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Chapter 15: Introducting New Market Offerings

1) Which of the following is most closely related with the organic growth of an organization?
A. acquiring a product or service brand
B. entering new marketplaces
C. increasing the operational profitability
D. increasing productivity of employees
E. developing new products from within
ANSWER: E
2) New-to-the-world products are ________.
A. low-cost products designed to obtain an edge in highly competitive markets
B. new product enhancements that supplement established products
C. new versions of an existing product that has been less successful
D. new products that create an entirely new market
E. existing products that are targeted to new geographical markets
ANSWER: D
3) Which of the following firms is most likely to seek radical innovation?
A. a traditional publishing company
B. a small scale FMCG company
C. a firm that procures and markets wheat
D. a high-tech firm in telecommunications
E. a firm that sells mineral water
ANSWER: D
4) Most new-product activities are devoted to ________.
A. changing the target markets
B. developing new-to-the-world products
C. introducing backward integration
D. improving existing products
E. changing the existing market dynamics
ANSWER: D
5) Which of the following is the best example of a new-to-the-world product?
A. Walmart, the retail giant, opens new stores in an underdeveloped African country.
B. Pestorica, a publishing company, decides to launch a new sports magazine.
C. Tata Motors, an Indian automobile company, acquires Jaguar to extend its business.
D. An Asian company licenses a US apparel brand name though the brand is not familiar in Asia.
E. Kids-Med, a company that produces childcare products, launches a non-contact thermometer.
ANSWER: E
6) Most established companies focus on ________ innovation when they aim to enter new markets by tweaking existing
products, or they want to stay one step ahead in the market by using variations on a core product.
A. incremental
B. continuous
C. spontaneous
D. radical
E. competitive
ANSWER: A
7) Jordan's firm enters new markets by tweaking products for new customers, uses variations on a core product to stay
one step ahead of the market, and creates interim solutions for industry-wide products. In other words, it uses ________.
A. disruptive technologies
B. incremental innovation
C. complex innovations
D. discontinuous innovations
E. radical innovations
ANSWER: E
8) It has been observed that most new products have shorter product life cycles. What is the reason for this?
A. Most new products do not use technology.
B. Most new products are not backed by a marketable idea.
C. New products do not get adequate management support.
D. Social and governmental constraints lead to this failure.
E. Rivals quickly copy products that are successful.
ANSWER: E

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9) Which of the following strategies for new-product development incorporates buyers' preferences in the final design of
the product?
A. quality function deployment
B. market leadership
C. cost leadership
D. incremental innovation
E. disruptive technology
ANSWER: A
10) Pager, a simple personal device for short messages, became famous in the 1990s. Troveron Communications launched
a pager in the early twenty-first century. Due to the introduction of mobile phones and text messaging, the pager industry
was on a decline. The company's innovations were not well received by the market and the product was a failure. Which
of the following is the most likely reason for the product's failure in this case?
A. poor launch timing of the product
B. a small and fragmented target market
C. high cost of development
D. social and economic constraints
E. hasty product development
ANSWER: A
11) After creating a product prototype, a company tests it within the firm to see how it performs in different applications.
The company refines the prototype to correct the mistakes found in in-house testing. What should be the next step?
A. commercializing the product
B. performing concept testing
C. conducting beta testing with customers
D. creating a marketing strategy for the product
E. performing business analysis
ANSWER: C
12) Identify a shortcoming of giving the responsibility to develop new products to the product managers of a company.
A. They would not be familiar with the industry standards.
B. Product managers would not have an operational focus.
C. Product managers are often busy managing existing lines.
D. They will find it difficult to gain support from employees.
E. Product managers are less likely to use participative management.
ANSWER: C
13) ________ teams are cross-functional groups charged with developing a specific product or business.
A. Virtual
B. Venture
C. Fundamental
D. Elemental
E. Transitory
ANSWER: B
14) Intercom Inc., together with its subsidiaries, primarily engages in the generation, transmission, and distribution of
electric power in the United States. The company observes that its growth has stagnated over a period of two years. In
an attempt to promote growth, it considers adding new features to the existing products and introducing a few new
products. The company forms a committee consisting of three top executives, one of the production mangers, a few
operational managers, and a representative of the HR department to generate ideas. This team is called a(n) ________
team.
A. virtual
B. venture
C. fundamental
D. elemental
E. transitory
ANSWER: B
15) A team formed at Intercom Inc. to generate ideas for new products conducts frequent meetings and engages in
activities such as mind mapping and brainstorming. Most of the meetings are conducted at informal locations away from
office. These workplaces are called ________.
A. skunkworks
B. idea funnels
C. research centers
D. stage-gate systems

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E. contextual bases
ANSWER: A
16) A ________ divides the innovation process into stages with a checkpoint at the end of each stage.
A. reverse assumption analysis technique
B. skunkworks system
C. stage-gate system
D. spiral development process
E. new-product department technique
ANSWER: C
17) ________ are informal workplaces, sometimes garages, where intrapreneurial teams attempt to develop new
products.
A. Stage-gate systems
B. Skunkworks
C. Funnels
D. Opportunity spaces
E. Research centers
ANSWER: B
18) Which of the following questions is answered during the business analysis of ideas?
A. Will this product meet our profit goals?
B. Have we got a technically and commercially sound product?
C. Can we find a cost-effective, affordable marketing strategy?
D. Can this product meet sales expectations?
E. Can we find a good concept consumers say they would try?
ANSWER: D
19) During which of the following stages in new product development decision making do managers analyze if they can
find a good thought consumers say they would try?
A. idea generation
B. idea screening
C. business analysis
D. concept development and testing
E. product development and testing
ANSWER: D
20) A ________ process recognizes the value of returning to an earlier stage to make improvements before moving
forward.
A. spiral development
B. reactive development
C. market testing
D. proactive development
E. concept testing
ANSWER: A

21) ________ means inviting the Internet community to help create content or software, often with prize money or a
moment of glory involved.
A. Stage-gating
B. Cocreation
C. Microstocking
D. Buzzing
E. Crowdsourcing
ANSWER: E
22) Companies such as Edison Nation and the Big Idea Group have sprung up to tap into ________ possibilities, often
combining its own design, branding, engineering, and sales teams with online participants, forming a community for
devising new products.
A. stage-gating
B. cocreation
C. microstocking
D. buzzing
E. crowdsourcing
ANSWER: E
23) Surgeons and ER nurses would be considered ________ for surgical equipment.

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A. venture agents
B. internal customers
C. buzz agents
D. lead users
E. connectors
ANSWER: D
24) Many people believe that customer focus does not help to create better, or new, products. This belief rests on which
of the following ideas?
A. Such new product developments decrease the chances of success.
B. Customers do not consider the cost of design when making suggestions.
C. Customers are at times unaware of what they really want.
D. It increases the cost of testing a product or service.
E. Having too much customer focus leads to a negative brand image.
ANSWER: C
25) The ________ technique for stimulating creativity lists all the characteristics of an object and then modifies each to
try to arrive at a new idea.
A. reverse assumption analysis
B. lateral marketing
C. attribute listing
D. forced relationship
E. morphological analysis
ANSWER: C
26) The ________ technique used for stimulating creativity identifies a problem and then considers the dimension, the
medium, and the power source.
A. attribute listing
B. reverse assumption analysis
C. mind mapping
D. lateral marketing
E. morphological analysis
ANSWER: E
27) In an attempt to improve the product, a company that manufactures screwdrivers discusses the modification of each
attribute, such as replacing the wooden handle with plastic, providing torque power, adding different screw heads, and so
on. This creativity technique is called ________.
A. attribute listing
B. mind mapping
C. morphological analysis
D. lateral analysis
E. reverse analysis
ANSWER: C
28) Electro Locomotors (EL) Inc. engages in the manufacture, distribution, and marketing of custom vehicles in Brazil.
Bono, a hybrid car brand that the company produces, is a market leader in the hybrid vehicles segment. With the
increased global focus on nature-friendly vehicles and governmental subsidies for companies that manufacture hybrid
vehicles, competition has increased for flex-fuel cars like Bono. The heads of the R&D team at EL are in a creative session
to generate ideas for improvements to Bono. They consider each part of the car and discuss the possibilities of
improvements in each of them. Identify the creativity technique used here.
A. attribute listing
B. forced relationship analysis
C. morphological analysis
D. reverse assumption analysis
E. mind mapping
ANSWER: A
29) ________ works by listing all the normal assumptions about an entity and then turning them around.
A. Lateral marketing
B. Attribute listing
C. Reverse assumption analysis
D. Forced relationships
E. Morphological analysis
ANSWER: C

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30) The ________ creativity technique begins with a thought that is written down, then proceeds to develop other
thoughts that are linked to the first thought, and finally a new idea materializes by associating all of the thoughts.
A. mind mapping
B. contextual analysis
C. attribute listing
D. reverse assumption analysis
E. morphological analysis
ANSWER: A
31) Increasingly, new-product ideas arise from ________ that combines two product concepts or ideas to create a new
offering.
A. reverse assumption analysis
B. lateral marketing
C. attribute listing
D. forced relationships
E. morphological analysis
ANSWER: B
32) A group of college graduates decides to start a business. Though they are knowledgeable in various business
domains, they are unable to arrive at a valuable business idea. They decide to search for ideas in a structured manner.
They meet and start discussing everyone's ideas. Each idea is recorded and then the thoughts that come up in relation to
the ideas are written down and discussed. This process helps them to finalize a business plan. What technique is used
here?
A. morphological analysis
B. forced relationship analysis
C. reverse assumption analysis
D. attribute listing
E. mind mapping
ANSWER: E
33) Morboro Energy Inc. is a large chain of fuel stations in Europe. The company decided to expand its business by
incorporating restaurants and automobile service stations as a part of its fuel outlets. This is an example of ________.
A. lateral marketing
B. brand extension
C. market development
D. internal marketing
E. brand personification
ANSWER: A
34) A ________ error occurs when the company dismisses a good idea.
A. probability
B. performance
C. double counting
D. DROP
E. GO
ANSWER: D
35) The stage in the new product process that occurs first and has a pass ratio of 1:4 is the ________ stage.
A. idea screening
B. product development
C. test marketing
D. product soft launch
E. concept testing
ANSWER: A
36) A(n) ________ is a possible product the company might offer to the market.
A. test brand
B. alpha product
C. beta version product
D. product idea
E. product concept
ANSWER: D
37) A(n) ________ is an elaborated version of a product idea expressed in consumer terms.
A. test brand
B. alpha product

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C. beta product
D. business schedule
E. product concept
ANSWER: E
38) ________ means presenting the product concept to target consumers, symbolically or physically, and getting their
reactions.
A. Perceptual mapping
B. Brand-positioning mapping
C. Brand attribute mapping
D. Concept development
E. Concept testing
ANSWER: E
39) Modern firms use the ________ tool to design products on a computer and then produce rough models to show
potential consumers for their reactions.
A. morphological analysis
B. rapid prototyping
C. concept testing
D. perceptual mapping
E. conjoint analysis
ANSWER: B
40) Brown & Smith Inc. engages in the design, development, making, and retail selling of designer jewelry in North
America. Before approving a new design, the company draws it on a computer and then produces models to show
potential consumers and get their reactions. This allows the company to analyze the possible customer reaction. Identify
the concept testing method used here.
A. conjoint analysis
B. perceptual mapping
C. virtual reality testing
D. rapid prototyping
E. digital fabrication
ANSWER: D
41) Consumer preferences for alternative product concepts can be measured through ________, a method for deriving
the utility values that consumers attach to varying levels of a product's attributes.
A. concept testing
B. perceptual mapping
C. gap level analysis
D. conjoint analysis
E. morphological analysis
ANSWER: D
42) With ________, respondents see different hypothetical offers formed by combining varying levels of the attributes,
then rank the various offers.
A. gap level analysis
B. conjoint analysis
C. perceptual mapping
D. concept testing
E. morphological analysis
ANSWER: B
43) Universal Services Inc. provides communication services to residential and business customers in rural and small
urban communities primarily in northern England. The company offers services such as local and long distance voice,
data, and Internet and broadband product offerings. The company, in an attempt to increase the attractiveness of its
offerings, decides to provide special voice and data packages to its customers. The company designs eight different packs
that offer varying voice and data benefits to customers. The company then asks a few of its customers to rank the packs
in order to choose two best packs. Which of the following testing methods is being used in this scenario?
A. virtual reality testing
B. conjoint analysis
C. perceptual mapping
D. product fabrication
E. rapid prototyping
ANSWER: B
44) The trade-off approach may be easier to use when there ________.

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A. are many variables

B. are only a few alternatives
C. are observers that are biased
D. are possible offers that are limited
E. is only one highly desirable solution
ANSWER: A
45) ________ is a "hybrid" data collection technique that combines self-explicated importance ratings with pair-wise
trade-off tasks.
A. Sales wave analysis
B. Simulative data testing
C. Adaptive conjoint analysis
D. Business analysis
E. Exponential data collection
ANSWER: C
46) ________ exhibit replacement cycles dictated by physical wear or obsolescence associated with changing style,
features, and performance.
A. Frequently purchased products
B. High-moving goods
C. Inexpensive products
D. Commodity products
E. Infrequently purchased products
ANSWER: E
47) To estimate replacement sales, management must research the product's ________, the number of units that fail in
year one, two, three, and so on.
A. survival-age distribution
B. life-cycle ratio
C. obsolescence rate
D. business turnover ratio
E. product-performance usage
ANSWER: A
48) ________ contribution lists the changes in income to other company products caused by the introduction of a new
product.
A. Supplementary
B. Dragalong
C. Gross
D. Cumulative
E. Net
ANSWER: A
49) The highest loss a project can create is called ________.
A. rapid prototyping income
B. payback income
C. maximum investment exposure
D. incremental yearly exposure
E. cannibalized income
ANSWER: C
50) The job of translating target customer requirements into a working prototype is helped by a set of methods referred
to as ________.
A. quality function deployment
B. quality control processes
C. rapid prototyping
D. marketing control
E. control system formation
ANSWER: A
51) Which of the following methodologies takes the list of desired customer attributes (CAs) generated by market
research and turns them into a list of engineering attributes (EAs) that engineers can use?
A. quality control processes
B. quality function deployment
C. rapid prototyping
D. marketing control

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E. control system formation

ANSWER: B
52) ________ testing is a customer test that involves placing the product within the firm to see how it performs in
different applications.
A. Beta
B. Research
C. Sales-wave
D. Alpha
E. Simulated
ANSWER: D
53) In consumer-goods market testing, the company seeks to estimate four variables. These four variables are: trial, first
repeat, adoption, and ________.
A. guaranteed response
B. price sensitivity
C. purchase frequency
D. usage convenience
E. preferential treatment
ANSWER: C
54) A large FMCG company decides to test market Kora, a new brand of face cleanser, to be launched soon. The company
initially distributes a few free samples to some prospective consumers. Later it offers the product to the customers at a
discounted price and observes that not only more than seventy percent of the customers are purchasing it but the same
number are also satisfied using it. The company keeps using this process 3-4 times to obtain a correct count of the
number of people purchasing the product repeatedly. Which of the following testing methods is being used here?
A. simulated testing
B. controlled testing
C. full test marketing
D. parallel testing
E. sales-wave research
ANSWER: E
55) Which of the following is an advantage of sales-wave research?
A. It gives surprisingly accurate results on advertising effectiveness.
B. It allows the brand to gain favorable shelf position.
C. It guarantees immediate brand recognition and high sales volume.
D. It can be implemented quickly with a fair amount of security.
E. It easily creates a buzz in the minds of customers.
ANSWER: D
56) Which of the following is usually referred to as a full-blown test market?
A. an internal focus group
B. a discussion group
C. a country
D. a city or a few cities
E. a laboratory
ANSWER: D
57) The least costly way of consumer-goods market testing is ________.
A. simulated test marketing
B. controlled test marketing
C. a few test markets
D. sales-wave research
E. test marketing in 25 percent of the country
ANSWER: D
58) Which of the following products is most likely to undergo alpha and beta testing?
A. food products
B. industrial goods
C. consumer products
D. commodities
E. FMCG products
ANSWER: B

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59) During ________ testing, the company's technical people observe how customers use the product, a practice that
often exposes unanticipated problems of safety and servicing and alerts the company to customer training and servicing
requirements.
A. beta
B. research
C. sales-wave
D. alpha
E. simulated
ANSWER: A
60) For a frequently purchased new product, the seller estimates repeat sales as well as first-time sales. A high rate of
repeat purchasing means customers ________.
A. value price more than differentiation
B. do not support innovation on brands
C. value differentiation more than price
D. prefer personalized products rather than standard ones
E. are satisfied with the product
ANSWER: E
61) Poga International, a multinational beverage corporation identifies that one of its competitors is launching an apple
flavored drink. The company decides to launch an apple flavor brand along with its competitor. What timing strategy is
used here?
A. first entry
B. blunt entry
C. parallel entry
D. late entry
E. exchange entry
ANSWER: C
62) Some firms might delay the launch of their products until after the competitor has borne the cost of educating the
market. Such an entry is called ________ entry.
A. strategic payoff
B. parallel
C. balancing
D. late
E. compensating
ANSWER: D
63) A(n) ________ is any good, service, or idea that is perceived as new, no matter how long its history.
A. commodity
B. innovation
C. adoption
D. invention
E. novel product
ANSWER: B
64) Adopters of new products move through five stages. These stages begin with ________ and follow with interest,
evaluation, trial, and adoption.
A. awareness
B. investigation
C. trial
D. innovation
E. diffusion
ANSWER: A
65) Identify the stage in the consumer adoption process in which the customer is stimulated to seek information about
the innovation.
A. awareness
B. adoption
C. interest
D. evaluation
E. trial
ANSWER: C

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66) Robert has heard about the latest cell phone from LG Electronics that features Wi-Fi hotspot technology. Wi-Fi hotspot
is a technology that allows users to share mobile internet with other Wi-Fi enabled devices. Robert visits the company's
Web site to read more about the phone. Robert is in the ________ stage of consumer-adoption process.
A. interest
B. awareness
C. evaluation
D. trial
E. adoption
ANSWER: A
67) Armordo is a famous vacuum cleaner brand in Africa. Clara has heard of Armordo and she knows that the product is a
success. She has started considering whether or not to buy the vacuum cleaner. What stage of the consumer-adoption
process is Clara in?
A. awareness
B. adoption
C. evaluation
D. trial
E. interest
ANSWER: C
68) Which of the following is the mental step in the consumer-adoption process where the customer starts considering
whether to try an innovation?
A. adoption
B. trial
C. awareness
D. evaluation
E. interest
ANSWER: D
69) People who are technology enthusiasts, venturesome, and who enjoy tinkering with new products and mastering their
intricacies are called ________.
A. innovators
B. early adopters
C. early majority
D. investigators
E. experimenters
ANSWER: A
70) Troma Inc. is a famous manufacturer of cookware that follows a traditional distributor- retailer system to distribute its
products. The company abstains from the use of automated supply chain management (SCM) systems mainly due to the
fear of unknown. However, rapidly escalating operational costs and inefficiencies have made it necessary for the company
to implement an SCM system. The company goes for a big-bang installation of SCM system to become more competitive
and cost effective. Identify the adopter group to which Troma belongs.
A. innovator
B. early adopter
C. early majority
D. laggard
E. late majority
ANSWER: D
71) Jason is a technology enthusiast who is happy to conduct alpha and beta testing and report on early weaknesses of
consumer electronics products. He is most likely to fall in the ________ adopter category.
A. late majority
B. early
C. early majority
D. innovator
E. laggard
ANSWER: D
72) Which of the following characteristics is closely associated with late majority adopter groups?
A. superior technological knowledge
B. low price sensitiveness
C. opinion leadership
D. deliberate pragmatism
E. high risk aversion

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ANSWER: E
73) Joseph, a student of Columbia University, finds many of his classmates have purchased an iPad tablet from Apple. The
iPad, launched a few months before has been identified as a very useful product and many students in the US have rated
it highly. Considering all these, Joseph also decides to purchase an iPad. Which of the following is the adopter group to
which Joseph belongs?
A. early adopter
B. innovator
C. late majority
D. laggard
E. early majority
ANSWER: E
74) Five characteristics influence the rate of adoption of an innovation. One of these is ________.
A. marketing expertise
B. relative advantage
C. packaging attractiveness
D. government regulations
E. place of value exchange
ANSWER: B
75) ________ is the effect one person has on another's attitude or purchase probability.
A. Sharing power
B. Collaborative power
C. Market influence
D. Brand power
E. Personal influence
ANSWER: E
76) Relative advantage of an innovation refers to the degree to which ________.
A. it matches the values and experiences of the individuals
B. it is difficult to understand or use
C. it can be tried on a limited basis
D. it appears superior to existing products
E. the benefits of use are observable or describable to others
ANSWER: D
77) The degree to which the beneficial results of an innovation's use are observable or describable to others is called
________.
A. divisibility
B. communicability
C. compatibility
D. relative advantage
E. plainness
ANSWER: B
78) Which of the following terms refers to the degree to which the innovation can be tried on a limited basis?
A. compatibility
B. relative advantage
C. divisibility
D. communicability
E. complexity
ANSWER: C

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Chap 16: Developing Pricing Strategies and Programs

1) When consumers examine products, they often compare an observed price to an internal price they remember. This is
known as a(n) ________ price.
A. markup
B. reference
C. market-skimming
D. accumulated
E. target
ANSWER: B
2) ________ price refers to what the consumers feel the product should cost.
A. Fair
B. Typical
C. Usual discounted
D. List
E. Maximum retail
ANSWER: A
3) While shopping at the mall, Jane was asked by one of the sales representatives at the cosmetics counter to try out a
new lipstick that her company was test marketing. The company representative asks her how much she would be willing
to pay for the lipstick. After trying it out, Jane is of the opinion that $5 is just the right price for it. What type of a
reference price is Jane using?
A. usual discounted price
B. fair price
C. maximum retail price
D. last price paid
E. historical competitor price
ANSWER: B
4) The reservation price, the maximum that most consumers will pay for a given product, is known as the ________ price.
A. expected future
B. usual discounted
C. upper-bound
D. typical
E. historical competitor
ANSWER: C
5) Which of the following is NOT one of the possible consumer reference prices?
A. typical price
B. actual future price
C. last price paid
D. expected future price
E. upper-bound price
ANSWER: B
6) A company decided to conduct a market survey for its new MP3 player that the company had priced at $150. In the
survey, 95 percent of participants said that the maximum they would pay for the MP3 player is $100. This is an example
of which of the following possible consumer reference prices?
A. historical competitor price
B. expected future price
C. usual discounted price
D. upper-bound price
E. last price paid
ANSWER: D
7) The minimum price that most consumers would pay for a given product is known as the ________ price.
A. everyday low
B. usual discounted
C. fair
D. typical
E. lower-bound
ANSWER: E
8) A company has developed the prototype of a mobile phone that it plans to launch in the next few months. The phone
comes equipped with the most advanced technological features. As part of its test marketing efforts, the company allows
customers to examine and use the prototype and also gathers feedback regarding product features and price. The results

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of this test marketing effort show that customers are willing to pay at least $500, considering the phone's various
features. As such, the company has discovered customers' ________.
A. last paid price
B. expected future price
C. lower-bound price
D. upper-bound price
E. typical price
ANSWER: C
9) Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the perfume is from a
well-known brand. What kind of pricing is the company depending on?
A. going-rate pricing
B. image pricing
C. market-skimming pricing
D. target pricing
E. markup pricing
ANSWER: B
10) Pricing cues such as sale signs and prices that end in 9 are more influential when ________.
A. customers have substantial knowledge about prices
B. customers purchase the particular item regularly
C. product quality is standardized
D. product designs vary over time
E. prices do not vary from time to time
ANSWER: D
11) Which of the following is the first step in setting a pricing policy?
A. selecting a pricing method
B. selecting the pricing objective
C. determining demand
D. estimating cost
E. analyzing competitors' costs, prices, and offers
ANSWER: B
12) After determining its pricing objectives, what is the next logical step a firm should take in setting its pricing policy?
A. It should analyze its competitors' costs, prices, and offers.
B. It should select its pricing method.
C. It should select its final price.
D. It should determine the demand for its product.
E. It should estimate the cost of its product.
ANSWER: D
13) A firm that is plagued with overcapacity, intense competition, or changing consumer desires would do better if it
pursues ________ as its major objective.
A. market skimming
B. product-quality leadership
C. survival
D. profit maximization
E. market penetration
ANSWER: C
14) After estimating the demand and costs associated with alternative prices, a company has chosen to price its product
in such a way that it gains the highest rate of return on its investment. The company is looking to ________.
A. maximize market share
B. skim the market
C. become a product-quality leader
D. survive in the market
E. maximize current profit
ANSWER: E
15) Companies who believe that higher sales volume leads to lower unit costs and higher long-run profits are attempting
to ________.
A. maximize their market share
B. skim the market
C. become a product-quality leader
D. merely survive in the market

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E. maximize their current profits

ANSWER: A
16) A company that is looking to maximize its market share would do well to follow ________ pricing.
A. markup
B. market-penetration
C. market-skimming
D. survival
E. target-return
ANSWER: B
17) A market-penetration pricing strategy is most suitable when ________.
A. a low price slows down market growth
B. production and distribution costs fall with accumulated production experience
C. a high price dissuades potential competitors from entering the market
D. the market is characterized by inelastic demand
E. a low price encourages actual competition
ANSWER: B
18) When a company introduces a product at a high price and then gradually drops the price over time, it is pursuing a
________ strategy.
A. market-penetration pricing
B. market-skimming pricing
C. value-pricing
D. switching cost
E. loss-leader pricing
ANSWER: B
19) When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the maximum amount of revenue
from the various segments of the market. Two months after the introduction, the price had come down to $399. What
kind of a pricing did Apple adopt?
A. loss-leader pricing
B. market-penetration pricing
C. market-skimming pricing
D. target-return pricing
E. value pricing
ANSWER: C
20) Market skimming pricing makes sense under all the following conditions, EXCEPT if ________.
A. a sufficient number of buyers have a high current demand
B. the unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will
bear
C. the high initial price does not attract more competitors to the market
D. consumers are likely to delay buying the product until its price drops
E. the high price communicates the image of a superior product
ANSWER: D
21) Companies that aim to ________ strive to be affordable luxuries.
A. survive in the market
B. partially recover their costs
C. maximize their market share
D. pursue value pricing
E. be product-quality leaders
ANSWER: E
22) Starbucks, Aveda, and BMW have been able to position themselves within their categories by combining quality,
luxury, and premium prices with an intensely loyal customer base. These companies are employing a ________ strategy.
A. market-skimming
B. market-penetration
C. survival
D. market share maximization
E. product-quality leadership
ANSWER: E
23) The first step in estimating demand is to ________.
A. analyze competitors' cost
B. select a pricing method

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C. understand what affects price sensitivity

D. calculate fixed costs
E. decipher the experience curve
ANSWER: C
24) Consumers are less price sensitive ________.
A. to high cost items
B. when they frequently change their buying habits
C. when there are more substitutes
D. when there are more competitors
E. when they do not readily notice higher prices
ANSWER: E
25) Consumers are less price sensitive when ________.
A. price is only a small part of the total cost spent on the product over its lifetime
B. they perceive the higher prices to be unjustified
C. they change their buying habits regularly
D. there are many substitutes and competitors in the market
E. they are buying high-cost items
ANSWER: A
26) If demand hardly changes with a small change in price, the demand is said to be ________.
A. strained
B. marginal
C. inelastic
D. flexible
E. unit elastic
ANSWER: C
27) If demand changes considerably, with a small change in price, the demand is said to be ________.
A. unit elastic
B. elastic
C. inelastic
D. marginal
E. strained
ANSWER: B
28) If consumers were largely indifferent to a $0.05 increase in the price of a gallon of milk, the price rise is said to fall
within customers' ________.
A. price indifference band
B. experience curve
C. arm's-length price
D. learning curve
E. net price index
ANSWER: A
29) JJ pays overhead each month, including his company's bills for rent, heat, interest, and salaries, which are examples
of ________ costs.
A. total
B. average
C. activity-based
D. variable
E. fixed
ANSWER: E
30) Which of the following is true regarding price elasticity?
A. The higher the elasticity, the lesser is the volume growth resulting from a 1 percent price reduction.
B. Within the price indifference band, price changes have little or no effect on demand.
C. If demand is elastic, sellers will consider increasing the price.
D. Price elasticity does not depend on magnitude and direction of the contemplated price change.
E. When demand is inelastic, sellers should lower prices in order to increase total revenue.
ANSWER: B
31) Costs that do not vary with production levels or sales revenue are known as ________ costs.
A. overhead
B. variable
C. average

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D. opportunity
E. total
ANSWER: A
32) Costs that differ directly with the level of production are known as ________ costs.
A. fixed
B. overhead
C. opportunity
D. target
E. variable
ANSWER: E
33) When ConAgra foods decided to cut $250 million in costs to return to a $1 price point (after sales dropped as a result
of raising prices $0.25 to cover higher commodity costs), it was using ________.
A. target costing
B. experience-curve pricing
C. ceiling pricing
D. the learning curve
E. promotional price elasticities
ANSWER: A
34) ________ cost is the cost per unit at that level of production; it equals total costs divided by production.
A. Target
B. Average
C. Marginal
D. Opportunity
E. Fixed
ANSWER: B
35) The decline in the average cost of production with accumulated production experience is called the ________.
A. demand curve
B. supply chain
C. learning curve
D. value chain
E. indifference curve
ANSWER: C
36) Experience-curve pricing ________.
A. assumes competitors are weak followers
B. allows products to project a high quality image
C. is applicable only to manufacturing costs
D. focuses on reducing fixed costs
E. is generally risk-free
ANSWER: A
37) Deducting the desired profit margin from the price at which a product will sell, given its appeal and competitors'
prices, is known as ________.
A. overhead costing
B. target costing
C. activity-based costing
D. benefit analysis
E. estimate costing
ANSWER: B
38) Competitors are most likely to react to a price change when ________.
A. the firm has a weak value proposition
B. the firm enjoys a monopoly
C. there are few competing firms
D. the product is heterogeneous
E. buyers have limited information
ANSWER: C
39) Which of the following is the most elementary pricing method?
A. value pricing
B. going-rate pricing
C. markup pricing
D. target-return pricing

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E. perceived-value pricing
ANSWER: C
40) Despite its weaknesses, markup pricing remains popular for which of the following reasons?
A. Sellers can determine demand much more easily than they can estimate costs.
B. By tying the price to cost, the pricing task becomes more sophisticated.
C. When all firms in the industry use markup pricing, price competition flourishes.
D. Sellers take advantage of buyers when the latter's demand becomes acute.
E. Many people feel that cost-plus pricing is fairer to both buyers and sellers.
ANSWER: E
41) A manufacturer has invested $750,000 in a new product and wants to set a price to earn a 15 percent ROI. The cost
per unit is $18 and the company expects to sell 50,000 units in the first year. Calculate the company's target-return price
for this product.
A. $18.10
B. $18.23
C. $20.25
D. $20.70
E. $25.50
ANSWER: C
42) An umbrella manufacturing company's fixed costs are $275,000. The variable cost per unit is $5 and each umbrella is
sold at $10. How many units should the firm sell in order to break even?
A. 1,819
B. 5,500
C. 18,000
D. 27,500
E. 55,000
ANSWER: E
43) ________ pricing takes into account a host of inputs, such as the buyer's image of the product performance, the
channel deliverables, the warranty quality, customer support, and attributes such as the supplier's reputation,
trustworthiness, and esteem.
A. Perceived-value
B. Value
C. Going-rate
D. Auction-type
E. Markup
ANSWER: A
44) The key to perceived-value pricing is to ________.
A. reengineer the company's operations
B. deliver more unique value than competitors
C. adopt subtle marketing tactics compared to competitors
D. deliver more value but at a lower cost
E. invest heavily in advertising in order to convey superior value
ANSWER: B
45) ________ pricing is a matter of reengineering the company's operations to become a low-cost producer without
sacrificing quality.
A. Value
B. Going-rate
C. Auction-type
D. Markup
E. Perceived-value
ANSWER: A
46) A retailer who utilizes a(n) ________ policy charges a constant low price with little or no price promotions and special
sales.
A. everyday low pricing
B. high-low pricing
C. low cost
D. going-rate pricing
E. auction-type pricing
ANSWER: A

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47) Matt's retail store offers all products at $2 less than its competitors. The store never runs promotional campaigns or
offers special discounts. Matt's retail store is following a(n) ________ pricing policy.
A. auction-type
B. target-plus
C. everyday low
D. high-low
E. going-rate
ANSWER: C
48) Everyday low pricing is most suitable if ________.
A. consumers are willing to perform activities such as clip coupons to avail of discounts
B. consumers tend to associate price with quality
C. customers are insensitive to changes in price
D. the cost of conducting frequent sales and promotions is high
E. consumers have sufficient time to find the best prices
ANSWER: D
49) In ________ pricing, the firm bases its price largely on competitor's prices.
A. going-rate
B. auction-type
C. markup
D. target-return
E. perceived-value
ANSWER: A
50) Which of the following auctions is characterized by one seller and many buyers?
A. Walrasian auctions
B. ascending bid auctions
C. closed auctions
D. sealed-bid auctions
E. reverse auctions
ANSWER: B
51) In which of the following auctions does the auctioneer first announce a high price for a product and then slowly
decreases the price until a bidder accepts?
A. a Dutch auction with one buyer and many sellers
B. an English auction with one seller and many buyers
C. an ascending bid auction
D. a sealed-bid auction
E. a Dutch auction with one seller and many buyers
ANSWER: E
52) In a(n) ________, the buyer announces something he or she wants to buy, and potential sellers compete to offer the
lowest price.
A. Dutch auction with one buyer and many sellers
B. English auction with one buyer and many sellers
C. English auction with one seller and many buyers
D. sealed-bid auction
E. ascending auction
ANSWER: A
53) ________ auctions let would-be suppliers submit only one bid; they cannot know the other bids.
A. Descending bid
B. Sealed-bid
C. English
D. Dutch
E. Reverse
ANSWER: B
54) In which of the following forms of countertrade do buyers and sellers directly exchange goods, with no money and no
third party is involved?
A. buyback arrangements
B. offsets
C. barter
D. sealed bids
E. compensation deals

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ANSWER: C
55) A Japanese firm is ready to sell its recent technological innovation to the US government. But it has asked for 80
percent in cash and the rest in mica. The Japanese firm is looking to enter into a(n) ________ with the US government.
A. functional discount
B. compensation deal
C. buyback arrangement
D. offset agreement
E. barter deal
ANSWER: B
56) Armac Ltd. is a sluice-box manufacturer based in China. A sluice-box is used for gold prospecting. Armac is interested
in selling a few of its machines to an American mining company, but it wants 95 percent of the machines' price in gold
and the rest in ores recovered by using the machines. This is an example of a ________.
A. buyback arrangement
B. functional discount
C. barter deal
D. compensation deal
E. sealed bid
ANSWER: A
57) ROC Engineering, a Chinese shipbuilding company, agrees to build a fleet of submarines for the Sri Lankan navy, for
which it will be paid in the local Sri Lankan currency. As per the agreement, ROC must also spend a substantial amount of
the money it generates through this deal within the country. In accordance with the contract, ROC buys Sri Lankan tea at
a reduced rate. This is an example of which of the following forms of countertrade?
A. descending bid
B. offset
C. barter
D. compensation deal
E. buyback arrangement
ANSWER: B
58) ________ are offered by a manufacturer to trade-channel members if they will perform certain functions, such as
selling, storing, and recordkeeping.
A. Consumer promotions
B. Quantity discounts
C. Functional discounts
D. Seasonal discounts
E. Trade-in allowances
ANSWER: C
59) When hotels, motels, and airlines offer discounts in slow selling periods, they are said to be offering ________.
A. trade discounts
B. quantity discounts
C. functional discounts
D. seasonal discounts
E. trade-in allowances
ANSWER: D
60) A(n) ________ is an extra payment designed to gain reseller participation in special programs.
A. seasonal discount
B. allowance
C. discount
D. quantity discount
E. functional discount
ANSWER: B
61) ________ reward dealers for participating in advertising and sales support programs.
A. Functional discounts
B. Trade discounts
C. Promotional allowances
D. Rebates
E. Quantity discounts
ANSWER: C
62) When supermarkets and department stores drop the price on well-known brands to stimulate store traffic, they are
said to be following ________ pricing.

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A. value
B. loss-leader
C. special event
D. high-low
E. everyday low
ANSWER: B
63) In ________, the seller charges a separate price to each customer depending on the intensity of his or her demand.
A. second-degree price discrimination
B. third-degree price discrimination
C. psychological discounting
D. special-customer pricing
E. first-degree price discrimination
ANSWER: E
64) In second-degree price discrimination, the seller charges ________.
A. less to buyers of larger volumes
B. different prices depending on the season, day, or hour
C. a separate price to each customer depending on the intensity of his or her demand
D. different prices for different versions of the same product
E. different prices for the same product depending on the channel through which it is sold
ANSWER: A
65) In ________, the seller charges different amounts to different classes of buyers.
A. perceived value pricing
B. third-degree price discrimination
C. first-degree price discrimination
D. second-degree price discrimination
E. psychological discounting
ANSWER: B
66) When museums charge a lower admission fee to students and senior citizens, this form of price discrimination is
known as ________ pricing.
A. location
B. channel
C. customer-segment
D. special-customer
E. loss-leader
ANSWER: C
67) Madame Tussaud's wax museum is a popular tourist attraction in London. The museum charges higher entry rates for
tourists compared to locals. This form of price discrimination is known as ________ pricing.
A. customer-segment
B. image
C. location
D. special customer
E. special event
ANSWER: A
68) When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast-
food restaurant, or a vending machine, then this form of price discrimination is known as ________ pricing.
A. product-form
B. loss-leader
C. special event
D. channel
E. location
ANSWER: D
69) The prices of tickets to the opera vary depending on where the person would like to be seated — in the gallery or in
the stalls. This is an example of ________ pricing.
A. channel
B. time
C. image
D. product-form
E. location
ANSWER: E

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70) When hotels drop their rates on the weekends, this form of price discrimination is known as ________ pricing.
A. channel
B. image
C. product-form
D. time
E. location
ANSWER: D
71) The airline and hospitality industries use ________, by which they offer discounted but limited early purchases,
higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.
A. special-customer pricing
B. yield pricing
C. cash rebates
D. location pricing
E. customer-segment pricing
ANSWER: B
72) ________ refers to selling below cost with the intention of destroying competition.
A. Bid rigging
B. Loss-leader pricing
C. Predatory pricing
D. Price discrimination
E. Price penetration
ANSWER: C
73) For price discrimination to work ________.
A. the market must be segmentable and the segments must show similar intensities of demand
B. members in the lower-price segment must be able to resell the product to the higher- price segment
C. competitors must be able to undersell the firm in the higher-price segment
D. the practice must not breed customer resentment and ill will
E. the extra revenue derived from price discrimination must not exceed the cost of segmenting and policing the market
ANSWER: D
74) When a movie theater charges a lower ticket fee for children and senior citizens, it is engaging in ________ pricing.
A. product-form
B. image
C. customer-segment
D. location
E. time
ANSWER: C
75) A low price buys market share but not market loyalty. The same customers will shift to any lower-priced product that
may come along. This is called the ________ trap.
A. low-price
B. relative-market-share
C. shallow-pockets
D. target-market-share
E. fragile-market-share
ANSWER: E
76) When higher-priced competitors match lower prices of their competitors but have longer staying power because of
deeper cash reserves, it leads to a(n) ________ trap.
A. low-quality
B. fragile-market-share
C. price war
D. escalator
E. shallow-pockets
ANSWER: E
77) A company does not set a final price until the product is finished or delivered. This is known as ________.
A. delayed quotation pricing
B. an escalator clause
C. special-event pricing
D. time pricing
E. the shallow-pockets trap
ANSWER: A

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78) When a company requires customers to pay today's price and all or part of any inflation increase that takes place
before delivery, it is known as ________.
A. special-customer pricing
B. an escalator clause
C. delayed quotation pricing
D. unbundling
E. time pricing
ANSWER: B
79) When a company maintains its price but removes or prices separately one or more elements that were part of the
former offer, such as free delivery or installation, it is known as ________.
A. escalating
B. differentiation
C. unbundling
D. reverse discounting
E. delayed quotation pricing
ANSWER: C
80) In markets that are characterized by products that are highly homogeneous, how should a firm react to a competitor's
reduction in price?
A. shrink the amount of the product available
B. substitute expensive materials or ingredients
C. reduce product features
D. reduce product services
E. augment the product
ANSWER: E

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Chapter 17 Designing and Managing Integrated Marketing Channels

1) ________ are sets of interdependent organizations participating in the process of making a product or service available
for use or consumption.
A. Marketing channels
B. Interstitials
C. Communication channels
D. Sales territories
E. Marketing terrains
ANSWER: A
2) A merchant is a(n) ________ in the marketing channel.
A. wholesaler
B. broker
C. sales agent
D. warehouse
E. advertising agency
ANSWER: A
3) A manufacturer uses the company's sales force and trade promotions to carry, promote, and sell products to end users.
Which of the following strategies is this manufacturer using?
A. personalization strategy
B. tailoring strategy
C. push strategy
D. pull strategy
E. consumer promotion strategy
ANSWER: C
4) Total Beverages, a maker of fruit juices and health drinks, recently launched a new brand of packaged drinking water
called AquaPure. In order to induce distributors to carry the product, Total offers all its intermediaries a free refrigerator
to store bottles of AquaPure. This is an example of a ________.
A. consumer promotion
B. push strategy
C. backward flow
D. reverse flow
E. pull strategy
ANSWER: B
5) Spike Inc. is a sportswear manufacturer that recently launched its new line of customizable running shoes. The shoes
come with a digital component that allows them to adapt to the runner's biomechanics. To promote this new product,
Spike launches an advertising campaign and entices a famous athlete to endorse the product. This is an example of a
________.
A. trade promotion
B. reverse flow
C. push strategy
D. pull strategy
E. backward flow
ANSWER: D
6) When is a pull strategy appropriate?
A. when there is low brand loyalty
B. when consumers are able to perceive differences between brands
C. when brand choice is made in the store
D. when it is a low involvement purchase
E. when the product is an impulse item
ANSWER: B
7) Using the push strategy is most appropriate when ________.
A. consumers are able to perceive differences between brands
B. the product being sold is an impulse item
C. there is high brand loyalty for the product
D. the product is a high involvement purchase
E. consumers choose the brand before they go to the store
ANSWER: B
8) A firm uses its sales force to sell to large accounts and outbound telemarketing to sell to medium-sized accounts. The
firm is using ________ marketing.

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A. hybrid
B. pull
C. personalized
D. vertical
E. internal
ANSWER: A
9) A computer manufacturing company allows customers to place orders online, which they can later pick up from a
convenient retail location. Which of the following terms best represents this practice?
A. channel integration
B. mass customization
C. online personalization
D. push strategy
E. internal marketing
ANSWER: A
10) Which of the following is the most accurate description of a value network?
A. a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings
B. a system of organizations and resources involved in moving a product from supplier to customer
C. an arrangement whereby an organization transforms inputs into finished goods
D. a network that allows an organization take the finished products to the end-users
E. a communication network that allows an organization to transfer information to end- customers
ANSWER: A
11) Companies should first think about the target market and then design the supply chain backward from that point.
This strategy is called ________ planning.
A. demand chain
B. resource
C. external channel
D. materials
E. strategic business
ANSWER: A
12) Which of the following channel functions constitute only a backward flow?
A. movement of physical goods
B. placing orders with manufacturers
C. persuasive communication
D. storage of physical goods
E. overseeing actual transfer of ownership
ANSWER: B
13) Identify the channel function that constitutes both backward and forward flow.
A. obtaining funds for financing
B. storage of physical goods
C. persuasive communication
D. movement of physical goods
E. overseeing actual transfer of ownership
ANSWER: A
14) Producers often shift some functions to intermediaries. Which of the following is the most significant benefit of doing
this?
A. It increases customer loyalty.
B. It provides the producer with greater control over operations.
C. It reduces the amount of direct customer interaction.
D. It lowers the producer's costs and prices.
E. It ensures greater information security.
ANSWER: D
15) Which of the following is an example of a zero-level channel?
A. A company takes online orders from customers and ships the products to them.
B. An organization uses a combination of direct salespeople and sales agencies to increase sales.
C. A company sells its products through wholesalers and retailers.
D. A company sells its products through chains of supermarkets and other large sellers.
E. A large company forms alliances with smaller companies to increase sales coverage.
ANSWER: A
16) Which of the following entities is present in a zero-level marketing channel?

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A. consumers
B. retailers
C. brokers
D. jobbers
E. wholesalers
ANSWER: A
17) A direct marketing channel is a ________ channel.
A. one-level
B. two-level
C. zero-level
D. three-level
E. reverse-flow
ANSWER: C
18) A jobber in a three-level marketing channel is a(n) ________.
A. small-scale wholesaler
B. external broker
C. advertising agent
D. independent evaluator
E. communication channel
ANSWER: A
19) Door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, and manufacturer-owned
stores are examples of ________.
A. zero-level channels
B. jobbers
C. wholesalers
D. manufacturer's representatives
E. consumers
ANSWER: A
20) Which of the following activities is a reverse-flow channel of marketing?
A. raw materials movement
B. product recycling
C. materials ordering
D. finished goods storage
E. customer order placement
ANSWER: B
21) Toyota has an advantage over Lexus due to the fact that there are more Toyota dealers, which helps customers save
on transportation and search costs in buying and repairing an automobile. Which of the following service outputs relates
to this competitive advantage?
A. spatial convenience
B. service backup
C. lot size
D. waiting time
E. delivery time
ANSWER: A
22) As a service output produced by marketing channels, product variety refers to the ________.
A. units the channel permits a customer to purchase at once
B. assortment provided by the marketing channel
C. add-on services provided by the channel
D. ability of a product to provide incremental value
E. degree to which the channel makes it easy for customers to purchase a product
ANSWER: B
23) Which of the following terms refers to add-on services such as credit, delivery, installation, and repairs, and is
provided by a marketing channel?
A. service backup
B. product accessories
C. external products
D. product variety
E. service extensions
ANSWER: A

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24) Atburex is a furniture manufacturing company in the United States. The company provides a 60-day credit period and
also offers on-site delivery and installation. These special benefits refer to which of the following service outputs?
A. service backup
B. large product variety
C. spatial convenience
D. large lot size
E. short waiting time
ANSWER: A
25) Which of the following types of distribution involves severely limiting the number of channel intermediaries?
A. exclusive
B. selective
C. intensive
D. aggressive
E. retail
ANSWER: A
26) Which of the following allows a firm to maintain control over service level and obtain more dedicated and
knowledgeable selling?
A. selective distribution
B. intensive distribution
C. push strategy
D. exclusive distribution
E. pull strategy
ANSWER: D
27) Which of the following channel alternatives is most suited to handle complex products and transactions?
A. sales forces
B. the Internet
C. dealers
D. telemarketers
E. direct mails
ANSWER: A
28) Which of the following is a major disadvantage of using the Internet as a marketing channel?
A. It is less effective for complex products.
B. It lacks convenience and practicality.
C. It cannot be used to reach a wide audience.
D. It is considered expensive.
E. It causes the company to lose direct contact with customers.
ANSWER: A
29) Armon Apparels designs, manufactures, and distributes athletic apparel and accessories for men and women. The
company has only nine distributors across the United States. These distributors control a nationwide network of 600
retailers. The company does not sell its products through other channels. This is an example of ________ distribution.
A. selective
B. intensive
C. exclusive
D. internal
E. passive
ANSWER: A
30) Exclusive dealing arrangements are mainly used by companies looking for an edge in markets increasingly driven by
________.
A. price
B. efficiency
C. product variety
D. add-on services
E. spatial convenience
ANSWER: A
31) An intensive distribution strategy serves well for ________.
A. premium cars
B. commercial trucks
C. private label products
D. industrial equipment

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E. newspapers
ANSWER: E
32) Which of the following products is most likely to be sold using an exclusive distribution strategy?
A. designer luggage
B. cigarettes
C. alcoholic beverages
D. car fuel
E. medicine
ANSWER: A
33) Which of the following covers payment terms and producer guarantees?
A. conditions of sale
B. pricing policies
C. exclusive dealings
D. mutual services
E. territorial rights
ANSWER: A
34) ________ call(s) for the producer to establish a schedule of discounts and allowances that intermediaries see as
equitable and sufficient.
A. Exclusive dealings
B. Mutual services
C. Territorial rights
D. Price policy
E. Tying agreements
ANSWER: D
35) Electrobar, a European manufacturer of industrial kitchenware, sells to industrial canteens, restaurants, hotels, and so
forth. The company provides a one-year warranty on all products and also allows customers to pay in installments — they
pay 50 percent on delivery and the rest as equal installments. This refers to which element in the "trade-relations mix"?
A. price policy
B. conditions of sale
C. distributors' territorial rights
D. exclusive dealings
E. mutual services and responsibilities
ANSWER: B
36) Which of the following channels is associated with the lowest cost per transaction?
A. Internet
B. telemarketing
C. retail stores
D. distributor
E. sales force
ANSWER: A
37) Which marketing channel is associated with the highest value added per sale?
A. retail stores
B. sales force
C. distributors
D. Internet
E. telemarketing
ANSWER: B
38) Which of the following problems is most likely when a company chooses to use a sales agency instead of company
salespeople?
A. The company will find it difficult to control the sales process.
B. They do not take title to goods or negotiate purchases or sales.
C. The value-added per sale is the lowest for sales agencies.
D. Agencies will pay less attention to customers who buy the most or in large volumes.
E. Sales agencies are often difficult to access due to strict contractual obligations.
ANSWER: A
39) In an effort to boost sales, Broomer offers its retailers a higher margin for promoting and selling products from the
"Inducer" line to customers. This is an example of ________ power.
A. coercive
B. reward

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C. passive
D. expert
E. referent
ANSWER: B
40) Because of the acceptance that the other Broomer products have in the market, retailers are willing to stock items
from the new "Inducer" line of clothing. This is an example of ________ power.
A. referent
B. passive
C. legitimate
D. coercive
E. reward
ANSWER: A
41) Broomer threatens to withdraw all its other products from the retailers' stores if they are unwilling to push products
from the "Inducer" line. This is an example of ________ power.
A. reward
B. coercive
C. legitimate
D. expert
E. referent
ANSWER: B
42) ________ power can be effective, but its exercise produces resentment and can lead the intermediaries to organize
countervailing power.
A. Coercive
B. Reward
C. Legitimate
D. Expert
E. Referent
ANSWER: A
43) A manufacturer offers its intermediaries an extra benefit for performing a promotional activity. This is an example of
the use of ________ power.
A. reward
B. coercive
C. functional
D. expert
E. referent
ANSWER: A
44) A manufacturer is using legitimate power when it ________.
A. requests a behavior that is warranted under the selling contract
B. threatens to withdraw a resource or terminate a relationship
C. offers intermediaries an extra benefit for performing specific acts or functions
D. makes the intermediaries sell more of a particular product by offering rewards
E. sells more products by making use of its reputation in the market
ANSWER: A
45) Hewlett-Packard is a highly respected brand. Many retailers want to be associated with the brand because of this
reputation. What kind of power does Hewlett-Packard obtain due to this reputation?
A. referent
B. functional
C. legitimate
D. coercive
E. reward
ANSWER: A
46) Which of the following types of power is objectively observable?
A. coercive power
B. legitimate power
C. group power
D. expert power
E. referent power
ANSWER: A
47) A new firm typically starts as a local operation selling in a fairly circumscribed market by ________.

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A. finding and developing new intermediaries

B. using a few existing intermediaries
C. forming partnerships with the market leader
D. creating a special channel
E. forming partnerships with other firms
ANSWER: B
48) Who will most likely be willing to pay for high-value-added channels?
A. early buyers of a product
B. internal customers of a company
C. small and matured buyers of an industry
D. consumers of low involvement products
E. repeat customers of a product
ANSWER: A
49) A producer must modify its channel design and arrangements if ________.
A. consumer buying patterns change
B. the competition in the market stabilizes
C. the product is in the growth stage of its life cycle
D. the market size remains unchanged for a particular period
E. the firm's profits stabilize
ANSWER: A
50) What is the major difference between a conventional marketing channel and a vertical marketing system (VMS)?
A. Elements in a conventional marketing channel act as separate businesses whereas the elements in a VMS act as a
unified system.
B. A VMS has many intermediaries whereas a conventional marketing channel has a limited number of intermediaries.
C. A VMS is characterized by an independent producer whereas a conventional marketing channel is characterized by
multiple producers.
D. A conventional marketing channel has elements such as retailers and wholesalers whereas these elements are not
present in a VMS.
E. Producers have complete control over the other members in a conventional marketing channel whereas this control is
minimal in a VMS.
ANSWER: A
51) A(n) ________ includes the producer, wholesaler(s), and retailer(s) acting as a unified system.
A. parallel marketing channel
B. vertical marketing system
C. extensive marketing channel
D. internal marketing system
E. conventional marketing channel
ANSWER: B
52) A(n) ________ vertical marketing system combines successive stages of production and distribution under single
ownership.
A. corporate
B. administered
C. contractual
D. regulatory
E. controlled
ANSWER: A
53) The most advanced supply-distributor arrangements for ________ vertical marketing systems rely on distribution
programming.
A. corporate
B. administered
C. contractual
D. regulatory
E. controlled
ANSWER: B
54) Rotter Garder Inc. is a large-scale paint manufacturer and is known for its wide range of decorative paint products
and industrial coatings. In addition to making paints, the company also owns and operates the retail stores that sell its
products. This is an example of a(n) ________ vertical marketing system.
A. administered
B. contractual

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C. referent
D. corporate
E. regulated
ANSWER: D
55) An administered VMS coordinates successive stages of production and distribution through ________.
A. an automated central control unit
B. single ownership
C. the combined efforts of all its members
D. the establishment of contractual obligations
E. the size and power of one of the members
ANSWER: E
56) A(n) ________ VMS consists of independent firms at different levels of production and distribution, integrating their
programs on a contractual basis to obtain more economies or sales impact than they could achieve alone.
A. administered
B. contractual
C. corporate
D. regulated
E. referent
ANSWER: B
57) A group of small sellers takes the initiative and organizes a new business entity to carry on wholesaling and possibly
some production. This entity is called a(n) ________.
A. retailer cooperative
B. franchise organization
C. area-based cartel
D. sponsored voluntary chain
E. alternate selling channel
ANSWER: A
58) In a retailer cooperative, ________.
A. profits are equally divided among members
B. members plan their advertising jointly
C. nonmembers cannot buy through the co-op
D. members rely on distribution programming
E. members standardize their selling practices
ANSWER: B
59) A group of small grocery shops forms a new business entity to buy products directly from manufacturers. The group
buys products in bulk that are then distributed among members. This helps the shops obtain better profit margins. Which
of the following types of vertical marketing systems can be observed here?
A. contractual
B. corporate
C. administered
D. controlled
E. regulatory
ANSWER: A
60) A franchise organization is an example of a(n) ________ vertical marketing system.
A. corporate
B. administered
C. contractual
D. regulatory
E. controlled
ANSWER: C
61) In a ________ marketing system, two or more unrelated companies put together resources or programs to exploit an
emerging marketing opportunity.
A. reverse flow
B. vertical
C. horizontal
D. lateral
E. forward flow
ANSWER: C
62) Which of the following is a major advantage of adding more channels for selling?

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A. It helps the company increase its market coverage.

B. It helps the company reduce its fixed costs.
C. It reduces the likelihood of channel conflict.
D. It is the best strategy for selling low-involvement consumer products.
E. It results in economies of scale.
ANSWER: A
63) Which of the following is the most complete and accurate description of a pure-click company?
A. These are companies that launch a Web site without any previous existence as a firm.
B. These firms' business models are based on advertising revenue.
C. These are established companies that have an online site for selling products.
D. These companies get paid every time a user visits their Web site.
E. These companies sell online space to other Web sites and are paid for the service.
ANSWER: A
64) A large retail chain in the United States decides to expand its operations by adding an online site for e-commerce.
This is called a(n) ________ company.
A. B2B
B. brick-and-mortar
C. m-commerce
D. pure-click
E. brick-and-click
ANSWER: E
65) An Internet service provider (ISP) is a(n) ________ company.
A. pure-click
B. brick and click
C. brick-and-mortar
D. m-commerce
E. one-level
ANSWER: A
66) JSE Securities Exchange is the largest stock exchange in Africa. The JSE provides a market where securities can be
traded freely under a regulated procedure. The company acts as an intermediary between the traders. JSE is an example
of a(n) ________.
A. internal broker
B. infomediary
C. customer community
D. market maker
E. third party arbitrator
ANSWER: D
67) Exxon Consulting works as an agent on behalf of business consumers to collect information on various industrial
products. When faced with buying decisions, businesses can approach Exxon to obtain detailed information on the various
options available to them. The company earns revenue by selling such information to various customers. Exxon
Consulting can be called a(n) ________.
A. infomediary
B. market maker
C. customer community
D. third party arbitrator
E. informant
ANSWER: A
68) Consumer surveys suggest that one of the most significant inhibitors of online shopping is the absence of ________.
A. pleasurable experiences
B. competitive prices
C. adequate technical information
D. after-sales service
E. facilities to compare offerings
ANSWER: A
69) Which of the following is an example of a brick-and-click company?
A. IFB Industries, a company that sells products using various channels such as Internet, retailers, direct outlets, and
franchisees.
B. Opera, a Web browser and Internet suite developed by Opera Software, performs common tasks such as displaying
Web sites and sending and receiving e-mail messages.

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C. Atrutron, a company that offers its customers access to the Internet using data transmission technology.
D. eBay Inc., an American company, facilitates online auctions and shopping to people and businesses across the globe to
buy and sell a broad variety of goods and services.
E. Yahoo! Inc., an American corporation, provides services via the Internet such as directories, e-mail, news, advertising,
online mapping, and so on.
ANSWER: A
70) M-commerce refers to ________.
A. conducting business using mobile channels
B. the use of mass media communications to attract customers
C. providing mobile and on-site services to customers
D. the use of a specific medium to communicate with prospects
E. using the Internet as a medium for doing business
ANSWER: A
71) When Japanese teenagers carry DOCOMO phones from NTT and use them to order goods, they are engaged in
________.
A. B2B e-commerce
B. brick-and-click commerce
C. infomediation
D. dilution
E. m-commerce
ANSWER: E
72) ________ channel conflict occurs between channel members at the same level.
A. Horizontal
B. Vertical
C. Multichannel
D. Administrative
E. Contractual
ANSWER: A
73) Alcart Solutions is a large distributor of Aldor phones in Canada. The company distributes products to various retailers
in the New Brunswick province. Recently Aldor received several complaints from its retailers that their orders are not
delivered on time. They also complain that Alcart offers preferential treatment to some of the other retailers in the region.
This is an example of ________ conflict.
A. multichannel
B. horizontal
C. vertical
D. intermediate
E. parallel
ANSWER: C
74) When Goodyear began selling its popular tire brands through Sears, Walmart, and Discount Tire, independent dealers
that sold the same tires at higher prices were angry. This is an example of a(n) ________ conflict.
A. horizontal
B. vertical
C. intermediate
D. multichannel
E. parallel
ANSWER: D
75) A manufacturer wants to achieve rapid market penetration through a low-price policy. However, the manufacturer's
dealers prefer to work with high margins and pursue short-run profitability. The major reason for this conflict is ________.
A. goal incompatibility
B. unclear roles
C. ambiguous rights
D. differences in perception
E. dependence on the manufacturer
ANSWER: A
76) When Estee Lauder set up a Web site to sell its Clinique and Bobbi Brown brands, Dayton Hudson reduced space for
Estee Lauder products in its department stores in response to the ________ conflict.
A. horizontal channel
B. multichannel
C. vertical channel

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D. grid channel
E. end-customer
ANSWER: C
77) General Motors' executives work for a short time in some dealerships, and some dealership owners work in GM's
dealer policy department. This strategy helps the company avoid conflicts with its dealers. This is an example of the
________ strategy.
A. employee exchange
B. dual compensation
C. joint membership
D. co-optation
E. diplomacy
ANSWER: A
78) RX Corp. is a large manufacturer of electronic goods and sells its products through distributors and retailers. In order
to keep pace with the growing use of the Internet, the company decides to start selling online. The company faces stiff
opposition from its retailers as they believe that this will significantly reduce their profits. The company attempts to
eliminate this resistance by offering its retailers commissions for processing and delivering orders received via the Web.
This is an example of which of the following conflict resolution strategies?
A. dual compensation
B. joint membership
C. arbitration
D. co-optation
E. strategic pricing
ANSWER: A
79) Co-optation is an effort by one organization to win the support of the leaders of another by ________.
A. including them in advisory councils
B. engaging in mediation and arbitration
C. encouraging joint memberships in trade associations
D. encouraging employee exchanges
E. offering strategic justifications
ANSWER: A
80) Winstar is a large-scale manufacturer with more than a hundred partners across the globe. When making decisions
concerning distribution and channel optimization, the company invites members from its channel partners to be part of its
advisory committee. This helps the company maintain harmony with its partners. Which of the following conflict resolution
techniques is Winstar using?
A. diplomatic counselling
B. mediation
C. arbitration
D. co-optation
E. joint membership
ANSWER: D
81) Which of the following channel conflict resolution techniques is used only if everything else proves ineffective?
A. legal recourse
B. mediation
C. arbitration
D. co-optation
E. superordinate goals
ANSWER: A
82) What is the trade-off in return for the benefits associated with an integrated multichannel marketing system?
A. increased market coverage
B. customers who buy in one channel are more profitable than customers who buy across different channels
C. lower channel costs
D. two or more channels may end up competing for the same customer
E. customized selling
ANSWER: D
83) If a producer wants to achieve rapid market penetration through a low-price policy, while a dealer wants to work with
high margins to pursue short-run profitability, the source of the channel conflict is ________.
A. unclear roles and rights
B. goal incompatibility
C. differences in perception

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D. intermediaries' dependence on the manufacturer

E. strategic justification
ANSWER: B
84) Jaycee was using ________ when his organization tried to win the support of the leaders of one of his distributors by
including them in advisory councils, boards of directors, and the like.
A. dual compensation
B. employee exchange
C. co-optation
D. joint membership
E. strategic justification
ANSWER: C

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