102. (p. 386) Brand loyalty refers to the degree to which customers are satisfied with a brand and are committed to
further purchases.
103. (p. 386) Although their names are similar, brand loyalty and brand equity are unrelated.
104. (p. 386) When consumer loyalty reaches the point of brand insistence, the product becomes a specialty good.
105. (p. 386) Event sponsorship like the FedEx Orange Bowl helps improve brand awareness.
106. (p. 386) Price, appearance, and reputation can influence a consumer’s perceptions of quality.
107. (p. 387) Endorsements by sports or movie celebrities can help create a favorable brand association.
108. (p. 387) Brand association is the linking of a brand to other favorable images such as a celebrity or
geographic location.
109. (p. 385) Federal legislation requires that the brand name of a product clearly identify the manufacturer of that
product.
110. (p. 386) Papa’s Market offers customers tissues, canned vegetables, napkins, and dishwashing detergent in
basic packaging with no identified brand. These goods are popular with Papa’s cost-conscious shoppers because
they are significantly less expensive than nationally known brand names. These types of goods are examples of
generic goods.
111. (p. 386) The intended goal of brand equity is to establish the firm’s brand name as the generic name for the
product.
112. (p. 386) Nailerman’s Hardware is a large chain of hardware stores that sells a line of tools under the
Nailerman brand even though they were actually produced by another firm. Since the products are actually
produced by another firm, using the Nailerman brand is an example of a knockoff brand
113. (p. 386) Travelwell manufactures and sells luggage and briefcases. Their marketing research indicates that
durability is the attribute that consumers most desire in their luggage and briefcases. Travelwell now
emphasizes durability in all of their promotional efforts. This strategy is intended to build brand equity.
114. (p. 387) Brand managers have direct responsibility for all the elements of the marketing mix for a particular
brand or product line.
115. (p. 387) Firms use brand managers or brand teams to give them greater control over both new-product
development and product promotion.
116. (p. 388) About 86% of new products fail to reach their business objectives within their first year of
introduction.
117. (p. 388) New-product failures are most often caused by excessively high prices.
118. (p. 388) New products often fail because they don’t deliver to consumers their promised benefits.
119. (p. 388) Firms should listen to their suppliers for new-product ideas.
120. (p. 388) Employees, not the firm’s research and development department, are the number one source of ideas
for new industrial products.
121. (p. 388) Product testing is designed to reduce the number of new product ideas that a firm works on at any
one time.
122. (p. 388) In the new-product development process, product analysis is completed prior to the product screening
stage.
123. (p. 388) It now takes about seven ideas to generate one commercial new product.
124. (p. 388) The product analysis stage of the new-product development process considers the sales forecasts and
125. (p. 389) Concept testing involves taking a product idea to consumers to test their reactions.
126. (p. 389) Interactive Web sites are useful in the commercialization process for new products.
127. (p. 389) New-product commercialization includes promoting the product to distributors and retailers as well
as developing strong advertising and sales campaigns.
128. (p. 387) Beth works for Champion Industries overseeing the marketing mix for the firm’s line of calculators.
Beth serves as a brand manager for Champion Industries.
129. (p. 387) Brand managers are responsible for the marketing of a product after it has been developed and a clear
promotional message has been identified.
130. (p. 388) SnackAttack has found that an effective technique to generate ideas for new consumer products is to
carefully listen to employees and suppliers.
131. (p. 389) The key to success for U.S. firms operating internationally is to increase their efforts to maintain high
quality while decreasing expenditures on new-product development.
132. (p. 389) “Create a better mousetrap and the world will beat a path to your door.” This statement is consistent
with the idea behind the commercialization of products.
133. (p. 389) At the concept testing stage, factors such as packaging, branding, ingredients, etc. should be tested to
ensure that a product is acceptable to potential consumers.
134. (p. 389) The product life cycle presents a theoretical model describing what happens to sales and profits for a
class of products over time.
135. (p. 389) While the time in each stage may vary, all products progress through each stage of the product life
cycle.
136. (p. 389-390, figure 14.4) The four stages in the product life cycle are introduction, market, exchange, and disposal.
137. (p. 389) While some products remain in the introductory stage of the product life cycle for years, other
products may go through the entire cycle in a few months.
138. (p. 389) Knowledge of the product life cycle model can help firms develop marketing strategies and anticipate
market changes.
139. (p. 390-391, figure 14.5) Successful firms maintain consistency in their marketing mix strategies throughout the
product life cycle.
140. (p. 390, figure 14.4) Profits peak during the maturity stage of the product life cycle.
141. (p. 390) While the product life cycle is a good theory, it’s not important for marketers to recognize what life
cycle stage a product is in.
142. (p. 390-391, figure 14.5) Successful businesses develop a mix of price, product, place, and promotion that is
consistently applied throughout a product’s life cycle.
143. (p. 390) Some goods have a product life cycle that is completed in a shorter amount of time than other goods.
144. (p. 390-391) After several years as a brand manager for an established product, Pete has taken a job with a
micro brewery. He is responsible for managing the marketing mix for a new product introduction. In his new
job, Pete will find that while the products may be at different stages of the product life cycle, the marketing
strategies will be essentially the same.
145. (p. 392) As consumers evaluate a product, price plays a small role.
146. (p. 392) A long-run pricing objective of almost all firms is to optimize profit.
147. (p. 392) Sometimes a firm will lower prices below their costs in order to build a customer base.
148. (p. 392) In order to achieve a social objective, firms use low prices to enable people with low incomes to buy
their product.
149. (p. 392) Rebates and zero-percent financing are pricing strategies to create an image of status and exclusivity.
150. (p. 392) Consumer perceptions of product quality are affected by promotions and packaging, but not by the
price of the product.
151. (p. 392-393) Successful firms coordinate pricing objective strategies with decisions regarding product design,
packaging, branding, distribution, and promotion.
152. (p. 392) Successful firms maintain consistency in the short-run and long-run pricing objectives.
153. (p. 393) Cost-based pricing adds a desired profit margin to the cost of producing a product.
154. (p. 393) In the long run the market determines what the price will be.
155. (p. 393) Target costing adds a profit margin to estimated cost of production to determine the optimal price.
156. (p. 393) Demand-based pricing is another name for cost-based pricing.
157. (p. 393) Target costing is a cost-based pricing strategy.
158. (p. 393) The target costing strategy establishes a selling price that consumers are willing to pay for a product,
and then subtracts a desired profit margin to determine a target cost of production.
159. (p. 393) In the long run, the price of a product is determined by the producer.
160. (p. 393) Competition-based pricing is a strategy based on what all the other competitors are doing.
161. (p. 393) Price leadership is a demand based pricing strategy.
162. (p. 393) Price leadership occurs when one or more dominant firms set pricing practices that other firms in the
market follow.
163. (p. 393) The purpose of break-even analysis is to determine the lowest price a firm can charge and still be
able to cover its costs of production.
164. (p. 393) Break-even analysis determines profitability of a firm at various levels of sales.
165. (p. 393) The break-even point is that level of sales where total revenues equals total costs.
166. (p. 394) Total fixed costs are those costs that change when the volume of production changes.
167. (p. 394) Variable costs are costs that change with the level of production.
168. (p. 394) A skimming price strategy involves a low pricing policy intended to attract price-sensitive customers
from competitors.
169. (p. 394) A penetration strategy calls for a firm to charge low prices with the intent of attracting a large
number of customers and discouraging competition.
170. (p. 394) Firms utilizing an everyday low pricing (EDLP) strategy establish a policy of special sales on a
regular basis.
171. (p. 394) A high-low pricing strategy may condition consumers to avoid paying the regular prices by waiting
for sale prices.
172. (p. 394) As the Internet grows in popularity, it is likely that more firms will adopt a high-low pricing
strategy.
173. (p. 394-395) A bundling pricing strategy establishes a price for two or more related products.
174. (p. 395) Psychological pricing utilizes high prices to create the image of a high quality product.
175. (p. 395) Ultimately, the price of a good is determined by the interaction of supply and demand in the
marketplace.
176. (p. 395) The key to demand-oriented pricing is the recognition that not all producers face the same costs of
production.
177. (p. 392-393) The pricing objectives of a firm should be set independently of the other elements of their
marketing mix.
178. (p. 393) Gill’s Gadgets establishes the price it charges for its products by determining the cost of production
and then adding on a desired profit margin. Gill’s strategy is known as target costing.
179. (p. 394) Rather than having frequent special sales, Walt’s Warehouse has a pricing strategy that maintains
lower prices than competitors all the time. Walt’s pricing strategy is known as everyday low prices (EDLP).
180. (p. 393-394) Carlotta owns and manages the Carlite Car Wash. She charges $8 per car wash. Her fixed costs
are $600 per month, while her variable costs per car wash amount to $2. Carlotta must wash 60 cars to break
even.
181. (p. 394) Shuichi owns and operates his own sushi bar. His fixed costs would include rent, insurance, and
property taxes.
182. (p. 394) Pattie Bunz operates the Zestee Burgers restaurant. The cost of pickles, onions, buns, catsup, and
meat patties would all be considered variable costs for her type of business.
183. (p. 394) Miranda is a marketing manager for a large manufacturer. Her boss has asked her to evaluate a new
product idea. One of the things Miranda wants to determine is how much of this product her firm would have to
sell in order to break even. In order to compute this break-even level of sales, she will need to know the price of
the good, the total fixed costs, and variable cost of producing each unit.
184. (p. 394) Webster Industries is one of the first producers of a unique consumer product. The company has
chosen a low price strategy, hoping this will enable them to quickly attract many customers while discouraging
potential competitors from entering the market. Webster’s approach to pricing is a classic example of the
skimming strategy.
185. (p. 393) Admiral Motors is the dominant firm in the auto market. When Admiral announces an increase in the
prices of its automobiles, Chord and Frysler, the smaller firms in the market, usually quickly announce similar
price increases for their own cars. This situation is an example of demand-oriented pricing.
186. (p. 394) Grandpa’s Burger Haven sells a medium soda for $1.50, a “Single Meat” burger for $1.99, and onion
rings for $1.83. However if you buy the “Single Meat Meal” the price is $5.00. Grandpa’s is practicing price
bundling with the “Single Meat Meal.”
187. (p. 395) Despite the fact that microeconomic theory places a great deal of emphasis on price, marketers often
try to find ways to compete on product attributes other than price.
188. (p. 395) For most firms, price competition is the most important way to gain a competitive advantage over
rivals.
189. (p. 395) Small firms often rely on nonprice competition when competing against larger firms.
190. (p. 395) One way firms can gain a competitive advantage without relying on low prices is by developing
close, friendly relationships with their customers.
191. (p. 395) Budd’s Floral Shoppe is located in a large town that has several other florists. The owner, Rose Budd,
is likely to find that the presence of many larger competitors means that the only way she can survive is to
charge rock bottom prices.
192. (p. 395) Community Catering Services, Inc. advertises that they are the “friendliest caterers in town.” Their
prices are no lower than the rates charged by competing caterers, but they put a lot of emphasis on getting to
know the needs of their customers. They tailor their efforts to meet these needs, providing a unique dining
experience that exactly matches the customer’s expectations. Community Catering is likely to find that this
approach is more effective in achieving its goals than the use of aggressive price cutting.