost with minimal promotion. Kal-Kan Foods markets Pedigree dry dog food and spends time and money to develop ads to show the relationships between dogs and their owners. The two companies’ products provide the same level of nutrients to dogs. These products are not differentiated. ANS: F Although the products have many similarities, these products are probably perceived as very different and are, therefore, differentiated. PTS: 1

DIF: Application

REF: p. 185

OBJ: 11

ESSAY 1. What are the four criteria that are necessary to define a market? ANS: A market has the following characteristics: • It is composed of people or organizations. • The people/organizations have needs and wants that can be satisfied by particular product categories. • The people/organizations have the ability to purchase the sought products. The people/organizations are willing to buy. •

PTS: 1

6-52

DIF: Application

REF: p. 162

OBJ: 1

2. What is a market segment? Why do companies engage in market segmentation? ANS: A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have relatively similar product needs. All people and all organizations within a given segment have some similar characteristics and needs. The process of dividing a market into meaningful segments or groups that are relatively similar and identifiable is called market segmentation. The purpose of segmentation is to enable the marketer to tailor marketing mixes to better meet the needs of one or more specific segments. PTS: 1

DIF: Application

REF: p. 162

OBJ: 1

3. You are given the following limited information about a market consisting of 10 people. Describe all the possible ways to segment this market. Gender Male Female Female Male Female Male Male Male Female Female

Income Medium Low Low High Low Low Medium High High High

ANS: There are five possible ways to segment this market: • One homogeneous market consisting of 10 people (one segment) • A market consisting of 10 individual segments • A market composed of two segments based on gender (five males and five females) • A market composed of three segments based on income (four low, two medium, four high) A market composed of five segments based on gender and income level (one Male/Low, two Male/Medium, two Male/High, three Female/Low, two Female/High) •

PTS: 1

DIF: Application

REF: p. 162

OBJ: 1

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4. Discuss why market segmentation is important to the well-being of most companies.. ANS: • Segmentation enables marketers to identify groups of customers with similar needs and to analyze characteristics and buying behaviour of those groups. • Segmentation provides marketers with information to help them design marketing mixes specifically matched with characteristics and desires of one or more segments. • Segmentation is consistent with the marketing concept of satisfying customer wants and needs while meeting the organization’s objectives. Market segmentation helps marketers define customers needs and wants more precisely. •

PTS: 1

DIF: Application

REF: p. 163

OBJ: 2

5. To be useful, a segmentation scheme must produce segments that meet four basic criteria. Name and briefly describe each of these four criteria. ANS: Substantiality. A selected segment must be large enough to warrant developing and maintaining a special marketing mix (commercially viable). Identifiability and measurability. The segments must be identifiable and their size measurable. Descriptive data regarding demographic, geographic, and/or other relevant characteristics of segment members must be available. Accessibility. The firm must be able to reach members of targeted segments with customized marketing mixes. Responsiveness. The market segment must respond Differently from other segments to marketing mixes; otherwise, there is no need to treat that segment separately. PTS: 1

DIF: Application

REF: p. 164-165

OBJ: 3

6. What is a segmentation base (or segmentation variable)? Name four of the common segmentation bases used by marketers to segment consumer markets. ANS: A segmentation base (or variable) is a characteristic of individuals, groups, or organizations that marketers use to divide a total market into segments. Consumer goods marketers commonly use one or more of the following characteristics to segment markets: • Geographic—by region, market size, market density, or climate • Demographic—such as age, gender, ethnic background, income, or family life cycle stage • Psychographics—such as motives, lifestyles, or personality • Benefit—such as less filling or great taste • Usage-rate—heavy, medium, or light The above list is not exhaustive, and students may come up with other examples of segmentation variables. PTS: 1

6-54

DIF: Application

REF: p. 165-174

OBJ: 4

7. Markets can be segmented using a single variable (such as gender), or by several variables in combination (such as gender, age group, and education). While multiple-variable segmentation is more descriptive and precise than single-variable segmentation, it has several disadvantages. Name three disadvantages of multiple-variable segmentation. ANS: The major disadvantages of multiple-variable segmentation include: •

It is often more difficult to employ than single-variable segmentation.

PTS: 1

DIF: Application

REF: p. 165

OBJ: 4

8. What is geographic segmentation? Name four reasons a company would use a regional marketing approach. Then give a specific example of a company marketing its product(s) regionally. ANS: Geographic segmentation refers to segmenting markets based on region of the country or world, market size, market density, or climate. Marketers might adopt a regional approach for the following reasons: • They want to meet regional preferences and buying habits. • They want to find new ways to generate sales volume because of mature markets characterized by slow growth and intense competition. • Computerized checkout stations with scanners enable retailers to accurately assess which brands are selling well in which regions. • Packaged-goods manufacturers are introducing new regional brands intended to appeal to local preferences. • Consumer goods companies use a regional approach because it allows them to react more quickly to competition. Examples of companies using a regional approach include: • •

Cracker Barrel as it designs its product offering to meet the cultural requirements of Different regions. Any company selling climate-dependent products such as snow blowers, water and snow skis, and air-conditioning and heating systems.

PTS: 1

DIF: Application

REF: p. 165-166

OBJ: 4

6-55

9. Marketers use demographic information to segment markets because it is widely available and often related to consumers’ purchasing and consumption behaviour. List four common bases used by marketers for demographic segmentation. For each base listed, give an example of a product specifically targeted to the needs and wants of the segment identified within the base. ANS: Common bases used in demographic segmentation include: • Age • Gender • Income • Ethnic background • Family life cycle Text examples include the following: Age. Toys, bikes, in-line skates, food and beverages, movies, spectator sports, consumer electronics, and video arcades marketed to preteens; home-prepared foods, housing, clothing, and alcohol marketed to people 35–44 years of age; restaurants, transportation, entertainment, education, personal insurance, and pensions marketed to people 45–54 years of age; and health care marketed to people 55 to 64 years of age are examples of products/services targeted at specific age groups. Gender. Marketers of clothing, cosmetics, personal care items, magazines, jewellery, and footwear commonly use gender as a segmentation variable. Income. The housing, clothing, automobile, frozen dinner, and alcoholic beverage markets are often segmented by income. Budget Gourmet frozen dinners are aimed at lower-income consumers, while Le Menu dinners are aimed at high-income consumers. Ethnic background. The text includes numerous examples of products targeted specifically to a variety of ethnic groups. Family life cycle. Marketers target people in Different stages of the family life cycle by noting spending needs. Young singles and marrieds buy more cars, furniture, appliances, and vacations. Marrieds with children buy more toys, baby products, and appliances. Middle-ageds buy more luxury items and home improvements. The elderly focus spending on medical care and medical products. PTS: 1

6-56

DIF: Application

REF: p. 165-170

OBJ: 4

10. What is the family life cycle (FLC)? Using the following selected stages from the FLC, briefly describe the lifestyle and purchasing needs of consumers in that stage: (1) Young single, (2) Young married without children, (3) Young married with children, (4) Middle-aged married without children, and (5) Older unmarried. ANS: The family life cycle is a series of stages determined by a combination of age, marital status, and the presence or absence of children. The FLC is a valuable basis for segmenting markets, because families’ needs, income, resources, and expenditures are Different in each life-cycle stage. Young single. Members of this group have few financial burdens, are fashion opinion leaders, and are recreation oriented. They buy kitchen equipment, basic furniture, cars, vacations, and items necessary for the “mating game.” Young married without children. This group is financially better off, so members purchase at a high rate. Many durables are bought, such as cars, home appliances, and furniture. Additionally, vacations are still bought. Young married with children. This group concentrates on home ownership and raising children, so liquid assets are low. They like new and advertised products. They tend to buy appliances, baby items, toys, and some medical products. Middle-aged married with no children. Members of this group enjoy a better financial position and are interested in travel, recreation, self-education, and home improvements. They tend to buy new furniture, boats, magazines, vacations, and luxuries. Older unmarried. Cuts in income curtail spending of this group. Purchases are more focused on medical care and medical products. PTS: 1

DIF: Application

REF: p. 170-171

OBJ: 4

11. What is psychographic segmentation? Why do marketers use psychographic segmentation? List four psychographic variables that are commonly used as segmentation bases. ANS: Age, gender, income, ethnicity, family life-cycle stage, and other demographic variables are usually helpful in developing segmentation strategies but often do not paint the entire picture. Psychographic variables can be used to “flesh out” the consumer description. Psychographic variables alone can be used to segment markets, or they can be combined with other segmentation variables. Psychographic variables include: • Personality • Motives • Lifestyles • Geodemographics PTS: 1

DIF: Application

REF: p. 171

OBJ: 4

6-57

12. What is geodemographic segmentation? What is the result of geodemographic segmentation? Give one specific example that illustrates this type of segmentation. ANS: Geodemographic segmentation clusters potential customers into neighbourhood lifestyle categories. It is a combination of geographic, demographic, and lifestyle segmentation. The result of geodemographic segmentation is micromarketing, which is the targeting of small geographic regions with specially designed marketing programs. PTS: 1

DIF: Application

REF: p. 173

OBJ: 4

13. What is benefit segmentation? For toothpaste, list six benefits that might be sought by consumers. For each benefit, give an existing brand name that best exemplifies segmentation according to that benefit. ANS: Benefit segmentation is the process of grouping customers into market segments according to Different benefits sought from the product. Student answers are likely to vary greatly. Possible benefits for toothpaste could include: Cavity/Decay Prevention—Crest White/Bright Teeth—Ultra Brite, Gleem, MacLeans, Plus White, Rembrandt Fresh Breath—Close-up, Pepsodent Tartar Control—Tartar Control Crest, Tartar Control Colgate Plaque Reduction—Dental Care, Viadent, Dentagard, Peak, Metadent Stain Remover—Pearl Drops, Topol, Caffree, Zact, Clinomyn, Rembrandt Gingivitis/Gum Disease Prevention—Crest, Colgate, Metadent Flavor/Great Taste—Aim, Colgate, Stripe Fun for Kids—Crest Sparkle, Oral-B Sesame Street, Colgate Jr. No Mess—pump, neat-squeeze, and specially capped toothpastes Sensitive Teeth—Sensodyne, Denquel, Promise All-in-One—Aquafresh Denture Cleaning—Dentu-Creme, Dentu-Gel, Complete Baking Soda—Arm & Hammer, Metadent Low Price—Arm & Hammer, store brands, brands on sale PTS: 1

DIF: Application

REF: p. 174

OBJ: 4

14. What is usage-rate segmentation? What is the 80/20 principle and how does it apply to usage rate segmentation? ANS: Usage rate segmentation divides a market based on the amount of product purchased or consumed. The 80/20 principle states that 80 percent of the demand for a product is generated by 20 percent of all customers. While the percentages are not always exact for all product categories, the principle highlights the disproportionate share of the total consumption of many products, and focuses marketers on heavy users. PTS: 1 6-58

DIF: Application

REF: p. 174

15. The business market consists of four broad segments. What are these segments? ANS: The four broad segments of the business market are: • Producers • Resellers • Institutions Government •

PTS: 1

DIF: Application

REF: p. 176

OBJ: 5

16. List in order the four steps used to segment a market. Then name two subsequent marketing activities. ANS: The four segmentation steps are: 1. Select a market or product category for study. 2. Choose a basis or bases for segmenting the market. 3. Select segmentation descriptors. 4. Profile and analyze segments. The two subsequent activities are: 5. Select target markets. 6. Design, implement, and maintain appropriate marketing mixes. PTS: 1

DIF: Application

REF: p. 177-178

OBJ: 6

17. After the market segmentation process, the marketing manager’s next task is to select one or more target markets. There are three general strategies for selecting target markets. Name and briefly define each of the three strategies. For each strategy, name one advantage and one disadvantage of using the strategy. ANS: UnDifferentiated targeting strategy. This strategy adopts a mass-market philosophy in which one marketing mix is targeted at the entire market. Advantages include economies of mass production and lower marketing costs. Disadvantages include susceptibility to competitive inroads and a higher likelihood of unimaginative product offerings with little appeal. Concentrated (or niche) targeting strategy. This strategy entails the selection of one segment of a market for targeting. Advantages include concentrated efforts on a highly specialized marketing mix that meets target needs, a focus of resources, the ability to compete against larger firms, and the ability to establish a strong position in a desirable market segment. Disadvantages include risky dependence on a single segment, necessity for success, and threat of competitive advances. Multisegment targeting strategy. When a firm chooses to serve two or more market segments and develops distinct marketing mixes for each segment, it is practising multisegment targeting. Advantages potentially include greater sales volume, higher profits, larger market share, and economies of scale in manufacturing and marketing. Disadvantages include high costs, cannibalization, loss of consumer privacy, and possibly spreading resources too thinly. PTS: 1

DIF: Application

REF: p. 178-181

OBJ: 7 6-59

18. Multisegment targeting offers many benefits to firms, as well as many additional costs. List two benefits and four costs of multisegment targeting. ANS: Benefits include potential: • Greater sales volume • Higher profits • Larger market share • Economies of scale Costs include those of: • Product design • Production • Promotion • Inventory • Marketing research • Management • Cannibalization Loss of consumer privacy •

PTS: 1

6-60

DIF: Application

REF: p. 181

OBJ: 7

19. You are the marketing manager for a food products firm. Your firm would like to introduce a new beverage to the marketplace. You have determined that two important dimensions for positioning a product are (1) nutritional value and (2) age orientation. Place the following beverages on the perceptual map provided: coffee, orange juice, diet cola, apple cider, mineral water, milk, herbal tea, liquor, tomato juice. Assuming the listed beverages comprise all competitive beverages, what position should your firm’s new beverage have? Describe the new beverage.

ANS:

6-61

Although exact locations will vary by student, likely quadrant locations are shown above. The positioning should indicate there is room for a non-nutritious beverage targeted at children, such as a presweetened punch or a sugared, artificially flavored and coloured soft drink. PTS: 1

DIF: Application

REF: p. 188

OBJ: 11

20. What are cannibalization and product Differentiation? How can product Differentiation help avoid cannibalization? ANS: Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. In this case, the firm’s products are competing against each other, rather than against the competition. Product Differentiation serves to distinguish one firm’s products from those of competitors. Differences can be either real or perceived. Products can be Differentiated according to brand names, packaging, colour, smell, or other means. Products can also be Differentiated according to real benefits such as quality, features, price, etc. PTS: 1

DIF: Application

REF: p. 182-185

OBJ: 7 and 11

21. What is one-to-one marketing? What is the primary goal for companies that adopt the one-to-one marketing approach? ANS: One-to-one marketing is an individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer. The goal is to reduce costs through customer retention and increase revenue through customer loyalty. PTS: 1

DIF: Application

REF: p. 183

OBJ: 8

22. What environmental forces influence one-to-one marketing? Briefly explain the impact of each of these forces on one-to-one marketing. ANS: Forces that have influenced or helped to shape one-to-one marketing include a more diverse society, more demanding and time-poor consumers, a decline in brand loyalty, the explosion of new media alternatives, changing channels of distribution, and demand for marketing accountability.

6-62

Consumers no longer want to be treated like the masses. One-to-one marketing allows consumers to be treated as individuals, with their own unique sets of needs and wants. Consumers today also have less time to spend shopping for the products they need. Through its targeted nature, one-to-one marketing can decrease the time consumers need to make purchase decisions. Further, consumers are less brand loyal than they were. One-to-one marketing techniques increase brand loyalty by focusing on finding a firm’s best customers, rewarding them for their loyalty, and thanking them for their business. As mass media approaches become less important, one-to-one marketing will increase in importance and offer marketers a more cost-effective avenue to reach customers. Finally, the demand for marketing accountability will drive the growth of one-to-one marketing and justify its continued existence. PTS: 1 OBJ: 9

DIF: Comprehension

REF: p. 183-184

23. One of the causes of the growth of one-to-one marketing is decreasing brand loyalty. Discuss the reasons consumers are more willing than ever to switch back and forth between major brands in a product category and even sometimes buy generic brands. ANS: The decline in brand loyalty can be attributed in part to excessive couponing, trade deals, and deep price promotions used by manufacturers and retailers. These techniques have accustomed customers to look for the best deals. Brand loyalty has also wavered due to the proliferation of brands available, with thousands more being introduced annually. With so many product choices, consumers often become confused about product Differentiation, or they lack the time to learn about each new brand. As a result, consumers often resort to basing their purchases on price. Another reason for declining brand loyalty is the increased power of retailers today. Retailers are increasingly taking control of their relationships with brand marketers, dictating level and type of in-store promotion, placement of products, and price. As a result, consumers are building more of a relationship with a particular retailer than with a brand. PTS: 1 OBJ: 9

DIF: Comprehension

REF: p. 183

24. You have decided your business should adopt a one-to-one marketing approach. You have invested in computer software that captures customer data such as name, address, age, education, and lifestyle characteristics. Now you find many customers are reluctant to provide you with such information. What are the general consumer concerns regarding this issue and how could you address these concerns? ANS: One-to-one marketing concerns some Canadians because of the potential for invasion of privacy, specifically the sheer volume of information that is aggregated in databases and the vulnerability of this information to unauthorized access and use.

6-63

Much of the concern is due to the fact that most consumers are unaware of how personal information is collected, used, and distributed, and they are unaware of how technology helps in collecting personal data. Many companies actively sell huge amounts of personal information to list compilers. Further, there is widespread misunderstanding among consumers about existing privacy laws and regulations. Frustrated by their lack of control, consumers want more opportunities to determine how their personal information will be used. It has been suggested that “permission marketing” be applied. This means that if consumers are made aware of the immediate benefits of providing personal information to a company, they would be more likely to do so. Consumers need to be made aware that, with their personal data, you as a business can then provide more personalized goods and services. There needs to be a more direct link in the consumers’ mind between sharing their personal data and customized rewards. PTS: 1 OBJ: 10

DIF: Comprehension

REF: p. 183

25. Name and briefly describe four bases that firms typically use for positioning or repositioning their products/services. ANS: Attribute. Products may be associated with an attribute, feature, or particular customer benefit. Price and quality. Firms may stress high price as a signal of quality or low price as a signal of value. Use or application. Stressing use situations or special applications effectively positions the product. Product user. This position base associates the product with a personality or type of user. Product class. The product is associated with a particular category of products. Competitor. Positioning against a competitor, such as Avis positioning itself as No. 2 against Hertz. PTS: 1

6-64

DIF: Application

REF: p. 184-187

OBJ: 11

Chapter 7—Decision Support Systems and Marketing Research MULTIPLE CHOICE 1. What is an interactive, flexible information system that enables managers to obtain and manipulate information as they are making decisions? a. a database marketing system b. a marketing information system c. a marketing decision support system d. an artificial intelligence system ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 200

2. What is the creation of a large computerized file of customers’ and potential customers’ names, profiles, and purchase patterns? a. competitive data mining b. sampling procedure specification c. database marketing d. consumer behaviour marketing ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 200

3. What should a true marketing decision support system be? a. rigorous b. interactive c. reactive d. customer-oriented ANS: B A true DSS should be flexible, interactive, discovery-oriented, and accessible. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 200

OBJ: 1

4. What entails planning, collecting, and analyzing data relevant to marketing decision making, the communication of the results of this analysis to management, and the addressing of “what if” questions? a. artificial intelligence b. single-source research c. marketing research d. data collection ANS: C REF: p. 201

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

7-1

5. Marketing research has three functional roles. What are they? a. descriptive, explanatory, and predictive b. descriptive, diagnostic, and predictive c. normative, descriptive, and explanatory d. predictive, normative, and persuasive ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 201

6. A manufacturer of an all-natural fruit and veggie bar targeted to people who want nutritious snacks has asked for marketing research to explain the reasons for the recent failure of its Apple-Broccoli bar. What is this type of research? a. diagnostic b. historical c. predictive d. descriptive ANS: A One of the roles of marketing research is to be diagnostic and to explain what happened. PTS: 1 DIF: Application BLM: Higher order

REF: p. 201

OBJ: 2

7. A bowling alley operator could use which of the following to determine why customers do not seem to like his bowling alley’s new location? a. transactional marketing b. marketing research c. market synergy d. public relations ANS: B Marketing research can be used by management to trace problems and their causes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 201

OBJ: 2

8. Soon after the Laura Secord Museum expanded its hours and began charging a small fee to pay for the extra help needed to keep it open longer hours, attendance decreased. What could museum staff use to determine why this decrease in attendance occurred? a. secondary data b. marketing research c. database marketing d. an internal marketing audit ANS: B Marketing research could be used to find out why attendance declined. PTS: 1 DIF: Application BLM: Higher order

7-2

REF: p. 201

OBJ: 2

9. The publisher of a Canadian business magazine wanted to make several major changes in the magazine’s content and format. To determine what changes would be supported by its subscribers and what changes would not be welcomed, what should the publisher engage in? a. marketing research b. database marketing c. secondary data d. a data retrieval system ANS: A Marketing research would be appropriate to determine how the publisher could provide greater customer satisfaction. PTS: 1 DIF: Application BLM: Higher order

REF: p. 201

OBJ: 2

10. What can marketing managers use marketing research for? a. to implement a sales promotion b. to improve the quality of their decision making c. to learn how to more efficiently respond to customers d. to find out why a marketing plan failed to launch ANS: B REF: p. 201

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

11. What would marketing managers typically use marketing research for? a. to implement a sales promotion b. to eliminate any guesswork in decision making c. to handle an individual customer’s complaint d. to determine why a new product failed ANS: D Marketing research is used to determine why marketing plans failed. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 201

12. What is the first step in the marketing research process? a. Collect the data. b. Plan the research design. c. Specify the sampling plan. d. Define the marketing problem to be studied. ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 203

7-3

13. Wango Ltd’s product manager in charge of “Wangochewy,” a dog treat, declared that the product’s weak sales were a result of a poor advertising effort. He decided to get to the root of the problem by having focus groups examine the advertising campaign. The focus group results indicated that the campaign was well executed and the message conveyed to consumers was clear and strong. What, if anything, is wrong here? a. Before the focus groups were arranged, primary data should have been collected. b. Before the focus groups were arranged, secondary data should have been collected. c. The product manager should have conducted quantitative research instead of qualitative research. d. The product manager did not properly identify and formulate the problem. ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 203

14. A private academy for children with learning disabilities has noticed a steadily declining enrollment in spite of the addition of several scholarships. Before conducting any marketing research to explain the decline in enrollment, what will the school’s staff need to do? a. Develop a survey to find out exactly what’s wrong. b. Define the problem to be researched. c. Determine who will be most likely to respond to their survey. d. Select a market sample from everyone in the population. ANS: B To respond to a symptom, one should find out what the underlying problem is. PTS: 1 DIF: Application BLM: Higher order

REF: p. 203

OBJ: 3

15. In contrast to marketing research problems, what are management decision problems? a. narrower in scope b. information-oriented c. pervasive d. action-oriented ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 204

16. Which of the following BEST describes the marketing research problem? a. It is information-oriented. b. It involves determining what resources will be used in research efforts. c. It is action-driven. d. It does not rely on managerial experience. ANS: A OBJ: 3

7-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 204

17. Why must managers combine specific pieces of information to identify the marketing research problem? a. Their field service objective is to provide insightful decision-making information. b. Their marketing research objective is to provide insightful decision-making information. c. Their company-correlated goal is to provide insightful decision-making information. d. Their autonomous task is to provide insightful decision-making information. ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 204

18. Post Properties is a company that manages apartments in various communities. It is concerned with a glut of apartments in Moose Jaw, Prince Albert, and Saskatoon. Its market researcher begins by examining the rental markets in Saskatchewan, the history of apartment buildings, local economies, competitive rents, and ownership—all information that was on hand and did not require any new research to locate. What did the market researcher look at? a. secondary data b. primary data c. priority databases d. a statistical analysis ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

19. Data previously collected for purposes other than the one at hand are an important source of information as the researcher defines the problem. What are these data called? a. secondary data b. convenience data c. primary data d. single-source data ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 205

20. Market research firms, commercial publications, and government data can be used as sources of which of the following? a. consensual information b. primary data c. marketing audits d. secondary data ANS: D Data previously collected for purposes other than the one at hand are an important source of information known as secondary data. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 205

7-5

21. The TNT cable channel began using the slogan, “TNT knows drama,” in early 2002. It wants to determine how its viewership has changed since it has changed its programming focus. It has decided to use secondary data to determine if its viewers’ demographics have changed. What is a potential disadvantage of this research plan? a. the difficulty of holding certain variables constant while varying one factor of interest b. the high cost of collecting secondary data c. the information not fitting the needs of the research problem d. interviewer bias during the collection process ANS: C Secondary data have been previously collected for some other purpose and may not fit the current research problem. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

22. Which of the following is correct when assessing the quality of secondary data? a. It is not necessary to know why the data were collected in the first place. b. It is important to know the purpose for which the data were originally collected. c. It is important to use the same methods and procedures as when primary data are collected. d. It is important to be able to have easy access to the data. ANS: B To assess the quality of the data, it is important to know when, where, why, and how the data were originally collected. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 205

23. Which of the following is an example of secondary data? a. a physical count of the number of cars passing through an intersection to determine the need for a traffic signal b. a collection of trade journal articles about the future of a particular industry c. the creation of a customer database d. a newspaper story describing the lifestyle of the average Internet user ANS: B Only the information in alternative B is secondary data. Alternative C is not even marketing research. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

24. Which of the following BEST describes a search engine? a. It answers specific, consultative marketing research questions. b. It provides a limited amount of information in response to a general search request. c. It requires a complete knowledge of Boolean logic and calculus. d. It contains collections of links to documents. ANS: D OBJ: 3 7-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 206

25. What are metasearch engines? a. a source of proprietary data b. companies designed to generate secondary data c. electronic scanners of consumer behaviour patterns d. search engines for search engines ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 206

26. In addition to using search engines to locate secondary data, people can also use subject directories. The two types of directors are academic and professional directories and which of the following? a. federal records b. commercial portals c. business-to-business Web pages d. compiled lists ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 206

27. Avon Meadows Travel Agency has seen its number of customers decline by almost 15 percent in the last two years. The agency needs to understand the reason(s) for the decline before it can make plans to reverse the trend. The agency’s manager has identified the problem as a smaller number of vacationers willing to travel by airplane. What is the agency’s next step in the marketing research process? a. Specify the sampling plan. b. Collect the data. c. Plan the research design. d. Recognize the marketing problem. ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 207

28. Which of the following function much like bulletin boards and are established to focus on a particular topic? a. commercial portals b. search engines c. newsgroups d. visitation portals ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 207

29. Fred Farkle, marketing manager at Thebee Industries, was trying to decide whether to collect information via personal interviews, telephone, or snail mail for a project he was working on. In which step of the marketing research process was Fred currently engaged? a. planning the research design and gathering primary data b. analyzing the data c. identifying and formulating the problem d. specifying the sampling procedures ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 207 7-7

30. What specifies the research questions to be answered, how and when the data will be gathered, and how the data will be analyzed? a. the research design b. secondary data use plan c. the sampling plan d. the research collaborative plan ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 207

31. What does the research design specify? a. the information that will be found b. follow-up procedures for the research c. the research questions to be answered using primary data d. how the information gathered will be used to predict external environmental changes ANS: C REF: p. 207

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

32. What is information that is collected for the first time for the purpose of solving a particular problem under investigation? a. convenience data b. primary data c. observation data d. secondary data ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 207

33. Stair Specialist, Inc. builds customized circular staircases for homes in southern Ontario. Its sales have plateaued. Nothing it does seems to change its sales picture. Its owner has asked you to advise the company on what it should do to increase its sales. Which of the following is an example of primary data that could be used for examining this marketing research problem? a. information from the Toronto Yellow Pages showing that the number of building contractors has declined over the past five years b. industry predictions that the number of new homes built in Quebec will increase by 15 percent c. a survey done of new home start-up buyers in southern Ontario d. an article in a construction trade journal predicting fewer housing starts during the next decade ANS: C Information that is collected for the first time for the purpose of solving a particular problem under investigation is called primary data. PTS: 1 DIF: Application BLM: Higher order

7-8

REF: p. 207

OBJ: 3

34. Mel and Mimi is the name of an upscale boutique that has outgrown the building it has been located in for the last two decades. Its owners want to know how its customers will react to a move and if the addition of new product lines will make the new location more attractive to its loyal customers. The store’s owners have surveyed several of their customers to gauge their reaction to various potential locations and changes in product lines. The survey results are an example of what type of data? a. Collaborative b. Observation c. Primary d. Secondary ANS: C Information that is collected for the first time for the purpose of solving a particular problem under investigation is called primary data. PTS: 1 DIF: Application BLM: Higher order

REF: p. 207

OBJ: 3

35. What is the chief advantage of primary data? a. its relevance to the problem at hand b. its availability to any interested party for use c. its accessibility through computerized databases d. avoiding interviewer biases ANS: A Primary data is information collected for the first time for the purpose of solving a particular problem under investigation. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 207

36. As Key Energy Services, Inc. planned its first marketing research project, its marketing director recommended it use primary data. Why? a. It will provide a benchmark for new secondary information. b. It will fit the information Key Energy Services needs exactly since the data will be collected specifically for this study. c. Its value is unrelated to sample size. d. This is information that is available free to all interested parties. ANS: B Primary data is information that is collected for the first time for the purpose of solving a particular problem under investigation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 207

OBJ: 3

7-9

37. Which of the following collect data on two different projects using one questionnaire? a. experiential data b. dichotomous inquiries c. single-source studies d. piggyback studies ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 210

38. The Salvation Army is collecting data on ways to make it simpler to give cash donations and assess public opinion toward the uniforms worn by its members using one questionnaire. What is this an example of? a. dichotomous inquiries b. piggyback studies c. dual experimentation d. Siamese twin projects ANS: B Piggyback studies collect data on two different projects using one questionnaire. PTS: 1 DIF: Application BLM: Higher order

REF: p. 210

OBJ: 3

39. The most popular method for gathering primary data is one in which a researcher interacts with people to obtain facts, opinions, and attitudes. Which of the following is that method? a. heuristic-oriented b. experiments c. single-source research d. survey research ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 211

40. Which of the following BEST describes in-home personal interviews? a. They are becoming increasingly more popular. b. They offer high-quality data at low cost. c. They offer high-quality data at high cost. d. They offer information of moderate quality, but at a low cost. ANS: C The cost of interviewer time and mileage is high, but these interviews yield high-quality information. PTS: 1 BLM: Remember

7-10

DIF: Definition

REF: p. 211

OBJ: 3

41. What is a major limitation of the mall intercept interview? a. the difficulty of demonstrating new products b. the difficulty of measuring attitudes and opinions c. the difficulty of obtaining a representative sample of the population of interest d. the need to interview people standing up ANS: C A mall intercept sample is basically a convenience sample and not necessarily representative of the population as a whole. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 211

42. A furniture manufacturer wants to test how consumers will respond to furniture upholstered in fabric made from recycled plastic. Which form of survey would allow it to do this? a. a laboratory test b. a mall intercept c. an observation study d. a telephone interview ANS: B A mall intercept allows demonstration of the product, and the others do not. A laboratory test is not a type of survey. PTS: 1 DIF: Application BLM: Higher order

REF: p. 211

OBJ: 3

43. What is the most popular method of primary data collection? a. survey research b. observational studies c. personal interviews d. focus groups ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 211

44. According to the text, which of the following statements about the mall intercept interview is true? a. Mall intercept interviews are the least expensive method to conduct surveys. b. It is difficult to get a representative sample of the population with a mall intercept interview. c. The mall intercept interviews offers researchers the ability to collect large quantities of information through complex surveys. d. Mall intercept interviews must be brief. ANS: B It is sometimes necessary for the mall intercept interviewer to ask probing questions. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 211

7-11

45. Your supervisor has instructed you to conduct a marketing research effort that will determine how your company’s business customer demographics have changed. You have also been instructed to use primary data. What will you do? a. Make sure you locate Internet information by using a search engine. b. Develop a mail survey to study your primary market. c. Employ studies done by Statistics Canada. d. Ask the Conference Board for its latest study. ANS: B Primary data is information collected for the first time and used to gain a better understanding of a primary market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 212

OBJ: 3

46. Computer-assisted personal interviewing and computer-assisted self-interviewing are two computerized methods for conducting which of the following? a. mall intercept interviews b. in-home interviews c. CLT interviews d. focus groups ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 212

47. What is a specially designed phone room used to conduct telephone interviewing? a. a central-location telephone (CLT) facility b. a multi-interviewer location site c. a telephone outsourcing centre d. a controlled-feedback facility (CFF) ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 212

48. What do telephone interviews offer? a. speed in gathering data b. the ability to collect complex and large amounts of data c. the highest-cost method for obtaining data d. a potential for reaching all households ANS: A Telephone interviews are of moderate cost when compared to in-home or mall interviews but are more expensive than mail surveys. PTS: 1 OBJ: 3

7-12

DIF: Comprehension BLM: Higher order

REF: p. 212

49. One day before the limited release of a multi-million-dollar movie about the bombing of the World Trade Center, a group of relatives of people who lost their family members on that day appeared on the news to tell everyone how wrong it was for any company to try to profit from the tragedy. To find out whether these relatives had an impact on the number of people who wanted to see the movie, the production company hired a research company to obtain questionnaire data from theatre goers in the cities where the movie was scheduled to open. Given the circumstances, what should the research company use? a. personal interview surveys b. a telephone survey c. a mail survey d. focus group interviews ANS: B The quickest way to ascertain this information is a telephone survey of voters. PTS: 1 DIF: Application BLM: Higher order

REF: p. 212

OBJ: 3

50. You need to collect information quickly using a complex questionnaire that probes for feelings behind why people purchase your products. You also want each interviewer to conduct the survey in the same manner. Fortunately, you have access to a computerized questioning system. Which of the following is your best option? a. focus groups b. central-location telephone (CLT) interviews c. in-home personal interviews d. mall intercept interviews ANS: B Central-location telephone interviewing allows for fast time spans, question probing, interviewer control, and the ability to handle complex questionnaires when computer aided. PTS: 1 DIF: Application BLM: Higher order

REF: p. 212

OBJ: 3

51. Mail surveys can provide more thoughtful replies than other research methods can, but they often produce low response rates. Why is this an important consideration? a. It would be less expensive to use telephone surveys and get a higher response rate. b. Certain members of the population are more likely to respond to mail surveys than others. c. The respondents may elaborate too much on their responses. d. Thoughtful replies are harder to quantify and are, therefore, of less value. ANS: B There could be a nonresponse bias because the type of subjects who do answer the survey may differ from the population as a whole. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 212

7-13

52. Low response rate is a problem commonly associated with which of the following? a. exit interviews b. mail surveys c. mall intercept interviews d. executive interviews ANS: B Mail surveys often have response rates as low as 4 percent, much lower than any other type of interviews or surveys. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 212

53. You must conduct research to find out a great deal of information about the motives and desires of potential customers for a home-delivery grocery service. You need a sample size of at least 300 people who spend at least $100 weekly at the supermarket, and you don’t have a lot of money to conduct the research. What should you use? a. a marketing experiment b. in-home personal interviews c. observation research d. mail surveys ANS: D Mail surveys are the least expensive method of data collection for a sample of this size when a lengthy survey is required. PTS: 1 DIF: Application BLM: Higher order

REF: p. 212

OBJ: 3

54. What is the most expensive type of survey research? a. focus groups b. mall intercept interviews c. CLT interviews d. executive interviews ANS: D REF: p. 212

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

55. Which of the following have essentially the same advantages and disadvantages of in-home interviews? a. focus groups b. mall intercept interviews c. CLT interviews d. executive interviews ANS: D The text describes executive interviews as the industrial equivalent of door-to-door interviewing. PTS: 1 OBJ: 3

7-14

DIF: Comprehension BLM: Higher order

REF: p. 212

56. Adidas, the athletic shoe manufacturer, wants to collect data on consumer receptivity to its newest product line extension—Adidas perfume, a perfume with a floral scent. The marketing research director has recommended using a mail panel operated by NPD Research. What can Adidas expect from a mail panel? a. data collection more rapid than telephone interviews b. the panel of consumers meeting monthly to discuss products that were sent to them to try c. the participants not usually being compensated for their assistance, so it will be inexpensive d. a very high response rate ANS: D Mail panel members are recruited to be used as a sample several times, and return rates of 70 percent are not uncommon. PTS: 1 DIF: Application BLM: Higher order

REF: p. 212

OBJ: 3

57. What is essential to the success of focus group research? a. group dynamics b. corporate synergy c. individualism d. empowerment ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 213

58. What is a form of personal interviewing that uses a group of seven to ten people who have been recruited because of certain desired consumer characteristics? a. a primary data group b. a focus group c. a CLT interview d. a passive people meter ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 213

59. In which of the following situations would a marketing researcher be most likely to use executive interviews? a. A shampoo manufacturer wants to test which smells consumers perceive as relaxing and exhilarating. b. The producers of children’s programming on public television want to learn more about the viewing habits of an audience composed of 5- to 12-year-old males. c. A manufacturer of frozen dinners wants to research the eating habits of its target market. d. A manufacturer of extruded plastic wants to determine where there are other markets for its products. ANS: D Only the extruded plastic manufacturer would be selling exclusively in the business-to-business market. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 213

OBJ: 3

7-15

60. A promoter wants to know if there is a market for a convention devoted to understanding how the intellectual property of music companies, book publishers, and software development companies will be protected in the future from unauthorized use. What type of survey technique would be most appropriate for gathering this type of primary data? a. in-home interviews b. executive interviews c. cyber focus groups d. CLT interviews ANS: B Since this is a topic where the respondent should be a product user as opposed to a consumer, executive interviews are most appropriate. PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

OBJ: 3

61. Which of the following consists of gathering seven to ten people together for a few hours with a qualified moderator to talk about products, services, companies, and/or brands? a. executive interviewing b. conversational interviewing c. computer-assisted personal interviewing d. focus group interviewing ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 213

62. In a survey of consumer buying habits, Visa Canada asked Canadian shoppers, “Do you ever buy holiday gifts for your pets? What kind of survey question is this? a. Likert scale b. multiple choice c. open-ended d. dichotomous ANS: D There are only two possible answers—yes or no. PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

OBJ: 3

63. After McDonald’s Canada introduced a Lighter Choice menu, its researchers conducted intercept interviews in store and asked consumers, “What motivated you to buy a Veggie Burger?” and “If you were to change the product in any way, how would you?” What are these examples of? a. open-ended questions b. dichotomous questions c. scaled-response questions d. multiple choice questions ANS: A The question encouraged an answer phased in the customer’s own words. PTS: 1 DIF: Application BLM: Higher order 7-16

REF: p. 213

OBJ: 3

64. Suppose the Canadian Red Cross sent out a questionnaire that included the question, “Why are so many people reluctant to donate blood?” What would this be an example of? a. an open-ended question b. a sampling frame question c. a scaled-response question d. a dichotomous response ANS: A Open-ended questions encourage unlimited answer choices phrased in the respondent’s own words. PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

OBJ: 3

65. You have been given the task of creating a questionnaire that requires each respondent to provide a rich array of information based on his or her own frame of reference. Which of the following types of questions would best deliver such information? a. true-false questions b. closed-ended questions c. scaled-response questions d. open-ended questions ANS: D Open-ended questions encourage unlimited answer choices phrased in the respondent’s own words. PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

OBJ: 3

66. When the marketing researcher for Avon Meadows Travel Agency was putting together its questionnaire for studying the domestic travel market and the travel habits of people who travel at least four times a year, it listed five possible answers for each question and asked the respondent to choose one. What is this an example of? a. sampling frame questions b. open-ended questions c. scaled-response questions d. closed-ended questions ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

67. In the survey Homer filled out after spending the night at a New Brunswick inn, he was asked, “Have you ever stayed at an inn before your visit here? Circle YES or NO.” What type of question is this? a. scaled-response b. open-ended c. dichotomous d. double-barrelled ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

7-17

68. A survey by RoperASW asked consumers to state where they were most likely to look for information about a new book. Choices were book club catalogues, book reviews in newspapers, book reviews in magazines, television programs, friends, radio programs, local reading groups, or the Internet. What type of question was used in this survey? a. sampling frame b. scaled-response c. multiple choice d. open-ended ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

69. In a survey about new washing machine features, survey respondents were asked, “How often do you wash clothes? Check one: once a month, twice a month, every week, twice a week, more than twice a week.” What type of question is this? a. scaled-response b. open-ended c. double-barrelled d. dichotomous ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

70. Which of the following is the BEST example of an effective question on a mail survey? a. “What is the economy of scale achieved by the transference of heat through solar cells?” b. “Do you believe the synergy of the indigenous population has created a precursor to ecological disaster?” c. “Have you ever put food out for wild birds?” d. “Why do you think dogs make good pets and cats make poor pets?” ANS: C The correct alternative is the only question that is not ambiguous, does not use difficult terminology, and asks only one question. PTS: 1 DIF: Application BLM: Higher order

REF: p. 214

OBJ: 3

71. What type of research depends on watching what people do? a. personal scanner b. anonymous viewership c. survey d. observation ANS: D OBJ: 3

7-18

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 215

72. When people are hired to record traffic patterns in a shopping mall, what type of research are they engaging in? a. sample framing b. observation c. experimental d. survey sampling ANS: B Research that does not rely on direct interaction with people is observation research. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 215

73. Mystery shoppers engage in a form of which of the following? a. experiential study b. market audit c. mall intercept study d. observation research ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 215

74. In the late 1990s, Procter & Gamble launched Dryel product, which allowed consumers to dry-clean their clothes in a dryer. Before launching the product, P&G researchers visited consumers’ homes and watched as people sorted laundry, creating piles of darks, whites, and delicates, and a pile that would go to the dry cleaners because they were unsure how to clean it. This was an example of what type of research? a. experiment b. survey c. mall intercept d. observation ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 215

75. A retailer of sporting goods equipment is interested in learning what peoples’ attitudes, motivations, and feelings are about its product lines. All of the following are potential sources for this information EXCEPT which one? a. focus group interviews b. observation study c. telephone survey d. mail questionnaire ANS: B Observation data does not provide good information on attitudes, motivations, or feelings. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 215

7-19

76. The owner of a small amusement park wanted to know how his employees interacted with park guests. Which of the following research methods is most appropriate for learning this information? a. a mail questionnaire of a sample of current customers b. a telephone survey of current and potential customers c. an employee focus group interview d. a mystery shopper ANS: D This is an appropriate research project for observation research. Mystery shoppers are one of the two primary forms of observation research. PTS: 1 DIF: Application BLM: Higher order

REF: p. 215

OBJ: 3

77. Murray Moman has a unique job. His mission is to walk the streets of Japan and locate fads. According to Moman, “Japan is advanced. What will happen 10 years from now is already happening in Japan.” What kind of research is Moman conducting? a. observation b. open-ended c. experiment d. survey ANS: A He is watching what people do. PTS: 1 DIF: Application BLM: Higher order

REF: p. 215

OBJ: 3

78. What is characterized by the researcher’s altering one or more variables—such as price or package design—while observing the effects of those alterations on another variable (usually sales)? a. research problem b. correlation of facts study c. observation research project d. experiment ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 216

79. Which are the best experiments? a. those in which all variables are held constant except the ones manipulated b. those in which the subjects are unpaid volunteers c. those in which all variables are allowed to act freely d. those in which two variables are held constant while all of the others are manipulated ANS: A An experiment is characterized by the researcher changing one or more variables while observing the effects of those changes on another variable. PTS: 1 OBJ: 3

7-20

DIF: Comprehension BLM: Higher order

REF: p. 216

80. Boston Pizza is trying to decide which of two potential new menu offerings it will add to its restaurant menu across Canada. Which research method would be best suited to make this decision? a. on-line research b. observation research c. experimental research d. mass telephone interviews ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 216

81. C&S Manufacturing Company wants to add five square metres to its most popular rolls of wrapping paper and keep the individual price of each roll at $4.95. C&S Manufacturing wonders if the additional paper area would increase sales enough to offset the higher costs. What type of primary data research should the company use to answer this question? a. mail surveys with current distributors b. experimental research c. telephone interviews with current and potential customers d. focus group interviews in a laboratory setting ANS: B An experiment is characterized by the researcher changing one or more variables while observing the effects of those changes on another variable. PTS: 1 DIF: Application BLM: Higher order

REF: p. 216

OBJ: 3

82. A marketing executive for a company that manufacturers mobile telephones wonders if a new line of phones in bright colours like tangerine and shocking pink will attract current nonusers of her products and cause them to become users. To research this problem, what should she do? a. Ask the sales force to interview each of their clients to see what their responses to the new colours are. b. Conduct a focus group and ask users and nonusers what they think about each of the new colours. c. Conduct an experiment that exposes some nonusers to the old product and others to the new product colours, and measure the difference in responses between the two groups. d. Conduct in-store personal interviews to ask potential buyers how they will respond to the new colours. ANS: C To see whether changes in one market condition (the product) will cause a change in behaviour (sales to nonusers), an experiment should be conducted. PTS: 1 DIF: Application BLM: Higher order

REF: p. 216

OBJ: 3

7-21

83. In a study whose purpose is to determine the market for a vitamin that is to be chewed like bubble gum, what is the first question to be answered before a sampling plan is selected? a. “Must the sample be representative of the population?” b. “What is the population or universe of interest?” c. “How large should the sample be in terms of its measurement costs?” d. “How often should the sample be redesigned?” ANS: B The first step is the definition of the group from which the sample will be drawn. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 216

84. Marketing researchers will draw inferences or conclusions about larger target groups of consumers through studying what? a. a small population of the target consumer population b. a small sample of the target consumer population c. a small audience of the target consumer population d. a small group of the target consumer population ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 216

85. What type of sample is characterized by every element in the population having a known nonzero probability of being selected? a. probability b. convenience c. nonprobability d. piggyback ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 216

86. A research manager decides to pick households for interviews by selecting street intersections at random, and then using a given route for the interviewers to follow—such as every fifth house on the right side of the road until the end of the street and then turn east and interview every fifth house on the left. What is this? a. a sampling error b. a convenience sample c. a nonprobability sample d. a probability sample ANS: D A probability sample is characterized by every element in the population having a known nonzero probability of being selected, allowing an estimate of the accuracy of the sample. PTS: 1 DIF: Application BLM: Higher order

7-22

REF: p. 216

OBJ: 3

87. While discussing an upcoming marketing research study of how the home decorating industry is affected by the teenage consumer, you emphasize the necessity of having a sample that is representative of the population. What type of sample must be used? a. a convenience sample b. a probability sample c. a field service sample d. a nonprobability sample ANS: B A probability sample is characterized by every element in the population having a known nonzero probability of being selected, allowing an estimate of the accuracy of the sample. PTS: 1 DIF: Application BLM: Higher order

REF: p. 216

OBJ: 3

88. A hospital is interested in getting a cross-section of patients’ opinions on proposed changes that will make the hospital stay more like a motel stay in terms of amenities. The hospital used a random number table to select participants from the list of patients who are currently in the hospital. What type of sample is this? a. random b. nonprobability c. synergistic d. representational ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 216

89. In what type of sample is little or no attempt made to obtain a representative cross-section of the population? a. nonprobability b. representational c. probability d. random ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

90. Which of the following BEST describes nonprobability samples? a. They include any sample in which little is done to obtain a representative cross-section of the population. b. They often start out with random numbers to ensure selection of subjects is truly random. c. By definition, they must be representative of the population. d. They require more expensive marketing research than probability sampling. ANS: A A nonprobability sample is any sample in which there is little or no attempt to obtain a representative cross-section of the population. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 217

7-23

91. Will Otley is the buyer for a sports equipment store. He is interested in learning more about the needs of people who participate in individual sports such as weight lifting and aerobics. Otley has decided to survey the people at his gym for information. What type of sample is Otley gathering? a. representational b. random c. convenience d. probability ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

92. Larry has to interview 20 people who are not part of the college community for his marketing research class project and decides to use his relatives and their neighbours. What type of sample is this? a. representational b. random c. convenience d. probability ANS: C A convenience sample is based on using respondents who are readily accessible. PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

OBJ: 3

93. After Mystery on Demand bookstore received the results of a survey that measured readers’ intentions to purchase a newly discovered Agatha Christie mystery as soon as it was released, the store owner worried that many readers might have overstated their intentions and would not actually buy. The owner was concerned about the potential for what kind of sampling error? a. nonresponse b. frame c. random d. measurement ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

94. What occurs when a sample, in some ways, is not representative of the target population? a. diagnostic error b. single-source research c. measurement error d. sampling error ANS: D OBJ: 3

7-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

95. What is one type of sampling error, which is created when the sample actually interviewed differs from the sample drawn? a. random error b. measurement error c. diagnostic error d. sampling error ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

96. If the sampling error cannot be calculated because of the method used to collect the sample, the market researcher has used which of the following? a. a probability sample b. a random sample c. a nonprobability sample d. a statistical sample ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

97. Five hundred women were surveyed about their thoughts on Martha Stewart. The majority admired her creativity but would not trust her as a friend. Because it used subscribers to her magazine as survey participants, the survey was what type of sample? a. convenience b. random c. framing d. representational ANS: A Convenience samples use respondents who are convenient or readily accessible. PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

OBJ: 3

98. What type of error arises if the sample drawn from a population differs from the target population? a. measurement b. frame c. field d. nonresponse ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

99. What type of error occurs when the selected sample is an imperfect representation of the overall population? a. field b. random c. representational d. frame ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

7-25

100. Which of the following specialize in arranging interviews for data collection on a subcontract basis, and also conduct focus groups, mall intercepts, retail audits, and other data collection services? a. single-source researchers b. marketing information organization companies c. decision support companies d. field service firms ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

101. A researcher wants to determine what percentage of the population in southern Ontario would use a mass transit system if it were well maintained. He gets telephone books from every city with over 50,000 people and selects the fifteenth name in the middle column on every 100th page as his sample. He has made what type of error? a. nonprobability b. random c. reliability d. frame ANS: D He has made a frame error because not everyone has a listed telephone number. PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

OBJ: 3

102. Several types of analysis are common to marketing research. Which one provides a general picture of the results of the study and is the simplest, noting how many respondents answered a question a certain way? a. one-way frequency tables b. scaled responses c. passive people meters d. statistical analyses ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 217

103. In a survey for her marketing class, Alicia interviewed 80 randomly selected men and asked them their opinions of women with tans. Her initial results showed that the men overwhelmingly believed tans were a health risk. When she conducted the same survey using the same methodology, she discovered that 50 percent of the surveyed population in the second group find women with tans sexy. This is most likely an example of what type of error? a. nonprobability b. representational c. reliability d. random ANS: D A random error occurs when the results of two surveys conducted in the same manner differ. PTS: 1 DIF: Application BLM: Higher order 7-26

REF: p. 217

OBJ: 3

104. Kent has gathered data concerning people’s preferences for traditional breakfast foods. He has learned that 30 percent of the population prefer eggs in the morning, 50 percent of the population prefer something sweet for breakfast like a doughnut, and an overwhelming 86 percent prefer food that they can eat while they drive to work. What method of analyzing the data has Kent used? a. cross-tabulation b. one-way frequency c. standard deviation d. linear regression ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

105. Which of the following permit the analyst to relate the responses to one question to the response to one or more other questions when assessing marketing research data? a. correlation analyses b. one-way frequency counts c. standard deviation measures d. cross-tabulations ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 218

106. If a researcher wanted to look at responses to pet ownership questions as they relate to age and educational level of respondent, what analysis approach would he or she use? a. scaled responses b. standard deviation measures c. cross-tabulations d. passive people meters ANS: C Cross-tabulations permit the analyst to relate the responses to one question to the response to one or more other questions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 218

OBJ: 3

107. According to the text, which of the following statements about preparing and presenting the market research report is true? a. Put the report in a language that the presenter is comfortable using. b. The report should begin with a clear, concise statement of the research project’s objectives. c. Rely on hunches or managerial intuition instead of costly research for data analysis. d. Never present the report orally. ANS: B Intuition is not what someone who has been paid to conduct marketing research should use. Research reports are typically presented orally and in writing. The language of the report should be tailored to suit the audience’s need—not that of the presenter. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 219

7-27

108. Which of the following statements explains the success of Internet marketing research? a. It decreases the ability to respond quickly to customer needs and market shifts. b. It allows for faster and better decision making through more rapid access to business intelligence. c. Its use makes it much harder to conduct follow-up studies. d. It increases labour- and time-intensive research activities and associated costs. ANS: B REF: p. 220

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

109. Tracey Dyer works for Recipher Marketing, a market research firm. She has determined over the past couple of years that Internet survey research has several advantages over traditional research methods. Which of the following is an advantage? a. rapid analysis b. decreased access to the “hard to reach” c. less personal interaction d. reduced cost ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 221

110. To determine how people reacted to the bombing of the World Trade Center, an Internet survey was conducted. Anyone who wanted to express his or her feelings about the event was allowed to participate. What type of sample did this survey use? a. interactive b. framed Internet c. unrestricted Internet d. restricted Internet ANS: C REF: p. 221

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

111. Which of the following is an advantage associated with the use of Internet surveys? a. ability to get analysis results much more rapidly b. ability to standardize the survey c. ability to contact hard-to-reach respondents d. increased labour costs even though data-collection costs decrease ANS: C REF: p. 221

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

112. How might Internet samples be classified? a. as unrestricted, screened, and recruited b. as traditional, panel, and longitudinal c. as random, recruited, and mined d. as convenience, quota, and probability ANS: A OBJ: 4

7-28

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 221-223

113. Which type of Internet sample would be used by a consumer products company that already has a database from which to select its sample? a. representational b. recruited c. mined d. conventional ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 223

114. What is the moderator’s role in cyber focus groups? a. to let respondents control the discussion b. to make sure costs remain relatively low c. to limit discussion to closed-ended questions d. to provide freestyle screen dialogue including text, instructions, and probes ANS: D One of the most difficult jobs of the moderator is to control the discussion. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 224

115. What are the two types of on-line focus groups? a. individual and panel b. real-time and time-extended c. field and laboratory d. diagnostic and predictive ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 224

116. What do marketing researchers use the Internet for? a. collaboration between the client and the research supplier in the management of a research project b. publication and distribution of sample surveys c. sending out on-line coupons d. distribution of financial results ANS: A REF: p. 225

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

117. Which of the following is an advantage associated with cyber focus groups? a. speed b. accessibility to older consumers c. respondents won’t exaggerate d. narrow geographic scope ANS: A REF: p. 225

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

7-29

118. Which of the following gathers its information from one group of respondents by continuously monitoring the advertising, promotion, price they are exposed to, and what is subsequently purchased to create a huge database of marketing efforts and resultant consumer behaviour? a. one-way-mirror observation study b. scanner-based research system c. CLT interview d. television meter investigation ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 226

119. What type of research continuously monitors consumer purchases linked to their exposure to various marketing mix inputs? a. primary research b. scanner-based research c. secondary research d. focus group research ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 226

120. A regional supermarket chain gathers monthly information from the same consumers. It continuously monitors the in-store promotion the consumers are exposed to and records their purchases. It uses the mail to send different promotions to different areas, and consumers complete diaries recording grocery purchases in return for a small fee. What is this an example of? a. a CLT interview b. scanner-based research system c. machinated observation d. the use of a people meter ANS: B Scanner-based research systems gather information over time from a single panel of respondents using UPC scanner information time. This is an attempt to develop an accurate picture of the direct causal relationship between marketing efforts and actual sales. PTS: 1 DIF: Application BLM: Higher order

REF: p. 226

OBJ: 5

121. IRI panel members shop with an ID card, which is presented at checkout in scanner-equipped grocery and drug stores, allowing IRI to electronically track each household’s purchasing over time. This information on the household members is a product called which of the following? a. BehaviourScan b. InfoScan c. Scanner Plus d. Nielsen Data ANS: A OBJ: 5

7-30

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 226

122. What is a scanner-based, national market tracking service for the consumer packaged goods industry that tracks retail sales, consumer purchasing information, and promotional activity for all bar-coded products? a. Scanner Plus b. Nielsen Data c. VideOCart d. InfoScan ANS: D OBJ: 5

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 226

123. When should marketing research NOT be undertaken? a. when there is no secondary data in existence to guide the project definition b. when the perceived costs are the same as the forecasted benefits c. when it will take a long time to complete d. when the actual costs are less than the forecasted benefits ANS: B The future benefits of the research must outweigh the cost of performing the research. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 226-227

124. Because some companies have been conducting market research for many years on particular markets they are interested in, they understand the characteristics of target customers. For this reason, when should marketing research NOT be undertaken? a. when the actual costs are less than the forecasted benefits b. when there is no secondary data in existence to guide the project definition c. when the perceived costs are the same as the forecasted benefits d. when the research would be redundant and a waste of money ANS: D The future benefits of the research must outweigh the cost of performing the research. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 226-227

125. What does competitive intelligence allow managers to do? a. predict changes in business relationships b. influence a competitor’s strategy c. learn about the impact of proposed government legislation on other industries d. learn about new technologies that can affect the country ANS: A REF: p. 227

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

7-31

126. In order for a firm to become a more efficient and effective competitor, it can assess its competition. What does such a competitive assessment require a company to engage in? a. an audit b. a competitive advantage c. competitive intelligence d. a differential competitive advantage ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 227

127. Annual reports, websites, advertisements, and trade shows are all sources of which of the following? a. primary data b. competitive intelligence c. promotion d. survey research ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 227

128. Bruno Harkin would like to open a local delivery service in his hometown, but he has no idea who his competitors might be. Harkin should first use which of the following external sources of competitive intelligence? a. the Yellow Pages of his hometown phone book b. the Internet c. advertisements in the local newspaper d. federal government business licensing applications ANS: A The Yellow Pages are a good first source for competitive intelligence, especially for a local marketplace. PTS: 1 DIF: Application BLM: Higher order

7-32

REF: p. 227

OBJ: 6

Observers of the supermarket industry see no letup in the use of checkout-counter-based target marketing. Sav-More Supermarkets has installed an electronic marketing system in its stores. The system allows the stores to do more direct mail promotions by combining the current Sav-More’s cheque-cashing cards with the new Sav-More’s Bonus Club frequent-shopper cards. The new system uses barcode scanners and magnetic cards issued to shoppers to track all purchases. As with most customer databases, demographic information is gathered for subsequent offers to frequent-shopper club members, and psychographic information is tracked whenever customers use the magnetic strip cards to make purchases. Generally, marketing to these consumers achieves better results than free-standing insert (FSI) coupons. 129. Refer to Sav-More Supermarkets. Sav-More management is continually provided with information to make better marketing decisions. This data is easily accessed and manipulated. What is this type of system called? a. a marketing research system b. a marketing information system c. a competitive intelligence system d. a marketing decision support system ANS: D An interactive, flexible system that enables a manager to obtain and manipulate information is a marketing decision support system. PTS: 1 DIF: Application BLM: Higher order

REF: p. 200

OBJ: 1

130. Refer to Sav-More Supermarkets. What is the creation of a large computerized file of customers’ demographic and psychographic characteristics through the new Sav-More system called? a. survey research b. database marketing c. secondary data d. situation analysis ANS: B Database marketing is the creation of a large computerized file of customers’ and potential customers’ profiles and purchase patterns. PTS: 1 DIF: Application BLM: Higher order

REF: p. 200

OBJ: 1

7-33

131. Refer to Sav-More Supermarkets. Al Edisto, Sav-More’s frozen food manager, noticed that sales of orange juice have fallen, and he wanted to set up a marketing research project to determine possible reasons for the decline. He first studied the data from the database system discussed above. What are these data? a. secondary b. representational c. single-source d. primary ANS: A Secondary data are data collected for any purpose other than the one at hand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

132. Refer to Sav-More Supermarkets. Al Edisto, Sav-More’s frozen food manager, decided the best way to determine what is causing the drop in orange juice sales was to conduct a survey among shoppers in the frozen-food section of Sav-More. What are the data Edisto collected? a. single-source b. secondary c. dichotomous d. primary ANS: D Information that is collected for the first time for the purpose of solving a particular problem under investigation is called primary data. PTS: 1 DIF: Application BLM: Higher order

REF: p. 207

OBJ: 3

133. Refer to Sav-More Supermarkets. Al Edisto, Sav-More’s frozen food manager, decided to survey each customer who stops in front of the frozen orange juice section on Saturday. What type of sample is Edisto using for his research project? a. convenience b. simple random c. stratified d. piggyback ANS: A The convenience sample is based on using respondents who are convenient or readily accessible to the researcher. PTS: 1 DIF: Application BLM: Higher order

7-34

REF: p. 217

OBJ: 3

Erica Cicarelli is an advertising sales representative for CHEZ, a radio station that has a play list limited to recordings from the 1980s. Cicarelli believes the listener ratings of her station provided by a marketing research company are inaccurate. CHEZ is ranked 25th in the city. Cicarelli believes her station is more likely ranked at least 10th and possibly higher with young professional listeners. Listener rankings determine the rates Cicarelli can charge for advertising time. Cicarelli decided her station needed to conduct its own ratings study to determine the size of the audience and a profile of current listeners. First, Cicarelli reviewed all data from the current ratings providers to see if she could find any trends in listenership. Next, she completed a background investigation of her station, competitive stations, and the market to determine what the ratings problem may be. Cicarelli then prepared a questionnaire for current and potential listeners. The questionnaire contained a long list of yes/no questions on whether the respondent listens to a specific station. The data were collected via telephone with 1,000 radio listeners using random-digit dialling. Cicarelli chose telephone interviewing because previous research has shown that nearly 100 percent of radio listeners have telephones, and it is faster than mail surveys. 134. Refer to CHEZ. Cicarelli’s initial background study of her company, competitors, and market represents which step in the marketing research decision process? a. analyzing the data b. specifying the sampling procedures c. planning the research design d. defining the marketing problem ANS: D Cicarelli is conducting a situation analysis to identify and structure the marketing problem. PTS: 1 DIF: Application BLM: Higher order

REF: p. 203

OBJ: 3

135. Refer to CHEZ. Cicarelli’s review of the current research information represents a study of what type of data? a. primary b. representational c. single-source d. secondary ANS: D Secondary data are data previously collected for any purpose other than the one at hand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

7-35

136. Refer to CHEZ. Cicarelli’s research design involves utilizing a questionnaire via telephone. This method best represents which type of research? a. survey b. laboratory test c. experimental d. single-source ANS: A In survey research, the researcher interacts with people to obtain facts, opinions, and attitudes. Telephone interviewing is a type of survey research. PTS: 1 DIF: Application BLM: Higher order

REF: p. 211

OBJ: 3

137. Refer to CHEZ. The yes/no questions about listening to particular stations are an example of which of the following? a. sampling frame questions b. open-ended questions c. dichotomous questions d. scaled-response questions ANS: C A dichotomous question is one that features only two alternatives. PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

OBJ: 3

138. Refer to CHEZ. What type of sampling plan is Cicarelli using? a. a probability sample b. a quota sample c. a convenience sample d. a nonprobability sample ANS: A Cicarelli has chosen a probability sample by utilizing random-digit dialling among a population that has telephones. PTS: 1 DIF: Application BLM: Higher order

7-36

REF: p. 216

OBJ: 3

According to marketing research by the Specialty Equipment Market Association (SEMA), a growing number of people want to buy compact performance cars and customize them. They want to turn Honda Civics, Acura Integras, and Mitsubishi Eclipses into personalized statements of automotive expression. Eighty-four percent of these people are under 30, and 42 percent are Asian-Canadian. More than 80 percent of them are men. SEMA research shows that a high percentage of this population is interested in finding a domestic car that can be customized. At a recent automotive after-market show, Ford showed three Focus-based concepts to demonstrate its seriousness about reaching this market. 139. Refer to SEMA. The type of research gathered by SEMA would have which of the following roles? a. predictive b. descriptive c. subjective d. fictional ANS: B Marketing research that is descriptive is the gathering and presenting of factual statements. PTS: 1 DIF: Application BLM: Higher order

REF: p. 201

OBJ: 2

140. Refer to SEMA. Since the SEMA research was not done specifically for Ford, how would it be classified? a. as primary data b. as secondary data c. as predictive data d. as descriptive data ANS: B Secondary data are data previously collected for another purpose. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

141. Refer to SEMA. The SEMA research was done by asking questions such as, “What features have you added to your car that best reflect your personality?” This type of question is an example which of the following? a. a scaled-response question b. a close-ended question c. an open-ended question d. a multiple-answer question ANS: C With an open-ended question, the interviewer encouraged the respondent to answer in his or her own words. PTS: 1 DIF: Application BLM: Higher order

REF: p. 213

OBJ: 3

7-37

142. Refer to SEMA. What type of research would have been done if SEMA researchers went to parking lots and counted the number of customized vehicles and noted the different ways they were customized? a. experimental b. nonprobability survey c. observation d. probability sample ANS: C Observation research is people watching what people do. PTS: 1 DIF: Application BLM: Higher order

REF: p. 215

OBJ: 3

143. Refer to SEMA. If the result of the SEMA research was an imperfect representation of the overall population, what type of error would have occurred? a. random b. framed c. quantitative d. sampling ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 216

Generally speaking, the digital divide is defined as the gap between those people who have computers and computer skills and those who do not. For companies considering marketing on the Internet, the digital divide measures the percentage of a segment using the Internet. Forrester Research wanted to see if the digital divide was as wide as some experts thought. According to research conducted by Forrester, in Canada 43 percent of white households , 33 percent of African American households, 47 percent of South Asian households, and 69 percent of Chinese households are on the Internet. This information becomes more interesting when Statistics Canada data are used that show that only 2 percent of the total population in Canada is Chinese. 144. Refer to Digital Divide. How would the marketing research conducted by Forrester be categorized? a. as descriptive b. as memorable c. as diagnostic d. as predictive ANS: A Forrester Research wanted to see if the digital divide was as large as some people thought. PTS: 1 OBJ: 2

7-38

DIF: Comprehension BLM: Higher order

REF: p. 201

145. Refer to Digital Divide. A retailer that used the Forrester Research to target its Internet retailing website to select an ethnic group for target marketing would be using what type of sample? a. random b. secondary c. primary d. representational ANS: A The data were previously collected for another purpose. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

146. Refer to Digital Divide. Included in the survey by Forrester Research was information on income and education. The income question asked the respondent if he or she earned less than $20,000, between $20,001 and $30,000, between $30,001 and $40,000, between $40,001 and $50,000, or more than $50,000. This is an example of what type of question? a. open-ended b. scaled-response c. multiple choice d. Likert scale ANS: C The respondent is asked to choose from a limited list of responses. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 213

147. Refer to Digital Divide. If all people with computers were allowed to participate in the survey, what type of error would exist? a. random b. frame c. measurement d. sampling ANS: D The target population is both computer owners and people who do not own computers. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 217

148. Refer to Digital Divide. During which step of the marketing research process would Forrester Research have discovered that the digital divide is largely due to income and educational inequities? a. problem identification b. data analysis c. report presentation d. sampling procedure specifications ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

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Research by Morgan Stanley revealed that 72 percent of Canada is willing to try flavoured colas. Since the cola industry is stagnant in most areas of the country, this is important data. 149. Refer to Morgan Stanley. Marketing research on how best to use this information will begin with which of the following steps? a. collection of the data b. research design c. recognition of the marketing opportunity d. specification of the sampling plan ANS: C Marketing research can hone in and clarify where the best opportunities lie. PTS: 1 DIF: Application BLM: Higher order

REF: p. 203

OBJ: 3

150. Refer to Morgan Stanley. The research also showed which flavours were most desired. Cola producers using this information provided to them by Morgan Stanley would be using what sort of data? a. observation b. primary c. secondary d. convenience ANS: C It is secondary data, which have been previously collected for some other purpose and may not fit the current research problem. PTS: 1 DIF: Application BLM: Higher order

REF: p. 205

OBJ: 3

To determine new product opportunities, British Colombia’s Sun-Rype Products conducted focus groups in which it learned Canadians are having trouble getting their required servings of fruits and vegetables each day—especially the vegetables. 151. Refer to Fruits. What type of data did it gather? a. consensual b. heuristic c. collaborative d. primary ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 207

152. Refer to Fruits. What type of research methods did Sun-Rype use? a. mall intercept b. survey c. experiment d. observation ANS: B OBJ: 3 7-40

PTS: 1

DIF: Application

REF: p. 211

When the Toronto Symphony Orchestra wanted to determine how to make classical music appeal to younger concertgoers, it hired CMN to conduct a survey. It was important that the survey had a relatively low cost and offered anonymity to respondents to ensure candid answers. 153. Refer to Toronto Symphony Orchestra. Which form of survey research should CMN have used? a. mall intercept interviews b. in-home personal interview c. CLT interviews d. mail survey ANS: D Relatively low cost and respondent anonymity are two of the benefits of mail surveys. PTS: 1 DIF: Application BLM: Higher order

REF: p. 212

OBJ: 3

154. Refer to Toronto Symphony Orchestra. What is CMN most likely an example of? a. a decision support company b. a marketing research diagnostics firm c. a field service firm d. a knowledge portal ANS: C Field service firms specialize in interviewing respondents on a subcontracted basis. PTS: 1 DIF: Application BLM: Higher order

REF: p. 217

OBJ: 3

TRUE/FALSE 1. A marketing decision support system is an interactive, flexible computerized data storage system that bypasses information-processing specialists and gives managers access to useful information from their own desks. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 196

2. The only connection between database marketing and decision support systems is that they both operate on computers. ANS: F The fastest-growing use of DSS probably is for database marketing, PTS: 1

DIF: Definition

REF: p. 196

OBJ: 1

3. The three roles of marketing research are persuasive, reminder, and informative. ANS: F The three roles are descriptive, diagnostic, and predictive. PTS: 1

DIF: Definition

REF: p. 197

OBJ: 2 7-41

4. A decision support system (DSS) involves the planning, collection, and analysis of data relevant to marketing decision making, and the communication of the results of this analysis to management. ANS: F This defines marketing research. PTS: 1

DIF: Definition

REF: p. 197

OBJ: 2

5. Marketing research provides decision makers with data on the effectiveness of the current marketing mix and also insights for necessary changes. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 197

6. When the Witchduck Diner, serving Caribbean cuisine, first opened in Wasaga Beach, it drew novelty seekers but few of the several hundred business people who worked within five kilometres of the restaurant. The owner’s recognition that a problem exists is the first step in the marketing research process. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 201

7. To save money on marketing research, a marketing manager suggests the company use the results of a survey conducted last year because similar questions were asked then. The manager is suggesting use of secondary data. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 205

8. Internal company information such as invoices, data from previous marketing research studies, and historical sales data are sources of secondary data. ANS: T REF: p. 202

PTS: 1 OBJ: 3

DIF: Comprehension

9. The quality of secondary data should never be questioned. ANS: F Secondary data often cannot be evaluated according to its reliability. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 202

10. Metasearch engines have proven impractical for most marketing research projects. ANS: F According to the text, metasearch engines can be very useful in doing Internet research. PTS: 1 OBJ: 3 7-42

DIF: Comprehension

REF: p. 203

11. Stuart Marketing Research is gathering information on the way people wrap gifts. The research is specifically for a large manufacturer of gift wrap paper that is considering introducing reusable wrapping paper with Velcro fasteners. This information gathered would be an example of primary data. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 205

12. The most popular technique for gathering primary data is statistical analysis. ANS: F RAT:The most popular technique for gathering primary data is survey research. PTS: 1

DIF: Application

REF: p. 206

OBJ: 3

13. Shayla Wong is considering mall intercept interview techniques for collecting some primary data. She can choose between computer-assisted personal interviewing and computer-assisted self-interviewing. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 207

14. Sundeep Thind would be engaged in observation research if she asked people in a discount store to show her what they had purchased. ANS: F There is no interaction between the observer and the person being observed in observation research. PTS: 1

DIF: Application

REF: p. 215

OBJ: 3

15. The best experiments are those in which all factors are held constant except the ones deliberately manipulated. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 216

16. A random sample is a carefully developed probability sample set up to ensure that every member of the population has an equal chance of being selected as part of the sample. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 216

17. Researcher Susan Brandon was interested in how the human resources department at her company might better address some of the issues facing its employees. To collect data on this issue, she interviewed the employees in her department. Brandon has used a random sampling procedure. ANS: F This describes a convenience sample. PTS: 1

DIF: Application

REF: p. 217

OBJ: 3 7-43

18. Measurement error occurs when the sample who was actually interviewed differs from the sample drawn and the target population. ANS: F This is the definition of sampling errors. PTS: 1

DIF: Definition

REF: p. 217

OBJ: 3

19. Once adequate amounts of data have been collected, the researcher should present the report. ANS: F The data must be analyzed and interpreted before a meaningful report can be prepared. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 217

20. An example of a good open-ended question would be, “Do you prefer auburn or blonde highlights in your hair?” ANS: F This is a close-ended question. It is not probing. PTS: 1

DIF: Application

REF: p. 213

OBJ: 3

21. Among the advantages claimed for cyber focus groups are speed, cost effectiveness, broad geographic scope, accessibility, and honesty. ANS: T REF: p. 225

PTS: 1 OBJ: 4

DIF: Comprehension

22. Scanner-based research is a system of gathering information on respondents by continuously monitoring the promotions panel members are exposed to and their subsequent purchase behaviour. ANS: T REF: p. 226

PTS: 1 OBJ: 5

DIF: Comprehension

23. The two major scanner data suppliers are Information Resources Incorporated (IRI) and the A.C. Nielsen Company; each has about half the market for single-source research. ANS: T OBJ: 5

PTS: 1

DIF: Definition

REF: p. 226

24. Cawfee Café has successfully operated 7 restaurants in the same community for 20 years. Management plans to introduce an egg-and-cheese breakfast burger to three restaurants after having success with this product in its other four diners. Cawfee Café doesn’t need to conduct research before introducing the new product to its remaining restaurants. ANS: T OBJ: 5 7-44

PTS: 1

DIF: Application

REF: p. 226-227

25. Competitive intelligence allows managers to predict changes in business relationships, identify marketplace opportunities, and discover new or potential competitors. ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 227

26. Government agencies, newspapers, and trade shows are good sources of competitive intelligence. ANS: T REF: p. 227

PTS: 1 OBJ: 6

DIF: Comprehension

ESSAY 1. What is a marketing DSS? Name and briefly describe three characteristics of a true DSS. ANS: A decision support system (DSS) is an interactive, flexible information system that enables managers to obtain and manipulate information as they are making decisions. Characteristics of a true DSS include the following. It is: Interactive. Managers give instructions and see immediate results. The manager does not rely on a computer programmer, an information processing specialist, or a scheduled report. Flexible. The system can sort, regroup, total, average, and otherwise manipulate data in many ways according to the varied needs of each user. Discovery-oriented. The system helps managers probe for trends, isolate problems, and ask new questions. Accessible. The system is easy to learn and should be immediately usable to computer novices. PTS: 1

DIF: Application

REF: p. 200

OBJ: 1

2. What is marketing research? Name and briefly describe the three functional roles of marketing research. ANS: Marketing research entails planning, collecting, and analyzing data relevant to marketing decision making, and communicating results of this analysis to management. Marketing research provides decision makers with data on the effectiveness of current marketing strategies. Marketing research is the primary data source for the marketing DSS. The three functional roles of marketing research are descriptive, diagnostic, and predictive. The descriptive role of marketing research includes gathering and presenting factual statements. The diagnostic role of research explains and assigns meaning to data. The predictive role allows the researcher to use the descriptive and diagnostic research to predict the results of a planned marketing decision. PTS: 1

DIF: Application

REF: p. 201

OBJ: 2

7-45

3. Marketing research is important to management because it helps managers in several ways. Discuss three major benefits of marketing research to managers. ANS: Improving the quality of decision making. Marketing research improves the quality of marketing decision making by exploring the desirability of various marketing alternatives. Tracing problems. Managers might use research to find out why something did not work as planned. Marketing research can identify incorrect decisions, changes in the external environment, and strategic errors. Focusing on the paramount importance of keeping existing customers. Marketing research helps companies measure the level of existing customer satisfaction. Costs fall because companies do not have to replace defectors. Steady customers are easier to serve. Increased customer retention also leads to increased employee job satisfaction. Understanding the ever-changing marketplace. Marketing research provides insight into questions about the marketplace. Marketing research can help managers develop the marketing mix by providing insights into lifestyles, preferences, and purchasing habits of target consumers. PTS: 1

DIF: Application

REF: p. 201

OBJ: 2

4. List in order the seven steps of the marketing research process. ANS: 1. Define the marketing problem. 2. Plan the research design and gather primary data. 3. Specify the sampling procedures. 4. Collect the data. 5. Analyze the data. 6. Prepare and present the report. 7. Follow up. PTS: 1

DIF: Application

REF: p. 203

OBJ: 3

5. What are secondary data? List four major sources of secondary data. Why do most research efforts rely on secondary data and usually collect secondary data before primary data is collected? ANS: Secondary data are data that have been previously collected for any purpose other than the one at hand. Secondary data can be either external or internal. Major sources of secondary data include historical internal information, market research firms, trade associations, university research bureaus, professional associations, foundations, commercial publications, and government data. Secondary data can ordinarily be obtained quickly and at relatively low cost. Secondary data investigation allows better preparation for primary data collection. PTS: 1

7-46

DIF: Application

REF: p. 205

OBJ: 3

6. What are primary data? What are three methods that marketing researchers use to gather primary data? What is a piggyback study? ANS: Primary data is information collected for the first time for the purpose of solving a particular problem. The most popular technique for gathering primary data is through survey research in which a researcher interacts with consumers to elicit information. Another method is by observation, in which consumer behaviours are observed, but no interaction takes place. Finally, experiments can be used by a researcher to collect primary data. One technique used to save money during primary data collection is to piggyback the studies; that is, to gather data on two different projects using one questionnaire. PTS: 1

DIF: Application

REF: p. 207

OBJ: 3

7. What is the difference between primary and secondary data? Name two advantages and two disadvantages for using each type of data. ANS: Primary data is information that is collected for the first time for the purpose of solving a particular problem under investigation. Secondary data are data that have been previously collected for any purpose other than the one at hand. Advantages of primary data: (1) They will answer a specific research question that cannot be answered by secondary data, (2) the data is current, (3) the source is known to the researcher, (4) the methodology is specified and controlled by the researcher, and (5) the information is proprietary. Disadvantages of primary data: (1) expense, (2) time consumption, and (3) possible lowered quality of data collection to save money. Advantages of secondary data: (1) saving time, (2) saving money, (3) assisting in problem statement formulation, (3) providing suggestions for research methods and other types of data needed for solving the problem, (4) pinpointing people and locations to approach, and (5) serving as a source of comparative data by which primary data can be analyzed and evaluated. Disadvantages of secondary data: (1) mismatch between the unique problem and the secondary data already collected for a different specific problem, (2) inability to answer specific questions relevant to the problem at hand, and (3) possible poor quality of the data. PTS: 1

DIF: Application

REF: p. 207

OBJ: 3

7-47

8. What is survey research? How does survey research differ from observation research? Name six popular forms of survey research. ANS: Survey research is a technique for gathering primary data. A survey involves the researcher interacting with people to obtain facts, opinions, and attitudes. Observation research does not rely on direct interaction with people. Popular forms of survey research include in-home personal interviews, mall intercept interviews (both computer-assisted personal interviewing and computer-assisted self-interviewing), telephone interviews, focus groups, mail surveys, mail panel surveys, on-line interviews (also called cyber focus groups), and executive interviews (for business-to-business marketing research). PTS: 1

DIF: Application

REF: p. 211

OBJ: 3

9. There are several marketing research survey techniques available to the marketing researcher. Match the type of survey technique with the research situation by placing the matching letter of the survey technique in the blank provided to the left of the description. Each letter is used only once. A. telephone interview B. mail survey C. focus group D. in-home (personal) interview E. mall intercept interview F. mail panel G. cyber focus group _____ _____ _____ _____ _____ _____ _____

7-48

A research firm desires face-to-face interaction with consumers for a taste test and short survey, but has a limited budget. A company needs a brief, simple survey that contacts a large sample and has extremely quick results. A marketing researcher is seeking detailed answers to specific questions and expects to have to demonstrate a complicated product and probe for answers. A company wishes to conduct a somewhat lengthy survey on a limited budget and on a one-time basis. A research firm assembles a small group of consumers who will discuss new product ideas. A researcher wants subjects to test products and respond several times to surveys. This method uses a database of respondents who were collected via a screening questionnaire on a website.

ANS: E

Mall intercept interview: A research firm desires face-to-face interaction with consumers for a taste test and short survey, but has a limited budget.

Telephone interview: A company needs a brief, simple survey that contacts a large sample and needs extremely quick results.

In-home interview: A marketing researcher is seeking detailed answers to specific questions and expects to have to demonstrate a complicated product and probe for answers.

Mail survey: A company wishes to conduct a somewhat lengthy survey on a limited budget and on a one-time basis.

Focus group: A research firm assembles a small group of consumers who will discuss new product ideas.

Mail panel: A researcher wants subjects to test products and respond several times to surveys.

Cyber focus group: A method of using a database of respondents who were collected via a screening questionnaire on a website.

PTS: 1

DIF: Application

REF: p. 211-212

OBJ: 3

10. As part of your summer intern job, you have been asked to perform some marketing research concerning a proposed playground. Because you are unsure of the athletic abilities and parental safety concerns, you decide to conduct a focus group to develop a better idea of what should be included in a quantitative survey questionnaire. How would you go about setting up and conducting these focus groups? ANS: First, focus group participants need to be recruited. People could be recruited via telephone calls (with a screening question to establish age group), by mail, or by invitations to parent groups. Qualified participants would be offered an incentive ($30–$50) to participate in a group discussion of seven to ten people. A discussion room should be set up with chairs, a table, and audiotaping equipment. The room may also have a one-way mirror and/or videotaping equipment. A moderator would be in the room to lead the group through a discussion of the proposed playgrounds. PTS: 1

DIF: Application

REF: p. 213

OBJ: 3

11. What are three advantages and three disadvantages inherent in the use of a mail survey? Distinguish between a mail survey and a mail panel. ANS: Benefits of using a mail survey include relatively low cost, elimination of interviewers and field supervisors, centralized control, actual/promised anonymity for respondents, and an opportunity for respondents to make more thoughtful replies.

7-49

Disadvantages of a mail survey include low response rates, unrepresentative samples, and the inability of respondents to clarify or elaborate on their answers. Mail panels are an alternative to the one-shot mail survey. The mail panel consists of a recruited sample of households that participate by mail. The mail panel is used several times. Panel members are rewarded for their participation, and response rates are quite high. PTS: 1

DIF: Application

REF: p. 212

OBJ: 3

12. A marketing researcher has many options when designing a questionnaire. However, some questions are better than others for obtaining specific types of responses. Match each survey question example with its most precise definition by placing the matching letter in the blank to the left of the example. Each letter is used only once. A. open-ended question B. closed-ended dichotomous question C. closed-ended multiple-choice question D. scaled-response question E. ambiguous question F. two questions in one G. biased and/or leading question _____ _____ _____ _____ _____ _____ _____

____

7-50

What is your favorite pizza topping? PEPPERONI ____ SAUSAGE ____ VEGETABLE ____ OTHER Have you ever eaten a vegetarian pizza? _____ YES ____ NO What are your opinions about vegetarian food in general? Do you like a vegetarian burger or a vegetarian pizza best? Don’t you think vegetarianism is a much healthier lifestyle? Now that you know about Garden Fresh vegetarian pizza would you ... ____ Definitely buy it ____ Probably buy it ____ Might or might not buy it ____ Probably not buy it ____ Definitely not buy it If you are thinking of buying Garden Fresh vegetarian pizza, will you be buying it soon? ____ YES ____ NO

ANS: C

What is your favorite pizza topping? PEPPERONI ____ SAUSAGE ____ VEGETABLE ____ OTHER CLOSED-ENDED MULTIPLE CHOICE

Have you ever eaten a vegetarian pizza? ____ YES ____ NO CLOSED-ENDED DICHOTOMOUS

What are your opinions about vegetarian food in general? OPEN-ENDED

Do you like a vegetarian burger or a vegetarian pizza best? TWO QUESTIONS IN ONE (Vegetarian burger? Vegetarian pizza?)

Don’t you think vegetarianism is a much healthier lifestyle? BIASED/LEADING (healthier is assumed)

Now that you know about Garden Fresh vegetarian pizza would you ... ____ Definitely buy it ____ Probably buy it ____ Might or might not buy it ____ Probably not buy it ____ Definitely not buy it SCALED RESPONSE

If you are thinking of buying a Garden Fresh vegetarian pizza, will you be buying it soon? ____ YES ____ NO AMBIGUOUS (What does “soon” mean?)

PTS: 1

DIF: Application

REF: p. 213

OBJ: 3

13. In contrast to survey research, observation research does not rely on direct interaction with people. Observation research takes three forms. What are these three forms? For each form, give one example of an observation method used. ANS: People watching people. Examples include mystery shoppers and one-way mirror observations. People watching phenomena. Observer stands at an intersection and counts traffic moving in various directions. Machines watching people. Movie or videotape records behaviours as in the people-watching-people example. Machines watching phenomena. Examples include traffic counters. PTS: 1

DIF: Application

REF: p. 215

OBJ: 3

7-51

14. What is an experiment? What is a characteristic of a good experiment? Why is it impossible to conduct a perfect experiment? ANS: An experiment is a method for gathering primary data. An experiment is characterized by the researcher changing one or more variables (such as price, package design, or advertising theme) while observing the effect of those changes on another variable (usually sales). The best experiments are those in which all factors are held constant except the ones manipulated. This allows the researcher to observe the changes in the variable of interest. However, holding all other factors constant in the external environment is costly to attempt and may be an impossible task. Competitors’ actions, weather, economic conditions, and other external environmental conditions are beyond the control of the researcher. Techniques can be used to help account for the changing external environment, but it cannot be completely accounted for. PTS: 1

DIF: Application

REF: p. 216

OBJ: 3

15. Primary data are most often collected from a sample (a subset of a larger population). An important question researchers must ask is, “Must the sample be representative of the population?” The answer to this question yields two possible types of samples. Name and describe each of the two sampling procedures. Give a specific example of a sample type for each procedure. ANS: Probability samples. If the sample must be representative of the population, probability sampling is used. In this case, every element in the population has a known nonzero probability of being selected. One type of probability sample is a random sample, in which every population element has an equal chance of being selected. Nonprobability samples. Any sample in which there is no attempt to ensure representativeness is a nonprobability sample. Researchers cannot statistically calculate the reliability of the sample. A common form of a nonprobability sample is a convenience sample, based on using respondents who are readily accessible. PTS: 1

DIF: Application

REF: p. 216

OBJ: 3

16. Any time a sample is used in marketing research, there will be two major types of errors, measurement error and sampling error. Briefly describe these two sources of error. Then name and define one other possible source of error. ANS: Measurement error occurs when there is a difference between the information desired by the researcher and the information provided by the measurement process. This error tends to be larger than sampling error. Sampling error occurs when a sample is not representative of the target population. There are several other types of error related to sampling error: nonresponse error, frame error, and random error. Nonresponse error is created when the sample actually interviewed differs from the sample drawn because people refuse to cooperate or are inaccessible. 7-52

Frame error arises if the sample is drawn from a population (or frame) that differs from the target population. Random error occurs because the selected sample is an imperfect representation of the overall population. PTS: 1

DIF: Application

REF: p. 217

OBJ: 3

17. List three reasons a manufacturer of health and beauty aids might want to use Internet marketing research as opposed to some other method for marketing research. ANS: 1. 2. 3. 4.

It allows for better and faster decision making through much more rapid access to business intelligence. It improves the ability to respond quickly to customer needs and market shifts. It makes the conducting of all follow-up studies and longitudinal research easier and more fruitful. It slashes labour- and time-intensive research activities and associated costs.

PTS: 1

DIF: Application

REF: p. 220

OBJ: 3

18. Comment on the following statement: “Internet surveys are superior to mail surveys.” ANS: Internet surveys can be filled out and returned to researchers much faster than mail surveys. The Internet is less expensive, with no mailing costs. Internet surveys can be highly personalized at a lower cost (no printing costs); survey requests can be personalized for each individual’s situation. Respondents who have grown intolerant of “snail mail” will still participate in Internet surveys and provide researchers with a much higher response rate. Certain groups can best be reached by the Internet—specifically those who receive numerous mail surveys that can be tossed into the trash without reading them. PTS: 1

DIF: Application

REF: p. 221

OBJ: 4

19. List and give a brief definition of the three types of Internet samples. ANS: Unrestricted Internet sample. Anyone who desires can complete the questionnaire and participate in the research. Screened Internet sample. It is adjusted for the unrepresentativeness of the self-selected respondent by imposing quotas on the sample based on some desired sample characteristic. Recruited Internet sample. This is a targeted population in surveys that require more control over the make-up of the sample. PTS: 1

DIF: Application

REF: p. 221-223

OBJ: 4

7-53

20. What is scanner-based research? What two companies currently provide most of the scanner data? ANS: A scanner-based system gathers its information from a single group of respondents by continuously monitoring the advertising, promotion, and pricing they are exposed to and what is subsequently purchased. The variables measured are advertising campaigns, coupons, displays, and product prices. This creates a huge database of marketing efforts and resultant consumer behaviour. Scanner data provides an accurate, objective picture of the direct, causal relationship between different kinds of marketing efforts and actual sales. The two major single-source data suppliers are Information Resources Incorporated (IRI) and the A.C. Nielsen Company. IRI offers scanner-based BehaviourScan, which is based on data from panel members who shop with an ID card. InfoScan is a scanner-based record of sales for consumer packaged goods. PTS: 1

DIF: Application

REF: p. 226

OBJ: 5

21. When a manager is faced with alternative solutions to a problem, he or she should not instinctively call for marketing research. The first decision to make is whether or not to conduct marketing research at all. Name and briefly discuss two situations in which it is best not to conduct marketing research. ANS: When decision-making information already exists. Some companies have been conducting research in certain markets for many years. These firms have developed a thorough understanding of target markets. Under these circumstances, further research may be redundant and a waste of money. When the costs of conducting research exceed the benefits. Willingness to acquire additional decision-making information depends upon a manager’s perception of the information quality, price, and timing. While marketing research relieves some uncertainty, it is also expensive, and the costs of obtaining research may not be outweighed by potential benefits. PTS: 1

DIF: Application

REF: p. 226-227

OBJ: 5

22. What is competitive intelligence and how is it used? Provide an example. ANS: Competitive intelligence is the creation of an intelligence system that helps managers assess their competition and their vendors in order to become more efficient and effective competitors. Competitive intelligence can help identify the advantage of a competitor and play a major role in determining how the advantage was achieved. Intelligence is analyzed information. It becomes decision-making intelligence when it has implications for the organization. For example, a primary competitor may have plans to introduce a product with performance standards equal to yours but with a 15 percent cost advantage. This intelligence has important decision-making and policy consequences for management. PTS: 1

7-54

DIF: Application

REF: p. 227

OBJ: 6

23. List five non-computer-based sources of competitive intelligence. ANS: • • • • • • • • •

Company salespeople Experts with in-depth knowledge CI Consultants Government agencies Uniform Commercial Code Filings Suppliers Periodicals Yellow Pages Trade shows and other official gatherings

PTS: 1

DIF: Application

REF: p. 228

OBJ: 6

7-55

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7-56

Chapter 8—Product Concepts MULTIPLE CHOICE 1. Raye stopped at a convenience store to buy milk. While he was paying for his milk, he noticed a fresh doughnut display and bought two glazed doughnuts. In this example, what are the doughnuts? a. specialty products b. business products c. unsought products d. convenience products ANS: D Convenience products are usually relatively inexpensive items that receive little shopping effort. An item bought on an impulse like the doughnut is an example. PTS: 1 DIF: Application BLM: Higher order

REF: p. 242

OBJ: 2

2. Which of the following is everything, both favourable and unfavourable, that a person receives in an exchange? a. product b. brand equity c. transaction d. quality ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 246

3. What is the starting point in creating a marketing mix? a. price b. product c. distribution channel d. production line ANS: B The product must be specified before other marketing mix variables can be planned. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 246

4. What are the additional customer services that are built around the actual product purchased by consumers? a. supplemental product b. core product c. augmented product d. auxillary product ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 246

8-1

5. Why is creation of a product the starting point for the marketing mix? a. Product development takes the longest amount of time to complete. b. The production department must know what to produce first. c. Determination of the price, promotional campaign, and distribution network cannot begin until the product has been specified. d. Production strategy is the first of the four Ps listed in the marketing mix. ANS: C The product is the first decision around which the others are based. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 246

6. Unilever owns the Lipton tea brand. When Unilever introduced Pyramid tea bags, which provide tea leaves with more room to move, and therefore produce a better-tasting brew, it was an example of which of the following? a. a quality modification b. an aesthetics modification c. a functional modification d. a product line contraction ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 246

7. Which of the following is a tangible feature of a product? a. packaging b. brand equity c. company d. brand name ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 246

8. In the long run, regardless of the effort put into the product management process, what is the most important factor determining if a consumer product will succeed or fail? a. the marketing plan it selects for its products b. how well the manufacturer satisfies its customers’ needs c. the way it implements its production strategy d. the competition encountered by the manufacturer ANS: B Products succeed because they deliver benefits and satisfy customer needs. PTS: 1 OBJ: 1

8-2

DIF: Comprehension BLM: Higher order

REF: p. 246

9. When Bay Minette Nursery markets bedding plants to businesses to make their sidewalks, entrances, and grounds more attractive, what is it selling? a. unsought products b. business products c. specialty products d. consumer products ANS: B Business products are purchased for (1) use in the production of other goods or services, (2) use in an organization’s operations, or (3) resale to other customers. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 246

10. What is the consumer product classification system based on? a. the physical attributes of the product b. the amount of effort consumers spend to acquire the product c. how the market is segmented d. the way the products are manufactured ANS: B Products are classified by the amount of effort that is normally expended in the shopping process. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 246

11. What type of products are purchased with little shopping effort and are purchased regularly, usually with little planning, and require wide distribution? a. generic b. unbranded shopping c. specialty d. convenience ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 246

12. Erika had a bicycle tire go flat while on a biking trip across Nova Scotia. She normally uses Michelin tires but settled for an Excel brand tire because that was the only brand stocked at the closest bicycle shop. For Erika, what is the recent tire purchase an example of? a. homogenous shopping b. component product c. heterogeneous shopping d. convenience product ANS: D She spent very little shopping effort buying the tire due to the emergency. PTS: 1 DIF: Application BLM: Higher order

REF: p. 246

OBJ: 2

8-3

13. Which of the following is the best example of a convenience product? a. sheets that match the new guest room wallpaper b. a cup of coffee purchased on the way to work c. an alarm clock purchased by an individual who wants to always be punctual d. a $39.95 rose bush for the front yard of a new home ANS: B This is a relatively inexpensive purchase. and if the individual was on her way to work, she probably did not do any comparison shopping. PTS: 1 DIF: Application BLM: Higher order

REF: p. 246

OBJ: 2

14. What does the convenience product marketing strategy include? a. higher than ordinary prices b. few retail outlets other than convenience stores c. wide distribution of the product d. heavy advertising ANS: C To sell large amounts of products that consumers are unwilling to search for, there must be a large number of retail outlets. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 246

15. Compared to the other classifications of consumer products, shopping products are which of the following? a. usually less expensive than convenience products b. purchased immediately after the consumer realizes he or she needs them c. widely available so they need little or no promotion d. usually more expensive than convenience products and are found in fewer stores ANS: D Shopping products are typically items such as clothing, automobiles, and major appliances. Consumers usually compare items across brands or stores. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 247

16. Wilbur wanted an umbrella table for his patio. He watched newspaper ads until he found one on sale. For Wilbur, the umbrella table is what type of product? a. component b. shopping c. unsought d. specialty ANS: B Wilbur is comparing ads looking for a low price. This is shopping product behaviour. PTS: 1 DIF: Application BLM: Higher order 8-4

REF: p. 247

OBJ: 2

17. Which of the following is the best example of a shopping product for most consumers? a. a meal plan at the university cafeteria b. a new television set c. the text for this marketing class d. a soft drink to drink before class ANS: B Shopping products are typically more expensive than convenience products (alternatives a and b) and are found in fewer shops. Alternative c describes a specialty product because of the specification of a brand name. PTS: 1 DIF: Application BLM: Higher order

REF: p. 247

OBJ: 2

18. What are the two types of shopping products? a. unsought and convenience b. heterogeneous and homogeneous c. consumer and business d. generic and family ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 247

19. What are products that consumers see as being basically the same, so consumers shop for the lowest price? a. product equivalents b. heterogeneous shopping products c. low-prestige specialty products d. homogeneous shopping products ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 247

20. Sela needs to buy several pieces of luggage. While there are several different manufacturers of luggage, Sela believes all of them are basically alike. The only feature she is genuinely concerned about is low price. For Sela, as what type of product would luggage be classified? a. unsought b. specialty c. homogeneous shopping d. heterogeneous shopping ANS: C Homogeneous products are products that consumers see as being basically the same, so consumers shop for the lowest price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 247

OBJ: 2

8-5

21. Comparisons between products are often quite difficult because they may have unique features and different levels of quality and price. These types of product are seen by consumers to differ in quality, style, suitability, and lifestyle compatibility. What products are they? a. heterogeneous shopping products b. comparative convenience products c. product equivalents d. homogeneous shopping products ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 247

22. Which of the following products is most likely to be considered an example of a heterogeneous shopping product? a. a stapler b. an off-campus apartment c. a package of pencils d. a flea collar ANS: B Heterogeneous shopping products are essentially different. Housing is one of the examples given in the text. PTS: 1 DIF: Application BLM: Higher order

REF: p. 247

OBJ: 2

23. When Ruby wanted new window treatments for her living room, she visited both Home Depot and Rona home-improvement stores, as well as three interior design stores before selecting drapes. If Ruby represents a typical window treatment buyer, what are drapes? a. an operating supply good b. an heterogeneous shopping good c. a homogeneous luxury product d. a shopping specialty good ANS: B Window treatments would be considered heterogeneous shopping products because consumers perceive various window treatments to have distinctive qualities such as patterns, colours, or levels of functionality that match the style of the customer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 247

OBJ: 2

24. Which of the following products are searched for extensively and may be quite expensive, substitutes are not acceptable, and distribution may be limited? a. exclusive shopping b. heterogeneous convenience c. branded shopping d. specialty ANS: D OBJ: 2

8-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 248

25. The most expensive refrigerator in the world is the Sub-Zero brand. Many consumers believe it to be the best brand made. For people who insist on having the best kitchen money can buy and will accept no less, the Sub-Zero refrigerator is an example of what kind of product? a. heterogeneous shopping b. specialty c. convenience d. exclusive ANS: B Sub-Zero refrigerators are expensive, and no substitutes are acceptable. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 2

26. Craig had just received a promotion as product manager for a consumer goods manufacturer. To celebrate, he told Tracey that he was going to buy a bottle of Chateau Margeaux, an expensive red French wine, for them to share. After driving to two liquor outlets but not finding his Margeaux, Tracey suggested that they just buy a bottle of French champagne instead. But Craig insisted that they try a third store on the other side of the city. For Craig, what is Chateau Margeaux? a. a specialty good b. a homogeneous shopping good c. an inconvenience good d. a heterogeneous shopping good ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

27. When deciding on distribution plans for specialty products, what do companies generally ensure? a. that the items are made available only through the mail b. that the items are distributed to a considerable number of stores in a geographic area c. that the items are made available in a large number of stores in a geographic area d. that the items are distributed to only a few stores in the geographic area ANS: D Specialty products are searched for extensively, and substitutes are not acceptable. These products may be quite expensive, and often distribution is limited. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 248

8-7

28. Horace has wanted to purchase a Rolex watch ever since he saw his first one at age 18. He has done extensive research into the history of Rolex. Finally, at age 55, he has achieved the income level to be able to purchase one. For Horace, the Rolex watch is an example of what type of product? a. unsought b. specialty c. business d. consumer ANS: B The fact that Horace did not consider another brand shows that the watch is a specialty product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 2

29. Which products are not known about or not actively searched for by consumers, and require aggressive personal selling and highly persuasive advertising? a. unsought b. shopping c. specialty d. hidden ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 248

30. Genette’s daughter often suffers from earaches and must take an antibiotic. Genette hates the fact the antibiotic prescribed must be taken for 10 days and has an unpleasant taste. Genette does not know that she can ask her doctor for a new antibiotic called Zithromax that works when taken for only five days and that has a pleasant cherry flavour. For Genette, what type of product is Zithromax because she doesn’t know it exists? a. convenience b. heterogeneous shopping c. unsought d. exclusive ANS: C New products are often examples of unsought products until promotion reveals their existence. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 2

31. Typically, what are unsought products? a. products that require little or no decision making by the buyer b. products that consumers purchase when they see them in a convenient location c. products that require only reminder advertising to be successful d. products that consumers don’t know about or don’t actively look for ANS: D OBJ: 2

8-8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 248

32. Irwin was initially excited about his new career sales rep position with Forever Memorials. He soon began to recognize, however, that his work was really cut out for him. Selling tombstones (memorials or monuments) was tough work. What category of product was Irwin selling? a. shopping b. unsought c. specialty d. convenience ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

33. Norman was spending “quality time” with his grandson Danny who was eagerly reading the BMW automobile website featuring the 400 horsepower M3 model. Norman remarked that he would have no use for that kind of power and performance but “in his youth” things would have been different. As far as Danny’s grandfather is concerned, what would a BMW M3 be? a. an unsought good b. a shopping good c. a niche good d. a specialty good ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

34. Most people under the age of 25 have a strong belief in their own personal invincibility. An insurance agency targeting this group for life insurance would find this market segment categorizes the insurance as what type of product? a. heterogeneous shopping b. relationship c. unsought d. exclusive ANS: C The buyer does not actively seek to buy this product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 2

35. A product line is a group of products that are closely related because of which of the following? a. The products are all sold under the same brand name. b. The products all function in a similar manner and provide similar benefits. c. The same company developed the idea for each product. d. The products share the same product managers. ANS: B A product line is a group of closely related products offered by the organization that basically perform the same tasks and provide the same benefits. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 248

8-9

36. The large variety of frozen dinners marketed by Stouffer is an example of which of the following for Stouffer? a. a product mix b. a product line c. a marketing mix d. a mix consistency ANS: B A product line is a group of closely related products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 3

37. Which of the following consists of all of a company’s product lines and items? a. the marketing mix b. the product offering c. the product mix d. the brand line ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 249

38. How is product mix width defined? a. the number of different product categories found within an industry b. the number of different product lines an organization offers for sale c. the average number of products offered by the company d. the average number of products within each product line in the company ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 249

39. Ocean Spray manufactures Cranberry Juice Cocktails. The addition of Light Cranberry Juice Cocktails is a way that Ocean Spray can expand which of the following? a. its product mix width b. its product mix depth c. its product line width d. its product line depth ANS: D Product line depth is the number of product items in a product line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

40. Crystal decided to add bicycling accessories, such as shoes, backpacks, and cycle repair kits, to her exclusive bicycle retail shop. What is Crystal adjusting? a. the quality modification b. the width of her product mix c. the scope of her product mix d. the depth of her product mix ANS: B OBJ: 3 8-10

PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

41. The leader in the industry of sports entertainment is World Wrestling Entertainment (formerly known as the World Wrestling Federation). When it opened a nightclub in New York City and partnered with Microsoft to create Xbox video game consoles, what did World Wrestling Entertainment expand? a. its product mix depth b. its product mix width c. its product line consistency d. its product line depth ANS: B Product mix width refers to the number of different product lines that an organization offers for sale. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

42. Unilever makes four different brands of ice cream (Magnum, Solero, Ben & Jerry’s, and Breyers). What is this an example of? a. Unilever’s product line width b. Unilever’s product mix inconsistency c. Unilever’s product mix d. Unilever’s product line depth ANS: D Product line depth is the number of product items in a product line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

43. Which of the following is an example of a product modification? a. changing the amount of management time spent overseeing production b. changing the colour of a laundry detergent c. increasing the number of distribution outlets d. dropping a product from the product line ANS: B Product modification entails changing one or more of a product’s characteristics. PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

OBJ: 3

8-11

44. A go-cart manufacturer recently added shock absorbers to make the ride in its go-carts smoother. It has not changed its prices. What type of modification is this? a. repositioning b. quality c. style d. upsale ANS: B Quality modifications entail changing a product’s dependability or durability. PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

OBJ: 3

45. Hellman’s is a brand name owned by Unilever. It is most often recognized as a brand of mayonnaise. When Unilever introduced Hellman’s honey mustard, it was an example of what type of strategy? a. repositioning b. demarketing c. product line extension d. cannibalization ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

46. One of the leading manufacturers of choir robes has added a fire retardant chemical to the fabric it uses in making the robes. The company has not changed its prices. What type of modification is this? a. functional b. quality c. upward extension d. repositioning ANS: A Functional modifications are changes in a product’s versatility, effectiveness, convenience, or safety. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 250

OBJ: 3

47. According to the text, which of the following statements about planned obsolescence is true? a. Style modification creates planned obsolescence. b. Planned obsolescence is not an ethical issue. c. A company that is interested in producing a quality product would never engage in planned obsolescence. d. Environmentalists support planned obsolescence. ANS: A Environmentalists consider planned obsolescence a wasteful practice as well as unethical. There are many manufacturers of quality clothing that engage in planned obsolescence. Planned obsolescence can result from any type of modification. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 250

48. According to the text, which of the following statements about planned obsolescence is true? a. Marketers may make quality, safety, and functional modifications to existing products to incorporate planned obsolescence into their marketing plans. b. Planned obsolescence describes the practice of causing products to become obsolete before they actually need replacement. c. Consumers do not like style modifications because they dislike changes in the appearance of goods such as clothing and cars. d. Opponents of planned obsolescence argue that the practice is environmentally friendly. ANS: B REF: p. 250

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

49. What is a style modification? a. a safety improvement b. an aesthetic product change c. a change in the product’s durability or dependability d. an improvement in product versatility and effectiveness ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 250

50. For years, many people thought plastic wrap was almost impossible to use and refused to buy the product. The manufacturer of Saran plastic wrap has spent many advertising dollars advising customers on how to eliminate the problems associated with the use of plastic wrap. What has this manufacturer engaged in? a. diversification b. product mix expansion c. repositioning d. product line expansion ANS: C Repositioning is changing consumers’ perceptions about a brand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

OBJ: 3

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51. A regional utility company needs to change consumers’ perceptions of its current service as being harmful to the environment. Which of the following strategies would best allow the company to accomplish this goal? a. use of product cannibalization b. repositioning c. contraction of number of services offered by the utility company d. adding new services to its product line ANS: B Repositioning is a firm’s attempt to change customer perceptions of a product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

OBJ: 3

52. Meaty Bones dog biscuit recently advertised that its treats are now bigger and would last longer than previously. The maker of Meaty Bones has made what type of modification in its product? a. implied b. functional c. adaptive d. aesthetic ANS: B The dog treat is now more effective because it lasts longer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

OBJ: 3

53. Which of the following commonly occurs soon after style modification? a. marketing innovation b. planned obsolescence c. implied repositioning d. planned functionality ANS: B Planned obsolescence is a term commonly used to describe the practice of modifying a product so that those already sold become obsolete. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 250

54. According to the text, what motivates firms to reposition established brands? a. an allocation of a disproportionate amount of resources b. growth of discretionary income c. changing demographics d. changes in technological environments ANS: C REF: p. 250

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PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

55. What is the most likely reason that Jell-O stopped making celery-flavoured gelatin? a. The brand lacked brand equity. b. The product’s identity could not be trademarked. c. The product did not create significant cognitive dissonance. d. The product was not contributing to the manufacturer’s profits. ANS: D This was an example of a product line contraction. PTS: 1 DIF: Application BLM: Higher order

REF: p. 251

OBJ: 3

56. The liquor industry is attempting to revive the stagnant spirits industry by introducing low-alcohol cocktails such as Jack Daniel’s Country Cocktails, Smirnoff Quenchers, and Southern Comfort Cocktails. What is the strategy behind these new product introductions? a. product item contractions b. product portfolio width adjustments c. portfolio breadth expansions d. product line extensions ANS: D Product line extension occurs when a firm adds a product to an existing product line to compete more broadly in the industry. PTS: 1 DIF: Application BLM: Higher order

REF: p. 251

OBJ: 3

57. Axe is a brand of body deodorant spray. The product’s manufacturer has recently introduced Axe shower gel products. Axe shower gel products are examples of the implementation of what type of strategy? a. portfolio breadth expansion b. product line extension c. product portfolio width adjustment d. repositioned marketing mix ANS: B Product line extension occurs when a firm adds a product to an existing product line to compete more broadly in the industry. PTS: 1 DIF: Application BLM: Higher order

REF: p. 251

OBJ: 3

58. Which of the following is the part of the brand that can be spoken? a. brand equity b. service mark c. brand name d. trademark ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 253

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59. What is the symbol in a brand that cannot be spoken? a. quality mark b. brand equity c. intangible product d. brand mark ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 253

60. Joseph Confectionery has decided to start marketing a line of Christian-oriented candy under the Testamint brand name. The candy maker is optimistic about establishing a brand in the marketplace and has high hopes of its success. As a marketing consultant, you inform the candy maker that branding can do all of the following EXCEPT which one? a. possibly yield a larger market share b. aid in positioning c. encourage consumer repeat purchasing d. ensure a higher margin of profit ANS: D Nothing can guarantee a higher profit margin. PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

OBJ: 4

61. Coca-Cola is the best known brand name in the world. The name has a high perceived quality and high brand loyalty among soft drink users. The company has developed the brand name for over 100 years. Which of the following does Coca-Cola have? a. a valuable brand quality standard b. a valuable brand loyalty hierarchy c. a valuable evoked set d. a valuable brand equity ANS: D The term brand equity refers to the tremendous value of company and brand names. PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

OBJ: 4

62. BMW cars have a strong reputation for high quality, superior performance, and high resale value. What can BMW be said to have? a. strong brand endurance b. strong brand performance c. strong brand engineering d. strong brand equity ANS: D OBJ: 4

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

63. What refers to brands where at least 20 percent of the product is sold outside the home country? a. master brand b. equity brand name c. ethnocentric trademark d. global brand ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 253

64. A consumer who consistently and repeatedly purchases the same brand is said to have which of the following? a. brand loyalty b. store loyalty c. product loyalty d. product repetition ANS: A Brand loyalty is the consistent preference of the same brand by the same consumer. Product loyalty could easily involve a variety of brands. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 253

OBJ: 4

65. A Toronto diamond distributor has developed the first branded diamond called Hearts on Fire to help smaller retailers counter the volume jewellers’ aggressive price discounting. What is this move meant to do? a. create a catchy phrase to promote diamonds b. combat the quality appeal of generic products c. combat low-cost production of generic brands d. build product identity and customer loyalty ANS: D Products in categories that traditionally have not been branded are now attempting to establish brand names that companies hope will build loyalty. PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

OBJ: 4

66. In selecting a good brand name, which of the following are desirable? a. names that suggest low price b. names that suggest something about the customer c. names that are creative d. names that are easy to translate into other languages ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 253

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67. Which of the following BEST describes brand loyalty? a. It can encourage competition. b. It can help ensure repeat sales. c. It can increase product diffusion. d. It can shorten the amount of time a product spends in the maturity stage. ANS: B Brand loyalty ensures repeat and regular sales. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 253

68. Websites for manufacturers such as General Electric, Toyota, and Benjamin Moore paint can provide these businesses with a nontraditional way to do which of the following? a. help their product brand names become generic b. avoid income taxes on international sales c. get away with deceptive market practices because the web is not regulated d. generate brand awareness ANS: D See Gerber, Procter & Gamble, and Campbell’s Soup examples in text. PTS: 1 DIF: Application BLM: Higher order

REF: p. 254

OBJ: 4

69. Because of who owns them, the brand names of producers such as Kellogg’s, Sherwin Williams, Harley-Davidson, and Ocean Spray are called which of the following? a. manufacturers’ brands b. master brands c. individual brands d. family brands ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 254

70. Walmart sells canned drinks under the brand name Sam’s Choice. This is an example of what type of brand? a. family b. manufacturer’s c. corporate d. private ANS: D A private brand is one owned by the retailer. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 254

OBJ: 4

71. Which of the following statements describes an advantage to retailers associated with developing their own brands? a. Higher gross margins are available on private brands. b. Dealers often buy in large quantities and thus always have a ready supply. c. Private brands are normally delivered more promptly by the manufacturer. d. Private brands, particularly those owned by discounters, are perceived to be of higher quality. ANS: A Private brands carry higher margins because manufacturers do not need to promote them. See Exhibit 8.5. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 254

72. A small chain of supermarkets in Manitoba sells only manufacturers’ brands. According to the text, which of the following is the BEST argument to dissuade the supermarket chain owner from selling only manufacturers’ brands? a. Relying on the manufacturer or wholesaler to deliver a national brand quickly is optimistic at best. b. Manufacturers typically offer a lower gross margin than could be earned on private-label brands. c. A well-known manufacturer’s brand will not enhance the chain’s image. d. Manufacturers rarely spend money advertising the brand name to consumers. ANS: B The dealer will get a higher gross margin on a private brand. See Exhibit 8.5. PTS: 1 DIF: Application BLM: Higher order

REF: p. 254

OBJ: 4

73. President’s Choice Chocolate Chip Cookies are manufactured specifically for sale in Loblaws and sister retailer stores. President’s Choice Cookies are an example of which of the following? a. private brand b. family brand c. manufacturer’s brand d. generic brand ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 255

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74. Kmart markets Route 66 brand clothing in its stores. Kmart stores are the only places where this brand is sold at the retail level. This is an example of what type of brand? a. family b. manufacturer’s c. private d. master ANS: C Manufacturers must decide whether to use their own names on their products or to distribute the products with a wholesaler’s or retailer’s brand name. If they use the name of a wholesaler or retailer, it is a private branding strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 255

OBJ: 4

75. Unilever markets offers brands such as Rama margarine, Rexona deodorant, I Can’t Believe It’s Not Butter spread, and Axe shower gels. Unilever appears to be using which type of branding strategy? a. individual b. family c. equity d. private ANS: A Individual branding is the policy of using different brand names for different products. Individual brands are used when products differ greatly in use, performance, quality, or targeted segment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 255

OBJ: 4

76. Procter & Gamble makes Camay soap for people concerned with soft skins and Safeguard for those who want deodorant protection. What type of strategy is Procter & Gamble using? a. combination branding b. individual branding c. trademarked branding d. private branding ANS: B An individual brand strategy allows for development of a unique brand image so as to distinguish between the two different products. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 255

OBJ: 4

77. Rosa’s husband, Phil, has a cold. Rosa went to the store to buy something that would help Phil sleep. Rosa purchased Breathe Right nasal strips embedded with Vicks mentholated vapour rub. The package showed both the Breathe Right and the Vicks brand names. What type of branding is this? a. equity b. functional c. ingredient d. family ANS: C Using two or more brand names in conjunction is cobranding. Ingredient branding is a form of cobranding. PTS: 1 DIF: Application BLM: Higher order

REF: p. 256

OBJ: 4

78. What happens when two or more established brand names of different companies are used on the same product? a. cobranding b. cannibalization c. brand extension d. family branding ANS: A OBJ: 4

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 256

79. Which of the following is a legal term indicating the owner’s exclusive right to use a brand name or other identifying mark? a. patent b. trademark c. private brand d. brand ANS: B OBJ: 4

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 256

80. Rollerblades is a brand name for in-line skates. People often refer to Rollerblades as if it were the product name. The company that makes Rollerblades may someday find its brand name becomes which of the following? a. an equity brand b. a certified name c. a generic product name d. a trademark ANS: C If a brand name becomes synonymous with the product category, it can become generic. PTS: 1 DIF: Application BLM: Higher order

REF: p. 256-257

OBJ: 4

8-21

81. What happens when a product name becomes generic? a. The price will have to drop to appeal to lower-income consumers. b. The firm must use black-and-white packaging. c. Competitors are prohibited by law from using the trademark. d. The product name is no longer recognized as the exclusive property of one firm. ANS: D A generic product name can be used by any firm and is public property. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 256-257

82. Your boss has just told you to work on getting trademark protection for a new brand of backpack the firm has developed. The product is to be called the Thermos Pak and has a unique logo. Why do you tell your boss that this protection will be difficult? a. The shape of your new and unusual product cannot be legally protected. b. Thermos is a generic product name. c. You also use abbreviated versions of your brand name such as TeePee and T.P. d. You will need a catchy phrase to promote the new brand. ANS: B A generic product name identifies a product by class of type and cannot be trademarked. PTS: 1 DIF: Application BLM: Higher order

REF: p. 256-257

OBJ: 4

83. Which of the following is one of the major functions of packaging? a. to contain the product b. to guarantee product quality c. to facilitate competition d. to promote the company ANS: A REF: p. 259

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

84. You have to convince your boss that packaging will be the key to increasing sales of the company’s new line of instant pudding mixes. What do you tell him about the packaging? a. It allows products to be shipped more easily. b. It can be used to help promote the product. c. It will conforms to all ethical standards. d. It will cause no environmental damage. ANS: B Promotion is a prime function of packaging that can help stimulate sales. PTS: 1 DIF: Application BLM: Higher order

8-22

REF: p. 259

OBJ: 5

85. While Starkist tuna is still available in cans, it is recently been made available in a pouch, which is conveniently designated the “family size” pouch. What was this change in packaging the result of? a. a brand equity strategy b. a new means of segmenting Starkist’s market c. a master brand strategy d. a move toward functional obsolescence ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 259

86. According to the text, which of the following statements about bar codes is true? a. Bar codes were first used in 2000. b. Bar codes are also called universal pricing codes (UPCs). c. Bar codes can be read by optical scanners. d. Bar codes cannot be used as a marketing research tool. ANS: C Bar codes are the same as universal product codes. They were first developed in 1974. Bar codes can be used in single-source research. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 260

87. What two types of package labelling are commonly used today? a. government-mandated and seller-controlled b. motivational and required c. informational and persuasive d. functional and persuasive ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 260

88. Labels that contain standard promotional claims such as new, improved, and super are examples of what type of labels? a. information b. descriptive c. repositioning d. persuasive ANS: D Persuasive labels primarily focus on a promotional theme or logo, and try to sell the customer on a new or changed feature. PTS: 1 DIF: Application BLM: Higher order

REF: p. 260

OBJ: 5

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89. Mia’s new raincoat contains a label that reads Dry-clean only. What is this an example of? a. an informational label b. a persuasive label c. a functional label d. a federally mandated label ANS: A Informational labelling is designed to help consumers make proper product selections and to lower cognitive dissonance after the purchase. These labels often include care and use information and an explanation of construction standards. PTS: 1 DIF: Application BLM: Higher order

REF: p. 260

OBJ: 5

90. Which of the following is one of the functions of universal product codes? a. to print product and price information on DVDs for the public b. to allow scanners to match codes with brand names, package sizes, and prices c. to assist the government in preparing records of customer purchases d. to provide detailed nutritional information ANS: B REF: p. 261

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

91. Which of the following is a branding and packaging consideration for companies considering global marketing? a. different currencies in each country, exchange rates, and final retail prices b. whether to use different brand names in the same markets for the same products c. product labelling, package aesthetics, and climate considerations d. whether to use one brand name with adaptation to local markets or to use one name but adapt and modify it for each local market ANS: C REF: p. 262-263

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

92. Which of the following is an important consideration for a French manufacturer that wants to market its products in Canada? a. An agreement between Canada and France should be created regarding language rules. b. Keeping the current brand names will allow the firm to capitalize on current domestic brand equity. c. Unique labels may be required by the Canadian government. d. There may be aesthetics issues associated with developing a branding strategy. ANS: C Brand equity in France will mean little to most Canada buyers since they will be unaware of it. PTS: 1 OBJ: 6

8-24

DIF: Comprehension BLM: Higher order

REF: p. 262-263

93. Lands’ End clothing catalogue retailer offers a satisfaction guarantee on all merchandise it sells. In other words, what sort of warranty does Lands’ End give its customers? a. implied b. express c. descriptive d. full ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 263

94. The label on Deagan’s new jacket that reads Will not shrink is an example of what type of warranty? a. descriptive b. express c. implied d. limited ANS: B An express warranty is any written guarantee. PTS: 1 DIF: Application BLM: Higher order

REF: p. 263

OBJ: 7

95. Realizing that its product needed a warranty to gain rapid market acceptance, the manufacturer of a high-tech system for investigating accidents produced which of the following? a. a written guarantee that the product would work as promised and that it is fit for the purpose it was sold b. a label stating that the product is of the highest quality and backed by years of manufacturing experience c. an acknowledgment of company responsibilities for salespeople to build into presentations d. a statement for salespeople to read to prospective buyers ANS: A A written guarantee is an express warranty and states what is contained in an implied warranty. PTS: 1 DIF: Application BLM: Higher order

REF: p. 263

OBJ: 7

96. The statement on the toothpaste box that brushing twice a day with this paste would remove 90 percent of all plaque from the user’s teeth is an example of which of the following? a. a universal warranty b. a functional label c. an express warranty d. an implied warranty ANS: C An express warranty is any written guarantee. PTS: 1 DIF: Application BLM: Higher order

REF: p. 263

OBJ: 7

8-25

97. Shannon had every reason to believe that the antacid he purchased would relieve his stomach problems if he followed the directions on the box. Why did he believe this? a. due to the functional label b. due to the express warranty c. due to the implied warranty d. due to the universal warranty ANS: C An implied warranty states that a product is fit for the purpose it was sold. PTS: 1 DIF: Application BLM: Higher order

REF: p. 263

OBJ: 7

98. All sales have an implied warranty under which of the following? a. Label Law b. Lanham Act c. Competition Act d. Bill of Rights ANS: C REF: p. 263

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

99. Hasem purchased an electric hedge trimmer two weeks ago and attempted to cut back bushes that had grown over the edges of the walkway this weekend. The hedge trimmer would not cut through the smallest branch. Under which of the following does Hasem have a legal right to demand the hedge trimmer perform the job for which it was purchased? a. Trademark Protection Act b. Competition Act c. Package Labelling Act d. Product Liability Act ANS: B Under the Competition Act, all sales carry an unwritten guarantee that the good or service is fit for the purpose of which it was sold. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 263

OBJ: 7

The Alberto Culver Company manufactures a wide variety of products from hairspray to seasonings. A large number of these products are intended for personal use. The company is divided into three key divisions: toiletries, household, and professional. The toiletries division sells hair care brands such as Alberto VO5, Alberto, and Bold Hold. Additionally, this division handles the FDS line of feminine deodorant products. The household division sells brands such as Mrs. Dash seasonings, Papa Dash salt substitute, Sugar Twin, and Static Guard. The professional division sells brands such as Tresemme, TCB, and Indola. Each of the brands listed above contains many individual products with varying formulations, such as the Alberto styling products, which include mousse, gel, spritz, spray-in conditioner, and hairspray. 100. Refer to Alberto Culver Company. Based on their intended use, Alberto Culver’s toiletries division products could best be classified as what type of products? a. unsought b. industrial c. convenience d. consumer ANS: D A consumer product is purchased to satisfy an individual’s personal wants. PTS: 1 DIF: Application BLM: Higher order

REF: p. 246

OBJ: 1

101. Refer to Alberto Culver Company. What could the moisturizing version of Alberto mousse be called? a. a product width b. a product consistency c. a product item d. a product depth ANS: C A product item is a specific version of a product that can be distinguished as a distinct offering among Alberto Culver’s products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 3

102. Refer to Alberto Culver Company. All the products that Alberto Culver sells in each of its three divisions are from which of the following? a. the company’s product mix b. the company’s product width c. the company’s product item d. the company’s product depth ANS: A The organization’s product mix includes all the products it sells. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

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103. Refer to Alberto Culver Company. Along with hair care products, Alberto Culver also markets Sugar Twin, Molly McButter, and Mrs. Dash salt-free seasoning. This is an abbreviated listing of which of the following? a. the company’s customer mix b. the company’s product line c. the company’s product inconsistency d. the company’s product mix ANS: D An organization’s product mix includes all of the products that it sells. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

104. Refer to Alberto Culver Company. The toiletries, household, and professional divisions compose which of the following? a. the company’s product mix width b. the company’s product mix length c. the company’s product mix consistency d. the company’s product mix depth ANS: A Product mix width refers to the number of product lines that an organization offers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

105. Refer to Alberto Culver Company. If a marketer looks only at the toiletries division and notes the brands and items within only that division, what is she analyzing? a. the width of the product line b. the levels of the product line c. the consistency of the product line d. the depth of the product line ANS: D Product line depth is the number of product items in a product line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

106. Refer to Alberto Culver Company. Why would the Alberto Culver Company be interested in increasing its product depth? a. to attract buyers with the same preferences b. to capitalize on economies of scale in production c. to capitalize on economies of scale in production d. to increase sales and profits by not segmenting the market ANS: B OBJ: 3

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

107. Refer to Alberto Culver Company. Alberto Culver introduced Baker’s Joy in the mid-1980s as a product for cooks to use to grease and flour baking pans. The product was not nearly as successful as the company had hoped, and it discontinued the product in 2001. This is an example of the implementation of what type of strategy? a. product line extension b. cannibalization c. divestment d. product line contraction ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 251

Choice Homes, Inc. built its reputation by building high-quality new homes, often at prices less than older ones. Choice Homes used mass purchasing power, innovative high-tech communications among employees to coordinate the building process, and other entrepreneurial strategies to hold costs down. Its homes are primarily targeted at first-time homeowners in an effort to get people out of apartments so they can experience the joy of home ownership for the same price as rent. Choice Homes later developed the “Choice Classic” brand name for higher-end homes targeted at wealthier dual-earner couples. The Choice Classic name was designed to capitalize on the reputation of Choice Homes, especially for current Choice home owners who are ready to “move up” to a larger home. Recently, Choice Homes started a third line of homes called “Reflections,” which are expensive, custom-designed homes located in exclusive, prestigious neighbourhoods. 108. Refer to Choice Homes, Inc. Kurt McKinney has just received a large inheritance and wants to have his dream home built. He knows exactly the architectural design he wants. He wants a particular Reflections home. The type of consumer product he wishes to buy is best classified as which of the following? a. a nondurable good b. a specialty product c. an unsought product d. a shopping product ANS: B McKinney is searching for an expensive item for which he will not accept a substitute. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 2

109. Refer to Choice Homes, Inc. What do the three different brands of homes (Choice, Choice Classic, and Reflections) represent? a. the firm’s line breadth b. the firm’s mix depth c. the firm’s product line d. the firm’s product itemization ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

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110. Refer to Choice Homes, Inc. Choice Homes is considering acquiring a mortgage and title company to add to its marketing power in selling homes. What would this acquisition expand? a. the firm’s line breadth b. the firm’s product breadth c. the firm’s product mix width d. the firm’s product line length ANS: C By adding more product lines, Choice is expanding its product mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 3

111. Refer to Choice Homes, Inc. Choice Homes is considering the development of a new category of small homes designed to replace low-income housing in the inner city. What does this strategy represent? a. functional modification b. a style modification c. a product line extension d. a product line contraction ANS: C Modifications are for existing product lines and items. A new line represents extension. PTS: 1 DIF: Application BLM: Higher order

REF: p. 251

OBJ: 3

112. Refer to Choice Homes, Inc. In a recent survey, Choice Homes’s customers indicated they thought their homes were high quality, made lots of referrals to friends, and planned to buy a Choice Classic or Reflection home in the future. This customer reaction indicates that Choice Homes has achieved which of the following? a. brand equity b. superficial skills c. generic status d. brand superiority ANS: A Brand equity indicates the brand has value because of its high awareness, perceived quality, and brand loyalty among customers. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 253

OBJ: 4

Ever wonder how video game dragons were created? Or how the makers of the movie Perfect Storm created and filmed those gigantic waves? The same computers that performed these stunts have also helped design everything from jumbo jets to an ice-cream-bar shape that minimizes melting in the midday sun. And by giving doctors ways to locate tumours with pinpoint precision, these machines are instilling new hope in victims of once-inoperable brain cancer. It’s all the work of the most magical computer maker on the planet, Silicon Graphics Inc. (SGI). Its engineering workstations and computer servers transform reams of data into 3-D images. In an industry marked by huge hype, SGI is the genuine article—a truly innovative company with clearly unique products. 113. Refer to Silicon Graphics, Inc. SGI is concerned about the success of its products with its various customers. Regardless of the effort put into the product management process, in the long run, the most important factor determining if SGI will succeed or fail is which of the following? a. SGI’s product mix plan b. the brand names it selects for its products c. the competition SGI encounters d. satisfaction of SGI’s customers’ needs ANS: D Products succeed because they deliver benefits and satisfy customer needs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 246

OBJ: 1

114. Refer to Silicon Graphics, Inc. All the products (engineering centres and computer servers) offered by SGI are closely related, though a little different based on the target markets. These products make up which of the following? a. SGI’s marketing mix b. SGI’s line depth c. SGI’s marketing line d. SGI’s product line ANS: D A product line is a group of closely related products offered by the organization that basically perform the same tasks and provide the same benefits. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 3

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115. Refer to Silicon Graphics, Inc. SGI wants to create a three-dimensional firearms training systems by using the same computer technology it currently uses. This training system would simulate actual situations by projecting images on screens and allow SWAT teams to practise their responses. It would be an example of which of the following? a. increase in marketing line breadth b. marketing mix expansion c. decrease in product mix width d. increase in product line depth ANS: D Since it is described as similar to existing products, it would represent an addition to the product line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 249

OBJ: 3

116. Refer to Silicon Graphics, Inc. Most companies have customers—SGI has a fan. Artist Peter Max is using SGI computers exclusively to create his famous graphics. He refuses to use any other company. What is this an example of? a. brand equity b. product diffusion c. product innovation d. brand loyalty ANS: D Brand loyalty is the consistent preference of the same brand by the same consumer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

OBJ: 5

117. Refer to Silicon Graphics, Inc. Despite the wide variety of technological applications for the same product, customers know that their SGI product is fit for the purpose for which it was sold. Why? a. because of the express warranty b. because of the implied warranty c. because of the product characteristics d. because of the packaging labelling ANS: B OBJ: 7

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 263

James Hardie began selling fibre cement siding products in the United States in 1989 to leading builders, lumberyards, and home improvement centres. Even though ads guaranteed the product would not rot or crack for 50 years, many builders hated the product. It was heavy to install, and it showed every flaw in a bad framing job. In 1997, Hardie decided to run ads in traditional lifestyle magazines and emphasize the emotional appeal of houses made with strong, weather-resistance materials. As a result, consumers began to request that the product be used by their builders or remodellers. Trade ads were used to explain how builders could take advantage of this interest created by ads in lifestyle magazines. By 2000, the Hardieplank was the number-one brand siding in North America. James Hardie is now the third most recognized brand of building material in the world. 118. Refer to Hardie Siding Products. Hardieplank siding is an example of what type of product? a. unsought b. convenience c. business d. specialty ANS: C This product is used to manufacture houses. PTS: 1 DIF: Application BLM: Higher order

REF: p. 246

OBJ: 2

119. Refer to Hardie Siding Products. What is Hardieplank siding an example of? a. a product standardization b. a product item c. a product mix d. a product line ANS: B Hardieplank is a specific item made by the company. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 3

120. Refer to Hardie Siding Products. What is the term for the different types of siding the company makes? a. its product line b. its product item c. its product reference point d. its product mix ANS: A The siding is a group of closely related products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 3

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121. Refer to Hardie Siding Products. By changing the focus of its promotion from those in the building industry to homeowners who saw their homes as sources of security, warmth, and stability, which of the following strategies did Hardie Siding use? a. market penetration b. divestment c. repositioning d. harvesting ANS: C The company changed consumers’ perceptions of the brand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

OBJ: 3

122. Refer to Hardie Siding Products. The goal of the company was to develop brand awareness for its project. What was the primary reason for the creation of this brand awareness? a. to create a specialty product b. to create a competitive advantage through product identification c. to sell a business product as a consumer product d. to allow the company to concentrate its resources on marketing research ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

123. Refer to Hardie Siding Products. Since all of the siding products sold by Hardie are sold under the Hardie brand name, it is clear that the company uses what type of strategy? a. repositioning b. cobranding c. family branding d. private branding ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 255

124. Refer to Hardie Siding Products. What type of warranty is Hardie offering in its promotions? a. valid b. responsive c. implied d. express ANS: D This is a written guarantee. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 263

OBJ: 7

One common Christmas tradition in many households is the Claxton fruitcake. The fruitcake bakery in Claxton, Georgia, makes about 6 million pounds of fruitcake annually and has $12 million in sales. One fruitcake batch weighs 375 pounds. About 70 percent of that weight is fruits and nuts. A single batch is divided into 34 loaf pans that hold 11 pounds each. Loaves are cooked for 100 minutes at 375 degrees. The bakery can cook 6,000 pounds at a time. During the baking season (August–December), the bakery uses a tracker-trailer load of raisins daily. The suggested retail price of a one-pound Claxton fruitcake is $3.69. 125. Refer to Claxton Fruitcakes. What type of consumer product is the Claxton fruitcake for people who believe it to be an integral part of a merry Christmas? a. a shopping product b. a specialty product c. an unsought product d. a component material ANS: B These people will specifically seek out the Claxton brand fruitcake. PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

OBJ: 2

126. Refer to Claxton Fruitcakes. Fruitcake is all the bakery manufactures. In terms of dimensions of product offering, what does Claxton Bakery have? a. a broad product extension mix b. a deep product line c. an emotional positioning strategy d. a shallow product line ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 248

127. Refer to Claxton Fruitcakes. There are numerous jokes about the indestructibility of fruitcake—many of them derogatory. To change its consumer image, Claxton periodically engages in public relations campaigns in which it describes fruitcakes in terms of family Christmas traditions. Attempts to move the fruitcake from being perceived by consumers as the butt of jokes to a comfort food is an example of what type of strategy? a. repositioning b. diversification c. demographic d. expansion ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

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128. Refer to Claxton Fruitcakes. Why is brand equity important for the Claxton brand? a. It means that its customers are extremely brand loyal. b. It facilitates the implementation of an international repositioning strategy. c. It means the product line has greater depth than width. d. It guarantees an annual profit. ANS: A Profits are never guaranteed. Target markets change over time. PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

OBJ: 4

129. Refer to Claxton Fruitcakes. Claxton is an example of which of the following brands? a. geographical b. manufacturers’ c. generic d. family ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 254

130. Refer to Claxton Fruitcakes. The fruitcake baker that packages its cakes in metal cans is most likely using its packaging to do what? a. contain and protect the cakes during shipment b. deal with problems commonly found in the decline stage of the product life cycle c. reposition the product d. create an environmental appeal ANS: A OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 259

Most people recognize Butterball as a brand of turkey. 131. Refer to Butterball. Which of the following includes fresh turkey breast cuts; turkey sausages; ground turkey; cold cuts; fresh marinated bone-in, boneless, and whole chicken; frozen chicken products; and Butterball stuffing and gravy mixes? a. Butterball’s line depth b. Butterball’s product line c. Butterball’s product mix d. Butterball’s product inconsistency ANS: C An organization’s product mix includes all of the products that it sells. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 249

OBJ: 3

132. Refer to Butterball, Butterball brand is also found on fresh turkey breast cuts, turkey sausages, ground turkey, cold cuts, fresh marinated bone-in, boneless and whole chicken, frozen chicken products, and Butterball stuffing and gravy mixes. What does Butterball use? a. generic branding b. family branding c. dealer branding d. brand grouping ANS: B Family branding refers to the strategy of marketing several different products under the same brand name. PTS: 1 DIF: Application BLM: Higher order

REF: p. 255

OBJ: 4

Rexona is the number-one brand of deodorant brand worldwide. 133. Refer to Rexona. Since the product was launched in the 1960s, the company has added an antiperspirant, a stick deodorant, deodorant wipes, and Rexona for Men. What are these additions examples of? a. mix repositionings b. product portfolio width adjustments c. product line extensions d. product item contractions ANS: C Product line extension occurs when a firm adds a product to an existing product line to compete more broadly in the industry. PTS: 1 DIF: Application BLM: Higher order

REF: p. 251

OBJ: 3

134. Refer to Rexona. The brand is a leader in Europe, South America, Asia, Africa, and the Middle East. What is Rexona an example of? a. a master brand b. a universal brand c. a global brand d. a family brand ANS: C At least 20 percent of a global brand is sold outside its home country. PTS: 1 DIF: Application BLM: Higher order

REF: p. 253

OBJ: 4

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135. When a company markets several different products under the same brand name, it is referred to as which of the following brands? a. family b. generic c. umbrella d. bargain ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 255

Tyler wants the Coca-Cola Barbie by Mattel for her birthday. This Mattel product contains items with the Coca-Cola trademark, and Barbie is wearing an outfit in Coca-Cola red and white. 136. Refer to Barbie. Because both brands are receiving equal treatment, what is this most likely an example of? a. umbrella branding b. cooperative branding c. complementary branding d. family branding ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 256

137. Refer to Barbie. What are Mattel and Coca-Cola using? a. private branding b. conjunctive branding c. complementary branding d. cobranding ANS: D Using two or more brand names in conjunction is cobranding. PTS: 1 DIF: Application BLM: Higher order

REF: p. 256

OBJ: 4

The manufacturer of Winston cigarettes is introducing its Eco-Flask packaging, which is crush-proof, water-resistant, and curved to better fit in a shirt pocket. 138. Refer to Winston. What type of modification has the manufacturer of Winstons made to the cigarettes? a. functional b. demarketing c. aesthetics d. quality ANS: A Functional modifications are changes in a product’s versatility, effectiveness, convenience, or safety. PTS: 1 DIF: Application BLM: Higher order 8-38

REF: p. 250

OBJ: 3

139. Refer to Winston. What is Winston using its packaging primarily to do? a. reduce environmental damage b. contain and protect the product c. facilitate distribution of the product d. facilitate recycling ANS: B The packaging protects the cigarettes from being crushed or becoming stale. PTS: 1 DIF: Application BLM: Higher order

REF: p. 259

OBJ: 5

Cinnamon Toast Crunch, Cocoa Puffs, and Trix cereals are now available with less sugar. Notices on the cereal boxes announce that these cereals now contain “75 percent less sugar.” 140. Refer to Low-sugar Cereals. The introduction of the low-sugar cereals are examples of which of the following? a. brand repositioning b. product modifications c. product diversifications d. brand mix extensions ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 250

141. Refer to Low-sugar Cereals. When would these notices be examples of persuasive labelling? a. if the federal government had not passed the Informational Labelling Act of 1996 b. if they were designed solely to promote the product c. if the words “new” and “improved” were also included on the package d. if consumers had not become saturated with promotional campaigns ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 260

142. Refer to Low-sugar Cereals. The notices are probably an example of what type of labelling? a. UPC b. informational c. environmental d. demographic ANS: B See discussion of low-fat products in text. PTS: 1 DIF: Application BLM: Higher order

REF: p. 260

OBJ: 5

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TRUE/FALSE 1. A product may be defined as everything, both favourable and unfavourable, that a person receives in an exchange. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 246

2. When consumers buy gasoline, most are more interested in its chemical composition than anything else. ANS: F Consumers do not buy gasoline based on its chemical makeup; they buy products based on the benefits they deliver. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 246

3. An elementary school teacher purchased a ream of art paper, a box of crayons, and some modelling clay. These products could be classified as either business goods or consumer goods, depending on the teacher’s intended use. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 246

4. Katerina is famous for her pound cakes, and she credits her success to her use of Robin Hood flour. She will use only Robin Hood flour and will travel to several different stores, if necessary, to find this particular brand. For Katerina, flour is a shopping product. ANS: F Because Katerina is so brand loyal and accepts no substitutes, this is an example of a specialty product. PTS: 1

DIF: Application

REF: p. 248

OBJ: 2

5. Deciding on which university to attend, with the many differences in majors available, living options, and image differences, would be classified as a heterogeneous shopping product for most people. ANS: T REF: p. 247

PTS: 1 OBJ: 2

DIF: Comprehension

6. Inez believes makeup is the most important part of her wardrobe. She spends considerable time comparing the prices, skin tone, and colour options available at various cosmetics counters in department stores. For Inez, makeup is a convenience product. ANS: F For Inez, makeup is a shopping product. PTS: 1 8-40

DIF: Application

REF: p. 247

7. Many cooks believe that nothing can beat Bakewell Cream for making delicious biscuits. Loyal customers are willing to go to great lengths to find this product and will accept no substitutes. Bakewell Cream is marketed only in Alberta. For these cooks, Bakewell Cream is a shopping product. ANS: F For these cooks, Bakewell Cream is a specialty product. PTS: 1

DIF: Application

REF: p. 248

OBJ: 2

8. YKK is the world’s largest manufacturer of sliding fasteners (zippers). It also manufactures optical components and aluminum architectural parts. These products represent YKK’s product line. ANS: F All these product items represent all of the firm’s products and are unrelated. The products, in total, represent the firm’s product mix. PTS: 1

DIF: Application

REF: p. 249

OBJ: 3

9. YKK is the world’s largest manufacturer of zippers. It makes over 1,500 different types and styles of zippers. The great variety of zippers made by YKK represents its product mix width. ANS: F The 1,500 various types of zippers represent depth in that product line. PTS: 1

DIF: Application

REF: p. 248

OBJ: 3

10. Product modification occurs when changes are made in how the product functions, the quality of the product is modified, or some aesthetic characteristic of the product is changed. ANS: T REF: p. 250

PTS: 1 OBJ: 3

DIF: Comprehension

11. Chef’s Catalog built its reputation on selling the highest-quality baking ingredients. The catalogue retailer has added a line of fine kitchen tools and wants its customers to think of the retailer as a place to buy everything needed to bake the finest breads and desserts—not just for buying the ingredients. The marketing term for changing consumers’ perceptions of the Chef’s Catalog is segmentation. ANS: F Changing consumers’ perceptions is called repositioning. PTS: 1

DIF: Application

REF: p. 250

OBJ: 3

12. Ocean Spray is known for cranberry juices. When it added Ocean Spray Craisins (dried sweetened cranberries to be eaten like raisins), it was an example of a product mix extension for the company. ANS: F It’s an example of a product line extension for the company. PTS: 1

DIF: Application

REF: p. 251

OBJ: 3 8-41

13. Isaac Golding, owner of a tutoring service, has developed a design for his firm that includes an owl wearing large spectacles and carrying a satchel crammed with books and papers. He plans to use this design on all communication that the firm sends out. This design is called the firm’s brand name. ANS: F Such a design would be called the firm’s brand; only the part of the brand that can be spoken—for example, the formal name of the firm—would be called the brand name. PTS: 1

DIF: Application

REF: p. 253

OBJ: 4

14. Brand names such as Kleenex, UPS, Sony, Chevrolet, and Kellogg’s are likely to have more brand equity than brand names such as Viking, Zojirishi, Shimano, and Thule. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 253

15. Shaun likes Michelin tires for his bicycle. If he needs new bicycle tires when Michelins are not on sale, he is willing to pay a higher price for Michelin rather than buy some other brand of bicycle tire. Shaun could be described as being brand loyal to Michelin. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 253

16. Generic products are those brands whose names have become generic and now identify a class or type of product, such as aspirin, cellophane, thermos, or shredded wheat. ANS: F These are generic brand names, not generic products. PTS: 1

DIF: Definition

REF: p. 257

OBJ: 4

17. When the manufacturer of French’s classic yellow mustard introduced French’s Dijon mustard, French’s Honey mustard, and French’s Sweet Onion mustard, it was an example of cobranding. ANS: F It’s an example of family branding. PTS: 1

DIF: Application

REF: p. 255

OBJ: 4

18. Rights to a trademark exist as long as the mark is used. If a firm does not use it for two years, the trademark is considered abandoned, and a new user can claim exclusive ownership of the mark. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 256

19. The most important functions of packaging are to contain and protect products, promote products, facilitate product storage, and facilitate recycling ANS: T REF: p. 259 8-42

PTS: 1 OBJ: 5

20. When Alec picked up the candy bar, he automatically looked to see its fat content. The information that Alec looked for was contained in a nutritional label. ANS: T OBJ: 5

PTS: 1

DIF: Application

REF: p. 260-261

21. Due to the time required to scan them, universal product codes (UPCs) are typically placed on merchandise that would be classified as shopping products. ANS: F UPCs appear on most items in supermarkets and other high-volume outlets. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 261

22. The only two branding strategies available to a company that wants to market its product globally are to either use the brand name everywhere or to develop a new brand name for each different market. ANS: F There is a third possible branding strategy: adapt and modify. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 262

23. Cultural traits can make a package design successful in one country and a failure in another. ANS: T REF: p. 262-263

PTS: 1 OBJ: 6

DIF: Comprehension

24. A warranty does not confirm the quality or performance of a good or service. ANS: F A warranty does, in fact, confirm the quality or performance of a good or service. PTS: 1

DIF: Definition

REF: p. 263

OBJ: 7

DIF: Definition

REF: p. 263

25. All sales have an implied warranty. ANS: T OBJ: 7

PTS: 1

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ESSAY 1. How would a marketer define the term product? ANS: A product is everything, both favourable and unfavourable, that a consumer receives in an exchange. A product may be a tangible good, a service, an idea, or any combination of these three. PTS: 1

DIF: Application

REF: p. 246

OBJ: 1

2. Products can be classified as either business/industrial or consumer products. What is the difference between business products and consumer products? Why is it important to know about these classifications? ANS: A product’s classification depends on the buyer’s intentions. Business products are purchased for (1) use in the production of other goods or services, (2) use in an organization’s operations, or (3) resale to other customers. Consumer products are purchased to satisfy an individual’s personal wants. The same item can be classified as either a business or a consumer product depending on the intended use. It is important to know about these product classifications because business and consumer products are marketed differently. These two target markets require different distribution, promotion, and pricing strategies. PTS: 1

DIF: Application

REF: p. 246

OBJ: 2

3. Name and briefly define the four categories of consumer products. For each category, list three specific examples of products that would most likely be classified in that category. ANS: Convenience products are relatively inexpensive items that require little shopping effort. The products are bought regularly, usually without significant planning. Convenience products may include candy, soft drinks, combs, aspirin, small hardware items, dry-cleaning, car wash services, and so on. Shopping products are more usually expensive than convenience products and found in fewer stores. Consumers spend some effort comparing brands and stores. Shopping products may include washers, dryers, refrigerators, televisions, furniture, clothing, housing, choice of university, and so on. Specialty products are those exclusive items for which consumers are willing to search extensively. Consumers are extremely reluctant to accept substitutes for specialty products. Brand names and service quality are important. Fine watches, luxury cars, expensive stereo equipment, gourmet restaurants, and specialized medical services could all be considered specialty products. Unsought products are those that the buyer does not know about or does not actively seek to buy. These products include insurance, burial plots, encyclopedias, and so on. PTS: 1

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DIF: Application

REF: p. 246-248

OBJ: 2

4. What is the difference between a homogeneous shopping product and a heterogeneous shopping product? Give specific examples of products that fit into each category to help illustrate your answer. ANS: Homogeneous shopping products are those that consumers see as being basically the same. The main purpose of shopping is to find the lowest-priced product that has the required features. Appliances and televisions are homogeneous shopping products for many people. Heterogeneous shopping products are those that consumers see as different in terms of quality, style, suitability, and lifestyle compatibility. Comparisons among heterogeneous shopping products are difficult because the alternatives possess unique features as well as different prices and quality levels. These products may include furniture, clothing, housing, and the choice of a university. PTS: 1

DIF: Application

REF: p. 247

OBJ: 2

5. The Crayola brand is currently placed on a wide variety of products, including crayons (standard and fluorescent colours packaged in a wide variety of box sizes), markers (regular and washable), paints (watercolour and acrylic), scissors, glue, and children’s clothing. Using this illustration as an example, answer the following questions: What is a product item? A product line? A product mix? ANS: A product item is a specific version of a product that can be designated as a distinct offering among an organization’s products. Any single product identified in the Crayola example could be an item. For example, a crayon package with 64 colours and a sharpener, or an 8-pack of washable markers, and so on. A product line is a group of closely related products offered by the organization. One could identify two Crayola product lines: arts and crafts, and clothing. Alternatively, three product lines could be identified: clothing, drawing/painting items, and supplies. Finally, as many as six product lines could be interpreted: crayons, markers, paints, scissors, glue, and clothing. A product mix includes all of the products and item varieties that the company offers for sale. All Crayola items and package variations identified above make up Crayola’s product mix. PTS: 1

DIF: Application

REF: p. 248

OBJ: 3

6. Organizations derive several benefits from organizing related product items into product lines. Briefly describe four of these benefits. ANS: Advertising economies. Product lines provide economies of scale, because several products can be advertised under the umbrella of the line. Additionally, advertising a product line can enhance the corporate name. Package uniformities. All packages in the line may have a common look without causing any product item to lose its individual identity. Thus, one item in a line can advertise another.

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Standardized components. Product lines provide an opportunity to standardize components, thus reducing manufacturing and inventory costs. Efficient sales and distribution. Product lines enable sales personnel to provide a full range of product alternatives to their customers. Distributors and retailers are often more willing to stock the company’s products if a full line is offered. Transportation and warehousing costs are also likely to be less for product lines rather than for a collection of individual items. Equivalent quality. A brand name symbolizes a certain quality level to buyers. Purchasers expect all products in a line to be of comparable quality, so further evaluation of individual product items need not take place. PTS: 1

DIF: Application

REF: p. 249

OBJ: 3

7. Crayola makes various products that are all targeted toward elementary school children. Drawing, painting, and supply items are sold at convenience stores, toy stores, and grocery stores. Clothing is sold in department stores. Crayola might arrange its product items in the following way: Drawing/Painting Crayons, regular wax Crayons, fluorescent Markers, regular Markers, washable Watercolour paints Acrylic paints Chalk

Supplies Crayon sharpeners Paint brushes Scissors Glue Storage cases

Textiles Boys’ clothing Girls’ clothing Bed and bath linens

What is the product mix width for Crayola? What is its product line depth? ANS: Product mix width refers to the number of product lines that an organization offers. In this case, the width of the product mix is three. Product line depth is the number of product items in a product line. There are seven items in the drawing/painting line, five items in the supplies line, and three items in the clothing line. PTS: 1

DIF: Application

REF: p. 249

OBJ: 3

8. You are the product manager for a line of patio furniture for a company called SeaBreeze Enterprises. Your assignment is to modify the existing products in the product line. Name and describe the three categories of modification options that you could propose to SeaBreeze’s management. Give an example under each category of a modification you could make. ANS: Quality modifications entail changing the product’s dependability or durability. SeaBreeze could reduce the product quality of some of its offerings to enable a lower price, which would appeal to a broader or price-sensitive target market. SeaBreeze could also increase quality, which would give the corporation a competitive advantage, encourage brand loyalty, allow higher prices, or provide new market segmentation opportunities.

8-46

Functional modifications are changes in a product’s versatility, effectiveness, convenience, or safety. SeaBreeze could add further capabilities to its patio furniture such as making it mildew-resistant, designing it to fold and store easily, and providing wider seats for greater comfort. The furniture could also add a safety feature to prevent unfolded furniture from collapsing when someone sits in it. Style modifications are aesthetic product changes. SeaBreeze could make its furniture in fashionable colours or add designer cushions. It could even personalize it by letting customers order the colour combinations they want. Team logos could be licensed, and the furniture sold to fans. PTS: 1

DIF: Application

REF: p. 250

OBJ: 3

9. What is a brand? What is the difference between a brand, brand name, a brand mark, a trademark, and a service mark? ANS: A brand is a name, term, symbol, design, or combination of these that identifies a seller’s products and differentiates them from competitors’ products. A brand name is that part of a brand that can be spoken. The brand mark is the part of the brand that cannot be spoken—a picture, logo, special decoration, or design. A trademark is a legal term indicating the owner has the exclusive right to use the brand name or other identifying mark; others are prohibited from using the brand without permission. A service mark performs the same functions as a trademark but for services. PTS: 1

DIF: Application

REF: p. 253

OBJ: 4

10. What are the three main objectives or benefits of branding? How do the concepts of brand equity and brand loyalty fit into these objectives? Use these three objectives to briefly evaluate Buick’s brand name for its new electric car, named Impact. ANS: Branding has three main objectives: identification, repeat sales, and new product sales. In terms of identification, branding allows marketers to distinguish their products from all others. Brands become familiar to consumers as indicators of quality. Brand equity refers to the value of a well-recognized brand name. Customers can readily identify a Buick product, although the name Impact will not be familiar at first. Repeat sales come from satisfied customers who recognize which brands to purchase again and which brands to avoid. Branding also helps word-of-mouth and mass media promotion. Brand loyalty occurs when a consumer consistently prefers one brand over all others. There are customers who are brand loyal to the Buick brand name, but brand loyalty to the Impact name may take some time. New product sales may be stimulated by the Buick name, but the name Impact may conjure images of car crashes for some consumers. Other consumers may feel that the name has positive connotations of excitement. PTS: 1

DIF: Application

REF: p. 253

OBJ: 4 8-47

11. Name and briefly describe six branding alternative strategies. ANS: Generic products. A firm may decide not to brand at all. Manufacturers’ brands. A firm can place the manufacturer’s name on the product. These brands may be either individual or family branded. Private brands. A retailer or wholesaler may choose to put its own name on products it carries. Individual brands. A firm may use different brand names for different products, especially when products vary greatly in use, performance, or quality. Family brands. A company may market several different products under the umbrella of the same brand name. This facilitates the introduction of new, related products. Cobranding entails placing two or more brand name on a product or its package. PTS: 1

DIF: Application

REF: p. 254-256

OBJ: 4

12. List and briefly define the three different types of cobranding. ANS: Ingredient branding identifies the brand of a part that makes up a product, Cooperative branding is where two brands receiving equal treatment borrow on each other’s brand equity. Complementary branding is where products are advertised or marketed together to suggest usage. PTS: 1

DIF: Application

REF: p. 256

OBJ: 4

13. You are the brand manager for the Fatal Vision (FV) goggles that simulate what the world looks to someone who is seriously intoxicated. The goggles make the user feel disoriented and dizzy and are used in teen driving courses. The FV goggles wrap around the wearer’s face to make sure they distort all areas of vision and come in bright orange to distinguish them from other goggles. The slogan used in the promotion of the goggles asks, “Orange you glad you don’t drink and drive?” What aspects of identifying this product qualify for trademark protection? If you notice another company infringing on your trademark, what legal action can you take? ANS: Parts of a brand or other product identification that qualify for trademark protection include shapes (the goggles wrap around the face), ornamental colour or design (bright orange), and the slogan and abbreviation. Thus, many aspects of the FV brand can be trademarked. The Trade-marks Act in Canada specifies remedies available for trademark violations. PTS: 1

8-48

DIF: Application

REF: p. 256

OBJ: 4

14. Packaging is an important component of the product strategy. List and briefly describe the four major functions of packaging. ANS: Contain and protect products. Packaging contains products in liquid, granular, or other divisible forms. Packaging allows firms to market products in specific quantities. Physical protection of the product is also necessary because most products are handled often between manufacture and final consumption. Packages protect products from breakage, light, heat, cold, infestation, spoilage, and so on. Promote products. A key role of packaging is promotion. Labels not only provide brand identification, ingredient listings, feature specifications, and directions, but also use designs, colours, shapes, and materials to influence consumers’ perceptions and buying behaviour. A package differentiates a product from competing products and may associate a new product with a family of other products from the same manufacturer. Packages are the last opportunity marketers have to influence buyers before they make purchase decisions. This promotional role differentiates the product from competitors’ products and establishes the brand’s image. Facilitate storage, use, and convenience. Packages can make products easier to ship, store, and stock on shelves. Additionally, package features or designs can make packages convenient. Features such as disposable packages, easy-opening devices, and reusability are a plus. Package size can also be used to segment markets. Facilitate recycling and reduce environmental damage. Environmental compatibility is preferred, if not demanded, by consumers. Packages should be recyclable, biodegradable, and reusable. PTS: 1

DIF: Application

REF: p. 255-261

OBJ: 5

15. An integral part of any package is its label. There are two basic labelling strategies. Name and describe each of the two strategies. ANS: Persuasive labelling focuses on a promotional theme or logo, with information for the consumer of secondary importance. The promotional theme may contain the words new, improved, or super. Informational labelling is designed to help consumers make proper product selections and lower postpurchase cognitive dissonance. These labels may explain construction standards, colour selection, cleaning instructions, or other use information. PTS: 1

DIF: Application

REF: p. 260

OBJ: 5

8-49

16. You are the Canadian brand manager of the Fluffit family of products. The products include a wide variety of synthetic and natural stuffing materials for furniture cushions, sleeping bags, quilts, and winter coats. The brand is a favourite among home repair enthusiasts and hobbyists of various kinds. Your firm would like to enter several foreign markets. Name and describe the three major alternative brand name choices for this global strategy. Discuss the viability of each alternative for Fluffit. ANS: One brand name everywhere. This strategy is useful when the company markets mainly one product and the brand name does not have negative connotations in any local market. Advantages of a one-brand strategy are greater identification of the product from market to market and ease of coordinating promotion from market to market. This strategy may be difficult for Fluffit because the variety of products are sold. Additionally, it is not likely that “fluff” carries the same meaning in all languages or communicates the benefits of the product. Adaptations and modifications. If the Fluffit name is not pronounceable in the local language, the brand name is owned by someone else, or the brand has a negative connotation in the local language, minor modifications can make the brand name more suitable. This could be a viable alternative for Fluffit. Different brand names in different markets. Local brand names are often used when translation or pronunciation problems occur, when the marketer wants the brand to appear to be a local brand, or when regulations require localization. This could also be a viable alternative for Fluffit. PTS: 1

DIF: Application

REF: p. 262

OBJ: 6

17. A warranty is a protection and information device intended to confirm the quality of performance of a good or service. What is the difference between an express warranty and an implied warranty? ANS: An express warranty is made in writing and may range from a simple statement to an extensive document. An implied warranty is an unwritten guarantee that the good or service is fit for the purpose for which it was sold. PTS: 1

DIF: Application

REF: p. 263

OBJ: 7

18. Distinguish between an implied warranty and an express warranty. Give one example of each. ANS: An express warranty is a written guarantee. Examples include Will not shrink, No ironing required, Precooked, etc. An implied warranty is an unwritten guarantee that the good or service is fit for the purpose for which it was sold. Examples are numerous—all should include the concept that the product does what it was intended to do. PTS: 1

8-50

DIF: Definition

REF: p. 263

OBJ: 7

Chapter 9—Developing and Managing Products MULTIPLE CHOICE 1. When the manufacturer of Pine-Sol cleaning liquid introduced an orange-scented cleaner, which of the following occurred? a. The product was easily sold to many foreign countries using the same, popular Pine-Sol brand name. b. The product was a new product because it was an improvement or revision of an existing product. c. The product was not accepted well in the market until a personal selling campaign was launched. d. The product was not considered new, because the product was not discontinuous. ANS: B New products can be improvements or revisions of existing products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

OBJ: 1

2. Marketers consider all of the following examples of new products EXCEPT which one? a. the addition of an investment service to a company that once specialized in insurance b. a new flavour of Jell-O gelatin c. a new low-fat formulation for Campbell’s soup d. a 2008 model-year GE dishwasher with the same style, parts, and colour as the 2007 model ANS: D All these are new products except the new model year with no other changes than the date. PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

OBJ: 1

3. The maker of Peter Pan peanut butter has developed a honey-flavoured peanut butter spread to add to its peanut product line. Is this a new product? a. Yes, this is a discontinuous innovation. b. No, peanut butter cannot be considered an innovation. c. Yes, additions to the product line are new products. d. No, this is not a product improvement. ANS: C An addition to the existing product line is considered a new product by marketers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

OBJ: 1

9-1

4. New-to-the-world products, where the product category itself is new, are also called which of the following? a. moderate innovations b. creative offerings c. venture products d. discontinuous innovations ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 272

5. When Sherwin Williams began selling Martha Stewart–designed paints, what could the approach be classified as? a. a repositioning strategy b. a revision to existing products c. a new product line d. an addition to an existing product line ANS: D These are new products that supplement, not replace, a firm’s established line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

OBJ: 1

6. Until the mid-1990s, MGP Ingredients, Inc. sold ethanol and animal feed. A steep drop in its sales led the company to focus on developing the first low-carb proteins and starches. What would these low-carb proteins and starches be an example of? a. an addition to an existing product line b. a revision to existing products c. a repositioning strategy d. a new product line ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

7. Stouffer’s added 25 percent more meat to its Lean Cuisine Skillet Sensations meal-in-a-bag. The addition of more meat made the product acceptable to men as well as women and expanded its target market. What is the meatier Lean Cuisine Skillet Sensations an example of? a. a repositioned product b. a discontinuous innovation c. a new product line d. an addition to a current product line ANS: A The meal-in-a-bag was modified to appeal to a new target market. PTS: 1 DIF: Application BLM: Higher order

9-2

REF: p. 273

OBJ: 1

8. What occurs when an existing product is targeted toward new market segments? a. brainstorming b. screening c. reciprocity d. repositioning ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 273

9. When Banquet made its chicken patties 20 percent larger to provide greater value to the consumer, it was not trying to reach a new target market. What has Banquet created? a. an addition to an existing product line b. a discontinuous innovation c. an improved product d. a repositioned product ANS: C Banquet improved an existing product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 273

OBJ: 1

10. What links the new-product development process with the objectives of the marketing department, business unit, and corporation? a. a concept test b. a new-product strategy c. a product strategy bridge d. a product-review committee ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 275

11. Companies that are most likely to succeed in the development and introduction of new products typically do which of the following? a. use an industry-specific approach that is driven by corporate objectives and strategies with a we-defined new-product strategy at its core b. capitalize on youth and creativity to achieve and maintain competitive advantage c. make the short-term commitment needed to support innovation and new-product development d. establish an environment conducive to achieving new-product objectives ANS: D REF: p. 275

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

9-3

12. What does a new-product strategy do? a. specify the roles new products play in the organization’s annual meeting b. link the new-product development process with the objectives of the finance department, the business unit, and the corporation c. describe the characteristics of products the organization wants to offer and the markets it wants to serve d. act as part of an organization’s overall financial strategy ANS: C REF: p. 275

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

13. What is the first stage of the new-product development process? a. establishing the new-product strategy b. exploring opportunities c. developing a business analysis d. building of a prototype ANS: A New-product strategy is the first subset of the organization’s new-product development plan. It specifies what roles new products play in the organization’s overall plan and describes goals. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 275

OBJ: 2

14. When Forrest Event Marketing, Inc. started searching for new product ideas, a marketing consultant suggested a variety of sources of information. Which is the LEAST likely source of new product ideas? a. its employees b. its competitors c. its customers d. its financial lenders ANS: D Customers, employees, distributors, and competitors are interacting with the marketplace and may have ideas for goods to serve customer needs. The bank from which it gets its debt financing is the least likely alternative here. PTS: 1 DIF: Application BLM: Higher order

REF: p. 276

OBJ: 2

15. A manufacturer of athletic equipment is finding it difficult to compete with cheaper imported merchandise. Which of the following is a potential source of new product ideas? a. the company’s former employees b. customers who have requested its catalogues c. current retailers that owe the company money d. its foreign suppliers ANS: B Customers are in the marketplace and may have ideas for goods to serve customer needs. PTS: 1 OBJ: 2 9-4

DIF: Comprehension BLM: Higher order

REF: p. 276

16. Which of the following sources is a source for new product ideas? a. employees b. government agencies c. former customers d. foreign distributors ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 276

17. A hospital created a focus group to identify new products that it believed would enhance the boomers’ aging process. This focus group most likely contained which of the following? a. members of other hospitals b. health care providers c. a sampling of all stakeholders from the sponsoring hospital d. people who would be categorized as baby boomers ANS: D To be useful, focus groups should contain people who are most directly affected by the focus group’s outcome. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 2

18. Which of the following is a type of scientific investigation aimed at discovering new technologies? a. product development b. concept testing c. applied research d. basic research ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 277

19. Scientists at University of Toronto are working to develop new technologies for customer interface interactions in retail stores. Right now they are not concerned with the potential cost-effectiveness of the technologies or the marketability of the technologies. What are these scientists involved in? a. basic research b. applied research c. brainstorming d. product generation ANS: A Basic research is scientific research aimed at discovering new technologies. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 2

9-5

20. What takes new technologies and attempts to find useful applications for them? a. brainstorming b. applied research c. product development d. basic research ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 277

21. Scientists at University of Toronto have received a patent for their newly discovered technologies for more effective customer interface interactions in retail stores. The university decided to sell the patent to an independent company whose scientists immediately began exploration into practical uses of this new technology. What are the scientists at the independent company involved in? a. product development b. applied research c. brainstorming d. basic research ANS: B Applied research takes new technologies and attempts to find useful applications for them. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 2

22. Christian Kniski has developed a new technology that uses miniature computerization to analyze DNA specimens. His next step after developing the product should be to work to find an application for this new technology through which of the following? a. applied research b. product development c. concept testing d. basic research ANS: A Applied research takes new technologies and attempts to find useful applications for them. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 2

23. What goes one step further than applied research by converting new technology applications into marketable products? a. marketing development b. product development c. basic research d. product modification ANS: B OBJ: 2

9-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 277

24. What is one way to determine whether a company has a balanced portfolio of products and, if not, what new product ideas are needed to offset the imbalance? a. research ombudsmen b. internal product development venture teams c. outside consultants d. marketing development departments ANS: C REF: p. 277

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

25. What is a process where a group thinks of as many ways as possible to vary a product or solve a problem without considering the practicality of the ideas? a. new-product brain dumping b. diffusion c. brainstorming d. screening ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 277

26. Mosaic Labs has developed a chemical compound that prevents mildew in even the most humid climates. The week after the compound was invented, a group of the firm’s employees got together and listed ways the product might be used. What is this an example of? a. focusing grouping b. brainstorming c. venture group activities d. screening ANS: B Brainstorming is a process where a group thinks of as many ways to vary a product or solve a problem as possible without considering the practicality of the ideas. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 2

27. One manufacturer produces Hanes, Playtex, and Bali clothing for women. This manufacturer assembled a group of nine regular customers and asked them to discuss what they like and do not like about its current product line for full-figured women and to suggest new product ideas, such as jewellery, shoes, and belts. Which research technique was the manufacturer using? a. a venture team b. a focus group c. a product-review committee d. a brainstorming session ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

9-7

28. A company that manufactures mantels, stairways, doors, windows, and other architectural reproductions brought together a group of 10 recent customers and asked them to discuss what they liked and disliked about the current designs marketed by the company. Which of the following research techniques did the manufacturer use? a. a venture team b. a buying centre c. brainstorming d. a focus group ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

29. What is the first filter in the new-product development process that serves to eliminate new product ideas that are inconsistent with the organization’s new-product strategy or are obviously inappropriate for some other reason? a. business analysis b. applied diffusion c. idea screening d. test marketing ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 277

30. At what stage of the new-product development process are most new product ideas rejected? a. test marketing b. idea generation c. idea screening d. diffusion ANS: C Screening is the stage when the bulk of the ideas are rejected for being incompatible or impractical. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 277

31. After the research team at DairyMade had generated more than two dozen new product ideas for a substitute for coconut that tastes the same but has zero fat, the company formed a committee to analyze whether the product ideas were consistent with the organization’s new-product strategy. What is this called? a. diffusion b. idea screening c. idea generation d. test marketing ANS: B Idea screening is the first filter in the product development process. It serves to eliminate new product ideas that are inconsistent with the organization’s new-product strategy. PTS: 1 DIF: Application BLM: Higher order

9-8

REF: p. 277

OBJ: 2

32. Top managers at a company that publishes regional magazines considered making maps, but then decided maps were not within the company’s corporate mission. Which stage of the new-product development process did its new-product development process reach? a. business analysis b. idea screening c. idea generation d. customer testing ANS: B Screening involves rejecting products that don’t fit with company plans. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 2

33. Until the mid-1990s, MGP Ingredients sold ethanol and animal feed. A steep drop in its sales led the company to focus on developing the first low-carb proteins and starches. The company was able to use existing manufacturing equipment to develop these food additives in response to the growing popularity of the Atkins Diet and similar food regimens. The realization that MGP could use the popularity of the Atkins Diet as a catalyst for success would have occurred in which stage of the new-product development process? a. developing a business analysis b. establishing the new-product strategy c. exploring opportunities d. screening and concept testing ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 277-278

34. What is the screening and concept testing stage of the new-product development process used to do? a. refine the promotion campaign to be used with the new product b. eliminate undesirable ideas and predict consumer acceptance c. determine the potential profits to be gained from the new product d. generate new product ideas ANS: B Concept tests involve describing the product idea to consumers, usually before any prototype has been created, and asking for their evaluations. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 277-278

35. Which of the following evaluate new product ideas usually before any prototype has been created? a. simulated market tests b. user tests c. concept tests d. market tests ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 278

9-9

36. After Mattel evaluated many new products to add to its Barbie product line and before any prototype was created, the toy manufacturer instructed a committee to select three of the ideas to present to a group of consumers. The consumer group was asked to evaluate the three product ideas in terms of their marketability. What is this stage of new-product development? a. market testing b. prototype screening c. idea manipulation d. concept tests ANS: D Concept tests evaluate new product ideas usually before any prototype has been created. PTS: 1 DIF: Application BLM: Higher order

REF: p. 278

OBJ: 2

37. Zippysnacks has come up with a new potential product, chocolate-covered jalapeno peppers, and is now asking potential customers, ―Would you buy this snack?‖ Zippysnacks is asking this question of potential customers in which of the following? a. prototype screening b. concept testing c. market testing d. the product development stage ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 278

38. In which stage of new-product development are preliminary demand, cost, sales, and profitability estimates made? a. business analysis b. prototype screening c. concept testing d. idea generation ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 278

39. In which stage of new-product development is the technical feasibility of manufacturing the new product examined as a prototype is produced? a. concept testing b. screening c. market testing d. development ANS: D During the development stage, the technical feasibility of manufacturing the product at a reasonable cost is thoroughly examined. This stage can be long and expensive and can involve a great deal of testing. Products are often modified after the testing. PTS: 1 BLM: Remember

9-10

DIF: Definition

REF: p. 279

OBJ: 2

40. The development stage of the new-product development process works best when which of the following is practised? a. simultaneous product development b. competitive product equity c. the new-product paradigm d. test marketing ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 279

41. According to the text, which of the following statements about simultaneous product development is true? a. All departments within the company work together at the same time, but to maintain a high level of secrecy, no one outside the company is involved in simultaneous product development. b. Simultaneous product development actually increases the length of time it takes to get a product to market and the time the product will stay in the growth stage of its product life cycle. c. With simultaneous product development, all relevant functional areas and outside suppliers participate in all stages of the new-product development process. d. Simultaneous product development refers to the practice of developing multiple new products at the same time. ANS: C Suppliers are typically involved in the process, which shortens the length of time it takes to get a new product to market. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 279

42. What is a limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation? a. test marketing b. laboratory testing c. use testing d. concept testing ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 280

9-11

43. Sara Lee, the maker of Ball Park sausages, has decided to introduce its new Ball Park hot dog buns in a limited market consisting of only four cities and to closely monitor the reactions of potential customers to the product and marketing program. What is Sara Lee using? a. profitability analysis b. test marketing c. market development analysis d. discontinuous innovation ANS: B Test marketing is a limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 280

OBJ: 2

44. When selecting a test market city, what should a researcher look for? a. a city where there is no competition b. a city where the demographics and purchasing habits mirror the overall market for the product c. a city that is as large as possible d. a city that has media spillover from other cities to increase media alternatives ANS: B Test marketing is a limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. The market city should be similar to the overall market for accuracy of results. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 280

45. Landingham Laboratories has decided to introduce its new over-the-counter antibiotic for ear infections in a limited market consisting of only two cities, and to closely monitor the reactions of potential customers to the product and its marketing program. What is this called? a. dual distribution b. laboratory testing c. test marketing d. use test ANS: C A test market is a limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. PTS: 1 DIF: Application BLM: Higher order

9-12

REF: p. 280

OBJ: 2

46. Which of the following has been found to be an efficient substitute for traditional methods of conducting test markets? a. market concentration b. on-line test marketing c. product sampling d. simulated product adoption ANS: B The text describes the activities of P&G, Quaker Oats, General Mills, and other companies that use on-line test marketing. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 281

47. The maker of Lysol disinfectant tested consumers’ reactions to the company’s Lysol Sanitizing Wipes by getting consumers to look through a newspaper with grocery store ads, make out a grocery list, and then ―shop‖ in a mock store filled with real products, including the new cleaning product. What is this an example of? a. a simulated (laboratory) market test b. a use test c. an adoption-rate test d. a concept test ANS: A Simulated (laboratory) market tests typically entail showing members of the target market advertising for a variety of products, and then monitoring purchase behaviour in a mock or real store. PTS: 1 DIF: Application BLM: Higher order

REF: p. 281

OBJ: 2

48. The maker of Skittles candy kitchen tested and prepared hundreds of batches of candy for taste-testers, who were employees of the company. The taste-testers were instructed to identify the best formula for mint-flavoured Skittles. This was an example of what type of test? a. laboratory b. concept c. diffusion d. market ANS: A Laboratory tests are conducted on prototype products during the development stage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 281

OBJ: 2

9-13

49. One of the following typically entails showing members of the product’s target market advertising and other promotional materials for several products, including the test product. These people are then taken to a mock or real store where their purchases are recorded. Which of the following is being described? a. simulated (laboratory) market test b. adoption-rate test c. concept test d. consumer juried test ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 281

50. What is the final stage in the new-product development process? a. product testing b. simulated marketing c. commercialization d. market testing ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 281

51. During which stage of the new-product development process does production start, inventories are built up, the product is shipped to distribution points, the sales force is trained, and advertising and promotion begin? a. product testing b. product prototyping c. commercialization d. simulated marketing ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 281

52. Parris Laboratories has ordered production materials and equipment needed to make its new slow-release chlorine emulsion for swimming pools in its Rossville plant. Which stage of new-product development is Parris Laboratories entering? a. diffusion analysis b. commercialization c. product prototyping d. business analysis ANS: B During commercialization, production materials and equipment are ordered. PTS: 1 DIF: Application BLM: Higher order

9-14

REF: p. 281

OBJ: 2

53. In the long run, products fail because of a poor match between which of the following? a. prices and consumer demand b. product characteristics and consumer needs c. advertising and personal selling d. the marketing mix and physical distribution ANS: B This poor match is a violation of the marketing concept, which focuses on serving customer needs with the product. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 282

54. When does absolute failure occur? a. when the company prices the product to indicate that it is of the highest quality b. when there is too much synergy between the marketing and production departments c. when products deliver a meaningful and perceivable benefit d. when a company cannot regain its development, marketing, and production costs for a new product ANS: D Failure does not occur from relativizing price and quality. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 282

55. Firms that routinely experience success in new-product introduction tend to have which of the following? a. figurehead leadership b. an obsession with quantity rather than quality c. a vision of what the market will be like in the future d. a history of a sales orientation ANS: C Firms that routinely experience success in new-product introduction tend to have strong leadership, a history of customer orientation, and an obsession with producing the very best product possible. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 282

9-15

56. What is the main goal of the global product development process? a. to expand the number of different new product offerings so that individual country needs are more likely to be met b. to develop every product for potential worldwide distribution and adaptation to other countries c. to come up with a single standard product or product line suitable for all global markets d. to repeat the steps in the process with marketing teams in each and every foreign country targeted ANS: B Multinational companies develop each product for potential worldwide usage, with minor unique requirements incorporated. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 283

57. A global organization that ―thinks local, act local‖ does which of the following? a. adopts a policy of international standardization b. does not engage in product line extension in countries where existing products are well received c. gives country managers more autonomy in new-product development d. adheres to a sales orientation ANS: C REF: p. 283

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

58. What is the name for a consumer who was sufficiently satisfied with his or her trial experience with a product to proceed with some further usage? a. an opt-in buyer b. an innovator c. an adopter d. a diffuser ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

59. When a consumer makes a trial purchase of a new product, what does he or she become in the new-product adoption-stage process? a. a diffusion user b. an adopter c. an inventor d. a laggard ANS: B A trial purchase does not make a consumer an adopter. Satisfaction and continued usage are required to make a consumer an adopter. PTS: 1 OBJ: 5

9-16

DIF: Comprehension BLM: Higher order

REF: p. 284

60. What is a product that is perceived as new by a potential adopter, whether the product is ―new to the world‖ or simply new to the individual? a. an innovation b. a diffusion c. a simulated new product d. a laggard ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

61. Because Laurence did not know companies sold pet insurance so that owners could pay for operations on their pets in the event of a sickness or accident, he paid almost $4,000 to have his dog’s broken hip replaced. Once he discovered that such a product existed, what did he perceive the insurance to be? a. a diffusion b. an innovation c. a product diversification d. a market laggard ANS: B An innovation is a product perceived as new by a potential adopter. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

OBJ: 5

62. The process by which the executives at a large company learned about a company called 25th Hour that provides personal assistants who will run errands for $17 per hour is an example of which of the following? a. a product dissemination b. a diffusion c. marketing communications d. an innovative dispersal ANS: C Diffusion is the process by which the adoption of an innovation spreads. PTS: 1 DIF: Application BLM: Higher order

REF: p. 284

OBJ: 5

63. What is the spread of a new idea from its source of invention or creation to its ultimate users or adopters? a. diffusion b. transmission c. dispersion d. circulation ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

9-17

64. In terms of categories of adopters, those who take on the role of opinion leaders in their community are typically found within which group? a. early majority b. early adopters c. innovators d. late majority ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

65. Those who embrace products relatively early in the product life cycle, are likely to be community oriented, and often are opinion leaders themselves are referred to as which of the following? a. late majority b. laggards c. innovators d. early adopters ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

66. Which of the following are eager to try new ideas and products, typically have higher incomes, are better educated, and are more cosmopolitan than other categories of adopters? a. early majority b. late majority c. early adopters d. innovators ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 284

67. Which of the following statements about how adopters participate in the diffusion process is FALSE? a. Innovators are the first to purchase a new product. b. There are three categories of consumers who will adopt computer products. c. The dominant characteristic of members of the late majority is skepticism. d. Laggards are the last consumers to adopt a new product. ANS: B There are five categories: innovator, early adopter, early majority, late majority, and laggard. PTS: 1 OBJ: 5

9-18

DIF: Comprehension BLM: Higher order

REF: p. 284-285

68. Reginald was happily jogging up the street in his florescent green jogging shorts while listening to his favourite cassette, ―The Best of Anne Murray,‖ in his Sony Walkman. Seeing a bus go by with a sign that claimed ―iPhone is THE way,‖ Reginald snorted, ―That’ll be the day.‖ Reginald belongs to which adopter group? a. early adopters b. laggards c. late majority d. early majority ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 285

69. Franco likes to be ―cutting edge‖ with respect to new trends but carefully researches the Web for anticipated benefits of consumption from peers and checks out competitive offerings before committing to purchase. Franco is in which of the following groups? a. innovators b. early majority c. late majority d. early adopters ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 285

70. Old Oscar’s favourite expression is, ―Old ways is best ways.‖ Oscar was recently told by a couple of his friends that he was becoming out of fashion with regard to his video viewing habits. Reluctantly, he just purchased a DVD player and has considered converting his massive VHS cassette collection to DVD. In terms of adopter categories, where would Oscar fall? a. early majority b. late majority c. early adopters d. laggards ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 285

71. A company finds out that members of its target market are likely to collect more information and evaluate more brands than early adopters. These people are cautious and thoughtful and do not try the product without asking someone else. The customers’ dominant characteristic is deliberateness. In terms of the diffusion process, these customers are most likely in which group? a. laggards b. early minority c. late majority d. early majority ANS: D The early majority will collect more information and evaluate more brands than do early adopters. They rely on friends, neighbours, and opinion leaders for information and norms. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 285

OBJ: 5

9-19

72. Who adopt a product because most of their friends have already done so, and their adoption is usually the result of pressure to conform because they rely on group norms? a. late majority b. innovators c. early majority d. laggards ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 285

73. Among the late majority group, what does adoption of a product primarily result from? a. broadcast advertising b. advertising in nontraditional media c. word-of-mouth advertising d. sales promotions ANS: C REF: p. 285

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

74. In the adopter categories, the final 16 percent to adopt are similar to innovators in that they do not rely on the norms of the group but are independent because they are tradition-bound. They tend to have the lowest socioeconomic status, are suspicious of new products, and are alienated from a rapidly advancing society. Who are they? a. laggards b. decliners c. late majority d. late diffusers ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 285

75. Which of the following is a characteristic that would slow the rate of adoption of new products? a. product complexity b. high compatibility with existing products c. relative advantage over substitute products d. an opportunity to try out the product ANS: A Products that are compatible with others will gain from existing product knowledge, past experiences, and correct needs. PTS: 1 OBJ: 5

9-20

DIF: Comprehension BLM: Higher order

REF: p. 286

76. Many product failures such as cucumber antiperspirant spray, Toaster Eggs, and Health-Sea sea-sausages did not succeed because they did not conform to which product characteristic? a. trialability b. compatibility c. observability d. complexity ANS: B These products failed because they were not compatible with existing products and because customers could not relate to them. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

77. Razor scooters gained instant popularity because walkers and runners frequently saw people on the scooters zipping by them and it looked like the users were having fun. This information suggests the adoption rate of the Razor scooter was most affected by which product characteristic? a. relative advantage b. complexity c. observability d. compatibility ANS: C Observability refers to the degree to which the product benefits can be observed. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

78. A personal care item such as a new flavour of dental floss may have a slow rate of adoption because it is not a highly visible item in homes. Also, this item is not often discussed among friends and coworkers. This is an example of how which characteristic can work to slow the adoption process? a. relative advantage b. observability c. compatibility d. trialability ANS: B Observability refers to the degree to which the benefits or other results of using a product can be observed by others and communicated to target customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

9-21

79. For years many people perceived it as difficult to tape programs on video cassette recorders (VCRs). They could not master the multiple programming steps. As a result, makers of VCRs streamlined the system. To tape a show, all the user needed was a program number available in TV Guide. Makers of VCRs realized that which product characteristic was slowing sales? a. complexity b. trialability c. compatibility d. relative advantage ANS: A Complexity is the degree of difficulty in understanding a product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

80. Which of the following products has the lowest level of trialability? a. green-tinted light bulbs b. low-carb yogurt c. a new reality-based television show d. orthodontic braces ANS: D Trialability is the degree to which the product can be tried on a limited basis. Braces cannot be. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

81. What can the marketers of consumer products expect to find when they study and apply the product life cycle theory to their products? a. Changes in a product can change its life cycle. b. The theory helps to predict how long a firm will stay in each stage. c. The lengths of time that products stay in any one stage is standardized for consumer products, but not industrial products. d. All products except those considered faddish go through every stage. ANS: A If a firm changes a feature of the product, it could move into another product life cycle stage. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 287

82. According to the text, which of the following statements about the product life cycle is true? a. The product life cycle concept encourages marketing managers to think reactively. b. Almost all sales in the intro and growth stages of the product life cycle represent repeat purchasing. c. The relationship between the laggard category and the stages of the product life cycle are well understood. d. The product life cycle is especially useful as a forecasting tool. ANS: D REF: p. 287

9-22

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

83. According to the text, which of the following statements about the product life cycle is true? a. Marketers do not yet understand the relationship between the adopter categories and the stages of the product life cycle. b. The product life cycle concept encourages marketing managers to think reactively. c. The product life cycle is especially useful as a predicting tool. d. Just as there are five adopter categories, there are five product life cycle stages. ANS: C The product life cycle concept encourages marketing managers to think proactively. Almost all sales in the maturity and decline stages of the product life cycle represent repeat purchasing. The relationship between the adopter categories and the stages of the product life cycle are well understood. The product life cycle has four stages. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 287

84. Laptop computers, pet food, cake mixes, DVDs, and recreational vehicles are examples of what? a. brand classes that satisfy a particular type of need b. line-extendable categories that satisfy a particular type of need c. product categories that satisfy a particular type of need d. product life cycle line items that satisfy a particular type of need ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 287

85. Otto-Light is a desk light that lets hobbyists match colour swatches accurately without going outside. It’s like convenient, natural sunlight inside. The lights have high marketing costs, are sold with high dealer margins, and have high production costs. Ads for the product aim at educating craftspeople who work with fabrics and paints about the benefits of the Otto-Light. In which stage of the product life cycle is the light? a. saturation b. decline c. growth d. introductory ANS: D These characteristics illustrate the introductory stage of the product life cycle. PTS: 1 BLM: Remember

DIF: Application

REF: p. 288

OBJ: 6

86. Which stage of the product life cycle would feature very high promotional expenditures in an attempt to create customer awareness? a. maturity b. introduction c. growth d. decline ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 288

9-23

87. Ortho Products would like to estimate the length of time that its new product, the Sonar Brush (cleans teeth without touching them), will stay in the introductory phase of its product life cycle. What do you tell management? a. Time is largely determined by the income level of its target markets. b. Time is largely determined by the political and legal environment. c. Time is largely determined by the level of relative advantage over what is currently being used. d. Time is largely determined by the general economic environment. ANS: C The relative advantage is the degree to which a product is perceived to be superior to existing substitutes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 288

OBJ: 6

88. Firebrand Technologies has been researching and developing a revolutionary product in its company labs for the past five years. The company has just finished developing a cigarette that is smokeless and contains no nicotine. Firebrand is looking forward to a very profitable product launch. What stage of the product life cycle is the company in? a. development b. growth c. maturity d. introduction ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 288

89. The length of the introductory stage of the product life cycle for a new product is largely determined by which of the following? a. the efficiency of the test marketing b. the product’s marketing mix c. product characteristics, such as advantages over substitute products d. the size of the product ANS: C The introductory stage of the product life cycle is affected by how customers perceive the characteristics of the product. Other factors that affect the length of the introductory stage are the educational effort required to use the item and management’s resource commitment to the item. PTS: 1 OBJ: 6

9-24

DIF: Comprehension BLM: Higher order

REF: p. 288

90. The advertising strategy during the growth stage of the product life cycle should be to do what? a. make the mass market aware of brand benefits b. emphasize the product’s low price to help reduce inventories c. use advertising as a vehicle for introducing the product category benefits d. make the market aware of product category brands ANS: A During growth, the competition has appeared, and advertising should emphasize brand differences. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 289

91. Why do profits increase during the growth stage of the product life cycle? a. Distribution intensity is increasing. b. Competitors have arrived and revenues are under pressure. c. Competition has not yet taken away company sales. d. Prices charged increase during the growth stage. ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 289

92. What is the phase of the product life cycle in which healthy profits usually begin to appear? a. introductory b. decline c. maturity d. growth ANS: D Because losses often occur during the introduction stage, profits first appear in the growth stage. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 289

93. What happens toward the end of the growth stage of the product life cycle? a. There is little emphasis on the distribution strategy. b. Demand for the product is limited to high-income consumers. c. Profits peak. d. There is decreased direct competition. ANS: C REF: p. 289

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

94. Zippy Construction Ltd. has been experiencing extremely tough competition in recent months for its specialty housing components. Fred Farkle, President of Zippy Construction, was reading the latest industry statistics on overall sales of specialty components and noted that revenues had plateaued. It is likely that Mr. Farkle was facing which stage of the product life cycle? a. maturity b. introduction c. growth d. decay ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 289 9-25

95. Normally, what is the longest stage of the product life cycle? a. introduction b. maturity c. decay d. growth ANS: B REF: p. 289

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

96. Typically, at the beginning of the maturity stage of the product life cycle, what happens to sales? a. They decrease at an increasing rate. b. They increase at an increasing rate. c. They increase at a decreasing rate. d. They become flat and do not change. ANS: C In the maturity stage, sales are still increasing, but the rate of increase has slowed down. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 289

97. What happens during the maturity stage of the product life cycle? a. Profit margins are at their peak. b. Promotion to the dealer is often intensified. c. More shelf space is made available to the product. d. Product lines are narrowed. ANS: B In maturity, one of the only ways to fuel an increase in sales is to push more products to the dealer. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 289

98. Post has been manufacturing and marketing breakfast cereals for over 100 years. It spends much of its marketing budgets on short-term promotions aimed at stealing market share from General Mills and other cereal manufacturers. From this information, you should know that cereals are in the which stage of their product life cycle? a. development b. growth c. decline d. maturity ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 289

99. A long-run drop in sales signals the beginning of which stage in the product life cycle? a. saturation stage b. laggard stage c. decline stage d. decay stage ANS: C REF: p. 290 9-26

PTS: 1 OBJ: 6

100. Which of the following products is most likely to be in the decline stage of its product life cycle? a. prerecorded audiocassette tapes b. programmable CD-ROMs c. wireless mobile phones d. sports drinks ANS: A Its sales are falling and the product is not being supported by marketing efforts even though there are still some computers that can use that size diskette. PTS: 1 DIF: Application BLM: Higher order

REF: p. 290

OBJ: 6

101. The rate of sales decline during the decline stage of the product life cycle is largely governed by which of the following? a. the number of competitors in the market b. how rapidly consumer tastes change or substitute products are adopted c. the intensity of the competition’s marketing efforts d. the amount of money spent on advertising ANS: B Changing consumer tastes can force a product into decline, particularly if an alternative is available. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 290

102. You are a product manager for a manufacturer of detergent. You have determined that detergent is in the mature stage of the product life cycle. To keep your product from entering the decline stage, what should you do? a. Promote detergent heavily to dealers and customers. b. Use promotion to increase primary demand for detergent. c. Raise the price of the detergent because customers are not price sensitive in this stage. d. Abandon peripheral target markets for detergent. ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 290

103. The marketing manager for a company that manufactures pet foods wants to base the marketing strategy he implements for the company’s products on the product life cycle stages. In order to do this, what should he do? a. Add new ingredients to products that enter the maturity stage of the product life cycle. b. Change all private brands to generic brands once a product reaches the maturity stage. c. Create a line extension for every product the company makes as soon the product leaves the introduction stage of its product life cycle. d. Change the labels on its products as they change stages of the life cycle. ANS: A See Review Learning Objective 6. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 290

OBJ: 6

9-27

After years of development and testing, Jabra Corporation unveiled the Jabra 1000 ear-bud phone. The entire device fits in your ear. Jabra’s transmitter picks up your voice by amplifying sound vibrations in your bones. Therefore, there’s no microphone boom to jut out in front of your face. Because the bone vibrations must be amplified, a special chip in the part of the system that connects to the base of your phone uses noise-cancellation technology to screen out background sounds. This anti-noise chip generates a mirror image of outside noises, and the colliding sound waves erase each other. The main electronics package—about the size of a deck of cards—also monitors the quality of the phone line and automatically raises the volume of voice transmissions when the connection is weak. This tech-talk isn’t cheap: the ear-bud phone lists for $329. 104. Refer to Jabra Corporation. What type of new product is the Jabra 1000 described above? a. a repositioned product b. an improvement to an existing product c. a discontinuous innovation d. an addition to existing product line ANS: C The Jabra 1000 is a new-to-the-world product (the product category itself is new) and, as such, is a discontinuous innovation. PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

OBJ: 1

105. Refer to Jabra Corporation. When the Jabra 1000 was first launched, it most likely appealed to which product adopter category? a. early majority b. late majority c. early adopter d. innovators ANS: D Innovators are eager to try new ideas and products almost as an obsession. Since the Jabra 1000 is a new-to-the-world product, innovators should be the first adopters. PTS: 1 DIF: Application BLM: Higher order

REF: p. 284

OBJ: 5

106. Refer to Jabra Corporation. The Jabra 1000 is technically advanced and somewhat difficult for people to understand. Thus, what may affect the rate of diffusion? a. the relative advantage of the product b. the compatibility of the product c. the complexity of the product d. the trialability of the product ANS: C Complexity refers to the degree of difficulty involved in understanding and using a new product. PTS: 1 DIF: Application BLM: Higher order

9-28

REF: p. 286

OBJ: 5

107. Refer to Jabra Corporation. The Jabra 1000 is similar to the ear-bud system in a Walkman, which may increase adoption rates. What may explain the rate of diffusion? a. the observability of the new product b. the compatibility of the new product c. the trialability of the new product d. the complexity of the new product ANS: B Compatibility refers to the degree to which the new product is consistent with existing values and product knowledge. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

108. Refer to Jabra Corporation. The Jabra 1000 is superior to existing hands-free telephones, especially with its small size and single part. However, consumers may think its advantages over current hands-free phones may not be worth the additional cost. Thus, what may affect adoption? a. the relative advantage of the new product b. the trialability of the new product c. the complexity of the new product d. the observability of the new product ANS: A The relative advantage is the degree to which a product is perceived to be superior to existing substitutes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

109. Refer to Jabra Corporation. When the first Jabra 1000 was sold, the initial sale signalled the start of which stage of the product life cycle? a. introductory b. growth c. maturity d. decline ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 288

9-29

In the early 1900s, a new product was developed—the phonograph record, and it allowed people to listen to and appreciate recorded music in the privacy of their homes. At first, consumers were reluctant because the idea was so novel and difficult to comprehend. During the 1930s, the pioneers in the record industry were experiencing strong sales and profits. As a result, other firms began to enter the market and competition intensified. At this point, there were hundreds of record producers and manufacturers. During the 1940s and 1950s, sales continued to increase, but at a much slower rate. The market stayed at approximately the same level until the late 1960s when a new technology arrived in the form of the eight-track tape. The record market began a slow decrease in sales. By the 1970s, another new technology, cassette tapes, replaced the eight-track tape. During the 1970s and 1980s, record production continued to decrease. In the late 1980s, sales dropped rapidly as yet another new technology arrived, the compact disc. Today, most stores no longer carry records, which have become a niche product, and digital audiotapes are a new alternative. 110. Refer to Music Industry. Digital audio tapes are similar to regular cassette tapes, but with superior sound quality. These characteristics may increase adoption rates. This suggests that which of the following may explain the rate of diffusion? a. the complexity of the new product b. the observability of the new product c. the compatibility of the new product d. the trialability of the new product ANS: C Compatibility refers to the degree to which the new product is consistent with existing values and product knowledge. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

111. Refer to Music Industry. The scenario outlines the stages of development of the market for phonograph albums. What is the name for this group of stages? a. product breadth b. marketing mix c. product life cycle d. product mix ANS: C The product life cycle traces the stages of a product’s acceptance from its introduction to its decline. PTS: 1 DIF: Application BLM: Higher order

9-30

REF: p. 287

OBJ: 6

112. Refer to Music Industry. Record companies spent a lot of money on product information advertising in the 1920s to educate the public about the new technology. This is a characteristic of which stage of the product life cycle? a. decline b. maturity c. introduction d. growth ANS: C Marketing costs are high because the market needs to be educated about the product in the introductory stage of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 288

OBJ: 6

113. Refer to Music Industry. The market for record albums in the 1930s suggests phonograph records were in which stage of the product life cycle at that time? a. decline b. introduction c. growth d. maturity ANS: C The record companies were experiencing strong growth during the 1930s and many competitors were entering the market. These are characteristics of the growth stage of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 289

OBJ: 6

114. Refer to Music Industry. The time from the 1940s through the 1960s corresponds to which stage of the product life cycle for phonograph records? a. decline b. growth c. introduction d. maturity ANS: D A period during which sales continue to increase, but at a decreasing rate, indicates the maturity stage of the life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 289

OBJ: 6

9-31

115. Refer to Music Industry. The phonograph record industry is currently in what stage of the product life cycle? a. growth b. decline c. oversaturation d. maturity ANS: B The long-run drop in sales signals that the industry is in the decline stage of the life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 290

OBJ: 6

When friends of Brian Richardson went to the carnival, they always wanted to take him with them because Richardson had an uncanny ability to win almost every arcade game he played. Usually by the end of the evening his friends were also winning because Richardson did not mind sharing his secrets. His friends urged him to write a book. After several attempts, Richardson created The Secrets of Amusement Park Games—Revealed. In the 85-page book, Richardson reduces the art of playing arcade games to a science. According to him, the trick is to realize each game is not a game of chance. Richardson’s mini-book is available at Amazon.ca for $5.95. 116. Refer to Amusement Park Games. In terms of the new-product development process, Richardson’s friends who encouraged him to put his ideas in a book were involved in which of the following? a. product development b. idea generation c. idea screening d. test marketing ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 276

117. Refer to Amusement Park Games. In terms of the new-product development process, Richardson’s several unsuccessful attempts to put his thoughts on paper are an example of which of the following? a. idea generation b. business analysis c. idea screening d. test marketing ANS: C OBJ: 2

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 276

118. Refer to Amusement Park Games. In terms of the new-product development process, the book’s availability on Amazon.ca is which stage? a. commercialization b. test marketing c. business analysis d. idea screening ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 281

119. Refer to Amusement Park Games. Since with the use of Richardson’s book, most people can win arcade games and carry home as many stuffed animals as their arms can hold, it would seem likely that carnival operators would hope for which of the following? a. a slow diffusion of the book b. the book’s purchase by laggards c. a rapid diffusion of the book d. intensive distribution of the book ANS: A OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 284

120. Refer to Amusement Park Games. Because the benefits of reading the book and employing its techniques are obvious to anyone who has ever attended a carnival, The Secrets of Amusement Park Games—Revealed can be said to exhibit which product characteristic? a. complexity b. compatibility c. observability d. trialability ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

121. Refer to Amusement Park Games. Some people might consider the use of Richardson’s techniques as being unethical, and this value judgment could adversely affect its adoption. What does the judgment result from? a. the book’s observability b. the book’s compatibility c. the book’s intangibility d. the book’s complexity ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

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Finland-based Rapala VMC Corp. is the world’s largest fishing lure manufacturer. It developed its first fishing lure—a cigar-shaped minnow—in 1962. The annual market for fishing lures in terms of retail sales is approximately $600 million. Rapala VMC garnered one-third of that amount in 2003. New lures must be introduced each year in order to stay competitive in this industry. Like other lure manufacturers, Rapala focuses on two questions in developing and making new lures: Does it work, and does it look good? Developing a new lure takes two or three years and involves extensive field testing by tournament professionals and fishing guides. At the annual fishing industry trade show in 2003, Rapala unveiled the “dream lure for the 21st century.” 122. Refer to Rapala. The ―dream lure for the 21st century will more than likely be an example of what? a. an addition to an existing product line b. a repositioned product c. a new product line d. an improvement to an existing product ANS: A The firm makes lures and is simply adding a new one to its product mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

OBJ: 1

123. Refer to Rapala. The testing of new lures by tournament professionals and fishing guides would take place in which stage of new-product development? a. idea screening b. idea generation c. product development d. concept testing ANS: C These lures would be prototypes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

OBJ: 3

124. Refer to Rapala. After the trade show, the newest lure made by Rapala will enter which stage of the new-product development process? a. idea screening b. commercialization c. concept testing d. product development ANS: B OBJ: 3

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 281

125. Refer to Rapala. As a global marketer, Rapala uses a one product–one message strategy. What does this mean? a. It empowers local managers to change the product in any way necessary. b. It sells the same product using the same promotional tools in every country in which it operates. c. It gives its local managers promotional and production autonomy. d. It has low brand equity. ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 283

126. Refer to Rapala. Because buyers of fishing lures want to have the newest, most technologically improved lure, most of Rapala’s customers would more than likely fall into which category of adopters? a. prompt diffusers b. early adopters c. early majority d. innovators ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 284

127. Refer to Rapala. The degree to which the newest lures are perceived as superior to earlier models refers to a characteristic used to predict the rate of adoption. What is it? a. complexity b. trialability c. relative advantage d. differentiation capability ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

128. Refer to Rapala. Fishing lures are most likely in which stage of their product life cycle? a. innovation b. growth c. maturity d. decline ANS: C One of the characteristics of product’s in the maturity stage is the addition of annual models. PTS: 1 DIF: Application BLM: Higher order

REF: p. 289

OBJ: 6

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A European dairy, which is famous for its rich ice creams, has introduced basil-, tomato-, fennel-, and oregano-flavoured ice creams. 129. Refer to European Dairy. What is the introduction of new flavours an example of? a. a new product line b. a repositioning strategy c. a revision to existing products d. an addition to an existing product line ANS: D OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 272

130. Refer to European Dairy. In the process of developing these new flavours, the dairy surveyed world-famous chefs to determine which nontraditional flavours had the greatest level of marketability. This survey would have happened during which stage of the product development process? a. basic research b. applied research c. idea screening d. brainstorming ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 277

131. Refer to European Dairy. Which of the following product characteristics would most likely influence the market success of these new flavours? a. compatibility b. competitive advantage c. comparability d. tangibility ANS: A OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

Canesta has developed a virtual keyboard out of light to be used with cell phones and personal digital assistants. The product beams an image of a keyboard on a desk, allowing the user to type on the image. The words are picked up by the user’s digital device. 132. Refer to Virtual Keyboard. This virtual keyboard, which is radically different from anything currently on the market would be classified as which of the following? a. a discontinuous innovation b. a sporadic innovation c. a venture product d. an episodic innovation ANS: A New-to-the-world products, where the product category itself is new, are also called discontinuous innovations. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 272

OBJ: 1

133. Refer to Virtual Keyboard. During which stage of its new-product development process would a group have been assigned the task of estimating preliminary demand for the product, costs, sales, and future profitability? a. business analysis b. idea generation c. screening d. test marketing ANS: A In the business analysis stage of new-product development, preliminary demand, cost, sales, and profitability estimates are made. PTS: 1 DIF: Application BLM: Higher order

REF: p. 278

OBJ: 2

134. Refer to Virtual Keyboard. In a meeting with Canesta corporate officials, you (a leading marketing consultant) are asked if the new virtual keyboard will be quickly accepted by the Canadian consumer. You tell them that this depends on many product characteristics—as a matter of fact, all of the following EXCEPT which one? a. the ―buy Canadian‖ movement in Canada b. how much of a relative advantage it has over currently used keyboards c. how similar it is to existing keyboards in use and fulfilling needs d. its degree of trialability ANS: A It is the product characteristics that affect the adoption rate most heavily, things such as features when compared to competitor brands or the simplicity and trialability of the product. The ―buy Canadian‖ movement is external to the acceptance of the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 286

OBJ: 5

Market researchers have determined nine categories of lifestyles for computer users. 135. Refer to Lifestyle Categories. One of the categories is described as ―Mouse Potatoes,‖ who like the Internet for entertainment and can’t wait to buy the latest in ―technoentertainment.‖ In terms of the diffusion process, ―Mouse Potatoes‖ would be classified as which of the following? a. innovators b. late majority c. early majority d. late adopters ANS: A See Exhibit 9.7. PTS: 1 DIF: Application BLM: Higher order

REF: p. 284

OBJ: 6

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136. Refer to Lifestyle Categories. One of the categories is described as ―Hand-Shakers,‖ who are typically managers who do not possess any computer skills but rather allow their assistants to provide all necessary technological knowledge. In terms of the diffusion process, ―Hand-Shakers‖ would most likely be classified as which of the following for office technology? a. late adopters b. late minority c. laggards d. late majority ANS: C See Exhibit 9.7. PTS: 1 DIF: Application BLM: Higher order

REF: p. 285

OBJ: 6

137. Refer to Lifestyle Categories. One of the categories is described as ―Fast Forwards,‖ who are the early adopters of new technology for home, office, and personal use. This means that this group is most likely to adopt new technology when it is in which stage of its product life cycle? a. expansion b. introduction c. maturity d. growth ANS: B See Exhibit 9.7. PTS: 1 DIF: Application BLM: Higher order

REF: p. 288

OBJ: 6

TRUE/FALSE 1. The development of a strawberry-flavoured cake mix by Duncan Hines would not be considered a new product since the company was already making cake mixes. It would simply be called a line extension. ANS: F Line extensions, such as new cake mixes, are considered to be a type of new product. PTS: 1

DIF: Application

REF: p. 273

OBJ: 1

2. Reynolds, the manufacturer of aluminum foil, developed plastic wrap in an array of different festive colours. This is an example of a new product. ANS: T OBJ: 1

PTS: 1

DIF: Application

REF: p. 273

3. While developing new products is far from an exact science, most firms do follow a formal new-product development process. ANS: T REF: p. 275 9-38

PTS: 1 OBJ: 2

DIF: Comprehension

4. A firm’s new-product strategy links the new-product development process with the objectives of the marketing departments, the business unit, and the corporation. ANS: T REF: p. 275

PTS: 1 OBJ: 2

DIF: Comprehension

5. For a firm that adheres to the marketing concept, the logical place to start generating new-product ideas is with the customers of the firm. ANS: T REF: p. 276

PTS: 1 OBJ: 2

DIF: Comprehension

6. The two techniques that are considered most useful for generating new-product ideas are customer generation and competitive imitation. ANS: F The two techniques that are considered most useful for generating new-product ideas are brainstorming and focus group. PTS: 1

DIF: Definition

REF: p. 277

OBJ: 2

7. Seven employees at Ferguson Fabricators are trying to come up with ideas for new-product development. The employees are all in a room together, shouting out potential ideas. The ideas are written down and evaluated as they are generated. This is an example of brainstorming. ANS: F Brainstorming does not involve evaluation of the ideas as they are generated; criticism of any kind is avoided. PTS: 1

DIF: Application

REF: p. 277

OBJ: 2

8. It is considered inefficient to use concept tests during the idea-screening stage of the new-product development process. ANS: F During the idea-screening stage of the new-product development process, it is appropriate to use concept tests. PTS: 1

DIF: Definition

REF: p. 277

OBJ: 2

9. Andersen Electronics is currently engrossed in its first estimations of costs and revenues for a new amusement park video skill game. This firm is engaged in a new-product business analysis. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 278

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10. Basically, all that happens in the development stage of the new-product process is that the first prototype of the product gets developed. ANS: F Not only is a prototype developed, where appropriate, but also preliminary decisions on every aspect of the four Ps are developed at this stage. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 279

11. A test market is one example of a laboratory test where consumers are encouraged to try a new product and provide feedback to the manufacturer. ANS: F A test market is not a laboratory test. PTS: 1

DIF: Definition

REF: p. 280

OBJ: 2

12. The city a firm chooses as its test market should reflect the demographic and other characteristics of the whole nation only if that is an accurate representation of the producer’s intended market for the product. ANS: T REF: p. 280

PTS: 1 OBJ: 2

DIF: Comprehension

13. Test marketing may result in a serious problem if a firm’s competitors find out about the new product before it has been fully introduced. ANS: T REF: p. 280

PTS: 1 OBJ: 2

DIF: Comprehension

14. Canada Post has developed a personalized photo stamp that customers can create and use to mail letters. Canada Post has already performed screening, development, and testing. Assuming the results coincide with profit and cost expectations, the most likely next step is commercialization. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 281

15. The most important factor in successful new-product introductions is a good match between product characteristics and customer desires. ANS: T REF: p. 282

PTS: 1 OBJ: 3

DIF: Comprehension

16. Increasing globalization of markets and of competition provides a reason for multinational firms to consider new-product development from a worldwide perspective. ANS: T REF: p. 283

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PTS: 1 OBJ: 4

DIF: Comprehension

17. Diffusion is the process by which the adoption of an innovation spreads. ANS: T OBJ: 5

PTS: 1

DIF: Definition

REF: p. 284

18. The Sumatra Coffee Company has two new products. One is a simple hand-cranked coffee grinder. The other is a combination grinder and brewer that also can be used to dispense hot milk. Of these two, the hand-cranked grinder will probably be diffused more quickly because it is less complex. ANS: T OBJ: 5

PTS: 1

DIF: Application

REF: p. 284

19. A recording company that is introducing audio versions of early television comedies has decided to offer clips of the recordings at its website. This plan will increase the trialability of the new product. ANS: T OBJ: 5

PTS: 1

DIF: Application

REF: p. 286

20. The product life cycle is so named because it is similar to the premise underlying the concept of any life cycle. The unit of interest is born, it grows for some time, and it reaches some level of maturity and stability before dying. ANS: T REF: p. 287

PTS: 1 OBJ: 6

DIF: Comprehension

21. Walker Zanger is about to introduce a new type of ceramic tile that is scratch-resistant and unbreakable. As with other products of this type, Walker Zanger can expect sales of this new type of flooring to follow a bell-shaped curve over the next 10 to 15 years as it follows the product life cycle. ANS: F Sales of product do not typically follow precise bell-shaped curves over a set period of time. The length of time a product spends in any one stage of the product life cycle may vary dramatically. PTS: 1

DIF: Application

REF: p. 287

OBJ: 6

22. Increasing competition, aggressive brand advertising, and healthy profits are all characteristics found in the introductory stage of the product life cycle. ANS: F This describes the growth stage. PTS: 1

DIF: Definition

REF: p. 287

OBJ: 6

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23. Canesta has developed a virtual keyboard out of light to be used with cell phones and personal digital assistants. Canesta is the pioneering firm in the field and is troubled by economic concerns. Production and promotional costs are high, and profits are negative. Such poor business performance is typical of firms in the introductory stage of the product life cycle. ANS: T OBJ: 6

PTS: 1

DIF: Application

REF: p. 288

24. Profits typically reach their peak during the growth stage of the product life cycle. ANS: T REF: p. 289

PTS: 1 OBJ: 6

DIF: Comprehension

25. Steve Legado designs software for the medical profession. He thinks that the market for his product is reaching saturation. This would imply that Legado’s product is in the growth stage of its product life cycle. ANS: F When a market approaches saturation, it indicates the product is in the maturity stage of the product life cycle. PTS: 1

DIF: Application

REF: p. 289

OBJ: 6

26. Many products may experience short-term fluctuations in sales, but a long-term drop in sales probably signifies that a product is in the decline stage of the product life cycle. ANS: T REF: p. 290

PTS: 1 OBJ: 6

DIF: Comprehension

27. The product life cycle concept encourages marketing managers to act reactively. ANS: F The product life cycle concept encourages marketing managers to plan so they can take the initiative instead of reacting to past events. PTS: 1

DIF: Application

REF: p. 290

OBJ: 6

ESSAY 1. Name and describe four categories of new products. ANS: New-to-the-world products (discontinuous innovations) are products that are introduced in an original form. These products create an entirely new market. New product lines are products that the firm has not offered in the past but will be introduced into an established market. Additions to existing product lines are new products that supplement a firm’s established line. Complementary products can also supplement a firm’s offerings. 9-42

Improvements or revisions of existing products are usually minor changes that may entail addition or deletion of ingredients. Many of these products are labelled ―new and improved.‖ Repositioned products are existing products targeted at new markets or market segments. Lower-priced products are those that provide similar performance to competing brands at a lower cost. Lower cost may result from technological advantages, economies of scale in production, or lower marketing costs. PTS: 1

DIF: Application

REF: p. 272-273

OBJ: 1

2. Studies of the new-product development process over the last 30 years have concluded that companies that are likely to succeed in developing and introducing new products exhibit certain characteristics. List three of the characteristics that improve the likelihood of successful product introduction. ANS: • A long-term commitment to the support of innovation and new-product development • Implementation of a company-specific approach, driven by corporate objectives and strategies, with a well-defined new-product strategy at its core • Capitalization on experience to achieve and maintain competitive advantage An organizational environment that is conducive to achieving company-specific new product and corporate objectives. This environment includes management style, organizational structure, and degree of top management support. •

PTS: 1

DIF: Application

REF: p. 282

OBJ: 2

3. The multiple-step new-product development process is an essential ingredient in new-product development. List the seven steps of this process. ANS: 1. 2. 3. 4. 5. 6. 7. PTS: 1

New-product strategy Idea generation Screening Business analysis Development Test marketing Commercialization DIF: Application

REF: p. 275-282

OBJ: 2

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4. As the marketing vice president for Vizard Garden Accessories, you must come up with new product ideas for the manufacturer of garden gazebos, trellises, benches, and tables. What are five important sources of new product ideas? What are some techniques you could use to stimulate creative thinking for new product ideas? ANS: Sources of ideas include: • Customers (toll-free numbers, letters, complaints, and so on) • Employees (sales force, marketing research personnel, and so on) • Distributors • Competitors • Research and development (basic and applied) staff • Outside consultant groups • Acquisitions • Inventors • Advertising agency • World Wide Web/Internet Techniques for idea generation include: • • PTS: 1

Brainstorming Focus groups DIF: Application

REF: p. 276-278

OBJ: 2

5. Describe the screening stage of the new-product development process. Describe a common test used during the screening stage. ANS: The screening process is used as an initial filter to eliminate new product ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason. The review is usually done by a group formally appointed to screen new product ideas. Most new product ideas are rejected at this stage. Concept tests are often used at the screening stage to evaluate product concept alternatives. Concept tests can be good predictors of early trial and repeat purchases for line extensions. They are not as accurate in predicting the success of new products that create new consumption patterns and require major changes in consumer behaviour. PTS: 1

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DIF: Application

REF: p. 277-278

OBJ: 2

6. New product ideas that survive the initial screening process move to the business analysis stage. List six questions that are commonly asked during the business analysis stage. ANS: 1. 2. 3. 4. 5. 6. 7. 8. 9.

What is the likely demand for the product? What impact would the new product probably have on total sales, profits, market share, and return on investment? How would the introduction of this product affect existing products? Would it cannibalize existing products? Would current customers benefit from the product? Would the product enhance the image of our overall product mix? Would the product affect current employees in any way? Would it lead to hiring more people or reducing the size of the work force? What new facilities, if any, would be needed? How might competitors respond? What is the risk of failure? Is the company willing to take the risk?

PTS: 1

DIF: Application

REF: p. 278

OBJ: 2

7. After successful business analysis of a new product, the development stage begins. Describe the development process. Be sure to explain the difference between laboratory testing and use testing. ANS: While a prototype product is being physically developed by the R&D or engineering department, the marketing department begins to develop marketing strategies. Packaging, branding, and labelling decisions are made, while preliminary promotion, price, and distribution strategies are developed. Technical feasibility of manufacturing the product at a reasonable cost is also examined. Prototype product models are often laboratory- and use-tested during the development stage. Laboratory tests subject products to much more severe treatment than is expected by end users. Laboratory testing can ensure that products conform to established safety standards. Use tests place the prototype in consumers’ homes or businesses for trial. Most products require some refinement based upon laboratory and use tests. PTS: 1

DIF: Application

REF: p. 279-280

OBJ: 2

8. After products and marketing programs have been developed for new products, they are usually tested in the marketplace. What is test marketing? How might a company benefit from the use of test marketing? How can test marketing cause problems for a company? ANS: Test marketing is a limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation. An advantage of test marketing is that it allows management to evaluate alternative strategies and see how well the various aspects of the marketing mix fit together. Test marketing may reduce risk by allowing modification of a marketing mix before national introduction or withdrawal of a product with failure characteristics.

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However, test markets have several disadvantages: costs of test markets are high, a test market reveals the product to competitors, and a product’s success in a test market does not guarantee it will be a nationwide hit. PTS: 1

DIF: Application

REF: p. 280-281

OBJ: 2

9. When choosing a test market, managers need to consider many criteria for a good test market city. List six criteria. ANS: • • • • • • • • • • • • • • • • • PTS: 1 OBJ: 2

Location has demographics and purchasing habits that mirror the overall market Company has good distribution in test cities Media isolation Similarity to planned distribution outlets Relative isolation from other cities Availability of advertising media that will cooperate Diversified cross-section as to ages, religion, cultural-societal preferences, etc. No atypical purchasing habits Representative population size Typical per capita income Good record as a test city, but not overly used Not easily ―jammed‖ by competitors Stability of year-round sales No dominant television station; multiple newspapers, magazines, and radio stations Availability of retailers that will cooperate Availability of research and audit services Freedom from unusual influences DIF: Application

REF: p. 280 Exhibit 9.2

10. What three ways can test marketing cause problems for a company? What are two alternatives that can be used instead of traditional test marketing? ANS: Costs of test markets are extremely high, and a product’s success in a test market does not guarantee it will be a nationwide hit. Additionally, test marketing exposes the new product and its marketing plan to competitors. Thus, there is a loss of the element of surprise as well as a loss of valuable information. Competitors can sabotage a testing program if they find out about it. Supermarket scanner testing (single-source research) is one test marketing alternative. Another alternative is a simulated market test (also called a laboratory market test). These tests entail showing people promotional materials for several products, including the test products. These people then shop at a mock or real grocery store where purchases are monitored. PTS: 1

DIF: Application

REF: p. 281

OBJ: 2

11. What is the final stage in the new-product development process? What tasks are set in motion during this stage? ANS: 9-46

The final stage in the new-product development process is commercialization. The decision to commercialize sets several tasks in motion: ordering production materials and equipment, starting production, building inventories, shipping the product to field distribution points, training the sales force, announcing the product to the trade, and advertising to potential customers. PTS: 1

DIF: Application

REF: p. 281

OBJ: 2

12. What is the most important factor in a successful new-product introduction? What are three reasons that products fail? Identify five characteristics of firms that typically experience success in new-product introductions. ANS: The most important factor in a successful new product introduction is a good match between the product and market needs as the marketing concept would predict. Furthermore, successful new products are different in some meaningful way from their intended substitutes and deliver a meaningful and perceivable benefit to a sizable number of people or organizations. Failure factors include a poor match between product characteristics and consumer needs, overestimation of market size, incorrect positioning, a price that is too high or too low, inadequate distribution, poor promotion, or an inferior product compared to those of competitors. Firms that routinely experience success in new-product introductions tend to share the following characteristics: • • • • • • PTS: 1

A history of carefully listening to customers An obsession with producing the best product possible A vision of what the market will be like in the future Strong leadership A commitment to new-product development A team approach to new-product development DIF: Application

REF: p. 282

OBJ: 3

13. Describe how a multinational corporation can most efficiently and effectively meet the needs of the global market. ANS: A firm that adopts a worldwide new-product development strategy is better able to develop products with specifications that are marketable in multiple countries. Ideally, products should be developed for potential worldwide distribution, and unique multinational market requirements are incorporated into the base product whenever technically feasible. A company could also design products to meet regulations and other key requirements in its major market and then meet smaller markets’ requirements on a country-by-country basis. The main goal of the global product development process is not to develop a standard product or product line, but to build adaptability into products that are expected to achieve worldwide appeal. PTS: 1

DIF: Application

REF: p. 283

OBJ: 4

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14. There are five categories of adopters that participate in the diffusion process. Name and briefly describe each of these five categories in the correct order from earliest adopter to last adopter. ANS: Innovators represent the first 2.5 percent of adopters. They are venturesome and eager to try new products. They have higher incomes, better education, self-confidence, and less reliance on group norms than noninnovators. Moreover, they are active outside their communities. Innovators obtain information from scientific sources and experts. Early adopters represent the next 13.5 percent of adopters. They are reliant on group norms and values, oriented to the local community, and likely to be opinion leaders. The early majority is the next 34 percent to adopt. They are deliberate in their information collection and are likely to be the friends and neighbours of opinion leaders. The late majority is the next 34 percent to adopt. They adopt with skepticism to conform to social pressure. They tend to be older and below average in income and education. They rely on word-of-mouth communication rather than the mass media. Laggards are the final 16 percent to adopt. They are tradition bound and do not rely on group norms. Laggards have the lowest socioeconomic status, are suspicious of new products, and are alienated from a rapidly advancing society. Marketers typically ignore laggards. PTS: 1

DIF: Application

REF: p. 284-285

OBJ: 5

15. There are five product characteristics that can be used to predict and explain the rate of acceptance and diffusion of a new product. Name and briefly describe four of these characteristics. ANS: Complexity refers to the degree of difficulty involved in understanding and using a new product. The more complex the product, the slower its diffusion. Compatibility refers to the degree to which the new product is consistent with existing values and product knowledge, past experiences, and current needs. Incompatible products diffuse more slowly than compatible products. Relative advantage is the degree to which a product is perceived to be superior to existing substitutes. Superiority increases the diffusion rate. Observability refers to the degree to which the benefit or other results of using the product can be observed by others and communicated to target customers. Trialability is the degree to which a product can be tried on a limited basis. Demonstrations and sampling help trialability. PTS: 1

9-48

DIF: Application

REF: p. 286

OBJ: 5

16. Canesta has developed a virtual keyboard out of light to be used with cell phones and personal digital assistants. The product beams an image of a keyboard on a desk, allowing the user to type on the image. The words are picked up by the user’s digital device. A clean, flat surface is required for the virtual keyboard. Five product characteristics can be used to predict and explain the rate of acceptance and diffusion of a new product. Use these characteristics to predict the rate of acceptance and diffusion of the Canesta virtual keyboard. ANS: Complexity refers to the degree of difficulty involved in understanding and using a new product. The more complex the product, the slower its diffusion. Virtual keyboards are more complex than traditional keyboards, and may be difficult to operate, thus having slow acceptance. Compatibility refers to the degree to which the new product is consistent with existing values and product knowledge, past experiences, and current needs. Incompatible products diffuse more slowly than compatible products. Although communication and technology are compatible with existing values and experiences, consumers have little product knowledge of the virtual keyboard and may not think this product is needed. Relative advantage is the degree to which a product is perceived to be superior to existing substitutes. Superiority increases the diffusion rate. Consumers may feel that the virtual keyboard has no advantage over the traditional one because of the flat surface requirement. Thus, the adoption rate could be slow. Observability refers to the degree to which the use of a new product can be observed by others and communicated to target customers. Unless many consumers own the product, the virtual keyboards cannot be observed. However, promotions may successfully communicate the virtual keyboard concept to consumers. Trialability is the degree to which a product can be tried on a limited basis. Demonstrations and sampling help trialability. The expense of a virtual keyboard in conjunction with the cell phone and personal digital assistant may make trialability difficult. PTS: 1

DIF: Application

REF: p. 286

OBJ: 5

9-49

17. Draw the sales line and the profit line of the product life cycle in the following diagram, and label each line. Then indicate the names of the four stages of the product life cycle in the blanks provided.

ANS: See Exhibit 9.4. The sales line should start at zero sales at the beginning of the introductory stage, accelerate during the growth stage, peak in the maturity stage, and decrease during the decline stage. The profit line should start in the negative range during the introductory stage, break even at the start of the growth stage, peak during the growth stage, and reach a near-zero asymptote during the maturity and decline stages. At no point should the profit line be above the sales line. PTS: 1

DIF: Application

REF: p. 287-290

OBJ: 6

18. List the four stages of the product life cycle. List four typical characteristics for each stage. ANS: The introductory stage is characterized by a high failure rate, little competition, frequent product modification, limited distribution, high marketing and production costs, negative profits, and promotion that stimulates primary demand. The growth stage is characterized by increased sales, new competitors, healthy profits that peak, aggressive brand promotion, expanded distribution, price reductions, and possible acquisitions. The maturity stage is characterized by a peak in sales, lengthened product lines, style modifications, price reductions, falling profits, competitor turnover, heavy promotion, and brand ―wars.‖ The decline stage is characterized by a long-run drop in sales and profits, less demand, widespread competitor failure, reduction of advertising costs, and possible elimination of the product. PTS: 1

9-50

DIF: Application

REF: p. 287-290

OBJ: 6

19. Briefly describe a typical marketing strategy followed for the four Ps in each stage of the product life cycle. Name the stages of the product life cycle at the top of the chart.

Stage I

Stage II

Stage III

Stage IV

PRODUCT:

DISTRIBUTION:

PROMOTION:

PRICE:

9-51

ANS:

Stage I INTRODUCTION

Stage II GROWTH

Stage III MATURITY

Stage IV DECLINE

PRODUCT: Limited number of Expanded number of Large number of models; frequent models; frequent models; full product product modifications product modifications lines

DISTRIBUTION: Usually limited distribution; high margins and heavy efforts are needed to get carriers

Expand number of dealers; try to get long-term channel relationships

Extensive number of dealers; lower margins; try to retain distributors and shelf space

PROMOTION: Stimulate primary Stimulate selective demand and product demand; aggressive awareness; personal brand advertising selling to distributors; coupons and samples to consumers

PRICE: Usually high price to recover development costs

PTS: 1

9-52

Unprofitable outlets are phased out

Stimulate selective Promotion is phased out demand; brand advertising; heavy promotion to retain dealers and customers

Prices begin to fall as competition enters market

DIF: Application

Elimination or repositioning or product modification

Prices continue to fall Prices stabilize at a low or stabilize; possible level; small price price wars increases are possible if competition is negligible

REF: p. 287-290

OBJ: 6

Chapter 10—Services and Nonprofit Organization Marketing MULTIPLE CHOICE 1. What is the result of applying human or mechanical efforts to people or objects? a. a tangible product b. a profit intermediary c. a service d. a nonprofit organization ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 298

2. Which of the following BEST describes the service sector? a. It employs roughly 76 percent of the Canadian work force. b. It is rarely capital intensive, as most services do not need high technology. c. It tends to create fewer new jobs than the manufacturing industry. d. It is decreasing in importance in Canada. ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 298

3. A service cannot be touched, seen, tasted, heard, or felt in the same manner in which goods can be sensed and, therefore, is referred to as which of the following? a. impervious b. perishable c. extraneous d. intangible ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 299

4. Ian Trent has an MBA and is being recruited by an investment banking firm as a sales representative. He has had 10 years of experience in selling industrial supplies. He was quite successful in this job but is worried that selling investment strategies may be more difficult. What factor would be the major reason for this worry? a. The extensiveness of distribution is unimportant when selling an investment service. b. The cost inventory management system of reimbursing him may cause a problem when he makes investments. c. The marketing program of investment strategies is inconsistent. d. Services are intangible and, therefore, different from his previous experience. ANS: D Investment banking has many intangible features and benefits that makes it quite different from tangible products such as industrial supplies. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

OBJ: 2

10-1

5. What is a characteristic that can be easily assessed prior to purchase, such as the softness of a mattress or the colour of curtains? a. search quality b. experience quality c. credence quality d. intangible attribute ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 299

6. Aristide and Oana are considering attending a clinic to help them quit smoking. What will they be better able to assess after they attend the clinic and learn about the techniques it uses to help customers quit smoking? a. the heterogeneity feature of the clinic b. the tangible attribute of the clinic c. the creative quality of the clinic d. the experience quality of the clinic ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

7. Which characteristic cannot easily be assessed even after purchase since the customers do not have the knowledge or experience? a. heterogeneity feature b. perishable attribute c. experience quality d. credence quality ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 299

8. Deidre Longo has just accepted a position with a major entertainment venue where she is responsible for selling season tickets. She formerly was a salesperson for a company that sold sound systems for arenas, stadiums, and theatres. She believed she understood why theatre managers bought certain products but realizes that selling tickets to individuals will be different. What is one of the key differences she can expect to find? a. A consumer will use experience qualities to evaluate the entertainment service. b. The location of Longo’s office is a key strategy criterion. c. The customer will select and evaluate entertainment on the basis of search qualities. d. Customers are engaged in this as a low-involvement product. ANS: A Many service situations are complicated and customers do not have the knowledge to judge the quality of the actual service itself. This question is difficult because it ties together several concepts that are in different sections of the chapter. PTS: 1 DIF: Application BLM: Higher order

10-2

REF: p. 299

OBJ: 2

9. Which of the following services would be most likely to exhibit strong credence qualities? a. an aerobics class b. the removal of an appendix c. a package delivery d. a haircut ANS: B A credence quality is a characteristic that cannot easily be assessed even after purchase and experience. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

OBJ: 2

10. Cooking classes, massages, and pedicures are all services that are produced and consumed at the same time. All of these services exhibit which service characteristic? a. variability b. intangibility c. inseparability d. perishability ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

11. Gigi had her makeup professionally applied for her prom night. She went to the beauty salon, watched the makeup artist apply cosmetics to her face, and then went home feeling gorgeous. Gina’s makeover illustrates which service characteristic? a. perishability b. inseparability c. flexibility d. heterogeneity ANS: B Inseparability is when services or goods are produced and consumed at the same time. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

OBJ: 2

12. When Avril and Laure went to eat dinner at the Bonaire Cafe, they discovered that there was an hour wait for restaurant seating. They decided to eat at another restaurant, and the Bonaire Cafe lost customers. The Bonaire Cafe has a limit to the number of people it can accommodate, so Avril and Laure’s experience illustrates what? a. the perishability of services b. the heterogeneity of services c. the inconsistency of services d. the flexibility of services ANS: A The services cannot be stored. An empty table earns no revenue. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 2

10-3

13. A reading service for visually impaired people requires each reader applicant to prepare and submit a one-hour interview tape of material chosen by the service to determine whether the reader has pleasing vocal characteristics and is accent-free so that it is not necessary to use the same reader every time. The reading service is trying to limit problems associated with which service characteristic? a. heterogeneity b. tangibility c. flexibility d. credence quality ANS: A Heterogeneity means that a service tends to be less standardized and uniform than goods. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 2

14. There are fewer problems caused by which service characteristics when the service being purchased requires little interaction between the service personnel and the customer? a. instability b. inseparability c. perishability d. heterogeneity ANS: D REF: p. 300

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

15. Why is it is difficult to achieve consistency and standardization of services? a. because of perishability characteristics b. because of intangibility characteristics c. because of heterogeneity characteristics d. because of simultaneous production and consumption characteristics ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 300

16. Jackson Caputo owns and operates Jax Stables, a complete horse service that offers grooming, training, show training for handlers, boarding, and veterinary care. To maintain a quality image, Caputo provides ongoing training for each employee in the company’s operations, objectives, and expected performance standards. What unique aspect of services is Caputo attempting to address? a. intangibility b. heterogeneity c. unfocused targeting d. simultaneous production and consumption ANS: B Heterogeneity causes inconsistency and lack of standardization. Training helps to alleviate these conditions. PTS: 1 DIF: Application BLM: Higher order

10-4

REF: p. 300

OBJ: 2

17. Services cannot be stored, warehoused, or inventoried due to which of the following? a. perishability b. tangibility c. intangibility d. heterogeneity ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 300

18. Services frequently use differential pricing in an attempt to synchronize supply and demand. Hotels frequented by business travellers often offer discounts for weekend bookings. Cinemas have lower prices for matinee shows. This is a way to contend with which service characteristic? a. intangibility b. simultaneous production and consumption c. perishability d. variability ANS: C Differential pricing tries to even out demand. This is important because services cannot be stored, inventoried, or warehoused. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 300

19. Which of the following is a service component customers use to evaluate service quality? a. validity b. assurance c. friendliness d. refund ability ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 300

20. Courtney’s mother died of breast cancer, and she is afraid of getting cancer. When she went to get a baseline mammogram, she wanted a facility where the personnel would not think her fears were silly and would answer all of her questions. By which of the following components of service quality is Courtney most likely to rate the mammogram provider? a. reliability b. assurance c. responsiveness d. empathy ANS: D Empathy refers to providing caring and individualized attention to customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 3

10-5

21. Through its company promotion campaigns, General Motors has stressed that its dealerships employ only “certified GM mechanics and certified GM parts” for all vehicle repairs. GM understands that customers evaluate service quality through the deployment of which component? a. empathy b. tangibles c. reliability d. responsiveness ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

22. Despite the large added expense, Rocky Mountain Financial Brokerage decided to install marble flooring and countertops as well as granite pillars at its corporate office. Rocky Mountain is concerned about its perceived quality against competitors and is dealing with this through which service component? a. assurance b. responsiveness c. reliability d. tangibles ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 301

23. Tim Horton’s stresses that its employees take pride in their company and display this pride through the wearing of clean, pressed company uniforms while on the job. Tim Horton’s understands that customers evaluate service quality through the deployment of which component? a. responsiveness b. reliability c. tangibles d. assurance ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 301

24. Clarksdale, Ontario, is the home of the Shack Up Inn, the only inn in the world that is made up of actual shotgun houses. (Shotgun houses contain two or three rooms in a row. A resident of the house is able to stand at the front door, shoot through all the rooms and out the back door without hitting any walls.) Obviously, the shacks are not luxurious although they do have indoor plumbing and electricity. The owner decided these were the only changes customers would want to be made in the shacks. In this instance, the service provider is likely to have a gap between which of the following? a. what management thinks customers want and the quality specifications that management develops to provide the service b. service expectations and what customers are told to expect c. what customers want and what management thinks customers want d. service quality specifications and employee training ANS: C The owners may have a lack of understanding of the needs and desires of the average tourist. PTS: 1 DIF: Application BLM: Higher order 10-6

REF: p. 301

OBJ: 3

25. If a hospital that measured the service quality of its physician care in terms of the total number of people who were attended to—even if patients appeared to want more individualized care—what would the hospital be exhibiting a gap between? a. the service quality specifications and the service that is actually provided b. what customers want and what management thinks customers want c. the service customers receive and the service they want d. what the company provides and what the customer is told it provides ANS: C There is no indication in the question that the hospital is concerned about what customers want. PTS: 1 DIF: Application BLM: Higher order

REF: p. 302

OBJ: 3

26. At the dealer-owned Radio Shack, the store manager is frustrated at the level of service employees provide to customers even after he wrote a guide to customer service and instructed each employee to read the guide. This is an example of a gap between which of the following? a. the service customers receive and the service they want b. what customers want and what management thinks customers want c. the service quality specifications and the service that is actually provided d. what management thinks customers want and the quality specifications management develops to provide the service ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 302

27. If a customer expects to wait one week for a pair of shoes to be mended but is told that the shoes are ready to be picked up less than 24 hours after leaving them at the repair shop, the customer’s evaluation of service quality will be high. However, a two-week wait would result in a lower evaluation. The two-week gap would illustrate a gap between which of the following? a. the service customers receive and the service they want b. what customers want and what management thinks customers want c. what the company provides and what the customer is told it provides d. service quality specifications and the service that is actually provided ANS: D When these gaps are large, service quality is perceived as low. As the gaps shrink, perceptions of service quality improve. PTS: 1 DIF: Application BLM: Higher order

REF: p. 302

OBJ: 3

28. Which of the following services is an example of possession processing? a. a theatrical performance b. a stop-smoking clinic c. dog boarding d. an advertising agency ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 303

10-7

29. Which of the following is an example of a type of service processing that can occur? a. tangibility processing b. people processing c. product processing d. warranty processing ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 303

30. Which of the following services is an example of mental stimulus processing? a. insurance b. veterinarian care c. a professional tennis match d. a haircut ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 303

31. Which of the following statements about developing marketing mixes for services is true? a. The tangibility and simultaneous production and consumption of services may require adjustments in marketing mix elements. b. Elements of the marketing mix must be preserved for the unique characteristics of services. c. The variability and perishability of services may require adjustments in marketing mix elements. d. Marketing mixes for services are the same as those for products. ANS: C REF: p. 303-307

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

32. The service offering for G& R Talent Agency is performers suitable for appearances on college and university campuses. What is this service an example of? a. the agency’s supplementary service b. the agency’s standardized service c. the agency’s customized service d. the agency’s core service ANS: D The core service is what the consumer is buying. PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

OBJ: 4

33. What is the strategy that uses technology to deliver customized services on a mass basis? a. mass standardization b. aggregated marketing c. technological processing d. mass customization ANS: D OBJ: 4

10-8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 304

34. The ability of each guest to check out of a hotel room through the use of his or her room’s television and to use the television to confirm additional charges on bills in the hotel’s restaurants and gift shops is an example of which of the following? a. a cooperative service b. aggregated standardization c. a market development strategy d. mass customization ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

35. BMW Canada’s company website (www.bmw.ca) allows consumers to “build [their] own car” on-line. What is this known as? a. mass customization b. a supplementary service c. standardization d. customization ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

36. After a customer has selected a book from Amazon.ca’s website, other books with similar topics are suggested. What is Amazon.com using? a. component service b. mass customization c. nonprofit marketing d. customized service ANS: B Mass customization uses technology to deliver customized service on a mass basis. PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

OBJ: 4

37. TheKnot.com is an Internet company that is a one-stop source of all the items needed to have a successful wedding including listings of local caterers and photographers. When someone registers on the site, he or she is sent the “Ultimate Wedding Organizer.” It offers advice on what to do with “cold feet” and how to handle in-laws. TheKnot.com recognizes that which of the following represents a portfolio of opportunities, risks, and challenges? a. a service mix b. an offering grouping c. a component combination d. an assembly process ANS: A The service mix refers to the different services offered by the service provider. PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

OBJ: 4

10-9

38. Which of the following is a key factor in the distribution strategy for services? a. customization b. price c. competitors d. number of intermediaries and outlets ANS: D Customization is a key factor in the product component of the service marketing mix. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 305

39. Marriott Hotels, as well as Hyatt Regency and Adam’s Mark Inns, have expended many resources in developing websites that allow prospective customers to learn all that is necessary before selecting a hotel destination. The sites then allow individuals to make reservations at the hotel that best satisfies their requirements. Which of the following reflects the distribution strategy used by these hotel chains? a. the physical appearance of a particular outlet b. intensity of distribution c. the decision to use direct distribution d. considerations of the storage of the service ANS: C The newest form of direct distribution is the Internet. PTS: 1 DIF: Application BLM: Higher order

REF: p. 305

OBJ: 4

40. Promotion strategies for dealing with the unique features of services include all of the following EXCEPT which one? a. creating strong organizational images b. using personal sources of information c. satisfying patronage-oriented objectives d. stressing tangible cues ANS: C Patronage-oriented objectives are part of a service pricing strategy. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 305-306

41. A pest control company paints dead roaches on its trucks and uses similar graphics on its letterhead, business cards, and all promotions. The pest control company is using what type of promotion strategy? a. stressing tangible cues b. using personal information sources c. stressing homogeneity d. providing packaging cues ANS: A OBJ: 4

10-10

PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

42. You have just started a limousine service and have developed a strategy that stresses quality and luxury. Your limos are always spotlessly clean on the inside, freshly waxed, and stocked with flowers, champagne, free car phones, and televisions. Your drivers are always immaculately dressed and are required to hold the door open for patrons entering and leaving the car. What is your promotional strategy stressing? a. tangible cues b. patronage-oriented objectives c. prestige prompts d. physiological prompts ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

43. Avril Lavigne has been picked as a spokesperson for T-Mobile wireless phone service. She was chosen because of her appeal to members of T-Mobile’s target market. In terms of service promotion strategy, she will be considered what type of information source? a. impersonal b. cue control c. personal d. remote ANS: C A celebrity is a person consumers are familiar with, and so can be a personal information source. Lavigne’s association with the service is expected to reduce customers’ perceived risk in using the service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

OBJ: 4

44. Boutique hotels are the perfect hotels for people who are tired of traditional cookie-cutter hotels that all look alike. One boutique hotel chain calls its staff its cast and has them wear fashionable solid black outfits. Its corridors are softly lit, and suite doors are arches lit with recessed blue lighting. Its lobby has a ceiling-to-floor water wall. What is the promotional strategy for this boutique hotel? a. to separate the point of production from the point of service consumption b. to create a strong organizational image c. to use personal information sources d. to stress intangible cues ANS: B One way to create a strong organizational image is to manage the physical environment of the service facility, the appearance of the service employees, and tangible items associated with the service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

OBJ: 4

10-11

45. When WestJet Airlines offers a dramatically reduced seat-sale price in the middle of February it is leveraging which pricing objective? a. patronage-oriented pricing b. benefit-oriented pricing c. operations-oriented pricing d. revenue-oriented pricing ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

46. Matching demand for theatre seats to the number of people wishing to see a movie can be attempted by raising prices at peak movie attendance times and decreasing them during times when attendance is typically low. Focusing on coordinating supply and demand by varying prices is what type of pricing objective for service firms? a. patronage-oriented b. equity-oriented c. revenue-oriented d. operations-oriented ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 306

47. Hotels that cater to business travellers have more expensive rates during peak usage times (weekdays) and discount rates for slower times (weekends and holiday periods). Which pricing objective does this illustrate? a. patronage-oriented b. revenue-oriented c. supply-demand d. operations-oriented ANS: D A focus on matching supply and demand by varying prices to ensure maximum use of productive capacity at any specific point in time is an operations-oriented pricing objective for service firms. PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

OBJ: 4

48. What are the three categories of pricing objectives for services? a. equity-, cost-, and revenue-oriented b. sales-, quality-, and location-oriented c. revenue-, operations-, and patronage-oriented d. turnover-, volume-, and capacity-oriented ANS: C OBJ: 4

10-12

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 306-307

49. A focus on maximizing the surplus of income over costs is which type of pricing objective for service firms? a. revenue-oriented b. patronage-oriented c. operations-oriented d. market-share-oriented ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 306-307

50. Determining costs may limit the usefulness of the objective and can be extremely difficult for a service provider that has adopted which pricing objective? a. break-even b. operations-oriented c. patronage-oriented d. revenue-oriented ANS: D Revenue-oriented objectives require calculations of income and costs, which can be difficult for many services. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 306-307

51. For service firms, what type of pricing objective focuses on maximizing the number of customers using a service? a. profitability-oriented b. maximization of demand c. patronage-oriented d. revenue-oriented ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 307

52. Winnipeg Transit bus service offers discount ticket prices to students and senior citizens. Which pricing objective does this illustrate? a. service quality b. operations-oriented c. subsidized d. patronage-oriented ANS: D A focus on maximizing the number of customers using a service is a patronage-oriented pricing objective for service firms. PTS: 1 DIF: Application BLM: Higher order

REF: p. 307

OBJ: 4

10-13

53. Because many services involve a process of continuous interaction between the service organization and the customer, what is an important strategy? a. relationship marketing b. affiliation marketing c. patronage marketing d. interactive marketing ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 307

54. Satisfied customers are likely to engage in positive word-of-mouth communication, thereby helping to bring in new customers. Thus, a means for attracting, developing, and retaining customer is known as which of the following? a. relationship marketing b. ambush marketing c. patronage marketing d. affiliation marketing ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 307

55. Many businesses have discovered that the costs associated with attaining a new customer are many times that of retaining existing customers. Thus businesses realize that they can benefit directly from practising what type of marketing? a. patronage b. interactive c. relationship d. attractive ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 307

56. Building value-added services into the delivery system that are not readily available from other firms defines relationship marketing based on the creation of which of the following? a. social bonds b. financial bonds c. personal communication channels d. structural bonds ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 307

57. Hyatt Regency’s Platinum Card Program allows members to bypass any line at the check-in desk and get immediate check-in service. In this example, what are developed by offering value-added services that are not readily available from other hotel chains? a. personal communication channels b. price incentives c. structural bonds d. social bonds ANS: C OBJ: 5 10-14

PTS: 1 DIF: Application BLM: Higher order

REF: p. 308

58. The level of relationship marketing that is least likely to be effective in the long term because its advantage is easily imitated by other firms is based on which of the following? a. pricing incentives b. structural bonds c. personal communications d. service delivery heuristics ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 308

59. Mountain Express is a company that provides grocery delivery service to several small communities in British Columbia. The company gives a 2 percent discount on all food orders to customers after they have used the service 10 times. An additional percentage discount is offered for each additional 15 orders up to a maximum of 8 percent. What is the relationship marketing strategy used by Mountain Express based on? a. creating structural bonds b. following service delivery paradigms c. building financial bonds d. building social bonds ANS: C Building financial bonds includes the use of price incentives. PTS: 1 DIF: Application BLM: Higher order

REF: p. 308

OBJ: 5

60. A management consulting business stays in touch with its business customers with phone calls and greeting cards. It periodically sends out needs-assessment questionnaires and designs new services to meet the needs revealed in these surveys. What is this example of relationship marketing based on? a. patronage bonds b. financial bonds c. social bonds d. structural bonds ANS: C Building social bonds includes staying in touch with customers, learning about their needs, and designing the service to meet those needs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 308

OBJ: 5

10-15

61. Relationship marketing programs that are based on which of the following bonds have the strongest potential for sustaining long-term relationships with customers? a. financial and patronage b. financial and structural c. financial, social, and structural d. financial and individual ANS: C Level-three marketing programs with all three components are the strongest relationship marketing programs. See Review Learning Objective 5. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 308

62. Treating employees as customers and developing systems and benefits that satisfy their needs, such as training, stressing teamwork, and employee empowerment is known as what type of marketing? a. relationship b. job-satisfaction c. internal d. job-faceted ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 309

63. Research studies have shown that replacing an employee in the service industry costs the equivalent of which of the following? a. 6 months’ pay b. a year’s pay c. 1 1/2 year’s pay d. 3 months’ pay ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 309

64. The Ritz-Carlton hotel chain trains its employees carefully, instills in them a sense of pride, and motivates them by recognizing and rewarding outstanding customer service. What does it use? a. patronage programming b. internal marketing c. service quality d. relationship marketing ANS: B Treating employees as customers and developing systems and benefits that satisfy their needs is known as internal marketing. PTS: 1 DIF: Application BLM: Higher order

10-16

REF: p. 309

OBJ: 6

65. Canada’s export of services passed what amount in 2007? a. $70 million b. $7 million c. $70 billion d. $7 billion ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 311

66. Which of the following seeks to achieve some goal other than the usual business goals of profit, market share, or return on investment? a. a nonprofit organization b. a synergistic entity c. a patronage-oriented organization d. a company with no equity ANS: A OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 311

67. What is the predominant form of nonprofit organization in Canada? a. private-sector volunteer organizations b. government c. arts museums and programs d. social service firms ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 311

68. Nonprofit organizations account for how much of all economic activity in Canada? a. 1 percent b. 60 percent c. 40 percent d. 20 percent ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 311

69. Which of the following is an example of a nonprofit organization? a. General Motors b. Canadian Brokers Association c. Canada Life, an insurance company d. Canadian Humane Society ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 311

10-17

70. Habitat for Humanity renovates vacant houses and sells them at no-interest mortgage rates to low-income home buyers. The organization relies on volunteers to provide the labour and funding for its renovations. Which of the following BEST describes Habitat for Humanity? a. It is a for-profit organization. b. It is a service branch. c. It is an image-oriented organization. d. It is a nonprofit organization. ANS: D OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 311

71. Which of the following includes marketing activities conducted by individuals and organizations to achieve some goal other than normal business goals, such as profit, market share, or return on investment? a. social marketing b. cause-related sponsorship c. nonprofit organization marketing d. service marketing ANS: C OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 312

72. Which of the following refers to the efforts of public and private nonprofit firms to bring about mutually satisfying exchanges with their target markets? a. social marketing b. nonprofit organization marketing c. public affairs marketing d. social targeting ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 312

73. Sierra Club and the Girl Guides of Canada are nonprofit organizations that want to develop marketing strategies to bring about mutually satisfying exchanges with their target markets as they work to protect our environment. What do both Sierra Club and the Girl Guides of Canada have? a. a marketing orientation b. the same organizational structure as profit-making firms c. no need for marketing skills d. no impact on nonbuyers ANS: A A nonprofit organization exists to achieve some goals other than profit, but like their corporate counterparts, nonprofit managers develop marketing strategies to bring about mutually satisfying exchanges with target markets. PTS: 1 DIF: Application BLM: Higher order

10-18

REF: p. 312

OBJ: 8

74. According to the text, which of the following statements about the marketing activities of a nonprofit organization is true? a. Nonprofit organizations express their objectives in terms of profit. b. Nonprofit organizations do not charge a price. c. Nonprofit organizations use the same terminology as for-profit companies when talking about their customers. d. Nonprofit organizations often use undifferentiated segmentation strategies.. ANS: D Nonprofit organizations often refer to their target markets as clients, patients, or members. Nonprofit organizations charge fees, donations, tuition, etc., which are all examples of prices. The major difference between nonprofits and for-profits is the lack of a profit objective. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 312

75. What is the first step in developing a marketing program for a nonprofit organization? a. Determine the marketing mix. b. Create a promotion to attract donors. c. Establish the financial needs of the organization. d. Define organizational objectives. ANS: D Defining organizational objectives will lead to selection of target markets and then to the marketing mix. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 312

OBJ: 8

76. What would be an acceptable goal of the Metropolitan Area Transit Authority, a nonprofit organization, for its new bus and rail service? a. increase awareness in its target market to 75 percent b. set ridership volumes to provide a 12 percent ROI c. increase expenses to fit budgetary allowances d. gain a larger market share than the for-profit Trip Planner Bus Lines’ routes in the area ANS: A The only appropriate goal for a nonprofit transportation firm would be a service goal such as awareness, not a financial or market share goal. PTS: 1 DIF: Application BLM: Higher order

REF: p. 312

OBJ: 8

10-19

77. What is one of the consequences of Canadian Blood Services’ nonprofit orientation? a. The success of Canadian Blood Services cannot be measured in financial terms. b. Canadian Blood Services’ success is based on how much money is donated to it. c. Canadian Blood Services will not make as much money as a profit-oriented firm. d. Canadian Blood Services is not expected to be as efficient as a for-profit firm. ANS: A Success in a nonprofit organization is measured by how well service goals are met and how well it serves the community. PTS: 1 DIF: Application BLM: Higher order

REF: p. 312

OBJ: 8

78. What is the major difference between the marketing orientation of Ford Motor Company and of Canadian Blood Services? a. Canadian Blood Services does not have to be concerned with advertising or promotion. b. Quantitative methods of market research can be used at Ford. c. Ford has a target market. d. The rewards of Canadian Blood Services are long-term social benefits. ANS: D Both Ford and Canadian Blood Services have target markets, products, advertising considerations, and the ability to do quantitative market research. But Canadian Blood Services is concerned with long-term social benefits to the public, and Ford is primarily concerned with profit-oriented goals. PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

OBJ: 8

79. Which of the following BEST describes a target market for a nonprofit organization? a. It is best defined geographically, to include the area served. b. It needs to be defined as the “community” in general in order to reach all potential targets. c. It may include many apathetic or strongly opposed targets. d. It is best defined as the potential donors because their funds will ensure the survival of the organization. ANS: C The target markets must include both the service users and the potential donors, which may be apathetic or strongly opposed groups. PTS: 1 OBJ: 8

10-20

DIF: Comprehension BLM: Higher order

REF: p. 313

80. Why do nonprofit organizations face a unique challenge? a. their target market is often the apathetic or strongly opposed individual b. their target market is often the community where it is located c. their target market is often the government d. their target market is often the people who provide the funding ANS: A The target market for many nonprofit services is the apathetic, disinterested, or opposed individuals who nonetheless may need the service. Alternatives a, b, and c are as likely to be targeted by for-profits as nonprofits. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 313

81. The Fountaindale Adult Literacy Education Program needs to understand and target all of the following potential markets EXCEPT which one? a. adults interested in teaching and literacy b. illiterate adults in the Fountaindale community c. community members in good economic circumstances d. the administrative board of the organization ANS: D Except for the administrative board, all are potential users, donors, or volunteers who will need to be convinced to participate. Members of the board will need no convincing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

OBJ: 8

82. Which of the following statements describes how a nonprofit organization should design its product offering? a. The organization should remember that the product offering is not as crucial to organizational success as the other elements of the service mix. b. The organization will need to satisfy the needs of the target market or it will fail. c. The product offering will have to be tangible. d. The organization should try to create products it can inventory. ANS: B As with any type of product, to be successful the product must meet the needs of the target market. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 313

10-21

83. A local church formed a special committee to provide aid to the homeless in its community. The church applied to the municipal and provincial governments for funding but was denied when it could not adequately state what services it would offer. In this case, why did the special committee fail? a. It had not defined its sponsoring organizations. b. It had not defined its product offering. c. It had not defined its donor market. d. It had not defined its user market. ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

84. If a benefit is indirect to the customer, the marketer may find a challenge in promoting a product with which of the following? a. little personalization b. little benefit strength c. little benefit complexity d. little feature charisma ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 313

85. Which of the following BEST describes the distribution channel of services for nonprofit organizations? a. It is always indirect. b. It must normally be direct from producer to consumer. c. It is usually facility-dependent. d. It is usually long and contains many layers of middlemen. ANS: B Most services, profit or nonprofit, have direct distribution. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 313

86. The Christmas Is For Children annual toy collection drive requires what type of distribution channels? a. those that are focused only on the collection of toys from donors b. those that are efficient for collecting donations as well as distributing the proceeds of the campaign c. those that are based on an exclusive distribution strategy d. those that are based on many levels of intermediaries and facilitating agents ANS: B Collection of funds and dispersion of goods or services both require good channels of distribution. PTS: 1 DIF: Application BLM: Higher order

10-22

REF: p. 313

OBJ: 8

87. A business professional from St. John’s University has been donating several hours of consulting time to local nonprofit organizations each month. This could be expected to provide the centre with all of the following benefits EXCEPT which one? a. community approval b. immediate financial gain c. personal satisfaction d. personal contacts ANS: B Donating time to a nonprofit firm will result in intangible and long-term benefits, but not immediate financial gain. PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

OBJ: 8

88. What is an announcement in mass media for which no charge is made and that promotes programs, activities, or services of federal, provincial, or municipal governments or the programs, activities, or services of nonprofit organizations? a. cause-related marketing b. nonsponsored advertising c. public service advertising d. social advertising ANS: C OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 314

89. Why might traditional promotional tools be inadequate to motivate product adoption of many nonprofit organizational products? a. because of direct distribution b. because of the wide range of potential consumer involvement c. because of nonprofit product volunteer policies d. because of infrequent use of target markets ANS: B Involvement may range from extremely high (join the military, stop smoking) to low (prevent forest fires, don’t litter), which is a much wider range than consumer products usually experience. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 314

90. A Brazilian restaurant named Fogo de Chão hosted a special dinner to benefit the Toronto Community Food Bank. This benefit meal is an example of which type of strategy? a. target market b. promotion c. direct marketing d. product ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 314

10-23

91. The Chrysalis Job Training for the Disabled program wants to notify the community about its upcoming rummage sale. As an experienced marketer and director of the program, you plan to visit several local radio and televisions stations to request which of the following? a. freestanding inserts b. nonsponsored advertising c. public service advertising d. societal marketing ANS: C An announcement in mass media for which no charge is made and that promotes programs, activities, or services of nonprofit organizations is called public service advertising. PTS: 1 DIF: Application BLM: Higher order

REF: p. 314

OBJ: 8

92. In a nonprofit organization, which of the following are often concerned with partially or fully defraying costs rather than achieving a profit? a. liquidity fees b. nonfiscal costs c. cause-related goals d. pricing objectives ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 314

93. In many nonprofit situations the consumer is not charged a tangible price yet must absorb time costs, embarrassment costs, or effort costs. What are these costs? a. the organization’s retained earnings b. the organization’s financial costs c. the organization’s liquidity fees d. the organization’s nonfinancial prices ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 314

94. In many nonprofit situations, consumers must absorb nonmonetary costs. Which of the following is a nonmonetary cost? a. indirect payments such as taxes b. relationship costs c. opportunity cost of time d. affiliation costs ANS: C OBJ: 8

10-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 314

95. Issues relating to pricing decisions that are unique to nonprofit organizations include which of the following? a. complementary positioning b. separation between payers and users c. benefit complexity d. apathetic targets ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 315

96. What is it called when services for those in relatively poor economic situations are largely paid for by those who are in better financial situations? a. nonfinancial pricing b. indirect payment c. indirect distribution d. separation between payers and users ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 315

97. One feature that distinguishes nonprofit organization pricing decisions from profit-sector pricing decisions also exists in the profit sector, but there it is considered to be an undesirable, temporary situation. An example is university tuition. What is this practice? a. nonfinancial prices b. separation between payers and users c. the lost pricing objective d. below-cost pricing ANS: D OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 315

In an industry where guests are tired of cookie-cutter hotels, some consumers are looking for personalized service, which can be found in boutique hotels. Boutique hotels cater to their guests’ sense of their personal image as being discriminating, more sophisticated, and more hip. Frequently, these guests don’t want to be where the crowds are. This is a small but growing market niche. There are no generally recognized rules for boutique hotels, but they tend to be small and service-oriented, with high-style decor, and top-notch restaurants. Employees are called cast members. Amenities include cordless phones, CD players, Aveda brand bath and hair products, and down comforters and pillows. 98. Refer to Boutique Hotels. The service provided by employees at boutique hotels cannot be touched, seen, or felt in the same manner as the hair and bath products. How can it be described? a. as intangible b. as tangible c. as incomprehensible d. as unknowable ANS: A Services are intangible because they cannot be touched, seen, or felt in the same manner as goods. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 299

OBJ: 2

10-25

99. Refer to Boutique Hotels. To evaluate the quality provided by boutique hotels, customers would most likely depend on which qualities? a. search b. credence c. relational d. experience ANS: D The quality of the service provided can be assessed only after experiencing it. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

OBJ: 2

100. Refer to Boutique Hotels. Since boutique hotels are typically independently owned and/or part of small chains, people who seek out boutique hotels cannot be sure of what type of amenities or specific services they will be provided. In other words, what do the services provided by boutique hotels tend to be? a. relatively high in intangibility b. relatively high in perishability c. relatively high in inseparability d. relatively high in heterogeneity ANS: D There is no way to standardize the services offered and, in fact, one of the benefits of boutique hotels is uniqueness of product offering. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299-300

OBJ: 2

101. Refer to Boutique Hotels. When a guest asks an employee for directions to a local gallery or museum, the service received cannot be stored or warehoused. Therefore, how is this service characterized? a. as perishable b. as intangible c. as unstable d. as inseparable ANS: A Services cannot be stored, warehoused, or inventoried, and, therefore, are perishable. PTS: 1 DIF: Application BLM: Higher order

10-26

REF: p. 300

OBJ: 2

102. Refer to Boutique Hotels. Within the promotion, what do the amenities provided by boutique hotels represent? a. prestige prompts b. intangible cues c. tangible cues d. manipulation tactics ANS: C The amenities are tangible cues and reminders of the quality of the service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 301

OBJ: 4

103. Refer to Boutique Hotels. Which type of processing occurs most often at a hotel that wants to provide personalized service? a. people processing b. possession processing c. information processing d. equipment processing ANS: A Information processing means the use of technology and/or brainpower. Financial services, such as those offered by a bank, depend on the collection and processing of information. PTS: 1 DIF: Application BLM: Higher order

REF: p. 303

OBJ: 4

104. Refer to Boutique Hotels. Boutique hotels encourage employees to develop personal relationships with guests. The hotels offer value-added services that are not available at traditional hotels. The relationship boutique hotels have with their customers is based on which of the following? a. social, financial, and structural bonds b. communication bonds and social bonds only c. service delivery d. experience qualities ANS: A The hotels are operating at the third level of relationship marketing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 308

OBJ: 5

10-27

105. Refer to Boutique Hotels. Boutique hotels not only call their employees cast members, but also compete for their talent, provide them with all the training needed, stress teamwork, and give employees freedom to make decisions. In order to provide the level of service guests require, boutique hotels need to engage in what type of marketing? a. affiliation b. internal c. relationship d. interactive ANS: B Internal marketing is providing the employees with the desire and the ability to offer superior service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 309

OBJ: 6

Sandy Tappan owns an automobile detailing business called Sizzlin’ Shine. Her goal is to outperform other auto shops by specializing in detailing services. Her shop doesn’t do any mechanical or collision repair work. Tappan prices her detailing service higher than her competition because she uses only the best materials, and they cost more than the materials used by her competitors. Her goal is to maximize profits. 106. Refer to Sizzlin’ Shine. The company uses trained detailing professionals to apply waxes by hand and utilize mechanical polishing equipment. What is the result of this effort? a. a good b. a service c. an objective d. a tangible product ANS: B The result of applying human or mechanical efforts to people or objects is a service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 298

OBJ: 1

107. Refer to Sizzlin’ Shine. Because the service provided at Sizzlin’ Shine cannot be touched, seen, or felt in the same manner as an automobile part such as a tire, what is it referred to as? a. homogeneous b. intangible c. perishable d. credible ANS: B Services are intangible because they cannot be touched, seen, or felt in the same manner as goods. PTS: 1 DIF: Application BLM: Higher order

10-28

REF: p. 299

OBJ: 2

108. Refer to Sizzlin’ Shine. Sizzlin’ Shine’s customers can judge the quality of the detailing services on their automobiles only after driving them for a period of time and seeing how the shine holds under various driving conditions. What can customers use to evaluate the service? a. heterogeneous features b. credence qualities c. search qualities d. experience qualities ANS: D An experience quality is a characteristic that can be assessed only after use, such as the quality of the detailing service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

OBJ: 2

109. Refer to Sizzlin’ Shine. To maintain Sizzlin’ Shine’s quality image, Tappan provides complete training for each employee in company operations, objectives, and performance standards. What unique aspect of services is Tappan attempting to address? a. intangibility b. heterogeneity c. inseparability d. perishability ANS: B Variability causes inconsistency and lack of standardization. Training helps to alleviate these conditions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299-300

OBJ: 2

110. Refer to Sizzlin’ Shine. When a customer first patronizes Sizzlin’ Shine’s complete detailing service, he or she receives a handwritten thank-you note, and a coupon for the next visit from Sandy Tappan. What do the thank-you note and coupon represent? a. prestige prompts b. tangible cues c. manipulation tactics d. intangible cues ANS: B The note and coupon represent tangible cues and reminders of the quality of the service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 301

OBJ: 4

10-29

111. Refer to Sizzlin’ Shine. Tappan’s pricing objective for Sizzlin’ Shine is best characterized as which of the following? a. quality-oriented b. revenue-oriented c. patronage-oriented d. operations-oriented ANS: B Tappan’s focus on maximizing the surplus of income over costs is a revenue-oriented pricing objective. PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

OBJ: 4

112. Refer to Sizzlin’ Shine. Tappan has just initiated a frequent-shine card for customers who purchase her shop’s services at least once a quarter. After four complete details, the customer receives the next detailing service free. How do frequency programs like this one implement relationship marketing? a. by using financial bonds b. by using social bonds c. by using personal communications d. by using homogeneous service ANS: A Building financial bonds includes the use of price incentives. PTS: 1 DIF: Application BLM: Higher order

REF: p. 308

OBJ: 5

A children’s exhibit at a Science Centre was titled, “Microbes: Invisible Invaders ... Amazing Aliens.” The 5,000-square-foot interactive exhibit uncovered a mysterious and virtually invisible universe of microscopic organisms—from those that sustain life to those that threaten our health. Its purpose was to show children that microbes are basically germs. The exhibit shows how researchers and others fight infection worldwide. The exhibit had hands-on activities, including a model kitchen where children learned about good and bad microbes. A virtual-reality game let participants combat deadly viruses, and other holograms, and 3-D animations. The long-term objective of the exhibit was to ensure the world’s supply of microbiologists in the upcoming decades. 113. Refer to Science Centre. What is the Science Centre an example of? a. a nonprofit organization b. a service-oriented firm c. a social marketing company d. a subgovernment entity ANS: A Nonprofit organizations exist to achieve some goal other than the usual business goals of profit, market share, or return on investment. PTS: 1 DIF: Application BLM: Higher order

10-30

REF: p. 311

OBJ: 8

114. Refer to Science Centre. What makes it difficult for the Science Centre to prioritize its objectives and evaluate its performance? a. inability to promote the exhibit b. creation of a benefit strength c. lack of a financial objective d. presence of intangible factors ANS: C Prioritizing objectives and performance evaluation are made more difficult without a financial objective. Service qualities are present in the exhibit itself, and there is no reason that the Science Centre cannot promote the exhibit. PTS: 1 DIF: Application BLM: Higher order

REF: p. 312

OBJ: 8

115. Refer to Science Centre. What do the visitors to the exhibit represent? a. the Smithsonian’s benefit complexity b. the Smithsonian’s service entity c. the Smithsonian’s target market d. the Smithsonian’s benefit strength ANS: C The people the Science Centre wishes to attract are its target market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

OBJ: 8

116. Refer to Science Centre. Which of the following BEST describes product decisions associated with the Science Centre exhibit? a. Word-of-mouth promotion would be the best communication tool to use. b. The benefits desired are short term and simplistic. c. Nonfinancial objectives will be used to set prices. d. They are very high involvement. ANS: D The benefits desired are long term, and service quality determines whether the objective is achieved. Word-of-mouth and financial objectives do not deal with product decisions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

OBJ: 8

10-31

117. Refer to Science Centre. A decision to use public service announcements about the microbe exhibit and to broadcast them in the local area is an example of what type of decision? a. product b. price c. promotion d. service ANS: C Communication with potential target markets is an example of promotion. PTS: 1 DIF: Application BLM: Higher order

REF: p. 314

OBJ: 8

Have you ever been somewhere and someone who was definitely not your type kept asking for your phone number and wouldn’t take “no” for an answer? It seems a lot of people have. Now when that annoying individual asks for your phone number, you can give this bothersome individual the number for the Rejection Hotline, which will explain to the individual that he or she is “dumb, short, fat, ugly, annoying, arrogant, or a general loser.” There is no charge for this service, which is available in 14 major cities and in Ireland. The Rejection Hotline handles about 150,000 calls weekly. 118. Refer to the Rejection Hotline. What is the Rejection Hotline an example of? a. a service provider b. a retail operation c. a wholesale intermediary d. a facilitator ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 298

119. Refer to the Rejection Hotline. Because its quality can be assessed only after its use, what does Rejection Hotline have? a. a high cognitive quality b. a high perceptual quality c. a high credence quality d. a high experience quality ANS: D Until someone gives the number to someone who is annoying him or her and sees that person really leave, there is no way to judge the benefit offered by this service. PTS: 1 OBJ: 2

10-32

DIF: Comprehension BLM: Higher order

REF: p. 299

120. Refer to the Rejection Hotline. Because the Rejection Hotline does not rely on humans, each time a person calls he or she will receive an identical pre-recorded message. This means that unlike similar products, the Rejection Hotline is which of the following? a. consistent b. not perishable c. tangible d. not responsive ANS: A It is consistent instead of heterogeneous. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 2

121. Refer to the Rejection Hotline. Because Rejection Hotline uses telephone technology to deliver its services, it can be said to use what type of strategy? a. segmented positioning b. differentiated segmentation c. mass customization d. standardization ANS: D Each customer receives the same service. All phone messages are identical. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 4

122. Refer to the Rejection Hotline. The ability to give someone a phone number that tells him or her exactly what you have been unable to communicate demonstrates that Rejection Hotline would score high when what is evaluated? a. its reliability b. its creativity c. its tangibility d. its empathy ANS: A The service is dependable because it performs its service right the first time. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 3

10-33

123. Refer to the Rejection Hotline. In terms of a product strategy, what is the Rejection Hotline telephone message? a. the promotion strategy b. the intangible product c. the relationship marketing tool d. the core product ANS: D In this example, a core product is an example of a core service. This is the service the company built its reputation on. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 303

124. Refer to the Rejection Hotline. The creator of the Rejection Hotline has recently started printing up fake business cards, which can be used to explain why someone is not right for you. Business cards are very popular with fathers who buy them for their daughters to hand out to inappropriate suitors. In terms of a product strategy, what are the business cards? a. an intangible product b. a supplementary product c. a promotion strategy d. a core product ANS: B In this example, a supplementary product is an example of a supplementary service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

OBJ: 4

The Ritzy Canine Carriage House looks like several other Manhattan boutique hotels. In the lobby is a crystal chandelier, brocade-patterned wallpaper, gold-framed mirrors, and antique chairs. Room service and salon service are available as well as exercise facilities. There is also a masseuse on staff. Dogs are the only guests, and they appreciate the video and video player in the $175-a-night Windsor suite. Without extras, a one-day visit will cost $33–$38, depending on the size of the dog. The Ritzy Canine is a high-end doggy care centre. In a world where people work long hours, they do not mind spending money on their dogs. 125. Refer to the Ritzy Canine. The facilities at the Ritzy Canine are very upscale in design to cope with the problems of which of the following? a. service heterogeneity b. service homogeneity c. service intangibility d. service perishability ANS: C OBJ: 2

10-34

PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

126. Refer to the Ritzy Canine. Research has shown that consumers evaluate service quality on five components. When customers rate the people who supervise the dog activities as being “dog people” and having an understanding of the needs of dogs and their owners, which component are they concerned with? a. standardization b. responsiveness c. empathy d. flexibility ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 300-301

127. Refer to the Ritzy Canine. According to the text, service is a process. Which category of service processes is used at this doggy care centre? a. physical stimulus b. information c. possession d. people ANS: C The dogs are physical possessions of the customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 303

OBJ: 4

128. Refer to the Ritzy Canine. Supervised doggy care is the core service product, and dog massages would be which service product? a. secondary b. supplementary c. core d. superfluous ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

129. Refer to the Ritzy Canine. Since the Ritzy Canine is able to provide whatever dietary needs, exercise plans, socialization, or medical attention a dog might require, it can be said to use which of the following? a. niche aggregation b. mass customization c. synergistic planning d. focused integration ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

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130. Refer to the Ritzy Canine. What type of promotion strategy would you expect the Ritzy Canine to use? a. engaging in postpurchase research b. forging prepurchase commitments c. using motivational behaviour d. creating a strong organizational image ANS: D The company creates an image by managing its environment. See the description of its lobby. PTS: 1 DIF: Application BLM: Higher order

REF: p. 306

OBJ: 4

Many people would like to sell and buy on eBay, the most popular of the current Internet auction sites, but they have questions about the process and how to sell and price their merchandise. A company called Keen.com has set up a directory of specialists of whom you can ask questions. When you choose a name and click on the “Call Now” button, the specialist is contacted and will personally call and answer your questions. Keen.com charges a per-minute fee to people who contact its specialist. 131. Refer to eBay. How would Keen.com be classified? a. as a service b. as a tangible product c. as a good d. as a nonprofit organization ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 298

132. Refer to eBay. You cannot evaluate the usefulness of the specialist’s advice until after you have received and used it. What is the term for the characteristic of this service? a. experience quality b. temporal quality c. search quality d. reliability ANS: A OBJ: 2

10-36

PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

133. Refer to eBay. Users can see the ratings given to each specialist by previous users before they contact that specialist. Which service component does Keen.com use to help its customers evaluate its service quality? a. empathy b. flexibility c. assurance d. responsiveness ANS: C Assurance refers to the knowledge and courtesy of the employees. Customer ratings would provide this information. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 3

Virtual Bellhop is a company that ships awkward sporting goods to vacation destinations so that its customers do not have to worry about lugging them through airports or having them damaged in transit. During the summer months and December, the company is extremely busy packaging and shipping sporting gear. 134. Refer to Virtual Bellhop. During months that are not popular vacation months, the company may have only one customer a day. This is because Virtual Bellhop is a service business and has to deal with the problems associated with which service characteristic? a. perishability b. variability c. inseparability d. intangibility ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

135. Refer to Virtual Bellhop. Thus far, the company’s record for getting the sporting equipment to the correct destination for the vacationer is perfect. This indicates that the company excels at which component of service quality? a. tangibles b. flexibility c. assurance d. reliability ANS: D Reliability is the ability to perform the service dependably and consistently. PTS: 1 DIF: Application BLM: Higher order

REF: p. 300

OBJ: 3

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136. Refer to Virtual Bellhop. The care with which the items are packed and the condition of the package when it arrives indicate concern with which aspect of service quality? a. tangibles b. reliability c. responsiveness d. variability ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 301

TeamBuilds is a service organization that has corporate teams pay $7,500 for an all-day team-building session with a management consultant while they work together on renovating a Habitat for Humanity home. 137. Refer to TeamBuilds. What is TeamBuilds an example of? a. a possession processor b. a service provider c. a target market d. a market niche ANS: B OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 298

138. Refer to TeamBuilds. Participants in the team-building exercises would use which quality to evaluate TeamBuilds? a. appraisal b. credence c. experience d. search ANS: C Only after experiencing it could participants tell whether they had gained from the exercises. PTS: 1 DIF: Application BLM: Higher order

REF: p. 299

OBJ: 2

139. Refer to TeamBuilds. What would be an influence if there were a significant difference between what TeamBuilds says it provides to customers and what it actually provides? a. the service paradigm b. the service delineation matrix c. the four dimensions of service quality d. the gap model of service quality ANS: D This would be an example of Gap 4. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 301

OBJ: 3

140. Refer to TeamBuilds. Which category of service processing does TeamBuilds offer? a. homogeneous processing b. possession processing c. tangible processing d. mental stimulus processing ANS: D TeamBuilds is an education program. PTS: 1 DIF: Application BLM: Higher order

REF: p. 303

OBJ: 4

141. Refer to TeamBuilds. Improved work team relationships are which of the following? a. TeamBuilds’ core product b. TeamBuilds’ niche product c. TeamBuilds’ supplementary product d. TeamBuilds’ primary product ANS: A Core service is the most base benefit the consumer is buying. PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

OBJ: 4

An Internet company, icruise.com, sold cruises by offering a “Suntan Guarantee.” The guarantee promised a full refund on a Caribbean cruise if more than one-quarter inch of rain fell from 10 a.m. to 4 p.m. for a preset number of days depending on the length of the cruise. 142. Refer to icruise.com. If it rained and the Internet company failed to honour its refund policy, it would represent a gap between which of the following? a. what the company tells the customer it provides and what is actually provided b. what management thinks customers want and the quality specifications that management develops to provide the service c. what customers want and what management thinks customers want d. service quality specifications and employee training ANS: A This is an example of a communications gap. PTS: 1 DIF: Application BLM: Higher order

REF: p. 302

OBJ: 3

143. Refer to icruise.com. What type of guarantee is the service? a. standardized b. supplementary c. customized d. core ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 304

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Save-the-Forest League is a nonprofit group committing to preserving ancient forests in British Columbia. 144. Refer to Save-the-Forest League. Environmentalists, loggers, hunters, national park visitors, and lumber-producing companies are which of the following? a. Save-the-Forest League’s niche b. Save-the-Forest League’s target market c. Save-the-Forest League’s market segment d. Save-the-Forest League’s market objective ANS: B The goal of the organization is to convince those groups and others of the importance of their work. PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

OBJ: 8

145. Refer to Save-the-Forest League. Because most people are not directly affected by what the organization does, what does the organization have? a. a weak donor commitment b. a weak differential advantage c. a weak benefit strength d. a weak advantage complexity ANS: C OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 313

TRUE/FALSE 1. Even though the growth of the service sector worldwide has been sluggish in the past decade, the service sector now accounts for approximately one-quarter of the gross national product in Canada. ANS: F Growth in service has been tremendous, and the service sector accounts for about 70 percent of GDP. PTS: 1

DIF: Definition

REF: p. 298

OBJ: 1

2. Insurance companies are examples of service organizations. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 298

3. Services are consider intangible because most services cannot be felt or touched in the same way most goods can be sensed. ANS: T REF: p. 299

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PTS: 1 OBJ: 2

DIF: Comprehension

4. Jorge Linez, owner of Shadetree Muffler Shop, must be physically present when he works on a car. The need for his presence as the service is performed is an example of the intangibility of services. ANS: F The need for his presence and the customer’s presence is an example of how services are produced and consumed simultaneously (inseparability). PTS: 1

DIF: Application

REF: p. 299

OBJ: 2

5. Variability of services means the quality of a service may not be tangible. ANS: F Service performances tend to be less standardized and uniform than goods. Variability of services means the quality of a service may vary from one service provider to another or may vary for the same service provider at different times of the day or week. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 299

6. Often hotels will offer deep discounts on weekends and during the off-season for the same reason airlines will adopt a similar pricing strategy during off-peak hours. These services cannot be stored, warehoused, or inventoried because they are perishable. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 300

7. The speed with which an ambulance can get to an accident site is an indication of the reliability dimension of service. ANS: F This is an example of responsiveness. PTS: 1

DIF: Application

REF: p. 300

OBJ: 3

8. The gap model of service quality shows how customers can be trained to respond more appropriately to the service being offered. ANS: F The gap model identifies five gaps that can cause problems in service delivery and influence customers’ evaluations of service quality. PTS: 1

DIF: Definition

REF: p. 301

OBJ: 3

9. The only type of service processing required for a comedian entertaining at a local club is information processing. ANS: F Comedians require mental stimulus processing. PTS: 1

DIF: Application

REF: p. 303

OBJ: 4 10-41

10. Convenience is not usually a factor when selecting a service provider as it is when selecting a product retailer. ANS: F Convenience is usually a key factor influencing the selection of a service provider. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 305

11. Erika is designing a promotional strategy for a company that provides cleaning services for buildings that have been vandalized. Her promotions should use personal information sources and stress the tangible cues associated with the service. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 305-306

12. Service firms may adopt patronage-oriented pricing to try to maximize the surplus of income over costs. ANS: F Service firms may adopt patronage-oriented pricing to try to maximize the number of customers using the service. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 307

13. Virtual Bellhop is a company that ships your skiing equipment and your golf clubs to a vacation site so they are there when you arrive and you don’t have to carry them through the airport. There is no way this company could institute relationship marketing. ANS: F It could institute relationship marketing by building relationships with frequent travellers through social bonds. PTS: 1

DIF: Application

REF: p. 307

OBJ: 5

14. Kohl’s department stores offers its corporate employees flexible work hours, work-at-home programs, on-site childcare, and travel benefits that reward quality performance. Kohl’s approach illustrates relationship marketing in action. ANS: F Kohl’s is practising internal marketing. Relationship marketing is focused on customers, not employees. PTS: 1

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DIF: Application

REF: p. 309

OBJ: 6

15. Canadian service firms such as those in finance, construction, engineering, insurance, and leisure will have a difficult time expanding to global markets because competing foreign firms possess many competitive advantages. ANS: F These Canadian firms have the greatest potential for globalization because of their existing competitive advantages. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 311

16. Nonprofit organization marketing accounts for more than one-fifth of all the economic activity in Canada. ANS: T OBJ: 8

PTS: 1

DIF: Definition

REF: p. 312

17. The only marketing mix component nonprofit organizations do not use is price. ANS: F Nonprofit marketers are involved with all elements of the marketing mix. However, the price for their service may be time rather than money. PTS: 1 OBJ: 8

DIF: Comprehension

REF: p. 312-315

18. Like any business, nonprofit organizations measure their success or failure in strictly financial terms. ANS: F Nonprofits lack a financial “bottom line.” PTS: 1 OBJ: 8

DIF: Comprehension

REF: p. 312

19. Nonprofit organizations are unique because their target markets are often disinterested, apathetic, or outright opposed to the products or services provided by these organizations. ANS: T REF: p. 313

PTS: 1 OBJ: 8

DIF: Comprehension

20. Many nonprofit organizations market services that elicit either very low involvement or very high involvement. ANS: T REF: p. 313

PTS: 1 OBJ: 8

DIF: Comprehension

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21. Both for-profit services and nonprofit organizations have characteristics that suggest their channels of distribution should be direct. ANS: T REF: p. 313

PTS: 1 OBJ: 8

DIF: Comprehension

22. Advertisements that promote programs, activities, or services of nonprofit organizations are called PSAs (public service advertisements) if there is no charge to the sponsor of the message. ANS: T OBJ: 8

PTS: 1

DIF: Definition

REF: p. 314

23. Consumers in many nonprofit situations pay prices not in money, as they pay for most goods, but in other ways such as time or opportunity costs. ANS: T REF: p. 314-315

PTS: 1 OBJ: 8

DIF: Comprehension

ESSAY 1. Most products are actually a combination of goods and services. Describe the service benefits that might have led to the purchase of each of the following products: • • •

A new car from a local dealership Hamburger meat from the grocery store A Domino’s pizza to be eaten at home

ANS: Car. A car is usually accompanied by a service warranty provided by the manufacturer. The dealership performs services on the car (such as waxing, window tinting, options installation, and upholstery protection) and for the consumer (such as filling the gas tank, providing financing, and performing tax, title, and licence services). Additionally, the local dealership may provide repair and maintenance service to the car at a later time. Hamburger. The grocer performs the service of obtaining government-approved beef as well as cutting, trimming, and grinding the beef. Finally, the ground beef is packaged in sizes convenient for the consumer and displayed in a refrigerated case. Pizza. Domino’s obtains the ingredients for pizza, and prepares, assembles, and bakes the pizza. Delivery service to the home soon after order placement is one of the most important components of the pizza sale. PTS: 1

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DIF: Application

REF: p. 298

OBJ: 1

2. Services have four unique characteristics that distinguish them from goods. Name and define each of these four characteristics. ANS: Intangibility. Services are intangible; that is, they cannot be touched, seen, tasted, heard, or felt in the same manner in which goods can be sensed. Services cannot be stored, are often easy to duplicate, seldom have hidden technology, and have no patent protection. Inseparability. Services are often sold and then produced and consumed at about the same time. This means consumers are involved in the production process of the services they purchase. Additionally, inseparability means services cannot be produced in a centralized location and consumed in decentralized locations. Heterogeneity. Services, although designed to be homogeneous at each production location, are more often heterogeneous. Consistency and quality control are often difficult to achieve in a service because services are dependent on their labour force, and services are produced and consumed at the same time. Perishability. Services cannot be stored, warehoused, or inventoried. Service organizations are often faced with severe overdemand where customers must be turned away, or with underdemand that provides no revenue. PTS: 1

DIF: Application

REF: p. 299-300

OBJ: 2

3. Services have four unique characteristics that distinguish them from goods. Name and briefly define each of these four characteristics. Use the example of an airline to help describe each of the four characteristics. ANS: Intangibility. Services are intangible; that is, they cannot be touched, seen, tasted, heard, or felt in the same manner in which goods can be sensed. An airline provides travel services. Although there are some aspects that are tangible (such as the plane, the staff, and the food), the service benefit of fast travel is intangible. Inseparability. Services are often sold and then produced and consumed at about the same time. For airline service, first the ticket is sold. At some later time, the service is produced and consumed simultaneously as the airplane flies to the destination point. Heterogeneity. Consistency and quality control are often difficult to achieve in a service because services are dependent on their labour force, and services are produced and consumed at the same time. In airline travel, a passenger cannot get exactly the same service experience from flight to flight. The length of the flight, flight comfort, flight attendants’ service, food, neighbouring passengers, and many other factors will vary. Perishability. Services cannot be stored, warehoused, or inventoried. An empty airline seat produces no revenue and cannot be saved for the next flight. However, by overbooking flights, passengers can be saved up and used to fill later flights. PTS: 1

DIF: Application

REF: p. 299-300

OBJ: 2

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4. Services have four unique characteristics that distinguish them from goods: intangibility, inseparability, heterogeneity, and perishability. These characteristics can make the marketing of services more difficult. What special strategies should marketers adopt for services to address each of the four characteristics? ANS: Intangibility. Marketers should rely on tangible cues to communicate a service’s nature and quality. This includes creation of the right environment and atmosphere at facilities that customers visit. Inseparability. Because services are often sold and then produced and consumed at the same time, customers are involved in production and interact with service staff and other customers. Care must be taken that staff are courteous and comfort is provided for all customers. Additionally, inseparability implies that services cannot be produced in a centralized location and distributed at decentralized locations convenient to the consumer. Service production facilities should be located in areas most convenient to the consumer. Variability. Consistency and quality control are often difficult to achieve in a service, because services are dependent on their labour force, and services are produced and consumed at the same time. Standardization and training help increase consistency and reliability. Another way to increase consistency is to mechanize the service process. Heterogeneity. Services cannot be stored, warehoused, or inventoried. Therefore, marketers must synchronize supply with demand. This may be accomplished by using differential pricing to encourage demand during nonpeak periods. PTS: 1

DIF: Application

REF: p. 299-300

OBJ: 2

5. What three evaluation qualities of goods or services are used by consumers? Give an example of a service that exhibits each quality. ANS: Search qualities are characteristics that can be easily determined before purchase. The emphasized tangible characteristics of a service would be evaluated by the consumer in this case. Automatic vs. standard transmission in a car, the colour of the new paint on a house, or the size of a hamburger at a fast-food restaurant are all examples of search components. Experience qualities are those that can be discerned only after purchase or during consumption. Services such as restaurants, housecleaning, and haircuts would fit in this category. Credence qualities are associated with specialized services in which the consumer might not have the experience or expertise to evaluate service quality even after consumption. Legal, tax, and medical services have credence qualities. PTS: 1

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DIF: Application

REF: p. 299

OBJ: 2

6. What is the model of service quality called? Identify the five gaps that can cause problems in service delivery and influence customer evaluations of service quality. ANS: The gap model is the model of service quality. Gap 1 is the gap between what customers want and what management thinks customers want. Gap 2 is the gap between what management thinks customers want and the quality specifications that management develops to provide the service. Gap 3 is the gap between the service quality specification and the service that is actually provided. Gap 4 is the gap between what the company provides and what the customer is told it provides, Gap 5 is the gap between the service that customers receive and the service they want. PTS: 1

DIF: Application

REF: p. 301-302

OBJ: 3

7. Define core and supplementary services. Give an example of each for the following services: a wedding consultant, a lawn care service, and tutoring service. ANS: The service is made up of a bundle of activities that include the core service (the most basic benefit being purchased), and supplementary services that support or enhance the core service. A wedding consultant’s core service would be planning a wedding. A supplementary service might be promising an error-free wedding. The wedding consultant could also include additional services such as honeymoon planning. The core service for a lawn care service is a green, mowed yard. Supplementary services could include cleaning the driveway, planting and maintaining flower borders, and watering when the homeowner is out of town. The core service for a tutoring service is education. Supplementary services could include mentoring, improvement in other classes than the one for which tutoring is needed, and a better self-image. Students, of course, should generate many additional answers. PTS: 1

DIF: Application

REF: p. 304

OBJ: 4

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8. What are the five key issues to remember when developing distribution strategies for service organizations? ANS: • • • • • PTS: 1

Convenience to customers Enough outlets to satisfy customers’ needs Whether to provide direct or indirect distribution Location of service Scheduling of when services will be available DIF: Application

REF: p. 305

OBJ: 4

9. There are four promotional strategies for dealing with the unique features of services. Name these strategies, and give examples of each, using Air Canada (or another air carrier you are familiar with) as your example service. ANS: Stressing tangible cues. The most obvious tangible cue is the aircraft itself because this is an equipment-based service. Other tangible cues can be stressed during in-flight service, such as special meal and beverage services, provision of promotional items such as playing cards featuring the Air Canada logo, or other methods of making intangible services more tangible. Using personal information sources. Personal sources of information can help to reduce a customer’s perceived risk in choosing a service. An endorsement of a famous actor or political figure who prefers to use Air Canada would be beneficial. Air Canada should also seek to stimulate positive word-of-mouth communication among present and prospective customers. Creating a strong organizational image. Service marketers should attempt to create strong organizational images. One way to create an image is to manage the evidence of the service. This would mean that Air Canada should create a good appearance of the flight crews and other employees, keep aircraft clean, and provide other tangible goods (items featuring the Air Canada logo). Using postpurchase communications. Postpurchase communication can be accomplished with postcard surveys, in-flight brochures, or personal interviews. Customers should be shown that their feedback is sought and their patronage is appreciated. PTS: 1

DIF: Application

REF: p. 305-306

OBJ: 4

10. Describe the two unique challenges faced by service providers as they decide on a pricing strategy to use. ANS: (1) In order to price a service, it is important to define the unit of service consumption. For example, should pricing be based on completing a specific service task or should it be time based? (2) For services that are composed of multiple elements, the issue is whether pricing should be based on a bundle of elements or whether each element should be priced separately. PTS: 1

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DIF: Application

REF: p. 306-307

OBJ: 4

11. Name and briefly define the three categories of pricing objectives for services. ANS: Revenue-oriented pricing focuses on maximizing the surplus of income over costs. A limitation of this approach is that for many services, determining costs can be difficult. Operations-oriented pricing seeks to match supply and demand by varying prices. Prices can be increased during peak times and decreased during slow times. Patronage-oriented pricing tries to maximize the number of customers using the service. Pricing according to different market segments’ ability to pay and offering methods of payment that increase the likelihood of purchase are strategies used for this pricing objective. PTS: 1

DIF: Application

REF: p. 306-307

OBJ: 4

12. Relationship marketing can be practised at three levels, each level adding a new kind of bond with the customer. Name and describe each of these levels, using a legal service to illustrate each level. ANS: Level one—financial bonds. This level of relationship marketing is based mainly on pricing incentives that encourage customers to continue doing business with a firm. A legal service could offer discounts to long-term customers or to customers who use the service frequently or regularly. Level two—social bonds. This level also uses pricing incentives, but also seeks to build social bonds with customers. This means staying in touch with clients, learning about their needs, and designing the service to meet those needs. For example, the legal service could send thank-you cards, or call clients to see if they were satisfied and ask about other desired services. Level three—structural bonds. This level of relationship marketing uses financial and social bonds but adds structural bonds. Structural bonds are developed by building value-added services into the service that are not readily available from other firms. This might include exclusive after-hours phone numbers for special clients; transportation services to and from legal hearings or the legal offices; fax, computer, or express document services; or permanent office space reserved for special clients’ use. PTS: 1

DIF: Application

REF: p. 308

OBJ: 5

13. What is the difference between internal marketing and relationship marketing? Why are these types of marketing important to service marketing? ANS: Internal marketing means treating employees as customers and developing systems and benefits that satisfy their needs. A firm that engages in internal marketing practises activities such as competing for talent, offering a vision, training employees, stressing teamwork, giving employees more freedom to make decisions, measuring and rewarding quality, and knowing employees’ needs. The quality of a firm’s employees is an important part of service quality. Employees who like their jobs and are happy with their company are more likely to deliver high-quality service. Internal marketing provides a strong foundation for the external marketing of services.

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Relationship marketing is a means for attracting, developing, and retaining customer relationships. Satisfied customers who are loyal will buy additional services from the firm and are unlikely to switch to a competitor. Satisfied customers are also likely to engage in positive word-of-mouth communications, thereby bringing in new customers. Because many services involve a process of continuous interaction between the service organization and the customer, relationship marketing is an important strategy. It is often more cost-effective to hang on to existing customers than to attract new ones. PTS: 1

DIF: Application

REF: p. 307-310

OBJ: 5 | 6

14. Briefly discuss Canada’s role in the global services marketing arena. Identify those industries playing a key role. What should a business do to be successful in the international marketplace? ANS: The international marketing of services is a major part of global business, and Canada has become a leading exporter of services. Many Canadian service industries have the potential for globalization because of their existing competitive advantages. These include financial institutions and insurance. To be successful in the global marketplace, service firms must first determine the nature of their core service offering. Then the marketing mix elements (supplementary services, pricing, promotion, distribution) should be designed to take into account each country’s cultural, technological, and political environment. PTS: 1

DIF: Application

REF: p. 311

OBJ: 7

15. What is nonprofit organization marketing? How does nonprofit marketing affect economic activity in Canada? ANS: Nonprofit organization marketing is the effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets by using the same marketing activities as for-profit businesses. Unlike for-profit organizations, nonprofits do not have a bottom-line orientation. Nonprofit organizations account for over 20 percent of the economic activity in Canada. Government organizations collect revenues that amount to 41.5 percent of the Canadian gross domestic product, and they employ nearly one of every five nonagricultural civilian workers. PTS: 1

10-50

DIF: Application

REF: p. 312

OBJ: 8

16. Nonprofit organizations include a wide variety of entities ranging from the government to private not-for-profit churches. Although nonprofit organizations differ substantially in size and purposes and operate in quite different environments, most perform common marketing activities. List four of these common activities. ANS: • Identify customers (such as clients, patients, members, or sponsors) they wish to serve or attract. • Explicitly or implicitly specify objectives. • Develop, manage, and eliminate programs and services. • Decide on prices (such as fees, donations, tuition, fares, or rates) to charge. • Schedule events or programs and determine where they will be held or where services will be offered. Communicate availability through brochures, signs, public service announcements, or advertisements. •

PTS: 1

DIF: Application

REF: p. 312

OBJ: 8

17. Three target market issues are unique to nonprofit organizations. Name these three issues, and provide one specific example of each of these issues. ANS: Apathetic or strongly opposed targets. While private-sector organizations develop market segments that are most responsive to their offerings, nonprofit organizations must develop marketing programs aimed at relatively unresponsive targets or people strongly opposed to receiving the service. This includes targets for services such as vaccinations, family planning, aid for substance abuse, and psychological counselling. Pressure to adopt undifferentiated segmentation strategies. Some nonprofit organizations fail to recognize the advantages of segmentation, or they use an undifferentiated approach for apparent economies of scale and low per capita costs. Other organizations are required to serve the maximum number of people by targeting the average user. Unfortunately, there are few “average” users and most nonprofit organizations benefit from differentiated strategies. Complementary positioning. Nonprofit organizations strive to provide services to those individuals or groups who are not adequately served by private-sector organizations. Thus, the goal is to complement rather than compete with the efforts of others. For example, a nonprofit organization would seek to identify underserved market segments (low-income families) and develop marketing programs that match their needs (low-cost housing). PTS: 1

DIF: Application

REF: p. 313

OBJ: 8

10-51

18. Nonprofit organizations do not make product decisions the same way that service providers do. List and briefly describe each of the three product-related decisions that are unique to nonprofit organizations. ANS: Benefit complexity. Nonprofit organizations market complex behaviours and ideas, such as the need to exercise or to stop smoking. The benefits are complex, long term, and intangible. Benefit strength. The benefit strength of many nonprofit offerings is weak or indirect. Most private-sector service organizations can claim direct, personal benefits. Involvement. Nonprofit organizations market products that elicit a wide range of involvement levels, from very low involvement (don’t litter) to very high involvement (stop smoking). Traditional promotional tools may be inadequate to motivate product adoption in either of these extreme cases. PTS: 1

DIF: Application

REF: p. 313

OBJ: 8

19. Nonprofit marketers face several limitations when making promotion decisions. What are some of these limitations? What two unique advantages for nonprofit organizations can help firms overcome these limitations? ANS: Many nonprofit organizations are prohibited from advertising, thus limiting their range of promotion options. Most federal agencies fall into this category. Other nonprofit organizations do not have the resources to retain advertising agencies, promotion consultants, or marketing staff members. Despite these limitations, nonprofit organizations sometimes have access to professional volunteers or donated media time or space. Professionals at advertising agencies or market research firms can donate services. Sales promotion activities that make the use of other existing services or resources can be used. Public service announcements (PSAs) are similar to advertisements, but the media donate time and space. PTS: 1

10-52

DIF: Application

REF: p. 314

OBJ: 8

20. You have been hired to promote the works of a local organization that provides services to troubled teens. Before beginning your job, you have been told that the organization cannot engage in advertising due to the sources of its funding. What three promotional options can you use? ANS: Professional volunteers. You can get professionals to donate their time and help. This allows the volunteers to become familiar with and supporters of the organization. Sales promotion activities. You could team up with a local bank or industry to draw attention to the organization through a sponsored event, or ask retailers to donate a portion of a day’s or a week’s sales to the cause. Public service announcements. This is not advertising because it is not paid for—but it can be used to communicate with the organization’s target market. PTS: 1

DIF: Application

REF: p. 314

OBJ: 8

21. Five key characteristics distinguish how nonprofit organizations make pricing decisions from how for-profit organizations make pricing decisions. List and briefly describe four of these characteristics. ANS: Pricing objectives. Nonprofit organizations are concerned with revenue production but only to defray costs, not to achieve profits for distribution to stockholders. Income redistribution takes the form of equitable allocation among individuals, households, or geographic or political boundaries. Nonfinancial prices. Consumers often absorb nonmonetary costs rather than paying a monetary price. These nonmonetary costs may consist of the cost of time, embarrassment costs, or effort costs. Indirect payment. Indirect payment is received to cover a broad range of services. Indirect payment may take the form of taxes or other dues that help pay for free services provided by libraries, police departments, or fire departments. Separation between payers and users. Services distributed to one group are largely paid for by those in another group (usually those in a better financial situation). Below-cost pricing. Often, products and services are provided below cost. Nonprofit organizations do this to remain socially responsible. PTS: 1

DIF: Application

REF: p. 314-315

OBJ: 8

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Chapter 11—Marketing Channels and Supply Chain Management MULTIPLE CHOICE 1. What is a business structure of interdependent organizations that reaches from the point of product origin to the consumer? a. a marketing channel or channel of distribution b. a marketing mix intermediary c. a selective distribution channel d. a transportation channel or channel of movement ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 326

2. How can marketing channels achieve economies of scale? a. through overcoming spatial discrepancies b. through specialization and division of labour c. through contact expertise d. through overcoming discrepancies of quantity ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 326

3. The difference between the amount of product produced and the amount an end user wants to buy is a discrepancy of which of the following? a. possession b. quantity c. accumulation d. assortment ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 326

4. To facilitate manufacturing in China, Ingersoll-Rand uses 18 different local suppliers of key component parts. These suppliers are part of which of the following for Ingersoll-Rand? a. the channel of distribution b. the materials-handling network c. the communication network d. the demand chain ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 326

11-1

5. A flour mill purchases bags of wheat from hundreds of different farmers. Then it grinds the wheat into flour and packages it into 2-kilo, 5-kilo, 10-kilo, and 25-kilo bags. By selling the packaged flour, the mill has aided the grocery stores by overcoming which discrepancy? a. possession b. assortment c. quantity d. space ANS: C The difference between the amount of product produced and the amount an end user wants to buy is a discrepancy of quantity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 326

OBJ: 1

6. If a retail outlet does not offer all the items necessary in order to use or to receive full satisfaction from a product that it sells, what is there? a. a temporal discrepancy b. a discrepancy of quantity c. a discrepancy of possession d. a discrepancy of assortment ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 326

7. A manufacturer may produce only one product, yet additional products may be required to actually use the first product. What does this create? a. a discrepancy of possession b. a discrepancy of quantity c. a spatial discrepancy d. a discrepancy of assortment ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 326

8. McKesson Company provides health care products to pharmacies. For example, it purchases bandages, gauze, antibacterial cream, and ointments (or anything else you would need to treat a cut or scrape) from a variety of different manufacturers. Its goal is to provide each pharmacy with every item a customer might want to treat a cut. How is McKesson aiding consumers? a. by overcoming discrepancy of quantity b. by overcoming discrepancy of assortment c. by overcoming discrepancy of possession d. by overcoming spatial discrepancy ANS: B A manufacturer may produce only one product, yet additional products may be required to actually use the first product. This creates a discrepancy of assortment. PTS: 1 DIF: Application BLM: Higher order

11-2

REF: p. 326

OBJ: 1

9. Distribution channels aid in overcoming barriers to exchange that are created in the production process by overcoming all of the following types of discrepancies EXCEPT which one? a. temporal b. possession c. quantity d. spatial ANS: B Channels facilitate the end goal of possession of the goods, but they do not help to overcome a discrepancy of possession. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 326-327

10. Which discrepancy is created when a product is produced but a consumer is not ready to purchase it? a. assortment b. supply c. possession d. temporal ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 327

11. Markets are often scattered over large geographic regions, yet a manufacturer may have only one location in the country. What type of discrepancy does this create? a. spatial b. assortment c. quantity d. temporal ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 327

12. YKK slide fasteners (zippers) are made in Macon, Georgia, yet manufacturers all over the world use zippers to manufacturer, clothes, luggage, shoes, and other items. Having wholesalers around the world helps to overcome which discrepancy for YKK? a. ownership b. creation c. temporal d. spatial ANS: D Markets are often scattered over large geographic regions, yet a manufacturer may have only one location. This creates a spatial discrepancy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 327

OBJ: 1

11-3

13. Marketing channels make distribution simpler by reducing the number of transactions required to get products from manufacturers to consumers. What is this called? a. contact efficiency b. forward integration c. reciprocity d. elimination of temporal discrepancies ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 327

14. The major characteristic used to differentiate between types of intermediaries is whether they do one of the following. Which one? a. raise profit margins for independent middlemen b. install exchange barriers such as location, time, and quantity c. decrease economies of scale d. take title to the products they sell ANS: D Marketing channels increase the efficiency of the buying and exchange process by reducing the number of contacts between buyers and sellers. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 328

15. Retailers and merchant wholesalers are examples of intermediaries that do which of the following? a. create temporal and spatial discrepancies b. do not benefit from any economies of scale c. use consumer promotions d. take title to a product ANS: D The difference is whether they own the merchandise and control the terms of the sale. Wholesalers would use trade promotions. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 328

16. W.W. Grainger, Inc., is one of the world’s largest business-to-business distributors of equipment, component parts, and supplies in the United States and Canada. It has ownership title to over 220,000 products, which are stocked in one national and nine regional warehouses to guarantee product availability and quick service to the many manufacturers who are its customers. What is W.W. Grainger an example of? a. a hypermarket intermediary b. an agent or broker c. a merchant wholesaler d. a consumer market ANS: C OBJ: 2

11-4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 328

17. Which of the following is an institution that buys goods from manufacturers, takes title to these goods, and resells them to businesses, government agencies, and/or other wholesalers or retailers? a. an agent b. a drop shipper c. a marketing cooperative d. a merchant wholesaler ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 328

18. Which of the following BEST describes agents and brokers? a. They have a great deal of control and risk invested in the goods. b. They represent only manufacturers in sales situations. c. They have a great deal of input on the terms of the sale. d. They do not take title to merchandise. ANS: D Agents and brokers represent retailers, wholesalers, or manufacturers in sales situations, but the agent or broker generally has little input into the terms of the sale. Agents and brokers generally receive a fee or commission, and do not take title, control, or risk concerning the merchandise. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 328

OBJ: 2

19. Which of the following are wholesaling intermediaries that facilitate the sales of a product from producer to end user by representing retailers, wholesalers, or manufacturers and providing little input as to the terms of the sale? a. channel cooperatives b. agents and brokers c. merchant wholesalers d. channel functionaries ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 328

20. One configuration of a marketing channel entails producers selling to consumers with no intermediaries involved. What is this called? a. a limited distribution system b. a vertical marketing system c. a direct channel d. a conventional channel ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 328

11-5

21. The only way Sal Ford in Manitoba can get one of Ian Broan’s wind chimes from B.C. is to order it through the mail. Ian Broan, who makes the wind chimes from scrap metal, uses which of the following exclusively? a. a vertical marketing system b. a reciprocal channel c. an exclusive distribution system d. a direct channel ANS: D The manufacturer sells directly to the consumer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 328

OBJ: 3

22. Fred Farkle just purchased his new home computer on-line at dell.ca. Which marketing channel route was taken for this transaction? a. an indirect channel b. a retailer channel c. a direct channel d. a wholesaler channel ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 328

23. What is the most typically used channel for industrial products? a. the direct channel b. the industrial distributor channel c. the extended channel d. the wholesaler channel ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 328

24. Vutek manufactures printing machines used to print high-resolution graphics for billboards, bus cards, banners, and posters. What would you expect Vutek to use for distribution? a. a horizontally integrated channel b. a network of facilitating agents c. a vertical marketing system d. a direct channel ANS: D For customized, high-tech business products requiring detailed technical specifications, the most common channel structure is the direct channel because of the amount of interaction and direct communication required. PTS: 1 DIF: Application BLM: Higher order

11-6

REF: p. 328

OBJ: 3

25. Generally, which of the following determine what type of intermediary a manufacturer should use? a. all controllable marketing factors b. product characteristics, buyer consideration, and market conditions c. competitive conditions and government regulations d. only noncontrollable environmental factors ANS: B The correct answer combines both internal and external elements. The internal elements can be controlled by the manufacturer, while external environmental factors cannot. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 328-329

26. What are the three basic functions channel members perform? a. contacting, negotiating, and ownership b. transactional, logistical, and facilitating c. assorting, accumulating, and allocating d. promoting, distributing, and bulk-breaking ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

27. According to the text, which of the following statements about merchant wholesalers is true? a. The buyer is generally satisfied with a long lead time when the merchant wholesaler is acting as the facilitating intermediary. b. Products typically carried by merchant wholesalers are technically simple. c. Customers of merchant wholesalers are typically concentrated. d. Frequent ordering is commonplace with a merchant wholesaler. ANS: D See Exhibit 11.2. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 329

28. Transactional channel functions include all of the following activities EXCEPT which one? a. promoting the products to be sold b. physical distribution and sorting c. taking the risks associated with product inventories d. contacting buyers ANS: B See also Exhibit 11.3. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

OBJ: 2

11-7

29. Marketing channels perform all of the following logistical activities EXCEPT which one? a. assorting products into homogeneous or heterogeneous collections b. grading c. sorting d. risk taking ANS: D Risk-taking is a transactional activity. See Exhibit 11.3. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

OBJ: 2

30. Which of the following includes managing the movement of raw materials and parts from their sources to production sites; managing the movement of materials, semi-finished, and finished products within and among plants, warehouses, and distribution centres; as well as the planning and coordinating of the physical distribution of finished goods to intermediaries and final buyers? a. intermodal transportation b. contract logistics c. logistics d. materials handling ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

31. Which of the following describes the process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption? a. logistics b. contract logistics c. disintermediation d. channel facilitation ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

32. Which of the following is a channel member typically used by manufacturers as they route their products to consumers? a. producer b. supplier c. other manufacturers d. industrial distributor ANS: A Industrial distributors are used for distributing industrial, not consumer products. PTS: 1 OBJ: 3

11-8

DIF: Comprehension BLM: Higher order

REF: p. 329

33. On the Internet, which of the following allow companies to automate their supply chains while sharing information only with select suppliers? a. disintermediation b. shopping bots c. Internet agents d. private exchanges ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

34. What do companies selling standardized items of moderate or low value to other companies often use? a. industrial distributors b. agents and brokers c. direct marketing organizations d. retailers ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

REF: p. 330

OBJ: 2

35. Which of the following is a sorting activity? a. assembling b. possession c. assorting d. repairing ANS: C See Exhibit 11.3. PTS: 1 BLM: Remember

DIF: Definition

36. What is breaking bulk at the wholesale level called? a. downsizing b. sorting out c. grading d. allocating ANS: D See Exhibit 11.3. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 330

OBJ: 2

11-9

37. Which of the following are examples of facilitating functions performed by wholesaling intermediaries? a. assorting, accumulating, grading, and allocating b. financial management and storing c. researching and financing d. sorting and storing ANS: C See Exhibit 11.3. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 330

OBJ: 2

38. Which distribution occurs when a producer selects two or more different channels to distribute the same products to target markets? a. selective b. intensive c. multiple d. contractual ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 331

39. Broad Corporation is a wholesale company that sells health care products to pharmacies, hospitals, rehabilitation centres, and nursing homes. This is an example of which type of distribution? a. intensive b. multiple c. cumulative d. aggregated ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Application

REF: p. 331

40. When the new father left the maternity ward to find something to eat, he was surprised to see that he could buy McDonald’s fast food in the hospital dining room. What is McDonald’s utilizing? a. logistical distribution b. multiplicative channels c. a strategic channel alliance d. a nontraditional channel ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 331

41. Which of the following use another manufacturer’s already established channel and are used when the creation of marketing channel relationships may be expensive and time consuming? a. relationship channels b. strategic channel alliances c. nontraditional channelization d. reverse channels ANS: B OBJ: 3 11-10

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 331

42. Grainhead Company in Moose Jaw, Saskatchewan, would like to expand to international markets, but it has neither the time nor the resources to spend on developing channels of distribution. What should the company consider? a. a reverse channel b. a strategic channel alliance c. a channel cooperative d. an industrial distributor ANS: B Strategic channel alliances use another manufacturer’s already established channel and are used when the creation of marketing channel relationships may be expensive and time consuming. PTS: 1 DIF: Application BLM: Higher order

REF: p. 331

OBJ: 3

43. Which of the following coordinates and integrates all of the activities performed by channel members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value? a. materials handling b. physical distribution c. yield management d. supply chain management ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 332

44. Which of the following BEST describes supply chain management? a. It is controlled at the manufacturer/producer level. b. It is a logistics function controlled by transportation companies. c. It is the process of strategically managing the efficient flow and storage of raw materials and finished goods from point of origin to point of consumption. d. It is a business structure of interdependent organizations that reach from the point of product origin to the wholesaler. ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 332

45. According to the text, which of the following statements about supply chain management is true? a. Supply chain management focuses on pulling products into the marketplace. b. Supply chain management is supply chain driven. c. Supply chain management focuses on pushing products into the marketplace. d. Supply chain management provides customers with maximum service levels. ANS: A Supply chain management is customer driven. Outsourcing is one option for supply chain managers. Supply chain management balances the costs of the supply chain with the level of service demands by customers; thus, customers may not get the maximum level of service. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 332

11-11

46. Which of the following BEST describes supply chain management? a. It is a physical flow process. b. It plays the role of stimulator of customer demand. c. It is supplier driven. d. It decreases customer and economic value. ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 332

47. According to the text, which of the following statements concerning how market factors affect channel decisions is true? a. A very large market requires fewer intermediaries. b. Geographically concentrated target markets should be served with an indirect sales force. c. New firms in extremely competitive markets will be more successful if they use indirect channels. d. Industrial customers tend to buy in larger quantities and require more customer service. ANS: D Generally, a very large market requires more intermediaries, including wholesalers and retailers. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 334

48. Which distribution is aimed at maximum market coverage and is used for many convenience goods and supplies that need to be available in every outlet where the potential customer might want to buy them? a. intensive distribution b. horizontal channelling c. selective distribution d. exclusive distribution ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 336

49. Mouthwash is sold in grocery stores, service stations, convenience stores, drugstores, discount stores, and motel vending machines. What type of distribution strategy is being used? a. intensive b. selective c. exclusive d. reciprocal ANS: A Intensive distribution is distribution aimed at maximum market coverage. It is used for many convenience goods that need to be available in every outlet where the potential customer might want to buy them. PTS: 1 DIF: Application BLM: Higher order

11-12

REF: p. 336

OBJ: 5

50. Which of the following manufacturers most likely uses intensive distribution? a. Cannondale, a manufacturer of bicycles and sportswear b. Sauder, a manufacturer of furniture c. Schwinn, a manufacturer of bicycles d. Coca-Cola, a manufacturer of soft drinks and bottled water ANS: D Only the soft drink is a low-value product. Low-value products are commonly sold in a variety of locations. PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

OBJ: 5

51. Which distribution is achieved by screening dealers to eliminate all but a few in any single geographic area? (Shopping goods and some specialty products that consumers are willing to search for are sold this way.) a. intensive b. dual c. controlled d. selective ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 336

52. Husqvarna Viking manufacturers sewing machines. The company carefully screens its dealers to ensure a quality dealer image and service ability. Only a few dealers are chosen in any single geographic area. This is an example of what type of distribution? a. exclusive b. controlled c. selective d. intensive ANS: C Selective distribution is achieved by screening dealers to eliminate all but a few in any single geographic area. Shopping goods and some specialty goods that consumers are willing to search for are sold by selective distribution. PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

OBJ: 5

53. The most restrictive form of market coverage entails establishing only one or a few dealers within a given geographic area. Because buyers need to be willing to search or travel to acquire the product, this form of distribution is limited to consumer specialty goods, a few shopping goods, and major industrial equipment. What is this type of distribution? a. selective b. intensive c. exclusive d. premium ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 336

11-13

54. Walker Zanger, Inc. manufactures decorative tile. The company has a policy of having only one or two dealers within a given large geographic area. Buyers of Walker Zanger brand terra cotta and mosaic tiles for home decorating will travel to acquire just the right product, so what type of distribution is appropriate for the tile? a. reciprocal b. premium c. intensive d. exclusive ANS: D The most restrictive form of distribution, exclusive, entails establishing one or a few dealers within a given geographic area. Because buyers need to be willing to search or travel to acquire the product, this form of distribution is limited to consumer specialty goods, a few shopping goods, and major industrial equipment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

OBJ: 5

55. Intensity of distribution for any product refers to which of the following? a. the number of manufacturers in the marketplace b. the number of intermediaries to be used in each market c. the amount of money spent on channel logistics d. the intensity of competing products in the marketplace ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 336

56. What would be the level of distribution used to support a product’s image and allow for a higher profit margin? a. exclusive b. selective c. closed d. intensive ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 336

57. If you were a manufacturer who wanted to maximize control of the sales efforts of your product but desired an indirect channel of distribution, what type of distribution system would you likely choose? a. comprehensive b. selective c. intensive d. exclusive ANS: D OBJ: 5

11-14

PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

58. What level of distribution would you recommend Mercedes-Benz use for the retail outlets for its automotive products? a. open distribution b. selective distribution c. exclusive distribution d. closed distribution ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

59. What is another name for a channel leader? a. a channel gatekeeper b. a channel facilitator c. a distribution supervisor d. a channel captain ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 337

60. DeBeers sells most of the diamonds it produces to industry. The company controls over 90 percent of the market and has great power over its distributors. In its marketing channel, what would DeBeers be considered? a. a channel leader b. a channel member c. a power broker d. a channel authority ANS: A DeBeers has control over delivery, inventory, etc. PTS: 1 DIF: Application BLM: Higher order

REF: p. 337

OBJ: 6

61. Which of the following BEST describes channel conflict? a. It can appear as either internal or external. b. It is often caused by an inability of some channel members to keep up with the changing times. c. It is not caused by ideological differences because such differences would prevent the members from ever operating as a channel. d. It always has an adverse effect on the members of the channel. ANS: B In a broad context, channel conflict can be good for a channel. It is sometimes caused by ideological differences. It appears as vertical or horizontal. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 337

11-15

62. Sewing machine retailers want to sell as many machines as possible in order to maximize profits, regardless of whether the piece is manufactured by Singer, Janome, or Husqvarna Viking. But the Singer manufacturer wants a certain sales volume and market share in each market. What can this situation produce? a. market share conflict b. channel conflict c. horizontal market share d. lateral channel takeover ANS: B Channel members may have conflicting goals, resulting in channel conflict. PTS: 1 DIF: Application BLM: Higher order

REF: p. 337

OBJ: 6

63. Honda uses just-in-time manufacturing to build its Odyssey minivans. Five companies that make component parts for the Honda Odyssey relocated to Alabama and states bordering Alabama when Honda announced plans to build a new Odyssey manufacturing plant in Alabama. This relocation in order to provide efficient delivery of goods indicates that Honda is which of the following? a. a horizontal integrator b. a demand maverick c. a distribution champion d. a channel captain ANS: D A channel captain exercises authority and power over the other channel members. PTS: 1 DIF: Application BLM: Higher order

REF: p. 337

OBJ: 6

64. Manufacturers that establish a web presence and sell their products over the web in e-commerce-enabled sites invoke which of the following with existing intermediaries? a. channel partnering b. vertical conflict c. horizontal conflict d. channel leadership ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 338

65. When does horizontal channel conflict occur most often? a. when manufacturers practise multiple distribution b. when manufacturers practise exclusive distribution c. when manufacturers practise value-added pricing d. when manufacturers practise channel partnering ANS: A Horizontal conflict occurs when more than one channel is used to handle the same brand. PTS: 1 OBJ: 6

11-16

DIF: Comprehension BLM: Higher order

REF: p. 338

66. What is the joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage? a. selective partnering b. intensive integration c. closed channel distribution d. channel partnering ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 339

67. Which of the following is a logistics component of the supply chain? a. production scheduling b. outsourcing c. push marketing strategy d. order taking ANS: A Supply chain management focuses on pulling products into the marketplace, so a pull strategy being used is being used. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 340

OBJ: 7

68. Which of the following is a member of the supply chain team that moves just-picked cotton to finished clothing and then to the consumer of that clothing? a. the ad agency that develops the promotion for competitors’ clothing b. the worker who picks the cotton c. the trucking company that hauls the workers to the cotton fields d. the warehouse in which the cotton was temporarily stored ANS: D The supply chain team is composed of everyone who participates in the movement from raw material to consumer, including all external participants such as ad agencies, transportation companies, and lending institutions. PTS: 1 BLM: Remember

DIF: Application

REF: p. 341

OBJ: 7

69. Which of the following means that raw materials arrive at the assembly line in guaranteed working order, and finished products are generally shipped to the customer immediately after completion? (It also reduces inventory levels and delivers the product as it is needed in the store.) a. contract logistics b. just-in-time manufacturing c. value-added channelization d. intermodal manufacturing ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 341

11-17

70. What is another name for just-in-time production (JIT)? a. lean production b. mass customization c. outsourcing d. disintermediation ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 341

71. Girls can log onto www.Barbie.com and design their own special Barbie doll. They can choose the doll’s skin tone, hair colour, clothes, accessories, and name. The doll is created to the new owner’s specifications and mailed to her by Mattel. What is Mattel using with this doll? a. customer accumulation b. mass customization c. disintermediation d. niche marketing ANS: B The doll is uniquely tailored for each girl. PTS: 1 DIF: Application BLM: Higher order

REF: p. 341

OBJ: 7

72. Paris Miki is a Tokyo eyeglass store that uses special software to design frames and lenses that conform to the shape of the customer’s face. What is Paris Miki engaged in? a. market development b. batch production c. disintermediation d. build-to-order ANS: D The glasses are uniquely tailored to each customer. Built-to-order is a synonym for mass customization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 341

OBJ: 7

73. A newspaper article on supply chain management discusses the importance of lean production. The article therefore focuses on the role of which of the following in supply chain management? a. materials-handling systems b. supply chain organization c. just-in-time manufacturing d. electronic distribution ANS: C Another name for just-in-time manufacturing is lean production. PTS: 1 DIF: Application BLM: Higher order

11-18

REF: p. 341

OBJ: 7

74. In which logistical component of the supply chain will you find electronic data interchange a common feature? a. transportation b. order processing c. materials handling d. production scheduling ANS: B REF: p. 341

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

75. A manufacturer of sewing machines has decided to implement just-in-time manufacturing. What can the manufacturer expect? a. finished product quality reductions b. the need for more backup suppliers c. more frequent deliveries and reduced inventory d. reduced errors in the purchasing system ANS: C Just-in-time manufacturing is based on receiving the parts from suppliers at the assembly line at the time of installation. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 341

76. What is the direct electronic transmission, from computer to computer, of standard business forms between two organizations, so orders can become virtually paperless and information about the order is available to both firms? a. just-in-time inventory b. electronic data interchange c. direct sourcing d. business prioritizing ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 342

77. What is a method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s needs? a. direct sourcing b. an inventory control system c. warehousing d. contract logistics ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 342

11-19

78. In which logistical component of the supply chain will you find distribution resource planning a common feature? a. production scheduling b. materials handling c. inventory control d. order processing ANS: C REF: p. 342

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

79. What kind of inputs are used in distribution resource planning? a. sales forecasts b. raw materials c. unfulfilled orders d. mode of production to be used ANS: A REF: p. 342

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

80. What is the goal of inventory control? a. to estimate proper usage rates b. to determine order timing and order quantity c. to minimize inventory levels while maintaining an adequate supply to meet customer demands d. to integrate JIT to reduce risks of obsolescence, theft, and damage ANS: C Inventory decisions affect physical distribution costs and service levels. The goal is to balance minimum inventory levels while meeting customer needs for stock. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 342

81. Which of the following provides time utility to buyers and sellers and aids manufacturers in managing supply and demand? a. storage b. direct sourcing c. containerization d. distribution ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 343

82. Which of the following moves inventory into, within, and out of a warehouse? a. a freight forwarder b. a multi-channel system c. an inventory control system d. a materials-handling system ANS: D OBJ: 7

11-20

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 343

83. What is the goal of any effective materials-handling system? a. to optimize the inventory control system b. to reduce the length of time a product is in the transportation subsystem c. to move items quickly with minimal handling d. to reduce the time of the order-processing system ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 343

84. ZuTech makes sensitive monitors for measuring exposure to hazardous materials. ZuTech has suffered substantial losses when moving products from the assembly line to the warehouse and shipping docks. ZuTech should consider reducing the number of times an item is moved in the warehouse by installing which of the following? a. an outsourcing system b. a materials-handling system c. an order-processing system d. an inventory control system ANS: B The goal of the materials-handling system is to move items quickly with minimal handling. PTS: 1 DIF: Application BLM: Higher order

REF: p. 343

OBJ: 7

85. Which mode of transportation provides the most accessibility? a. pipelines b. truck freight c. air freight d. railroad ANS: B Motor carriers (trucks) can go to more locations than any of the other modes of transportation. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 344

86. Transportation typically accounts for what percentage of the price of goods? a. 5 percent–10 percent b. 15 percent–20 percent c. 20 percent–25 percent d. 10 percent–15 percent ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 344

11-21

87. The growers of Vidalia onions have determined that their chief priority for choosing a transportation mode within Canada is transit time. However, this must be tempered by practical cost considerations. In light of these considerations, Vidalia onion growers should use which of the following to ship their onions? a. airplanes b. motor carriers c. water transportation d. railroads ANS: B Motor carriers are not as fast as airplanes, but they are much less expensive, particularly when dealing with a bulky product such as onions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 344

OBJ: 7

88. What is one major advantage of pipelines over other modes of transportation? a. speed b. availability c. points served d. dependability ANS: D Pipelines are rarely interrupted by weather, traffic, or labour disputes. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 344

89. Which of the following describes a disadvantage associated with water transportation? a. product weight restrictions b. capability c. lack of speed d. it cannot be used for international trade ANS: C Shipping via water is the slowest mode of transportation. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 344

90. Which of the following transportation modes can most easily determine the location of a package en route between shipper and receiver? a. rail b. air c. truck d. water ANS: B Air speed offers an important additional benefit to shippers: the ease of tracing shipments. PTS: 1 OBJ: 7 11-22

DIF: Comprehension BLM: Higher order

REF: p. 344

91. The Canadian lobster harvest requires special handling coupled with rapid transportation to ensure the cargo reaches destinations alive. What would be the favoured transportation mode? a. rail b. water c. air d. truck ANS: C Air transportation ensures the speed necessary for lobster delivery. (Air Canada has developed special handling and shipping techniques for the lobsters.) PTS: 1 DIF: Application BLM: Higher order

REF: p. 344

OBJ: 7

92. Papa John’s is a pizza chain that uses UPS trucks to carry supplies to its franchises. Papa John’s does not own the truck but has contracted with UPS to have all of the trucks it uses in its deliveries to Papa John’s establishments painted with the Papa John’s logo and company colours. What is Papa John’s using? a. multi-sourcing b. a selective distribution channel c. outsourcing d. a horizontal distribution channel ANS: C Papa John’s supplier is an independent third party. PTS: 1 DIF: Application BLM: Higher order

REF: p. 344

OBJ: 8

93. What is the major benefit of RFID technology deployed in a logistics capacity? a. The transportation network replaces the warehouse. b. Instances of damage are reduced. c. Goods can be tracked from the time they are shipped until they reach the customer. d. Many middleman jobs can be eliminated. ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 345

94. Which of the following is a trend in physical distribution? a. contract logistics b. an overdependence on computer technology c. direct sourcing d. fewer direct channels ANS: A Use of third-party contractors to provide logistics services is an accelerating trend. PTS: 1 OBJ: 8

DIF: Comprehension BLM: Higher order

REF: p. 346

11-23

95. A manufacturer or supplier uses an independent third party to manage an entire function of the logistics system, such as transportation, warehousing, or order processing. Which of the following BEST describes this? a. direct sourcing b. contract logistics c. freight forwarding d. intermodal sourcing ANS: B OBJ: 8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 346

96. Working with FedEx, Volvo set up a warehouse in Memphis with a complete stock of truck parts. A dealer needing a part for an emergency phones a toll-free number, and the part is delivered by FedEx within 24 hours. This is an example of how manufacturers are using which of the following? a. outsourcing b. disintermediation c. piggybacking d. an integrated demand channel ANS: A With outsourcing, a company would use an independent third party to operate some or all of its logistics system. PTS: 1 DIF: Application BLM: Higher order

REF: p. 346

OBJ: 8

97. A manufacturer of automobile component parts that has turned over all transportation functions to an independent third party in its supply chain has engaged in which of the following? a. channel rotation b. outsourcing c. task deployment d. creating a dependent materials-handling system ANS: B OBJ: 8

PTS: 1 DIF: Application BLM: Higher order

REF: p. 346

98. Manufacturers who outsource their transportation function are seeking all the following EXCEPT which one? a. on-time delivery and pickup at competitive rates b. reliable delivery without loss or damage c. more carriers and more services from these additional carrier alternatives d. systems for tracing and tracking shipments every step of the way ANS: C Buyers of transportation are using fewer carriers. PTS: 1 OBJ: 8

11-24

DIF: Comprehension BLM: Higher order

REF: p. 346

99. When Cheryl purchased tickets to a Floor 13 concert on the Internet, it was an example of which of the following? a. single-sourcing distribution b. one-way channelization c. mass customization d. electronic distribution ANS: D Tickets are just one of many types of products and services that can be distributed electronically. It is not one-way communication because Cheryl could respond to questions on her computer screen. PTS: 1 DIF: Application BLM: Higher order

REF: p. 346

OBJ: 8

100. Companies wanting to sell to overseas markets are more likely to succeed with their own company-controlled sales force, rather than foreign intermediaries, when all of the following conditions are present EXCEPT which one? a. Close competitors have set up their own direct distribution channels. b. Few legal restrictions constrain direct foreign investment. c. The product category is relatively mature and the products are standardized. d. The company already has experienced salespeople and an established distribution channel in the foreign country. ANS: C A direct channel of distribution with a sales force is most effective when the product category is relatively new and the products within it are not standardized. PTS: 1 OBJ: 9

DIF: Comprehension BLM: Higher order

REF: p. 348

101. What occurs when products are distributed through unauthorized marketing channels? a. reverse channelling b. gray marketing c. countertrading d. black marketing ANS: B OBJ: 9

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 348

11-25

102. Kiell is the manager of a small, private firm that manufactures cork board. He decided not to enter the global market. According to the text, his decision was probably primarily based upon which of the following? a. uncertainties regarding global logistics b. lack of a unified international pricing structure c. lack of common languages and cultures among global customers d. inability to support a multinational promotion strategy ANS: A Uncertainty regarding shipping usually tops the list of reasons that smaller companies resist international markets. PTS: 1 DIF: Application BLM: Higher order

REF: p. 348

OBJ: 9

103. What sets service distribution apart from traditional manufacturing distribution? a. In a service environment, service distribution has a narrower focus. b. In a service environment, production and consumption are simultaneous. c. In a service environment, faster modes of transportation can offset service production problems. d. In a service environment, production setbacks can be remedied by using safety stock. ANS: B In a service environment, services are produced and consumed at the same time. PTS: 1 OBJ: 10

DIF: Comprehension BLM: Higher order

REF: p. 350

104. Which of the following businesses is most likely to have a problem with distribution because production and consumption of the product occurs simultaneously? a. a retailer that sells used books b. a company that manufacturers small kitchen appliances c. a company that repairs earthmoving equipment d. a chicken hatchery ANS: C Only alternative b describes a business that sells a service. PTS: 1 DIF: Application BLM: Higher order

11-26

REF: p. 350

OBJ: 10

105. You are responsible for physical distribution of your company’s service. What should you focus on? a. minimizing wait times, managing service capacity, and providing delivery through distribution channels b. setting quality standards, choosing faster transportation modes, and using safety stock c. customer-oriented order processing and inventory control d. ensuring the intangibility of the service so that physical distribution becomes a less important factor ANS: A Service industries are customer-oriented and must manage intangible services by minimizing wait times, managing service capacity, and providing delivery through distribution channels. PTS: 1 OBJ: 10

DIF: Comprehension BLM: Higher order

REF: p. 350

Selfridges is the second-largest department store in Great Britain. It works with House of Frasier, one of its competitors, to reduce operating costs by sharing channels of distribution to ship goods from more than 1,500 suppliers. 106. Refer to Selfridges. What are Selfridges and House of Frasier engaged in? a. a strategic channel alliance b. an integrated supply chain c. a distribution cooperative d. vertical conflict ANS: A A strategic channel alliance is a cooperative agreement between businesses to use each other’s already established distribution channels. PTS: 1 DIF: Application BLM: Higher order

REF: p. 331

OBJ: 3

107. Refer to Selfridges. In choosing a channel of distribution, what did Selfridges more than likely rely on? a. geodemographic factors b. market factors c. producer factors d. production factors ANS: B Market factors include customer considerations. Customers of Selfridges anticipate great product width and depth. PTS: 1 DIF: Application BLM: Higher order

REF: p. 334

OBJ: 5

11-27

The 2002 strike by dockworkers at West Coast ports paralyzed transportation of goods across the Pacific Ocean and left manufacturers short of component parts and Asian importers with excess inventory. 108. Refer to West Coast Ports. This paralysis would have resulted from a widespread use of which of the following? a. supply chain management b. materials requirements procurement c. just-in-time manufacturing d. materials-handling systems ANS: C With JIT, inventory parts are delivered as they are needed in production. The loss of these deliveries would cause production to cease. PTS: 1 DIF: Application BLM: Higher order

REF: p. 341

OBJ: 7

109. Refer to West Coast Ports. Because the ships could not be unloaded, which of the following occurred? a. The strike created low flexibility. b. The strike created low responsiveness. c. The strike created low accessibility. d. The strike created low capability. ANS: D Capability refers to the ability of the carrier to provide the appropriate goods and equipment for moving those goods. PTS: 1 BLM: Remember

DIF: Application

REF: p. 344

OBJ: 7

According to experts at a conference on supply chain management, increased traceability is the key requirement needed to improve today’s supply chains. 110. Refer to Supply Chain Management. In this instance, what does traceability refer to? a. the relative ease with which a shipment can be located and transferred b. a carrier’s ability to move goods over a specific route c. a carrier’s ability to provide the appropriate equipment and conditions for moving specific kinds of goods d. the consistency with which a carrier delivers goods on time ANS: A Traceability is one of the criteria used for choosing a mode of transportation. PTS: 1 OBJ: 7

11-28

DIF: Comprehension BLM: Higher order

REF: p. 344

111. Refer to Supply Chain Management. Pipelines provide the lowest level of traceability; which of the following provides the highest? a. rail b. air c. water d. truck ANS: B See Exhibit 11.10. PTS: 1 DIF: Application BLM: Higher order

REF: p. 344

OBJ: 7

R.H. Kurt & Son, Inc., distributes rifles for both hunting and target shooting, rifle barrels, triggers, cleaning equipment, and reloading equipment to sporting equipment retailers and many large discount stores. It carries products from 41 different manufacturers. The manufacturers it carries are known for producing superior products and are leaders in their industries. In addition, Kurt is able to repair damaged rifles through its gunsmith service, which is available to all of its retailers. 112. Refer to R.H. Kurt & Son. What is its marketing channel composed of? a. all organizations in the industry that make it possible for a consumer to buy his or her desired product b. the distribution, objectives, strategies, and tactics used to move products from the manufacturer to the retailer c. any organization that had a part in moving the product from the distributor to the retailer d. the 41 different manufacturers, R.H. Kurt, the retailers it serves, and their customers ANS: D A marketing channel is a set of interdependent organizations that facilitate the transfer of ownership as products move from producer to business user or consumer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 324

OBJ: 1

113. Refer to R.H. Kurt & Son. Customers at retail stores usually want only one rifle or one scope. They do not want to buy in the quantities the manufacturers need to sell. What is overcome by the marketing channels? a. this discrepancy of quantity b. this discrepancy of possession c. this spatial discrepancy d. this discrepancy of facilitation ANS: A Discrepancy of quantity is the difference between the amount of product produced and the amount an end user wants to buy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 324

OBJ: 1

11-29

114. Refer to R.H. Kurt & Son. When a consumer goes to a sporting goods store to buy a rifle scope and cleaning equipment and discovers that the store does not carry rifle scopes, which of the following is created, leaving the consumer dissatisfied? a. discrepancy of integration b. discrepancy of quantity c. discrepancy of possession d. discrepancy of assortment ANS: D Discrepancy of assortment occurs when a retailer does not have all the items needed to receive full satisfaction. PTS: 1 DIF: Application BLM: Higher order

REF: p. 324

OBJ: 1

115. Refer to R.H. Kurt & Son. When Kurt solicits an order from a sporting goods store, what is it engaging in? a. a functional function b. a facilitating function c. a logistical function d. a transactional function ANS: D OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 327

116. Refer to R.H. Kurt & Son. When Kurt combines products from 41 different manufacturers into a collection that retail buyers want available at one place, what is it engaging in? a. a transactional function b. a facilitating function c. compressed distribution d. creating an assortment ANS: D See Exhibit 11.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 327

OBJ: 3

117. Refer to R.H. Kurt & Son. Given the nature of the products carried by Kurt, its 41 manufacturers most likely want Kurt to use which type of distribution? a. unitary b. extensive c. selective d. intensive ANS: C Its manufacturers would want consumers to seek out their products to maintain a superior product image. PTS: 1 DIF: Application BLM: Higher order

11-30

REF: p. 336

OBJ: 5

After years of phenomenal growth, many food franchisers are branching out from traditional single-purpose stores. One of these innovators is Taco Bell. Taco Bell, a division of Yum Brands, is selling its Mexican-style fare at kiosks and movable carts in malls, at the corner gasoline station, on supermarket shelves, even in school-lunch programs. In only a few years, it has more than quintupled its points of access. And it has barely begun its expansion. By the end of the decade, it aims to have 200,000 outlets. Most will be nontraditional, and their success will depend on location and operating efficiency. In one of many moves to create peak operating efficiency, Taco Bell has hired an outside company to cut and slice the lettuce, tomatoes, and onions it uses in the preparation of food. Taco Bell’s new direction produces greater convenience for consumers, heightens competition for some established-brand marketers, and creates a potential nightmare for franchisees. 118. Refer to Taco Bell. Beef producers, vegetable growers, Taco Bell, and consumers are part of which of the following? a. a marketing channel b. a transportation channel c. a distribution cooperative d. a logistics system ANS: A A marketing channel is a set of interdependent organizations that facilitates the transfer of ownership as products move from producer to business user or consumer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 324

OBJ: 1

119. Refer to Taco Bell. When Taco Bell sells its products to students through college cafeterias, what is it using? a. multiple channels b. a nontraditional channel c. a strategic channel alliance d. logistical distribution ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Application

REF: p. 331

120. Refer to Taco Bell. Taco Bell appears to be moving toward what type of distribution to get its products to market? a. intensive b. market focused c. product focused d. extensive ANS: A Intensive distribution is aimed at maximum market coverage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

OBJ: 5

11-31

121. Refer to Taco Bell. What is Taco Bell potentially producing among its franchisees and other distributors of Taco Bell products? a. disintermediation b. vertical conflict c. horizontal conflict d. supply management divergence ANS: C Horizontal conflict occurs among channel members on the same level. PTS: 1 DIF: Application BLM: Higher order

REF: p. 338

OBJ: 6

122. Refer to Taco Bell. While the preparation of the vegetables used in the food is often performed in-house, what has Taco Bell chosen to use? a. job rotation b. dependent materials handling c. task deployment d. outsourcing ANS: D Outsourcing is the use of an independent third party to perform some function. PTS: 1 DIF: Application BLM: Higher order

REF: p. 346

OBJ: 9

123. Refer to Taco Bell. Taco Bell restaurants provide food and service to customers. As a service provider, what does Taco Bell need to do? a. create tangible service distribution benefits b. locate faster modes of transportation to offset service production problems c. consider the problems that may arise as a result of simultaneous production and consumption d. maintain extensive safety stock ANS: C Production problems cannot be offset with inventory or a quick delivery system when service is being marketed. PTS: 1 DIF: Application BLM: Higher order

REF: p. 350

OBJ: 10

Cutter & Buck is a high-end fashion sportswear company. Even though swimwear is a product category that does not sell year round, its sales remain steady all year because Cutter & Buck sells to wholesale distributors that stock the product.

11-32

124. Refer to Cutler & Buck. Which discrepancy are the wholesale distributors helping to overcome? a. temporal b. assortment c. possession d. quantity ANS: A A temporal discrepancy is created when a product is produced but a consumer is not ready to purchase it. PTS: 1 DIF: Application BLM: Higher order

REF: p. 327

OBJ: 1

125. Refer to Cutter & Buck. Cutter & Buck sells to wholesale distributors that perform which of the following functions for Cutter & Buck? a. logistical b. promotional c. transactional d. facilitating ANS: A Storing for later sale to retailers is a logistical function. See Exhibit 11.3. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 329

OBJ: 2

Canesta Co. has developed a virtual keyboard out of light to be used with cell phones and personal digital assistants. The product beams an image of a keyboard on a desk, allowing the user to type on the image. The words are picked up by the user’s digital device. When introduced to the market, the device will sell for less than $50. 126. Refer to Canesta Co. If in choosing its channel, Canesta is most concerned about supplying the number of consumers who have expressed interest in such a device, what will its choice of channels largely be influenced by? a. market factors b. product factors c. possession factors d. exclusivity agreements ANS: A The size of demand, as well as the type of consumers it will have are market factors. PTS: 1 DIF: Application BLM: Higher order

REF: p. 334

OBJ: 5

11-33

127. Refer to Canesta Co. If, in choosing its channel, Canesta is most concerned about the life cycle of the device, what will its choice of channels largely be influenced by? a. ownership factors b. customer characteristics c. product factors d. market factors ANS: C Stage of the product life cycle is a product factor. PTS: 1 DIF: Application BLM: Higher order

REF: p. 335

OBJ: 5

128. Refer to Canesta Co. If, in choosing its channel, Canesta is most concerned about its lack of financial, managerial, and marketing resources to support the product’s introduction, what will its choice of channels largely be influenced by? a. factors of ownership b. product factors c. internal environmental characteristics d. producer factors ANS: D Financial, managerial, and marketing issues are producer factors. PTS: 1 DIF: Application BLM: Higher order

REF: p. 335

OBJ: 5

129. Refer to Canesta Co. What level of distribution intensity should the company use? a. controlled b. extensive c. exclusive d. selective ANS: D Screening dealers will promote a quality image for the product. Price is also a factor in its level of distribution intensity. It is not a convenience good. PTS: 1 DIF: Application BLM: Higher order

REF: p. 336

OBJ: 5

Peachtree Windows does not make a window until it is ordered. It is able to make 27,000 different window configurations and promises delivery in five working days because of the excellent relationships it has established with its suppliers.

11-34

130. Refer to Peachtree Windows. This partnering relationship that Peachtree Windows has established with its suppliers and contractors indicates the use of which of the following? a. horizontal marketing channels b. intensive distribution strategy c. channel networks d. supply chain management ANS: D Supply chain management coordinates and integrates all the activities from raw materials to product consumption. PTS: 1 DIF: Application BLM: Higher order

REF: p. 332

OBJ: 4

131. Refer to Peachtree Windows. Peachtree Windows will make special adjustments to these configurations if there is a request for modifications as long as the modifications meet the company’s exacting safety requirements. What does Peachtree Window engage in? a. niche marketing b. mass customization c. product development d. customer accumulation ANS: B Mass customization is a production method whereby products are not made until an order is placed by the customer; products are made to the customer’s specifications. PTS: 1 DIF: Application BLM: Higher order

REF: p. 341

OBJ: 7

TRUE/FALSE 1. A marketing channel is a business structure composed of interdependent organizations that reach from the point of product origin to the consumer. Its purpose is to move products to their final consumption destination. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 326

2. As products move through the marketing channel, channel members provide specialization and division of labour, overcome discrepancies, and provide contact efficiency. ANS: T REF: p. 326

PTS: 1 OBJ: 1

DIF: Comprehension

3. Theo stopped by the convenience store to buy a loaf of bread. He is glad that he can buy one loaf at a time, instead of having to buy the thousands of loaves of bread the manufacturer produces every day. For Theo, the convenience store overcomes a discrepancy of quantity. ANS: T OBJ: 1

PTS: 1

DIF: Application

REF: p. 326

11-35

4. Residents of Kenora, Ontario, live in an isolated area of the province. Residents must travel two hours to receive medical treatment. Luckily, a physician has just opened a new practice in Thunder Bay. In this case, the physician has overcome service discrepancies by opening an office close to consumers. ANS: F This is an example of overcoming a spatial discrepancy. PTS: 1

DIF: Application

REF: p. 327

OBJ: 1

5. Consider a scenario in which there are four manufacturers, no intermediaries, and three consumers. Twelve transactions would be required for each consumer to receive products from each manufacturer. The introduction of one intermediary reduces the required number of transactions to four and demonstrates the idea of contact efficiency, ANS: F Introducing one intermediary reduces the required number of transactions to seven. PTS: 1

DIF: Application

REF: p. 328

OBJ: 1

6. A merchant wholesaler is an institution that buys goods from manufacturers and resells them to businesses, government agencies, and other wholesalers or retailers. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 328

7. Harris Peng represents a manufacturer of prefabricated housing and gets paid a commission for finding buyers and linking them up with the manufacturer. Peng is a merchant wholesaler. ANS: F This defines an agent or broker. PTS: 1

DIF: Application

REF: p. 328

OBJ: 2

8. The three basic functions a channel intermediary provides are transactional (including physical distribution and sorting), logistical (including research and financing), and facilitating (including contacting, promoting, negotiating, and risk taking). ANS: F Although the three functions are correct, their subdescriptions are not. Transactional functions include contacting and promoting, negotiating, and risk taking. Logistical functions include physical distribution and sorting. Facilitating functions include research and financing. PTS: 1

11-36

DIF: Definition

REF: p. 329

OBJ: 2

9. Logistics is a subset of physical distribution and refers to the transporting of raw materials and/or finished goods. ANS: F Logistics describes the process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption. PTS: 1

DIF: Definition

REF: p. 329

OBJ: 2

10. Grace Yoder makes jams and jellies, which she sells at craft festivals to end users. Yoder does not use channel intermediaries; she uses a direct channel. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 330

11. The direct channel is used more often in consumer markets than in business-to-business markets. ANS: F The direct channel is used more often in business-to-business markets than in consumer markets. PTS: 1

DIF: Definition

REF: p. 330

OBJ: 3

12. LoneStar Bar & Grill is a small chain of restaurants that feature marinated steaks. The marinade is so popular that LoneStar sells it at its restaurants and also sells it at supermarkets. This is an example of intensive distribution. ANS: F This is an example of multiple (dual) distribution. To be intensive distribution, LoneStar would have to offer the product through discount stores, drugstores, supermarkets, and so on. PTS: 1

DIF: Application

REF: p. 333

OBJ: 3

13. Supply chain management is completely producer driven. ANS: F Supply chain management is completely customer driven. PTS: 1

DIF: Definition

REF: p. 334

OBJ: 4

14. Companies that use supply chain management techniques typically also use a push promotional strategy. ANS: F They typically use a pull strategy. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 334

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15. The use of supply chain management results in reduced inventory management costs. ANS: T REF: p. 336

PTS: 1 OBJ: 4

DIF: Comprehension

16. Metallurgical Designs makes gold and silver charms for necklaces and bracelets. It markets its charms to a few retailers in any one region and promotes them intensively to those retailers. This is an example of intensive distribution. ANS: F Intensive distribution means the product is available in every outlet the potential customer might want to buy it, not to just a few retailers. PTS: 1

DIF: Application

REF: p. 339

OBJ: 5

17. Shopping goods are usually distributed selectively. Consumers are willing to look around for them but may not be willing to search or travel extensively to acquire the product. ANS: T REF: p. 339

PTS: 1 OBJ: 5

DIF: Comprehension

18. Exclusive distribution is the most restrictive form of market coverage. ANS: T REF: p. 340

PTS: 1 OBJ: 5

DIF: Comprehension

19. An international consumer products manufacturer requires all of its suppliers to provide the lowest possible cost and to adhere to a just-in-time inventory system. Wholesalers and manufacturers generally yield to the authority of this large manufacturer. This consumer products manufacturer exercises channel power. ANS: T OBJ: 6

PTS: 1

DIF: Application

REF: p. 340

20. Horizontal conflict occurs among channel members on the same level, such as two or more different wholesalers or two or more different retailers that handle the same manufacturer’s brands. ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 341

21. Master Technology produces neon insulator sign components on an assembly line, and suppliers deliver the needed parts in four small shipments each day. Master Technology has noticed a dramatic decrease in carrying costs using this method, but a sharp increase in delivery costs since the company must pay more for the added delivery convenience. Master Technology uses just-in-time (JIT) manufacturing. ANS: T OBJ: 7

11-38

PTS: 1

DIF: Application

REF: p. 345

22. Despite its name, the goal of a materials-handling system is to handle products as infrequently as possible. ANS: T REF: p. 346

PTS: 1 OBJ: 7

DIF: Comprehension

23. The six criteria important in selecting a transportation mode are cost, time involved, reliability, capability, how easily a shipment can be traced, and price. ANS: F Cost (price) is included twice; the criterion of accessibility is not included. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 347

24. Airways are faster, cheaper, and more dependable than railways. ANS: F Railways are both more reliable and less expensive than air transportation. See Exhibit 11.10. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 347

25. Since the criterion that is most important in the transportation of flour is accessibility to consumers, a flour mill would deliver by truck. ANS: T OBJ: 7

PTS: 1

DIF: Application

REF: p. 347

26. Both water transportation costs and transit speed are low when compared with any other transportation mode. ANS: T REF: p. 347

PTS: 1 OBJ: 7

DIF: Comprehension

27. Another name for outsourcing is downsizing. ANS: F Outsourcing is also called contract logistics. PTS: 1

DIF: Application

REF: p. 351

OBJ: 8

28. Contract logistics allows companies to cut inventories, locate stock at fewer plants and distribution centres, and still provide the same service level or even better. ANS: T REF: p. 351

PTS: 1 OBJ: 8

DIF: Comprehension

11-39

29. ―Grey‖ marketing channels exist in many countries. ANS: T ―Grey‖ marketing channels use unauthorized channel intermediaries. PTS: 1

DIF: Definition

REF: p. 353-354

OBJ: 9

30. Unlike marketers of physical products, marketers of services do not have to address the question of logistics since services do not require a distribution strategy. ANS: F Logistics activities of services are difficult to visualize; however, the same strategies used to manage inventory can also be used to manage service inventory, for instance, hospital beds, bank accounts, or airline seats. PTS: 1 OBJ: 10

DIF: Comprehension

REF: p. 351-352

ESSAY 1. What is a marketing channel? What is a supply chain? ANS: A marketing channel, or channel of distribution, is a business structure of interdependent organizations, that ease the transfer of ownership as products move from producer to business users or consumers. They encompass the processes involved in getting the right product to the right place at the right time. They represent ―place‖ in the marketing mix. A supply chain is the connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics function. PTS: 1

DIF: Application

REF: p. 324

OBJ: 1

2. One important reason channel members are included between producers and users is the concept of specialization and division of labour. Define these concepts and explain their roles in channels of distribution. ANS: Specialization and division of labour breaks down a complex task into smaller, simpler ones and allocates them to specialists, which results in much greater efficiency. Marketing channels achieve economies of scale through specialization and division of labour. Some producers do not have the interest, financing, or expertise to market directly to end users or consumers. These producers hire channel members to perform functions and activities that the producers are not equipped to perform or that these intermediaries are better prepared to perform. Channel members can perform some functions and activities more efficiently than producers, and they enhance the overall performance of the channel because of their specialized expertise. PTS: 1

11-40

DIF: Application

REF: p. 324

OBJ: 1

3. One important reason channel members are included between producers and end users is to overcome discrepancies. Name and briefly describe four discrepancies channel members overcome. ANS: Discrepancy of quantity. Large quantities produced to achieve low unit costs create quantity discrepancies (the amount of product produced compared to the amount an end user wants to buy). Marketing channels overcome quantity discrepancies by making products available in the quantities that buyers desire. Discrepancy of assortment. This discrepancy occurs when mass production does not allow a firm to produce all the items necessary for buyers to receive full satisfaction from products. Marketing channels overcome discrepancies of quantity by assembling assortments of products that buyers want in one place. Temporal discrepancy. This is created when a product is produced but the consumer is not ready to purchase it. Marketing channels overcome temporal discrepancies by maintaining inventories in anticipation of demand. Spatial discrepancy. Mass production requires a large number of potential purchasers, so markets are usually scattered over large geographic regions. Marketing channels overcome spatial discrepancies by making products available in locations convenient to consumers and business buyers. PTS: 1

DIF: Application

REF: p. 324-325

OBJ: 1

4. Channel members such as wholesalers and retailers are often included between producers and business users or consumers for three important reasons. Name and briefly describe these reasons. ANS: Specialization and division of labour. Economies of scale, specialization and division of labour, and the use of professional management normally result in lower average production costs. Overcoming discrepancies. Several discrepancies such as quantity, assortment, time, and space can be overcome by using intermediaries. Channel members help to bridge the gaps these discrepancies create. Contact efficiency. Channels make distribution simpler by reducing the number of transactions required to get products from manufacturers to consumers. PTS: 1

DIF: Application

REF: p. 324-325

OBJ: 1

11-41

5. One important reason channel members are included between producers and users is to increase contact efficiency. How do channel members increase contact efficiency? Use the following two scenarios to illustrate your answer: (1) Assume there are 2,000 business students who need to buy textbooks from eight textbook publishers. How many transactions must take place? (2) Assume the first scenario exists, except that one campus bookstore is now acting as an intermediary. Now how many transactions must take place? ANS: Channels make distribution simpler and more efficient by reducing the number of transactions required to get products from manufacturers to consumers. In the provided example, the first scenario requires 16,000 transactions (2,000 students  8 publishers). In the second scenario, only 2,008 transactions are necessary (1 bookstore  8 publishers + 2,000 students  1 bookstore). Clearly, a significant reduction in transactions takes place if intermediaries are added to the system. PTS: 1

DIF: Application

REF: p. 324-325

OBJ: 1

6. Intermediaries must perform three basic functions. Name these functions, and describe two activities involved in each function. ANS: Transactional functions include contacting and promoting (contacting potential customers, promoting products, soliciting orders), negotiating (determining how many goods or services to buy and sell, transportation types, delivery times, and payment method and timing), and risk taking (assuming the risk of owning inventory). Logistical functions include physical distribution (transporting and storing goods to overcome temporal and spatial discrepancies), and sorting (overcoming discrepancies of quantity and assortment by sorting out, accumulation, allocation, and assorting). Facilitating functions include research (gathering information about other channel members and consumers), and financing (extending credit and other financial services to facilitate the flow of goods through the channel to final consumer). PTS: 1

DIF: Application

REF: p. 327-328

OBJ: 2

7. Industrial and consumer products may require different distributions. Draw the four channels used for consumer products. Which channels are more commonly used for consumer products? Draw the channels used for industrial products. Which channels are more commonly used for industrial products? ANS: Channels are diagrammed in Exhibit 11.4 and Exhibit 11.5. Manufacturers can route products to consumers four different ways: • Direct channel: no intermediaries • Retailer channel: one intermediary—the retailer • Wholesaler channel: two intermediaries—the wholesaler and retailer • Agent/broker channel: three intermediaries—agents or brokers, wholesalers, and retailers

11-42

Direct marketing to consumers includes telemarketing, factory outlets, mail-order and catalogue shopping, and electronic retailing. However, most consumer products are sold through retailer and wholesaler channels. Five channel structures are common in business-to-business markets: • Direct channel: no intermediaries, direct to industrial user • Direct channel: no intermediaries, direct to government buyer • Industrial distributor channel: one intermediary—the industrial distributor • Agent/broker channel: one intermediary—agents or brokers • Agent/broker-industrial distributor channel: two intermediary—agents or brokers and industrial distributors Direct selling to a final user is more common in business-to-business marketing than in consumer marketing. If intermediaries are used, agents or brokers can be used to bring producers and buyers together for negotiations. Alternatively, an industrial distributor can be used as an intermediary for standardized items of moderate or low value. Industrial distributors are channel members that buy and take title to products, usually keep inventories of their products, and sell and service these products. PTS: 1

DIF: Application

REF: p. 329-330

OBJ: 3

8. Name and briefly discuss two alternative channel arrangements that can be used to move products. ANS: Multiple channels/dual or multiple distribution. Two or more different channels could be selected to distribute the same product to target markets. For example, the consumer products could be sold through wholesaler and/or retailer channels, in addition to catalogue mail ordering and electronic shopping. Non-traditional channels. The products could be sold at sporting events, contests, concerts, parks, zoos, or entertainment centres. Strategic channel alliances. The company could form an alliance with another manufacturer that already has an established channel. This could be important in foreign distribution, or in any case when creation of marketing channel relationships may be expensive and time consuming. PTS: 1

DIF: Application

REF: p. 331

OBJ: 3

11-43

9. How has the use of supply channel management resulted in a radical reformulation of traditional marketing, production, and distribution functions? ANS: The use of supply chain management has resulted in a customer-driven view of traditional marketing, production, and distribution functions. It has reversed the flow of demand from a ―push‖ to a ―pull.‖ Through the channel partnering of suppliers, manufacturers, wholesalers, and retailers along the whole supply chain who work together toward the common goal of creating customer value, supply chain management allows companies to respond with unique product configuration and mix of services demanded by the customers. Thus, supply chain management communicates customer demands from the point of sale all the way to the supplier. In addition, supply chain management engineers the timely and cost-effective flow of goods through the entire supply pipeline. PTS: 1

DIF: Application

REF: p. 332

OBJ: 4

10. What are the three factors affecting channel choice? Briefly discuss how each factor might influence a company to implement a direct channel of distribution. ANS: Market factors. Industrial customers tend to buy in larger quantities and require more customer service. Conversely, consumers usually buy in very small quantities and sometimes do not mind if they get no service at all. Geographic location and size also determine channel choice. A geographically concentrated market is appropriate for direct selling through a direct sales force. Markets that are more widely dispersed may need more intermediaries. Generally, a very large market requires more intermediaries. Also, if there is lots of existing competition, choosing a direct channel may be less difficult and more profitable. Product factors. Products that are more complex and customized and have a high unit cost tend to use shorter and more direct marketing channels. Product life cycle also plays a role. In the introductory stage of the product life cycle, a direct sales force may be used. During the maturity stage, alternative channels are sought, and a direct channel may be added for multiple distribution to an already existing channel choice. Finally, fragile and perishable products require a shorter channel that has less handling. Producer factors. Producers with large financial, managerial, and marketing resources are better able to use channels that require fewer intermediaries. More direct channels may also be used by producers who wish to control pricing, positioning, brand image, and customer support. PTS: 1

11-44

DIF: Application

REF: p. 334

OBJ: 5

11. Organizations have three options when it comes to distribution intensity. Name and briefly describe these three levels. Give examples of two products that logically would be distributed at each level of intensity. ANS: Intensive distribution is aimed at maximum market coverage. The manufacturer tries to have the product available in every outlet where the potential customer might want to buy it. If a buyer is unwilling to search for a product, the product must be placed closer to the buyer. If the product is of low value and is frequently purchased, a lengthy channel may be required. Candy, gum, cigarettes, soft drinks, and any other type of convenience good or operating supply would be distributed intensively. Selective distribution is achieved by screening dealers to eliminate all but a few in any geographic area. Because only a few retailers are selected, the consumer must be willing to seek out the product. Shopping goods such as electronic equipment and appliances and some specialty products are distributed selectively. Accessory-equipment manufacturers in the business-to-business market usually follow a selective distribution strategy. Exclusive distribution entails establishing one or a few dealers within a given geographic area. This is the most restrictive form of market coverage. Because buyers may have to search or travel extensively to purchase the product, exclusive distribution is usually limited to consumer specialty goods, a few shopping goods, and major industrial equipment. Some products distributed exclusively include Rolls Royce automobiles, Anna Pavlov perfume, Pettibone tower cranes, and Steinway pianos. PTS: 1

DIF: Application

REF: p. 336

OBJ: 5

12. Define channel power, channel control, channel leadership, and channel partnering. How are these four terms related? ANS: Power, control, leadership, and partnering are the main social dimensions of marketing channel relationships. Channel power refers to the capacity of one channel member to control or influence other channel members. Channel control occurs when one channel member intentionally affects another member’s behaviour. Channel leadership is the exercise of authority and power. Channel partnering is the joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage. They are all components of channel relationship management. PTS: 1

DIF: Application

REF: p. 337

OBJ: 6

13. What is JIT? What is the basic assumption that explains the use of JIT? List four benefits and four risks that are associated with the use of JIT. ANS: JIT is just-in-time manufacturing. This innovative system is a way to redesign and simplify manufacturing—from the receipt of raw materials to the delivery of the finished product. With JIT, every part arrives in guaranteed working order to the assembly line ―just in time‖ to be installed. The basic assumption of JIT is that carrying any inventory is bad because it ties up capital.

11-45

Benefits of JIT include: • Reduced inventory levels and associated costs • Shorter lead times • Better relationships with suppliers • Lower production costs • Better quality supplies • Less paperwork for management Risks of JIT include: • • • • • •

Implementing JIT principles too rapidly Cutting inventory without implementing other JIT principles Increased delivery costs ―Supplier shock‖ Employee stress Potential bottlenecks caused by supplier delays

PTS: 1

DIF: Application

REF: p. 341

OBJ: 7

14. What is an inventory control system? What is the objective of inventory management? What are two major decisions managers must make regarding inventory? ANS: An inventory control system develops and maintains an adequate assortment of products to meet customers’ demands. The objective of inventory management is to balance minimum inventory levels (to reduce costs) while maintaining an adequate supply of goods to meet customer demand. Two major decisions managers must make regarding inventory are when to buy (order timing) and how much to buy (order quantity). PTS: 1

DIF: Application

REF: p. 342

OBJ: 7

15. Distribution managers select different transportation modes based on several distinct criteria. List and briefly define five of these criteria, and name the best and worst transportation mode for each criteria. ANS: Cost. The total amount a specific carrier charges to move the product from the point of origin to the destination. Airways have the highest cost, while water is the cheapest mode. Transit time. The total time a carrier has possession of goods. Water has the highest transit time, and air is the fastest mode. Reliability. The consistency with which the carrier delivers goods on time and in an acceptable condition. Pipelines are the most reliable, while water transport is the least reliable. Capability. Ability of the carrier to provide the appropriate equipment and conditions for moving specific kinds of goods. Water has the most capability, while pipelines have the least.

11-46

Accessibility. The carrier’s ability to move goods over a specific route or network. Trucks have the best accessibility, and pipelines have the most limited accessibility. Traceability. Relative ease with which a shipment can be located and transferred. Air is the best mode, and pipeline is the worst. PTS: 1

DIF: Application

REF: p. 344

OBJ: 7

16. Carter has taken a summer job working in the warehouse of a large manufacturing company. He overheard his supervisor talk about how the transportation system used by the company is no longer a ―black hole.‖ Explain to Carter what his supervisor is referring to. ANS: The transportation systems of most companies were once called a ―black hole‖ because products and materials fell out of sight once they were placed in the system and did not reappear until they were delivered to their final destination much later. In essence, there was no tracking system. The ―black hole‖ has virtually disappeared as a result of the implementation of systems that track freight, monitor the speed and location of carriers, and make routing decisions on the spur of the moment. Over three-quarters of the nation’s carriers have on-board tracking systems. Managers now know exactly where their shipments are. PTS: 1

DIF: Application

REF: p. 344

OBJ: 8

17. Describe contract logistics. How do contract logistics affect the efficient deployment of supply chain management? ANS: With contract logistics or outsourcing, a company turns over the entire function of buying and managing transportation to a third party, usually an independent carrier. Third-party carriers have economies of scale because of consolidating transportation modes and can also offer extra services. Many corporations use contract logistics due to budget constraints, mergers and divestitures, and increased globalization. Outsourcing can also apply to contract warehousing. Outsourcing allows companies to cut inventories, locate stock at fewer plants and distribution centres, and provide the same service level or better. Outsourcing often leads to exclusive partnerships between suppliers, retailers, or manufacturers, and carriers, warehousing experts, or logistics management suppliers. These partnerships allow JIT inventory management, the ability to meet delivery dates, filling of emergency orders, and high accuracy in filling orders. Thus, outsourcing is becoming increasingly important in efficient deployment of supply chain management. PTS: 1

DIF: Application

REF: p. 346

OBJ: 8

11-47

18. List and briefly describe the three main areas of importance in service distribution. ANS: Minimizing wait time. Minimizing the amount of time a customer waits for service is a key factor in maintaining the quality of service. People tend to overestimate the amount of time they spend waiting in line, and unexplained waiting seems longer than explained waiting. Managing service capacity. For product manufacturers, inventory acts as a buffer, enabling them to provide the product during periods of peak demand without extraordinary effort. Service providers do not have that luxury. If they don’t have the capacity, they must either refuse to serve someone, let overall service standards decline, or increase capacity. Improving delivery through new distribution channels. Like manufacturers, service providers are now experimenting with different distribution channels. These new channels can increase the time that service is available (such as the Internet) or add to consumer convenience (such as pizza delivery). PTS: 1

11-48

DIF: Application

REF: p. 350-351

OBJ: 10

Chapter 12—Retailing MULTIPLE CHOICE 1. Which of the following is defined as all activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use or consumption? a. retailing b. business c. wholesaling d. distribution ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 364

2. Which of the following is the best example of a retailer? a. an advertising agency b. a television station c. a real estate company d. the local tax office ANS: C A tax office would accept money, but nothing is directly sold. The TV station and ad agency try to persuade people to buy goods and services, but they do not actually “sell” those items (no transaction). A real estate company is likely to be engaged in sales transactions with ultimate consumers, even though it is also probable that some of its transactions will be with other businesses. PTS: 1 BLM: Remember

DIF: Application

REF: p. 364

OBJ: 1

3. How can a retail store be classified? a. according to its distribution method b. according to its decor and atmosphere c. according to its inventory control d. according to its product assortment ANS: D A retail establishment can be classified according to its ownership, level of service, product assortment, price and gross margin. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 364

OBJ: 2

12-1

4. What was the largest retailer in Canada, measured in Canadian dollar sales, for 2007? a. Walmart b. Sobey’s c. Loblaws d. Costco ANS: C See Exhibit 12.1. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 364

OBJ: 2

5. The Canadian economy is heavily dependent on retailing. How much did retailers ring up in sales in 2005? a. over $43 billion b. over $403 billion c. over $403 million d. over $4.3 billion ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 364

6. Around the world, most retailers operate one or a few stores in their community, and are owned by a single person or partnership, not operated as part of a larger retail institution. What are they known as? a. franchise outlets b. product assortment stores c. independent retailers d. specialty clubs ANS: C REF: p. 365

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

7. Small neighbourhood florists, shoe stores, and ethnic food markets are most likely to be which of the following? a. franchise outlets b. chain stores c. membership clubs d. independent retailers ANS: D Most retailers are independent retailers operating one or a few stores in their community. PTS: 1 DIF: Application BLM: Higher order

12-2

REF: p. 365

OBJ: 2

8. Under this form of ownership of retail stores, administrative and purchasing tasks are handled by the home office. The stores are owned and operated as a group by a single organization. What are these stores called? a. chain stores b. home base stores c. independent retailers d. franchisees ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 365

9. Ingrid owns and operates her own income tax preparation service, but the establishment is licensed by H&R Block. What is Ingrid’s tax preparation service? a. a franchise b. a licensor c. an independent retailer d. a doubly managed outlet ANS: A Franchises are owned and operated by individuals, but licensed by larger supporting organizations. PTS: 1 DIF: Application BLM: Higher order

REF: p. 365

OBJ: 2

10. The number of different varieties of scented soaps carried by The Beauty Shoppe refers to which of the following? a. the store’s assortment depth b. the store’s supply standard c. the store’s retail mix d. the store’s complete retail offering ANS: A Breadth and depth refers to product assortment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 366

OBJ: 2

11. Which of the following shows how much the retailer makes as a percentage of sales after the cost of goods sold is subtracted? a. net income b. net equity c. gross margin d. profitability ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 366

12-3

12. As a general rule of thumb, what will a retailer with a high gross margin have? a. high prices b. salespeople trained in cross-selling techniques c. an inventory management system d. low prices ANS: A The level of gross margin and the price level generally match. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 366

13. What does gross margin refer to? a. how much money a retailer makes as a percentage of sales after the cost of goods sold is subtracted b. how much money a retailer makes after the cost of goods sold is subtracted c. how much money a retailer makes as a percentage of sales after the cost of goods sold and business expenses are subtracted d. how much money a retailer makes after the cost of goods sold and business expenses are subtracted ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 366

14. According to Statistics Canada, what is the average gross margin for a Canadian retail operation? a. 6 percent b. 16 percent c. 26 percent d. 36 percent ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 366

15. Housing several departments under one roof, which of the following carries a wide variety of shopping and specialty goods and provides a high level of service? a. a super club b. a supermarket c. a department store d. a specialty store ANS: C OBJ: 3

12-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 367

16. Using what you have learned about retailing, which type of retail store would typically have the highest labour costs? a. a warehouse club b. a department store c. a discount store d. an off-price retailer ANS: B A department store carries a wide variety of shopping and specialty goods in several departments and provides a high level of service, all of which is labour intensive and adds to the cost of doing business. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 367

17. Each department in a department store is usually headed by a person who selects the merchandise mix for the department and may also choose the promotional devices and personnel for that department. What is this person known as? a. a financial broker b. a human resources manager c. a comptroller d. a buyer ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 367

18. What is the buyer who heads a department in a department store responsible for? a. the merchandise mix in that department b. the store’s advertising program c. the store’s exchange and return policies d. the store’s credit policies ANS: A Each department in a department store is usually headed by a buyer who selects the merchandise mix for the department and may also choose the promotional devices and personnel for that department. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 367

19. Who is the person at a Sears department store who selects the merchandise for his or her department and is often responsible for the promotion and personnel in that department? a. the purchasing agent b. the franchisee c. the merchandiser d. the buyer ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 367

12-5

20. Which of the following types of stores has a high gross margin, a narrow product assortment, and a high level of service? a. full-line discount store b. supermarket c. warehouse club d. specialty store ANS: D See Exhibit 12.2. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 368

OBJ: 3

21. Of the following types of stores, which pair can be described as having low levels of service, broad product assortments, and low gross margins? a. supermarket and warehouse club b. warehouse club and discount specialty c. discount specialty and full-line specialty d. off-price retailer and wholesale store ANS: A See Exhibit 12.2. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 368

OBJ: 3

22. This type of retailer specializes in a given type of merchandise with a deep but narrow assortment. It is not only a type of store, but also a method of retail operations. Which of the following is being described? a. a specialty store b. a warehouse club c. a general store d. a factory warehouse store ANS: A OBJ: 3

12-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 368

23. According to the text, which of the following statements about specialty stores is true? a. Customers usually consider price to be the most important factor in their selection of a specialty store. b. Specialty stores typically avoid price wars. c. A typical specialty store carries a wider assortment of specialty merchandise than department stores. d. Customers at specialty stores are not concerned with the distinctiveness of the merchandise or the store’s physical appearance. ANS: B Customers usually consider price to be of secondary importance in their selection of a specialty store. Customers at specialty stores are very concerned with the distinctiveness of the merchandise or the store’s physical appearance. Specialty stores provide a low-risk testing ground for new products. A typical specialty store carries a narrower assortment of specialty merchandise than department stores. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 368

24. The Faux Store is a chain of stores selling an assortment of products needed to create custom decorator painting effects such as crackling, aging, and marble textures. Its products have high gross margins, and its salespeople are willing and able to answer any how-to questions its customers might ask. How would the store most likely be classified? a. as a department store b. as a general store c. as a hypermarket d. as a specialty store ANS: D A specialty store is not only a type of store but also a method of retail operations, specializing in a given type of merchandise with a deep but narrow assortment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 368

OBJ: 3

25. The development and opening of a store that sell nothing but materials used in creating scrapbooks is an example of which of the following? a. store location modelling b. repositioning c. specialty retailing d. consumer density ANS: C A specialty store is not only a type of store but also a method of retail operations, specializing in a given type of merchandise with a deep but narrow assortment. Customers are drawn by the assortment, which is highly specialized and more complete than in other types of retail stores. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 368

12-7

26. A manufacturer wants to introduce a line of hand-smocked children’s clothing in conjunction with the growing number of professional women who are now having babies. The least expensive of these outfits will be $75. Which of the following types of stores would most likely support an effective product launch? a. a specialty store b. a full-discount store c. an off-price retailer d. a warehouse club ANS: A Small specialty stores provide a low-risk testing ground for many new product concepts. PTS: 1 DIF: Application BLM: Higher order

REF: p. 368

OBJ: 3

27. Which of the following are large, departmentalized, self-service retailers that specialize in wide assortments of foodstuffs and a few nonfood items? a. discount stores b. assortment merchandisers c. supermarkets d. membership wholesale clubs ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 368

28. Which of the following environmental trends is most directly influencing supermarket operations? a. Regional malls are hosting fewer anchor stores. b. The number of dual-income and single-parent families is increasing. c. To make a profit, supermarkets are having to carry products with high gross margins. d. Recessionary trends are decreasing the amount of money spent on nonfood items. ANS: B REF: p. 368

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

29. Lorenzo Michaelson owns a small chain of retail outlets that are described as large, departmentalized, self-service stores that specialize in wide assortments of foodstuffs and limited nonfood items. What are Michaelson’s stores? a. off-price retailers b. wholesale clubs c. supermarkets d. discount stores ANS: C The key factors are the emphasis on food and the size of the stores. PTS: 1 BLM: Remember

12-8

DIF: Definition

REF: p. 368

OBJ: 3

30. Which of the following provides the most likely reason to explain why Ingall’s supermarkets sell planters, lawn furniture, and baking utensils as well as food products? a. the fulfillment of the wheel of retailing hypothesis b. growth of convenience merchandising c. repositioning as a discounter d. consumer demand for one-stop shopping often leads to scrambled merchandising ANS: D In many cases, supermarkets offer a wide variety of nontraditional goods and services under one roof (a strategy called scrambled merchandising) to respond to consumers who want convenience. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 369

31. According to the text, what is one way supermarkets establish long-term relationships with their customers? a. They avoid any obviously ethnic appeal. b. They conduct longitudinal focus group studies. c. They create and use loyalty marketing programs. d. They limit the number of nonfood items carried by the stores. ANS: C One of the trends in supermarkets is taking advantage of growing ethnicity. Supermarkets also commonly use scrambled merchandising. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 369

32. When supermarkets offer a wide variety of nontraditional goods and services under one roof, what are they engaged in? a. cross-selling b. scrambled merchandising c. cross-docking d. disintermediation ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 369

33. Loblaws and Safeway, along with other supermarket chains, offer a variety of nontraditional goods and services such as DVD rental, flower shops, dry cleaning, and banking. What is this practice called? a. specialty service b. retail wheeling c. trade-up positioning d. scrambled merchandising ANS: D In many cases supermarkets offer a wide variety of nontraditional goods and services under one roof, a strategy called scrambled merchandising. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 369

OBJ: 3

12-9

34. Blockbuster offers recent and classic movies for sale or rent, along with a variety of candies, soft drinks, and popcorn. What is Blockbuster using? a. product depth b. merchandise assortment c. scrambled merchandising d. mass merchandising ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 369

35. The initial attraction of drugstores for consumers was the pharmaceuticals they carried, but now consumers can have their prescriptions filled at mass merchandisers and supermarkets, and through the mail. What have drugstores done to remain competitive? a. taken legal steps to prevent the sale of prescription drugs at supermarkets b. introduced generic prescription medicines c. provided customers with value-added services d. raised their prices ANS: C They have added services such as being open 24 hours a day, 7 days a week, and installing drive-through windows. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 370

36. These self-service stores are typically located near residential areas and are open long hours, seven days a week. They carry a limited line of high-turnover, high-priced goods and resemble miniature supermarkets. Which of the following is being described? a. convenience stores b. factory outlets c. wholesale stores d. general stores ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 370

37. Why are prices usually higher in convenience stores than in supermarkets? a. Convenience stores offer higher-quality goods. b. Convenience stores offer a higher level of customer services. c. Convenience stores offer better location, longer hours, and faster service. d. Convenience stores offer a wider variety of products. ANS: C Convenience stores carry a limited amount of high-turnover, high-priced goods, and resemble miniature supermarkets. Customers patronize these stores because of convenience. PTS: 1 OBJ: 3

12-10

DIF: Comprehension BLM: Higher order

REF: p. 370

38. Which of the following are retailers that compete on the basis of low prices, high turnover, and high volume? a. discount stores b. convenience outlets c. general stores d. department stores ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 370

39. Which of the following BEST describes discount stores? a. They compete on the basis of assortment and depth. b. They offer more SKUs than department stores. c. They compete on the basis of low prices, high turnover, and high volume. d. They provide their customers with full service. ANS: C Discount stores have a wider range of merchandise than department stores but less depth of any category. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 370

OBJ: 3

40. National chains dominate this segment. The retailers carry a broad assortment of nationally branded hard goods (broader than a department store) and offer customers very limited service. a. full-line discount stores b. specialty supercentres c. discount specialty stores d. factory outlets ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 370

41. Zellers carries a broad assortment of nationally branded hard goods (broader than a department store), and offers customers few services. Zellers competes on the basis of moderate to low prices on large quantities of merchandise and lower service to stimulate rapid turnover of products. What is Zellers an example of? a. a department store b. a full-line discount store c. a wholesale store d. a category killer ANS: B OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 370

12-11

42. Which of the following is the term for the retailing strategy of setting moderate to low prices on large quantities of products and utilizing promotion to stimulate a high turnover of inventory? a. m-store retailing b. mass merchandising c. merchandise positioning d. the wheel of retailing ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 371

43. Zellers uses a strategy of setting moderate to low prices on large quantities of products, and then uses substantial amounts of promotion to stimulate a high turnover of inventory. Zellers offers a wide variety of different product lines. What is Zellers an example of? a. a factory outlet b. a mass merchandiser c. a franchising operation d. a specialty store ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 371

44. Schwegman’s has a 90,000-square-foot facility that houses a florist, baker, bank, craft shop, photo finisher, dry cleaner, and pharmacy under the same roof as grocery and household items. What is this facility called? a. a factory outlet b. a supercentre c. a membership warehouse club d. a mass merchandiser ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 371

45. What are full-line discount, off-price retailers that entice shoppers from the low- and fixed-income customers who live near the stores? a. category killers b. neighbourhood outlets c. extreme-value retailers d. membership wholesale clubs ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 371

46. Which of the following groups is most likely to be the target market for extreme-value retailers? a. professionals who like bargains b. middle-class innovators c. teenagers d. low-income earners ANS: D REF: p. 371

12-12

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

47. What is the term for single-line stores that offer a nearly complete selection of one line of merchandise and use self-service, discount prices, high volume, and high-turnover merchandise to their advantage? a. factory outlets b. general stores c. specialty discount stores d. mass merchandisers ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 372

48. Why are specialty stores such as, Office Depot and Staples, often called category killers? a. They can destroy the profit potential for a category of merchandise for other retailers. b. They have a broad merchandise mix and shallow assortment. c. They offer an exclusive category of merchandise. d. They are located at stand-alone sites. ANS: A Because these stores dominate their narrow merchandise segment, they are called category killers. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 372

49. Which of the following sell a limited selection of brand-name appliances, household items, and groceries, usually in bulk on a cash-and-carry basis to members only? a. warehouse membership clubs b. factory outlets c. off-price discount retailers d. wholesale discounters ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 372

50. Which of the following BEST describes a warehouse membership club? a. It offers a medium level of customer service. b. It has extensive merchandise depth, which it uses to create demographic positioning. c. It tends to have more educated and more affluent customers than other retail establishments. d. It sells only to ultimate consumers. ANS: C Warehouse clubs sell to small businesses and ultimate consumers. They maintain low inventory holding costs because they carry a limited assortment of fast-moving items. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 372

OBJ: 3

12-13

51. Laura buys supplies for her catering business at a retailer that stocks a limited selection of items, which are sold in bulk on a cash-and-carry basis to members only. As she browses through a huge store, she buys flour, a set of muffin pans, and a package of paper towels as well as an assortment of fresh produce. Where is Laura most likely shopping? a. a factory outlet b. a wholesale outlet c. an off-price discount retailer d. a warehouse membership club ANS: D Warehouse clubs sell a limited selection of brand-name appliances, household items, and groceries, usually in bulk on a cash-and-carry basis to members only. PTS: 1 DIF: Application BLM: Higher order

REF: p. 372

OBJ: 3

52. Which of the following BEST describes off-price retailers? a. They seldom stock brand-name merchandise. b. They are owned by the manufacturer of the products they sell. c. They are often able to take advantage of manufacturers’ faulty sales forecasting. d. They very often offer a consistent assortment of merchandise. ANS: C Off-price retailers buy manufacturers’ overruns at cost or even less. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 372

OBJ: 3

53. A publisher of books on holiday decorating, cooking, and crafts has to find a way to dispose of its overrun and unsold end-of-season output. As a marketing consultant, you suggest that the firm sell the merchandise to which of the following? a. supermarkets b. department stores c. off-price retailers d. mass merchandisers ANS: C Off-price retailers purchase goods at cost or less from manufacturers’ overruns, bankruptcies, irregular stock supplies, and unsold end-of-season output. The other four categories may be current customers and would not have a use for the overruns and out-of-season stock. PTS: 1 DIF: Application BLM: Higher order

12-14

REF: p. 372

OBJ: 3

54. Which of the following is an off-price retailer that is owned and operated by a manufacturer and carries one line of merchandise—its own? a. mass merchandiser b. wholesale club c. factory outlet d. discount store ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 372

55. Well-known manufacturers such as Nike, Liz Claiborne, and Roots have decided the most profitable way to dispose of out-of-season and irregular stock is to open stores and sell their own merchandise. What are these stores? a. types of discount stores b. types of factory outlets c. types of seasonal outlets d. types of mass merchandisers ANS: B A factory outlet is a type of off-price retailer that is owned and operated by a manufacturer and carries one line of merchandise—its own. PTS: 1 DIF: Application BLM: Higher order

REF: p. 372

OBJ: 3

56. According to the text, which of the following statements about restaurants is true? a. Restaurants are clearly retailing establishments. b. Because barriers to entry are low, the restaurant business appeals to many people. c. The demographic issue of time-poor consumers has led to a growing demand for restaurants. d. Restaurants are clearly a service industry. ANS: B According to the text, restaurants straddle the line between a retailing establishing and a service industry. At the moment, food service companies are generally overexpanded. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 373

57. Which of the following refers to shopping without visiting a store and is currently growing faster than in-store shopping because of the consumer demand for convenience? a. niche marketing b. nonstore retailing c. customerization d. specialty merchandising ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 374

12-15

58. According to the text, which of the following statements about nonstore retailing is true? a. The high growth rate for nonstore retailing is due to the growth of TV home shopping b. Nonstore retailing is increasing at a rate lower than in-store retailing. c. Nonstore retailers are currently growing faster than in-store retailing. d. More than 80 percent of all sales are made through nonstore retailing. ANS: C Nonstore retailing refers to shopping without visiting a store; convenience is playing a major role in the growth of nonstore business. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 374

59. Which of the following is a low-profile, yet important form of retailing in which consumers get products out of automated machines? a. professional selling b. automatic vending c. direct marketing d. party-plan selling ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 374

60. Manufacturers of Pampered Chef kitchen equipment and Longaberger baskets utilize party plan selling. The sales transactions usually occur in a home setting. What is this form of nonstore retailing called? a. direct retailing b. direct-response marketing c. selling representation d. personal marketing ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 375

61. Chez Amie manufactures children’s clothing for infants and toddlers. Its sales representatives set up parties at homes of mothers of preschool children so that its sales reps can demonstrate the quality and value of the Chez Amie products. What is Chez Amie using? a. personal marketing b. direct-response marketing c. direct retailing d. selling representation ANS: C Direct retailing includes door-to-door selling and party plans. PTS: 1 DIF: Application BLM: Higher order

12-16

REF: p. 375

OBJ: 4

62. Which of the following refers to the techniques used to get consumers to buy from their home? a. in-home retailing b. direct retailing c. nonstore vending d. direct marketing ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 376

63. How can marketers precisely target their customers according to demographics, geographics, and psychographics? a. with franchise stores b. with direct mail c. with specialty retail outlets d. with electronic selling ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 376

64. Which of the following is the term for the use of a telephone to sell directly to customers? a. phone vending b. telemarketing c. two-way vending d. indirect marketing ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 377

65. Sunni received a phone call last night during supper. The caller wanted her to subscribe to a travel magazine. Since Sunni had never thought of purchasing this type of magazine before she received the call, this is obviously an example of what type of telemarketing? a. inbound b. qualifying c. outbound d. relationship ANS: C Outbound telemarketing is generally used for unsolicited selling. PTS: 1 DIF: Application BLM: Higher order

REF: p. 377

OBJ: 4

12-17

66. The Mad Stencilist has decided to demonstrate how to use the company’s products to create custom gift tags on a local cable television channel and encourage shoppers to call a toll-free number to purchase the merchandise with a credit card. What is this form of retailing called? a. in-store electronic shopping b. videotex c. an electronic point of sale d. a shop-at-home network ANS: D Using a TV channel to display goods that are sold over the phone is the shop-at-home network format. PTS: 1 DIF: Application BLM: Higher order

REF: p. 378

OBJ: 4

67. The Cedar Store carries a full line of cedar swings, gliders, garden benches, and tables. All of its products can be purchased through its website. The site has done well since the Cedar Store’s products do not need to be touched or smelled before purchase. What is the Cedar Store engaging in? a. mobile vending b. on-line retailing c. shop-at-home networking d. electronic wholesaling ANS: B On-line retailing is a two-way interactive service offered to users with personal computers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 378

OBJ: 4

68. According to the text, which of the following statements about on-line retailing is true? a. On-line retailing is also called e-merchandising. b. The earliest use of on-line retailing was for Internet auctions. c. After a rapid increase in sales, the popularity of on-line retailing has declined over the last decade. d. Most traditional retailers are using on-line retailing to move merchandise that can be purchased at their stores. ANS: D On-line retailing is called either electronic retailing or e-tailing. On-line shopping has been and is growing at an astonishing rate. Internet auctions are a fairly new phenomenon. PTS: 1 OBJ: 4

12-18

DIF: Comprehension BLM: Higher order

REF: p. 378

69. Which of the following is a continuing relationship in which an individual or business grants business rights to operate or sell a product to another individual or business? a. a leasing contract b. an alliance for profit c. a brokered partnership d. a franchise ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 379

70. Which of the following is a reason that individuals may be tempted to buy a franchise business rather than develop their own independent business? a. to try his or her own personal innovative product and service ideas in the business b. to have the freedom to make decisions c. to avoid management training requirements d. to obtain a well-known product or service name ANS: D The ties to the franchiser’s policies may be very restrictive for an innovative businessperson because certain products and procedures must be adhered to. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 379

71. A retailer in Owen Sound, Ontario, is licensed to sell Gardenia lawn mowers. What is the term for this retailer? a. a relationship franchisee b. a licensed franchiser c. a business format franchisee d. a product and trade name franchisee ANS: D In product and trade name franchising, a dealer agrees to buy or sell certain products or product lines from a supplier. PTS: 1 DIF: Application BLM: Higher order

REF: p. 380

OBJ: 5

72. Breit Ideas is an on-line retailer licensed to sell products designed by Mary Engelbreit—everything from Christmas ornaments and books to wallpaper and toys. What is Breit Ideas an example of? a. a business format franchisee b. a licensed franchiser c. a product and trade name franchisee d. a relationship franchisee ANS: C OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 380

12-19

73. What are H&R Block, Midas Muffler, and Subway all examples of? a. business format franchisees b. licensed franchisers c. relationship franchisees d. product and trade name franchisees ANS: A OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 380

74. What do Arby’s, Jiffy-Lube, Baskin-Robbins, and Sylvan Learning Centres use? a. product franchising b. logistic franchising c. trade name franchising d. business format franchising ANS: D Business format franchising is an ongoing relationship between a franchiser and a franchisee in which the franchiser sells a franchisee the rights to use a format or approach to doing business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 380

OBJ: 5

75. What is the first task of developing a retail strategy? a. to define the target market b. to decide what to buy c. to define the pricing policies d. to create a promotional strategy ANS: A The target market’s wants and needs form the foundation for a successful retail strategy. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 382

OBJ: 6

76. Retailers control the six Ps of the retailing mix. The six Ps include the marketing mix plus which of the following? a. personality and persuasion b. potential and perception c. personnel and presentation d. positioning and purchasing ANS: C OBJ: 6

12-20

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 383

77. Retailers such as The Bay and Zellers are responding to consumer needs by changing product mixes, hours of operation, locations, and prices. These stores are changing aspects of which of the following? a. their retail trade areas b. their merchandising groupings c. their product offerings d. their retailing mixes ANS: D Retailers are altering several aspects of the six Ps of the retailing mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 383

OBJ: 6

78. Which of the following BEST describes the merchandise mix? a. It describes the composition of a traditional shopping centre. b. It is the retailer’s product offering. c. It refers to the six levels in a buying organization. d. It is the term for the marketing communications used by retailers. ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 384

79. Which of the following BEST describes analytics? a. It uses complex mathematical models to help retailers make better product mix decisions. b. It is a relatively new method of inventory control. c. It determines the level of quality and service desired by customers. d. It is a computerized technique for making site location decisions. ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 384

80. As defined in the text, what does product depth refer to? a. merchandise mix b. after-sales service of products offered c. the assortment of products offered d. the number of different brands offered within each assortment ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 384

81. What does product width refer to? a. merchandise mix b. the number of different brands offered within each assortment c. the assortment of products offered d. price and after-sales service of product offerings ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 384

12-21

82. As competition in the retail industry has intensified, Kmart began selling clothing called Route 66. Kmart is the only place that you will find the Route 66 brand. The prices of this merchandise are lower than that for national brands and give consumers greater value. What is this brand of clothing called? a. a generic brand b. a family brand c. a private brand d. a promotional brand ANS: C Private brands are designed and developed by the retailer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 384

OBJ: 6

83. What is the primary goal of the retail promotion strategy? a. to help position the store in consumers’ minds b. to reach a national audience c. to create transactions d. to generate publicity ANS: A REF: p. 385

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

84. Ads linking Adidas footware and Athletes World, a Canadian athletic clothing and footware retail chain, let consumers know that the latter sells the former’s latest styles. What is this an example of? a. shared advertising b. cooperative advertising c. advertising advocacy d. specialty promotion ANS: B Cooperative advertising is a collaborative effort in which both the retailer and the manufacturer share the costs and benefits. PTS: 1 DIF: Application BLM: Higher order

12-22

REF: p. 385

OBJ: 6

85. According to the text, which of the following statements about a retailer’s promotion strategy is true? a. The design of the promotion strategy would be done separately from the creation of the retailing mix. b. Retailers find direct-mail marketing inefficient. c. Retail promotion strategy does not include public relations activities. d. The goal of a retail store’s promotion mix is to position the store in consumers’ minds. ANS: D Promotion is part of the retailing mix. Most advertising for retailers is carried out at the local level. Retailers have been very successful with direct marketing. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 385

86. Why is the selection of a retail location so critical to a store’s success? a. A location decision typically requires long-term commitment of resources. b. A location decision ties up funds that will not appreciate or gain in value. c. Employee density is affected by the area in which the store is located. d. Location affects pricing decisions but does not affect store image. ANS: A One critical point about location choice is that it ties up a large amount of resources and is difficult to change. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 386

87. As discussed in the text, what was a key ingredient in the success story of the North West Company, the historic firm associated with Canada’s fur trade? a. its product width b. its store locations in small and remote Canadian communities c. its product depth d. maintaining large stores in major urban centres ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 386

88. Linus is opening a store that will carry pet supplies and is trying to decide on a location. He should consider all of the following factors EXCEPT which one? a. land costs b. traffic flow c. nature of the competition d. employee density ANS: D Employee density is concerned with the amount of employees per 1,000 square feet in the store—not in the neighbourhood. The other factors are to be considered when deciding on a location. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 386

OBJ: 6

12-23

89. What are often built as freestanding stores and are stores that consumers purposely plan to visit? a. benefit retailers b. lifestyle stores c. relationship builders d. destination stores ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 387

90. When establishing a type of site location, which of the following are often used by large retailers such as Leon’s or IKEA, and sellers of shopping goods such as automobiles and furniture? a. office complexes b. freestanding stores c. factory outlets d. regional malls ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 387

91. The Summer Place has decided consumers will be drawn to its offering of wicker furniture and even be willing to drive out of their way to visit it. The store really needs to keep its overhead costs (such as rent) low and wants to avoid locating near competitors. For a location, the Summer Place will probably choose which of the following? a. a freestanding store b. a factory outlet c. a strip centre d. a shopping centre ANS: A A freestanding store has the advantage of low site costs and will be a benefit if consumers are willing to seek it out. PTS: 1 DIF: Application BLM: Higher order

REF: p. 387

OBJ: 6

92. This form of retail location first became popular in the 1950s when the population started migrating to the suburbs. It places a diverse group of retailers together in one location. What is it? a. a shopping centre b. a scrambled merchant area c. a freestanding lifestyle centre d. a mass merchandising centre ANS: A OBJ: 6

12-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 387

93. These are often unplanned business districts and may be crowded and have inadequate parking. Their biggest selling point is their convenience. They are typically located along busy streets and include a supermarket, a variety store, and a few specialty stores. Which of the following is being described? a. strip centres b. regional markets c. community shopping centres d. category killers ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 387

94. Which of the following BEST describes anchor stores (or generator stores)? a. They are often large department stores that are located at opposite ends of a mall to create a heavy pedestrian traffic flow. b. This is the generic name given to supermarkets that are located within shopping malls. c. This is a term for retail stores that “drop off” to freestanding locations. d. They usually specialize in high-priced items such as furniture. ANS: A Anchors are the large stores at the ends of shopping malls and may sell a variety of products. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 387

OBJ: 6

95. A specialty store is considering locating a retail store in a regional shopping mall. Which of the following is a likely benefit associated with a mall location? a. anchors that attract customers b. ability to target wealthy shoppers c. inadequate parking d. inexpensive leases ANS: A Leases are usually expensive. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 387

96. What is the newest generation of shopping centres? a. strip malls b. shopping business districts c. lifestyle centres d. franchised centres ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 387

12-25

97. Which group is targeted by lifestyle centres? a. consumers on a fixed income b. time-poor consumers c. teenagers who don’t drive d. people who engage in cocooning ANS: B REF: p. 387

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

98. Wright wants to open a store to sell movie memorabilia and is considering locating it in a regional shopping mall. Before opening his new store, what does he need to understand? a. There is usually a problem with store image because malls have no unified image, as a shopping centre does. b. The leases required by mall owners are usually inexpensive. c. His store could be the mall anchor. d. The mall atmosphere and that of neighbouring stores will help attract shoppers. ANS: D Malls have unified images, convenient parking, and expensive leases. Another book store should not be a problem, and the mall atmosphere and other stores will attract shoppers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 387

OBJ: 6

DIF: Definition

REF: p. 387

99. What is another name for an anchor store? a. a host store b. a generator store c. a shopping centre pillar d. a destination store ANS: B OBJ: 6

PTS: 1 BLM: Remember

100. Instead of having frequent sales, stores such as Sears and Loblaws have adopted which type of strategy? a. a deep assortment b. a discount c. a limited-time offer d. EDLP ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 388

101. A recent pricing trend among retailers is EDLP. What does it stand for? a. efficient data long-range planning b. efficient dollar loss planning c. electronic data laser purchasing d. everyday low pricing ANS: D OBJ: 6

12-26

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 388

102. The most predominant aspect of the store’s presentation is the overall impression conveyed by the store’s physical layout, decor, and surroundings. What is another name for this? a. total merchandise mix b. merchandise depth c. atmosphere d. price strategy ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 389

103. Many technologically advanced retailers are using a technique to analyze the huge amounts of data collected through their point-of-purchase scanning equipment. The analysis looks for products that are commonly purchased together to help retailers merchandise their stores to place products in the right places. What is this technique? a. market-basket analysis b. market cross-tabulations c. product/customer correlation analysis d. customer lifestyle analysis ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 389

104. What is the development of a retail outlet’s store atmosphere intended to do? a. appeal to a consumer’s feelings within the retail environment b. enhance employees’ sense of well-being and loyalty c. increase consumer retail traffic d. make a visual impact on the consumer ANS: A OBJ: 6

PTS: 1 DIF: Conceptual BLM: Higher order

REF: p. 389

105. Athena Goddess is a store that specializes in women’s athletic wear. The store has bright lights so that its merchandise can be carefully evaluated; uses lots of brightly coloured signs to direct store traffic; is decorated with posters of famous women athletes; and plays bouncy, energetic music in the background. What are these factors used to create? a. the store’s target strategy b. the store’s promotional strategy c. the store’s atmosphere d. the store’s merchandise mix ANS: C The most predominant aspect of the store’s presentation is the atmosphere, how the store’s physical layout, decor, and surroundings convey an overall impression. PTS: 1 DIF: Application BLM: Higher order

REF: p. 389

OBJ: 6

12-27

106. Whenever a customer buys a stencil at Stencil Works, a sales clerk asks the customer whether she needs brushes, paints, or tape for her stenciling project. In other words, the sales clerk engages in which of the following? a. service-disguised selling b. customer relationship retailing c. suggestion selling d. trading up ANS: C Suggestion selling seeks to broaden customers’ original purchase with related items. PTS: 1 DIF: Application BLM: Higher order

REF: p. 391

OBJ: 6

107. When Boris went into Sears to buy his wife a new iron for her birthday, he planned to spend only about $30, but the sales clerk was able to show him the superiority of a $60 iron to the less expensive model. In this example, the sales clerk engaged in which of the following? a. suggestion selling b. trading up c. bait and switch d. customer relationship retailing ANS: B Trading up means persuading customers to buy a higher-priced item than the one they intended to buy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 391

OBJ: 6

108. The quiet, comfortable couches and cafes of bookstores such as Chapters are part of a recent trend in retailing. What does the text call this trend? a. nonstore retailing b. adding interactivity c. m-commerce d. convenience retailing ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 392

109. Interactivity is one of the new developments in retailing. In retailing, what does interactivity refer to? a. entertainment for customers to get them involved b. a new form of customer relationship marketing c. the use of information kiosks d. the use of improved communications with customers ANS: A OBJ: 7

12-28

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 392

110. One of the new developments in retailing is m-commerce. What does the m in commerce stand for? a. multimedia b. marketing c. mobile d. motivated ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 393

111. One of the new developments in retailing is m-commerce. What does m-commerce refer to? a. the ability to motivate consumers to buy more by creating more feedback channels b. the ability to use unique communication techniques to send advertising messages c. the ability to more efficiently manage customer demand with inventory d. the ability to shop using wireless mobile devices ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 393

Les Ailes de la Mode is a Quebec retailer that wants to portray an image of quality to help reinforce its prestige image. 112. Les Ailes de la Mode. The key element in this store’s positioning strategy and classification would be which of the following? a. price b. placement c. product d. promotion ANS: A Price would best indicate this store’s classification and position. PTS: 1 DIF: Application BLM: Higher order

REF: p. 388

OBJ: 6

113. Refer to Les Ailes de la Mode. The specialty department store creates relationships with its customers through their experiences in the store. Its vice-president of marketing has said, “We are here to build a very good personalized experience—it’s not just a matter of marketing strategy, it’s our mission.” The shopping experience at the store includes “little extras” like free coat check, free shoeshine, baby feeding rooms, a highly trained staff (and more of them on the floor) and a place for people to go to read the newspaper. What is this an example of? a. a store that emphasizes customer service b. retail positioning c. trading up d. lifestyle marketing ANS: A REF: p. 391

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

12-29

A newspaper article announced that The Bay would be an anchor store in a new shopping centre. 114. Refer to The Bay. Which of the following will The Bay be? a. a destination store b. expected to create heavy foot traffic for the centre c. the only large store in the shopping centre d. unable to control the local store’s pricing policies ANS: B There is typically more than one anchor store in any mall. Freestanding stores are destination stores. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 387

115. Refer to The Bay. What is one advantage that The Bay will have because it is inside the shopping centre? a. a cheap lease agreement b. adequate parking c. the potential of direct competition within the shopping centre d. lease restrictions on hours of operation ANS: B Lease agreements are expensive and dictate hours of operation. Direct competition can be a disadvantage. One of the advantages of shopping centres is ample parking. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 387

John Diaz immigrated to Toronto from Cuba in the 1980s. He set up a coffee shop called Diaz in a small upper-middle-class neighbourhood. It rapidly became popular because of the wonderful coffee brewed there. Soon Diaz was selling the finest coffees from around the world, plus coffee-making necessities such as grinders and brewers. Within 10 years, Diaz was operating a lucrative mail-order business in addition to his coffee shop. 116. Refer to Diaz. In terms of ownership, what would Diaz’s coffee shop be classified as? a. a franchise b. a wholesaler c. an independent retail operation d. an agency ANS: C It is owned by a single person. PTS: 1 DIF: Application BLM: Higher order

12-30

REF: p. 365

OBJ: 2

117. Refer to Diaz. Which of the following would be a typical method by which to classify Diaz’s coffee shop? a. ownership b. level of profit c. suppliers d. sales ANS: A A retail establishment can be classified according to its ownership, service, product assortment, and price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 365

OBJ: 2

118. Refer to Diaz. The type of merchandise carried by Diaz is deep but with a narrow assortment. How would the store most likely be classified? a. as a membership club b. as a category killer c. as a specialty store d. as a convenience store ANS: C A specialty store specializes in a given type of merchandise with a deep but narrow assortment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 368

OBJ: 3

119. Refer to Diaz. What pricing strategy would you expect to find being used at Diaz? a. single pricing b. discount pricing c. prestige pricing d. EDLP ANS: C Prestige pricing would best suit its positioning image as an upscale shop. PTS: 1 DIF: Application BLM: Higher order

REF: p. 388

OBJ: 6

120. Refer to Diaz. The smell of fresh coffee, the fact it is made where drinkers can watch the process, and the comfortable chairs all are used to create which of the following? a. the store’s merchandise mix b. the store’s atmosphere c. the store’s promotional strategy d. the store’s target strategy ANS: B The most predominant aspect of the store’s presentation is the atmosphere, how the store’s physical layout, decor, and surroundings convey an overall impression. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 389

OBJ: 6

12-31

When Golden Rental opened 10 years ago in Barrie, Ontario, it competed with only one or two other DVD rental stores within a five-km radius. Today, there are eight stores in that radius, including two Blockbusters, each one kilometre away in different directions. There is little doubt that independently owned DVD rental stores are having a tough time competing with chains such as Blockbuster, but many are finding their own special ways of surviving. Part of the solution has been in supplementary merchandise and services such as sports cards and camcorder rentals, or renting and selling the X-rated titles shunned by many chains. Lower rental fees also are prevalent among independents, but the key to success in the mom-and-pop businesses appears to be personalized service. Golden Rental provides services such as helping parents choose G-rated movies that they can watch with their children from their specially designed children’s section. To add value, Golden Rental also sells comic books, sports cards, and toys. With friendly and value-added services, Golden Rental has boosted business in spite of the stiff competition. 121. Refer to Golden Rental. How can Golden Rental best be described? a. as a wholesaler b. as a retailer c. as a distributor d. as a franchise ANS: B Golden Rental sells directly to the consumer and is therefore a retailer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 364

OBJ: 1

122. Refer to Golden Rental. Stores in the DVD rental industry, such as Golden Rental and Blockbuster, can be classified on each of the following bases EXCEPT which of the following? a. location b. ownership c. price levels d. product assortment ANS: A Retailers can be classified according to ownership, level of service, product assortment, and price levels. PTS: 1 DIF: Application BLM: Higher order

12-32

REF: p. 365

OBJ: 2

123. Refer to Golden Rental. Golden Rental and Blockbuster represent which type of retailers? a. mass merchandiser b. specialty store c. membership club d. factory outlet ANS: B These stores are specialty stores because they specialize in a given type of merchandise with a deep but narrow assortment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 368

OBJ: 3

124. Refer to Golden Rental. Blockbuster Rental grants individuals the right to open a Blockbuster store through the use of a contractual arrangement. This suggests that Blockbuster is which of the following? a. a licensed outlet b. a chain with one ownership c. a franchise d. a cooperative ANS: C A franchise is a continuing relationship in which an individual or business grants business rights to operate or sell a product to another individual or business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 379

OBJ: 5

125. Refer to Golden Rental. What type of site location would you expect Golden Rental to utilize? a. a shopping centre b. a strip centre c. a freestanding store d. a regional mall ANS: B Golden Rental is a specialty store. The customers demand convenience and the ability to get in and out quickly. As such, the store is most likely to locate in a strip centre. PTS: 1 DIF: Application BLM: Higher order

REF: p. 387

OBJ: 6

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The first Wawa store opened in 1964. Today the company has 15,000 employees and owns and operates more than 550 units in Ontario, New Brunswick, Manitoba, Saskatchewan, and Alberta. The chain’s sales topped $2 billion in 2002. Wawa began as a store for distributing Wawa dairy products. Since then it has gotten into the gasoline business to increase store traffic, but its primary draw is hot meals and cold sandwiches in a quick-service restaurant format that mimics a shopping mall food court. Personalization is a fundamental part of the store concept and is built into things like coffee and sandwiches. Stores have an eight-head cappuccino machine where customers can mix and match whatever flavors they want and add steamed milk or cream, all for the same price as a regular cup of coffee. In addition to being restaurants, Wawa stores also do a big business in a limited line of high-turnover convenience products and can accurately be described as mini-supermarkets. 126. Refer to Wawa. Who buys most of the merchandise sold in the individual stores? a. a licensee b. a franchisee c. a store manager d. the home office ANS: D According to the text, chain stores are owned and operated as a single organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 365

OBJ: 2

127. Refer to Wawa. In terms of types of retail operations, how could Wawa stores be categorized? a. as department stores b. as franchises c. as discount stores d. as convenience stores ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 370

128. Refer to Wawa. What would the decision to allow customers to create their own coffee drinks be part of? a. Wawa’s retailing mix b. Wawa’s customer mix c. Wawa’s promotion strategy d. Wawa’s presentation effects ANS: A The retailing mix would include decisions about product offerings. PTS: 1 DIF: Application BLM: Higher order

12-34

REF: p. 383

OBJ: 6

129. Refer to Wawa. Its restaurant format that mimics a shopping mall food court would be a factor in which element of the retailing mix? a. place b. promotion c. product d. presentation ANS: D The mall food court look would be part of a store’s atmosphere. PTS: 1 DIF: Application BLM: Higher order

REF: p. 388-389

OBJ: 6

130. Refer to Wawa. The ability to personalize your coffee yourself is consistent with which new development in retailing? a. m-commerce b. interactivity c. atmosphere extension d. market-basket analysis ANS: B It helps the stores differentiate themselves. PTS: 1 DIF: Application BLM: Higher order

REF: p. 392

OBJ: 7

TRUE/FALSE 1. Retailing can be defined as all activities directly related to the sale of goods and services to the ultimate consumer for personal and nonbusiness use. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 364

2. The retailing industry is dominated by a large number of small- and medium-sized companies. ANS: F Although most retailers are quite small, a few giant organizations dominate the industry. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 364

3. A retail establishment can be classified according to its ownership, level of service, product assortment, and price. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 364

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4. Esther Jui has just opened a specialty store that will sell Asian wedding gowns to Asian-Canadians who want a traditional wedding. Because it will be a specialty store, she should have a broad product assortment with moderately low prices. ANS: F Specialty stores have narrow product assortments and moderate to high prices. PTS: 1

DIF: Application

REF: p. 368

OBJ: 3

5. Lou Farrigamo is the store manager of a local retailing establishment that sells a wide variety of shopping and specialty goods, including apparel, cosmetics, housewares, and electronics. Farrigamo probably manages a department store. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 367-368

6. Hildebrand Stein operates a retail store that has a wide assortment of window treatments with little depth in any one product line. Stein operates a specialty store. ANS: F Specialty stores typically have deep but narrow assortments of merchandise. PTS: 1

DIF: Application

REF: p. 368

OBJ: 3

7. Justin Nilssen and Joe Metzger disagree about what it means to be a specialty store. Nilssen says, “A specialty store is just one type of store.” Metzger says, “It’s more than that—it’s also a method of retailing, and involves specializing in a type of merchandise, too.” Metzger is correct. ANS: T REF: p. 368

PTS: 1 OBJ: 3

DIF: Comprehension

8. Supermarkets are self-service retailers that specialize in food and food products although many now carry nonfood items as well. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 368

9. Roland LaFarge owns an appliance store where he also sells bird feeders, tools, electrical and plumbing supplies, collectible figurines, homemade candy, and greeting cards, as well as wall paint. LaFarge uses multibrand merchandising. ANS: F This would be an example of scrambled merchandising because it involves offering nontraditional goods. PTS: 1

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DIF: Application

REF: p. 369

OBJ: 3

10. Baggie Waggie is the name of a chain of small stores that which carry high-turnover products such as lip balm, milk, laundry detergent, bread, and aspirin. Baggie Waggie stores are open all day every day and would best be classified as convenience stores. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 370

11. A typical discount store competes by carrying a limited line of high-turnover, high-margin goods. ANS: F Discount stores compete on the basis of low prices, high turnover, and high volume. The strategy in the example describes a convenience store. PTS: 1

DIF: Definition

REF: p. 370

OBJ: 3

12. Supercentres are more than just larger versions of traditional “markets.” In addition to foodstuffs, supercentres have pharmacies, dry cleaners, portrait studies, photo finishing, hair salons, and restaurants. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 371

13. Specialty discount stores are often called category killers because they dominate the competition in their narrow merchandise segment. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 372

14. Off-price retailers differ from other discount stores in the merchandise they carry. While most other discounters offer a predictable assortment of merchandise, the styles and brands offered at off-price retailers change frequently because they buy only what is currently available at a good deal. ANS: T REF: p. 372

PTS: 1 OBJ: 3

DIF: Comprehension

15. Factory outlet stores are generally the same as warehouse clubs, except that a factory outlet store carries only the merchandise of the manufacturer that owns it. ANS: F Factory outlet stores are generally the same as off-price discount stores PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 372-373

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16. Marketers that use nonstore retailing no longer have to worry about the “place” element of the four Ps. ANS: F Nonstore retailing refers to shopping without visiting a store; however, products must still be distributed to end users, whether by vending, in-home retailing, or direct marketing. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 374

17. Most direct retailers use a party plan in lieu of door-to-door selling. ANS: T REF: p. 375

PTS: 1 OBJ: 4

DIF: Comprehension

18. The person who called Grace last night and tried to sell her a subscription to Canadian Living magazine was using inbound telemarketing. ANS: F Inbound telemarketing is used to take orders and provide customer service. PTS: 1

DIF: Application

REF: p. 378

OBJ: 4

19. Electronic retailing includes the 24-hour, shop-at-home television networks and on-line retailing. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 378

20. The two types of franchising are target market franchising and geographic franchising. ANS: F The two types of franchising are product and trade name franchising and business format franchising. PTS: 1

DIF: Application

REF: p. 379-380

OBJ: 5

21. The six Ps of the retailing mix are product, place, price, promotion, personnel, and planning. ANS: F Presentation, not planning, is one of the six Ps of the retailing mix. PTS: 1

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DIF: Definition

REF: p. 383

OBJ: 6

22. Petco has just purchased a sizable plot of land on which it will build a store building with a large parking lot. Across the street is a collection of specialty shops and a furniture store. Petco will be part of a strip shopping centre. ANS: F Because all the other stores are across the street, Petco cannot be part of a strip centre. It is a freestanding store. PTS: 1

DIF: Application

REF: p. 387

OBJ: 6

23. To ensure that a firm has the desired atmosphere, retailers must select appropriately dense employees with lots of character. ANS: F Employees should not be dense. Density refers to the number of employees, and the character of each employee must be appropriate to the desired atmosphere. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 389

24. Colour can be used by retailers to create a mood or focus customer attention on a particular product. ANS: T REF: p. 391

PTS: 1 OBJ: 6

DIF: Comprehension

25. Providing great customer service is one of the most challenging elements in the retail mix because customer expectations for service are so varied. ANS: T REF: p. 391

PTS: 1 OBJ: 6

DIF: Comprehension

26. For the past few years, adding interactivity in the retail environment has been one of the most popular strategies in retailing. ANS: T REF: p. 392

PTS: 1 OBJ: 7

DIF: Comprehension

27. M-commerce is a type of managed commerce in which both buyer and seller end the transaction with a win-win feeling. ANS: F M-commerce is mobile commerce. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 393

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ESSAY 1. Define retailing. Name two ways that retailing affects Canadian citizens. ANS: Retailing is defined as all activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use or consumption. Retailing adds to the quality of life by providing goods and services through retail establishments. The retailing industry is also one of Canada’s largest employers. PTS: 1

DIF: Application

REF: p. 364

OBJ: 1

2. There are several types of retail stores, each offering a different product assortment, service level, and price level, according to the shopping preferences of its customers. Name eight types of retailers. For each type, indicate the level of service, width of product assortment, and price level. ANS: Type of Retailer Department store Specialty store Supermarket Convenience store Drugstore Discount store Warehouse club Off-price retailer PTS: 1

Service Level high high low low moderate/low moderate/low low low DIF: Application

Assortment broad narrow broad medium/narrow medium medium/broad broad medium/narrow REF: p. 365

Price Level moderately high high moderate moderately high moderate moderately low low/very low low OBJ: 3

3. What is a department store? Name and describe two strategies that department store managers use to preserve market share. ANS: A department store is a type of retailer that houses several departments under one roof. These departments may carry a wide variety of shopping and specialty goods, including apparel, cosmetics, housewares, electronics, and furniture. Department stores are characterized by high service levels, wide assortments, moderate to high prices, and moderately high gross margins. Although department stores enjoy large size and buying power, heavy competition from power retailers, discounters, outlets, and other price cutters has caused the demise of many department stores. Strategies that have been used to counteract this demise include: Repositioning. Many department stores are repositioning as soft-goods specialty outlets that serve higher-income customers. A focus on “mini-boutiques” for each department shifts the focus from price, and makes a department store into many unique specialty stores. Customer service. A unique benefit of department stores is the ability to offer increased customer service. Customer service is an effective way to attract customers and shift the focus from price. Increased customer service includes complimentary alternations, longer store hours, personalized attention, wardrobe planning, and after-sale follow-up. 12-40

Renovations. Expansion and remodelling of existing stores revitalizes store image and brings stores up to date with new merchandising directions. PTS: 1

DIF: Application

REF: p. 367-368

OBJ: 3

4. A specialty store is not only a type of store, but also a method of retail operations. Describe the specialty store strategy. Then name two examples of specialty stores. ANS: Specialty stores specialize in a given type of merchandise such as children’s clothing, men’s clothing, candy, baked goods, sporting equipment, or pet supplies. Specialty stores carry a narrow assortment of merchandise but a very deep product selection. Specialty stores typically offer more customer service and more knowledgeable salesclerks. Prices and gross margins tend to be high, but this is of secondary importance to the customer who strongly values distinctive merchandise, attractive stores, and quality personnel. Examples of specialty stores include Benetton, Victoria’s Secret, The Body Shop, and Foot Locker. PTS: 1

DIF: Application

REF: p. 368

OBJ: 3

5. Compare and contrast supermarkets and convenience stores. Name several characteristics of each store in your answer. ANS: A supermarket is a large, departmentalized, self-service retailer that specializes in wide assortments of foodstuffs and a few nonfood items. Prices are moderate, but profit margins are slim at about 1 to 2 percent. Supermarkets seek to meet consumer demands by providing larger, one-stop stores (all the way up to the giant hypermarket) and scrambled merchandising. Convenience stores are like miniature supermarkets. They carry only a limited line of high-turnover convenience goods. Convenience stores offer convenient locations, long hours, and fast service. Prices are usually higher, and gross margins are moderately high. Most convenience stores are self-service organizations. Many also practise scrambled merchandising to compete with full-service gas stations. PTS: 1

DIF: Application

REF: p. 368-370

OBJ: 3

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6. Discount stores are retail chains that compete on the basis of low prices, high turnover, and high volume. Name and briefly describe four types of discounters, and give an example of each type. ANS: Full-line discounters. These stores are similar to traditional department stores, except that they carry a much broader assortment of well-known, nationally branded hard goods and offer consumers very limited service. Most full-line discounters are national chains such as Zellers. A hypermarket is a hybrid form of full-line discounter. Similar to the hypermarket is the supercentre. Specialty discount stores. Single-line specialty discount stores offer consumers a nearly complete selection of one line of merchandise and use self-service, discount prices, high volume, and high-turnover merchandise in their retailing strategies. These stores are also called “category killers” because they dominate their narrow segment. Toys “R” Us (toys), Home Depot (home improvement), Office Depot (office supplies), and Best Buy (electronics) are examples. Warehouse membership clubs. These are warehouse outlets that allow public members to buy items on a cash-and-carry basis. Examples include Costco . Off-price retailers. These retailers buy manufacturers’ overruns, irregular merchandise, unsold end-of-season output, and goods from bankrupt stores. The merchandise is often bought for cash with no return privileges. The merchandise is then sold at large discounts from traditional department stores. Factory outlets are owned and operated by manufacturers and carry only their own line of merchandise. Outlets are used to sell surplus goods, factory seconds, return merchandise, and closeouts. Most manufacturers place these outlets in locations that do not conflict with their normal retailers. Manufacturers with factory outlets include Liz Claiborne, J. Crew, Calvin Klein, Oneida, Gap, and Lands’ End. PTS: 1

DIF: Application

REF: p. 370-373

OBJ: 3

7. Retailing opportunities can take place without customers shopping at a store. Name and briefly discuss four forms of nonstore retailing. ANS: Automatic vending. Vending machines for soft drinks, snacks, coffee, etc., are an important form of nonstore retailing. Assortments are narrow, prices are often moderate, and there is no service. Direct retailing. This form of nonstore retailing is characterized by sales transactions in a home setting. This includes door-to-door selling and party plan selling. Direct (response) marketing. In this case, consumers buy from their homes. Direct marketing (sometimes called direct response marketing) refers to a variety of techniques such as telephone selling, direct mail, catalogues, mail-order services, inbound and outbound telemarketing, and advertisements that invite consumers to call a toll-free number. Electronic retailing. This form of nonstore retailing includes the 24-hour, shop-at-home television networks and electronic retailing, which is also called e-tailing or on-line retailing. The best known television network is the Home Shopping Network. PTS: 1

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DIF: Application

REF: p. 374-379

OBJ: 4

8. What is a franchise? What are the two basic forms of franchising? List two benefits of franchising to a franchiser and two to a franchisee. ANS: A franchise is a continuing relationship in which a franchiser grants operating rights to a franchisee. The franchiser originates the trade name, product, and methods of operation, and grants franchisees the right to operate and sell the product or service in return for revenue. Two basic forms of franchising are product and trade name franchising and business format franchising. Advantages to the franchiser include (1) company expansion with limited capital requirements, (2) motivated store owners, and (3) bulk purchasing of inventory. Advantages to the franchisee include (1) an opportunity to become a businessperson with reduced operating capital, (2) a product or service that has already been established in the marketplace, (3) technical training and managerial assistance from the franchiser, and (4) positive results achieved by quality control and product uniformity. PTS: 1

DIF: Application

REF: p. 379

OBJ: 5

9. After defining and selecting a target market, retailers must develop the six Ps of the retailing mix to successfully meet the needs of the chosen target market. What are the six Ps of the retailing mix? ANS: The six Ps of the retailing mix are: • Product • Place • Promotion • Price • Personnel • Presentation PTS: 1

DIF: Application

REF: p. 383

OBJ: 6

10. What is the first task of developing a retail strategy? What is involved in this task? ANS: The first and most important task of developing a retail strategy is defining the target market the prospective retailer wishes to serve. This process begins with market segmentation and a thorough knowledge of the segment targeted. Target markets in retailing are often defined on demographic, geographic, and psychographic dimensions. Different combinations of the elements in the retail marketing mix enable a retailing establishment to position itself for its particular targeting strategy. PTS: 1

DIF: Application

REF: p. 382

OBJ: 6

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11. You have been hired to be the retail manager for wealthy lottery winner who wants to open a retail store. Your first task is to design the new retailing mix. You know that the first element in the retailing mix is the product offering. Why is the product offering so important to the success of the enterprise? What information should you use in selecting the product offering? Should you consider product depth and width when selecting the product offering? ANS: A retail product offering is also called a merchandise mix or a product assortment. It is a key factor in classifying or positioning retail establishments. A retailer decides what to sell on the basis of what its target market wants to buy. This decision is based on marketing research, past sales, fashion trends, customer requests, and other sources. Developing a product offering is essentially a question of width and depth of the product assortment. Width refers to the assortment of products offered, and depth refers to the number of different brands offered within each assortment. The most critical factor consumers use to determine where they will shop is merchandise selection. PTS: 1

DIF: Application

REF: p. 384

OBJ: 6

12. You are the promotion managers for a clothing store targeted to pregnant career women. What should be the objective of your promotional strategy? What components could your retail promotional strategy contain? Use specific examples. ANS: The objective of any retail promotional strategy is to help position the store relative to competitors in consumers’ minds. The promotional strategy includes advertising, public relations, publicity, and sales promotion. Students should give many examples of the types of promotions that the specialty bookstore can use. These include but are not limited to articles about the store in local newspapers, ads in local media, a membership club with accompanying benefits, a contest to promote literacy efforts in the community, etc. Through promotional efforts, retailers communicate information about their stores such as location, merchandise, hours, prices, and sales periods. PTS: 1

DIF: Application

REF: p. 385

OBJ: 6

13. The place element of the retailing mix involves the selection of the proper site location. List two reasons that selecting a proper site is a critical decision for a retailer. ANS: Selecting a proper location is a critical decision for several reasons: (1) a location decision is a large and long-term commitment of resources, and it reduces a retailer’s future flexibility, (2) growth goals often imply that more new locations should be established, and (3) environmental changes may cause the value of a location to deteriorate, thus requiring managerial action. PTS: 1

12-44

DIF: Application

REF: p. 386

OBJ: 6

14. When retailers decide on location, they have two basic site options, which are the freestanding store and the shopping centre. Briefly describe these location alternatives. Cite one advantage and one disadvantage of each location alternative. ANS: Freestanding stores. This alternative is an isolated, freestanding location that customers will seek out (a destination store). Advantages include low site cost or rent and no direct competitors close by. Disadvantages are that it may be difficult to attract customers, and there are no shared costs. Shopping centres. These include strip centres, community shopping centres, and malls. An advantage of a strip store is customer convenience. A disadvantage is crowding, lack of parking, and old buildings. Community shopping centres and malls provide several advantages, including a planned shopping environment, anchor stores, good parking, a unified image, and special activities. Disadvantages include expensive leases, common promotional expenses, not attracting customers to a particular store, lease restrictions on merchandise and hours of operation, domination of anchors, and possibility of direct competition within the same facility. PTS: 1

DIF: Application

REF: p. 387

OBJ: 6

15. The presentation of a retail store to its customers helps determine the store’s image. The predominant aspect of a store’s presentation is its atmosphere. Name and briefly describe four major determinants of store atmosphere. ANS: Employee type and density. The employees’ general characteristics and the number of employees per 1,000 square feet of selling space can make up a casual, service-oriented, or an “air of desperation” atmosphere. Merchandise type and density. The types of brands carried and the display of those brands contribute to atmosphere. Fixture type and density. Fixtures should be consistent with the general atmosphere the store is trying to create. Sound. Music can create a pleasant (or unpleasant) shopping experience and can affect a customer’s shopping pace. Odours. Smell can stimulate or detract from sales. Visual factors. Colours can create different moods or focus attention. PTS: 1

DIF: Application

REF: p. 389

OBJ: 6

16. Describe two common selling techniques that are commonly used in by retail salespeople in clothing stores. ANS: Trading up means convincing the customer to buy a higher priced item than he or she originally intended to buy. Suggestion selling seeks to broaden the customer’s original purchase with related items. PTS: 1

DIF: Application

REF: p. 391

OBJ: 6

12-45

17. List and briefly describe the trends that are currently having the greatest impact on the future of retailing. ANS: (1) Interactivity—adding interactivity is one method of differentiating a retail establishment—no matter what the size. Interactivity is the term used to describe creating opportunities for customers to be entertained while they shop. (2) M-commerce (mobile commerce) enables customers to use wireless mobile devices to connect to the Internet and shop. PTS: 1 OBJ: 7

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DIF: Comprehension

REF: p. 392-393

Chapter 13—Integrated Marketing Communications MULTIPLE CHOICE 1. What is communications by marketers that inform, persuade, and remind potential buyers of a product in order to influence an opinion or elicit a response? a. publicity b. perceptual communication c. promotion d. distributive communication ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 406

2. Tyler is responsible for developing a plan for the optimal use of advertising, personal selling, sales promotion, and public relations. What is Tyler developing? a. a set of promotion goals b. a promotional strategy c. a communication mix d. a marketing mix ANS: B OBJ: 1

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 406

3. In 2004, the movie company that produced The Bourne Supremacy used advertising, personal selling, public relations, and sales promotion to communicate with its target audience for the movie. What was composed of the movie production company’s plan on how to use these tools? a. its promotional strategy b. its selling plan c. its mass communication mix d. its marketing mix ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

4. What is the main function of promotion? a. to convince consumers a firm’s products offer competitive advantages over those of its competition b. to find a niche in the marketplace for the firm and its products c. to guarantee control over the length of the stages of the product life cycle d. to provide the firm with research information about the success of its marketing effort ANS: A The function of promotion is to convince target customers that the goods and services offered provide a competitive advantage over the competition. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 406

13-1

5. What is defined as a set of unique features of a company and its products perceived by the target market as significant and superior to the competition? a. a unique selling proposition b. a competitive advantage c. a special benefit d. a comparative differentiation ANS: B OBJ: 1

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 406

6. People who love to fish prefer Magic Lures that are cut from ash or cedar and then hand-painted and hand-tied with a feather skirt. Advertising for Magic Lures emphasizes how its lures, unlike others, are all handcrafted. What is being described? a. Magic Lures’s competitive advantage b. Magic Lures’s sales promotional theme c. Magic Lures’s one-to-one marketing advantage d. Magic Lures’s marketing differentiator ANS: A A competitive advantage is a set of unique features of a company and its products perceived by the target market as significant and superior to the competition. It is not the result of publicity; it is design and production based. Since this is advertising, the sales promotion theme may or may not agree; there is no indication of IMC. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

7. The maker of Mayfield ice cream simply states, “It is the best you’ve ever tasted.” This is an example of how a product creates which of the following? a. a promotional theme b. a comparative differentiation c. a competitive advantage d. a unique selling proposition ANS: C A competitive advantage is a set of unique product features perceived by the target market as significant and superior to the competition. It may be based on a scientific discovery, but the company didn’t create it by saying it. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

8. What does the promotional mix consist of? a. advertising, personal selling, sales promotion, and public relations b. advertising, publicity, direct marketing, and personal selling c. public relations, direct marketing, personal selling, and publicity d. advertising, telemarketing, public relations, and sales promotions ANS: A OBJ: 4

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 414

9. The four major promotional tools are known collectively as which of the following? a. the publicity four b. the promotional mix c. the advertising campaign d. the communication model ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 414

10. What is any form of sponsor-identified, paid mass communication? a. publicity b. promotion c. public relations d. advertising ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 414

11. A local exterminator uses the image of a large dead cockroach to communicate its service. The pictures of the dead insect appear on transit boards throughout the community. What is this a form of? a. publicity b. public relations c. sales promotion d. advertising ANS: D Advertising is a form of sponsor-paid, one-way mass communication. PTS: 1 DIF: Application BLM: Higher order

REF: p. 414

OBJ: 4

12. According to the text, which of the following statements about advertising is true? a. The cost per contact in advertising is low. b. The total costs of advertising are typically low. c. The signs on the outsides of buses and taxis are not a form of advertising. d. Advertising is any form of communication in which the sponsor is identified. ANS: A The total costs of advertising are typically high even though the cost of contact is low. To be advertising, the communication must be paid for. Innovative media is used in advertising. The signs are a form of advertising because they are paid for and they identify their sponsors. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 414

13-3

13. What is the marketing function that evaluates public attitudes, identifies areas within the organization that are of public interest, and executes a program of action to gain public understanding? a. advertising b. sales promotion c. personal selling d. public relations ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 416

14. In 2004, Montreal once again hosted the Peachtree Road Race, a running event that attracts many world-calibre racers. This year, after numerous requests from Quebecers, the race officials sanctioned a race conducted in Iraq so that soldiers from the province would not have to miss the annual event. The winners of the Mideast race as well as scenes of the actual race were televised. In terms of a promotional mix, this Iraqi Peachtree was an example of which of the following? a. strategic product promotions and resulting sales b. a target marketing strategy c. sales promotion efforts d. a public relations strategy and resulting publicity ANS: D The public relations activities involved in the race in Iraq led to publicity in the form of news media reporting. PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

OBJ: 4

15. What is public information about a company, good, or service appearing in the mass media as a news item? a. publicity b. sales promotion c. mass communications d. advertising ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 416

16. Which of the following BEST describes publicity? a. It is free communication. b. It has many internal costs to the company associated with it. c. It will never damage a company because it performs the information task of promotion. d. It has to be purchased from the mass media. ANS: B A firm may have to hire a public relations firm to prepare new releases and persuade media personnel to print or broadcast the news. This can be expensive. PTS: 1 OBJ: 4

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DIF: Comprehension BLM: Higher order

REF: p. 416

17. According to the text, which statement regarding spam is true? a. Tough criminal legislation in the United States has been effective in curbing spam. b. Spam is an acronym for Specific Program Algorithm Mail c. Approximately 37 percent of email that is received by Canadians is spam. d. Canada currently has no anti-spam laws. ANS: D REF: p. 411

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

18. According to the text, which of the following statements about sales promotions is true? a. All sales promotions must be aimed outside the organization. b. Trade shows, coupons, premiums, and vacation giveaways are types of sales promotions. c. Public relations cannot effectively be used with sales promotions. d. Marketers view sales promotions as more effective when they are created as long-term stimulation tools. ANS: B Sales promotions can be used to improve the effectiveness of advertising and public relations activities. Sales promotions are most effective as short-term tools. Sales promotions are commonly directed at the organization’s employees as well as to consumers and dealers. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 416

19. Which of the following consists of all marketing activities that stimulate consumer purchasing such as coupons, contests, free samples, and trade shows? a. sponsorship b. sales promotion c. advertising d. publicity ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 416

20. A 35-cents-off coupon for Campbell’s chicken broth is a form of which of the following? a. publicity b. sales promotion c. public relations d. personal selling ANS: B OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

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21. Frank’s RedHot hot sauce created a “Sing the Blues” contest. Participants were asked to write original lyrics about Frank’s RedHot sauce set to their favourite tune and submit their songs to the manufacturer. The writer of the winning song received a free all-expense paid trip to a House of Blues. What is this an example of? a. a sales promotion b. advertising c. a public relations activity d. personal selling ANS: A Sales promotion includes marketing activities, such as contests. PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

OBJ: 4

22. Which of the following is a purchase situation in which two or more people communicate in an attempt to influence each other? a. mass communication b. implicit communication c. synergistic communication d. personal selling ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 416

23. Java Jacket is a company that designs and prints ads on the paper sleeves that go around hot coffee cups sold in coffee shops. To find clients to advertise on the sleeves, the company sent a representative to companies such as Warner Brothers, eBay.com, and The Wall Street Journal to tell them how their ads on sleeves would give them inexpensive exposure to a large number of potential customers. How can Java Jacket’s activities best be described? a. as mass communication b. as personal selling c. as public relations d. as implicit communication ANS: B Personal selling incorporates planned, face-to-face presentations in a conversation with one or more prospective purchasers for the purpose of making sales. PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

OBJ: 4

24. What is the process by which we exchange or share meanings through a common set of symbols? a. advertising b. communication c. publicity d. feedback ANS: B OBJ: 2

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 407

25. What is interpersonal communication? a. long-distance communication between a business and its target market b. direct communication between two or more people c. nonpaid information such as publicity d. paid communication placed in personal media ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 407

26. What are the two major categories of communications? a. informative and persuasive b. direct and indirect c. mass and interpersonal d. verbal and nonverbal ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 407

27. What is the term for communication to large audiences, usually through a medium such as television or a newspaper? a. mass communication b. referential communication c. public communication d. interpersonal communication ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 407

28. Shaw Cable television uses radio, television, magazine, and newspaper advertising to inform television viewers about new episodes of Restaurant Makeover, a popular television series. What kind of communication is Shaw using? a. public b. factual c. mass d. referential ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 407

29. Which of the following would a firm using mass communication NOT experience? a. inability to know exactly who is receiving the message b. clutter from competitors’ messages c. great expense on a per-person-exposed basis d. inability to assess customer reactions to the promotion immediately ANS: C Mass media reach so many people that even though the initial investment is large, cost per person is small. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 407

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30. What does the communication process itself consist of? a. sender, receiver, and message b. encoding, decoding, channel, sender, and receiver c. comprehension, noise, and feedback d. source, receiver, and channel ANS: B See Exhibit 13.2. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 408-409

OBJ: 2

31. Who is the originator of the message in the communication process? a. the receiver b. the encoder c. the sender d. the communicator ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 408

32. Procter & Gamble spent $25 million on its “Locks in the Spills” promotion campaign for Bounty paper towels. What role did Procter & Gamble play in the communication process? a. channeller of the message b. sender of the message c. decoder of the message d. communicator of the message ANS: B The sender is the originator of the message in the communication process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 408

OBJ: 2

33. The manufacturer of Meridian yam products spent $25,000 to create an ad that ran in the Thanksgiving issue of a popular cooking magazine. Because it was the originator of the communication process, what is Meridian? a. a noise filter b. a receiver c. a sender d. a decoder ANS: C OBJ: 2

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 408

34. The maker of Frank’s RedHot sauce spent $25,000 to create an ad targeted to consumers in the southern Ontario market. Because it created the ad itself and used no ad agency, what did Frank’s RedHot sauce engage in? a. receiving b. encoding c. decoding d. creating noise ANS: B OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 408

35. Which of the following is the conversion of the sender’s ideas and thoughts into a message? a. encoding b. development c. envelopment d. decoding ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 408

36. What is encoding? a. conversion of the sender’s ideas and thoughts into a message b. creation of the original ideas and thoughts of the message c. deciphering and understanding of a message d. receipt and comprehension of the message ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 408

37. Procter & Gamble hired an advertising agency to create a $25 million campaign for Bounty paper towels. The ad agency created a “Locks in the Spills” message for Bounty ads. What was the ad agency? a. the channeller of the message b. the encoder of the message c. the sender of the message d. the receiver of the message ANS: B Encoding is the conversion of the sender’s ideas and thoughts into a message. PTS: 1 DIF: Application BLM: Higher order

REF: p. 408

OBJ: 2

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38. What is a channel in communication? a. someone who places advertising into media b. any communication medium c. usually an ad agency or public relations firm d. the only source of noise ANS: B A channel is the transmitter of the message such as a voice, gesture, radio, newspaper, or any other communication medium. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 409

39. Campbell’s soup has been promoted with television commercials, radio spots, newspaper coupons, and magazine advertisements. In the communication process, these media served as which of the following for transmitting the message? a. encoders b. channels c. decoders d. senders ANS: B A channel is the transmitter of the message such as a voice, gesture, radio, newspaper, or any other communication medium. PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

OBJ: 2

40. Which of the following is anything that interferes with, distorts, or slows the transmission of information? a. feedback b. nonpaid communication c. noise d. static ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 409

41. Just as Grace was in sight of a billboard for the Riverbend Antique Mall, a police car drove by with its lights flashing. Grace was so concerned with seeing where the police car went that she totally missed seeing the mall’s billboard. In terms of the communication process, what did the police car act as? a. media interruptus b. noise c. negative feedback d. static ANS: B Noise is anything that interferes with, distorts, or slows the transmission of information. PTS: 1 DIF: Application BLM: Higher order 13-10

REF: p. 409

OBJ: 2

42. Veterinarian Richard Dixon places his service’s advertising messages on outdoor signs and in the Yellow Pages. These communications are directed at the person who will decode the message. What is that person called? a. the encoder b. the sender c. the receiver d. the communicator ANS: C Customers are the receivers who decode the message. PTS: 1 DIF: Application BLM: Higher order

REF: p. 408

OBJ: 2

43. Which of the following is the interpretation of the language and symbols sent by the source through a channel? a. perceiving communication b. encoding c. channelling d. decoding ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 409

44. What do the most successful global marketing managers realize? a. It is imperative that every message be completely customized to each subculture. b. Translation and possible miscommunication of promotional messages can occur. c. Consumers’ cultural environments play a large role in the communication process and affect decoding. d. Any message can be considered uniform by easily translating the message into all other languages. ANS: B REF: p. 410

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

45. For communication to be effective, which of the following is necessary? a. Marketers should use televised instead of print communication. b. Marketing managers must ensure a proper match between the message to be conveyed and the target market’s attitudes and ideas. c. All steps of the communications process model must take place. d. Marketing managers should use both interpersonal and mass communications. ANS: B Common understanding between two communicators is required for effective communication. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 409

13-11

46. Some large retailers are successful in most areas of the country yet fail in certain regions that are heavily populated with different races and subcultures. This is because it is difficult to communicate without an understanding of which of the following? a. income influences b. gender differences c. culture d. locational variants ANS: C One stumbling block for many firms is communicating with and selling to diverse cultures that do not share a common frame of reference. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 409

47. Ernest has three engineering degrees. He has hired an interior decorator to update his home. He is tremendously frustrated when he asks what he thinks are simple questions about weight-bearing walls and insulation requirements, and the designer is unable to understand. Yet Ernest has the same problems when the designer starts talking about mauve, cerise, and magenta. Why is the communication process not working in this instance? a. The designer is not intelligent enough to understand engineering. b. The sender and receiver do not share overlapping frames of reference. c. Personal selling should not be used to market this type of product. d. Noise is interfering with both encoding and decoding. ANS: B When people receive a message, they tend to manipulate, alter, and modify it to reflect their own biases, needs, knowledge, and culture. The designer has no knowledge base in engineering. PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

OBJ: 2

48. The receiver’s response to a message is which of the following to the source? a. decoded b. feedback c. static filled d. noise ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 410

49. What is the final step in the communication process? a. encoding b. decoding c. transmission d. feedback ANS: D OBJ: 2

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 410

50. Clarice went to WB.com and ordered a CD that she had heard playing in the background on Charmed and that was promoted at the end of the television show. In terms of the communication process, what was Clarice’s purchase an example of? a. feedback b. noise c. channelled communication d. message encoding ANS: A The receiver’s response to a message is feedback to the source. PTS: 1 DIF: Application BLM: Higher order

REF: p. 410

OBJ: 2

51. The marketing campaign for Alpo dog food uses posters in veterinarians’ offices, radio and television ads, as well as a website to promote benefits of the dog food. In terms of the communication process, what did Alpo use? a. several different channels b. several different sources of feedback c. several different decoders d. several different encoders ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

52. Ruby was offended by an ad spokesperson and wondered why anyone would want to do business with a company that thought being obnoxious was good business practice. In terms of the communication process, what happened? a. Ruby improperly decoded the message. b. Ruby created a longer than normal communication channel. c. Ruby correctly encoded the message. d. Ruby improperly encoded the message. ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

53. Bag Media is a British company that sells space on paper bags to advertisers who want to drive consumers to their websites. A Bag Media representative is making a presentation to several Internet entrepreneurs who are interested in getting traffic to their websites. What is the company rep engaged in? a. interpersonal communication b. publicity c. mass communication d. crowd selling ANS: A Interpersonal communication is direct communication between two or more people. PTS: 1 DIF: Application BLM: Higher order

REF: p. 407

OBJ: 2

13-13

54. Refer to Bag Media, When one of the Internet entrepreneurs ordered its Web address printed on 25,000 bags, what was it an example of? a. feedback b. nonverbal communication c. indirect transmission d. decoding ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 410

55. According to the text, which of the following statements about the characteristics of the elements in the promotional mix is true? a. The sponsor is identified in public relations, advertising, and personal selling. b. The speed of feedback is delayed in sales promotion, advertising, and personal selling. c. The most feedback is available with personal selling. d. The message flow is two-way in public relations, sales promotions, and personal selling. ANS: C The speed of feedback is delayed in sales promotion and advertising. Message flexibility is greatest with personal selling. The message flow is one-way in public relations and sales promotions. The sponsor is not identified in public relations. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 410

56. According to the text, which of the following statements about the characteristics of the elements in the promotional mix is true? a. The fastest feedback occurs with personal selling. b. The mode of communication for sales promotion is usually direct and personal. c. A large audience is best reached with personal selling. d. Control over message content is greatest when public relations is used. ANS: A There is little control over message content with public relations. Personal selling reaches large audiences slowly. Sales promotions are usually indirect and impersonal. The message flow with advertising is one-way. See Exhibit 13.3. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 410

57. What is the overriding goal of promotion? a. to raise awareness of products and services b. to express ideas and thoughts c. to modify behaviour and thoughts d. to sell products and services ANS: C OBJ: 3

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 413

58. What are the three basic tasks of promotion? a. informing, persuading, and reminding b. informing, convincing, and reminding c. informing, persuading, and convincing d. persuading, convincing, and reminding ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 413

59. Which of the following is one of the basic tasks typically performed by promotion? a. perceiving b. persuading c. managing d. organizing ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 413

60. When is informative promotion generally used? a. when the brand name is well known to consumers b. when advertising a simple, nontechnical, mature product c. during the early stages of the product life cycle d. during an attempt to gain the immediate action of a consumer ANS: C Informative promotion is a necessary ingredient for increasing demand for a product category, and is used when the product is introduced. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 413

61. The Hollymatic Patty Machine grinds and shapes meat into perfectly sized patties using a revolutionary new process that decreases shrinkage. The advertising agency is writing copy for the Hollymatic Patty Machine and has decided on which of the following formats because the product is so technical? a. informative b. persuasive c. influencer d. reminder ANS: A Informative promotion is a necessary ingredient for a highly technical product category. PTS: 1 DIF: Application BLM: Higher order

REF: p. 413

OBJ: 3

13-15

62. When Heinz introduced its ketchup globally, it had to first deal with the fact ketchup is not a household staple in many countries outside North America. Heinz had to show foreign users how ketchup can be used. Globally, Heinz has had to rely primarily on which type of advertising? a. persuasive b. influential c. informative d. compulsive ANS: C Informative promotion is a necessary ingredient for increasing demand for a product category, and is used when the product is introduced. PTS: 1 DIF: Application BLM: Higher order

REF: p. 413

OBJ: 3

63. What is the goal of persuasive promotion? a. to describe available services b. to remind the consumers where they can buy the product c. to stimulate purchase or other action d. to maintain top-of-mind consumer awareness ANS: C Persuasion generally attempts to motivate a consumer to purchase a product. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 413

64. When does persuasion normally become the primary promotion goal? a. when a firm is reminding consumers where to buy the product b. when the product enters the growth stage of the product life cycle c. when new products are in the early stages of the product life cycle d. when a firm is trying to increase brand awareness ANS: B Persuasion attempts to motivate a consumer to purchase a particular product. It is useful after the product has been made known through informational advertising during introduction. PTS: 1 OBJ: 4

13-16

DIF: Comprehension BLM: Higher order

REF: p. 413

65. Innovyx is an e-mail marketing service provider. It has a new ad campaign aimed at changing negative perceptions of e-mail. The ads explains how much cheaper e-mail advertising is than traditional advertising and what a high return on investment it can generate if used properly. Finally, the message ends by suggesting that companies that want to promote their products give e-mail a chance to show them what it can do. What task does this promotion have? a. rewarding b. suppressing c. informing d. persuading ANS: D This promotion is aimed at persuading consumers to change their attitudes and try e-mail. PTS: 1 DIF: Application BLM: Higher order

REF: p. 413

OBJ: 4

66. Which promotion is used to keep a familiar brand name in the public’s mind and is prevalent during the maturity stage of the product life cycle? a. influence b. reminder c. informative d. persuasive ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 414

67. For many years during the fall, Campbell’s has run a series of ads showing consumers how to use chicken broth to make moister chicken dressing. What is this promotion intended to do? a. influence consumers to switch to Campbell’s b. persuade nonusers of Campbell’s to try it c. act as a persuasive device for the product category d. act as a reminder advertisement ANS: D Reminder promotion is used to keep a familiar brand name in the public’s mind and is prevalent during the maturity stage of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 414

OBJ: 4

13-17

68. For many years Jell-O gelatin has run advertisements that tell consumers that there is “always room for Jell-O.” This is an example of what type of promotion? a. influence b. informative c. reminder d. amusement ANS: C Reminder promotion is used to keep a familiar brand name in the public’s mind and is prevalent during the maturity stage of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 414

OBJ: 4

69. Which of the following outlines a sequential four-step process for achieving promotional goals? a. AIDA concept b. Maslow’s hierarchy of needs c. communication model d. hierarchy of impacts ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 418

70. Which of the following BEST describes the AIDA concept? a. It is a model effectively showing that advertising can move people to the purchase stage. b. It demonstrates that buyers go through nine stages on the way to making a decision. c. It is a budget plan based on the effectiveness of various promotion mixes in achieving certain objectives. d. It is a model for reaching promotional objectives that outlines a sequential process for effective promotion. ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 418

71. What does AIDA stand for? a. Attention-Interest-Desire-Action b. Attitude-Interest-Demand-Activity c. Awareness-Intent-Demand-Action d. Attitudes-In-Developing-Acquisitions ANS: A REF: p. 418

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

72. According to the AIDA concept, what is the first step a marketer must achieve with potential customers? a. attention b. attitude alignment c. action d. adaptation ANS: A OBJ: 5 13-18

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 418

73. Lyndon went to a website that sells barbecue grills and read reviews of several different models. He has requested more information about a Weber grill that appeared to meet his needs, but he is not yet willing to give up his search to find the perfect grill. As far as Weber is concerned, Lyndon is in which step of the AIDA concept? a. attention b. interest c. desire d. action ANS: B Lyndon is aware of the product, but he is not yet convinced it is the one he wants to purchase. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

74. When Mona saw the features available on the Singer sewing machine Dee had received for her birthday, Mona immediately knew she wanted to own one just like it someday. According to the AIDA concept, which stage had Mona entered? a. liking b. interest c. action d. desire ANS: D The Singer machine has created a brand preference. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

75. Point-of-purchase displays in grocery stores, coupons, premiums, and trial-size packages are most useful when the consumer is near which stage of the AIDA model? a. knowledge b. action c. preference d. awareness ANS: B These extras are the sales promotion techniques that often push the complacent consumer into the purchase stage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

13-19

76. For which of the following purchases is Leah most likely to pass through all four stages of the AIDA process? a. toilet tissue b. a tube of toothpaste c. batteries for her digital camera d. a wedding gown ANS: D Most buyers involved in high-involvement purchases pass through the four stages of the AIDA model. The gown would be the alternative most likely to create a high level of psychological risk. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

77. According to the text, which of the following statements about the AIDA model is true? a. Sales promotion is not helpful during the attention stage of the AIDA model. b. Certain promotional tools are more effective at certain stages of the AIDA model. c. The promotional mix should not be influenced by the AIDA model. d. The AIDA model explains why public relations is the most important element in the promotion mix. ANS: B A helpful concept for marketing managers is that as the customer moves from awareness to purchase, different promotional tools are more effective at certain points. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 418

78. Which of the following BEST describes the AIDA concept? a. It assumes that the second step in the purchase-decision process is inertia. b. It indicates that the purchase decision is the same for high-involvement and low-involvement products. c. It does not explain how all promotions influence purchase decisions. d. It assumes that consumers regularly go through each stage of the process during all purchases. ANS: C The second step in the AIDA concept is interest. Customers typically do not go through all stages for a low-involvement product. PTS: 1 OBJ: 5

13-20

DIF: Comprehension BLM: Higher order

REF: p. 418

79. To provide more delivery service to the consumer market, UPS created UPS Stores. According to the AIDA model, to create attention for this more convenient way and less expensive way to mail packages through UPS, its marketing department should have relied on which element of the promotion mix? a. sales promotion b. personal selling c. direct marketing d. public relations ANS: D Public relations is best at drawing attention to a product or company. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

80. In terms of the AIDA concept, sales promotion is most effective at creating which of the following? a. positive attitudes toward a brand b. strong desire and purchase intent c. awareness of a product d. awareness of a product and purchase intent ANS: B REF: p. 418

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

81. Entrepreneur Lara Kraft has developed pecan pie jam, apple pie jam, and cherry pie jam, which she is marketing under the name Pi-Full. Everyone who has tried the product loves it, but she is having trouble getting potential consumers to the desire stage of the AIDA concept. Which of the following elements of the promotion mix would be most likely to move people toward looking for the product and buying it? a. a $1-off coupon for a 6-ounce jar of jam b. increasing the number of stores carrying Pi-Full c. flyers placed under windshield wipers in supermarket parking lots d. article in local newspaper about entrepreneurs ANS: A Sales promotions (coupons) are very effective at creating desire and action. PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

OBJ: 3

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82. Which of the following is LEAST likely to be a factor that would determine the nature of the promotional mix? a. funds available for promotion b. size of the company c. stage in the product life cycle d. target market characteristics ANS: B Size of the company may or may not impact the promotional mix, depending on other factors such as available funds or product type. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 414

83. Which promotional mix elements should be emphasized for products moving into the growth stage of the product life cycle? a. public relations and reminder advertising b. personal selling and persuasive advertising c. informational advertising and publicity d. sales promotion and public relations ANS: B During the growth stage, advertising and public relations remain strong, sales promotion declines in importance, and personal selling is used. Advertising is persuasive. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 422

84. Regarding the promotional mix, producers of business goods such as industrial machinery rely heavily on which of the following rather than on advertising? a. personal selling b. public relations c. sales promotion d. publicity ANS: A REF: p. 416

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

85. Because soft drinks are in the maturity stage of their product life cycle, which promotional mix element should be emphasized in the marketing of this product? a. reminder advertising b. telemarketing c. public relations d. publicity ANS: A During the maturity stage, persuasive and reminder advertising are emphasized, as well as sales promotion. Personal selling is maintained, while the usefulness of public relations is doubtful. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 422

OBJ: 7

86. For a product such as audio cassette tapes, which is in the decline stage of its product life cycle, what happens? a. Sales promotion is used to build market share. b. Heavy public relations is used to maintain brand loyalty. c. Personal selling should be used to obtain distribution. d. Reminder advertising is commonly used. ANS: D REF: p. 422

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

87. Fans of Cheerwine cherry-flavoured cola are able to explain why Cheerwine is superior to any other type of cherry cola. These people are scattered throughout the Maritimes and are extremely brand loyal. The characteristics of this target market indicate that a promotional mix with which of the following should be used? a. more advertising and less sales promotion and public relations b. less sales promotion and more advertising and personal selling c. more advertising and sales promotion and less personal selling d. less publicity and sales promotion and more personal selling ANS: C OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 423

88. When a product is in the growth stage of its product life cycle, which of the following occurs? a. Persuasive and reminder advertising is decreased. b. Heavy advertising is used to build brand loyalty. c. Personal selling and sales promotions are the major elements of the promotional mix used. d. Personal selling is ineffective. ANS: B Heavy advertising and decreased use of sales promotions are common during the growth stage. Reminder advertising is used when the product/brand reaches the maturity stage. During the growth stage, personal selling is used to maintain distribution. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 422

89. What is the most effective promotion mix to use with products that are convenience goods and purchased routinely? a. personal selling and advertising b. public relations and personal selling c. sales promotion and advertising d. advertising and public relations ANS: C For routine buying decisions, the most effective promotion tools are advertising and sales promotion. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 416

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90. Which of the following elements of the promotional mix would be most effective for helping highly involved consumers make complex buying decisions? a. sales promotion b. reminder advertising c. personal selling d. informative advertising ANS: C REF: p. 416

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

91. What is probably the most important factor in determining the promotional mix? a. media availability b. money c. the advertising agency d. message flexibility ANS: B Without available funds, the promotional mix is severely limited. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 416

92. The use of aggressive personal selling and trade advertising by a manufacturer to convince a wholesaler or retailer to carry and sell its merchandise is known as which type of strategy? a. pull b. strong-arm c. push d. foot-in-the-door ANS: C OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 424

93. Petra McCoy has developed a product for cleaning grout called Grout-Chee. Everyone who has tried the product really appreciates how quickly it works, but McCoy is having trouble getting retail stores to carry the product. She has decided to send retailers free samples and use other trade promotions to encourage stores to carry her product. What type of promotional strategy is McCoy using? a. pull b. push c. advertorial d. kinetic ANS: B OBJ: 4

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 424

94. An ad in a trade magazine targeted to veterinarians urges them to prescribe Hepato for cats and dogs with damaged livers. This ad was placed by the product’s manufacturer. This ad is an example of how manufacturers use which type of strategy? a. push b. kinetic c. pull d. inertia ANS: A A push strategy is a marketing strategy that uses trade advertising to convince a retailer (in this case the veterinarian) to carry and sell particular merchandise. PTS: 1 DIF: Application BLM: Higher order

REF: p. 424

OBJ: 7

95. The various Survivor shows have been promoted through personal appearances by show participants, websites, merchandise with the Survivor logo as well as print and broadcast advertising. To ensure that all of the promotional messages are coordinated, CBS (the network on which the show is broadcast) should use which of the following? a. the AIDA concept b. the integrated marketing communications approach c. the integrated communications management approach d. the interpersonal and mass communications approach ANS: B IMC is the careful coordination of the promotions messages for a product to assure the consistency of messages at every contact point. PTS: 1 DIF: Application BLM: Higher order

REF: p. 419

OBJ: 6

96. Slatescape sells crushed slate to be used as a decorative, permanent mulch to keep weeds out of flower beds. Initially, Slatescape was marketed heavily to home owners, but after years of radio and television advertising, Slatescape has decided to put a majority of its promotion budget into personal selling and sales promotion to lawn and garden supply stores and large discount stores such as Zellers. What type of strategy is this new approach? a. pull b. push c. reinforcement d. kinetic ANS: B The use of aggressive personal selling and trade advertising by a manufacturer to convince a wholesaler or retailer to carry and sell its merchandise is known as a push strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 424

OBJ: 7

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97. Fred was selling a number of well-known brands of wine to various restaurants in town. He was directing all his promotional efforts to the restaurants. What was he using? a. a creative communications promotional strategy b. a pull promotional strategy c. a demand promotional strategy d. a push promotional strategy ANS: D OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 424

98. The product manager of Opa Energy Drinks visited the buying centre of Farkle Grocers, a medium-sized chain of grocery stores across western Canada, and performed a number of persuasive product presentations. What is the product manager following? a. a pull strategy b. a push-pull strategy c. a push strategy d. a demand strategy ANS: C OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 424

99. A manufacturer using which type of promotional strategy focuses its promotional efforts on the consumer? a. push b. pull c. kinetic d. personal selling ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 425

100. An ad for a prescription-only antihistamine that does not make its users sleepy like many other allergy medications was run in several health and fitness magazines. The ad said to ask your physician if you were interested in learning more about the new product or trying it . What type of promotional strategy was the manufacturer of the drug using? a. kinetic b. reinforcement c. push d. pull ANS: D The manufacturer using the pull promotional strategy focuses its promotional efforts on the consumer. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 425

OBJ: 7

101. Procter & Gamble uses cents-off campaigns, couponing, and free samples to increase sales of Tide detergent. In other words, it uses which type of promotional strategy? a. pull b. push c. personal selling d. kinetic ANS: A The manufacturer using the pull strategy focuses its promotional efforts on the consumer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 425

OBJ: 7

102. Consumers will demand the product from retailers and the retailers will demand the product from the manufacturers if which of the following is effective? a. a pull strategy b. a push strategy c. word of mouth d. a demand strategy ANS: A REF: p. 425

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

103. Opa Energy Drinks Ltd. carefully weighed the cost and benefit options of hiring a sales force for its line of beverages versus launching a national advertising campaign. In the end, president Ernie Opa opted for a national advertising campaign on television and radio. What type of strategy is Opa following? a. a pull strategy b. a push strategy c. a product promotion strategy d. a push-pull strategy ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 425

104. To get more retailers to stock its products, Rust-Oleum paint developed a strong advertising campaign aimed at consumers. The ads show creative ways to use paint to make homes more attractive and emphasize the facts the paint doesn’t chip, peel, or fade. What type of promotional strategy is Rust-Oleum using? a. reinforcement b. pull c. channel d. push ANS: B A pull strategy involves ad campaigns aimed at consumers in hopes of getting consumers to demand the product from retailers who in turn will demand it from manufacturers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 425

OBJ: 7

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105. When Lee Apparel introduced Lee Dungarees, it carefully coordinated posters, radio and television commercials, and a Web-based interactive game that drove customers to off-line stores and back to the website. All of these elements produced a consistent, unified, customer-focused message. What did Lee Apparel use? a. creative selling b. promotional mixing c. processed marketing d. integrated marketing communications ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 419

106. What is the method of carefully coordinating all promotional activities to produce a consistent, unified message that is customer focused? a. creative selling b. integrated marketing communications c. promotional mixing d. relationship marketing ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 419

107. Molson beer is produced in Canada. Coors is manufactured in the United States. A merger of the two breweries would give each brand access to a significantly larger market. To effectively reach both markets, the merged company would need to coordinate its promotion mix so as to produce a consistent, unified, and customer-focused message. In other words, the brewery would need to use which of the following? a. integrated marketing communications b. creative selling c. transactional communications d. coordinational promotion ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 419

108. What is the most common failure of a company’s marketing communication effort? a. Not enough funds are allocated toward IMC. b. There is a failure to effectively tie personal selling in with the other elements of the promo mix. c. Consumers recognize discordance within the promo mix. d. There is a failure to blend long-term plans with short-term goals. ANS: A REF: p. 419

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PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

It wasn’t so long ago that cable swaggered around the television industry as the upstart threatening the broadcast networks. Now, cable is old news. The antagonist is the satellite dish with the capability of delivering hundreds of channels and offering an array of movies and sports events. The technology is known as direct broadcast satellite, or DBS. The new challenger has shaken awake the “sleeping giant” cable industry, which has hit the airwaves with some of the most aggressive advertisements the television industry has seen. The ads emphasize the downside of disconnecting cable and choosing to purchase a satellite dish. One commercial opened with a man on a couch joined by his wife with a large bowl of popcorn. They snuggle in front of their TV set, hooked to up to DBS. She seemed excited about their new system and exclaimed, “So this is it?” She then asked how much the satellite dish cost. When her husband answered, the excitement was off. “There’s no monthly fee?” she asked. “No more than cable,” he responded. When she requests to watch the news, he sheepishly said, “Uh, can’t get local news.” At the end of the commercial, the spokesperson for the cable industry declared, “These days when everyone is promising you the future of television, isn’t it nice to know you already have it?” 109. Refer to Cable TV. The television advertising used by cable operators represents the means by which the company communicates to current users to influence an opinion or elicit a response. What is this called? a. publicity b. distribution c. promotion d. price ANS: C Promotion is communication by marketers that informs, persuades, and reminds potential buyers of a product or service to influence an opinion or elicit a response. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

110. Refer to Cable TV. The cable industry’s ad campaigns are designed to communicate to a large audience via television and radio. What type of communication does it use? a. interpersonal b. intrapersonal c. mass d. public ANS: C Mass communication refers to communicating to large audiences, usually through a mass medium such as television or newspaper. PTS: 1 DIF: Application BLM: Higher order

REF: p. 407

OBJ: 2

111. Refer to Cable TV. The television cable industry is the originator of this ad campaign against satellite dishes. What does the industry represent in the communication process? a. the communicator b. the receiver c. the sender d. the encoder Copyright © 2012 Nelson Education Limited

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ANS: C The sender is the originator of the message in the communication process. PTS: 1 DIF: Application BLM: Higher order

REF: p. 408

OBJ: 2

112. Refer to Cable TV. What does television represent in the communication process used by the cable industry to transmit its message? a. the feedback loop b. the receiver c. the encoder d. the channel ANS: D A channel is any communication medium utilized to transmit a message. PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

OBJ: 2

113. Refer to Cable TV. Joey is watching television and sees an ad for DBS. Two ads later, she sees the new television ad for her local cable system. When questioned an hour later about advertising she has seen most recently, Joey remembers a “cable” ad but cannot recall the details. Joey’s inability to recall the ad is most likely caused by which of the following in the communication process? a. noise b. a shared frame of reference c. cognitive dissonance d. feedback ANS: A Noise is anything that interferes with, distorts, or slows down the transmission of information. Competing ads can be a source of noise. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 409

OBJ: 2

Greg Martin has developed his own line of children’s books. The books are written for children ages 3 to 6, and are produced using cotton fibre as pages, rendering them “nearly” indestructible. This unique feature makes Martin’s books superior to the competition. His products are called RugRatReaders. Martin has decided to advertise the books to his target market (women with children ages 3 to 6) via radio. He does not have a formal advertising budget, but he will spend whatever money he has in the bank after producing the books each month. His message will focus on the product and its unique features. Martin has been having problems getting retailers to stock his new product. It is Martin’s hope that consumers will go to their local book stores and ask for the RugRatReaders. 114. Refer to RugRatReaders. In all Martin’s ads, he will emphasize the book’s indestructibility. What does this represent? a. the product’s objective strategy b. the product’s feedback c. the product’s competitive advantage d. the product’s promotional result ANS: C A competitive advantage is a set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

115. Refer to RugRatReaders. The promotional campaign Martin is utilizing is designed to accomplish which basic promotional task? a. influencing b. reminding c. informing d. persuading ANS: C Informative promotion is important for a new product and more prevalent during the early stages of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 413

OBJ: 3

116. Refer to RugRatReaders. Martin’s choice of radio as his promotional tool is based on the fact that it is a one-way mass communication vehicle. Radio is most commonly used with which promotion mix element? a. advertising b. sales promotion c. sponsorship d. public relations ANS: A Advertising is a form of impersonal, one-way communication paid for by the sponsor. Radio is an example of an advertising medium. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 414

OBJ: 4 13-31

117. Refer to RugRatReaders. According to the AIDA model, what is the first step Martin must achieve with his target market? a. attention b. attitude c. action d. activate ANS: A The first step in AIDA is to draw customers’ attention to the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

118. Refer to RugRatReaders. In attempting to get consumers to ask the retailer for his product, what type of promotional strategy is Martin using? a. pull b. publicity c. push d. reinforcement ANS: A A pull strategy stimulates consumer demand to obtain product distribution. PTS: 1 DIF: Application BLM: Higher order

REF: p. 425

OBJ: 7

VIA, a Canadian railroad company, is taking the gloves off in advertisements and belittling its major competition, which is the airline shuttles. VIA’s new name for its Metroliner is The Smart Shuttle. Gone are ads that were inner-directed and sold the Metroliner on its leisurely pace. In their place are ads showing rapid shots of the sleek train and business executives conducting no-nonsense meetings “eyeball-to-eyeball.” The campaign, which includes television, radio, print, billboards, and posters in commuter railroad cars, targets business travellers, who, VIA says, incorrectly believe the train takes far longer than the airplane to travel between two cities. One television spot opens with a shot of airplanes stacked up in a tarmac traffic jam. Another shows a business traveller lumbering into the airport during a snowstorm. The announcer says, “Schedule a meeting. Take the shuttle. Then cross your fingers.” The poor soul looks up at the departure board and sees a row of “Cancelled” signs. The announcer continues, “Schedule a meeting. Take the Metroliner. Then cross your legs.” 119. Refer to VIA. What are the means by which VIA communicates with business travellers about the merits and characteristics of the Metroliner? a. publicity b. promotion c. direct marketing d. distribution ANS: B Promotion is the means by which businesses communicate with their target audiences. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 406

OBJ: 1

120. Refer to VIA. What is the plan to optimally utilize television, radio, print, and out-of-home vehicles to target business travellers? a. a promotion goal b. a promotional strategy c. a publicity plan d. a selling plan ANS: B A promotional strategy is a plan for the optimal use of the promotion elements. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

121. Refer to VIA. VIA’s campaign stresses that the Metroliner is more comfortable and more likely to be on time and run in inclement weather. What does the promotional campaign focus on? a. VIA’s superior skill set b. VIA’s competitive advantage c. VIA’s special feature d. VIA’s tactical strategy ANS: B A competitive advantage is a set of unique features of a company and its products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

122. Refer to VIA. VIA’s campaign is designed to communicate to a large audience via television, radio, and print. This is an example of what type of communication? a. public b. mass c. intrapersonal d. interpersonal ANS: B Mass communication refers to communicating to large audiences, usually through a mass medium such as television or newspaper. PTS: 1 DIF: Application BLM: Higher order

REF: p. 407

OBJ: 2

123. Refer to VIA. VIA originated the new campaign. What does VIA represent in the communication process? a. decoder b. promotional impetus c. sender d. receiver ANS: C The sender is the originator of the message in the communication process. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 408

OBJ: 2

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124. Refer to VIA. Television, radio, print, and out-of-home media represent which of the following in the communication process used by VIA? a. the channel b. the communicator c. the encoder d. the receiver ANS: A A channel is any communication medium utilized to transmit a message. PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

OBJ: 2

125. Refer to VIA. VIA’s careful coordination of all of its promotional activities to present one single, focused communication to its consumers is an example of which of the following? a. promotional mixing b. processed marketing c. integrated marketing communications d. coordinational promotion ANS: C OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 419

In 2001, the United Methodist church, the second-largest Protestant denomination in Canada, launched a four-year, $2 million national ad campaign. The theologically gentle but culturally edgy ads were aimed at Canadians who are unchurched—people who know the name Methodist but don’t know anything else about it. The “Igniting Ministries” ads appeared on CBC and cable TV. The purpose of the ads was to draw more people through Methodist church doors in a time when mainline Protestant denominations were struggling. 126. Refer to Methodist Church. What type of communication did the ad campaign use? a. hierarchical b. functional c. direct d. mass ANS: D Mass communications refers to communicating a concept or message to large audiences. PTS: 1 DIF: Application BLM: Higher order

REF: p. 407

OBJ: 2

127. Refer to Methodist Church. In terms of the communication process, what were the unchurched who see the ads while watching television expected to be? a. channels and decoders b. receivers and decoders c. senders and receivers d. receivers and channels ANS: B OBJ: 2

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 409

128. Refer to Methodist Church. The church hoped to see an increase of 3 percent in visitors to Methodist Churches as a result of this ad. In terms of the communication process, what is this? a. the desired encoding b. the desired channel c. the desired feedback d. the desired reception ANS: C Feedback is the response to the promotional message. PTS: 1 DIF: Application BLM: Higher order

REF: p. 410

OBJ: 2

129. Refer to Methodist Church. A news article about the Methodist Church that appeared in the Rome News-Tribune was an example of which promotional mix element? a. personal selling b. pull strategy c. advertising d. public relations ANS: D The article is an example of favourable publicity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

OBJ: 4

130. Refer to Methodist Church. According to the AIDA concept, what should the ads have done first? a. augmented current knowledge b. acted on unfulfilled needs of the unchurched c. attracted interest in the Methodist Church d. drawn attention to the Methodist Church ANS: D AIDA is attention, interest, desire, and action. PTS: 1 DIF: Application BLM: Higher order

REF: p. 418

OBJ: 5

131. Refer to Methodist Church. How might the United Methodist Church benefit from use of the IMC? a. Correct decoding is guaranteed with the application of IMC concepts. b. The application of IMC concepts allows marketers to reach a more fragmented market. c. Noise can be eliminated from the communication channel with the use of IMC concepts. d. Ads built using the IMC concept are not as closely regulated by the Federal Trade Commission. ANS: B Nothing can eliminate noise or guarantee correct decoding. PTS: 1 DIF: Application BLM: Higher order

REF: p. 419

OBJ: 6

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Lee Apparel, the makers of Lee Dungarees, shows how strong its pants are and at the same time appeals to the 17- to 24-year-old market through the use of the antics of its Buddy Lee doll and the slogan, “I’m Buddy Lee. You can’t bust me.” 132. Refer to Lee Apparel. Buddy Lee and his battles against nefarious characters occur in which of the following in order to reach a large number of people at one time? a. personal selling presentations b. public relations c. sales promotion d. advertising ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 414

133. Refer to Lee Apparel. Lee Apparel, maker of Lee Dungarees, created the Buddy Lee doll in the 1920s. It continued using the doll in its promotional mix and giving out Buddy Lee dolls to customers until 1964. After a 40-year absence, Lee once again began using the doll in its promotions of Lee Dungarees to the 17- to 24-year- old market. The reintroduction of the Buddy Lee doll and people’s reaction to it was the subject of a lengthy article in Business 2.0 magazine. What was the news article an example of? a. a sales promotion b. advertising c. publicity d. implicit communications ANS: C OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

134. Refer to Lee Apparel. The actual doll, which was given away as a premium, is an example of which of the following? a. publicity b. advertising c. a personal sales presentation d. a sales promotion ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

One in every 400 cats suffers from diabetes. Purina developed the first and only cat food designed to manage the glucose levels of diabetic cats.

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135. Refer to Purina. For owners of diabetic cats, what would Purina’s new cat food have? a. a synergistic goal b. a comparative benefit c. a competitive advantage d. a tactical objective for implementing strategy ANS: C A competitive advantage is one or more unique aspects of an organization that causes target customers to patronize that brand rather than others. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

136. Refer to Purina. What would be the goal of promotion developed for this new cat food? a. to inform consumers b. to encourage consumers c. to prompt consumers d. to persuade consumers ANS: A Informative promotion seeks to stimulate interest in a new product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 413

OBJ: 3

137. Refer to Purina. Which elements of the promotional mix would be most useful in attracting attention to this new Purina product? a. direct marketing and personal selling b. advertising and public relations c. public relations and direct marketing d. advertising and direct marketing ANS: B See Exhibit 13.4. PTS: 1 DIF: Application BLM: Higher order

REF: p. 416

OBJ: 4

The Canadian Plastics Council wants to create more consumer demand for products that are packaged in plastic.

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138. Refer to Canadian Plastics Council. The council has developed an approach in which it will use all of the elements of the promotional mix to create a coordinated plan that will become an integral part of the organization’s marketing strategy. What is being described? a. a communication objective b. a tactic for communication c. a promotional strategy d. an informative strategy ANS: C A promotional strategy is a plan for the optimal use of the elements of the promotional mix. PTS: 1 DIF: Application BLM: Higher order

REF: p. 406

OBJ: 1

139. Refer to Canadian Plastics Council. Planned ads will explain how plastics protect families from food spoilage and contamination. The ads will also describe how tamper-evident plastic seals provide an extra measure of product safety assurance. By trying to change customers’ perception of plastic packaging, what is the council using? a. persuasive promotion b. diffusive promotion c. reminder promotion d. declarative promotion ANS: A The council is trying to stimulate demand for consumer products packaged in plastics. PTS: 1 DIF: Application BLM: Higher order

REF: p. 413

OBJ: 4

140. Refer to Canadian Plastics Council. An article in BusinessWeek about how the council plans to stimulate consumer demand would be an example of which of the following? a. direct marketing b. news marketing c. cause marketing d. publicity ANS: D Publicity is public information in mass media about a company and its products. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 416

OBJ: 4

141. Refer to Canadian Plastics Council. Planned ads will be run in consumer magazines and, it is hoped, cause customers to ask retailers to carry more products packaged in plastic. The Canadian Plastics Council is planning to use what type of strategy? a. push b. inertia c. advertorial d. pull ANS: D A pull strategy is a marketing strategy that stimulates consumer demand to obtain product distribution. PTS: 1 DIF: Application BLM: Higher order

REF: p. 425

OBJ: 7

TRUE/FALSE 1. Promotion is communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence their opinion or elicit a response. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 406

2. When it comes to steak sauce, Lawry’s was specifically designed to cling to the steak and be less runny than other brands of steak sauce. Its thickness is the way its manufacturer creates a competitive advantage for the steak sauce. ANS: T A competitive advantage is an aspect of the product the target market perceives as different from and superior to its competition. PTS: 1

DIF: Application

REF: p. 406

OBJ: 1

3. The promotional mix is the combination of promotion tools used to reach the target market and fulfill the organization’s overall goals. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 414

4. Advertising is any form of impersonal, one-way mass communication in which the sponsor is identified. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 414

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5. Raz and Nasim are arguing about newspaper publicity. Raz says favourable publicity is free—hence the phrase “free publicity.” Nasim says that publicity is not free because costs were incurred in developing the public relations materials used by the newspapers. Raz has a more accurate grasp of the definition of publicity. ANS: F Publicity is not free. Preparing news releases, staging special events, and persuading media to broadcast them costs money. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 416

6. Publicity is free. ANS: F Preparing news releases, staging special events, and persuading media to broadcast them costs money. PTS: 1

DIF: Definition

REF: p. 416

OBJ: 4

7. Sales promotion is a promotional tool generally used to stimulate consumer buying and dealer effectiveness. ANS: T Sales promotion is a short-run tool used to stimulate increased demand. PTS: 1

DIF: Definition

REF: p. 416

OBJ: 4

8. Communication via telephone is not considered personal selling because it is not face-to-face. ANS: F Telemarketing is a form of personal selling. It does allow for immediate interaction. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 407

9. Missy Li is attempting to exchange information with her roommate by using symbols to assign meanings to the facts she hopes to convey. This is an example of communication. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 407

10. Beech Nut uses popular magazines, radio, and newspapers to promote its brand of baby food. Beech Nut uses mass communication. ANS: T OBJ: 3

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PTS: 1

DIF: Application

REF: p. 407

11. When a marketer sends a message to its target market, the marketer must first decode the symbols used. ANS: F The receiver decodes the message; the marketer as a sender would encode it. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 49

12. NutriFoods is concerned that its advertising messages are not getting through to the target market as intended. Its radio ads contain music that its target market does not like, and its spokesperson has a very nasal voice that sounds like he has a perpetual cold. These are examples of noise in the communications process. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 49

13. Lincoln and Ming Agency designed and placed ads in local newspapers for one of its clients. The agency knows that once the ads are received by the target market, the message will be understood by all. ANS: F Even though a message is received, it will not necessarily be properly decoded; receivers interpret messages based on idiosyncratic frames of reference. PTS: 1

DIF: Application

REF: p. 49

OBJ: 3

14. OneCore, a financial company, is studying its promotion strategies by looking at sales trends and market research. OneCore uses direct feedback to evaluate its promotional strategies. ANS: F One Core relies on indirect feedback. Direct feedback would imply immediate interaction. PTS: 1

DIF: Application

REF: p. 410

OBJ: 3

15. All promotions are designed to either inform, persuade, or remind the target audience. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 413

16. Frigo Design has developed easy-to-install panel sets to update any refrigerator, dishwasher, or compactor made since 1942. The company has found that its new product cannot be patented. Frigo Design panels are in the introductory stage of the product life cycle, and as yet have no direct competition. Its promotional objectives should be persuasion. ANS: F Early in the life cycle, the primary focus of promotions should be to inform consumers of the product. PTS: 1

DIF: Application

REF: p. 422

OBJ: 4 13-41

17. It’s been a few years since odour-free paint hit the market, and a paint manufacturer estimates the paint to be in the growth stage of its product life cycle. With all the competition in the industry today, the manufacturer should use promotions that persuade buyers of odour-free paint to purchase its brand over all others. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 422

18. AIDA is an acronym for Attention-Interest-Desire-Action. ANS: T OBJ: 5

PTS: 1

DIF: Definition

REF: p. 418

19. A person buying a Valentine’s Day gift for his significant other is more likely to go through all of the steps in the AIDA process than a person buying a gift certificate for her mail carrier. ANS: T The present for Valentine’s Day is more likely to be a high-involvement purchase, and people engaged in high-involvement purchases typically go through all four stages of the AIDA process. PTS: 1

DIF: Application

REF: p. 418

OBJ: 5

20. The AIDA concept can be used to explain how all promotions influence purchase decisions. ANS: F The order of stages in the model, as well as whether consumers go through all its steps, has been much debated. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 418

21. In terms of the AIDA process, public relations has its greatest impact in gaining attention for a company, good, or service. ANS: T REF: p. 418

PTS: 1 OBJ: 5

DIF: Comprehension

22. Allyson Brown is trying to develop a promotional mix for her firm’s new product, a sophisticated modular sunporch designed for use all year. She reasons that because her product is complex and carries high financial risks for consumers, the mix should concentrate on personal selling. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 416

23. A blend of more advertising and sales promotion and less personal selling is useful when the target market is informed, loyal to the product in question, and geographically widely scattered. ANS: T REF: p. 423

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PTS: 1 OBJ: 7

DIF: Comprehension

24. Lansky sells 60 different knife and garden tool sharpeners. It uses aggressive personal selling and sales promotions to encourage intermediaries to carry and sell its sharpener. Lansky is using a push strategy. ANS: T OBJ: 7

PTS: 1

DIF: Application

REF: p. 424

25. Marketers typically use either a push or a pull strategy exclusively. ANS: F Companies rarely use one or the other exclusively. The strategy that best supports their promotional objectives (usually in combination) is what is selected. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 424-425

26. From the consumer’s point of view, a company’s communications are already integrated, no matter how the company itself defines them. ANS: T REF: p. 419

PTS: 1 OBJ: 6

DIF: Comprehension

27. One of the reasons for the growing popularity of integrated marketing communications is the proliferation of thousands of new media choices. ANS: T REF: p. 419

PTS: 1 OBJ: 6

DIF: Comprehension

ESSAY 1. What is promotion? Why is it a vital part of a company’s marketing mix? ANS: Promotion is communication by marketers that informs, persuades, and/or reminds potential buyers of a product to influence an opinion or elicit a response. It is a vital part of the marketing mix because few goods or services, no matter how well developed, can survive in the marketplace without effective promotion. It also informs the consumer of the product’s benefits, thus positioning it in the marketplace. The main function of promotion is to convince target customers that the goods and services offered provide a competitive advantage over the competition. PTS: 1

DIF: Application

REF: p. 406

OBJ: 1

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2. The promotional mix is made up of a blend of four promotional tools. Name and briefly define each of these four tools. ANS: Advertising is a form of impersonal, one-way mass communication that is paid for by the sponsor. Advertising is transmitted by different media, including television, radio, newspapers, magazines, books, direct mail, billboards, and transit cards. Public relations is the marketing function that evaluates public attitudes, identifies the policies and procedures of the organization, and executes programs to earn public understanding and acceptance. A solid public relations program can generate favourable publicity. Personal selling involves a planned face-to-face presentation to one or more prospective purchasers for the purpose of making sales. Personal selling is more prevalent in the industrial goods field. Sales promotion includes a wide variety of activities for stimulating consumer purchasing and dealer effectiveness. Examples include free samples, contests, bonuses, trade shows, and coupons. PTS: 1

DIF: Application

REF: p. 416

OBJ: 4

3. You are the promotions manager for a new weight-loss program that is based on a low-carbohydrate diet. Describe how you might use all four tools of the promotional mix to promote the product. ANS: Promotion tools should be directed toward a weight-conscious target audience. General examples of tools are: Advertising could take place in many different media, including television, radio, newspapers, magazines, books, direct mail, billboards, and transit cards. Public relations could be used to generate publicity for the new product in the form of news items, feature articles, or sporting event sponsorship. Personal selling may be needed to encourage wholesalers and/or retailers to carry the product. However, personal selling may not be feasible to reach a large target audience. Sales promotion could include free samples, contests, bonuses, trade shows, and coupons. PTS: 1

DIF: Application

REF: p. 416

OBJ: 4

4. What is the basic definition of communication? What are two forms of communication? Give specific examples of these two forms and how a company could use each of them. Then explain how your company can avoid miscommunication. ANS: Communication is the process by which individuals exchange or share meanings though a common set of symbols. Individuals assign meanings to feelings, ideas, facts, and attitudes. Interpersonal communication is direct communication between two or more people. With this communication people know whom they are communicating with and can respond to the other person’s reaction almost immediately. An example of this is a salesperson speaking directly with a client. 13-44

Mass communication is communication with large audiences, usually through a mass medium such as television, radio, magazine, or a newspaper. In this case, the company does not know individually the people with whom it is communicating, and there is no way to respond immediately to the consumers’ reactions. Common understanding between two communicators is required for effective communication. Bright colours and graphics have been shown to increase consumers’ comprehension of marketing communication. Factors that can lead to miscommunication are differences in age, social class, education, culture, and ethnicity. Marketing managers must ensure a proper match between the message to be conveyed and the target market’s attitudes and ideas. Additionally, televised marketing communications are misunderstood more often than printed communications. PTS: 1

DIF: Application

REF: p. 407

OBJ: 2

5. Draw a diagram that illustrates the communication process. ANS:

PTS: 1

DIF: Application

REF: Exhibit 13.2

OBJ: 2

6. You are the promotions director for Sunland Farm cholesterol-free eggs. Describe the steps in the communication process in your promotion campaign, using specific examples of the actions that will take place in promoting the eggs. ANS: 1. The sender encodes ideas into a promotional message. In this case, the promotions director at Sunland Farm is the sender of the message, and may hire an advertising agency to create or encode an advertising message. 2. The message is transmitted through a channel, or communication medium. Sunland Farm’s promotion may be carried by television, radio, magazines, newspapers, billboards, or other media. 3. The message may or may not be received by the intended target market. The audience may not be exposed to the channel.

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Receivers decode the message by interpreting the contents of the promotion. Messages may or may not be properly decoded. When people receive messages, they tend to manipulate, alter, and modify the messages to reflect their own biases, needs, knowledge, and culture. The receiver’s response to a message is feedback to the source. In mass communications, feedback is indirect rather than direct. Sunland Farm may need to conduct marketing research to see if the audience can recognize, recall, or state they have been exposed to the message. Any phase of this process may be hindered by noise, such as competitive advertisements.

PTS: 1 OBJ: 2

DIF: Application

REF: p. 407 | p. 412

7. Choose two of the four tools of the promotional mix and use them as column headings in the table that follows. Then fill in the rest of the table by using the characteristics listed in the left column to describe the two tools. PROMOTION TOOL: Direct or indirect communication? Nonpersonal or personal? Amount of feedback? Speed of feedback? Content control? Sponsor identified? Speed in reaching large audience? ANS: PROMOTION TOOL:

ADVERTISING Indirect

PUBLIC RELATIONS Usually indirect

Nonpersonal

Little

Delayed

Yes

Direct or indirect communication? Nonpersonal or personal? Amount of feedback? Speed of feedback? Content control? 13-46

Yes

Fast

Usually Fast

PERSONAL SELLING Direct

SALES PROMOTION Usually indirect

Personal

Nonpersonal

Much

Little/Moderate

Immediate

Varies

Yes

Slow

Fast

Sponsor identified? Speed in reaching large audience? PROMOTION TOOL: Direct or indirect communication? Nonpersonal or personal? Amount of feedback? Speed of feedback? Content control? Sponsor identified? Speed in reaching large audience? PTS: 1 OBJ: 4

DIF: Application

REF: p. 416| Exhibit 13.3

8. What are the three basic tasks of promotion? For each of these three tasks, give two specific promotions examples of how that task might be accomplished. ANS: Inform • • • • • • • • •

Increase awareness of a new product or brand Inform the market of new product attributes Suggest new uses for a product Reduce consumers’ anxieties Tell the market about a price change Describe available services Correct false impressions Explain the way a product or service works Build a company image

Persuade • Build brand preference • Encourage brand switching • Change customers’ perceptions of product attributes • Influence consumers to buy now • Persuade customers to receive a sales call Remind Copyright © 2012 Nelson Education Limited

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• • • • PTS: 1 OBJ: 3

Remind consumers that the product may be needed in the near future Remind consumers where to buy the product Keep the product in consumers’ minds during off times Maintain consumer awareness DIF: Application

REF: p. 413 | p. 414

9. The ultimate objective of any promotion is a purchase or some other activity. A model for reaching promotional objectives is called the AIDA concept. What does this acronym stand for? Describe what marketing actions might take place in each stage of this model. ANS: AIDA stands for Attention-Interest-Desire-Action. A promotion manager attracts a person’s attention by a greeting and approach (personal selling) or loud volume, unusual contrasts, bold headlines, movement, bright colours, and so on (advertising and sales promotion). Second, a good sales presentation, demonstration, or promotional copy creates interest in the product. Third, desire is created by illustrating how the product’s features will satisfy the consumer’s needs. Finally, a special offer or a strong closing sales pitch may be used to obtain purchase action. PTS: 1

DIF: Application

REF: p. 418

OBJ: 5

10. The ultimate objective of any promotion is a purchase or some other activity. One model for reaching promotional objectives is called the AIDA concept. This model proposes that consumers are moved through four stages by the promotional mix. Suppose you are the promotional manager for the new B-Gone squirrel-proof bird feeders. (Before the B-Gone, there were no feeders on the market that were really squirrel-proof.) This bird feeder is guaranteed to prevent squirrels from reaching and eating its contents. Describe the promotional activities you would recommend in each stage of AIDA model for the B-Gone feeder. Assume that personal selling will NOT be used. ANS: Attention. General awareness could be created with heavy publicity, advertisements on television during nature shows, and print ads in birdwatching magazines. Knowledge. Next, the target market should be informed about the product’s characteristics. Print advertisements could detail features of the B-Gone, including price, availability, construction material, installation instructions, and so forth. These ads could also explain how the feeder keeps squirrels out. Interest. Simple awareness does not generally result in a sale. To generate a favourable attitude, birdwatching clubs could be sent a sample B-Gone and then asked to recommend the feeders in television, radio, and magazine advertisements. Managers of stores catering to nature lovers could also be sent free samples and then asked to recommend the B-Gone to their customers. Desire. In this stage, promotion should create brand preference. Promotions should tell bird lovers how much better off the birds will be if they install a B-Gone feeder. Promotions should also emphasize that bird lovers will spend fewer aggravating hours trying to chase squirrels away. The fact the feeder is squirrel-proof should be promoted as the competitive advantage.

13-48

Action. Catchy displays in stores targeted to nature lovers, coupons in birdwatching magazines, premiums (such as free seed or bird food), a display of how a B-Gone feeder works in some public park, or other forms of sales promotion could be used to encourage a consumer to purchase. PTS: 1

DIF: Application

REF: p. 418

OBJ: 5

11. There are several factors that affect the choice of promotional mix. Name five of these factors. ANS: • • • • • • PTS: 1

Nature of the product (consumer or industrial) Stage in the product life cycle Target market characteristics Type of buying decision Available funds for promotion Use of a push or pull strategy DIF: Application

REF: p. 421-425

OBJ: 7

12. Several factors inherent to the product itself influence the promotional mix. Name and briefly describe three of these factors. ANS: Costs and risks. When the costs or risks of a product’s use increase, personal selling becomes more important. Stage in product life cycle. During the introduction stage, emphasis is placed on advertising and public relations as well as some sales promotion and personal selling. During growth, sales promotion efforts are reduced, while advertising and public relations continue. At maturity, sales promotion and advertising become the focus. All promotion is reduced during the decline stage. Nature of product. If the product is a business product, it is less likely to be well suited for mass communication. Since they are often custom tailored, business products are better suited for personal selling. Consumer products are designed to appeal to a large audience, so advertising and sales promotion are more appropriate. PTS: 1

DIF: Application

REF: p. 421-425

OBJ: 7

13. List the four stages of the product life cycle. Then describe the promotional strategies used in each stage. ANS: Introduction. During the introduction stage, emphasis is placed on general product class factors and informative messages. Heavy advertising and public relations are used to build awareness, while sales promotion can be used to induce trial. Personal selling is used in this stage to obtain distribution. Growth. In this stage, promotion emphasizes the product’s competitive advantage over the competition. Heavy advertising and public relations are used to build brand loyalty. Sales promotion decreases, while personal selling is used to maintain distribution.

13-49

Maturity. With increased competition, advertising may decrease slightly and the advertising used is more often the persuasive and/or reminder type. Sales promotion increases to build market share, and personal selling is used to maintain distribution. Decline. In general, all products decline, and promotional messages may be focused on other firm products. Because of expense, advertising and public relations are dramatically decreased. Sales promotion and personal selling may be maintained at low levels. PTS: 1

DIF: Application

REF: p. 422-423

OBJ: 7

14. Target market characteristics and the type of buying decision the target market is making can affect the mix of promotional elements. Describe how differences in each factor change the promotional mix. ANS: Target market characteristics. Widely scattered customers, highly informed buyers, and brand-loyal repeat purchasers generally require a blend of more advertising and sales promotion and less personal selling. Personal selling is required for industrial installations, even if buyers are extremely competent. Print advertising can be used when potential customers are difficult to locate. PTS: 1

DIF: Application

REF: p. 423

OBJ: 7

15. You are the promotions manager for a small, financially strapped company. Describe how a lack of funds affects the use of each of the promotional tools. Describe the trade-offs that occur between funds available and other aspects of promotion. ANS: A firm with limited funds can rely heavily on publicity if the product is unique. If personal selling is necessary, the firm may use manufacturers’ agents who work on a commission basis. Some sales promotions can also be inexpensive. Although advertising is very expensive, it has low cost per contact, which may be necessary for a large potential market. There is usually a trade-off among the funds available, the number of people in the target market, the quality of communication needed, and the relative costs of the various promotional elements. PTS: 1

13-50

DIF: Application

REF: p. 421-425

OBJ: 7

16. You are the promotions manager for Pyrolave, a company that turns lava rock into counter tile. The company’s counter tile is easy to clean and resistant to scratches, but more expensive than other materials used for countertops. You need to decide whether to implement a push or a pull promotional strategy. Define and describe both the push and the pull strategy, and describe what promotions might be used in each strategy. ANS: A push strategy is when manufacturers use aggressive personal selling and trade advertising to convince a wholesaler or a retailer to carry and sell their merchandise. The wholesaler, in turn, must push the merchandise forward by persuading the retailer to handle the goods. The retailer then uses advertising, displays, and so on to convince the consumer to buy the pushed products. A pull strategy stimulates consumer demand to obtain product distribution. In this case, the manufacturer focuses its promotional efforts on final consumers, usually with mass media. As consumers demand the product, the retailer orders the merchandise from the wholesaler. As the wholesaler is confronted with rising demand, it places orders for the merchandise from the manufacturer. Stimulating final consumer demand pulls the product through the distribution channel. Consumer advertising, cents-off campaigns, and couponing are part of a pull strategy. PTS: 1

DIF: Application

REF: p. 424-425

OBJ: 7

17. What is integrated marketing communications (IMC)? How is IMC implemented? ANS: Integrated marketing communications is the method of carefully coordinating all promotional activities to produce a consistent, unified message that is consumer focused. To implement IMC, marketing managers carefully work out the roles the various promotional elements will play in the marketing mix. Timing of promotional activities is coordinated and the results of each campaign are carefully monitored to improve future use of the promotional mix tools. Typically, one individual in the firm is given the overall responsibility for integrating the company’s marketing communications. PTS: 1

DIF: Application

REF: p. 419

OBJ: 6

18. List three reasons that the concept of integrated marketing communications (IMC) has been growing in popularity. ANS: (1) (2) (3) (4)

The proliferation of thousands of media choices beyond traditional media has made promotion a more complicated process. The mass market has become increasingly more fragmented. Marketers have slashed their advertising spending in favour of promotional techniques that generate immediate sales responses and those that are more easily measured. The interest in IMC is largely a reaction to the scrutiny that marketing communications has come under and particularly to suggestions that uncoordinated promotional activities are wasteful and inefficient.

PTS: 1

DIF: Application

REF: p. 419

OBJ: 6

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13-52

Chapter 14—Advertising and Public Relations MULTIPLE CHOICE 1. What is a form of impersonal, sponsor paid, one-way mass communication? a. promotion b. direct marketing c. public relations d. advertising ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 436

2. Procter & Gamble’s marketing efforts for its Pert shampoo include television commercials, billboards, magazine inserts, and radio spots. These activities are all activities of which of the following? a. advertising b. publicity c. sales promotions d. public relations ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 436

3. Which of the following BEST describes advertising expenditures in Canada? a. They exceed $250 billion per year in the huge industry that employs over 3 million people. b. They are dominated by the millions of small firms competing for business through price wars. c. They are completely controlled by the top 10 marketing communication companies in Canada. d. They are large, but the industry is small with fewer than 54,000 employees. ANS: D Advertising is a visible but small industry. Advertising spending is increasing and is dominated by the largest firms. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 436

4. What is Canada’s top marketing communications service company, according to number of employees? a. DDB Canada b. Maritz Canada c. Cossette Communications d. Carlson Marketing Group Canada ANS: C See Exhibit 14.1. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 436

OBJ: 1

14-1

5. In advertising and sales promotion, beyond a certain level of spending, diminishing results set in. What is this phenomenon known as? a. the law of diminishing returns b. advertising latency c. the threshold spending phenomenon d. the advertising response function ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 436

6. Why do many brands with a large market share spend proportionally less on advertising compared to brands with small market share? a. The firms with large market share do not understand the advertising-to-sales relationship. b. Certain industries have a practice of spending a low amount of dollars, relative to sales, on advertising. c. Beyond a certain volume of promotion, diminishing returns set in. d. There is no minimum level of exposure for advertising to have an effect on sales. ANS: C There is a saturation point for advertising. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 436

7. What does the advertising response function help marketers do? a. use their advertising budgets wisely b. determine the reach and frequency of specific media c. create ads that will be noticed by consumers each time the ad runs d. select an executional appeal appropriate to the product being advertised ANS: A The advertising response function is a phenomenon in which spending for advertising and sales promotion increases sales or market share up to a certain level but then produces diminishing results. PTS: 1 OBJ: 1

14-2

DIF: Comprehension BLM: Higher order

REF: p. 436

8. Why do companies with new brands that have a small market share tend to spend proportionately more for advertising and sales promotions compared to those with large market share for existing products? a. as a result of experiential marketing research b. to create the appropriate level of institutional advertising c. to prevent product cannibalization d. to achieve a certain minimum level of exposure to measurably affect purchase habits ANS: D There are two reasons that companies with new brands with small market share tend to spend proportionately more for advertising and sales promotions compared to those with existing products and large market share. The first reason is in response to the advertising response function. The second reason is to create product awareness in the minds of its target audience. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 436

9. When The Home Depot introduced its Expo Design retailing concept, it spent several billion dollars on advertising and other promotions and successfully boosted its market share. As an advertising consultant, what would you advise The Home Depot to do? a. shift the budget dollars from advertising to sales promotion and personal selling due to a change in the product life-cycle stage b. focus on maintaining market share and spend proportionately less on advertising because additional expenditures would reap diminishing benefits c. maintain the current advertising budget and continue to focus on brand awareness and market share gains d. slowly increase the amount spent on advertising and promotion to offset competitive advertisements ANS: B The advertising response function shows that beyond a certain level of spending for advertising and sales promotion, diminishing returns set in. As a mature, successful company, The Home Depot can choose to spend only as much as needed to maintain market share. PTS: 1 DIF: Application BLM: Higher order

REF: p. 436

OBJ: 1

10. How does advertising affect consumers? a. It changes negative attitudes to positive ones. b. It makes people buy things they do not want. c. It changes cultural practices and conventions. d. It manipulates society against its will. ANS: A Advertising can affect attitudes but cannot alter values or force people to do things they do not want to do or believe are wrong. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 437

14-3

11. People who drink Cheerwine (a cherry-flavored cola) are extremely loyal to this product that is primarily found in the Maritimes. How would increased advertising of Cheerwine affect extremely brand loyal users of Cheerwine? a. The advertising could cause the loyal Cheerwine users to buy more. b. The advertising could encourage the loyal Cheerwine users to try other brands. c. The advertising would have no effect because loyal users of Cheerwine have a neutral frame of reference. d. The advertising could create a positive frame of reference for the loyal Cheerwine users. ANS: A Increased advertising will increase sales to brand-loyal consumers who already have a positive frame of reference for the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 437

OBJ: 1

12. About how much TV per week do Canadians watch, on average a. 4 hours b. 21 hours c. 11 hours d. 41 hours ANS: B REF: p. 437

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

13. Amway runs advertisements that show how people who sell Amway products are involved in helping their communities through tutoring students and cleaning up the environment. These ads are examples of what type of advertising? a. product b. institutional c. comparative d. pioneering ANS: B Institutional advertising is a form of advertising designed to enhance a company’s image rather than promote a particular product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 439

OBJ: 2

14. What type of advertising is designed to enhance a company’s image rather than promote a particular product? a. publicity b. image c. pioneering d. institutional ANS: D OBJ: 2

14-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 439

15. DuPont has an advertisement that shows police officers describing how they were shot at close range in the line of duty. The advertisement explains that the lives of these public servants were saved by Kevlar bullet-proof vests, and that Kevlar was invented by DuPont. This is an example of what type of advertising? a. image b. pioneering c. attribute d. institutional ANS: D Institutional advertising is designed to enhance the image of the company and asks for no action except maintaining a favourable attitude toward the advertiser and its goods and services. PTS: 1 DIF: Application BLM: Higher order

REF: p. 439

OBJ: 2

16. A unique form of institutional advertising is a means for corporations to express their viewpoints on various controversial issues. What is it? a. image advertising b. persuasive advertising c. comparative advertising d. advocacy advertising ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 439

17. Unlike advertising that establishes or maintains a company’s identity, what touts the benefits of a specific good or service? a. image advertising b. selective advertising c. product advertising d. advocacy advertising ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 439

18. Fujitsu runs magazine advertisements that encourage purchase of its tablet-size PC. This is an example of what type of advertising? a. product b. advocacy c. pioneering d. comparative ANS: A Product advertising touts the benefits of a specific product or service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 439

OBJ: 2

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19. What type of advertising is used to stimulate demand for a new product or product category and is heavily utilized during the introductory stage of the product life cycle? a. innovative b. comparative c. focused d. pioneering ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 439

20. One of the problems with using aluminum foil to line casserole dishes is that it sticks to the food. Reynolds Wrap has developed Release nonstick aluminum foil. Its advertising campaign for the new product describes how the new foil is superior to existing foils. What type of advertising is Reynolds Wrap using to promote Release? a. pioneering b. focused c. innovative d. introductory ANS: A Pioneering advertising is heavily utilized during the introductory stage of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 439

OBJ: 2

21. Hill’s Science Diet dog food has been available at pet stores and veterinary clinics for years. The manufacturer of Hill’s recently developed Hill’s Science Diet for dogs with sensitive skin. This product differs from the company’s previous product offerings because it produces healthy skin and shiny coats. Hill’s other dog food was not designed for dogs with sensitive skin. What type of advertising should be used for the new Hill’s Science Diet for dogs with sensitive skin? a. innovative b. promotional c. introductory d. pioneering ANS: D Pioneering advertising is intended to stimulate demand for a new product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 439

OBJ: 2

22. The goal of this type of advertising is to influence demand for a specific brand of good or service and is less informational and more emotional. The emphasis is on brand name, recall, and favourable brand attitude. What advertising is being described? a. competitive b. pioneering c. comparative d. institutional ANS: A OBJ: 2

14-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 440

23. What is comparative advertising? a. It compares one or more competing attributes with one or more specific attributes b. It is like a shotgun in that it compares multiple features of two products. c. It is like a rifle in that it compares only a single benefit or advantage. d. It is like a mirror because it compares all negative and positive features of both products. ANS: A Comparative advertising compares one or more competing attributes one or more specific attributes. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 440

24. Procter & Gamble’s ads for Crest White Strips emphasize the brand name and how effectively it whitens teeth. The ads show demonstrations of how the strips can be worn at any time of the day—even at work. This is an example of what type of advertising? a. comparative b. competitive c. institutional d. pioneering ANS: B The goal of competitive advertising is to influence demand for a specific brand of good or service. It is less informational and more emotional. The emphasis is on brand name, recall and favourable brand attitude. PTS: 1 DIF: Application BLM: Higher order

REF: p. 440

OBJ: 2

25. Which type of advertising compares two or more specifically named or present competing brands on one or more specific attributes? a. contrasting b. superlative c. pioneering d. comparative ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 440

14-7

26. Pepsi’s advertising campaign that depicts people who mistakenly drink Coke as suddenly living a boring lifestyle, acting “square,” or singing mellow, old songs, is an example of what type of advertising? a. comparative b. image c. pioneering d. institutional ANS: A This comparative advertising names and shows Coke and contrasts it to the positive results of drinking Pepsi. PTS: 1 DIF: Application BLM: Higher order

REF: p. 440

OBJ: 2

27. What prohibits advertisers from falsely describing competitors’ products and allows competitors to sue if ads show their products or brand names in an incorrect or false manner? a. Competition Act b. Better Business Bureau c. Truth in Advertising Act d. Advertising Standards Council ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 440

28. Which type of advertising is usually employed when a new product enters a marketplace that is occupied by strong existing products? a. competitive b. pioneering c. reminder d. comparative ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 440

29. According to the text, which of the following statements about comparative advertising is true? a. Comparative advertising is highly regulated and is illegal in certain countries. b. Direct comparative advertisements will not decrease purchase intentions for established brands even though consumer awareness of new ones is increased. c. Comparative advertising for a new brand has a negative impact on purchase intentions if a brand with high credibility is the comparison product. d. Canada has no federal law that has any regulatory power over comparative advertising. ANS: A When comparative ads are personally relevant and a brand with high credibility is the comparison product, comparative advertising for a new brand has a more positive effect on purchase intentions. PTS: 1 OBJ: 2

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DIF: Comprehension BLM: Higher order

REF: p. 440

30. Those expensive Coke television ads featuring computer-generated images are primarily a type of which type of advertising? a. persuasive b. competitive c. comparative d. reminder ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 440

31. Because the ads imply that the Kraft crackers are superior to the Sunshine brand cheese crackers, what are ads showing consumers preferring Kraft Cheese Nips to Sunshine Cheezits? a. comparative advertising b. cooperative advertising c. advocacy advertising d. differential advertising ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 440

32. Which of the following BEST describes an advertising campaign? a. It extends for a defined period of time. b. It rarely has a specific budget. c. It starts with determining which media will be used. d. It may contain a wide variety of themes and slogans. ANS: A The advertising campaign is a series of related advertisements that focus on a common theme, slogan, and set of advertising appeals, and extend for a defined period of time. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 441

33. What is a specific communication task that should be accomplished for a specified target audience during a specified period of time? a. an advertising life span b. an advertising objective c. a marketing mix d. a promotional mix ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 441

34. According to the text, what is one method used for setting advertising objectives? a. percentage of sales b. contribution margin c. objective and task d. the DAGMAR approach ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 442

14-9

35. What is the first step in the advertising campaign decision process? a. Make creative decisions. b. Develop advertising copy. c. Evaluate the campaign. d. Determine campaign objectives. ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 442

36. What is DAGMAR an acronym for? a. designing advertising with market research b. defining and achieving goals means advertising reach c. developing aggressive growth markets and revenues d. defining advertising goals for measured advertising results ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 442

37. When the conservative Royal Bank decided to hire Campbell & Cook advertising agency to launch a new advertising campaign, what was the agency’s first step? a. See if sales promotion was superior to other tools within the promotion mix. b. Decide what executional style to use in the ads. c. Determine that the goal of the ads was to emphasize the bank’s customer service. d. Set its marketing budget. ANS: C The first step in any advertising campaign is to set advertising objectives. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 442

38. The new Hydrience hair colour advertising campaign encourages people to “treat their hair to lush, radiant colour.” What is the advertising focusing on? a. the product b. a product benefit c. product implementation d. creating product loyalty ANS: B The ad answers the customer’s question, “What’s in it for me?” PTS: 1 DIF: Application BLM: Higher order

14-10

REF: p. 442

OBJ: 3

39. A newspaper ad for General Mills cereal highlights its Box Tops for Education program in which General Mills donates cash to schools when the schools redeem box tops off General Mills cereal. What does this ad focus on? a. a product mission b. a product benefit c. a product attribute d. creating product loyalty ANS: B The ad answers the customer’s question, “What’s in it for me?” PTS: 1 DIF: Application BLM: Higher order

REF: p. 442

OBJ: 3

40. The ad reads, “Dove brand beauty bars are 1/4 moisturizing lotion.” What is this an example of? a. a loyalty reward b. a product attribute c. a product benefit d. production implementation ANS: B The contents of the soap are an attribute. PTS: 1 DIF: Application BLM: Higher order

REF: p. 442

OBJ: 3

41. The new advertisements for Stouffer’s Skillet Sensations meals focus on the fact the easy-to-prepare meal contains 50 percent more chicken than it originally did. What does this advertising highlight? a. the creation of brand loyalty b. a product benefit c. how negative consumers’ attitudes are modified d. a product attribute ANS: D The increased chicken content conveys product attributes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 442

OBJ: 3

42. When making creative decisions for the advertising campaign, the advertising manager may consider all of the following EXCEPT which one? a. identification of the product’s benefits b. the selection of advertising objectives c. the selection of a unique selling proposition d. how to develop advertising appeals ANS: B Determining advertising objectives must be done before creative decisions are made. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 442

14-11

43. In advertising, what is the goal? a. to sell the product’s characteristics, not its appeals b. to sell the product’s competitive edge, not its virtues c. to sell the product’s differential advantage, not its properties d. to sell the product’s benefits, not its attributes ANS: D A well-known rule of thumb in advertising is “Sell the sizzle, not the steak.” PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 442

44. You are the advertising campaign manager for Health Express, a new fast-food restaurant that caters to the health-conscious. Which of the following messages would be LEAST effective in communicating product benefits? a. Eating at Health Express will make you healthier. b. Health Express has hamburgers made from lean buffalo meat. c. Even your children will love Health Express’s baked fries. d. Health Express allows you to eat a quick, nutritious meal. ANS: B Lean buffalo meat is an attribute. PTS: 1 DIF: Application BLM: Higher order

REF: p. 442

OBJ: 3

45. Which of the following identifies a reason for a person to buy a product? a. an advertising execution b. an advertising profile c. an advertising format d. an advertising appeal ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 443

46. The slogan for Lawry’s meat marinades is “Always Tender. Always Juicy. Always Easy.” This slogan, which describes meat after it has been cooked using the marinade, describes which of the following? a. the product’s promotional mix b. the product’s advertising objective c. the product’s unique selling proposition d. the product’s basis for comparative advertising ANS: C OBJ: 3

14-12

PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

47. Which of the following BEST describes an effective advertising appeal? a. It must make a positive impression on the target market. b. It must be similar to its competitors’ advertising appeals. c. It must be familiar. d. It must be inexpensive. ANS: A An effective advertising appeal must be believable, unique, and differ from competitors. Cost is not a concern when selecting ad appeals. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 443

48. Ads for M&M candy that prominently feature the M&M candies in real-life situations are using which type of appeal? a. mood or image b. slice of life c. demonstration d. fun and pleasure ANS: D All except alternative c are executional styles. See Exhibits 14.2 and 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

49. The dominant advertising appeal selected for the campaign will become which of the following? a. the media profile b. the basis for comparative advertising c. the unique selling proposition d. the decision factor in media selection ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 443

50. In the past, Miller Lite Beer relied on the slogan “Tastes great, less filling” to create which of the following? a. the company’s unique selling proposition b. the company’s basis for identification c. the company’s promotional mix d. the company’s differential attribute ANS: A This slogan is so strongly associated with Miller Lite that it creates the beer’s unique selling proposition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

14-13

51. An ad for applesauce cups describes how the product provides 100 percent of your daily vitamin C in every cup. What kind of an advertising appeal is this ad using? a. vanity and egotism b. profit c. health d. admiration ANS: C See Exhibit 14.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

52. An ad for an RBC MasterCard offered zero percent interest on any balance transferred from another card by September 1, as well as no annual fee. What kind of an advertising appeal is this ad using? a. admiration b. profit c. environmentally consciousness d. vanity and egotism ANS: B See Exhibit 14.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

53. An ad for bottled water shows why and how the bottler supports the reforestation of forests. What kind of an advertising appeal is this ad using? a. environmentally consciousness b. concern c. health d. admiration ANS: A See Exhibit 14.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

54. An ad for Kraft Easy Mac, six microwaveable snack packets of macaroni and cheese, asks, “Need a snack?” and responds, “Snack the Mac.” What kind of an advertising appeal is this ad using? a. admiration b. convenience c. profit d. taste ANS: B See Exhibit 14.2. PTS: 1 DIF: Application BLM: Higher order 14-14

REF: p. 443

OBJ: 3

55. Which of the following is the way an advertisement portrays its information? a. appeal formation b. focus selection c. benefit determination d. message execution ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 444

56. The ads for Advantage flea and tick control show well-loved pets miserably scratching. With one application of Advantage, the pets are happy and doing what they do best—providing pleasure for their owners. What type of executional style do these ads use? a. scientific b. mood or image c. demonstration d. lifestyle ANS: C This ad shows consumers the expected benefits of using Advantage. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

57. An RBC ad shows a woman who has just filled her bird feeder, only to have squirrels steal the feed. The theme of the ad is that many investment banks can be like squirrels, eager to dip into a customer’s funds instead of providing good service. Which executional style is being used in this ad? a. mood or image b. fantasy c. slice of life d. demonstration ANS: C This ad depicts people in normal settings. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

58. A newspaper ad for Hill’s Science Diet dog food shows a man joyfully playing with his two very healthy looking golden retrievers. Which executional style is being used in this ad? a. testimonial b. demonstration c. slice of life d. mood or image ANS: C This ad depicts people in normal settings. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

14-15

59. An ad for Lake of Bays deli cheese shows someone’s hands building a sandwich using generous portions of Land of Bays brand cheese. Which executional style is being used in this ad? a. slice of life b. fantasy c. mood or image d. demonstration ANS: D See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

60. A magazine ad for Baker’s chocolate shows a picture of a luscious chocolate cookie and is headlined, “Love, cleverly disguised as chocolate.” Which executional style is being used in this ad? a. fantasy b. demonstration c. humorous d. scientific ANS: C The ad is intended as gentle humour. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

61. Ads for General Foods International Coffees all feature the slogan, “It stirs the soul.” Given this information and the fact that the ads feature flowers, soft lights, and romantic settings, you know that these ads use which type of executional style? a. demonstration b. scientific c. mood d. lifestyle ANS: C The ads build a mood around the coffee. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

14-16

REF: p. 444

OBJ: 3

62. In an advertisement for Dow bathroom cleaner, animated, talking scrubbing bubbles are used to show how hard the bubbles work to clean. The lively scrubbing bubbles appear in all advertisements for this product and are depicted on the packaging. This is an example of what type of executional style? a. slice of life b. fantasy c. product symbol d. spokesperson ANS: C A product symbol (such as the animated scrubbing bubbles) is one executional style that uses a character to represent the product. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

63. In an advertisement for Planters peanuts and trail mix, a peanut wearing a monocle and a top hat and called Mr. Peanut represents the product quality. Mr. Peanut appears in all advertisements for Planters. This is an example of how a company can use what type of executional style? a. lifestyle b. fantasy c. product symbol d. spokesperson ANS: C Message execution is the development of how the advertisement will be portrayed, and a product symbol (such as Mr. Peanut) is one executional style that uses a character to represent the product. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

64. An ad for the General Electric Advantium microwave shows people rushing to get from one place to another and has the headline, “If your life moves this fast, maybe your oven should too.” According to the ad, even though it seems that there never is enough time to cook, this microwave will help you find the time to prepare home-cooked meals. This is an example of the use of which executional style? a. lifestyle b. mood c. demonstration d. humorous ANS: A This ad shows how well the product can fit in with the consumer’s lifestyle. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 444

OBJ: 3

14-17

65. According to the text, which of the following statements about postcampaign evaluation is true? a. Testing ad effectiveness can be done either before or after the campaign. b. Most advertising campaigns ask for action instead of creating an image for the product c. Evaluating an advertising campaign can be the least demanding task facing advertisers. d. Even if an ad campaign has been particularly successful, advertisers will not typically conduct a postcampaign evaluation. ANS: A REF: p. 446

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

66. According to the text, which of the following statements about developing an advertising campaign is true? a. Advertisers use DAGMAR to determine the product’s appeal. b. The product’s unique selling proposition is identified early so that advertising objectives can be efficiently set. c. In developing an advertising campaign, it is more important for the advertiser to identify the attributes than the benefits. d. Evaluating results of an advertising campaign helps marketers to adjust objectives for future campaigns. ANS: D DAGMAR is used to set advertising objectives. The last stage of the process is campaign evaluation. The unique selling proposition is identified after benefits (not attributes) are defined. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 446

67. Creative work in an advertising campaign cannot be completed without knowing which message channel will be used to convey the message to the target market. What is the message channel? a. the appeal b. the product network c. the medium d. the executor ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 447

68. Which of the following is the series of decisions advertisers make regarding the selection and use of media that will optimally and cost-effectively communicate the message to the target audience? a. media planning b. promotional implementation c. media reach and frequency strategy d. marketing mix planning ANS: A OBJ: 4

14-18

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 447

69. According to the text, which of the following statements about the selection of media for advertising is true? a. Creative work is finished before the media are selected. b. The appeal and executional style of the ad strongly affect the media selection. c. The media selection is typically unrelated to the advertising objectives. d. Creative planning for an ad that goes on a billboard is the same as the planning for an ad that runs on television. ANS: B Advertising objectives strongly affect the media that are selected, as does the creative work, which cannot be finished until the media selection is made. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 447

70. Which advertising has the advantages of being both timely and geographically flexible? a. newspaper b. magazine c. television d. outdoor ANS: A Newspapers are often used by local retailers because they are current and flexible and directed to a local but wide market. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 447

71. An ad for Calvin Klein jeans contained information about The Bay department stores where the jeans could be purchased. This ad was most likely an example of what type of advertising? a. advocacy b. strategic c. institutional d. cooperative ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 448

72. Which advertising is an arrangement under which a manufacturer pays a percentage of the advertising cost for an ad that a retailer places for the manufacturer’s brand? a. one-to-one b. comparative c. institutional d. cooperative ANS: D OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 448

14-19

73. What is one reason a retailer might avoid the use of newspaper advertising? a. little demographic selectivity b. high individual market coverage c. year-round readership d. absence of geographic selectivity ANS: A See Exhibit 14.6. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 448

74. The advantages of immediacy, good local market coverage, geographic flexibility, and short lead time apply best to which media type? a. magazines b. television c. newspapers d. radio ANS: C REF: p. 448

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

75. The advantages of demographic and local market selectivity, high pass-along rate, and long advertising life belong to which media type? a. magazines b. television c. outdoor media d. newspapers ANS: A REF: p. 448

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

76. What is one advantage of television advertising? a. ability to reach wide and diverse audience b. commercial clutter c. long lead time d. low costs ANS: A See Exhibit 14.6. PTS: 1 OBJ: 4

14-20

DIF: Comprehension BLM: Higher order

REF: p. 449

77. Which of the following types of advertising has the advantage of its local market selectivity? a. outdoor b. magazine c. newspaper d. radio ANS: B Magazines are available for almost every market segment and can be highly specialized PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 448

78. Which advertising medium has the lowest rates? a. magazines b. direct mail c. outdoor d. radio ANS: D Radio rates are the lowest and most negotiable of any medium. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 448

79. Which of the following is an advantage offered by radio to its advertisers? a. ability to reach a wide and diverse audience b. relative low cost c. billions of listeners d. short lead time ANS: B Radio stations are often local and do not reach the widest audiences. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 448

80. What is direct-response advertising in the form of a 30-minute advertisement that resembles a TV talk show? a. an infomercial b. an extended sales pitch c. an ad expander d. a prolonged advertisement ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 449

14-21

81. The Flow-Bee hair cutting vacuum cleaner attachment is shown during a half-hour television spot. The product is demonstrated on volunteer studio audience members, testimonials are given by Flow-Bee owners, and viewers are encouraged to order the product through a toll-free telephone number. Which form of direct-response advertising is Flow-Bee using? a. mega-mercial b. prolonged ad c. infomercial d. extended sales pitch ANS: C Direct-response advertising in the form of a 30-minute advertisement that resembles a TV talk show is called an infomercial. PTS: 1 DIF: Application BLM: Higher order

REF: p. 449

OBJ: 4

82. Which of the following BEST describes outdoor advertising? a. It can be used to reach a narrow, selective target market. b. It is a flexible low-cost medium that can take many forms. c. It is not affected by noise. d. It is often used to sell specialty products. ANS: B Outdoor advertising is a low-cost medium and reaches a broad and varied audience, but may be subject to many distractions (noise). It usually advertises convenience and shopping products. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 450

83. According to the text, which of the following statements about Internet advertising is true? a. It is easy to measure ad effectiveness with this medium. b. It is a medium to which all consumers have access. c. It is the fastest growing of all the advertising media. d. By its very nature, this medium reaches a broad, diverse audience. ANS: C See Exhibit 14.6. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 451

84. Advertisers categorize ads inside grocery stores and ads at gas station pumps as examples of which of the following? a. direct advertising b. distribution channels for ads c. outdoor advertising d. alternative media ANS: D OBJ: 4

14-22

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 452

85. Why are advertisers looking to alternative media to advertise their products? a. to minimize problems associated with reach b. to maximize noise levels c. to cut through the clutter d. to maximize advertising exposure ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 452

86. When the company that produces Testamints candy, the candy that comes with spiritual messages on each piece, decided how much space and/or time would be placed in each advertising medium that the company wants to use, what was the candy manufacturer determining? a. its advertising campaign b. its marketing mix c. its media mix d. its promotional plan ANS: C The media mix is the combination of media to be used and the volume of advertising that will be conducted among the various media vehicles. PTS: 1 DIF: Application BLM: Higher order

REF: p. 454

OBJ: 4

87. Which of the following is usually used as a basis used for making media mix decisions? a. audience income b. cost per thousand c. clutter d. media schedule ANS: B The media schedule will be the result after the media mix decisions are made, based on the other factors. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 454

14-23

88. The manufacturer of Testamints candy, the candy that comes with spiritual messages on each piece, estimates the product’s new advertising campaign will reach 1,750,000 people and will cost $400,000 if the company uses radio and newspaper, and $6.5 million if it uses television. What does the company’s decision seem to rest on? a. noise level b. geographic selectivity c. flexibility d. cost per contact ANS: D Cost per contact is the cost of reaching one member of the market. Comparing the cost of contacting the same amount of people using different media mixes is a common aid in selecting media. PTS: 1 DIF: Application BLM: Higher order

REF: p. 454

OBJ: 4

89. Which of the following enables advertisers to compare media types’ efficiency in reaching their target markets? a. focus group research b. frequency c. reach d. cost per contact ANS: D REF: p. 454

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

90. Which of the following measures the number of different target consumers who are exposed to a commercial at least once? a. cost per contact b. reach c. noise level d. frequency ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 454

91. This measure of the number of times an individual is exposed to a brand message is used to measure the intensity of a specific medium’s coverage. What is it? a. synchronization b. frequency c. cost per contact d. media scheduling ANS: B OBJ: 4

14-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 454

92. What is a medium’s ability to reach a precisely defined market? a. its geographic selectivity b. its market singularity c. its audience selectivity d. its life span ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 454

93. Media vehicles such as Time or Newsweek magazines appeal to a wide cross-section of the population. In contrast, what do BMW World and Fitness magazines have high levels of? a. audience selectivity b. market singularity c. flexibility d. geographic selectivity ANS: A A medium’s ability to reach a precisely defined market is audience selectivity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 454

OBJ: 4

94. After a visit to Athens, the International Olympic Committee representative said, “If you look around Athens, it is one of the most visually polluted cities in terms of outdoor advertising in all of Europe.” In terms of media selections, this condition means that outdoor advertising in Athens has which of the following? a. no geographic selectivity b. high noise levels c. limited flexibility d. minimum reach ANS: B There are lots of distractions to the target audience. PTS: 1 DIF: Application BLM: Higher order

REF: p. 455

OBJ: 4

95. Prices on items sold by supermarkets change frequently, and supermarkets often offer special sales to match or beat the prices of their competitors. Therefore, which of the following is a major consideration when a supermarket selects an advertising vehicle? a. audience duplication b. noise level c. cost per contact d. flexibility ANS: D Flexibility of the medium refers to the ability to change the message to fit changing market conditions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 455

OBJ: 4

14-25

96. Billboard advertisements often have to compete for a driver’s attention with traffic, passengers, radio, or other billboards. How would billboard advertising be described? a. as having a high noise level b. as having a low noise level c. as being a great channel for informative ads d. as the most flexible advertising medium ANS: A Noise level is the amount of distractions—other advertisements, people, competing sounds in the environment or news stories—involved with a type of medium. Outdoor advertising such as billboards suffers from a great deal of competing noise. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 455

97. Advertisers are often concerned with the noise level in a medium. Which medium is assumed to have the lowest noise level? a. radio b. direct mail c. newspaper d. magazines ANS: B Noise level is the amount of distractions—other advertisements, people, competing sounds in the environment or news stories—involved with a type of medium. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 455

98. Because Mohawk Industries, manufacturer of carpet, hardwood, and laminated wood flooring, wants to spend its promotional budget on advertisements that will have a long life span, what type of advertising should it use? a. television b. magazine c. creative d. radio ANS: B Some media such as magazines have a long life span with the consumer, and advertisements may be seen repeatedly. Ads in other media such as radio and television are gone instantly. PTS: 1 DIF: Application BLM: Higher order

14-26

REF: p. 455

OBJ: 4

99. Advertising researchers today are discussing the qualitative factors that should be present during media selection. Which of the following is an example of one of those qualitative factors for placing television advertising? a. whether the medium is satellite- or cable-based b. the kind of noise filtration system used by the network c. the clarity of the picture d. how well the program is liked by potential consumers ANS: D The text has a lengthy discussion on how consumer behaviour should be considered when making media selections. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 456

100. Which type of media schedule is used for products in the latter stages of the product life cycle that are advertised on a reminder basis? a. unremitting b. continuous c. trailing d. intermittent ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 456

101. Which of the following media schedules can an advertiser use to schedule ads heavily every other month to achieve a greater impact with an increased frequency and reach at those times? a. periodic b. alternating c. flighted d. intermittent ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 456

102. Which type of media schedule combines continuous scheduling throughout the year with a flighted schedule during the best sales periods? a. unremitting b. vibrating c. pulsing d. bursting ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 456

103. Which of the following products is most likely to use a pulsing media schedule? a. bookkeeping services b. light bulbs c. gasoline d. mystery novels ANS: A REF: p. 456

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order 14-27

104. Which of the following products is most likely to have a seasonal media schedule? a. DVD players b. snow blowers c. paper clips d. airplane tickets ANS: B Seasonal products such as snow blowers are not advertised year-round because they are not used year-round. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 456

105. Which of the following designates the vehicles, specific publications or programs, and insertion dates of advertising? a. a promotion strategy b. an advertising plan c. a media schedule d. a promotional profile ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 456

106. Meek’s Hunting Emporium is a retail store that carries all the products hunters need or think they need. It has set up an advertising plan that allows it to advertise every day prior to the opening of quail-, deer-, and turkey-hunting seasons on four local radio stations, as well as in the local newspapers. What is this an example of? a. a frequency timetable b. a message execution plan c. a media profile d. a media schedule ANS: D The media schedule designates when and where advertising will appear. PTS: 1 DIF: Application BLM: Higher order

REF: p. 456

OBJ: 4

107. Budweiser uses reminder advertising that runs steadily all year. This is an example of which type of media schedule? a. flighted b. seasonal c. consecutive d. continuous ANS: D A continuous advertising schedule allows advertising to run steadily throughout the advertising period. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 456

OBJ: 4

108. Knight’s Dinner Theatre runs ads in the entertainment section of the local newspaper the first weekend of every month. What type of scheduling plan is this? a. continuous b. flighted c. bursting d. seasonal ANS: B Flighted media scheduling schedules ads heavily for a period, then drops them, and then repeats them. PTS: 1 DIF: Application BLM: Higher order

REF: p. 456

OBJ: 4

109. Mother Goose is the name of a retail store that caters to preteens. It advertises regularly both on radio and in the daily newspaper. The month prior to the beginning of each new school year, the store buys extra advertising space and time. What type of scheduling plan is this? a. seasonal b. interval c. replication d. pulsing ANS: D Pulsing combines continuous scheduling with extra “pulses” during heavy sale periods. PTS: 1 DIF: Application BLM: Higher order

REF: p. 456

OBJ: 4

110. Products such as surfboards, swimsuits, lawn mowers, allergy medication, and flower seeds are most likely to be advertised with which type of media schedule? a. consecutive b. flighted c. pulsing d. seasonal ANS: D Products that are used more during certain times of the year tend to follow a seasonal strategy. PTS: 1 DIF: Application BLM: Higher order

REF: p. 456

OBJ: 4

111. What is the promotional mix element that evaluates public attitudes, identifies issues that may elicit public concern, and executes programs to gain public understanding and acceptance? a. mass communications b. public relations c. personal selling d. sales promotion ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 457

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112. A newspaper article on how the relocation of the new Korean-owned plastics manufacturing plant will affect the environment of Guelph, Ontario, is an example of which of the following? a. publicity b. free advertising c. newspaper advertising d. a sales promotion ANS: A Publicity is the effort to capture media attention. PTS: 1 DIF: Application BLM: Higher order

REF: p. 458

OBJ: 5

113. A news story on why Air Canada pilots refuse to work overtime hours and are causing flight cancellations and delays is an example of which of the following? a. a sales promotion b. free advertising c. newspaper advertising d. publicity ANS: D Publicity can be either positive or negative. PTS: 1 DIF: Application BLM: Higher order

REF: p. 458

OBJ: 5

114. Lance Armstrong’s multiple wins in the Tour de France created which of the following for the bicycle race? a. personal selling opportunities b. free positive advertising c. numerous sales promotion opportunities d. a great deal of publicity ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 458

115. Which of the following refers to efforts made to influence government officials to promote or defeat legislation? a. press relations b. lobbying c. public affairs d. corporate communication ANS: B OBJ: 5

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PTS: 1 BLM: Remember

DIF: Definition

REF: p. 458

116. Tools for the public relations manager include all of the following EXCEPT which one? a. product publicity b. press relations c. sales promotions d. corporate communications ANS: C Sales promotions are not part of public relations. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 458

117. When Sara Lee developed crustless bread, it probably planned to rely on which of the following to gain exposure for the bread and to explain how the convenience of the product justifies its higher price. (Sara Lee could not have done this if the product had not been new and innovative.) a. personal selling b. sales promotion c. publicity d. advertising ANS: C Publicity (a form of public relations) for new, innovative products can result in more exposure than conventional advertising and other promotional tools. PTS: 1 DIF: Application BLM: Higher order

REF: p. 458

OBJ: 5

118. BMW has paid motion picture producers for the rights to feature some of its automobiles in mainstream Hollywood films such as The Bourne Ultimatum. What is this known as? a. event sponsorship b. product placement c. new product publicity d. subliminal advertising ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 459

119. The appearance of a box of Cheerios cereal in the children’s movie Matilda is an example of which of the following for General Mills, its manufacturer? a. paid-for public relations b. product placement c. a sales promotion d. advertising ANS: B Product placement is a public relations tool and is used to create product exposure. PTS: 1 DIF: Application BLM: Higher order

REF: p. 459

OBJ: 5

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120. On an episode of ER, one of the doctors asked a nurse for a Nitrolingual Pumpspray, which is used for acute relief of chest pain caused by angina. The free appearance of the product on the show gave its small manufacturer some needed publicity. This was an example of how positive publicity can result from which of the following? a. show sponsorship b. product placement c. product promotion d. product advertising ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 459

121. General Mills put together a brochure titled, “A Guide to Good Food, Good Health,” which it made available to elementary teachers at the beginning of a school year so teachers could use the brochures to explain to children why it is important to eat right. This is an example of which public relations tool? a. product placement b. crisis management c. event sponsorship d. consumer education ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 459

122. Many people have trouble defining the term “casual dress” when it comes to what is appropriate to wear to work. Levi Strauss & Co. put together a newsletter and a video, detailing what was suitable for casual work attire. Levi sent the video to human resources managers all over the country. What is this an example of? a. consumer education b. lobbying c. product placement d. issue sponsorship ANS: A Consumer education is a type of public relations in which the user benefits by educating the consumer to the usefulness of its products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 459

OBJ: 5

123. RC Cola put together a 25-market tour that included radio tie-ins, whitewater rafting, and skydiving to introduce its new Edge Maximum Power. (RC’s Maximum Edge Power is targeted to teens and contains ginseng, taurine, and caffeine.) This is an example of which public relations tool? a. consumer education b. event placement c. event sponsorship d. product placement ANS: C OBJ: 5

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 460

124. Coors Brewing Company obtained free press coverage by sponsoring the “Literacy. Pass It On Program,” which taught 20,000 women to read. What is this an example of? a. event sponsorship b. product placement c. issue sponsorship d. consumer education ANS: C This issue sponsorship was sufficiently newsworthy to get Coors free publicity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 460

OBJ: 5

125. Companies that show support in recycling efforts and other examples of green marketing through advertising are engaged in which of the following? a. event sponsorship b. issue sponsorship c. public relations profiling d. event publicity ANS: B Green marketing is an important way for companies to build loyalties by promoting a popular issue. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 460

126. Which of the following is used by public relations specialists to handle the effects of unfavourable publicity? a. message power b. media planning c. crisis management d. damage control ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 463

127. A newspaper article revealed that hazardous wastes buried in an on-site landfill at a paper manufacturer were leaking into the local water supply. Even though the company quickly stopped the leak and paid for an additional water purification system for the town, it still received some very negative publicity. What should the company have done? a. ignored the publicity and assumed it would go away b. begun a pulsing advertising campaign c. implemented its crisis management plan d. done nothing until the actual damage levels were determined ANS: C Crisis management is used to handle the effects of unfavourable publicity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 463

OBJ: 5

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Joe Average is “A-OK” with the Slate Mountain ski resort. Rather than try to keep up with big-budget competitors like Banff and Lake Louise, the southeastern B.C. resort has poured its meager marketing budget into a no-frills advertising approach to lure “real people” to its slopes. The advertising campaign has the catchy slogan, “You Don’t Have to Be Cool to Ski Slate.” “Movie Star,” the title of a full-page colour ad, features a Polaroid photo of a smiling, overweight, slightly geeky man in a neon orange ski suit. His skis aren’t new, his hat doesn’t match his outfit, and he is wearing goggles. This ad’s copy says “We are Slate, not Whistler. And this is John Taber—not someone the tabloids would follow to the slopes. You don’t need to be a celebrity to be treated like a star at Slate Mountain.” This year, public relations activities included passing out to news media plastic pocket protectors containing pens, a used pencil, and a comb bearing the message: “Slate Mountain—No. 1 in Grooming.” 128. Refer to Slate Mountain. Slate Mountain’s advertising slogan is most consistent with which major type of advertising? a. focused b. institutional c. competitive d. pioneering ANS: C Competitive advertising is designed to influence demand for a specific brand of good and is less informational and more emotional. The emphasis is on brand name, recall, and favourable brand attitude. PTS: 1 DIF: Application BLM: Higher order

REF: p. 440

OBJ: 2

129. Refer to Slate Mountain. The ad copy in the “Movie Star” print ad could be considered an example of which major type of advertising? a. comparative b. advocacy c. pioneering d. product ANS: A The ad copy mentions two specifically named competitive brands (Slate Mountain and Whistler) and compares them on one specific product attribute (type of skier who frequents the resort). PTS: 1 DIF: Application BLM: Higher order

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REF: p. 440

OBJ: 2

130. Refer to Slate Mountain. The “Movie Star” ad is only one of a series of ads that focus on a common theme, “You Don’t Have to Be Cool to Ski Slate.” The series of ads, taken together, represent which of the following? a. the advertising campaign b. the advertising mix c. the promotional plan d. the marketing mix ANS: A The advertising campaign is a series of related advertisements that focus on a common theme, slogan, and set of advertising appeals. PTS: 1 DIF: Application BLM: Higher order

REF: p. 441

OBJ: 3

131. Refer to Slate Mountain. Slate’s ads are designed to communicate with the “Average Joe” or the middle of the ski market. What is the specific communication task that should be accomplished for this target market during a specified period of time? a. a media profile b. a media schedule c. an advertising objective d. an advertising life span ANS: C An advertising objective is a specific communication task a campaign should accomplish for a specified target audience during a specified period of time. PTS: 1 DIF: Application BLM: Higher order

REF: p. 442

OBJ: 3

132. Refer to Slate Mountain. The Slate Mountain campaign tells skiers that they do not have to worry about how they look on the slopes. This is a specific reason given to the target audience for why they should choose Slate over other ski areas. What is this reason called? a. an advertising format b. a message execution c. an advertising objective d. an advertising appeal ANS: D An advertising appeal identifies a reason a person should purchase a product or service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

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133. Refer to Slate Mountain. The “Movie Star” ad discussed above is an example of which executional style? a. lifestyle b. slice of life c. scientific d. fantasy ANS: A The ad is representative of a lifestyle execution in that skiers do not have to worry about how they look on the slopes. They can be themselves. See Exhibit 14.3. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

Some years ago, Tambrands Inc., the beleaguered market leader of the $680 million tampon industry, tried to revive its sagging market share by targeting arch-rival Playtex Products Inc. Part of its strategy was to brag about the superiority of its cardboard applicators in its new Satin Touch product and to air audacious commercials in which it compared itself directly to Playtex’s plastic tampons. The ad campaign cost an estimated $12 million; though modest, it was the most Tambrands had ever spent on a new product. Tambrands’s original television commercials for Satin Touch featured a young woman wrinkling her nose and saying, “Plastic, who needs it?” The ad stresses that unlike plastic, cardboard is “flushable and biodegradable” and suggested that it’s more environmentally correct. Tambrands supported the campaign with a print ad and coupon for a free sample that carried the slogan, “A free offer isn’t the only reason to give up plastic.” 134. Refer to Tambrands Inc. The Satin Touch ad discussed above is an example of which major type of advertising? a. advocacy b. pioneering c. parity d. comprehensive ANS: B The ad is a pioneering ad because it is intended to stimulate demand for a new product. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 439

OBJ: 2

135. Refer to Tambrands Inc. The Satin Touch campaign gives the users a specific reason that they should purchase the product (the applicators are flushable and biodegradable). This reasoning is an example of which of the following? a. the advertising objective b. the advertising appeal c. the message execution d. the media profile ANS: B An advertising appeal identifies a reason a person should purchase a product or service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

136. Refer to Tambrands Inc. The Satin Touch advertising campaign is based on which type of advertising appeal? a. convenience b. admiration c. fun and pleasure d. fear ANS: A This is an example of convenience in that the applicators are flushable and biodegradable. See Exhibit 14.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

137. Refer to Tambrands Inc. When analyzing the introduction of the new campaign, Tambrands claimed the ad was seen by more than half of the nation’s teens and young female adults in one weekend. What does this refer to? a. the advertisement’s frequency b. the advertisement’s reach c. the advertisement’s cost per contact d. the advertisement’s media profile ANS: B Reach is the number of different target consumers who are exposed to a commercial at least once during a specific time period. PTS: 1 DIF: Application BLM: Higher order

REF: p. 454

OBJ: 4

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138. Refer to Tambrands Inc. The new, environmentally correct applicator won Tambrands a “Green Award” from the National Environmental Concern Organization. What does the winning of this award represent? a. media mixing b. publicity c. increased frequency d. free advertising ANS: B Publicity was garnered by this award. PTS: 1 DIF: Application BLM: Higher order

REF: p. 458

OBJ: 5

Betty and Orville LeBlanc recently opened LeBlanc’s Pecan Company retail store. In addition to shelled and unshelled pecans, the Alberta store sells pecan pies, tortes, fruitcakes, fudge, pralines, and chocolate pecan bark in addition to homemade pecan ice cream toppings and jams and jellies. At this time, there are no other stores of this type in the Calgary area. The LeBlancs are considering developing an advertising campaign for their store, focusing on its wide assortment of pecan-related products. Using the DAGMAR approach, Orville has drawn up a list of communication tasks the advertising must accomplish. The new ads feature Betty talking to customers about the store’s products. The ads have been placed on a local cable system. 139. Refer to LeBlanc’s Pecan Company. The new campaign for the store is designed to stimulate demand for the LeBlancs new store, given that the store is in the introductory stage of the product life cycle. What would the campaign be considered? a. pioneering b. exclusive c. open-ended d. comparative ANS: A The campaign is pioneering because it is designed to stimulate demand for a new store, given that the store is in the introductory stage of the product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 439

OBJ: 2

140. Refer to LeBlanc’s Pecan Company. The new LeBlanc’s Pecan Company advertisements focus on the wide assortment of products available at the LeBlanc’s store. What does this advertising highlight? a. changing a negative attitude b. market share c. a product attribute d. target markets ANS: C The wide assortment is a product attribute. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 442

OBJ: 3

141. Refer to LeBlanc’s Pecan Company. When Orville LeBlanc created the list of communication tasks the advertising must accomplish, what was he setting? a. his advertising life span b. his media schedule c. his advertising objectives d. his marketing mix ANS: C An advertising objective is a specific communication task that should be accomplished for a specified target market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 442

OBJ: 3

142. Refer to LeBlanc’s Pecan Company. The LeBlancs focused their campaign on reasons that customers should shop at their store. This is an example of what type of advertising? a. objective b. appeal c. format d. execution ANS: B An advertising appeal is a reason for a person to buy a product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

OBJ: 3

143. Refer to LeBlanc’s Pecan Company. If Orville LeBlanc is most interested in audience selectivity and production costs, he should select which of the following as the store’s primary advertising medium? a. outdoor b. magazine c. radio d. cable television ANS: C See Exhibit 14.6. PTS: 1 DIF: Application BLM: Higher order

REF: p. 448

OBJ: 4

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144. Refer to LeBlanc’s Pecan Company. A feature article in a Calgary newspaper describing LeBlanc’s Pecan Company store and what it sells would be an example of which of the following? a. product placement b. competitive advertising c. publicity d. newspaper advertising ANS: C Publicity is the effort to attract media attention. PTS: 1 DIF: Application BLM: Higher order

REF: p. 458

OBJ: 5

145. Refer to LeBlanc’s Pecan Company. When Orville LeBlanc decided which media he would use to optimally and cost-effectively reach the store’s target audience, what was he engaged in developing? a. a media plan b. an advertising campaign c. a marketing mix d. a promotional plan ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 447

Realemon juice relies on the slogan, “Fresh Lemon Taste Made Easy.” 146. Refer to Realemon. This slogan gives the juice which of the following? a. its unique selling proposition b. its basis for product identification c. its basis for comparative advertising d. its media profile ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 443

147. Refer to Realemon. What kind of an advertising appeal is this ad using? a. admiration b. convenience c. vanity and egotism d. mood ANS: B See Exhibit 14.2. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 443

OBJ: 3

TRUE/FALSE 1. Spending on advertising varies by industry. ANS: T REF: p. 436

PTS: 1 OBJ: 1

DIF: Comprehension

2. The advertising response function is a phenomenon in which increased spending for advertising and sales promotion increases sales or market share up to a certain level but then produces diminishing results. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 436

3. The goal of advertising is to change people’s values. ANS: F Advertising cannot change a person’s basic value system, moral code, or cultural influences. Advertising instead tries to change consumers’ attitudes about brands. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 436

4. Periodically, DuPont Industry runs ads describing the merits of LYCRA elastic fibres (a product DuPont produces) in clothing. Its ads are an example of institutional advertising. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 439

5. A small high-tech company has just launched a new writing pen that has a memory, much like a small computer. The advertising campaign focuses on the innovativeness of the new product. This is an example of pioneering advertising. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 439

6. Scripture Candy in Birmingham, Alabama, has just introduced lollipops with a message from the Bible on the front of each pop. Its ads focus on the spiritual advantage of eating its candy and showing others Christians are not afraid to show their beliefs. This is an example of pioneering advertising. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 439

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7. The advertisements for Torengo chips show how the leading brand of tortilla chips (Tostitos by Frito-Lay) contains broken chips, and all Torengo chips are uniform in size and shape. These ads are examples of contrasting advertising because they are showing how Torengo chips are superior to Tostitos. ANS: F Comparative advertising specifically compares two or more products. PTS: 1

DIF: Application

REF: p. 440

OBJ: 2

8. Unlike other types of advertising, a comparative advertising campaign can be readily globalized. ANS: F In many countries, the hard-sell tactics found in comparative advertising are illegal. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 440

9. The DAGMAR approach is one of the best methods for determining the most effective media schedules. ANS: F The DAGMAR approach is a method of setting advertising objectives. PTS: 1

DIF: Definition

REF: p. 442

OBJ: 3

10. A print ad depicts a picture of a frozen dessert accompanied by information about the dessert: “two servings, only 300 calories per serving, and no cholesterol.” This is an example of an advertisement selling the product’s benefits. ANS: F This ad sells the product’s attributes. PTS: 1

DIF: Application

REF: p. 442

OBJ: 3

11. An insurance company’s advertisement poses the question, “Will your family survive if you die uninsured?” This is an example of a health appeal. ANS: F This is an example of a fear appeal. See Exhibit 14.2. PTS: 1

DIF: Application

REF: p. 443

OBJ: 3

12. There are many types of microwave meals, but only Swanson makes one specifically for children. Its target market is the product’s unique selling proposition. ANS: T OBJ: 3

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PTS: 1

DIF: Application

REF: p. 443

13. Nabisco developed a “Stuck in the Middle” ad campaign for its Oreo cookies, which showed animated Oreos singing on a crowded bus. This is an example of a fun and pleasure appeal. ANS: F OBJ: 3

PTS: 1

DIF: Application

REF: p. 443

14. Testing the effectiveness of a media campaign can be done either before or after the campaign is run. ANS: T REF: p. 446

PTS: 1 OBJ: 3

DIF: Comprehension

15. The advantages of newspaper advertising are geographic flexibility and timeliness. ANS: T REF: p. 447

PTS: 1 OBJ: 4

DIF: Comprehension

16. R&B Industries has developed an inexpensive yet safe car seat for cats. The company doesn’t have much money for advertising and has decided to run one ad in one medium. Its best choice is an ad in a specialty magazine because this will reach its highly specialized target market ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 448

17. The manufacturer of the George Foreman grill has produced a 30-minute sales pitch in the form of a talk and demonstration show to be aired on local cable TV channels. This is an example of an infomercial. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 449

18. Researchers are unanimously convinced of the effectiveness of banner advertising on Internet websites. ANS: F The effectiveness of banner advertising is one hotly contested area of Internet advertising. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 451

19. The media mix determines how much of the advertising budget will be spent in each advertising media. ANS: F The media mix is the combination of media to be used for the promotional campaign. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 454

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20. NutriHealth makes vitamins and mineral supplements. It is determining whether to put its advertisements in newspapers or on television. Its primary concern is with how many people in its target market will be exposed to its ads. In other words, the company is concerned about frequency. ANS: F It is concerned about reach. PTS: 1

DIF: Application

REF: p. 454

OBJ: 4

21. A candy store runs newspaper advertisements only the week before holidays, such as Valentine’s Day, Easter, and Halloween. This is an example of a flighted schedule. ANS: F This is an example of a seasonal schedule. PTS: 1

DIF: Application

REF: p. 456

OBJ: 4

22. Publicity consists of programs developed by a company to capitalize on the factors that will enhance the firm’s image and minimize those that generate negative images. ANS: F The statement describes public relations. Publicity is the outcome of these public relations efforts. PTS: 1

DIF: Definition

REF: p. 457

OBJ: 5

23. Lobbying, product publicity, and crisis management are all functions of public relations tools. ANS: T REF: p. 457

PTS: 1 OBJ: 5

DIF: Comprehension

24. The sponsorship of NASCAR races is an example of a public relations activity. ANS: T Event sponsorship is a public relations tool. PTS: 1

DIF: Application

REF: p. 460

OBJ: 5

25. Crisis management should begin before a crisis occurs. ANS: T REF: p. 463

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PTS: 1 OBJ: 5

DIF: Comprehension

ESSAY 1. You have been invited to give a lecture to the local college business administration program about the advertising industry. What will you tell the students about the economics of advertising, including industry size, and top industry advertisers? ANS: Advertising spending increases annually though the industry itself is small. The industry employs approximately 54,000 people. The Canadian industry is composed of both Canadian firms and U.S. multinationals. In 2005, the Cossette Communications Group from Quebec was Canada’s largest advertising agency employer with 1,446 employees and total revenues of $143.4 million. Advertising expenditures vary by industry, with toys, book publishers, mail-order catalogue companies, educational services, food manufacturers, and soap makers having the highest advertising-to-sales ratios. PTS: 1

DIF: Application

REF: p. 436

OBJ: 1

2. Discuss how advertising affects the everyday life of consumers. Include a discussion of how frequently consumers are exposed to ads, how ads affect attitudes and values, how ads reinforce brand loyalty, and how ads influence the way consumers rank brand attributes. ANS: Advertising affects consumers’ lives and influences purchase situations because consumers are exposed to hundreds of ad messages daily. Although advertising cannot affect culturally rooted values, advertising can change attitudes. A positive attitude can lead to brand loyalty. Advertising can also affect the way consumers perceive brand attributes by providing attribute and benefit information to consumers. Consumers then make purchase choices according to the promoted attribute. PTS: 1

DIF: Application

REF: p. 437

OBJ: 1

3. Name and briefly define the two major types of advertising. ANS: Institutional advertising is used when the goal of the campaign is to build up the image of a product or service, the company, or the industry. Institutional advertising has several audiences, including the public, the investment community, customers, and employees. Advocacy advertising is a special form of institutional advertising that allows corporations to express viewpoints on controversial issues. Product advertising touts the benefits of a specific product or service. Product advertising can take three forms: pioneer advertising, competitive advertising, and comparative advertising. PTS: 1

DIF: Application

REF: p. 439

OBJ: 2

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4. What is institutional advertising? What are the audiences of this type of advertising? How does advocacy advertising differ from institutional advertising? ANS: Institutional advertising is used when the goal of the campaign is to build up the image of a product or service, the company, or the industry. Institutional advertising has four important audiences: (1) the public, which includes legislators, businesspeople, and opinion leaders; (2) the investment community, which mainly comprises stockholders; (3) the customers; and (4) the company’s employees. Advocacy advertising is a special form of institutional advertising that allows corporations to express viewpoints on controversial issues. Most advocacy campaigns react to unfair criticism or media attacks. Other campaigns may attempt to ward off impending regulatory threats. PTS: 1

DIF: Application

REF: p. 439

OBJ: 2

5. Name and briefly define three forms of product advertising. ANS: Product advertising touts the benefits of a specific product or service. It is used if the advertiser wishes to enhance the sales of a specific product, brand, or service. Product advertising can take three forms: pioneer advertising, competitive advertising, and comparative advertising. Pioneer advertising is intended to stimulate primary demand for a new product or product category. It is used during the introductory stage of the product life cycle to offer information about product class benefits. Competitive advertising is used to influence demand for a specific brand of a good or service. This advertising emphasizes the building of brand name recall and favourable brand attitudes. This type of advertising is often used during the growth and maturity stages of the product life cycle. Comparative advertising compares two or more specifically named or present competitive brands on one or more specific product attributes. PTS: 1

DIF: Application

REF: p. 439-440

OBJ: 2

6. How does competitive advertising differ from comparative advertising? Which type of advertising is more effective? ANS: Competitive advertising is used to influence demand for a specific brand of a good or service as is comparative. This advertising emphasizes the building of brand name recall and favourable brand attitudes. This type of advertising is often necessary during the growth stage of the product life cycle, when competitive entry eliminates the need to stimulate product category demand. This type of advertising stresses subtle differences between brands, such as target market or price. Comparative advertising compares two or more specifically named or present competitive brands on one or more specific product attributes. Advertisers may make taste, price, and preference claims specifically at the expense of the competing brand.

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One could argue that comparative advertising is more effective. Academic research reveals these findings: (1) comparative advertisements facilitate the recall of advertised and competing brands; (2) claim recall effectiveness is higher for comparative advertisements; and (3) comparative advertisements are more likely to induce patronage for a new brand than are noncomparative advertisements. PTS: 1

DIF: Application

REF: p. 440

OBJ: 2

7. Your company has decided to become the Canadian producer of Chocomel, a Dutch soft drink that tastes like chocolate mousse. It is made from partially creamed milk, sugar, cocoa, and stabilizers. The price for one glass bottle will be $1.09. You are responsible for developing several advertisements for Chocomel. Name six common advertising appeals. For each appeal, give an example of a Chocomel advertisement message using that appeal. ANS: Profit. The higher than ordinary price of Chocomel will allow the distributor to recoup its expenses more quickly. U8 Concern for health. Chocomel is an fun way to get the calcium the body needs. Love/romance. Chocomel—is it an aphrodisiac? Fear. When all your friends are talking about this wonderful new soft drink, will you be part of the in-crowd who have enjoyed a cold bottle of Chocomel? Admiration. An attractive celebrity spokesperson could promote Chocomel. Convenience. Chocomel is ready to drink right out of the can Fun and pleasure. A bottle of Chocomel will make any event fun. Vanity and egotism. Only the truly innovative will be able to appreciate the exquisite taste of Chocomel. Environmental consciousness. Chocomel comes in a recyclable bottle. Of course, students will have other ideas about advertising appeals. PTS: 1

DIF: Application

REF: p. 443

OBJ: 3

14-47

8. Eighty percent of all pregnant women suffer from morning sickness. In a large majority of women, the morning sickness is alleviated by ginger. Your company has developed Gin-Gins, an all-natural hard candy made from real ginger. You are responsible for developing advertisements for Gin-Gins. Name six common advertising executional styles. Then briefly describe how you would design six different Gin-Gins advertisements (one for each executional style you have listed). ANS: Slice of life. Two newly pregnant professional woman trying to work—one is morning sick and the other is not because she has Gin-Gins. Lifestyle. The ad could show how important Gin-Gins is for someone who wants to continue working and playing during her pregnancy. Spokesperson/testimonial. A pregnant celebrity could endorse Gin-Gins. Fantasy. This ad could build a fantasy for mothers-to-be. Their baby is born and is an immediate genius, makes a million dollars before she is six. Humour. Famous female comedians could talk about how awful their morning sickness was and wish that Gin-Gins had been invented when they needed it. Real or animated product symbols. Through animation, this ad could show how Gin-Gins settles a raging stomach. Mood or image. This ad would build a mood or image around Gin-Gins—mothers can enjoy the pregnancy when they are not sick. Demonstration. Ad could show women enjoying the taste of Gin-Gins and the feeling of good health it gives them. Musical. The benefits of Gin-Gins could be demonstrated through a lullaby-based video. Scientific evidence. Research or scientific evidence could be used to demonstrate how Gin-Gins relieve morning sickness. Of course, students will likely come up with other executional techniques. PTS: 1

14-48

DIF: Application

REF: p. 444

OBJ: 3

9. Name five major advertising media. List two advantages and two disadvantages associated with the use of each of these media. ANS: Television. Advantages: (1) wide reach, (2) creative demonstration opportunities, (3) immediate messages, and (4) entertainment carryover. Disadvantages: (1) little demographic selectivity, (2) short message life, (3) consumer skepticism toward claims, and (4) high cost. Radio. Advantages: (1) low cost, (2) high frequency, (3) immediate messages, (4) short notice rescheduling, (5) stable audience, (6) portable medium, (7) negotiable costs, (8) short-term advertiser commitments, (9) entertainment carryover, (10) audience selectivity, (11) geographical selectivity, and (12) low production costs. Disadvantages: (1) no visuals, (2) short message life, (3) background sound, and (4) commercial clutter. Magazines. Advantages: (1) good colour reproduction, (2) message longevity, (3) demographic selectivity, (4) regional and local market selectivity, (5) long life, and (6) high pass-along rate. Disadvantages: (1) long-term advertiser commitments, (2) slow audience buildup, (3) limited demonstration capacity, (4) lack of urgency, and (5) long lead time. Newspapers. Advantages: (1) geographic selectivity and flexibility, (2) short-term advertiser commitments, (3) news value and immediacy, (4) advertising permanence, (5) stable readership, (6) high individual market coverage, (7) co-op and local tie-in availability, and (8) short lead time. Disadvantages: (1) little demographic selectivity, (2) limited colour capabilities, (3) different local and national rates, (4) low pass-along rate, (5) may be expensive, and (6) noise from competing ads and news stories. Outdoor media. Advantages: (1) repetition, (2) moderate cost, and (3) flexibility. Disadvantages: (1) short message, (2) lack of demographic selectivity, and (3) high noise. Internet. Advantages (1) ability to reach a narrow target audience, (2) relatively short lead time required for creating Web-based advertising, and (3) moderate costs. Disadvantages: (1) difficult to measure ad effectiveness and return on investment, (2) ad exposure relies on “click-throughs” from banner ads, and (3) not all consumers have access to the Internet. PTS: 1

DIF: Application

REF: p. 447-452

OBJ: 4

10. Describe the two traditional print media vehicles. ANS: Newspapers are generally a mass-market medium. The largest source of newspaper ad revenue stems from the local retail sector through cooperative advertising between retailers and manufacturers. Recently, weakening economies have reduced newspaper advertising. Advantages include (1) geographic selectivity and flexibility, (2) short-term advertiser commitments, (3) news value and immediacy, (4) advertising permanence, (5) stable readership, (6) high individual market coverage, (7) co-op and local tie-in availability, and (8) short lead time. Disadvantages include (1) little demographic selectivity, (2) limited colour capabilities, (3) different local and national rates, (4) low pass-along rate, (5) may be expensive, and (6) noise from competing ads and news stories.

14-49

Magazine advertising has increased in recent years because of segmented niche marketing. Advantages include (1) good colour reproduction, (2) message longevity, (3) demographic selectivity, (4) regional and local market selectivity, (5) long life, and (6) high pass-along rate. Disadvantages include (1) long-term advertiser commitments, (2) slow audience buildup, (3) limited demonstration capacity, (4) lack of urgency, (5) long lead times, and (6) high total cost. PTS: 1

DIF: Application

REF: p. 447-448

OBJ: 4

11. Compare and contrast radio and television as media vehicles. ANS: Radio is a medium that lends itself well to cooperative advertising. Local advertising accounts for about 80 percent of radio ad volume. Advantages include (1) low cost, (2) high frequency, (3) immediate message, (4) short notice rescheduling, (5) stable audience, (6) portable medium, (7) negotiable costs, (8) short-term advertiser commitments, (9) entertainment carryover, (10) audience selectivity, (11) geographical selectivity, and (12) low production costs. Disadvantages include (1) no visuals, (2) short message life, (3) background sound, and (4) commercial clutter. Television can be divided into three basic types: network television (CBC, CTV, ABC, CBS, NBC, FOX), independent stations, and cable television. The largest growth market is cable television. Advantages of television include (1) wide reach, (2) creative demonstration opportunities, (3) immediate messages, and (4) entertainment carryover. Disadvantages include (1) little demographic selectivity, (2) short message life, (3) consumer skepticism toward claims, and (4) high cost. PTS: 1

DIF: Application

REF: p. 448-449

OBJ: 4

12. Your company has decided to become the Canadian producer of Chocomel, a Dutch soft drink that tastes like chocolate mousse. It is made from partially creamed milk, sugar, cocoa, and stabilizers. You have been hired to take over the outdoor advertising campaign for the new soft drink. Describe outdoor advertising and the various forms of outdoor media that you could use in your campaign. With which advantages and disadvantages should you be concerned? ANS: Outdoor advertising is a flexible, low-cost per-contact medium that may take a variety of forms. Examples include billboards, skywriting, bus shelters, taxicabs, giant inflatables, construction site fences, mini-billboards in malls, lighted moving signs in bus terminals and airports, and ads painted on the sides of cars and trucks. Outdoor advertising reaches a broad and diverse market. Therefore, it is normally limited to promoting convenience products such as soft drinks. Advertisers usually base billboard use on census tract data. Advantages include (1) repetition, (2) moderate cost, and (3) flexibility. Disadvantages include (1) short message, (2) lack of demographic selectivity, and (3) high noise. PTS: 1

14-50

DIF: Application

REF: p. 450-451

OBJ: 4

13. There are several criteria used in selecting media in an advertising campaign. Name and briefly discuss the impact of five of these criteria used to select media. ANS: Cost per contact is the cost of reaching one member of the target market. Lower cost per contact may be appealing to advertisers, but total cost should be considered as well. Cost per thousand is the standard criterion for comparing media. Reach is the number of different target consumers who are exposed to a commercial at least once during a specific period, usually a month. Frequency is the number of times an individual is exposed to a message in a given period. Target market. Media selection is a matching process whereby the medium is matched to the target market. Different target markets are exposed and pay attention to different media. Even when market profiles match media profiles, other factors such as reach and image must be considered. Audience selectivity is the medium’s ability to reach a precisely defined market. Some media ehicles like newspapers and television appeal to a wide cross-section of the population. Other media can be chosen to reach very specific groups. Flexibility is how adaptable the medium is to changes. Magazines, for example, have poor flexibility as they require ad copy months before publication. Radio allows an ad to be changed in one day. Noise level is the extent to which that the target audience is distracted. Billboards may have high noise level, due to driver distraction, whereas direct mail has low noise level. Life span is how long the advertising message lasts. A radio or television commercial lasts only for the duration the commercial is aired, whereas a magazine ad may viewed several times by several people. PTS: 1

DIF: Application

REF: p. 454-456

OBJ: 4

14. List and briefly describe the three basic types of media scheduling. Give an example of a product that would be likely to use each of these types of scheduling. ANS: (1)

(2)

(3)

A continuous media schedule allows the advertising to run throughout the advertising period. Examples: milk, computers, mobile telephones, soft drinks, bar soap, and detergent. A flighted media schedule means the advertiser schedules ads heavily every other month or every two weeks to achieve a greater impact with an increased frequency and reach at those times. Examples: department store sales, gifts appropriate for Mother’s Day and Father’s Day, or candy at Easter, Valentine’s, and Halloween. A seasonal media schedule is for products that are used more during certain times of the year. Examples: sun block, skis, wood-burning stoves, wood for wood-burning stoves, and holiday decorations.

PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 456-457

14-51

15. What is public relations? What is publicity? ANS: Public relations is the promotional element that evaluates public attitudes, identifies policies and procedures of the organization, and executes programs to earn public understanding and acceptance. Public relations is a vital link in a progressive company’s marketing communications mix. The outcome of public relations is publicity—the effort to receive media attention. Public relations and publicity may serve to boost new product introduction, and position or reposition mature products. The two terms are often confused, but publicity is simply one of several public relations tools. PTS: 1

DIF: Application

REF: p. 457-458

OBJ: 5

16. List and briefly describe four functions commonly performed by public relations departments. ANS: Press relations. Placing newsworthy information in the news media to attract attention to a person, product, or service. Product publicity. Publicizing specific goods or services. Corporate communications. Creating internal and external communications to promote understanding of the firm or institution. Public affairs. Building and maintaining national or local community relations. Lobbying. Dealing with legislators and government officials to promote or defeat legislation and regulation. Employee and investor relations. Maintaining positive relationships with employees, shareholders, and others in the financial community. Crisis management. Responding to unfavourable publicity or a negative event. PTS: 1

DIF: Application

REF: p. 457-458

OBJ: 5

17. Why do McDonald’s, Visa, and The Home Depot sponsor swimming, diving, and gymnastics events? ANS: The companies are engaged in event sponsorship. Public relations managers use events that are sufficiently newsworthy to achieve press coverage. The sponsorship of these events is all used to reinforce brand identification. PTS: 1

DIF: Application

REF: p. 460-461

OBJ: 5

18. CyroLife is a company that provides body parts for transplanting purposes. A spate of deaths suggested that CyroLife had not carefully screened some of the donated bodies. As the director of public relations, describe the public relations tool you would use to counter this negative publicity. ANS: Crisis management is the key to countering most negative publicity. Crisis management is the coordinated effort to handle the effects of unfavourable publicity, ensuring fast and accurate communications in times of emergency. To be effective, the crisis management plan must exist before the disaster occurs. PTS: 1 14-52

DIF: Application

REF: p. 463

Chapter 15—Sales Promotion and Personal Selling MULTIPLE CHOICE 1. Which of the following comprises marketing communication activities in which a short-term incentive is offered to induce the purchase of a particular good or service? a. promotion b. sales promotion c. advertising d. publicity ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 474

2. Which of the following BEST describes sales promotion? a. It is a publicity tool. b. It is more difficult to measure than advertising. c. It offers a short-term incentive to buy. d. It is a smaller percentage of the promotion budget than advertising. ANS: C Sales promotion is an activity in which a short-term incentive is offered to induce the purchase of a particular good or service. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 474

3. Which type of promotion is directed at wholesalers and retailers? a. channel b. consumer c. trade d. customer ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 474

4. AFLAC Insurance Company introduced a duck in its ads that said the company’s name instead of “Quack.” Since the advertising campaign began, AFLAC has created a duck premium, developed a line of clothing with the AFLAC duck, and used the AFLAC duck on its website. What has the AFLAC duck become a tool for? a. advocacy advertising b. comparative advertising c. push strategies d. sales promotions ANS: D Sales promotion is an activity in which a short-term incentive is offered to induce the purchase of a particular good or service. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 474

OBJ: 1

15-1

5. What are the two types of sales promotion? a. elastic and inelastic b. hierarchical and functional c. introductory and maturity d. consumer and trade ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 474

6. Which sales promotions are targeted toward the ultimate consumer market? a. facilitating b. pull c. intermediary d. consumer ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 474

7. Which of the following would be a target for a trade sales promotion offered by Science Diet pet food? a. a Science Diet distributor b. children c. a dog food manufacturer d. dog shows ANS: A Trade promotions are directed to members of the marketing channel, such as wholesalers and retailers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 474

OBJ: 1

8. What is the usual goal of sales promotion (regardless of what form it takes)? a. immediate purchase by consumers b. market share leadership c. return on investment d. economies of scale ANS: A REF: p. 474

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

9. What are coupons, premiums, contests, free samples, and frequent buyer programs examples of? a. advertising b. trade sales promotion c. consumer sales promotion d. publicity ANS: C Consumer sales promotion consists of short-term incentives to the final customer. PTS: 1 BLM: Remember 15-2

DIF: Definition

REF: p. 474

OBJ: 2

10. Because of the high costs of coupons and their disappointing redemption rates, marketers of packaged goods are doing which of the following? a. distributing single-coupons that can be redeemed for exclusive brands b. Lengthening the time the coupon can be redeemed to give consumers more time to use them c. shortening the time the coupon can be redeemed to create a feeling of urgency d. issuing more coupons and using more everyday low pricing ANS: C REF: p. 477

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

11. Why are many marketers shortening the time in which a coupon can be redeemed? a. to track response rates b. to respond to claims that coupons adversely affect consumer behaviour c. to increase introductory sales d. to create a greater sense of urgency to redeem the coupon ANS: D Many marketers believe a shortened time frame will increase the redemption rate. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 477

12. According to the text, what is the current redemption rate of coupons nationwide in Canada? a. 39 percent b. .29 percent c. 2.9 percent d. 29 percent ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 477

13. What is a cash refund given to consumers for the purchase of a product during a specific time period? a. a trade discount b. a functional allowance c. a rebate d. a purchase allowance ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 478

15-3

14. Why do some marketers offer rebates instead of price reductions to induce short-term sales? a. Rebates have a much higher redemption rate than coupons. b. A price reduction of this type would have likely been an example of price discrimination. c. Rebates offer a more immediate reward than price reductions. d. Rebates are especially good at enticing purchases, but most consumers never bother to redeem them. ANS: D Rebates are unrelated to price discriminations. From the consumer viewpoint, one of the disadvantages of a rebate is having to wait for the money. Rebates are used most often to attract customers that are classified as bargain hunters. Brand-loyal customers would not be as likely to be attracted to a rebate offer. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 478

15. When Craig purchased a VTech wireless mobile phone, he was able to mail in a proof-of-purchase and his cash register receipt to receive a cheque from VTech for $20. What did Craig receive? a. a functional discount b. a rebate c. a purchase allowance d. a trade allowance ANS: B A rebate is a cash refund given for the purchase of a product during a specific period. PTS: 1 DIF: Application BLM: Higher order

REF: p. 478

OBJ: 2

16. When Janey Ming purchased a subscription to Western Living magazine, she received a free cookbook entitled Christmas Cookies. What is the cookbook an example of? a. a trade sample b. a premium c. a contest d. a loyalty incentive ANS: B An extra item offered to consumers along with their purchase is a premium. PTS: 1 DIF: Application BLM: Higher order

15-4

REF: p. 478

OBJ: 2

17. When Darrell purchased a five-kg bag of 9 Lives cat food, he received a free can of the manufacturer’s new gourmet cat food. What is the can of cat food an example of? a. product placement b. a premium c. a loyalty incentive d. a trade sample ANS: B A premium is an item offered, usually with proof of purchase, to the consumer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 478

OBJ: 2

18. The maker of Serta mattresses gives away a stuffed sheep with every purchase of a new mattress. What is the sheep an example of? a. a trade sample b. a loyalty incentive c. a premium d. a trade product ANS: C A premium is an extra item offered to the consumer because the consumer has purchased some other product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 478

OBJ: 2

19. Co-branded credit cards are used in conjunction with which of the following? a. trade consumer promotion b. consumer discount programs c. functional consumer discount d. loyalty marketing programs ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 479

20. What is one of the best methods for creating and rewarding brand loyalty among consumers who might otherwise switch to competing brands? a. a sweepstakes b. a directed coupon mailing c. a sampling program d. a loyalty marketing program ANS: D Loyalty marketing or frequent-buyer programs induce brand loyalty by rewarding customers for multiple purchases. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 479

15-5

21. Unlike other sales promotion activities, what is the objective of a loyalty marketing program? a. to take away customers from the competition b. to appeal to bargain hunters who consistently buy the lowest-priced brand c. to modify customers’ attitudes toward a product d. to build long-term, mutually beneficial relationships between a company and its key customers ANS: D Sales promotions are more efficient at changing behaviour than attitudes. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 479

22. Through loyalty programs, shoppers receive discounts, alerts on new products, and other offers. What is the chief benefit for a retailer’s future? a. detailed customer databases b. higher gross margins c. purchase dollars spent per visit increases d. “stolen” top customers from other retailers ANS: A REF: p. 479

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

23. Whenever Hugo buys a soft drink at his nearby convenience store, he gets a stamp for the card that he carries in his wallet. When he has eight stamps, he can exchange the card for a free soda. What is this an example of? a. a loyalty incentive b. a frequent-buyer program c. a consumer allowance d. an in-store rebate ANS: B A frequent buyer program rewards loyal customers for multiple purchases. PTS: 1 DIF: Application BLM: Higher order

REF: p. 479

OBJ: 2

24. The Pillsbury Bake-Off requires people to submit a recipe using Pillsbury baking products. Finalists are brought to Pillsbury kitchens to bake their recipes so the winner of the cash prize can be chosen. What is this an example of? a. a contest b. a push money deal c. a sales promotion game d. a sweepstakes ANS: A Contests are promotions in which participants use some skill or ability to compete for prizes. PTS: 1 DIF: Application BLM: Higher order

15-6

REF: p. 480

OBJ: 2

25. Every year SC Johnson gives its customers an opportunity to register on-line or through the mail to win $5,000 for a room makeover. This prize is awarded on Room by Room, a show on HGTV that SC Johnson sponsors. What has SC Johnson designed? a. an annual loyalty incentive plan b. an annual contest c. an annual event sponsorship d. an annual sweepstakes ANS: D Sweepstakes depends on chance or luck, and participation is usually free. PTS: 1 DIF: Application BLM: Higher order

REF: p. 480

OBJ: 2

26. According to the text, which of the following statements about contests and sweepstakes is true? a. Contests are generally effective tools for creating long-term relationships with customers. b. Sweepstakes usually draw about 10 times more participants than contests. c. Contests depend on luck, and participation is free. d. Sweepstakes are promotions that require participants to exhibit some skill. ANS: B Contests require participants to have some skill. Sweepstakes are based on chance, and as such have resulted in some discussion as to their ethics. Neither contests nor sweepstakes should be used if the marketer’s objective is to create a long-term relationship with its customers. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 480

27. Manitoba’s Best is a new precooked meal-in-a-bag product made from bison meat. The company is having difficulty gaining consumer acceptance of its bison products even though bison is high in protein and low in cholesterol, fat, and calories. Those who have tried the meat have agreed that it is as tender and delicious as any choice steak, and it is less expensive. Manitoba’s Best should focus on which of the following sales promotion tools? a. sponsorship b. sampling c. premiums d. in-pack couponing ANS: B Sampling is most effective when the benefits of the new product are superior to those of existing products and the item has unique attributes that the customer must experience to believe. PTS: 1 DIF: Application BLM: Higher order

REF: p. 481

OBJ: 2

15-7

28. When Monique took her home-delivered newspaper out of its plastic bag, she found a small box of Pepcid AC tablets in the bottom of the bag. The manufacturer of the new over-the-counter medication was using which form of sales promotion? a. introductory premium b. sampling c. pull product d. push product ANS: B Sampling is most effective when the benefits of the new product are superior to those of existing products and the item has unique attributes that the customer must experience to believe. PTS: 1 DIF: Application BLM: Higher order

REF: p. 481

OBJ: 2

29. Why did the manufacturer of Claritin, a drug for allergy sufferers that was designed to not result in sleepiness, give physicians free samples of the drug? a. Trial-size containers are a form of advertising. b. It is an inexpensive promotional tool. c. This allows the consumer to try the product risk-free. d. This is an increasingly popular technique with manufacturers. ANS: C A sample allows the consumer to try the product without investing any money or having a full-size container. It is an expensive strategy but works well if the trial product is significantly different and better than other products on the market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 481

OBJ: 2

30. A men’s health centre in Chicago offers free blood pressure tests, cholesterol screening tests, and prostate exams one day each year. What are these free health tests an example of? a. a free sample b. a premium c. a service commission d. a sponsorship ANS: A Services can be sampled as easily as products can. PTS: 1 DIF: Application BLM: Higher order

REF: p. 481

OBJ: 2

31. Which of the following are promotional exhibits set up at the retailer’s location to build traffic, advertise the product, or induce impulse buying. (They are targeted to consumers.) a. direct demonstrations b. freestanding kiosks c. indirect demonstrations d. point-of-purchase displays ANS: D OBJ: 2 15-8

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 482

32. Which of the following is an example of a point-of-purchase promotion? a. shelf talkers b. newspaper inserts c. sample booths d. television monitors in supermarket aisles ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 482

33. What do point-of-purchase promotions work best for? a. complex products that require technical knowledge to operate b. impulse buys c. high-involvement products d. purchases that require extensive decision making ANS: B Point-of-purchase promotions are most effective for impulse items. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 482

34. What is one of the major advantages to using point-of-purchase promotions? a. its ability to create long-term relationships with intermediaries b. its ability to create long-term relationships with customers c. the fact it has a captive audience d. its low costs ANS: C Some examples of this consumer promotion are very expensive and, like most sales promotions, it is not designed to create a long-term relationship. P-O-P displays can be expensive. See examples in text. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 482

35. You are responsible for sales promotion for VitaBalls, a vitamin in a bubble-gum form. Your objectives are to encourage product trial and repurchase, encourage brand switching to your brand, and increase the amount of product purchased by current customers. You have used coupons in the past but found that many were sent to homes that were childless. To reach consumers who have an interest in your product, what should you do? a. hire a sales force b. introduce point-of-purchase displays c. continue with coupons through an on-line distributor d. use sweepstakes ANS: C Some companies are experimenting with coupons on the Internet for a better redemption rate. PTS: 1 DIF: Application BLM: Higher order

REF: p. 482-483

OBJ: 2

15-9

36. According to the text, which of the following statements about the impact of technology on personal selling is true? a. The use of technology severely limits the time a salesperson has to spend with his or her customers. b. Technology is a threat to job security for most salespeople. c. Technology is freeing salespeople from tedious administrative tasks, such as placing routine orders, shipping catalogues, and tracking orders. d. Technology has had no impact on personal selling. ANS: C REF: p. 482-483

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

37. According to the text, as of 2005, what percentage of all Canadian companies sold products/services on-line? a. 47 percent b. 27 percent c. 67 percent d. 7 percent ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 482-483

38. According to the text, which of the following statements about on-line sales promotions is true? a. There is no way for a marketer to build long-term, mutually beneficial relationships with customers on-line. b. Internet sales promotions are more effective and cost efficient at generating responses than their offline counterparts. c. One of the few types of sales promotion that cannot be used on-line is sampling. d. Loyalty marketing programs are ineffective when used at websites to encourage traffic. ANS: B Customer loyalty programs are very effective on Internet sites to build customer loyalty. Sampling is a sales promotion option that can be effectively used by Internet businesses. On-line coupons have a higher redemption rate than offline ones. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 482-483

39. Which of the following is an example of a trade sales promotion? a. pull money and training b. point-of-purchase displays c. premiums and coupons d. business meetings and conventions ANS: D Premiums and coupons are directed at consumers. PTS: 1 DIF: Definition BLM: Higher order

15-10

REF: p. 483-484

OBJ: 3

40. Trade sales promotions support which of the following strategies? a. push b. pull c. hierarchical d. disintermediation ANS: A Trade promotions push a product through the distribution channel. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 484

41. Which of the following is a price reduction offered by manufacturers to intermediaries such as wholesalers or retailers, in exchange for performance of specified functions or purchasing during special periods. a. pull money b. a functional discount c. a quantity discount d. a trade allowance ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 484

42. Schwinn Cycling and Fitness, Inc., is offering a chain of sporting goods superstores a 20 percent discount on all Schwinn bicycles if the stores will run their own special promotion on the new Schwinn Paramount Titanium bikes. What is Schwinn offering? a. a life cycle extension promotion b. a trade allowance c. a push money deal d. a product development deal ANS: B A trade allowance is a price reduction offered by manufacturers to intermediaries such as wholesalers or retailers, in exchange for performance of specified functions or purchasing during special periods. PTS: 1 BLM: Remember

DIF: Application

REF: p. 484

OBJ: 3

43. Broyhill is offering the sales force at Meers Furniture Emporium a $50 reward for each Broyhill Pleasant Isle Living Room Collection sold in the next 30 days. What type of trade sales promotion is the $50? a. a direct commission b. push money c. a trade allowance d. a selling deal ANS: B Intermediaries receive push money as a bonus for pushing the manufacturer’s brand. PTS: 1 BLM: Remember

DIF: Application

REF: p. 484

OBJ: 3

15-11

44. Which of the following is money offered by a manufacturer to employees of channel intermediaries to encourage them to sell the manufacturer’s product? a. push money b. a trade allowance c. a selling deal d. a direct trade sales promotion ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 484

45. Fiona is a sales associate at a store that sells new and used videos and DVDs. Recently, she was given a CD of the music from Vanity Fair to encourage her to suggest customers buy this movie. What is the CD an example of? a. a trade sales promotion b. free consumer sales promotion c. an intermediary rebate d. a trade allowance ANS: A Free merchandise to sales intermediaries is an example of a trade promotion. PTS: 1 DIF: Application BLM: Higher order

REF: p. 484

OBJ: 3

46. Which of the following BEST describes the use of trade shows, conventions, and conferences to contact customers? a. It has been decreasing in recent years. b. It is usually directed toward the consumer goods market. c. It is most effective for mature products. d. It costs much less per potential customer than personal sales calls. ANS: D Shows can be cost effective. The cost per potential customer contacted is estimated to be 56 percent less than that of a personal sales call. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 484

47. You are responsible for sales promotion for a new brand of low-carb dairy products for people who are trying to lose weight. You need to introduce a new product to supermarket managers and owners, attract and identify new store contacts, and test market the response to your new product. Which type of trade promotion would most likely help you reach your objectives? a. direct sampling and store demonstrations b. trade allowances and direct incentives c. trade shows d. push money ANS: C Trade shows are uniquely effective in introducing new products. PTS: 1 DIF: Application BLM: Higher order 15-12

REF: p. 484

OBJ: 3

48. Trade sales promotions are popular among manufacturers because they do all of the following EXCEPT which one? a. obtain wholesaler and retailer support for consumer sales promotions b. create long-term relationships between manufacturers and customers c. provide retailers with increased store traffic d. improve trade relations ANS: B Trade shows are not typically used to create any type of long-term relationships. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 484

49. Which of the following is direct communication between a sales representative and one or more prospective buyers, for the purpose of making a sale? a. sales promotion b. trade promotion c. personal selling d. direct marketing ANS: C OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 485

50. Trianka Patel has recently started a mailing service in a region that is showing tremendous industrial growth. Her business has the capability to print, fold, insert, and mail all types of letters. Her customers include three local retailers, a small university, and a regional cable television provider. She needs more customers and plans to spend one day per week visiting businesses and introducing her services. What is she engaged in? a. personal selling b. research and development c. direct sales management d. sales promotion ANS: A Personal selling is direct communication between a sales representative and one or more prospective purchasers for the purpose of making a sale. Students should realize that all professions have to sell. PTS: 1 DIF: Application BLM: Higher order

REF: p. 485

OBJ: 4

15-13

51. What is an advantage personal selling has over other forms of promotion? a. It is easier to vary the message according to what the customer needs to know with personal selling. b. Personal selling is less expensive on a per contact basis. c. Personal selling is better for convenience products d. It is easier to direct the marketing effort to disgruntled customers with personal selling. ANS: A Personal selling is more expensive than mass advertising or sales promotions when calculated on a per-person-contacted basis. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 485

52. When is personal selling more important than advertising and sales promotion? a. if the products being sold are technically complex b. if the product being sold has a low value c. if there are many customers for the product being sold d. if the buyers of the product are extremely dispersed ANS: A See Exhibit 15.2. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 485

53. For which of the following products would its producer be more likely to choose personal selling rather than advertising or sales promotion to market it? a. hammers b. insurance policies c. office supplies d. satellite programming guide ANS: B Insurance policies are linguistically complex; buyers purchase only infrequently; and the product has a high value. See Exhibit 15.2. PTS: 1 DIF: Application BLM: Higher order

15-14

REF: p. 485

OBJ: 4

54. Mountain Valley Springs Company, a producer of bottled water, sells a highly standardized product to consumers all over Canada. You would expect Mountain Valley Springs to rely on which of the following to promote its product? a. publicity and direct marketing b. advertising and sales promotion c. public relations d. personal selling ANS: B With a standard product of low value, and widely dispersed customers, the producer should rely on advertising. See Exhibit 15.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 485

OBJ: 4

55. Harland & Wolff in Belfast, North Ireland, makes ocean-going vessels. Last year its primary customer was the U.S. government. You would expect Harland & Wolff to rely on which of the following to promote its vessels? a. product innovations and direct marketing b. personal selling c. publicity d. advertising and sales promotion ANS: B Harland & Wolff is selling a complex, high-value product to a few customers in a small area. See Exhibit 15.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 485

OBJ: 4

56. How does personal selling differ from other forms of promotion? a. It is considerably less effective for obtaining sales and gaining a satisfied customer. b. Its costs can be less easily controlled. c. It is best able to handle customer objections as they arise. d. It does have to deal with unqualified customers. ANS: C REF: p. 485

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

57. How does personal selling differ from other forms of promotion? a. It wastes more sales resources than any other promotion. b. It is not as effective at satisfying customers. c. It can use a message customized to the immediate needs of the customers. d. It is best for selling simple, low-involvement products. ANS: C REF: p. 485

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

15-15

58. Jefferson Smurfit Company is a multi-billion-dollar supplier of packaging materials. One of its salespeople rearranged production schedules at three different plants to satisfy an unexpected demand for boxes from General Electric. The salesperson’s actions are typical of the company’s sales philosophy and indicate an emphasis on which of the following? a. transformational selling b. adaptive selling c. transactional buying d. relationship selling ANS: D Relationship selling or consultative selling is designed to help customers achieve their goals. PTS: 1 DIF: Application BLM: Higher order

REF: p. 486

OBJ: 5

59. Which of the following is a sales practice that involves building, maintaining, and enhancing interactions with customers in order to develop long-term satisfaction through mutually beneficial partnerships? a. adaptive selling b. relationship selling c. stimulus-response selling d. needs-dependent selling ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 486

60. Which of the following BEST describes relationship selling? a. It is also called adaptive selling. b. It is more concerned with making a sale than with developing customer trust. c. It emphasizes a win-win outcome. d. It is more typically used when selling low-involvement products in the consumer market. ANS: C Relationship selling is also called consultative selling. It is more concerned with developing customer trust than with making a sale. Typically, industrial-type goods are sold using relationship selling. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 486

OBJ: 5

61. Which of the following statements characterizes the traditional personal selling approach? a. Traditional selling uses long-term follow-ups that focus on product delivery. b. Traditional personal selling is decreasing in popularity. c. Salespeople sell advice and assistance. d. Proposals and presentations used emphasize pricing and product features. ANS: D The traditional sales approach has not disappeared completely; however, it is being used less and less often by professional salespeople. See also Exhibit 15.3. PTS: 1 OBJ: 5 15-16

DIF: Comprehension BLM: Higher order

REF: p. 486

62. Which of the following BEST describes consultative selling? a. It emphasizes closing the sale during the sales presentation. b. It uses limited sales planning. c. It sells advice, assistance, and counsel rather than products. d. It uses short-term follow-ups, which focus on product delivery. ANS: C See Exhibit 15.3. Consultative selling is also called relationship selling. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 486

63. How are “webinars” used in personal selling? a. to support relationship selling tasks b. to facilitate transactional selling c. to test market sales presentations d. to help consumers shop at on-line sites ANS: A Webinars are on-line seminars that support selling tasks such as lead generation, client support, and sales training. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 486

64. What are the set of steps a salesperson goes through to sell a particular product? a. the sales presentation b. the sales continuum c. the stimulus-response hierarchy d. the sales process ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 488

65. What is the last step in the personal selling process? a. signing the contract b. closing the sale c. following up d. handling objections ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 488

15-17

66. The seven steps of the selling process closely follow which of the following? a. the process of forecasting and satisfying industry demand b. the traditional communications model c. the AIDA concept d. the hierarchy of needs ANS: C The seven steps attempt to move the customer from attention to interest to desire, and finally to action. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 488

67. Which of the following, also known as prospecting, is the identification of those firms and people most likely to buy the seller’s offerings? a. lead generation b. lead qualification c. referral calling d. cold calling ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 490

68. Sales leads are LEAST likely to be generated by which of the following? a. trade shows and conventions b. networking c. reorders d. cold calling ANS: C A lead is a potential for a new sale, not a reorder. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 490

69. AutoFry is the leading manufacturer of ventless deep fryers for supermarket deli and food service operations. It has developed a new high-capacity fryer. The company has decided to purchase a mailing list of thousands of food service managers and to send out brochures with a detachable card that the managers can use to request more information. What is AutoFry involved in? a. lead generation b. sales presentation c. moving through the sales continuum d. lead qualification ANS: A Lead generation is the identification of those firms and people most likely to buy the seller’s offerings. PTS: 1 DIF: Application BLM: Higher order

15-18

REF: p. 490

OBJ: 6

70. According to the text, which of the following statements about the relative amount of time spent in the selling process for different types of salespeople is true? a. A traditional salesperson would spend a lot of time following up the sale. b. A consultative salesperson would spend a lot of time closing the sale. c. A consultative salesperson would spend a lot of time generating leads. d. A relationship salesperson would spend a lot of time qualifying leads. ANS: D See Exhibit 15.4. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 490

71. Ramas Llewelyn sells display shelving used in retail stores. He is asking his current customers for the names of other retail operations that might be interested in buying his company’s shelving. What is he using to get his sales leads? a. networking b. noncompeting sales c. referrals d. cold calling ANS: C A recommendation from a customer or business associate is a referral. PTS: 1 DIF: Application BLM: Higher order

REF: p. 490

OBJ: 6

72. Which of the following is a process of finding out about potential clients from friends, business contacts, coworkers, acquaintances, and fellow members in professional or civic organizations? a. lead intermediation b. people surfing c. looking for the golden parachute d. networking ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 490

73. When Jeffrey began selling water treatment systems to consumers, he called friends, relatives, and college roommates to see if they were concerned about water quality and looking for a deal on a water treatment system for their home. What is this technique for generating leads called? a. quota driving b. networking c. qualifying d. cold calling ANS: B Networking uses friends, business contacts, coworkers, and acquaintances as a means of meeting potential clients. PTS: 1 DIF: Application BLM: Higher order

REF: p. 490

OBJ: 6

15-19

74. What is the most basic criterion for determining whether someone is a prospect for a product? a. size of buying centre b. a need that is not being satisfied c. degree of autonomy d. need for reciprocity ANS: B REF: p. 490

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

75. Devone Kanudsky, the junior salesperson for NU-VU Food Services Systems, has been given a list of phone numbers for all the food service managers in his province. Kanudsky has been instructed to call each number on the list and see if the respondent is interested in buying a NU-VU pizza/bread baking system. What is George doing? a. networking b. using cold referrals c. lead qualifying d. cold calling ANS: D Cold calling is a form of lead generation in which the salesperson approaches potential buyers without any prior knowledge of the prospects’ needs or financial status. PTS: 1 DIF: Application BLM: Higher order

REF: p. 491

OBJ: 6

76. Which of the following is a form of lead generation in which the salesperson approaches potential buyers without any prior knowledge of the prospects’ needs or financial status? a. networking b. cold calling c. lead qualification d. lead follow-up ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

77. Which of the following consists of determining which sales prospects have a recognized need, buying power, receptivity, and accessibility? a. lead reciprocity b. lead qualification c. prospect examination d. customerization ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

78. Lead qualification consists of determining whether a prospect has which of the following? a. any resources b. a real or imagined need for a product c. any interest in a product d. a recognized need, buying power, and receptivity and accessibility ANS: D OBJ: 6 15-20

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

79. Which of the following is a process that describes the homework that must be done by a salesperson before he or she contacts a prospect? a. pre-sales dialogue b. prospect customerization c. sale profiling procedure d. preapproach ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

80. A salesperson should learn as much as possible about the prospect’s organization and its buyers. What is this process? a. the needs assessment b. prospecting c. the preapproach d. lead generation ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

81. Often the task of lead qualification is handled by a telemarketing group or a sales support person who frees the sales representative from the time-consuming task by engaging in which of the following? a. database mining b. networking c. cold calling d. prequalification ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

82. During the preapproach, what does the salesperson do? a. handle pricing objections b. ask for referrals c. create point-of-purchase displays d. learn as much as possible about the prospect’s organization and its buyers ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 491

83. Which of the following is a determination of the customer’s specific needs and wants and the range of options the customer has for satisfying them? a. needs assessment b. needs hierarchy c. stimulus-response continuum d. sales probability ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 492

15-21

84. Which of the following is a written document or professional presentation that outlines how a company’s product will meet or exceed the client’s needs? a. a customer profile b. a needs assessment c. a sales proposal d. a qualifying document ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 492

85. Which of the following BEST describes the sales proposal and the sales presentation? a. They are a relatively inexpensive step in the sales process. b. They are the first step in the consultative selling process. c. They follow the sales approach. d. They are the first step in traditional selling process. ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 492

86. WonderRoast makes rotisserie units for supermarket delicatessens. Its salesperson is demonstrating to a deli manager and her employees how easy it is to load and unload chicken in its Model 302 rotisserie. Which stage of the sale is this? a. follow-up b. development and proposal of solutions c. sales approach d. leading ANS: B The sales presentation often involves a face-to-face presentation of the product or its benefits to a prospect. PTS: 1 DIF: Application BLM: Higher order

REF: p. 492

OBJ: 6

87. In relationship selling, the sales rep typically attempts to solve a customer’s problem by presenting a solution to the customer (or potential customer). What is this solution presentation known as? a. the sales pitch b. the sales proposal c. the client solution d. the presentation ANS: B REF: p. 492

15-22

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

88. Where is more time spent in traditional selling than in relationship selling? a. designing and proposing solutions b. handling objections c. following up d. approaching the customer and probing needs ANS: B See Exhibit 15.4. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 493

89. According to the text, which of the following statements about handling objections is true? a. A professional salesperson should not anticipate objections. b. A good salesperson dreads having to handle sales objections. c. Objections should not be used to close the sale. d. Salespeople should view objections as requests for more information. ANS: D A good salesperson should anticipate objections and be prepared to answer them. The way an objection is handled can be used to close a sale. A good salesperson welcomes objections as a legitimate part of the purchase decision. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 493

90. For a powerful sales presentation, salespeople must do all of the following EXCEPT which one? a. use hand gestures and voice inflections b. use direct eye contact c. practise d. ask close-ended questions ANS: D Salespeople need to ask open-ended questions. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 493

91. What should the consultative salesperson do when the prospect says, “Does that mean your product is 10 percent slower than your competitor’s?” a. Conduct an unplanned needs assessment. b. Immediately leave the prospect’s office. c. Modify his or her sales proposal. d. Handle the question as an objection. ANS: D The client is objecting to the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 493

OBJ: 6

15-23

92. When a salesperson asks for the sale, what is he or she doing? a. reducing cognitive dissonance b. creating long-term reciprocal arrangements c. qualifying the sale d. closing the sale ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 493-494

93. Tate sells coffee machines to offices. He is trying to conclude the sale of a large coffee machine at the headquarters of a large management consulting company. He finally offers free delivery and eight coffee grinders at half price if the consulting firm representative agrees to purchase eight systems from Tate—one for each of its regional offices. Which closing technique is Tate using? a. summary b. assumptive c. negotiation d. adaptive ANS: C Negotiation involves offering special concessions during the closing of the sale. PTS: 1 DIF: Application BLM: Higher order

REF: p. 494

OBJ: 6

94. Which of the following is the process during which both the sales rep and the prospect offer special concessions in an attempt to arrive at a sales agreement? a. negotiation b. solution proposal c. haggling d. objection handling ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 494

95. Salespeople ensure that delivery schedules are met, that the good or service performs as promised, and that buyers are trained in the use of the product. All of these functions are part of the final step in the selling process. What is that step called? a. the preapproach b. closing c. following up d. the sales presentation ANS: C OBJ: 6

15-24

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 494

96. What is the first step in the sales management process? a. Determine the sales force size. b. Set sales objectives. c. Develop the compensation plan. d. Recruit the sales force. ANS: B Sales goals and objectives, stated in clear numerical terms, are the base for all other plans. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 495

97. Which of the following is typically a responsibility area for a sales manager? a. sales force administrative tasks b. advertising c. product design d. salespeople evaluation ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 495

98. Which of the following is a statement of sales objectives, usually based on sales volume? a. breakeven statement b. quota c. order forecast d. account report ANS: B OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 496

99. According to the text, which of the following statements about recruiting and training the sales force is true? a. Salespeople are typically trained to be presenters. b. Sales training should begin after a long orientation. c. One of the most important traits to look for in a sales job candidate is ego strength. d. Training should be limited to just the new sales force members. ANS: C REF: p. 496

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

100. Guilden Corporation has instructed its new salesperson that she is responsible for selling 5 display cases with infrared heating capability per week, plus calling on 5 current and 10 potential customers. These objectives comprise which of the following? a. her quota b. her promotion goal c. her contribution d. her potentiality ANS: A A quota is a statement of sales objectives given to an individual salesperson. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 496

OBJ: 7 15-25

101. A new salesperson generally receives training in which of the following? a. product knowledge b. nonselling duties, such as filling out production reports c. industry financials d. accounting procedures ANS: A Accounting procedures and policies are not a typical part of a saleperson’s domain. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 496-497

102. Sales departments have traditionally been organized by all of the following EXCEPT which one? a. competitive nature b. product line c. geographic region d. industry ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 497

103. Which of the following sales force structures are gaining popularity in today’s competitive selling environment for companies that emphasize relationship selling? a. product based b. geographic based c. industry or market based d. customer based ANS: C REF: p. 497

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

104. All salespeople who work for Lennox Industries are paid a percentage of their individual sales, and there is no guaranteed minimum pay. What type of plan does Lennox use? a. straight commission b. bonus c. combination pay d. salary plus drawing account ANS: A In a straight commission plan, the salesperson receives no pay until a sale is made. PTS: 1 DIF: Application BLM: Higher order

15-26

REF: p. 497

OBJ: 7

105. If a company needs more salespeople but cannot afford to hire until cash flow improves and sales increase, it would be best for the company to do which of the following? a. institute a wage-plus-bonus plan b. use a straight commission plan c. use a combination pay plan d. pay an hourly wage ANS: B In a straight commission plan, the salesperson receives no pay until a sale is made. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 497

106. The salespeople at Manitoba Supplies, Inc., spend most of their time filling out information reports, calling on small customers, and dispensing product information. Because of these required activities, Manitoba should compensate its sales force using which of the following? a. a straight commission system b. a straight salary system c. a percentage of sales plan d. a combination pay plan ANS: B Because of all the nonselling activities, these salespeople will need guaranteed straight salary. PTS: 1 DIF: Application BLM: Higher order

REF: p. 497

OBJ: 7

107. If management not only desires to provide its sales force with an incentive to sell but also wants control over other nonselling activities, what would be the best compensation plan? a. a combination system b. a bonus system c. a straight salary system d. progressive commission ANS: A Combination systems help management control sales force while still providing motivation. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 497

15-27

108. Seacrest Corp. makes equipment for moving and stacking merchandise in warehouses. It would like to reduce its employee turnover and offer some incentive to sell more volume. The company is considering various pay plans. What should it use? a. a combination system b. a percentage of sales without salary c. a straight commission system d. an hourly wage ANS: A Combination plans include both a guaranteed salary and an incentive or commission. The fixed component should also reduce turnover while the commission motivates sale reps to increase sales volume. PTS: 1 DIF: Application BLM: Higher order

REF: p. 497

OBJ: 7

109. Which of the following is a key leadership trait for effective sales leaders? a. an assertive personality b. an absence of ego c. a strong desire to avoid risk taking d. a strong need for reciprocity ANS: A See Exhibit 15.5 PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

REF: p. 498

110. Why are market or industry-based salesforce structures gaining popularity in today’s competitive selling environment? a. Being conversant with one industry or market allows sales reps to “specialize” and offer better solutions to customers. b. Customers have demanded this type of sales structure due to historically poor track records of geographically based salesforces. c. They are easier and less time intensive for sales management to administer. d. They are less expensive to organize than traditional geographical-based structures. ANS: A REF: p. 498

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

111. For sales reps and sales managers alike, empathy skills are crucial to their success. What is empathy? a. the ability to skillfully negotiate b. the ability to motivate people c. the ability to listen and understand d. the ability to remain open to new ideas ANS: C REF: p. 498

15-28

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Higher order

Digital Cookware has developed a new kind of skillet that should make cooking easier for many non-chefs. The skillet has a display on its handle that beeps to alert the cook when the pan’s target temperature is reached. With the aid of an accompanying cookbook, the skillet will take much of the guesswork out of cooking. Digital Cookware is a small company, and it has invested considerable money in developing this new technology, which it eventually hopes to use in an entire line of pots and pans. It has run some small ads for the new skillet in cooking magazines and been featured on some morning talk shows. It needs a quick infusion of cash to maintain its current operational level and to develop the rest of the cookware line. Digital Cookware is considering some kind of sales promotion. 112. Refer to Digital Cookware. The company’s first task is to define its exact sales promotion objective. If the goal of the company is to persuade customers to buy its brand of skillet as opposed to one of the skillets made by its competition, what should it do? a. give away samples to prospective customers b. use on-pack coupons c. run a cooking contest that has contestants enter recipes that use the new skillet d. institute a loyalty marketing program ANS: C See Exhibit 15.1. PTS: 1 DIF: Application BLM: Higher order

REF: p. 474

OBJ: 1

113. Refer to Digital Cookware. Why would coupons probably be an unsuitable sales promotion for this company? a. Customers make too-frequent use of coupons. b. Coupons cannot support any on-line sales of the new product, which might be used to increase sales volume. c. Coupons are typically used for repeat purchases by actual customers. d. Coupons are ineffective at encouraging trial purchases. ANS: C Coupons are very usable in on-line sales. Most coupons are not redeemed. Coupons are an excellent tool for encouraging trial purchase. PTS: 1 DIF: Application BLM: Higher order

REF: p. 477

OBJ: 2

15-29

114. Refer to Digital Cookware. Why might a rebate be a good sales promotion for Digital Cookware to use? a. Rebates are useful in building long-term relationships with customers. b. Rebates create mutually beneficial relationships between the manufacturer and its customers. c. Rebates can be piggybacked with similar products. d. Rebates are good at enticing purchases, but most rebates are not redeemed. ANS: D Building long-term relationships describes a loyalty marketing program. Sweepstakes and contests generate publicity. Piggybacked is a term used with sampling. PTS: 1 DIF: Application BLM: Higher order

REF: p. 478

OBJ: 2

115. Refer to Digital Cookware. Which of the following trade sales promotions would be inappropriate for Digital Cookware to use? a. store demonstrations b. event sponsorship c. trade shows d. push money ANS: B Event sponsorship is a public relations activity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 484

OBJ: 3

116. Refer to Digital Cookware. If Digital Cookware offered the sales associates for a chain of cooking stores a bonus for each digital skillet they sold, it would be an example of which of the following? a. a trade rebate b. a trade allowance c. pull money d. push money ANS: D Push money is money offered to channel intermediaries. PTS: 1 DIF: Application BLM: Higher order

15-30

REF: p. 484

OBJ: 3

The Entertainment Book is jammed with discounts on dining, travel, and entertainment provided by both local and national businesses. It was created by Entertainment Publications over 30 years ago. People are so excited about good, cheap fun that they’re willing to pay between $40 and $50 for the book. Consumers justify the cost because total values offered in any Entertainment Book are worth hundreds of dollars. And as the books grow in popularity, more marketers are requesting that a coupon for their businesses be featured in the book. The book is a huge seller each year, and sales are growing steadily. More than 100,000 merchants, including 40,000 restaurants, are represented in The Entertainment Book, making it the largest national discount dining program. Further, The Entertainment Book is sold through clubs, youth groups, and schools. Entertainment Books creates and distribute ads, posters, fliers, and other sales materials to all its sales organizations. Entertainment Publications has teamed up with BP-Amoco, a major petroleum company in the United States, to provide a premium item called the MultiCard Savings Book. BP-Amoco distributes the book to all its MultiCard members. It contains local and national advertisers that are of interest to BP-Amoco members. In the United States, in a joint venture with American Airlines, Entertainment Publications created a program called AAdvantage Dining, which was offered to the airline’s frequent flyer customers as another way to earn miles. 117. Refer to The Entertainment Book. American Airlines’ distribution of the Entertainment Books is an example of which of the following? a. trade promotion b. advertising c. sales promotion d. publicity ANS: C Sales promotion consists of short-term incentives to the customer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 474

OBJ: 2

118. Refer to The Entertainment Book. The restaurants that offer coupons in The Entertainment Book are hoping to appeal to which of the following types of buyers? a. people who consistently look for quality b. loyal customers who could provide more repeat business c. people who go to only a select few restaurants and who could be called brand switchers d. people who go to a competitor’s restaurant none of the time ANS: B See Exhibit 15.1. All of the groups listed are targeted by sales promotions. PTS: 1 DIF: Application BLM: Higher order

REF: p. 476

OBJ: 1

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119. Refer to The Entertainment Book. What is the sales promotion objective of the Entertainment Books and the companies that sponsor coupons in the books? a. to improve returns on investment b. to control market share c. to raise funds d. to generate immediate purchase by customers ANS: D The books are distributed widely to generate immediate purchase by consumers, as is the goal of most coupons. PTS: 1 DIF: Application BLM: Higher order

REF: p. 477

OBJ: 1

120. Refer to The Entertainment Book. What did BP-Amoco use to enhance its relationships with its customers? a. trade allowances b. premiums c. coupons d. sampling ANS: B The MultiCard members were given a coupon book (a premium), not BP-Amoco coupons. PTS: 1 DIF: Application BLM: Higher order

REF: p. 478

OBJ: 2

Successful selling of complex products such as computer software requires excellent salespeople. Lack of quality service in the marketplace led Alan Hall, head of a small computer networking company, to open Technology Advancement Corporation in 1988. Today, Technology Advancement is a national field marketer with several divisions. The bulk of its business involves training and educating salespeople on the features, benefits, competitors, and market potential of Technology Advancement’s clients’ products. To date, Technology Advancement has focused on computer software and hardware makers and has launched most of the marquee names in the industry: Novell, Lotus Development, IBM, Microsoft, Apple Computer, Hewlett-Packard, Motorola, Intel, and Xerox, as well as smaller firms. Here’s how the Technology Advancement client relationship works for training. A marketer hires the company to promote its product or to launch a new product, and Technology Advancement assigns a team exclusively to that client. The team gathers and the client comes in and does the training. The training starts with explaining how personal selling fits the company strategy and how it differs from sales promotion. Latest developments in the selling process are explained with a special emphasis on networking, follow-up strategies, and postpurchase customer service. Many computer giants have reported that this type of training program has significantly affected their business.

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121. Refer to Technology Advancement. What is the advantage Technology Advancement is providing to computer firms? a. personal selling is better for complex products b. personal selling has more reach than other methods c. personal selling is less expensive on a per person contacted basis. d. personal selling is more effective than sales promotion ANS: A Personal selling is direct communication between a representative and one or more prospective purchasers of computers, for the purpose of educating the consumer and making a sale. PTS: 1 DIF: Application BLM: Higher order

REF: p. 485

OBJ: 4

122. Refer to Technology Advancement. Why is personal selling important in the computer industry? a. The number of potential customers has increased. b. The complexity of products has decreased. c. The value of the products is high. d. Products are standardized. ANS: C If the value of the product is high, customers usually need more information, demonstration, and someone to answer their questions. See Exhibit 15.2. PTS: 1 DIF: Application BLM: Higher order

REF: p. 485-486

OBJ: 4

123. Refer to Technology Advancement. When John Cason began selling IBM computers, he used what he had learned at the training seminar and called friends, relatives, and former business acquaintances to see if they were looking for new computer systems. What is this lead generation technique known as? a. cold calling b. networking c. qualifying d. quota driving ANS: B Networking uses friends, business contacts, coworkers, and so on for meeting potential clients. PTS: 1 DIF: Application BLM: Higher order

REF: p. 490

OBJ: 6

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124. Refer to Technology Advancement. One of the key areas of training provided by Technology Advancement Corporation involves postpurchase customer satisfaction surveys. What is this part of? a. sales presentation b. negotiation c. referral d. following up ANS: D Postpurchase satisfaction surveys are part of after-sale services, or following up activities. PTS: 1 DIF: Application BLM: Higher order

REF: p. 494

OBJ: 6

Kraft Foods recently reorganized its sales force, cut prices on key products, divested itself of lower-margin brands, and closed plants. The activity that has proven most effective has been the reorganization of the sales force. Kraft Food now has one sales force, compared to four originally. Its 3,500 sales staffers are responsible for its entire product portfolio. The sales force works in integrated sales teams organized around product lines and assigned a sales quota. Any new problems encountered by the sales teams are shared with other teams. The sales teams are encouraged to use the AIDA concept (attention, interest, desire, and action). The sales teams are well trained in networking, generating sales leads, sales forecasting, and negotiations. As a result of these changes, two-thirds of the Kraft portfolio showed a significant increase in market shares. 125. Refer to Kraft Foods. Why is the AIDA concept encouraged among the sales teams? a. It can help in the selling process. b. It can help in the communication process. c. It can help in the networking process. d. It can help in the cold calling process. ANS: A The steps of the selling process closely follow the AIDA concept (attention, interest, desire, and action). PTS: 1 DIF: Application BLM: Higher order

REF: p. 488

OBJ: 6

126. Refer to Kraft Foods. Which of the following is the identification of those firms and people most likely to buy Kraft products? a. the sales approach b. lead qualification c. the sales presentation d. prospecting ANS: D When Kraft identifies the firms most likely to buy its products, it is engaging in lead generation or prospecting. PTS: 1 DIF: Application BLM: Higher order

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REF: p. 490

OBJ: 6

127. Refer to Kraft Foods. Mallory, a junior salesperson for Kraft, has been given a list of all grocery retailers in her province. She has been instructed to call each number on the list and see if the respondent is interested in stocking several new Kraft product lines. What is Mallory doing? a. networking b. quota setting c. referring d. cold calling ANS: D Cold calling is a form of lead generation in which the salesperson approaches potential buyers without any prior knowledge of the prospects’ needs or financial status. PTS: 1 DIF: Application BLM: Higher order

REF: p. 491

OBJ: 6

128. Refer to Kraft Foods. Each Kraft sales team is given a statement of his or individual sales objectives, usually based on sales volume. What is this called? a. a quota b. an objective report c. an order forecast d. an account report ANS: A OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 496

Most colleges and universities have a campus activity board that brings entertainers and special events to campuses. To locate and hire these entertainers, many campuses send their student activity board members to one of the seven regional or the national NACA (National Association of Campus Activities) conventions. More than 100 entertainers, talent agencies, and companies that provide promotional services exhibit their products at these convention in an area similar to a trade show. (Conference attendees call this the Marketplace.) Approximately 20 entertainers are selected to present a short program (called a showcase) in which they get to demonstrate what they would do if hired to perform on campus. Many other entertainers have videos and CDs, which they hand out to student attendees. Only one or two members of any student group can actually set up a contractual agreement with an entertainer or his or her agency. Other student attendees provide input as to which entertainers best match the demographics of their institutions. 129. Refer to College Entertainers. When some of the entertainers visit campuses, they give free T-shirts to people who came to see them perform. What are these T-shirts examples of? a. premiums b. loyalty reminders c. informative advertising d. trade promotions ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 478

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130. Refer to College Entertainers. What are the entertainers’ showcases examples of? a. sampling b. reminder advertising c. event sponsorships d. product placement ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 481

131. Refer to College Entertainers. The entertainers and agency representatives engage in which of the following in the Marketplace? a. loyalty marketing programs b. all types of marketing communications c. personal selling d. transformational management ANS: C Types of marketing communications include billboards, which would not be found here. PTS: 1 DIF: Application BLM: Higher order

REF: p. 485

OBJ: 4

132. Refer to College Entertainers. The Marketplace gives the entertainers and the agencies that represent entertainers an opportunity to engage in which of the following? a. generating leads b. reminder advertising c. disintermediation d. supply chain management ANS: A OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 490

133. Refer to College Entertainers. The student activity board members who attended a NACA conference were approached by a talent agent who represents a group of comedians who have been known to use profane language in their routines. Several of the college students told the agent how poorly received that type of language was at their college. The agent promised the group the comedians he represented were able and willing to perform an act they could bring their grandmothers to see without being embarrassed. In this example, what was the agent doing? a. doing a preapproach b. handling objections c. qualifying leads d. using trade promotions ANS: B OBJ: 6

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PTS: 1 DIF: Application BLM: Higher order

REF: p. 493

134. Refer to College Entertainers. The student members might agree to pay lodging and travel expenses in return for the entertainer reducing his or her fees by $100. What is this called? a. creating a value chain b. countertrade c. engaging in cross-promotion d. closing the sale ANS: D OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 493-494

135. Refer to College Entertainers. Talent agents are typically paid 10 to 15 percent of the fees earned by the entertainers they represent. If the entertainer does not perform, the agents receive no money. For this amount of money, agents promote the entertainers, locate performing venues, engage in negotiation, and provide other similar services. This is the only money they earn from this relationship. What are talent agents typically paid? a. a straight fee plus a bonus b. a straight commission c. a salary plus a drawing account d. an equitable part of the monetary return ANS: B The talent agent acts as a salesperson for the entertainer. PTS: 1 DIF: Application BLM: Higher order

REF: p. 497

OBJ: 7

TRUE/FALSE 1. A sales promotion campaign could include any (or all) of the four promotional elements of the promotional mix. ANS: F Sales promotion is only one of the four promotional elements. Therefore, while a promotional campaign could include any of the four promotional elements, a sales promotion campaign can include only sales promotions. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 474

2. Marketers find it much easier to evaluate the effectiveness of advertising than the effectiveness of sales promotions. ANS: F Sales promotions are used because a marketer can measure how many people used a coupon. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 474

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3. Sales promotions are primarily short-term incentives. Immediate purchase is usually the goal of sales promotion. ANS: T OBJ: 1

PTS: 1

DIF: Definition

REF: p. 474

4. Although coupon distribution has been going up in Canada, redemption rates have been on the decline. ANS: T Coupon distribution by packaged-goods manufacturers has been steadily declining. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 477

5. When California Closets offers to pay $50 to customers who buy closet storage units from the company, it is an example of a premium offer. ANS: F It is an example of a rebate. PTS: 1

DIF: Application

REF: p. 478

OBJ: 2

6. Boxes of Kraft macaroni and cheese contain information on how consumers can receive a free apron that looks like the box by mailing the proofs of purchase from five boxes of microwaveable Kraft macaroni and cheese to the manufacturer. The apron is an example of a premium. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 478

7. A marketer who wants the greatest impact from a sweepstakes should offer one large prize rather than several smaller ones. ANS: F Offering several smaller prizes will make sure that customers are happy. No one likes to go away empty-handed. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 480

8. Point-of-purchase promotions are seldom used as a sales promotion tool because most purchase decisions are made before consumers ever enter a store. ANS: F Point-of-purchase promotions are an extremely important sales promotion tool because up to 70 percent of all purchase decisions are made in the store. PTS: 1 OBJ: 2

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DIF: Comprehension

REF: p. 482

9. A trade allowance is a price reduction offered by retailers to customers who are buying homogeneous shopping goods. ANS: F A trade allowance is a price reduction offered by manufacturers to intermediaries. PTS: 1

DIF: Definition

REF: p. 484

OBJ: 3

10. Hewlett-Packard offered $25 to individual Office Depot salespeople for each HP Laser Jet printer they sold. The $25 is push money. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 484

11. Trade shows are an excellent place to introduce new products to the marketplace. ANS: T REF: p. 484

PTS: 1 OBJ: 3

DIF: Comprehension

12. Manufacturers use trade promotions because they help manufacturers gain new distributors, obtain intermediary support for consumer promotions, and improve trade relations. ANS: T REF: p. 484

PTS: 1 OBJ: 3

DIF: Comprehension

13. Eli Tillotson represents the DEL Medical Systems Group. He is currently talking to three veterinarians’ offices to try to convince them to order his company’s new universal X-ray machine. Tillotson is engaged in personal selling. ANS: T OBJ: 4

PTS: 1

DIF: Application

REF: p. 485

14. Personal selling becomes a more important promotional tool as product complexity and buyer risk increase. ANS: T See Exhibit 15.2. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 485

15. Consultative selling is also called relationship selling. ANS: T REF: p. 486

PTS: 1 OBJ: 5

DIF: Comprehension

16. Relationship selling is typically used to sell industrial-type goods, such as oil-drilling equipment. ANS: T REF: p. 486

PTS: 1 OBJ: 5

DIF: Comprehension

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17. With relationship selling the salesperson spends most of his or her contact time with the prospect talking about the product because the salesperson does not want to waste the customer’s time. ANS: F With relationship selling, the salesperson spends most of his or her time attempting to build a problem-solving environment with the customer. See Exhibit 15.3. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 486

18. Salesperson Tami Hravian’s products are liked by her clients. These clients give Hravian names of others who may also like her products. Hravian is using cold calling to generate leads. ANS: F This is a referral. PTS: 1

DIF: Application

REF: p. 490

OBJ: 6

19. In relationship selling, salespeople focus more time on generating leads than on qualifying leads. ANS: F See Exhibit 15.4. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 490

20. To qualify a sales lead, a salesperson must identify who in an organization has the authority to buy the product and must close the sale with that individual. ANS: F Qualifying a sales lead consists of identifying who in an organization has the authority to buy the product and assessing which prospects can afford it. PTS: 1

DIF: Definition

REF: p. 491

OBJ: 6

21. Before approaching the customer, a salesperson should learn as much as possible about the prospect’s organization and its buyer. This process is called sales acculturation. ANS: F This is the definition of the preapproach. PTS: 1

DIF: Definition

REF: p. 491

OBJ: 6

22. Salespeople should view objections as requests for information. ANS: T REF: p. 484

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PTS: 1 OBJ: 6

DIF: Comprehension

23. Fred Farkle typically negotiates the price with his prospective customers because he knows price is the most effective negotiating tool when closing a sale. ANS: F Effective negotiators avoid using price as a sales tool. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 493

24. The final selling duty for most successful salespeople is closing the sale. ANS: F A salesperson’s responsibilities do not end with a sale; a follow-up is critical to encouraging repeat business. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 494

25. Meta Singh is expected to sell two surgical laser systems each month. This sales objective is an example of a quota. ANS: T OBJ: 7

PTS: 1

DIF: Application

REF: p. 496

26. Paul Metzger is a headhunter—a specialized employment agent. For every client he places, Metzger receives a finder’s fee equal to 10 percent of the client’s first-year salary. This finder’s fee is paid by the hiring firm and represents his entire pay. This is an example of a straight salary system. ANS: F This is a straight commission system. PTS: 1

DIF: Application

REF: p. 497

OBJ: 7

27. Raul earns a 20 percent commission on every sale he makes to supplement his base income of $20,000. This is an example of a straight commission system. ANS: F This is a combination system. PTS: 1

DIF: Application

REF: p. 497

OBJ: 7

28. The final stage of sales management is evaluating the effectiveness and performance of the sales force. ANS: T OBJ: 7

PTS: 1

DIF: Definition

REF: p. 499

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ESSAY 1. What is sales promotion? What are the objectives of sales promotion? ANS: Sales promotion often comprises short-term incentives offered to the customer to induce the purchase of a particular product or service. Sales promotion offers consumers incentives to buy via coupons, premiums, contests, and free samples. Immediate purchase is usually the goal of sales promotion. Specifically, the promoter attempts to increase trials, boost consumer inventory, or encourage repurchase. A corollary objective may be to increase the effectiveness of advertising. PTS: 1

DIF: Application

REF: p. 474

OBJ: 1

2. Oakley Grove and Abraham Enterprises both market oranges and grapefruits. Oakley Grove has been in business for almost 40 years, while Abraham Enterprises has been selling citrus fruit for only about 18 months. Abraham Enterprises would like to take away business from Oakley Grove, and Oakley Grove wants to retain all of its customers. Explain which sales promotions each should emphasize in its marketing mix. ANS: Oakley Grove wants to maintain its current customers. To achieve this objective, it can create a loyalty marketing program. Customers could earn points for each pound purchased, and after acquiring a certain number of points, they could be redeemed for a free gift box. Also, bonus packs would be a good sales promotion to use and would give customers an incentive to stock up. Another possibility is to have customers collect proofs of purchases off the Oakley Grove packages and redeem those for a premium, such as a juicer. Abraham Enterprises would need to use different sales promotions because its goal is to persuade customers to switch from Oakley Grove to its brand of fruit. One method it could try is sampling, especially if it believes that its product is superior to Oakley Grove. It could also use a sweepstakes or a contest (such as who makes the best dessert using oranges) to gain publicity for its product and to draw attention to the products it produces. It, too, could use a premium offer, but it would need to be something unique (such as the bounty of one orange tree for a year) so that it could make a strong impression on the customers whom it wants to gain from its competitors. see Exhibit 15.1 PTS: 1

DIF: Application

REF: p. 474

OBJ: 1

3. Consumer sales promotion seeks to reach new users, keep current users, and entice users to stock up. It can also be used to reinforce advertising for the good or service. Name and define four popular consumer sales promotional tools. ANS: Coupons are certificates given to consumers entitling them to an immediate price reduction when they purchase the item. Premiums are items offered to the consumer, usually with proof of purchase required. The premium should be related to the product in some way.

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Loyalty marketing programs or frequent-buyer programs reward loyal consumers for making multiple purchases of a particular good or service. Contests are promotions in which participants compete for prizes based on some skill or ability. Sweepstakes allow anyone to participate and are characterized by chance drawings for prizes. Sampling refers to free samples and trial sizes. Sampling allows consumers to try products with minimal risk. Trial sizes reduce the risk of trying new products. They also eliminate the problem of being stuck with a large quantity of a disliked product. Point-of-purchase promotions are special displays set up at retail locations to build traffic, advertise the product, or induce impulse buying. On-line sales promotions are a way to boost website traffic by giving away free services and/or equipment. They also include sites that distribute coupons on-line as a way to counter the high cost and low redemption rate of coupons in print media. Some Internet sites also use loyalty programs; users are rewarded with points, which can be redeemed later. Sampling is also possible at some websites. PTS: 1

DIF: Application

REF: p. 477-483

OBJ: 2

4. You are the sales promotion manager for Vita-Balls, a new children’s vitamin that is designed to be chewed like gum. Your company uses a pull strategy, and you are responsible for recommending sales promotion tools to accomplish this strategy. Describe three specific sales promotion activities you would recommend for Vita-Balls. ANS: Because Vita-Balls uses a pull strategy, consumer sales promotion tools should be used. Coupons for discounts on Vita-Balls could be mailed directly to parents or could be placed in parenting magazines. Premiums could be offered to purchasers of Vita-Balls, with proof of purchase required. The premium should be related to the product, such as books on common parenting problems, a subscription to a nutrition magazine, or other children’s health care products. Loyalty marketing programs or frequent-buyer programs could also be offered, such as offering one free container of Vita-Balls after 12 are purchased. Contests could be offered to parents. Entrants could write an essay about Vita-Balls or send in a photograph of their child, with the winning picture appearing on the new package of Vita-Balls. A sweepstakes could allow anyone to enter a random drawing for a free year’s supply of Vita-Balls. Sampling would allow parents to try the product without risk. Free small sizes could be mailed to parents.

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Point-of-purchase promotions could be set up at drugstores or grocery stores to attract new customers and encourage current customers to try Vita-Balls. Using on-line sales promotions, the manufacturer of Vita-Balls could set up a website where it provided on-line coupons for the vitamin, which could be redeemed at retail stores, as well as hints on how to get children to eat more nutritiously. It could award points for visiting this site and have the points redeemable for Vita-Balls. PTS: 1

DIF: Application

REF: p. 477-483

OBJ: 2

5. Business-to-business marketers use many of the same sales promotion tools used in consumer promotions. There are several tools, however, that are unique to these marketers. Name and briefly describe five of these unique sales promotion tools. ANS: Trade allowances are price reductions offered by manufacturers to intermediaries. The price reduction or rebate is in exchange for performance of specified functions or purchasing during special periods. Push money is a bonus that intermediaries’ sales representatives receive for pushing the manufacturer’s brand. Training programs may be provided for an intermediary’s personnel if the product is complex. Free merchandise may be offered in lieu of quantity discounts. It may also be used as payment for trade allowances provided though other sales promotions. Store demonstrations can be performed at the retail establishment for customers. Customers can then sample products or see how they are used. Business meetings, conventions, and trade shows are all ways to meet other vendors and potential customers. PTS: 1

DIF: Application

REF: p. 483-485

OBJ: 3

6. You are the sales promotion manager for the Pal-o-matic, an automated pallet dispenser used in grocery warehouses. Your company uses a push strategy, and you are responsible for recommending sales promotion tools to accomplish this strategy. Describe three specific sales promotion activities you would recommend for the Pal-o-matic. ANS: Because the Pal-o-matic requires a push strategy, tools unique to trade sales promotion should be used. Trade allowances could be offered to wholesalers in the form of price reductions or rebates. In exchange, wholesalers would promise to purchase during the holiday season or perform warehousing functions for the Pal-o-matic. Push money could be offered as a bonus to the wholesaler’s sales force for pushing the Pal-o-matic brand.

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Training programs could be provided for the intermediary’s personnel. The sales force could be trained in selling techniques and operation of the Pal-o-matic. Free merchandise in the form of extra pallets may be offered in lieu of quantity discounts. Or one free Pal-o-matic could be offered if the wholesaler pays for all further promotional expenditures. Demonstrations could be performed at grocery warehouses to show how the Pal-o-matic works. Business meetings, conventions, and trade shows are all ways to meet other vendors and potential customers of the Pal-o-matic. PTS: 1

DIF: Application

REF: p. 483-485

OBJ: 3

7. Personal selling offers several advantages over other forms of promotion. List four of these advantages. ANS: • Personal selling can be used to provide a detailed explanation or demonstration of the product. This capability is especially needed for complex or new goods or services. • Salespeople have the freedom to vary the message according to the motivations and interests of each prospect. When prospects raise objections, counterarguments and explanations can be provided by the salesperson. • Personal selling can be directed only to qualified prospects, whereas other forms of promotion waste coverage. • Personal selling costs can be controlled easily by adjusting the size of the sales force in one-person increments. Commission plans can also help expenses. Personal selling is more effective in closing the sale than other promotional tools. •

PTS: 1

DIF: Application

REF: p. 485

OBJ: 4

8. Certain customer and product conditions indicate personal selling might work better than other forms of promotion. List four of these conditions. ANS: Personal selling is more important when: • The product has a high value. • The product is custom-made. • There are few potential customers. • The product is technically complex. Customers are concentrated. •

PTS: 1

DIF: Application

REF: p. 485

OBJ: 4

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9. Compare and contrast traditional personal selling and relationship selling. ANS: Traditional selling: • Focuses solely on the sales transaction • Is concerned with making a one-time sale and moving on to the next transaction • Emphasizes a planned presentation for the sole purpose of making the sale • Attempts to persuade buyers to accept a point of view or convince the buyer to take some action • Has objectives that are frequently at the expense of the buyer (win-lose outcome) Relationship or consultative selling: • Emphasizes the relationship that develops between a salesperson and a buyer • Builds, maintains, and enhances interactions with customers to develop long-term satisfaction through mutually beneficial partnerships • Develops trust over time Emphasizes solution development over a long-term relationship (a win-win outcome) •

PTS: 1

DIF: Application

REF: p. 485-486

OBJ: 5

10. What are the seven steps in the personal selling process? ANS: 1. 2. 3. 4. 5. 6. 7. PTS: 1

Generating sales leads Qualifying sales leads Doing a needs assessment Developing solutions Proposing solutions through a sales presentation Closing the sale Following up DIF: Application

REF: p. 488

OBJ: 6

11. The first step in the personal selling process is sales lead generation. Define lead generation. Then explain why referral is a superior method for generating leads. ANS: Lead generation, or prospecting, is the identification of those firms and people most likely to buy the seller’s offerings. These firms or people become “sales leads” or “prospects.” Referrals are recommendations from customers or business associates. The advantages of referrals over other forms of prospecting include highly qualified leads, higher closing rates, larger initial transactions, and shorter sales cycles. PTS: 1

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DIF: Application

REF: p. 490

OBJ: 6

12. Franco Ziffarelli is a salesperson for Allied Pets, a company that sells veterinarian supplies. He has a prospect who is showing interest in learning more about his company’s products, so now he must qualify this sales lead. What will Franco do? ANS: Recognize a need. First, the salesperson must determine if the prospect has a need that is not being satisfied. Preliminary interviews and questioning may help in this process. Determine buying power. To avoid wasting time and money, the salesperson should identify the buying authority before making a presentation. An organization chart, secretary, or direct questioning can qualify the prospect. Telemarketing may also help. Additionally, information on a firm’s credit standing can be obtained from credit and financial reporting services. For smaller firms, local credit bureaus can provide information. Telemarketing may help as well. Determine receptivity and accessibility. The prospect must be willing to see the salesperson and be accessible to the salesperson. PTS: 1

DIF: Application

REF: p. 491

OBJ: 6

13. Franco Ziffarelli is a salesperson for Allied Pets, a company that sells veterinarian supplies. He is working on a needs assessment for East Athens Veterinary Clinic. What information will he need to find out about East Athens? ANS: A consultative salesperson must know everything there is to know about: • The products that Allied Pets offers • East Athens as a customer and have an understanding of its specific needs • The competition East Athens faces • The industry East Athens operates in PTS: 1

DIF: Application

REF: p. 492

OBJ: 6

14. What are the tasks in the sales management process? ANS: • • • • • •

Defining sales objectives and the sales process Determining the sales force structure Recruiting and training the sales force Compensating and motivating the sales force Supervising the sales force Evaluating the sales force

PTS: 1

DIF: Application

REF: p. 495

OBJ: 7

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15. You are the sales manager for Allied Pets, a manufacturer of veterinarian supplies. You are responsible for designing the training program for its new salespeople. List four major areas in which you would like your salespeople to receive instruction. ANS: • • • • •

Company policies and practices Selling techniques Product knowledge Industry and customer characteristics Nonselling duties

PTS: 1

DIF: Application

REF: p. 495

OBJ: 7

16. There are three basic compensation methods for salespeople. Name and define the three methods. Under what conditions might companies use each type of plan? ANS: Straight commission provides salespeople with a specified percentage of their sales revenue. No compensation is received until a sale is made. Firms with limited resources or firms selling high-priced items typically use commission plans. Other companies may use commission as a way to reward sales performance. Many major retail chains are converting to straight commission programs to boost sales and upgrade service. Straight salary compensates salespeople with a stated salary regardless of their sales productivity. This plan may be used in firms in which performance of nonselling activities is extremely important. The salary system is also used when a team selling approach is used, or when territories require an extensive amount of prospecting. Combination systems offer a salesperson a base salary plus an incentive. The incentive is a commission or bonus. This system is used by firms that wish to combine the advantages of the commission and salary systems. Base salaries allow control over nonselling tasks, while the added commission provides incentive to produce. PTS: 1

15-48

DIF: Application

REF: p. 497

OBJ: 7

Chapter 16—Pricing Concepts MULTIPLE CHOICE 1. Why are marketing managers finding it more difficult to set prices in today’s environment? a. Inflationary and recessionary periods have made customers less price sensitive. b. Fewer dealer and generic brands are available because the competition has been eliminated. c. Marketing managers are finding it difficult to compare prices between suppliers. d. The high rate of new product introductions has led to careful re-evaluation by consumers. ANS: D With constant new product introductions, consumers have many alternative goods to choose from, and selecting the right price becomes a very complicated task for the marketing manager. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 507

2. According to the text, how is price best described? a. the cost in dollars for a good or service as set by the producer b. the value of a barter good in an exchange c. money exchanged for a good or service d. the perceived value of a good or service ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 512

3. Which of the following BEST describes revenue? a. It equals price minus costs. b. It equals quantity sold times profit margin. c. It equals price of goods times quantity sold. d. It equals return on investment. ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 512

4. Which of the following pay for every activity of the company? a. investments b. prices c. revenues d. profits ANS: C Revenue is price times units sold, or the total inflow of capital that is available to pay for the costs of manufacturing the good and running the business. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 512

16-1

5. What is money left over after paying for company activities? a. a current asset b. return on investment c. a contribution margin d. profit ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 512

6. According to the text, which of the following statements about price is true? a. Price and revenue are synonyms. b. Price is not necessarily based on the satisfaction consumers receive from a product. c. High prices result in high profits. d. Price always equals some monetary figure. ANS: B Price can relate to anything with perceived value, not just money. The price paid is based on the satisfaction consumers expect to receive from a product, not necessarily what they actually receive. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 512

7. For convenience, pricing objectives can be divided into three categories. What are they? a. perceived, actual, and unique-situational b. profit-oriented, sales-oriented, and status quo c. monopolistic, fixed, and variable d. refundable, competitive, and attainable ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 513

8. What is an organization using when it sets its prices so that total revenue is as large as possible relative to total costs? a. sales maximization b. profit maximization c. status quo pricing d. market share pricing ANS: B OBJ: 2

16-2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 513

9. The pricing policy used by Middleton Industries, manufacturer of Renaissance charms for bracelets and necklaces, is to set prices so that its retail prices are as high as the market will tolerate. Additionally, Middleton strives to keep its costs at an industry low by using silver and gold overlays over charms made of cheap base metal. This is an example of what type of policy? a. profit maximization b. market share pricing c. demand-oriented d. sales maximization ANS: A Profit maximization means setting prices so that total revenue is as large as possible relative to total costs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 513

OBJ: 2

10. Hal Macini, owner of Evergreen Landscaping, is more interested in earning customer goodwill than striving for maximum profit. He determines his prices by maintaining the company’s profitability at a level that gives him a good living but will never make him a rich man. What is Macini basing his pricing policy on? a. creating the most sales possible b. maintaining stable sales levels c. earning satisfactory profits d. decreasing consumer demand ANS: C The objective of satisfactory profits is characterized by seeking a level of profits that is satisfactory to management and owner(s). PTS: 1 DIF: Application BLM: Higher order

REF: p. 513

OBJ: 2

11. What measures the overall effectiveness of management in generating profits with its available assets? a. return on investment b. efficiency maximization c. target-on-sales d. retained earnings ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 514

16-3

12. The Fenton Company produces memorial bricks, which veterans’ organizations, Chambers of Commerce, and other service organizations sell as fund raisers. The company has a target return on investment of 13 percent. This means that the Fenton Company has what type of pricing objective? a. sales maximization b. status quo c. market share maximization d. profit-oriented ANS: D Targeted ROI is one of the most common types of profit-oriented pricing objectives. PTS: 1 DIF: Application BLM: Higher order

REF: p. 514

OBJ: 2

13. Parrish Farms produces homemade cheese. Last year, it managed to exceed its target ROI for the current fiscal year. The following results were found on its financial statements: Gross Revenues: Gross Profits: Net Profits after Tax:

$250,000 $100,000 $ 50,000

Total Assets: Total Liabilities: Owner’s Equity:

$500,000 $200,000 $300,000

What was the actual return on investment (ROI) for Parrish Farms? a. 6.67 percent b. 10 percent c. 28 percent d. 22 percent ANS: B ROI is net profits after taxes divided by total assets: $50,000 ? 500,000 = 10. PTS: 1 DIF: Application BLM: Higher order

REF: p. 514

OBJ: 2

14. Mickaela McAuliffe wants to open a store to sell quilting supplies. She cannot decide whether to base her store’s pricing objectives on market share, dollar sales, or unit sales. Regardless of which she chooses, how can her firm’s pricing objective be categorized? a. as profit-oriented b. as cost-oriented c. as sales-oriented d. as status quo ANS: C Sales-oriented pricing objectives are based on either market share or dollar or unit sales. PTS: 1 DIF: Application BLM: Higher order

16-4

REF: p. 515

OBJ: 2

15. A company using market share pricing has what type of pricing objective? a. profit-oriented b. demand-oriented c. supply-oriented d. sales-oriented ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 515

16. Under which of the following conditions will companies with low market share be most likely to fail? a. competing in an industry requiring market power and economies of scale b. competing in a slow-growth industry c. competing in an industry with few product changes d. competing in an industry that makes frequently purchased items ANS: A A larger market share is required to boost economies of scale and market power. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 515

17. Trident makes luxury bicycles. Its target market has been people who willingly pay $1,000 or more for their bicycles, and it acknowledges that its prices are high. Trident has lowered prices to target customers who want a good bike but who can’t or won’t spend $1,000 for one. Trident is most likely using what type of pricing objective? a. status quo or satisfactory profits b. profit maximization or target return on investment c. demand-oriented or supply-oriented d. market share or sales maximization ANS: D By lowering prices, Trident can attract new buyers, thus increasing market share and sales volume. PTS: 1 DIF: Application BLM: Higher order

REF: p. 515-516

OBJ: 2

18. At the end of February, the Hearts and Flowers store reduced the price on all of its Valentine’s Day’s candy by 50 percent in order to liquidate this inventory. What type of pricing strategy is being used in this example? a. target return on investment b. satisfactory profit c. sales maximization d. profit maximization ANS: C Sales maximization ignores profit and competition for the purpose of raising cash. PTS: 1 DIF: Application BLM: Higher order

REF: p. 516

OBJ: 2

16-5

19. Sunny Florist is a flower shop that has recently moved to a new, larger location. At this new location, it has been unable to attract sufficient customers. Bonita Cho, its owner, does not have the cash to pay the current loan installment due on the building and inventory. Cho has decided to reduce all merchandise prices by at least 50 percent for a weekend sale so she can at least make her loan payment. Her pricing objective can be classified as which of the following? a. satisfactory profits b. asset maximization c. sales maximization d. market share maximization ANS: C The strategy described will maximize sales dollars, but will not maximize or improve any of the other objectives in the long term. PTS: 1 DIF: Application BLM: Higher order

REF: p. 516

OBJ: 2

20. As a short-term pricing objective, which of the following can be effectively used on a temporary basis to sell off excessive inventory? a. profit-oriented pricing b. market share pricing c. profit maximization d. sales maximization ANS: D Sales maximization pricing is a short-term price reduction to increase sales. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 516

21. If a company’s pricing objective is to meet the competition or to maintain existing prices, what type of pricing is it using? a. status quo b. target return on investment c. market share d. head-on ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 516

22. Which of the following statements describes an advantage of status quo pricing? a. Status quo pricing causes price wars. b. Status quo pricing requires little planning. c. Status quo pricing is derived from actual costs of manufacturing. d. Status quo pricing maintains the organization’s differential advantage. ANS: B Status quo pricing requires little planning because it involves just copying the competitions’ pricing policies. PTS: 1 OBJ: 2 16-6

DIF: Comprehension BLM: Remember

REF: p. 516

23. Queeg Industries sells all types of artists’ paint brushes. When the owner of Queeg learned that Patterson Art, one of its biggest competitors, had lowered its prices on all synthetic brushes by 5 percent, he did the same. This is an example of what type of pricing? a. status quo b. cost-plus c. market share d. predatory ANS: A Status quo pricing is best described as meeting the competition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 516

OBJ: 2

24. Although many factors can influence price, what are the primary determinants? a. the demand for the good and the cost to the seller b. demand by the consumer and perceived quality c. stage of the product life cycle and costs to the consumer d. costs of manufacturing and distribution ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 516

25. Which of the following is defined as the quantity of a product that will be sold at various prices for a specified period? a. demand b. market share c. supply d. revenue ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 516

26. The price of the good or service is a key decision for a marketer because it most significantly and directly affects which of the following? a. the product’s promotion b. the product’s distribution c. the product’s demand d. the product’s quality ANS: C The quantity of a product that people will buy depends on its price. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 516

16-7

27. The quantity of a product that people will buy/demand is most dependent on which of the following? a. supply b. quality parameters c. price d. promotion strategy ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 516

28. Benito is the manager of a souvenir shop in Panama City, Florida. He has decided to graph the demand per week for fresh orange juice because its price varies as the supply of fresh oranges varies. The graph indicates a demand schedule that slopes downward and to the right. This graph indicates that the quantity of juice demanded increases as which of the following occurs? a. price decreases b. cost increases c. price increases d. supply increases ANS: A The lower the price, the more goods or services will be demanded. PTS: 1 DIF: Application BLM: Higher order

REF: p. 517

OBJ: 3

29. Autumn Fair sells reusable plastic stencils for use in decorating. When graphed, the demand schedule for Autumn Fair brand stencils forms a straight line. If at $3 per stencil, 500 stencils are demanded, and at $4 per stencil, 450 stencils are ordered, how many will be ordered at a price of $6 per stencil? a. 333 b. 350 c. 400 d. 375 ANS: B With a linear demand curve, the slope of the line will remain constant. In this example, for every $1 that price increases, sales will decrease by 50 stencils. PTS: 1 DIF: Application BLM: Higher order

16-8

REF: p. 517

OBJ: 3

30. Aviary Industries produces and markets unfinished birdhouses to craft retailers. When graphed, the demand schedule for its birdhouses is a straight line. If one birdhouse costs $20, 5,000 unfinished houses are sold. At $25, 4,500 birdhouses are sold. How many birdhouses will be sold if the price per house is increased to $30? a. 3,750 b. 3,500 c. 4,250 d. 4,000 ANS: D With a linear demand curve, the slope of the line will remain constant. In this example, for every $5 increase in price, sales will decrease by 500 birdhouses. PTS: 1 DIF: Application BLM: Higher order

REF: p. 517

OBJ: 3

31. Which way do most demand curves slope? a. upward and to the right b. vertically c. downward and to the right d. downward and to the left ANS: C For most products when prices increase, demand will decrease. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 517

32. The quantity of products that will be sold in the market at various prices for a specified time period is referred to as which of the following? a. demand b. supply c. equity d. inventory ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 516-517

33. What is the term for the quantity of a product that will be offered to the market by suppliers at various prices for a specified period? a. supply b. equity c. demand d. inventory ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 517-518

16-9

34. At a price of $6 each, 314 people want to buy sun visors designed especially for volunteers at the Peachtree Road Race, and only 314 such visors were available. In this example, a state of which of the following has been achieved? a. price equilibrium b. symmetry c. marketing balance d. commerce stability ANS: A REF: p. 518

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

35. What is the point at which there is no inclination for the price to rise or fall? a. price symmetry b. price stability c. price status quo d. price equilibrium ANS: D REF: p. 518

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

36. When Richard opened The Kite Hut, he charged $7 for kites and could not keep up with demand. The Kite Hut has raised the price to $10, and now Richard is still selling all the kites he carries, but he is not forced to reorder on a daily basis. The $10 price is probably which of the following? a. a price equilibrium b. an inelastic price c. a symmetrical price d. an inventory equalizer ANS: A When demand and supply are approximately equal, price equilibrium is reached. PTS: 1 DIF: Application BLM: Higher order

REF: p. 518

OBJ: 3

37. The responsiveness or the sensitivity of consumer demand to changes in price occurs when consumers buy more or less of a product when the price changes. What is this called? a. the break-even point b. elasticity of demand c. the point of equilibrium d. unitary revenue ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 518

38. When consumers are sensitive to price changes, which of the following occurs? a. elastic demand b. inelastic supply c. elastic supply d. inelastic demand ANS: A OBJ: 3 16-10

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 518

39. What happens when demand is elastic? a. As price goes up, revenue does not change. b. As price goes down, revenue goes down. c. As price goes down, revenue does not change. d. As price goes up, revenue goes down. ANS: D If demand is elastic, price increases will decrease demand by a larger amount, reducing total revenue. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 518

40. In a discount store Lee found a “sun kit” containing a beach towel, a sun visor, and sun block. The items, which were sold together, retailed at $18.50, but were marked down to $12.99. The retailer sold one for $18.50 and six at $12.99. Demand for the sun kit package is which of the following? a. elastic b. inelastic c. synergistic d. unitary ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 518

41. What occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same? a. highly elastic demand b. fixed elasticity c. inelastic demand d. unitary elasticity ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 518

42. Concha y Toro, a Chilean wine, has reduced the price of one bottle from $10 to $8. It previously sold 420 bottles in the month prior to the price reduction, and it now sells 525 bottles per month. What is being experienced? a. unitary elasticity b. elastic demand c. consumer surplus d. inelastic demand ANS: A Under unitary elasticity, the increase in demand exactly offsets the decrease in price. 420 × $10 and 525 × $8 = $4,200. PTS: 1 DIF: Application BLM: Higher order

REF: p. 518

OBJ: 3

16-11

43. Procter & Gamble dropped the price of Pringle Potato Chips due to price competition and consumer demand. As a result of the price reduction, Procter & Gamble increased unit sales and earnings by 10 percent due to which of the following? a. market share fluctuations b. increases in both supply and demand c. elasticity of demand d. price wars with other snack food makers ANS: C When Procter & Gamble reduced prices, sales and revenues increased. This shows that the demand for chips is elastic. PTS: 1 DIF: Application BLM: Higher order

REF: p. 518-519

OBJ: 3

44. Generally speaking, a firm can set its price higher when which of the following is true? a. demand is more fixed b. demand is more inelastic c. demand is more elastic d. demand is more variable ANS: B REF: p. 519

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

45. When is demand inelastic? a. if price stays the same and revenue goes down b. if price goes down and revenue goes down c. if price goes up or down and revenue stays the same d. if price goes up and revenue goes down ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 519

46. When price decreases and total revenue falls, demand is which of the following? a. absolute b. stable c. elastic d. inelastic ANS: D OBJ: 3

16-12

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 519

47. Critics claim bank ATMs take advantage of which customers who suffer a poverty of time and have a strong need for convenience? a. customers with inelastic demand schedule b. customers with elasticity of demand c. customers with unitary supply and demand d. customers with supply characteristics ANS: A Customers are paying a premium for the convenience of ATM use. PTS: 1 DIF: Application BLM: Higher order

REF: p. 519

OBJ: 3

48. Dosta Mattress Company manufactures and sells mattresses to retailers that then put their own store brand names on the product. At a price of $1,000, it sold 100 mattresses. It dropped its price to $600 and sold 175 mattresses. Regarding elasticity, what is demand for the mattresses? a. unitary b. inelastic c. asymmetrical d. elastic ANS: D The first price is $1,000 with total revenue of $100,000; the second price is $600 with total revenue of $100,500. Therefore, price dropped, and total revenue went up. PTS: 1 DIF: Application BLM: Higher order

REF: p. 519

OBJ: 3

49. Consumers exhibit less price sensitivity for all of the following reasons EXCEPT which one? a. when the product they are buying is unique b. when substitutes are hard to find c. when the product in question is in high demand d. when the total expenditure for a product is high relative to their income ANS: D REF: p. 519-520

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

50. Which of the following factors directly affect the elasticity of demand? a. the other uses of a product b. the inputs needed to manufacture the product c. the unavailability of substitute goods d. a product’s warranty ANS: A Inputs at time of manufacture only indirectly affect the demand, if at all. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 520

16-13

51. Which of the following use complex mathematical software to profitably fill unused capacity? a. yield management systems b. service management systems c. capacity correlation systems d. capacity management software ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 521

52. What are yield management systems used for? a. to profitably fill unused capacity b. to determine the availability of product substitutes in complex industries that are experiencing rapid change c. to predict necessary service levels to achieve revenue goals d. to determine whether it is financially more feasible to buy a new product or repair a broken one ANS: A OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 521

53. Hostlight Industries operate a chain of moderately priced motels across Canada. The company has many businesses competing for tourist dollars, and some nights during the tourist season its motels are only half full. Other nights, Hostlight has to turn away guests because there are no vacancies. Assuming the quality of the room and the services provided by the motels remain the same, Hostlight Industries could use which of the following to fill unused rooms? a. service forecasting tools b. a capacity correlation system c. capacity maintenance tools d. a yield management system ANS: D A yield management system is complex mathematical software used to profitably filled unused capacity. PTS: 1 DIF: Application BLM: Higher order

REF: p. 521

OBJ: 4

54. Which of the following statements about YMS is true? a. YMS are mathematically complex systems to make use of underutilized capacity and reduce the cost of perishability. b. YMS are complex pricing systems used to set equilibrium pricing points. c. The first use of YMS was in the car industry as it looked for ways to compete with imports. d. YMS cannot be used by any other businesses but services. ANS: A YMS was first used in the airline industry, but it is now used by automobile manufacturers to make use of underutilized capacity. PTS: 1 OBJ: 4

16-14

DIF: Comprehension BLM: Higher order

REF: p. 521

55. Which of the following is most likely to be a variable cost for a manufacturer of amusement park rides? a. annual lease of a tractor-trailer used to deliver rides to buyers b. warehouse rent to store semi-finished and finished rides c. executive salaries d. steel, lumber, and aluminum used in construction of rides ANS: D Cost of materials is the only item that varies depending upon the amount of units manufactured. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

56. What is a cost that changes with the level of output? a. an elastic cost b. a fixed cost c. a liquidity cost d. a variable cost ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 523

57. The Pizza Depot is an independent retailer of pizzas and deli sandwiches. Which of the following is the BEST example of one of its fixed costs? a. paper napkins b. boxes for pizza delivery c. payment on leased pizza ovens d. electric and gas for baking ANS: C The payment on leased equipment remains the same, no matter how many pizzas are produced, and therefore, is a fixed cost. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

58. Which costs do not change as output is increased or decreased? a. status quo b. variable c. fixed d. asset ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 523

16-15

59. During sporting events at the local high school, Megan runs a concession stand. The costs associated with the purchase of hot dogs, mustard, relish, ketchup, chips, sodas, paper napkins, and cups are all examples of what type of costs? a. fixed b. variable c. liquidity d. promotional ANS: B A cost that changes with the level of output is called a variable cost. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

60. Al has opened a auto repair shop. The monthly payment on the tools he recently purchased, the rent on his business location, and his business license are all examples of what type of costs? a. marginal b. fixed c. demand d. variable ANS: B Fixed costs do not change as output changes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

61. The maintenance costs of WestJetLite’s airplane storage facilities represents what type of cost? a. variable b. inelastic c. fixed d. elastic ANS: C REF: p. 523

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

62. Aviation fuel for WestJetLite Airlines represents what type of cost? a. inelastic b. marginal c. fixed d. variable ANS: D REF: p. 523

16-16

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

63. A firm develops a satisfactory product/service, evaluates the total expense of the product/service, and sets a price that covers all expenses and a target profit. This type of pricing is product/service driven. What is being described? a. marginal revenue-based pricing b. market-driven pricing c. cost-based pricing d. demand-based pricing ANS: C REF: p. 523

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

64. Monthly output at Vincent Sheds and Outbuildings changed from 15 to 16 outdoor storage buildings, and the total costs changed from $27,000 to $28,500. What was the marginal cost for the company? a. $1,500 b. $2,000 c. $1,200 d. $10,000 ANS: A Marginal cost is the change in total costs associated with a one-unit change in output. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

65. What is the change in total costs associated with a one-unit change in output? a. variable cost b. marginal cost c. flex cost d. elastic cost ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 523

66. When a seller determines the selling price by adding to cost an amount for profit and expenses not previously accounted for, what type of pricing is the seller using? a. demand-oriented pricing b. profit maximization pricing c. markup pricing d. target return pricing ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 523

67. What is the most popular method used by wholesalers and retailers in establishing a sales price? a. formula pricing b. markup pricing c. break-even pricing d. marginal revenue pricing ANS: B REF: p. 523

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order 16-17

68. What is the biggest advantage associated with markup pricing? a. its inability to be decoded by customers b. its reliance on marginal costs c. its simplicity d. the fact that merchandise is never underpriced with this technique ANS: C What could be easier than multiplying one number by another to get a price? PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 523

69. Which of the following describes a disadvantage associated with markup pricing? a. how difficult it is to implement b. its inability to consider product demand c. its dependence on marginal costs d. too many factors influence it ANS: B Because the method ignores demand, overpricing and/or underpricing can occur. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 523

70. Antique Reproductions pays a manufacturer $800 for a hand-forged iron fireplace screen, and it sells the fireplace screen to a customer for $1,600. What is the markup on the screen? a. $160 b. $240 c. $400 d. $800 ANS: D Mark-up is selling price minus cost: $1,600 – $800 = $800. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523-524

OBJ: 5

71. An event planner wants to determine a price for a package of garland of silk flowers. Its cost is $7.00. She wants a markup of 30 percent based on selling price. Which of the following is closest to the price she should charge her customers? a. $15 b. $18 c. $10 d. $12 ANS: C Price = Cost + Markup Price = 7.00 + (.3) = $9.10 Price = $10 PTS: 1 DIF: Application BLM: Higher order 16-18

REF: p. 524

OBJ: 5

72. An office supply store can buy an office chair for $30. If the store owner sells the office chair for $45, what is the markup based on the selling price? a. 25 percent b. 30 percent c. 50 percent d. 15 percent ANS: C Price = Cost + Markup $45 = $30 + (.5) markup 15 = (.5)markup 50 percent = markup PTS: 1 DIF: Application BLM: Higher order

REF: p. 524

OBJ: 5

73. What is the practice of marking up prices by 100 percent (or doubling the cost to set the selling price)? a. symmetrical pricing b. mark-on adding c. margin pricing d. keystoning ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 525

74. Deco Furniture sells reproductions of furniture and collectibles that were seen during the early part of the 20th century. The store’s owner does not take into account competition when pricing the store’s merchandise. The markup on all items in the store is 100 percent over cost (or double the cost). What is Deco Furniture using? a. break-even pricing b. keystoning c. target ROI pricing d. double sourcing ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 525

75. What is the extra revenue associated with selling an additional unit of output? a. average variable cost b. marginal cost c. marginal revenue d. net profit ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 525

16-19

76. What is keystoning? a. the practice of maintaining variable costs at one-half of total fixed costs b. a method used for determining the point of elasticity c. a method of changing consumers’ perceptions about price d. the practice of marking up prices by 100 percent ANS: D OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 525

77. When does profit maximization occur? a. when marginal variable costs equal average revenues b. when marginal revenue equals marginal cost c. when total costs equals average fixed revenue d. when total costs equal total variable costs ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 525-526

78. As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold, what should a firm do? a. reach its break-even point very shortly b. continue manufacturing c. continue using price equilibrium d. consider using sales maximization pricing ANS: B Diminishing returns have not set in, so the firm should continue manufacturing. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 525-526

79. The point at which marginal cost and marginal revenue are equal always results in which of the following? a. maximization of revenue b. maximization of costs c. maximization of profits d. break-even equilibrium ANS: C Until the point where MC = MR, each unit of sales has contributed to additional profit; therefore, profit, not revenue or costs, has been maximized at MC = MR. PTS: 1 OBJ: 5

16-20

DIF: Comprehension BLM: Higher order

REF: p. 525-526

80. Which of the following determine what sales volume must be reached for a product before the company’s total costs equal total revenue and no profits are earned? a. price equilibrium analyses b. break-even analyses c. marginal revenue estimates d. marginal costs of goods sold ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 526

81. The typical break-even model assumes a given fixed cost and which of the following? a. constant average variable cost b. variable per unit cost c. constant inventory turnover d. markup cost attained through keystoning ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 526

82. Amanti Lighting sells a lamp kit for making personalized lighting. The company sells each lamp kit for $22. The average variable cost for each lamp kit is $13, and the total annual fixed costs for plant operation is $78,300. What is the break-even point in units? a. 8,700 b. 2,237 c. 6,023 d. 3,559 ANS: A Break-even quantity equals the total fixed costs ($78,300) divided by the fixed cost contribution per unit ($22 – $13 = $9) + 8,700. PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

83. Regency Inc. makes disposable cap and gown sets for graduations. Each cap and gown set sells for $15. The average variable cost for manufacturing 10 cap and gown sets is $100. Total fixed costs for the year equal $65,000. What is the break-even point in units? a. 4,334 b. 1,300 c. 13,000 d. 765 ANS: C Break-even = $65,000/(15 – (100/10)) = 13,000 PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

16-21

84. Ceylon Express sells bottled pasteurized tea to retailers. It has the following revenues and costs: Sales price per bottle: $0.50 Variable costs per bottle: $0.30 Total fixed costs (annual): $50,000 Tax rate: 20 percent What is the annual break-even point in unit for the company? a. 100,000 b. 50,000 c. 250,000 d. 166,667 ANS: C Break-even quantity is the total fixed costs ($50,000) divided by fixed cost contribution per unit ($.20) = $250,000. PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

85. Entertainment Central makes video game consoles, which it sells for $500. It estimates its variable costs to be $200 per console. It figures its fixed costs to be $600,000 per year. How many consoles does it have to sell to break even? a. 2,000 b. 2,500 c. 3,000 d. 1,200 ANS: A Break-even quantity equals the total fixed costs ($600,000) divided by the fixed cost contribution per unit ($500 – $200 = $300). PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

86. According to the text, which of the following statements describes a limitation associated with break-even analysis? a. It can be expressed only as a break-even point in dollar amounts. b. It considers only demand. c. It is sometimes difficult to ascertain whether a cost is fixed or variable. d. It requires the calculation of marginal revenue. ANS: C Not all costs are easily categorized because a cost may be fixed when viewed in the short term but variable when considered over a longer period of time. PTS: 1 OBJ: 5

16-22

DIF: Comprehension BLM: Higher order

REF: p. 526-527

87. An analyst at Onyx, a company that makes bakers’ racks, has calculated the sales volume at which the company’s costs equal revenue. This analyst announced at the company’s quarterly sales meeting that 13,000 racks at an average cost of $150 must be sold to retail stores during the next quarter to reach this point. Which important factor has been excluded from his analysis? a. fixed and variable cost determination b. break-even analysis c. market share d. consumer demand ANS: D Onyx’s analyst includes only company costs and does not consider consumer demand. PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

88. When Laser Technology developed and introduced a high-tech crash investigation system to be used by law enforcement officers, the company determined that demand for the product was inelastic, and there was no existing competition. What should be the pricing strategy for the system? a. low initial price, rising constantly through growth and into maturity b. high initial price, falling slightly when entering the growth stage c. high price, continuing through growth and maturity d. low initial price, rising slightly when entering the growth stage ANS: B A high initial price is used when a new product faces little competition, needs to recoup R&D costs, and has inelastic demand. Prices will fall slightly when entering the growth stage. PTS: 1 DIF: Application BLM: Higher order

REF: p. 528

OBJ: 6

89. In the mature and highly competitive furniture industry, you would expect furniture manufacturers to engage in which of the following? a. prestige pricing b. a price war c. geographical pricing d. price escalation ANS: B In the maturity stage, with heavy competition, below-market pricing leads to price wars. PTS: 1 DIF: Application BLM: Higher order

REF: p. 528

OBJ: 6

16-23

90. How can manufacturers regain some control over the price their products are sold for at the retail level? a. by developing brand loyalty in consumers by delivering low prices b. by avoiding doing business with price-cutting discounters c. by outsourcing d. by using an exclusive computerized inventory system ANS: B REF: p. 528

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

91. HeartGood Eggs decided to offer a much larger than customary profit margin to grocery wholesalers and retailers on its new low-cholesterol eggs. This pricing strategy is designed to do all of the following EXCEPT which one? a. develop wide and convenient distribution b. encourage trial by consumers if priced low by retailers c. maximize profit margin for the producer d. give dealers an incentive to promote the new product ANS: C The egg producer is passing a large portion of the profit margin on to the wholesalers and retailers, not maximizing profit margin for itself. PTS: 1 DIF: Application BLM: Higher order

REF: p. 528

OBJ: 6

92. Safeway will place well-known brands on the shelves at high prices while offering its own Safeway brand at lower prices. This practice is an example of which of the following? a. brand cutting b. illegal pricing c. price pressurization d. selling against the brand ANS: D Selling against the brand with private labels causes sales of the higher-priced brands to decline. PTS: 1 DIF: Application BLM: Higher order

REF: p. 529

OBJ: 6

93. Which of the following BEST describes selling against the brand? a. It helps manufacturers gain shelf visibility. b. It has resulted in manufacturers slowly gaining control of distribution channels. c. It has resulted in the sales declines of manufacturer brands. d. It has been a losing battle for private-label brands. ANS: C REF: p. 529

16-24

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

94. According to the text, which of the following statements about the impact of the Internet on pricing strategy is true? a. Setting prices on the Internet offers retailers few advantages. b. One area where the Internet is having a major impact on pricing is the bargaining power between buyers and sellers. c. The promise of pricing efficiency on the Internet has been realized. d. Extranets are on-line price-comparison engines. ANS: B The promise was not fulfilled. Setting prices on the Internet offers retailers several advantages. Internet marketers have found it difficult to determine exactly what price consumers will pay. Shopbots are on-line price-comparison engines. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 530

95. With respect to pricing, what has retailers’ presence on the Internet resulted in? a. retailers gaining firmer control of market pricing at the expense of the end user b. the retailers’ ability to charge what the market will bear c. the end user having more ability to comparison shop thus resulting in a larger measure of control over prices charged by retailers d. vast economies of scale resulting in higher profit margins for retailers ANS: C REF: p. 530-531

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

96. What is another name for on-line price comparison engines? a. extranets b. shopbots c. price “tickers” d. virtual spreadsheets ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 531

97. How do shopbots affect pricing strategies? a. They create inelastic demand. b. They provide a means for comparison shopping. c. They create opportunities for prestige pricing. d. They link manufacturers, suppliers, and customers. ANS: B Alternative B is the definition of extranets. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 531

OBJ: 6

16-25

98. Which of the following BEST describes extranets between suppliers and customers? a. They cannot be used by a traditional bricks-and-mortar store. b. They save significant amounts associated with the changing of prices. c. They cost more than they save. d. They will someday replace marketing inventory systems. ANS: B Extranets are cost saving. They are widely used by both click-and-mortar stores and brick-and-mortar stores. Extranets are unrelated to marketing inventory systems. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 531

99. During the off-season, Parrish Farms, a bed-and-breakfast inn, offers a 25 percent reduction on its weekend rates to entice customers to make last-minute reservations at its website. This is an example of pricing strategy used as which of the following? a. a direct sales tool b. a promotion strategy c. a product strategy d. an Internet enhancer ANS: B OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 532

100. What happens when pricing is used as part of a promotion strategy? a. It must be accompanied by personal selling. b. It cannot be used as a public relations tool. c. It can be effectively used in trade promotions. d. It makes the establishment of a price-to-quality relationship unnecessary. ANS: C REF: p. 532

PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

101. Many consumers, especially when faced with an uncertain purchase decision, think which of the following? a. A high price is an indication that consumers are being exploited. b. A high price will always lead to major price discounts to wholesalers and retailers that distribute it. c. A high price is a signal of quality. d. A high price is a sign of the company’s overall market share. ANS: C Numerous studies have shown that consumers equate high price with high quality. PTS: 1 OBJ: 6

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DIF: Comprehension BLM: Higher order

REF: p. 532

102. Len knows little about atlases and does not want to spend the time to learn about them. However, he needs to buy an atlas to use in a school history project. Not wanting to make a poor choice, he is likely to do which of the following? a. buy the most expensive atlas (perhaps paying too much), guessing that the price is related to quality b. buy the least expensive atlas because most consumers believe that price is not directly related to quality c. avoid making a decision by not buying an atlas d. research the product and buy the least expensive atlas ANS: A Most consumers equate price and quality. PTS: 1 DIF: Application BLM: Higher order

REF: p. 532-533

OBJ: 6

103. Kables Optic builds quality binoculars with innovative components (such as water resistance) and superior durability. Kables Optic has managed to keep its price lower than its competitors. However, Kables’s sales have been disappointing. For a fast and simple remedy, what should Kables do? a. raise prices because of consumer expectations b. lower the quality of its products c. re-educate potential consumers about its products d. emphasize low price in all its advertising ANS: A The price needs to fit the product quality for a more cohesive image. PTS: 1 DIF: Application BLM: Higher order

REF: p. 532-533

OBJ: 6

104. Marketing managers who attempt to raise the quality image of their product by selling it at high prices are following which type of strategy? a. prestige pricing b. market share c. profit maximization d. investment asset ANS: A Prestige pricing strategy sets high prices to connote high product quality. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 533

OBJ: 6

16-27

105. Tom likes to drink scotch whiskey. He was familiar with the Johnny Walker brand, which he purchased for around $30. When he found a bottle of Johnny Walker Black Label priced at more than $200, he was positive that it would be a much finer whiskey. For Tom, what indicated quality? a. selective pricing b. premium pricing c. exclusive pricing d. prestige pricing ANS: D Prestige pricing is the charging of a higher price to help promote high quality. PTS: 1 DIF: Application BLM: Higher order

REF: p. 533

OBJ: 6

106. Which of the following BEST describes prestige pricing? a. It is also called leader pricing. b. It emphasizes the monetary nature of price. c. It is the practice of marking up prices by 100 percent. d. It uses high prices to promote a high-quality product. ANS: D Prestige pricing emphasizes all the intangible considerations buyers make when purchasing. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 533

OBJ: 6

107. The advertisements for Joy brand perfume claim that it is the most expensive perfume in the world. This is an example of which type of pricing? a. market share b. target return c. prestige d. profit maximization ANS: C Prestige pricing strategy sets high prices to connote high product quality and exclusiveness. PTS: 1 DIF: Application BLM: Higher order

16-28

REF: p. 533

OBJ: 6

In the mid-1990s, WestJet chose to compete head-on with Air Canada by launching WestJetLite, an alternative low-fare commercial airline passenger operation. Top executives at WestJet had expected its no-frills operation to break even within a year of its inception, but the airline fell short of the goal. A source close to the company explained it by saying, “Its costs were too high, and its revenues were too low.” Some observers criticized WestJetLite’s marketing efforts. When the no-frills service was first launched, it lacked a distinct name or identity, missing its chance to make a splash. Then WestJet tried to sell three “brands” at once—Plush , a new premium service, and its more traditional long-haul domestic flights. As one rival expressed it, “You cannot be all things to all people.” 108. Refer to WestJetLite. The statement that WestJetLite had problems because, “Its costs were too high, and its revenues were too low,” suggests which of the following? a. The airline had no revenue left over after paying for airline activities. b. The airline had no profit left over after paying for airline activities. c. The airline had no returns left over after paying for airline activities. d. The airline had no ROI left over after paying for airline activities. ANS: B Profit is what is left over after paying for company activities. PTS: 1 DIF: Application BLM: Higher order

REF: p. 512

OBJ: 1

109. Refer to WestJetLite. WestJetLite’s pricing objectives were based on gaining as much market share as possible from Air Canada. This suggests that WestJetLite had what type of pricing objectives? a. sales-oriented b. need-oriented c. cost-oriented d. profit-oriented ANS: A Sales-oriented pricing objectives are based on either market share or dollar or unit sales. PTS: 1 DIF: Application BLM: Higher order

REF: p. 515

OBJ: 2

110. Refer to WestJetLite. The airline industry’s demand curve slopes downward and to the right. This curve indicates the quantity demanded is increased as which of the following occurs? a. Supply is decreased. b. Price is increased. c. Price is decreased. d. Supply is increased. ANS: C The lower the price, the more travel will be demanded. PTS: 1 DIF: Application BLM: Higher order

REF: p. 517

OBJ: 3

16-29

111. Refer to WestJetLite. Consumers who travelled on WestJetLite or Air Canada were very sensitive to price changes. What does this suggest? a. inelastic supply b. inelastic demand c. elastic supply d. elastic demand ANS: D Demand changes with price changes. PTS: 1 DIF: Application BLM: Higher order

REF: p. 518

OBJ: 3

In a sluggish economy, consumers will buy even the most modest of products with the same discretion once shown only to big-ticket items, such as computers, air fares, and designer clothes. The result is a growing popularity of cheaper private-label products, and the likelihood that price wars among consumer goods could lead to the same kind of consolidation that occurred in the airline and electronics industries. Moreover, analysts say changing buying habits will force premium brand marketers to lower their prices to protect their positions. These companies may also upgrade products to distinguish them from private labels and promote their brands more aggressively than ever. One analyst says that consumers are forcing product innovation. Products have to be sold on merit. As a result, there will be fewer brands of significance, but the significant brands will be stronger. Brand loyalty is believed to exist only when, or if, value is provided. How do the significant brands compete? One analyst says that a combination of sensible pricing and innovation with a strong brand name can stabilize market share. Reformulated or repackaged products are typical examples of innovative attempts to solidify market share. 112. Refer to Consumer Buying Habits. In the past, Procter & Gamble set prices on significant brands such as Pampers so that total revenue was as large as possible relative to total costs. What type of approach does this represent? a. demand-oriented pricing b. sales maximization c. profit maximization d. market share pricing ANS: C Profit maximization means setting prices so that total revenue is as large as possible relative to total costs. PTS: 1 DIF: Application BLM: Higher order

16-30

REF: p. 513

OBJ: 2

113. Refer to Consumer Buying Habits. One analyst said that the big brands can compete by combining sensible pricing and innovation with a strong brand name. This is done to stabilize market share. This is an example of which type of pricing? a. status quo b. sales-oriented c. profit-oriented d. supply-oriented ANS: B Sales-oriented pricing objectives are based upon market share. PTS: 1 DIF: Application BLM: Higher order

REF: p. 515

OBJ: 2

114. Refer to Consumer Buying Habits. Changing consumer buying habits will force premium brand marketers to lower their prices to protect their positions (maintain the same revenue). This suggests that demand for premium products is which of the following? a. elastic b. unitary c. fixed d. highly elastic ANS: B If the price goes down and revenue remains the same, elasticity is unitary. PTS: 1 DIF: Application BLM: Higher order

REF: p. 518

OBJ: 3

115. Refer to Consumer Buying Habits. To compete against the private labels, the significant brands can upgrade products to distinguish them from private labels and advertise their brands more aggressively than ever. Most of the ads will feature cents-off coupons. This pricing strategy clearly involves manipulation of which of the following? a. distribution strategy b. promotion strategy c. product mix strategy d. credence qualities ANS: B Price is used here as a promotional tool to increase consumer interest. PTS: 1 DIF: Application BLM: Higher order

REF: p. 532

OBJ: 6

16-31

116. Refer to Consumer Buying Habits. Assume a product has a strong brand name, a reasonable price, and good quality. Which of the following strategies should be implemented? a. Improve product quality. b. Decrease promotional efforts to save money. c. Offer less variety to focus on your core products. d. Lower the price. ANS: A With a strong brand name, further lowering of price is unnecessary. PTS: 1 DIF: Application BLM: Higher order

REF: p. 532-533

OBJ: 6

Imagine you’re planning an after-symphony fund-raising party, and you need a life-size grand piano cake. Or you are a developer proposing a new shopping centre to a group of investors, and you want to serve a cake shaped like an architectural rendition of the centre. Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano cake for a gala in Toronto. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia’s creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike. 117. Refer to Specialty Cakes. Although many factors determine the prices charged by Cecilia Villaveces Cakes, what are the two primary determinants? a. stage of the product life cycle and costs to the consumers b. the demand for the good and cost to the seller c. demand by the consumer and perceived quality d. costs of manufacturing and distribution costs ANS: B If there were reduced demand, than Cecilia would have to lower prices. Also, she must charge for the time, energy, and resources that go into each cake. PTS: 1 DIF: Application BLM: Higher order

REF: p. 518

OBJ: 3

118. Refer to Specialty Cakes. Many party planners will use only Cecilia Villaveces Cakes at their parties—no matter what the price. They know that Cecilia’s cakes can make a party a success. Moreover, the cakes are what people remember most about the parties. From this description, you should assume Cecilia Villaveces Cakes have which of the following? a. elastic supply b. elastic demand c. inelastic demand d. inelastic supply ANS: C Price increases do not decrease demand for cakes. PTS: 1 DIF: Application BLM: Higher order

16-32

REF: p. 518

OBJ: 3

119. Refer to Specialty Cakes. Which of the following is the BEST example of a fixed cost for Cecilia Villaveces Cakes? a. delivery costs b. part-time employees c. electricity consumption d. food preparation licences ANS: D Delivery costs, electricity consumption, and use of part-time employees will vary according to the job. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

120. Refer to Specialty Cakes. Which of the following is the BEST example of a variable cost for Cecilia Villaveces Cakes? a. flour and sugar b. ovens used for cooking cakes c. life insurance on Cecilia d. interest payment to the bank ANS: A Only the consumption of flour and sugar would vary from cake to cake. PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

OBJ: 5

121. Refer to Specialty Cakes. To set the price of her cakes, Cecilia simply doubles her costs, which often include many hours of labour and expensive raw materials. What is this method of price setting called? a. premium pricing b. add-on pricing c. mark-on pricing d. keystoning ANS: D The practice of marking prices up 100 percent is called keystoning. PTS: 1 DIF: Application BLM: Higher order

REF: p. 525

OBJ: 5

16-33

122. Refer to Specialty Cakes. There are many occasions for which people may need to buy a cake, but most people do not have the time or interest to learn about cakes and their bakers. These people who do not know about the quality of the Cecilia Villaveces Cakes might choose them for which reason? a. They equate price and quality. b. They know cakes are in the mature stage of their product life cycle. c. They desire value-added services. d. They believe there is not a relationship between price and quality. ANS: A Most consumers equate price and quality. PTS: 1 DIF: Application BLM: Higher order

REF: p. 532-533

OBJ: 6

The Canadian Girl catalogue began as a concept to introduce today’s girls to girls who lived in the past. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Manitoba. Her story begins with her long sea voyage from Iceland. The basic doll dressed in a calico dress and striped apron plus the hardcover story of how she got to Manitoba costs $90. Six more hardback books of Kristen’s life are available for $74.95. Kristen’s nightgown costs $20, and a matching one for the doll owner is an additional $38. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $213. Shipping costs vary with the price of the merchandise ordered. 123. Refer to Canadian Girl Doll. What is the revenue to Canadian Girl if it sells 20 basic Kristen doll and books? a. $427.95 b. $90.00 c. $1,800.00 d. $100.95 ANS: C Revenue equals price times number of items sold. PTS: 1 DIF: Application BLM: Higher order

16-34

REF: p. 512

OBJ: 1

124. Refer to Canadian Girl Doll. Canadian Girl is the primary seller of historically accurate dolls with accompanying books in a market where there is very little competition. It has no cash flow problems and is not interested in maximizing its sales. From this information, you should know Canadian Girl has what type of pricing objectives? a. sales-oriented b. psychological c. profit-oriented d. supply derived ANS: C Because it has no competitors to speak of, status quo objectives are unlikely. It is not interested in maximizing its sales, so sales-oriented objectives are also not likely. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 513

125. Refer to Canadian Girl Doll. The popularity of the Canadian Girl dolls is so great that an increase in the price of the basic Kristen doll and books by 5 percent will not significantly affect the demand for the product. This means that the demand for the Canadian Girl doll is which of the following? a. inelastic b. a multiplier c. elastic d. derived ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 518

126. Refer to Canadian Girl Doll. Which of the following factors is most likely to affect the elasticity of demand for the doll? a. the existence of complementary products b. a variety of alternative uses for the product c. the price relative to purchasing power d. the absence of substitutes ANS: D There is nothing like the Canadian Girl doll in terms of historical accuracy. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 518

16-35

127. Refer to Canadian Girl Doll. In terms of the costs of producing the dolls and its accessories, the salary of the graphic designer who does the layout for the Canadian Girl catalogue is which of the following? a. a variable cost b. a fixed cost c. a markup cost d. an elastic cost ANS: B Salaries are considered fixed costs. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 523

128. Refer to Canadian Girl Doll. In terms of producing the dolls and its accessories, the calico fabric used to make Kristen’s dress is an example of which of the following? a. an elastic cost b. a fixed cost c. a variable cost d. a markup cost ANS: C How much fabric is used depends on how many dolls are made. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 523

129. Refer to Canadian Girl Doll. You can buy a doll at Zellers for $5.99. The high price of the Canadian Girl doll is used to promote a high-quality image. Which type of pricing strategy does Canadian Girl use? a. supply derived b. prestige c. demand based d. markup ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 533

At her local supermarket, TJ saw a pizza pan and a package of mix to make homemade pizza. The items, which were sold together, retailed at $28.50, but were marked down to $19.99. 130. Refer to Pizza. What is $19.99? a. the price b. the liquidity value c. the profit d. the revenue ANS: A OBJ: 1

16-36

PTS: 1 DIF: Application BLM: Higher order

REF: p. 512

131. Refer to Pizza. The retailer sold one item for $28.50 and five items at $19.99. What is the retailer’s revenue? a. $28.50 b. $99.95 c. $71.45 d. $128.45 ANS: D $28.50 + ($19.99 × 5) PTS: 1 DIF: Application BLM: Higher order

REF: p. 512

OBJ: 1

A bakery supply catalogue sells 5-kg bags of moist apricots and cranberries, sweet dates, bits of pineapple, and candied cherries to be used in fruitcakes. Each bag costs $24.95. If the price of cranberries were to increase by 5 percent, it would have no effect on the price of the fruit mix because cranberries are only one of several fruits in the package. 132. Refer to Fruitcake. What is the demand for cranberries for this particular use? a. asymmetrical b. joint c. inelastic d. elastic ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 519

133. Refer to Fruitcake. Since the amount of cranberries purchased depends on how many bags of fruit are demanded, what is the cost of the cranberries? a. a joint cost b. a fixed cost c. a variable revenue d. a variable cost ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 523

Chulo Ibsen makes and sells hand-forged wrought iron fireplace screens for $125 each. He has determined that his fixed costs are $8,000, and his variable costs per firescreen are $45. 134. Refer to Fireplace Screens. What is Ibsen’s fixed cost contribution per screen? a. $88.89 b. $45 c. $80 d. $125 ANS: C $125 – $45 = $80 PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

16-37

135. Refer to Fireplace Screens. What is Ibsen’s break-even point in units? a. 47 b. 100 c. 50 d. 64 ANS: B ($8,000)/($125 – $45) = 100 PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

136. Refer to Fireplace Screens. What is his break-even point in dollars? a. $10,000 b. $8,000 c. $5,875 d. $12,500 ANS: B [$8,000)/($125 – $45)] × $125 = $12,500 PTS: 1 DIF: Application BLM: Higher order

REF: p. 526-527

OBJ: 5

TRUE/FALSE 1. Price is defined as the perceived value of a good or service that is exchanged for a certain dollar amount. ANS: F Price is not necessarily measured in terms of money. In bartering, other items of value may be exchanged. PTS: 1

DIF: Definition

REF: p. 512

OBJ: 1

2. Today’s firms must develop specific, measurable, and attainable pricing objectives if they hope to survive in highly competitive markets. ANS: T REF: p. 512

PTS: 1 OBJ: 2

DIF: Comprehension

3. A marketers using a profit maximization strategy will charge the highest prices the market will bear. ANS: F Profit maximization means setting prices so that total revenue is as large as possible relative to costs. PTS: 1

16-38

DIF: Definition

REF: p. 513

OBJ: 2

4. Profit maximization is the most common pricing objective used by firms. ANS: F Target return on investment (ROI) is the most common pricing objective used by firms. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 513

5. Sales-oriented pricing objectives are either based on market share or dollar or unit sales. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 515

6. Maximization of sales is an appropriate and useful long-term pricing objective for most firms. ANS: F Maximization of sales should never be a long-term objective. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 516

7. Status quo pricing objectives indicate that prices are adjusted to meet the competition. ANS: T OBJ: 2

PTS: 1

DIF: Definition

REF: p. 516

8. When pricing goals are mainly sales-oriented, cost considerations are usually subordinated to demand considerations. ANS: T REF: p. 516

PTS: 1 OBJ: 3

DIF: Comprehension

9. Price equilibrium is the price at which supply and demand are equal, and there is no inclination for prices to rise or fall. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 518

10. If demand for athletic shoes is elastic, consumers will not change their purchasing habits greatly when the price of athletic shoes changes. ANS: F Elastic demand occurs when consumers are sensitive to price changes. PTS: 1

DIF: Application

REF: p. 518

OBJ: 3

11. If the formula for elasticity results in a measure of elasticity (E) equal to 1, the increase in sales exactly offsets the decrease in price so that total revenue remains the same. ANS: T REF: p. 518

PTS: 1 OBJ: 3

DIF: Comprehension 16-39

12. If the formula for elasticity results in a measure of elasticity (E) greater than 1, demand is said to be inelastic. ANS: F If E is greater than 1, demand is elastic. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 518

13. Because the price of condensed soup is small relative to a consumer’s purchasing power, and there are several alternate uses for the product, condensed soup probably has elastic demand. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 520

14. Yield management systems (YMS) were first used by Internet service providers.. ANS: F Yield management systems (YMS) were first developed in the airline industry. PTS: 1

DIF: Definition

REF: p. 521

OBJ: 4

15. Yield management systems can be used only by service industries. ANS: F As the popularity of yield management systems increases, their use is spreading to manufacturing (in terms of production capacity). PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 521

16. Firms that price their products solely on the basis of costs are adhering to the marketing concept. ANS: F Firms pricing their products solely on the basis of costs are not following the marketing concept. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 523

17. Variable costs vary with changes in the level of output, whereas marginal costs do not vary as output changes. ANS: F Marginal costs are the changes in total costs associated with a one-unit change in output. PTS: 1

16-40

DIF: Definition

REF: p. 523

OBJ: 5

18. Markup pricing, adding an amount to cost to cover expenses and profit, is one of the most common pricing methods used by intermediaries to establish a selling price. ANS: T REF: p. 523

PTS: 1 OBJ: 5

DIF: Comprehension

19. A firm has maximized its profits when its marginal revenue equals its marginal cost. ANS: T REF: p. 525-526

PTS: 1 OBJ: 5

DIF: Comprehension

20. Break-even analysis determines what sales volume must be reached for a product before the company’s total revenue equals total costs. ANS: T OBJ: 5

PTS: 1

DIF: Definition

REF: p. 526

21. As products enter the growth stage of the product life cycle, prices generally begin to fluctuate wildly. ANS: F Prices generally begin to stabilize as the product enters the growth stage. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 527-528

22. Sara Lee Crustless bread designed for making sandwiches is a product in the introductory stage of its product life cycle. If management at Sara Lee is typical, its pricing strategy will depend on the elasticity of demand for the crustless bread. ANS: T OBJ: 6

PTS: 1

DIF: Application

REF: p. 527-528

23. When there is only one product manufacturer left for a product in the decline stage, prices will stabilize. ANS: T REF: p. 528

PTS: 1 OBJ: 6

DIF: Comprehension

24. Adequate distribution for a new product is often obtained by reducing the size of the profit margin for its resellers. ANS: F Adequate distribution for a new product is often obtained by offering a larger-than-usual profit margin to its distributors. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 529

16-41

25. Price is often used as a promotional tool. ANS: T REF: p. 532-533

PTS: 1 OBJ: 6

DIF: Comprehension

26. Consumers use price as an indicator of the quality of a product, especially when consumers have a substantial degree of knowledge about the product. ANS: F Consumers rely on price as an indication of quality when they lack other information—not when they are well informed. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 533

ESSAY 1. What is price? ANS: Price is the perceived value of a good or service. Perceived value is usually expressed in monetary terms, so price is typically the money exchanged for the good or service. However, price can be anything with perceived value, such as another good or service. A transaction can take place by trading goods and services (barter) rather than exchanging a good or service for dollars. PTS: 1

DIF: Application

REF: p. 512

OBJ: 1

2. One of the most stressful and pressure-filled tasks of the marketing manager is attempting to set the right price. Specify three aspects of the current pricing environment in consumer markets that have contributed to the difficulty in setting correct prices. ANS: The text lists three factors in the consumer products market: (1) the high rate of new product introductions has led potential buyers to constantly re-evaluate the price of a new item relative to the value of existing products; (2) the increased availability of bargain-priced private and generic brands has caused an overall downward pressure on prices, and (3) many firms try to maintain their large market share by cutting prices. PTS: 1

16-42

DIF: Application

REF: p. 512

OBJ: 1

3. List the three categories of pricing objectives and then two specific strategies in each category that a marketer could implement to achieve those objectives. ANS: Profit-oriented pricing objectives include: • Profit maximization • Satisfactory profits • Target return on investment Sales-oriented pricing objectives include: • Market share • Sales maximization (dollars or units) Status quo pricing objectives include: • Maintaining the existing price • Meeting the competition PTS: 1

DIF: Application

REF: p. 513-516

OBJ: 2

4. Last quarter Abingdon Company sold 1,000 decorative decals for $1 each, Cedar Decaliania sold 200 decorative decals at $4 each, Creative Decals sold 500 decals at $2 each, and Donnelly, Inc. sold 300 decals for $4 apiece. Assuming the four companies are the only firms competing in the decorative decal market, calculate unit and dollar market share for each company for last quarter. For each company, which market share figure might be used in an advertisement for that company? ANS: The following calculation table shows the resultant unit and dollar shares. Market share should be expressed in percentage points. Firms often state market share in terms that are most flattering to the company. Abingdon would express unit shares in an advertisement, while Cedar Decaliania and Donnelly would use dollar shares. Creative Decals’s market share is 25 percent for either calculation. Company Abingdon Cedar Decaliania Creative Decals Donnelly

PTS: 1

Units sold 1,000

Unit price $1.00

Total dollars $1,000

Unit market share 1,000/2,000 = 50%

$1,000/$4,000 = 25%

200

$4.00

$ 800

200/2,000 = 10%

$ 800/$4,000 = 20%

500

$2.00

$1,000

500/2,000 = 25%

$1,000/$4,000 = 25%

300 2,000

$4.00

$1,200 $4,000

300/2,000 = 15% 100%

$1,200/$4,000 = 30% 100%

DIF: Application

REF: p. 515

Revenue Market Share

OBJ: 2

16-43

5. List the two primary determinants of price. What other factors can affect price setting? ANS: The price established depends primarily on (1) demand for the good or service and (2) the cost to the seller of that good or service. Other factors that would influence price include distribution strategies, promotion strategies, perceived quality, and stage in the product life cycle (including competition). PTS: 1

DIF: Application

REF: p. 516

OBJ: 3

6. The daily demand for bottled water is 35 bottles when the price is set at $1. However, if the price is raised to $5, the demand is only 5 bottles. The bottled water producer is willing to supply 40 bottles if the price is set at $5 per bottle, but will supply only 10 bottles if the price is set at $2. Draw the supply and demand curves for the water bottles on the graph below. Label each curve and each axis. At what level does equilibrium occur? What are the areas of surplus and shortage?

ANS:

16-44

The vertical axis should be labelled as price, and the horizontal axis should be labelled as quantity. The demand curve should show a negative slope, crossing the positively sloped supply curve at the equilibrium point of $3 and 20 units. Surplus occurs in the area between the curves and above the equilibrium point while shortage occurs below the equilibrium point. PTS: 1

DIF: Application

REF: p. 511-512

OBJ: 3

7. List the three types of elasticity of demand. What would the demand curve for each look like when graphed? ANS: Elastic demand occurs when consumers are sensitive to price changes. The demand curve is almost horizontal or exactly horizontal if demand is perfectly elastic. Inelastic demand means that an increase or a decrease in price will not significantly affect demand for the product. The demand curve is almost vertical or exactly vertical if demand is perfectly inelastic. Unitary elasticity exists when the increase in sales exactly offsets the decrease in price so that total revenue remains the same. The demand curve crosses each axis at exactly a 45-degree angle. PTS: 1

DIF: Application

REF: p. 518-520

OBJ: 3

8. List three factors that affect elasticity of demand. Briefly describe how each affects demand. ANS: Availability of substitute goods and services. When many product substitutes are available, the consumer can easily switch from one product to another. This makes demand more elastic. Price relative to a consumer’s purchasing power. Low price relative to the purchasing power of the consumer results in relatively inelastic demand, as long as changes in price are perceived as inconsequential. Product durability. Durable products last a long time and often offer the consumer the option for repair rather than replacement. This results in elastic demand. Product’s other uses. The greater the number of product uses, the more elastic demand will tend to be. As price varies for a product with wide use applications, substitutability becomes an issue. PTS: 1

DIF: Application

REF: p. 520

OBJ: 3

9. What are yield management systems (YMS).?In what type of industry were they first used? ANS: Yield management systems are a technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity by discounting early purchases, limiting early sales at these discounted prices, and overbooking capacity. YMS are used to raise prices to maximize revenues. They were first used in the service industries—specifically the airline and lodging industries—but have been recently discovered by manufacturers as a way to make more efficient use of resources. PTS: 1

DIF: Application

REF: p. 521

OBJ: 4 16-45

10. What are the problems associated with the use of a cost-based pricing strategy? What contribution does cost make to the setting of prices? ANS: Setting prices based solely on costs ignores demand and other important factors such as marketing mix components or consumer needs and wants. Prices determined strictly on the basis of cost may be too high for the target market, thereby reducing or eliminating sales. Cost-based prices may also be too low, causing the firm to earn a lower return than it should. Costs play an important role in price setting, however. Costs serve as a floor below which a good or service must not be priced in the long run. PTS: 1

DIF: Application

REF: p. 523

OBJ: 5

11. What is the difference between fixed and variable costs? Give examples of each type of cost. ANS: Fixed costs are those expenses of the firm that are stable and do not change with the level of output. Examples include rent and executive salaries. Variable costs are those expenses of the firm that vary directly with the level of output. Examples of variable costs associated with output include cost of materials, direct labour, and packaging. PTS: 1

16-46

DIF: Application

REF: p. 523

OBJ: 5

12. Calculate answers for the following scenarios: a. A stapler is sold for $2.50. The retailer added $.50 to the original cost. What is the markup percentage? b. The cost of a lamp is $40 and the retailer applies a markup of $60. What is the retail markup percentage? c. A retailer marks up all products by 20 percent. If a fanny pack costs the retailer $10, what will the final selling price be? d. A retailer marks up all products by 75 percent. If the selling price of a single silk rose is $4, what was the cost to the retailer? ANS: The student must remember that markup percentages for the retailer are stated in terms of the final selling price. The dollar markup is calculated as selling price minus cost, and percentage markup can be calculated by dividing dollar markup by selling price. a. b.

Dollar markup ? selling price = % markup $0.50 ? $2.50 = 20% Selling price = (dollar markup + cost) Dollar markup ? selling price = % markup $60 ? ($60 + $40) = 60% Dollar markup = (selling price – cost) (Selling price – cost) ? selling price = % markup (S – $10) ? S = .20 (S – $10) = .20S $10 = .80S Selling price = $12.50 (Selling price – cost) ? selling price =% markup ($4 – C) ? $4 = .75 ($4 – C) = (.75 ? $4) C = $4 – $3 = $1

PTS: 1

DIF: Application

REF: p. 523-525

OBJ: 5

16-47

13. What is marginal revenue? Based on the provided schedule from the Chesapeake Bay Swing Company, at which quantity should Chesapeake Bay start producing additional swings? Quantity 1 2 3 4 5 6 7

Marginal Revenue $260 110 190 170 160 150 120

Marginal Cost $160 140 120 140 160 180 220

Total Profit $200 270 340 370 370 340 240

ANS: Marginal revenue is the extra revenue associated with selling an extra unit of output. As long as the revenue of the last unit produced and sold is greater than the cost of the last unit produced and sold, the firm should continue manufacturing. The student should find the point in the schedule where marginal revenue is equal to marginal cost, which is at five units. The firm would not stop producing at four units, even though the addition of the fifth unit did not add any profits. This is because the firm could not determine an increase or decrease in profits after the fourth unit until an additional unit had been produced. PTS: 1

DIF: Application

REF: p. 525-526

OBJ: 5

14. What is a break-even point? The Catera Company makes and sells cotton candy machines. What is the break-even volume for Catera machines in units? Catera Machines Financial Information Salesperson salary $50,000 Advertising 80,000 Research and development 30,000 Production equipment 15,000 Overhead allocation 15,000 Total fixed costs Catera’s selling price Variable cost

$190,000 $600 $400

ANS: A break-even point is that level of units sold at a certain price at which no profit or loss is incurred. Break-even analysis determines what sales volume must be reached for a product before the company breaks even (total costs are equal to total revenue). Using the break-even formula indicates that Catera must sell 950 cotton candy machines to break even. Fixed cost contribution = selling price – variable cost FCC = $600 – $400 = $200

16-48

Break-even quantity = total fixed costs ÷ fixed cost contribution BEQ = $190,000 ÷ $200 = 950 units PTS: 1

DIF: Application

REF: p. 526

OBJ: 5

15. Name two advantages and two disadvantages associated with the use of break-even analysis. ANS: Advantages of using break-even analysis include that it (1) provides a quick glance at how much the firm must sell to break even, (2) provides information about how much profit can be earned if higher sales volume is obtained, and (3) reduces the dependence on marginal cost and revenue data, which is frequently unavailable. Disadvantages of using break-even analysis include (1) difficulty in knowing whether a cost is fixed or variable and (2) a failure to account for the concept of demand. For example, a firm may not be able to sell the break-even number of units because demand may be limited to fewer units. PTS: 1

DIF: Application

REF: p. 526

OBJ: 5

16. As a product moves through its life cycle, the demand for the product and the competitive conditions tend to change. For each stage in the product life cycle, discuss pricing strategies appropriate for that stage. ANS: Introduction. Generally, prices are set high in the introduction stage to recover developmental costs. However, pricing strategies followed in this stage depend on elasticity of demand. If demand is inelastic, a high introductory price is warranted. If demand is elastic and consumers are price sensitive, the price should be set at the market level or lower. Growth. Price may stabilize at this level as competitors enter the marketplace. Price may fall somewhat as economies of scale allow lower costs to be passed on to the consumer in the form of lower prices. Maturity. This stage brings on further price declines as competition increases and inefficient, high-cost firms are eliminated. Remaining competitors typically offer similar prices. Price increases are cost initiated rather than demand initiated. Decline. In the final stage of the product life cycle, prices may decline even further as the few remaining competitors attempt to salvage the last vestiges of demand. If only one firm is left in the market, prices will stabilize or even rise as the product becomes a specialty good. PTS: 1

DIF: Application

REF: p. 527-528

OBJ: 6

16-49

17. How does price interact with the other three Ps of the marketing mix? ANS: Product. The product life cycle stage and the perceived relationship of price to quality of the product impact its price. Some students may also mention the fact that price levels must be set according to the cost of the product, demand for the product, and elasticity of demand for the product. Place/distribution. Adequate distribution of a new product can often be attained by offering a large profit margin to wholesalers and retailers. Price can be set higher than normal if the product is distributed to outlets that are convenient to the consumer—more specifically, with the use of computers and shopping bots. Promotion. Price is often used as a promotional tool to increase consumer interest. Special low prices are often advertised as an inducement. Discount coupons, cents-off campaigns, price rebates, and other discounts are all price-promotion marketing tools. Trade promotions also are used. PTS: 1

DIF: Application

REF: p. 527-533

OBJ: 6

18. What is the impact of the Internet and extranets on pricing strategies? ANS: Internet: The Internet is enabling buyers to quickly and easily compare products and prices, putting them in a better bargaining position. At the same time, the technology allows sellers to collect detailed data about customers’ buying habits, preferences, and even spending limits so they can tailor their products and prices. This raises hopes of a more efficient marketplace. Extranets: Extranets are private networks created by companies that link them with their suppliers and customers. These systems make it possible to get a precise handle on inventory, cost, and demand at any given moment—and adjust prices instantly. Streamlined networks reduce cost and time. PTS: 1

DIF: Application

REF: p. 530-533

OBJ: 6

19. How do consumers use the price–quality relationship to evaluate goods? How can marketers take advantage of this consumer response? ANS: Consumers tend to rely on price as an indicator of product quality; that is, a higher price indicates higher quality in the form of better materials, more careful workmanship, or higher service levels. Conversely, lower price indicates lower quality as illustrated by the adage, “you get what you pay for.” Marketers can take advantage of the price-quality phenomena by increasing the price of the product to enhance the image of their product. This is known as a prestige pricing strategy. PTS: 1

16-50

DIF: Application

REF: p. 532-533

OBJ: 6

Chapter 17—Setting the Right Price MULTIPLE CHOICE 1. The marketing manager of icruise.com (a website targeted to consumers who want a luxury vacation) finds that the firm can gain market share and become the industry leader if it slashes prices by 50 percent during December. However, the vice-president of finance is committed to reporting a 25 percent return on investment at all times. What does this conflict illustrate? a. how target markets can be ignored b. how pricing operates in a mature marketplace c. a lack of corporate concentration on the marketing concept d. the need for tradeoffs in pricing objectives ANS: D Different individuals in an organization may have pricing objectives that are not mutually compatible and will involve tradeoffs. PTS: 1 DIF: Application BLM: Higher order

REF: p. 542

OBJ: 1

2. After establishing pricing goals, managers should estimate total revenue at a variety of prices. What should they do next? (Only after performing this task are they are ready to estimate how much profit and how much market share can be earned at each possible price.) a. Implement pricing segmentation. b. Set a corresponding cost for each price. c. Choose the ROI target. d. Estimate industry supply. ANS: B REF: p. 542

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

3. What is the easiest pricing goal for a firm to implement? a. meeting competition b. return on investment c. profit-based d. sales volume-based ANS: A REF: p. 542

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

4. A company’s pricing strategy should do all of the following EXCEPT which one? a. define the initial price b. give direction for price movements over the product life cycle c. ignore the targeting and positioning strategy of the company d. set a competitive price ANS: C The pricing strategy needs to blend with the targeting and positioning strategy of the company. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 543

17-1

5. A 16-ounce bottle of Prairie Herb vinegar sells for $4.95, and a 16-ounce bottle of Heinz vinegar costs $1.05. Prairie Herb vinegar is new to the market, perceived to be of higher quality, and provides a unique flavour to foods even though it is used in the same way as Heinz vinegar. Prairie Herb vinegar is most likely using which type of policy? a. price skimming b. bundling cost pricing c. penetration pricing d. status quo pricing ANS: A Price skimming is common for products in the introductory stage of their product life cycle. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

6. A shortage of blood for transfusions for injured animals has resulted in the introduction of a synthesized product called Oxyglobin, which can be used effectively as a blood replacement. The manufacturer of the product has put a high price on the product in order to recoup its research and development costs. Which type of policy is the manufacturer of Oxyglobin using? a. price skimming b. price banding c. price lining d. penetration pricing ANS: A Price skimming is a pricing policy whereby a firm charges a high introductory price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

7. The price-skimming strategy is sometimes called a “market-plus” approach to pricing because it denotes a high price relative to the prices of competing products. When does this strategy work best? a. when production capacity is large and flexible b. when demand is greater than supply c. when supply is greater than demand d. when revenues are equal to expenses ANS: B Price skimming denotes a high price; therefore, the demand must be great. PTS: 1 OBJ: 1

17-2

DIF: Comprehension BLM: Higher order

REF: p. 543

8. When the Mosquito Magnet was introduced, it was designed to rid the immediate area of mosquitoes and other annoying insects. The technology for the Mosquito Magnet took years to develop. It is a patented grill-like apparatus that emits carbon dioxide to attract bugs to a fan, which draws them into the device where they die. What type of pricing policy would you have recommended the company use to introduce this product to the market? a. price skimming b. leader pricing c. penetration pricing d. status quo pricing ANS: A The price-skimming strategy will recoup the R&D costs quickly. Also, the product is probably price inelastic. Patents will limit or prohibit direct competition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

9. For which of the following situations would a price-skimming strategy be most appropriate? a. the elimination of demand for low-wattage light bulbs b. the introduction of a Barbie Olympic champion doll by Mattel and the International Olympic Committee c. the introduction of a unique, roomy automobile model that has extremely low energy and fuel costs d. the introduction of a new brand of bottled water ANS: C The automobile will justify a price-skimming strategy because the manufacturer will need to recoup R&D costs, and it will take several years for the competition to catch up. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

10. The DCS Stainless Steel Gas Grill for outside cooking costs $3,995. The market for a grill that could easily replace a kitchen range is limited even though a lot of people have seen articles about this grill in cooking magazines and in the cooking section of newspapers. There is no potential competitor for this grill. Which strategy is probably best? a. price lining b. price skimming c. status quo d. penetration pricing ANS: B Like products in the introductory stage of the product life cycle, this grill has no competition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

17-3

11. The market for turkey products is large. If a major producer of turkeys were to introduce a boneless fresh turkey wrapped around savory dressing, most of the large market for this new product would be aware of its existence. The market is price sensitive, and there is some potential competition. What would be the appropriate strategy? a. price skimming b. cost bundling c. penetration pricing d. price lining ANS: C The market for the new product is price sensitive. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

12. Dell’s new line of computers is selling for up to 20 percent lower than similar computers sold by its largest competitors. Since Dell’s goal is to maximize its sales, it is probably using which type of strategy? a. status quo pricing b. price lining c. penetration pricing d. price skimming ANS: C Consumers are price sensitive in this market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 544

OBJ: 1

13. When a firm introduces a new product at a relatively low price because it hopes to reach the mass market, which type of strategy is it following? (The low price is designed to capture a large share of a substantial market and produce lower production costs.) a. price elasticity b. penetration pricing c. price skimming d. cost bundling ANS: B OBJ: 1

17-4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 544

14. A penetration strategy tends to be effective in a price-sensitive market. Thus, one of the purposes of penetration pricing is to do which of the following? a. recoup product development costs quickly b. discourage competitors from entering the market c. produce a large margin of profit per unit d. attract the price-insensitive buyer who demands the latest in technology ANS: B A low price will mean a low profit margin and will be attractive only if a large volume of business can be seized. The first company on the market that uses penetration pricing has a great advantage. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 544

15. Penetration pricing means charging a relatively low price for a product as a way to reach the mass market. The low price is designed to capture a large share of a substantial market. Thus, which of the following BEST describes penetration pricing in this case? a. It tends to lower production costs. b. It recoups product development costs quickly. c. It tempts competitors to enter the market. d. It provides a large profit per unit sold. ANS: A The low price is designed to capture a large share of the market, resulting in lower production costs. Production costs are lowered because of economies of scale in production. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 544

16. The introductory price for the Nintendo Gamecube video game console was $100 lower than the list price of Xbox and Playstation 2, its only two competitors. Given this information, you can assume Nintendo used what type of policy for its Gamecube? a. cost bundling b. flexible pricing c. penetration pricing d. competitive skimming ANS: C OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 544

17. When does a penetration pricing strategy tend to be most effective? a. under unitary conditions b. in price-sensitive markets c. when the company can perform only small production runs d. if unit costs are high ANS: B Penetration pricing is the logical choice given an elastic demand curve. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

REF: p. 544

17-5

18. Leupold & Stevens, Inc. makes Leupold scopes for rifles and has introduced a new scope that has the quality and performance for which Leupold & Stevens is famous at a price much lower than it has ever sold a rifle scope before. The new scope offers several different magnifications and is the only scope in the $200 range that is made in the United States. (All similar scopes are priced much higher.) Which pricing strategy is Leupold & Stevens using to appeal to a larger market? a. status quo pricing b. penetration pricing c. cost sharing d. price skimming ANS: B OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 544

19. As production experience increases, the average cost per unit produced decreases. What is this drop called? a. the cost curve b. the experience curve c. the demand curve d. the short-run average cost curve ANS: B REF: p. 545

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

20. A firm charging a price identical to or very close to the competition’s price is using which type of strategy? a. differentiation pricing b. leader pricing c. preemptive pricing d. status quo pricing ANS: D OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 546

21. In Canada, most of the legal issues regarding pricing are covered by which of the following? a. the Better Business Bureau b. the Competition Act c. the Consumer Protection Act d. the Advertising Act ANS: B OBJ: 2

17-6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 546

22. Super-Sav supermarket employees regularly shop at other local supermarkets in order to make certain that Super-Sav is charging prices comparable to the other supermarkets. What type of pricing strategy is Super-Sav using? a. status quo pricing b. leader pricing c. preemptive pricing d. flexible pricing ANS: A Status quo pricing is simply meeting the competition. PTS: 1 DIF: Application BLM: Higher order

REF: p. 546

OBJ: 1

23. Sellers must carry adequate levels of merchandise that has been price promoted or offer “rain cheques” if the product sells out. What will failure to comply result in a charge of? a. deceptive pricing b. price fixing c. resale price maintenance d. price discrimination ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 546

24. General Electric Co. was accused of conspiring with De Beers Centenary AG to set a price for industrial diamonds, which are used on industrial cutting tools. As a result, what were the two companies charged with? a. channel control pricing tactics b. unfair trade practices c. price discrimination d. price fixing ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 547

25. What is the illegal practice of manufacturers controlling prices at the retail level? a. price discrimination b. deceptive pricing c. price fixing d. resale price maintenance ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 547

17-7

26. The Association of Specialty Surgical Practice has published a minimum fee schedule for services and distributed this schedule throughout the medical profession. What is Specialty Surgical encouraging? a. bait pricing b. price fixing c. predatory pricing d. unfair trade practices ANS: B Publishing and circulating minimum fee schedules is an example of price fixing. PTS: 1 DIF: Application BLM: Higher order

REF: p. 547

OBJ: 2

27. What is an agreement between two or more businesses on the price they will charge for a product? a. price discrimination b. resale price maintenance c. deceptive pricing d. price fixing ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 547

28. K&G Restaurant Supplies sells paper products and commodity items such as flour to for-profit businesses. It charges a substantially lower price to companies that operate multiple locations such as a restaurant chain. It charges a higher price to small or independent operations because they are less profitable customers. What is K&G Restaurant Supplies engaging in? a. unfair trade practices b. price fixing c. bait pricing d. price discrimination ANS: D If a seller charges different prices to different customers for the same product, price discrimination is occurring. PTS: 1 DIF: Application BLM: Higher order

REF: p. 547

OBJ: 2

29. In Canada, federal legislation prohibits firms from selling to two or more competing buyers on an ongoing basis, within a short period of time, goods of like grade and quality at different prices where the result would be to lessen competition in the marketplace. What is this infraction known as? a. resale price maintenance b. predatory pricing c. price discrimination d. deceptive pricing ANS: C OBJ: 2

17-8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 547

30. Imagine you have developed a device that can be used to tell whether uncooked meat has been irradiated. Several smaller retail chains have agreed to carry your product, but a large discount retailer has asked you to sell the device to it for a substantially lower price. What is the large discount retailer asking you to practise? a. price discrimination b. channel control pricing c. unfair trade practices d. price fixing ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 547

31. When Microsoft introduced its Windows NT network operating system, it gave buyers free Web server software. At the same time, Netscape was trying to sell similar Web server software for $4,999. Once Microsoft got a lion’s share of the market, and Netscape’s market share declined substantially, Microsoft began charging above-market price for its Web server software. Many people thought Microsoft was guilty of which of the following? a. unfair trade practices b. price discrimination c. price fixing d. predatory pricing ANS: D Predatory pricing is the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market. PTS: 1 DIF: Application BLM: Higher order

REF: p. 547

OBJ: 2

32. In Canada, under federal legislation, it is unlawful for a firm to price below its costs with the intent of driving the competition out of business. What is this practice known as? a. price discrimination b. predatory pricing c. price fixing d. resale price maintenance ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 547

33. After managers understand both the legal and the marketing consequences of price strategies, they should set a price, the general level at which a company expects to sell a good or service. What is this price? a. base b. demand c. leader d. functional ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 549

17-9

34. Razer-Edge makes machines for sharpening the blades used by butchers to slice meat. When Razer-Edge priced its Primary Sharpener, its salespeople were told that it would be sold for $1,700, but that there would be room for discounts and flexibility. The $1,700 price is which of the following prices for the Primary Sharpener? a. functional b. base c. channel leader d. demand ANS: B The $1,700 price is the general price level at which the company intends to sell the product, and this price is also known as the base price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 549

OBJ: 3

35. When a buyer pays a lower price for buying in multiple units or above a specified dollar amount, what is the buyer receiving? a. a quantity discount b. a functional discount c. a promotional allowance d. a cash discount ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 549

36. Which type of discount is a deduction from list prices that is aimed at encouraging customer loyalty? a. noncumulative quantitative b. cumulative quantitative c. frequent-buyer d. cash ANS: B Because quantity discounts are allowed to be achieved over time, customers become locked into buying from a single supplier to qualify for the discount. There is no such term as frequent-buyer discount. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 549

OBJ: 3

37. One order of over $500 from The Baker’s Catalogue earns a 5 percent discount, and one order of $1,000 and over earns a 10 percent merchandise discount. What are these discounts examples of? a. promotional allowances b. noncumulative quantity discounts c. frequent buyer discounts d. cumulative quantity discounts ANS: B OBJ: 3

17-10

PTS: 1 DIF: Application BLM: Higher order

REF: p. 549

38. Why are quantity discounts most often used? a. to increase the sales potential of slow-moving items b. to reward a channel intermediary for performing some service c. to reward the buyer who pays in cash d. to shift the storage function backward to the supplier ANS: A Quantity discounts encourage wholesalers or retailers to buy in larger amounts. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 549

39. Current is a catalogue retailer that sells greeting cards, wrapping paper, and decorative bows. Since its inception, the catalogue retailer has offered three separate prices on each item purchased. The highest price is for purchases of a single item. The middle price is for purchases between two and five of the same item. The lowest price is for purchases over five of the same item. What common form of purchase discount is Current using? a. quantity discount b. cash discount c. functional discount d. promotional allowance ANS: A Quantity discounts offer lower prices for buying in multiple units or above a specified dollar amount. PTS: 1 DIF: Application BLM: Higher order

REF: p. 549

OBJ: 3

40. Merchants frequently offer a discount off the base price to customers who pay immediately, or within a specified time period. What is this called? a. a cash discount b. a functional discount c. a promotional allowance d. a base discount ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 549

41. When a customer of Vegas Sign Company chooses to pay immediately on delivery rather than wait to be billed in 30 days, the buyer receives a 5 percent discount. What is this 5 percent discount an example of? a. a rebate b. a promotional allowance c. a cash discount d. a functional discount ANS: C A cash discount is offered to those who pay immediately or within a specified time frame. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 549

OBJ: 3

17-11

42. When a channel intermediary is compensated for the ordinary services and tasks performed within the channel of distribution, the compensation, usually in the form of a discount from base price, is called which of the following? a. a functional (or trade) discount b. a rebate or refund c. a promotional allowance d. a cumulative or noncumulative quantity discount ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 550

43. When the salesperson from R.W. Hunt & Sons, a distributor of rifles and other items needed for hunting or target practice, calls on retail sporting goods stores, she is authorized to offer the retailers a 15 percent discount from the list price in recognition of activities retailers perform for the distributor. These activities include unpacking, floor display setup, and a repair service. What is this 15 percent discount called? a. a trade discount b. a quantity discount c. a promotional allowance d. a channel allowance ANS: A A functional, or trade, discount is the customary discount from list price that is offered to intermediaries in recognition of functions that are performed in the selling of the product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 550

OBJ: 3

44. What is a price reduction that shifts the storage function forward to the purchaser and enables manufacturers to maintain steady production year-round? a. a base allowance b. a promotional allowance c. a seasonal discount d. a quantity discount ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 550

45. A June sale on chocolate eggs, an Easter staple for many people, is an example of which of the following pricing tactics? a. a promotional allowance b. a functional discount c. a quantity discount d. a seasonal discount ANS: D A seasonal discount is a price reduction for buying merchandise out of season. PTS: 1 DIF: Application BLM: Higher order

17-12

REF: p. 550

OBJ: 3

46. What are cash refunds given for the purchase of a product during a specific period? a. reciprocal allowances b. rebates c. demand discounts d. promotional allowances ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 550

47. When Janeka purchased a pair of walkie-talkies so she could stay in contact with her 10-year-old son when he was playing in the neighbourhood, she noticed that if she mailed the manufacturer a proof-of-purchase and the cash register receipt showing where and when she had purchased the two-way radio system and how much she had paid, she would receive a cheque for $25. What is this $25 an example of? a. a rebate b. a trade promotion c. a cash discount d. a reciprocal allowance ANS: A Rebates are cash refunds. PTS: 1 DIF: Application BLM: Higher order

REF: p. 550

OBJ: 3

48. Supposed a firm is customer-driven and seeks to understand the attributes customers want in the goods and services they buy and the value customers contribute to those attributes. The firm sets the price of the product at a level that seems to the customer to be a good price compared with the prices of other options. What is this pricing? a. price b. value-based c. market concept d. noncumulative ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 550

49. When a coffee shop in a suburban mall and an upscale cafe in a luxury hotel charge different prices for the same cup of coffee served to customers who find the atmosphere in the hotel worth the difference, what is the pricing method used? a. demand-based b. break-even c. value-based d. cost-based ANS: C REF: p. 550

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

17-13

50. Which of the following uses buyers’ perceptions of a product’s worth, not the sellers’ costs, as the basis of pricing? a. price elasticity b. demand management c. everyday low pricing d. value-based pricing ANS: D REF: p. 550

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

51. What is the basic assumption behind value-based pricing? a. Consumers are more concerned about price than quality. b. Additional long-term costs to manufacturers will increase. c. Increased profitability for wholesalers will increase the number of services they are willing to perform. d. The firm is both customer-driven and competitor-driven. ANS: D The basic assumption is that the business is seeking to understand its customers. Because of the unlikelihood that it is operating as a monopoly, it must also pay attention to what its competitors are doing. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 550

52. One price tactic requires the purchaser to absorb the freight costs from the shipping point. In this case, the farther buyers are from sellers, the more they pay because transportation costs generally increase with the distance merchandise is shipped. What is being described? a. uniform delivered pricing b. FOB origin pricing c. zone pricing d. freight absorption pricing ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

53. FOB is an acronym for which of the following? a. first on board b. free on board c. freight on board d. fee on buyer ANS: B OBJ: 3

17-14

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

54. Shipping fresh-cut flowers to international buyers can be risky because of price changes during the time required for shipment, expense incurred over long distances, and quality of product delivered. To minimize costs, what would a seller likely employ? a. basing-point pricing b. freight absorption pricing c. FOB origin pricing d. uniform delivered pricing ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

55. With which of the following does the seller pay the actual freight charges and bill every purchase with an identical, flat freight charge? a. uniform delivered pricing b. FOB origin pricing c. basing-point pricing d. freight absorption pricing ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

56. What does uniform delivered pricing enable a firm to do? a. maintain a nationally advertised price b. charge each customer the actual cost of shipping its products c. charge each customer its fair share of the cost of shipping d. discriminate in favour of buyers that are geographically closer to the seller ANS: A With uniform delivered pricing, all customers will pay the same price regardless of their location. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 552

57. A Toronto-based catalogue retailer features cast-iron skillets. Its customers in New Brunswick are charged one shipping rate, and customers in B.C. are charged a different rate. Customers in Quebec are charged yet another rate. What kind of geographical pricing is the catalogue using? a. zone pricing b. FOB origin pricing c. freight absorption pricing d. FOB factory ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

17-15

58. If your favourite mail-order catalogue lists freight charges according to the dollar amount of merchandise purchased, you know that it is using which of the following pricing? a. freight absorption b. uniform delivered c. zone d. FOB origin ANS: B With uniform delivered pricing, all customers will pay the same price regardless of their location. PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

OBJ: 3

59. Which of the following BEST describes uniform delivered pricing? a. It is prevalent in the steel, cement, corn oil, and lead industries. b. It is common where freight costs are a large portion of total costs. c. It is sometimes called “postage stamp pricing.” d. It creates no geographical price discrimination. ANS: C With uniform delivered pricing, all customers pay the same amount for freight regardless of location. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 552

60. If a company decides to divide its market area into segments or regions and charge a flat rate for freight to all customers in a given region, what type of pricing is the company using? a. freight absorption b. basing-point c. zone d. uniform delivered ANS: C OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

61. Green Earth Marketing sells containers for temporary storage of recyclables nationally through its catalogue. The company wants to simplify pricing and reduce its risk. Green Earth also desires some type of difference in price due to distance. Which type of pricing should the company use? a. freight absorption b. two-part c. flexible d. zone ANS: D In zone pricing, the freight prices are set according to geographic areas. PTS: 1 DIF: Application BLM: Higher order

17-16

REF: p. 552

OBJ: 3

62. Lee Valley, Inc. is a catalogue retailer of woodworking tools used by craftspeople. It uses two different shipping prices. All customers west of Manitoba pay $6.99 shipping and handling costs per order, while all east of Manitoba pay $8.99. This is an example of which type of pricing? a. zone b. skimming c. freight absorption d. basing-point ANS: A Two zones have been established. Every customer pays the same price in zone 1 while every customer in zone 2 pays a higher price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

OBJ: 3

63. If the seller pays all or part of the actual freight charges and does not pass them on to the buyer, which type of pricing is the seller using? a. freight absorption b. uniform delivered c. FOB origin d. basing-point ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

64. Landover Carpentry, Inc. currently markets its garden benches in the Ontario market. It would like to expand into the Western Canada market, but the competition there is intense. Which geographic pricing tactic should the Landover use? a. freight absorption pricing b. zone pricing c. FOB origin pricing d. basing-point pricing ANS: A In freight absorption pricing, the seller pays all or part of the freight costs and does not pass them on to the purchaser. This keeps the purchase price low. PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

OBJ: 3

17-17

65. If a manufacturer designates a shipping point from which to calculate all freight charges and charges customers freight from that point (even if the goods were shipped from another location), which type of pricing is the manufacturer using? a. zone b. freight absorption c. basing-point d. FOB origin ANS: C With a basing-point price, the seller designates a location as a basing-point and charges all buyers the freight costs from that point. PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

OBJ: 3

66. A manufacturer of lighting fixtures has six warehouses and a pricing policy of charging freight from the closest warehouse to the customer, regardless of where parts are shipped. For instance, if the customer is in Vancouver, British Columbia, the closest warehouse to the customer is in Seattle, Washington. If the ordered car part actually comes from the Toronto warehouse, the customer still pays freight from Seattle. Which type of pricing is the manufacturer using? a. freight absorption b. uniform delivered c. zone d. basing-point ANS: D In basing-point pricing, customers pay freight from a set base point, regardless of the location from which the goods are shipped. PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

OBJ: 3

67. Suppose price is not set on the product until the item is either finished or delivered. Which of the following is being used? a. price shading b. delayed-quotation pricing c. escalator pricing d. bid pricing ANS: B OBJ: 5

17-18

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 552

68. The Dollar Tree is a small chain of discount stores where all of the merchandise is priced at $1. What does the Dollar Tree use? a. flexible pricing b. a single-price tactic c. leader pricing d. price lining ANS: B The single-price tactic offers all goods and services at the same price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

OBJ: 3

69. Which of the following BEST describes single-price selling? a. It does not benefit the retailer. b. It is most effective when used during an inflationary period. c. It encourages clerical errors. d. It removes price comparisons from the buyer’s decision-making process. ANS: D Single-price selling allows retailers to enjoy the benefits of simplified pricing and minimal clerical errors. Inflation creates headaches as retailers must raise prices frequently in order to continue earning a profit. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 552

70. One tactic allows different customers to pay different prices for essentially the same merchandise bought in equal quantities This tactic is often found in the sale of shopping goods, specialty merchandise, and most industrial goods except supply items. What is it? a. psychological (or odd-even) pricing b. flexible (or variable) pricing c. zoning (or basing) pricing d. price maintenance ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 553

71. What is an advantage associated with a flexible pricing policy? a. It enables a seller to close a sale with a price-conscious customer. b. It causes inconsistent profit margins. c. It causes ill will among customers if they discover that other customers are paying lower prices. d. It enables salespeople to automatically lower the price to make a sale. ANS: A Flexible pricing may allow a salesperson to negotiate with a price-sensitive customer, which is an advantage. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 553

17-19

72. Ahmad Jing operates a wedding consultant service. He will often provide essentially the same service to different customers at distinctly different prices depending on how he likes the customer and how much he thinks the customer needs his services. What does Jing use? a. two-part pricing b. price maintenance c. an illegal pricing policy d. flexible pricing ANS: D Flexible pricing is defined as selling essentially the same product to different customers for different prices. PTS: 1 DIF: Application BLM: Higher order

REF: p. 553

OBJ: 3

73. Eustis Lee is a lawyer who handles only drunk-driving cases. No matter how quickly he resolves the case, he charges each customer $5,000. Lee justifies the fee because of his lengthy education and the years he has spent learning how the judicial system operates. Which pricing policy is the lawyer using? a. price maintenance b. potential (or base) pricing c. flexible (or variable) pricing d. professional services pricing ANS: D Professional services pricing is used by people with lengthy experience and training, who are often certified by a licensing board. PTS: 1 DIF: Application BLM: Higher order

REF: p. 553

OBJ: 3

74. Merck & Co., the manufacturer of the AIDS drug Crixidan, distributes exclusively to one distributor, Stadtlanders Pharmacy. The pharmacy has been criticized for charging too high a price for the drug and exploiting inelastic demand. Stadtlanders claims the charges are ethical because of high staffing costs and associated discounts with various health plans. This situation describes issues associated with which of the following? a. uniform delivered pricing b. flexible pricing c. professional services pricing d. resale price maintenance ANS: C Professional services pricing is often used with products and services that have an inelastic demand. PTS: 1 DIF: Application BLM: Higher order

17-20

REF: p. 553

OBJ: 3

75. Often a seller will establish a series of prices for a family of merchandise items. There may be several different models at specific price points but no prices in between. What is this policy called? a. price bracketing b. price lining c. price bundling d. family pricing ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 553

76. Why is price lining a valuable tactic for marketing managers? a. A company that uses price lining is able to carry a smaller total inventory and reduce confusion for its customers. b. The price lining strategy allows the company to gain brand loyalty from its targeted segments. c. A company that uses price lining has more price markdowns and greater markup. d. Price lining tends to confuse customers and requires them to listen closely to the salesperson pitch. ANS: A With price lines, a retailer can choose to carry a smaller inventory because it wants to offer products at certain price levels but not at every possible point of the price scale. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 553

77. The Hagarty & Adolph funeral home has coffins priced at $1,200, $2,000, $3,500, and $5,000. Why have the owners of the funeral home chosen price lining? a. It will enable them to carry a larger total inventory b. It will maintain all of the product line at the same stage in the product life cycle. c. It will reach several different target market segments. d. It will thwart competitors that are trying to sell similar products. ANS: C Price lining allows a retailer to appeal to several different target markets. It is not an uncommon strategy and competitors probably use it. It should not affect inventory overall and will not confuse customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 553

OBJ: 3

17-21

78. In a catalogue targeted to people who like to bake, customers can buy a single yeast bread mix designed specifically to be baked in bread machines for $3.95 each or 12 different mixes for $37.50. What is this an example of? a. status quo pricing b. penetration pricing c. psychological pricing d. price bundling ANS: D The 12 items sold together are priced less expensively than if purchased separately. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

79. Which of the following is an attempt by the marketing manager to induce store patronage through selling a product near cost or even below cost? a. leader pricing b. price skimming c. odd-even pricing d. price lowballing ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 554

80. The owner of a flower shop decided to sell a dozen red roses for $13.50. He hopes the below-cost price for the roses will attract current and new customers who will also buy regularly priced items. The manager is encouraging store patronage through which of the following? a. price lowballing b. leader pricing c. psychological pricing d. variable pricing ANS: B Leader pricing involves selling a product near or even below cost to attract business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

81. What can leader pricing be used to do? a. attract customers to the store so they will buy other products in addition to the leader product b. bundle products together for sale c. attract customers to a store so they can be persuaded to buy a more expensive product instead d. price products at odd-numbered amounts to stimulate demand ANS: A Leader pricing involves selling a product near or even below cost to attract business. PTS: 1 OBJ: 3

17-22

DIF: Comprehension BLM: Higher order

REF: p. 554

82. The office supply store was selling two-drawer file cabinets for $20, which is a below-market price, to lure customers into the store in hopes that while they are in the store to buy a file cabinet they will also buy other items that have a much higher markup. What is the office supply store using? a. price lowballing b. leader pricing c. price lining d. functional pricing ANS: B Leader pricing involves selling a product near or even below cost to attract business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

83. If a marketer decides to price goods at odd-numbered dollar amounts to denote bargains, and at even-numbered amounts to denote quality, what is he or she using? a. decoy pricing b. price lining c. two-part pricing d. psychological pricing ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 554

84. Which of the following phrases accurately describes psychological pricing? a. It is essentially the same as price shading b. It is also called odd-even pricing c. It is equally effective on all types of products d. It is designed to aid the economy-minded purchaser ANS: B Psychological pricing has mixed results, depending on the type of product. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 554

85. What is the term for marketing two or more products in a single package for a special price? a. price bundling b. price lining c. two-part pricing d. family pricing ANS: A OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 554

17-23

86. R.W. Hunt & Sons, a distributor of hunting bows and anything needed for hunting or target practice, has packaged a new range-finder scope with a package of paper targets at one low price. R.W. Hunt is selling the scope slightly below cost, but the paper targets are very profitable. Which pricing technique is R.W. Hunt using? a. bait pricing b. price bundling c. psychological pricing d. two-part pricing ANS: B Marketing two or more products in a single package for a special price is called price bundling. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

87. OfficeMax, a retailer of office supplies, is selling a point-and-shoot digital camera, the printer and software needed to print photographs, and a starter package of photograph paper for $230. If purchased separately, the items would cost a total of $250. What has OfficeMax used? a. two-part pricing b. price bracketing c. price lining d. price bundling ANS: D Marketing two or more products in a single package for a special price is called price bundling. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

88. The Terra Vista Airport is a small airport frequently used by people who love skydiving. To help keep costs in line, the airport now charges its customers a small parking fee. At one time, the cost of parking at the airport was included in the price of the jump. What is Terra Vista Airport using? a. unbundling b. professional services pricing c. potential (or base) pricing d. price maintenance ANS: A Reducing the bundle of services that comes with the basic product is called unbundling. PTS: 1 DIF: Application BLM: Higher order

17-24

REF: p. 554

OBJ: 3

89. Kasha has decided to keep her new power boat in a “drystack” storage facility rather than in the water at a marina. The storage facility charges her a fee of $500 per year, plus $25 each time she calls ahead and asks the facility to put her boat in the water for the day or weekend. Which pricing tactic is the facility using? a. price bundling b. professional services pricing c. two-part pricing d. price lining ANS: C Two-part pricing involves two separate charges to consume a single product or service. PTS: 1 DIF: Application BLM: Higher order

REF: p. 555

OBJ: 3

90. Why do consumers sometimes prefer two-part pricing? a. Consumers prefer a limited number of choices. b. Consumers like to be in control of costs. c. Prices have little or no psychological influence on most consumers. d. Consumers are uncertain about the number and types of activities that might be used at places like amusement parks. ANS: D Two-part pricing is a price tactic that charges two separate amounts to consume a single good or service. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 555

91. What are extra fees paid by consumers for violating the terms of purchase agreements? a. financial judgments b. consumer penalties c. punitive fees d. decoy fees ANS: B OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 556

92. Lipton makes several easy-to-prepare side dishes that all use macaroni shells. In promoting this product line, Lipton offers a 50-cents-off coupon that can be used for any of its macaroni-based mixes. Therefore, what must Lipton consider when pricing its mixes? a. joint costs b. potential (or basing) costs c. bundling costs d. differential costs ANS: A Joint costs are costs that are shared in the manufacturing and marketing of several products in a product line. PTS: 1 DIF: Application BLM: Higher order Copyright © 2012 Nelson Education Limited

REF: p. 558

OBJ: 4

17-25

93. Which of the following factors can a manager IGNORE when deciding on prices for an entire product line? a. Products in the line could be substitutes for one another. b. Products in the line are complementary to one another. c. The buyer considers the brand or the price first. d. Products share joint costs. ANS: C The manager is trying to determine the relationships between the various products in the line and is looking at the products, not the buyer. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

REF: p. 558

94. Which of the following BEST describes delayed-quotation pricing? a. It requires a seller to submit a bid after the closing date. b. It prevents the competitor from submitting an earlier bid. c. It allows the final selling price to reflect cost increases incurred between the time the order is placed and the final delivery takes place. d. It is also known as price-shading bidding. ANS: C Delayed-quotation pricing delays the setting of the final price. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 559

95. Which of the following allows for price increases based on the cost-of-living index or some other formula? a. a price-shading index b. a factorial clause c. an escalator price clause d. a quotation index differential ANS: C OBJ: 5

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 559

96. What is escalator pricing? a. It is a demand-oriented pricing tactic. b. It is similar to price shading. c. It is also called postage stamp pricing. d. It is similar to delayed-quotation pricing. ANS: D Escalator pricing allows for price increases and delays the setting of the final price. PTS: 1 OBJ: 5

17-26

DIF: Comprehension BLM: Higher order

REF: p. 559

97. Business-to-business salespeople often use a discounting practice that is often done routinely without much forethought. The goal is to heighten the demand for certain items in a product line. Which of the following is being described? a. price shading b. price lining c. devaluation d. consumer discounts ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 559

98. What can a marketing manager do to make demand for his or her product more inelastic? a. create similar offerings b. create supplier dependency c. change the package design d. cultivate selected supply ANS: C REF: p. 559-560

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

99. What can a marketing manager do to make demand for his or her product more inelastic? a. avoid making any product changes b. eliminate brand equity c. cultivate selected demand d. eliminate any unique products from the product line ANS: C The marketing manager would need to use some demand-oriented tactic. Escalator pricing is a cost-oriented tactic. Creating unique products and changing packaging are both recommended tactics. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 559-560

100. Which of the following pricing methods can be used to build market share during a recession? a. psychological pricing b. variable pricing c. resale price maintenance d. bundling ANS: D The other commonly used technique is value-based pricing. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

REF: p. 560-561

17-27

101. During the recent worldwide recession when wine usage was declining, Nickel & Nickel launched a new brand of wine, which it sold at $125 a bottle. The wine is allowed to age three times as long as lower-priced wines, and the grapes used in the wine’s production are a rare variety. Wine lovers appreciate how both production techniques improve wine quality. What did Nickel & Nickel use to build market share? a. price lining b. value-based pricing c. status quo pricing d. leader pricing ANS: B Value-based pricing indicates the consumers are getting value for their money. PTS: 1 DIF: Application BLM: Higher order

REF: p. 560-561

OBJ: 5

102. What are two effective pricing tactics, which can be used during a recession, to hold or build market share? a. value pricing and bundling b. unbundling and price shading c. flexible pricing and price shading d. price lining and escalator pricing ANS: A Value pricing stresses that customers are getting a good value for their money. If features are added to a bundle, customers may perceive the offering as having a greater value. PTS: 1 OBJ: 5

17-28

DIF: Comprehension BLM: Higher order

REF: p. 560-561

It’s September and Sophia wants to buy some arts and crafts supplies for an after-school program she is developing for her daughter’s elementary school. In her Sunday newspaper was a flyer from Michael’s, an arts-and-crafts retailer. As she looked through the newspaper insert, she noticed that if she purchased three or more bottles of Alene’s Tacky Glue, the regular price of $1.50 each was reduced to $1.15 each. She also saw that the store priced its plastic storage boxes at $1.99, $3.99, and $5.99. She thought they would be useful for storing each individual child’s projects. On the front page of the flyer was an ad for Funky Girls Gel Pens, something she knew her daughter would love to use. The price at Michael’s was $6.99 lower than the price she had found at the other stores that carried the pens. She thought that some of the older girls might like to start a scrapbook and was pleased to find that Michael’s had a scrapbook starter kit, which includes scissors, book, pages, and stickers for only $15. The items could be purchased separately for $19.99. The flyer also announced that all flag-related items leftover from its Canada Day sale were reduced by 40 percent. 103. Refer to Art Supplies. Which type of discount is being using to price the Tacky Glue? a. noncumulative quantity discount b. cash discount c. cumulative quantity discount d. promotional allowance ANS: A A noncumulative quantity discount is a reduction from list price that applies to a single order rather than to the total volume placed during a specific period. PTS: 1 DIF: Application BLM: Higher order

REF: p. 549

OBJ: 3

104. Refer to Art Supplies. Which of the following merchandise is offered in the flyer with a seasonal discount? a. scrapbook starter kit b. Tacky Glue c. flag-related items d. plastic storage boxes ANS: C Seasonal discounts are pricing reductions for buying merchandise out of season. PTS: 1 DIF: Application BLM: Higher order

REF: p. 550

OBJ: 3

105. Refer to Art Supplies. What pricing practice was used to price the plastic storage boxes? a. seasonal pricing b. price shading c. cumulative pricing d. price lining ANS: D Price lining is the practice of offering a product line with several items at specific price points. PTS: 1 DIF: Application BLM: Higher order

REF: p. 553

OBJ: 3

17-29

106. Refer to Art Supplies. Which pricing tactic was Michael’s probably using with its Funky Girls Gel Pens? a. seasonal pricing b. leader pricing c. price bundling d. price lining ANS: B Leader pricing is an attempt by the marketing manager to attract customers by selling a product near or at cost. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

107. Refer to Art Supplies. What pricing practice was used with the scrapbook starter kit? a. price lining b. price bundling c. psychological pricing d. seasonal pricing ANS: B Price bundling is marketing two or more products for a special price. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

Sharyl Kabbes manufactures dairy products on her farm outside Walkerton, Ontario. Her products carry the brand name Mrs. K’s Premium. The company sells milk, cheese, and sausage products. The products are sold individually or in sets that include a variety of cheeses and sausage products for a special price. Currently the products are sold only in Ontario. Mrs. K’s products were introduced with a high price relative to competition. Kabbes says that her products are premium and therefore justify the high initial price. To get retailers to carry Mrs. K’s products, the company offers discounts to buyers who will transport the products from the Kabbes Farm to their warehouses. Kabbes also offers retailers money to run ads for Mrs. K’s products. Because Mrs. K’s products are perishable, transportation is very important, and some of her customers could not take advantage of the discount offered for picking up the product from the farm. As such, Kabbes has decided to divide the province into several segments and base her freight charges on the location of the buyer within these segments.

17-30

108. Refer to Mrs. K’s Premium Cheese. The introductory pricing policy chosen by Mrs. K’s exemplifies which type of policy? a. price lining b. penetration pricing c. price skimming d. price fixing ANS: C Price skimming denotes high price relative to prices of competitors. PTS: 1 DIF: Application BLM: Higher order

REF: p. 543

OBJ: 1

109. Refer to Mrs. K’s Premium Cheese. What is the type of discount offered by Mrs. K’s to buyers who are willing to assume the transportation of products from the farm to their warehouses? a. a quantity discount b. a potential (or base) allowance c. a functional discount d. a promotional allowance ANS: C Functional discounts are given to channel intermediaries who perform ordinary services and tasks (such as transportation) within a channel of distribution. PTS: 1 DIF: Application BLM: Higher order

REF: p. 550

OBJ: 3

110. Refer to Mrs. K’s Premium Cheese. The money offered by Mrs. K’s to retailers to advertise the company’s products is called which of the following? a. a quantity discount b. a promotional allowance c. a rebate d. a cash discount ANS: B A promotional allowance is a payment to a dealer for promoting a manufacturer’s product. PTS: 1 DIF: Application BLM: Higher order

REF: p. 550

OBJ: 3

17-31

111. Refer to Mrs. K’s Premium Cheese. Dividing Ontario into segments and pricing products based on the freight charges to different segments represents the use of which type of pricing? a. FOB origin b. zone c. freight absorption d. basing-point ANS: B Zone pricing requires dividing the firm’s marketing area into zones and charging a flat freight rate to all customers within a given zone. PTS: 1 DIF: Application BLM: Higher order

REF: p. 552

OBJ: 3

112. Refer to Mrs. K’s Premium Cheese. Mrs. K’s sells some products in sets that include a variety of cheeses and sausage products for a special price. What is this known as? a. aggregate pricing b. price bundling c. two-part pricing d. price lining ANS: B Marketing two or more goods in a single package for a special price is known as price bundling. PTS: 1 DIF: Application BLM: Higher order

REF: p. 554

OBJ: 3

The Canadian Girl catalogue began as a concept to introduce girls who lived in the past to today’s girls. Each historically accurate doll is carefully crafted and dressed and has books to describe her life. For example, Kristen is an 1854 pioneer girl who is growing up in Manitoba. Her story begins with her long sea voyage from Iceland. The basic doll dressed in a calico dress and striped apron and the hardcover story of how she got to Manitoba costs $90. Six more hardback books of Kristen’s life are available for $80. Kristen’s nightgown costs $20, and a matching one for the doll owner is an additional $40. Buy both together and the price is only $50. A hand-painted wooden bed and trunk for Kristen are available for $220. Shipping costs vary with the price of the merchandise ordered and are not connected to weight or distance. 113. Refer to Canadian Girl Catalogue. In order to determine how to price the doll, Canadian Girl most likely used a four-step process. What was the first step in this process? a. Establish pricing goals. b. Determine a base price. c. Estimate profits. d. Estimate costs. ANS: A See Exhibit 17.1. PTS: 1 DIF: Application BLM: Higher order

17-32

REF: p. 542

OBJ: 1

114. Refer to Canadian Girl Catalogue. While a doll can be purchased at Zellers for less than $10, Canadian Girl markets its dolls at a price much higher than the prices of its competitors. Which strategy does it most likely use? a. penetration b. status quo pricing c. price skimming d. price baiting ANS: C REF: p. 543

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Higher order

115. Refer to Canadian Girl Catalogue. What kind of geographic pricing does Canadian Girl use? a. FOB factory b. freight absorption pricing c. FOB origin pricing d. uniform delivered pricing ANS: D REF: p. 552

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

116. Refer to Canadian Girl Catalogue. Look at the prices of items found in the Canadian Girl catalogue. Which fine-tuning pricing tactic does Canadian Girl use? a. cross-docking b. unbundling c. psychological pricing d. penetration pricing ANS: C This is even-numbered pricing. Odd-even pricing is also called psychological pricing. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 554

117. Refer to Canadian Girl Catalogue. Why does Canadian Girl use even-numbered pricing? a. It is the norm in the toy industry. b. Even-numbered pricing is used to denote quality. c. Even-numbered pricing makes consumers feel they are paying a lower amount. d. It is the norm in the retail catalogue industry. ANS: B REF: p. 554

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

17-33

118. Refer to Canadian Girl Catalogue. When a customer buys the matching nightgown set for the doll and her owner, Canadian Girl priced the items using which of the following? a. markdown pricing b. psychological pricing c. status quo pricing d. price bundling ANS: D The two items sold together are priced less expensively than if purchased separately. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

REF: p. 554

Kule, Inc. produces three different lines of car racks for transporting large, bulky items.

Sales Less: cost of goods sold Net profit

Bicycle $140,000 110,000 30,000

Luggage $100,000 110,000 (10,000)

Skis $160,000 140,000 20,000

Total company net annual profit = $40,000 Included in the cost of goods sold is $120,000 of annual rent (a fixed cost) that is distributed equally among the three product lines. 119. Refer to Kule, Inc. What will be the effect on total net profit for the company if the line of bicycle racks is dropped? a. Total net profit will decrease by $10,000. b. Total net profit will increase by $30,000. c. Total net profit will increase by $10,000. d. Total net profit will decrease by $70,000. ANS: D Current net profit is $40,000. Dropping the bicycle line will increase profit by $10,000 initially, but the fixed rent costs ($40,000) that are being covered by that line will have to be distributed to the other two lines. This will result in the loss from the luggage division growing to $30,000 and will erase the profits from the skis division. Kule would then have a net loss of $30,000 rather than a net profit of $40,000, a decrease of $70,000. PTS: 1 DIF: Application BLM: Higher order

17-34

REF: p. 558

OBJ: 4

120. Refer to Kule, Inc. Included in the cost of goods sold is $12,000 of annual rent (a fixed cost) that is distributed equally among the three product lines. As a consultant to Kule, will you recommend that the company drop the luggage rack line? a. No, because dropping the line will result in increased fixed costs. b. Yes, because dropping the line will increase company net profits. c. Yes, because dropping the line will reduce joint costs. d. Yes, because dropping the line will reduce cost of goods sold and increase revenues. ANS: B Current net profit is $40,000. Dropping the luggage rack line will increase profit by $10,000 initially, but the fixed rent costs ($4,000) that are being covered by that line will have to be distributed to the other two lines. This will result in a net decrease of $8,000, and total net profit would rise to $42,000. Therefore, Kule should drop the line. PTS: 1 DIF: Application BLM: Higher order

REF: p. 558

OBJ: 4

TRUE/FALSE 1. The first step in setting the right price for a new product is to estimate demand, costs, and profits. ANS: F The first step in setting the right price for a new product is to derive pricing goals from the firm’s overall objectives. PTS: 1

DIF: Definition

REF: p. 542

OBJ: 1

2. All pricing objectives have tradeoffs that managers must weigh. ANS: T REF: p. 542

PTS: 1 OBJ: 1

DIF: Comprehension

3. Once he compiles information on pricing objectives, market demand, quantity supplied, and the price elasticity of demand, the marketing manager for a firearms training system will be ready to determine optimal price for a new product extension. ANS: F He must also collect information or estimates about costs and total revenue at a variety of prices. Only then can he make reasonable estimates about profits and market share. PTS: 1

DIF: Application

REF: p. 542

OBJ: 1

4. Hasbro wants to introduce a new brand of flying disc similar to Wham-O’s Frisbee. Hasbro would have a great amount of freedom in choosing a price for its new toy. ANS: F If a firm brings out a new item similar to a number of others already on the market, its pricing freedom will be restricted. PTS: 1

DIF: Application

REF: p. 543

OBJ: 1 17-35

5. It makes the most sense to use price skimming as a pricing policy when demand is relatively elastic in the upper ranges of the demand curve. ANS: F It makes the most sense to use price skimming as a pricing policy when demand is relatively inelastic in the upper ranges of the demand curve. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 543

6. Price penetration is sometimes referred to as a “market-plus” approach to pricing. ANS: F Price skimming is sometimes referred to as a “market-plus” approach to pricing. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 543

7. The Raver-Smythe Corporation (RSC) has introduced mylar-based artificial fingernails. It earns a low profit margin on the sale of each box of its new fingernails and is still able to meet its revenue objectives due to economies of scale. RSC is using a penetration pricing policy. ANS: T OBJ: 1

PTS: 1

DIF: Application

REF: p. 544

8. One disadvantage of using a penetration pricing policy is that the high unit profit margins will attract potential competitors into production of similar products. ANS: F Penetration pricing has low profit margins on each unit sold. This is seen as an advantage because it discourages potential customers from entering the market. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 544

9. Price fixing is clearly illegal in all instances. ANS: T REF: p. 547

PTS: 1 OBJ: 2

DIF: Comprehension

10. The two operators of carriage tours in Victoria are in a price war with each other. Whenever one reduces its fare, its competitor reduces its fares by the same amount. This is an example of status quo pricing. ANS: T OBJ: 1

PTS: 1

DIF: Application

REF: p. 546

11. Price discrimination can sometimes be justified. ANS: T OBJ: 2 17-36

PTS: 1

DIF: Application

REF: p. 547

12. If the world’s largest manufacturer of door knobs and deadbolt locks set wholesale prices below its cost, with the intention of driving its competitors out of business, the manufacturer would be engaged in predatory pricing. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 547

13. Manufacturers know the approximate price level they can expect when establishing a product price. This approximate price is called the base price. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 549

14. A company that is allowed to deduct 3 percent from its total bill if it pays by a specific date is receiving a cash discount. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 549

15. Functional discounts are simple to calculate. The total discount is the retail list price times the accumulated margin percentages. ANS: F Functional discounts are figured on a chain basis from one level of the distribution channel to the next and cannot be aggregated in the above manner. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 550

16. Gary Thrower is a chimney sweep. He gives large discounts to homeowners who use his services in June and July. This is an example of a seasonal discount. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 550

17. Functional discounts, noncumulative quantity discounts, and promotional allowances are examples of rebates given to the trade customer. ANS: F Rebates involve a cash refund for the purchase of a product during a specific period. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 550

17-37

18. The basic assumption with price skimming is that the firm is customer driven, seeking to understand the attributes customers want in goods and services they buy and the value of that bundle of attributes to customers. ANS: F This is the basic assumption for value pricing. PTS: 1

DIF: Definition

REF: p. 550

OBJ: 3

19. Winnipeg Metallic Company, a manufacturer of baking pans, requires its buyers to pay for the cost of transportation from the manufacturing site to their place of businesses. Winnipeg Metallic uses FOB origin pricing. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 552

20. A manufacturer using uniform delivered pricing is legally discriminating against buyers who are located close to the point of shipping because they pay the same amount as buyers located far from the point of shipping. ANS: T REF: p. 552

PTS: 1 OBJ: 3

DIF: Comprehension

21. A retail store implements a single-pricing tactic as a way to remove price comparisons from the buyer’s decision-making process. ANS: T REF: p. 552

PTS: 1 OBJ: 3

DIF: Comprehension

22. A catalogue retailer offer three styles of khaki pants at three price levels. Customers can buy khaki pants for $26.00, $32.00, or $38.00 and at no other prices but these. The special pricing tactic used by the catalogue retailer is best described as variable psychological pricing. ANS: F The catalogue retailer is using price lining as a pricing tactic as well as psychological (odd-even) pricing. PTS: 1

DIF: Application

REF: p. 553

OBJ: 3

23. Hannah’s cable system has offered her a deal for basic cable plus six premium channels for less than she is currently paying for basic cable. The cable system is using price lining to increase its overall profits. ANS: F The cable system is using price bundling. PTS: 1

17-38

DIF: Application

REF: p. 554

OBJ: 4

24. One example of price bundling occurs when theatres sell season tickets at a lower price than individual tickets for the same show. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 554

25. Rag fibres for paper and cotton seeds for cottonseed oil are two byproducts of the cotton textile industry. Because these products are produced together, they are complementary products. ANS: F Complementary products are those that are consumed together, whereby the sale of one causes an increase in the sale of the other. PTS: 1

DIF: Application

REF: p. 557

OBJ: 4

26. Escalator pricing and price shading are two examples of cost-oriented pricing tactics. ANS: F Escalator pricing is an example of cost-oriented pricing tactics; price shading is an example of a demand-oriented pricing tactic. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 559

27. Many businesses find recessions to be an excellent time to build market share through the use of price shading. ANS: F Recessions are an excellent time to build market share through value-based pricing, bundling, and unbundling. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 559

ESSAY 1. List in order the four steps used to set the right price for a product. ANS: 1. Establish pricing goals. 2. Estimate demand, costs, and profits. 3. Choose a pricing policy to help determine a base price. 4. Fine-tune the base price with pricing tactics. PTS: 1

DIF: Application

REF: p. 542

OBJ: 1

17-39

2. What activities occur once the marketing manager has established pricing goals? Why are these activities important? ANS: The marketing manager must first estimate quantity demand levels and elasticity of demand, which allows for an estimate of revenues at a variety of price levels. Next, corresponding costs should be determined for each price. Then the manager can estimate the amount of profit and market share that can be earned at each possible price. Alternative pricing policies can be examined in terms of revenues, costs, and profits. This information becomes the core of the price policy by determining which price can best meet the firm’s pricing goals. PTS: 1

DIF: Application

REF: p. 542

OBJ: 1

3. What are the three basic strategies for setting a price on a new good or service? Briefly describe each strategy. ANS: Price skimming. With this method, a high introductory price is charged that skims the top off a market in which there is inelastic demand. The high introductory price attracts a smaller market share but recoups costs quickly. Penetration pricing. With this method, a firm charges a relatively low price, hoping to reach the mass market in the early stages of the product life cycle. The low price allows the product to penetrate a large portion of the market, resulting in large market share and lower production costs. Status quo pricing. With this method, price is set identical or close to that of the competition. This strategy may be used more often by small firms for survival or ease of use but ignores demand and cost. PTS: 1

DIF: Application

REF: p. 543

OBJ: 1

4. Under what conditions is each of the three basic pricing methods successful? ANS: Price skimming is successful when 1) demand is relatively inelastic in the upper ranges of the curve; 2) there are barriers to competitive entry, such as legal protection or technological breakthroughs; 3) production cannot be expanded rapidly, and 4) demand is greater than supply. Penetration pricing is successful when 1) the market is price sensitive, 2) economies of mass production are feasible, and 3) the firm has substantial resources to sustain the short-run losses necessary to obtain penetration. Status quo pricing can be successful when 1) the firm is comparatively small, and 2) the firm needs a safe route to long-term survival. PTS: 1

17-40

DIF: Application

REF: p. 543-546

OBJ: 1

5. List the three basic pricing methods. Name one advantage and one disadvantage associated with using each method. ANS: Price-skimming advantages include 1) quick recovery of product development or educational costs, 2) pricing flexibility that allows subsequent lowering of price, and 3) the ability to market prestige products successfully. Disadvantages include encouragement of competitive entry into the market. Penetration pricing advantages include 1) a tendency to discourage competitive entry, 2) large market share due to high volume sold, and 3) lower production costs resulting from economies of scale. Disadvantages include 1) lower profits per unit, 2) higher volume required to reach the break-even point, 3) slow recovery of development costs, and 4) inability to later raise prices. Status quo policies have the advantage of simplicity. Disadvantages include ignoring demand and cost. PTS: 1

DIF: Application

REF: p. 543-546

OBJ: 1

6. Which pricing method (skimming, penetration, or status quo) would be most appropriate for each of the following products: (1) a new kind of automatic vacuum cleaner; (2) brightly coloured wooden blocks to be used as a child’s toy; (3) a new, low-cost, no-calorie fat substitute; (4) a home computer; and (5) a designer perfume? Briefly justify your answers. ANS: Vacuum cleaner. Skimming could be used, because there are innovators and early adopters who would like to be “first” to own the product. It is likely that competition could also follow fairly quickly, further justifying a skimming policy. Child’s blocks. Status quo pricing could be used, because this type of toy is a mature product with many substitutes. Penetration pricing could be argued if one assumes the producer found manufacturing cost advantages. Fat substitute. Penetration pricing would quickly gain a large market share and is appropriate for a low-cost item. Skimming could be argued if one assumes inelastic demand for the product. Home computer. Penetration pricing is appropriate because of the large amount of competition in this particular market. Perfume. Skimming would be appropriate, because a lower introductory price might reduce the high-prestige perception of the product. PTS: 1

DIF: Application

REF: p. 543-546

OBJ: 1

17-41

7. Some pricing decisions are subject to government regulation. Name and define three pricing practices that are illegal. ANS: Price fixing is an agreement between two or more firms on the price they will charge for a product or service. The Competition Act govern price fixing practices. Price discrimination occurs when a firm sells to two or more different buyers at different prices, and the result reduces competition. Price discrimination can also occur if the seller discriminates between buyers in terms of supplementary services provided, or if the buyers use their power to force sellers into discriminatory practices. The Competition Act prohibits these forms of price discrimination. Predatory pricing is the practice of charging a very low price with the intent of driving competitors out of business or out of the market. This practice is illegal under the Competition Act. PTS: 1

DIF: Application

REF: p. 546-548

OBJ: 2

8. A base price may be lowered through the use of a discount. Discounts take a variety of forms and have several different objectives. Name and define three types of discounts (do not include allowances or rebates). State the main objective of each type of discount you identify. ANS: Quantity discounts are offered to buyers who purchase multiple units or above a specified dollar amount. The objectives of the quantity discount include selling large volumes, locating fewer buyers for the same number of units, increasing sales potential of slow-moving items, and gaining profits and/or market share. Cash discounts are price reductions offered to buyers who pay promptly. One objective is to save the seller carrying charges, billing expenses, and expenses associated with extending credit. Another objective is to avoid bad debt. Functional (trade) discounts are compensation to wholesalers and retailers for performing channel functions. The objective is to compensate the channel member for services rendered or to encourage additional functions to be performed by the trade. Trade loading is one form of functional discount. Seasonal discounts are price reductions for buying merchandise out of season. The objectives of seasonal discounts include shifting the storage function forward to the purchaser, enabling a steady manufacturing schedule, and more fully utilizing services. PTS: 1

17-42

DIF: Application

REF: p. 549-550

OBJ: 3

9. Distinguish between a cumulative and a noncumulative discount. ANS: A cumulative quantity discount is a deduction from list price that applies to the buyer’s total purchases made during a specific period and is intended to encourage customer loyalty. The buyer’s purchases are totalled at the end of the period and the discount depends on the quantity purchased in that time. The discount percentage usually increases as the quantity purchased in the time period increases. A noncumulative quantity discount is a deduction from list price that applies to a single order and is intended to encourage orders in large quantities. The size of the discount generally increases with the size of the order. This discount rewards buyers whose purchase patterns help the seller reduce costs. PTS: 1

DIF: Application

REF: p. 549

OBJ: 3

10. What is a promotional allowance? What is the difference between a promotional allowance and a functional discount? Give two specific examples of promotional allowances. ANS: A promotional allowance is a payment to a dealer for promoting the manufacturer’s products. A promotional allowance is similar to a functional discount as a pricing tool but also serves as a promotional device. Like functional discounts (and other forms of discount), promotional allowances must be made available to all purchasers on essentially the same terms. Examples of promotional allowances include cooperative advertising (in which the manufacturer pays for a portion of retailer-based advertising) or display assistance (in which the manufacturer pays for a special display or provides free goods for the display). PTS: 1

DIF: Application

REF: p. 550

OBJ: 3

11. Imagine you are the marketing manager for the Sheet Metallic Company. It manufactures all types of baking sheets and pans. You are responsible for coming up with a rebate plan. What is a rebate? What different types of rebates could you elect to use? Why would you prefer to use a rebate rather than a simple price reduction? ANS: A rebate is a cash refund given for the purchase of the product during a specific period. There are several options for rebates, including instant rebates, product rebates, and mail-in rebates. The advantage of a rebate over a simple price reduction for stimulating demand is that a rebate is a temporary inducement that can be taken away without altering the basic price structure. Consumers are often less resistant to paying the regularly marked price once the rebate is discontinued. PTS: 1

DIF: Application

REF: p. 550

OBJ: 3

17-43

12. What is value-based pricing? What is the basic assumption marketers must make about their markets before implementing a value-based pricing strategy? ANS: Value-based pricing is a pricing strategy that has grown out of the quality movement. Instead of figuring prices based on costs or competitors’ prices, it starts with the customers, considers the competition, and then determines the appropriate price. The basic assumption is that the firm is customer driven, seeking to understand the attributes customers want in the goods and services they buy and the value of that bundle of attributes to customers. PTS: 1

DIF: Application

REF: p. 550

OBJ: 3

13. Geographically dispersed sellers often result in significant freight costs. Define four types of geographic pricing tactics that can be selected by a marketing manager to moderate the impact of freight costs on its more dispersed customers. For each tactic defined, specify the circumstances that would prompt the selection of that geographic pricing tactic. ANS: FOB origin pricing. This price tactic requires the purchaser to pay for the cost of transportation from the shipping point. A manager would choose to use FOB origin pricing if he or she is not concerned about total costs varying among the firms’ clients or if freight charges are not a significant pricing variable. Uniform delivered pricing. With this price tactic, the seller pays the actual freight charges, but bills every buyer with an identical, flat freight charge. This equalizes the total cost of the product for all buyers, regardless of location. A manager would select this policy if the firm is trying to maintain a nationally advertised price or when transportation charges are a minor part of total costs. The tactic also reduces price competition among buyers. Zone pricing. This price tactic is a modification of uniform delivered pricing in which the geographic selling area is divided into zones. A flat freight rate is charged to all customers in a given zone, but different rates will apply to each zone. A marketing manager would use this strategy to equalize total costs among purchasers within large geographic areas. Freight absorption pricing. With this price tactic, the seller pays all or part of the actual freight charges and does not pass these charges along to the customer. A manager would choose this tactic if competition is extremely intense, if the firm is trying to break into new market areas, or if greater economies of scale are a company goal. Basing-point pricing. This method requires the seller to designate a location as a basing point and charge all purchasers the freight cost from that point (regardless of the point from which the goods are actually shipped). This tactic might be used for firms that sell relatively homogeneous products and for which transportation costs are an important component of total costs. PTS: 1

17-44

DIF: Application

REF: p. 552

OBJ: 3

14. What type of geographic pricing policy would a marketing manager most appropriately choose for the following products: (1) nationally advertised bubble gum, (2) rebuilt engines for jet airplanes, and (3) bulk amounts of a rare spice harvested from a single mountain in Canada and used in high-priced restaurants? Justify your answers, and specify any assumptions you used to arrive at your answer. ANS: Geographic pricing policies should be compatible with the total price structure of the firm, so assumptions about the company’s pricing objectives and other pricing policies will affect responses. Additionally, assumptions about competitors’ practices and customs in the industry are important. Bubble gum. In this case, identical retail prices would be sought, so the bubble gum should be delivered at the same price throughout the country. This would result in a pricing policy of uniform delivered pricing or possibly freight absorption pricing if competition is extremely intense. Engines. Because engines are large and heavy, transportation costs are an important component of pricing. In this case, FOB origin pricing could be used to put the burden of transportation on the purchasers. This pricing policy could be assumed if there were few competitors in the jet engine business. Otherwise, basing-point pricing would be the most appropriate pricing policy. Spice. Zone pricing would be appropriate in this case. Because the spices are sold in bulk, it should be assumed that transportation costs are not insignificant. Uniform delivered pricing is not appropriate because there is no significant competition. FOB origin pricing could be used as well, because other pricing aspects of the spice might outweigh the transportation costs. PTS: 1

DIF: Application

REF: p. 551-552

OBJ: 3

15. Marketing managers can use a wide variety of special pricing tactics to fine-tune prices. Name and define five of the special pricing tactics that are legal. For each tactic, give an example of a specific company, industry, or product that would use the tactic. ANS: Single-price tactic means all goods and services are offered at the same price (or perhaps two or three prices). Examples of retailers include One Price Clothing Stores, Dre$$ to the Nine$, Your $10 Store, and Fashions $9.99. Flexible pricing or variable pricing means different customers pay different prices for essentially the same merchandise purchased in equal quantities. Magazine subscriptions are priced this way. Professional services pricing refers to the charging of an hourly rate as well as a fee based on some problem solution or performance. Lawyers, architects, and management consultants are all examples. Price lining is the practice of offering a product line with several items at specific pricing points. Leader pricing is a method used to attract customers to a store by offering a product at or below cost with the hope the customer will buy other merchandise while in the store. Supermarkets are the most used example.

17-45

Odd-even pricing or psychological pricing uses a price ending in an odd number to connote a bargain and a price ending in an even number to connote quality. Discount stores use odd pricing, and specialty boutiques use even pricing. Price bundling is marketing two or more products in a single package for a special price. The tourist industry does this frequently as do fast-food restaurants with their deals for a drink, a sandwich, and an order of fries. Two-part pricing means establishing two separate charges to consumers for a single good or service. Examples include memberships at country clubs and in fraternities and sororities. PTS: 1

DIF: Application

REF: p. 552-555

OBJ: 3

16. Two reasons are given to explain why some companies price their products too, low thereby reducing company profits. What are they? ANS: First, managers attempt to buy market share through aggressive pricing. Usually, these price cuts are quickly met by competitors. Thus, any gain in market share is short-lived, and overall industry profits end up falling. Second, managers have a natural tendency to make decisions that can be justified objectively. Managers, however, often lack the hard data needed to make an accurate assessment of the market and what pricing strategy should be used. Managers tend to make pricing decisions based on easily gathered, short-term-focused information, such as costs, sales, market share, and competitor’s prices rather than on long-term profitability. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 551

17. What are consumer penalties? What two reasons do businesses give for requiring consumers to pay them? ANS: Consumer penalties are extra fees paid by the consumer for violating the terms of purchase agreements. Businesses impose consumer penalties for two reasons. They will allegedly (1) suffer an irreversible revenue loss until the penalty is charged and/or (2) incur significant additional transaction costs should customers be unwilling or unable to comply with the purchase agreement. PTS: 1

17-46

DIF: Application

REF: p. 556

OBJ: 3

18. Name five of the special pricing tactics. Give one advantage and one disadvantage associated with using each of the tactics you have named. ANS: Single-price tactic. Advantages include (1) removal of price comparisons from the buyer’s decision-making process, (2) a simplified pricing system, and (3) minimization of clerical errors. Disadvantages include (1) continually rising costs and (2) necessity for frequent revisions of the selling price. Flexible (or variable) pricing. Advantages include (1) allowance for competitive adjustments for meeting or beating another seller’s price, (2) ability for the seller to close a sale with price-conscious consumers, and (3) the ability to procure business from a potential high-volume shopper. Disadvantages include (1) the lack of consistent profit margins, (2) the potential ill will of high-price purchasers, (3) the tendency for salespeople to automatically lower the price in order to make a sale, and (4) the possibility of a price war among sellers. Professional services pricing. Advantages include (1) prices justified according to the education and experience of the service provider, and (2) the simplicity of flat-rate pricing. Disadvantages include (2) difficulty in attaching dollar amounts to experience, education, or certifications, and (2) a temptation to charge “all that the traffic will bear” in an inelastic demand situation. Price lining. Advantages include (1) reduction of confusion for salespeople and consumers, (2) a wider variety of merchandise offered to the buyer at each price, (3) the ability of the seller to reach several market segments, and (4) smaller total inventories for the seller. Disadvantages include (1) rising costs that force confusing changes in price line prices and (2) difficulty in determining where to place the prices within a line. Leader pricing. Advantages include (1) increase in store patronage, (2) potential higher volume of sales per customer, and (3) inducement of store switching. Disadvantages include (1) potential of consumers to stock up on only the leader items and (2) lack of response because of competition with other stores offering similar bargains. Bait pricing. Advantages may include (1) increase in store patronage, (2) potential higher volume of sales per customer, and (3) inducement of store switching. The main disadvantage is that the practice is illegal. Odd-even (or psychological) pricing. Advantages include (1) implied bargains (odd) or quality (even) and (2) stimulation of demand for some products. Disadvantages include (1) creation of a saw-toothed demand curve and (2) changes in the price elasticity of demand. Price bundling. Advantages include (1) stimulation of demand for the bundled items if the consumers perceive the price as a good value, (2) better coverage of constant fixed costs (especially in service industries), and (3) assistance in selling the maximum number of options (on a car, for example). Disadvantages include (1) customers’ resistance if one of the bundled items is not wanted and (2) consumers’ incorrect value perceptions. Price unbundling. Advantages include keeping costs down. A possible disadvantage is that customers may not want to pay “extra” for items that have typically been bundled.

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Two-part pricing. Advantages include (1) consumers’ preference of two-part pricing when they are unsure of utilization, (2) high-use consumers paying a higher total price, and (3) possible increase in revenue for the seller by attracting low-use consumers. Disadvantages include (1) difficulty in establishing pricing levels from usage estimates, and (2) resistance by high-use consumers. PTS: 1

DIF: Application

REF: p. 552-555

OBJ: 3

19. What is product line pricing? What three relationships among products in the line must managers be aware of before setting prices? For each relationship, give an example of a product that fits the situation. ANS: Product line pricing is setting prices for the entire line of products rather than for a single component of the line. In product line pricing, the marketing manager attempts to achieve maximum profits or other goals for the entire line. Before determining price, the manager must determine the type of relationship that exists among the various products in the line. Three types of relationships exist: complementary, substitute, and neutral. Complementary products. In this case, an increase in sales for one item in the line will increase demand for a complementary product in the line. Examples of complementary products include shampoo and conditioner or skis and ski poles. Product substitutes. Items in a line may also act as substitutes for one another. If a buyer purchases one item in the line, he or she will be less likely to purchase a second, substitutable item in the line. Examples of substitutable items would be liquid and powder Tide laundry detergent or paste and liquid Turtle Wax car polish. Neutral relationship. In this case, the demand for one product is not related to the demand for any other product. Examples include Ralston Purina’s sale of chicken feed and Wheat Chex or Gillette’s sale of disposable razors and disposable writing pens. PTS: 1

DIF: Application

REF: p. 557

OBJ: 4

20. Carrie Dunn is the owner and operator of Dunn’s Best Jams, which she sells at craft festivals. She makes and sells only three types of jams—pecan pie jam, chocolate pie jam, and lemon tart jam. The joint costs of leasing her professional kitchen for manufacturing, travel to craft shows, insurance, and so on are allocated on an equal basis to the three types of jams sold. Last year’s sales figures and allocated joint costs follow. Should Dunn’s Best Jams stop selling its pecan pie jam? Why or why not? Pecan Pie Jam Sales Less: Cost of goods sold Gross margin

17-48

$4,000 5,000 ($1,000)

Chocolate Pie Jam $8,000 5,000 $3,000

Lemon Tart Jam $9,000 5,000 $4,000

ANS: Dunn’s Best Jams should continue to produce and sell all three types of jams. An investigation of overall figures shows that a $6,000 profit was earned on the three items in the line:

Sales Less: Cost of goods sold Gross margin

Pecan Pie Jam $4,000 5,000 ($1,000)

Chocolate Pie Jam $8,000 5,000 $3,000

Lemon Tart Jam $9,000 5,000 $4,000

Total $21,000 15,000 $ 6,000

The pecan pie jam should not be dropped just because it is currently showing a loss; the joint costs would have to be allocated to the remaining two lines:

Sales Less: Cost of goods sold Gross margin

Chocolate Pie Jam $8,000 7,500 $ 500

Lemon Tart Jam

Total

$9,000 7,500 $1,500

$17,000 15,000 $ 2,000

Equal allocation of joint costs may not be the right way to distribute the costs. Other allocation bases that may be used include weighting, market value, or quantity sold. Other allocation methods would change the figures for each type of jam, but not overall figures. PTS: 1

DIF: Application

REF: p. 558

OBJ: 4

21. When the economy is characterized by high inflation, special pricing tactics are often necessary. One popular cost-oriented tactic is culling low profit margin products from the product line. Why might this tactic backfire? What two other cost-oriented tactics can be used to guard against inflation? Describe these tactics. ANS: Culling low-profit margin products from a product line may backfire because of (1) the high volume and thus high profitability of a low-profit margin item; (2) a loss of economies of scale as certain products are eliminated, which lowers the margins on other items; or (3) a lowering of the price/quality image of the entire line. Instead of culling these products, two cost-oriented tactics may be used: delayed-quotation pricing and escalator pricing. Delayed-quotation pricing. With this tactic, price is not set on the product until the item is either finished or delivered. This is a popular tactic for builders of nuclear power plants, ships, and airports. Escalator pricing. With this tactic, the final selling price will reflect cost increases incurred between the time the order is placed and delivery is made. This tactic is used for complex products of long duration, with new customers, or with inelastic demand products. PTS: 1

DIF: Application

REF: p. 559

OBJ: 5

17-49

22. Describe three tactics used during recessions to make demand for a good or service more inelastic and to create buyer dependency. ANS: Cultivating selected demand. In this case, close relationships are cultivated with affluent organizational customers. Managers should appeal to prosperous buyers who will pay extra for convenience or service. Creating unique offerings. By satisfying buyers in a superior way, sellers can make them dependent. This is done by studying buyers’ needs and designing distinctive goods or services uniquely fitting these needs. Buyers might incur high changeover costs in switching to another supplier that offers less customized service. Changing the package design. Another way companies pass on higher costs is to shrink product size but keep the prices the same. Companies also have changed the names of the size to de-emphasize the magnitude of the product shrinkage. Heightening buyer dependence. By selling complete systems packages (including product, servicing, training, installation, and so on), competition can be eliminated and higher prices will be supported. PTS: 1

DIF: Application

REF: p. 559-560

OBJ: 5

23. How do value-based pricing, unbundling, and bundling help marketers hold onto market share during a recession? ANS: Value-based pricing stresses to customers that they are getting a good value for their money. Products that typically use prestige pricing can introduce products at a lower price, thereby earning lower profit margins, which are typically offset by increased sales volume. Unbundling allows a marketer to start charging separately for some products that were sold together prior to the economic recession. By selling items separately, the markets have a lower base price, which often appeals to consumers. Bundling can stimulate demand. When features are added to a product, consumers may perceive the offering as having greater value, which appeals to some consumers. PTS: 1

17-50

DIF: Application

REF: p. 554

OBJ: 5

Chapter 18—Customer Relationship Management (CRM) MULTIPLE CHOICE 1. What is a companywide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer segments? a. customer relationship management b. consumer relationship marketing c. market aggregation d. total quality management ANS: A OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 572

2. Which of the following BEST describes customer relationship management? a. It organizes the company around functional departments. b. It is often described as a closed-loop system. c. It is a very simplistic method of encouraging customer satisfaction. d. It involves only personnel in marketing and management departments. ANS: B REF: p. 572

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

3. To initiate the CRM cycle, what must a company first do? a. acquire and capture customer data for product categories b. establish customer relationships within the organization c. establish marketing objectives d. decide on a segmentation strategy ANS: B OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 572

4. The difference between traditional marketing and customer relationship marketing can be compared to the difference between which of the following? a. circles and squares b. shooting a rifle and a shotgun c. night and day d. mice and elephants ANS: B REF: p. 572

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

5. Which of the following statements about the CRM cycle is true? a. The letters CRM are an acronym for consumer relationship marketing. b. The CRM cycle does not affect employees outside the marketing and management functional areas. c. The CRM cycle takes a simplistic perspective on customers. d. The CRM cycle is continuous and circular with no predefined start or end point. ANS: D REF: p. 572

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember 18-1

6. According to the text, which of the following statements about a CRM system is true? a. A company using a CRM system must view its customers as bits of data. b. Due to privacy laws, a CRM system disseminates customer information only to those who are actually in day-to-day contact with customers. c. A CRM system operates on the theory that all customers are equally important. d. A critical component of a CRM system is the use of the appropriate technology to store and integrate customer data. ANS: D The CRM system allows companies to make use of the 80/20 rule. Customers should be viewed comprehensively. PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

REF: p. 573

7. What is the fundamental element of CRM systems used by the Bank of Montreal and Rogers as discussed in the text? a. a reliance on marketing research to more precisely segment their target markets b. a focus on one-to-one customer communication c. a focus on capturing information on current and prospective customers d. providing means for customers to communicate with the company ANS: C REF: p. 573

PTS: 1 OBJ: 1

DIF: Comprehension BLM: Remember

8. Suppose a company customizes its product offerings based on data generated through interaction between the customer and the company. What does the company have? a. a supply-based focus b. a demand-based focus c. a sales orientation d. a customer-centric focus ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 575

9. Customer-centric is an internal management philosophy similar to which of the following? a. the equity theory b. utilitarianism c. the marketing concept d. consumerism ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 575

10. Suppose a firm builds long-term relationships with clients by focusing on what satisfies and retains valuable clients. Which of the following BEST describes the firm? a. market-oriented b. supply-based c. customer-centric d. sales-oriented ANS: C OBJ: 2 18-2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 575

11. The way to people’s hearts may be through their stomachs, but the marketers at Kraft Foods have decided not to rely exclusively on that maxim to secure the long-term loyalty of the company’s customers. They are also making new product developments through data generated from interaction between Kraft and its customers. Which of the following BEST describes Kraft Foods? a. It has a customer-centric focus. b. It is product-oriented. c. It is sales-oriented. d. It is ethnocentric. ANS: A OBJ: 1

PTS: 1 DIF: Application BLM: Higher order

REF: p. 575

12. In a CRM environment, which of the following is defined as the informal process of collecting customer information through customer contacts and feedback on product performance? a. learning b. attitude adjustment c. organizational perception d. stimulus/response research ANS: A OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 576

13. By listening to customer feedback and informally gathering specific comments on benefits and features that the marketing department thought interested customers, the manufacturers of SUVs have made sure that every seat has at least one cup holder. What did the manufacturers of SUVs use? a. perceptual application b. knowledge management c. database marketing d. learning ANS: D It was an informal process of collecting customer information from comments and feedback. Knowledge feedback is organization-wide. PTS: 1 DIF: Application BLM: Higher order

REF: p. 576

OBJ: 2

14. What is the process by which learned information from customers is centralized and shared in order to enhance the relationship between customers and the organization? a. information marketing b. database marketing c. learning d. knowledge management ANS: D OBJ: 2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 576

18-3

15. Synavant is a pharmaceutical company in Toronto, Ontario. Its director of business development told a group of investors, “There is a single database repository in this company from which everybody can access data about a customer or potential customers.” What is Synavant most likely using? a. sales-oriented marketing b. learned research c. motivational research d. knowledge management ANS: D OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 576

16. Which of the following refers to the latitude organizations bestow on their representatives to negotiate mutually satisfying commitments with customers? a. consumer learning b. interaction c. empowerment d. customerization ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 576

17. The guest at a Marriott stepped in a mud puddle on his way into the hotel. His pants were drenched, and he had planned to wear them to an important sales presentation in an hour. The hotel concierge saw the guest’s unhappy face and asked if he could help. After learning of the problem, the concierge used his contacts to get a rush cleaning done by a local dry cleaner. Why was the concierge able to handle the situation in a matter that created customer satisfaction? a. Marriott has a sales orientation. b. Marriott uses interactive marketing. c. Marriott empowers its employees. d. Marriott uses knowledge management. ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 576

18. What is the point at which a customer and a company representative exchange information and develop learning relationships? a. a social contact b. an empowering moment c. an interaction d. an equilibrium point ANS: C OBJ: 2

PTS: 1 BLM: Remember

DIF: Application

REF: p. 576

19. How can the success of CRM be directly measured? a. by the increased revenue and profit levels of the firm b. by the decrease in costs to acquire new business and retain existing business c. by the effectiveness of the interaction between the customer and the firm d. by the breadth and depth of the customer database ANS: C REF: p. 577 18-4

PTS: 1 OBJ: 2

20. According to the text, which of the following statements about touch points is true? a. The marketing research department of a company with a CRM system is an example of an external touch point. b. Data gathered at external touch points, once interpreted, provide information that affects internal touch points. c. A customer request is an example of an external touch point. d. A customer applying for a credit card is an example of an internal touch point. ANS: B REF: p. 578

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Higher order

21. In a CRM system, what are those areas of the business where customer data are gathered and used to guide and direct the decision making within that business unit? a. observational points b. focus areas c. data mining d. touch points ANS: D OBJ: 3

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 578

22. In Canada, Kraft Foods has launched its website (www.kraftcanada.com) with enhanced content that provides “what we [Kraft Foods] knew our consumers were looking for, based on the information they had shared.” What type of interactions is Kraft Foods using to send and receive communications from its customers? a. Web-based b. technology-centric c. product-centric d. transaction-based ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 579

23. The executive vice-president of Hudson’s Bay Company, the major retailer, said in an interview, “We have to be able to offer customers what they want when they want it. We need better insight into their spending—we have gaps in knowledge of how customers spend.” Which type of interactions would provide the retail chain the best opportunity for learning about its customers? a. technology-centric b. relationship-based c. sales-oriented d. point of sale ANS: D Only alternative a is the name of one of the types of interactions discussed in the text. PTS: 1 DIF: Application BLM: Higher order

REF: p. 579

OBJ: 3

18-5

24. How should an organization view all transactions? a. as deleterious to customer relationship management b. as the opportunity to collect vast amounts of data about the customer c. as simply a financial exchange d. as the creation of customer-organization synergy ANS: B REF: p. 579-580

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

25. When viewed as an interaction between the organization and the customer, a transaction can produce all of the following data EXCEPT which one? a. average amount spent on purchases b. name, address, and phone number c. past purchase history d. information about the customer’s relationship with other customers ANS: D REF: p. 579-580

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

26. Which type of interactions occur when a customer buys a product with his or her credit card? a. activity-based b. transaction-based c. retail-centric d. relationship-based ANS: B OBJ: 4

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 580

27. The Shell Company offers a Shell MasterCard, which can be used anywhere an ordinary credit card can be used. Every time the credit card is used, the Shell Company gathers information about consumer buying habits. The Shell Company relies on which type of interactions to gather customer information? a. store-based b. customer-centric c. transaction-based d. retail-centric ANS: C This is similar to the Visa example in the text. PTS: 1 DIF: Application BLM: Higher order

REF: p. 580

OBJ: 4

28. The traditional approach for acquiring data from customers is through which of the following? a. media b. personal selling c. channel interactions d. feedback mechanisms ANS: C REF: p. 580

18-6

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

29. What do CRM systems use to enable individualized contact with customers? a. customer feedback surveys b. marketing research studies c. technology that automates interactions d. database sorting programs ANS: C REF: p. 580

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

30. What is a central repository for data from various functional areas of the organization from which these data can be shared by all of the organization’s departments? a. an information intermediary b. an information mine c. an information extraction unit d. a data warehouse ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 581

31. “Lots of organizations have customer data, but not in a way that’s useful,” said a speaker at the Canadian Marketing Association’s National Convention. “Retailers have all kinds of data in different places—they didn’t have a single view of the customer.” The speaker is criticizing how retailers do NOT use which of the following? a. information distribution centres b. information extraction mines c. data warehouses d. marketing information systems ANS: C REF: p. 581

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Higher order

32. What is the core of the data warehouse? a. point-of-sale interactions b. a compiled list c. the database d. transaction channels of communication ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 581

18-7

33. In a speech, David Poirier, executive VP, CIO of Hudson’s Bay Company said, “We [Hudson’s Bay Company] had all kinds of data in different places. We didn’t have a single view of the customer until we focused on finding one method to manage relationships with our customers.” What could Hudson’s Bay use to profile customer segments for better CRM marketing efforts? a. a data mart b. a decision support system c. a customer information system d. a data warehouse ANS: D A data warehouse is essentially a very large, corporate-wide database, culled from a number of legacy systems, such as order fulfillment, distribution, and sales, already in place within the organization. PTS: 1 DIF: Application BLM: Higher order

REF: p. 581

OBJ: 5

34. What is essentially a very large, corporate-wide database, culled from a number of separate systems, such as billing, accounting, order fulfillment, distribution, customer service, and marketing and sales, already in place within an organization? a. a decision support system b. a customer information system c. a data warehouse d. a data cluster ANS: C OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 581

35. Lesley Owens has limited money to invest in a mailing to people who might be interested in subscribing to a new magazine about making scrapbooks. She wants to mail to those prospects with the highest probability of becoming subscribers. What should Owens use? a. a data warehouse b. a data mine c. a response list d. a management database ANS: C A response list includes the names and address information of individuals who have responded to an offer in the past. PTS: 1 DIF: Application BLM: Higher order

18-8

REF: p. 582

OBJ: 5

36. Andy recently purchased a new surge protector for his computer using a $20 rebate offer. He completed the rebate certificate and sent it to the manufacturer. The rebate certificate contained Andy’s full name, his phone number, his address, and some purchase information. What has Andy most likely become part of? a. the manufacturer’s compiled list b. the manufacturer’s response list c. the manufacturer’s electronic cash list d. the manufacturer’s Internet research list ANS: B A response list includes the names and address information of individuals who have responded to a similar offer in the past. PTS: 1 DIF: Application BLM: Higher order

REF: p. 582

OBJ: 5

37. Which list generally includes names and addresses gleaned from directories or membership rosters? a. actionable b. response c. aggregated d. compiled ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 582

38. Alexis is very interested in developing a mailing list of people who enjoy stenciling as a hobby. She has offered to purchase a list of the current members of the Stencil Artisans League. What is Alexis building? a. an e-mail list b. a predictive list c. a response list d. a compiled list ANS: D A compiled list is one that generally includes names and addresses gleaned from directories or membership rosters. PTS: 1 BLM: Remember

DIF: Application

REF: p. 582

OBJ: 5

39. What is the overlay of information to customer or prospect records for the purpose of better describing or better determining the responsiveness of customers or prospects? a. data mining b. information formatting c. predictive modelling d. database enhancement ANS: D OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 582

18-9

40. According to the text, what does database enhancement refer to? a. the acquisition of customer names, addresses, telephone numbers, and a complete transaction history with the company b. the acquisition of demographic, lifestyle, or behavioural data. c. the ability of a company to rapidly and economically scale up its database as it acquires larger numbers of customers. d. the periodic upgrading of a firm’s customer database capabilities. ANS: B OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 582

41. What is the process of finding hidden patterns and relationships in the customer data stored in the data warehouse? a. data feedback b. information retrieval c. data mining d. information extraction ANS: C OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 583

42. Which of the following transforms customer data into customer information that a firm can use to make managerial decisions such as, “Who are our best customers and what actions can we take to keep them?” a. marketing research b. data mining c. cost-benefit analysis d. scanner-based data ANS: B OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 583

43. What would an on-line retailer use to discover that customers who purchase flannel sheets also had a high probability of purchasing all-natural Christmas wreaths if the opportunity were made available? a. knowledge interpretation b. information extraction c. information search d. data mining ANS: D OBJ: 6

18-10

PTS: 1 DIF: Application BLM: Higher order

REF: p. 583

44. Ford Canada has turned to the Internet to help it stand apart from its competitors in the automotive industry. One Internet ad shows a Ford truck driving out of a forest with its engine roaring and mud splattering on the screen. The ad directed viewers to a site (www.ford.ca/builtfordtough) where they could sign up to receive direct mail from Ford. Ford Canada will combine this database with a database of new F-series truck owners to look for significant patterns and trends. What will Ford Canada use? a. an information search system b. data interpolation c. data mining d. data graphing ANS: C Data mining is used to identify significant patterns and trends. PTS: 1 DIF: Application BLM: Higher order

REF: p. 583

OBJ: 6

45. Which of the following is the most useful in the identification of an organization’s most profitable customers and prospects? a. information searches b. knowledge interpolation c. a distribution intermediary d. data mining ANS: D REF: p. 583

PTS: 1 OBJ: 7

DIF: Comprehension BLM: Remember

46. Which of the following techniques used to analyze marketing databases considers whether a customer has made a purchase in the last 90 days as well as how often that customer makes a purchase? a. recency-frequency-monetary analysis b. predictive modelling c. customer valuation d. data mining ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 585

18-11

47. Marketing to repeat customers is more profitable than marketing to first-time buyers according to the basic assumption of which of the following? a. customer segmentation b. lifetime value analysis c. predictive modelling d. customer valuation ANS: B Lifetime value analysis is a data manipulation technique that projects the future value of the customer over a period of years using the assumption that marketing to repeat customers is more profitable than to first-time buyers. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Remember

REF: p. 585

48. What is a data manipulation technique that projects the future value of a customer over time using the assumption that marketing to repeat customers is more profitable than marketing to first-time buyers? a. LTV b. RFM c. data mining d. predictive modelling ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 585

49. Which of the following is a data mining technique based on the notion that “birds of a feather flock together?” a. patterning b. lifetime transactional audit c. actionable predicting d. modelling ANS: D PRIZM is an example of modelled data that is based on this notion. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Remember

REF: p. 586

50. Which of the following is simply the act of building a model in a situation where the answer is known and then applying the model in a situation where the answer is unknown? a. consumer simulation b. patterning c. correlation analysis d. modelling ANS: D OBJ: 6

18-12

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 586

51. Which of the following uses independent and dependent variables to predict the likelihood that some occurrence, such as a response or purchase, will take place? a. predictive modelling b. causal research c. data mining d. lifetime value analysis ANS: A OBJ: 6

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 586

52. Ford Motor Company has launched an on-line effort to market its F-Series trucks. It hopes to use its database capabilities to capture valuable data on car buyers. Ford plans on cross-referencing new F-series owners with the database generated from this on-line campaign to see how many names are duplicated. Ford will use these data to forecast which campaigns have the greatest probability of success. Which of the following methods will Ford most likely use to analyze these data? a. recency-frequency-monetary analysis b. reach-frequency-media analysis c. predictive modelling d. lifetime value analysis (LTV) ANS: C OBJ: 6

PTS: 1 DIF: Application BLM: Higher order

REF: p. 586

53. What was the technique used to suggest that the customer who wanted to buy the $29 shirt would also be a likely prospect for the cigar humidor? a. recency-frequency-monetary analysis b. predictive modelling c. market aggregation d. customer segmentation ANS: B Predictive modelling is a data manipulation technique in which marketers try to determine, based on some past set of occurrences, the odds that some other occurrence, such as a purchase, will take place. PTS: 1 DIF: Application BLM: Higher order

REF: p. 586

OBJ: 6

18-13

54. Looking to build up its post-purchase relationships, General Motors recently launched a service whereby GM vehicle owners can sign up to get e-mail service reminders, access information about GM vehicles, and receive special promotions. What is General Motors using to enhance its customer relationships? a. data mining b. valence management c. campaign management d. modelling ANS: C It has established a campaign to sell its services to car buyers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 587

OBJ: 7

55. What is the development of product offerings customized for the appropriate customer segment and then pricing and communicating these offerings for the purpose of enhancing customer relationships? a. transaction management b. knowledge management c. data mining d. campaign management ANS: D OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 587

56. Many high-end hotel chains award points for every dollar spent in one of their hotels. Customers who earn a high number of points are given special privileges that may include upgraded hotel rooms or several free nights. This application of one-to-one marketing is an example of which of the following? a. designing targeted marketing communications b. retaining loyal customers c. cross-selling other products and services d. reinforcing competitive promotional decisions ANS: B Loyalty programs reward loyal customers for making multiple purchases with the objective of building long-term relationships. PTS: 1 DIF: Application BLM: Higher order

18-14

REF: p. 587

OBJ: 7

57. When Ginnie phoned to place a catalogue order for a black wool blazer, she was pleased when the operator suggested that she might also be interested a black-and-white silk scarf that was on sale. The operator was using a method commonly used in one-to-one marketing. What is that method? a. data mining b. cross-selling c. database enhancement d. trading-up ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 588

58. After Ruth and Mike had paid in advance for their week’s stay at a country inn, Ruth felt like they might have chosen poorly and that they were committing themselves to stay at a place they might hate. Then Ruth got a letter from the inn’s owner stating that she was looking forward to their visit and asking what they most enjoyed for breakfast. How did the hospitality of the letter deal with Ruth’s cognitive dissonance? a. by cross-selling b. by implementing a penetration strategy c. by reinforcing her purchase decision d. by disintermediation ANS: C A database offers marketers an excellent opportunity to reach out to customers to reinforce the purchase decision. PTS: 1 DIF: Application BLM: Higher order

REF: p. 589

OBJ: 7

59. A manufacturer of craft items used in home decorating could promote its stencil designs to subscribers of The Artistic Stenciler, the official magazine of the Stencil Artisans League. In this way, the manufacturer could use one-to-one marketing to do which of the following? a. reinforce purchase decisions b. induce product trial c. cross-sell d. reduce cognitive dissonance ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 589

18-15

60. A catalogue retailer that sells fleece-lined outerwear knows its target market includes people who work outdoors year-round as well as people who engage in winter sports. The catalogue retailer could mail personalized catalogues to prospects who were subscribers to a journal for people actively involved in the lumber industry. In this way, the catalogue retailer could use one-to-one marketing to do which of the following? a. reinforce purchase decisions b. cross-sell c. retain loyal customers d. induce product trial ANS: D Since a marketing database already has a profile of its best customers, it can easily find new customers that look like its most profitable segment. PTS: 1 DIF: Application BLM: Higher order

REF: p. 589

OBJ: 7

61. In customer relationship management, what is a marketing channel? a. the structure that moves products from producer to ultimate consumer b. the method used to facilitate all communications c. the link between the retailer and the consumer d. the direct link to the ultimate consumer from the manufacturer ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 589

62. Why does CRM concern some Canadians? a. the large number of people who must be served b. not all customers have access to CRM marketing c. invasion-of-privacy issues d. the expense to consumers ANS: C Consumers have privacy concerns primarily because they are unaware of how personal information is collected and used. PTS: 1 OBJ: 7

DIF: Comprehension BLM: Remember

REF: p. 590-592

63. According to the text, which statement is true about Canadian privacy legislation? a. Canada’s privacy laws enable customers the right to request copies of any files a firm keeps on their personal data. b. PIPEDA states that customers must sign an “opt-in” agreement before a firm can do whatever it wishes with the customer data. c. Since PIPEDA has come into effect in 2004, the majority of malls and mid-size business have initiated programs of privacy compliance. d. Marketers that rely on third-party CRM-specialist firms to assist them with their customer database management will expose the third-party firm to potential lawsuits for privacy violation unless the third-party firm approaches the customers. ANS: A REF: p. 592 18-16

PTS: 1 OBJ: 7

64. Organizations in Canada must follow rules that are designed to protect the personal information of both their clients and their employees. Where are these rules contained? a. the PIPED Act b. the Competition Act c. the Consumer Protection Act d. the Fair Trade Practices Act ANS: A OBJ: 7

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 592

Volvo has a concept car website that caters to car enthusiasts who might want to see concept cars evolve into real-life products. A “Forum” section allows people to submit opinions and questions—enabling Volvo to gauge consumer reaction to new ideas. 65. Refer to Volvo. What type of interactions is Volvo using to send and receive communications from consumers? a. relationship-based b. technology-centric c. Web-based d. product-centric ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 579

66. Refer to Volvo. What does CRM give Volvo the opportunity to do? a. retain loyal customers b. enhance its database c. reinforce customer purchase decisions d. design targeted marketing communications ANS: D It allows Volvo to target car enthusiasts—to tailor a message for this group. PTS: 1 DIF: Application BLM: Higher order

REF: p. 588

OBJ: 7

Subaru Canada added an outdoor life section to its website that is organized by area of interest to target outdoor enthusiasts. The site will serve as a platform for co-marketing and promotional programs.

18-17

67. Refer to Subaru. This offering of customized product offerings to a customer segment for the purpose of enhancing the auto manufacturer’s customer relationships is an example of which of the following? a. transaction segmentation b. data mining c. campaign management d. knowledge management ANS: C Personalization through the use of a segmentation strategy is a common tactic in campaign management. PTS: 1 DIF: Application BLM: Higher order

REF: p. 587

OBJ: 7

68. Refer to Subaru. The site will serve as a platform for co-marketing and promotional programs, and will allow Subaru to gather most overt and covert information. Which of the following provides the most likely reason that Subaru has added this section to its site? a. to lessen the importance of customer service b. to design more targeted marketing communications c. to reduce problems associated with cultural diversity d. to increase the effectiveness of its channels of distribution ANS: B OBJ: 7

PTS: 1 DIF: Application BLM: Higher order

REF: p. 588

In 1981, the producers of Butterball Turkey opened the Butterball Turkey Talk-Line. Created to assist struggling chefs with preparing the holiday bird, the Butterball Turkey Talk-Line was initially staffed with six home economists who responded to 11,000 phone calls in its first year. The Butterball Turkey Talk-Line is known as “the granddaddy of all help lines.” Today the staff of 45 home economists and nutritionists responds to over 100,000 questions each November and December. In keeping with its history of technological advances, Butterball launched butterball.com in 1995, one of the first consumer websites, complete with turkey preparation tips and favourite recipes from the Butterball kitchens. Butterball Turkey’s commitment to providing premium products and renowned customer service has prevailed as a long-standing tradition to call on, not just at the holidays, but all year long. 69. Refer to Butterball Turkey. Butterball’s commitment to providing premium products and renowned customer service indicates a commitment to which of the following? a. consumer relationship marketing b. consumer replacement market c. customer relations mapping d. customer relationship management ANS: D OBJ: 1

18-18

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 572

70. Refer to Butterball Turkey. As more struggling chefs needed the information provided by the Butterball Turkey Talk-Line, Butterball added more employees. When many consumers expressed an inability to tell when the turkey was done, Butterball developed a pop-up signal that made it easy to tell when the turkey was cooked to perfection. When customers wanted more low-fat meat products, Butterball produced turkey luncheon meats and sausage. Butterball is definitely which of the following? a. sales-oriented b. product-oriented c. customer-centric d. production-oriented ANS: C OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 576

71. Refer to Butterball Turkey. To centralize and share the vast amount of customer information that its staff gathered through its years of interaction with customers, what would Butterball use? a. knowledge management b. customer empowerment c. cognitive learning d. the marketing concept ANS: A Knowledge management is the process used by companies. Employees are empowered, not customers. PTS: 1 DIF: Application BLM: Higher order

REF: p. 576

OBJ: 2

72. Refer to Butterball Turkey. By having the customers initiate the communication with Butterball and developing learning relationships between the company and its customers, what was Butterball establishing? a. a flat span of management b. a stable organizational culture c. motivation for obsolescence d. interactions ANS: D REF: p. 576

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

73. Refer to Butterball Turkey. What are Butterball’s touch points? a. its emotional-appeal commercials b. its human resources department c. its new product innovations d. its help line and its website ANS: D OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 578

18-19

As flextime, consulting, telecommuting, and downsizing make it more difficult for people to donate blood at the workplace, Canadian Blood Services has launched a CRM marketing campaign to boost awareness and repeat donations. Early in the campaign it went to its listings of previous donors and pulled out those with birthdays in February, March, and April. These donors were sent a birthday card with the greeting, “On the anniversary of your life, would you consider saving another’s life?” 74. Refer to Blood Services. The card sent by the organization is an example of which of the following? a. a service message b. a touch point c. transformational exchange d. a predictive campaign ANS: B Touch points are all possible areas of a business where customers communicate with the business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 578

OBJ: 3

75. Refer to Blood Services. Where is the information about past donors stored? a. in the organization’s data mine b. in the organization’s database c. in the organization’s information repository d. in the organization’s spreadsheet ANS: B A database is a collection of data, especially one that can be accessed and manipulated by computer data. PTS: 1 DIF: Application BLM: Higher order

REF: p. 581

OBJ: 5

76. Refer to Blood Services. What type of list of donors did the organization develop to receive birthday cards? a. feedback b. proactive c. response d. compiled ANS: C A response list is derived from donors (customers) who have indicated interest in the service (given blood previously). PTS: 1 DIF: Application BLM: Higher order

18-20

REF: p. 582

OBJ: 6

77. Refer to Blood Services. What technique did the organization use to access donor information? a. niche marketing b. data mining c. predictive modelling d. customer segmentation ANS: D Customer segmentation is the process of breaking large groups of customers into smaller, more homogeneous groups. PTS: 1 DIF: Application BLM: Higher order

REF: p. 584

OBJ: 6

78. Refer to Blood Services. What did the organization use CRM marketing to do? a. define customer service b. increase effectiveness of distribution strategy c. design targeted marketing communications d. cross-sell other products ANS: C The birthday cards (a type of communication) were intended as reminders and thank-you cards. PTS: 1 DIF: Application BLM: Higher order

REF: p. 588

OBJ: 7

Les Ailes de la Mode is a Quebec retail store that promotes the highest quality customer service. The company has established itself not only as a top retailer in the province, but also as a credit card and point program company, a cataloger, and even a publisher. It gathers customer information for its credit cards and point program through catalogue orders, and through subscriptions to its publications. 79. Refer to Les Ailes de la Mode. The company promotes its service by maintaining the importance at the point at which the customer and store personnel exchange information and develop learning relationships. What is being described? a. the transactional dyad b. an interaction c. knowledge analysis d. an empowerment moment ANS: B OBJ: 2

PTS: 1 BLM: Remember

DIF: Application

REF: p. 576

80. Refer to Les Ailes de la Mode. What has Les Ailes de la Mode created? a. several different touch points b. several different interrelationship promotions c. several different focus areas d. several different distribution channels ANS: A OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 578

18-21

81. Refer to Les Ailes de la Mode. How did Les Ailes de la Mode learn that its customers wanted more and better trained store personnel? a. by using transaction-based interactions with customers while they were shopping in the store b. by using retail-centric interactions with customers while they were shopping in the store c. by using point-of-sale interactions with customers while they were shopping in the store d. by using relationship-based interactions with customers while they were shopping in the store ANS: C OBJ: 3

PTS: 1 DIF: Application BLM: Higher order

REF: p. 579

82. Refer to Les Ailes de la Mode. Les Ailes de la Mode offers customers a Les Ailes MasterCard. The card is connected to a points program that offers one point for every $20 of purchases on the card, and triple that on purchases made at Les Ailes. It also incorporates an electronic chip, on which a $10 coupon is rewarded to each member every month via the electronic gift card (on purchases of $10 or more every month). Card members also receive free subscriptions to the retailer’s Les Ailes magazine. This shows how CRM can be used for which of the following purposes? a. to create transactional relationships b. to develop a compiled list c. to increase knowledge about the competition d. to retain loyalty ANS: D One of the advantages of CRM is the ability to personalize the message. PTS: 1 DIF: Application BLM: Higher order

REF: p. 587

OBJ: 7

Fingerhut, a catalogue retailer, wanted to determine whether customers who change residences are three times more likely than customers who have not moved to buy tables, fax machines, and decorative products but no more likely to buy jewellery or footwear. If the customers were more likely to buy the first group of goods, Fingerhut would create a catalogue for people who have changed residences. 83. Refer to Fingerhut. What would Fingerhut use to find the information it seeks? a. information retrieval channels b. information search c. an information environment d. data mining ANS: D Data mining is a process that identifies significant customer patterns. PTS: 1 DIF: Application BLM: Higher order

18-22

REF: p. 583

OBJ: 6

84. Refer to Fingerhut. Which of the following describes how the company discovered the information? a. automatic extrapolation to predict past behaviour b. trend analysis and hypothesis testing to reveal trends in consumer behaviour c. customer-initiated information systems d. the automated prediction of trends and behaviours and the automated discovery of previously unknown patterns ANS: D Past behaviour is not predictable; it is a known. Notice that the answer to this question includes the two major capabilities associated with data mining. PTS: 1 BLM: Remember

DIF: Application

REF: p. 583

OBJ: 6

L.L. Bean, Inc. has been reducing the number of catalogues it sends out over the past several years while increasing its sales and profits. L.L. Bean now uses a number of criteria to establish a model showing which catalogues buyers purchased from and to judge their likelihood of buying from a catalogue that they have never purchased from. 85. Refer to L.L. Bean, Inc. What does L.L. Bean use to collect this information? a. predictive data b. hypothesis testing c. correlation analysis d. modelling ANS: D Modelling takes known information and uses it to predict how individuals will respond in unfamiliar situations. PTS: 1 DIF: Application BLM: Higher order

REF: p. 586

OBJ: 6

86. Refer to L.L. Bean, Inc. L.L. Bean now uses a number of criteria about buyers and prospects to judge their likelihood of buying from a particular catalogue. What does it use to do this? a. lifetime analysis b. cross-selling c. recency-frequency-monetary analysis d. predictive modelling ANS: D Through predictive modelling, marketers try to determine the odds that some other occurrence, such as a response or purchase, will take place in the future. PTS: 1 DIF: Application BLM: Higher order

REF: p. 586

OBJ: 6

18-23

Hudson’s Bay Company in Canada operates The Bay, Zellers, Home Outfitters, and hbc.com. At each of its stores, it gives HBC Rewards enables that members to earn points. Consumers can redeem points in the HBC Rewards catalogue for various items, including travel, leisure and entertainment items, Air Miles reward miles, or Bay and Zellers gift certificates. To use the system, customers have to provide store personnel with their HBC card number. 87. Refer to Hudson’s Bay Company. This introduction of the reward program enables Hudson’s Bay to engage in which type of interactions with its customers? a. transaction-based and retail-centric b. point of sale and Web-based c. customer-centric and technology-centric d. retail-centric and Web-based ANS: B Because Hudson’s Bay does business at its store and at its website, it engages in both point-of-sale and Web-based interactions. PTS: 1 BLM: Remember

DIF: Application

REF: p. 579

OBJ: 3

88. Refer to Hudson’s Bay Company. According to the text, which of the following is the most likely reason that Hudson’s Bay Company implemented this reward program? a. to make sure the 80/20 principle is not influencing its activities b. to lessen the importance of customer service c. to retain loyal customers d. to reduce problems associated with cultural diversity ANS: C The HBC Rewards program is a loyalty program. PTS: 1 BLM: Remember

DIF: Application

REF: p. 587

OBJ: 7

TRUE/FALSE 1. Customer relationship management requires that companies are organized around customer segments. ANS: T REF: p. 572

PTS: 1 OBJ: 1

DIF: Comprehension

2. The first step in establishing a customer relationship management cycle is to acquire and capture all relevant information about existing and potential customers. ANS: F The CRM cycle is a closed-end loop with no predefined start or end. PTS: 1

18-24

DIF: Definition

REF: p. 572

OBJ: 1

3. The technological environment has no influence on customer relationship management systems. ANS: F Technology plays a major role in any CRM system. PTS: 1 OBJ: 1

DIF: Comprehension

REF: p. 572

4. Data mining is an analytical process that compiles actionable data about the purchase habits of a firm’s current and potential customers. ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 583

5. Data mining in a CRM environment is normally an informal process of collecting customer information through customers’ feedback on products. ANS: F This is the text’s definition of learning. PTS: 1

DIF: Definition

REF: p. 576

OBJ: 2

6. Through the application of knowledge management, the Lands’ End clothing catalogue retailer would have learned that a substantial number of its customers would like Lands’ End to offer a line of maternity wear. ANS: T OBJ: 2

PTS: 1

DIF: Application

REF: p. 576

7. The success of CRM can be directly measured by the effectiveness of suppliers in providing exactly what the company needs to satisfy its customers. ANS: F The success of CRM is directly measured by the effectiveness of the interaction between the customer and the organization. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 576

8. For a catalogue retailer, the contact between the customer and the company’s order taker would be an example of a touch point. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 578

18-25

9. Transactions-based interactions are no different from any other type of touch point. ANS: F Transactions-based interactions differ from other interactions in that they focus on the exchange of information at the point of actual transaction. PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 578-579

10. When Amazon.ca asks visitors to its website to create wish lists and then invites them to send the lists to people who may be planning on buying them a present soon, it is relying on Web-based interactions to help it learn about its customers. ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 579

11. Point-of-sales interactions are used both in marketing and in merchandising activities. ANS: T REF: p. 579

PTS: 1 OBJ: 3

DIF: Comprehension

12. Once a credit card is swiped, the retailer captures information about the product being purchased and information about the customer’s credit history. ANS: T OBJ: 3

PTS: 1

DIF: Definition

REF: p. 579

13. Channel interactions include store visits, conversations with salespeople, and wireless communication. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 579-580

14. Transactions do not provide any information beyond the customer’s name, address, and phone number. ANS: F Transactions can provide all types of information about the customer’s past purchases. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 579-580

15. The process of centralizing data in a CRM system is sometimes referred to as the interpolation of external and internal touch points. ANS: F The process of centralizing data in a CRM system is called data warehousing. PTS: 1

18-26

DIF: Definition

REF: p. 581

OBJ: 5

16. For a CRM system to be effective, customer information must be stored in a data mine. ANS: F The information must be stored in a data warehouse, a central repository for data from various functional areas of the organization. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 581

17. Response lists are especially important in database creation because past behaviour is a strong predictor of future behaviour. ANS: T A response list includes the names of addresses of individuals who have responded to an offer of some kind. PTS: 1

DIF: Definition

REF: p. 582

OBJ: 5

18. As a process strategy, customer relationship management manages the interactions between a company and its customers. ANS: T REF: p. 583

PTS: 1 OBJ: 6

DIF: Comprehension

19. Multinational companies often face difficult problems when pulling together internal data about their customers. ANS: T The problems include differences in language, computer systems, and data collection methods. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 583

20. Data mining analyzes significant relationships simultaneously among several customer dimensions with vast data warehouses. ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 583

21. Volvo has a website that caters to car enthusiasts who might want to see concept cars evolve into real-life products. It would have used data mining to locate people who were car enthusiasts and innovators. ANS: T OBJ: 6

PTS: 1

DIF: Application

REF: p. 583

18-27

22. As a predictive tool, data mining has limited utility. ANS: F Data mining has great utility as a predictive tool. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 584

23. RFM analysis is used to delete unnecessary or duplicated data. ANS: F RFM analysis identifies customers most likely to purchase again. PTS: 1

DIF: Definition

REF: p. 585

OBJ: 6

24. Lifetime value analysis is helpful only when it is used on current customers. ANS: F LTV facilitates targeting new customers who look as though they will be profitable customers. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 585

25. Through campaign management, the organization’s marketing department controls outbound communications to customers concerning product offerings. ANS: F Campaign management involves all functional areas of an organization in selling the product offering. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 587

ESSAY 1. Comment on the following statement: “A CRM cycle is a rather simplistic customer service strategy.” ANS: On the surface, CRM may seem like simplistic customer service, but customer service is only a small part of totally integrated holistic approach to building customer relationships. The CRM cycle is described as a closed-loop system that has no predefined start or end. It is initiated with the establishment of customer relationships within the organization. Next, a company needs to establish and maintain interaction with its current customer base, acquire and capture customer information based on the interactions, use technology to store this customer information, and analyze the data for profitable/unprofitable segments. Once this is done, the information should be disseminated throughout the organization. PTS: 1

18-28

DIF: Application

REF: p. 572-573

OBJ: 1

2. Describe the actions of a company that is referred to as having a customer-centric focus. ANS: Companies that implement a CRM system adhere to a customer-centric focus. Customer-centric is an internal management philosophy similar to the marketing concept. Under this philosophy, the company customizes its product offerings based on data generated through interactions between the customer and the company. PTS: 1

DIF: Application

REF: p. 576

OBJ: 2

3. What is knowledge management? What type of companies use knowledge management? ANS: Knowledge management is the process by which learned information from customers is centralized and shared in order to enhance the relationship between customers and the organization. Companies that have a CRM system need to use knowledge management. PTS: 1

DIF: Application

REF: p. 576

OBJ: 2

4. Explain the importance of interaction in a customer relationship system. Most colleges and universities have some form of CRM system. Describe an interaction that occurs at your institution. ANS: Interaction is the point at which a customer and a company representative exchange information and develop learning relationships. There are several examples—probably the best occurs when the student goes through the admission process. The applying student provides information for the registrar’s office, and the registrar’s office provides information to the student about classes, living arrangements, food plans, etc. PTS: 1

DIF: Application

REF: p. 576

OBJ: 2

5. How can a company measure its success at implementing customer relationship marketing (CRM) techniques? How does empowerment influence CRM marketing? ANS: The success of CRM can be directly measured by the effectiveness of the interaction between the customer and the organization. The more latitude (empowerment) a company gives its representatives, the more likely the interaction will conclude in a way that satisfies the customers. PTS: 1

DIF: Application

REF: p. 576

OBJ: 2

6. What is a touch point? Give two examples of touch points. ANS: Touch points are all possible areas of a business where customers communicate with that business. Touch points include sales, requests for information, complaints, warranty applications, and credit applications. Students may develop other equally correct answers. PTS: 1

DIF: Application

REF: p. 578

OBJ: 3 18-29

7. What is a data warehouse? How does it differ from a database? ANS: Both are a collection of data. Traditionally, collected data was stored in separate databases throughout an organization. A data warehouse is a central repository for data from all of the functional areas of the organization. The information can be shared by all with the use of a data warehouse. PTS: 1

DIF: Application

REF: p. 581

OBJ: 5

8. Distinguish between a compiled list and a response list. ANS: A response list includes the names and addresses of individuals at home or in the workplace who have responded to an offer of some kind either by mail, telephone, direct response television, product rebates, contests, sweepstakes, billing inserts, etc. Response lists tend to be most actionable because past behaviour is a strong predictor of future behaviour. A compiled list is developed by gathering names and addresses from directories and membership rosters, usually enhanced with information from public records, such as census data, auto registration, birth announcements, business start-ups, bankruptcies, etc. It is a method used to get a jump-start on building a customer database. PTS: 1

DIF: Definition

REF: p. 582

OBJ: 5

9. An organization wants to identify its best customers. What five common techniques can it use if all of its customer information is stored in a database? ANS: 1. 2. 3. 4. 5.

customer segmentation recency-frequency-monetary analysis lifetime value analysis predictive modelling data mining

PTS: 1

DIF: Definition

REF: p. 583-586

OBJ: 6

10. Briefly describe how, why, and when an organization uses data mining. ANS: Data mining is the process of finding hidden patterns and relationships in customer data stored in a data warehouse. Data mining tools analyze significant relationships simultaneously among several customer dimensions. Data mining is used when the decision maker has limited knowledge of a particular subject. With data mining, an organization is capable of the automated prediction of trends and behaviours and the automated discovery of previously unknown patterns. PTS: 1

18-30

DIF: Application

REF: p. 583

OBJ: 6

11. What is modelling? When do decision makers engage in modelling? ANS: Modelling is the act of building a model in a situation where the answer is known and then applying the model to another situation where the answer is unknown. Data mining works through a process of modelling. If the information is available in the data warehouse, the data mining process can model virtually any customer activity. Modelling makes possible the automated prediction of trends and behaviours and the automated discovery of previously unknown patterns. PTS: 1

DIF: Application

REF: p. 586

OBJ: 6

12. Briefly describe six common CRM marketing database applications. ANS: Campaign management: This involves developing customized products for the appropriate customer segment, pricing these products attractively, and communicating these offers in a manner that enhances customer relationships. Retain loyal customers: Loyalty programs reward loyal consumers for making multiple purchases. Cross-sell other products: A database allows marketers to match product profiles and consumer profiles to cross-sell customers other products that match their demographic, lifestyle, or behavioural characteristics. Design targeted marketing communications: Using transaction and purchase data in addition to personal or demographic information allows marketers to tailor a message. Reinforce consumer purchase decisions: A database offers marketers an opportunity to reach out to customers to reinforce their purchase decisions. Induce product trial by new customers: Using the profile of its best customers, marketers can find new customers who look like its most profitable segment. Increase the effectiveness of distribution channel marketing: Marketing databases enable manufacturers to advise retailers how to better meet customer needs, and make it possible to serve customers using direct channels instead of the traditional indirect channels. Improve customer service: Many companies are using CRM marketing techniques to create product differentiation by determining how best to tailor products to customers’ needs. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 587-590

18-31

13. You have decided your business should adopt a CRM marketing approach. You have invested in computer software that captures customer data such as name, address, age, education, and lifestyle characteristics. Now, you find many customers are reluctant to provide you with such information. What are the general consumer concerns regarding this issue? How could you address these concerns? ANS: One-to-one marketing concerns some Canadians because of the potential for invasion of privacy, specifically the sheer volume of information that is aggregated in databases and the vulnerability of this information to unauthorized access and use. Much of the concern is due to the fact that most consumers are unaware of how personal information is collected, used, and distributed and they are unaware of how technology helps in collecting personal data. Many companies actively sell huge amounts of personal information to list compilers. Further, there is widespread misunderstanding among consumers about existing privacy laws and regulations. Frustrated by their lack of control, consumers want more opportunities to determine how their personal information will be used. It has been suggested that “permission marketing” be applied. This means that if consumers are made aware of the immediate benefits of providing personal information to a company, they would be more likely to do so. Consumers need to be made aware that with their personal data, a business can then provide more personalized goods and services. There needs to be a more direct link in the consumers’ mind between sharing their personal data and customized rewards. PTS: 1 OBJ: 7

18-32

DIF: Comprehension

REF: p. 590-593

Chapter 19—Marketing on the Web MULTIPLE CHOICE 1. Approximately how much of all money spent by consumers on Internet transactions is for travel and tourism products? a. 10 percent b. 3 percent c. 33 percent d. 66 percent ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 605

2. In Canada, in a retail market worth a total of $400 billion, what is the value of all consumer e-commerce? a. $188 billion b. $128 billion c. $5 billion d. $68 billion ANS: C OBJ: 1

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 605-606

3. According to Porter’s Five Industry Forces, barriers of entry on the Internet are which of the following? a. low b. lower than barriers to exit c. of little consequence d. high ANS: A Barriers to entry and to exit are low on the Internet. Barriers to exit are lower, though, as a Web master has only to turn off the server to pull the material off the Web. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 606

19-1

4. Kyra is shopping for a kitchen faucet. She surfs the Internet doing research on available styles, manufacturers, and prices. When she finds the faucet she wants, she prints out the pricing information at Faucet.com (the lowest-priced Internet retailer) and takes it to her local plumbing store. She tells the manager that if she can get the same price at the store, she will buy locally rather than over the Internet. This is an example of which of the following crossing between on-line and offline environments? a. on-line rivalry b. bargaining power of suppliers c. threat of competition d. bargaining power of buyers ANS: D Kyra is the buyer, and she is attempting to dictate the price she will pay to the local plumbing store. She is using the Internet pricing as leverage in her request. PTS: 1 DIF: Application BLM: Higher order

REF: p. 606

OBJ: 2

5. Companies that do not use the Internet will find it increasingly difficult to remain competitive. Once a company begins using the Internet, what happens? a. It will lose any advantage that it had previously. b. It will accrue sustainable competitive advantage. c. It will have only promotional advantage. d. It has to work hard to keep up with changing technology. ANS: D New innovations spread almost immediately after they are deployed and soon everyone is using the new strategy, product, or service. Companies have to stay on their toes to stay ahead of the curve. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 607

6. According to the text, which statement is true about marketing channel significance? a. Multichannel customers spend between two and three times as much as retail customers alone. b. By implementing integrated, cross-channel strategies, the Internet should be able to replace existing marketing programs. c. Cross-channel business strategies for business are costly and are less profitable than a purely e-business focus. d. Internet customers spend 10 times as much as traditional retail customers. ANS: A OBJ: 2

19-2

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 607

7. According to the text, which of the following BEST describes the fast-paced investment in Internet technologies that characterized the 1990s? a. It enabled the on-line data integration and communication technology that we know today. b. It stretched into the 21st century. c. It was foolhardy and has reaped no benefits. d. It had no effect on the marketing mix. ANS: A REF: p. 607

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

8. What was the result of the dot-com bubble? a. a deformed market b. a re-formed market c. an unformed market d. a breakthrough market ANS: B REF: p. 607

PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

9. In a re-formed market, why do first movers have the advantage? a. They have more experience in their industry. b. They write the rules in the re-formed market. c. They are on the leading edge of technology. d. First movers do not have the advantage in a re-formed market. ANS: D Second movers have the advantage in a reformed market; they learn from the blunders of the first movers and have none of the heavy expense of investment in R&D. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Remember

REF: p. 607-608

10. What are two basic forms of virtual business? a. consumer-to-consumer e-commerce and consumer-to-business e-commerce b. consumer-to-business e-commerce and business-to-consumer e-commerce c. business-to-business e-commerce and business-to-consumer e-commerce d. business-to-wholesaler e-commerce and business-to-consumer e-commerce ANS: C REF: p. 609

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

19-3

11. According to the text, which of the following is the BEST example of business-to-consumer commerce? a. A plant wholesaler purchased one dozen plastic pots from a website. b. Amazon.ca sold Pete the complete set of Harry Potter books. c. Allison bought a silver picture frame on eBay. d. Deidre returns a blouse she purchased at the Disney website. ANS: B Only alternative c has an individual making a purchase from an Internet business. That is the best answer. Alternative a is an exchange, not a purchase. PTS: 1 DIF: Application BLM: Higher order

REF: p. 609

OBJ: 3

12. According to the text, which of the following is the BEST example of business-to-business commerce? a. Robin uses eBay to buy a pair of Victorian lamps from a seller in Windsor. b. A restaurant orders 50 kg of sugar from the Redpath sugar website. c. Pratish buys his wife a birthday gift at Flowers.com. d. A homeowner goes to a website that sells building supplies to complain about a late shipment. ANS: B There is no indication in alternative a that Robin is a business. Alternative c is an example of B2C commerce. Alternative d is not a business transaction. Businesses are clearly defined in alternative b. PTS: 1 DIF: Application BLM: Higher order

REF: p. 609

OBJ: 3

13. Which of the following acts as a channel intermediary bringing together buyers and sellers to form a virtual exchange community? a. a website value-added interconnect b. a business-to-business on-line exchange c. an electronic warehouse d. a website facilitating unit ANS: B OBJ: 3

19-4

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 609

14. According to the text, which of the following BEST describes on-line B2B exchanges? a. They account for less than 10 percent of business purchasing. b. They continue to grow in popularity. c. They account for over 70 percent of business purchasing. d. They are not catching on because businesses don’t know about them. ANS: A The popularity of B2B exchanges is waning, with nearly half going out of business. Although 70 percent of businesses have experimented with on-line purchases, on-line purchasing accounts for less than 10 percent of total business purchasing. PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

REF: p. 609

15. Where do on-line auctions most commonly take place? a. in the B2C environment b. in the C2C environment c. in the B2B environment d. in a B2B on-line exchange ANS: B REF: p. 610

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

16. According to Forrester Research, three factors influence a consumer’s on-line buying behaviour. They are attitude toward technology, motivation to use technology, and which of the following? a. psychographic factors b. income c. propensity for on-line exchanges d. utilization of technology for information searches ANS: B REF: p. 613

PTS: 1 OBJ: 3

DIF: Comprehension BLM: Remember

17. What are the central elements in designing an on-line marketing plan? a. traffic, pricing, and promotion b. page design, page views, and pricing c. page views and promotion d. product, place, promotion, price ANS: D The 4 Ps of marketing remain the central elements of an on-line marketing plan. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

REF: p. 614

19-5

18. When Amazon launches a personalized Web page every time a visitor arrives at the site, what is the company using? a. selective customization b. customer relationship extension c. Internet personalization d. mass customization ANS: D REF: p. 614

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

19. What is a branded commodity? a. a commodity that is known by the company that makes it, such as Laura’s Lean Beef b. a commodity that is turned into a brand, such as Uncle Ben’s rice c. commodities that bear the imprint of the company that sells them d. national brands that are available at so many retailers that the products are considered equivalent ANS: D Branded commodities are national brands that are available at so many retailers that the products are considered equivalent and the consumers shop on price. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

REF: p. 615

20. Jackson is interested in buying a particular Uniden cordless telephone. He knows he can find the same model at several different Internet retailers. As a result, Jackson is shopping on brand and price rather than wanting to purchase at a particular store. In this example, what is Jackson’s phone an example of? a. a price-driven item b. an Internet commodity c. an Internet product d. a branded commodity ANS: D OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 615

21. How many Web users arrive at a site by direct navigation? a. approximately 60 percent b. virtually 100 percent c. less than 10 percent d. none ANS: A The percentage of Web users who arrive at a site by direct navigation is approximately 64 percent. PTS: 1 OBJ: 4

19-6

DIF: Comprehension BLM: Remember

REF: p. 615-616

22. Which one of the following is the most important factor that influences consumer purchasing from certain company websites? a. the familiarity of the on-line firm to the consumer b. the costs if the purchased product does not actually ship to the consumer after on-line payment? c. The appearance and “feel” of the site to the consumer. d. having a physical location also ANS: D REF: p. 616

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Higher order

23. Regina sells handmade children’s books on her website. She is dissatisfied with the number of visitors to her site and would like to place a link to her site on more popular book sites such Amazon.ca and Chapters.ca. If she affiliated with either of these sites, what would Regina most likely have to do? a. pay the affiliate site every time someone linked to her site through the affiliate b. pay the affiliate a commission on sales generated from buyers that linked to Regina’s site from the affiliate site c. pay a sign-up fee d. pay a monthly fee for having her link on the site ANS: B Affiliates generally receive a commission on sales generated from buyers. In essence, this is a finder’s fee; the affiliate gets paid only if matching a potential buyer to the seller results in a sale. PTS: 1 DIF: Application BLM: Higher order

REF: p. 616

OBJ: 4

24. When Aaron went to a website specializing in Victorian architecture, he noticed a small placement for Amazon.com on the edge of the page. The text was about 10 cm square, told him that he could find books on this topic at Amazon.ca, and included a link directly to Amazon. What is the architecture site most likely to be? a. an affiliate of Amazon b. a partner of Amazon c. a strategic arm of Amazon d. a channel resource of Amazon ANS: A Affiliates provide links for other companies on their own websites and are paid a commission on any sales resulting from the link. PTS: 1 DIF: Application BLM: Higher order

REF: p. 616

OBJ: 4

25. According to the text, which of the following BEST describes spam? a. It requires the mailer to use opt-in mailing lists. b. It is illegal. c. It is an effective method of finding prospects. d. It is sent to unqualified prospects. ANS: D REF: p. 617

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember 19-7

26. According to the text, which of the following statements about e-mail is true? a. Spam accounts for 85 percent of all e-mail transmissions. b. Spam is regarded as a simple invasion of privacy. c. Halting the use of spam through legislation is relatively quick and easy. d. Low conversion rates have resulted in quite unprofitable e-mail promotional campaigns. ANS: A REF: p. 617

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

27. Why is optimizing search engine results critical for marketers? a. Over 40 percent of users quit searching after the first page of results. b. Almost 90 percent of users quit searching after the first page of results. c. Users tend to click on the first 10 links and then run a new search. d. Optimizing search engine results is not very important. ANS: A Almost 50 percent of users quit after scanning the first page; 80 percent quit after three pages. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

REF: p. 619

28. On-line businesses understand the benefits inherent in promoting customer loyalty. What do the best loyalty programs offer? a. better customer service b. volume purchase discounts c. free merchandise to their best customers d. lower prices than the competition ANS: A REF: p. 621

PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

29. Approximately what percentage of the global population have access to the Internet? a. 37 percent b. 26 percent c. 57 percent d. 1.7 percent ANS: B OBJ: 5

19-8

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 623

30. MGM Mirage, owner of 19 casinos including the Bellagio, the Mirage, and the MGM Grand, recently launched the first on-line casino out of the Isle of Man. The new site rejects gamblers from dozens of countries, including the United States, where on-line gambling is illegal. This is an example of how which of the following are shaping Internet strategies? a. e-tailers b. environmental factors c. site extensions d. e-marketplaces ANS: B Legislation that affects marketing is part of the Internet marketing environment and plays a role in shaping Internet marketing strategies. PTS: 1 DIF: Application BLM: Higher order

REF: p. 624

OBJ: 5

31. Which of the following is an electronic piece of information written to the user’s local hard drive, keyed to a specific server, and passed back to the server when the user’s browser again accesses the site? a. a cookie b. a customer information file c. spam d. an Internet bot ANS: A OBJ: 5

PTS: 1 BLM: Remember

DIF: Definition

REF: p. 624

32. August Moon is a talent agency that specializes in providing entertainers for college campuses in Canada. When Bradley visited the August Moon website, he found a list of all of the entertainers represented by the agency, a brief bio of each entertainer, and a history of the talent agency. The next time Bradley visited the August Moon site, he was welcomed back and shown a list of currently running shows starring performers he had clicked on during his previous visit. To maximize its customer relationship marketing efforts, August Moon’s website uses which of the following? a. Trojan horse technology b. page layering c. enhancement technology d. cookies ANS: D Cookies are the technology that enables personalized Web pages. PTS: 1 DIF: Application BLM: Higher order

REF: p. 624

OBJ: 5

19-9

33. Which technology makes customized Web pages possible? a. byte mapping b. bit c. cookies d. HTML ANS: C Cookie technology enables marketers to know what pages visitors have used and learn their preferences in order to customize Web pages. PTS: 1 OBJ: 5

DIF: Comprehension BLM: Remember

REF: p. 624

34. Sunil is reviewing a marketing plan for his new Internet site. How will he know if his design is a success? a. He can write lots of cookies to visitors’ hard drives. b. Lots of visitors come often and stay a long time. c. Lots of visitors come to this site (lots of hits). d. A minimum number of visitors surf many pages at the site (lots of page views). ANS: B Stickiness is the most currently used metric for Internet success. Hits and page views give data that cannot be translated into information. The number of cookies dropped doesn’t indicate a successful website. PTS: 1 DIF: Application BLM: Higher order

REF: p. 625

OBJ: 6

DIF: Definition

REF: p. 625

35. What is the formula for stickiness? a. Hits × Page Views b. Frequency × Duration c. Frequency × Duration × Site Reach d. Duration × Hits × Page Views ANS: C OBJ: 6

PTS: 1 BLM: Remember

36. According to the text, what is a key to successful metrics of Internet success? a. making them available to marketing researchers b. generating a vast amount of data from log files c. tying users’ behaviour to prior events d. knowing how many people come to the site ANS: C The key to leveraging the vast amount of data collected by server logs is tying the data on individual consumers to past surfing and purchasing behaviour. Analyzing the data against behaviour patterns allows for marketers to predict future behaviour. PTS: 1 OBJ: 6

19-10

DIF: Comprehension BLM: Remember

REF: p. 625

37. Whenever Jamie launches RealPlayer, a large screen for Casino.com interrupts her download. If she clicks on it, marketers at the on-line casino can begin timing how long she stays at the site. What is Casino.com measuring? a. recency b. click-through c. duration d. a hit ANS: C Length of stay at a site is termed duration. A hit simply indicates that someone went to the site. Recency is a measurement of the time since the last visit. Click-through is a tabulation of how many, not how long. PTS: 1 OBJ: 6

DIF: Comprehension BLM: Higher order

REF: p. 625

38. The Busy Bee is a specialty shop that sells gourmet food products and wine as well as operating a small gourmet deli at lunchtime. The owner is thinking of selling gift baskets over the Internet during the holidays. Because The Busy Bee is unknown out of its neighbourhood, what would benefit it from using? a. using a third-party service such as VeriSign to build trust with new customers b. creating and broadcasting an electronic newsletter full of recipes c. links to popular food preparation websites, such as Cooking Light and Gourmet d. participating in a shopping bot ANS: A Because potential customers might be suspicious of buying from an unfamiliar company, The Busy Bee would benefit from having third-party service verify the security of its transactions and data collection. Linking to other sites would take potential customers away from Busy Bee; participating in a shopping bot would put price pressure on Busy Bee’s specialty products. PTS: 1 DIF: Application BLM: Higher order

REF: p. 626

OBJ: 7

39. When Calvin’s Visa bill arrived, he found numerous charges at locations where he had not conducted business. In addition, transactions were billed from around the country, although Calvin had not left home or used the Internet to purchase anything for that billing period. Calvin was a victim of which of the following? a. multiple billing b. identity theft c. identity fixing d. identity duplication ANS: B OBJ: 7

PTS: 1 DIF: Definition BLM: Higher order

REF: p. 627

19-11

40. Webcasts are a tool that marketers use for which of the following? a. on-line sales promotion b. on-line media distribution c. on-line public relations d. on-line advertising ANS: C A Webcast is an on-line event in which a company disseminates information directly to consumers. PTS: 1 OBJ: 4

DIF: Comprehension BLM: Remember

REF: p. 620

41. A person looking for the best deal on Richard Gywn’s biography of Sir John A. Macdonald could do a price comparison with multiple sellers simultaneously by using which of the following? a. a shopping bot b. clickstream c. hypertext d. a multimedia server ANS: A OBJ: 4

PTS: 1 DIF: Application BLM: Higher order

REF: p. 620

Longaberger is a company that sells baskets, pottery, fabrics, home decor, and home accessories through independent sales consultants. It has a website at www.longaberger.com. A visitor at this website can learn how to become a sales consultant and present a Longaberger home show for his or her friends. Answers to any questions a potential sales consultant might have are available at the site. Additional pages at the site tell the company’s history, offer decorating tips, and spotlight this month’s products. Each month the company, which began as a producer of high-quality baskets, creates an on-line newsletter for its customers, who are very brand loyal. One issue of the newsletter included sale information, new product information, and a story about the history of the Longaberger family. Access to the newsletter is available at the website. 42. Refer to Longaberger. If someone who wanted to buy a set of baskets for the top of her desk, she could use which of the following to find the prices of other baskets—not just those made by Longaberger. a. a clickstream b. a multimedia server c. a shopping bot d. hypertext ANS: C With shopping bots, the prices of multiple sellers can be compared. PTS: 1 DIF: Application BLM: Higher order

19-12

REF: p. 620

OBJ: 4

43. Refer to Longaberger. If the Longaberger Company wants to know how many people visit its site, and how often and how long they stay each time, the company would be examining which of the following? a. its stickiness b. its browsing record c. its click-through tally d. its page views ANS: A Stickiness is Frequency × Duration × Site Reach PTS: 1 DIF: Application BLM: Higher order

REF: p. 625

OBJ: 6

44. Refer to Longaberger. Longaberger would like to sell direct to consumers at its website. Since most of its customers are used to dealing with the sales force, the company is concerned that they will be uncomfortable, and maybe even suspicious, of dealing directly with the company in an on-line environment. What technology could Longaberger use to allay customer concerns about transaction data? a. bit protection b. Secured Sockets Layer (SSL) c. BBB reliability d. cookies ANS: B Secured Sockets Layer encryption (SSL) will protect customer data going to and from the company website. Cookies are not a data protection technology. PTS: 1 DIF: Application BLM: Higher order

REF: p. 625

OBJ: 5

45. Refer to Longaberger. Susan was unfamiliar with Longaberger baskets until she followed a link from a craft supplies website to the Longaberger website. The craft supplies site is probably which of the following? a. an affiliate of Longaberger b. an outlet of Longaberger c. a channel leader for Longaberger d. a channel partner of Longaberger ANS: A Linking to one site through another is usually evidence of an affiliate program. PTS: 1 DIF: Application BLM: Higher order

REF: p. 616

OBJ: 4

19-13

Men’s Wearhouse, a men’s clothing retailer, has made a significant financial investment in developing software for Web-enabled personal computers that have replaced cash registers. The PCs allow sales personnel to not only ring up purchases but also check inventory and retrieve information on what to wear when. If one store doesn’t have a certain jacket in a certain size, salespeople can give shoppers instant access to the inventory of the chain’s 504 stores, via the MensWearhouse.com website (www.menswearhouse.com) as well as a company intranet. Customers can then order the jacket on-line and have it delivered to their home or for pickup at the store. 46. Refer to Men’s Wearhouse. The website that Men’s Wearhouse has as part of its in-store program can best be described as which of the following? a. a promotional strategy b. integrating conventional and Internet channels c. transactive marketing d. the dissolution of a pure Internet strategy ANS: B Because the registers represent locating the company’s Web presence inside its physical stores, the strategy is best described as integration of traditional and Internet channels. PTS: 1 OBJ: 2

DIF: Comprehension BLM: Higher order

REF: p. 607

47. Refer to Men’s Wearhouse. By replacing cash registers with Web-enabled PCs, what did Men’s Wearhouse implement? a. a new Internet product strategy b. a new Internet pricing strategy c. a new Internet distribution strategy d. a new Internet promotion strategy ANS: C The integration of retail stores with the company’s website represents a new distribution strategy, since two channels were combined in a single place. The company’s products, promotion, pricing, and personnel did not change. PTS: 1 OBJ: 4

19-14

DIF: Comprehension BLM: Higher order

REF: p. 615

48. Refer to Men’s Wearhouse. Salespeople at Men’s Wearhouse can now offer shoppers merchandise that is not on the floor, or even in that particular store, through the company’s website. The integration of conventional and Internet marketing has been a strategy focused on which of the following? a. price b. product c. place d. promotion ANS: C Click and mortar stores and sites have many advantages over solely virtual competitors and solely traditional competitors. This represents a strategy of place, or where the customer meets the company to transact business. PTS: 1 DIF: Application BLM: Higher order

REF: p. 615

OBJ: 2

49. Refer to Men’s Wearhouse. The new Web-based cash registers at the Men’s Wearhouse give the company the opportunity to do which of the following? a. move customers to the Web and out of the store b. retain more technically qualified personnel c. redeem on-line coupons d. capture information about the purchases of individual customers ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 624

50. Refer to Men’s Wearhouse. What have the new Web-based cash registers at the Men’s Wearhouse stores helped the company to do? a. integrate its marketing communications b. expand its marketing research c. grow its customer base d. improve customer service ANS: D The Internet-based software helps salespeople offer better customer service at a store that wants to be known for providing a boutique-style shopping experience. PTS: 1 DIF: Application BLM: Higher order

REF: p. 624

OBJ: 5

19-15

Joel Veitch is the creator of a British Internet comedy screen called Viking Kittens. Photographs of two kittens have been modified to make them look like Vikings and then superimposed on an animated background of them crossing the ocean on a Viking ship. In the background plays Led Zeppelin’s “Immigrant Song.” More striking perhaps than the comedy of the animation is the fact that as the kittens are rolling along the waves, you can follow a link to an on-line store selling mugs, t-shirts, and sweatshirts with the Viking kittens’ image emblazoned on them. Veitch began adding merchandise only a week after the site went live as a response to e-mail requesting he create Viking Kitten products. He says he sells about 15 to 20 items a day from his various comic websites, and he estimates selling one item for roughly 3,500 Viking Kittens page views. 51. Refer to Viking Kittens. Why has Joel Veitch’s small business enterprise benefited from Internet technology? a. Barriers to entry in Internet marketing are low. b. He knows about viral marketing. c. His only product is electronic entertainment. d. He had high inventories of Viking Kitten merchandise. ANS: A OBJ: 2

PTS: 1 DIF: Application BLM: Higher order

REF: p. 606

52. Refer to Viking Kittens. What type of virtual activity is Viking Kittens? a. C2C e-commerce b. B2B e-commerce c. corporate e-commerce d. B2C e-commerce ANS: D Since Joel Veitch is merchandising his humour sites, he can be considered a Web entrepreneur, and hence engaging in business-to-consumer e-commerce. PTS: 1 DIF: Definition BLM: Higher order

REF: p. 609

OBJ: 3

53. Refer to Viking Kittens. Viking Kittens is based in the United Kingdom. How many people there have Internet access? a. 60 million b. 46 million c. 1 million d. 3.7 million ANS: B REF: p. 19-21

19-16

PTS: 1 OBJ: 5

DIF: Comprehension BLM: Remember

54. Refer to Viking Kittens. CafePress sells Viking Kitten memorabilia on-line. At the bottom of every Viking Kitten animation is a link to the CafePress store. If the relationship between Joel Veitch and CafePress is an affiliate program, then which of the following would be true? a. Joel Veitch would receive a fee for every time someone visiting his animations clicked through to the CafePress site. b. CafePress would charge a monthly brokering fee for sales of Viking Kitten merchandise, but Joel Veitch would get all the proceeds from the sales. c. Joel Veitch would receive a commission on every sale of Viking Kitten memorabilia made by someone linking to the store from his animation. d. CafePress would receive a commission on every sale it made of Viking Kitten memorabilia. ANS: C An affiliate program involves a linking relationship between two websites. Site A places a link to its site on Site B. If a visitor to Site B clicks on the link, arrives at Site A, and makes a purchase, then Site B receives a commission for that sale. The commission is essentially a finder’s fee for bringing buyer and seller together. In this example, Veitch is Site B and CafePress is Site A. PTS: 1 DIF: Application BLM: Higher order

REF: p. 616

OBJ: 4

55. Refer to Viking Kittens. Jamie happened upon the Viking Kittens and, thinking it very humorous, sent the link to her husband, father, brother, and close friends. What is Jamie engaging in? a. viral marketing b. extension marketing c. pass-along marketing d. spread-the-word marketing ANS: A Viral marketing is the on-line equivalent of referrals. Even though Joel Veitch is not requesting visitors to engage in viral marketing, visitors to the site still create a buzz about the site. PTS: 1 DIF: Application BLM: Higher order

REF: p. 618

OBJ: 4

56. Refer to Viking Kittens. Jamie typed “Viking Kittens” into the Google search engine. Joel Veitch’s site was not the first listing. That place was occupied by eBay advertising Viking memorabilia and was labelled a sponsored link. Veitch’s site was not labelled a sponsored link. What does this mean? a. eBay paid for the top listing slot. b. Veitch cannot afford the top listing. c. Veitch’s site link is selected less often than the eBay site link. d. Veitch did not have enough search terms to get the highest listing. ANS: A Sponsored links are paid links. They do not necessarily mean a better fit for the search terms. Search engines differentiate between paid and unpaid listings by using terminology such as “sponsored” and “sponsors.” PTS: 1 DIF: Application BLM: Higher order

REF: p. 619

OBJ: 4

19-17

57. Refer to Viking Kittens. Joel Veitch wants to track visitors to the site. If he knows more about them, he can have the website load their favourite animation as soon as they arrive at VikingKittens.com. To do this, what would Joel need to use? a. Secured Sockets Layer b. page view data c. click-through data d. cookies ANS: D OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 624

58. Refer to Viking Kittens. When Jamie goes to VikingKittens.com, she can visit other animated photographs set to rock songs. Since the site is so funny, she goes there whenever she needs a good laugh. Once she’s there, she forgets about time and ends up watching Viking Kittens and other animations several times each. Which metric best describes Jamie’s response to the Viking Kittens site? a. click-through b. clickstream c. sticky d. page view ANS: C Stickiness is Duration × Frequency × Site Reach. Jamie is representing two variables of the formula: duration and frequency. PTS: 1 DIF: Application BLM: Higher order

REF: p. 625

OBJ: 6

59. Refer to Online Dictionary. Tools that Marlo could use effectively include all of the following EXCEPT which one? a. targeted e-mail messages to school administrators b. a newsletter about language development sent electronically to parents and schools c. affiliate marketing with Webster, Britannica, and other adult dictionaries and information sources d. untargeted e-mail messages to develop broad national attention ANS: D Unsolicited e-mail messages are rarely successful and are often considered spam. PTS: 1 DIF: Application BLM: Higher order

19-18

REF: p. 617

OBJ: 4

60. Refer to Online Dictionary. Marlo is considering using the power of e-mail to encourage customers to tell their friends about her dictionary. What is this known as? a. customer relationship creation b. blanket marketing c. spread d. viral marketing ANS: D Viral marketing is the process of sending personal messages to friends. This is the Internet version of a referral. PTS: 1 DIF: Application BLM: Higher order

REF: p. 618

OBJ: 4

Abby sells customized makeup in flashy, unconventional colours. Her target market is Generation Y. 61. Refer to Makeup. In order to find out more about her customers’ experience with their products, what should Abby consider using? a. virtual newsletters b. telephone surveys c. social networking d. a viral marketing fan site ANS: C Social networking has been particularly embraced by Generation Y and by customer service teams wanting to connect with their customer base. Since Abby’s target market is Gen Y and her concerns are service related, social networking would be the best tool of the choices given. PTS: 1 DIF: Application BLM: Higher order

REF: p. 618

OBJ: 4

62. Refer to Makeup. When someone types “makeup” into the Google search engine, Abby’s site is near the bottom of the list. In order to maximize her search engine placement, what can Abby do? a. place important phrases at the top of the page b. bid and pay for better placement c. create a more limited set of search terms d. use beta tags ANS: B OBJ: 5

PTS: 1 DIF: Application BLM: Higher order

REF: p. 619

TRUE/FALSE 1. Today’s on-line integration wouldn’t have progressed as far without the cash and resources harnessed by the fledgling Internet startups of the late 1990s. ANS: T REF: p. 607

PTS: 1 OBJ: 2

DIF: Comprehension

19-19

2. Mass customization is not possible on the Internet because there is no product to be customized. ANS: F Mass customization can be seen on the Internet in the personalization of Web pages at companies such as Amazon and Chapters. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 614

3. When Levi’s makes custom jeans, the jeans are still just an assembly-line product because they have to be manufactured in a traditional factory. ANS: F Companies can use their available resources and technologies and still provide a customized experience for customers. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 614

4. A branded commodity means that a coffeemaker with a certain model number at one retailer is equivalent to the same coffeemaker with the same model number at a different retailer. ANS: T OBJ: 4

PTS: 1

DIF: Definition

REF: p. 615

5. Nationally branded products cannot be considered commodities in the same way grain and livestock are. ANS: F Because of the Internet, branded products experience the same perception of equivalency that characterizes commodities. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 615

6. An affiliate program is a goodwill relationship where one company agrees to put a link to another website on its own corporate website for free. ANS: F Affiliates receive a commission for placing the link on their site. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 616

7. One of the biggest hurdles on-line businesses have to overcome is the consumers’ lack of awareness that their websites even exist. ANS: T REF: p. 616

19-20

PTS: 1 OBJ: 4

DIF: Comprehension

8. Broadcasting solicited e-mail is considered spamming. ANS: F Broadcasting unsolicited e-mail is considered spamming. PTS: 1

DIF: Definition

REF: p. 617

OBJ: 4

9. Using social networking is a useful way to interact with consumers of Generation Y. ANS: T REF: p. 618

PTS: 1 OBJ: 4

DIF: Comprehension

10. Companies pay fees for better placement in the results of search engine listings. ANS: T REF: p. 619

PTS: 1 OBJ: 4

DIF: Comprehension

11. A shopping bot is an electronic piece of information written to the user’s local hard drive. It is keyed to a specific server and passed back to the server when the user’s browser again accesses the server. ANS: F This is the definition of a cookie. PTS: 1 OBJ: 4

DIF: Definition

REF: p. 620 | p. 624

12. Webcasts are popular on-line public relations tools. ANS: T REF: p. 620

PTS: 1 OBJ: 4

DIF: Comprehension

13. Pricing on the Web is consistent and inflexible. ANS: F Pricing on the Web is variable and fluid. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 620-621

14. Web cash, such as CyberCash and Digicash, is a popular way to pay for purchases. ANS: F Alternative Web currencies have gone by the wayside. Companies that created them have gone bankrupt and ceased operating. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 621

19-21

15. More Americans use the Internet than citizens of any other country in the world. ANS: F REF: p. 623

PTS: 1 OBJ: 5

DIF: Comprehension

16. People with lower levels of education are as likely to be on the Internet as those who have graduated from postsecondary education. ANS: F The percentage of Internet users among those with advanced degrees is higher than among those without advanced degrees, although this gap is narrowing PTS: 1 OBJ: 3

DIF: Comprehension

REF: p. 612

17. Male consumers make more on-line purchases and spend more money than females ANS: T OBJ: 3

PTS: 1

DIF: Application

REF: p. 612

18. E-marketplaces are used for only business-to-business (B2B) marketing. ANS: F E-marketplaces exist for B2C and C2C marketing. PTS: 1

DIF: Definition

REF: p. 610

OBJ: 3

19. The controversy around cookies is all hype. They are protected on your hard drive. ANS: F The controversy around cookies grew because marketers can exchange with other marketers the information culled from cookies they have deposited. PTS: 1 OBJ: 5

DIF: Comprehension

REF: p. 624

20. Spam is easy to regulate. Lawmakers just need to make a registry for spam like the do-not-call telemarketing list. ANS: F Spam is difficult to regulate because much of it originates outside Canada. PTS: 1 OBJ: 4

DIF: Comprehension

REF: p. 617

21. Jeremy is planning on launching a website to sell in-home medical supplies for the elderly. He thinks his target market is generally uncertain about the Internet and using it to transact business. He should consider using the services of Scan Alert or VeriSign to ease customer concerns. ANS: T OBJ: 7 19-22

PTS: 1

DIF: Definition

REF: p. 626

22. Measuring hits is the best way to learn about your website traffic. ANS: F Hits are an out-of-date metric that indicate only how many times someone (anyone) visited your website. Hit counts don’t indicate who the visitors were, how long they stayed, or what they viewed while there. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 625

23. Stickiness measures how often someone comes to your site, how long he or she stays, and how many different people are coming (and staying). ANS: T OBJ: 6

PTS: 1

DIF: Definition

REF: p. 625

24. Stickiness refers to how long a Web surfer stays (is stuck) to your site. ANS: F Stickiness is Duration × Frequency × Site Reach. PTS: 1

DIF: Definition

REF: p. 625

OBJ: 6

25. Porter’s Five Industry Forces do not really apply on the Internet; they are better applied to traditional operations. ANS: F Porter’s Five Industry Forces are equally valid on the Internet as in traditional spaces. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 606

26. The Internet’s revolutionary technology created a new, breakthrough market. ANS: F The Internet’s revolutionary technology simply re-formed the existing market. PTS: 1 OBJ: 2

DIF: Comprehension

REF: p. 607

19-23

ESSAY 1. You are the marketing manager for a small business that sells travel products. Lately you have noticed that when you are surfing the Web, you are constantly interrupted by pop-up casino ads. You wonder if those kinds of ads would work for your product. You decide to write a memo to your boss outlining five reasons to use interactive ads. Since your boss is always asking about measurement and control, be sure to include ways you can measure performance of your ad. ANS: Reasons to Use Interactive Ads 1. Increase brand awareness and brand awareness tracking 2. Generate trial

How to Measure Performance * Pre/post (or exposed vs. unexposed)

Increase usage of the brand

Up-sell customers to premium product or service Encourage customer to buy more per visit

PTS: 1

DIF: Application

* *

Increase target audience Track first-time buyers

* * *

Track frequency of purchase Field usage study Track purchase behaviour over time (what was bought) Track amount purchased per purchase occasion

REF: p. 619-620

OBJ: 4

2. Describe three ways that the Internet is putting pressure on pricing. ANS: Shopping bots are allowing customers to compare pricing across a wide variety of Internet retailers. This puts pressure on retailers to be the low-cost seller of an item. In addition, customers are increasingly comparing shipping and handling costs as well as taxes when assessing the price of an item. Auction pricing is a pricing method made popular by sites such as eBay. Rather than offering predetermined price, potential buyers bid on the item, sometimes driving the price higher, sometimes letting an item languish unsold. Demand pricing is a variable pricing strategy whereby marketers can make the price of an item rise and fall with demand in order to maximize revenue. Because retailers are easily able to monitor competition on the Web, companies are pressured to keep prices competitive or be undercut by a rival. PTS: 1 OBJ: 4

19-24

DIF: Comprehension

REF: p. 620-622

3. Abby has developed a line of flashy, brightly coloured cosmetics. The products have humorous names that are slightly irreverent. For example, her lipsticks are called Kissing Sticks and come in colours like bright orange, lavender, and minty green. Prices for a lipstick begin at $18, well over the average of $6.50 found at the local drugstore. Abby wants to begin marketing her products on the Internet. She has asked you, her marketing manager, to identify whether you think this is a good idea based on Internet demographics and trends. ANS: See Exhibit 19.3. PTS: 1

DIF: Application

REF: p. 612

OBJ: 3

4. Today you have received an e-mail from a potential customer who is interested in your product. At the end of his e-mail, he wrote, “I’m so glad I found your company, but I must say it wasn’t easy. I had to go through several search pages and irrelevant links before I found you guys. But, boy, am I glad I was persistent.” You forward the e-mail to the marketing department and Web master with a note including several ways that the company can optimize its search engine listings. Write the memo. ANS: The memo should include some or all of the following points: 1. The company needs to re-examine the search terms that it thinks visitors to the site would likely use to find it. 2. Once the terms are decided, the content must be tailored to be more relevant to the search term than competing sites. 3. Important words should be at the top of the page. 4. Important terms should include meta tags, such as boldface type and large font. Build affiliate programs so that other sites link to your site, giving it greater relevance in search algorithms. 5.

PTS: 1

DIF: Application

REF: p. 619

OBJ: 4

5. Discuss how companies can use third parties as verification services to create consumer confidence. ANS: Companies can use any or all of the following as a means to bolster consumer confidence in transactions on the company website: The Better Business Bureau offers a “Reliability Seal,” which lets visitors know that the site is a member of the BBB. The seal logo is placed on the company site, and when clicked links to the BBB’s server, which acknowledges the validity of the seal and provides information about the company. Scanalert offers a date-stamped “Hacker Safe” seal that indicates the company’s server was audited that day to ensure that hackers cannot break into the site. Truste offers a privacy seal to assure visitors that the site will not misuse any information provided by the shopper.

19-25

Verisign offers a “Secure Site” seal that ensures shoppers that transaction data is encrypted using SSL technology. PTS: 1 OBJ: 7

DIF: Comprehension

REF: p. 626-629

6. Explain why stickiness is a better metric than number of hits. ANS: Hit counters are a software device that counts the number of file requests made of the server to create the pages seen by visitors. Unfortunately, the hit counters don’t record who visited or how many times or even what interested them. The information hit counters gathered didn’t provide much useful information, and that’s why they’re scarcely seen now. On the other hand, combining frequency data with the length of time a visitor spent on the website (duration) and the number of site pages viewed during each visit (total site reach) can provide an analytical measure for a site’s stickiness factor: Stickiness = Frequency × Duration × Site Reach By measuring the stickiness factor of a website before and after a design or function change, the marketer can quickly determine whether the change was embraced by the visitors. Adding purchase information to determine what level of stickiness is needed to provide a desired purchase volume, the marketer gains an even more precise understanding of how a site change affects business. An almost endless number of factor combinations can provide a quantitative method to determine buyer behaviour on-line. But first, it must be determined what measures are required and which factors can be combined to arrive at those measurements. Those measures and factors will vary from one company to another. Stickiness is a much more robust metric than the single dimension hit counter. PTS: 1 OBJ: 6

DIF: Comprehension

REF: p. 625

7. What effect do Porter’s Five Industry Forces have in the on-line environment? ANS: 1. Rivalry among existing competitors intensifies on-line because the consumer’s cost to switch from one provider to another is nearly zero. 2. Barriers to entry are low, which means it takes little capital to get started. Since barriers are low, it is easy to enter the market; hence, the market is crowded. 3. Threat of substitutes is high. Substitute products and services are everywhere on-line. All it takes is a new set of search terms to find a suitable substitute. 4. Bargaining power of suppliers plummets. Through the Internet, buyers have access to all kinds of suppliers. As a result, bargaining power of buyers is higher on-line. In fact, the increased bargaining power of buyers in the on-line environment has spilled over into the offline environment, as consumers compare prices across channels. 5.

PTS: 1 OBJ: 2 19-26

DIF: Comprehension

8. How has technology changed the 4 Ps of marketing? ANS: Product Commodities Available of delivered goods

Place Retail Store Local vendors selling unbranded products

Era of National Brands Advertising Manufacturer’s (1840s to 1990s) image, reputation, and product quality

Malls and Superstores Advances in transportation technology broadened the geographic availability of products

Era of Interactive Commerce (1994 and beyond)

Worldwide Marketplace Shopping from home or office via desktop computer

Era of Personal Selling (pre-1840s)

* Branded Commodities Finding the lowest worldwide price for well-known goods * Mass Customization Using technology to deliver unique goods at the lowest worldwide price

Affiliate Programs Increasing marketing opportunities obtained by recruiting other sites to drive traffic and sales

Promotion Store Displays Whatever the shop owner had handy and seen only by local customers National Advertising Newspaper, radio, and television communicated nationwide

Price Going Rate Whatever the local buyers would pay

Internet-based Websites Delivering worldwide goods and services to the customer’s computer

Intelligent Software Agents Automatically locating the lowest worldwide price

Retail Price Greater price competition generates lower prices

Interactive Ads Making the Internet more relevant with targeted and personalized offerings Instant Messaging Speeding two-way communication with customers without the lag-time of e-mail or the high cost of telephoning

PTS: 1

DIF: Comprehension

REF:

p. 614

OBJ:

4 19-27

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19-28