Complete Test Bank For Business Marketing Management b2b 11th Edition by Hutt

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IM Part 3: Exam Questions: MC, TF, SA, Essay
Chapter 1—A Business Marketing Perspective
MULTIPLE CHOICE
1. The business market consists of the following three components:

a. commercial enterprises, resellers, and government.
b. manufacturers, institutions, and defense.
c. manufacturers, service organizations, and government.
d. commercial enterprises, service organizations, and government.
e. commercial enterprises, institutions, and government.
ANS: E PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Marketing Plan | R&D Knowledge of
general business functions
2. Concerning manufacturing customers, the business market is:

a. concentrated by size.
b. geographically concentrated.
c. experiencing declining growth in many large metropolitan areas.
d. all of the above.
e. (a) and (b) only.
ANS: E PTS: 1
3. Based on the volume of their purchases, _____ are the most important
commercial customers in the business or industrial market.
a. construction companies
b. manufacturers
c. transportation companies

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d. service firms (e.g., hotels)

e. health care facilities
ANS: B PTS: 1
general business function
4. Market-driven firms demonstrate:
a. the coordinated use of interfunctional resources (for example, research
and development, manufacturing).
b. a set of values and beliefs among employees that places the customer's
interests first.
c. the ability to generate, disseminate, and productively use superior
information about customers and competitors.
e. (b) and (c) only.
ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Knowledge of
5. Market-driven firms spot market changes and react well in advance of their
competitors. This illustrates:
a. the customer-linking capability of market-driven firms.
b. the value proposition of market-driven firms.
c. the market-sensing capability of market-driven firms.
d. the value of using direct channels of distribution in the business market.
e. both (b) and (c).
ANS: C PTS: 1

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6. The particular skills, abilities, and processes that an organization has developed to
manage close customer relationships are referred to as:
a. the customer-linking capability.
b. channel management.
c. derived demand.
d. the market-sensing capability.
e. the extended enterprise.
ANS: A PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Customer | R&D Managing
decision-making processes
7. The ability of an organization to quickly recognize changes in its market and to

anticipate customer responses to marketing programs is referred to as:
a. market research capability.
b. customer-linking capability.
c. competitive intelligence.
d. market-sensing capability.
e. derived demand.
ANS: D PTS: 1
8. Motorola reduced the price of the electronic engine control that it sells to Ford by
10 percent and experienced a 15 percent increase in quantity demanded. This
suggests that Ford’s price elasticity of demand is:
a. elastic.
b. inelastic.
c. neither elastic nor inelastic.
d. insensitive to price changes.
e. none of the above.
ANS: A PTS: 1

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NAT: AACSB Reflective Thinking | CB&E Model Pricing | R&D Knowledge of

9. Dayco increased the price of the drive belts that it sells to General Motors by 5
percent and sales of the item grew by 9 percent. Price elasticity of demand for
drive belts appears to be:
a. elastic.
b. inelastic.
c. neither elastic nor inelastic.
d. sensitive to price changes.
ANS: B PTS: 1
10. A diverse array of organizations make up the business market. These organizations
can be broadly classified as:
a. commercial enterprises, governmental organizations, and institutions.
b. commercial enterprises, users, and governmental units.
c. commercial enterprises, users, and original equipment manufacturers.
d. producers and resellers of industrial products or services.
e. upstream suppliers, users, and governmental units.
ANS: A PTS: 1
11. When purchasing a high speed packaging machine, General Foods would be
classified as:
a. an original equipment manufacturer.
b. a user.
c. a distributor.
d. a dealer.
e. an institutional buyer.

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ANS: B PTS: 1
12. Concerning the chain of suppliers involved in the creation of a Honda automobile,
which of the following fall within the business marketing domain?
a. Honda purchasing power steering components from direct suppliers.
b. Direct suppliers of power steering systems purchasing sheet metal from
upstream suppliers.
c. Organizations purchasing Honda automobiles for their fleets.
ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Distribution | R&D Knowledge of
13. Which of the following transactions fall into the business marketing domain?
a. Ford purchasing machine tools for their plants from Cincinnati Milacron.
b. Ford selling their automobiles to the fleet manager at Cincinnati
Milacron for use by the sales force.
c. Ford purchasing power-steering systems from Motorola for use in a
particular model.
e. (a) and (c) only.
ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Distribution | R&D Knowledge of
14. When purchasing machine tools for their plants, American Honda is:
a. an original equipment manufacturer.

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b. a user.
c. a distributor.
d. an institutional buyer.
e. an upstream supplier.
ANS: B PTS: 1
15. Concerning the classification of customers in the business market, General Motors
is a(n) ____ when purchasing a mainframe computer system from IBM, but is a(n)
____ when purchasing tires from Goodyear.
a. user; original equipment manufacturer (OEM)
b. user; distributor
c. original equipment manufacturer (OEM); user
d. user; upstream supplier
e. original equipment manufacturer (OEM); downstream supplier
ANS: A PTS: 1
16. As an industrial customer, Ford Motor Company would be classified as:

a. a user.
b. an original equipment manufacturer (OEM).
c. a user in purchasing some products, an OEM in purchasing other
products.
d. a producer of facilitating goods.
ANS: C PTS: 1

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17. When purchasing microprocessors from Intel Corporation to be incorporated into

Dell's line of personal computers, IBM would be classified as:
a. a user.
c. an institutional buyer.
d. a dealer.
e. a distributor.
ANS: B PTS: 1
18. When purchasing manufacturing equipment from General Electric, Chrysler would
be classified as:
a. a user.
c. an institutional buyer.
d. a dealer.
e. a distributor.
ANS: A PTS: 1
19. When Armco Steel realizes a drop in the demand for steel as a result of a decline
in ultimate consumer demand for automobiles, this illustrates the concept of:
a. derived demand.
b. connector demand.
c. linked demand.
d. reflection demand.
e. evoked demand.
ANS: A PTS: 1

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20. The method of classifying industrial goods into meaningful categories in the
business market centers on this question:
a. How does the industrial good enter the production process and the cost
structure of the firm?
b. How much effort are organizational buyers willing to exert in purchasing
this industrial good?
c. Will organizational buyers purchase this industrial good from a
distributor or directly from a manufacturer?
d. What is the weight and unit value of the industrial good?
e. How many product alternatives are organizational buyers willing to
consider before making a choice?
ANS: A PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Marketing Plan | R&D Knowledge
of general business functions
21. Industrial products and services can be broadly classified as:

a. upstream, downstream, and direct goods.
b. entering, manufactured, and fabricated goods.
c. entering, accessory, and manufactured goods.
d. entering, foundation, and facilitating goods.
e. foundation, accessory, and component goods.
ANS: D PTS: 1
22. The cost of raw materials such as sheet steel is treated as:
a. an expense item which is depreciated over time.
b. a capital item which is depreciated over time.
c. a fixed cost.
d. an expense item which is assigned to the manufacturing process.

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ANS: D PTS: 1
23. Some industrial products have been processed before reaching the industrial
customer, but are processed further by this customer before becoming part of the
finished product that you buy. These items are called:
a. component parts.
b. facilitating parts.
c. accessory materials.
d. component materials.
e. accessory parts.
ANS: D PTS: 1
24. Which of the following is(are) characteristic of the marketing strategy that would
be appropriate for a firm like Otis Elevator, which sells installations in the business
market?
a. Personal selling is the dominant promotional tool.
b. Trade advertising and direct-mail advertising reinforce personal selling.
c. Price is the central force in marketing strategy.
d. All of the above.
ANS: E PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Promotion | R&D Knowledge of
media communications & delivery

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25. Mead Paper Company recently purchased a new high-speed paper machine for
one of their plants. The new machine is used in manufacturing a special grade of
paper at a rate of over 1500 feet per minute. This product would be classified as:
a. a facilitating good.
b. an entering good.
c. accessory equipment.
d. an installation.
ANS: D PTS: 1
26. The distinguishing characteristic(s) of foundation goods is(are) that they:

a. are capital items.
b. are expense items.
c. become part of the finished product.
d. Both (a) and (c) are true.
e. All of the above are true.
ANS: A PTS: 1
27. With little or no additional processing, ____ can be installed directly into another
product.
a. component parts
b. component materials
c. operating equipment
d. light factory equipment
e. all of the above
ANS: A PTS: 1

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28. Bond Office Products manufactures a diverse array of office supplies and serves
the business market. Which of the following characteristics is (are) associated with
the marketing strategy for this category of goods?
a. Personal selling is less important for supplies than it is for other
categories of goods having a higher unit value, such as installations.
b. the company requires a wide variety of marketing middlemen to cover
the broad and diverse market adequately.
c. Price may be critical in the marketing strategy because many office
supply items are undifferentiated.
d. All of the above are true.
e. (a) and (c) only
ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Managing strategy
& innovation
29. When companies want to sell products to consumer and business markets, they
have to:
a. produce products that are not identical.
b. reorient their business strategies.
c. link customer capabilities.
d. none of the above
ANS: B PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Customer| R&D Managing
30. Marketers who want to serve both consumer and business market sectors should:
a. develop a market oriented organizational plan.
b. become proficient in understanding customers.
c. become proficient in satisfying customers.

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ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Customer| R&D Managing
31. Companies can demonstrate market-sensing and customer-linking capabilities by:

a. sharing product movement information.
b. jointly planning promotional activities with other channel members.
c. jointly planning product changes with other channel members.
ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Marketing Plan | R&D Managing
strategy & innovation
32. A business marketer becomes a preferred supplier to major customers by:

a. developing intimate knowledge of the customers operations.
b. developing a market orientation organization plan.
c. contributing unique value to a customer's business.
ANS: E PTS: 1
33. Business marketing strategy must be based on an assessment of the:

a. customer.
b. competitor.
c. company.

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ANS: D PTS: 1
& innovation
34. Functional areas other than marketing directly or indirectly affect which of the
following ?
a. Product marketing decisions
b. Price marketing decisions
c. Promotion marketing decisions
d. Distribution marketing decisions
e. All of the above are affected
ANS: E PTS: 1
35. Which type of goods are treated as an expense item because they do not enter the
production process or become part of the finished product?
a. Facilitating Goods
b. Foundation Goods
c. Entering Goods
d. None of the above are correct.
ANS: A PTS: 1
36. The buying motives for major installations center on:

a. emotional factors.
b. purely economic or rational considerations.
c. a blend of rational and emotional factors.
d. the initial price and cost.
e. projected maintenance and operating costs.

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ANS: C PTS: 1
37. An implication of relationship marketing is:

a. that sellers do not require an intimate knowledge of a customer's
operations.
b. that a sale signals the beginning of a relationship, rather constituting the
end result.
c. the building of one-to-one relationships.
ANS: E PTS: 1
38. The factors that distinguish business marketing from consumer marketing include:
a. the importance of promotion.
b. the intended use of the product.
c. the nature of the customer.
ANS: E PTS: 1
39. Which of the following characteristics of business customers is true?

a. A single purchase by a business customer is typically larger than that of
an individual consumer.
b. Demand for industrial products is derived from ultimate demand for
consumer products.
c. Relationships between business marketers tend to be close and

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enduring.
d. All of the above characteristics are true.
e. Only (a) and (b) are true.
ANS: D PTS: 1
40. The skills required to identify, initiate, develop, and maintain profitable customer
relationships describes:
a. customer management relationship capabilities.
b. market-sensing capabilities.
c. derived demand.
d. supply chain management.
e. the extended enterprise.
ANS: A PTS: 1
41. If consumers are not price sensitive in purchasing a consumer product such as
Smucker’s Jams, a 10% increase in the retail price of strawberry jam because of a
10% increase in the cost of strawberries from farmers will not affect demand for
jam. Thus, the derived demand indicates that the demand for strawberries is:
a. elastic
b. inelastic
c. unpredictable
d. unknown
e. none of the above
ANS: B PTS: 1

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42. Which of the following would be classified as foundation goods?

a. fixed equipment
b. operating supplies
c. buildings and land rights
d. maintenance and repair services
e. both (a) and (c)
ANS: E PTS: 1
43. The use of a goods classification system can be extremely valuable to business
marketers because:
a. a marketing strategy appropriate for one category of goods may be
entirely unsuitable for another.
b. a marketing strategy that works for consumer products will often work
for products sold in business markets.
c. the physical nature of the industrial good and its intended use by the
organizational customer affects the marketing program’s requirements.
d. all of the above are true.
e. only (a) and (c) are true.
ANS: E PTS: 1
44. Market-driven firms attempt to match their resources, skills, and capabilities with:
a. competitive intelligence.
b. customers needs that are not currently being served adequately.
c. derived demand.
d. the needs of upstream suppliers.
ANS: B PTS: 1

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45. Which of the following statements about major installations is true?

a. Personal selling or account management is the dominant promotional
tool.
b. Initial price, distribution, and advertising play lesser roles.
c. Only economic factors matter as buying motives.
e. Only (a) and (b) are true.
ANS: B PTS: 1
46. Business marketers that define their business markets with a horizon that
stretches beyond the boundaries of the United States to include foreign markets
for industrial goods and services employ:
a. a global market perspective.
b. a target market perspective.
c. a market orientation perspective.
d. an ethnocentric perspective.
ANS: A PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model International perspective | R&D
Knowledge of general business functions
47. Marketing activities directed toward establishing, developing, and maintaining

successful exchanges with customers is:
a. relationship marketing.
b. global marketing.
c. cross-functional marketing.
d. supply chain management.
ANS: A PTS: 1

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48. The technique for linking a manufacturer’s operations with those of all its strategic
suppliers and its key intermediaries and customers to enhance efficiency and
effectiveness is called:
a. relationship marketing.
b. supply chain management.
c. global marketing.
d. consumer marketing.
ANS: B PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Distribution | R&D Managing
logistics & technology
49. Achieving the goals of supply chain management requires:

a. information sharing.
b. joint planning.
c. shared technology.
d. shared benefits.
e. all of the above.
ANS: E PTS: 1
50. Which of the following would qualify as facilitating goods?

a. Fixed equipment.
b. Component materials.
c. Raw materials.
d. Operating supplies.
e. Office equipment.
ANS: D PTS: 1

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51. The use of law firms or advertising agencies by business marketers constitutes
what type of industrial good?
a. Facilitating goods.
b. Entering goods.
c. Foundation goods.
d. Installations.
ANS: A PTS: 1
52. Markets for products and services, local to international, bought by businesses,
government bodies, and institutions for consumption, for use or for resale are:
a. consumer markets.
b. business markets.
c. global markets.
d. target markets.
ANS: B PTS: 1
53. Developing a marketing program that reaches the ultimate consumer directly for a
product that incorporates your product, such as DuPont advertising to consumers
to increase the sales of carpeting which incorporates their product is known as:
a. demand elasticity.
b. stimulating demand.
c. fluctuating demand.
d. price sensitivity.
ANS: B PTS: 1

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TRUE/FALSE
1. The intended use of the product and the intended consumer distinguishes
business marketing from consumer-goods marketing.
ANS: T PTS: 1
2. The demand for industrial products is derived from the ultimate demand for
consumer products.
ANS: T PTS: 1
3. A close examination of a market-driven firm will reveal two important capabilities:

market sensing and customer linking.
ANS: T PTS: 1
4. Firms operating in the business market must respond not to a single consumer but
to a much wider group of buying influentials, all of whom may bring different
criteria to bear on the purchase decision.
ANS: T PTS: 1

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5. Planning in the business marketing setting requires more functional

interdependence and a closer relationship to total corporate strategy than does
planning in the consumer goods sector.
ANS: T PTS: 1
& innovation
6. A particular industrial customer might be properly classified as a user by some

business marketers and an original equipment manufacturer by other business
marketers.
ANS: T PTS: 1
7. Industrial goods are classified on the basis of how organizational buyers shop for
particular products and services.
ANS: F PTS: 1
8. In contrast to raw materials, manufactured materials and parts would be classified

as capital items.
ANS: F PTS: 1
9. As foundation goods are used up or worn out, a portion of their original cost is
assigned to the production process as a depreciation expense.
ANS: T PTS: 1

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10. Personal computers and light factory equipment such as portable drills provide
examples of industrial goods that would be classified as accessory equipment.
ANS: T PTS: 1
11. A marketing strategy that works well for selling entering goods should be equally
successful for facilitating goods.
ANS: F PTS: 1
& innovation
12. Price may be critical in the marketing strategy for supplies because many supply
items are undifferentiated.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Pricing | R&D Managing strategy &
innovation
13. Other functional areas affect all business marketing decisions, either directly or
indirectly.
ANS: T PTS: 1
14. The "compatibility" of a cross-functional working relationship can be defined as

the common ground or shared goals that can unite managers who represent
different functional areas.
ANS: T PTS: 1

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15. Due to downturns in the economy, the demand for many consumer products
tends to fluctuate more than the demand for industrial products.
ANS: F PTS: 1
16. None of the products purchased by customers in the business market are the
same as those purchased by ultimate consumers.
ANS: F PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Product | R&D Knowledge of
17. Customers in the business market can be broadly classified into three categories:
(1) commercial enterprises; (2) government; and (3) institutions.
ANS: T PTS: 1
18. Supply chain management requires Information sharing, shared technologies, and
shared benefits.
ANS: T PTS: 1
19. Personal selling is less important for supplies than it is for other categories of
goods, such as installations.
ANS: T PTS: 1

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20. Relationships between business marketers tend to be close and enduring.
ANS: T PTS: 1
SHORT ANSWER
1. Business market customers can be broadly classified into these three categories:
ANS:
1. Business commercial enterprises
2. Institutions
3. Government
PTS: 1
2. The value elements that contain essentially the same performance characteristics
as the next best alternative and the value elements that render the supplier’s
offering either superior or inferior to the next best alternative are known
respectively as:
ANS:
Points of parity and points of difference
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Strategy| R&D Managing strategy
& innovation

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3. Because demand in business markets is derived from consumer markets, business

must carefully monitor demand patterns and changing consumer buying
preferences. Because of these changes, the demand for many industrial products
can be described as:
ANS:
Fluctuating demand
PTS: 1
4. Those that have the power in the business buying process are referred to as:
ANS:
Key buying influentials
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Marketing Plan | R&D Managing
5. This type of equipment is generally less expensive and is short-lived compared

with installations, and is not considered part of the fixed plant:
ANS:
Accessory equipment
PTS: 1
6. Like supplies, business services are considered expense items. Business services
can be classified as:
ANS:

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Maintenance and repair support and advisory support
PTS: 1
ESSAY
1. Using a product of your choice, illustrate the concept of the supply chain and
indicate which elements or exchange relationships fall into the business versus the
consumer-goods marketing domain.
ANS:
n/a
PTS: 1
2. Carefully compare and contrast the marketing strategy patterns and buying
considerations for a $3 million air conditioning system to be used in a large factory
versus photocopying paper for use in an office.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Strategic & systems
skills
3. Conrad Spring produces manufactured materials and parts for diverse customer
groups in the business market, ranging from automobile manufacturers and
household appliance producers to toy makers and medical equipment specialists.
Describe the nature of marketing strategy for industrial goods of this type.

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ANS:
n/a
PTS: 1
skills
4. Dell Computer has excelled with a fast-paced build-to-order approach that

involves taking customer orders online, orchestrating production tailored to each
customer, and forging a one-to-one relationship with the customer after the sale.
Some auto industry executives have turned to Michael Dell, the company founder,
for advice concerning how to make their businesses look like his. Senior executives
at Ford, for example, envision a future where customers will order online and
factories will build to order, eliminating billions of dollars of inventory costs (for
example, large stocks of vehicles on hand). All of those mass produced cars sitting
for weeks on dealer lots represent a massive investment that yields no return until
a buyer comes along.
a. Evaluate the feasibility of a build-to-order system for an automaker
like Ford and outline the key requirements that Ford must meet to
make the strategy work for a potential customer like you.
b. How would a build-to-order system alter the way in which suppliers
(business marketers) would serve Ford as a customer?
ANS:
n/a
PTS: 1
skills

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5. Consider some leading-edge consumer product manufacturers like Procter &

Gamble, Gillette, or Coca Cola. What major differences would you expect to find in
comparing the marketing strategy patterns employed by these consumer-products
companies to those of leading business marketing firms such as Intel, 3M, or Dow
Chemical? Next, describe the similarities and differences that emerge when
comparing the distinctive attributes of a leading-edge consumer products
marketer to a firm that demonstrates superb skills serving customers in the
business market.
ANS:
n/a
PTS: 1
skills
6. Hayes enjoys a well-established position as a supplier to the automobile industry.

The firm supplied wheels to the Model T Ford. Today, Hayes is betting on a new
product, fabricated aluminum wheels, which weigh up to 20 percent less than cast
aluminum wheels and 40 percent less than steel ones. Hayes has signed contracts
worth $50 million for the new wheels—mostly for use in spare tires—with
DaimlerChrysler, Ford, General Motors, and BMW. Drawing on the industrial
goods classification scheme, how would you classify the aluminum wheels?
Sketch out the critical buying motives that organizations like DaimlerChrysler
would emphasize in evaluating the wheels and explore Hayes’ associated
marketing strategy implications.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Learning,
motivation & leadership

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7. Smucker’s sells products to both business and consumer markets. Compare and
contrast the marketing strategies that Smucker’s will use when selling their
products to each type of market.
ANS:
n/a
PTS: 1
skills
8. Please explain the following statement and how it affects business marketers.
“All business marketing decisions - product, price, promotion, and distribution -

are affected, directly or indirectly, by other functional areas. In turn, marketing
considerations influence business decisions in R&D and in manufacturing and
procurement, as well as adjustments in the overall corporate strategy.”
ANS:
n/a
PTS: 1
skills
Chapter 2—Organizational Buying Behavior
MULTIPLE CHOICE
1. The organizational buying process, which ultimately may lead to the purchase of a
new computer, could be set into action by:
a. the existing computer breaking down.
b. a new cost accounting system.
c. an IBM sales presentation.
d. (a) and (b) only.

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e. any of the above.
ANS: E PTS: 1
2. Concerning the eight-stage model of the organizational buying process, research

suggests that:
a. the process may be reoriented at any point by a redefinition of the basic
problem.
b. the process may be discontinued by a change in the external
environment.
c. certain stages may be completed concurrently.
d. many small or incremental decisions are made during the procurement
process that ultimately translate into the final selection of a supplier.
e. all of the above
ANS: E PTS: 1
3. The purchase of an expensive piece of material handling equipment would be

classified as:
a. a new task buying situation.
b. a modified rebuy.
c. a straight rebuy.
d. any of the above.
ANS: D PTS: 1

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4. Mary Bronson, purchasing manager for the Los Angeles Tool Company, placed her
quarterly order for supplies from the Gibson Paper Company. Mary has been
dealing with Gibson for many years. What type of problem solving would Mary
employ in this purchase decision?
a. routine problem solving
b. casual problem solving
c. limited problem solving
d. extended problem solving
e. specialized problem solving
ANS: A PTS: 1
5. As a result of poor delivery performance by a supplier of high quality metal

components, Jim Houser, purchasing agent at Milton Toy Company, plans to
consider a possible change in suppliers. This provides an illustration of:
a. the backlash effect.
b. routinized problem solving.
c. a modified rebuy.
d. a straight rebuy.
e. selective perception.
ANS: C PTS: 1
6. The problem solving approach followed by an organizational buyer in a new task

buying situation is:
a. selective.
b. extensive.
c. cerebral.
d. systematic.

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ANS: B PTS: 1
7. The problem solving approach followed by an organizational buyer in a modified

rebuy situation is:
a. limited.
b. selective.
c. routinized.
d. extended.
e. cerebral.
ANS: A PTS: 1
8. When buying influentials and decision makers lack well-defined criteria for
comparing alternative products and suppliers and they also lack strong
predispositions toward a particular solution, they are operating in a stage of _____
problem solving.
a. cerebral
b. limited
c. selective
d. routinized
e. extensive
ANS: E PTS: 1
9. When organizational buyers have well developed choice criteria to apply to the
purchase decision, they are operating in a stage of problem solving known as:
a. cerebral response behavior.

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b. limited response behavior.

c. selective response behavior.
d. routine response behavior.
e. extended response behavior.
ANS: D PTS: 1
10. When organizational buyers have well-defined criteria to apply to the purchase
decision, but are uncertain about which suppliers can best fit their needs, they are
operating in a stage of _____ problem solving.
a. cerebral
b. limited
c. selective
d. routinized
e. extended
ANS: B PTS: 1
11. Because of the technical complexity of the product, the difficulty of evaluating
alternatives, or the unpredictable aspects of dealing with a new supplier, this type
of buying decision involves the greatest level of uncertainty.
a. complex modified rebuy decision
b. strategic modified rebuy decision
c. judgmental new task decision
d. strategic new task decision
e. lost-for-good decision
ANS: C PTS: 1

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12. Those buying decisions that are of extreme importance to the firm strategically
and financially are referred to as:
a. strategic new task buying decisions
b. strategic modified rebuy decisions
c. judgmental new task decisions
d. lost-for-good decisions
e. complex modified rebuy decisions
ANS: A PTS: 1
13. In choosing a new piece of manufacturing equipment, the buying organization is

uncertain of the model or brand to choose, the suitable level of quality, and the
appropriate price to pay. This represents which type of buying situation?
a. complex modified rebuy decision
b. strategic modified rebuy decision
c. judgmental new task decision
d. strategic new task decision
e. lost-for-good decision
ANS: C PTS: 1
14. Those buying decisions that involve a narrow set of choice alternatives,
encompass a moderate amount of both information search and analysis, and
concentrate on the long-term relationship potential of suppliers are called:
a. simple modified rebuy.
b. complex modified rebuy.
c. casual purchases.
d. routine low priority purchases.
e. specialty purchases.

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ANS: A PTS: 1
15. The simple modified rebuy:

a. involves a narrow set of choice alternatives.
b. centers on a product of minor importance to the firm.
c. encompasses little or no information search or analysis.
ANS: A PTS: 1
16. Upon meeting with a General Electric buyer, a salesperson learned that the G.E.
purchasing function is unhappy with the supplier's performance and is openly
considering new options. This provides an illustration of:
a. a new task buying situation.
b. a straight rebuy.
c. a modified rebuy.
d. extended problem solving.
e. value analysis.
ANS: C PTS: 1
17. Strategies that would be appropriate for an "out" supplier to follow when
confronting a modified rebuy situation include:
a. offering performance guarantees.
b. encouraging the organization to sample the firm's offering.
c. defining and responding to the organization's problem with the existing
supplier.

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d. all of the above

e. (b) and (c) only
ANS: D PTS: 1
18. Strategies that would be appropriate for an "out" supplier to follow in dealing with
a well-satisfied customer in a straight rebuy situation include:
a. attempting to gain a position on the organization's preferred list of
suppliers.
b. demonstrating to the organization that the potential benefits of
reexamining requirements and suppliers exceed the costs of doing so.
c. convincing organizational buyers that their purchasing requirements
have changed or that the requirements should be interpreted
differently.
d. all of the above
e. (b) and (c) only
ANS: D PTS: 1
19. Jim Parker, Purchasing Manager for the Boston Motor Works, is involved in many
organizational buying decisions each year. The forces that influence Jim's
organizational buying decisions might be broadly classified as:
a. economic, organizational, group, and legal.
b. group, environmental, individual, and organizational.
c. organizational, cultural, environmental, and economic.
d. legal, political, organizational, and group.
e. organizational, domestic, legal, and international.
ANS: B PTS: 1

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20. The environmental forces that influence organizational buying behavior include:
a. economic factors.
b. political and legal factors.
c. technological factors.
ANS: D PTS: 1
21. Within the buying center, individuals who actually make the organizational buying
decision, whether or not they have formal authority to do so, are performing the
role of:
a. a user.
b. a gatekeeper.
c. an influencer.
d. a decider.
e. a buyer.
ANS: D PTS: 1
22. Within the buying center, an individual who has formal authority for selecting a
supplier and implementing all procedures connected with securing the product is
performing the role of:
a. a user.
b. a gatekeeper.
c. an implementer.
d. a decider.
e. a buyer.

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ANS: E PTS: 1
23. Individuals who control the flow of information into the buying center are
performing the role of:
a. a user.
b. a gatekeeper.
c. an implementer.
d. a decider.
e. a buyer.
ANS: B PTS: 1
24. The composition of the buying center:

a. evolves during the purchasing process.
b. varies from one purchasing situation to another.
c. varies from firm to firm.
ANS: D PTS: 1
25. A common identifiable element in buying centers in all sectors of the industrial
market is:
a. the chief executive officer.
b. the accounting function.
c. the purchasing function.
d. the production function.

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e. the engineering function.
ANS: C PTS: 1
26. In the purchase of a new papermaking machine, what role would the firm’s
manufacturing superintendent assume in the buying center?
a. influencer
b. decider
c. gatekeeper
d. any or all of the above.
ANS: D PTS: 1
27. The evaluative criteria that engineers apply to a purchasing decision may be quite
different from those used by purchasing managers because engineers:
a. are exposed to different journals or publications.
b. possess different professional goals and values.
c. have a different educational background.
d. attend different conferences.
ANS: E PTS: 1

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28. When organizational buyers modify a salesperson's message to make it more

consistent with their predispositions toward the company, this provides an
illustration of:
a. selective exposure.
b. selective attention.
c. selective perception.
d. selective retention.
e. selective memory.
ANS: C PTS: 1
29. The formation of organizational preferences and ultimately the organization's

buying choice is determined by the _____ of the members of the buying center.
a. interaction structure
b. operating resources
c. relevant set
d. primary set
ANS: A PTS: 1
30. As the risk associated with an organizational purchase decision increases:

a. buying center participants will be motivated to invest greater effort
throughout the purchase process.
b. product quality becomes more important than price.
c. after-sale service becomes more important than price.

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ANS: D PTS: 1
31. Buying decisions that are somewhat important to the firm and involve a moderate
amount of analysis are:
a. casual purchases.
b. routine low priority purchases.
c. straight rebuy purchases.
d. extensive problem-solving purchases.
ANS: B PTS: 1
32. Those buying decisions that involve a large set of choice alternatives and pose
little uncertainty, and involve buyers actively searching for information, applying
sophisticated analysis techniques, and careful consideration of long-term needs
are called:
a. simple modified rebuy.
b. complex modified rebuy.
c. casual purchases.
d. routine low priority purchases.
e. specialty purchases.
ANS: B PTS: 1
33. In a modified rebuy situation, the “in” supplier should do which of the following?
a. Make every effort to understand and satisfy the procurement need.
b. Try to move decision makers into straight rebuy.
c. Both (a) and (b).
d. Neither (a) nor (b).

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ANS: C PTS: 1
34. In a modified rebuy situation, the “out” supplier should do which of the following?
a. Try to move decisions makers into straight rebuy.
b. Hold the buying organization in modified rebuy status long enough to
consider new alternatives.
ANS: B PTS: 1
35. A significant increase in the price of gasoline that leads to a decrease in the
purchases of new automobiles is an example of the impact of which
environmental force?
a. economic factors.
b. political and legal factors.
c. technological factors.
ANS: A PTS: 1
36. Which of the following are ambitious strategic priorities being pursued by many
chief procurement officers?

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a. Becoming business partners, not just buyers.

b. Developing fewer and deeper relationships with strategic suppliers.
c. Emphasizing more than just price, including a focus on business
outcomes, total cost of ownership, and the development of long-term
value creation.
e. Only (a) and (c).
ANS: D PTS: 1
37. Individuals actually making the buying decision, whether or not they have the
formal authority to do so, are performing the role of:
a. a user.
b. a gatekeeper.
c. an influencer.
d. a decider.
e. a buyer.
ANS: D PTS: 1
38. Individuals affecting the purchasing decision by supplying information for the
evaluation of alternatives or by setting buying specifications is performing the role
of:
a. a gatekeeper.
b. a user.
c. an influencer.
d. a decider.
e. a buyer.
ANS: C PTS: 1

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39. For a salesperson trying to determine the impact of group forces on the
organizational buying process, which of the following questions are appropriate?
a. Which organizational members take part in the buying process?
b. What is each member’s relative influence in the decision?
c. What criteria are important to each member in evaluating prospective
suppliers?
d. All of the above questions are appropriate.
e. Only (a) and (b) are appropriate.
ANS: D PTS: 1
40. A _____ consists of individuals who participate in the purchasing decision and
share the goals and risks arising from the decision.
a. buying center
b. target market
c. sales force
d. strategic task force
ANS: A PTS: 1
41. Which of the following statements about buying centers is true?

a. The composition can change from one buying situation to another.
b. Different individuals are important to the process at different times.
c. Buying centers vary from firm to firm.
e. Only (a) and (c) are true.

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ANS: D PTS: 1
42. Which of the following represent clues or techniques for identifying powerful
buying center members?
a. Isolating the personal stakeholders.
b. Following the information flows.
c. Identifying the experts.
e. None of the above.
ANS: D PTS: 1
43. Selective _____ is the tendency to accept communication messages consistent

with existing attitudes and beliefs.
a. exposure
b. attention
c. perception
d. retention
e. memory
ANS: A PTS: 1
44. As the risk associated with an organizational purchase decision increases, which of
the following occur?
a. The buying center becomes smaller.
b. The information search is a active and a wide variety of information
sources are consulted.
c. Buying center participants invest greater effort.
d. All of the above occur.

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e. Only (b) and (c) occur.
ANS: E PTS: 1
45. Which of the following statements are true of reverse auctions?

a. They are most appropriate for commodity-type items.
b. They involve one buyer who invites bids from several pre-qualified
suppliers.
c. Both a and b are true.
d. Neither a or b is true.
ANS: C PTS: 1
46. The Total Cost of Ownership

a. Includes all costs associated with the product and its delivery
b. Is used by buyers to determine what they should spend on an item
c. Considers the full range of costs associated with the purchase and use of a
product or service over its complete life cycle
d. Is an accounting concept that buyer’s use to compare the value of competing
offerings
ANS: C PTS: 1
TRUE/FALSE
1. The decision to purchase a fork-lift truck may be a new task buying situation in one
organization and a modified or straight rebuy in another.

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ANS: T PTS: 1
2. Many small or incremental decisions are made during the procurement process
that ultimately translate into the final selection of a supplier.
ANS: T PTS: 1
3. The information requirements of organizational buyers are highest in modified

rebuy situations.
ANS: F PTS: 1
4. Technical and engineering personnel tend to be more important to the

organizational buying process where the rate of technological change is great.
ANS: T PTS: 1
5. A purchasing manager could assume the roles of buyer, gatekeeper, and

influencer in the buying center.
ANS: T PTS: 1
6. Members of the buying center are generally in agreement concerning the criteria
that should be used in evaluating the merits of alternative suppliers.

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ANS: F PTS: 1
7. Purchasing managers assume a dominant role in repetitive buying situations.
ANS: T PTS: 1
8. Those individuals who have an important personal stake in the decision will exert
more influence than other members of the buying center.
ANS: T PTS: 1
9. Well-known companies, recognized as credible sources, tend to be favored by

organizational buyers facing high-risk decisions.
ANS: T PTS: 1
10. The higher the level of perceived risk in a buying situation, the lower the
probability that the organizational buying decision will be made by a group.
ANS: F PTS: 1
11. For "risky" purchase decisions, the buying center will become larger and will be
comprised of members with higher levels of organizational status and authority.

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ANS: T PTS: 1
12. Influencers control information to be reviewed by other members of the buying

center.
ANS: F PTS: 1
13. The greatest level of uncertainty confronts firms in judgmental new task situations
because of the technical complexity of the product and the difficulty of evaluating
the alternatives.
ANS: T PTS: 1
14. The buying center becomes larger and comprises members with higher levels of
organizational status and authority as perceived risk increases.
ANS: T PTS: 1
15. A business marketer confronting a new-task buying situation can gain a differential
advantage by participating actively in the initial stages of the procurement
process.
ANS: T PTS: 1

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16. The four groups of forces that have an impact on organizational buying behavior
are environmental, organizational, strategic, and individual.
ANS: F PTS: 1
17. Because globalization is upsetting traditional patterns of competition, the rise of

material costs, and customer resistance to price increases, the influence of the
procurement function is increasing in most organizations.
ANS: T PTS: 1
SHORT ANSWER
1. The first stage of the Organizational Buying Process involves:
ANS:
Problem Recognition
PTS: 1
2. Alternative proposals are evaluated by a purchasing manager and a number of

members of the production department in which stage of the Organizational
Buying Process?
ANS:
Acquisition and Analysis of Proposals
PTS: 1

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COMPLETION
1. ____________________forces involve job function, past experience, and buying

motives of individual decision participants
ANS: Individual
PTS: 1
2. Collectively, uncertainty about the outcome of a decision and the magnitude of

consequences from making the wrong choice comprise ____________________.
ANS: Perceived risk
PTS: 1
3. Key influencers are frequently located outside of

the____________________department.
ANS: Purchasing
PTS: 1
ESSAY

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1. Mary Bronson recently completed the sales training program at Dow Chemical and
has spent the past few months in San Diego, her assigned territory. Today she
plans to call on two accounts and then complete a sales forecast for next quarter.
The first account is a small, high-tech firm that potentially could use a Dow
product directly in a production process. This production process is new and the
purchasing manager indicated that several substitute products will likely receive
consideration. What strategy should Mary follow in dealing with this customer?
The second account has been buying their chemical products from Allied for the
past three years. Of course, Mary would like them to change to Dow but the
purchasing manager at this firm seems preoccupied with other matters. What
strategy should Mary follow here? She wonders if it's even worth stopping by
because she could spend the time talking to an existing customer.
ANS:
n/a
PTS: 1
2. Using an illustration of your choice, describe the factors that might move a
purchasing manager to shift from a straight rebuy to a modified rebuy. Next,
describe the steps that should be taken by both the “in” supplier and “out”
supplier as a modified rebuy situation develops.
ANS:
n/a
PTS: 1

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3. To remain competitive, Johnston Equipment has decided to adopt more

sophisticated manufacturing technology. The eight members of the firm who have
been actively involved in defining specifications and in evaluating suppliers are
evenly split over “which way to go.” Four members are strong advocates for
Supplier A; four are committed to Supplier B. Describe the factors that motivate
individual decision makers during the organizational buying process and explain
why product perceptions and evaluation criteria often differ among organizational
decision makers.
ANS:
n/a
PTS: 1
4. Boeing, AT&T, and 3M are among the corporations that have adopted centralized
procurement. Other large corporations may find that a decentralized
procurement structure constitutes a better fit for their operations. First, which
factors are conducive to the development of a centralized procurement function?
Second, what adjustments must be made in business marketing strategy to reach
the centralized purchasing unit?
ANS:
n/a
PTS: 1

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5. Texas Instruments has a major manufacturing plant that falls within your new
sales territory. On your initial visit to this plant, you learn from a receptionist that
the purchasing department is in the very preliminary stages of making a major
purchase of the type of production equipment that you sell. First, how would you
predict the likely composition of the buying center for this particular purchase?
Second, what questions could you ask to determine the relative influence that
different organizational members might exert on the buying decision?
ANS:
n/a
PTS: 1
6. Members of the buying center assume different roles throughout the

procurement or organizational buying process. Discuss the nature of the five roles
that a buying center member may assume. Provide an example of each role in the
organizational buying context.
ANS:
n/a
PTS: 1
7. There are four categories of forces that influence organizational buying behavior.
Please identify and briefly describe the four categories of forces. Assume that you
are a salesperson in any industry you choose, provide one specific example in each
category of how these forces affect organizational buying behavior in the industry
you have chosen.
ANS:
n/a

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PTS: 1
8. What are the two components that determine perceived risk in purchase
decisions? Please describe some of the characteristics of the buying center and
decision-making process when perceived risk is high. What actions should a
salesperson take when selling to an organization when perceived risk is high?
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Customer | R&D Managing decision-
making processes
Chapter 3—Customer Relationship Management Strategies for Business Markets
MULTIPLE CHOICE
1. Transactional exchange features very close:

a. information linkages.
b. social linkages.
c. operational linkages.
ANS: E PTS: 1

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2. On-going transactions in the business market where the customer and the supplier
focus only on the timely exchange of standard products at competitive prices
could be described as:
a. transactional exchange.
b. a partnership.
c. collaborative exchange.
d. a strategic alliance.
e. a joint venture.
ANS: A PTS: 1
3. There is a gravitational pull that moves buyers toward the transactional side of the
exchange spectrum because:
a. competitors are continually working to attract the best customers away.
b. customer requirements and expectations keep changing.
c. customers can freely explore new options in real time on the Internet.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
4. _____ reflect(s) the degree to which the systems, procedures, and routines of the
buying and selling firms have been connected to facilitate operations.
a. Relationship connectors
b. Information exchange
c. Cooperative norms
d. Operational linkages
e. Legal bonds
ANS: D PTS: 1

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5. Buying firms prefer a transactional relationship when:

a. the complexity of the purchase is high.
b. there is a competitive supply market featuring many alternatives.
c. the supply market is stable.
d. all of the above
e. (b) and (c) only
ANS: E PTS: 1
6. Buying firms prefer a more collaborative relationship when:

a. the purchase is deemed strategically important to the buying
organization.
b. the market is dynamic.
c. there are few alternatives.
d. all of the above
e. (a) and (c) only
ANS: D PTS: 1
7. Transactional relationships:
a. are characterized by high levels of information exchange.
b. are emphasized by buyers when the purchase is viewed as less
important to the organization's objectives.
c. are more likely to involve operational linkages.
d. all of the above
e. (a) and (c) only

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ANS: B PTS: 1
8. Collaborative relationships:
a. are emphasized by buying firms when the purchase is deemed important
to the organization.
b. are emphasized by buyers when the complexity is high.
c. are more likely to involve operational linkages.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
9. Which of the following statements about buyer-seller relationships is(are) true?

a. Customers prefer a transactional orientation when there are few
alternative offerings from suppliers.
b. Customers emphasize a collaborative orientation when the purchase
decision is not complex.
c. Collaborative relationships are more likely to involve operational
linkages and high levels of information exchange.
d. All of the above
e. None of the above
ANS: C PTS: 1
10. Which of the following statements about transactional relationships is(are) true?
a. Customers emphasize a transactional orientation when the purchase is
viewed as less important to the organization.
b. Customers prefer a transactional relationship when the market is

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dynamic (for example, rapidly-changing technology.

c. Transactional relationships are more likely to involve operational
linkages.
d. all of the above
ANS: A PTS: 1
11. Which of the following statements about collaborative relationships is(are) true?
a. Customers prefer a collaborative relationship when there is a
competitive supply environment featuring many alternatives.
b. Collaborative relationships are less likely to involve operational linkages
between the buying and selling firms.
c. Buyers prefer collaborative relationships when the purchase decision is
not complex.
d. all of the above
ANS: E PTS: 1
12. For collaborative customers, the business marketer should:

a. invest resources to build operational linkages and information-sharing
mechanisms for the relationship.
b. directly assist customers with planning and strategy development.
c. work with a wide array of managers on strategy and coordination issues.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1

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13. For transactional customers, the business marketer should:

a. see that operational linkages are designed into the relationship to keep
product and service offerings aligned with customer needs.
b. directly assist the customer with planning and strategy issues.
c. focus primary attention on the purchasing staff.
d. all of the above
ANS: C PTS: 1
14. Rather than adopting the approach of "one design fits all," the astute marketer
matches the strategy to the product and market conditions that surround a
particular relationship. Which of the following statements is(are) true?
a. It is unwise for marketers to make specialized investments in
transactional relationships.
b. For transactional customers, the salesperson should center primary
attention on the purchasing staff.
c. Transactional customers display less loyalty to a particular supplier and
can easily switch part or all of their purchases from one vendor to
another.
d. all of the above
e. (a) and (c) only
ANS: D PTS: 1
15. Business marketing relationships vary in terms of their closeness or degree of

collaboration. Transactions that are almost, if not entirely, void of a close,
collaborative relationship:

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a. do not involve the exchange of money.

b. involve long-term, contractual commitments.
c. are one-time exchanges of value between two parties with no prior or
subsequent interaction.
d. intend to move each partner toward the attainment of some long-term
strategic goal.
ANS: C PTS: 1
16. The belief by a partner that an ongoing relationship is so important that it

deserves maximum effort to maintain it is referred to as:
a. trust.
b. solidarity.
c. relationship commitment.
d. a strategic alliance.
e. interfirm cooperation.
ANS: C PTS: 1
17. _____ exists when one party has confidence in a partner's reliability and integrity.
a. Trust
b. Solidarity
c. Relationship commitment
d. A strategic alliance
e. Interfirm cooperation
ANS: A PTS: 1

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18. The open exchange of information is a characteristic of ____ relationships.

a. close
b. distant
c. transactional
d. all of the above
ANS: A PTS: 1
19. Value can be defined as the _____ benefits received by a customer firm in
exchange for the price paid for a product offering.
a. economic
b. technical
c. social
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
20. Using the continuum of working relationships, the industry bandwidth refers to:
a. the range of relationship strategies (from transactional to collaborative)
that are pursued by competing firms.
b. the number of competitors in the particular industry.
c. always-a-share customers.
d. the lost-for-good customer.
e. the number of organizations in a straight rebuy situation.
ANS: A PTS: 1

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21. Business marketers track customer loyalty and retention because:

a. the cost of new customers is often far less than long-standing customers.
b. all satisfied customers will remain loyal.
c. the firm can identify opportunities for expanding the relationship.
d. the cost of serving established customers usually increases.
ANS: C PTS: 1
22. When a business marketer demonstrates special skills in managing relationships

with key customers or by developing innovative strategies with alliance partners,
they are trying to create:
a. a collaborative advantage.
b. an equal advantage.
c. an arm’s length transaction.
d. a transactional exchange.
ANS: A PTS: 1
23. _____ centers on all activities directed toward establishing, developing, and
maintaining successful exchanges with customers and other constituents.
a. Relationship marketing
b. Transactional exchange
c. A strategic alliance
d. Buying centers
ANS: A PTS: 1

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24. Which of the following are reasons for business marketers to employ relationship
marketing activities?
a. Loyal customers are far more profitable than price sensitive customers.
b. Having strong relationships with customers can be hard for competitors
to understand or duplicate.
c. Both (a) and (b) are true.
d. Neither (a) nor (b) is true.
ANS: C PTS: 1
25. _____ involves a partner’s belief that an ongoing relationship is so important that
it deserves maximum efforts to maintain it.
a. Trust
b. Relationship commitment
c. Relationship marketing
d. A strategic alliance
ANS: B PTS: 1
26. When organizational buyers consider changes from one selling firm to another,
what are the two main categories of switching costs they consider?
a. Trust and relationship commitment
b. Transactional and collaborative relationships
c. Investments and risk of exposure
d. Operational linkages and relationship connectors.
ANS: C PTS: 1

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27. _____ features very close information, social, and operational linkages as well as
mutual commitments made in expectation of long-run benefits.
a. Transactional exchange
b. Value-added exchange
c. Competitive exchange
d. Collaborative exchange
ANS: D PTS: 1
28. _____ occur in between the two extremes on the relationship continuum, where
the focus of the selling firm shifts from attracting customers to keeping customers.
a. Transactional exchanges
b. Value-added exchanges
c. Competitive exchanges
d. Collaborative exchanges
ANS: B PTS: 1
29. Which of the following are goals of customer relationship management (CRM)?
a. A continuing dialogue with customers.
b. Personalized treatment of the most valuable customers.
c. Achieving customer retention.
ANS: D PTS: 1

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30. A(n) _____ represents the products, services, ideas, and solutions that a business
marketer offers to advance the performance goals of the customer organization.
a. industry bandwidth
b. value proposition
c. marketing plan
d. customer relationship management program
ANS: B PTS: 1
31. Which of the following performance attributes has research recently shown
influences customer satisfaction of business buyers?
a. Responsiveness of the supplier in meeting the firm’s needs.
b. Product quality.
c. Delivery reliability.
e. Only (a) and (b).
ANS: D PTS: 1
32. When business marketers are assessing which of their current customers
represent the best opportunities for growth, which of the following factors should
be considered?
a. The cost-to-serve the customer.
b. Projected profit margins.
c. The current share of the wallet the firm has attained.
ANS: D PTS: 1

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33. _____ illuminates exactly what activities are associated with serving a particular
customer and how these activities are linked to revenues and the consumption of
resources.
a. Customer profitability
b. Activity-based costing
c. Total cost of ownership
d. Margin analysis
ANS: B PTS: 1
34. Relationship efficacy

a. relates to the longevity of the relationship between a buyer and seller
b. is created by interactions at the top levels of the two firms involved in a
relationship
c. refers to the ability of an interfirm relationship to achieve desired objectives.
d. is not required if the firms are in an arms-length relationship
ANS: C PTS: 1
35. From the customer's perspective, relationship quality centers on:

a. the sensitivity of the salesperson in understanding how business conditions
affect the industry within which the buying firm operates.
b. the ability of the salesperson to understand the selection criteria of each
member of the buying center.
c. trust in the salesperson.
d. satisfaction with the salesperson.

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e. both (c) and (d)
ANS: E PTS: 1
36. ____ is composed of at least two dimensions: (1) trust in the salesperson and (2)
satisfaction with the salesperson.
a. role definition
b. relational adaptiveness
c. relationship quality
d. role congruity
e. relationship congruity
ANS: C PTS: 1
TRUE/FALSE
1. Customized, high-technology products-like semiconductor test equipment-fit the

transactional exchange category.
ANS: F PTS: 1
2. Buyers seek a close relationship for strategic purchases and employ a more distant
arms-length approach in procuring non- strategic items.
ANS: T PTS: 1

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3. Buying firms prefer a transactional relationship when there are few alternatives
and the complexity of purchase is high.
ANS: F PTS: 1
4. Buying firms prefer a more collaborative relationship when the supply market is
dynamic.
ANS: T PTS: 1
5. Buyer-seller relationships that arise for important purchases are the ones that are
more likely to involve operational linkages and high levels of information
exchange.
ANS: T PTS: 1
6. When supply needs are complex, the buying firm is less likely to opt for a close
relationship with a supplier.
ANS: F PTS: 1
7. Operational linkages and information-sharing mechanisms are common features

of collaborative relationships.
ANS: T PTS: 1

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8. For collaborative customers, the salesperson not only works with the purchasing
staff, but also with a wide array of managers throughout the organization.
ANS: T PTS: 1
9. Relationship commitment exists when one party has confidence in a partner's

reliability and integrity.
ANS: F PTS: 1
10. Transactional exchange centers on the timely delivery of basic products for highly
competitive market prices.
ANS: T PTS: 1
11. The cost of serving a long-standing customer is often more than the cost of
acquiring a new customer.
ANS: F PTS: 1
12. While loyal customers are likely to be satisfied, all satisfied customers will not
remain loyal.
ANS: T PTS: 1

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13. Collaborative exchange features very close information, social, and operational
linkages as well as mutual commitments made in expectation of long-run benefits.
ANS: T PTS: 1
14. Relationship commitment involves a partner’s belief than an ongoing relationship

is so important that it deserves maximum efforts to maintain it.
ANS: T PTS: 1
15. Total cost of ownership illuminates exactly what activities are associated with
serving a particular customer and how these activities are linked to revenues and
the consumption of resources.
ANS: F PTS: 1
16. Firing a customer may be appropriate if the customer is not profitable, not new,
and shows little or no opportunity for learning.
ANS: T PTS: 1
17. All customers hold similar amounts of growth potential.
ANS: F PTS: 1

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18. Having a relationship orientation is critical to developing a customer-relating

capability.
ANS: T PTS: 1
19. The contribution of a firm’s customer-relating capability to the firm’s position of

advantage depends on the degree to which the market offers an attractive
opportunity.
ANS: T PTS: 1
20. The whale curve of cumulative probability demonstrates that the most profitable
20 percent of customers generate between 150 and 300 percent of total profits.
ANS: T PTS: 1
SHORT ANSWER
1. When the focus of the selling firm shifts from attracting customers to keeping
customers, these exchanges are best described as:
ANS:
Value-added exchanges
PTS: 1

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2. In a collaborative exchange, the supply market dynamism would best be described

as:
ANS:
Volatile
PTS: 1
3. Once a firm implements an Activity-Based Costing approach, and plots cumulative

profitability against customers, a striking pattern emerges that is known as:
ANS:
The Whale Curve
PTS: 1
4. A cross-functional process for achieving a continuing dialogue with customers,

with personalized treatment of the most valuable customers and ensuring
customer retention and the effectiveness of marketing initiatives is known as:
ANS:
Customer relationship management
PTS: 1
5. Value is best defined as the economic, technical, service and social benefits
received by a customer firm in exchange for the:

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ANS:
price paid for a product offering.
PTS: 1
COMPLETION
1. The most profitable customers are those that have a

high____________________and a low____________________.
ANS: Net margin realized, Cost-to-serve
PTS: 1
2. ____________________ consist of unwritten and largely nonverbalized sets of

congruent expectations and assumptions held by the parties to the alliance about
each other’s prerogatives and obligations.
ANS: Psychological contracts
PTS: 1
ESSAY
1. Xerox serves a diverse set of customers in the business market.
· Customer group A demands a wide variety of services in addition to a

perfectly functioning copier. These customers value the relationship

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with Xerox and are willing to pay a premium for product and service
quality.
· Customer group B wants a quality copier but, most of all, they want a
rock bottom price and choose suppliers on that basis.
· Customer group C demands a quality product and extensive service
support but wants all of this for a “rock bottom” price. These
customers will freely switch from one supplier to the next. As
competition intensifies for Xerox, more customers are moving into this
group each month.
First, describe how Xerox might develop a portfolio of relationship strategies to

meet the needs of such diverse customer groups. Second, some customers in each
group are more costly to serve than others. How should such cost differences be
reflected in the particular relationship strategies that Xerox follows? Third, what
strategies can Xerox follow to increase the switching costs of customers in Group B
or Group C?
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Managing decision-
making processes
2. Rather than adopting the approach of “one design fits all,” the astute marketer
matches the strategy to the product and market conditions that surround a
particular account. Describe the product and market conditions that support a
collaborative relationship? a transactional relationship?
ANS:
n/a
PTS: 1
making processes

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3. To optimize the purchasing strategy, buying firms across industries are beginning
to segment the supply base: buyers seek a close relationship for strategic
purchases and employ a more distant arm’s-length approach in procuring non-
strategic items. Describe the resulting implications for firms that are evaluating
potential customers to target with relationship marketing strategies.
ANS:
n/a
PTS: 1
4. Some customers place a high value on supporting services (for example, technical
advice and training) and are willing to pay a premium price for this support. Other
customers do not value service support and are extremely price sensitive in
making product selection decisions. Describe how a business marketer might
profitably serve each of these customer segments.
ANS:
n/a
PTS: 1
making processes

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5. Gartner Group, a research firm for information technology users, reports that 55
percent of all customer relationship management software projects fail to produce
results. Worse yet, one in every five companies report that their CRM initiatives
not only had failed to deliver profitable growth but also had damaged long-
standing customer relationships. Experts suggest that these problems tend to
occur when executives mistake CRM technology for a customer strategy. First,
define customer relationship management (the cross-functional process) and
describe how CRM technology (the software) allows a firm to provide customized
treatment of key customers. Second, describe the central components of a
customer relationship management strategy and the way in which CRM
technology can support each strategy component.
ANS:
n/a
PTS: 1
making processes
6. As software manufacturers and consulting organizations diffuse best practices, and

the relevant CRM software becomes widely available and economical to use, all
competitors will be equally equipped. However, when compared to rivals, some
firms will be rewarded by customers with higher rates of customer loyalty and
lower rates of defection while others will continue to stumble. In the end, to excel
at customer relationship management, a firm requires a customer-relating
capability. Describe the central elements of a customer-relating capability and
how it can provide a firm with a strong advantage over competitors.
ANS:
n/a
PTS: 1
making processes

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7. Large firms tend to make up the majority of the most profitable customers AND of
the least profitable customers. What are some of the characteristics that define
both high-cost-to-serve and low-cost-to-serve customers? What can business
marketers do to manage high and low cost-to-serve customers?
ANS:
n/a
PTS: 1
making processes
8. Please identify the three main components of a strong customer-relating

capability and how each component helps develop a strong customer-relating
capability. How does customer-relating capability lead to a relationship
advantage?
ANS:
n/a
PTS: 1
making processes
Chapter 4—Segmenting the Business Market and Estimating Segment Demand
MULTIPLE CHOICE
1. Concerning segmentation criteria, _____ refers to the degree to which information

on the particular buyer characteristic exists or can be obtained.
a. measurability
b. accessibility
c. substantiality
d. responsiveness
e. enforceability

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ANS: A PTS: 1
& innovation
2. Which of the following statements concerning business market segmentation

is(are) true?
a. The decision to enter a particular market segment carries with it
significant long-term resource commitments for the industrial firm.
b. In evaluating alternative bases for segmentation, the marketer is
attempting to identify good predictors of differences in buyer behavior.
c. Segmentation decisions can be reversed more easily in the business
market than in the consumer market.
d. all of the above
e. (a) and (b) only
ANS: E PTS: 1
& innovation
3. Market segmentation is:

a. more useful to consumer goods marketers than to business marketers.
b. of little value to business marketers that concentrate on the
governmental and institutional sectors of the organizational market.
c. difficult to apply in the business market because groups, not individuals,
make many purchasing decisions.
d. a useful tool for both business and consumer goods marketers.
e. inappropriate for low market share firms.
ANS: D PTS: 1
& innovation

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4. Which of the following statements concerning business market segmentation

is(are) false?
a. In selecting a market segment, the business marketer is also choosing a
competitive environment.
b. The cost of research increases if a microlevel of segmentation is
required.
c. Compared to their consumer goods counterparts, business marketers
can more readily change segmentation strategies, shifting attention from
one segment to another.
d. both (a) and (c)
ANS: C PTS: 1
& innovation
5. The business market can be segmented on several bases, broadly classified into
two major categories:
a. economic and demographic.
b. macro and micro.
c. top-down and bottom-up.
d. concentration and coverage.
e. organizational and end-use application.
ANS: B PTS: 1
& innovation
6. The business market can be segmented on several bases. Macro bases of

segmentation center on:
a. characteristics of the buying situation.
b. characteristics of the buying organization.
c. the nature of the product application.
d. all of the above
e. both (a) and (c)

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ANS: D PTS: 1
& innovation
7. Bases of business or organizational market segmentation that center on the

characteristics of the buying organization and the buying situation are broadly
categorized as:
a. macrosegmentation.
b. microsegmentation.
c. economic bases.
d. bottom-up bases.
e. concentration bases.
ANS: A PTS: 1
& innovation
8. Bases of business or organizational market segmentation that focus on the

characteristics of decision-making units are broadly classified as:
a. macrosegmentation.
b. microsegmentation.
c. economic bases.
d. demographic bases.
e. coverage bases.
ANS: B PTS: 1
& innovation
9. The microsegmentation of business markets center on characteristics of:

a. buying organizations (e.g., the size).
b. the product application (e.g., end market served).
c. decision-making units (e.g., decision style).
d. the purchasing situation (e.g., types of buying situation).

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e. geographic regions (e.g., Midwest).
ANS: C PTS: 1
& innovation
10. All of the following are potential macro bases of business market segmentation
except:
a. purchasing strategy.
b. usage rate.
c. size.
d. product application.
e. geographic location.
ANS: A PTS: 1
& innovation
11. All of the following are potential micro bases of business market segmentation
except:
a. organizational innovativeness.
b. importance of purchase.
c. personal characteristics.
d. structure of decision-making unit.
e. type of buying situation.
ANS: E PTS: 1
& innovation

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12. Large buying organizations may possess unique requirements and respond to
different marketing stimuli than small firms. Research suggests that the degree of
influence of presidents, vice presidents, and owners _____ with an increase in
corporate size.
a. remains constant
b. increases
c. decreases
ANS: C PTS: 1
& innovation
13. Park Rapids Electronics divides their market on the basis of NAICS category, end
market served, and type of buying situation. They have also developed a special
strategy for large centralized buyers. They are emphasizing:
a. macro bases of segmentation.
b. micro bases of segmentation.
c. a blend of macro and micro bases of segmentation.
d. psychographic and economic bases of segmentation.
ANS: A PTS: 1
& innovation
14. Chandler Machine Tool has been successful in segmenting their market using the
following bases: (1) NAICS category and (2) key purchasing criteria emphasized by
particular groups of buyers within each NAICS industry. They are using:
a. macro bases of segmentation.
b. micro bases of segmentation.
c. a blend of macro and micro bases of segmentation.
d. psychographic and economic bases of segmentation.

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ANS: C PTS: 1
& innovation
15. Lansing Motor Works produces a line of precision motors. Based on feedback from
the sales force, management has learned that one of their new motors is
especially well-suited to high-speed packaging systems. The new motor requires
less maintenance and has a longer useful life than competing offerings. Lansing
Motor Works is now concentrating on this segment. This provides an illustration of
segmentation on the basis of:
a. usage rate.
b. purchasing strategy.
c. size of firm.
d. value-in-use.
e. organizational innovativeness.
ANS: D PTS: 1
& innovation
16. For the medical x-ray market, Du Pont initiated a formal positioning study among
hospital administrators, radiology department administrators, and technical
managers in order to identify the firm's relative standing and the specific needs
(criteria) for each level of buying influence within each potential segment. This
provides an illustration of segmentation on the basis of:
a. the importance of purchase.
b. attitude toward vendors.
c. value-in-use.
d. key criteria.
e. decision-specific conflict.
ANS: D PTS: 1

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& innovation
17. A segmentation study found that purchasers of IBM equipment are more
concerned about software support and breadth of product line and they are less
concerned about absolute price and price flexibility (i.e., willingness of suppliers to
negotiate price). This provides an illustration of segmentation on the basis of:
a. the importance of purchase.
b. key criteria.
c. the structure of the decision-making unit.
d. attitude toward vendors.
e. decision style.
ANS: B PTS: 1
& innovation
18. Concerning segmentation criteria, _____ concerns the degree to which segments
respond differently to different marketing mix elements, such as pricing or product
features.
a. measurability
b. accessibility
c. substantiality
d. compatibility
e. responsiveness
ANS: E PTS: 1
& innovation
19. Business market segmentation at the _____ level requires a higher level of market
knowledge and, therefore, a greater investment in research.
a. geographic
b. macro
c. micro
d. demographic

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e. aggregate
ANS: C PTS: 1
& innovation
20. The Thompson Spring Company has developed a separate marketing strategy for
each of the industries that uses its products. These industries include makers of
machine tools, bicycles, surgical devices, telephones, and missile systems. This
provides an illustration of segmentation on the basis of:
a. usage rate.
b. product application.
c. type of buying situation.
d. the structure of procurement.
e. key decision criteria.
ANS: B PTS: 1
& innovation
21. The criteria marketers use to evaluate the degree to which the firm can effectively
focus its marketing efforts on chosen segments is:
a. accessibility.
b. measurability.
c. sustainability.
d. compatibility.
e. responsiveness.
ANS: A PTS: 1
& innovation

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22. Which of the following are means by which a marketer can implement a
microsegmentation strategy?
a. Importance of the purchase.
b. Attitudes toward vendors.
c. Organizational Innovativeness.
ANS: E PTS: 1
& innovation
23. A successful implementation of a segmentation strategy requires attention to:

a. how should the sales force be organized.
b. what adaptations will be needed to serve selected international market
segments.
c. which media outlets can be used to target advertising at a new segment.
ANS: D PTS: 1
& innovation
24. Which of the following is a benefit of effective segmentation?

a. The mere attempt to segment business market forces the marketer to
become more attuned to the unique needs of customer segments.
b. Knowledge of the needs of particular market segments helps the
business appropriately train and deploy the salesforce.
c. It allows the business marketer to focus on product development efforts.
ANS: D PTS: 1

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& innovation
25. The classification of customers on a continuum range from nonuser to heavy user
is an example of:
a. macro level segmentation.
b. micro level segmentation.
c. product application segmentation.
d. "value in use" segmentation
ANS: A PTS: 1
& innovation
26. Which of the following is not one of the criteria for assessing the desirability of a
potential market segment?
a. Measurability
b. Accessibility
c. Responsiveness
d. Substantiality
e. Accountability
ANS: E PTS: 1
& innovation
27. A _____ is a group of present or potential customers with some common

characteristic which is relevant in explaining and predicting their response to a
supplier’s marketing stimuli.
a. market segment
b. prospect group
c. business population
d. market opportunity

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ANS: A PTS: 1
& innovation
28. Concerning segmentation criteria, _____ refers to the degree to which the
segments are large or profitable enough to be worth considering for separate
marketing cultivation.
a. measurability
b. accessibility
c. substantiality
d. compatibility
e. responsiveness
ANS: C PTS: 1
& innovation
29. When a business marketer determines whether a buyer is employing a new task,
modified rebuy or straight rebuy decision-making process, what macrolevel
segmentation variable is being used?
a. Type of buying situation.
b. Structure of procurement.
c. Geographical location.
d. End market being served.
ANS: A PTS: 1
& innovation
30. When a business marketer decides to target only those firms with centralized
buying centers, what macrolevel segmentation variable is being used?
a. Geographical location.
b. Usage rate.

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c. Structure of procurement.
d. End market served.
ANS: C PTS: 1
& innovation
31. Which of the following is NOT a personal characteristic used in microlevel

segmentation?
a. Demographics.
b. Risk.
c. Confidence.
d. Job responsibility.
e. Importance of purchase.
ANS: E PTS: 1
& innovation
32. Successful implementation of a business segmentation strategy requires attention

to which of the following issues?
a. Adaptations to serve selected international markets.
b. A comprehensive on-line strategy to provide continuous support to
customers in the segments.
c. Organization of the sales force.
e. Only (b) and (c).
ANS: D PTS: 1
& innovation
33. Qualitative techniques that can be used for forecasting sales include:
a. market surveys.

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b. time series.
c. the Delphi method.
d. single series statistical methods.
e. none of these.
ANS: C PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Research | R&D Managing strategy
& innovation
34. Advanced Technologies, Inc. faces a forecasting dilemma. They wish to evaluate
the level of sales that a new technology might enjoy in 2014. Historical data is
limited and of little value since the new product is not well defined and the
product concept is unique. Which forecasting approach would appear to be most
appropriate?
a. time series analysis
b. input/output analysis
c. the sales force composite
d. regression analysis
e. the Delphi method
ANS: E PTS: 1
& innovation
35. Which sales forecasting approach is effective when intimate knowledge of

customer plans is important?
a. executive judgment
b. Delphi method
c. time series
d. sales force composite
e. causal analysis
ANS: D PTS: 1

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& innovation
36. The qualitative approach that most closely resembles the executive panel method
of sales forecasting is:
a. input/output analysis.
b. the sales force composite.
c. market surveys.
d. time series methods.
e. regression analysis.
ANS: B PTS: 1
& innovation
37. The sales forecasting approach that utilizes a panel of experts and converts their
opinions into an informed consensus by means of highly structured, multi-stage
pooling is:
a. the Delphi method.
b. executive panel method.
c. the sales force composite.
d. organizational learning.
e. the multiple series method.
ANS: A PTS: 1
& innovation
38. The industrial chemical industry in England shows a fairly regular rise and fall in
demand over four- or five-year periods. This provides an illustration of the _____
component of a time series.
a. trend
b. cycle
c. random
d. seasonal
e. irregular

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ANS: B PTS: 1
& innovation
39. Albany Products found that the sales of one of their most important products is
logically related to new construction expenditures. If the firm can forecast future
values of this variable, which forecasting technique would appear to be most
appropriate?
a. time series
b. regression
c. Delphi method
d. trend extension
ANS: B PTS: 1
& innovation
40. Which forecasting technique uses historical data ordered in time to project the
trend and growth rate of sales?
a. input/output analysis
b. the Delphi method
c. causal techniques
d. time series analysis
e. market survey method
ANS: D PTS: 1
& innovation
41. Company sales, reported on a monthly basis for the past four years, is an example
of a:

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a. cycle.
b. time series.
c. top-down approach.
d. trend.
e. seasonal index.
ANS: B PTS: 1
& innovation
42. The _____ component of a time series reflects short-term, random movements in
the data that do not conform to a pattern which is regularly related to the
calendar.
a. trend
b. cycle
c. seasonal
d. irregular
ANS: D PTS: 1
& innovation
43. The _____ component of a time series reflects intermediate-term, regularly

recurring, upswings and downswings of data around the long-term general
direction of the data.
a. trend
b. cycle
c. seasonal
d. irregular
ANS: B PTS: 1
& innovation

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44. _____ techniques have as their objective the determination of a relationship

between sales and one or more variables presumed to be related to sales.
a. Time series
b. Delphi
c. Causal
d. Qualitative
e. Trend extension
ANS: C PTS: 1
& innovation
45. The most crucial limitation(s) associated with causal methods of sales forecasting
is(are):
a. the problem of determining future values of the independent or causal
variables.
b. the problem of securing unbiased sales estimates from the sales force.
c. that seasonal variations in performance are difficult to precisely
estimate.
d. both (b) and (c).
e. All of the above are crucial limitations of causal methods of sales
forecasting.
ANS: A PTS: 1
& innovation
46. The ideal approach to sales forecasting for the business marketer relies on:
a. strictly quantitative approaches.
b. strictly qualitative approaches.
c. a blend of the Delphi method and well-executed market surveys.
d. a combination of qualitative and quantitative approaches.
e. single and multiple statistical series approaches.

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ANS: D PTS: 1
& innovation
47. Sales forecast data is used to:

a. distribute inventory.
b. manage stock levels.
c. directing the entire supply chain process.
ANS: D PTS: 1
& innovation
48. Executive judgement methods produce accurate forecasts when:

a. forecasts are made infrequently.
b. the environment is volatile
c. the linkage between decision, action, and feedback is short.
ANS: C PTS: 1
& innovation
49. Quantitative forecasting includes the primary methodology called:

a. time series.
b. causal.
c. regression.
ANS: D PTS: 1

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& innovation
50. Typically, causal models are more reliable for:

a. intermediate than for long-range forecasts.
b. long-range than intermediate forecasts.
c. long-range than short-range forecasts.
d. short-range than long range forecasts.
e. short-range than for intermediate forecasts.
ANS: A PTS: 1
& innovation
51. Which of the following are true of qualitative approaches to sales forecasting?
a. Effectiveness depends on close relationships between customers and
suppliers.
b. They are more appropriate for well-established products.
c. It brings users of the forecast into the forecasting process.
ANS: E PTS: 1
& innovation
52. The Delphi technique is particularly well suited to:

a. new product forecasts.
b. estimation of future events for which historical data are limited.
c. situations that are not suited to quantitative analysis.
ANS: D PTS: 1

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& innovation
53. In time series analysis, the _____ component indicates the long-term general
direction of the data.
a. trend
b. cycle
c. seasonal
d. irregular
e. causal
ANS: A PTS: 1
& innovation
54. In time series analysis, the _____ component represents regular, recurring
movements within the year.
a. trend
b. cycle
c. seasonal
d. irregular
e. causal
ANS: C PTS: 1
& innovation
TRUE/FALSE
1. The concept of market segmentation is more applicable to consumer-goods

marketers than to business marketers.
ANS: F PTS: 1

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& innovation
2. Micro bases of organizational market segmentation require a high degree of

market knowledge and focus on the characteristics of decision-making units within
each of the various macrosegments.
ANS: T PTS: 1
& innovation
3. Examples of possible micro bases of business market segmentation include size,

geographical location, and usage rate of buying organizations.
ANS: F PTS: 1
& innovation
4. If the business marketer can identify meaningful and profitable market segments
at the macro level, the segmentation process is complete.
ANS: T PTS: 1
& innovation
5. The information needed for micro level segmentation in the business market can
usually be drawn from available secondary sources.
ANS: F PTS: 1
& innovation
6. Compared to centralized buyers, decentralized purchasing units emphasize short-

term cost efficiency.
ANS: T PTS: 1

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& innovation
7. Industrial firms lack the flexibility of their consumer-goods counterparts in moving

into and out of market segments.
ANS: T PTS: 1
& innovation
8. Value-in-use constitutes a microlevel base of segmentation.
ANS: F PTS: 1
& innovation
9. The North American Industrial Classification System (NAICS) is an especially

valuable source when segmenting the market on the basis of end use.
ANS: T PTS: 1
& innovation
10. The cost of research is greater at the macrolevel of segmentation than at the
microlevel.
ANS: F PTS: 1
& innovation
11. In evaluating alternative bases for segmentation, the marketer is attempting to

identify good predictors of differences in buyer behavior.
ANS: T PTS: 1

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& innovation
12. Because a specific industrial good is often used in different ways, the marketer can
divide the market using the NAICS.
ANS: T PTS: 1
& innovation
13. Buying organizations can be segmented based on the stages of the procurement
process, such as new-task or straight rebuy.
ANS: T PTS: 1
& innovation
14. By directing its resources to all of its customers evenly, the business marketer is
less vulnerable to focused competitors that may seek to "cherry pick" the firm's
most valuable customers.
ANS: F PTS: 1
& innovation
15. If the requirements of segmentation are met, it should provide the business
marketer with valuable guidelines for allocating marketing resources.
ANS: T PTS: 1
& innovation
16. In order to use macrolevel bases of segmentation, the business marketer must
move beyond secondary sources of information by soliciting input from the sales
force or by conducting a special market segmentation study.

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ANS: F PTS: 1
& innovation
17. The personal characteristics of decision-makers in buying centers, such as their

decision style and confidence, are examples of macrolevel bases of segmentation.
ANS: F PTS: 1
& innovation
18. Customers that actively seek business marketing firms that can help them create
new value to gain a competitive edge in their markets can be segmented using
value-based strategies.
ANS: T PTS: 1
& innovation
19. A well-defined segmentation plan will fail without careful attention to

implementing the plan.
ANS: T PTS: 1
& innovation
20. The Delphi method constitutes a highly sophisticated quantitative approach to

sales forecasting.
ANS: F PTS: 1
& innovation
21. Time series techniques are especially appropriate when management believes that
sales will behave differently in the future than they have in the past.

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ANS: F PTS: 1
& innovation
22. The cycle component in a time series indicates the long term general movement in
the data in one direction.
ANS: F PTS: 1
& innovation
23. The fact that sales and some causal variables are correlated implies that the causal
variable "caused" sales.
ANS: F PTS: 1
& innovation
24. Time series methods are well suited to short-range forecasting because the
assumption that the future will be like the past is more reasonable over the short
run than over the long run.
ANS: T PTS: 1
& innovation
25. Qualitative sales forecasting techniques provide a systematic analysis of cause and
effect relationships.
ANS: F PTS: 1
& innovation

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26. Regression models are useful to industrial firms projecting final consumer demand
for items of which their products become a part.
ANS: T PTS: 1
& innovation
27. Recent research on forecasting techniques indicates that improvements in

forecasting accuracy can be achieved by combining the results of several
forecasting methods.
ANS: T PTS: 1
& innovation
28. The primary advantage of the Executive Judgement method is that systematically
analyzes cause-and-effect relationships.
ANS: F PTS: 1
& innovation
29. The sales force composite approach to forecasting is a quantitative forecasting

method because it uses past sales data to predict future sales potential.
ANS: F PTS: 1
& innovation
30. Because the Delphi technique is often used for new products or when a product
concept is unique, it is only applied to short-range forecasting.
ANS: F PTS: 1
& innovation

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31. Regression methods of forecasting require considerable historical data to be valid

and reliable.
ANS: T PTS: 1
& innovation
32. In time series analysis, the seasonal component represents regular, recurring
movements within the year.
ANS: T PTS: 1
& innovation
COMPLETION
1. Customers who are not particularly price or service sensitive and who made
purchases in a routine fashion of products that are not central to their operation
are best known as____________________buyers.
ANS: Programmed
PTS: 1
& innovation
2. Bargain hunters are____________________-volume buyers who are very sensitive

to any changes in price or service with respect to products that are very important
to their operations.
ANS: Large
PTS: 1

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& innovation
3. ____________________-focused customers are committed to being first to

market with new technologies and seek new-product-development expertise that
will attract new customers.
ANS: Innovation
PTS: 1
& innovation
4. Sharing of downstream data along with replenishment plans and sales forecasts
describe customers who align with____________________-tier services.
ANS: High
PTS: 1
& innovation
5. Once demand is estimated for each segment, the manager can allocate
expenditures on the basis of ____________________ volume.
ANS: potential sales
PTS: 1
& innovation
6. ____________________ data is used to distribute inventory in the supply chain,

manage stock levels at each link and schedule resources for all the members of a
supply chain.
ANS: Sales forecast

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PTS: 1
& innovation
7. The ____________________ method combines and averages top executives’

estimates of future sales and is popular because it is easy to apply and understand.
ANS: Executive judgment
PTS: 1
& innovation
8. ____________________ is a unique approach to forecasting demand in that it

involves combined efforts of many functions within the firm as well as with supply
chain partners.
ANS:
CPFR
Collaborative Planning Forecasting and Replenishment
PTS: 1
& innovation
ESSAY
1. An emerging high-technology firm develops and sells a line of electronic software

products and services that enable businesses to engage in business-to-business
communications and transactions with suppliers and customers. The firm’s
products and services are used by retailers such as Wal-Mart, manufacturers like
Pillsbury, apparel firms like New Balance Athletic Shoes, and insurance firms and
others. The firm needs your assistance in segmenting this vast potential market
that includes most types of businesses.

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First, suggest possible bases of segmentation that the high-tech firm might use in
isolating potential clusters or segments of customers. Next, provide a set of
guidelines that the firm might follow in evaluating whether or not a particular base
of segmentation provides an appropriate market and strategic fit for the firm.
ANS:
n/a
PTS: 1
skills
2. Johnson Technology, a highly successful producer of specialized equipment for the

paper industry is contemplating entry into a new industry segment. Beth Walker,
the firm's marketing vice-president, has always felt that Johnson Technology could
serve the equipment needs of food processors like General Foods. The same basic
technology underlies the equipment in both sectors and Beth feels that Johnson
Technology has a meaningful edge over all competitors.
Describe the company, competitive, and market factors that the firm should
consider before committing resources to this new industry segment.
ANS:
n/a
PTS: 1
skills

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3. Your first task as a product manager at Dow Chemical is to evaluate the market
segmentation strategy followed by your predecessor. For the past four years, this
manager had been dividing the market on the basis of NAICS codes and
developing a separate marketing strategy for each of 5 different NAICS industries.
Describe the specific steps that you would follow in evaluating the existing
segmentation plan. What factors might prompt you to seriously consider making a
change in the existing segmentation approach?
ANS:
n/a
PTS: 1
skills
4. Provide an illustration of a situation where value-in-use segmentation would seem

to be especially appropriate.
ANS:
n/a
PTS: 1
skills
5. You have just taken over as the new national sales manager for Smucker’s. You
have just been presented with a plan from your boss, the Vice-President of Sales,
to add new institutional market segments for Smucker’s products - cafeterias in
schools and hospitals. After reading the report, you strongly believe that the new
segments have been well-defined and are extremely viable. What steps can you
take to ensure that this new segmentation strategy is successfully implemented?
ANS:
n/a

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PTS: 1
skills
6. Effective segmentation often begins with the analysis of macrolevel bases of

segmentation, and then continues with the identification of microsegments within
each potential macrosegment using microlevel bases of segmentation. However,
segmentation can effectively end after considering only macrolevel variables.
Please provide an illustration of a situation where only macrolevel bases are used
to identify market segments and what variables or issues business marketers
should use to determine whether macrosegmentation alone is enough for
effective organizational market segmentation.
ANS:
n/a
PTS: 1
skills
7. Compare and contrast the different quantitative sales forecasting techniques that
are used by business marketing managers. Be sure to note the strengths and
limitations of each technique.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Research | R&D Strategic &
systems skills
8. Using a product example and market setting of your choice, describe the
underlying logic of forecasting with regression or causal analysis. What are the
limitations of the approach?

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ANS:
n/a
PTS: 1
systems skills
9. Compare and contrast the different qualitative sales forecasting techniques that
are used by business marketing managers. Be sure to note the strengths and
limitations of each technique.
ANS:
n/a
PTS: 1
systems skills
10. Recent research on forecasting techniques indicates that forecasting accuracy can
be improved by combining the results of several forecasting methods, leading
many to advocate the use of a composite forecasting model that includes both
qualitative and quantitative factors. Using a product example and market setting
of your choice, demonstrate how the use of a composite forecasting model can
lead to more accurate forecasting.
ANS:
n/a
PTS: 1
NAT
Chapter 5—Business Marketing Planning: Strategic Perspectives
MULTIPLE CHOICE

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1. In the hierarchy of strategies, _____ strategy defines the businesses in which a

company will compete, preferably in a manner that utilizes resources to convert
distinctive competence into competitive advantage.
a. functional
b. corporate
c. business-level
d. product
e. divisional
ANS: B PTS: 1
& innovation
2. In the hierarchy of strategies, _____ strategy centers on how a firm will compete
in a given industry and will position itself against its competitors.
a. functional
b. corporate
c. business-level
d. product
e. divisional
ANS: C PTS: 1
& innovation
3. In the hierarchy of strategies, _____ strategy centers on how resources allocated

to various functional areas can be used most effectively and efficiently to support
the strategy of a strategic business unit.
a. functional
b. corporate
c. business-level
d. product
e. divisional

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ANS: A PTS: 1
& innovation
4. A _____ is a single business or collection of businesses that has a distinct mission,

a responsible manager, its own competitors, and an independent position in the
firm.
a. strategic business unit
b. market segment
c. sub-business center
d. divisional organizational scheme
e. sector unit
ANS: A PTS: 1
& innovation
5. The collective action perspective of strategy formulation applies to strategic

decisions that cut across functional areas, involve issues related to the
organization's long-term goals, or involve the allocation of resources across
business units. According to the collective action perspective, strategic decision
processes:
a. are typically centered in a single functional area (e.g., in marketing or in
R&D).
b. are often characterized by conflict that often divides participants in the
strategy formulation process.
c. involve negotiation and compromise among partisan participants.
d. all of the above
e. (b) and (c) only
ANS: E PTS: 1
& innovation

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6. Conflict often divides participants in the strategy formulation process. Conflict

most often emerges from:
a. bickering within a single functional area.
b. issues surrounding sales territories.
c. turf issues.
d. thought world differences.
e. both (c) and (d)
ANS: E PTS: 1
& innovation
7. The composition or functional area representation of the marketing strategy

center:
a. is strictly prescribed by the organizational chart.
b. evolves during the strategy development process.
c. varies from one strategy situation to another.
d. all of the above
e. (b) and (c) only
ANS: E PTS: 1
& innovation
8. Responsibility charting provides a tool for defining decision-making roles. A

manager who accepts or vetoes a decision before it is implemented, or chooses
from alternatives developed by others, is performing which of the roles?
a. responsible
b. approve
c. consult
d. implement
e. inform
ANS: B PTS: 1

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& innovation
9. Responsibility charting constitutes an approach that can be used to classify

decision-making roles and to highlight the multifunctional nature of business
marketing decision making. A manager who takes initiative for analyzing a
situation, developing alternatives, assuring consultation with others, and who
makes initial recommendations is performing which of the following roles?
a. responsible
b. approve
c. consult
d. implement
e. inform
ANS: A PTS: 1
& innovation
10. In developing strategic plans, managers who represent the various business
functions in the firm often hold different views concerning the best strategic
course. Why?
a. Because different functions are rewarded for different things.
b. Because each function often reflects a unique orientation or thought
world.
c. Because some functions are oriented toward short-term objectives while
others center on long-term goals.
ANS: D PTS: 1
& innovation
11. A business concept or model consists of the following major components except:

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a. core strategy.
b. strategic resources.
c. customer interface.
d. value network
e. negotiated outcomes.
ANS: E PTS: 1
& innovation
12. The overall objectives of the strategy that sets a course of direction and defines a
set of performance criteria that will be used to measure progress is called the:
a. business mission.
b. product scope.
c. market scope.
d. basis for differentiation.
ANS: A PTS: 1
& innovation
13. Which of the following describes where the firm competes?

a. The business mission.
b. The product scope.
c. The market scope.
ANS: E PTS: 1
& innovation
14. All of the following are elements that determine how a firm chooses to compete
except:

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a. the business mission.

b. the product scope.
c. the basis for differentiation.
d. the core process processes.
ANS: D PTS: 1
& innovation
15. Which of the following is an element of the customer interface?

a. Relationship dynamics.
b. Core processes.
c. Pricing structure.
ANS: E PTS: 1
& innovation
16. All of the following are components of a firm's value network except:
a. suppliers.
b. coalitions.
c. strategic alliance partners.
d. customers.
ANS: D PTS: 1
& innovation
17. Cisco and General Electric demonstrate special skills in forging relationships with
suppliers and alliance partners. This is an example of:
a. a value network.
b. relationship dynamics

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c. a strategic asset.
d. a market scope.
ANS: A PTS: 1
& innovation

marketing decision-making. A manager who is asked for substantive input before
the decision is approved but does not possess veto power is performing which of
the following roles?
a. responsible
b. approve
c. consult
d. implement
e. inform
ANS: C PTS: 1
& innovation

marketing decision-making. A manager who is told of the decision when it is
made, but may not have been consulted before the decision was approved is
performing which of the following roles?
a. responsible
b. approve
c. consult
d. implement
e. inform
ANS: E PTS: 1

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& innovation
20. The element of customer interface that refers to the channels a business
marketing firm uses to reach customers and the level of service it provides is:
a. fulfillment and support.
b. information and insight.
c. relationship dynamics.
d. pricing structure.
ANS: A PTS: 1
& innovation
21. The element of customer interface that refers to the knowledge captured from
customers and the degree to which this information is used to provide enhanced
value to the customer is:
a. fulfillment and support.
b. information and insight.
c. relationship dynamics.
d. pricing structure.
ANS: B PTS: 1
& innovation
22. Techniques for differentiating products and services include which of the
following?
a. Superior service or technical assistance.
b. Superior quality.
c. Lowest price among competitors.
e. Only a and b.

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ANS: E PTS: 1
& innovation
23. _____ are the set of skills, systems, and technologies a company uses to create
uniquely high value for customers.
a. Strategic assets
b. Core competencies
c. Core processes
d. Core strategies
e. Customer interfaces
ANS: B PTS: 1
& innovation
24. _____ are the most tangible requirements for advantage that enable a firm to
exercise its capabilities.
a. Core competencies
b. Strategic assets
c. Core processes
d. Core strategies
ANS: B PTS: 1
& innovation
25. _____ are the methodologies and routines companies use to transform
competencies, assets, and other inputs in to value for customers.
a. Core competencies
b. Core strategies
c. Core processes
d. Value networks

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ANS: A PTS: 1
& innovation
26. The three major levels of strategy include which of the following?
a. Corporate strategy
b. Competitive strategy
c. Functional strategy
e. Only a and c.
ANS: E PTS: 1
& innovation
27. The role of marketing at the corporate level of strategy includes which of the
following?
a. Assess market attractiveness.
b. Assess competitive effectiveness.
c. Formulate the firm’s overall value proposition.
e. Only a and b.
ANS: D PTS: 1
& innovation
28. The members of the organization involved in the business marketing decision-
making process constitute the _____.
a. marketing strategy center.
b. buying center.
c. value network.
d. target market.

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e. core business.
ANS: A PTS: 1
& innovation
29. Common challenges for marketers using the marketing strategy center to manage
across business functions include which of the following?
a. The fostering of a shared appreciation of other functional units.
b. Minimization of interdepartmental conflict.
c. Elimination of interdependencies between functional units.
e. Only a and b.
ANS: E PTS: 1
& innovation
30. Which of the following represent the three bridge elements that tie together the
major components of the business model?
a. Customer benefits, configuration, and company boundaries.
b. Firm benefits, configuration, and functional boundaries.
c. Customer benefits, configuration, and functional boundaries.
d. Core strategies, strategic resources, and value networks.
ANS: A PTS: 1
& innovation
31. The _____ provides managers with a comprehensive system for converting a
company’s vision and strategy into a tightly connected set of performance
measures.
a. value network

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b. balanced scorecard
c. customer interface
d. financial audit
e. core business strategy
ANS: B PTS: 1
& innovation
32. The balanced scorecard uses which of the following perspectives to measure firm
performance?
a. Financial.
b. Customer.
c. Internal business processes.
d. Learning and growth.
e. All of the above.
ANS: E PTS: 1
& innovation
33. Which of the following are forms of differentiation that can be used by business
marketers when developing a value proposition?
a. Lowest total cost.
b. Complete customer solutions.
c. Product innovation.
e. Only a and c.
ANS: D PTS: 1
& innovation

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34. Which of the following are used in the Customer Perspective of the Balanced
Scorecard to measure core customer outcome measures?
a. Market share.
b. Customer acquisition.
c. Customer retention.
e. Only b and c.
ANS: D PTS: 1
& innovation
35. Internal business processes support which elements of a company’s strategy?

a. They create and deliver the value proposition for customers.
b. They create and support interfirm supply chain teams.
c. Both a and b.
d. Neither a or b.
ANS: A PTS: 1
& innovation
36. The three principal drivers of organizational learning and growth include:
a. human capital.
b. information capital.
c. organizational capital.
e. Only b and c.
ANS: D PTS: 1
& innovation

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37. A _____ enables an organization to describe and illustrate its objectives,

initiatives, targets, the measures used to assess performance, and the linkages
that are the foundation for strategic direction.
a. value network
b. marketing strategy center
c. strategy map
d. strategic alignment
e. positioning map
ANS: C PTS: 1
& innovation
TRUE/FALSE
1. Functional strategy centers on how a firm will compete in a given industry and will
position itself against its competitors.
ANS: F PTS: 1
& innovation
2. All business marketing decisions are affected, directly or indirectly, by other

functional areas.
ANS: T PTS: 1
& innovation
3. The composition of the marketing strategy center is neatly prescribed on the

organizational chart.
ANS: F PTS: 1
& innovation

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4. The composition or functional area representation of the strategy center evolves

during the marketing strategy development process, varies from firm to firm, and
varies from one strategy situation to another.
ANS: T PTS: 1
& innovation
5. All participants in the business marketing planning process are evaluated on the
bases of sales, profits, and market share.
ANS: F PTS: 1
& innovation
6. Strategic plans emerge out of a bargaining process among functional areas.
ANS: T PTS: 1
& innovation
7. Conflicts frequently emerge during the strategy formulation process because

various functional units operate under unique reward systems and reflect unique
orientations.
ANS: T PTS: 1
& innovation
8. For a strategy to succeed, individuals in a company must understand and share a

common definition of a firm's existing business concept.
ANS: T PTS: 1

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& innovation
9. The extent to which the business concept is common to competitors on

dimensions shared by the customer is a factor than can determine the potential
profit of a business concept.
ANS: F PTS: 1
& innovation
10. Suppliers and coalitions are part of a firm's value network.
ANS: T PTS: 1
& innovation
11. The business mission defines where the firm competes.
ANS: F PTS: 1
& innovation
12. In the hierarchy of strategies, the three major levels of strategy are corporate,
business-level, and functional.
ANS: T PTS: 1
& innovation
13. The two most common forces that divide participants during the strategy
formulation process are turf issues and different thought-worlds.
ANS: T PTS: 1
& innovation

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14. Responsibility charting is an approach that can classify decision-making roles and
highlight the multifunctional nature of business marketing decision making.
ANS: T PTS: 1
& innovation
15. The four perspectives used in the balanced scorecard to measure performance are
financial, customer, internal business processes, and learning and growth.
ANS: T PTS: 1
& innovation
16. Lowest total cost and product innovation are two forms of differentiation that can
be uses by business marketers when developing a value proposition.
ANS: T PTS: 1
& innovation
17. The four major components of the business model or concept are customer
interface, core competencies, strategic resources, and the value network.
ANS: F PTS: 1
& innovation
18. The core strategy determines how the firm chooses to compete.
ANS: T PTS: 1
& innovation

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19. Core competencies are the more tangible requirements for advantage that enable
a firm to exercise its capabilities.
ANS: F PTS: 1
& innovation
20. Core customer outcome measures used to monitor performance include market
share, customer retention, and customer profitability.
ANS: T PTS: 1
& innovation
21. The three principal drivers of organizational learning and growth are human
capital, information capital, and financial capital.
ANS: F PTS: 1
& innovation
COMPLETION
1. Subcultures exist when one subunit shares different values, beliefs, and goals than
another subunit, resulting in different____________________.
ANS: thought-worlds
PTS: 1
& innovation
2. Responsibility charting is an approach that can classify

____________________roles and highlight the multifunctional nature of business
marketing decision making.

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ANS: decision-making
PTS: 1
& innovation
3. Customer interface, core strategy, strategic resources and the value network
constitute the ____________________or model.
ANS: business concept
PTS: 1
& innovation
4. The____________________determines how the firm chooses to compete.
ANS: Core strategy
PTS: 1
& innovation
5. A ____________________ is a tool used for visualizing a firm’s strategy as a chain

of cause-and-effect relationships among strategic objectives.
ANS: Strategy map
PTS: 1
& innovation
6. The ____________________clarifies the condistions that will create value for the
customer.

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ANS: Customer value proposition
PTS: 1
& innovation
7. Growth, sustain and ____________________ are three stages of a business that

are isolated and linked to appropriate financial objectives.
ANS: Harvest
PTS: 1
& innovation
ESSAY
1. For a strategy to succeed, individuals in a company must understand and share a

common definition of a firm’s existing business concept. For example, ask any
employee at Dell and they will tell you about the “Dell model” that sets them
apart from competitors. A critical component of a business model is the core
strategy. Describe the key elements that are involved in setting a core strategy.
ANS:
n/a
PTS: 1
skills
2. Some business models demonstrate more profit potential than others: Southwest
Airlines is more profitable than America West Airlines; Dell is more profitable than
Gateway; and Intel readily outperforms its rivals. Describe the factors that
determine the profit potential of a business concept or model.

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ANS:
n/a
PTS: 1
skills
3. Jim Craig, a marketing manager at a communications equipment firm, was

enthusiastic about the prospects for the new, upgraded model of the Apex tester.
The previous two models were quite profitable and a marketing research study
clearly identified the improvements that should be embodied in the new model.
Key market segments wanted a lighter more compact system and one that could
handle a wider range of equipment test functions. Given the strength of the firm's
R&D and manufacturing capabilities and the “can do” attitude that prevailed in the
organization, Jim was confident that the model could be designed to incorporate
the new upgrades and meet the planned target to release the new model in
fifteen months. To his surprise, however, R&D and manufacturing vigorously
resisted his proposed modification. In the end, the Apex tester was released on
schedule, embodied the attributes isolated by marketing research, and was a
glowing market success. Why do managers who represent different functional
areas often see things differently and clash over the appropriate strategic course?
What steps can marketing managers like Jim take to minimize cross-functional
conflict while serving as a strong advocate for the consumer?
ANS:
n/a
PTS: 1
skills
4. A central challenge for the business marketer during the strategy formulation
process is to minimize interdepartmental conflict while fostering shared
appreciations of the interdependencies with other functional units. Explain.

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ANS:
n/a
PTS: 1
skills
5. The marketing strategy center includes the members of an organization involved

in the business marketing decision-making process. Using any product and market
setting you choose, please illustrate how responsibility charting can be used to
classify decision-making roles and highlight the multifunctional nature of business
marketing. Be sure to include a discussion of all five roles that participants can
play in the decision-making process.
ANS:
n/a
PTS: 1
skills
6. The balanced scorecard provides managers with a performance measurement

system that can be linked to a company’s business marketing strategies. Identify
and briefly describe the four perspectives of performance in the balanced
scorecard. Next, explain how each perspective can help business marketers with
their business strategies.
ANS:
n/a
PTS: 1
skills

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Chapter 6—Business Marketing Strategies for Global Markets
MULTIPLE CHOICE
1. An industrial firm's first encounter with an overseas market usually involves _____
because it involves the least commitment and risk.
a. contracting
b. licensing
c. exporting
d. franchising
e. a turnkey operation
ANS: C PTS: 1
Managing strategy & innovation
2. Exporting is a viable international entry strategy when the firm:

a. wishes to maintain direct control of the marketing program.
b. lacks the resources to make a significant commitment to the market.
c. wants to form long-term relationships with international customers.
d. all of the above
ANS: B PTS: 1
3. Included among the contractual modes of international market participation are:

a. licensing.
b. management contracts.
c. exporting.
d. all of the above
e. both (a) and (b)

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ANS: E PTS: 1
4. As a mode of international market entry, licensing agreements pose the following

limitation(s):
a. a firm has less control over a license than over its own exporting or
manufacturing abroad.
b. licensing agreements include a time limit and additional extensions
(beyond the first) that may not be readily permitted by a number of
foreign governments.
c. the licensee may become an important competitor in the future.
d. all of the above
e. (b) and (c) only
ANS: D PTS: 1
5. _____ involves sourcing a product from a producer located in a foreign country for
sale there or in other countries.
a. Contract manufacturing
b. Exporting
c. Franchising
d. A joint venture
e. A turnkey operation
ANS: A PTS: 1

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6. This mode of international market participation permits a client to require a

complete operational system, together with skills sufficient to allow the unassisted
maintenance and operation of the system. Once the package agreement is on line,
the system is owned, controlled, and operated by the client. This provides an apt
description of:
a. licensing.
b. a turnkey operation.
c. a joint venture.
d. contract manufacturing.
e. importing.
ANS: B PTS: 1
7. In pursuing international entry options, joint ventures often constitute a feasible

option because:
a. they provide the only path of entry into many foreign markets.
b. they may provide for better relationships with local organizations (for
example, local authorities) and with customers.
c. they may open up market opportunities that neither party to the
venture could pursue alone.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
8. Consider this position: If you run a pharmaceutical company with a good product
to distribute in Japan but have no sales force to do it, find someone in Japan who
also has a good product but no sales force in your country. Why not join forces to
maximize contribution to each other's fixed costs? This describes the logic of:
a. a joint venture.

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b. exporting.
c. franchising.
d. importing.
e. global marketing.
ANS: A PTS: 1
9. Multinational firms have traditionally managed operations outside their home

country with an approach that permits individual subsidiaries to compete
independently in different country-markets. Here each subsidiary resembles a
strategic business unit that is expected to contribute earnings and growth to the
organization. This describes:
a. a multidomestic strategy.
b. a differentiated strategy.
c. a global strategy.
d. an export-based strategy.
e. a coordinated strategy.
ANS: A PTS: 1
10. When a firm seeks competitive advantage with strategic choices that are highly
integrated across countries (for example, a standardized core product that
requires minimal local adaptation across country-markets), this describes:
a. a multidomestic strategy.
b. a differentiated strategy.
c. a global strategy.
d. an export-based strategy.
e. a coordinated strategy.
ANS: C PTS: 1

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11. _____ is one in which a firm's competitive position in one country is significantly
influenced by its position in other countries.
a. A multidomestic industry
b. A differentiated industry
c. A global industry
d. An export-based industry
e. A coordinated industry
ANS: C PTS: 1
12. In _____, firms pursue separate strategies in each of their foreign markets-
competition in each country is essentially independent of competition in other
countries.
a. a multidomestic industry
b. a differentiated industry
c. a global industry
d. an export-based industry
e. a coordinated industry
ANS: A PTS: 1
13. The type of international strategy that concentrates as many activities as possible
in one country, serves the world market from the home base, and closely
coordinates those activities that must be performed near the buyer (for example,
service) is referred to as:
a. a country-centered strategy.
b. an export-based strategy.
c. a purest global strategy.

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d. a segmented international strategy.

e. a coordinated international strategy.
ANS: C PTS: 1
14. Concerning international strategy, a firm that concentrates manufacturing and

support activities in one country but gives local marketing subsidiaries significant
latitude in each region of the world is following which type of international
strategy?
a. a country-centered strategy
b. an export-based strategy
c. a purest global strategy
d. a segmented international strategy
e. a coordinated international strategy
ANS: B PTS: 1
15. The choice of a particular international market entry mode depends on a range of
factors including the size of the market and its growth potential. Markets of
limited size surrounded by trade barriers may be supplied most cost effectively
via:
a. licensing or contract manufacturing.
b. a local production and marketing subsidiary.
c. exporting.
d. selective distribution.
ANS: A PTS: 1

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16. In entering high-risk country-markets, firms can reduce their risk exposure by
adopting low-commitment modes of entry such as:
a. licensing.
b. wholly-owned subsidiaries.
c. contract manufacturing.
d. all of the above
e. (a) and (c) only
ANS: E PTS: 1
17. Which of the following modes of international market entry provides for greater
potential returns and a greater degree of control over operations?
a. licensing
b. wholly-owned subsidiaries
c. contract manufacturing
d. exporting
e. franchising
ANS: B PTS: 1
18. As an entry strategy, licensing requires:

a. capital investment.
b. marketing strength in foreign markets.
c. a company to have less control over a licensee than over its own
exporting or manufacturing abroad.
ANS: C PTS: 1

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19. Potential partners for a global alliance are evaluated based on:
a. resources.
b. relationships.
c. culture.
ANS: D PTS: 1
20. An advantages of joint ventures is:

a. they include the only path of entry into many foreign markets.
b. they open up market opportunities that neither partner to the venture
could purse alone.
c. they transfer knowledge to the partner.
ANS: E PTS: 1
21. The home base for a business is the location where:

a. strategy is set.
b. core product and process technology is created and maintained.
c. a critical mass of sophisticated production and service activities reside.
ANS: D PTS: 1

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22. Successful global companies achieve unified action by:

a. establishing a strategies that are independent across countries.
b. developing accounting systems that are country specific.
c. encouraging personal relationships and the transfer of learning among
subsidiary managers across locations.
ANS: C PTS: 1
23. Research suggest that over _____ % of joint ventures are disbanded or fall short of
expectations.
a. 10
b. 20
c. 30
d. 40
e. 50
ANS: E PTS: 1
24. In high-risk markets, firms can reduce their equity exposure by adopting low
commitment modes such as:
a. licensing.
b. contract manufacturing.
c. joint ventures with a majority share.

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ANS: E PTS: 1
25. Rather than modifying the firm's product offerings from country to country, ____
strategy requires a patient, long-term campaign to enter every significant foreign
market while maintaining and leveraging the company's unique strategic position.
a. a global
b. an exporting
c. a joint venture
d. a licensing
ANS: A PTS: 1
26. Firms that quickly and intelligently seize global opportunities can secure which of
the following forms of competitive advantage?
a. Cost advantage.
b. Market access advantage.
c. Capabilities advantage.
ANS: D PTS: 1
27. A firm that includes rapidly developing economies (RDEs) in their global cost
structures can realize savings of _____ in the landed costs of their products.
a. 0 to 20 percent
b. 20 to 40 percent
c. 40 to 60 percent
d. 60 to 80 percent

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ANS: B PTS: 1
28. The hidden costs in operating in rapidly developing economies include which of
the following?
a. One-time setup costs.
b. Risk management costs.
c. Exit costs.
ANS: D PTS: 1
29. Companies can use capabilities advantages to:

a. improve research and development.
b. address unmet customer needs.
c. further standardize products in the home country.
ANS: E PTS: 1
30. The decision to outsource business operations to rapidly developing economies is

affected by which of the following sets of factors?
a. Economic.
b. Competitive.
c. Environmental.

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ANS: D PTS: 1
31. Factors that favor relocation of products or services to rapidly developing

economies include:
a. High labor content.
b. Low growth potential
c. Standardized manufacturing or service-delivery processes.
ANS: E PTS: 1
32. Factors that favor keeping products or services at home instead of relocating to
rapidly developing economies include:
a. Protection of intellectual property is critical.
b. High sensitivity to production location.
c. Very high technology content.
ANS: D PTS: 1
33. Which of the following issues pose challenges to business marketers considering
strategic alliance as a market entry mode?
a. Problems with maintaining alliances over time.
b. Difficult to implement alliances on a global scale.
c. Problems establishing coordination and trust.

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ANS: D PTS: 1
34. Which of the following issues pose problems to firms trying to manage joint
venture relationships?
a. Disagreements over profit-sharing.
b. Opening up of new market opportunities.
c. Problems responding to changing market needs.
ANS: A PTS: 1
35. The choice of a foreign market entry mode depends upon:

a. the size of the market.
b. the market’s growth potential.
d. Neither (a) or (b).
ANS: C PTS: 1
36. _____ refers to how similar activities performed in various countries are couple
with each other.
a. Coordination
b. Configuration
c. The home base

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d. The value network
ANS: A PTS: 1
37. The BCG Global Advantage Diamond portrays the key elements that must be
developed and integrated to secure a strong position in global markets. This
framework includes
a. A market access element
b. A market relevancy element
c. A resource accuracy element
d. All of the above
e. None of the above
ANS: A PTS: 1
36. When moving to a RDE, suppliers must adjust their operating models to:
a. Maintain quality levels
b. Counter local suppliers offerings
c. To fully capture the cost advantages.
d. Consider the increased transportation costs involved
e. Consider market research data on procurement preferences
ANS: C PTS: 1
TRUE/FALSE

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1. Some research suggests that, compared to consumer goods, industrial and high-
technology products may be more appropriate for global brand strategies.
ANS: T PTS: 1
2. An industrial firm's first encounter with an overseas market usually involves the
formation of a wholly-owned subsidiary in another country.
ANS: F PTS: 1
3. Exporting involves giving up direct control of the marketing program, which often
makes it difficult to coordinate activities.
ANS: T PTS: 1
4. As an entry strategy, licensing requires a major capital investment in a foreign

market.
ANS: F PTS: 1
5. Problems often plague joint ventures and, as a result, many of them fall short of
expectations or are disbanded.
ANS: T PTS: 1

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6. A multidomestic strategy seeks competitive advantage with strategic choices that

are highly integrated across countries.
ANS: F PTS: 1
7. Upstream activities in the value chain involve those primary activities that are
closely tied to where the buyer is located.
ANS: F PTS: 1
8. In multidomestic industries, a firm's competitive position in one country is

significantly influenced by its position in other countries.
ANS: F PTS: 1
9. The purest global strategy concentrates as many activities as possible in one

country, serves the world market from this home base, and closely coordinates
those activities that must be performed near the buyer.
ANS: T PTS: 1
10. In high-risk foreign markets, firms can reduce their equity exposure by adopting
low-commitment modes of entry such as licensing or contract manufacturing.
ANS: T PTS: 1

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11. Markets of limited size surrounded by trade barriers may be supplied most cost
effectively by using the exporting mode of entry.
ANS: F PTS: 1
12. The home base for a business is the location where strategy is set and a critical
mass of sophisticated production and service activities reside.
ANS: T PTS: 1
13. A single-country may not be large enough for a firm to realize economies of scale.
ANS: T PTS: 1
14. The choice of a particular entry mode will also depend on the size of the market
and its growth potential.
ANS: T PTS: 1
15. Coordination centers on where each activity is performed, including the number of
locations.
ANS: F PTS: 1

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16. The need for a global strategy is determined by the nature of international
competition in a particular industry.
ANS: T PTS: 1
17. For truly global industries, a firm's position in one country significantly affects its
position elsewhere, so a multi-domestic strategy is required.
ANS: F PTS: 1
18. The two primary sources of cost advantages driving firm to implement operations
in rapidly developing economies are lower operating costs and lower capital
investment requirements.
ANS: T PTS: 1
19. A factory in a rapidly developing economy can be built with 70% of the investment
level needed in a highly developed economy.
ANS: T PTS: 1
20. A firm whose products are technically complex and are protected by U.S. patents
is a good candidate for relocating to a rapidly developing economy.
ANS: F PTS: 1

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21. Arguments over profit-sharing and management styles are common problems
experienced in exporting.
ANS: F PTS: 1
22. Configuration centers on where each activity is performed, including the number
of locations.
ANS: T PTS: 1
23. Multidomestic industries do not need a global strategy because the focus should
be on developing a series of distinct domestic strategies.
ANS: T PTS: 1
COMPLETION
1. The primary reason that companies are moving to sourcing from Rapidly
Developing Economies is due to very large and sustainable
____________________ from lower operating costs and lower capital investment
requirements.
ANS: cost advantages
PTS: 1

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2. The realized net savings after logistics costs, other management costs, and import
duties involved in moving the product from the RDE to the market destination is
referred to as ____________________costs.
ANS: landed
PTS: 1
3. In China’s steel industry, their main source of competitive advantage is due not to
cheap labor, but rather massive government energy ____________________.
ANS: subsidies
PTS: 1
4. An industrial firm’s first foray into an overseas market usually

involves____________________because it requires the least commitment and
risk.
ANS: exporting
PTS: 1
5. ____________________involves sourcing a product from a producer located in a

foreign country for sale there or in other countries.
ANS: Contract manufacturing
PTS: 1

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6. ____________________offer a number of benefits, such as access to markets or

technology, economies of scale in manufacturing and marketing, and the sharing
of risk among partners.
ANS: Strategic alliances
PTS: 1
7. Multinational firms have traditionally managed operations outside their home

country with ____________________ that permit individual subsidiaries to
compete independently in their home country markets.
ANS: Multidomestic strategies
PTS: 1
8. A global industry is one in which a firm’s ____________________ in one country is

significantly influenced by its position in other countries.
ANS: competitive position
PTS: 1
9. Additional insights into international strategy can be gained by examining two

dimensions of competition in the global
market:____________________and____________________.

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ANS:
configuration, coordination
coordination, configuration
PTS: 1
ESSAY
1. Some experts emphasize that since customer needs are becoming increasingly
homogeneous worldwide, the opportunity exists to sell the same type of product
across countries and to use essentially the same marketing strategy around the
globe. If customers respond favorably to a strategy in St. Louis, will the same
strategy work in London or Tokyo? While a standardized approach might work for
Coke or Levi's, will it work for business marketers like Dow Chemical or Hewlett-
Packard? Explain.
ANS:
n/a
PTS: 1
Strategic & systems skills
2. To diagnose the sources of competitive advantage, domestic or international,

Michael Porter divides the chain of activities performed by a firm into distinct
groups. Describe Porter's value chain concept and explore its relevance to
international strategy.
ANS:
n/a
PTS: 1

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3. Joint ventures assume a very prominent role in the global strategy of many
business marketing firms like Dow Chemical and Xerox. While offering significant
benefits, joint ventures often fall short of expectations or dissolve. Why?
ANS:
n/a
PTS: 1
4. Rather than modifying the firm’s product and service offerings from country to
country, a global strategy requires a patient, long-term campaign to enter every
significant foreign market while maintaining and leveraging the company’s unique
strategic positioning. Agree or disagree? Support your position.
ANS:
n/a
PTS: 1
5. While the location of the corporate headquarters is less important and may reflect
historical factors, a firm must develop a clear home base for competing in each of
its strategically distinct businesses. What role does a home base assume in
forming a global strategy and what factors should be considered in choosing a
location? Under what conditions might a firm create a home base for a different
product line in another country?
ANS:
n/a

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PTS: 1
6. Rapidly developing economies (RDEs) are having a significant impact on the global
economy, both as attractive new markets but also as new competitors for firms in
highly developed economies. Explain the three forms of competitive advantage
that firms can achieve by moving operations to and marketing in RDEs. What
products or services make the most sense to relocate to RDEs?
ANS:
n/a
PTS: 1
7. Options for entry into foreign markets range from exporting to global strategies.
Explain how commitment, complexity, risk, and control changes as firms move
across the spectrum of involvement in international marketing. What factors
should firms consider when choosing entry modes?
ANS:
n/a
PTS: 1
Chapter 7—Managing Products for Business Markets
MULTIPLE CHOICE
1. Industrial product lines that are created to meet the needs of one or a small group
of customers are defined as:

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a. custom-built items.
b. catalog items.
c. proprietary items.
d. custom-designed items.
e. component items.
ANS: D PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Product | R&D Managing strategy
& innovation
2. Industrial product lines that are offered only in certain configurations and are
produced in anticipation of orders are called:
a. custom-designed items.
b. services.
c. catalog items.
d. custom-built items.
e. component items.
ANS: C PTS: 1
& innovation
3. When the buyer is purchasing a company's capability in a particular area, such as

maintenance or machine repair, the customer is buying:
a. a catalog item.
b. an industrial service.
c. a custom-designed item.
d. a generic product class.
e. a specialty item.
ANS: B PTS: 1
& innovation

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4. A lathe manufacturer that offers a line of products in different sizes, with a range
of options (such as different motor sizes) and accessories for different applications
is a producer of:
a. custom-designed items.
b. services.
c. catalog items.
d. custom-built items.
e. proprietary items.
ANS: D PTS: 1
& innovation
5. _____ represents the place that a product occupies in a particular market; it is

found by measuring organizational buyers' perceptions and preferences for a
product in relation to its competitors.
a. Product positioning
b. Product anchor
c. Product determinacy
d. Product segment
e. Product attribute
ANS: A PTS: 1
& innovation
6. Which of the following dimensions of a product market definition is(are) relevant?

a. the alternative technologies available to satisfy a particular need
(technology dimension)
b. the sequence of stages along which competitors serving the market can
operate (value-added system dimension)
c. the customer groups that have needs that must be served (customer
segment dimension)
d. all of the above
e. (a) and (c) only

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ANS: D PTS: 1
& innovation
7. All of the following are dimensions relevant to the definition of a product-market

except:
a. customer function.
b. technological.
c. customer segment.
d. physical distribution system.
e. value-added system.
ANS: D PTS: 1
& innovation
8. Because organizational buyers perceive products as bundles of attributes, the

product strategist should examine the attributes that assume a central role in
buying decisions. Attributes that are both important and differentiating are called:
a. primary attributes.
b. star attributes.
c. determinant attributes.
d. quality attributes.
e. dominant attributes.
ANS: C PTS: 1
& innovation

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9. St. Louis Capital Equipment Company found that organizational buyers view
reliability as being important in the purchase of a machine tool. In turn, research
indicates that a new model recently introduced by the firm is viewed by
organizational buyers as being superior to competing brands on the reliability
dimension. Thus, reliability would be classified as a _____ attribute.
a. primary
b. star
c. dominant
d. determinant
e. focal
ANS: D PTS: 1
& innovation
10. If organizational buyers view a particular attribute as being neither important nor
differentiating, an appropriate generic strategy for a product manager to follow
would be to:
a. increase the importance of the attribute to customers.
b. increase the difference between the competition and the firm's brand.
c. convert this determinant attribute into a non-determinant one.
d. all of the above
e. (a) and (b)
ANS: E PTS: 1
& innovation
11. Consider this dilemma: A product manager finds that organizational buyers view a
particular product attribute as being both important and differentiating;
unfortunately, the firm's brand is viewed as being inferior to competing brands on
this attribute. In this situation, an appropriate generic strategy for the product
manager to follow would be to:
a. increase the importance of the attribute to customers.

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b. increase the difference between the competition and the firm's brand.
c. convert this determinant attribute into a non-determinant one.
d. all of the above
e. (a) and (b)
ANS: C PTS: 1
& innovation
12. Some industrial products are created to meet the needs of one or a small group of
customers. Boeing, for example, serves a very defined group of customers with its
747 aircraft model. This is an example of:
a. a proprietary product.
b. a specialty product.
c. a custom-built product.
d. a custom-designed product.
e. a catalog product.
ANS: D PTS: 1
& innovation
13. NCR offers a set of basic equipment items to retailers that includes numerous
accessories and options. The retailer can begin with a simple cash register or
checkstand system and later add inventory control systems for the store and
ultimately a computer that ties multiple stores in a chain together. This provides
an example of:
a. proprietary products.
b. specialty products.
c. custom-built products.
d. custom-designed products.
e. catalog products.
ANS: C PTS: 1

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& innovation
14. Among technology adopters, these customers serve as a gatekeeper to the rest of
the technology life cycle and their endorsement is needed for an innovation to get
a fair hearing in the organization. However, they do not have access to the
resources needed to move an organization toward a large-scale commitment to
the new technology. This describes:
a. technology enthusiasts.
b. visionaries.
c. skeptics.
d. pragmatists.
e. product champions.
ANS: A PTS: 1
& innovation
15. Among technology adopters, these customers have access to organizational

resources and can assume an influential role in giving an innovation a boost during
the early stages of market development. However, these customers frequently
demand modifications to the product that are difficult for the innovator to
provide. This describes:
b. visionaries.
c. skeptics.
d. pragmatists.
ANS: B PTS: 1
& innovation

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16. Among technology adopters, these customers make the bulk of technology
purchases in organizations and seek products from a market leader with a proven
track record of providing useful productivity improvements. This describes:
b. visionaries.
c. skeptics.
d. pragmatists.
ANS: D PTS: 1
& innovation
17. The stage in the adoption life cycle where a product gains acceptance from
segments within the mainstream market but has yet to achieve widespread
adoption is referred to as:
a. the segmentation phase.
b. the early market phase.
c. the bowling alley phase.
d. the mainstreet phase.
e. the tornado phase.
ANS: C PTS: 1
& innovation
18. During the bowling alley phase of the adoption life cycle, the business marketing
strategist should:
a. focus on market segmentation.
b. extend distribution channels.
c. drive to the next lower price point.

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ANS: A PTS: 1
& innovation
19. During the tornado phase of the adoption life cycle, the business marketing
strategist should:
a. focus on market segmentation.
b. extend distribution channels.
c. drive to the next lower price point.
ANS: E PTS: 1
& innovation
20. The quality standards set out by the Geneva-based International Standards
Organization are referred to as:
a. ISO 9000
b. Six Sigma
c. the Big Q
d. none of the above.
ANS: A PTS: 1
& innovation
21. The standard of quality that means a product would have to have a defect level of
no more than 3.4 parts per million is called:
a. Six Sigma
b. ISO 9000
c. the Big Q

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ANS: A PTS: 1
& innovation
22. The first stage of the quality movement:

a. centers on conformance to standards or success in meeting
specifications.
b. emphasized that quality was more than a technical specialty.
c. examines a firm's quality performance relative to competitors.
d. focuses on market-perceived quality and value versus that of
competitors.
ANS: A PTS: 1
& innovation
23. In stage three of the quality movement attention shifts:

a. from zero defects in products to zero defections in customers.
b. to customer loyalty.
c. to the conformance to standards or success in meeting specifications.
ANS: D PTS: 1
& innovation
24. The percentage of organizational buyers who have a positive image of a company
minus the buyer with a negative opinion is called:
a. brand attitude.
b. brand equity.
c. a strong brand

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ANS: A PTS: 1
& innovation
25. Which of the following statements is false in regard to brand attitude for high-
technology firms?
a. The appointment of a well-recognized executive officer who introduced
a new strategy increases
b. Brand attitude is independent of competitive actions.
c. Changes in brand attitude have been shown to be associated with stock
market performance.
d. Investments in building brand attitude for high-technology firms
increases the firm's value.
ANS: B PTS: 1
& innovation
26. A ____ establishes the distinct arena in which the business marketer competes.
a. target market
b. product market
c. market segment
d. competitive analysis
ANS: B PTS: 1
& innovation
27. Among technology adopters, these customers are pessimistic about their ability to
derive any value from technology investments and are extremely price sensitive.
b. visionaries.
c. pragmatists.
d. conservatives.
e. skeptics.

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ANS: D PTS: 1
& innovation
28. Among technology adopters, these customers are ever-present critics of the hype
surrounding high-technology products.
b. visionaries.
c. pragmatists.
d. conservatives.
e. skeptics.
ANS: E PTS: 1
& innovation
29. _____ represents a business customer’s overall assessment of a relationship with

a supplier based on perceptions of benefits received and sacrifices made.
a. Market analysis
b. A value network
c. Customer value
d. Relationship management
e. Relationship quality
ANS: C PTS: 1
& innovation
30. Customer benefits from a relationship with a supplier include which of the
following?
a. Core benefits.
b. Add-on benefits.
c. Gross margin benefits.

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e. Only a and b.
ANS: E PTS: 1
& innovation
31. Benefits and sacrifices are both considered when assessing customer value.
Sacrifices include:
a. the purchase price.
b. acquisition costs.
c. operations costs.
e. Only a and b.
ANS: D PTS: 1
& innovation
32. Which dimension of the product market definition involves the benefits that are
provided to satisfy the needs of the organizational buyers?
a. Customer function.
b. Technological.
c. Customer segment.
d. Value-added system.
ANS: A PTS: 1
& innovation
33. Which dimension of the product market definition considers the distinct customer
needs that must be served?
a. Customer function.
b. Technological.

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c. Customer segment.
d. Value-added system.
ANS: C PTS: 1
& innovation
34. Which of the following is NOT a step in the product-positioning process?

a. Identify the relative set of competitive products.
b. Determine the product’s current position versus competing offerings.
c. Develop an evoked or consideration set of possible positions.
d. Examine the fit between preferences of segments and the current
product position.
ANS: C PTS: 1
& innovation
35. In the technology adoption life cycle, the gap between visionaries and pragmatists
where sales often drop significantly is called:
a. the bowling alley.
b. main street.
c. the chasm.
d. the end of life.
e. the early market.
ANS: C PTS: 1
& innovation
36. In the technology adoption life cycle, the stage that represents a period of
aftermarket development where supply exceeds demand is called:
a. the chasm.
b. the tornado.

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c. the bowling alley.

d. the main street.
e. the end of life.
ANS: D PTS: 1
& innovation
37. In the technology adoption life cycle, the main goal of the ____ stage is to develop
value-based strategies targeted to particular end user segments.
a. chasm
b. tornado
c. bowling alley
d. main street
e. end of life
ANS: D PTS: 1
& innovation
38. The basic premise of his CBBE model is that the power of a brand lies in
a. What consumers have learned, felt, seen, and heard about the brand over time
b. The market share it commands
c. How the decision maker perceives the ultimate value of the item
d. None of the above
e. All of the above
ANS: A PTS: 1
& innovation
39. The main factor stimulating the megatrend of sustainability is

a. Intensified global competition for natural resources
b. Escalating public concern

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c. Escalating government concern

d. Natural resource depletion
e. All of the above
ANS: E PTS: 1
& innovation
40. A brand mantra is

a. a very short summary of the essence of the brand
b. is used to communicate the core values of the brand
c. helps employees understand the key meaning of the company’s product
d. is crucial in the overall process of building a strong brand
ANS: E PTS: 1
& innovation
TRUE/FALSE
1. Proprietary items are industrial products that are offered only in certain
configurations and produced in anticipation of orders.
ANS: T PTS: 1
& innovation
2. Custom-built items are created to meet the needs of one or a small group of
customers.
ANS: F PTS: 1

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& innovation
3. Strong brands have a personality that defines how it might be described if it had
human qualities (for example, friendly, confident).
ANS: T PTS: 1
& innovation
4. Determinant attributes are both important and differentiating in the eyes of

business market customers.
ANS: T PTS: 1
& innovation
5. Visionaries make the bulk of technology purchases in organizations.
ANS: F PTS: 1
& innovation
6. A finely-tuned market segmentation strategy is critical to success during the

tornado phase of the adoption life cycle.
ANS: F PTS: 1
& innovation
7. A mass market strategy is the appropriate course to follow during the bowling
alley phase of the technology adoption life cycle process.
ANS: F PTS: 1
& innovation

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8. Brand attitude is defined as the percentage of organizational buyers who have a

negative image of a company minus the buyers with a positive one.
ANS: F PTS: 1
& innovation
9. The two forms of customer benefits are core and add-on.
ANS: T PTS: 1
& innovation
10. Recent research has demonstrated that add-on benefits more strongly influence
customer value than core benefits.
ANS: T PTS: 1
& innovation
11. Custom-designed products are creates to meet the needs of one or a small group
of customers.
ANS: T PTS: 1
& innovation
12. The four dimensions of a product market definition are customer function,
environmental, technological, and value-added system.
ANS: F PTS: 1
& innovation

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13. For high-technology firms, well-recognized executives and competitive actions can
both be drivers of brand attitude change.
ANS: T PTS: 1
& innovation
14. The central success factors for the tornado phase of the technology adoption life
cycle are remarkably similar to the bowling alley phase.
ANS: F PTS: 1
& innovation
COMPLETION
1. ____________________ is a set of brand assets and liabilities linked to a brand, its

name, and symbol that add to or subtract from the value provided by a product or
service and/or to that firm’s customers.
ANS: Brand equity
PTS: 1
& innovation
2. ____________________ brand equity is defined as the differential effect that

customers’ brand knowledge has on their response to marketing activities and
programs for that brand.
ANS: Customer-based
PTS: 1
& innovation

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3. Brand ____________________is described as the ways in which the brand

attempts to meet customers’ more abstract psychological or social needs.
ANS: Imagery
PTS: 1
& innovation
4. Brand ____________________refers to the customer’s ability to recall or

recognize a brand under different conditions.
ANS: awareness
PTS: 1
& innovation
5. Brand ____________________represents the strength of the psychological bond

that a customer has with a brand and the degree to which this connection
translates into loyalty, attachment, and active engagement with the brand.
ANS: resonance
PTS: 1
& innovation
6. New products or services that require the end-user and the marketplace to
dramatically change their past behavior, with the promise of gaining equally
dramatic new benefits are known as ____________________ innovations.
ANS: discontinuous

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PTS: 1
& innovation
ESSAY
1. Along with consumer-goods names like Nike or Coca Cola, the world’s most
valuable brands include high-tech representatives such as Intel, Hewlett-Packard,
IBM, and Microsoft. Describe the attributes of a strong high-tech brand. Do the
investments in building a high-tech brand pay off? Explain.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Product | R&D Strategic & systems
skills
2. Strategy experts suggest that a company’s product or service is competitively

superior if, at a price equal to the price of competing products, customers always
choose it. With this in mind, consider the spectacular growth of Dell Computer—a
firm that sells direct to organizations and individuals who can place orders by
phone or through the Internet. Using the value-in-use concept, describe the costs
and benefits a customer faces in buying a computer directly from Dell. On what
dimensions would local computer dealers and retailers enjoy an edge over Dell?
Overall, what are the critical factors that shape the product strategy followed by
Dell?
ANS:
n/a
PTS: 1
skills

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3. Selecting a hypothetical product and market setting, describe how a business

marketing manager might use product positioning analysis to examine the
competitive position of a product. Drawing on your illustration, suggest the
product strategy implications.
ANS:
n/a
PTS: 1
skills
4. The bowling alley represents a stage in the adoption life cycle where a product
gains acceptance from selected groups of customers within the mainstream
market but has yet to achieve widespread adoption. Describe the strategy that the
business marketing firm should follow at this stage in the technology adoption life
cycle. Next, explore the factors that trigger a tornado in high-tech markets and
discuss how the focus of strategy changes during this chaotic phase.
ANS:
n/a
PTS: 1
skills
5. Main Street represents a stage in the technology adoption life cycle where the
frantic waves of adoption have subsided and supply now exceeds demand. Using
any product and industry you choose, please describe the strategies that business
marketers should follow during this phase.
ANS:
n/a
PTS: 1

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skills
6. Customer value represents a business customer’s overall assessment of a supplier

based on perceptions of benefits received and sacrifices made. Discuss the
benefits and sacrifices typically considered by customers when assessing value.
What has recent research discovered matters most in customer value and how do
these findings impact business marketing strategies?
ANS:
n/a
PTS: 1
skills
Chapter 8 —Managing Innovation and New Industrial Product Development
MULTIPLE CHOICE
1. Concerning the management of product innovation, which of the following

statements is incorrect? The successful management of product innovation:
a. is vital to the long-term health of an industrial company.
b. requires the firm to take risks.
c. is properly characterized as a rational, deliberate, and analytical process.
d. should lead to a stream of attractive products.
e. None of the above statements is incorrect.
ANS: C PTS: 1
& innovation
2. With respect to induced strategic behavior, please identify the incorrect

statement. Induced strategic behavior:

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a. exhibits communication that is consistent with the organizational work

flow pattern.
b. is generally observed in conjunction with major types of innovations for
new markets.
c. typically involves formal organizational channels related to decision
making.
d. follows established administrative procedures.
e. is characterized by well-defined roles for the participants in the strategy
formulation process.
ANS: B PTS: 1
& innovation
3. Please identify the incorrect statement concerning autonomous strategic behavior.

Autonomous strategic behavior:
a. normally relies on the emergence of an informal network of participants.
b. exhibits communication flows that depart from the formal organizational
work flow pattern.
c. is analogous to entrepreneurial activity.
d. is generally activated by an individual manager defining a market need
that diverges from the organization's existing concept of strategy.
e. None of the above statements is incorrect.
ANS: E PTS: 1
& innovation
4. Within the context of autonomous strategic behavior, product championing refers

to the process of:
a. defining organizational goals more clearly.
b. actively promoting an existing product for an existing market.
c. creating or adapting an idea for an innovation and actively creating
momentum for the project.
d. specifying organizational roles to be assumed as strategic alternatives

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are mapped out.

e. attempting to maintain the status quo in the face of changing market
conditions.
ANS: C PTS: 1
& innovation
5. In contrasting induced strategic behavior with autonomous strategic behavior,

which of the following statements is incorrect?
a. Induced behavior corresponds to deliberate strategies while
autonomous behavior gives rise to emergent strategies.
b. Autonomous behavior stems from the organization's existing concept of
strategy while induced behavior will eventually be integrated into the
firm's concept of strategy.
c. The two types of behavior cannot be meaningfully separated and
discussed.
d. While autonomous behavior will initially rely on an informal network of
support, induced behavior will draw support from formal organizational
channels.
e. (a) and (b)
ANS: B PTS: 1
& innovation
6. Identify the correct statement(s) concerning differences between induced

strategic behavior and autonomous strategic behavior:
a. Induced behavior will rely on the firm's current concept of strategy for
its rationale while autonomous behavior necessitates active
championing.
b. Autonomous behavior will appear haphazard in nature, when compared
to induced behavior.
c. While induced behavior will normally exhibit a creeping commitment

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toward a particular strategy, autonomous behavior can often benefit

from existing administrative mechanisms and commitment.
d. All of the above are correct.
e. Both (a) and (b) are correct.
ANS: E PTS: 1
& innovation
7. The type of development project that centers on incremental product

enhancements (for example, new feature), incremental process improvements
(for example, a lower-cost manufacturing process), or incremental changes in both
dimensions is referred to as a:
a. platform project.
b. breakthrough project.
c. research and development project.
d. derivative project.
ANS: D PTS: 1
& innovation
8. A feature-enhanced or cost-reduced Canon fax machine provides an example of

which type of development project?
a. platform project
b. breakthrough project
c. research and development project
d. derivative project
ANS: D PTS: 1
& innovation

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9. Commercial development projects that create the design and components that
are shared by a set of products are referred to as:
a. platform projects.
b. breakthrough projects.
c. research and development projects.
d. derivative projects.
ANS: A PTS: 1
& innovation
10. A common motor in all Black & Decker hand tools provides an example of which
type of commercial development project?
a. platform project
b. breakthrough project
c. research and development project
d. derivative project
ANS: A PTS: 1
& innovation
11. Commercial development projects that establish new core products and new core
processes that differ from those of previous generations are referred to as:
a. platform projects.
b. breakthrough projects.
c. research and development projects.
d. derivative projects.
ANS: B PTS: 1

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& innovation
12. Computer disks and fiber-optics cable each created a new product category. The
type of commercial project that created these products would be classified as a:
a. platform project.
b. breakthrough project.
c. research and development project.
d. derivative project.
ANS: B PTS: 1
& innovation
13. _____ involve the creation of the know-how and know-why of new materials and
technologies that eventually translate into commercial development.
a. Platform projects
b. Breakthrough projects
c. Research and development projects
d. Derivative projects
ANS: C PTS: 1
& innovation
14. _____ involves activities in which the decision and execution of strategy actions
approach convergence with each other in time.
a. Time pacing
b. Patching
c. Routinization
d. Quality function deployment
e. Improvisation

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ANS: E PTS: 1
& innovation
15. _____ is a strategy for competing in fast-changing markets by creating new

products at predictable intervals.
a. Time pacing
b. Patching
c. Routinization
d. Quality function deployment
e. Improvisation
ANS: A PTS: 1
& innovation
16. Successful product innovators in the computer industry:

a. emphasize real-time communication within new product development
teams and across product teams.
b. do not invest in any version of the future but, instead, use a variety of
low-cost probes to create many options for the future.
c. carefully manage the transition between current and future projects.
d. all of the above
e. (a) and (c) only
ANS: D PTS: 1
& innovation
17. Products that share a common platform but have different specific features and
enhancements that are required for different sets of consumers constitute:
a. a product family.
b. a product market.
c. derivative products.
d. a product consideration set.

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e. heavyweight products.
ANS: A PTS: 1
& innovation
18. A benchmarking study sought to uncover the critical success factors that drive a
firm's new product performance. The results indicate that successful firms:
a. center development efforts on clearly-defined market and technology
domains.
b. seldom "kill" a project once the new product development process has
been initiated.
c. emphasize low-price strategies to penetrate a mass market.
ANS: A PTS: 1
& innovation
19. Successful companies employ a high quality new product development process.
Among high performing firms,
a. the new product process was flexible-certain stages could be skipped in
line with the nature and risk of a particular project.
b. tough project Go/Kill decision points are included in the process and the
Kill option is actually used.
c. market and technical assessments are conducted before projects move
into the development phase.
ANS: D PTS: 1

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& innovation
20. "Lead users" are characterized as important sources of new product ideas because
they:
a. have needs that will be general in the marketplace in the future.
b. represent influential buying organizations.
c. are consistent early adopters of new technologies.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
& innovation
21. Rapid product development offers a number of competitive advantages. Research

indicates that the _____ strategy increased the speed of product development for
products that had predictable designs and that were targeted for stable and
mature markets.
a. induced
b. experiential
c. autonomous
d. compressed
e. funnel
ANS: D PTS: 1
& innovation
22. Speed is becoming an important strategic weapon, particularly in high-technology

markets. Research indicates that the _____ strategy increased the speed of
product development for markets characterized by rapidly evolving technology
and unpredictable patterns of competition.
a. induced
b. experiential
c. autonomous

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d. compressed
e. funnel
ANS: B PTS: 1
& innovation
23. This strategy for the new product development process views product
development as a predictable series of steps and speed comes from carefully
planning these steps and shortening the time it takes to complete each step. This
describes the _____ strategy.
a. induced
b. experiential
c. autonomous
d. compressed
e. funnel
ANS: D PTS: 1
& innovation
24. This strategy for the new product development process views product
development as a highly uncertain path and speed comes from multiple design
iterations, extensive testing, and a powerful leader who can keep the product
teams focused. This describes the _____ strategy.
a. induced
b. experiential
c. autonomous
d. compressed
e. funnel
ANS: B PTS: 1
& innovation

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25. The move toward a product family perspective requires:

a. a long-term view of technology strategy.
b. an isolated R&D function that free to create.
c. a multiple-year commitment of resources.
ANS: E PTS: 1
& innovation
26. Competitors are strongly motivated to react to new product introductions in their
market when:
a. the market is experiencing a low rate of growth.
b. the new product represents a major threat to their market.
c. the new product targets a niche markets.
ANS: B PTS: 1
& innovation
27. New products ideas flow from:

a. top management who know the company's strengths and weaknesses.
b. salespersons who are close to customer needs.
c. channel members.
ANS: D PTS: 1
& innovation

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28. Which of the following characteristics is true of induced strategic behavior?

a. Communication is consistent with organizational flow.
b. An informal network assesses technical and market merit.
c. An individual manager defines a market need that diverges from the
organization’s concept of strategy.
e. Only a and b.
ANS: A PTS: 1
& innovation
29. Which of the following is NOT a type of development project?

a. Derivative.
b. Platform.
c. Breakthrough.
d. Research and development.
e. Market capital.
ANS: E PTS: 1
& innovation
30. The use of a product-family focus in planning should include which of the
following?
a. Close interfunctional working relationships.
b. A short-term view of technology strategy.
c. A year-by-year commitment of resources.
e. Only b and c.
ANS: A PTS: 1

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& innovation
31. Special insights into innovation management can come from examining the rate at
which products are improving and customers can use the improvements. These
insights are captured in:
a. the disruption innovation model.
b. the supply chain management model.
c. the derivative projects model.
d. the value network.
e. the technology life cycle adoption model.
ANS: A PTS: 1
& innovation
32. A _____ targets demanding, high-end customers with better performance than
what was previously available.
a. sustaining innovation
b. disruptive innovation
c. a new market innovation
d. None of the above.
ANS: A PTS: 1
& innovation
33. A _____ represents a product or service that is not as good as currently available
alternatives, but that is typically simpler and less expensive.
a. sustaining innovation
b. disruptive innovation
c. a breakthrough innovation
ANS: B PTS: 1

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& innovation
34. For a low-end disruptive innovation strategy to work, which of the following
requirements must be met?
a. There needs to be customers at the low end of the market who are
eager to purchase a “good enough” product for a lower price.
b. The company must be able to create a business model to make profits at
a discount price.
c. Both a and b.
d. Neither a or b.
ANS: C PTS: 1
& innovation
35. Examples of low-cost probes or experiments in product development include

which of the following?
a. Development of experimental products for new markets.
b. Conducting regular planning sessions on the future.
c. Increase understanding of future customer needs by entering into
strategic alliances with leading-edge customers.
e. Only a and b.
ANS: D PTS: 1
& innovation
36. According to research, major drivers of a firm’s new product performance include:
a. Resource commitment.
b. Profitability relative to competition.
c. Success rate of new products.
e. Only a and c.

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ANS: A PTS: 1
& innovation
37. Important dimensions of the new product development process include:

a. technical knowledge.
b. predevelopment proficiency.
c. market knowledge.
e. Only a and b.
ANS: D PTS: 1
& innovation
38. For a new-market strategy innovation strategy to work, which of the following
requirements need to be met?
a. The company must be able to create a business model to make profits at
a discount price.
b. Present customers need to go to an inconvenient location to use the
product or service.
c. Both a and b.
d. Neither a or b.
ANS: B PTS: 1
& innovation
39. A firm that lead customers where they want to go before the customers actually
know it themselves is employing:
a. the lead user method.
b. the new product development process.

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c. time pacing.
d. a discontinuous innovation.
ANS: A PTS: 1
& innovation
TRUE/FALSE
1. Induced strategic behavior relates primarily to major types of innovations.
ANS: F PTS: 1
& innovation
2. Product championing refers to the process of creating or adopting an idea for an

innovation and actively creating momentum for the project.
ANS: T PTS: 1
& innovation
3. Induced strategic behavior corresponds to deliberate strategies while autonomous

strategic behavior gives rise to emergent strategies.
ANS: T PTS: 1
& innovation
4. Creators of successful product portfolios emphasize planning rather than

experimentation or improvisation.
ANS: F PTS: 1

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& innovation
5. Derivative projects establish new core products and new core processes that differ
fundamentally from previous generations.
ANS: F PTS: 1
& innovation
6. Platform projects create the design and components that are shared by a set of
products.
ANS: T PTS: 1
& innovation
7. Breakthrough projects center on incremental product enhancements, incremental

process improvements, or incremental changes on both dimensions.
ANS: F PTS: 1
& innovation
8. "Lead users" are consistent early adopters of new technologies.
ANS: T PTS: 1
& innovation
9. Research and development is the creation of the know-how and the know-why of
new materials and technologies that eventually translate into commercial
development.
ANS: T PTS: 1

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& innovation
10. Cross-functional teams appear to work best when the products are familiar, such
as product modifications.
ANS: F PTS: 1
& innovation
11. For well-known markets and technologies, a compression strategy speeds

development.
ANS: T PTS: 1
& innovation
12. Improvisation involves activities in which the design and execution of actions
approach convergence with each other in time.
ANS: T PTS: 1
& innovation
13. New product ventures require systematic thought.
ANS: T PTS: 1
& innovation
14. Competitors are less motivated to react to a new production introduction when
the market is experiencing a high rate of growth.
ANS: F PTS: 1
& innovation

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15. A detailed market research study and a preliminary business/financial analysis is

an example of predevelopment proficiency.
ANS: T PTS: 1
& innovation
16. All development projects center on either improving the manufacturing process or
improving product, but not both.
ANS: F PTS: 1
& innovation
17. Many business marketing strategists believe that firms should focus on product
families instead of single products to improve planning.
ANS: T PTS: 1
& innovation
18. A disruptive innovation targets demanding, high-end customers with better

performance than was previously available.
ANS: F PTS: 1
& innovation
19. Research has shown that creators of successful product portfolios do not invest in
one version of the future but use several low-cost probes to create options.
ANS: T PTS: 1
& innovation

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20. Research has shown that the three factors that drive a firm’s new product
performance are the quality of the firm’s new-product-development process, the
resource commitments made to new product development, and the new product
strategy.
ANS: T PTS: 1
& innovation
21. Lead user projects are conducted by cross-functional teams that include four to six
managers from marketing and technical departments.
ANS: T PTS: 1
& innovation
COMPLETION
1. An organization member who creates, defines, or adopts an idea for an innovation

and is willing to assume significant risk to successfully implement the innovation is
known as a____________________.
ANS: Product champion
PTS: 1
& innovation
2. Compared with induced strategic behavior, autonomous

or____________________initiatives are more likely to involve a communication
process that departs from the regular work flow and the hierarchical decision-
making channels.
ANS: Entrepreneurial

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PTS: 1
& innovation
3. Disruptive strategies can take two forms: ____________________ disruptions and

____________________.
ANS: low-end; new-market
PTS: 1
& innovation
4. A small number of highly influential and high-volume buying organizations that are
consistent early adopters of new technologies that deserve special attention are
known as ____________________.
ANS: Lead users
PTS: 1
& innovation
5. Marketing____________________ is the fit between the needs of the project and

the firm’s resources and skills in marketing.
ANS: synergy
PTS: 1
& innovation

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6. New products developed and designed to meet foreign requirements and targeted
at world or nearest-neighbor export markets is enhanced by firms holding
an____________________orientation.
ANS: international
PTS: 1
& innovation
7. New-product-development efforts for existing businesses or market-development

projects for the firm’s present products are the outgrowth
of____________________strategic initiatives.
ANS: induced
PTS: 1
& innovation
ESSAY
1. Kathleen Eisenhardt argues that in fast-paced high-technology markets, "strategy

is a video game." Strategic decision making is often described as a rational and
deliberate process but, in turbulent markets, new technology and rapidly-changing
customer expectations can upset the established order. Given the unstable state,
describe the characteristics that separate winners and losers in high-tech markets.
ANS:
n/a
PTS: 1
skills

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2. Research indicates that the most significant and profitable innovations that many
leading-edge firms have introduced in the past decade emerged from an informal
championing effort rather than from a highly-structured planning system. What
implications does this raise for structuring the new product development process,
for motivating and rewarding employees, and for nurturing creativity and risk-
taking?
ANS:
n/a
PTS: 1
skills
3. Consider this position taken by Tom Peters in Thriving on Chaos: "You must
become what I call an executive champion-a nurturer, protector, facilitator, and
interference runner for as many energetic champions as you can induce to sally
forth." Compare and contrast induced versus autonomous strategic behavior and
describe the role that the product champion assumes in new product
development.
ANS:
n/a
PTS: 1
skills
4. Successful new product creation is a collective achievement that requires the

energy and commitment of multiple functions in the organization. Often, however,
managers who represent different functional areas hold sharply different views
concerning the course that product development should take. Discuss the source
of this conflict.
ANS:

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n/a
PTS: 1
skills
5. Research has isolated certain determinants of new product success in the business
market. What factors are most important in determining the success of a new
industrial product?
ANS:
n/a
PTS: 1
skills
6. What are the characteristics of lead user firms? What are the characteristics of
lead user projects and how can the lead user method be used to develop new
products?
ANS:
n/a
PTS: 1
skills
7. What are the differences between a sustaining and disruptive innovation? Explain
the differences in creating new-growth businesses represented by sustaining
innovations, low-end disruptions, and new market disruptions.
ANS:
n/a

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PTS: 1
skills
Chapter 9—Managing Services for Business Markets
MULTIPLE CHOICE
1. From the following list, identify the item that is least likely to be considered a pure
service.
a. market research
b. security and protection services
c. after-sales equipment repair and maintenance
d. insurance
e. consulting
ANS: C PTS: 1
& innovation
2. Many business offerings are composed of a combination of product and service

elements. From the following, choose the correct ordering, from tangible
dominant to intangible dominant, of the items listed.
a. industrial grease, executive management seminars, convention hotel
b. executive management seminars, industrial grease, convention hotel
c. convention hotel, industrial grease, executive management seminars
d. convention hotel, executive management seminars, industrial grease
e. industrial grease, convention hotel, executive management seminars
ANS: E PTS: 1
& innovation

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3. Simultaneous production and consumption is a unique service characteristic. From

the following list, choose the marketing implication most closely related to this
characteristic.
a. planning capacity on the basis of peak demand
b. buyer-seller interaction requires that the service be done "right"
c. focusing promotion on the advantages of non-ownership
d. using pricing and promotion to even out demand peaks and valleys
e. developing systems that minimize deviations and human error
ANS: B PTS: 1
& innovation
4. The degree of tangible-intangible dominance of an industrial offering refers to the:

a. simultaneous production and consumption of the service.
b. variability in the quality of the service.
c. perishability of the offering.
d. non-ownership of the service purchased.
e. relative importance accorded, by the buyer, to tangible versus intangible
elements.
ANS: E PTS: 1
& innovation
5. Service variability is a unique service characteristic. From the following list, choose
the marketing implication most closely related to this characteristic.
a. buyer-seller interaction requiring that the service be done "right"
b. planning capacity on the basis of peak demand
c. emphasizing strict quality control standards
d. using pricing and promotion to even out demand peaks and valleys
e. None of the above applies specifically to service variability.
ANS: C PTS: 1

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& innovation
6. When the marketer emphasizes reductions in staff, overhead, and capital as

potential benefits to the purchaser, this relates to the service characteristic of:
a. variability.
b. perishability.
c. simultaneous production and consumption.
d. intangibility.
e. lack of ownership.
ANS: E PTS: 1
& innovation
7. In the production and sale of industrial services, productive capacity is often a

substitute for inventory. In other words, capacity will reflect the level of demand
which the service provider can meet. This is primarily in response to which service
characteristic?
a. perishability
b. lack of ownership
c. nonstandardized output
d. simultaneous production and consumption
e. the extent to which tangible elements dominate intangible elements
ANS: A PTS: 1
& innovation
8. Concerning the nonstandardized nature of most industrial services, which of the

following statements is incorrect?
a. The more labor-intensive the service, the less uniform will be the output.
b. As the extent to which equipment is utilized to produce the service
increases, variability will increase.
c. As automation of the service decreases, uniformity of the output will

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also decrease.
d. It is important to develop systems to minimize human error.
e. It is often difficult for the user to judge service quality before the service
is provided.
ANS: B PTS: 1
& innovation
9. The interaction of the individual service provider with the customer may be the
key element in the firm's entire marketing strategy. This is an explicit recognition
of which characteristic unique to business services?
a. simultaneous production and consumption
b. lack of ownership
c. nonstandardized output
d. inability to stockpile
e. the dominance of intangible elements
ANS: A PTS: 1
& innovation
10. Buyers of business services often experience difficulty in evaluating service quality.
Since it is difficult to evaluate quality,
a. buyers tend to experience more perceived risk.
b. buyers rely on different prepurchase information sources to reduce risk.
c. symbology plays a more important role in the evaluation process.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
& innovation

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11. When the business service marketer attempts to facilitate the customer's
evaluation process, this is in response to:
a. the nonstandardized nature of services.
b. the simultaneous consumption and production of services.
c. perceived determinant attributes.
d. the difficulty in evaluating service quality.
e. an emphasis on equipment/facilities service attributes.
ANS: D PTS: 1
& innovation
12. In evaluating service quality, customers focus on:

a. empathy.
b. responsiveness.
c. assurance.
d. reliability.
e. all of the above
ANS: E PTS: 1
& innovation
13. In evaluating the quality of a service, which of the following dimensions is most
important to customers?
a. empathy
b. responsiveness
c. assurance
d. reliability
e. all of the above
ANS: D PTS: 1
& innovation

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14. "Delivering on promises" relates to which of the following dimensions of service

quality?
a. empathy
b. responsiveness
c. assurance
d. reliability
e. all of the above
ANS: D PTS: 1
& innovation
15. Development of the marketing mix is contingent upon the customer segment to
be served. How do customer service segments differ from product market
segments?
a. Service segments are often narrower than product segments.
b. Service segmentation focuses on what business buyers need versus on
what they expect.
c. Service segments are often wider than product segments.
d. The demand patterns of each service segment are very similar.
ANS: A PTS: 1
& innovation
16. The customer benefit concept refers to:

a. a detailed listing of which services will be provided.
b. guidelines for the delivery of the service product.
c. the core benefit that the customer will derive from the service.
d. the general benefits the service company will provide to the customer.

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ANS: C PTS: 1
& innovation
17. In conceptualizing the service product, the service offer refers specifically to the:
a. actual creation and delivery of the service product.
b. detailed service elements that will make up the total services package.
c. general benefits the service company will provide to the customer.
d. benefits sought by customers.
e. overall process of assessing and responding to customer needs.
ANS: B PTS: 1
& innovation
18. The ____ defines the general benefits the service company will provide in terms of
the bundle of goods and services sold to the customer.
a. customer-benefit concept
b. service offer
c. cross-selling concept
d. mixed bundling concept
e. service concept
ANS: E PTS: 1
& innovation
19. In the marketing of business services, items such as uniforms, logos, guarantees,
written contracts, and color schemes are examples of:
a. determinant attributes.
b. the service concept.
c. the actual service offer.
d. physical evidence of the actual service.
e. the system used to create and deliver the service.

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ANS: D PTS: 1
& innovation
20. Which of the following capabilities are particularly critical to the successful launch
of hybrid service offerings:
a. Design-to-service capability.
b. an assessment of the impact of demand elasticity on price changes.
c. Production capacity evaluation.
d. Customer engagement in the design process.
e. the marketing of two or more services in a "package" for a special price.
ANS: A PTS: 1
& innovation
21. Research on new service success suggests that:

a. the determinants of success for new services closely resemble those
found for successful new products.
b. a well managed service development process is crucial.
c. successful projects provide clear customer benefits.
ANS: D PTS: 1
& innovation
22. Services are:

a. deeds.
b. processes.
c. performances.

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ANS: D PTS: 1
& innovation
23. The concept of tangibility helps the manager to:

a. focus clearly on the firm's total market offering.
b. recognize that a change in one of the elements of the marketing offering
may completely change the offering in the view of the customer.
c. determine how a service will marketed.
ANS: D PTS: 1
& innovation
24. Which of the following statements regarding the perishability of services is

incorrect?
a. Capacity is a substitute for inventory.
b. The demand for services is often predictable and consistent.
c. If capacity is set for peak demand, a service inventory must exist to
supply the highest level of demand.
ANS: E PTS: 1
& innovation
25. When a manager is in charge of intangible and heterogeneous services, he/she

should develop marketing strategies that:
a. emphasize word-of-mouth communication.
b. provide tangible evidence.

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c. employ value pricing.

ANS: D PTS: 1
& innovation
26. Recent research shows that business-to-business service firms are more likely to
emphasize:
a. relationship strategies as opposed to transactional strategies.
b. arms-length strategies.
c. the total buyer-seller process
ANS: E PTS: 1
& innovation
27. Service quality benefits should be linked to::

a. customer satisfaction.
b. customer retention.
c. profitability.
d. market share.
ANS: E PTS: 1
& innovation
28. If a firm provides maintenance and repair services to its installed base of products
at a customer location, then:
a. the service attributes can be evaluated before purchase.

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b. the core service demand is inelastic.

c. product usage data can be systematically gathered and used to tailor
service offerings that advance customers’ goals.
ANS: C PTS: 1
& innovation
29. When Xerox offers a Total Satisfaction Guarantee that allows customers to return
copiers for any reason, this is an example of:
a. word of mouth.
b. developing tangible clues.
c. service bundling.
ANS: B PTS: 1
& innovation
30. Which of the following is NOT true of the solutions-centered approach instead of a
product-centered approach?
a. Win by creating and delivering superior customer solutions.
b. Value is created by the firm.
c. Relationship with customer is interaction-based.
d. Quality focus on customer-firm interactions.
e. All of the above are true.
ANS: B PTS: 1
& innovation
31. Benefits of solution-centered marketing strategy include:

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a. new avenues for growth.

b. sustained differentiation and customer loyalty.
c. Both a and b.
d. Neither a or b.
ANS: C PTS: 1
& innovation
32. Differences between goods and services include:

a. intangibility.
b. variability.
c. profitability.
e. Only a and b.
ANS: E PTS: 1
& innovation
33. Perishability is a unique service characteristic. From the following list, choose the
marketing implication most closely related to this characteristic.
a. Need to use promotion and pricing to even out demand patterns.
b. Use physical cues in promotions to help customers evaluate service
quality.
c. Emphasize strict quality control standards.
d. High-level training for service personnel.
ANS: A PTS: 1
& innovation
34. Non-ownership is a unique service characteristic. From the following list, choose
the marketing implication most closely related to this characteristic.

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a. Need to use promotion and pricing to even out demand patterns.

b. Need to emphasize the benefits of reduced labor and overhead.
c. Use strict quality control standards.
d. High-level training for service personnel.
ANS: B PTS: 1
& innovation
35. Which of the following are components of a firm’s service offering and customer-
linking processes that affect customer satisfaction?
a. Technical assistance and training.
b. Recovery process for fixing service problems.
c. Basic elements of the service offering expected by customers.
e. Only a and b.
ANS: D PTS: 1
& innovation
36. _____ encompasses the procedures, policies, and processes a firm uses to resolve
customer service problems promptly and efficiently.
a. A value network
b. Service recovery
c. Service quality
d. Service loyalty
e. Service offering
ANS: B PTS: 1
& innovation

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37. The _____ is the product dimension of service, including decisions about the
essential concept of the service, the range of services provided, and the quality
and level of the service.
a. service strategy
b. service package
c. service recovery
d. service bundling
e. service loyalty
ANS: B PTS: 1
& innovation
38. The service offer is linked with the service concept and also:
a. spells out in more detail the service offering.
b. when and to whom they will be provided.
c. how they will be presented.
ANS: D PTS: 1
& innovation
39. Hybrid service offerings

a. May be a combination of services and products.
b. Have inelastic demand.
c. come from a well-managed new-service-development process.
e. Only a and c.
ANS: A PTS: 1
& innovation

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40. In following a “solutions” strategy” for B2B services, solution effectiveness can be
enhanced by the supplier by
a. Laying out a blueprint to guide employees on creating a solution
b. Documenting the history of prior customer solution engagements
c. Developing complimentary incentives for all of the staff that may be involved
d. Only a and c
e. All of the above
ANS: E PTS: 1
& innovation
TRUE/FALSE
1. A pure service, by definition, accompanies the sale of a physical product.
ANS: F PTS: 1
& innovation
2. Simultaneous production and consumption requires that the service be done

"right."
ANS: T PTS: 1
& innovation
3. An emphasis on strict quality control standards is necessitated by service

variability.
ANS: T PTS: 1
& innovation

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4. Planning capacity on the basis of peak demand is necessitated by service

variability.
ANS: F PTS: 1
& innovation
5. The more labor-intensive the service, the less uniform will be the output.
ANS: T PTS: 1
& innovation
6. Perishability of services may necessitate equating capacity with peak demand.
ANS: T PTS: 1
& innovation
7. Research suggests that among the service quality dimensions, responsiveness is

most important to customers.
ANS: F PTS: 1
& innovation
8. Hybrid service offerings can be classified on the basis of whether the provider
promises to perform a deed or to achieve a certain performance outcome.
ANS: T PTS: 1
& innovation

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9. The service offer refers to the detailed service elements that will make up the total
services package.
ANS: T PTS: 1
& innovation
10. In the marketing of business services, items such as logos, uniforms, guarantees,
and color schemes are examples of physical evidence of the actual service.
ANS: T PTS: 1
& innovation
11. Product lifestyle services refer to services that facilitate the customer’s access to a
manufacturers product and ensure is functioning throughout the product’s useful
life..
ANS: T PTS: 1
& innovation
12. The concept of tangibility helps the manager to focus clearly on the firm's total
market offering.
ANS: T PTS: 1
& innovation
13. For services, capacity is a substitute for inventory.
ANS: T PTS: 1
& innovation

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14. The actual performance by the service provider is of little relevance compared to
the customer's perception of the service.
ANS: T PTS: 1
& innovation
15. Business-to-business service firms are more likely to emphasize transactional

strategies as opposed to relationship strategies.
ANS: F PTS: 1
& innovation
16. A solution-centered approach starts with the product and leads to a solution that
satisfies customers.
ANS: F PTS: 1
& innovation
17. In order to effectively use a solutions perspective, business marketers need to

define their unique capabilities and determine how to use them to help customers
reduce costs, increase responsiveness, or improve quality.
ANS: T PTS: 1
& innovation
18. Reliability, responsiveness, and empathy are all dimensions of service quality.
ANS: T PTS: 1
& innovation

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19. Service quality encompasses the procedures, policies, and processes a firm uses to
resolve customer service problems promptly and effectively.
ANS: F PTS: 1
& innovation
20. Process delegation services (PDS) represent those services where a manufacturer
performs specific processes on behalf of the customer.
ANS: T PTS: 1
& innovation
21. Demand for services is rarely steady or predictable enough to avoid service
perishability.
ANS: T PTS: 1
& innovation
22. Research indicates that manufacturers typically earn a very high percentage of
gross profits from the aftermarket, though it accounts for a very much smaller
percent of revenue
ANS: T PTS: 1
& innovation
COMPLETION
1. Customer____________________represents teh internal and subjective response

a business customer has to any direct or indirect contact with a company.
ANS: experience

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PTS: 1
& innovation
2. Instances where the customer has direct contact with either the product or service
itself or with representatives of it by a third party, such as a channel partner are
known as____________________.
ANS: touchpoints
PTS: 1
& innovation
3. The first step in understanding a customer’s experience is to develop a

____________________map.
ANS: life cycle
PTS: 1
& innovation
4. Service____________________means that services cannot be stored or

stockpiled; if they are not provided at the time they are available, the lost revenue
cannot be recaptured.
ANS: perishability
PTS: 1
& innovation

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5. Treating customers as individuals exemplifies

the____________________dimension of service quality.
ANS: empathy
PTS: 1
& innovation
6. ____________________combine products and services into innovative value

propositions for customers .
ANS: Hybrid offerings
PTS: 1
& innovation
7. __________________________ is the manufacturer’s capacity to integrate the

product and service elements of the offering early in the development process to
tap the full potential for revenue generation and/or cost reduction.
ANS: Design-to-service capability
PTS: 1
& innovation
ESSAY

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1. A large hospital in Chicago recently purchased four top-of-the-line, high-speed

copiers from Xerox. The purchasing department carefully scrutinized the quality,
price, warranties, and service features of several vendors before choosing Xerox.
In the words of Jim Parker, the director of purchasing at the hospital, "it was the
quality that gave Xerox the edge." Describe the role of service quality in this
buyer-seller relationship. What factors may have been involved in shaping Jim
Parker's perception of service quality?
ANS:
n/a
PTS: 1
skills
2. Automatic Data Processing (ADP) was born through an innovation that created a
new business niche-a foolproof outside service to help small businesses meet their
weekly payrolls. First, position this service on a product-service continuum for
which the basic underlying variable is tangibility. Second, describe how ADP's
marketing strategy would be different from an office equipment manufacturer
that called on the same small businesses.
ANS:
n/a
PTS: 1
skills
3. The development of marketing programs for both products and services can be
approached from a common perspective, yet the relative importance of various
strategic elements and the form of these strategic elements will differ between
products and services. Explain.
ANS:

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n/a
PTS: 1
skills
4. New product development is inherently more difficult, messier, and less successful
in the service sector. What steps can be taken to enhance the effectiveness of the
new service development process? What are the common features that successful
new service projects seem to share?
ANS:
n/a
PTS: 1
skills
5. Many business marketers are turning from a product to a solutions perspective.

How is the solutions perspective different from a product-centered perspective?
What are the benefits of solution marketing? Illustrate the differences and
benefits of solution marketing with an example using a business services marketer.
ANS:
n/a
PTS: 1
skills
6. Because business marketers cannot always provide flawless service, the response
to service problems is critical to future success. Explain how an excellent service
recovery process can lead to a differential advantage for firms. How does a
business marketer figure out how much to spend on service recovery and service
quality?

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ANS:
n/a
PTS: 1
skills
Chapter 10—Managing Business Marketing Channels
MULTIPLE CHOICE
1. The channel strategy that does not utilize any manufacturers' representatives,
industrial distributors, or other kinds of middlemen is referred to as:
a. indirect distribution.
b. selective distribution.
c. direct distribution.
d. exclusive distribution.
e. restrictive distribution.
ANS: C PTS: 1
2. The channel strategy that involves the utilization of one or more middlemen is
referred to as:
a. indirect distribution.
b. direct distribution.
c. selective distribution.
d. exclusive distribution.
e. restrictive distribution.
ANS: A PTS: 1

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3. The most appropriate channel of distribution for an industrial product is:

a. direct.
b. indirect.
c. one that relies on the firm's sales force.
d. a combination of direct and indirect.
e. dependent upon a host of product, company, market, and competitive
conditions.
ANS: E PTS: 1
4. The need to employ more than one type of industrial channel of distribution arises
as a result of:
a. different target markets sought by the firm.
b. a geographically concentrated market.
c. different marketing tasks associated with different products produced by
the firm.
d. both (a) and (c)
e. all of the above
ANS: D PTS: 1
5. The largest proportion of sales handled by industrial channel members is

accounted for by:
a. brokers and jobbers.
b. brokers and commission merchants.
c. manufacturers' representatives and industrial distributors.
d. jobbers and industrial distributors.
e. brokers and distributors.

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ANS: C PTS: 1
6. Service provided by industrial distributors includes:

a. repair.
b. credit.
c. maintenance.
d. all of the above
e. (b) and (c) only
ANS: D PTS: 1
7. The industrial distributor:

a. takes title to the product sold.
b. occasionally does some assembly and manufacturing work.
c. provides delivery.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
8. A distributor classification, the combination house:

a. operates in two sectors of the industrial market.
b. operates a chain of distributorships.
c. operates in both the industrial and consumer markets.
d. does not take title to the goods handled.
e. is paid on a commission basis.

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ANS: C PTS: 1
9. Generally, manufacturers' reps:

a. take title to the products handled.
b. are restricted to a limited geographical area.
c. hold inventory.
d. provide customers with prompt delivery.
e. all of the above
ANS: B PTS: 1
10. Manufacturers' reps:

a. possess expert product knowledge.
b. sell non-competing but complementary products.
c. take title to the goods handled.
d. all of the above
e. (a) and (b) only
ANS: E PTS: 1
11. Concerning the compensation of manufacturers' representatives, the business

marketer compensates them on the following basis:
a. percentage commission.
b. a salary.
c. salary plus commission.
d. varies by product category.
e. varies by SIC industry.

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ANS: A PTS: 1
12. A business marketer who places the highest priority on achieving control in the
channel of distribution should use:
a. a direct channel.
b. a channel which includes numerous industrial distributors.
c. a channel which includes numerous manufacturers' representatives.
d. a channel which includes numerous commission merchants.
e. an indirect channel.
ANS: A PTS: 1
13. The first step in the channel design process is to:

a. determine channel design constraints.
b. consider the availability of good intermediaries.
c. outline key channel alternatives.
d. determine the tasks to be performed by the channel.
e. define customer segments
ANS: E PTS: 1
14. Which of the following statements concerning the selection of industrial channel
structures is(are) true?
a. Frequently, the manager has little flexibility in the selection because of
trade, competitive, company, and environmental factors.
b. The channel should be viewed as a set of channel institutions rather than
as a sequence of activities to be performed.
c. Competitors often have the better intermediaries "locked up."
d. all of the above

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e. (a) and (c) only
ANS: E PTS: 1
15. In specifying channel alternatives, which of the following issues is(are) involved?
a. determining the levels to be included in the channel
b. determining the number of channel intermediaries at each level of the
channel
c. determining the types of intermediaries to employ
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
16. Industrial products that are complex, unique and made to order are more
frequently sold through:
a. direct channels.
b. indirect channels.
c. manufacturers' representatives.
d. industrial distributors.
e. merchant wholesalers.
ANS: A PTS: 1
17. Factors that contribute to the use of more than one distribution channel for the
same product include:
a. various market segments are served.
b. the needs and buying processes employed by prospective customers

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varies.
c. conflict between competing channels is relatively rare.
d. all of the above
e. both (a) and (b)
ANS: E PTS: 1
18. Which of the following channels would give the business marketer the greatest
amount of channel control?
a. a channel consisting of merchant wholesalers
b. a channel composed of industrial distributors
c. a channel consisting of both manufacturers' reps and distributors
d. a channel composed of jobbers
e. a channel consisting of manufacturers' reps
ANS: E PTS: 1
19. The compensation provided to industrial channel members should reflect:

a. the length of service of the channel member.
b. the nature of the marketing tasks performed by the channel member.
c. the loyalty of the channel member.
d. the amount of market potential available in the territory.
e. all of the above
ANS: B PTS: 1
20. Manufacturers who wish to strengthen the dependence that channel members
have on them could:

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a. increase commissions.
b. encourage channel members to carry the firm's full product line.
c. increase promotion to enhance the profitability of channel members.
d. all of the above
e. (b) and (c) only
ANS: D PTS: 1
21. Robert Morgan and Shelby Hunt suggest that relationship commitment and trust
develop when:
a. firms align themselves with partners that have distinctly different
corporate values.
b. firms share valuable information on expectations, markets, and
performance.
c. firms offer benefits and resources that are superior to what other
partners could offer.
ANS: E PTS: 1
22. A direct sales force is best used for:

a. highly standardized solutions.
b. small customers.
c. simple transactions.
d. complex products.
ANS: D PTS: 1

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23. The industrial distributor's primary responsibilities include:

a. contact.
b. repair.
c. product availability.
ANS: D PTS: 1
24. _____ cater to a broad array of industrial goods.

a. Specialists
b. General-line distributors
c. A combination house.
ANS: B PTS: 1
25. There is a trend toward _____ as a result of increasing technical complexity of

products.
a. general-line distributors
b. specialists
c. combination houses
ANS: B PTS: 1

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26. A recent poll asked distributors which business strategies would have the largest
impact on them in the future. The top two factors were:
a. collaboration with supply chain partners.
b. new information technologies.
c. the increase in general-line distributors
ANS: D PTS: 1
27. Manufacturer reps are most likely used:

a. by large firms.
b. when there is unlimited market potential.
c. to eliminate significant overhead costs.
ANS: C PTS: 1
28. The manufacturer-rep channel is generally used when the:

a. gross margin is large.
b. product is not technically complex.
c. product is not standard, but is closer to made-to-order.
ANS: C PTS: 1

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29. The primary reason for using more than one type of intermediary for the same
product is:
a. the gross margin is not large.
b. the product tends toward technical complexity.
c. different market segments require different channel structures.
d. the product is not standard, but is closer to made-to-order.
ANS: C PTS: 1
30. When evaluating alternative channels, the critical element is to compare both
systems on the basis of:
a. customer service.
b. performance.
c. structure.
d. costs.
ANS: E PTS: 1
31. When evaluating channel alternatives, if the existing channel is about as good as it
can be and if customer satisfaction is low,:
a. an alternative channel should be utilized.
b. the fault is not with the channel design, it is with poor management.
c. the existing system can be changed without sacrificing management
goals.
ANS: B PTS: 1

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32. When evaluating channel alternatives, if the feasible system lies between the ideal
and existing system,
a. the existing system can be changed without sacrificing management
goals.
b. relaxing management constraints might produce even greater benefits.
c. the fault is not with the channel design, it is with poor management.
ANS: D PTS: 1
33. Techniques for motivating individual channel members include all of the following
except:
a. dealer advisory councils.
b. competitive compensation.
c. building trust.
d. better planning by the business marketer.
e. product training for channel members.
ANS: D PTS: 1
34. Which of the following are tasks that are performed by channels of distribution?
a. Arranging financing.
b. Storage.
c. Transportation.
e. Only b and c.
ANS: D PTS: 1

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35. Use of a direct sales force is best for:

a. highly customized solutions.
b. smaller customers.
c. complex products.
e. Only a and c.
ANS: E PTS: 1
36. E-channels can be used by business marketing firms for:

a. information platforms.
b. transaction platforms.
c. customer relationship management platforms.
e. Only b and c.
ANS: D PTS: 1
37. What percentage of U.S. Gross Domestic Product is sold through indirect
distribution channels?
a. 10%
b. 25%
c. 40%
d. 60%
e. 80%
ANS: D PTS: 1

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38. _____ are generally small, independent businesses serving narrow geographic
markets.
a. Distributors
b. Channel partners
c. Manufacturers’ representatives
d. Broker houses
e. Field offices
ANS: A PTS: 1
39. Responsibilities for distributors include:

a. making products available.
b. repair.
c. providing service and technical advice.
e. Only a and b.
ANS: D PTS: 1
40. In the classification of distributors, _____ focus on one line or on a few related
lines.
a. general-line distributors
b. specialists
c. combination houses
d. brokers
ANS: B PTS: 1

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41. Manufacturers’ representatives are used:

a. by smaller firms that cannot afford their own sales force.
b. when a manufacturer’s market potential is limited.
c. to help reduce overhead costs.
e. Only a and c.
ANS: D PTS: 1
42. _____ is the dynamic process of developing new channels where none existed and
modifying existing channels.
a. Channel structure
b. Channel design
c. Channel choice
d. Channel partnering
e. Supply chain management
ANS: B PTS: 1
43. Channel length decreases:

a. when the purchase becomes more significant.
b. when market or industry concentration increases.
c. when customer potential increases.
e. Only a and b.
ANS: D PTS: 1

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44. When motivating channel members, the primary motivating device tends to be:
a. dealer advisory councils.
b. trust.
c. compensation.
d. strong relationships.
e. training.
ANS: C PTS: 1
45. Selecting the best channel of distribution to accomplish objectives can be difficult
because:
a. the alternatives are so numerous.
b. marketing goals differ.
c. separate channels must often be used concurrently.
e. Only a and b.
ANS: D PTS: 1
TRUE/FALSE
1. Industrial distributors are generally large business firms that cover broad
geographical markets.
ANS: F PTS: 1

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2. The industrial distributor takes title to the products sold but rarely maintains an
inventory.
ANS: F PTS: 1
3. A business marketer that uses industrial distributors will usually, as a matter of

policy, not utilize any manufacturers' representatives.
ANS: F PTS: 1
4. A source of conflict between business marketers and their manufacturers'

representatives centers on the size of inventory levels reps maintain.
ANS: F PTS: 1
5. Manufacturers' representatives sell noncompeting but complementary products.
ANS: T PTS: 1
6. When a manufacturer sells through hundreds of distributors across the U.S., reps
may sell and service the distributors.
ANS: T PTS: 1

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7. There are many situations in business marketing where a direct channel of

distribution is not feasible.
ANS: T PTS: 1
8. The compensation provided to middlemen should be based on loyalty, length of

service, and past years' sales performance.
ANS: F PTS: 1
9. By retaining title to the goods, the business marketer has a higher level of channel
control in a rep channel as opposed to a distributor channel.
ANS: T PTS: 1
10. A business marketer that serves many different market segments would likely use
a direct channel.
ANS: F PTS: 1
11. Indirect distribution is appropriate when control of the selling job is necessary to
ensure proper implementation of the total product package and to guarantee a
quick response to market conditions.
ANS: F PTS: 1

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12. For products that are bought frequently, repetitively, and in small quantities,
industrial distributors provide an efficient channel path.
ANS: T PTS: 1
13. Frequently, the manager has little flexibility in the selection of channel structures
because of trade, competitive, company, and environmental factors.
ANS: T PTS: 1
14. Once a particular industrial channel structure is selected, channel participants

must be selected, and arrangements made to ensure that all obligations are
assigned.
ANS: T PTS: 1
15. A direct sales force is best used for complex sales opportunities.
ANS: T PTS: 1
16. Channel member motivation begins with the understanding that the channel
relationship is a partnership.
ANS: T PTS: 1

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17. Business marketing channels typically include fewer types of intermediaries than
consumer-goods channels.
ANS: T PTS: 1
18. The goal of a multichannel model is to coordinate the activities of many channels
to enhance the total customer experience and profitability.
ANS: T PTS: 1
19. The two critical elements of the distributor’s function are to secure financing and
have products readily available.
ANS: F PTS: 1
20. The availability of good intermediaries and product characteristics are two factors
that often limit the choice of industrial channels.
ANS: T PTS: 1
21. The geographic dispersion of customers and competitive strategies have very little
influence on the choice of industrial channels.
ANS: F PTS: 1

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22. The backbone of channel design is the analysis of objectives, constraints, and
channel activities.
ANS: T PTS: 1
COMPLETION
1. Manufacturers’ representatives and industrial distributors are both examples

of____________________channels.
ANS: Indirect
PTS: 1
2. ____________________systems provide a valuable tool for coordinating sales

channel activities and managing crucial connections and handoffs between them.
ANS: CRM
PTS: 1
3. The primary responsible of____________________salespersons is to take

telephone orders, processing orders, and schedule delivery.
ANS: inside
PTS: 1

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4. Full-service intermediaries that take title to the products they sell and perform the
full range of marketing functions are known as____________________.
ANS: distributors
PTS: 1
5. Channel____________________refers to the number of channel levels, the

number and types of intermediaries and the linkages among channel members.
ANS: structure
PTS: 1
6. The last step of the channel design process is to evaluate and select
____________________.
ANS: channel options
PTS: 1
7. The surest way to lose intermediary support is____________________ policies

that do not meet industry and competitive standards.
ANS: compensation
PTS: 1

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ESSAY
1. An Arizona-based high-technology firm, Three Five Systems, produces component

parts that are sold to cellular phone manufacturers as well as a diverse set of
customers across several different industry sectors. The firm uses a corporate
sales force for large customers, like Motorola, and relies on a mix of
manufacturers' reps and/or industrial distributors to serve small and medium-
sized customers.
The top management team at Three Five Systems would like you to conduct an
audit of the firm's channel strategy. These executives are concerned that rapidly-
changing customer needs have created important gaps in the firm's market
coverage and market offerings. Describe the specific steps that you would follow
in conducting this audit and highlight the particular questions that you would
emphasize in the assessment.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Distribution | R&D Strategic &
systems skills
2. A medium-sized industrial firm plans to significantly expand their operations next

year, and they are considering a change in channel structure. Discuss five (5)
questions you would ask them to help you determine whether they should use
their own sales force, reps, or industrial distributors.
ANS:
n/a
PTS: 1

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systems skills
3. Describe specific product, market, and competitive conditions that lend

themselves to: (a) a direct channel of distribution and (b) an indirect channel of
distribution.
ANS:
n/a
PTS: 1
systems skills
4. A large consumer goods company recently entered the business market with a
new product with broad industrial application. They must develop a channel of
distribution through which the product will be sold. Discuss, generally, the key
factors the company must evaluate in designing the channel.
ANS:
n/a
PTS: 1
systems skills
5. Since all of the organizations or member firms that comprise the business
marketing channel are interested in achieving important profit goals, why does
conflict often emerge in the channel and what steps can the business marketing
manager take to control it?
ANS:
n/a
PTS: 1

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systems skills
6. Explain the important product/market factors that lend themselves to the use of
manufacturers’ representatives by business marketers.
ANS:
n/a
PTS: 1
systems skills
7. Consider a small manufacturing firm that does not have the resources or ability to
hire their own sales force. As this firm considers hiring distributors and
manufacturers’ representatives, what factors should they use to determine
whether to hire distributors, reps, or both?
ANS:
n/a
PTS: 1
systems skills
8. Describe the major factors that limit the choice of industrial channels for business
marketers.
ANS:
n/a
PTS: 1
systems skills

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9. Marketing strategies can fail if business marketers do not consider the needs and
capabilities of their intermediaries. What are the key factors in effectively
motivating channel members?
ANS:
n/a
PTS: 1
Chapter 11—Supply Chain Management
MULTIPLE CHOICE
1. The supply chain includes a variety of firms, ranging from those that process raw
materials to make component parts to those engaged in wholesaling. Included
also are organizations engaged in:
a. warehousing.
b. transportation.
c. materials handling.
ANS: D PTS: 1
2. To integrate activities across the supply chain, supply chain management often:
a. requires that firms in the supply chain share sensitive and proprietary
information about customers and corporate plans.
b. creates excess inventory in the pipeline leading to the customer.
c. involves higher transportation and handling costs.
e. (b) and (c) only

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ANS: A PTS: 1
3. Supply chain management seeks to achieve which of the following goals?

a. waste reduction
b. unit cost reduction
c. flexible response
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
4. A firm that can respond to a customer's unique requirements for packaging and
order size in a cost-effective manner is addressing which of the following supply
chain goals?
a. time compression
b. waste reduction
c. unit cost reduction
d. flexible response
e. inventory reduction
ANS: D PTS: 1
5. The most commonly reported benefits for firms that adopt supply chain
management are:
a. higher profit margins.
b. enhanced cash flow.
c. higher order-to-delivery cycle time.

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ANS: E PTS: 1
6. The supply chains for products that could be categorized as "innovative" (e.g.,
high-tech products) differ from the supply chains for functional products because:
a. demand is less predictable for innovative products.
b. attention centers on capturing high profits during peak demand periods
for the innovative product.
c. minimizing inventory costs is not a major concern with innovative
products.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
7. In contrast to "innovative" products, the supply chain for functional products is

designed to:
a. minimize logistics and inventory costs.
b. assure low-cost manufacturing.
c. adapt production capacity to uncertain demand patterns.
d. all of the above
e. (a) and (b) only
ANS: E PTS: 1
8. Many U.S. manufacturers have adopted the just-in-time (JIT) purchasing principle.
Concerning this trend, all of the following statements are accurate except:

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a. One objective of a JIT system is to eliminate waste of all kinds from the
production process.
b. Because JIT attempts to relate purchases to production requirements,
the typical order size increases.
c. A significant effect of JIT purchasing has been the drastic reduction in the
number of suppliers utilized by manufacturers.
d. Suppliers find that relationships with JIT customers are longer lasting.
e. both (b) and (c)
ANS: B PTS: 1
9. In serving JIT customers, business marketers find that:

a. the typical order size shrinks.
b. more frequent deliveries are required.
c. relationships with JIT customers are longer lasting and often formalized
with a written contract that may span up to five years.
d. all of the above
e. (b) and (c) only
ANS: D PTS: 1
10. As a controllable element in the logistics system, ____ triggers the logistics process
and directs the activities necessary to deliver products to customers.
a. order processing
b. customer service
c. production planning
d. inventory management
e. information management
ANS: A PTS: 1

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11. In applying the total cost approach to logistical management, management:

a. seeks to minimize the cost associated with each logistical activity in the
firm.
b. attention centers on minimizing transportation costs.
c. attention centers on minimizing inventory costs.
d. recognizes that a decision made for one logistical variable affects all or
some of the other logistics variables.
e. recognizes the importance of minimizing fixed facility (warehouse) costs.
ANS: D PTS: 1
12. In the management of logistical activities, the performance variable(s) of prime

interest (is) are:
a. number of products handled.
b. total distribution costs.
c. inventory movement per warehouse facility.
d. the level of logistical service provided to customers.
e. both (a) and (d)
ANS: D PTS: 1
13. In regard to logistical service, the business marketer should:

a. provide the same level of logistical service to all customers.
b. adjust the level of logistical service for different segments based on
requirements of the product type.
c. adjust the level of logistical service for different segments based on
requirements of the customer.

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ANS: E PTS: 1
14. A business marketer that provides erratic delivery service to industrial distributors:
a. increases the distributor's inventory carrying costs.
b. creates stockouts at the distributor level.
c. damages channel relations.
d. all of the above
e. (a) and (c) only
ANS: D PTS: 1
15. The warehouse circumvents the need for premium transportation (for example,
air freight) and costly order processing by keeping products readily available in
local markets. Which type of warehousing involves no capital investment and
offers the advantage of flexibility--the firm can increase or decrease its use of
space in a given market?
a. merchant
b. mobile
c. fixed
d. third party
e. private
ANS: D PTS: 1
16. The use of faster modes of transportation within the logistical network results in:

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a. lower variable costs for product movement.

b. higher customer service levels.
c. higher investments in inventory.
d. all of the above
e. (a) and (c) only
ANS: B PTS: 1
17. _____ is typically the largest logistics expense.

a. Warehousing
b. Inventory control
c. Transportation
d. Order processing
e. Materials handling
ANS: C PTS: 1
18. Concerning speed of service in the logistical system, which of the following is(are)
accurate?
a. The longer the delivery time, the more inventory customers must
maintain to service their needs while the shipment is in transit.
b. The slower modes of transportation involve higher variable costs for
product movement.
c. The faster modes of transportation result in the need for higher
investments in inventory by customers.
d. all of the above
e. both (b) and (c)
ANS: A PTS: 1

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19. A business marketer who shifts from rail to air in the logistical system would likely
generate:
a. higher variable costs associated with product movement.
b. lower customer investments in inventory.
c. a higher customer service level.
d. all of the above
e. (a) and (c) only
ANS: D PTS: 1
20. The "best" mode of transportation to use in moving industrial products to

customers is:
a. rail.
b. air.
c. truck.
d. barge.
e. dependent upon cost, service and investment tradeoffs.
ANS: E PTS: 1
21. The use of slower modes of transportation within the logistical network results in:
a. lower variable costs for product movement.
b. higher customer service levels.
c. higher investments in inventory.
d. all of the above
e. (a) and (c) only
ANS: E PTS: 1

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22. An emerging development in performing the logistics process is the utilization of

third-party logistics firms. Third-party logistics firms can:
a. perform the warehousing function.
b. perform the transportation function.
c. perform the entire logistics process from production scheduling to
delivery of finished goods to the customer.
ANS: D PTS: 1
23. The advantages of third-party warehouses are that they allow the business
marketing firm to:
a. increase or decrease warehouse space in a given market.
b. replace the distributor channel when the sales function can be
performed by a direct sales force or by manufacturers' representatives.
c. reduce expenditures on company-owned warehouses.
d. all of the above
e. (a) and (c) only
ANS: D PTS: 1
24. Despite the advantages, some firms are reluctant to use third party logistics firms
because:
a. of the diminished direct contact with customers.
b. they lose direct control of the logistics process.
c. of the problems associated with terminating internal operations.
d. all of the above

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e. (b) and (c) only
ANS: D PTS: 1
25. Which of the following statements are false regarding Supply Chain Management?
a. SCM is one of the predominant management approaches driving many
organizations.
b. The supply chain increasingly is seen as the main conduit for getting
products from its source to the ultimate customer.
c. The supply chain touches almost every function within the organization.
d. The supply chain has the greatest impact on customer satisfaction and
the greatest potential for improving the bottom line and enabling
competitive advantage.
e. All of the above are true statements.
ANS: E PTS: 1
26. Supply chains should manage _____ in an integrated manner across organizational
borders.
a. relationships
b. information
c. material flow
ANS: D PTS: 1

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27. Which of the following statements is false regarding supply chain management?
a. SCM seeks to create an overlap among participants in the supply chain.
b. Traditional supply chains openly share information across the supply
chain.
c. Non-integrated approaches to managing product and information flows
are expensive and time consuming.
d. Aligning both internal and external processes is the ultimate goal of
SCM.
ANS: B PTS: 1
28. The underlying premise of SCM is that waste reduction and enhanced supply chain
performance will exist when there is both intrafirm and interfirm:
a. functional integration.
b. sharing.
c. cooperation.
d. all of above.
ANS: D PTS: 1
29. Waste reduction throughout the supply chain is accomplished by minimizing:

a. duplication.
b. harmonizing operations and systems.
c. quality defects.
ANS: D PTS: 1

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30. The Internet has allowed business marketers to realize several supply chain
related benefits, including more timely:
a. product development.
b. access to new customer segments.
c. reduction in communication and customer support costs.
ANS: D PTS: 1
31. Which of the following statements is false regarding the relationship of the
Internet and SCM?
a. The Internet promotes efficiency across the supply chain.
b. The Internet promotes effectiveness across the supply chain.
c. The Internet permits suppliers to gain real-time knowledge of their
customer's needs for materials and components.
d. The use of the Internet as a part of supply chain management has
allowed business marketers develop new products in a more timely
manner.
e. The Internet has provided companies the opportunities to increase
channel inventories.
ANS: E PTS: 1
32. Which of the following is false regarding supply chain management?

a. The focus of logistics is the flow of product through the supply chain.
b. Timely information drives the entire supply chain process.
c. Product flow in the reverse direction is an important aspect of supply
chain management.

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d. The formation close relationships among participants is an inherent

need of SCM.
e. All of the above are true statements.
ANS: E PTS: 1
33. The mechanism to trace the cost of performing logistics services to the customer
that use these services is called:
a. ABC
b. JIT
c. TCO
d. SCM
ANS: A PTS: 1
34. Inventories are needed in business channels because:

a. production and demand are perfectly matched.
b. operating deficiencies in logistical system often result in product
unavailability.
c. business customers can predict their product needs with certainty.
ANS: B PTS: 1
35. A firm that is able to accomplish production and logistics processes in less time is
addressing which of the following supply chain management goals?

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a. Waste reduction.
b. Time compression.
c. Flexible response.
d. Unit cost reduction.
e. Transportation cost reduction.
ANS: B PTS: 1
36. A firm that is able to lower costs by minimizing duplication, harmonizing

operations, and enhancing quality is addressing which of the following supply
chain management goals?
a. Waste reduction.
b. Time compression.
c. Flexible response.
d. Inventory reduction.
e. Transportation cost reduction.
ANS: A PTS: 1
37. As a controllable element in the logistics system, _____ ensures that products are
available for inventory in the correct assortment and quantity.
a. production planning
b. plant and warehouse location
c. customer service
d. inventory control
e. logistics communication
ANS: A PTS: 1

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38. As a controllable element in the logistics system, _____ relates to the

effectiveness of creating time and place utility.
a. customer service
b. order processing
c. inventory control
d. production planning
e. logistics communication
ANS: A PTS: 1
39. As a controllable element in the logistics system, _____ ensures that information
exchanged in the distribution process guides the activities of the logistics system.
a. customer service
b. order processing
c. logistics communications
d. inventory control
e. production planning
ANS: C PTS: 1
40. _____ is the integration of business processes from end user through original
suppliers that provides products, services, and information that add value for
customers.
a. Customer relationship management
b. Supply chain management
c. Logistics management
d. A marketing plan
e. Order processing

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ANS: B PTS: 1
41. The final stage in the adoption of supply chain management where companies
have successfully aligned both their internal and external processes is called:
a. the Expanded Enterprise stage.
b. Internal Process Integration stage.
c. the Informal stage.
d. the Functional stage.
e. the Customer Relationship Management stage.
ANS: A PTS: 1
42. The key to maintaining a competitive advantage through supply chain strategies is
to:
a. the ability to adapt to changes.
b. the ability to maintain low cost relationships with partners.
c. the ability to continuously develop successful new products.
d. continue purchasing the most advanced supply chain software and
technologies.
ANS: A PTS: 1
43. For a supply chain partnership to succeed, which of the following are true?
a. Partners need to clearly define their strategic objectives.
b. Managers in both organizations need to fairly divide decision-making
responsibilities.
c. Use performance metrics that are tied to chosen strategies.

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ANS: E PTS: 1
44. When compared to logistics management, supply chain management is:

a. broader.
b. less integrative.
c. is focused on moving and storing activities.
ANS: A PTS: 1
45. Common elements of logistics service include:

a. delivery time.
b. order accuracy.
c. cost-per-unit.
ANS: E PTS: 1
46. _____ is the variable cost of moving products from origin to destination, including
any terminal and accessory charges.
a. Speed of service
b. Transportation cost
c. Cost of service
d. Fixed cost

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ANS: C PTS: 1
TRUE/FALSE
1. Supply chain management may require that all firms in the supply chain share
sensitive and proprietary information about customers and corporate strategic
plans.
ANS: T PTS: 1
2. Properly implemented, supply chain management will lead to longer order-to-

delivery cycle time.
ANS: F PTS: 1
3. Firms that adopt supply chain management generally find that costs increase but
are more than offset by higher profit margins and revenue growth.
ANS: F PTS: 1
4. For innovative products, the goal is to design a supply chain that minimizes
logistics and inventory costs, and assures low- cost manufacturing.
ANS: F PTS: 1

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5. For supply chain management, functional products typically have predictable

demand patterns while innovative products do not.
ANS: T PTS: 1
6. If the costs of each logistical activity are minimized, total logistical costs for the
enterprise will be minimized.
ANS: F PTS: 1
7. An increase in the supplier's delivery time performance permits a buyer to hold

less inventory.
ANS: F PTS: 1
8. If the business marketer can offer a buyer more consistent delivery performance
from the logistical system, the buyer would have the opportunity to cut the level
of safety stock maintained.
ANS: T PTS: 1
9. The longer the delivery time in the logistical system, the more inventory
customers must maintain to service their needs.
ANS: T PTS: 1

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10. Not all products nor all customers require the same level of logistical service.
ANS: T PTS: 1
11. Warehousing is usually the largest single logistical expense.
ANS: F PTS: 1
12. Although air provides the lowest average delivery time, generally it has the highest
variability in delivery time relative to average.
ANS: T PTS: 1
13. As a customer adopts JIT purchasing, the typical order size shrinks and more
frequent deliveries are required.
ANS: T PTS: 1
14. Some firms are reluctant to use third-party logistics firms because they wish to
maintain direct contact with customers and retain control over the logistics
process.
ANS: T PTS: 1

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15. The faster modes of transportation result in higher levels of customer service, but
also higher investments in inventory.
ANS: F PTS: 1
16. Supply chain management, as a source of competitive advantage, should be seen

as a source of revenue as well as a means of reducing costs.
ANS: T PTS: 1
17. The underlying premise of SCM is that waste reduction and enhanced supply chain
performance come only when there is both intrafirm and interfirm functional
integration, sharing and cooperation.
ANS: T PTS: 1
18. Recent evidence suggests that firms that stumble in the SCM area are punished by
the stock market.
ANS: T PTS: 1
19. Speed of service is usually more important that service consistency.
ANS: F PTS: 1

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20. Supply chain management is both a boundary and function spanning endeavor.
ANS: T PTS: 1
21. Waste reduction, time compression, and flexibility are all goals of supply chain
management.
ANS: T PTS: 1
22. Logistics management is primarily concerned with movement and storage

activities.
ANS: T PTS: 1
23. Materials handling is the controllable element of a logistics system that relates to
the effectiveness of in creating time and place utility.
ANS: F PTS: 1
24. The two performance variables that must be considered when managing logistical
activities are the total distribution costs and the level of logistical service.
ANS: T PTS: 1

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25. When evaluating transportation performance, service consistency is usually more

important than average delivery time.
ANS: T PTS: 1
26. Reasons for having inventories in business channels include the inability of
business customers to predict their demand perfectly and operational problems in
the logistics system that can cause stockouts.
ANS: T PTS: 1
COMPLETION
1. The focus of____________________in the supply chain for business marketers is

the flow of product through the supply chain, with timely information driving the
entire process.
ANS: logistics
PTS: 1
2. The ____________________, or trade-off, approach to logistical management

guarantees to minimize total logistical costs in the firm and within the channel.
ANS: total-cost
PTS: 1

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3. ____________________ increases the speed of, and reduces the cost of, picking
orders in the warehouse and moving products between storage and the
transportation carriers.
ANS: Materials handling
PTS: 1
4. A measure of the physical conditions of the product when received by the buyer is
known as____________________, this common element of logistics service.
ANS: Damage
PTS: 1
5. Innovative approaches to tighten the distribution process, bolstering links with

suppliers and customers, and integrating production and marketing is described by
the term ____________________management.
ANS: Supply chain
PTS: 1
6. Central to SCM are the coordination and collaboration activities performed with
channel partners, which may include____________________,
____________________, third party____________________,
and____________________.

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ANS:
suppliers, intermediaries, service providers, customers
intermediaries, customers, service providers, suppliers
customers, suppliers,service providers, intermediaries
PTS: 1
7. Supply chain management can improve overall company performance in two

fundamental ways: ____________________ and ____________________.
ANS:
revenue enhancement, cost reduction
cost reduction, revenue enhancement
PTS: 1
8. When designing the supply chain, firms should concentrate on

creating____________________processes for functional products
and____________________processes for innovative products.
ANS: efficient; responsive
PTS: 1
9. SCM requires____________________not only among departments within the

organization but also with external partners.
ANS: integration

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PTS: 1
ESSAY
1. Rather than Ford competing with Honda on a firm-to-firm basis, some experts
argue that the true competitive battle involves Ford's supply chain versus Honda's
supply chain. Define the supply chain management concept and relate it to the
competitive rivalry between Ford and Honda.
ANS:
n/a
PTS: 1
systems skills
2. By reducing waste, compressing time, reducing unit costs, and by demonstrating a

flexible response, Dell Computer achieves the four major goals of supply chain
management. Briefly describe the meaning and significance of each of these goals
to a firm like Dell.
ANS:
n/a
PTS: 1
systems skills
3. What are the most commonly reported financial benefits that accrue to firms that
excel in supply chain management?
ANS:

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n/a
PTS: 1
systems skills
4. The Ford Motor Company's electronic components plant in Lansdale, Pennsylvania

produces 124,000 engine controllers, anti-lock brake sensors, and speed-control
units a day. Since each product has 400 to 500 parts, managers have to keep track
of more than five million individual pieces daily. Lean inventories and quick
production changeovers require dependable suppliers. To maintain tight control,
Ford issues a monthly report card to suppliers listing quality rejects, conformance
with schedule, and overshipments. In the words of the plant manager, "this puts
our relationship with them on an objective basis." Describe the particular logistical
capabilities that a business marketer must possess to successfully meet the
requirements of this highly sophisticated Ford plant. Explore other elements of the
business marketing strategy that may be crucial in initiating and sustaining a
profitable relationship with this customer.
ANS:
n/a
PTS: 1
systems skills
5. Rather than waiting for customers in the business market to demand just-in-time
(JIT) service, explain how a business marketer could proactively seek out
opportunities to assist customers using JIT inventory management as a marketing
strategy. To implement such a strategy, what adjustments would be required in
the logistical system?
ANS:
n/a

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PTS: 1
systems skills
6. Since purchasing managers are evaluated and rewarded on the basis of cost
savings generated, why are they often willing to overlook the low-price supplier in
favor of a higher-priced supplier that offers superior logistical service? Can they
justify this on a cost basis?
ANS:
n/a
PTS: 1
systems skills
7. What is the total-cost approach to developing a logistical system? Explain what

variables should be considered when designing and administering a logistical
system aimed at utilizing the total-cost approach.
ANS:
n/a
PTS: 1
systems skills
8. The implementation of supply chain management (SCM) by business marketers

requires strong relationships, shared information, common goals aligned with
common strategies, and integration between functions and across firms. What
are some possible barriers or challenges to successfully implementing SCM given
these and other requirements?
ANS:
n/a

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PTS: 1
systems skills
Chapter 12—Pricing Strategy for Business Markets
MULTIPLE CHOICE
1. From an organizational buyer's perspective, the cost of an industrial good:

a. is equal to the seller's price.
b. is equal to the seller's price plus order processing costs.
c. includes not only the seller's price, but also transportation, installation,
order handling, and inventory carrying costs.
d. includes the seller's price adjusted for quantity discounts that may be
received in the future.
ANS: C PTS: 1
innovation
2. The price elasticity of demand:

a. is not the same at all prices.
b. varies by industrial market segment.
c. is relatively easy to measure in the industrial market.
d. all of the above
e. (a) and (b) only
ANS: E PTS: 1
innovation
3. The business marketer will find that total revenue will ____ if the price is
decreased and demand is price inelastic.

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a. rise a little
b. rise sharply
c. remain the same
d. fall
ANS: D PTS: 1
innovation
4. If the business marketer's product input assumes an insignificant role in the final
product's total cost, demand is likely:
a. elastic.
b. price sensitive.
c. inelastic.
d. small.
ANS: C PTS: 1
innovation
5. Successful pricing strategies are:

a. value based.
b. proactive.
c. profit-driven.
e. only a and c.
ANS: D PTS: 1
innovation
6. Those costs, fixed or variable, that can be traced to a product, customer, or sales
territory (for example, general plant overhead may be indirectly assigned to a
product) are called:

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a. direct traceable costs.

b. indirect traceable costs.
c. assignable costs.
d. general costs.
e. administrative overhead.
ANS: B PTS: 1
innovation
7. Concerning pricing and the competitive environment, which of the following

statements is(are) accurate?
a. Competition establishes an upper limit on price.
b. Late entrants to the market often enjoy potential cost advantages over
the pioneering firm.
c. Competitors will be more sensitive toward price reductions that
threaten market segments that they deem important.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
innovation
8. The degree of latitude that an industrial firm has in setting prices above those
offered by competitors is dependent upon:
a. the firm's objectives.
b. the cost of producing the product.
c. the level of differentiation that the product enjoys in the perceptions of
organizational buyers.
d. the size of the firm's promotional budget.
e. both (a) and (b)
ANS: C PTS: 1

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innovation
9. Motorola introduced a new personal communicator priced at a significant

premium over competing models. Initially, Motorola will concentrate on the
business user but the firm plans to reduce the price later and capture a share of
the consumer market. This policy of beginning with a high price and then moving
to a lower price is referred to as:
a. product differentiation.
b. market segmentation.
c. price administration.
d. time segmentation.
e. life cycle pricing.
ANS: D PTS: 1
innovation
10. The policy of using a skimming pricing approach when a product is introduced,
followed by penetration pricing as the product matures, is referred to by Joel Dean
as:
b. market segmentation.
c. time segmentation.
d. price administration.
e. life cycle pricing.
ANS: C PTS: 1
innovation
11. A penetration policy is appropriate when there is:

a. a strong threat of imminent competition.
b. inelastic demand.
c. an opportunity for a substantial reduction in production costs as volume

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expands.
d. all of the above
e. (a) and (c) only
ANS: E PTS: 1
innovation
12. During the innovative firm's monopoly period, a _____ is optimal if the demand
curve is stable over time (no diffusion) and production costs decline with
accumulated volume.
a. life cycle costing pricing policy
b. skimming policy
c. penetration policy
d. time segmentation policy
e. bid price policy
ANS: B PTS: 1
innovation
13. During the innovative firm's monopoly period, a _____ is optimal if there is a
relatively high repeat purchase rate for nondurable goods or if a durable good's
demand is characterized by diffusion.
a. life cycle costing pricing policy
b. skimming policy
c. penetration policy
d. time segmentation policy
e. bid price policy
ANS: C PTS: 1
innovation

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14. The competitive bidding approach that may include deliberations with suppliers
throughout the bidding process is referred to as:
a. closed bidding.
b. open bidding.
c. contractual bidding.
d. institutional bidding.
ANS: B PTS: 1
innovation
15. Before preparing a bid for any potential contract, the industrial firm should first:
a. estimate the profitability of the potential contract.
b. assess the probability of winning the contract.
c. carefully define their objectives.
d. conduct a preliminary analysis of their expected costs in performing the
potential contract.
e. evaluate the strength of potential competing bidders.
ANS: C PTS: 1
innovation
16. Which of the following statements concerning target costing is(are) accurate?
a. Japanese managers who pioneered the approach view target costing as
a profit-management tool.
b. The approach is designed to reach market segments comprised of
buyers who consistently select the lowest-priced alternative.
c. Target costing tends to move product developers toward products that
include only the bare essentials.
ANS: A PTS: 1

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innovation
17. Pine River Equipment has developed a distinctly new product that offers
considerable promise. By exploiting the experience effect, management believes
that there are opportunities for a substantial reduction in production costs as
volume expands. While the market is quite large, there is a strong threat of
imminent competition. The firm should likely use:
b. a skimming approach to pricing.
c. a penetration approach to pricing.
d. a bid price policy.
e. a life cycle costing pricing policy.
ANS: C PTS: 1
innovation
18. In hypercompetitive environments,

a. leading-edge firms are reluctant to lower prices because they enjoy
attractive margins.
b. successful firms sustain quality but drive to the next lower price point to
enjoy a burst of volume and an expansion of market share.
c. successful firms are reluctant to disrupt the equilibrium of the market.
d. successful firms look for the first opportunity to raise prices.
e. both (a) and (c).
ANS: B PTS: 1
innovation
19. The successful implementation of value-based strategies requires close

coordination between the _____ and _____ units in the firm.
a. product

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b. sales
c. service
e. (b) and (c) only
ANS: D PTS: 1
innovation
20. Pertinent considerations for pricing industrial products or services include:

a. competition.
b. demand determinants.
c. cost determinants.
ANS: D PTS: 1
innovation
21. Examples of pricing objectives include:

a. channel relationships.
b. achieving a market-share goal.
c. achieving a target return on investment.
ANS: D PTS: 1
innovation
22. Since higher costs are incurred in providing higher levels of performance on one or
more of the attributes, the strategists should assess the:
a. relative importance of the attributes to different market segments.

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b. strength of the firm's offering on each of the importance attributes vis-a-

vis competitors.
c. costs associated with the experience effect.
ANS: D PTS: 1
innovation
23. The buyer's price sensitivity increases to the degree that:

a. buyers can switch from one supplier to another without incurring
additional costs.
b. organizational buyers can easily shop around and assess the relative
performance and price of alternatives.
c. the product represents one for which it is difficult to make price
comparisons.
ANS: E PTS: 1
innovation
24. _____ are those that support a number of activities that cannot be objectively
assigned to a product on the basis of a direct physical relationship.
a. Indirect traceable costs
b. Attributable costs
c. General costs
ANS: C PTS: 1
innovation

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25. Which of the following statements regarding competitive threats is incorrect?

a. Matching a price cut will be an ineffective strategy if the competitor
simply reestablished the differential by a further price reduction.
b. A single response is rarely enough to stop price moves by competitors
that are struggling to establish a market position.
c. If a price response is required, the strategist should focus the firm's
competitive retaliation on those actions that are most cost-effective for
the firm.
ANS: D PTS: 1
innovation
26. General plant overhead is an example of _____ costs.

a. direct traceable
b. indirect traceable
c. general
d. attributable
ANS: B PTS: 1
innovation
27. If competitors are likely to continue to pursue price cutting, the best strategy for
the defender is to:
a. allow the competitor to win where it is least damaging to profitability.
b. create barriers that make it more difficult for competitors to reach less
price-sensitive customer segments.
c. center reactive price cuts on a particular geographic region.

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ANS: E PTS: 1
innovation
28. _____ costs include financing, storage, and inspection costs.

a. Acquisition
b. Possession
c. Usage
d. None of the above
ANS: B PTS: 1
innovation
29. _____ refers to the rate of percentage change in quantity demanded attributable
to change in price.
a. Cost/benefit analysis
b. Customer demand
c. Price elasticity of demand
d. Perceived value
e. Competitive edge
ANS: C PTS: 1
innovation
30. A skimming strategy is appropriate when:

a. there is high price elasticity of demand.
b. strong threat of imminent competition.
c. the firm has a distinctly new product in a monopoly period.
ANS: C PTS: 1

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innovation
31. _____ features a design-to-cost philosophy that begins by examining market

conditions.
a. Target costing
b. ABC costing
c. Value-based segmentation
d. Total cost costing
e. Penetration pricing
ANS: A PTS: 1
innovation
32. _____ represents a business customer’s overall assessment of the utility of a

relationship with a supplier based on the benefits received and sacrifices made.
a. Core benefits
b. Add-on benefits
c. Customer value
d. Relationship commitment
e. Total cost analysis
ANS: C PTS: 1
innovation
33. _____ are those attributes that are not typically required but that can ultimately
lead to a supplier being selected by a customer over other qualified suppliers.
a. Core benefits
b. Add-on benefits
c. Supplier personality traits
d. Customer values
e. Elasticities of demand

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ANS: B PTS: 1
innovation
34. Examples of typical add-on benefits include:

a. joint working relationships.
b. commitment.
c. supplier flexibility.
ANS: D PTS: 1
innovation
35. Which of the following are useful to business marketers trying to gauge
competitive responses to pricing?
a. Examining the cost structure and strategy of direct competitors.
b. Examination of annual reports and other public records.
c. Identifying which markets competitors deem as important.
ANS: D PTS: 1
innovation
36. Which of the following are reasons why followers into a market often find lower
costs than the pioneer firm?
a. The use of more current production technologies.
b. Experience of suppliers leads to cost reductions.
c. Learning from the pioneer’s mistakes.

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ANS: D PTS: 1
innovation
37. Which of the following are questions that must be addressed when determining
responses to a competitor’s threat?
a. If you respond, is the competitor willing and able to lower their price
again?
b. Is our position in other markets at risk if the competitor gains market
share?
c. Is there a response that would cost you more than the preventable sales
loss?
ANS: E PTS: 1
innovation
38. _____ involves a formal invitation to potential suppliers to submit written, sealed
bids.
a. Closed bidding
b. Open bidding
c. On-line bidding
d. E-commerce
e. Comparative bidding
ANS: A PTS: 1
innovation

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TRUE/FALSE
1. Organizational buyers tend to associate high price with high quality.
ANS: F PTS: 1
innovation
2. Business marketers should base their pricing decisions primarily on cost and
competitive considerations.
ANS: F PTS: 1
innovation
3. If the business marketer's product input plays an insignificant role in the final
product's total cost, demand is likely elastic.
ANS: F PTS: 1
innovation
4. Success in penetrating a buying organization with one item often means success
for other items in the product line.
ANS: T PTS: 1
innovation
5. Closed bidding is particularly appropriate when specific requirements are hard to

rigidly define or when the products and services of competing suppliers vary
substantially.
ANS: F PTS: 1

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innovation
6. To sustain profitability, price reductions should be avoided by strategists in

hypercompetitive environments.
ANS: F PTS: 1
innovation
7. The value customers assign to a firm’s offering can vary by market segment
because of how the product will be used.
ANS: T PTS: 1
innovation
8. Buyers tend to be price sensitive when they can switch from one supplier to
another without incurring additional costs.
ANS: T PTS: 1
innovation
9. The importance of the business marketer's product as an input into the total cost
of the end product influences demand elasticity. If the business marketer's
product has an insignificant effect on cost, demand is likely to be inelastic.
ANS: T PTS: 1
innovation
10. Developing a bidding strategy is the important first step in planning for
competitive bidding.
ANS: F PTS: 1

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innovation
11. Price elasticity of demand is not the same at all prices.
ANS: T PTS: 1
innovation
12. Total revenue will decrease if the price is decreased and demand is price elastic.
ANS: F PTS: 1
innovation
13. Low switching costs allow a buyer to focus on minimizing the cost of a particular
transaction.
ANS: T PTS: 1
innovation
14. Raw materials are an example of indirect traceable costs.
ANS: F PTS: 1
innovation
15. According to the Robinson-Patman Act, price differentials are permitted, but they
must be based on cost differences or the need to meet competition.
ANS: T PTS: 1
innovation

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16. Because making competitive bids is costly and time-consuming, firms should
choose potential bid opportunities with care.
ANS: T PTS: 1
innovation
17. Differentiation value is the value associated with product features that are unique
and different from competitors
ANS: T PTS: 1
innovation
18. Recent research indicates that highly satisfied customers are just as sensitive to
price changes as customers with low to moderate levels of satisfaction.
ANS: F PTS: 1
innovation
19. The goals of a cost classification system are to properly classify cost data in to
fixed and variable components and to properly link costs to the activities causing
them.
ANS: T PTS: 1
innovation
20. A penetration pricing policy is optimal if there is a relatively low repurchase rate
for durable goods.
ANS: F PTS: 1
innovation

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COMPLETION
1. Costs that support a number of activities that cannot be objectively assigned to a

product on the basis of a direct physical relationship are classified
as____________________costs.
ANS: General
PTS: 1
innovation
2. A____________________pricing approach is most appropriate for a distinctly new

product, and provides an opportunity to profitably reach market segments that
are not sensitive to the high initial price.
ANS: skimming
PTS: 1
innovation
3. The Robinson-Patman Act holds that it is unlawful to____________________in

price between different purchasers of commodities of like grade and quality.
ANS: discriminate
PTS: 1
innovation

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4. Two types of benefits can contribute to customer value in business markets:

____________________ benefits which are the basic requirements the business
marketer must meet to be included in the customer’s consideration set and
____________________ benefits which are those attributes typically not required,
that assist the customer in selecting a supplier from among a qualified set of
potential suppliers.
ANS: core, add-on
PTS: 1
innovation
5. ____________________costs include financing, storage, inspection, taxes,

insurance, and other internal handling costs.
ANS: Possession
PTS: 1
innovation
6. The first component in the Price-Setting Decision Process

is____________________.
ANS: Set strategic pricing objectives
PTS: 1
innovation
7. ____________________drivers add incremental value by facilitating revenue or

margin expansion while____________________drivers create value by providing
economic savings.

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ANS: Revenue, cost
PTS: 1
innovation
ESSAY
1. A small high-technology firm in Arizona recently developed a new component part

that offers superior advantages over competing products. The component is used
in high-speed production systems and, due to its durable composition, has a useful
life of 12 months versus 3 months for competing products. By reducing downtime
and frequent changeovers, the product will offer users a significant improvement
in production efficiency. Of course, the exact savings will vary by market segment.
The two executives, who launched the firm, are divided over the course that
should be followed in pricing the component—one favors a high price for a quick
payback while the other opts for a lower price and a more deliberate approach.
Outline the critical issues that should be examined in setting the price.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Pricing | R&D Strategic & systems
skills
2. Two competitors with similar products may ask differing prices because their total
offerings are perceived as being unique by buyers. In the eyes of the
organizational buyer, one firm may provide more value than another.
Demonstrate how this might occur and outline the corresponding marketing
strategy implications.
ANS:
n/a

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PTS: 1
skills
3. A firm developed a new component part (i.e., a timing mechanism) that can be
effectively used in dishwashers, automobiles, toys and medical equipment.
Describe the process that the firm might follow in measuring the elasticity of
demand for the new product. Is it likely to vary by application?
ANS:
n/a
PTS: 1
skills
4. A large consumer goods company recently entered the business market with a
new product with broad industrial application. They are in the process of
determining the appropriate price for the product. Discuss the role of costs in
determining price and indicate some of the key cost considerations that must be
evaluated in setting price.
ANS:
n/a
PTS: 1
skills
5. When challenged by an aggressive competitor, the immediate thought that comes

to mind for many managers is to fight back and match the price cut. However,
because price wars can be quite costly, experts suggest that a more systematic
process should be followed. Describe the factors that a strategist should consider
before matching a price cut by a rival.

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ANS:
n/a
PTS: 1
skills
6. If an aggressive competitor cuts prices, what action can a strategist take to

minimize the damage and respond in the most cost-effective way? Under what
conditions should a strategist merely ignore an aggressive price move by a
competitor?
ANS:
n/a
PTS: 1
skills
7. How do conditions differ in hypercompetitive environments as opposed to

traditional markets? How can business marketers create and/or use
hypercompetitive rivalries to their advantage and how can they predict the
reactions of their competitors to their pricing actions?
ANS:
n/a
PTS: 1
skills
Reflective Thinking | CB
Chapter 13—Business Marketing Communications: Advertising and Sales Promotion

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MULTIPLE CHOICE
1. Important social media to be considered by B2B marketers would be focused on:

a. discussion forums
b. blogs.
c. social networks.
d. wiki
e. all of the above
ANS: E PTS: 1
2. Social media:
a. are more effective than traditional media at reaching hard-to-reach
propects.
b. are typically less expensive that print media.
c. facilitate targeted, personalized contact across the customer experience
landscape.
d. enhance the impact of trade promtions.
e. all of the above
ANS: C PTS: 1
3. In designing advertising strategy, the business marketer should first:

a. determine the size of the advertising budget.
b. select appropriate media sources.
c. determine advertising objectives.
d. develop a series of responsive messages.
e. forecast sales.

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ANS: C PTS: 1
4. Advertising objectives are typically stated in terms of:

a. sales goals.
b. profit goals.
c. cost constraints.
d. communication goals.
e. market share goals.
ANS: D PTS: 1
5. ____ provides the guidelines for company and advertising agency personnel on
how the product is to be "positioned" in the marketplace.
a. The creative strategy statement
b. The objective-task concept
c. Product position
d. Controlled circulation
e. Advertising objectives
ANS: A PTS: 1
6. A useful method for determining the size of the business or industrial advertising
budget is:
a. the objective-task method.
b. the percentage of sales approach.
c. the competitive parity approach.
d. the affordable approach.
e. the trend line approach.

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ANS: A PTS: 1
7. In formulating advertising messages, the business marketer should:

a. emphasize product and technical specifications.
b. identify general buying criteria of importance to a range of buying center
members.
c. use color and illustrations sparingly.
d. both (a) and (b)
ANS: E PTS: 1
8. The most successful advertisements directed at business customers tend to focus

on:
a. the physical product.
b. product attributes.
c. product benefits.
d. indirect appeals to action.
e. the price of the advertised product.
ANS: C PTS: 1
9. Which method for determining advertising expenditures focuses on the

communications effects of advertising, not on the sales effects?
a. affordable
b. percent-of-sales
c. match competitors
d. objective-task

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e. arbitrary
ANS: D PTS: 1
10. Concerning business-to-business advertising media, _____ publications are

directed at a specific industry and may be read by everyone from foreman to
company president.
a. common
b. specialty
c. horizontal
d. vertical
e. target
ANS: D PTS: 1
11. Concerning business-to-business advertising media, the publications Purchasing,

Advertising Age, and Materials Handling Engineering would be classified as a:
a. specialty publication.
b. target publication.
c. horizontal publication.
d. vertical publication.
e. common publication.
ANS: C PTS: 1
12. Concerning business-to-business advertising media, _____ publications are

directed at a specific task, technology, or function, whatever the industry.

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a. common
b. specialty
c. horizontal
d. vertical
e. target
ANS: C PTS: 1
13. Concerning the allocation of the publication budget among various journals,
a. the cost-per-thousand calculation should be based on circulation to the
total audience.
b. the cost-per-thousand calculation should be based on circulation to the
target audience.
c. the comparison of alternative journals can readily be made by examining
their actual page rates (cost-per-page).
d. the comparison of alternative journals can readily be made by examining
total circulation.
e. publications with low circulation levels should be avoided.
ANS: B PTS: 1
14. In evaluating the effectiveness of a business-to-business advertising program, the

manager should center on:
a. changes in the target market's purchase rate.
b. changes in the target market's product awareness.
c. changes in the target market's product knowledge.
d. both (b) and (c)
ANS: D PTS: 1

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15. Measuring industrial advertising effectiveness involves an assessment of

advertising's impact on:
a. sales variables.
b. profit variables.
c. intervening variables in the buyer’s purchase decision process.
d. all of the above
e. both (b) and (c)
ANS: C PTS: 1
16. An advertising evaluation program would include an assessment of:

a. target markets.
b. media and messages.
c. overall results.
d. buying motives.
e. all of the above
ANS: E PTS: 1
17. The cost of reaching a prospect at a trade show is approximately:

a. $50
b. $150
c. $250
d. $500
e. $750
ANS: C PTS: 1

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18. Which of the following statements concerning trade shows is(are) accurate?
a. The cost of reaching a prospect at a trade show less than the cost of
making a personal sales call.
b. Over 83 percent of all trade show visitors have some buying authority.
c. The average company participates in 45 trade shows per year.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
19. In deciding which trade shows to attend, some business marketing strategists turn
to reports published by Exhibit Surveys, Inc., a company that surveys trade show
audiences. One useful measure that they provide isolates the percentage of the
show audience that has decision authority for the types of products being
exhibited. This is called:
a. Surveys of Industrial Purchasing Power.
b. Controlled Audience Index.
c. Total Buying Plans.
d. Buying Power Index.
e. Net Buying Influences.
ANS: E PTS: 1
20. The final, and critical, step for managing Business-to-Business advertising is:
a. integrating it with other business components.
b. formulating advertising objectives.
c. evaluating and selecting media.
d. evaluating the effectiveness of the campaign.

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ANS: D PTS: 1
21. An advertising objective must:

a. specify what is to be achieved and when.
b. be measurable.
c. be realistic.
ANS: D PTS: 1
22. Which of the following statements regarding advertising expenditures is incorrect?

a. Because advertising is a relatively large part of the total marketing
budget for business firms, managers tend to follow simple rules of
thumb (e.g., allocate 1% of sales to advertising).
b. The fundamental problem with percentage-of-sales rules is that they
implicitly make advertising a consequence rather than a determinant of
sales and profits.
c. Percentage-of-sales rules suggest that the business advertiser reduce
advertising when sales volumes decline.
d. The decision to "match the competition's level of advertising spending"
is an example of a rule of thumb philosophy.
ANS: A PTS: 1

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23. The Objective-Task method addresses the major problem of the rule-of-thumb
methods by applying funds to accomplish a specific goal:
a. so that advertising is a determinant of those results.
b. so that advertising is a consequence of those results.
c. because the manager does not have to have some knowledge or instinct
for the proper relationship between expenditure level and
communication response.
ANS: A PTS: 1
24. The formula for calculating adverting cost is:

a. Cost per thousand = Cost per page / Circulation in thousands.
b. Cost per thousand = Circulation in thousands / Cost per page.
c. Cost per page = Cost per thousands / Circulation in thousands.
d. Cost per page = Circulation in thousands / Cost per thousands
ANS: A PTS: 1
25. Direct mail is commonly used for:

a. corporate image promotion.
b. sales force support.
c. distribution channel communication.
ANS: D PTS: 1

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26. Which of the following statements regarding direct mail is incorrect?

a. Direct mail is efficient when compared to other media.
b. Direct mail is a viable medium when potential buyers cannot be clearly
identified.
c. A direct mail advertisement typically gains the full attention of the
reader.
d. Direct mail can accomplish all of the major advertising functions.
ANS: B PTS: 1
27. An e-mail list can be created by:

a. offering an e-mail alert service.
b. asking for e-mail addresses in direct mail campaigns.
c. collecting e-mail addresses at trade shows.
ANS: D PTS: 1
28. An evaluation of an advertising campaign will usually measure:

a. awareness.
b. recall.
c. motivation.
ANS: D PTS: 1

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29. In deciding which trade shows to attend, some business marketing strategists turn
to reports published by Exhibit Surveys, Inc., a company that surveys trade show
audiences. One useful tool that they provide measures the percentage of the
audience planning to buy the products being exhibited within the next 12 months.
This is called:
a. Surveys of Industry Purchasing Power.
b. Controlled Audience Index.
c. Total Buying Plans.
d. Buying Power Index.
e. Net Buying Influences.
ANS: C PTS: 1
30. A model of "lead efficiency" is calibrated using the firm's:

a. historical sales lead and lead conversion-to-sale data.
b. total number of sales booths at past shows.
c. gross margin.
ANS: E PTS: 1
31. Which of the following statements is (are) true about the Internet’s impact on
marketing communications?
a. Changed from a one-way to a two-way process.
b. Customization of advertising messages.
c. Improved customer service.

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ANS: D PTS: 1
32. Which of the following are advantages of the objective-task method of setting
advertising budgets?
a. Advertising is determinant of results, not a consequence.
b. Easy to use and familiar to management.
c. Must use instinct for identifying proper level of expenditures to reach
goals.
ANS: A PTS: 1
33. The important elements of perception include:

a. attention.
b. interpretation.
c. benefits.
d. Only (a) and (b).
ANS: A PTS: 1
34. Horizontal publications are more effective for business marketers when:
a. their product has applications in only a few industries.
b. many industries are potential users
c. well-defined functions are the principal buying influencers.

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ANS: E PTS: 1
35. Characteristics of effective B2B print ads include:

a. the use of a “rational approach.”
b. a clear description of the product and its benefits.
c. a detailed listing of most pricing considerations.
ANS: E PTS: 1
36. Recent research has indicated that the indirect communication effects of
advertising include:
a. increased word-of-mouth communications.
b. increased overall company reputation.
c. improved logistics performance.
ANS: E PTS: 1
37. The benefits of having a trade show exhibit to business marketers include:
a. the ability communicate with a large and interested audience.
b. free publicity.
c. the generation of sales leads.

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ANS: D PTS: 1
38. Which of the following factors should be considered when planning an effective
trade show communications strategy?
a. The focus of the marketing efforts.
b. The appropriate show mix.
c. The functions performed by the trade show in the total marketing
communications program.
ANS: D PTS: 1
39. Which of the following represent common trade-show objectives?

a. Identification of decision influencers.
b. Handling current customer problems.
c. Providing product, service, and company information.
ANS: D PTS: 1
40. Indices of trade show performance include:

a. attraction.
b. contact.
c. conversion efficiency.

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ANS: D PTS: 1
TRUE/FALSE
1. Most industrial firms spend roughly the same amount of dollars on advertising as
they do on personal selling.
ANS: F PTS: 1
2. Generally, social media can augment an offering to expand the value proposition,
thereby changing what people buy and how they relate to a brand
ANS: T PTS: 1
3. Business-to-business advertising objectives are usually stated in terms of a specific

sales goal.
ANS: F PTS: 1
4. Organizational buyers tend to retain messages that clash with their attitudes,
needs, and beliefs.
ANS: F PTS: 1

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5. From the business marketer's perspective, the cost-per-thousand calculations for

various media options should be based on circulation to the target audience, not
the total audience.
ANS: T PTS: 1
6. The planning and budgeting for trade shows must focus on specific objectives to
be accomplished.
ANS: T PTS: 1
7. The organizational buyer may read every word of the ad copy, and find a meaning
in it quite opposite from that intended by the advertiser.
ANS: T PTS: 1
8. Measuring advertising effectiveness means assessing advertising's impact on sales.
ANS: F PTS: 1
9. Internet marketing costs far less than direct mail marketing.
ANS: T PTS: 1

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10. Although certain mechanical aspects help create awareness and interest in the
advertisement, its ultimate success will depend on how well the message is
targeted to the benefits sought by the buying influential.
ANS: T PTS: 1
11. Circulation is the most important criterion in the selection of publications.
ANS: F PTS: 1
12. If a business marketer's product has applications only within a few industries,
horizontal publications are a logical choice.
ANS: F PTS: 1
13. Lead efficiency is defined as the number of sales leads obtained at the show
divided by the total number of show visitors with definite plans to buy the
exhibitor's product or one similar to it.
ANS: T PTS: 1
14. Vertical publications are directed at a specific task, technology, or function

whatever the industry.
ANS: F PTS: 1

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15. Even though a publication has a high cost-per-thousand basis, it may in fact be a
cost-effective alternative due to a low rate of wasted circulation.
ANS: T PTS: 1
16. The Internet is more than just an advertising medium for business marketers
because it can also help them create value for customers by customizing messages
and helping customers search for products.
ANS: T PTS: 1
17. For many purchasing decisions, advertising alone cannot create product
preference.
ANS: T PTS: 1
18. The rules of thumb approach to setting advertising budgets is not always effective,
but it is commonly used because it is easy to implement and managers are familiar
with it.
ANS: T PTS: 1
19. The five primary areas for evaluating advertising are profits generated, markets,
motives, messages, and results.
ANS: F PTS: 1

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20. Recent research indicates that follow-up sales efforts generate higher sales
productivity when customers have already seen a company’s products at a trade
show.
ANS: T PTS: 1
COMPLETION
1. The communications process attempts to take potential buyers sequentially from

unawareness of a product to____________________, to brand preference, to
conviction that a particular purchase will fulfill their requirements, and ultimately
to____________________.
ANS: awareness, purchase
PTS: 1
2. The initial stage of developing the business-to-business advertising program

entails setting____________________and defining the____________________.
ANS: Advertising objectives, target market
PTS: 1
3. The____________________statement provides guidelines for the company and

advertising agency on how to position the product in the marketplace.

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ANS: creative strategy
PTS: 1
4. The objective-task method for budgeting ad expenditures consists of evaluating

the tasks advertising will perform, analyzing the costs, and summing up
the____________________to arrive at a final budget.
ANS: total costs
PTS: 1
5. Many trade publications are____________________publications, meaning that

they offer free subscriptions to selected readers.
ANS: requester
PTS: 1
6. The number of sales leads obtained at a trade show divided by the total number of
show visitors with definite plans to buy the exhibitor’s product or one similar to it
describes the concept of____________________.
ANS: lead efficiency
PTS: 1

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ESSAY
1. Dell Computer has been developing closer relationships with its corporate
customers by setting up Web sites on internal company networks. The system
enables individual employees at customer locations to easily order from a pre-
approved line of Dell Computers. Discuss how Dell might use direct e-mail
advertising to reach employees at these companies and reinforce its Web strategy.
ANS:
n/a
PTS: 1
NAT: AACSB Reflective Thinking | CB&E Model Promotion | R&D Strategic &
systems skills
2. For most business marketers, the amount of the promotional budget spent on
personal selling far exceeds expenditures on advertising. In addition, it is nearly
impossible to evaluate the impact of advertising on industrial sales. Given this
situation, should business marketers advertise, and how can they justify
advertising if they cannot measure its impact on sales?
ANS:
n/a
PTS: 1
systems skills
3. Describe the steps that a business marketing manager should follow in developing
an appropriate advertising message for a new high-speed packaging system
targeted for the food industry.
ANS:
n/a

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PTS: 1
systems skills
4. Explain why a full-page ad by Digital in the Wall Street Journal might be carefully
read by a production manager at Pillsbury but quickly passed over by the
purchasing manager across the hall.
ANS:
n/a
PTS: 1
systems skills
5. Possis Medical invests a significant proportion of their promotional budget in trade

shows. Management, however, wonders whether they are getting the proper
return on this sizeable investment. Propose a set of guidelines that the firm might
use in designing a more effective trade show communications strategy and in
evaluating trade show performance.
ANS:
n/a
PTS: 1
systems skills
6. Compare and contrast the rules of thumb and objective task method of setting
advertising budgets. Describe the process that business marketers should use that
decide to use the objective task method.
ANS:
n/a

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PTS: 1
systems skills
7. Interactive marketing, or the use of the Internet, e-mail, and web sites in
advertising, is becoming more common. Compare and contrast direct mail with
interactive marketing as direct marketing tools. What factors should business
marketers consider when deciding on the mix of direct marketing approaches to
use?
ANS:
n/a
PTS: 1
NAT: AACSB &E Model Promotion | R&D Strategic & systems skills
Chapter 14—Business Marketing Communications: Managing the Personal Selling

Function
MULTIPLE CHOICE
1. High-performing salespeople are generally set apart from low performing sales
people on the basis of:
a. their time on the job
b. their ability to recruit desired ad hoc members on to their sales team
c. their past experience in new task selling situations
d. all of the above
ANS: B PTS: 1

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2. Expertise coordination is the process of

a. integrating the functions of finance and operations with sales
b. working with top management to help engage the top level managers in the
sales process
c. diagnosing customer requirements and assembling an ad hoc team of internal
experts who possess the skills to deliver a superior customer solution.
d. evaluating competitive offers and developing plausible approaches for
surpassing those offers in the mind of prospective customers
e. All of the above
ANS: C PTS: 1
3. The best practices of high-performing salespeople can provide

a. relational adaptiveness to a sales effort
b. Improved role definition to the sales job
c. the opportunity to create relationship congruity
d. relationship quality to the sales team
e. a template for improving the client management process.
ANS: E PTS: 1
4. The product-oriented sales organization presents which of the following

disadvantages?
a. A "critical mass" of demand is required to offset the associated costs.
b. Compared to other ways of organizing the sales force, the salesperson
has the greatest degree of latitude in choosing which products and
customers to emphasize.
c. Several salespersons may be required to meet the diverse product
requirements of a single customer.
d. all of the above

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e. both (a) and (c)
ANS: E PTS: 1
5. When each industrial salesperson performs all of the selling tasks associated with
all of the firm's products, and performs these tasks for all customers in a particular
territory, the sales force is organized on:
a. a customer basis.
b. a market-centered basis.
c. a geographical basis.
d. a product basis.
e. a cluster basis.
ANS: C PTS: 1
6. The geographical sales organization structure presents which of the following

disadvantages?
a. Each salesperson requires substantial product and customer knowledge.
b. This is the most costly form of sales organization.
c. Sales personnel may have a tendency to emphasize those products and
end-use applications with which they are most familiar.
d. all of the above
e. (a) and (c) only
ANS: E PTS: 1

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7. By organizing its sales force around retailing, financial services, and the petroleum
industry, Hewlett-Packard is employing the _____ approach in structuring the
sales force.
a. geographical
b. product
c. market-centered
d. territory
e. national accounts
ANS: C PTS: 1
8. Effective sales training:

a. builds the confidence and motivation of the salesperson.
b. keeps the personal selling function aligned with marketing program
objectives.
c. reduces the costs associated with recruiting.
d. all of the above
e. (a) and (b) only
ANS: D PTS: 1
9. Salespersons tend to have a high level of job satisfaction when:

a. management provides them with the assistance and support needed to
meet unusual and nonroutine problems.
b. they perceive themselves to have an active part in determining company
policies and standards that affect them.
c. they perceive that their first-line supervisor closely directs and monitors
their activities.
d. all of the above
e. (a) and (b) only

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ANS: D PTS: 1
10. Sales managers use a variety of measures to evaluate salesperson performance.

When the measurement system is behavior-based, the sales manager:
a. employs objective measures to evaluate performance.
b. emphasizes a compensation system with a large incentive component.
c. monitors and directs the activities of salespeople.
d. indirectly supervises salesperson activities.
e. measures the self-esteem of each salesperson.
ANS: C PTS: 1
11. Both behavior-based and outcome-based measures are used by sales managers to
evaluate salesperson performance. When the system is outcome-based, the sales
manager:
a. employs objective measures (sales results, market share gains) to
evaluate performance.
b. directly monitors the activities of salespeople.
c. uses subjective measures of salesperson performance.
d. emphasizes a compensation system with a large fixed component.
e. measures the self-esteem and verbal intelligence of each salesperson.
ANS: A PTS: 1

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12. In the sales performance literature, recent evidence suggests that a strict reliance
on the ____ measurement approach may not produce the desired sales or
marketing results because it "has lulled some sales executives into thinking that
important sales outcomes could be reasonably accomplished without intense
management reinforcement."
a. esteem-based
b. behavior-based
c. satisfaction-based
d. outcome-based
ANS: D PTS: 1
13. The _____ measurement approach of salesperson performance is best suited for
the emerging emphasis on relationship selling.
a. esteem-based
b. behavior-based
c. satisfaction-based
d. outcome-based
ANS: B PTS: 1
14. Using the behavior-based measurement approach to salesperson performance,

sales managers:
a. monitor and direct the activities of salespeople.
b. use subjective measures of salesperson behavior.
c. emphasize a compensation system with a large fixed component.
d. consider the knowledge and presentation skills of the salesperson.
e. all of the above

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ANS: E PTS: 1
15. Concerning the level of sales that a salesperson might achieve in a particular
territory, which specific territory traits appear to be most important?
a. potential, workload, dispersion
b. potential, concentration, dispersion
c. potential, competition, concentration
d. potential, workload, competition
e. potential, dispersion, competition
ANS: B PTS: 1
16. The characteristic of a sales territory that refers to the degree to which potential is
available in the larger accounts in a particular territory is called:
a. potential.
b. critical mass.
c. concentration.
d. workload.
ANS: C PTS: 1
17. The sales resource grid indicates that a particular territory (planning and control
unit) possesses high PCU opportunity but low sales organization strength. This
suggests which of the following sales resource assignments?
a. Invest a high level of sales resources to take advantage of opportunity.
b. Invest a minimal level of sales resources; selectively eliminate resource
coverage; possible elimination of PCU.

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c. Either direct a high level of sales resources to improve position and take
advantage of opportunity or shift resources to other planning and
control units.
d. Invest a moderate level of sales resources to maintain current position.
ANS: C PTS: 1
unit) possesses low PCU opportunity but high sales organization strength. This
b. Invest a minimal level of sales resources; selectively eliminate resource
coverage; possible elimination of PCU.
c. Either direct a high level of sales resources to improve position and take
advantage of opportunity or shift resources to other planning and
control units.
d. Invest a moderate level of sales resources to maintain current position.
ANS: D PTS: 1
19. The primary objective of the organizational selling center include:

a. acquisition and processing of pertinent marketing-related information.
b. execution of selling strategies.
c. designing the channel structure.
ANS: D PTS: 1

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20. A _____ sales organization is especially appropriate when the product line is large
or diverse.
a. geographical
b. product oriented
c. market centered
ANS: B PTS: 1
21. A key account represents a customer who:

a. purchases an insignificant volume as a percentage of a seller's total
sales.
b. buys for an organization with geographically concentrated units.
c. involves several organizational members in the purchasing process.
ANS: C PTS: 1
22. Responsibility for recruiting salespersons may lie with:

a. the first-line supervisor.
b. the Human Resources department.
c. executives at the headquarters level.
ANS: D PTS: 1

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23. Motivation to perform is thought to be related strongly to:

a. the value the salesperson places on rewards.
b. the individual's perceptions of the types and amounts of rewards that
will accrue from various degrees of job performance.
c. the extent to which a salesperson can see him/herself as a member of
the target market.
ANS: D PTS: 1
24. Job satisfaction is theorized to decline when the salesperson's perception of

his/her role is:
a. inaccurate in terms of the expectations of superiors.
b. characterized by conflicting demands among role partners that the
salesperson cannot possibly resolve.
c. surrounded by uncertainty due to a lack of information about the
expectations and evaluation criteria of superiors and customers.
ANS: E PTS: 1
unit) possesses high PCU opportunity and high sales organization strength. This
b. Invest a minimal level of sales resources.
c. Invest a moderate level of sales resources to keep current position

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strength.
d. Either direct a high level of sales resources to improve position or shift
resources to other PCUs.
ANS: A PTS: 1
unit) possesses low PCU opportunity and low sales organization strength. This
a. Invest a high level of resources to take advantage of opportunity.
b. Invest a moderate level of resources.
c. Invest a minimal level of sales resources, selectively eliminate resource
coverage, or possibly eliminate the PCU.
ANS: C PTS: 1
27. _____ is a measure of the total business opportunity for all sellers in a particular
market.
a. Potential
b. Concentration
c. Dispersed
d. Territory workload
ANS: A PTS: 1
28. The final phase of for selecting key accounts:

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a. centers on the profit potential of a customer.

b. identifies those customer accounts that have unique support
requirements.
c. considers the degree to which the transactions with potential customer
will complement the economies of the seller's business.
ANS: C PTS: 1
29. The first phase of for selecting key accounts:

a. identifies those customer accounts that have unique support
requirements.
b. centers on the profit potential of a customer.
c. considers the degree to which the transactions with potential customer
ANS: B PTS: 1
30. The second phase of for selecting key accounts:

a. considers the degree to which the transactions with potential customer
b. identifies those customer accounts that have unique support
requirements.
c. centers on the profit potential of a customer.
ANS: B PTS: 1

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31. Organization of the sales force depends on the:

a. nature of the product.
b. the length of the product line.
c. the nature of the buying behavior in each segment.
ANS: D PTS: 1
32. A key account represents a customer who:

a. buys for an organization with geographically concentrated units.
b. involves a small number of key organizational members in the
purchasing process.
c. purchases a significant volume as a percentage of a seller’s total sales.
ANS: C PTS: 1
33. When compared to a traditional selling focus, a key account selling focus is
different in which of the following ways?
a. Uses a longer-term time horizon.
b. Wants to lower customer’s total costs.
c. Individual salesperson is primary link to customer organization.
ANS: E PTS: 1

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34. Research suggests that successful national account units:

a. have senior management support.
b. have well-defined objectives.
c. have experienced individuals who know how to create effective
customer solutions.
ANS: D PTS: 1
35. Which of the following topics must be part of a business firm’s salesperson
training programs?
a. Effective communication skills.
b. Knowledge about the company.
c. Knowledge about the product line.
ANS: D PTS: 1
36. _____ is the amount of effort a salesperson desires to expend on each of the
activities or tasks associated with his or her job.
a. Supervision
b. Motivation
c. Attitude
d. Performance
e. Intrinsic satisfaction

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ANS: B PTS: 1
37. A salesperson’s job performance is a function of:

a. product knowledge and expertise.
b. level of motivation.
c. aptitude or ability.
ANS: E PTS: 1
38. When a salesperson attains rewards on a personal basis, such as feelings of

accomplishment or self-worth, this is a an example of:
a. internally mediated rewards.
b. externally mediated rewards.
c. job satisfaction.
d. aptitude.
ANS: A PTS: 1
39. Which of the following are influences on the potential level of sales in a particular
territory?
a. Salesperson characteristics.
b. Competition.
c. Territory characteristics.

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ANS: D PTS: 1
40. To identify coverage gaps across territories and to better match sales resources with market
opportunity, the GE process for accomplishing territory alignment involves
a. evaluating account quality
b. examining account density
c. implementing changes to enhance sales force effectiveness and
efficiency
d. all of the above
e. a and c above
ANS: D PTS: 1
TRUE/FALSE
1. The most common form of sales organization found in the industrial market is the
market-centered organization.
ANS: F PTS: 1
2. Frequent contact between the salesperson and sales manager is instrumental to

the job satisfaction of the salesperson.
ANS: F PTS: 1

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3. Salespersons appear to be able to accept authority and direction from a number of

different departments in the organization without a significant negative impact on
job satisfaction.
ANS: T PTS: 1
4. An example of a planning and control unit or PCU is a sales territory.
ANS: T PTS: 1
5. Relationship quality is composed of at least two dimensions: trust in the

salesperson and satisfaction with the salesperson.
ANS: T PTS: 1
6. If the territory is geographically dispersed, sales will probably be lower due to time
wasted in travel by the salesperson.
ANS: T PTS: 1
7. A key account represents a customer who buys for an organization with

geographically concentrated units.
ANS: F PTS: 1

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8. The final phase for selecting key accounts centers on the profit potential of a
customer.
ANS: F PTS: 1
9. A successful training effort will increase the cost of recruiting.
ANS: F PTS: 1
10. Internally mediated rewards are those controlled and offered by managers or
customers.
ANS: F PTS: 1
11. A salesperson's job performance is a function of aptitude.
ANS: T PTS: 1
12. Salespersons tend to have a higher level of job satisfaction when they perceive
that their first-line supervisor closely directs and monitors their activities.
ANS: T PTS: 1
13. Smaller firms often reduce training costs by hiring experienced and more
expensive salespersons.

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ANS: T PTS: 1
14. Changes in business marketing strategy requires corresponding changes in

personal selling styles.
ANS: T PTS: 1
15. When the sales resource opportunity grid indicates a low PCU and a high PCU sales
organization strength, the firm should invest a moderate level of sales resources
to keep current position strength.
ANS: T PTS: 1
16. Strategic components of sales force management include methods for organizing
the sales force and key account management.
ANS: T PTS: 1
17. The organization of the sales force can be affected by the length of a product line
and the nature of buying behavior in each market segment.
ANS: T PTS: 1

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18. A key account represents a customer that purchases a significant volume as a

percentage of a seller’s total sales but is easier to manage because there are only
a few organizational members involved in the purchasing process.
ANS: F PTS: 1
19. The decision whether to use key accounts depends on three factors: profit
potential, learning benefits, and cost drivers associated with customers.
ANS: T PTS: 1
20. Salesperson job satisfaction decreases when there is increased uncertainty about
expectations and the length of the product line increases.
ANS: F PTS: 1
SHORT ANSWER
1. Relationship marketing activities influence three important drivers of relationship

marketing effectiveness including
relationship____________________,____________________,
and____________________.
ANS:
quality, breadth, composition
breadth, composition, quality
composition, quality, breadth
PTS: 1

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2. Relationship____________________represents the number of interpersonal ties

that a firm has with an exchange partner.
ANS:
Breadth
PTS: 1
3. Relationship____________________captures the ability of an interfirm

relationship to achieve desired objectives.
ANS:
efficacy
PTS: 1
4. Relationship____________________represents the customer’s desire to engage in

strong relationships with a current or potential supplier.
ANS:
orientation
PTS: 1

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5. Key account customers purchase in very large volume and the focus of exchange
extends beyond a core product as the seller augments the offering
through____________________ services and support.
ANS:
value-added
value added
PTS: 1
6. The structure of the buying center in a traditional selling focus is indicated by

the____________________and a few other individuals are involved in the buying
decision.
ANS:
purchase manager
PTS: 1
7. Periodic training is required to sharpen the skills of experienced salespersons,

especially when the firm’s environment is____________________.
ANS:
changing rapidly
PTS: 1

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8. Externally mediated rewards are controlled and offered

by____________________or____________________, such as financial incentives,
pay, or recognition.
ANS:
managers, customers
customers, managers
PTS: 1
9. An outcome-based sales force control system involves less direct field supervision
of salesperson activities and uses____________________measures to
evaluate____________________and a compensation system with a large
incentive component.
ANS:
objective, performance
PTS: 1
ESSAY
1. Key account management strategies are emphasized by top-tier business

marketing firms like 3M, IBM, and Dow Chemical. Compare and contrast a key
account with a regular account. Next, describe how the sales strategy for a key
account differs from the traditional selling focus used for regular accounts.
ANS:
n/a
PTS: 1

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systems skills
2. While key accounts possess buying power, they are also very demanding
customers that are often more costly to serve. If the business marketing firm can
have close and important relationships with a rather small set of customers and if
these relationships each require a large investment, key accounts must be chosen
wisely. Describe the process, along with the specific criteria that the business
marketing strategist should use, in selecting the right key accounts.
ANS:
n/a
PTS: 1
systems skills
3. IBM is reorganizing its marketing and sales operations into 14 worldwide industry
groups such as banking, retail, and insurance. In moving away from an
organization based on geography, IBM hopes to eliminate turf wars and make
itself more responsive to customers. Explain the cost/benefit trade-offs of a
market-centered sales organization. What is the nature of the turf wars that
plague firms that are organized around products or geographical territories?
ANS:
n/a
PTS: 1
systems skills

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4. Cassidy Computer Systems has witnessed a gradual decline in the performance of

its sales force since a key sales manager left the company for another position.
While well-educated and extremely knowledgeable about the computers that they
sell, the sales force is not inspired by the management style of their new superior.
Using the concepts of sales force motivation, job satisfaction, and role
perceptions, describe why salesperson performance may have declined at Cassidy.
Recommend a strategy that Cassidy could adopt to improve the effectiveness and
productivity of their sales force.
ANS:
n/a
PTS: 1
systems skills
5. Describe the factors that appear to influence the salesperson's satisfaction with
the job and the work environment.
ANS:
n/a
PTS: 1
systems skills
6. Describe the sales resource opportunity grid and illustrate how a firm might use it
in deploying the sales force. What specific information does a sales manager
require in order to properly apply and use the sales resource opportunity grid?
ANS:
n/a
PTS: 1

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systems skills
7. What roles do account managers play in the selling organization? What are some
of the characteristics and factors that separate high performing account managers
from other account managers?
ANS:
n/a
PTS: 1
systems skills
8. Why is training so important to selling organizations? What are some of the keys
to effective salesperson training programs?
ANS:
n/a
PTS: 1
systems skills
Chapter 15—Marketing Performance Measurement
MULTIPLE CHOICE
1. The balanced scorecard measures the performance of a business unit from:

a. a customer perspective.
b. a financial perspective.
c. a learning and growth perspective.

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ANS: D PTS: 1
& innovation
2. The level of marketing control that examines whether the strategy is being
implemented as planned and whether it produces the intended results is termed:
a. strategic control.
b. annual plan control.
c. strategic component control.
d. profitability control.
e. incremental control.
ANS: A PTS: 1
& innovation
3. The level of marketing control that examines how well resources have been
utilized in each element of the marketing strategy is:
c. efficiency and effectiveness control.
e. incremental control.
ANS: C PTS: 1
& innovation
4. The ____ is a comprehensive, periodic and systematic evaluation of the firm's

marketing operation which analyzes the market environment and the firm's
internal marketing activities.
a. environmental audit
b. marketing audit
c. profit audit
d. annual plan

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e. competitive audit
ANS: B PTS: 1
& innovation
5. The purpose of annual plan control is to:

a. examine the general direction the company is pursuing.
b. examine how well resources have been utilized in each element of the
marketing strategy.
c. examine where the company is making or losing money.
d. examine whether the planned performance standards are being
achieved.
e. examine the general directions of industry demand.
ANS: D PTS: 1
& innovation
6. If a business marketer is particularly concerned with over- or underspending on a

particular marketing strategy element, such as advertising, which of the following
tools would be most useful?
a. expense-to-sales ratio analysis
b. market share analysis
c. sales analysis
d. marketing audit
e. profit analysis
ANS: A PTS: 1
& innovation

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7. If a business marketer is concerned with how the firm is performing relative to

competition, which of the following tools would be most useful?
a. expense-to-sales ratio analysis
b. market potential analysis
c. market share analysis
d. sales analysis
e. segmental analysis
ANS: C PTS: 1
& innovation
8. ____ is an assessment of how the firm is doing relative to competition.

a. Sales analysis
b. Expense-to-sales analysis
c. Profit analysis
d. Market share analysis
e. Segmental analysis
ANS: D PTS: 1
& innovation
9. St. Paul Equipment Company experienced a 15 percent sales gain that, on the
surface, appears favorable. However, if total industry sales are up 30 percent, an
analysis of ____ could suggest that the firm has not fared well relative to
competitors.
a. expense-to-sales ratios
b. profit
c. market share
d. distribution costs
e. sales by channel type
ANS: C PTS: 1

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& innovation
10. Flagstaff Electrical Supply wonders whether they are spending too much or too
little on various elements in their marketing program. Which of the following tools
would appear to be most appropriate in examining the efficiency of operations?
a. sales analysis
b. market share analysis
c. expense-to-sales ratio analysis
d. price analysis
e. product analysis
ANS: C PTS: 1
& innovation
11. _____ reveals the links between performing particular activities and the demands
that those activities make on the organization's resources.
a. A logistical cost system
b. A supply-oriented cost system
c. A demand-oriented cost system
d. An activity-based cost system
e. A controllable element cost system
ANS: D PTS: 1
& innovation
12. Which of the following statements concerning an activity-based cost (ABC) system
is(are) correct?
a. ABC analysis illuminates exactly what activities are associated with a
particular product or customer segment and how these activities are
linked to the generation of revenues and the consumption of resources.
b. ABC analysis often relies on percentage allocations that are somewhat

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arbitrary.
c. ABC analysis segregates the expenses of indirect and support resources
by activities.
d. all of the above
e. (a) and (c) only
ANS: E PTS: 1
& innovation
13. Using this approach, the costs of producing a printed circuit board are determined
by first evaluating the activities required to produce the board and then costing
out each of the activities. This describes:
a. traditional cost accounting.
b. an activity-based cost system.
c. variable cost analysis.
d. direct traceable costing.
e. contribution costing.
ANS: B PTS: 1
& innovation
14. The process that translates marketing plans into action assignments and ensures
that such assignments are executed in a manner to accomplish a plan's defined
objectives is called:
a. marketing control.
b. marketing implementation.
c. strategic marketing.
d. marketing accountability.
e. competitive advantage.
ANS: B PTS: 1

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& innovation
15. If marketing implementation is poor:

a. management may never become aware of the soundness of the
strategy.
b. the cause of failure is hard to diagnose because poor strategy might be
masked by the inability to execute.
c. management can usually see the problem immediately.
d. all of the above
e. (a) and (b) only
ANS: E PTS: 1
& innovation
16. Which of the following could assume a role in the marketing strategy center?
a. technical service managers
b. physical distribution managers
c. research & development executives
d. manufacturing executives
e. all of the above
ANS: E PTS: 1
& innovation
17. _____ provides a visual representation of the cause-and-effect relationships

among the components of a company’s strategy.
a. A Strategy Map
b. Market Sensing
c. Customer-Linking
d. Building Blocks
ANS: A PTS: 1

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& innovation
18. Marketing managers who are flexible and intelligent in dealing with the firm's
information and control systems are exhibiting good _____ skills.
a. monitoring
b. allocation
c. interacting
d. organizing
ANS: A PTS: 1
& innovation
19. Which of the following are steps in the planning process that utilizes the Balanced
Scorecard and a Strategy Map to build a tightly integrated marketing strategy?
a. Define Financial Objectives.
b. Define the Customer Value Proposition.
c. Identify the Critical Strategic Themes and Internal Processes.
ANS: D PTS: 1
& innovation
20. When using strategy maps, shareholder value can be created via:
a. long-term revenues.
b. short-term productivity.
c. product differentiation.
ANS: E PTS: 1

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& innovation
21. The _____ of the Balanced Scorecard describes the human capital, information
capital, and organizational capital that must be aligned with strategy.
a. financial perspective
b. customer perspective
c. internal perspective
d. learning and growth perspective
ANS: C PTS: 1
& innovation
22. Which of the following are interrelated evaluations that are required to design a
marketing strategy?
a. How much should be spent on marketing in the planning period?
b. How are marketing dollars to be allocated?
c. Within each element of the marketing strategy, how should dollars be
allocated?
d. Which segments, products, and geographic areas are most profitable?
ANS: E PTS: 1
& innovation
23. _____ represents the portion of total purchases in a product and service category
that a customer makes from the firm.
a. Share-of-wallet
b. Market share
c. Marketing reach
d. Feedforward control

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ANS: A PTS: 1
& innovation
24. The major forms of marketing control are:

a. control over the efficient allocation of marketing effort.
b. the comparison of planned and actual performance.
ANS: C PTS: 1
& innovation
25. The primary levels of marketing control include:

c. efficiency and effectiveness control.
ANS: E PTS: 1
& innovation
26. Examples of product measures for efficiency and effectiveness control include
which of the following?
a. Sales by market segments.
b. Logistics costs by logistics activity by channel.
c. New accounts per time period.
ANS: A PTS: 1

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& innovation
27. The goal of _____ is to describe where the firm is making or losing money in terms
of the important segments of its business.
a. strategic control
b. annual plan control
c. efficiency and effectiveness control
d. profitability control
ANS: D PTS: 1
& innovation
28. Research has shown that which of the following are important implementation
skills for marketing managers?
a. Organizing.
b. Allocating.
c. Monitoring.
ANS: D PTS: 1
& innovation
29. To be successful, successful business marketing managers:

a. must assume an active role in the marketing strategy center.
b. must negotiate with other functions.
c. must get advanced secondary education.
ANS: E PTS: 1

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& innovation
30. The ____ of the Balanced Scorecard describes the expected outcomes of strategy,
such as revenue growth or productivity improvements.
a. financial perspective
b. customer perspective
c. internal perspective
d. learning and growth perspective
ANS: A PTS: 1
& innovation
31. The primary responsibility for strategic control typically lies with:
a. top management.
b. middle management.
c. salespeople.
d. buying organizations.
e. front-line employees.
ANS: A PTS: 1
& innovation
TRUE/FALSE
1. The balanced scorecard attempts to keep the sales of a business unit in balance
with profit growth.
ANS: F PTS: 1
& innovation

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2. One component of the balanced scorecard centers on customer satisfaction while

another centers on employee satisfaction.
ANS: T PTS: 1
& innovation
3. The central focus of a marketing audit is on the firm's cost accounting system.
ANS: F PTS: 1
& innovation
4. Expense-to-sales ratios provide one measure of the efficiency of marketing

operations.
ANS: T PTS: 1
& innovation
5. R&D, manufacturing, technical service, and other business functions play

fundamental roles in the development and implementation of business marketing
strategy.
ANS: T PTS: 1
& innovation
6. Under an activity-based cost system, managers must refrain from allocating all
expenses to individual units and, instead, separate the expenses and match them
to the level of activity that consumes the resources.
ANS: T PTS: 1
& innovation

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7. Warehousing costs fit into an activity-based cost system but advertising costs do
not.
ANS: F PTS: 1
& innovation
8. Sales results provide an excellent benchmark against which to measure

performance.
ANS: F PTS: 1
& innovation
9. Although the dividing line between strategy and execution is a bit fuzzy, it is often
not difficult to diagnose implementation problems and to distinguish them from
strategy deficiencies.
ANS: T PTS: 1
& innovation
10. Market share analysis is an attempt to determine why actual sales varied from
planned sales.
ANS: F PTS: 1
& innovation
11. Good implementers struggle and wrestle with their markets and businesses until
they can simply and powerfully express the "back of the envelope ratios necessary
to run the business, regardless of formal control system inadequacies."
ANS: T PTS: 1

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& innovation
12. The Balanced Scorecard measures performance from a learning and growth
perspective.
ANS: T PTS: 1
& innovation
13. Marketing control is a process whereby management generates information on

performance, such as efficient allocation of marketing effort.
ANS: T PTS: 1
& innovation
14. The efficiency of a marketing operation can be assessed via expense-to-sales

ratios.
ANS: T PTS: 1
& innovation
15. In regard to profitability control, a segment can be a channel structure.
ANS: T PTS: 1
& innovation
16. Strategy maps can be used to align internal processes to support different
marketing strategies.
ANS: T PTS: 1

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& innovation
17. The strategy map, when coupled with the measures and targets from the balanced
scorecard, provides a valuable framework for the strategist.
ANS: T PTS: 1
& innovation
18. For customers with a transactional focus, business marketers should discontinue
the use of expensive customer databases and set revenue targets and profit goals.
ANS: F PTS: 1
& innovation
19. Middle management typically has the primary responsibility for efficiency and
effectiveness control.
ANS: T PTS: 1
& innovation
20. In annual plan control, the objectives specified in the annual plan become the
performance standards that are compared to actual results.
ANS: T PTS: 1
& innovation
21. Relating sales revenues and marketing costs to market segments improves
decision making.
ANS: T PTS: 1

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& innovation
22. Important implementation skills for marketers include interacting, allocating, and
monitoring.
ANS: T PTS: 1
& innovation
23. The strategy map provides a framework for highlighting the interdisciplinary role
of marketing strategy and for exploring key implementation requirements.
ANS: F PTS: 1
& innovation
COMPLETION
1. In the balanced scorecard, the____________________perspective describes the

business processes that have the greatest effect on the chosen strategy, such as
customer relationship management, innovation management or supply-chain
management.
ANS: internal
PTS: 1
& innovation
2. The second step of the strategy process is defining the

customer____________________for target customer segments, in effort to
generate revenue from existing customers.
ANS: value proposition

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PTS: 1
& innovation
3. The____________________coupled with the balanced scorecard provides a

valuable framework by describing the strategy, detailing objectives for the
processes that create value and the organizational assets needed to support them.
ANS: strategy map
PTS: 1
& innovation
4. The portion of the total purchases in a product and service category that a
customer makes from the firm is known as ____________________.
ANS: Share-of-wallet
PTS: 1
& innovation
5. Strategic____________________focuses on assessing whether the strategy is

being implemented as planned and whether it produces the intended results.
ANS: control
PTS: 1
& innovation
6. Efficiency and effectiveness control is the primary responsibility

of____________________management.

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ANS: middle
PTS: 1
& innovation
7. Expense-to-sales ratios are analyses of the____________________of marketing

operations to determine whether the firm is overspending or underspending.
ANS: efficiency
PTS: 1
& innovation
8. ____________________cost systems reveal the links between performing

particular activities and the demands those activities make on the organization’s
resources.
ANS: Activity-based
PTS: 1
& innovation
ESSAY
1. Dell Computer entered into a strategic alliance with Lexmark, a producer of

printers and ink cartridges, to provide a more direct challenge to Hewlett-Packard
(H-P)—the market leader in printer and cartridge sales. Clearly, this will take time
and a well conceived strategy by Dell because H-P has about 50 percent market
share in printer sales and a huge installed base of printer customers around the
world. For this strategic initiative in the printer business, describe how Dell might
use a strategy map to illustrate objectives, targets, and strategies as well as
measures it might use to assess its performance in this new business.

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ANS:
n/a
PTS: 1
skills
2. With the balanced scorecard, executives can now measure how their business
units create value for current and future customers and how they must enhance
internal capabilities and the investment in people, systems, and procedures
necessary to improve future performance. Describe the four perspectives of
organizational performance that are considered in the balanced scorecard
approach.
ANS:
n/a
PTS: 1
skills
3. Motorola plans to introduce an advanced personal communicator to the business

market. They feel that the system is ideally suited for managers. While a broad
marketing strategy has been sketched out, it is now time to put together the
specific details of the marketing plan from start-to-finish. The planned
introduction is six months away. Provide a comprehensive list of the key decisions
the firm should make in the areas of pricing, channels, advertising, sales force
training, segmentation, and related areas. Next, describe the specific types of
information that might be gathered to facilitate each decision. Finally, once the
product is introduced, what performance areas should be monitored to determine
if strategy adjustments are required for the new product?
ANS:
n/a

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PTS: 1
skills
4. A firm that sells sophisticated equipment to paper manufacturers (for example,

Mead Corporation) learned that the same technology may have important
potential in the lucrative food-processing industry. Potential customers here
would include firms such as General Foods and Sarah Lee. Suggest several critical
issues that this firm should address before embarking on this new strategy course.
ANS:
n/a
PTS: 1
skills
5. Many marketing plans fail because they are poorly implemented. Explain the
special implementation challenges that emerge for managers operating in the
business marketing environment.
ANS:
n/a
PTS: 1
skills
6. Illustrate how a business marketing manager might use a responsibility chart to

pinpoint the roles that diverse functional specialists must perform in the
implementation of marketing strategy.
ANS:
n/a

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PTS: 1
skills
7. Using any selling firm, product, and market of your choice, please illustrate how a
strategy map that utilizes the balanced scorecard measures can be used to build
an effective and efficient marketing strategy plan.
ANS:
n/a
PTS: 1
skills
8. Marketing control is a process business marketers can use to generate information

on marketing performance. For each of the levels of marketing control, describe
the purpose of the control, identify who is primarily responsible for that control in
the organization, and provide examples of tools that can be used.
ANS:
n/a
PTS: 1
skills

Complete Test Bank For Business Marketing Management b2b 11th Edition by Hutt

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IM Part 3: Exam Questions: MC, TF, SA, Essay

Chapter 1—A Business Marketing Perspective

1. The business market consists of the following three components:

2. Concerning manufacturing customers, the business market is:

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d. service firms (e.g., hotels)

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7. The ability of an organization to quickly recognize changes in its market and to

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NAT: AACSB Reflective Thinking | CB&E Model Pricing | R&D Knowledge of

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16. As an industrial customer, Ford Motor Company would be classified as:

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17. When purchasing microprocessors from Intel Corporation to be incorporated into

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general business functions

21. Industrial products and services can be broadly classified as:

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26. The distinguishing characteristic(s) of foundation goods is(are) that they:

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of general business functions

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31. Companies can demonstrate market-sensing and customer-linking capabilities by:

32. A business marketer becomes a preferred supplier to major customers by:

33. Business marketing strategy must be based on an assessment of the:

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36. The buying motives for major installations center on:

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37. An implication of relationship marketing is:

39. Which of the following characteristics of business customers is true?

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42. Which of the following would be classified as foundation goods?

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45. Which of the following statements about major installations is true?

47. Marketing activities directed toward establishing, developing, and maintaining

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NAT: AACSB Reflective Thinking | CB&E Model Customer | R&D Managing

49. Achieving the goals of supply chain management requires:

50. Which of the following would qualify as facilitating goods?

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NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Knowledge of

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NAT: AACSB Reflective Thinking | CB&E Model Strategy | R&D Knowledge of

3. A close examination of a market-driven firm will reveal two important capabilities:

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5. Planning in the business marketing setting requires more functional

6. A particular industrial customer might be properly classified as a user by some

8. In contrast to raw materials, manufactured materials and parts would be classified

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of general business functions

14. The "compatibility" of a cross-functional working relationship can be defined as

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NAT: AACSB Reflective Thinking | CB&E Model Promotion | R&D Knowledge of

20. Relationships between business marketers tend to be close and enduring.

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3. Because demand in business markets is derived from consumer markets, business

5. This type of equipment is generally less expensive and is short-lived compared