Answers
Chapter 5 Quiz
Question
Answer
1. What is a value
proposition?
The marketing benefits offered to each target market segment.
2. What are marketing
‘benefits’?
The motivations each segment has for buying your product or
service.
3. What is a marketing
strategy?
How the value proposition is delivered to customer segments.
4. How is the value
proposition delivered to
customers?
Through the marketing mix or ‘Five Ps’: Product/service, price,
promotion/communication, people (service) and place
(distribution channels etc.).
5. What is a niche
marketing strategy?
A strategy that involves high differentiation and customer focus.
6. What are the five criteria
necessary for a market
niche to be viable?
It must be:
1. Distinctive with significantly different needs from other
segments
2. Sufficiently large or willing to pay a high enough price, to
make the segment commercially attractive
3. Accessible
4. Defendable from competitors
7. What are the three core
value propositions?
1. Low price/low cost
2. High differentiation
3. Customer focus
New Venture Creation: A framework for entrepreneurial start-ups
For more resources visit http://www.palgrave.com/companion/burns-new-venture-creation
© Paul Burns 2014
8. What are the business
imperatives for a low
price/low cost strategy?
1.
2.
3.
4.
5.
Maintaining cost leadership through economies of scale
Continually driving down costs
Achieving high sales volumes
Improving efficiency
Standardization
9. What are the business
imperatives for a high
differentiation strategy?
1.
2.
3.
4.
5.
6.
Understanding the basis for the differential advantage
Building on the differential advantage
Building barriers to entry
Building the brand
Continuous innovation
Encouraging creativity and innovation
10. What are the business
imperatives for a
customer focus strategy?
1. Maintaining close relationships with customers
2. Keeping in touch with and understanding changes in
customer needs
3. Maintaining customer loyalty
4. Maximizing sales to existing loyal customers (economies of
scope)
5. Building the brand
11. What is ‘cost +’ or ‘fullcost’ pricing?
This takes the total cost of producing a product or delivering a
service and divides it by the predicted number of units to be
sold, to arrive at the average cost, to which a target mark-up is
then added.
12. What is differential
pricing?
Pricing different market segments a different price to reflect the
different benefits they receive.
13. What is cross elasticity of
demand?
How demand reacts to changes in price.
14. Define the term
contribution per unit.
Sales price minus variable-cost.
15. Define the term
contribution margin.
Contribution per unit ÷ sales price (or total contribution ÷
turnover).
16. What is a supply-push
sales strategy?
Encouraging sales to customers by encouraging distributors to
stock the product and ‘push’ sales.
17. What is a demand-pull
sales strategy?
Encouraging sales to customers by encouraging customers
directly to purchase the product.
18. What is the difference
between a customer and
A customer is a person or organization purchasing a product. A
consumer is a person or organization consuming or using a
New Venture Creation: A framework for entrepreneurial start-ups
For more resources visit http://www.palgrave.com/companion/burns-new-venture-creation
© Paul Burns 2014
a consumer?
product.
New Venture Creation: A framework for entrepreneurial start-ups
For more resources visit http://www.palgrave.com/companion/burns-new-venture-creation
© Paul Burns 2014