Chapter 2—Adapting Marketing to the New Economy
True/False Questions
1. An intranet connects people within the same company. True (easy) p. 24
2. Bill has agreed to hook his suppliers and distributors into an information web, this is called mcommerce. False (moderate) p. 24
3. When Priceline.com offered its services of bringing airfare customers together with airfare sellers,
this was an example of the marketplace becoming reintermediated. True (moderate) p. 25
4. Prosumers are self-producing consumers who can essentially design their own goods, enabled by the
company. True (moderate) p. 25
5. In the new economy, firms should overpromise and overdeliver. False (moderate) p. 26, Table 2-1
6. E-business is the same as E-commerce. False (moderate) p. 26
7. The most frequent online item purchased (in terms of percent of online buyers saying they have
purchased in the category) so far, has been music. False (difficult) p. 27
8. Business-to-business Web sites do ten to fifteen times the commerce that business-to-consumer Web
sites do. True (moderate) p. 27
9. Infomediaries are third parties that create markets linking buyers and sellers. False (moderate) p. 27
10. eComplaints is an example of a C2B Internet domain. True (moderate) p. 28
11. At www.adobe.com, users can download free software that allows them to open up documents
scanned in a particular format. Adobe’s site is considered a content site. False (difficult) p. 29
12. Bookseller Amazon.com is considered a search engine because of its powerful ability to find out-ofprint titles. False (moderate) p. 29
13. Brick-and-click organizations are likely to have more success than pure-click companies, due to their
access to greater resources. True (moderate) p. 29-30
14. The Internet site design element “customization” enables site-to-user, user-to-site, or two-way
communication. False (moderate) p. 30
15. Web site ease of use is measured by whether a site loads quickly, is easy to understand, and is easy to
navigate. True (easy) p. 30
16. Using humor on a website is one way of bringing browsers back for a second visit. True (moderate)
p. 31
17. An interstitial ad is one that “pops” up or under when a Web site is visited. True (moderate) p. 32
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18. Selling or renting your detailed customer list for extra revenue is called getting profile income. True
(moderate) p. 32
19. The first step to one-on-one marketing is to customize products, services, and messages to each
customer. False (moderate) p. 33
20. Database marketing is extracting information about individuals, trends, and segments from a data
warehouse. False (moderate) p. 35
Multiple Choice Questions
21. Bill’s company has an internal e-mail and information communications network. What is this kind of
connectivity called?
a.) Internet
b.) extranet
c.) intranet (moderate) p. 24
d.) ultranet
e.) m-commerce
22. Monroe is an intermediary and allows its suppliers and buyers to hook into a special information
communications network. What is this kind of connectivity called?
a.) Internet
b.) extranet (moderate) p. 24
c.) intranet
d.) ultranet
e.) m-commerce
23. NTT’s DoCoMo system in Japan is an example of ___________.
a.) Internet
b.) extranet
c.) intranet
d.) ultranet
e.) m-commerce (moderate) p. 24
24. Which of the following is not considered a driver that underpins the “new” economy?
a.) multitasking and restructurization (moderate) p. 24
b.) digitalization and connectivity
c.) disintermediation and reintermediation
d.) customization and customerization
e.) industry convergence
25. When a bricks-only retailer is put out of business by a Web site based business that serves the
consumer need better, this is an example of ___________.
a.) reintermediation
b.) digitalization
c.) disintermediation (moderate) p. 25
d.) customerization
e.) industry convergence
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26. Dylan created a Web site that brought together a large international group of collectors and sellers, as
well as others who have interest in Ty stuffed toys. This new approach to serving customer and
supplier need is called
a.) reintermediation (moderate) p. 25
b.) digitalization
c.) disintermediation
d.) customerization
e.) industry convergence
27. Jonas is able to landscape a yard to any design a consumer brings to him. This is called ___________.
a.) customization (easy) p. 25
b.) prosumerization
c.) personalization
d.) customerization
e.) reintermediation
28. _______________ refers to the combination of operational customization and marketing
customization.
a.) Customization
b.) Prosumerization
c.) Personalization
d.) Customerization (moderate) p. 25
e.) Reintermediation
29. Merck makes prescriptions and nonprescription drugs, and is considering adding chemicallyengineered food supplements to their product line. This new line would fall under the category of
___________.
a.) cosmoneuticals
b.) nutriceuticals (moderate) p. 25
c.) cosmonauticals
d.) nutrichemicals
e.) biogenicals
30. Which of the following is not an example of marketing in the new economy?
a.) organize by customer segments
b.) focus on stakeholders
c.) build brands through performance
d.) underpromise, overdeliver
e.) focus on profitable transactions (moderate) p. 26, Table 2-1
31. Which of the following is an example of marketing in the new economy?
a.) organize by product units
b.) everyone does the marketing (moderate) p. 26, Table 2-1
c.) focus on customer acquisition
d.) focus on shareholders
e.) look primarily at financial scorecard
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32. Chris does most of her buying online, rather than get out and do her shopping in person. She is an
example of a ___________.
a.) hybrid consumer
b.) cyberconsumer (easy) p. 26
c.) superconsumer
d.) traditional consumer
e.) consumer activist
33. ____________ is a term that describes a company’s efforts to inform, communicate, promote, and
sell its products and services over the Internet.
a.) E-business
b.) E-commerce
c.) E-purchasing
d.) E-consuming
e.) E-marketing (difficult) p. 26
34. Yacobo Pistorius builds computers in his house to sell to a growing list of local customers. He buys
all his parts online and makes a nice profit on each machine he builds to order. Yacobo’s online
supply allows him to take part in ___________.
a.) e-business
b.) e-commerce
c.) e-purchasing (easy) p. 26
d.) e-consuming
e.) e-marketing
35. Scott goes online to follow a group that discusses the Yamaha Road Star motorcycle. Most
contributors on the site are owners, and they often share information about the bikes, rallies and ride
opportunities, and technical information and reviews about aftermarket products. There is even a buysell forum where you can find parts or used bikes for sale. This is an example of a __________
Internet domain.
a.) B2C
b.) B2B
c.) C2C (difficult) p. 27
d.) C2B
e.) B2B2C
36. The Internet is most useful for ________ products when the consumer seeks greater ordering
convenience, lower cost, or information about product features and prices. It is less useful for
products that must be touched or examined in advance.
a.) B2C (difficult) p. 27
b.) B2B
c.) C2C
d.) C2B
e.) BCG
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37. Which kind of Internet domain does by far the greatest amount of commerce?
a.) B2C
b.) B2B (moderate) p. 27
c.) C2C
d.) C2B
e.) BCG
38. Downward price pressure on undifferentiated products is increasing, because business buyers have
access to more information from all the following except ___________.
a.) supplier Web sites
b.) infomediaries
c.) market makers
d.) market mavens (moderate) p. 27
e.) customer communities
39. DaimlerChrysler, Ford, and GM have come together to build a money-saving, Web-based
procurement system called ___________.
a.) eVixxion
b.) DFM*B2B
c.) iSite
d.) Covisint (difficult) p. 27
e.) Deltronicos
40. __________ are third parties that add value by aggregating information about alternatives.
a.) Supplier Web sites
b.) Infomediaries (easy) p. 27
c.) Market makers
d.) Market mavens
e.) Customer communities
41. C2C Internet domains have also been termed _________, and are an important buying influence.
a.) word of mouth
b.) web of mouth
c.) word of web (moderate) p. 27
d.) World Wide Web
e.) mouth of web
42. Sites such as PlanetFeedback and eComplaints allow frustrated consumers to communicate their
dissatisfaction with businesses and products. These types of sites have been termed _________
Internet domains.
a.) B2C
b.) B2B
c.) C2C
d.) C2B (moderate) p. 28
e.) BCG
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43. You might find all of the following on a C2B Web site, except ___________.
a.) a feature that allows customers to build their own products (moderate) p. 28
b.) an invitation to e-mail a question
c.) a system that allows consumers to give feedback
d.) a way of conveying a complaint
e.) a “call-me” button
44. Google.com is a sophisticated tool for finding content on the Web. It is in the _________ category of
pure-click companies.
a.) search engine (moderate) p. 29
b.) portal
c.) commerce site
d.) transaction site
e.) content site
45. The Economist is a British weekly business newspaper, which now has a presence on the Web at
www.economist.com. This is an example of a ______________.
a.) portal
b.) commerce site
c.) transaction site
d.) content site (moderate) p. 29
e.) enabler site
46. Yahoo! and other companies would like you to pick their homepage as your homepage. These types
of sites are called ________________.
a.) search engines
b.) portals (moderate) p. 29
c.) commerce sites
d.) content sites
e.) enabler sites
47. All of the following are reasons many early pure-click firms failed, except ___________.
a.) poorly-designed Web site
b.) focus on successful business models (easy) p. 29
c.) focus on customer acquisition rather than building relationships
d.) relied on buzz instead of target marketing
e.) lack of infrastructure
48. ____________, now a brick-and-click company, conducted research and found that the type of
customers drawn to online service did not overlap greatly with those who preferred the traditional
method of buying products and services.
a.) Liberty Mutual
b.) Merrill Lynch
c.) Schwab
d.) E*Trade
e.) Avon (moderate) p. 29
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49. Which of the following is not one of the advantages of being a brick-and-click firm?
a.) better known brand names allow less marketing to acquire new customers
b.) channel conflict issues are simplified (moderate) pp. 29-30
c.) greater financial resources
d.) deeper industry knowledge
e.) allows service to far-flung customers
50. Scuba Steve’s has an electronic chat room linked to its site. This Web site design element allows for
what Rayport and Jaworski have called ___________.
a.) context
b.) content
c.) community (moderate) p. 30
d.) customization
e.) communication
51. The degree to which a site is linked to other Web sites is called ___________.
a.) community
b.) customization
c.) communication
d.) connection (moderate) p. 30
e.) commerce
52. The layout and design of Northwest Territories Surf Shop’s Web site is termed the ___________.
a.) context (moderate) p. 30
b.) content
c.) community
d.) connection
e.) commerce
53. Which of the following is not a key attribute used by Web browsers to determine ease of Web site
use?
a.) whether the site loads quickly
b.) whether the graphics slow down user surfing
c.) whether the homepage is easy to understand
d.) whether the site makes good use of color and sound (moderate) p. 30
e.) whether the visitor can easily navigate to other pages
54. Certain types of Web site content are effective in attracting first-time visitors and bringing them back.
Which of the following is not one of these types of content?
a.) deep information
b.) changing news of interest
c.) interesting banner ads (moderate) p. 31
d.) changing free offers
e.) humor
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55. Which of the following is not recommended for creating a Web site design that attracts and keeps
people’s interest?
a.) simple and intuitive
b.) graphics that load quickly
c.) informative homepage that tells the visitor what the site will do for them
d.) build attention slowly to keep interest (moderate) p. 31
e.) headlines, bullet points, or short bursts of text
56. On the cnbc.com portal site, there are frequently ads for financial institutions, placed in rectangular
boxes near the top of the page. This type of ad is called a(n) ___________.
a.) banner ad (moderate) p. 32
b.) sponsorship
c.) microsite
d.) interstitial
e.) browser ad
57. The X-10 camera sold thousands of small units after pop-up ads appeared on popular sites such as
Yahoo! and espn.com. These pop-ups are formally known as _________ ads.
a.) banner
b.) sponsorship
c.) microsite
d.) interstitial (difficult) p. 32
e.) browser
58. The Wall Street Journal was one of the first companies to buck the “give it away for free” trend in
their early Internet days. Instead they asked readers to pay a monthly charge for access to the
complete paper online. This is an example of a(n) _______________ revenue and profit model.
a.) advertising income
b.) sponsorship income
c.) alliance income
d.) membership and subscription income (moderate) p. 32
e.) profile income
59. Even though most customers are not happy when they learn it has happened to them, and there may
be codes of ethics that prohibit it, nonetheless many Web sites sell information about their customers.
This is an example of a(n) ________________ revenue and profit model.
a.) advertising income
b.) sponsorship income
c.) alliance income
d.) membership and subscription income
e.) profile income (moderate) p. 32
60. NewsLibrary charges $1.00 to $2.00 for site visitors to download archived news stories they have
searched and found. This is an example of a __________ revenue and profit model.
a.) profile income
b.) product and service sales income
c.) transaction commissions and fees
d.) market research/information charges (moderate) p. 33
e.) referral income
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61. Every time Edmunds.com links a buying customer to buy one of its partners, the partner pays
Edmunds a fee. This is an example of a __________ revenue and profit model.
a.) profile income
b.) product and service sales income
c.) transaction commissions and fees
d.) market research/information charges
e.) referral income (moderate) p. 33
62. All of the following activities will help firms improve the value of their customer base, except
a.) reducing customer defections
b.) increasing the life of the customer relationship
c.) aggressively going after all segments (moderate) p. 33
d.) enhancing customer profit potential
e.) “terminating” some customers
63. LaVeen styles hair at his upscale salon in Beverly Hills. He works only by appointment, and only
works on three or four customers’ hair per day. If he were to formally adopt Peppers and Rogers’
four-step framework for one-to-one marketing, he would do all of the following except ___________.
a.) build up his clientele to include more celebrities (moderate) p. 33
b.) not go after every customer
c.) lavish more effort on his most valuable customers
d.) learn more about the individual needs of his customers
e.) customize his marketing efforts to each customer
64. Which of the following is part of one-to-one marketing?
a.) mass distribution
b.) customer attraction
c.) economies of scale
d.) standardized product
e.) customer profile (moderate) p. 34, Table 2-2
65. Which of the following is part of mass marketing?
a.) customized product offering
b.) customer anonymity (moderate) p. 34, Table 2-2
c.) share of customer
d.) two-way messages
e.) customer retention
66. Every time Johnny’s Formalware salespeople make a sale, they record the customer’s name, address,
and telephone contact information. Johnny’s then uses this information to send out promotional
messages about upcoming sales events. Johnny’s is using a ________________.
a.) customer database
b.) database marketing
c.) customer mailing list (moderate) p. 34
d.) business database
e.) data warehouse
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67. Radio Shack keeps track of what each customer purchases, and in what quantities. They also tie this
information to data on customer’s preferences and media habits, which they obtain through contests
which require short surveys be filled out for entry. Radio Shack is putting together a ___________.
a.) customer database (moderate) p. 34
b.) database marketing
c.) customer mailing list
d.) business database
e.) data warehouse
68. One study of the success of CRM (customer relationship management) programs reported that 70
percent of the firms that implemented them found little or no improvement in their business as a
result. Which of the following is not a likely reason for CRM failure?
a.) Large investment in the system and training was not outweighed by the cost savings of repeat
business.
b.) Customer base is too large to make CRM useful. (difficult) p. 35
c.) Getting everyone customer-oriented and using the system is very difficult.
d.) Not all customers desire a relationship beyond the transaction.
e.) Keeping the data up-to-date is a challenge.
69. Datamining allows a company to do all the following except ___________.
a.) identify the best prospects by sorting through a mass of responses
b.) match a specific offer with a specific consumer
c.) deepen customer loyalty by remembering customer preferences
d.) charge more for service to those who cost less to serve (moderate) p. 35
e.) reactivate customer purchases through timely promotions
70. Jimmi prefers to use cash for all her transactions, will not give her social security number to anyone
except her employer, and would like to remain anonymous for the most part. Jimmi is an example of
which type of problem with successful execution of a CRM system?
a.) Large investments in the system and training are not outweighed by the cost savings of repeat
business.
b.) Using the system is not intuitive after using a “legacy” system.
c.) Getting everyone customer-oriented and using the system is very difficult.
d.) Not all customers desire a relationship beyond the transaction. (easy) p. 35
e.) Keeping the data up-to-date is a challenge.
Essay Questions
71. Raliberto’s is a small chain of Mexican restaurants run by Alvaro Montes. Regular customers are
greeted by name and the menu is based on about 10-15 items, which can be combined into literally
hundreds of dishes. Discuss how Raliberto’s could use the menu and customer relationship to
customize and customerize the eating experience in its restaurants.
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Answer:
Customization means that Raliberto’s can provide individually differentiated meals. The flexible
kitchen and menu allow for this.
Personalization is an important aspect of this process, and in Raliberto’s case, this is already being
done, at least for the regulars.
Customerization is the combination of operational customization (the kitchen) and marketing
customization (the atmosphere, the product, etc.).
In a sense, Raliberto’s is already practicing both the principle of customization and customerization in
its current operations.
(moderate) p. 25
72. Shoe and apparel maker K-Swiss came in slowly to the digital revolution. They are now a very
connected and networked company. Discuss the three types of networks that a company like K-Swiss
needs to stay connected with all the relevant parties.
Answer:
The big three are: intranets, extranets, and the Internet.
a.) K-Swiss needs to allow customers to visit them virtually through providing an Internet site. The
site should be well designed, interesting, and give the visitor reasons to stay and reasons to return
later.
b.) An intranet site allows K-Swiss to connect its employees together for internal communications
purposes.
c.) Extranets are closed systems that allow a company to communicate with its suppliers (rubber,
leather, composites, textiles), manufacturers (mostly in Asia, due to labor costs and
specialization), and reseller customers (stores like Dillard’s, Athlete’s Foot, etc.).
d.) For a company the size and complexity of K-Swiss, all three types will be necessary to remain
competitive.
(moderate) p. 24
73. Pella Windows used to make windows in stock sizes and do very little custom work. In the last five
years they have revamped their production processes and abilities in order to become a “new”
economy company. What are some of the contrasts between doing business the old economy way and
doing it the new way?
Answer:
Students can list lots of things correctly to answer this question. Table 2-1 has 9 old economy
practices and 9 new economy practices.
OLD
1) organize by product unit
NEW
1) organize by customer segment (individuals,
retailers, builders, commercial accounts)
2) focus on customer lifetime value (bigger
accounts will spend more on each order and over
time)
3) use marketing as the measure of success
(customer satisfaction, retention, etc.)
4) focus on stakeholders (includes customers,
business allies, stockholders, employees, etc.)
2) focus on profitable transactions
3) look primarily at financials to measure success
4) focus on shareholders
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5) marketing does the marketing
5) everyone does the marketing (all employees,
especially those that come in contact with the
customer, need to be aware they are part of the
company’s communication process - whether
they like it or not!)
6) build brand through performance (let the
quality do the talking)
7) focus on customer retention (new customers
cost much more to get than established
customers cost to maintain)
8) measurement (customers, especially the most
profitable ones, need to be able to communicate
their pleasure or displeasure with the firm)
9) underpromise, overdeliver (delight customers
with more than they expected, they will feel the
value and return) (moderate) p. 26, Table 2-1
6) build brand through advertising
7) focus on customer acquisition
8) no customer satisfaction measurement
9) overpromise, underdeliver
74. Foster Grant sells its eyewear through its Web site, through distributors such as Wal-Mart, and to
wholesalers who resell to chains, such as 7-Eleven and smaller stores, such as Minimarket in Piggot,
Arkansas. Which of the four types of Internet domains does or should Foster Grant use to take
advantage of the ability to connect in the marketplace.
Answer:
a.) FG already uses the Internet, as mentioned. This is a B2C channel (business-to-consumer) or
domain.
b.) Because they sell product to Wal-Mart, they may already be a part of a larger B2B (business-tobusiness) system, since Wal-Mart is quite sophisticated in their information systems management.
c.) It would be a good idea for FG to at least monitor the C2C (consumer-to-consumer) activities
related to their products. These needs are often filled by independent third parties, and allow
consumers to talk to one another in an open forum.
d.) FG should consider providing a feedback option on their current Web site, making a C2B
(customer-to-business) link between the company and the customers.
(moderate) p. 26
75. Novell has outgrown its information system and asks you for advice about the possibility of including
a CRM (customer relationship management) package in the new system they will be implementing.
They seem to understand well the upside to CRM, but want you to detail the possible scenarios that
would make the system not effective.
Answer:
a.) CRM systems are costly to buy, customize, and implement. Many of Novell’s customers do not
do enough business (one-time or small customers, for example) to make CRM cost effective.
b.) So-called “legacy” systems (the way we have always done it) may stand in the way of the switchover. Even with an outdated system, employees are able to find their way around and get most
things done. A new system takes training that may not seem worth the effort for years until it
truly pays off.
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c.) Novell may find that many customers do not want more contact or service than they are already
getting from the company. Hence, the system is overkill for dealing with this group.
d.) Though maybe less of a problem for a high-tech company than for others, the challenge of
keeping records and other data up-to-date is potentially an immense one for a complex and
international company like Novell.
The book mentions a study that concluded that in 70 percent of the cases studied, CRMs had not paid
off. That implies a big risk, and Novell should carefully consider the costs and benefits of including a
CRM package in their new system.
(difficult) p. 35
Mini-Cases
Mini-Case 2-1
Scuba-Doobie-Doo is a group of entrepreneurs who wish to create a full service SCUBA Web site. They
plan to include SCUBA chat rooms for visitors, an ever-changing photo and story gallery where visitors
can post, read, and view the adventures of others and of professional SCUBA writers. They plan to have
an online store with all possible SCUBA equipment available for purchase. They plan to link the site to
providers of SCUBA experience vacations. They plan to sell advertising to SCUBA companies. They
even plan to give visitors free e-mail accounts in an effort to have a hardcore group use the homepage as
the homepage on their personal computers. Scuba-Doobie-Doo will be a one-stop SCUBA source for
enthusiasts.
76. Refer to Mini-Case 2-1. In relation to the Scuba-Doobie-Doo site, which of Rayport and Jaworski’s
design elements (the 7Cs) is not discussed?
a.) customization (moderate) p. 30
b.) content
c.) community
d.) communication
e.) commerce
77. Refer to Mini-Case 2-1. Allowing visitors to choose a free e-mail account with the site is an example
of which of 7Cs design elements for successful Web sites?
a.) context
b.) content
c.) community (difficult) p. 30
d.) communication
e.) commerce
78. Refer to Mini-Case 2-1. If Scuba-Doobie-Doo sells its customer information as an early source of
revenue, they would be including the ___________________ revenue and profit model in their
business plan.
a.) advertising income
b.) alliance income
c.) profile income (moderate) p. 32
d.) transaction commissions and fees
e.) referral income
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Mini-Case 2-2
Barnes and Noble hesitated to build an online presence until Amazon.com’s success was too great to
ignore. They originally feared that their network of hundreds of “bricks-only” stores would suffer sales
losses due to the Web site competing with the stores. When the decision was finally made, B&N decided
that the proper business model was to make a vast inventory of books and music available for market
prices. They accepted little advertising on the site, preferring that visitors focus on B&N’s offerings. They
did, however, allow other sites to post B&N ads and paid the owners of those sites a percent of each sale
made to the referred customer. BarnesandNoble.com has never really caught up to the sales of
Amazon.com, but the company feels the effort has increased overall company sales and B&N must
maintain the Web presence in order to stem losses to their number one competitor.
79. Refer to Mini-Case 2-2. The B&N site allows few non-B&N ads or promotional efforts on their site,
though they do allow _________________________ to be present on the site.
a.) banners
b.) interstitials
c.) affiliate programs (moderate) p. 32
d.) browser ads
e.) sponsorships
80. Refer to Mini-Case 2-2. The main revenue and profit model for the B&N online presence is
_________.
a.) advertising income
b.) membership and subscription income
c.) profile income
d.) product and service sales income (moderate) p. 33
e.) transaction commissions and fees
81. Refer to Mini-Case 2-2. The risk of cannibalizing the bricks-only store network is an example of a
how a bricks-and-clicks operation can cause __________________.
a.) a well-known brand name to diminish
b.) greater financial resources
c.) deeper industry knowledge
d.) channel conflict (moderate) p. 29
e.) 24-7 access
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