Chapter 5 – Understanding Markets, Market Demand,
and the Marketing Environment
True/False Questions
1. A marketing information system consists of the people, equipment, and procedures to gather, sort,
analyze, evaluate, and distribute information to decision makers. True (moderate) pp. 86-87
2. Marketing information systems allow managers to do a better job of choosing their markets. True
(easy) p. 86
3. The systematic collection, analysis, and reporting of data relevant to specific problems is the task of
marketing research. True (moderate) p. 89
4. Small companies can engage in marketing research in a number of creative and inexpensive ways,
including using an online information service such as the Internet. True (easy) p. 89
5. A marketing information system (MIS) uses only internal sources of information to aid in managerial
decision making. False (moderate) p. 87
6. Usually, syndicated service research firms can provide consumer-panel data at a much lower cost than
if a company carried on its own panel operations. True (moderate) p. 89
7. The last step in marketing research is developing the research plan. False (difficult) p. 89
8. The second step in the marketing research process is the definition of the problem and the research
objectives. False (moderate) p. 89
9. Primary data is generally available more quickly and at a lower cost than secondary data. False
(moderate) p. 90
10. Primary data is data that was gathered for another purpose and already exists. False (moderate) p.
90
11. Researchers who use probability sampling can calculate their confidence in the accuracy of their
findings. True (difficult) p. 92
12. On average, companies budget about 11-12 percent of company sales on marketing research. False
(moderate) p. 89
13. If speed is of the essence for a marketing research project, one of the best contact methods is
telephone. True (easy) p. 93
14. Ethos Research provides marketing research based on in-home or field in-depth interviews. The
company would be considered a syndicated service research firm. False (difficult) p. 89
15. If versatility is the most important criterion for a marketing research project, the preferred contact
method is personal interview. True (moderate) p. 93
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16. Developing the research plan design is typically the most expensive step of the marketing research
process. False (moderate) pp. 91-92
17. Market demand for a product refers to the total volume that would be bought by a defined customer
group in a defined geographical area in a defined time period in a defined environment under a
defined marketing program. True (moderate) p. 95
18. A sales quota is the sales goal set for a product line, company division, or sales representative. True
(moderate) p. 96
19. A trend is unpredictable, short-lived, and without social, economic, and political significance. False
(moderate) p. 99
20. The market-buildup method for estimating current demand is to identify all potential buyers in each
market and estimate their potential purchases. True (difficult) p. 97
Multiple Choice Questions
21. A marketing information system (MIS) consists of _______________.
a.) the set of procedures and sources used by managers to obtain everyday information and relevant
developments in the marketing environment
b.) the systematic design, collection, analysis, and reporting of data and findings relevant to a
specific marketing situation
c.) an organized collection of comprehensive data about individual customers, prospects, or suspects
that is currently accessible for marketing purposes
d.) the people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute
necessary accurate information in a timely fashion to marketers (difficult) pp. 86-87
e.) the coordination of the collection of data, systems, tools, and techniques with supporting software
and hardware by which an organization gathers and interprets information from the business
environment
22. When Molly’s parents retired, they decided they wanted to travel. They found an ideal job that
allows them to travel for free, but the only catch is they have to stay at Holiday Inns. During each
stay, they test all the amenities offered by the motel and evaluate each. The evaluation forms are sent
to the motel headquarters where it becomes part of the motel’s _______________ system.
a.) sales reporting
b.) marketing research
c.) experiential research data
d.) accountability information system (AIS)
e.) marketing intelligence (moderate) p. 87
23. Which of the following is not a step that might be used to improve the quality of a firm’s marketing
intelligence?
a.) setting up a consumer panel
b.) collecting competitive intelligence by buying a competitor’s products
c.) watching how the stock market reacts to interest rate changes (moderate) pp. 87-88
d.) motivating distributors to pass along important intelligence from the marketplace
e.) purchasing information from outside suppliers
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24. The systematic collection, analysis, and reporting of data relevant to specific problems is the task of
_______________.
a.) the sales reporting system
b.) marketing research (moderate) p. 89
c.) marketing intelligence
d.) the sales force
e.) top management
25. Small companies can engage in marketing research in a number of creative and inexpensive ways,
including _______________.
a.) setting up their own Web site
b.) hiring an independent marketing research firm
c.) buying information from database companies like A.C. Nielsen
d.) using its own internal marketing research department
e.) using an online information service such as the Internet (moderate) p. 89
26. All of the following are steps in the marketing research process EXCEPT _________________.
a.) define the problem and research objectives
b.) develop the research plan
c.) collect the information
d.) compare data to government sources (moderate) p. 89
e.) present the findings
27. The step in the marketing research process that includes determining who will be sampled is
_________________.
a.) define the problem and research objectives
b.) develop the research plan (moderate) p. 92
c.) collect the information
d.) make decision based on the project outcomes
e.) present the findings
28. The second step in the marketing research process is the _______________.
a.) development of the research plan (moderate) p. 89
b.) definition of the problem and research objectives
c.) survey of stakeholders to determine if problems exist
d.) decision regarding the research tools and target group
e.) collection of the available sources for needed information
29. Which of the following is not a consideration when preparing a sampling plan?
a.) Who is to be surveyed?
b.) How many are to be surveyed?
c.) How will the sample respondents be paid? (moderate) p. 92
d.) Should a probability sample be used or not?
e.) How should respondents be chosen?
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30. Rita Jenkins, president of a local Chamber of Commerce, had difficulty getting members to assist in
running the organization. She felt it was because of lack of commitment to the Chamber. Her vicepresident felt it was due to having too many meetings. The organization’s secretary felt it was
because there were several other professional organizations to which the members also belonged. If
Rita wants to do research to determine the real reason why members do not want to run for office, she
should begin by _______________.
a.) determining the optimum number of meetings
b.) evaluating the advantages the Chamber offers over other similar organizations
c.) defining the problem (difficult) p. 89
d.) developing the marketing research plan that she would employ
e.) holding focus groups of members of similar organizations to determine whether the problems the
Chamber is facing are universal or local
31. After working for a roofing contractor for ten years, Cameron Gomez finally established his own
operation. Unfortunately, Cameron’s first six months have been disappointing. He decided to
conduct a marketing research study to gather preliminary data to shed light on the nature of the
problem and suggest some new ideas. He needs to conduct _______________ research.
a.) exploratory (moderate) p. 90
b.) causal
c.) secondary
d.) descriptive
e.) observational
32. Which of the following is a type of causal research project that would be used by a company that
publishes custom memory books that are used as fundraisers for churches, colleges, and civic groups?
a.) a study to determine the types of fundraising most commonly used by church groups
b.) a survey of previous customers to see if they are interested in a new edition
c.) a study to see if more people buy the custom memory book if the cover has a picture
relating to the group selling it rather than just a generic cover (difficult) p. 91
d.) a study to determine the price range for an average-sized cookbook
e.) an industrial study of what similar publishing companies are doing to better serve their customers
33. _______________ data is data that was gathered for another purpose and already exists.
a.) Primary
b.) Descriptive
c.) Causal
d.) Secondary (moderate) p. 90
e.) Observational
34. Which of the following is an example of primary data that would be used by Topps card company to
determine the popularity if its hologram baseball card series?
a.) data gathered by a card collectors club
b.) an article on baseball card collecting found in Parade, the Sunday magazine found in many
newspapers
c.) product sales figures made available by QVC
d.) responses to a mail survey by National Family Opinion on how likely someone is to buy a
collectible card
e.) observing how individuals react to the cards when they first see them (difficult) p. 90
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35. Which of the following is an example of primary data that would be used by the Topps card company
to determine the popularity of its new hologram baseball card series?
a.) input from a focus group that was put together specifically to discuss their perception of the
popularity of the hologram card series (moderate) p. 90
b.) an article about the hologram cards in a recent issue of Sport Illustrated
c.) sales records for baseball cards gathered by the industry’s trade council
d.) a survey that noted that cards were the most often collected item by males between the ages of 10
and 35
e.) data from the sales records kept by the exclusive dealers of the Topps hologram series
36. Which of the following is not typical of a focus group?
a.) 14-18 participants spend a few hours together. (moderate) pp. 90-91
b.) A skilled moderator guides the discussion.
c.) The discussion centers on a product, service, or marketing entity.
d.) They can gauge consumer reaction to product features or design.
e.) They can give quick consumer feedback to new ideas.
37. Which of the following is an example of how ACE Crafts, a manufacturer of acrylic paints used in
arts and crafts, would use observational research to gather primary data?
a.) Survey current users to find out ways the paint could be improved.
b.) Watch how members of a class learning to paint unfinished crafts use the paint. (moderate)
p. 90
c.) Ask users of other brands of paint to list the most important attributes for acrylic paint.
d.) Conduct a focus group of current users to determine how ACE is positioned in their minds when
it is compared to similar products.
e.) Include a mail survey with each bottle of paint sold.
38. A(n) _______________ is a gathering of 6 to 10 people who spend a few hours with a skilled
moderator to discuss a product, service, or other marketing entity.
a.) focus group (moderate) pp. 90-91
b.) intermediary team
c.) agent group
d.) consolidated group
e.) grouped dataset
39. _______________ are best suited for descriptive research such as learning about people’s knowledge,
beliefs, preferences, and satisfaction, and measuring these magnitudes in the general population.
a.) Observational research methods
b.) Focus groups
c.) Surveys (moderate) p. 91
d.) In-depth interviews
e.) Qualitative research methods
40. A catalog retailer wants to know more about the buying habits of people who order more than once a
month from its pages. The catalog retailer will use its database to examine _______________ data.
a.) observation
b.) survey
c.) primary
d.) experimental
e.) behavioral (moderate) p. 91
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41. The manufacturer of Babylok brand sewing sergers wants to know the effect rebates have on sales. It
plans on dividing its retailers into three regions. One group will offer consumers who buy a Babylok
serger a $25 cash rebate. One will offer buyers of the machine $50 worth of “free” machine
accessory parts. A third region will offer buyers a $40 store credit. The results of this market
research will provide Babylok with _______________ data.
a.) observation
b.) survey
c.) primary
d.) experimental (difficult) p. 91
e.) descriptive
42. A(n) _______________ consists of a set of questions presented to respondents for their answers.
a.) questionnaire (moderate) p. 91
b.) focus group
c.) data set
d.) database
e.) observation
43. _______________ prespecify all of the possible answers, so they are easy to interpret and tabulate.
a.) Open-end questions
b.) Closed-end questions (moderate) p. 91
c.) Galvanometers
d.) Audiometers
e.) Samplings
44. _______________ allow respondents to answer in their own words.
a.) Open-end questions (moderate) p. 91
b.) Closed-end questions
c.) Galvanometers
d.) Audiometers
e.) Samplings
45. Which of the following statements about probability sampling is true?
a.) Probability sampling is the least expensive type of sampling to use.
b.) Probability sampling is the simplest and least difficult type of sampling to generate.
c.) Researchers who use probability sampling can choose from a judgment or quota sample.
d.) Probability sampling does not allow researchers to measure sampling error.
e.) Researchers who use probability sampling can calculate their confidence in the accuracy of
their findings. (difficult) p. 92
46. The contact method that minimizes interviewer bias is _______________.
a.) mail (moderate) p. 93
b.) telephone
c.) intercept interview
d.) focus group
e.) personal interview
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47. The best contact method to use to determine how many people saw the ad for the new Volkswagen
Beetle that ran last night during the 6:00 p.m. news would be _______________.
a.) mail
b.) Internet
c.) telephone (moderate) p. 93
d.) focus group
e.) personal interview
48. If reducing the cost of data gathering is the most important criterion for a marketing research project,
the preferred contact method to avoid is _______________.
a.) intercept interview
b.) telephone
c.) focus group
d.) personal interview (moderate) p. 93
e.) mail
49. Which is typically the most expensive step of marketing research process?
a.) problem definition
b.) developing the research plan
c.) information collection (moderate) p. 92
d.) information analysis
e.) questionnaire design
50. The last step in the marketing research process is to _______________.
a.) create a database using the research results
b.) determine the best solution to the problem
c.) present the findings (moderate) p. 89
d.) analyze the information
e.) remove all jargon and technical language from the report
51. The _______________ is the set of consumers who have a sufficient level of interest in a market
offer.
a.) market
b.) target market
c.) potential market (moderate) p. 94
d.) available market
e.) qualified market
52. Which of the following defines the set of consumers who have interest, income, and access to a
particular offer?
a.) market
b.) target market
c.) potential market
d.) available market (moderate) p. 94
e.) qualified market
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53. Which of the following best describes the expected level of company sales based on a chosen
marketing plan and an assumed marketing environment?
a.) Company sales forecast (moderate) p. 96
b.) Sales quota
c.) Sales budget
d.) Company demand
e.) Market potential
54. A _______________ is the set goal for a product line, company division, or sales representative.
a.) sales quota (moderate) p. 96
b.) sales budget
c.) sales potential
d.) sales forecast
e.) sales aggregation
55. A sales quota is _______________.
a.) the expected level of company sales based on a given sales plan
b.) a conservative estimate of the expected volume of sales
c.) the sales goal set for a product line, company division, or sales representative (difficult) p.
96
d.) typically expressed as the company’s share of market demand at alternative levels of marketing
effort
e.) the percentage of total product available in the industry that each division or salesperson is
supposed to sell in a given period of time
56. A _______________ is a conservative estimate of the expected sales volume, and is used primarily
for making current purchasing, production, and cash-flow decisions.
a.) company sales forecast (moderate) p. 96
b.) sales quota
c.) sales budget
d.) company demand
e.) market potential
57. _______________ is the maximum amount of sales that might be available to all of the firms in an
industry during a given period under a given level of industry marketing effort and given
environmental conditions.
a.) Total market potential (moderate) p. 97
b.) Company sales quota
c.) Company demand potential
d.) Selective demand potential
e.) Integrated demand potential
58. The manufacturer of the line of Grote industrial meat slicers wants to identify all of the supermarkets,
delis, and restaurants that were potential customers for its products in each of its market areas. Then
it wants to estimate which model each will need to buy. What method of assessing market potential
will the manufacturer need to use?
a.) the multiple-factor index method
b.) the market-buildup method (moderate) p. 97
c.) the total market potential formula
d.) the market-demand breakdown
e.) a multi-regression analysis
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59. Companies commonly use a three-stage procedure for preparing a sales forecast. This first step is to
_______________.
a.) project the ability of supply to meet demand
b.) predict consumer spending trends
c.) prepare a macroeconomic forecast (difficult) p. 98
d.) prepare an industry forecast
e.) prepare a microeconomic forecast
60. Spotting trends is an important task for companies that wish to sell in the future. Which of the
following is not a part of the approach used by experts at trend-spotting?
a.) searching through the trash of competitors (easy) p. 99
b.) seeing the future as an extension of the past
c.) analyzing the actions of customers and other stakeholders
d.) searching for cycles and patterns
e.) monitoring technological and social events as they unfold
61. The major macroenvironmental forces include all of the following except _______________.
a.) socio-cultural
b.) demographic
c.) natural
d.) technological
e.) managerial (easy) p. 100
62. Concern with the population age mix, ethnic markets, and household patterns fall within which of the
following macroenvironments?
a.) demographic (moderate) pp. 100-102
b.) socio-cultural
c.) competitive
d.) technological
e.) natural
63. Nations vary greatly in level and distribution of income and industrial structure. Which of the
following is not a type of industrial structure referred to in the book?
a.) subsistence economies
b.) raw-material importing economies (moderate) p. 102
c.) raw-material-exporting economies
d.) industrializing economies
e.) industrial economies
64. Which of the following is true regarding savings, debt, and credit availability around the world?
a.) U.S. consumers tend to save more of their income than do Japanese consumers.
b.) Lower-income borrowers tend to pay lower interest rates.
c.) U.S. consumers have a high debt-to-income ratio. (moderate) p. 102
d.) U.S. consumers save more than 10 percent of their income.
e.) Credit is not very available in the United States.
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65. The U.S. Federal Food and Drug Administration must approve all drugs before they can be sold. This
reflects the importance to marketers of which macroeconomic environment(s)?
a.) demographic and socio-cultural
b.) competitive
c.) natural
d.) technological and political-legal (moderate) pp. 104-105
e.) competitive and internal
66. Which of the following is not one of the purposes for business legislation?
a.) to protect society from unbridled business practices
b.) to protect firms from unfair competition
c.) to protect consumers from unfair business practices
d.) to protect some competitors from being unfairly overrun by other competitors
e.) to protect against too much competition (moderate) p. 105
67. _______________ lobby government officials and pressure business executives to pay more attention
to consumer rights, women’s rights, senior citizen rights, minority rights, and gay rights.
a.) Political-action committees (moderate) p. 105
b.) Cultural-action committees
c.) Environmental-action committees
d.) Green marketing committees
e.) Enterprising committees
Essay Questions
68. Walnut Hill is a company that sells everything you could possibly need to make your own candles.
Before its owner expands into other craft areas, she wants to do some marketing research. She has
heard of too many companies that have gone out of business as a result of inappropriate or ill-timed
expansion. In a short essay, explain the three types of market research firms from which she can buy
market research. Then, offer her three suggestions on ways that she can obtain less expensive market
research.
(easy) p. 89
69. Roberto Media is a newly formed software gaming production company that is currently developing
several new interactive “shows” for online users. It needs to know about online surfing habits and
trends. It believes it can use secondary data to learn all that it needs to know before it tries to sell the
ideas currently in development. In a short essay, discuss the four types of secondary data sources.
Then, discuss which one the company will be able to use and which one will not be very useful in this
research project?
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Answer:
The two sources that are of doubtful value are internal sources and government publications. Internal
sources would include prior research reports, past data on what types of shows it sold previously, and
how they were sold. Since this is a new enterprise, none of this type of information will be available.
Government publications might provide some demographic information to help with determining
what Internet portals should be targeted, but would not be worth the effort for the information
gathered. Periodicals and books should be able to provide the company with information on trends
and viewing habits—both periodicals written for the industry and popular press publications.
Commercial data will certainly be useful, especially from Nielsen and possibly from Simmons
Market Research Bureau.
(difficult) pp. 88-91
70. Suppose you are the brand manager for Do-the-Wild-Thing, an unscented deodorant shampoo aimed
at X-Generation members. Sales of your product have been declining. Exploratory research suggests
your brand is not price competitive. In a short essay, outline a research plan that would provide you
with the information you need to decide what to do. Then, explain why you selected those specific
methods instead of others.
Answer:
Students’ answers to this question will vary considerably. All answers should consider what research
approach will be used, the type of research instrument(s) if appropriate, a sampling plan, and the
appropriate contact method(s). In this instance the survey approach is most appropriate. The
questionnaire will be the appropriate instrument with some kind of closed-ended question. The
higher quality answers will provide sample questions. The sample plan, given declining sales, should
be inexpensive. Nonprobability samples would be appropriate using mail, telephone, or a
combination of both.
(moderate) pp. 90-93
71. Compare and contrast the various ways in which contact with respondents in a marketing research
project could take place. In each case, describe the advantages and disadvantages.
Answer: This is a fairly straightforward exercise. Table 5-2 lays out the distinct advantages and
disadvantages of using the mail, the telephone, the Internet, or personal interviews to contact study
participants. (moderate) p. 93
72. Scott wishes to open an all-age music club in a medium-size college town in the Rocky Mountains.
He is considering several real estate options, but is unsure how much space he can actually fill with
young customers. Acting as a consultant, please describe to Scott the different ways he might forecast
the demand in his community for the club, thus helping him decide on the size of the venue.
Answer: Scott could do a survey of buyer intentions. Scott could ask experts in the community about
their expectation for demand. He could look at the competition’s success for guidance. He could rent
space and do a market test. Better answers will recognize that Scott is not a marketing research expert
and will probably need to hire this work out. Also, some students will note that the report will not
make the decision, but that Scott himself, as manager, will have to do that. (moderate) pp. 97-98
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Mini-Cases
Mini-Case 5-1
The owners of the 21,900 funeral homes in the United States are experiencing tremendous changes in
their industry. Fewer families today are having bodies embalmed and displayed at a service. Of those
who choose burial, many are shopping at retail and mail order casket dealers, not at the funeral home as
used to be the custom. Another change is the fact that many people want personal touches and quirky
tributes in their funeral services. A growing number are choosing cremation rather than burial. Today
almost a quarter of the nation’s 2.3 million annual deaths are cremated. Funeral homes typically charge
only about one-third the amount for cremation that they do for a burial. It has become imperative that
funeral directors invest time and money in learning about their potential consumers.
73. Refer to Mini-Case 5-1. Imagine you are a funeral home director in a rural area that is experiencing
rapid growth as a result of urban spillover. You need to be aware of the latest trends in the funeral
business to survive in the business. Which of the following is the most affordable and practical
method for monitoring trends in the industry?
a.) Hire a syndicated-service research firm.
b.) Set up an internal marketing research department.
c.) Use the Internet and examine competitors’ Web sites and locate trends. (difficult) p. 99
d.) Subscribe to newsmagazines like Newsweek and look for articles on the industry.
e.) Conduct a survey of people over the age of 65.
74. Refer to Mini-Case 5-1. Which of the following is an example of a primary data source for research
about consumer attitudes toward the funeral industry?
a.) a 1999 study by the Federal Trade Commission on how well mortuaries were disclosing their
price structures
b.) a survey of funeral directors
c.) a report published by the National Funeral Directors Association
d.) focus group research involving people who have experienced recent bereavement
(moderate) pp. 90-91
e.) an Internet site for people who feel funerals are over-priced.
75. Refer to Mini-Case 5-1. A funeral director who watches and records data on how consumers select a
casket would be engaged in _______________ research.
a.) observational (moderate) p. 90
b.) experimental
c.) survey-based
d.) behavioral
e.) database
76. Refer to Mini-Case 5-1. One new funeral product being offered to customers is a casket brightly
painted with the logos of the favorite teams of the deceased. The total number of these caskets that
would be purchased in the Southwestern United States during the next two years, assuming the
economy stays prosperous and the death rate stays constant, would be referred to as
_______________.
a.) product target
b.) market demand (moderate) p. 95
c.) primary demand
d.) market forecast
e.) company sales forecast
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Mini-Case 5-2
Raul wants to expand his successful auto parts business into nearby Mexico. Though he speaks decent
Spanish, he grew up in southern Texas and does not know the Mexican market well. Raul is trying to
consider all the issues that will be important to him as he begins the new venture. He grabs his laptop,
jumps in his car, and heads for the border (just 5 minutes away).
77. Refer to Mini-Case 5-2. The first thing Raul notices is a lot of older Chevys and Fords on the road.
This may indicate that the ___________ environment will be extremely important to his success.
a.) competitive
b.) economic (moderate) p. 102
c.) political-legal
d.) natural
e.) technological
78. Refer to Mini-Case 5-2. Once in the country, Raul passes the mayor’s office and wonders about the
paperwork he’ll have to complete to open his new business in the city. This illustrates that the
__________ environment will likely affect what Raul does.
a.) political-legal (easy) pp. 104-105
b.) competitive
c.) natural
d.) technological
e.) economic
79. Refer to Mini-Case 5-2. Raul figures that he can choose his market, and his marketing mix, but that
the macroenvironments of doing business in Mexico will not let him choose certain things about how
business is conducted. This reflects
a.) the difficulty of selling auto parts
b.) the difficulty of marketing in Mexico
c.) the difficulty of choosing a product line for export
d.) the difficulty of dealing with the “uncontrollables” (difficult) p. 99-100
e.) the difficulty of finding suppliers outside the United States
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