CH6

Chapter 6 Analyzing Business Markets
True/False Questions
1. SAP is a German software company that helps businesses automate their finance
and management systems. True (easy) pp. 101 102
2. Organizational buying is the decision-process by which organizations establis
h and satisfy their needs for goods and services. True (moderate) p. 102
3. Mining, manufacturing, banking, and distribution services are all considered
part of the business market. True (easy) p. 102
4. Schools and prisons are considered institutional buying organizations and the
y tend to have captive clienteles and limited budgets. True (moderate) p. 102
5. Characteristics of business markets include that there are more buyers and la
rger buyers. False (moderate) p. 103, Table 6.1
6. When compared to the consumer market, the demand for goods and services in th
e business market is derived. True (moderate) p. 103, Table 6.1
7. In selling to the government, the contract is always awarded to the lowest bi
dder. False (difficult) p. 104
8. A new supplier is least likely to make a sale to a prospect involved in the s
traight-rebuy situation. True (moderate) p. 104
9. A new supplier is least likely to make a sale to a prospect involved in the s
traight-rebuy situation. True (moderate) p. 104
10. A straight rebuy is a more complex process than a new task because the firm is l
imited to an approved list of vendors. False (moderate) pp. 104 105
11. One key thing to keep in mind when marketing across cultural boundaries is t
hat all people are NOT basically alike. True (moderate) p. 107
12. A secretary who prevents salespersons from contacting users or deciders is p
laying a gatekeeper role. True (easy) p. 107
13. Interpersonal factors have almost no influence in business purchasing decisi
ons. False (moderate) p. 107
14. The business buying process is influenced by environmental, organizational,
and individual factors. True (moderate) p. 107
15. Reading an advertisement about a new business service in a trade magazine to
which the purchasing agent subscribes would be an example of how a problem migh
t be recognized in an organizational setting. True (moderate) p. 109
16. Even if a supplier firm has the capacity to deliver a business product or se
rvice, that supplier might NOT be allowed to submit a proposal in the buying pro
cess. True (difficult) p. 110
17. When responding to a request for a written proposal, a business marketer sho
uld remember the document is primarily a technical document explaining the featu
res of the product. False (moderate) p. 110
18. Product value analysis can involve determining which components can be made
cheaper through redesign or standardization, while keeping the same performance
level of those components. True (moderate) p. 110
19. In the negotiation process, if the potential supplier is faced with the lowe
r price of a competitor, he or she should always lower his/her price. False (mod
erate) p. 111
20. A blanket contract or stockless purchase plan establishes a long-term relati
onship in which the buyer promises to buy all the stock of a particular seller a
t agreed-upon prices. False (moderate) p. 111
Multiple Choice Questions
21. The business market differs from the consumer market in that __________.
a. more mass media are used to communicate with the business market
b. it is a much larger market with many more buyers than the consumer market
c. it is a much smaller market in dollar volume than the consumer market
d. more product customization takes place in the consumer market
e. it acquires goods or services in order to use them for another purpose, as op
posed to acquiring goods or services for personal consumption (difficult) p. 102
22. Organizational buying is __________.
a. the process by which organizations recognize their needs for goods and servic
es
b. a way a company can produce a greater variety of high-quality products at low
er cost, in less time, with less labor
c. the decision-making process by which organizations establish and satisfy thei
r needs for goods and services (difficult) p. 102
d. the practice of establishing of strategic partnerships between manufacturers
and their suppliers
e. the practice of buying a total solution for a problem from one seller
23. The __________ consists of all of the organizations that acquire goods and s
ervices used in the production of other products or services that are sold, rent
ed, or supplied to other customers.
a. business market (moderate) p. 102
b. institutional market
c. consumer market
d. government market
e. specialized market
24. The institutional market is best described as having __________.
a. low budgets and a captive clientele (moderate) p. 102
b. demand elasticity and geographically concentrated suppliers
c. contract negotiations and fluctuating demand
d. derived demand, geographically concentrated suppliers, and budgetary constrai
nts
e. demand that is elastic, derived, and fluctuating
25. All of the following are major industries making up the business market EXCE
PT:
a. agriculture, forestry, fisheries.
b. manufacturing, mining.
c. construction, transportation.
d. banking, finance.
e. governments, institutions. (moderate) pp. 102 104
26. Business buying behavior differs from consumer buying behavior in that _____
_____.
a. the buyers for the business market are typically more geographically disperse
d than those for the consumer market and the demand for products and services in
the consumer market is unaffected by price fluctuations
b. fewer people typically participate in or influence business buying decisions
than in the consumer market
c. businesses buy products to accomplish a single goal, which varies by industry
and business
d. the demand for business goods and services is derived from consumers final dem
and (moderate) p. 103
e. businesses buy through longer channels with more intermediaries
27. When compared to the consumer market, the demand for goods and services in t
he business market is _________.
a. far more elastic
b. significantly more constant
c. derived (moderate) p. 103
d. more likely to be affected by changes in price
e. all of the above
28. Business buyers _________.
a. are geographically as diverse as consumers
b. tend to be geographically concentrated with over half of them in seven states
(difficult) p. 103
c. are largely concentrated in the southwestern United States
d. tend to be found in smaller communities and rural areas in the Midwest
e. use geographical dispersion to keep shipping costs low
29. 3M has developed a new type of plastic film used for shipping security. It i
s more durable than any other form of film on the market. The first year after t
he product was introduced its sales totaled $435 million. Analysts have predicte
d an annual growth of 30 percent as businesses like transportation companies dis
cover how well the film protects their products. Because the demand for the new
3M film is dependent on the demand for the products transported within it, the d
emand for the film is __________.
a. derived (moderate) p. 103
b. inelastic
c. routine
d. elastic
e. constant
30. The buying department for a nursing home is informed the price of the ibupro
fen used for patient medication has increased by 15 percent. He orders a new sup
ply anyway because he knows he can pass the increase on to the clients. This is
an example of business products having __________ demand.
A. routine
b. inelastic (moderate) p. 103
c. volatile
d. accelerated
e. elastic
31. Which of the following is true of the U.S. government as a market?
a. The U.S. government is the largest customer in the world. (moderate) p. 104
b. Most purchases by the U.S. government are in the billions of dollars, usually
for technology.
c. The U.S. government will always award the contract to the lowest bidder.
d. A comprehensive bid proposal might take as much as a few days to prepare and w
eigh in at a few dozen pages.
e. Cost minimization is the driving force behind buying decisions made by the U.
S. government.
32. __________ organizations typically require suppliers to submit bids. Normall
y, they award the contract to the lowest bidder, although they sometimes take in
to account a supplier s superior quality or reputation for completing contracts on
time.
a. Business
b. Institutional
c. Consumer
d. Government (moderate) p. 104
e. Specialized
33. Suppliers describe governmental organizations as ________.
a. always selecting quality over price when buying products and/or services
b. avoiding opting for the bottom-line perspective
c. sometimes considering quality or reputation but primarily rewarding contracts
on the basis of price (difficult) p. 104
d. requiring minimal paperwork and having a process open to public scrutiny
e. woefully lacking in specific guidelines for would-be suppliers
34. Which of the following buying situations would represent the purchase of off
ice supplies such as reams of computer and copier paper, and computer disks?
a. straight rebuy (easy) p. 104
b. modified rebuy
c. new task
d. routine rebuy
e. direct purchase
35. The most routine decision process undertaken by business buyers is called a
__________.
a. straight rebuy (easy) p. 104
b. modified rebuy
c. new task
d. routine rebuy
e. direct purchase
36. A new supplier is least likely to make a preliminary sale to a prospect invo
lved in which of the following buying situations?
a. new task
b. modified rebuy
c. functional rebuy
d. straight rebuy (moderate) p. 104
e. direct purchase
37. Angelo Weinstein is a produce buyer for Alliant, a large food supplier. He i
s buying lettuce, cucumbers, and tomatoes for producing pre-made salads. He orde
rs the same number and quality of these vegetables as before but notices that hi
s supplier s prices have increased slightly. Angelo is conducting a __________.
a. straight rebuy (moderate) p. 136
b. direct purchase
c. modified rebuy
d. new task buy
e. reciprocal buy
38. The __________ is a situation in which the buyer wants to modify product spe
cifications, prices, delivery requirements, or other terms.
a. straight rebuy
b. direct purchase
c. modified rebuy (easy) p. 104
d. new task buy
e. reciprocal buy
39. Angelo Weinstein is a produce buyer for Alliant, a large food supplier. He i
s buying lettuce, cucumbers, and tomatoes for producing pre-made salads. He orde
rs the same number and quality of these vegetables as before but notices that hi
s supplier s prices have increased slightly. If prices from his usual produce supp
lier continue to rise, you can expect Angelo to engage in a __________.
a. straight rebuy
b. direct purchase
c. modified rebuy (moderate) p. 104
d. new task buy
e. functional rebuy
40. Purchasing department personnel for a corporate farm would have the most inf
luence when the organization is __________.
a. buying marketing materials for its booth at a national agricultural trade sho
w
b. purchasing farm equipment for the firm s agricultural business unit
c. negotiating the performance specifications for new grain storage facilities
d. renewing its subscriptions to several trade journals (moderate) p. 104
e. switching to a new vendor for satellite moisture reporting
41. Which of the following has the most influence in straight rebuy and modified
rebuy situations in a multinational corporation?
a. finance department
b. purchasing agents (difficult) pp. 104 105
c. administrative personnel
d. engineering department
e. production managers
42. The __________ is a buying situation in which a purchaser buys a product or
service for the first time.
a. straight rebuy
b. direct purchase
c. modified rebuy
d. new task buy (moderate) p. 105
e. functional rebuy
43. Robison Corp. is a ground beef processing plant. Owners William and Walker R
obison attended a trade show and saw a meat grinding machine that operates at a
capacity of 9,000 pounds per hour and requires only one employee. Until the show
, the brothers had no idea such a product existed. As far as they have learned o
nly one company is manufacturing such a machine. They have calculated that such
a machine could save them up to $185 a day in labor costs. They have contacted t
he company to learn more about the $53,000 grinder. The Rogers brothers are enga
ged in a __________.
a. straight rebuy
b. direct purchase
c. modified rebuy
e. functional rebuy
44. Advertising usually has its greatest impact at the __________ stage of new-t
ask buying.
a. awareness (moderate) p. 105
b. interest
c. trial
d. evaluation
e. adoption
45. Salespeople usually have their greatest impact at the ________ stage of new-
task buying.
a. awareness
b. interest (moderate) p. 105
c. trial
d. evaluation
e. adoption
46. __________ is(are) where a single supplier provides the buyer with all requi
red maintenance, repair, and operating supplies, resulting in lower costs to the
buyer.
a. Missionary sales
b. A turnkey solution
c. Project engineering
d. Systems contracting (moderate) p. 105
e. Prime contracting
47. The _________ is composed of all those individuals and groups who participate
in the purchasing decision-making process, who share some common goals and the
risks arising from the decisions.
a. buying center (moderate) p. 106
b. initiating team
c. purchasing division
d. engineering division
e. influencing center
48. In the buying center, __________ are people who request that something be pu
rchased, including users or others.
a. initiators (moderate) p. 106
b. influencers
c. deciders
d. approvers
e. gatekeepers
49. Office manager Billie has signatory authority for organizational purchases u
nder $2,500. She delegates the task of finding five new acceptable fax machines
to a trusted subordinate, Jules. If Billie does not involve herself further in t
he buying process, other than to sign off on what Jules presents to her, her rol
e is limited to that of __________.
a. gatekeeper
b. decider
c. influencer
d. approver (moderate) p. 106
e. user
50. Erin s secretary developed a file of visiting salespeople, but only allowed a
few to actually have time on Erin s calendar. Erin is frequently charged with buyi
ng expensive office equipment as part of her job. Erin s secretary is playing what
role in the business buying process?
a. Initiator.
b. User.
c. Decider.
d. Approver.
e. Gatekeeper. (moderate) p. 106
51. Which of the following best describes the buying center role in which people
have the power to prevent sellers or information from reaching members of the b
uying center?
a. Initiators.
b. Influencers.
c. Deciders.
d. Approvers.
e. Gatekeepers. (moderate) p. 106
52. The owner of a mulch plant is planning to purchase a $41,000 trailer for hau
ling bulk product to a distribution company where the mulch will be packaged int
o 2 cubic feet bags, and sold at gardening supply stores. The operator of the di
stribution company would probably assume the roles of __________ in the buying c
enter.
a. user and gatekeeper
b. approver and influencer (difficult) p. 106
c. initiator, gatekeeper, and decider
d. decider, user, and influencer
e. influencer and gatekeeper
53. With the help of the yard operations manager, the owner of Memphis Logistics
is planning on buying a sophisticated loader to move merchandise from trucks on
to rail cars. It will be replacing an obsolete piece of equipment which the yard
operations manager describes as hard to operate and potentially dangerous. In t
erms of the buying center, the yard operations manager who will be responsible f
or the overseeing the employees who operate and maintain the dumper has the role
s of __________.
a. gatekeeper and decider
b. influencer, user, and approver
c. buyer, influencer, initiator, and gatekeeper
d. decider, user, and buyer
e. initiator, influencer, and decider (difficult) p. 106
54. Which of the following is LEAST likely to be a useful question to ask when c
onsidering selling to industrial customers who are of a culture other than one s o
wn?
a. What is their preferred mode of business communication?
b. How do they perceive time?
c. In what time zone is their headquarters? (moderate) p 107
d. How do they make decisions?
e. Do they value consensus?
55. Because Dante is new at her job as company buyer, she is very cautious in he
r buying decisions even when engaged in straight rebuys. __________ influences h
ave the greatest effect on Dante as she performs her job.
a. Environmental
b. Interpersonal
c. Organizational
d. Individual (moderate) p. 107
e. Cultural
56. Which of the following is NOT an example of an organizational influence that
might affect the purchasing agent for a multinational conglomerate?
a. Many of the tasks formerly done by the purchasing agent are now being perform
ed by a centralized purchasing department.
b. The conglomerate has adopted just-in-time production in two of its divisions.
c. The purchasing agent has a want-the-best attitude when it comes to buying compo
nent parts. (difficult) p. 108
d. The organization is negotiating more long-term contracts than in previous yea
rs.
e. The company is doing much of its purchasing through the Internet.
57. For the _________ type of business customer, low prices are desired, but the
y will respond to arguments about lower cost or more dependable supply and/or se
rvice.
a. price-oriented
b. solution-oriented (moderate) p. 108
c. silver-standard
d. gold standard
e. strategic-value
58. The gardener in charge of maintaining the beautiful grounds at an amusement
park was strolling through the park looking at the flowers and bushes from a gue
st s perspective when he noticed some Japanese beetles flying around. He made a me
ntal note to himself that he had to order some Japanese beetle traps when he got
back to the office. This is an example of which of the steps in the purchase/pr
ocurement process?
a. problem recognition (moderate) p. 109
b. general need description
c. product specification
d. supplier selection
e. supplier search
59. Which of the following is NOT a major part of the product specification proc
ess?
a. Determining the item s general characteristics.
b. Setting desired quantities.
c. Mandating terms for delivery. (moderate) p. 109
d. Defining quality levels.
e. Defining pricing.
60. Which of the following buy phases would definitely be included in a modified
rebuy situation?
a. Problem recognition.
b. General need description.
c. Supplier selection.
d. Supplier search.
e. Product specification. (moderate) p. 109, Table 6.3
61. The routine placing of the twice-weekly order to restock a commercial kitche
n s freezer with meats, poultry, frozen juices, and fresh-frozen pre-mades like doug
hs and stuffed pastas, definitely includes which of the following stages in the
business buying process?
a. Problem recognition.
b. General need description.
c. Order-routine specification.
d. Supplier search.
e. Product specification. (moderate) p. 109
62. __________ is an approach to cost reduction in which components are carefull
y studied to determine if they can be redesigned or standardized or made by chea
per methods of production.
a. Product value analysis (moderate) p. 110
b. Customer cost analysis
c. Total quality management
d. Product reengineering
e. Marketing research
63. A product value analysis is conducted at the __________ step of the procurem
ent process.
a. problem recognition
c. product specification (moderate) p. 110
d. supplier search
e. proposal solicitation
64. An online retailer of outdoor equipment was looking for some help with its W
eb site maintenance so as to be more user-friendly and convenient. The owner att
ended the 2002 Web-EX Trade Show and asked several of her colleagues for recomme
ndations. She is in the __________ phase of business buying.
a. problem recognition
d. supplier search (moderate) p. 110
e. order-routine specification
65. The Knoll Textile Manufacturing Company is evaluating potential suppliers of
zippers to be used in production of a line of children s outerwear. The company i
s concerned about the delivery reliability, price, and supplier reputation. Knol
l is in the __________ phase of the business buying process.
a. supplier selection (moderate) p. 111
b. proposal solicitation
d. performance review
e. order-routine specification
66. Easter Village store sells Easter-related cards and gifts year-round. The pr
imary source for its domestic and foreign gifts is Festival Supply, but Easter V
illage also buys some ornaments from Pasquallis Global and from Kerr-Nal Distrib
utors. Both of the distributors continue to try to price their merchandise at pr
ices lower than those of Festival Supply because Pasquallis and Kerr-Nal Distrib
utors are both:
a. outsuppliers. (moderate) p. 111
b. outsourcing agents.
c. second-tier suppliers.
d. value-added suppliers.
e. subordinate suppliers.
67. As Rikka and the salesperson talked, they agreed Rikka would buy six pallets
of world flags, four 12-foot sections of display shelving, and two gross of sup
er-hero, bobble-head dolls for Rikka s arts and crafts supply store. In addition,
the salesperson agreed to have the items delivered in ten working days and give
Rikka an 8-percent discount. Rikka and the salesperson are engaged in which phas
e of the procurement process?
a. Supplier selection.
b. Proposal solicitation.
c. Product specification.
d. Performance review.
e. Order-routine specification. (moderate) p. 111
68. A blanket purchase contract leads to __________.

a. buyers being less dependent upon any given supplier
b. the rebuy process being upgraded to a new task buy each time there s a reorder
c. the supplier maintaining the inventory (difficult) p. 111
d. systems selling
e. multiple sourcing
69. A(n) __________ establishes a long-term relationship in which the supplier p
romises to resupply the buyer as needed at agreed-upon prices over a specified p
eriod.
a. blanket contract (moderate) p. 111
b. specialized contract
c. over-run contract
d. purchase order contract
e. superior order contract
70. A company can review the performance of a supplier by __________.
a. using a buyflow map
b. developing a supplier-attribute positioning map
c. using financial data from Dun and Bradstreet
d. aggregating the cost of poor performance to come up with an adjusted cost of
purchase, including price (difficult) p. 112
e. using any of the above methods
Essay Questions
71. Two sales associates, Diz Miller and Nestor Marlbrough, enter a room outside
the purchasing agent s office. The purchasing agent works for a fiberglass manufa
cturer. Miller has sold to the company several times in the past. He has stopped
by to see if the purchasing agent needs to restock any of his company s machine l
ubricants. Marlbrough will try to convince the purchasing agent to buy a machine
for extracting and trimming glass fibers that will reduce waste by 13 percent a
nd costs $44,000. The furniture company currently does this by employing skilled
laborers who use hand tools. Classify the products being sold in terms of buycl
ass. What buy phases are associated with each buyclass? In what buy phase do you
think the purchasing agent is now?
Answer:
The lubricants will be a straight rebuy. The only two buy phases for the purchas
ing agent are product specification and performance review. The machine sold by
Marlboro would be a new task buy and would require the purchasing agent to go th
rough all the stages of the buy phase 1) problem recognition, 2) general need desc
ription, 3) product specification, 4) supplier search, 5) proposal solicitation,
6) supplier selection, 7) order-routine specification, and 8) performance revie
w. The agent is in the product specification phase with the adhesives. Given the
way the question is written, he is most likely in the supplier search phase for
the new task buy.
(difficult) Table 6.3
72. Rhet and Julie Raymond had a larger-than-average crop of mangos last year. T
hey decided to make some extra jars of Julie s mother s mango chutney to see if they
could sell it at a local crafts fair. Response was very promising and demand wa
s strong. Now Julie and Rhet own a company that produces gourmet chutneys under
the brand name Exoti-Sauce. Working at the company now are Rhet, Julie, her moth
er Mandalee, and Rhet and Julie s nephew Bert who makes deliveries and does the he
avy lifting and cleaning. Rhet is in charge of marketing and helps out in the ki
tchen. There are also a number of part-time workers. A salesperson wants to sell
them a bottle-labeling system that will speed up production by 200 percent. It
costs about $12,500. In a short essay, discuss how each of the company s full-time
employees might assume various roles in the buying center.
Answer:
Students answers to this question will vary, but the following are some possible
answers.
a) Julie knows how much work it is to glue on labels so she would definitely be an
initiator. She would also by the same logic be a user. Because the decision is
jointly made, she would be an influencer to convince the others and a decider, a
n approver, and a buyer as part owner of the company. She could take the role of
gatekeeper if she knew of a cheaper system but decided not to tell the others a
bout it.
b) Rhet is not involved in the production part, but as part owner of the company
, he would take the roles of decider, approver, and buyer. He could take the rol
e of gatekeeper if he refused to let the salesperson present any other equipment
that might be useful in the Exoti-Sauce kitchen.
c) Mandalee also knows how much work it is to place the labels so she would defini
tely take the roles of initiator and user. Even though she has no ownership righ
ts, she would also act as an influencer. She could act as a gatekeeper if she kn
ew the building currently used by Exoti-Sauce was not big enough to hold the sys
tem where it could be used efficiently.
d) Bert is not involved in the production of chutneys except to help clean. Depe
nding on how easy the new system is to clean, he could be an influencer. He woul
d most likely play no other roles.
(difficult) p. 106
73. Imagine you are a salesperson for a company that sells office supplies to bu
yers in different buying situations. In a short essay, develop three scenarios t
hat illustrate each of the three situations.
Answer:
Students answers will vary. The straight rebuy could occur when the buyer has bou
ght from you previously and is simply restocking its shelves. The modified rebuy
could occur when the buyer wants to modify delivery schedules or payment plans.
New task buying would occur if the buyer were purchasing something it had not p
reviously purchased such as audiovisual equipment or instructional or motivational
books or networking software.
(easy) pp. 104 105
74. In a brief essay, explain how an organizational buyer might decide whether a
potential supplier is qualified and whether a proposal should be solicited and/
or accepted from that supplier. How can the supplier improve their odds in the p
rocess?
Answer:
Some buyers require that suppliers have external certifications, such as ISO 900
0. Better answers would tell why this is a helpful indicator. Attaining trusted a
dviser status through expertise also helps a company stand out to the potential b
uyer. Out-suppliers may have to fight harder for a piece of the business by findin
g ways to overcome the status quo (e.g., the usual suppliers get all the new con
tracts). Some bidders do not have the needed capacity to actually fulfill the co
ntract, and buyers should carefully consider track records of reliability and po
tential for bidders who are not well known.
(moderate) p. 110
75. Explain how the governmental procurement process differs from the business m
arket purchase process.
Answer:
Government organizations are major buyers of goods and services. Government orga
nizations typically require suppliers to submit bids and normally they award the
contract to the lowest bidder. Governments will also buy on a negotiated contra
ct basis, primarily in the case of complex projects involving major R&D costs an
d risks and in cases where there is little competition. Government organizations
tend to favor domestic suppliers over foreign ones. Because their spending deci
sions are subject to public review, government organizations require considerabl
e paperwork from suppliers. Just as companies provide government agencies with g
uidelines on how best to purchase and use their products, governments provide wo
uld-be suppliers with detailed guidelines describing how to sell to the governme
nt.
(easy) p. 104
Mini-Cases
Mini-Case 6-1
Dr. Therese Turek s Minnesota ear, nose, and throat practice is booming and she ne
eds more office space to accommodate the growth. She asks her office manager Jam
es to help decide the attributes that will assure that a new space will be adequ
ate for the practice now and in the future. James asks all the employees for the
ir input as to what is needed in a new office. After much research, James recomm
ends that the office move to a new medical complex, where office space is priced
30 percent higher. The new space has an on-site, out-patient surgery center, be
tter wiring for more sophisticated machinery, and covered parking. James does no
t include information about more affordably-priced and available office space in
the same complex because he would like a shorter commute to work. Dr. Turek is
impressed with James recommendations and announces to staff and patients that the
practice will be relocating in 60 days.
76. Refer to Mini-Case 6-1. In the case, James had what roles in the buying proc
ess for new office space?
a. Initiator and decider.
b. User and approver.
c. Influencer and gatekeeper. (moderate) p. 106
d. Initiator and user.
e. Gatekeeper and initiator.
77. Refer to Mini-Case 6-1. Dr. Turek played what roles in the decision to move
her practice?
a. Initiator, user, and gatekeeper.
b. Initiator, user, and approver. (moderate) p. 106
c. Only initiator.
d. Only approver.
e. Only influencer.
78. Refer to Mini-Case 6-1. When James withheld information about the closer off
ice possibilities, this was an example of which type of influence on the buying
process?
a. Environmental.
b. Organizational.
c. Interpersonal.
d. Individual. (moderate) p. 107
e. Macro.
Mini-Case 6-2
Billionaire investor Warren Buffet once called his jet The Indefensible, referring
to its high price tag. Later, however, he named it The Indispensable. Others shar
e this sentiment because many corporations today own corporate jets to support e
fficient schedules and to reach remote locations. Given the increasingly global
nature of business, corporate aircraft makes sense. The GulfStream V, one of the
top of the line executive jets cost Buffet $38 million. Its speed is nearly 600
miles per hour. A nonstop flight between New York and Tokyo takes about 13 hour
s and 40 minutes on the Gulfstream V and about an hour and ten minutes longer on
a commercial jet. Major manufacturers of corporate jets are Gulfstream, Cessna,
the Beech Division of Raytheon Co., and Dessault Aviation of France. The larges
t manufacturer in terms of sales is Bombardier, which makes the Learjet.
79. Refer to Mini-Case 6-2. Most executives, including Warren Buffet, would desc
ribe the demand for corporate jets as __________.
a. inelastic (moderate) p. 103
b. routine
c. low-involvement
d. elastic
e. accelerated
80. Refer to Mini-Case 6-2. Considering how shareholders have felt about the own
ership of corporate jets in general, now when a company considers buying a corpo
rate jet, they will engage in a(n) _________.
a. functional buy
b. modified rebuy
c. indirect purchase
e. systems buy
Chapter 7 Identifying Market Segments and Targets
1. Traditionally, micromarketing of a consumer product results in the largest po
tential market for that product. False (moderate) p. 117
2. Consumers who belong to the same market segment have identical needs and want
s. False (difficult) p. 117
3. Target marketing requires marketers to take three major steps: 1) identify an
d profile distinct groups, 2) select one or more segments to enter, and 3) predi
ct the consumer behavior of the segments. False (moderate) p. 117
4. There are four levels at which a firm could micromarket segments, niches, local
areas, and individuals. True (easy) p. 117
5. The ultimate level of marketing segmentation is mass marketing. False (modera
te) p. 118
6. If everyone s choice for their computer printer were an HP LaserJet 1200, there
would be a heterogeneous preference segment in the computer printer market. Fal
se (moderate) p. 119
7. Mass customization means a company has the ability to prepare individually de
signed products to meet customer requirements. True (easy) p. 119
8. The first step in segmenting a market is to create segment story boards to test
the segment s viability. False (moderate) p. 119
9. Geoclustering is a technique for segmenting markets on the basis of multiple
attributes. True (difficult) p. 120
10. One reason geoclustering is increasingly popular is the falling cost of data
manipulation. True (difficult) p. 120
11. One of the reasons demographic variables are the most popular variables for
segmenting the consumer market is because usage rates are often associated with
demographic characteristics. True (moderate) p. 122
12. Lifestyle is an example of a demographic segmentation variable. False (easy)
p. 122
13. By and large, income is an excellent predictor of who will buy what products
. False (easy) p. 122
14. Social Class is an example of a psychographic segmentation variable. False (
moderate) p. 122
15. Many marketers believe behavioral variables are the best starting point for
constructing market segments. True (moderate) p. 123
16. Benefits sought is an example of a behavioral segmentation variable. True (mod
erate) p. 124
17. When Harley Davidson used the slogan It s time, and offered test rides and barga
in financing on its Sportsters products, it was using geographic segmentation. F
alse (moderate) pp. 124-125
18. In business market segmentation, operating variables are the most important
segmentation variable. False (moderate) p. 125
19. Single-segment concentration, one of five patters of target market selection
, means serving just one market segment with one product. True (moderate) p. 129
20. Firms that offer tailored programs for several different market segments eng
age in differentiated marketing. True (moderate) p. 130
21. Traditionally, mass marketing of a consumer product results in __________.
a. the largest potential market for that product (moderate) p. 117
b. increased product prices due to the lack of differentiation and decreased com
petition
c. easier channel selections
d. fewer competitors because there are fewer markets
e. lower profit margins
22. Bentley produces fine automobiles with price tags in the $300,000 and above
range. Because the number of people with sufficient income to purchase a Bentley
is relatively small, we might say Bentley is engaged in __________ marketing.
a. local
b. aggregated
c. individual
d. niche (easy) p. 117
e. derived
23. A(n) __________ market is characterized by a fairly narrowly defined market
with a complete and distinct set of needs, and a willingness to pay a premium to
meet those needs.
a. local
b. niche (easy) p. 117
c. individual
d. derived
e. homogeneous
24. All of the following are part of an attractive niche EXCEPT:
a. the niche has variety-seeking consumers. (moderate) p. 117
b. consumers in the niche have distinct needs.
c. the niche is not likely to attract heavy competition.
d. the niche can specialize and therefore realize certain economies.
e. the niche has growth potential.
25. A southern chain of barbecue restaurants would find it advantageous to prepa

re a sweet pork sandwich with coleslaw inside for Mississippians, a mustard-base
d sauce with pork and coleslaw on the side for Carolinians, and a smoky beef san
dwich with thick white bread instead of a bun for Texans. If the chain engages i
n __________ marketing, it will improve the likelihood of its success.
a. local (moderate) p. 118
b. niche
c. individual
d. homogeneous
e. demographic
26. An argument against local marketing is that it __________.
a. makes it difficult to be profitable because of the small size of the market
b. makes it difficult to select a proper distribution channel
c. drives up marketing and manufacturing costs by reducing economies of scale (d
ifficult) p. 118
d. leads to a homogenization of the market
e. solidifies a brand s overall image in the marketplace because it delivers the s
ame advertising message throughout its market
27. The ultimate level of marketing segmentation is __________ marketing.
a. local
b. niche
c. individual (moderate) p. 118
d. homogeneous
e. mass
28. __________ is the ability to prepare, on a mass basis, individually designed
products to meet each customer s requirements.
a. Niching
b. Specialization
c. Mass customization (moderate) p. 119
d. Concentrated marketing
e. Clustered marketing
29. A consumer preference pattern in which all the dots are spread out and no pa
ttern emerges is called __________.
a. clustered preferences
b. homogeneous preferences
c. concentrated preferences
d. diffused preferences (moderate) p. 119
e. honeycombed preferences
30. If everyone s choice for their computer printer were an HP LaserJet 4100, ther
e would be a ________ preference segment in the computer printer market.
a. homogeneous (moderate) p. 119
b. heterogeneous
c. diffused
d. stratified
e. clustered
31. A marketer facing a market segment with natural market segments is dealing w
ith a market with __________ preferences.
a. diversified
b. stratified
c. heterogeneous
d. diffused
e. clustered (moderate) p. 120
32. If a food company segments a market on the basis of demographic and/or psych
ographic information, its basis for segmentation is __________.
a. customer responses
b. preference segments
c. customer characteristics (moderate) p. 120
d. customer behavior
e. market partitions
33. If you go to a Target store on the east side of Phoenix, you will find praye
r candles but no bicycle child carriers. The Target store in Scottsdale sells tr
ailers but does not stock portable heaters. You d have to go to the Target store i
n Mesa to find heaters. Target realizes that the people in each of these neighbo
rhoods do not have the same needs and should therefore not be offered the same p
roducts. This is an example of __________.
a. benefits segmentation
b. geoclustering (moderate) p. 120
c. demographic segmentation
d. behavioral segmentation
e. psychographic segmentation
34. When the parent company introduced Southern Belles magazine, it was describe
d as a new publication that covers female style and southern life. From this state
ment, you should be able to describe the segmentation strategy used for the maga
zines as __________.
a. benefits segmentation
b. geoclustering (moderate) p. 120
c. demographic segmentation
d. behavioral segmentation
e. psychographic segmentation
35. The Lazy H Dude Ranch is open to people of all sizes, shapes, and belief sys
tems. It s a place people can go to unwind from the stress of daily life. Which of
the following is an example of a psychographic variable the owner of the retrea
t could use in its marketing strategy?
a. occupation
b. age
c. lifestyle (moderate) p. 123
d. social class
e .income
36. A segmentation study of people who would be interested in subscribing to a m

usic and entertainment magazine discovered three distinct groups of potential su
bscribers: 1) those who wanted reviews of the latest music releases, 2) those wh
o wanted to know behind the scenes gossip about the stars, and 3) those who soug
ht to improve their own musicianship. This magazine discovered its market can be
segmented using __________ variables.
a. demographic
b. social class
c. lifestyle (moderate) p. 123
d. generation
e. geographic
37. Because two-thirds of the sales of new motorcycle policies at Dairyland Insu
rance Company are to current policyholders, it should use a __________ segmentat
ion strategy.
a. education-based
b. benefit
c. demographic
d. behavioral (moderate) p. 123
e. psychographic
38. While studying consumer-buying patterns for malt liquor, Joan has learned th
at more of the product is consumed in ethnic neighborhoods on a per capita basis
than in less homogeneous areas. She is studying __________ data.
a. geographic
b. demographic (easy) p. 122
c. psychological
d. personality
e. lifestyle
39. Which of the following is an example of a demographic segmentation variable?
a. Generation or social class. (moderate) p. 122
b. Personality.
c. Attitude toward the product.
d. Lifestyle.
e. User status.
40. Perrigo Corporation makes One-Source Mature, a high potency, multivitamin fo
r active men and women over 50. This is an example of __________ segmentation.
a. gender
b. generation
c. age and life-cycle (moderate) p. 122
d. user status
e. usage rate
41. Which of the following statements best describes the difference between age
and life-cycle segmentation and generational segmentation?
a. Age and life-cycle segmentation is rigid and unchanging over time while gener
ational segmentation changes with each decade.
b. Age and life-cycle segmentation assumes people are influenced by where they a
re in life, and generational segmentation assumes they are influenced by what th
ey grew up with. (difficult) p. 122
c. Age and life-cycle segmentation is a relatively straightforward segmentation
strategy while generational segmentation is much harder to implement.
d. Age and life-cycle segmentation assumes the effect of time, and generational
segmentation is based on the effects of economic and social status.
e. There are no differences between age and life-cycle segmentation and generati
onal segmentation.
42. For years Spiral-Cut Hams have been on thousands of Easter dinner tables. Sp
iral-Cut is working hard to implement other segmentation strategies beyond the l
imited __________ strategy it used in the past.
a. user rate
b. lifestyle
c. family life-cycle
d. benefit
e. occasion (moderate) p. 124
43. Research by Voicestream Wireless revealed that it serves two different kinds
of consumers: chatterboxes who seemed to live on the phone and those that make
lots of short calls. Based on this research, it should use a(n) __________ segme
ntation strategy.
a. age-based
b. usage rate (moderate) p. 125
c. user status
d. loyalty status
e. occupation-based
44. Which of the following is NOT true of the VALS framework?
a. VALS uses date of birth to help determine market segment membership. (difficu
lt) p. 123
b. Over 80,000 new surveys a year are added to the VALS data.
c. SRI identifies eight primary VALS segments in the United States.
d. The Innovators segment has high resources.
e. The experiencers segment is primarily motivated by self-expression.
45. Which of the following is an example of a behavioral segmentation variable?
a. Generation.
b. User status. (moderate) p. 125
c. Personality.
d. Religion.
e. Social class.
46. When dealing with loyalty status, buyers can be segmented in a variety of wa
ys. When given a choice of canned fruit at the supermarket, Barton will select e
ither Libby s or the house brand, and no other brand. He makes his selection based
on which brand first catches his eye. Barton is an example of a __________.
a. hardcore loyal
b. split loyal
c. shifting loyal (difficult) p. 125
d. switcher
e. splinter loyalist
47. Which of the following is an example of a behavioral segmentation variable?
a. Occupation.
b. Education level.
c. Readiness stage. (moderate) p. 125
d. Lifestyle.
e. Family life cycle.
48. Ninety percent of all sales made by GEICO Insurance Company are initiated by
the buyer rather than commissioned agents. Before purchasing insurance, buyers
had typically researched and compared GEICO to other providers; they felt that G
EICO best satisfied their needs. Given this information, GEICO should develop a
strategy around which of the behavioral segmentation strategies?
a. Buyer-readiness. (difficult) p. 125
b. Income.
c. Education.
d. lifestyle.
e. Attitude.
49. According to Bonoma and Shapiro, the most important segmentation variable fo
r business markets is __________.
a. demographic characteristics (moderate) p. 125
b. operating variables
c. situational factors
d. purchasing approaches
e. personal characteristics
50. Which of the following is NOT a major business segmentation variable?
a. Demographic.
b. Geographic. (difficult) p. 126
c. Purchasing approaches.
d. Operating variables.
e. Personal characteristics.
51. A company s power structure and the nature of its existing relationships with
suppliers are all related to which of the major business market segmentation var
iables?
a. Demographic.
b. Operating variables.
c. Purchasing attributes. (moderate) p. 126
d. Situational factors.
52. A company s size and physical location are all related to which of the major b
usiness market segmentation variables?
a. Demographic. (moderate) p. 126
b. Operating variables.
c. Purchasing attributes.
d. Situational factors.
53. Which of the following is NOT necessary to make a market segment useful?
a. It is measurable.
b. It is satisfied. (moderate) pp. 127-128
c. It is substantial.
d. It is actionable.
e. It is accessible.
54. A sports car manufacturer considered marketing to a market segment made up o
f individuals separated from their spouses but not yet divorced. However, invest
igation of the segment showed that this group of individuals could not be reache
d by any specific media. In effect, this group was not a(n) _________ market.
a. accessible and substantial
b. measurable, differentiable, and accessible
c. accessible, differentiable, and actionable (difficult) pp. 127-128
d. actionable, differentiable, and substantial
e. substantial and actionable
55. A marketer wants to market beeping balls to sight-disabled softball players.
This market segment is __________ even if it meets none of the other characteri
stics needed for a market segment to be useful.
a. immeasurable
b. substantial
c. accessible
d. differentiable (moderate) p. 128
e. not quantifiable
56. _________ are business buyers who are starting their purchasing relationship
, and want easy-to-comprehend instructions, hotlines for questions, lots of trai
ning, and knowledgeable sales reps.
a. First-time prospects
b. High-maintenance
c. Sophisticates
d. Fringe account companies
e. Novices (moderate) p. 127
57. Which type of business buyer is most likely to want to deal with a company s
alesperson instead of a catalog or online purchasing environment?
a. First-time prospects. (moderate) p. 127
b. Innovators.
c. Sophisticates.
d. Fringe account companies.
e. Novices.
58. The main two things to consider when selecting a target market are:
a. if the segment has potential and if it fits with the company s objectives and r
esources. (difficult) p. 128
b. if the segment is easily communicated with and if it is different enough from
other segments.
c. if it is easy to define the needs of the segment and if economies of scale ar
e possible with the segment.
d. if the segment is actionable and if the consumers in it are action-oriented.
e. if the firm can provide a flexible market offering to fulfill the segment s nee
ds and if the segment is large enough to be viable.
59. The last step in segmenting a market is __________.
a. concept testing
b. the survey stage
c. segment acid test
d. marketing mix strategy (difficult) p. 128
e. segment identification
60. A marketer who selected a __________ segmentation strategy would find this s
egmentation strategy to possess the greatest amount of risk.
a. selective specialization
b. single-segment concentration (moderate) p. 128
c. full market coverage
d. market specialization
e. product specialization
61. Research shows that sports cards appeal to 6- to 17-year-old boys, 24- to 54
-year-old men, and professional collectors. Because these groups only exploitable
similarity is their interest in sports cards, this would be an example of a(n)
__________.
a. interrelated segment
b. market niche
c. supersegment (moderate) p. 130
d. blocked market
e. inter-segment cooperative
62. A manufacturer of disposable, patterned, paper placemats that decided it was
only going to sell to sit-down restaurants would have adopted a __________ segm
entation strategy.
a. selective specialization
b. single-segment concentration
c. full market coverage
d. market specialization (moderate) p. 130
63. For years, Sears used the slogan, Sears Has Everything. Which of the following
strategies does this slogan most likely support?
a. differentiated marketing.
b. Single-segment concentration.
c. Undifferentiated marketing. (moderate) p. 130
d. Market specialization.
e. Product specialization.
64. Ford Motor Company sells Ford, Mercury, Volvo, Lincoln, and Jaguar brands, e
ach having appeal to a select segment of the market. This is an example of _____
_____.
a. counter-segmentation
b. undifferentiated marketing
c. differentiated marketing (easy) p. 130
e. single segment concentration
65. The Gap caters to buyers seeking classic clothing at mid-range prices. It al
so owns other retailing chains including Banana Republic (catering to more afflu
ent buyers) and Old Navy (which sells value-priced jeans, tee-shirts and khakis)
. The Gap is practicing __________ marketing.
a. differentiated (moderate) p. 130
c. undifferentiated
e. product generalization
66. Firms that offer tailored programs for several different market segments eng
age in __________ marketing.
a. differentiated (moderate) p. 130
c. undifferentiated
67. In terms of its affect on the marketing process, differentiated marketing __
________.
a. lowers total sales, which increases profits by increasing the margin on each
sale
b. significantly decreases manufacturing costs
c. keeps advertising costs low
d. reduces inventory costs
e. increases administrative and production costs (difficult) p. 130
68. In terms of its affect on the marketing process, undifferentiated marketing
__________.
a. increases administrative and production costs
b. keeps down advertising and R&D costs (moderate) p. 130
c. increases the firm s cost for product modification
d. creates more total sales than differentiated marketing
e. puts the company at risk of being supplanted by an entirely new technology
69. When companies encounter blocked markets, the best approach to those markets
is to __________.
a. use a segment-by-segment invasion plan
b. use a megamarketing approach (moderate) p. 131
c. forget the blocked market and approach easier to enter markets
d. study intersegment cooperation and use it to enter the blocked markets
e. find an exploitable similarity and create a megamarket
70. __________ is strategic coordination of economic, psychological, political,

and public-relations skills to gain the cooperation of a number of parties in or
der to enter and/or operate in a given market.
a. Segment-by-segment invasion planning
b. Market niching
c. Megamarketing (moderate) p. 131
d. Intersegment cooperation
e. Turbomarketing
Essay Questions
71. Markets can be segmented at four levels. In a short essay, describe each lev
el and explain the benefits associated with segmenting the market at each of the
four levels.
Answer:
1) Segment marketing consists of a large identifiable group within a market with
similar wants, purchasing power, geographical location, buying attitudes, or bu
ying habits. With segment marketing, the marketer can create a more fine-tuned p
roduct or service offering than with mass marketing. The product can be priced a
ppropriately for its target audience. The choice of distribution and communicati
on channels becomes easier. The company also faces fewer competitors in the segm
ent. 2) A niche is a more narrowly defined group, typically a small market whose
needs are not well served. With niche marketing, a marketer finds customers wit
h a distinct set of needs that will pay premium prices to the firm that best sat
isfies that need. The niche is not likely to attract other competitors. The nich
e gains certain economies through specialization, and the niche has size, profit
, and growth potential. 3) Tailoring marketing programs to the needs and wants o
f local customer groups (trading areas, neighborhoods, and even individual store
s) is called local marketing. National advertising could be wasteful because it
often fails to address local needs. 4) The ultimate level of segmentation is ind
ividual marketing. Marketers benefit from increased sales and profits by realizi
ng that their customers want to express their individuality.
(difficult) pp. 117 119
72. Suppose potato chip buyers are asked how much they value price, taste, crunc
hiness, and nutritional content as product attributes. In a short essay, describ
e the three different preference patterns that should emerge from this research?
Answer:
The attributes would reveal three basic-market preference graphs. 1) The term ho
mogeneous preferences describes a market where all the consumers have roughly th
e same preferences for value and nutritional content. The market shows no natura
l segments. Potato chip brands would cluster around the center of the scale. 2)
The term diffused preferences is at the other extreme. Consumer preferences vary
greatly. The first brand to enter the market is likely to position itself in th
e center to appeal to the most people. A brand in the center minimizes the sum o
f total customer dissatisfaction. A second competitor could locate next to the f
irst and fight for market share, or locate in the corner to attract those not sa
tisfied with the center brand. 3) Clustered preferences occur when the market re
veals distinct preference clusters called natural market segments, like if a gro
up preferred a crispier chip with more nutritional content. The first firm would
have three options. It might position itself in the center, hoping to appeal to
all groups. It might position itself in the largest marketing segment. It might
develop several brands, each positioned in different segments. If the first fir
m developed only one brand, then competitors would enter and introduce brands in
the other segments.
(moderate) p. 119
73. In a short essay, discuss niche marketing and explain the phrase guerrillas a
gainst gorillas as it relates to marketing to niche segments. Give an actual or m
ade-up example of a niche market and the firms that compete there.
Answer:
The phrase refers to the fact that large firms (the gorillas) often lose small p
ieces of their market share to highly focused competitors (the guerrillas). A ni
che is a narrowly defined group that seeks a distinct set of benefits. They will
often pay a premium to the firm that better satisfies their needs. Niches are s
mall enough that they do not attract as much competition as do segments with lar
ger potentials. The examples students give will vary according to their knowledg
e and experiences.
(moderate) pp. 117 118
74. As multinational companies look for ways to improve their efficiency, one so
lution is the purchase of executive jet planes. It is quite often necessary for
management to fly to other operations around the world. Having a corporate jet r
emoves time constraints from these trips. In a short essay, discuss which major
segmentation variables for business markets a manufacturer of corporate jets can
use.
Answer:
Students will answer this question in a variety of ways. The following is a poss
ible answer: Industry and location of industry are both potential demographic va
riables than can be used. Businesses can be segmented according to heavy or ligh
t usage of air travel; this would be an example of an operating variable. All fi
ve of the purchasing approaches would be applicable as segmentation variables purc
hasing-function organization, power structure of organization, nature of existin
g relationship, general purchase policies of buyer, and buyer s purchasing criteri
a. The one that is least likely is the nature of existing relationship, but it i
s not out of the realm of possibility that a company would need and buy more tha
n one corporate jet. In terms of situational factors as segmentation variables,
how the buyer will use the jet falls under the category of specific application.
Personal characteristics might include buyer s willingness to take risks, and buy
er-seller similarities could also be a viable segmentation variable in this exam
ple.
75. A Chinese manufacturer of small and inexpensive motorcycles (125cc to 250cc
engines, probable retail prices $1,200 to $2,100) decides to enter the U.S. mark
et, as they see very little competition in that power range. You are asked to he
lp them decide how to segment the U.S. marketplace for small motorbikes. Using t
he Major Segmentation Variables for Consumer Markets, discuss three or four poss
ible segments that might be targeted by the Chinese concern. Include a brief exp
lanation for why this segment might be a good one to consider.
Answer:
Better answers will include more than income and age (demographics), although th
ese are the easiest and may work just fine. Other segmentation variables to use
would include lifestyle (psychographics), benefits sought (behavioral), and city
size (geographic). The proposed segments and the explanations for why they migh
t work will obviously vary, but here are some examples of viable market segments
: high school and college students (education, income, and occupation within the
Demographic heading they are on a budget); city dwellers (in the Geographic headi
ng parking and traffic might spur this group); sports enthusiasts (lifestyle varia
ble under the Psychographic heading the bikes might seem like a fun and sporty way
to get around); commuters (benefits sought under the Behavioral heading their nee
ds may be similar to the city dweller group and also the budget issue).
(moderate) p. 121
Mini-Cases
Mini-Case 7-1
A group of investors are starting a for-profit college to be called Haven Univer
sity. They have identified a small segment of society that is displeased with th
e high cost of college and is willing to forego all social and sporting extracur
ricular activities in order to get an inexpensive, quality education in four yea
rs. The university investors will advertise nationally. Its target audience is i
ndividuals between 22 and 30 years of age who have either not started earning a
college degree or who did not finish one they began in the last ten years. The i
nvestors want to attract students who are currently working at a job with which
they are dissatisfied. Haven will only offer three degree programs, which cannot
be modified to individual student needs. Research has shown that these are degr
ees that this market segment repeatedly seeks. Students can earn their degrees o
ver the Internet and only have to attend a one-week seminar on campus twice a ye
ar.
76. Refer to Mini-Case 7-1. These university investors are using __________ mark
eting to identify their target market.
a. mass
b. niche (easy) pp. 117 118
c. local
d. aggregated
e. individual
77. Refer to Mini-Case 7-1. The investors have identified their market through t
he use of __________ segmentation variables.
a. behavioral, geographic, and demographic
b. psychographic and behavioral
c. geographic and demographic
d. psychographic, behavioral, and geographic
e. demographic, psychographic, and behavioral (moderate) pp. 120 125
78. Refer to Mini-Case 7-1. The investors discovered there was a segment of the
population who was being passed over for promotions because they lacked a colleg
e degree. These people had always assumed getting a degree was impossible becaus
e they did not have the time to attend classes. What kind of segmentation variab
le would be used to identify this segment?
a. Usage.
b. Personality.
c. Values.
d. Benefit. (moderate) p. 124
e. Lifestyle.
Mini-Case 7-2
A large international pharmaceutical firm decides to enter the Philippines with
a new oral birth control product. The Filipino population varies greatly in term
s of levels of age, education, rural versus urban population, income, ethnicity,
sexual activity rates, awareness about the availability and uses of birth contr
ol, religious orientation, access to health care, and other variables that might
influence consumption patterns for birth control.
79. Refer to Mini-Case 7-2. If the firm marketed their product in the form of wh
ite pills in a plain bottle and sold it to rural government clinics, which subsi
dized it to the consumers, the target segment most prominently includes which va
riables?
a. Religion, age, sexual activity, and city size.
b. Income, access to health care, and city size. (moderate) pp. 120 125
c. Race, income, and education.
d. Age, awareness (readiness), and religious orientation.
e. Nationality, loyalty status, and stage of the family life cycle.
80. Refer to Mini-Case 7-2. If the firm decides to sell pastel colored pills at
higher than the competitors prices, and sell through pharmacies in the capital, M
anila, the target segment most prominently includes which variables?
a. Religion, age, sexual activity, and city size.
b. Income, access to healthcare, and city size. (moderate) pp. 120 125
c. Race, income, and education.
d. Age, awareness (readiness), and religious orientation.
e. Nationality, loyalty status, and stage of the family life cycle.
Chapter 8 Creating Brand Equity
1. A brand is a name, term, sign, symbol, or design, or a combination of them, i
ntended to identify the goods or services of one seller or group of sellers and
to differentiate them from those of competitors. True (easy) p. 136
2. Brand loyalty can create barriers to entry for competitors. True (moderate) p
. 136
3. A brand is said to have a positive industrial-based brand equity when consume
rs react more favorably to a product and the way it is marketed when the brand i
s identified as compared to when it is not. False (moderate) p. 137
4. A brand promise is the product, service, and all accompanying marketing activ
ities and supporting marketing programs. False (moderate) p. 138
5. Name-research procedures used when developing brand elements include associat
ion tests and memory tests. True (moderate) p. 139
6. The brand elements of protectable, adaptable, and transferable are considered
brand building elements. False (difficult) p. 139
7. The three key themes in designing brand-building marketing programs are perso
nalization, integration, and externalization. False (moderate) p. 140
8. Brand bonding occurs when customers experience the company as delivering on i
ts brand promise. True (easy) p. 141
9. It is possible to borrow from other brands or ideas by linking your offering to
consumers knowledge of those brands. True (moderate) p, 142
10. A brand audit is a means of understanding where, how much, and in what ways
brand value is being created. False (moderate) p. 143
11. A brand audit is a consumer-focused exercise that involves a series of proce
dures to assess the health of the brand and uncover its sources of brand equity.
True (moderate) p. 143
12. The only way to reverse a fading brand s fortune is to returns to its roots and
restore lost sources of brand equity. False (moderate) p. 144
13. The stronger the brand equity and corporate image, the more likely it is tha
t the firm can successfully emerge from a serious brand crisis. True (easy) p. 1
45
14. Snickers Cruncher, a crispy rice bar, with honeyed peanuts, caramel and coat
ed in chocolate would be considered a brand extension. True (moderate) p. 146
15. Snickers Cruncher, a crispy rice bar, with honeyed peanuts, caramel and coat
ed in chocolate would be considered a branded variant. False (moderate) p. 146
16. The Harley-Davidson version of the Ford F150 truck is an example of co-brand
ing. True (easy) p. 147
17. A Granturismo, made by Italian scooter maker Vespa, is an example of the sub
-branding strategy. True (moderate) p. 146
18. By using brand extensions, marketers can cut the cost of new product introdu
ctions. True (moderate) p. 148
19. When Apple introduced the iPod Nano model, it simultaneously took its most p
opular model, the Mini, off the market. This is an example of preemptive canniba
lization. True (moderate) p. 149
20. A flanker brand is the same as a fighter brand that is the same as a flagship bra
d. False (moderate) p. 150
21. Which of the following is NOT part of the strategic brand management process
?
a. Building and conveying brand history. (moderate) p. 135
b. Identifying and establishing brand positioning.
c. Planning and implementing brand marketing.
d. Measuring and interpreting brand performance.
e. Growing and sustaining brand value.
22. A(n) __________ is a name, term, sign, symbol, or design, or a combination o
f them, intended to identify the goods or services of one seller or group of sel
lers and to differentiate them from those of competitors.
a. logo
b. brand (easy) p. 136
c. trademark
d. copyright
e. intellectual property
23. Which is NOT true of brands?
a. Consumers learn of brands through experiences.
b. Good brands simplify consumers decision making.
c. Consumers use savings cues more than brand cues. (moderate) p. 136
d. Consumers learn of brands through marketing.
e. Good brands reduce consumer risk.
24. Which of the following is NOT a benefit of brand loyalty?
a. Loyalty provides predictability.
b. Loyalty allows for company security of demand.
c. Loyalty can translate into consumer willingness to pay a higher price.
d. Loyalty is easily matched by competitors. (moderate) p. 136
e. Loyalty can create barriers to entry for other firms.
25. __________ is endowing products and services with the power of a brand.
a. Brand equity
b. Consumer risk reduction
c. Loyalty
d. Marketing infusion
e. Branding (easy) p. 136
26. All the thoughts, feelings, images, experiences, beliefs, and so on that bec
ome associated with the brand are known as __________.
a. brand knowledge (moderate) p. 137
b. brand equity
c. inelastic consumer response to the brand
d. brand perceptions
e. brand loyalty
27. Which is NOT a marketing advantage of strong brands?
a. Improved perception of product performance.
b. Higher vulnerability to competitive marketing actions. (moderate) p. 137
c. Greater loyalty.
d. Larger margins.
e. Less vulnerability to marketing crises.
28. __________ can be defined as the differential effect that brand knowledge ha
s on customer response to the marketing of that brand.
a. Brand power
b. Brand knowledge
c. Customer-based brand equity (moderate) p. 137
d. Brand freedom
e. Brand differentials
29. Which is NOT a marketing advantage of strong brands?
a. Additional brand extension opportunities.
b. Possible licensing opportunities.
c. Increased marketing communications effectiveness.
d. Lower margins. (moderate) p. 137
e. Improved perceptions of product performance.
30. A(n) __________ is the marketer s vision of what the brand must be and do for
consumers.
a. brand s equity
b. brand mission
c. guarantee
d. implicit warranty
e. brand promise (moderate) p. 138
31. ___________ are trademarkable devices that serve to identify and differentia
te the brand.
a. Brand elements (moderate) p. 139
b. Brand equities
c. Consumer knowledge bases
d. Intellectual properties
e. Brand promises
32. Consumers brand knowledge dictates, to some degree, all of the following, EXC
EPT:
a. what they think about the brand.
b. how they expect the brand to react to competitor brands. (moderate) p. 138
c. what they feel about the brand.
d. whether they will grant or deny permission to a particular marketing action or pr
ogram.
e. where they believe the brand should go.
33. Which is the name of the research procedure associated with the question What
images come to mind? ?
a. Preference tests.
b. Learning tests.
c. Association tests. (moderate) p. 139
d. Memory tests.
e. Retention tests.
34. The name-research procedure associated with the question How well is the name
remembered? is __________.
a. preference tests
b. learning test
c. restoration tests
d. memory tests (easy) p. 139
e. association tests
35. What question is associated with name-research tests of association?
a. What images come to mind? (moderate) p. 139
b. How easily is the name pronounced?
c. How well is the name remembered?
d. Which names are preferred?
e. How much would you pay?
36. All of the following are criteria for choosing brand elements, EXCEPT:
a. noncontroversial. (moderate) p. 139
b. memorable.
c. meaningful.
d. adaptable.
e. transferable.
37. __________ is about making sure that the brand and its marketing are as rele
vant as possible to as many customers as possible.
a. Target marketing
b. Personalizing marketing (difficult) p. 140
c. Permission marketing
d. Integrating marketing
e. Internal branding
38. __________ is about mixing and matching marketing activities to maximize the
ir individual and collective effects.
a. Eclectic marketing
b. Salad tossing
c. Integrating marketing (moderate) p. 140
d. Personalizing marketing
e. Synergy marketing
39. A __________ is any information-bearing experience a customer or prospect ha
s with the brand, the product category, or the market that relates to the market
er s product or service.
a. brand brush-up
b. loyalty builder
c. loyalty inducer
d. brand contact (moderate) p. 140
e. hook or handle
40. Which of the following is a key theme in designing brand-building marketing
programs?
a. Depersonalization.
b. Integration. (moderate) p. 140
c. Externalization.
d. All of the above.
e. None of the above.
41. Informing and inspiring employees about the brand through various activities
and processes is called __________.
a. internal branding (moderate) p. 140
b. employee coaching
c. motivational training
d. indoctrination
e. none of the above
42. __________ occurs when customers experience the company as delivering on its
brand promise.
a. Internal branding
b. Brand bonding (moderate) p. 141
c. Personalization branding
d. Brand image
e. Brand building
43. Which of the following is NOT one of the ways Jones Soda created a successfu
l cult brand?
a. Recruited people on the street and provided samples.
b. Invited customers to submit photos of unusual product uses.
c. Agreed to large slotting fees to get good shelf placement. (moderate) p. 141
d. Made the soda in unusual and bright colors.
e. Initially, sold the product through nontraditional outlets, like surf shops.
44. Which is NOT a secondary source of brand knowledge for consumers?
a. Country of origin information.
b. Other brands.
c. Third-party endorsements.
d. Things.
e. Library research. (moderate) p. 142
45. The indirect approach to measuring brand equity __________.
a. assesses the actual impact of brand knowledge on consumer response to differe
nt aspects of the marketing
b. is the same as measuring sales outcomes related to marketing communications
c. is preferred by CEOs
d. assesses potential sources of brand equity by identifying and tracking consum
er brand knowledge structures (moderate) p. 143
e. All of the above are correct answers.
46. A(n) __________ is a consumer-focused exercise that involves a series of pro
cedures to assess the health of the brand, uncover its sources of brand equity,
and suggest ways to improve and leverage its equity.
a. brand audit (easy) p. 143
b. portfolio analysis
c. brand inventory
d. association test
e. equity examination
47. Which of the following is NOT part one of the functions of the brand audit?
a. Assess the health of the brand.
b. Inventory public awareness of brand equity. (moderate) p. 143
c. Uncover sources of brand equity.
d. Suggest ways to improve the brand s equity.
e. Suggest ways to leverage the brand s equity.
48. With well-known companies, brand value is typically over __________of the to
tal market capitalization.
a. one-tenth
b. one-fourth
c. one-half (moderate) p. 143
d. three quarters
e. There is no numerical average available to answer this question.
49. The brand audit can be used to set the strategic direction for the brand. Qu
estions that are answered include all of the following EXCEPT:
a. Are the current sources of brand equity satisfactory?
b. Do certain brand associations need to be strengthened?
c. Does the brand lack uniqueness?
d. What kinds of advertising would highlight the brand? (moderate) p. 143
e. What brand opportunities exist?
50. In which country do companies NOT list brand equity on their balance sheets?
a. The United Kingdom.
b. Hong Kong.
c. The United States. (moderate) pp. 143 144
d. Australia.
e. Businesses in all these countries list brand equity on their balance sheets.
51. Brand equity is reinforced by marketing actions that consistently convey the
meaning of the brand to consumers in terms of all of the following EXCEPT:
a. what products the brand represents.
b. what core benefits the brand supplies.
c. what needs the brand satisfies.
d. which strong, favorable, and unique brand associations exist in the consumers
minds.
e. how brand fans accept less-than-perfect performances. (moderate) p. 144
52. Unless there is some environmental change, there is little reason to deviate
from __________.
a. vigorous preservation of brand status quo
b. successful brand positioning (moderate) p. 144
c. last year s brand advertising
d. the practices that produce dwindling brand leadership
e. All of the above answer the question correctly.
53. Reversing a fading brand s fortunes may require __________.
a. relinquishing lost sources of brand equity
b. establishing new sources of brand equity
c. a return to its roots
d. only two of the above (moderate) p. 144
e. a, b, and c
54. Which of the following is NOT on the list of corporate resources that would
help a firm weather a brand crisis?
a. Strong brand equity.
b. Strong corporate image.
c. Strong credibility.
d. Good lawyers. (moderate) p. 145
e. High trustworthiness.
55. What two words best describe how to execute successful brand crisis manageme
nt?
a. Fast and furious.
b. In and out.
c. Credibility and trustworthiness.
d. Fess up and settle.
e. Swift and sincere. (moderate) p. 145
56. Which is NOT part of devising a branding strategy?
a. Discovering brand elements. (moderate) p. 146
b. Deciding the nature of new brand elements.
c. Deciding the nature of existing brand elements.
d. Applying brand elements to new products.
e. Applying brand elements to existing products.
57. Which of the following is NOT one of the approaches for improving or refreshi
ng a brand s equity?
a. Expand the breadth of brand awareness.
b. Expand the depth of brand understanding. (moderate) p. 145
c. Improve consumer recall of the brand.
d. Improve the uniqueness of brand associations that make up brand image.
e. Improve consumer recognition of the brand.
58. Using a parent brand to enter a different product category from that current
ly served by the parent is a __________.
a. brand extension
b. sub-brand
c. category extension (moderate) p. 146
d. parent brand
e. line extension
59. An existing brand that gives birth to a brand extension is a __________.
a. family brand
b. brand line
c. brand mix
d. parent brand (moderate) p. 146
e. branded variant
60. The definition of a sub-brand is __________.
a. using an established brand to launch a new product
b. all products sold under a particular brand
c. the set of all brand lines that a firm offers to buyers
d. the company s brand assortment
e. combining a new brand with an existing brand (moderate) p. 146
61. BMW, maker of the Mini Cooper brand is using what kind of brand strategy wit
h its Mini products?
a. Individual names. (moderate) p. 146
b. Blanket family names.
c. Separate family names.
d. Corporate names.
e. Generic names.
62. Toyota, maker of the Scion brand is using what kind of brand strategy with S
cion products?
a. Separate family names.
b. Blanket family names.
c. Individual names. (moderate) p. 146
d. Corporate names.
e. Generic names.
63. There is a special edition King s Ranch Ford F150 truck. This is an example of
what type of co-branding?
a. Same-company co-branding.
b. Multiple-sponsor co-branding.
c. Joint-venture co-branding. (moderate) p. 147
d. Ingredient co-branding.
e. Retail co-branding.
64. Dell laptop computers have a permanent sticker attached to the top of each m
achine proclaiming Intel Inside. This is an example of what type of co-branding?
a. Multiple-sponsor co-branding.
b. Same-company co-branding.
c. Retail co-branding.
d. Ingredient co-branding. (moderate) p. 147
e. Joint-venture co-branding.
65. A __________ is when the parent brand is used on a new product targeting a n
ew market segment within a category currently served by the parent.
a. joint-venture co-brand
b. same-company co-brand
c. category extension
d. multiple-sponsor co-brand
e. line extension (moderate) p. 148
66. Which of the following is NOT an advantage of co-branding?
a. Might contribute to overexposure of the brand. (moderate) p. 147
b. Helps position new products.
c. Generates additional sales from the existing target market.
d. Provides more opportunities with new consumers.
e. Can open up new channels for the marketer.
67. __________, a potential downside of too much brand extension, occurs when co
nsumers no longer associate a brand with a specific product or highly similar pr
oducts and start thinking less of the brand.
a. Brand death
b. Brand dilution (moderate) pp. 148-149
c. Brand maturity
d. Brand decline
e. All of the above are correct responses.
68. When Apple introduced its popular iPod Nano model, it dropped its Mini iPod
at the same time. The Mini was at the time the most popular mp3 player in the ma
rketplace. This is an example of __________.
a. corporate insanity
b. CEO Steve Jobs large ego
c. preemptive cannibalization (moderate) p. 149
d. a brand shake-out
e. product maturity
69. Brands can play a number of specific roles within a company s brand portfolio.
For example, a __________ is positioned with respect to competitors brand so tha
t more important and profitable brands retain their desired positioning.
a. cash cow
b. low-end, entry level brand
c. high-end, prestige brand
d. flanker (moderate) p. 150
e. mid-market brand
70. Brands can play a number of specific roles within a company s brand portfolio.
For example, a __________ may be retained despite dwindling sales because it st
ill appeals to a sufficient number of customers and remains profitable with virt
ually no marketing support.
a. low-end, entry level brand
b. high-end, prestige brand
c. fighter brand
d. flanker
e. cash cow (easy) p. 150
Essay Questions
71. What are the three main sets of brand equity drivers? Give examples in each
category.
Answer:
Brand elements or identities making up the brand. This could include bra
nd names and other identifiers, such as logos, spokespeople, and slogans. A bran
d element for McDonald s is the I m Lovin It, Late campaign slogan.
The product and service and all accompanying marketing activities and su
pporting marketing programs. This one is fully self-explanatory. An example woul
d be all the financial and customer services offered by Fidelity Investments.
Other associations indirectly transferred to the brand by linking it to
some other entity. Outback Steakhouse cues diners of an Australian steak-eating
experience with old signs, menus that feature Kangaroos, and menu items suggesti
ng ties to the country/continent.
(moderate) p. 138
72. The brand elements chosen when building a brand should differ from those emp
loyed when defending a brand. What are the different criteria for choosing brand
elements, based on these differences?
Answer:
For building the brand: 1) The element should be easily recalled and recognized,
in other words it should be memorable. 2) The element should be meaningful, so
that it suggests how it will provide benefits. 3) And it should be likeable, mea
ning it is appealing to see or say or look at.
For defending the brand: 1) The image or element should be transferable, allowin
g it to add value to other categories. 2) It should be adaptable, allowing for u
pdates and freshness. 3) It should legally protectable and not easily copied.
(moderate) p. 139
73. What is a brand audit? Why is it done?
Answer:
A brand audit is a consumer-focused exercise that involves a series of procedure
s to assess the health of a brand, uncover its sources of brand equity, and sugg
est ways to improve and leverage its equity. It can help set the strategic direc
tion for the brand. It asks these kinds of questions: Are the current sources of
brand equity satisfactory? Do certain brand associations need to be strengthene
d? Does the brand lack uniqueness? What brand opportunities exist and what poten
tial challenges exist for brand equity?
From the perspective of the firm, it is necessary to understand exactly what pro
ducts and services are currently being offered to consumers and how they are bei
ng marketed and branded.
(moderate) p. 143
74. Explain four general strategies for choosing brand names. Give an example of
each.
Answer:
Individual names: The Mini Cooper automobile is made and marketed by BMW, but th
e Mini brand has no obvious relationship with BMW.
Blanket family names: Most universities have schools or colleges that have not b
een sponsored or endowed by a benefactor. Thus, the business school at the Unive
rsity of Texas at Brownsville, is called the UTB School of Business.
Separate family names for all products: The Ford Motor company owns the Volvo, M
ercury, Lincoln, Jaguar, Land Rover, and Aston Martin brands, in addition to the
Ford nameplate. Each of these brand families has a line-up of vehicles of its o
wn.
Corporate name combined with individual product names: The Ford Fusion automobil
e has its own name (Fusion), but is also called a Ford.
75. What are some of the different roles played by different brands in a brand p
ortfolio? Give an example of each.
Answer:
Examples will, of course, vary. But the four types of roles described in
the text are:
Flanker brands, also called fighter brands, are positioned so as to allow
flagship brands prime
positioning in the marketplace. The book s example is Procter & Gamble s budget-pric
ed diapers Luvs, which do not take away sales from the premium diaper product Pa
mpers, but help establish another price/quality tier in the minds of the consume
r.
Cash cows are brands that still generate plenty of sales, and do so with
out much need for marketing
efforts, such as promotion. For example, the Bic Twin brand of shaver co
ntinues to sell in healthy
numbers with virtually no consumer marketing effort. The profits may be spun off
to help develop other Bic brands, which are newer or less established, in the m
arketplace (new pens or lighters, for example).
Low-end entry-level brands introduce the brand to new or younger consumers. Toyo
ta recently added a line of cars under the Scion name that are aimed at young pe
ople. Young Americans are not familiar with the Toyota brand and so this allows
them into the Toyota family, where they will hopefully
experience satisfaction and move up to higher priced/higher quality Toyo
ta products.
High-end prestige brands allow some of the extra good perceptions to spill over
onto other brands in the lineup. The new Pontiac Solstice is stylish and attract
ive and, if it turns out to be a credible product, may bring new buyers into the
Pontiac family.
(moderate) p. 150
Mini-Cases
Mini-Case 8-1
Players from the 1990s alternative band Dan Quayle s Children are considering a re
union tour. The plan is to play dozens of their old haunts from Athens, Georgia
in the south to Boston in the north. The band flamed out very suddenly in 1996 w
hen their drummer X-Man was very publicly thrown in jail for an Internet child p
ornography conviction. The band did not know how to deal with the crisis and for
about a month they just sort of went into hiding. After that response, they could
never really get booked for any gigs, and after about 6 months the remaining Ch
ildren took day jobs and went on with their lives.
76. Refer to Mini-Case 8-1. If Dan Quayle s Children is to reverse their fading br
and s fortunes, it will require which of the following?
a. Relinquishing lost sources of brand equity, such as well-known songs and logo
s.
b. Establishing new sources of brand equity, such as new songs, styles, and stag
e antics.
c. A return to its roots, such as playing old crowd favorites and telling stories
of the road onstage.
d. Two of the above could help the band reverse the band s fortunes.(moderate) p.
144
e. A, b, and c are all ways the band could reverse its fortunes.
77. Refer to Mini-Case 8-1. For the band to have better weathered the 1996 brand
crisis, they could have used all of the following EXCEPT:
a. strong brand equity.
b. a strong organizational image.
c. strong credibility.
d. good lawyers. (moderate) p. 145
e. high trustworthiness.
78. Refer to Mini-Case 8-1. Lead singer Loser Bubba is also the band s leader and sp
okesperson. What two words best describe how the band might have better executed
successful brand (band) crisis management?
a. Be fast and furious in your response.
b. Get in and out of the problem quickly.
c. Increase credibility and trustworthiness.
d. Fess up and settle.
e. Be swift and sincere in addressing the problem. (moderate) p. 145
Mini-Case 8-2
Chocolate maker Hershey is looking for growth opportunities, and has considered
launching a few new products it has developed and acquired. Hershey has traditio
nally used blanket family brand names such as Hershey s Milk Chocolate Bar, or ind
ividual names such as Mr. Goodbar, their chocolate with peanuts bar.
79. Refer to Mini-Case 8-2. Hershey has a new product that is almond and caramel
-based, covered with chocolate. The California Almond Growers Association want t
o create a tie-in with their products, by calling the new product the Hershey Ca
lifornia Almond Express. This is an example of what type of co-branding?
a. Same-company co-branding.
b. Multiple-sponsor co-branding.
c. Joint-venture co-branding. (moderate) p. 147
d. Ingredient co-branding.
e. Retail co-branding.
80. Refer to Mini-Case 8-2. If Hershey created Mr. Goodbar nibbles, basically a
chocolate-covered nut product for eaters who are on the run or who wish for grea
ter portion control, this would be considered a __________.
a. joint-venture co-brand
b. same-company co-brand
c. category extension
d. multiple-sponsor co-brand
e. line extension (moderate) p. 148
Chapter 9 Creating Positioning and Dealing with Competition
1. Positioning is the act of designing the company s offering and image to occupy
a distinctive place in the mind of the target market. True (easy) p. 155
2. Points of parity (POP) are attributes or benefits consumers strongly associat
e with a brand, and which they believe that they could not find to the same exte
nt with a competing brand. False (moderate) p. 156
3. In choosing points of difference (PODs) for the firm s positioning, it is impor
tant that consumers find those PODs desirable. True (moderate) p. 157
4. One of the key deliverability criteria for points of difference (PODs) is fea
sibility meaning that the firm must be able to actually create the POD. False (mod
erate) p. 158
5. Form product differentiation refers to the characteristics that supplement th
e product s basic function. False (moderate) p. 159
6. Differentiating your offering in the channel could refer to coverage, experti
se, or performance issues. True (easy) p. 159
7. One way of differentiating a service is through customer training. True (mode
rate) p. 160
8. Strong style can create product distinctiveness that is difficult to copy, ho
wever strong style does NOT always mean strong performance. True (moderate) p. 1
60
9. Michael Porter s Threat of Entry force (from the five forces) suggests that the m
ost attractive segment has high entry and exit barriers. False (moderate) p. 161
10. According to Porter s Five Forces model, a segment is unattractive if buyers p
ossess or will possess strong bargaining power. True (moderate) p. 162
11. In monopolistic competition, only one firm provides a certain offering in a
specific area. False (moderate) p. 163
12. Integrating your business backward or forward in the value chain is also cal
led vertical integration. True (moderate) p. 164
13. A group of firms following the same strategy in a given target market is cal
led a strategic group. True (easy) p. 166
14. Share of heart is defined as the percentage of customers who name the compan
y when asked, Name the first company that comes to your mind in the industry. Fals
e (moderate) p. 167
15. The acknowledged market leader in an industry has the largest share of the r
elevant product market and usually leads the others in price changes, new produc
t introductions, distribution coverage, and promotional intensity. True (easy) p
. 167
16. Part of a market leader s strategy to defend market share is to consider which
segments to defend (even at a loss) and what segments to surrender. True (diffi
cult) p. 168
17. Fighting for market share makes sense because, for example, in the soft drin
k market, a one-share-point gain is worth over $100 million in revenue. True (mo
derate) p. 170
18. The meaning of a frontal attack against a market challenger is to identify s
hifts in market segments that cause gaps and then fill those gaps. False (modera
te) p. 170
19. Levitt argued that product imitation might be as profitable as product innov
ation. True (moderate) p. 172
20. Logitech makes computer mouse products of every possible description. This e
xtreme specialization is an example of a niche strategy. True (easy) p. 172
21. A good brand positioning helps the firm and consumer by doing all of the fol
lowing EXCEPT:
a. helps competitors understand where NOT to compete. (moderate) p. 155
b. helps clarify the brand s essence.
c. helps consumers understand what the brand will help them achieve.
d. helps consumers maximize the benefits of the brand.
e. helps guide marketing strategy.
22. A __________ is a cogent (logical or sound) reason why the target market sho
uld buy the product.
a. market niche service agreement
b. customer-focused value proposition (moderate) p. 155
c. price/benefit analysis
d. marketing campaign
e. differentiation plan
23. __________ includes the products or sets of products with which a brand comp
etes and which function as close substitutes.
a. The evoked set
b. Brand choice
c. Category membership (moderate) p. 156
d. The inept set
e. The competition set
24. What acronym is associated with the following definition attributes or benefits
consumers strongly associate with a brand, positively evaluate, and believe tha
t they could NOT find to the same extent with a competitor brand ?
a. WOM
b. WOW
c. POD
d. POP (moderate) p. 156
e. POS
25. What type of points-of-parity is related to association s consumer view as nec

essary to be a legitimate offering within a certain category?
a. Head-to-head.
b. Competitive.
c. Word-of-mouth.
d. Membership.
e. Category. (moderate) p. 156
26. Which of the following is NOT a major way of conveying a brand s category memb
ership?
a. Relying on word of mouth among zealous consumers. (moderate) p. 157
b. Announcing category benefits.
c. Using the brand name of the product to explain the offering s benefits.
d. Comparing to exemplars.
e. Relying on a product descriptor.
27. The preferred positioning approach is to inform consumers of a brand s _______
___ before stating its __________.
a. POPs; PODs
b. membership; point-of-difference (moderate) p. 157
c. category benefits; comparisons to exemplars
d. membership; value proposition
e. point-of-difference; positioning
28. XM Satellite Radio, the brand name, is a perfect example of using which stra
tegy to convey the brand s category membership?
a. Relying on word of mouth among zealous consumers.
b. Comparing to exemplars.
c. Relying on the product descriptor. (moderate) p. 157
d. Announcing category benefits.
e. Explaining the value proposition.
29. One criterion for points-of-difference (POD) is the feasibility criterion, w
hich means __________.
a. the positioning must be preemptive, defensible, and difficult to attack
b. the POD must be personally relevant and important to target consumers
c. target customers must find the POD believable
d. the firm must be able to actually create the POD (moderate) p. 158
e. the brand must substantiate that it can deliver the desired benefit
30. One criterion for points-of-difference (POD) is the communicability criterio
n, which means __________.
a. the positioning must be preemptive, defensible, and difficult to attack
b. the POD must be personally relevant and important to target consumers
c. target customers must find the POD believable
d. the firm must be able to actually create the POD
e. the brand must substantiate that it can deliver the desired benefit (difficul
t) p. 158
31. Which of the following brand position sets would NOT be difficult to pull of
f in the same campaign?
a. Classy; tasteful. (moderate) p. 158
b. Good tasting; low calorie.
c. Inexpensive; high quality.
d. Sophisticated; discount retailer.
e. Positive; negative.
32. __________ refer(s) to the product s size, shape, or physical structure.
a. Form (moderate) p. 159
b. Features
c. Performance quality
d. Conformance quality
e. Durability
33. __________ is(are) the level(s) at which the product s primary characteristics
operate.
a. Form
b. Features
c. Performance quality (moderate) p. 159
d. Conformance quality
e. Durability
34. __________ is(are) the degree9S0 to which all of the produced units are iden
tical and meet promised specifications.
a. Form
b. Features
c. Performance quality
d. Conformance quality (moderate) p. 159
e. Durability
35. Which of the following is NOT a way of differentiating the product offering?
a. Form.
b. Features.
c. Conformance.
d. Style.
e. Expertise. (moderate) pp. 159-160
36. Which of the following is a way of differentiating a marketing offering via
personnel?
a. Responsiveness. (moderate) p. 159
b. Ordering ease.
c. Coverage.
d. Events.
e. Conformance.
37. Which of the following is a way of differentiating a marketing offering via
the surrounding services?
a. Reliability.
b. Installation. (moderate) p. 159
c. Design.
d. Quality.
e. Expertise.
38. A product s __________ is a measure of the probability that a product will NOT
malfunction or fail within a specified period.
a. repairability
b. style
c. reliability (difficult) p. 160
d. design
e. durability
39. A product s __________ refers to the work done to make a product operational i
n its planned location.
a. ordering ease
b. design
c. maintenance and repair
d. installation (moderate) p. 160
e. reliability
40. __________ describes the product s look and feel to the buyer.
a. Positioning
b. Design
c. Distinctiveness
d. Uniqueness
e. Style (moderate) p. 160
41. Which of the following is NOT a main service differentiator?
a. Ethical personnel. (moderate) p. 160
b. Ordering ease.
c. Delivery.
d. Installation.
e. Customer consulting.
42. When a(n) __________ cannot be differentiated easily, the key to competitive
success may lie in adding valued __________ and improving their quality.
a. idea; creativity
b. product; services (moderate) p. 160
c. service; products
d. value proposition; creative responses
e. idea; styling
43. Which is NOT a way of differentiating an offering via the channel of distrib
ution?
a. Wider coverage.
b. Expertise.
c. Communication. (moderate) p. 161
d. More exclusive coverage.
e. Performance.
44. Which does NOT add to a segment s unattractiveness, according to Porter s five f
orces model?
a. Numerous competitors.
b. Growing plant capacity.
c. High exit barriers.
d. The segment is growing. (moderate) p. 161
e. High fixed costs.
45. Which of the following is a likely outcome during tough economic time if the
re are low barriers to entry and high exit barriers?
a. Stable returns.
b. More firms coming online.
c. High profits.
d. Firms easily dropping out of that business.
e. Chronic overcapacity. (moderate) p. 161
46. Which is NOT one of Porter s five forces that determine market attractiveness?
a. Internal resources. (moderate) pp. 161 162
b. Potential entrants.
c. Buyer power.
d. Supplier power.
e. Threat of substitutes.
47. Which of Porter s five forces depends heavily on industry entrance and exit ba
rriers?
a. Segment rivalry.
b. Potential entrants. (easy) pp. 161-162
c. Buyer power.
d. Supplier power.
e. Threat of substitutes.
48. Which is NOT a reason that buyers power might grow or concentrate?
a. Undifferentiated product.
b. Price sensitivity.
c. Product represents an insignificant portion of buyers costs. (difficult) p. 16
2
d. Low switching costs.
e. Upstream integration possibilities.
49. Which is NOT a reason that suppliers bargaining power might grow?
a. When there are few substitutes.
b. When the supplied product is an important input.
c. When downstream integration possibilities exist.
d. When sellers are price sensitive. (moderate) p. 162
e. When they are well organized.
50. In which type of industry competition do many competitors offer the same pro
duct or service?
a. Pure monopoly.
b. Oligopoly.
c. Monopolistic competition.
d. Differentiated oligopoly.
e. None of the above. (moderate) p. 163
51. The U.S. auto industry is an example of which form of competition?
a. Differentiated oligopoly. (moderate) p. 163
b. Pure monopoly.
c. Pure competition.
d. Monopolistic competition.
e. Pure oligopoly.
52. Which of the following is NOT a way in which industries are classified?
a. Degree of product differentiation.
b. Publicly versus privately held. (difficult) p. 163
c. Number of sellers.
d. Cost structure.
e. Degree of globalization.
53. Which is NOT an exit barrier?
a. Moral obligations to employees.
b. High vertical integration.
c. Scarce raw materials. (difficult) p. 164
d. Low asset salvage value.
e. Emotional barriers.
54. Which is NOT an entry barrier?
a. Economies of scale.
b. Scarce locations.
c. High capital requirements.
d. Abundance of distributors. (moderate) p. 164
e. Reputation requirements.
55. An oil producer that refines the product and owns gasoline filling stations
has integrated __________.
a. backward
b. horizontally
c. diagonally
d. crosswise
e. forward (moderate) p. 164
56. Due to exit barriers or for other reasons, many firms will stay in an indust
ry as long as they cover their __________ and some or all of their __________. T
his results in lowered profits for everyone in that industry.
a. variable costs; fixed costs (moderate) p. 164
b. losses; gains
c. losses; variable costs
d. capital costs; materials costs
e. fixed costs; losses
57. On the competitor map proposed by Rayport and Jaworski, __________ part of t
he model shows consumers behavior.
a. the diagonal correlations
b. the center (difficult) p. 165
c. the outside the box (thinking)
d. the outer-most ring
e. the wheel of retailing
58. Which measure is the percentage of consumers saying a particular brand when
asked, Name the company from which you would prefer to buy (such-and-such) produc
t ?
a. share of mind.
b. share of pocketbook.
c. share of heart. (moderate) p. 167
d. share of market.
e. share of wrap-up.
59. Which of the following represents the idea of share of mind?
a. The percentage of the target market the brand has.
b. The percentage that says the brand is the one they think of first. (moderate)
p. 167
c. The percentage that refuses to answer the survey.
d. The percentage that says the brand is their preference.
e. The percentage that says the competition s brand first.
60. Which is a characteristic of a good competitor?
a. They try to buy share.
b. They take large risks.
c. They invest in overcapacity.
d. They upset the industry s equilibrium.
e. They limit themselves to a segment of the industry. (moderate) p. 167
61. Which is a characteristic of a bad competitor?
a. They take large risks. (moderate) p. 167
b. They set prices in relation to costs.
c. They limit themselves to a segment of the industry.
d. They accept the general level of share and profits.
e. They invest in capacity-lowering measures.
62. Which of the following is NOT a characteristic of the market leader in an in
dustry?
a. They lead in the share of relevant product market.
b. They lead in distribution coverage.
c. They lead others in price changes.
d. They lead in promotional intensity.
e. All of these are characteristics of the market leader. (moderate) p. 167
63. A __________ defense involves building superior brand power, making the bran
d almost impregnable.
a. flank
b. counteroffensive
c. position (moderate) p. 168
d. contraction
e. mobile
64. The aim of __________ strategy is to reduce the probability of attack, diver
t attacks to less threatening areas, and lessen their intensity.
a. looking-back
b. innovation
c. counteroffensive
d. defensive (moderate) p. 168
e. development
65. When a company cannot properly defend all of its (business) territory, which
of the following is a suggested course of action?
a. Strategically withdraw.
b. Execute a contraction defense.
c. Give up weaker territories.
d. All of the above. (easy) p. 169
e. None of the above.
66. Expanding market share can be a very lucrative way to increase sales and pro
fits. For example, a one-point market share increase in the U.S. coffee market i
s worth nearly __________.
a. $50 million (moderate) p. 170
b. $250 million
c. $500 million
d. $750 million
e. $1 billion
67. The __________ type of defense in which the leader stretches its domain over
new territories that can serve as future centers for defense and offense, using
market broadening and market diversification.
a. flank
b. mobile (moderate) p. 169
c. counteroffensive
d. contraction
e. preemptive
68. Which is NOT a market-challenger attack option?
a. Frontal.
b. Flank.
c. Preemptive. (difficult) pp. 170-171
d. Encirclement.
e. Bypass.
69. __________ is another name for identifying shifts in market segments that ca
use gaps to develop, then filling the gaps and developing them into strong segme
nts.
a. A frontal attack
b. An encirclement attack
c. A bypass attack
d. A flanking strategy (moderate) p. 170
e. Guerilla warfare
70. In which specialized niche role, does the firm customize its products for in
dividual customers?
a. End-user specialist.
b. Channel specialist.
c. Service specialist.
d. Specific-customer specialist.
e. Job-shop specialist. (difficult) p. 173
Essay Questions
71. What are PODs and POPs? Give examples of each.
Answer:
Points-of-difference are attributes and benefits consumers strongly asso
ciate with a brand. They are positively evaluated by consumers, who believe thes
e attributes or benefits cannot be found to the same extent in competing offerin
gs. An example of a point of difference is the mystique surrounding Harley-Davidso
n ownership. No other maker can match this authentic, extraordinary quality.
Points-of-parity are associations that are not unique to the brand, but
may be shared with other brands. They may be necessary for the brand to be consi
dered, but they are probably not sufficient to make the consumer choose a brand.
An example, Samuel Adams is available on tap at some bars, and a certain consum
er may only consider on-tap brands, but there is no guarantee the consumer will
choose Sam based only on that availability.
(moderate) p. 156
72. What are the three main ways of conveying to consumers that a brand is right
fully in a certain category? Provide examples of each.
Answer:
1) Announcing category benefits this reassures consumers that the brand wi
ll deliver on the fundamental reason for using a category of product. An LG refr
igerator might show that it belongs in the consumer s kitchen by announcing that i
t produces filtered-water ice cubes in huge quantities and has room for four gal
lons of milk in the door.
2) Comparing to exemplars early reviews of Coldplay music compared the sin
ger s voice and the songwriting to those of U2. If the band felt this was positive
, they could include the reviews in their ads.
3) Relying on the product descriptor in other words, using brand naming as
a device to announce what the product does. An example is Scotch Super Strength
Packaging Tape that leaves no one confused about that the product is for and in
what category it rests.
(moderate) p. 157
73. Computer mouse maker Logitech has established itself among its customers via
many points-of-difference. The book mentions six key criteria for points-of-dif
ference, split into the categories of consumer desirability and deliverability.
Describe how Logitech has or could use the criteria to stand out in the marketpl
ace.
Answer:
Consumer Desirability Criteria
1) Relevance Logitech must be on the cutting edge in offering the latest s
tyles and features in their mouse line, and consumers must be aware of and care
about those styles and features.
2) Distinctiveness mouse buyers must be convinced that the products produc
ed and marketed by Logitech are different and more interesting than those offere
d by other firms.
3) Believability when describing how its products are superior in ads, pot
ential and actual Logitech customers must find the claims credible.
Deliverability Criteria
1) Feasibility Logitech must be able to remain innovative and create aesth
etically-pleasing designs.
2) Communicability consumers need to know about and believe that Logitech
products are great.
3) Sustainability Logitech must keep creating new ways of helping PC and M
ac users to conduct their business with screen-movement tools such as mice, touc
hpads, etc.
(moderate) p. 158
74. Lowe s Home Improvement has tried to distinguish itself from the largest playe
r in the category, The Home Depot, by choosing and training floor personnel in s
uch as way as to be better than the competition. The book lists six important ways
that a company might differentiate its offering through personnel. What are the
y?
Answer:
1) Competence Lowe s floor associates are likely to know the products they are recom
mending, either through training or because they were hired for their particular
expertise and experience in certain areas.
2) Courtesy Lowe s floor associates will often take the time to walk with you to fin
d what you are looking for and may spend several minutes working through your pr
oject with you without seeming to be rushed. They are also very woman-friendly,
a plus in a normally male-oriented commercial environment.
3) Credibility because associates are competent, they are perceived as mor
e trustworthy.
4) Reliability also dependent on associate competence, this measures consistency a
nd accurateness in floor workers behavior and advice.
5) Responsiveness associates should react quickly to customer questions an
d problems.
6) Communication this is related to the associates ability to understand customer p
roblems and requests, and to be able to clearly respond to them.
(moderate) p. 159
75. Nearly every consumer electronics maker recognizes Apple Computer s iPod as th
e gold standard for personal music devices. Apple has by far the largest market
share and its players are elegantly designed. The company prices competitively a
nd yet still makes huge profits on this line of products. If a company considers
Apple as its opponent and the objective is to take away market share, what are fi
ve general market-challenger attack options?
Answer:
1) A frontal attack would consist of matching Apple point for point with their m
arketing mix. The hardest part of this strategy is that others players have not b
een seen by consumers as as good as the iPods are. And, many would-be competitors
do not have the resources necessary to compete head-to-head with a giant like Ap
ple.
2) A second attack strategy would be to chip away at Apple where it is weak or i
n some way underperforming this is called a flank attack. Sony might introduce the
ir competitive player to the Chinese market, where Apple does not have such a st
ronghold. Or perhaps Aiwa could make quite aesthetically pleasing and colorful p
layers that are in contrast to iPods white and black color choices.
3) Encirclement entails launching a simultaneous campaign against the chosen com
petitor on many fronts. This takes lots of resources, both financial and manager
ial. The purpose is to break the opponent s will.
4) The most indirect strategy is to bypass the competitor completely and go afte
r easier markets or competitors.
5) Guerilla warfare uses small, intermittent attacks to harass and demoralize the
competitor of choice. This might be done with aggressive price-cutting or intens
e promotional efforts. This form of attack is useful to smaller companies becaus
e it can be done cleverly with fewer resources.
Mini-Cases
Mini-Case 9-1
Salve Regina University in Newport, Rhode Island is a growing organization and i
s seeking additional institutional recognition and awareness among potential tar
get students and financial donors. Few outside the immediate area have heard of
Salve or know what they stand for. Over the last several years they have raised
their profile by inviting famous international guests to give public lectures. F
or example, the Dalai Lama spoke in 2005.
76. Refer to Mini-Case 9-1. The president and the marketing director for Salve R
egina University want to greatly increase the number of people who respond with S
alve, when asked the following question: Name the university in southern New Engla
nd at which you would prefer to study international relations. What type of share
are the president and the marketing director seeking to increase?
a. Share of mind.
b. Share of pocketbook.
c. Share of heart. (moderate) p. 167
d. Share of market.
e. Share of wrap-up.
77. Refer to Mini-Case 9-1. Along with international visitors on campus, the adm
issions group has been actively seeking international students and bulking up its
offerings in the international arena. Other parts of the university have been gr
owing at a steadier pace, unaided by special programs or dollar incentives. How
is Salve Regina University exhibiting the characteristics of a good competitor,
based on the scenario presented?
a. They are trying to buy share.
b. They are taking large risks.
c. They are making investments in overcapacity.
d. They are upsetting the local education industry s equilibrium.
e. They are limiting themselves to a segment of the industry. (moderate) p. 167
Mini-Case 9-2
Samsung has made a very slim, very aesthetically pleasing phone that it sells th
rough Sprint and other mobile communications providers. The phone has enough fla
sh memory to store and play 500 songs in its MP3 player. It has built-in softwar
e that allows users to load their own music or other sound segments as ringtones
. It has a finder feature for when it is misplaced. As far as the marketing people
at Samsung can tell, the phone meets and exceeds every potential user s expectati
on for what a phone should be.
78. Refer to Mini-Case 9-2. Samsung s U.S. advertising agency is refining their __
________ for the phone, which is a cogent (logical or sound) reason they will pu
t in the advertising campaign for why the target market should buy the product.
a. market niche service agreement
b. customer-focused value proposition (moderate) p. 155
c. price/benefit analysis
d. marketing campaign
e. differentiation plan
79. Refer to Mini-Case 9-2. Samsung s new phone is more than a phone with its addi
tional features. The advertising agency wants to position the product in the min
ds of the consumer as belonging to the most elite and up-to-date phones on the m
arket, and at the same time, show consumers how great the additional features ar
e over the competitive phones. This is the right approach, because the preferred
positioning process is to inform consumers of a brand s __________ before stating
its __________.
a. POPs; PODs
b. membership; point-of-difference (moderate) p. 157
c. category benefits; comparisons to exemplars
d. membership; value proposition
e. point-of-difference; positioning
80. Refer to Mini-Case 9-2. The Samsung phone will come encased in scratchproof
shiny plastic, similar to how Apple s iPod exteriors are. This interesting choice
will attract more attention in a marketplace where most phones are in metallic o
r dull plastic finishes. This innovative product exterior is part of the product s
__________.
a. form (moderate) p. 159
b. features
c. performance quality
d. conformance quality
e. durability
Chapter 10 Setting Product Strategy and Marketing Through the Life Cycle
1. A famous marketer once said his company was selling hope, not make-up. If thi
s is true, hope would be considered the core benefit of the product category mak
e-up. True (easy) p. 178
2. A radon gas detection system for homes would be considered a specialty good i
n the consumer-goods classification scheme. False (moderate) p. 180
3. The depth of a product mix refers to how many variants of each product are of
fered. True (moderate) p. 180
4. In the industrial-goods classification scheme, raw materials are long-lasting
goods that facilitate developing or managing the finished product. False (moder
ate) p. 180
5. All sellers are legally responsible for fulfilling the buyer s normal or reason
able expectations. True (Easy) p. 183
6. An existing product that has been repositioned can be considered a new produc
t. True (moderate) p. 184
7. The new product development process starts with profitability analysis of the
ideas. False (moderate) p. 185
8. Many of the best ideas for new industrial products originate with customer id
eas. True (moderate) p. 185
9. A product-positioning map uses selected criteria to show where a product stan
ds in relationship to comparable products. True (moderate) p. 186
10. Concept testing is the most expensive part of the new product development pr
ocess. False (moderate) p. 186
11. Alpha testing means testing a product within the firm, while beta testing me
ans enlisting customers to use the product and provide feedback. True (easy) p.
188
12. Simulated test marketing and test marketing are the same thing. False (moder
ate) p. 189
13. In spite of the benefits of test marketing, many firms today question its va
lue. True (moderate) p. 189
14. Personal influence is most important in the awareness stage of the adoption
process. False (difficult) p. 191
15. The stage of the product life cycle characterized by low sales, heavy promot
ion, low or negative profits, and minimal competition is the introduction stage.
True (moderate) p. 192
16. Typically, the longest stage in the product life cycle is the maturity stage
. True (moderate) p. 192
17. Increasing usage, frequency of use, or variety of use are all acceptable pro
duct modification strategies for a product in the maturity stage of the life cyc
le. False (moderate) p. 194
18. The appropriate decline strategy for a company depends on the industry s relat
ive attractiveness and the company s competitive strength. True (moderate) p. 195
19. The basic strategy for managing the growth stage of the PLC is product expan
sion. False (moderate) pp. 193 196
20. One criticism of the Product Life-Cycle concept is that it is not always cle
ar what stage a product is in it may appear to be mature when in fact it is in a p
lateau and has further potential. True (moderate) p. 196
21. Which of the following is NOT a reason that Steinway pianos command a premiu
m price in the marketplace?
a. They manufacture more affordable brands, such as Boston and Essex. (moderate)
p. 177
b. The pianos take nine months to build.
c. To build the piano requires 12,000 parts.
d. The piano is the most popular among composers and musicians.
e. Steinway can only produce only a few thousand concert pianos per year.
22. All of the following could be considered products, EXCEPT:
a. physical goods.
b. distribution channels. (moderate) p. 178
c. events.
d. persons.
e. ideas.
23. Marketers plan their market offerings at five levels. What is the correct or
der of the levels, going from the most fundamental level to the level with the m
ost benefits?
a. basic expected augmented core potential
b. expected potential basic augmented core
c. core basic expected augmented potential (moderate) p. 179
d. potential augmented expected core basic
e. basic core augmented potential expected
24. Painting and consulting are considered industrial goods, because __________.
a. they are specialty goods
b. they are considered component materials
c. most firms do not seek them directly
d. they facilitate developing and managing the finished product (moderate) p. 18
0
e. they are nondurables
25. In 2003, Toyota introduced its Scion brand, with the aim of bringing younger
buyers into the family. This was a classic example of __________.
a. line modernization
b. line featuring
c. line cannibalization
d. line padding
e. line stretching (difficult) p. 181
26. When SAP software added a Windows-style back button to its industrial invoice
management software, the new product __________.
a. used a repositioning strategy
b. introduced a new product line
c. added to an existing product line
d. improved upon an existing product (easy) p. 184
e. used a market diversification strategy
27. Mazda s Miata convertible originally drew the most interest from women between
the ages of 35 55. In order to interest more potential customers in the roadster,
Mazda beefed up the model with heavier shocks and a faster engine, then emphasi
zed performance in its advertising. This is an example of creating a new product
by ¬¬¬¬__________.
a. repositioning (moderate) p. 184
b. the development of a new product line
c. a market diversification strategy
d. a product development strategy
e. a new-to-the-world product
28. __________ are formal statements of expected product performance by the manu
facturer.
a. Open pricing statements
b. Promotional statements
c. Warranties (moderate) p. 183
d. General guarantees
e. Specific guarantees
29. Why do new products fail?
a. Because most products today have a longer product life, there is less need fo
r new products.
b. Social and governmental deregulations have made new-product development costs
more expensive, and therefore, producers avoid new product ventures.
c. Marketers tend to underestimate the market size and underestimate demand, whi
ch results in lost customers.
d. New-product development costs are higher than anticipated, and competitors re
spond more effectively than predicted. (difficult) p. 184
e. The underpricing of the product causes customers to overstock and depletes al
l future demand for the product.
30. What is NOT listed in the text as a reason products fail?
a. Too much demand. (moderate) p. 184
b. Ignoring or misinterpreting marketing research.
c. Ineffective advertising.
d. Overestimating market size.
e. Poor design.
31. In terms of new-product development, Spam Meat Product s annual Great Ideas fo
r Spam! Contest brings together Spam cooking ideas from all over the world. Each
contestant hopes his or her idea for a new recipe will win the grand prize. For
the makers of Spam, the contest serves as an avenue for __________.
a. idea screening
b. idea generation (moderate) p. 185
c. concept development
d. prototype development
e. business analysis
32. Which of the following is(are) an acceptable source of or opportunity to fin
d new product ideas?
a. Interactions with consumers.
b. Reversing normal assumptions.
c. Employee-submitted ideas.
d. A, B, and C are all acceptable ways of getting new product ideas. (easy) p. 1
85
e. The only acceptable idea source is internal research and development (R&D) un
der controlled conditions.
33. A potential marketer of new combination bread and sandwich maker machine ask
s consumers, Do you understand how the machine can benefit you? and Would this type
of machine solve a need for you? This marketer is in the __________ stage of new
-product development.
a. concept development and testing (difficult) pp. 186
b. business analysis
c. product development
d. idea generation
e. market testing
34. A product idea can be turned into several elaborated versions by asking ques
tions such as: Who will use the product? What primary benefit will it provide? W
hen will people use or consume it? The elaborated versions of the product idea a
re called __________.
a. product positions
b. brand concepts
c. product concepts (moderate) p. 186
d. brand positions
e. marketing audits
35. The marketing strategy plan is comprised of three parts. The first part cons
ists of describing the __________.
a. product s features, advantages, and benefits
b. target market size, structure, and the behavior of its target market (moderat
e) p. 186
c. planned price, distribution strategy, and marketing budget
d. long-run sales, profit goals, and marketing mix strategy
e. target market composition, its long-run sales goals, and the product s planned
pricing strategy
36. Neelim is trying to decide how many people will buy her new scrapbooking sof
tware and the accompanying printer accessories only once, how many will buy it m
ore than once, but only infrequently, and how many will become frequent purchase
rs of her scrapbooking product line. She is engaged in __________.
a. estimating costs and profits
b. marketing strategy development
c. estimating total sales (moderate) p. 187
d. risk analysis
e. sales-wave research
37. Scotto Giordinello is trying to launch a franchise version chain of his sand
wich shops. He has successfully done a concept test with target consumers. Now h
e is writing up his three-part preliminary marketing strategy in order to intere
st investors. What should be in the final section of the document?
a. Descriptions of the target market s size, structure, and behavior.
b. A description of the marketing budget for the first year.
c. Descriptions of the planned pricing and distribution for the product.
d. A description of the rapid-prototyping used to inform the architects.
e. Descriptions of the long-term sales, profit goals, and marketing-mix strategy
over time. (difficult) p. 187
38. EA, a gaming software products company has developed a role-playing game (RP
G) incorporating ideas supplied by some of the most famous game writers in the w
orld. The company asked about one hundred people to download the company s RPG, pl
ay it extensively, and give feedback on it. EA is using _________ testing.
a. beta (moderate) p. 188
b. concept
c. market
d. alpha
e. simulated
39. What is the first thing entrepreneurs should know when moving to the product
development stage of the New Product Development Decision Process described in
the text?
a. This is the stage where risk analysis is performed to see if it is worth it t
o proceed.
b. In this stage, alpha testing is carried out with actual consumers.
c. This stage involves a jump in investment that dwarfs the costs incurred in th
e earlier stages. (moderate) p. 188
d. The communication between engineering and marketing is likely to be natural a
nd effective by the time you have made it to this stage.
e. Making it to this stage guarantees eventual success of the product.
40. As a part of new-product development, beta testing is most useful when _____
_____.
a. the potential customers are homogeneous
b. the company is quite knowledgeable on the potential applications of the produ
ct
c. opinion leadership from early adopters is sought (difficult) pp. 188 192
d. the buying center for the product is limited to the individual making the act
ual purchase
e. all of the above occur.
41. Seven-Up briefly marketed a soda brand called Seven-Up Gold in medium-sized
cities like Virginia Beach. The product had a spiced flavor and contained caffei
ne. It was never introduced nationally. Seven-Up was probably engaging in ______
___.
a. full-blown test marketing
b. controlled test marketing (moderate) p. 189
c. simulated test marketing
d. sales-wave research
e. alpha testing
42. Suppose a marketing research firm that manages a panel of retail stores agre
es (for a fee) to study a company s new candy bar-based granola product. The resea
rch firm provides sales results and evaluates the impact of promotion. This is a
n example of __________.
a. simulated test marketing
b. controlled test marketing (moderate) p. 189
c. test markets
d. conjoint market analysis
e. sales-wave research
43. Which of the following is the most expensive part of the new product develop
ment process?
a. Concept testing.
b. Business analysis.
c. Product development.
d. Commercialization. (moderate) p. 190
e. Idea generation.
44. Market testing is beneficial when creating business products, but the proces
s may vary somewhat from that of testing consumer products because __________.
a. there is no good way of alpha testing business products
b. there is no good way of beta testing business products
c. conjoint analysis has limited value for testing industrial customers product a
ffinity
d. business product market tests are always more expensive than consumer product
s market tests
e. trade shows and distributor display rooms are crucial for assessing customer
acceptance (moderate) p. 189
45. McDonald s is preparing (yet another time) to roll out a new version of its Mc
Rib product. McDonald s is currently deciding if its new product should enter the
market at the same time it knows a new Arby s barbeque product is coming out. The
firm is devising its _________ for new-product commercialization.
a. geographic strategy
b. introductory market strategy
c. market-penetration plan
d. market pricing plan
e. timing (moderate) p. 190
46. If a firm learns that a major competitor is nearing the end of its product d
evelopment work, it may choose a number of approaches. Which of the following co
rrectly describes a market timing approach?
a. First entry includes locking up important distributors and gaining reputation e
arly. (moderate) p. 190
b. First entry which guarantees early dominance and ongoing market leadership.
c. Parallel entry means launching the exact same product simultaneously to the com
petitor s launch.
d. Late-entry has the disadvantage of bearing the financial brunt of educating the
consumer about the new category.
e. Secondary entry involves purposely coming into the marketplace the week after t
he primary entrant and seeking the niche customers only.
47. During commercialization, a company must develop an action plan for the roll
out. The action plan answers the commercialization question of __________.
a. What?
b. Where?
c. How? (moderate) p. 190
d. To whom?
e. Who?
48. During the implementation of the introductory marketing strategy, a marketer
could use _________ to show the simultaneous and sequential activities that mus
t take place to launch the new product.
a. a Gantt chart
b. a PERT table
c. a position map
d. critical path scheduling (moderate) p. 190
e. a rollout plan
49. Before Dede read the article about Toyota s new super-efficient, low-polluting
car, the Prius (the car is propelled by a hybrid of an electric motor and small
gasoline engine), she had previously heard that the product existed, but didn t k
now much about it. Having read the article, she now wants to learn even more abo
ut the new car. In terms of the adoption process, Dede has moved from __________
.
a. evaluation to trial
b. awareness to interest (easy) p. 191
c. awareness to evaluation
d. interest to evaluation
e. interest to trial
50. Guadalupe is thinking about buying an iPod Nano music player. The market is
constantly changing, so she has read Consumer Reports, talked to several salespe
ople, and avidly watched for sales. Guadalupe has also checked her bank account
to see if she can afford the personal music and video player. She is in the ____
______ stage of the consumer adoption process.
a. awareness
b. interest
c. adoption
d. evaluation (moderate) pp. 190-192
e. trial
51. Personal influence is most important in the __________ stage of the adoption
process.
a. awareness
b. interest
c. evaluation (moderate) p. 191
d. trial
e. adoption
52. Which of the following groups is the largest group of adopters?
a. The innovative majority.
b. The opinion leaders.
c. The early adopters.
d. The divisibility majority.
e. The early majority. (easy) p. 191
53. Pre-made Rice Krispy treats were a huge success because they were perceived
as much easier than making the recipe yourself which required consumers to melt ma
rshmallows, use large mixing bowls, and stir for just the right amount of time.
Pre-packaged Rice Krispy treats had a high level of __________ when compared to
the former way of obtaining this tasty dessert.
a. relative advantage (moderate) p. 191
b. divisibility
c. communicability
d. complexity
e. comparability
54. Birth control pills didn t diffuse as quickly in predominately Roman Catholic
countries as they did in the United States. This is an example of problems with
the new product s __________.
a. relative advantage
b. compatibility (moderate) p. 192
c. communicability
d. complexity
e. divisibility
55. When a new product innovation is relatively difficult to understand or use,
the characteristic of __________ slows the adoption rate of the new product.
a. relative advantage
b. divisibility
c. communicability
d. complexity (moderate) p. 192
e. compatibility
56. According to the concept of the product life cycle, __________.
a. products have a limited life (difficult) p. 192
b. products spend a predetermined amount of time in each stage of the life cycle
; this time span is determined by the product category
c. most products require the same level of marketing throughout their life cycle
d. a product s profits are fixed throughout its life cycle
e. all products begin at the introductory stage and move through all the life cy
cles stages at a steady rate
57. Which of the following is NOT an underlying assumption of the product life c
ycle?
a. Products have a limited life.
b. Products pass through distinct stages with different challenges to the market
er.
c. Services do not pass through life-cycle stages like products do. (moderate) p
. 192
d. Profits rise and fall at different stages.
e. Products require different marketing and other business strategies in each st
age.
58. Which of the following is NOT generally true of the product life cycle?
a. Profits are negative in the introduction stage.
b. Profits decline in the decline stage.
c. Profits reach their highest point during the maturity stage.
d. As the product passes through different stages, marketing adjustments are req
uired.
e. Sales peak in the maturity stage. (moderate) p 192
59. The stage of the life cycle characterized by low sales, heavy promotion, low
profit, and minimal competition is the _________ stage.
a. introduction (moderate) p. 193
b. growth
c. repositioning
d. maturity
e. decline
60. In the Schnaars study of 28 industries in which imitators surpassed the inno
vators, which of the following was NOT a common weakness of the failing pioneers
?
a. New products that were too crude.
b. Products that were improperly positioned.
c. Products appeared before strong demand.
d. Too many new products in the pipeline. (moderate) p. 193
e. Managerial incompetence or unhealthy complacency.
61. Which of the following is NOT one of the factors Tellis and Golder say under
pin long-term market leadership?
a. Niche market dominance. (moderate) p. 193
b. Relentless innovation.
c. Asset leverage.
d. Vision of a mass market.
e. Persistence.
62. Most products are in the __________ stage of the product life cycle.
a. introduction
b. growth
c. pre-maturity
d. maturity (moderate) p. 194
e. decline
63. The stage in the product life cycle in which the marketing objective is to m
aximize profit while defending market share is the __________ stage.
a. introduction
b. growth
c. rejuvenation
d. maturity (moderate) p. 194
e. decline
64. Volkswagen continued to sell its sedan (Beetle) in Brazil and Mexico for nea
rly 20 years after it withdrew the product from the United States. The company r
educed R&D costs for the car to virtually nothing during that time, and did no a
dvertising. In product life cycle terms, VW was __________ with the Beetle.
a. divesting
b. harvesting (moderate) p. 195
c. maintaining
d. reducing overcapacity
e. engaging in product improvements
65. When psychological persuasion is NOT as effective as financial persuasion, m
arketers tend to use which form of sales stimulation technique?
a. Advertising.
b. Word of mouth (WOM).
c. Sales promotion. (moderate) p. 194
d. Product quality improvement.
e. Product style improvement.
66. Which is NOT a possible characteristic of harvesting a product in a declinin
g industry?
a. Reducing market participation. (moderate) p. 195
b. Reducing product quality.
c. Reducing sales force size.
d. Reducing advertising expenditures.
e. Reducing investment in R&D.
67. Price reductions, promotion cutbacks, and competitor dropout characterize th
e __________ stage of the life cycle.
a. introduction
b. growth
c. stable maturity
d. decaying maturity
e. decline (easy) pp. 194 195
68. Pricing changes are necessary across the product life cycle. Which of the fo
llowing represents a correct match of PLC stage to price strategy?
a. Cutting prices in the introduction stage.
b. Pricing to penetrate the market in the growth stage. (moderate) p. 195
c. Matching competitors pricing in the decline stage.
d. Charging cost-plus pricing in the decline stage.
e. Pricing to best competitors in the introduction stage.
69. Distribution changes are necessary across the product life cycle. Which of t
he following represents a correct match of PLC stage to distribution strategy?
a. Phasing out unprofitable outlets in the growth stage.
b. Phasing out unprofitable outlets in the introduction stage.
c. Building more intensive distribution in the maturity stage. (moderate) p. 195
d. Being selective about distribution in the growth stage.
e. Building selective distribution in the decline stage.
70. Although many swear by the product life cycle (PLC), some criticize the conc
ept because __________.
a. PLC doesn t help managers compare product performance to other similar products
b. PLC is an ineffective product management tool
c. marketers can seldom tell what stage of the PLC a product is in (difficult) p
. 196
d. the product life-cycle pattern is an inevitable pattern relatively unaffected
by marketing strategies
e. PLC is not applicable to any services
Essay Questions
71. Marketers plan their market offering at five levels, each adding customer va
lue. Consider Apple s iPod what might be included in each of the product s levels?
Answer:
The five levels are depicted in the concentric circles model in Figure 10.2.
Core Benefit The fundamental service or benefit that the iPod buyer is really buyi
ng. This could be an ability to listen to music while on the go, or the opportunit
y to store lots of music in one place. The core benefit for some users might be
considered as fashion.
Basic Product The way the core benefit it turned into a product. This is the physi
cal product, the white or black plastic, or brushed metal colors, the control whe
el, the headphones, the hard drive inside, etc.
Expected Product Buyers normally expect a certain set of attributes and conditions
when they purchase an iPod. For example, the iPod needs to work, store reserve
power for hours of listening, find songs you want to hear, deliver a certain amo
unt of audio quality, etc.
Augmented Product These are the pluses iPod tries to deliver, if Apple is too good a
t it, these may become expectations. Ease is a big plus for iPod, once users get
the hang of the machine, they come to take for granted how easy it is to create
playlists, add and delete music, etc. Apple could easily add value by sending u
sers a free download every once in awhile, which would add unexpected but real v
alue to users without much cost to the company.
Potential Product All the possible augmentations and transformations possible. iPo
d could add a phone or PDA function, allow text or email transmission, or be ava
ilable in truly tiny sizes in the future. There are many, many potential possibi
lities.
(difficult) p. 179, Figure 10.2
72. Maurer has developed a hermetic system for smoking meat that uses 50 percent
less energy than industrial-sized smokers currently on the market even though i
t will smoke the same amount of meat uniformly. It also has an added advantage i
n that it is easy to clean because the hermetic system reduces tar and ash resid
ue. In a short essay, discuss how Maurer would conduct a business-goods marketin
g test.
Answer:
Maurer would use alpha testing within the company and beta testing with outside
customers. During beta testing, its vendor s technical people will observe how tes
t customers use the product, a practice that might expose unanticipated problems
of safety and servicing and alert Maurer to the needs for customer training and
servicing requirements. The vendor can also observe how much value the equipmen
t adds to the customer s operation as a clue to subsequent pricing. The vendor wil
l ask the customers to express their purchase intention and other reactions afte
r the test. A second common test method Maurer could use would be to introduce t
he new smoker at trade shows. Trade shows draw a large number of potential buyer
s. The vendor can observe how much interest buyers show in the new smoker. The s
moker could also be tested in distributors and dealers display rooms where they ma
y stand next to the Maurer s other products and possibly competitors products. Maur
er would come closest to using full test marketing if it gives a limited supply
of the product to the sales force to sell in a limited number of areas that rece
ive promotional support.
(difficult) p. 188
73. In a short essay, explain the five stages that adopters of new products and
services move through. Then consider the following scenario: Burke comes back to
his dorm room from a night out drinking and entertainment and is excited about
a new local band he heard the Route 66 Killers. He thinks their retro surf-influen
ced style sounds interesting. His roommate Bridgett tells Burke the band will pl
ay again at another local nightspot on Friday. A friend that has dropped by ment
ions that she has listened to nothing else since buying the R6K s CD, and she love
s their T-shirt! A fraternity pledge, Tony, from the apartment next door, heard
the band at one of the events during hell week and says he can t stand the band si
nce hearing them not enough punk influence for him and he hates the drummer, Moloto
va, because Josh s girlfriend flirted with the musician. Now indicate which stage o
f the adoption process each of the above participants is in.
Answer:
The consumer adoption process focuses on the mental processes through which an i
ndividual passes from first hearing about an innovation to final adoption. 1) Aw
areness. The consumer becomes aware of the innovation but lacks information abou
t it. 2) Interest. The consumer is stimulated to seek information about the inno
vation. 3) Evaluation. The consumer considers whether to try the innovation. 4)
Trial. The consumer tries the innovation to improve his or her estimate of its v
alue. 5) Adoption. In the case of the Route 66 Killers, the consumer decides to
make full and regular use of the innovation. Burke is in the interest stage. Bri
dgett is in the evaluation stage. The fraternity pledge reached the trial stage
and stopped. The friend is in the adoption stage.
74. The decline stage of the product life cycle (PLC) has its own special challe
nges for marketers. In a short essay, define the five strategies that a marketer
can use for dealing with a product in the decline stage. What factors determine
the strategy that should be implemented?
Answer:
1) Increase the firm s investment so as to either dominate the market or strengthe
n its competitive position. 2) Maintain the firm s investment level until the unce
rtainties about the industry are resolved. 3) Decrease the firm s investment level
selectively, by dropping unprofitable customer groups, while simultaneously str
engthening the firm s investment in lucrative niches. 4) Harvest the firm s investme
nt to recover cash quickly. 5) Divest the business quickly by disposing of its a
ssets as advantageously as possible. The appropriate decline strategy depends on
the industry s relative attractiveness and the company s competitive strength in th
at industry.
(moderate) pp. 194-195
75. A father-and-son team owns a company that hand-makes customized high-quality
guitars for famous musicians. The son is convinced that such guitars are in the
maturity stage of the product life cycle (PLC) and wants to implement strategie
s that will stimulate sales. The father is critical of the whole PLC concept. Ov
er the years, as more and better-funded competitors entered the market and their
profits shrunk, they have debated the PLC concept. In a short essay, discuss th
e reasons the son seems to be so in favor of the PLC concept and the father seem
s to be so opposed to it.
Answer:
The PLC concept is best used to interpret product and market dynamics. As a plan
ning tool, the PLC concept helps managers characterize the main marketing challe
nges in each stage of a product s life and develop major alternative marketing str
ategies. As a control, the PLC concept helps the company measure product perform
ance against similar products launched in the past. Critics of the PLC concept
contend that life-cycle patterns are too variable in their shape and duration. P
LCs lack what living organisms have namely, a fixed sequence of stages and a fixed
length for each stage. Critics also charge that marketers can seldom tell what
stage the product is in. They charge that the PLC pattern is the result of marke
ting strategies rather than an inevitable course that sales must follow.
Mini-Cases
Mini-Case 10-1
In 1991, Jenny Wood was trying to figure out a way to make some extra cash. Her
husband was a student, and they had two small children. She was already selling
Jenny s Country Kitchen gourmet cocoa mixes at local fairs and craft shows when sh
e came up with the idea for flavored creamers for coffee. She developed nine dif
ferent flavors of creamers, including raspberry mocha and cherry vanilla. Respon
se to the creamers was so good, she decided to rent a small manufacturing facili
ty. Her continued success brought her to the attention of some national retailer
s who were interested in carrying her product. National exposure on the QVC shop
ping channel gave the business a big boost in customer awareness.
76. Refer to Mini-Case 10-1. Because this is a small operation, Jenny and her hu
sband would have most likely used __________, the simplest method of evaluating
the merit of her new product idea.
a. break-even analysis (easy) p. 188
b. conjoint analysis
c. risk analysis
d. an attribute listing worksheet
e. extensive concept testing
77. Refer to Mini-Case 10-1. Since her appearance on QVC, Jenny has started a ma
il-order business. She has used sales-wave research to estimate trial, first rep
eat, and customer level of satisfaction with the flavored creamers. Jenny probab
ly selected sales-wave research because it __________.
a. measures the effectiveness of different sales promotions on customer trial ra
tes
b. does not in any way expose the product to the scrutiny of competitors
c. can be implemented quickly and can be conducted with a fair amount of securit
y (difficult) p. 189
d. is cost-free
d. indicates the brand s power to gain distribution and favorable shelf position s
hould she decide to market to retailers
78. Refer to Mini-Case 10-1. A consumer who was aware of Jenny s Country Kitchen f
lavored creamers, but who did not know where or how to purchase them, their cost
, or their contents and was stimulated to seek information about the product, wo
uld be in the __________ stage of the new product adoption process.
a. interest (moderate) p. 191
b. trial
c. diffusion
d. adoption
e. evaluation
Mini-Case 10-2
Scooter Williams has devoted his life to all things motorized and on two wheels.
He is currently working for a Honda dealership, but would like to start his own
motorcycle repair company. For years he has been making plans to go independent
by offering the service on a mobile basis that is, he will go to the motorcycle i
n need of repair rather than make the biker deliver the ailing machine in the ba
ck of a truck. Scooter figures this will save on retail space and provide added
value to those with broken down motorcycles. The new company will be called Scoo
ter s.
79. Refer to Mini-Case 10-2. Scooter plans to ask about 30 motorcycle owners abo
ut their preferences regarding commercial motorcycle maintenance, including show
ing them his ad materials and asking about acceptable pricing levels. Scooter is
engaged in __________.
a. controlled test marketing
b. full-blown test marketing
c. sales-wave research
d. covert test marketing
e. simulated test marketing (difficult) p. 189
80. Refer to Mini-Case 10-2. Some of the owners contacted say they have heard of
Scooter s idea through friends over the years. They are in the ¬¬__________ stage of
the adoption process.
a. awareness (easy) p. 191
b. interest
c. evaluation
d. trial
e. adoption
81. Refer to Mini-Case 10-2. In general, the core customer benefit of motorcycle
repair work is __________.
a. door-to-door delivery of the bike
b. the rider can keep riding (difficult) pp. 178 179
c. the changing of the nuts and bolts and parts by the mechanic
d. the advice the mechanic gives on extended warranties
e. the satisfaction Scooter will feel when he has a happy customer

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Chapter 6 Analyzing Business Markets

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