Product-markets with low indexes for both market attractiveness and competitive
position have the strongest portfolio position and the best opportunities for profit
performance.
If a business fails to deliver acceptable or expected levels of serviceability and
appearance, an advantage in other dimensions of product performance will not matter.
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.
Advertising effort made in a given period will produce some additional sales response
in subsequent sales periods, and the advertising carryover coefficients range from zero
to less than one.
Changes in marketing metrics such as product awareness, customer satisfaction, and
customer perceptions of relative product quality and customer value generally precede
actual changes in customer purchasing behavior.
Customer satisfaction is considered a forward-looking marketing metric.
After a business goes beyond the break-even level of sales, profitability begins to drop
significantly.
Every business must manage its costs, but not every business can have a cost
advantage.
Lifestyle forces that shape customer needs and market demand include how the product
is used, when it is used, and how much it is used.
Product positioning starts with company engineers or product managers, not target
customers.
Competitive benchmarking is a process that was developed initially at Xerox to
improve its competitive position relative to key competitors.
The cost of using direct marketing channels is typically higher than that of indirect
marketing channels for manufacturers.
Every marketing channel is basically the same in its cost structure and its customer
reach.
During the rapid-growth phase of market development, customer needs become more
salient and numerous, and segments begin to form.
A strategic market plan sets the direction and provides guidelines for resource
allocation.
After a business goes beyond the break-even level of sales, profitability begins to drop
significantly.
Every business must manage its costs, but not every business can have a cost
advantage.
The ultimate goal of a customer relationship management is to build one-on-one
customized relationships between a business and individual customers.
For products that project a “brand personality,” there is an opportunity to create
customer value through the delivery of emotional benefits.
To use single-segment pricing, a company bases the price of a product on the costs of
manufacturing and marketing the product, not on the attractive savings the customers
realize over the life of the product.
One disadvantage of the market share index is that it does not identify important
sources of lost market share opportunity.
When pursuing a large-segment strategy, a business presents a generic value proposition
built around the core customer need and the business’s generic positioning strategy to
the entire market.
The primary goal of a defensive strategy is to protect profitability and key strategic
share positions that are worth the investment.
Shareholder measures of performance are directly influenced by product-market
performance and profitability.
Product positioning starts with company engineers or product managers, not target
customers.
Without backward-looking metrics, the business has only an internal measure of
performance.
The company’s customer value index is the sum of its performance index and its cost of
purchase index.
A portfolio analysis is an evaluation of a business, product, or market with respect to
market attractiveness and competitive position as an aid in identifying the most
appropriate strategic plan.
Measures of market performance, such as sales and market share, are backward-looking
measures of success or failure.
In a price-sensitive market, product positioning generally requires a higher price
because this is the only source of differentiation that target customers value.
The net marketing contribution as a percentage of sales is called the marketing ROI.
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.
Compared to a direct marketing channel, an indirect marketing channel has lower
margins and also, lower costs of marketing and channel management.
Communications that are targeted at industry gurus and consultants lead to secondary
marketing communications.
The life expectancy of a customer decreases exponentially as a business moves to
higher levels of customer retention.
A product-based business can use its order cycle to create important sources of
customer value that the business’s consumer-focused competitors will never see.
Traditional media advertising is considered more personal than social media
engagement and is “viral” in nature.
Which of the following is a branding and brand-management strategy?
A) umbrella brand
B) brand differentiation
C) brand encoding
D) bundling and unbundling
E) flanker brand
Which of the following strategies is referred to as the “workhorse” that has to succeed
in order for the strategic market plan to achieve both short- and long-run performance
objectives?
A) a harvest strategy
B) a marketing mix strategy
C) a defensive strategy
D) an offensive strategy
E) a monetizing strategy
In the ________, all elements of a market plan merge into a forecast of percent margins
and marketing profitability.
A) situation analysis
B) performance review
C) profit plan
D) marketing performance plan
E) adjusting marketing plan
Which of the following would be considered an indirect customer touch point?
A) in-store interactions
B) news articles
C) return counters
D) voice mail systems
E) service calls
Logic teach Inc., a software manufacturing firm, specializes in inventory management
and billing software for supermarkets and hotels. The product has a price of $500,
acquisition cost of $100, installation cost of $300, and usage and maintenance cost of
$300. What is the life-cycle cost of Logic Tech’s inventory management software?
A) $1,200
B) $300
C) $600
D) $1,000
E) $500
Which of the following is the best measure of how well the ad reached a target market
and how often it was seen?
A) total revenue
B) gross rating points
C) total advertising cost
D) cost advantage index
E) brand advantage index
New customers will be hard to find, once a market reaches ________.
A) the rapid growth stage
B) the early growth stage
C) its lowest market potential
D) its tipping point
E) saturation
If the sales effect for period 5 is $125 million and the carryover effect is 0.25, calculate
the total sales impact for period 5.
A) $500 million
B) $31.25 million
C) $166.67 million
D) $93.75 million
E) $156.25 million
GTB Electronics enters a new market and needs to set its pricing strategy for the
market. Which of the following is a favorable condition for implementing skim pricing?
A) There is little differentiation between competing products in the market.
B) The market has many well-established competitors.
C) Entry into that particular market is difficult.
D) There are many substitute products available, with a wide range of prices and
features.
E) GTB’s product position is about the same as competitors’ positions in every area of
product and service quality.
VitaMind manufactures a line of vitamins and supplements, and distributes them
through retail health food and organic grocery stores. While this young company is
currently realizing profits, the owners want to plan for future growth and are beginning
the formal market planning process.
Mini-Case Question. Based on information from their analysis, VitaMind determined
that there is an opportunity to expand distribution of its line of products into mass
merchandisers. In which of the following steps of the market planning process will
specific details regarding VitaMind’s proposed channel strategy be specified?
A) situation analysis
B) SWOT analysis
C) revenue plan
D) marketing strategy
E) performance review
What is the relation between the customer retention (CR) and average customer life
(N)?
A) CR=1/N
B) CR=1+(1/N)
C) CR=N/2
D) CR=(N-1)/2
E) CR= 1-(1/N)
Which of the following is the best measure of how well the ad reached a target market
and how often it was seen?
A) total revenue
B) gross rating points
C) total advertising cost
D) cost advantage index
E) brand advantage index
What is the main reason that a business suffers several economic consequences when a
dissatisfied customer leaves?
A) The cost of attracting a new customer is greater than retaining a current customer.
B) The business’s competitors enjoy a greater customer loyalty toward the same type of
products.
C) The amount of money spent on developing the product for the dissatisfied customer
cannot be reimbursed.
D) The business has to pay a large compensation fee to the customer.
E) The future costs for the development of a similar product increases abruptly.
If four-wheel drive capability is weighed at 40 on relative importance, and your truck
scores 8 out of 10, while the three competitors score 7, 6, and 6, respectively, your truck
has a relative advantage score of ________.
A) 4
B) 12
C) 27
D) 40
E) 80
A push marketing strategy differs from a pull marketing strategy in that a push
marketing strategy ________.
A) is directed at end-users
B) is directed at channel intermediaries
C) is a form of direct marketing
D) uses social media and media advertising
E) aims to build awareness, attraction, and loyalty and to reduce search costs
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.
Calculate the total volume of music players sold by MyTunes Inc. if the total market
demand is 280 million units and the company has a 15% market share.
A) 42 million units
B) 96 million units
C) 136 million units
D) 180 million units
E) 238 million units
Calculate the total number of retailers interacting with 120 manufacturers if 10
transactions are made per year. The total number of transactions is 15 million
transactions per year.
A) 7,900
B) 4,800
C) 12,500
D) 16,500
E) 22,000
Which of the following defensive strategies allows a business to exit a market slowly?
A) a monetize market strategy
B) a disintermediation market strategy
C) a divest market strategy
D) a harvest market strategy
E) an optimize market strategy
A business generates a net profit of $124 million and its return on capital is 12.5%.
Calculate the total capital invested into the business.
A) $992 million
B) $860 million
C) $740 million
D) $668 million
E) $532 million
Maxim Computer has 10 percent of a $250 billion market. Maxim is a low-cost leader
and realizes a 20% margin on sales, and marketing, and administrative expenses
equaling 10% of sales. What is Maxim’s gross profit?
A) $250 billion
B) $25 billion
C) $5 billion
D) $2.5 billion
E) $500 million
Calculate the share potential index if a business is achieving a share development index
of 45 at a market share index of 25%.
A) 20%
B) 55.6%
C) 70%
D) 35%
E) 60%
Which of the following is a marketing effort factor influencing a business’s market
share?
A) price
B) product differentiation
C) product breadth
D) brand image
E) sales promotions
Calculate the return on capital of a business whose net marketing contribution is $300
million and total invested capital is $900 million. The other expenses, including interest
and taxes, amount to $120 million.
A) 40%
B) 15%
C) 5%
D) 30%
E) 20%
Which of the following is the first level of the customer response hierarchy?
A) aware of the ad
B) comprehend the ad
C) exposed to the ad
D) intend to buy
E) buy the product
Which of the following are the components of a revenue plan?
A) return on sales, asset turnover, and return on assets
B) percent margins and profitability metrics
C) personnel and expenditures
D) market share, pricing, and revenues
E) break-even sales and shares
Which of the following industry forces is most likely to give a new business a far better
chance of succeeding?
A) intense rivalry among competitors
B) high customer power
C) high barriers to entry
D) high supplier power
E) many product substitutes
Which of the following is true of product line pricing?
A) As a business adds more products to its product line, it decreases the risk of
cannibalizing existing product sales.
B) Adding more products to a business’s product line enhances sales growth.
C) Products that have a negative cross-price elasticity are substitutes.
D) It is not necessary to know the degree to which a product has cross-price elasticity
with other products.
E) Products that have a positive cross-price elasticity are complementary products.
Calculate the market share index of a business if its share development index is 85 and
it has a share potential index of 12.2%.
A) 87.8%
B) 74.6%
C) 14.4%
D) 12.2%
E) 10.4%
Kristy’s Decorations Inc. is a firm that manufactures and sells Halloween decorations in
Oakland. The firm starts heavily advertising its products during September and October,
and sets up temporary shops in various neighborhoods during this period. After
Halloween is over, the firm does not direct any messages to its target customers till the
next year. In this example, Kristy’s Decorations Inc. uses which of the following
marketing communications strategies?
A) a distributed frequency strategy
B) a gross frequency strategy
C) an umbrella strategy
D) a concentrated frequency strategy
E) a heavy-up message strategy
Ridgewell Inc. was a pioneer in the cleaning equipment market and sold their products
exclusively through a direct marketing approach. However, after extensive market
research, the firm realized that the majority of sales in this market occurred in retail
stores. To improve its performance, Ridgewell Inc. began selling through specialty
cleaning equipment retailers as well as multiple mass market cleaning equipment stores.
Which of the following offensive strategies does this represent?
A) entering related new market segments
B) building marketing advantage
C) harvesting for cash flow
D) divesting for cash flow
E) lowering costs
Your consumer printer has the following relative advantages for the four purchase
components of the product. What is your relative cost of purchase index?
A) 6.5
B) 126
C) 74
D) 13.5
E) 54
If 75% of consumers are aware of Ace Motors’ newly launched line of hybrid cars
called the Opus, and 45% of that group likes the product’s benefit, and 44% of that
group finds the price acceptable, and 51% of that group intends to buy the product in
their local market, and 75% of that group actually purchase the product from Ace
Motors and its dealers, then the market share index for the Opus is ________.
A) 1.2%
B) 3.6%
C) 5.7%
D) 7.5%
E) 12.9%
With respect to competitive advantage, share followers with above-average profits
________.
A) have lower relative product quality
B) have lower levels of capacity utilization
C) have lower levels of price, and unit margin
D) invest less aggressively in marketing as a percentage of sales, in comparison with
competitors
E) invest more in research and development (R&D) as a percentage of sales