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Chapter 11 - Developing and Managing Goods and Services 1. Compare and contrast a line extension and a product modification. Answer: A line extension is the development of a product closely related to one or more products in the existing product line but designed specifically to meet somewhat different customer needs. On the other hand, a product modification involves changing one or more characteristics of a product. A product modification differs from a line extension because the original product does not remain in the line. However, like a line extension, a product modification entails less risk than developing new products. 2. Identify and describe the three major ways to modify existing products, and give an example of each. Answer: There are three major ways to modify products: quality, functional, and aesthetic modifications. Quality modifications are changes relating to a product’s dependability and durability. The changes usually are executed by altering the materials or the production process. For instance, for a service, such as air travel, quality modifications may involve increasing leg room in the seating area. Changes that affect a product’s versatility, effectiveness, convenience, or safety are called functional modifications; they usually require that the product be redesigned. For example, making programs available in 3-D on DirectTV is a functional modification. Aesthetic modifications change the sensory appeal of a product by altering its taste, texture, sound, smell, or appearance. The fashion industry relies heavily on aesthetic modifications from season to season. For example, Louis Vuitton clothing, handbags, and leather goods are leaders in the haute couture industry. In order to maintain its reputation for the utmost level of quality and style, the company performs aesthetic modifications on its products regularly. 3. List and discuss the seven phases of the new-product development process. Answer: The seven phases of the new-product development process are: idea generation, screening, concept testing, business analysis, product development, test marketing, and commercialization. Businesses and other organizations seek product ideas that will help them to achieve their objectives. This activity is idea generation. In the process of screening, the ideas with the greatest potential are selected for further review and analyzed to determine whether or not they match the organization’s objectives and resources. In concept testing, a small sample of potential buyers is presented with a product idea through a written or oral description (and perhaps a few drawings) to determine their attitudes and initial buying intentions regarding the product. During the business analysis stage, the product idea is evaluated to determine its potential contribution to the firm’s sales, costs, and profits. Product development is the phase in which the organization determines if it is technically feasible to produce the product and if it can be produced at costs low enough to make the final price reasonable. A limited introduction of the product in geographic areas chosen to represent the intended market is called test marketing. During the commercialization phase, plans for full-scale manufacturing and marketing must be refined and settled and budgets for the project prepared. 4. Explain the concept testing phase of the new-product development process, and state its importance. Answer: In concept testing, a small sample of potential buyers is presented with a product idea through a written or oral description (and perhaps a few drawings) to determine their attitudes and initial buying intentions regarding a product. For a single product idea, an organization can test one or several concepts of the same product. Concept testing is important because it is a low-cost procedure that allows a company to determine customers’ initial reactions to a product idea before it invests considerable resources in research and development. 5. Explain the business analysis phase of the new-product development process. Answer: During the business analysis stage, a product idea is evaluated to determine its potential contribution to a firm’s sales, costs, and profits. In the course of a business analysis, evaluators determine whether a product fits with the organization’s existing product mix. They also ascertain if demand of the product is strong enough to justify entering a market, and whether the demand will endure. Moreover, the evaluators estimate types of environmental and competitive changes that can affect the product’s future sales, costs, and profits. During the business analysis stage, a firm determines whether its research, development, engineering, and production capabilities are adequate to develop a product; whether new facilities must be constructed, how quickly they can be built, and how much they will cost; and whether the necessary financing for development and commercialization is on hand or is obtainable based upon terms consistent with a favorable return on investment. 6. Discuss the advantages of test marketing. Also, state the risks associated with it. Answer: Test marketing provides several benefits. It lets marketers expose a product in a natural marketing environment to measure its sales performance. A company can strive to identify weaknesses in a product or in other parts of the marketing mix. A product weakness discovered after a nationwide introduction can be expensive to correct. Moreover, if consumers’ early reactions are negative, marketers may be unable to persuade consumers to try the product again. Thus, making adjustments after test marketing can be crucial to the success of a new product. On the other hand, test marketing results may be positive enough to warrant accelerating the product’s introduction. Test marketing also allows marketers to experiment with variations in advertising, pricing, and packaging in different test areas and to measure the extent of brand awareness, brand switching, and repeat purchases resulting from these alterations in the marketing mix. Test marketing is not without risks. It is expensive, and competitors may try to interfere. A competitor may attempt to “jam” the test program by increasing its own advertising or promotions, lowering prices, and offering special incentives, all to combat the recognition and purchase of the new brand. Sometimes, too, competitors copy the product in the testing stage and rush to introduce a similar product. It is desirable to move to the commercialization phase as soon as possible after successful testing. 7. Discuss the three approaches that marketers use to differentiate their products from their competitors’ products. Answer: The three approaches that marketers use to differentiate their products from their competitors’ products are: product quality, product design and features, and product support services. Product quality refers to the overall characteristics of a product that allow it to perform as expected in satisfying customer needs. The concept of quality varies between consumer and business markets. For business markets, technical suitability, ease of repair, and company reputation are important characteristics. Unlike consumers, most businesses place far less emphasis on price than on product quality. Product design refers to how a product is conceived, planned, and produced. The style of a product is one design feature that can allow certain products to sell very rapidly. Good design, however, means more than just appearance; it also involves a product’s functionality and usefulness. Product features are specific design characteristics that allow a product to perform certain tasks. By adding or subtracting features, a company can differentiate its products from those of the competition. Product features also can be used to differentiate products within the same company. Many companies differentiate their product offerings by providing support services. Usually referred to as customer services, these services include any human or mechanical efforts or activities a company provides that add value to a product. 8. Identify and explain the dimensions of product quality. Answer: The two dimensions of product quality are level of quality and consistency of quality. Level of quality is the amount of quality a product possesses. The concept is a relative one because the quality level of one product is difficult to describe unless it is compared with that of other products. Consistency of quality refers to the degree to which a product has the same level of quality over time. Consistency means giving customers the quality they expect every time they purchase the product. As with level of quality, consistency is a relative concept. It implies a quality comparison within the same brand over time. 9. Describe product positioning. List and explain the bases for positioning. Answer: Product positioning refers to the decisions and activities intended to create and maintain a certain concept of a firm’s product (relative to competitive brands) in customers’ minds. When marketers introduce a product, they try to position it so that it appears to have the characteristics that the target market most desires. Marketers can use several bases for product positioning. A common basis for positioning products is to use competitors. A firm can position a product to compete head­on with another brand. Head­to­head competition may be a marketer’s positioning objective if the product’s performance characteristics are at least equal to those of competitive brands and if the product is priced lower. Head-to-head positioning may be appropriate even when the price is higher if the product’s performance characteristics are superior. A product’s position can be based on specific product attributes or features. If a product has been planned properly, its features will give it the distinct appeal needed. The target market can also be a positioning basis caused by marketing. This type of positioning relies heavily on promoting to the types of people who use the product. Other bases for product positioning include price, quality level, and benefits provided by the product. 10. Why do brands require repositioning? What are the ways in which repositioning can be accomplished? Answer: When introducing a new product into a product line, one or more existing brands may have to be repositioned to minimize cannibalization of established brands and thus ensure a favorable position for the new brand. Repositioning can be accomplished by physically changing the product, its price, or its distribution. Rather than making any of these changes, marketers sometimes reposition a product by changing its image through promotional efforts. Finally, a marketer may reposition a product by aiming it at a different target market. 11. Explain the concept of product deletion. List and explain the ways in which a product can be deleted. Answer: Product deletion is the process of eliminating a product from the product mix, usually because it no longer satisfies a sufficient number of customers. A declining product reduces an organization’s profitability and drains resources that could be used to modify other products or develop new ones. A marginal product may require shorter production runs, which can increase per-unit production costs. Finally, when a dying product completely loses favor with customers, the negative feelings may transfer to some of the company’s other products. There are three basic ways to delete a product: phase it out, run it out, or drop it immediately. A phase-out allows the product to decline without a change in the marketing strategy; no attempt is made to give the product new life. A run-out exploits any strengths left in the product. The third alternative, an immediate drop of an unprofitable product, is the best strategy when losses are too great to prolong the product’s life. 12. Why is it often difficult for organizations to delete products? Answer: Most organizations find it difficult to delete a product because a decision to drop a product may be opposed by managers and other employees who believe that the product is necessary to the product mix. Salespeople who still have some loyal customers are especially upset when a product is dropped. Considerable resources and effort are sometimes spent trying to change a slipping product’s marketing mix to improve its sales and thus avoid having to eliminate it. 13. List and explain the six distinguishing characteristics of services. Answer: Services have six basic characteristics: intangibility, inseparability of production and consumption, perishability, heterogeneity, client-based relationships, and customer contact. Intangibility means a service is not physical and therefore cannot be touched. Inseparability refers to the fact that the production of a service cannot be separated from its consumption by customers. Services are characterized by perishability because the unused service capacity of one time period cannot be stored for future use. Heterogeneity refers to variation in quality. Services delivered by people are susceptible to heterogeneity. Quality of manufactured goods is easier to control with standardized procedures, and mistakes are easier to isolate and correct. Client-based relationships refer to interactions with customers that result in satisfied customers who use a service repeatedly over time. The success of many services depends on creating and maintaining client-based relationships. Customer contact refers to the level of interaction between a service provider and a customer that is necessary to deliver a service. Not all services require a high degree of customer contact, but many do. 14. Explain the roles of “promises” and “trust” in successful marketing of a service. Answer: The characteristic of intangibility makes it difficult for customers to evaluate a service prior to purchase. Intangibility requires service marketers, such as hairstylists, to make promises to customers. The customer is forced to place some degree of trust in the service provider to perform the service in a manner that meets or exceeds those promises. Service marketers must guard against making promises that raise customer expectations beyond what they can provide. To cope with the problem of intangibility, marketers employ tangible cues, such as well-groomed, professional-appearing contact personnel and clean, attractive physical facilities, to help assure customers about the quality of the service. Service companies must be careful not to promise too much regarding their services so that customer expectations do not rise to unattainable levels. 15. How do providers of time-sensitive services smooth the fluctuations in demand from times of peak demand to times of off-peak demand? Answer: Providers of time-sensitive services often use demand-based pricing to manage the problem of balancing supply and demand. They charge top prices during peak demand and lower prices during off-peak demand to encourage more customers to use the service. 16. Services are vulnerable to heterogeneity. Explain this issue, and discuss different ways in which heterogeneity can occur in service delivery. Answer: Services delivered by people are susceptible to heterogeneity, or variation in quality. Quality of manufactured goods is easier to control with standardized procedures, and mistakes are easier to isolate and correct. Because of the nature of human behavior, however, it is very difficult for service providers to maintain a consistent quality of service delivery. This variation in quality can occur from one organization to another, from one service person to another within the same service facility, and from one service facility to another within the same organization. Heterogeneity usually increases as the degree of labor intensiveness increases. Many services, such as auto repair, education, and hairstyling, rely heavily on human labor. People-based services are often prone to fluctuations in quality from one time period to the next. 17. Explain how the characteristics of services affect the development of marketing mixes. Answer: The characteristics of services create a number of challenges for service marketers in the development of marketing mixes. A service offered by an organization generally is a package, or bundle, of services consisting of a core service and one or more supplementary services. Heterogeneity results in variability in service quality and makes it difficult to standardize services. However, heterogeneity provides one advantage to service marketers: it allows them to customize their services to match the specific needs of individual customers. Customization plays a key role in providing competitive advantage for the service provider. Being able to personalize the service to fit the exact needs of the customer accommodates individual needs, wants, or desires. The characteristic of intangibility makes it difficult for customers to evaluate a service prior to purchase. Intangibility requires service marketers, such as hairstylists, to make promises to customers. The customer is forced to place some degree of trust in the service provider to perform the service in a manner that meets or exceeds those promises. Service marketers must guard against making promises that raise customer expectations beyond what they can provide. The inseparability of production and consumption and the level of customer contact also influence the development and management of services. The fact that customers are present during the production of a service means that other customers can affect the outcome of the service. Service marketers can reduce problems by encouraging customers to share the responsibility of maintaining an environment that allows all participants to receive the intended benefits of the service environment. 18. How do marketers promote services? Answer: The intangibility of services results in several promotion-related challenges to service marketers. Because it may not be possible to depict the actual performance of a service in an advertisement or to display it in a store, explaining a service to customers can be a difficult task. Promotion of services typically includes tangible cues that symbolize the service. To make a service more tangible, advertisements for services often show pictures of facilities, equipment, and service personnel. Marketers may also promote their services as a tangible expression of consumers’ lifestyles. 19. How does high degree of customer contact affect service performance? Answer: Customer contact refers to the level of interaction between a service provider and a customer that is necessary to deliver a service. High-contact services include healthcare, real estate, legal, and spa services. These services generally involve actions directed toward people, who must be present during production. When a customer must be present, the process of production may be just as important as its final outcome. High-contact services typically require that the customer go to the production facility. Thus, the physical appearance of the facility may be a major component of the customer’s overall evaluation of the service. Employees of high-contact service providers are part of a very important ingredient in creating satisfied customers. A fundamental precept of customer contact is that satisfied employees lead to satisfied customers. To minimize the problems that customer contact can create, service organizations must take steps to understand and meet the needs of employees by training them adequately, empowering them to make more decisions, and rewarding them for customer-oriented behavior. 20. In what ways do perishability and intangibility affect the pricing of services? Answer: Services should be priced with consumer price sensitivity, the nature of the transaction, and its costs in mind. Prices for services can be established on several different bases. Some services use demand-based pricing. When demand for a service is high, the price is also high; when demand for a service is low, so is the price. The perishability of services means that when demand is low, the unused capacity cannot be stored and is therefore lost forever. Some services are very timesensitive because a significant number of customers desire the service at a particular time. This point in time is called peak demand. A provider of time-sensitive services brings in most of its revenue during peak demand. Providers of time-sensitive services often use demand-based pricing to manage the problem of balancing supply and demand. Because of the intangible nature of services, customers rely heavily at times on price as an indicator of quality. If customers perceive the available services in a service category as being similar in quality, and if the quality of such services is difficult to judge even after these services are purchased, customers may seek out the lowest-priced provider. 21. Discuss the factors that affect the delivery of services. How can service marketers use these factors to their advantage? Answer: Marketing channels for services usually are short and direct, meaning that the producer delivers the service directly to the end user. Some services, however, use intermediaries. For example, travel agents facilitate the delivery of airline services, independent insurance agents participate in the marketing of various insurance policies, and financial planners market investment services. Service marketers are less concerned with warehousing and transportation than are goods marketers. They are very concerned, however, about inventory management, especially balancing supply and demand for services. The service characteristics of inseparability and level of customer contact contribute to the challenges of demand management. In some instances, service marketers use appointments and reservations as approaches for scheduling the delivery of services. Health-care providers, attorneys, accountants, and restaurants often use reservations or appointments to plan and pace the delivery of their services. To increase the supply of a service, marketers use multiple service sites and also increase the number of contact service providers at each site. To make delivery more accessible to customers and to increase the supply of a service, as well as reduce labor costs, some service providers have decreased the use of contact personnel and replaced them with equipment. In other words, they have changed a high-contact service into a low-contact one. 22. Compare and contrast a product manager and a brand manager. Answer: A product manager is responsible for a product, a product line, or several distinct products that make up an interrelated group within a multiproduct organization. On the other hand, a brand manager is responsible for a single brand. Both product and brand managers operate cross-functionally to coordinate the activities, information, and strategies involved in marketing an assigned product. Product managers and brand managers plan marketing activities to achieve objectives by coordinating a mix of distribution, promotion (especially sales promotion and advertising), and price. 23. Line extensions are more common than new products because line extensions: A. only focus on increasing sales within the existing market segment. B. are guaranteed to succeed in the marketplace. C. are a less expensive and lower-risk alternative for increasing sales. D. require no market research. E. do not keep the original product in the line after extension. Answer: C 24. Coca-Cola has expanded to Diet Coke, Cherry Coke, and Caffeine-free Coca-Cola, to name a few. These are examples of: A. product modification. B. brand extension. C. product bundling. D. line extension. E. brand equity. Answer: D 25. When Chrysler produces new model vehicles, it discontinues production of previous year’s model. However, when Apple brings out a new iPhone, it continues to produce the previous version for at least some period of time. Chrysler’s new product strategy is an example of a(n) ________, while Apple’s strategy is an example of a(n)________. A. functional modification; quality modification B. product modification; line extension C. product lining; product bundling D. product extension; brand extension E. brand extension; product bundling Answer: B 26. If the manufacturer of Cool Whip were to introduce a chocolate-flavoured whipped cream and still continue to produce its existing flavors of whipped cream, this would be an example of a: A. brand extension. B. line extension. C. functional modification. D. quality modification. E. product bundling. Answer: B 27. ___________ is the development of a product that is closely related to one or more products in a firm's existing product line but is designed specifically to meet somewhat different customer needs. A. Brand extension B. Line extension C. Brand stretching D. Product bundling E. Product churning Answer: B 28. Which of the following is a primary distinction between a line extension and a product modification? A. A product modification results in a completely new product, while a line extension is simply changing an old product. B. Both line extension and product modification involve alteration of an existing product, but the alteration is more dramatic with a product modification than it is with a line extension. C. A line extension is designed to aptly meet the needs of an existing market segment, while a product modification targets entirely new market segments. D. With a product modification, the original product is replaced in the product line, while with a line extension, the original product remains intact in the product line. E. A line extension consists of strictly aesthetic changes to an existing product, whereas a product modification consists of changes in quality and functionality. Answer: D 29. In product modification, three conditions must be met to improve a firm's product mix: the product must be modifiable, customers must be able to perceive that a modification has been made, and: A. the modification should make the product more consistent with customers' desires. B. competing companies should not be aware of planned product modifications. C. management must avoid functional modifications in the product to evade any risk associated with the safety element of the modified product. D. management must essentially enhance the modified product’s quality and lower its price to increase its customer base. E. resources needed for product modification should be limited in order to lower production costs. Answer: A 30. Bauman Flooring found a supplier of very inexpensive fibers that could be used to produce low-grade carpeting at a very low cost. Because Bauman had been facing stiff competition in the medium-grade carpet industry, it started using the new material in all of its carpeting and also reduced its prices. This is an example of a(n): A. aesthetic modification. B. line extension. C. brand extension. D. functional modification. E. quality modification. Answer: E 31. Which of the following best illustrates functional modification? A. Campbell's adds large chunks of higher-grade chicken in its classic chicken noodle soup. B. A smoke detector is upgraded to be more sensitive to smoke at farther distances. C. Motorola uses long-lasting batteries for its cell phones to facilitate quicker charging. D. A manufacturer of primer and sealer introduces an odorless variety. E. Friskies changes the ingredients in its cat food to a taste that is preferred by most cats. Answer: B 32. Conair, a manufacturer of appliances and personal care products, adds an electrical component to its curling iron that automatically switches off the curling iron when it has been idle for more than an hour. This improvement would best be classified as a(n): A. product line extension. B. quality modification. C. aesthetic modification. D. brand extension. E. functional modification. Answer: E 33. Changes that affect the sensory appeal of a product by altering its taste, texture, sound, smell, or visual characteristics are called ___________ modifications. A. aesthetic B. functional C. operational D. quality E. feature Answer: A 34. Sony's design of its new large-screen television set with smoked-glass control panel cover and other visual changes would be classified as a(n) ___________ modification; changes to make the TV’s remote easier to use would be classified as a(n) ___________ modification. A. functional; aesthetic B. aesthetic; functional C. functional; quality D. quality; aesthetic E. quality; functional Answer: B 35. The major drawback of using aesthetic modifications in products is: A. that the cost of the modifications is very high. B. that the value of the modification is determined subjectively. C. the need for redesign of the product. D. its dependency on quality and functional modifications. E. that there is no differentiation for the product in the market. Answer: B 36. If Stonefield School Furniture Company provides standard primary school chairs in new colors to match the interiors of schools, this modification is most likely to be viewed as a(n) ___________ modification. A. aesthetic B. functional C. quality D. operational E. feature Answer: A 37. Morgan is interested in upgrading to a new sofa for her apartment. She browses the Internet to check new models of her favorite sofa brand and gets information on the style and color of couches. However, she can’t actually sit on a new model of sofa to determine its comfort level. Morgan is able to evaluate the ___________ modifications to the sofa, but not the ___________ modifications. A. quality; functional B. quality; aesthetic C. aesthetic; functional D. functional; quality E. functional; aesthetic Answer: C 38. All of the following are major steps in developing new products except: A. test marketing. B. competitor analysis. C. screening. D. commercialization. E. idea generation. Answer: B 39. Outback Steakhouse, a restaurant chain, wants to expand its range of dishes on its menu. The restaurant managers conduct surveys on customers to determine the dishes that would appeal to the customers. Outback is currently in the ___________ phase of the new-product development process. A. business analysis B. product development C. test marketing D. screening E. idea generation Answer: E 40. When marketers at Nabisco met with groups of young adults to identify the types of snacks that youths prefer, they were engaging in the ___________ phase of the new-product development process. A. idea generation B. business analysis C. test marketing D. commercialization E. product development Answer: A 41. Marketers begin to make decisions about labeling, packaging, branding, pricing, and promotion during the ___________ phase of the new-product development process. A. commercialization B. screening C. concept testing D. product development E. test marketing Answer: D 42. Concerns about cannibalization of current product sales must be addressed in the ___________ phase of the new-product development process. A. screening B. concept testing C. business analysis D. product development E. test marketing Answer: A 43. Which of the following is a phase of the new-product development process that involves determining whether a product idea is compatible with company objectives, needs, and resources on a general level? A. Product development B. Evaluation of competitor's efforts C. Screening D. Idea generation E. Business analysis Answer: C 44. A group of managers has been assigned the task of developing a new product. The group is now in the process of assessing several ideas to determine whether they are consistent with the firm's overall objectives and resources. The managers are at the ___________ stage of the new-product development process. A. business analysis B. product testing C. idea generation D. commercialization E. screening Answer: E 45. Compared with other phases of the new-product development process, the largest number of new product ideas is rejected during the ___________ phase. A. idea generation B. concept testing C. business analysis D. screening E. test marketing Answer: D 46. The phase of the new-product development process in which a small sample of potential buyers is presented with a product idea through a written or oral description in order to determine their attitudes and initial buying intentions regarding a product is called: A. concept testing. B. customer response testing. C. idea analysis. D. test marketing. E. screening. Answer: A 47. Patrick is a member of a consumer market research panel and has been introduced to a company’s new idea for energy drinks. Some of the questions he has been asked are, “How often would you buy this product?" and "Which features are of little or no interest to you?" Patrick is most likely participating in the ___________ phase of the newproduct development process. A. concept testing B. business analysis C. idea screening D. idea generation E. test marketing Answer: A 48. Which of the following is a stage of the new-product development process where customers are exposed to a new product idea for the first time? A. Screening B. Concept testing C. Business analysis D. Product development E. Test marketing Answer: B 49. Marketers at Starbucks generated several ideas for new food products. Management assessed these ideas to determine whether or not they were consistent with Starbucks’ objectives and resources. Several product ideas were dropped after this analysis. The next stage of development for the remaining product ideas is: A. product development. B. idea screening. C. concept testing. D. business analysis. E. test marketing. Answer: C 50. Which of the following phases of new-product development is likely the most cost-effective procedure? A. Commercialization B. Concept testing C. Business analysis D. Product development E. Test marketing Answer: B 51. Karla tells Jeff that she likes his team's idea about new shock-resistance running shoes but wants him to consider some figures regarding anticipated sales, costs, and resulting profits. To which of the following stages of the newproduct development process is she asking Jeff to proceed? A. Idea generation B. Business analysis C. Commercialization D. Test marketing E. Screening Answer: B 52. Breakeven analysis is a tool that marketers are most likely to employ during the ___________ stage of the new-product development process. A. screening B. concept testing C. business analysis D. product development E. test marketing Answer: C 53. "Is the demand strong enough to justify entering the market?" is a question that marketers ask during the ___________ phase of the new-product development process. A. screening B. idea generation C. business analysis D. commercialization E. cannibalization Answer: C 54. Clive is an engineer involved in the product development of a new plastic laminate that would be sold to manufacturers of kitchen counter tops. Currently, Clive and his colleagues are considering the potential for profitability of the new product. They are likely in the ___________ phase of the new-product development process. A. idea generation B. market testing C. business analysis D. concept testing E. compatibility research Answer: C 55. As Justin works on the prototype of a new action-oriented computer game, he is engaging in the ___________ phase of the new-product development process. A. idea generation B. commercialization C. test marketing D. screening E. product development Answer: E 56. Ideally, test marketing should follow the ___________ stage in the new-product development process. A. commercialization B. business analysis C. screening D. idea generation E. product development Answer: E 57. Kara is a member of the product development team at a company that manufactures sports equipment. During a recent meeting, one of the team members asked, "What level of quality are we building into the camping gear?" In this case, Kara and her team are most likely in the ___________ phase of the new-product development process. A. commercialization B. concept testing C. business analysis D. product development E. test marketing Answer: D 58. The phase of the new-product development process when an organization determines the technical feasibility of producing a product at a cost that results in a reasonable selling price is: A. test marketing. B. commercialization. C. concept testing. D. product development. E. business analysis. Answer: D 59. After building a prototype of his new device, Brad is asked to conduct rigorous functional testing to examine whether the device meets performance and safety qualifications. This is part of the ___________ phase of the newproduct development process. A. product design B. screening C. product development D. concept testing E. test marketing Answer: C 60. Marcellis is a product manager for a major electronics company. His current project deals with the development and introduction of a new smartphone. Since there are a number of smartphones currently out on the market, Marcellis is concerned about product failure. Currently, Marcellis and his team are in the screening phase of the new product development process. Has his team already passed the phase which is best able to measure the product failure concern? A. Yes, the best phase is the idea generation phase. B. Yes, the best phase is the concept testing phase. C. No, the best phase is the concept testing phase. D. Yes, the best phase is the test marketing phase. E. No, the best phase is the test marketing phase. Answer: E 61. Top managers at Cincinnati Microwave believe that they have a successful working prototype of their new radar detector and plan to advance directly to regional commercialization of the new product. In this instance, they are contemplating skipping the ___________ phase of the new-product development process. A. screening B. test marketing C. product development D. business analysis E. idea generation Answer: B 62. The test marketing phase of the new-product development process: A. is an extension of the product development phase. B. should be conducted immediately after business analysis. C. eliminates the risk of product failure. D. is a sample launching of the entire marketing mix. E. prevents competitors from copying the product. Answer: D 63. Which of the following statements is true of the test marketing stage of the new-product development process? A. Test marketing is simply an extension of the screening and development stages. B. All the products that undergo test marketing must be launched. C. Test marketing allows marketers to expose a product in a natural marketing environment to measure its sales performance. D. In test marketing, a small sample of potential buyers is presented with a product idea to determine their attitudes regarding the product. E. Test marketing enables companies to eliminate the risk of product failure. Answer: C 64. PepsiCo has developed a new flavor of soft drink that it wants to test to determine reactions of probable buyers. Which of the following test-market characteristics would be least useful to PepsiCo when testing the new soft drink? A. There are research and audit services available in the test area. B. Retailers in the test area would be cooperative. C. Testing efforts would not be easily jammed by competitors. D. Tourism is a major industry in the test area. E. The test area has stable year-round sale of soft drinks. Answer: D 65. The management team at Tablerock Foods believes that it has come up with a delicious low-calorie dessert, but it is uncertain about the type of promotional and pricing campaigns to be used that can ensure better receptivity by consumers. In this instance, the management team should probably proceed to the ___________ stage of the new-product development process. A. idea generation B. commercialization C. screening D. test marketing E. product development Answer: D 66. One disadvantage of test marketing a new product is that: A. the product is distributed on a regional basis. B. competitors may copy the product and rush to introduce a similar product. C. the results give little indication of the product's future success. D. price, advertising, and packaging cannot be varied from market to market. E. it does not allow marketers to measure the extent of repeat purchases. Answer: B 67. Stacey and Evan are preparing budgets for a new product as well as finalizing plans for the full-scale manufacturing and marketing of the new Genie-Vac. They are in the ___________ phase of the new-product development process. A. test marketing B. business analysis C. concept testing D. product development E. commercialization Answer: E 68. When Natalie and Chris analyze the results from a recently completed test market to determine if any changes in the marketing mix of the product are needed, they are in the ___________ phase of the new-product development process. A. idea generation B. commercialization C. concept testing D. business analysis E. screening Answer: B 69. During the commercialization phase of the new-product development process, a new product is launched in stages, starting in one geographic area and gradually expanding into adjacent areas. This gradual introduction of the product is known as: A. market development. B. concept testing. C. rollout. D. market extension. E. jamming. Answer: C 70. Which of the following is a disadvantage of gradually introducing a new product to a market? A. It increases the risk of introducing a new product. B. It makes a firm more susceptible to losses. C. It prohibits fine-tuning of the marketing mix often leading to customer dissatisfaction. D. It allows competitors to monitor the results of the new product. E. It prevents product differentiation based on geographical differences. Answer: D 71. Frito Lay introduces a new variety of Doritos initially in Ft. Worth, Texas; Columbia, South Carolina; Peoria, Illinois; and Spokane, Washington. After its initial success, Frito Lay markets the Doritos in the whole of the selected states, then in the adjacent states, and finally in the entire country. Frito-Lay is using a ___________ for its new variety of Doritos. A. multi-stage introduction B. rollout approach C. test-market expansion D. mass commercialization E. trickle-down approach Answer: B 72. The ability of a product to provide the same level of quality over time is called: A. consistency. B. longevity. C. variability. D. functionality. E. accuracy. Answer: A 73. The overall characteristics of a product that allow it to perform as expected in satisfying customer needs is called: A. quality. B. longevity. C. variability. D. functionality. E. design. Answer: A 74. Victor thinks that a Lexus coupe is a quality vehicle. Yet compared to a Mercedes Benz, he feels the quality of a Lexus is not as high. This demonstrates that the dimension of ___________ is relative or difficult to describe without a basis of comparison. A. consistency of quality B. level of quality C. product differentiation D. quality rollout E. product positioning Answer: B 75. Schwinn has developed a new bicycle that has the strongest and lightest-weight frame of any bicycle outside of those made for racing. Furthermore, Schwinn has added several new features to its bike that are attractive to individuals who work as “bike messengers” in large, urban cities. Since no other company makes a bike that has these specific attributes, Schwinn is creating a: A. commercialization. B. brand extension. C. product line. D. product position. E. product differentiation. Answer: E 76. TerraCycle is a company that takes waste and “upcycles” it into new products. Currently, TerraCycle markets a bicycle rack made of recycled plastic to schools, parks, and cities. This rack does not scratch or damage the bikes as concrete and steel racks do, and is eco-friendly since it is made of waste material. TerraCycle is differentiating its product based on: A. intended use. B. support services. C. durability. D. product features. E. aesthetic modification. Answer: D 77. Which of the following best defines product features? A. The sensory appeal of a product B. Mechanical efforts or activities a company provides that add value to a product C. Specific design characteristics that allow a product to perform certain tasks D. How a product is conceived, planned, and produced with the necessary functions E. The physical appearance of a product Answer: C 78. The Home Depot differentiates its product offerings from its competition with stores like Sam's, by offering delivery and installation, warranties, and repairs. The Home Depot is differentiating through: A. product ancillaries. B. company quality. C. customer services. D. company features. E. product features. Answer: C 79. Seth recently purchased a new Brunswick Billiards table for his recreation room. The next day after delivery, Seth noticed a fault with one of the table pockets. Since it was a weekend, he didn’t expect that it could be repaired immediately. However, when he called a Brunswick store to leave a message, the call was answered by a repair representative who assured Seth that he would come over to Seth’s house for the repair service within an hour. Brunswick Billiards is most likely differentiating itself through: A. product styling. B. product support services. C. product positioning. D. product features. E. customer requests. Answer: B 80. A suggested approach to deleting products, in which each product is evaluated periodically to determine its impact on the overall effectiveness of a firm's product mix, is called a(n): A. evaluation study. B. formal evaluation. C. product inspection. D. systematic review. E. reassessment examination. Answer: D 81. The product deletion process is similar to the ___________ step of the new-product development process because both involve deciding whether the product should be in the product mix based on an assessment of sales, costs, and profits. A. idea generation B. screening C. product development D. commercialization E. business analysis Answer: E 82. Marketers of a particular brand of ice cream have decided to delete their line of ice cream bars. They intend to do so by letting the product decline without changing their current marketing scheme. This method of deletion is called: A. gradual termination. B. immediate drop. C. screening. D. phase-out. E. run-out. Answer: D 83. If Splenda assesses that its sweetener, “Splenda with Vitamins”, is not meeting profit expectations and simply allows the product to decline without any change in marketing strategy, it is using a(n) ___________ deletion strategy. A. run-out B. immediate drop C. slow-down D. phase-out E. drop-down Answer: D 84. A run-out approach of product deletion: A. let’s the product decline without changing the product strategy. B. is an immediate-drop decision. C. exploits any strengths left in the product. D. raises the price of the product continually to secure as much profit as possible before the product is priced out of the market. E. occurs when production cannot keep pace with demand because of material shortages. Answer: C 85. In general, the primary difference between goods and services is determined by the: A. degree of labor intensiveness. B. type of target market. C. degree of tangibility. D. type of provider. E. degree of consumer contact. Answer: C 86. Hair stylists find it challenging to standardize their service because the customer must be involved in the haircut procedure. Which of the following unique features of services does the scenario illustrate? A. Intangibility B. Inseparability C. Perishability D. Heterogeneity E. Homogeneity Answer: B 87. Personal trainers cannot make fitness assessments of their clients without the clients being physically present because of the ___________ characteristic of services. A. perishability B. intangibility C. inseparability D. heterogeneity E. tangibility Answer: C 88. Jason Robinson, a dentist, realizes that his dental practice is not generating enough revenues to cover his expenses. He would like to schedule more appointments, but he finds that almost every time slot is booked by his existing patients. Jason's difficulty in expanding his practice involves the aspect of service called: A. slotting. B. perishability. C. credence. D. inseparability. E. heterogeneity. Answer: D 89. The fact that services cannot be stored and then sold at a later date is called: A. intangibility. B. heterogeneity. C. inseparability. D. perishability. E. nonstorability. Answer: D 90. Kate, the owner of K’s Tanning Salon, reviews the day's appointment schedule and notices that it is completely full as it is Saturday. She wishes that some of the empty tanning beds that were vacant during the weekdays could be available presently. Kate’s problem deals with the ___________ characteristic of services. A. credence B. heterogeneity C. perishability D. search E. inseparability Answer: C 91. Providers of services must deal with the challenge of balancing supply and demand and plan for times of peak and off-peak demand. Which of the following characteristics of services creates these challenges? A. Inseparability B. Customer contact C. Perishability D. Heterogeneity E. Intangibility Answer: C 92. Lashawna is a concert promoter and has singer Kanye West as one of her clients. She works hard to ensure that most of Kanye’s concerts tickets are sold out. She understands the concept of perishability, which implies that: A. as the concert is not tangible, concert audience will have a difficult time judging its quality in advance. B. the performance of the concert and the attendance of the concert by fans cannot be separated, so tickets must be sold. C. a high level of interaction will exist between the audience and the musicians, which makes the audience's presence necessary. D. if the tickets are not sold out, seats will remain empty, and they can never be sold to anyone again. E. that each concert is different and customers will miss a unique experience if they are not present at the concert. Answer: D 93. The greater the degree of ___________ involved in delivering a service, the greater the level of heterogeneity. A. technological dependence B. home sourcing C. perishability D. tangibility E. labor intensiveness Answer: E 94. Amanda is a masseuse at a massage parlor. The fact that the first massage she gives each day is better than the last massage, demonstrates the ___________ of services. A. heterogeneity B. customer contact aspect C. intangibility D. inseparability E. perishability Answer: A 95. Saresh is the owner of Change-ezz, a salon specializing in hair cutting and hair styling. Lately, Saresh has been trying to improve the quality of service provided by Change-eez. However, he has been experiencing difficulties in finding ways to systematize and control the salon’s quality of operations. Saresh’s inability to standardize his salon’s service best illustrates the ___________ feature of the service. A. intangibility B. inseparability C. perishability D. heterogeneity E. marketability Answer: D 96. H&R Block, a major tax preparation firm, reported facing issues with regard to its employees’ inconsistency in filing of returns. With which of the following characteristics of the service offering is the firm experiencing an issue? A. Tangibility B. Intangibility C. Perishability D. Inseparability E. Heterogeneity Answer: E 97. Services delivered through machines such as computer kiosks, ATMs, and vending machines can reduce the ___________ aspect that arises from increased contact with human employees. A. intangibility B. perishability C. inseparability D. heterogeneity E. tangibility Answer: D 98. Many services base their success on building a group of satisfied customers who use their services repeatedly over time. This critical component of success is referred to as: A. partnerships. B. heterogeneity. C. inseparable clientele. D. perishability. E. client-based relationships. Answer: E 99. Troy is a service provider for a low-contact service. Which of the following services is most likely provided by Troy? A. Real estate B. Website design C. Healthcare D. Legal services E. Personal trainer Answer: B 100. Which of the following best illustrates a high-contact service? A. Appliance repair B. Newspaper delivery C. Tax preparation D. Dry cleaning E. Plastic surgery Answer: E 101. Which of the following is not a “customer contact” characteristic in services marketing? A. High-contact services typically require that the customer go to the production facility. B. High-contact services are less expensive to deliver because they are typically equipment-based. C. Employees of high-contact service providers are part of a very important ingredient in creating satisfied customers. D. Service companies can minimize customer dissatisfaction by changing high-contact services into low-contact services. E. An employee training program is an effective way to ensure effective customer contact and resolve issues with customers. Answer: B 102. If Best Western, a leading global hotel chain, bundles its rooms with services such as free local phone calls, cable television, wireless Internet access, and complimentary breakfast, these services are known as ___________ services. A. core B. supplementary C. bundled D. intangible E. complimentary Answer: B 103. Which of the following service characteristics results in variability of service quality yet provides opportunity for customizing services to match the specific needs of individual customers? A. Tangibility B. Perishability C. Heterogeneity D. Intangibility E. Inseparability Answer: C 104. The heterogeneity characteristic of services provides marketers with tremendous opportunity to: A. customize their services to meet specific individual customer needs. B. minimize the cost of providing services to customers. C. create standardized packages that can appeal to a diverse customer base. D. offer similar services as that of their competitors. E. develop relationship marketing with their customers. Answer: A 105. Service marketers make promises to customers, suggesting that the customers must place some degree of trust in them. In this way, service marketers are trying to address the challenge of the service characteristic of: A. perishability. B. heterogeneity. C. inseparability. D. intangibility. E. customer contact. Answer: D 106. Brittany recently moved to a new city. She is looking for a mechanic to conduct a maintenance check and repair on her car. She visits several car dealers to assess their physical facility and also the cleanliness and grooming of the mechanics. After evaluation, she finally chooses a mechanic. Brittany is trying to overcome the ___________ aspect of services. A. heterogeneity B. perishability C. customer contact D. intangibility E. inseparability Answer: D 107. One of the ways in which service businesses communicate a higher degree of trust to their customers is by having their employees be well-groomed, sharp looking, and dressed in appropriate uniforms. This is a way to address the ___________ characteristic of services. A. intangibility B. perishability C. homogeneity D. inseparability E. heterogeneity Answer: A 108. If a nonsmoker dines in a restaurant that does not impose a restriction on smoking, the overall quality of service experienced by the nonsmoking customer probably declines if another customer smokes inside the restaurant. Which of the following service characteristics is illustrated by the scenario? A. Perishability B. Inseparability C. Heterogeneity D. Intangibility E. Homogeneity Answer: B 109. A sign at a doctor's office waiting room reads, "Please be courteous of others waiting with you." The doctor's office is trying to positively emphasize the ___________ aspect of services. A. tangibility B. perishability C. inseparability D. customer contact E. heterogeneity Answer: C 110. Prudential Insurance uses "the Rock of Gibraltar " logo to symbolize stability and security to its customers. This is Prudential's attempt to help customers better understand its services by: A. emphasizing tangible cues in promoting the service. B. using sign association. C. personalizing the selling of the service. D. utilizing publicity techniques to enhance the service’s value. E. distributing the service directly through advertising. Answer: A 111. Marketing channels for services are: A. complex and multifaceted. B. characterized by fewer than two intermediaries. C. dependent on the geographical location of consumers. D. determined by customers. E. direct from provider to customer. Answer: E 112. By installing automated check-in kiosks in airports, airlines have increased customer convenience and facilitated faster check-in by customers. It has considerably reduced the number of personnel attending to flight passengers. This has led to a decrease in ___________ characteristic of the airline service. A. perishability. B. intangibility. C. customer contact. D. homogeneity. E. customer service. Answer: C 113. Logos such as The Travelers Companies’ umbrella is designed to help customers overcome the ___________ of services. A. heterogeneity B. unpredictability C. inseparability D. intangibility E. perishability Answer: D 114. Flo is a fictional character depicted in Progressive Insurance’s TV commercials. She symbolizes friendliness, reliability, and knowledge about the company’s products. The part Flo plays in the promotion is designed to address the ___________ characteristic of the service. A. intangibility B. perishability C. heterogeneity D. inseparability E. customer service Answer: A 115. The ___________ characteristic of a service denotes the fact that production and consumption of the service occur simultaneously. A. intangibility B. heterogeneity C. customer contact D. perishability E. inseparability Answer: E 116. An American West Airlines flight from Dallas to Houston was fully booked, and the flight tickets were more expensive than that of the nearly empty American West flight from Chicago to Phoenix. This is an example of ___________ service pricing. A. unit-based B. demand-based C. supply-based D. cost-based E. customer-based Answer: B 117. Demand-based pricing is most closely related to the ___________ of services. A. perishability B. intangibility C. heterogeneity D. customer contact aspect E. inseparability Answer: A 118. The point in time when a significant number of customers desire the same service simultaneously is known as: A. peak demand. B. preferred demand. C. composite demand. D. derived demand. E. competitive demand. Answer: A 119. When a movie theatre entices customers to view movies during the daytime by offering tickets at a reduced price, it is trying to resolve the services marketing challenge of: A. inseparability. B. intangibility. C. customer contact. D. off-peak demand. E. heterogeneity. Answer: D 120. Safe Auto Insurance asserts "minimum coverage for minimum budgets" for its automobile insurance. Which of the following best describes Safe Auto's approach? A. Customers often use price as an indicator of quality, and Safe wants to be seen as a low quality provider. B. The type of advertising used by Safe makes insurance more tangible to the customer. C. Safe wants to reassure customers that it provides the highest level of service quality available. D. Because market conditions limit price rise on auto insurance, Safe uses this approach to gain customers. E. For certain services, customers look for the low-cost provider, which is what Safe claims to be. Answer: E 121. American Life utilizes portfolios with leather look covers and high-quality paper and printing for its life insurance policies in order to indicate: A. the heterogeneity of its services. B. the intangibility of its service. C. the perception of its management. D. the inseparability of its agents and customers. E. the quality of its services. Answer: E 122. A ___________ is responsible for marketing a product, product line, or several distinct products in an interrelated group within an organization. A. venture team B. brand manager C. facilities manager D. product manager E. line manager Answer: D 123. A brand manager in a multiproduct firm would be responsible for: A. performance of a specific brand. B. marketing of all brands within a product line. C. advertising of several distinct products that make up an interrelated group. D. functioning of all products in a brand line. E. promotion of all brands manufactured by the firm. Answer: A 124. If Megan Roberts is entrusted with the complete marketing responsibility of Diet Cherry 7Up, she would hold the position of ___________ manager. A. product B. line C. venture team D. advertising E. brand Answer: E 125. Luis Mayo is an accountant at Ralston Purina. However, he is currently working with a group of experts to determine the feasibility of a new brand of hot breakfast cereal. Luis and the experts are also developing a marketing strategy for the product. After the product is launched, Luis will resume working in the accounting department. His present position can be described as a: A. product manager. B. brand manager. C. member of a consulting team. D. member of a venture team. E. market account manager. Answer: D 126. Elizabeth, Manuel, Tony, Cynthia, and Alexandra work in the marketing, finance, production, engineering, and R&D departments of a company respectively. They are collectively assigned to develop a new low-calorie, high-nutrition snack treat. These five people constitute a(n) ___________ at their company. A. venture team B. distributed team C. brand management group D. focus group E. product positioning group Answer: A Scenario 11.1 Use the scenario to answer the questions. Cheetos Fat-free Crunchies is a product developed through continuous innovation. Cheetos engineered a technique for making low-fat snacks that taste delicious and also remain fresh for a longer duration. It introduced Fat-free Crunchies in limited markets in 2012 and began nationwide distribution in 2013. About 18 months later, a series of ads by Cheetos’ competitors was aired to counterclaim that Cheetos Crunchies actually contained 1.5 grams of fat along with some percentage of preservatives and additives. Research showed that Cheetos Crunchies was not well-received by certain groups of customers. To retain its consumer base, Cheetos reduced the remaining fat of Chrunchies to 0 grams, took out the preservatives, and improved the taste. 127. Refer to Scenario 11.1. The new improved Cheetos Fat-Free Crunchies is an example of ________. A. product bundling B. aesthetic modification C. functional modification D. brand extension E. innovative modification Answer: B 128. Refer to Scenario 11.1. Cheetos produces several cheese-based snacks and is keen on developing a new brand of crackers. This new Cheetos product would most likely be an example of a(n): A. brand extension. B. line extension. C. quality modification. D. functional extension. E. aesthetic modification. Answer: B 129. Refer to Scenario 11.1. In 2012, which of the following phases of the new-product development process was Cheetos in? A. Idea screening B. Product development C. Test marketing D. Business analysis E. Idea generation Answer: C 130. Refer to Scenario 11.1. Suppose that Cheetos stops its production of Fat-free Crunchies and sells all of its remaining inventory to a warehouse club. This would be an example of a(n): A. strategy for the maturity phase. B. phase-out product deletion strategy. C. immediate drop decision. D. pull-out product deletion policy. E. return to test marketing. Answer: C Scenario 11.2 Use the scenario to answer the questions. Jonathan Moore, President of Polar Manufacturing Company, has just reviewed the performance reports for the previous year and observes that there are certain areas in which the company needs to improve. He specifically feels that Polar's product mix can be managed in a more effective way. Jonathan summons a meeting of all the managers responsible for each of the product lines that Polar currently manufactures. The group reaches a consensus that the complete industrial product line of ice chests needs to be eliminated. It contemplates to do so by letting the product decline without making any changes in the marketing strategy or product. The group also decides to delete Polar's line of personal thermal underwear within a week, owing to its unprofitability. While discussing these strategies, the group also uncovers several customer segments at which new products could be targeted. The managers decide to assemble a group of people from all functional areas of the company and confer them responsibilities for all aspects of the new-product development. 131. Refer to Scenario 11.2. The Polar management team is currently in the ___________ stage of the new-product development process. A. idea generation B. screening C. concept testing D. product development E. test marketing Answer: A 132. Refer to Scenario 11.2. The decision to delete the industrial product line of ice chests is an example of deleting a product through a(n) ________, while the decision to drop the thermal underwear line is an example of a(n) ________. A. run-out; phase-out B. phase-out; immediate drop C. immediate drop; run-out D. immediate drop; phase-out E. phase-out; run-out Answer: B 133. Refer to Scenario 11.2. Since some products are not performing well, Jonathan Moore thinks that the company should set up a procedure to evaluate each product so that management will know when and how a product should be eliminated. He is suggesting a: A. product-drop decision. B. discontinuance procedure. C. product deletion strategy. D. closing system. E. systematic review. Answer: E 134. Refer to Scenario 11.2. The group of people that the management has assembled to take on the task of new product development can be best described as a: A. buying centre. B. focus group. C. virtual team. D. venture team. E. brand management team. Answer: D Scenario 11.3 Use the scenario to answer the questions. The YMCA in mid-town Atlanta has recently upgraded its facilities, which includes construction of a new Olympic sized swimming pool and a children's playground. All locations of the Atlanta "Y" are open from 6:00 am until 11:00 pm, all year round. The children's playground is accessible for members alone, and is a fenced and secured area. During the weekdays, children under the age of 12 can engage themselves in recreation activities at the playground under supervision, for no additional fee. Additionally, swimming lessons are conducted for children of all age groups, which are also covered under the monthly membership fee. The swimming pool is very popular among professionals who stop by for a swimming workout before or after work. Many of the YMCA sites are bustling with activities throughout the day; however, the midtown "Y" is busier during early morning hours and early evenings. At a recent meeting, Maya Sinclair, its manager, shares her concerns about getting more people into the "Y" at other times of the day. She asks her staff for ideas on ways to attract more customers during the off-peak hours. She also declares that the city of Atlanta has reduced YMCA's funding for the next year by 20%. This would require the "Y" to either gain additional members or increase its monthly and annual membership fees per head. 135. Refer to Scenario 11.3. The children who take swimming lessons must be present at the poolside during the time of their appointment. The need for the children to be present in order to receive the lesson is an example of the ___________ feature of a service, while the need for them to be there at the time of their appointment, represents the ___________ feature. A. inseparability; heterogeneity B. heterogeneity; perishability C. inseparability; perishability D. intangibility; perishability E. intangibility; inseparability Answer: C Scenario 11.4 Use the scenario to answer the questions. Kaycee is looking for a new company to prepare her tax returns this year. She explores the yellow pages of her phone book, and browses the Internet to find information about tax preparers in the area. She finds the names and contact details of several accountants, as well as popular tax preparation companies such as H&R Block and Jackson Hewitt. Since Kaycee is currently short of money, she decides to approach an accountant rather than the two popular companies. She finds the contact details of three accountants on the Internet, and visits their respective offices. The first office is located in an impoverished part of the town, but has an attractive interior and also a friendly receptionist. The second office is situated in an affluent locality, but does not have any employee other than the accountant himself. Moreover, the interiors of the office are shabby. The third office that Kaycee visits, is overall in a better condition with pleasant interiors and well-groomed staff. The accountant seems well-disposed, so Kaycee selects him for preparing her tax returns. 136. Refer to Scenario 11.4. The accountant whom Kaycee selects to prepare her taxes will most likely require her to schedule an appointment due to the ___________ characteristic of the service. If Kaycee schedules an appointment during the month of February, the accountant will most likely use ___________ when charging for the service. A. inseparability; time-based pricing B. inseparability; off-peak demand pricing C. perishability; bundled pricing D. perishability; demand-based pricing E. intangibility; time-based pricing Answer: D 137. Quality modifications never seek to reduce quality of existing products. A. True B. False Answer: False 138. Quality modification of an existing product aims at changing the product's safety, convenience, or versatility. A. True B. False Answer: False 139. Functional modifications usually require that a product be redesigned. A. True B. False Answer: True 140. Functional modifications make an existing product more durable. A. True B. False Answer: False 141. Functional modifications of existing products help an organization achieve and maintain a progressive image. A. True B. False Answer: True 142. New products are classified solely as innovations that have never been sold by any organization. A. True B. False Answer: False 143. In the idea generation phase of the new-product development process, sales personnel constitute an external source for new product ideas. A. True B. False Answer: False 144. The concept testing phase of the new-product development process presents a small sample of potential buyers with a trial version of a new product to determine their initial reactions. A. True B. False Answer: False 145. The business analysis stage of the new-product development process explores how well a new product fits in with a firm's existing product mix. A. True B. False Answer: True 146. The business analysis phase of the new-product development process provides a tentative sketch of a product's profitability. A. True B. False Answer: True 147. An important question in the business analysis stage of the new-product development process is, "Will a new product meet an organization’s profit goal?" A. True B. False Answer: True 148. Estimates of sales are an important component of the business analysis stage of the new-product development process. A. True B. False Answer: True 149. The product development stage of the new-product development process determines the technical feasibility of producing a new product. A. True B. False Answer: True 150. Relatively few product ideas are put into the product development stage of the new-product development process as this stage is frequently lengthy and expensive. A. True B. False Answer: True 151. The test marketing stage of the new-product development process is an extension of the product development stage. A. True B. False Answer: False 152. Test marketing should be conducted when a product has been given a low probability of success. A. True B. False Answer: False 153. The new-product development process does not include planning for advertising. A. True B. False Answer: False 154. Test marketing is conducted by companies of all sizes, primarily because of the perceived risk of product failure on open market and the associated consequences. A. True B. False Answer: True 155. Time spent in test marketing can benefit a firm's competitors. A. True B. False Answer: True 156. During the commercialization phase of the new-product development process, plans for full-scale manufacturing and marketing are refined and settled. A. True B. False Answer: True 157. Designing a product that customers perceive as different from competing products is an example of product differentiation. A. True B. False Answer: True 158. The concept of product quality is the same for different consumer groups and remains constant across consumer and business markets. A. True B. False Answer: False 159. The sum of a product's physical characteristics is called product quality. A. True B. False Answer: False 160. If you buy McDonald's French fries in Fort Collins, Colorado, and later buy McDonald's French fries in College Station, Texas, you expect them to be of the same quality. This is referred to consistency of quality. A. True B. False Answer: True 161. How a pair of jeans looks, regardless of the price, is an example of styling. A. True B. False Answer: True 162. Product support services are important mainly when a company wants to differentiate its products from other products in a market that essentially have the same quality, design, and features. A. True B. False Answer: True 163. Delivery, installation, financing, repair, warranties, and guarantees are all examples of product features. A. True B. False Answer: False 164. Layaway plans and customer trainings are examples of product support services. A. True B. False Answer: True 165. The decision to drop a product should always be a unanimous decision of the management team. A. True B. False Answer: False 166. Systematic reviews of a company's product mix aid in determining when product deletion is necessary. A. True B. False Answer: True 167. The phase-out approach to product deletion involves a process of continuous price increases to make as much profit as possible before the product is finally priced out of existence. A. True B. False Answer: False 168. The phase-out approach to product deletion exploits any strength left in the product. A. True B. False Answer: False 169. The run-out approach to product deletion is used for technologically obsolete products. A. True B. False Answer: True 170. A run-out approach to product deletion allows a product to decline without changing its marketing strategy. A. True B. False Answer: False 171. The immediate drop approach to product deletion generates a sales spurt just before removing a product from the market. A. True B. False Answer: False 172. Services can involve both human and mechanical efforts. A. True B. False Answer: True 173. All products—whether goods, services, or ideas—are to some extent intangible. A. True B. False Answer: True 174. Goods can be defined in terms of their physical attributes but services cannot because they are intangible. A. True B. False Answer: True 175. The education a student derives from attending a class is an example of intangibility of services. A. True B. False Answer: True 176. Because services are intangible by nature, marketers should downplay the tangible cues associated with a particular service. A. True B. False Answer: False 177. Both production and consumption of services occur at the same time. A. True B. False Answer: True 178. Because of inseparability of the production and consumption of services, customers are present when a service is produced. A. True B. False Answer: True 179. Because of inseparability of services, customers expect a service to be provided in a particular way by a specific individual. A. True B. False Answer: True 180. Services are highly perishable and cannot be inventoried for future use. A. True B. False Answer: True 181. Because of perishability of services, service marketers cannot plan for demand that fluctuates according to day of the week, time of day, or season. A. True B. False Answer: False 182. People-based services are often prone to fluctuations in quality from one time period to the next. A. True B. False Answer: True 183. A hairstylist who gives good haircuts in the morning but tends to give haircuts of lesser quality in the evening hours is affected by the challenges associated with intangibility of the haircut service. A. True B. False Answer: False 184. Client-based relationships are interactions that result in satisfied customers who repeatedly use a service over time. A. True B. False Answer: True 185. The goal of building client-based relationships is to satisfy customers so well that they become very loyal and would be unlikely to switch to competitors. A. True B. False Answer: True 186. Training of employees is more important in low-contact services than in high-contact services. A. True B. False Answer: False 187. A supplementary service is the basic service experience or commodity that a customer expects to receive. A. True B. False Answer: False 188. The ability to customize services to match the specific needs of individual customers is an advantage to service marketers as it enables them to offer standardized packages. A. True B. False Answer: True 189. Intangible cues are used by service marketers to provide customers with assurance of service quality. A. True B. False Answer: False 190. The intangibility of services results in promotion-related challenges for service marketers because it is difficult to depict the actual performance of a service in an advertisement or to display it in a store. A. True B. False Answer: True 191. Advertisements for services use tangible cues to help customers understand the intangible attributes associated with a particular service. A. True B. False Answer: True 192. Service providers offering discounted deals to existing customers who refer new customers to them are using existing customers as a part of their service promotion strategies. A. True B. False Answer: True 193. Demand-based pricing relies on information concerning peak demand and off-peak demand of a particular service. A. True B. False Answer: True 194. Demand-based pricing of a service denotes low prices during times of low demand and high prices during times of high demand. A. True B. False Answer: True 195. If the quality of different service providers is likely to vary, customers seldom rely on the price-quality association. A. True B. False Answer: False 196. The intangible nature of services often leads customers to rely on price as an indicator of quality. A. True B. False Answer: True 197. The supply and demand of a service can be balanced by keeping the service price inflexible regardless of the time of day, week, or year. A. True B. False Answer: False 198. Both the service provider and the customer must work together to provide and receive a service’s full value. A. True B. False Answer: True 199. Because of the heterogeneity and intangibility of services, customers tend to believe company-sponsored advertising rather than word-of-mouth communication while gathering information about a service product. A. True B. False Answer: False 200. To manage products effectively, a product manager of an organization must be independent of other departments. A. True B. False Answer: False 201. Both brand and product managers operate cross-functionally in an organization. A. True B. False Answer: True 202. A product manager of an organization is responsible for the development of new products that may be aimed at new markets. A. True B. False Answer: False 203. A venture team has the authority to execute plans for the development of products. A. True B. False Answer: True 204. Venture teams work outside of established organization divisions. A. True B. False Answer: True 205. Venture team members usually come from the same functional area within a firm. A. True B. False Answer: False Test Bank for Foundations of Marketing William M. Pride, O. C. Ferrell 9781285429779, 9781439039441

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