SECTION 1: True and False <TOTAL20 marks>
For each of the following, place a “T” if the statement is “true”, “F” if the
statement is false. (20 marks)
__F____1.When the price setter stresses the supply or cost side of the pricing problem,
they are using competition-orientation pricing.
____T__2. All activities involved in selling renting, and providing goods and services
to ultimate consumers for personal, family or household use are known as retailing.
___F___ 3.Any paid form of nonpersonal communication about an organization, good,
service or idea by an identified sponsor is called: publicity
___F___ 4. The main reasons a firm segments its markets is to refine sales forecasts
and allow for more product differentiation.
____F___5. The retail position matrix makes use of these two dimensions:width and
depth of product line.
_____T___6. The purchase of a bottle of water is a low-involvement purchase.
___F___ 7.During the introduction stage of the PLC, sales gradually increase and
competition becomes tough.
___F___ 8 “Marketing” is best described as “selling”
__T____ 9. The marketing objective for the maturity stage of PLC is to maintain
brand loyalty.
____F___10. In introduction stage, a company retains the product but reduces
marketing support costs it is in what stage of the PLC.
SECTION 2: Multiple Choice. (Total 40, 2 Marks/Question)
Right answers are highlighted.
1. Between classes, many college students stop at conveniently located vending
machines for their favorite candy bar and soft drink. Their choices are generally made
quickly and with little or no effort to consider alternative product offerings. The
college students described here are most likely involved in __________.
a) limited problem solving situations
b) routine problem solving situations
c) extensive problem solving situations
d) intensive problem solving situations
e) unlimited problem solving situations
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Ans: b
Feedback: Routine purchase decisions involve low-priced, frequently purchased
products. Consumers typically spend very little effort or time seeking or evaluating
alternatives. Purchase decisions resemble habitual responses and are typical of
low-involvement decisions.
……………………………………………………………
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2. The anxiety felt because the consumer cannot anticipate the outcomes of a purchase
but believes there may be negative consequences is called __________.
a) a negative antecedent
b) perceived risk
c) temporal uncertainty
d) spatial uncertainty
e) buyers' remorse
Ans: b
3. Because the average consumer operates in a complex environment, the human brain
attempts to organize and interpret information with a process called __________.
a) selective retention
b) selective attention
c) selective exposure
d) selective perception
e) stimulus discrimination
Ans: d
4. Questions such as:”What ads do you remember seeing yesterday?” are an example
of what type of post-test?
a) Aided recall
b) Unaided recall
c) Inquiry test
d) Attitude test.
…………………………………………………
5. __________ is a favorable attitude toward and consistent purchase of a single brand
over time.
a) Brand bias
b) Brand discrimination
c) Brand loyalty
d) Behavioral loyalty
e) Selective perception
Ans: c
6.A market segment would have a collection of prospective buyers that are:
a) Ready to buy
b) Showing unfilled needs
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c) Relatively heterogeneous
d) Relatively homogeneous.
7.KFC in Japan sells tempura crispy strips. In northern England, it stresses gravy and
potatoes, while in Thailand it offers fresh rice. In Holland instead of potatoes, KFC
offers customers a potato and onion croquette. In France, KFC sells pastries alongside
its chicken. These examples illustrate that KFC exhibits an understanding of and
appreciation for the __________ of other societies.
a) demographics
b) symbols
c) customs
d) sensitivities
e) selective perception
Ans: c
Feedback: Customs are what is considered normal and expected about the way people
do things (including what they eat) in a specific country. KFC serves food that suits
the tastes of its target markets in each of the countries listed.
8.The framework to relate the market segments of potential buyers to products offered
or potential marketing actions by the firm is called:
a) Action grid
b) Relation grid
c) Product grid
d) Market grid.
9.When a firm distributes to two or more different types of channels for the same
product, this is called:
a) Double channel duty
b) Dual network
c) Split distribution
d) Dual distribution
10.Which of the following is NOT a criterion used in forming segments?
a) Potential for increased profit
b) Similarity of needs of potential buyers within a segment
c) Competitive position
d) Potential of marketing action to reach a segment
e) Simplicity and cost of assigning potential buyers to segments
Ans: c
Feedback: Competitive position is a reason for selecting a market, not for segmenting
it. The five criteria to be used in forming segments include (1) potential for increased
profit; (2) similarity of needs of potential buyers within a segment; (3) difference of
needs of buyers among segments; (4) potential of a marketing action to reach a
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segment; (5) simplicity and cost of assigning potential buyers to segments.
11.Automobiles and TV’s are in what stage of the PLC
a) Introduction
b) Growth
c) Maturity
d) Decline
12.Campbell's found that its canned nacho cheese sauce, which could be heated and
poured directly onto nacho chips, was too hot for Americans in the East and not hot
enough for those in the West and Southwest. Today, Campbell's plants in Texas and
California produce a hotter nacho cheese sauce than that produced in the other plants.
Campbell's is using __________ segmentation.
a) age
b) behavioral
c) socioeconomic
d) geographic
e) perceptual
Ans: d
Feedback: Campbell's is marketing a different sauce to different markets depending
on where they are located. This is geographic segmentation.
13.What type of ad gets the consumers to take immediate action?
a) Delayed-response advertising
b) Direct-response advertising
c) Direct-trigger advertising
d) Direct-action advertising
14. The consumers represented by "B" in Figure 11-5 are called __________.
a) innovators
b) late majority
c) early majority
d) early adopters
e) laggards
Ans: d
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Feedback: Figure 11-5 shows the consumer population divided into five categories of
product adopters based on when they adopt a new product: (A) innovators, (B) early
adopters, (C) early majority, (D) late majority and (E) laggards.
15. Sugarcane producers are now promoting them as an alternative source of energy
to oil. They are __________.
a) finding new users through a product modification strategy
b) creating new use situations through a market modification strategy
c) increasing use by existing customers through a product modification strategy
d) modifying the product characteristics
e) demarketing the product
Ans: b
Feedback: With market modification strategies, a company tries to find new
customers, increase a product's use among existing customers or create new use
situations. Finding new uses for a more mature product helps extend the product's life
cycle, as in the case of sugarcanes.
16. Pizza Hut’s recent introduction of the thin and crispy crust pizza on top of its
original thick crust is an example of __________ and should attract new buyers.
a) a market-product strategy
b) diversification
c) market modification
d) product modification
e) harvesting
Ans: d
Feedback: Product modification is a strategy that involves altering a product's
characteristic such as its quality, performance or appearance to try to increase the
product's value to customers and increase sales.
17.The marketing of two or more products in a single package price is called
a) Target pricing
b) Bundle pricing
c) Odd-even pricing
d) Price lining.
18. In response to Duracell's introduction of the Duracell Ultra battery, Energizer
introduced an Advanced Formula battery, but unlike Duracell, Energizer priced its
batteries at a low initial price to attract the mass market. Energizer used __________.
a) penetration pricing
b) prestige pricing
c) skimming pricing
d) price lining
e) cost-plus fixed-fee pricing
Ans: a
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Feedback: Penetration pricing is setting a low initial price of a new product—the
strategy Energizer chose.
19.Which promotional mix alternatives allows the seller to see or hear the potential
buyers reaction to the message?
a) Advertising
b) Personal selling
c) Public relations
d) Sales promotions
20. To handle products in the decline stage of the product life cycle, companies often
use either __________.
a) diversification or harvesting
b) diversification or contracting
c) deletion or harvesting
d) deletion or diversification
e) building or contracting
Ans: c
Feedback: To handle a declining product, a company will follow one of two strategies.
Deletion is dropping the product from the company's product line; harvesting is
retaining the product but reducing marketing costs.
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SECTION 3: SHORT ANSWERS (40 marks)
Question 1 (20 marks- Branding)
Pro Image
The marketing of professional and university team sportswear and novelty items is a
$3 billion-a-year industry. Pro Image was one of the first franchiser of the one-stop
sports fan shop. Pro Image controls over 130 stores, with an additional 100
franchised outlets. Each franchise store costs roughly $100,000, approximately
$16,000 of which covers the franchise fee with the rest going toward inventory and
store improvements.
Pro Image assists franchisees in site selection, lease negotiation, and advertising.
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Pro Image requires new owners to attend a four-day training session. Other
assistance includes a business hotline and a computerized inventory and sales system.
As an added service they stock hard to get items in a 4,500 square-foot warehouse,
making them more readily available to franchisees.
2a) Suppose you are interested in opening a sports fan shop. What are the
advantages and disadvantages of becoming part of a franchise operation? (10 marks)
Answers
For franchisor:
• Expansion:
VC & control
• Legal consideration
no more licenses
• Operation consideration
franchisee has greater incentive
than employee
For franchisee:
• Employment
a way of owning a business
• Quick start
a proven trademark
• Training
Franchisor provide significant
training
For franchisor:
• Limited pool of available franchisees
Financial resources & desire
• Control
Careful screen franchisee
Illegal operation by franchisee damage goodwill of franchisor
For franchisee:
• No guarantee
Business risk
• Control
Loss of control
Required to follow system
• Price
franchise fee, ongoing royalties and advertising contributions
• Conflicts
acting in bad faith
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2b) A franchise is described as what type of vertical marketing system? How does this
system differ from the other two types? (10 marks)
Answers
Franchising is on contractual base.
The other two are based on: corporate control or administrative control.
Question 2 (20 Marks)
GURU, a China based brand, is an energy drink made from all natural ingredients. It
combines the power of carefully chosen ingredients from around the world.
GURU drink is made from carbonated water, white grape juice concentrate, natural
flavors, guarana extract, lemon juice, ginseng extract, Echinacea extract and ginkgo
biloba extract. While the primary benefit of most other beverages on the market
today is to quench thirst and refresh, GURU’s main benefit is to provide the user with
not only a boost of physical energy, but a mental one as well. GURU is used to
delivery energy for athletic performance and to aid memory (helping students study).
2. a) Assuming GURU is about to enter the maturity phase in the product life cycle.
What changes to the marketing mix would you advise the management of GURU as it
enters this phase of the Product Life Cycle? (10marks)
Answers
Product: Different version
Price: lower price
Place: intensive distribution
Promotion: reminding, competitive ad, sales promotion.
(2.5 each)
2. b) How could GURU extend its product life cycle? (4)
Answers
Modify the product
Modify the market
Repositioning
2 c) Which pricing strategy would you suggest to Guru, skimming pricing or
penetration pricing at current product life cycle stage? Explain why. (6 marks)
Answers
There is no right answer. As long as students indicate 3 reasons, they get the points.
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Penetration Pricing.
a. Setting a low initial price on a new product to appeal immediately to the
mass market is penetration pricing, the exact opposite of skimming
pricing.
b. The conditions favoring penetration pricing are:
Many segments of the market are price sensitive.
A low initial price discourages competitors from entering the market.
Unit production and marketing costs fall dramatically as production
volumes increase.
c. A firm using penetration pricing may:
Maintain the initial price for a time to gain profit lost from its low
introductory level.
Lower the price further, counting on the new volume to generate the
necessary profit.
d. Penetration pricing may follow skimming pricing:
A firm might initially price a product high to attract price-insensitive
consumers as well as recoup initial R&D costs and introductory
promotional expenses.
Then, penetration pricing is used to appeal to a broader segment of the
population and increase market share.
Skimming Pricing.
a. A firm introducing a new or innovative product can use skimming pricing,
setting the highest initial price that customers really desiring the product
are willing to pay.
These customers are not very price sensitive. They weigh the new
product’s price, and quality against the same characteristics of
substitutes.
As consumer demand is satisfied, the firm lowers the price to attract
another, more price-sensitive segment.
Skimming pricing gets its name from skimming successive layers of
“cream,” or customer segments, as prices are lowered in a series of
steps.
b. Skimming pricing is an effective strategy when:
Enough customers are willing to buy the product at the high initial
price to make these sales profitable.
The high initial price will not attract competitors.
Lowering price has only a minor effect on increasing the sales volume
and reducing the unit costs.
Customers interpret the high price as high quality.
These four conditions are most likely to exist when patents or
copyrights protect the new product or its uniqueness is understood and
valued by consumers.
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