Chapter 8—Business Markets and Buying Behavior
ESSAY
1. What are the four major types of business markets, and what are the characteristics of each?
2. Discuss the differences between business and consumer transactions.
3. What are some of the major concerns of business customers in making purchase decisions?
4. What factors affect the purchase method that business customers choose?
5. Compare and contrast the three major types of purchases made by business customers.
6. Discuss how demand for business products differs from demand for consumer products.
ANS:
7. What is derived demand?
8. Explain how purchase decisions for business products may be influenced by persons in a buying
center.
9. Draw and label the framework that represents the business buying decision process and the factors that
influence it.
10. In what ways do environmental factors affect the business buying decision process?
11. How do a firm’s objectives affect the business buying decision process?
12. Discuss how interpersonal factors influence the business buying decision process.
13. How do individual factors affect the business buying decision process?
14. Compare and contrast the consumer buying decision process and the business buying decision process.
15. In what ways can an industrial classification system be used by business marketers to analyze target
markets?
16. What are the major advantages of the North American Industry Classification System (NAICS)
compared to the Standard Industrial Classification (SIC) system?
ANS:
SHORT ANSWER
17. A(n) ____________________ market consists of individuals or groups that purchase products for
resale, use in production, or daily operations.
MULTIPLE CHOICE
18. The three purposes for which individuals or groups can use products in order for it to be considered a
business market are
a.
use in daily operations, end consumption, and resale.
b.
direct use in producing other products, company travel, and end consumption.
c.
resale, use in daily operations, and direct use in producing other products.
d.
governmental, institutional, and reseller purposes.
e.
making other products, selling to other businesses, making component parts.
19. In business markets, individuals or groups purchase products for one of three purposes. These
purposes are
a.
resale, wholesale, and direct use.
b.
wholesale, direct use, and use in producing other products.
c.
resale, wholesale, and use in producing other products.
d.
resale, direct use in producing other products, and use in general daily operations.
e.
use in general daily operations, wholesale, and resale.
20. When Hunter Ceiling Fans buys electrical wire for use in producing its ceiling fans, Hunter is part of
what type of market for electrical wire?
a.
Resale
b.
Wholesale
c.
Customer
d.
Consumer
e.
Business
21. Business markets are typically divided into four categories. These categories are
a.
retailers, wholesalers, services, and nonprofit firms.
b.
producer, manufacturer, reseller, and government.
c.
producer, reseller, government, and institutional.
d.
manufacturer, wholesaler, retailer, and services.
e.
reseller, retailer, government, and institutional.
22. Individuals and business organizations that purchase products for the purpose of making a profit either
by using the products to produce other products or by using them in their operations are classified as
____ markets.
a.
consumer
b.
institutional
c.
producer
d.
government
e.
reseller
23. An accountant who purchases software for maintaining clients’ books is an example of a buyer in a(n)
____ market.
a.
consumer
b.
producer
c.
reseller
d.
government
e.
institutional
24. Individuals and business organizations that buy finished goods and resell them to make a profit
without changing the physical characteristics of the product are classified as ____ markets.
a.
consumer
b.
institutional
c.
producer
d.
government
e.
reseller
25. ____ buy products from manufacturers and then resell the products to other firms in the distribution
system.
a.
Retailers
b.
Producers
c.
Distributors
d.
Warehouses
e.
Wholesalers
26. Mike’s Roadside Market buys produce from area farmers, marks the merchandise at a price that
includes some profit, and then sells the fruit and vegetables to the people in and around Centerville.
Mike’s would be classified as part of a ____ market.
a.
consumer
b.
producer
c.
government
d.
reseller
e.
wholesaler
27. Snappy Tools, Inc., purchases hammers, bolts, and other hardware items from a variety of
manufacturers and sells them to hardware stores at a price that includes a profit for Snappy Tools, Inc.
The company would be part of what type of business market?
a.
Reseller
b.
Producer
c.
Consumer
d.
Government
e.
Supply
28. Motorola buys silicone which is used in its chip-making process. Motorola produces microchips for
use within a wide variety of products for other firms, such as Ford, GM and Samsung. Motorola is a
buyer in a(n) ____ market.
a.
producer
b.
government
c.
reseller
d.
construction
e.
institutional
29. Retailers like Target and Kmart are considered to be members of which business market?
a.
Reseller
b.
Customer
c.
Producer
d.
Institutional
e.
Services
30. Which of the following statements about reseller markets is false?
a.
Resellers are concerned with the level of demand for the product.
b.
Resellers are not concerned with how much space the product takes up as long as it has a
high price.
c.
Resellers want producers to be able to supply adequate quantities of the product.
d.
Resellers are concerned with the availability of technical and promotional assistance from
the producer.
e.
Resellers are concerned with the markup percentage they can get on the product.
31. Because retailers have to be concerned with product selection, price, and space, they often evaluate
products on the basis of
a.
their markup.
b.
sales per square foot of selling area.
c.
how many of the product they can fit in a certain amount of space.
d.
profit per dollar of selling price.
e.
the reliability of the supplier.
32. Which type of business market tends to have the most complex buying procedures?
a.
Reseller
b.
Institutional
c.
Retailer
d.
Government
e.
Producer
33. When the city of Chicago buys iPadsTM for its restaurant inspectors to use during their visits, the
purchase from Apple would be considered
a.
a regulatory sale.
b.
a reseller purchase.
c.
a government purchase.
d.
a producer purchase.
e.
an institutional sale.
34. The state of Montana is preparing to buy a large quantity of frozen orange juice for use in a large
school district. Citrus Sweet, Inc. is in the citrus juice business but has never sold to the government
market. To have a chance at getting this order, Citrus Sweet’s first step must be to get her firm to
a.
make a presentation appointment with the state.
b.
quote prices to the purchasing department.
c.
advertise in the capital city.
d.
negotiate with the state.
e.
secure a slot on the list of qualified bidders.
35. About what percentage of the annual U.S. gross domestic product is government spending?
a.
2 percent
b.
10 percent
c.
20 percent
d.
30 percent
e.
50 percent
36. A friend of yours starts his own business. He would like to expand his client base to include the
government, but he believes his small business would be ignored. Based on your knowledge from the
text, you tell him
a.
that he’s absolutely right, the government doesn’t deal with small businesses.
b.
although the government will deal with small businesses, he will never make a profit off a
government contract.
c.
that any government, federal, state, or local would laugh at the size of his business.
d.
the government rarely considers new suppliers when making purchasing decisions.
e.
the government buys products from all sizes of business, but there is some red tape.
37. The government decides to purchase a new fleet of fighter jets for the U.S. Air Force. What type of
buying procedure is the government most likely to use?
a.
The government will request bids from all companies on its qualified bidder list.
b.
It will contact whatever company made the last jets and have them develop the new ones.
c.
Ads will be placed in the top five circulated U.S. newspapers for a company to produce
the jets.
d.
The government will select a few firms and enter into negotiations with them until the
contract is awarded.
e.
The contract will go to the first company that submits a reasonable bid for the desired jets.
38. Pi Delta Mu sorority purchases food in bulk to feed its members living in the house. This means it is
part of a(n) ____ market.
a.
producer
b.
consumer
c.
reseller
d.
institutional
e.
government
39. When charitable organizations such as the American Cancer Society, Second Harvest Foodbank, and
the Red Cross make purchases for goods and services to use in their daily operations, they would be
considered to be _______ buyers.
a.
corporate
b.
government
c.
institutional
d.
producer
e.
nonprofit
40. Institutional markets are
a.
intermediaries who resell goods to make a profit.
b.
federal and state government units.
c.
state or local government units.
d.
consumers who buy products for their own use.
e.
organizations that seek nonbusiness goals.
41. Which of the following would be considered an institutional buyer?
a.
The University of Illinois
b.
The Environmental Protection Agency
c.
Apple Computers
d.
The United Way
e.
City of Greenville
42. What are the two ways governments make purchases?
a.
Cash or credit
b.
Contracting previous suppliers and bids
c.
Bids and negotiated contracts
d.
Lottery system and contract negotiations
e.
Request for new purchases and recurring orders
43. What is a primary difference between business and consumer buyers?
a.
Consumer buyers require more product information than business buyers.
b.
Business purchases are made by one individual whereas families make consumer
purchases together.
c.
Repeat sales are more common with consumer buyers than business buyers.
d.
Consumers primarily buy inexpensive items; businesses only buy expensive items.
e.
Business buyers generally make larger orders than consumer buyers.
44. Bob Denton of Denton Pest Control buys equipment from Allied Tools because Allied hires him to
spray its warehouse for insects periodically. This practice is an example of
a.
cost-benefit trading.
b.
cooperative selling.
c.
reciprocity.
d.
supplier agreements.
e.
modified rebuy purchase.
45. A disadvantage of reciprocity is that it can lead to
a.
a price war.
b.
higher promotional costs.
c.
more competitive firms entering the industry.
d.
less-than-optimal purchases for the buyer.
e.
longer periods of negotiation.
46. Jason owns a small landscaping business called GreenScapes. When buying a new pickup truck for
his landscaping business, Jason negotiated with Palmetto Dodge, a dealer, with the agreement that
GreenScapes would be the service company Palmetto Dodge used for all of its landscaping needs.
This is an example of
a.
a new task purchase.
b.
a straight rebuy.
c.
a modified rebuy.
d.
reciprocity.
e.
a straight purchase.
47. Which of the following statements about business buying is false?
a.
Business marketers prefer not to sell to customers who place small orders.
b.
Business marketers must often sell their products in large quantities to make profits.
c.
Most business purchases are made by committee.
d.
Business purchases are usually made on the basis of contracts.
e.
Orders in business markets tend to be smaller than those placed in consumer markets.
48. Many suppliers and their customers invest time and resources to build and maintain mutually
beneficial relationships which are often called
a.
partnerships.
b.
co-ops.
c.
monopolies.
d.
reciprocity.
e.
alliances.
49. Raython Hardware and Thames Industrial Supplier have worked closely for many years and have a
mutually beneficial relationship in which Raython provides all of Thames’s hardware needs in a timely
manner. Raython and Thames’s relationship could be best characterized as a(n)
a.
reciprocity agreement.
b.
partnership.
c.
intra-organizational group.
d.
alliance.
e.
tying arrangement.
50. Which of the following is true with respect to buyers in business markets?
a.
Business buyers always act rationally when making purchases for their company.
b.
Business customers tend to be less informed about the products they purchase than
consumer buyers.
c.
Business customers demand detailed information about a product’s quality, features, or
technical specifications.
d.
Business customers are no different than buyers in consumer markets.
e.
Business customers tend to buy products from their friends and contacts with business
suppliers.
51. When buying materials, the purchasing agent for Alco Pillow Manufacturing Company considers a
variety of factors. Which one of the following is least likely to concern this buyer?
a.
Does the quality of the goods meet company specifications?
b.
Does the supplier consistently deliver on time?
c.
Does the supplier also sell to my competitors?
d.
Does the supplier offer the services required?
e.
Does the price meet company budget requirements?
52. Product specifications are best described as
a.
physical characteristics and level of quality.
b.
descriptions of a product.
c.
numbers of quality inspections required.
d.
comparisons to similar products.
e.
defective product return policies.
53. Most businesses try to control the level of quality in the parts they buy from suppliers. Most firms
develop standards for ____ in order to achieve their quality goals.
a.
how many different suppliers they use
b.
how many parts can fail
c.
controlling when shipments will arrive
d.
the percentage of defects allowed
e.
how long the parts should last
54. All of the following are important concerns of business customers except
a.
achieving a specific level of quality in the products offered to target markets.
b.
obtaining a level of quality that meets specifications.
c.
obtaining products that exceed specifications to ensure the best possible product
performance.
d.
obtaining products for which the quality level is consistent.
e.
supporting customers with services they expect.
55. Volkswagen purchases upholstery for the interiors of its vehicles from various suppliers. This
upholstery must have a set of characteristics that is expressed by Volkswagen. This set is called
a.
descriptions.
b.
product features.
c.
criterion.
d.
purchase requests.
e.
specifications.
56. Management at Readyfresh Dry Cleaners is concerned that it maintains a high level of service for its
business accounts. How should the firm monitor the level of service these customers receive?
a.
Develop a code of service.
b.
Set service objectives.
c.
Formally survey customers.
d.
Specify service uniformity.
e.
Stress truthfulness with employees.
57. Johnson’s Industrial Pest Control Service wants to meet its customers’ expectations with regard to the
quality of service it provides. How should Johnson’s identify these expectations?
a.
Conduct market research.
b.
Use management judgment.
c.
Trace existing service levels.
d.
Stress quality service with employees.
e.
Train employees better.
58. A Pillsbury mill in Utah buys grain from growers in the western region. The purchasing agent for
Pillsbury will most likely use which buying method?
a.
Description
b.
Inspection
c.
Sampling
d.
Negotiation
e.
Selection
59. Collin Roberts of Roberts Construction is planning to buy a piece of used earth-moving equipment. He
would most likely base his purchase decision on ____ of the alternative machines.
a.
descriptions
b.
inspections
c.
a sampling
d.
specifications
e.
reputations
60. Which method of business buying is most likely to be used when the products being purchased are
standardized based on certain characteristics?
a.
Homogeneous selection
b.
Inspection
c.
Description
d.
Sampling
e.
Negotiation
61. A representative product taken from a lot or batch, evaluated, and purchased refers to
a.
homogeneous selection.
b.
description.
c.
trust.
d.
negotiated inspection.
e.
sampling.
62. Which method of business buying is necessary when products are highly homogeneous and
examination of each item is not feasible?
a.
Negotiation
b.
Sampling
c.
Description
d.
Inspection
e.
Homogeneous selection
63. St. Jude’s Hospital decides to redo its kitchen with new flooring, cabinets, counters, and appliances.
The hospital compiles a description of the project and then asks sellers to submit bids. After
determining the most attractive bids, the hospital will then work with two or three companies to
determine who will get the contract. This is an example of using ____ for a purchase decision.
a.
sampling
b.
negotiation
c.
inspection
d.
elimination
e.
description
64. Which of the following products is most likely to be purchased on the basis of contract negotiation?
a.
Eggs
b.
Office supplies
c.
Used cars
d.
A custom-made bulldozer
e.
Wheat
65. Most business purchases can be classified as belonging to one of three types:
a.
delinquent, repetitive, or delivered.
b.
repetitive, new-task, or modified rebuy.
c.
modified rebuy, new-task, or straight rebuy.
d.
delinquent, new-task, or reciprocal.
e.
rebuy, reciprocal, or delayed.
66. The United States Navy purchases uniforms from a single supplier. For the last twenty-five years, the
trousers purchased from this supplier have not changed and have been bought every six months, in
seven different sizes. This example is called a
a.
new-product purchase..
b.
repetitive purchase.
c.
straight rebuy.
d.
modified rebuy.
e.
standard order.
67. When a business is making its initial purchase of an item to be used to perform a new job, it is known
as a ____ purchase.
a.
straight rebuy
b.
reciprocal
c.
delayed
d.
new-task
e.
modified rebuy
68. Perry Supply’s sales and sales force have continued to expand. Now, the firm plans to add a fleet of
company cars as part of its sales compensation package. For Perry Supply, these vehicles would
represent a ____ purchase.
a.
modified rebuy
b.
straight rebuy
c.
new-task
d.
reevaluated
e.
repetitive
69. Anderson Distribution Company has purchased 15 forklifts over the past two years. As it plans to
place its next order for another five machines, management wonders if additional features may be
needed in order to handle changes in the product lines it carries. For Anderson, these new forklifts
represent a ____ purchase.
a.
new-task
b.
repetitive
c.
straight rebuy
d.
repetitive order
e.
modified rebuy
70. A representative from Coca-Cola stops by at a local fast-food restaurant once a month to inquire how
much soft drink syrup the store will need. The restaurant’s orders are an example of which type of
business purchase?
a.
New-task
b.
Modified rebuy
c.
Straight rebuy
d.
Bid
e.
Negotiated
71. Safeway Supermarkets recently placed an order with the Kahn Corporation for hotdogs. The typical
weekly order is for 10 cases; however, since the upcoming weekend includes a holiday, this time
Safeway is ordering 100 cases of hotdogs. Safeway orders this product on a regular basis. What type
of purchase does this week’s purchase represent?
a.
New-task
b.
Repetitive
c.
Institutional
d.
Straight rebuy
e.
Modified rebuy
72. The Eagle Pawn Company is a regional business that owns seven pawn stores in the Houston area.
The owners of Eagle Pawn have recently purchased a new software system designed to better track
their inventory. Now that they have had the system for a couple of months, they have decided to
upgrade to a newer version. The original purchase is an example of a(an) ________, while the current
purchase will be a(an) _____.
a.
new task; modified rebuy
b.
new task; continued new-task
c.
contractual; modified rebuy
d.
new task; straight rebuy
e.
negotiated task; modified rebuy
73. Demand for business products is also known as ____ demand.
a.
derived
b.
corporate
c.
business buying
d.
manufacturing
e.
industrial
74. The fact that business customers purchase products to be used directly or indirectly in the production
of goods and services to satisfy customers’ needs means that demand for business products is
a.
joint.
b.
economically stable.
c.
derived.
d.
inelastic.
e.
more fluctuating.
75. Goodyear is a manufacturer and marketer of tires for new passenger cars. In recent years, the
company’s business has declined because of the overall decrease in consumer demand for new cars. In
this case, the demand for Goodyear’s tire products is said to be ____ since it depends on the demand
for new cars.
a.
inelastic
b.
fluctuating
c.
derived
d.
elastic
e.
nonderived
76. Demand for business products is characterized as derived. From what is the demand derived?
a.
Industrial demand
b.
Modified demand
c.
Demand for consumer products
d.
Future product demand
e.
The business cycle
77. All of the following describe the demand for business products except
a.
elastic.
b.
derived.
c.
joint.
d.
inelastic.
e.
fluctuating.
78. ____ is(are) a major threat to the sales success of jointly demanded products.
a.
Price changes
b.
Shortages
c.
Economic instability
d.
Inventory buildup
e.
Proliferation of brands
79. Inelastic demand simply means that
a.
buyers will not make a modified rebuy purchase.
b.
demand depends on how many items are purchased.
c.
a price increase or decrease will not significantly change the demand for an item.
d.
when price goes up, demand goes down.
e.
when supply is reduced, the price will increase.
80. Inelastic demand in business markets refers to a situation where
a.
demand for a given product fluctuates very little over time.
b.
price increases or decreases will not significantly change demand for a given product.
c.
demand for a given product fluctuates significantly over time.
d.
demand for one product depends heavily on the demand for another product.