Companies cannot enjoy high levels of customer retention without having high levels of
customer satisfaction.
When the total contribution produced by a pricing strategy is lower, overall profits will
also be lower because fixed costs are deducted from the total contribution.
The share potential index is an estimate of the share performance index if the business
were to achieve maximum levels of performance for each share metric.
Competitive benchmarking is a process that was developed initially at Xerox to
improve its competitive position relative to key competitors.
A channel system should enhance customer value by increasing customer benefits,
lowering customer cost of purchase, or both.
A business implements an oblique strategy because it seeks to gain a competitive
advantage with direct confrontation.
The formula for calculating the customer value index is: Brand Image+Warranty+Price
+Callbacks.
A product that will eliminate or significantly reduce the usage costs that customers
presently
incur offers a substantial economic value.
Poor customer retention has a powerful impact on financial performance only if a
business is losing market share.
A business that has a 75 percent customer retention rate has an an average customer life
of 6 years.
Both creative insight and analytical structure are necessary to paint a meaningful
picture of the market situation, marketing strategy, and a logic-based path that leads to
the desired performance objectives.
It is during the early stages of market growth that maximum marketing profits are
obtained.
An oblique strategy requires superior knowledge of both competitors and customers.
Insufficient message frequency and poor ad copy both contribute to target customers’
lack of awareness and comprehension.
The strategic market plan of “investing to improve position” is an offensive strategic
market plan to invest marketing resources to grow the market.
When a business’s product has no considerable and sustainable differential advantage in
a quality-sensitive market, with many competitors, many substitutes and easy
competitor entry, conditions are favorable for a skim pricing strategy.
The benefit of needs-based market segmentation is that it allows us to identify in
advance the individual customers who would fall into each segment.
A low level of market attractiveness requires an offensive strategic market plan.
Businesses exercise greater control over service quality when they use direct marketing
channels to market their goods.
Dividing the NMC by the investment in marketing and sales produces the marketing
return on investment.
VARs and OEMs operate in the consumer market but not in the business-to-business
market.
Studying the experience of lead users provides insights for improving a product by
adding new features or modifying it in other ways.
Three fundamental forces that capture the shape of the market growth curve and the rate
of market growth are market potential, market penetration, and the rate at which new
customers enter the market.
In order to implement a mass-personalization strategy, a business’s database marketing
system must be able to track individual customers and their buying history.
In the context of market planning, it is advisable to view the potential market as a
homogeneous market irrespective of the different needs and demands of the smaller
niche markets.
Traditional media advertising is considered more personal than social media
engagement and is “viral” in nature.
One key benefit provided by a broad market definition is that it concentrates a business’
focus on articulated customer needs.
We can create a set of preference curves by examining how customers make trade-offs
when choosing among various combinations of price and benefits, using conjoint
analysis.
The ratio of total sales to current market demand is known as the share development
index (SDI).
In order to implement a mass-personalization strategy, a business’s database marketing
system must be able to track individual customers and their buying history.
A larger unit volume allows for production and purchasing economies that lower the
per-unit manufacturing cost of a product, thereby creating a scope effect.
Diversification decreases the likelihood that a firm’s overall performance will be
consistent.
A market-based management business gives its dissatisfied customers as much attention
as its “very satisfied” customers.
Creating awareness among a large number of people is not the objective of most
marketing communications.
The objective of brand-image communications is to trigger an emotional response that
builds a strong connection between the brand and the image the company wants to
create among its target customers.
A(n) ________ strategy involves the sale of two or more products at an overall price
that is lower than the total price that a customer would pay to purchase the products
separately.
A) pure product bundling
B) impure product bundling
C) cobranding
D) horizontal brand extension
E) vertical brand extension
What is the total sales a business should generate if it must obtain a net profit of $125
million at a sales return of 20%?
A) $1.25 billion
B) $250 million
C) $2.5 billion
D) $625 million
E) $750 million
Which of the following is true of variable cost advantage?
A) Scale effect occurs for a manufacturer who doubles production capacity.
B) Businesses with a substantial market share advantage generally achieve a higher unit
cost.
C) As volume increases, the cost per unit generally increases.
D) A larger unit volume allows for production that lowers the per-unit manufacturing
cost, thereby creating a scope effect.
E) As a business builds more of the same product, there is a greater opportunity for
scale effects.
Smith Automotive is a company that produces component parts for automobile engines.
A margin of $4 per unit produces fixed expenses of $80 million. The market demand for
the component parts is 400 million units per year.
Mini-Case Question. Determine the required volume if the company’s operating income
is $20 million.
A) 10 million units
B) 20 million units
C) 25 million units
D) 30 million units
E) 35 million units
Which of the following statements is true about market metrics?
A) They involve using uniform benchmarks across all industries.
B) They provide qualitative data, and not quantitative data.
C) They always express the measurements as pie charts.
D) They measure market conditions and a business’s performance in that market.
E) They are more advanced product-market metrics for companies that are dealing with
pricing issues.
Which of the following is true about defensive portfolio strategies?
A) They are more growth oriented than offensive portfolio strategies.
B) They aim to protect important strategic market positions.
C) They are most commonly implemented in attractive markets by businesses with a
weak competitive position.
D) They are most commonly implemented in unattractive markets by businesses with a
high competitive position index.
E) They aim to reduce short-run cash flow and profit performance, to promote growth
in the long-run.
In which of the following ways of creating a new company, brand, or subbrand name,
the names are derived from the basic benefit provided by the product?
A) evocative names
B) experiential names
C) functional names
D) invented names
E) realistic names
The combination of ________ and ________ creates a portfolio position for any given
product-market.
A) market attractiveness; competitive advantage
B) marketing expenditure; sales revenue
C) market share; sales revenue
D) cost of production; competitive advantage
E) brand awareness; financial advantage
Kate owns a women’s fashion apparel manufacturing firm. She has determined that the
customers for her business’ products can be segmented into three distinct segments
differing in primary needs, demographics, lifestyle, and purchase behaviors. She now
wants to develop a value proposition that delivers value to target customers in each
segment. Which stage of the needs-based market segmentation process does this
represent?
A) segment identification
B) segment attractiveness
C) segment profitability
D) segment positioning
E) segment marketing mix strategy
Which of the following is true about a pull communication strategy?
A) It uses uses channel marketing instead of direct marketing.
B) It is directed at end-users.
C) It uses tools such as sales incentives and co-op advertising.
D) It motivates retailers to carry a particular product or brand.
E) It aims to build the interest, purchase, inventory, and marketing efforts of its
intermediaries.
Dow Corning has been a market leader in silicon technology applications for over 50
years. Its products span many market applications in electronics, construction, health
care, and a multitude of industrial applications. However, as some of its product-market
applications reached the mature stage of the product life cycle, they became less
competitive. Dow Corning’s full service consultative engineering approach did not work
in more mature, price-sensitive market applications. It was also unprofitable for Dow to
pursue these customers as they represented a majority of target customers but only
represented 20% of the revenue potential for the total market for their products.
Mini-Case Question. When considering Dow’s product offerings, if the channel system
can build an image among quality-conscious customers, the company is improving
customer value by increasing ________.
A) product assortment
B) after-sale services
C) availability/delivery
D) transaction services
E) brand reputation
Which of the following formulas is used to calculate the net marketing contribution?
A) Acquisition Costs + Retention Costs
B) Volume (units) + Margin per Unit
C) Price + Variable Cost
D) Gross Profit – Marketing and Sales Expenses
E) Price – Variable Cost
The table given below shows four aspects of product performance that customers seek
in commercial scanners. The product performance ratings are shown for PrintWorth
Inc., an American firm that manufactures commercial scanners, and three of its
competitors.
Mini-Case Question. What is the relative product performance index for PrintWorth Inc.?
A) 100
B) 130
C) 25
D) 48
E) 62.9
Which type of marketing channel allows a manufacturer to have the highest degree of
control over service quality?
A) indirect
B) direct
C) intermediate
D) mixed
E) value-added
Aster Inc. is an American firm that manufactures and markets cell phones for sale in
discount stores and other retail settings. The firm also sells cell phone accessories. Aster
Inc. conducted an analysis of its competitive advantage for one of its product-markets
and conducted research to learn the following information:
Mini-Case Question. If differentiation advantage and cost advantage are both rated at 40%
of total importance and marketing advantage is weighted much lower at 20%, what is Aster
Inc.’s competitive position index for this product-market?
A) 29.6
B) 18.4
C) 6.8
D) 54.8
E) 45.7
McCann Chemicals is a multinational pharmaceutical company with headquarters in
New York. The firm invites all the research scientists at McCann Chemicals, as well as
clinicians and academicians to work on open-source projects funded by the firm.
McCann Chemicals has a special web site that is used to create an open-ended group of
prosumers, professionals, specialists, and employees, who can share information and
help each other. In this example, McCann Chemicals is using which of the following
methods?
A) reverse innovation
B) emphatic method
C) vertical integration
D) mass collaboration
E) horizontal integration
Which of the following is a backward-looking market metric?
A) customer awareness
B) market share
C) product trial
D) customer satisfaction
E) perceptions of relative product quality
Which of the following is considered a market access factor that influences a market’s
attractiveness?
A) market size
B) growth rate
C) buyer power
D) channel access
E) price rivalry
Calculate the return on assets for Nestor Inc., which generates a net profit of $45
million from its assets worth $780 million.
A) 57.1%
B) 45%
C) 28.5%
D) 17.5%
E) 5.7%
Which of the following is true of direct marketing channels?
A) Direct marketing channels offer the greatest opportunity for sales communication
and customer interaction.
B) Direct marketing channels yield very low margins for the manufacturer.
C) Direct marketing channels do not allow the manufacturer control over the sales
messages and service quality.
D) Direct marketing channels are most suited for inexpensive products that are bought
in low quantities.
E) Direct marketing channels result in the lowest out-of-pocket marketing expenses for
the manufacturer.
When assessing the current situation in the first step of a marketing plan, it is
recommended that one ________.
A) avoids making assumptions of any kind
B) eliminates areas that lack factual data from the purview of the plan
C) utilizes only concrete facts about the future projections and performance gaps
D) generates estimates based on knowledge and experience to be modified in the future
E) substitutes the data of current performance by that of the projected performance in
the plan
________ programs allow a business to test price-performance preferences and to
evaluate its product’s value on the basis of the business’s competitive position.
A) Harvest technique
B) TURF analysis
C) Discourse analysis
D) Conjoint analysis
E) SWOT analysis
________ is the amount that is left over after deducting all other business expenses but
before deducting interest and taxes.
A) Sales revenue
B) Operating income
C) Net marketing contribution
D) Marketing expenses
E) Gross profit
Which of the following is true of unprofitable customers?
A) They produce a referral value that is over three times their customer lifetime value.
B) They are loyal customers in waiting.
C) They buy a lot from many companies and do not have a strong preference for one
over the other.
D) They have a low desire to repurchase but are unable to move easily to another
company’s product.
E) They are a result of mismanaged customer selection.
What is the total sales revenue generated by an organization that has a net marketing
contribution of $25 million at a gross profit margin of 5%, and its marketing and sales
expenses amount to $10 million?
A) $500 million
B) $600 million
C) $700 million
D) $800 million
E) $900 million
If the total factor-weighted attractiveness scores for market forces, competitive
environment, and market access are 10, 24, and 35, respectively, what is the market
attractiveness index?
A) -3
B) 1
C) 23
D) 49
E) 69
Clarion Inc. is a firm that produces components for the manufacturing equipment
market and currently enjoys a 42% market share. Through an analysis of the share
development path, the marketing department of the firm estimates that the firm should
perform at a 95% level in product awareness, 85% in product preference, 80% in
intentions to purchase, 90% in product availability, and 75% in rate of purchase.
Mini-Case Question. Clarion Inc. has focused its product-market strategies on large
manufacturers, that have sales exceeding $100 million per year and that purchase
large-scale, multi-million dollar equipment. However, research conducted by the
marketing department identifies a fairly attractive market potential for Clarion
manufacturing equipment among smaller manufacturers. Clarion Inc. produces a line of
lower capacity manufacturing equipments, with a pricing strategy aimed at catering to
the needs of the small manufacturers. In this example, Clarion Inc. uses a ________
strategy.
A) improve customer loyalty and retention
B) develop a new market
C) enter new-market segments
D) harvest for cash flow
E) divest for cash flow
Ryan’s friends consider him an expert on electronic products. Ryan purchased quick
read, one of the first electronic books launched by EasyTech Inc. years before any of his
friends did. Ryan paid four times more for this product than they did. He wanted the
benefits of an electronic book and was not concerned that his friends thought he was
foolish to buy electronic reader when they first came out on the market. For EasyTech
Inc., John is most likely to be classified as a(n) ________ customer.
A) captive
B) lead
C) mainstream
D) laggard
E) early majority
Which strategy would be used if a business is losing money in a given market and
decides to pursue a quick market exit?
A) a monetize market strategy
B) a disintermediation market strategy
C) a harvest market strategy
D) a divest market strategy
E) an optimize market strategy
Which of the following formulas is used to calculate the net marketing contribution?
A) Acquisition Costs + Retention Costs
B) Volume (units) + Margin per Unit
C) Price + Variable Cost
D) Gross Profit – Marketing and Sales Expenses
E) Price – Variable Cost
A business with a share development index equal to 45 means that the business
________.
A) can only achieve 45 percent of the total market share
B) achieved a 45 percent growth in market share
C) achieved only 45 percent of its share potential index
D) achieved a 45 percent growth in competitive advantage
E) has to achieve 45 percent more in market share to reach its potential market share
The table given below shows four aspects of product performance that customers seek
in commercial scanners. The product performance ratings are shown for PrintWorth
Inc., an American firm that manufactures commercial scanners, and three of its
competitors.
Mini-Case Question. What is the overall relative advantage score of PrintWorth Inc. for
image quality?
A) 0
B) -40
C) 26.66
D) 13.34
E) 6
Which of the following is true of product line advantage?
A) A business with a broad line of products has to be more focused in order to be cost
effective in its marketing efforts.
B) It is important to expand a business’s product line during the emerging stage of the
product life cycle.
C) Businesses with narrow product lines are more profitable during the emerging and
growing stages of a product life cycle.
D) A narrow line of products creates more selling opportunities for the sales force and
channel partners.
E) It is a source of competitive advantage that is independent of differentiation
advantage.
