Chapter 12 Pricing, Distributing, and Promoting Products 1. If prices are set too high, the company will make a large profit on each item but will sell fewer units. Answer: True Explanation: If prices are too high, demand for the item will not be sufficient to sell many units. 2. Variable costs of a product are those costs that change due to the conditions of the market. Answer: True Explanation: Changing market conditions can affect the cost of a product. 3. Price skimming occurs when a company sets an initially low price to establish a new product in the market. Answer: False Explanation: Price skimming means setting a high price initially to quickly recoup costs. 4. Companies using price lining offer all items in certain categories at a limited number of prices. Answer: True Explanation: In price lining, certain price points are established in which goods of certain categories are sold. 5. The distribution mix is the combination of channels that a firm selects to get a product to end users. Answer: True Explanation: The distribution mix is one of the components of the marketing mix. 6. Discount houses, catalog showrooms, and factory outlets are examples of product-line retailers. Answer: False Explanation: Retailers that offer special brands of certain types of products are product-line retailers. 7. Shopping agents (e-agents) help people shop from factory outlet stores. Answer: False Explanation: Shopping agents (e-agents) rapidly gather, sort, and present accurate information to help Internet consumers compare Web sites, stores, prices, and product features. 8. The oldest and most expensive form of sales is personal selling, in which a salesperson communicates one-on-one with potential customers to identify their needs and align them with the product. Answer: True Explanation: Personal selling is direct selling of a product by a salesperson. 9. Sales promotions are short-term promotional activities designed to stimulate consumer buying or cooperation from distributors, sales agents, or other members of the trade. Answer: True Explanation: Sales promotions are designed to sell products quickly. 10. The only goal of determining prices is to maximize profit for the firm. Answer: False Explanation: Marketers price their products with various objectives in mind; for example, some marketers price their products in order to increase market share. 11. When making pizzas, the cost of the cheese is a fixed cost. Answer: False Explanation: Cheese, in this scenario, would be considered a variable cost; the cost of cheese will vary, depending on how many pizzas are made. 12. Products priced above the market play on the common assumption that a higher price means higher quality. Answer: True Explanation: Godiva chocolates and Patek Philippe watches are examples; prices are set high by promoting prestige and quality images. 13. Using the odd-even psychological pricing strategy, a restaurant would price an entree at $10.00 rather than $9.95. Answer: False Explanation: Odd-even pricing posits that consumers prefer prices that are not stated in even dollar amounts, so the restaurant would price the entree at $9.95, not $10.00. 14. Most business products are distributed through direct channels. Answer: True Explanation: Most business goods, especially those bought in large quantities, are sold directly by the manufacturer to industrial buyers. 15. Agents and brokers buy products from manufacturers and then sell them to other businesses. Answer: False Explanation: Agents and brokers do not own, or "take title to," the goods they distribute; they merely serve as a liaison between buyers and sellers. 16. One drawback of non-direct distribution is higher prices. Answer: True Explanation: The more members in the channel—the more intermediaries making a profit by charging a markup or commission—the higher the final price. 17. Shopping agents allow consumers to purchase products directly from their site. Answer: False Explanation: Two types of e-intermediaries are shopping agents and e-retailers. 18. Once an online catalog is in place, there are high costs in maintaining and accessing it. Answer: False Explanation: Once an online catalog is in place, there is little cost in maintaining and accessing it. 19. Most products are well-suited to distribution by high-speed digital transmission. Answer: False Explanation: It is restricted to products that exist as digital bits that can be transmitted over communication channels. 20. Because railroads do not have limited delivery routes, they can economically transport high-volume, heavy, bulky items, such as cars, steel, and coal. Answer: False Explanation: Railroad delivery routes are limited by fixed, immovable rail tracks. 21. Many firms have turned to distribution through supply chains as a cornerstone of business strategy. Answer: True Explanation: Instead of just offering advantages in product features, quality, price, and promotion, many firms have turned to supply chains that depend on distribution as a cornerstone of business strategy. 22. The ultimate objective of any promotion is to increase sales. Answer: True Explanation: Marketers often use promotion in various forms in order to communicate information, position products, and add value; ultimately, the main objective is to increase sales. 23. Marketing efforts for promoting a product are no longer needed after the customer has purchased the product. Answer: False Explanation: After the purchase, promotion can remind customers they have made a wise purchase in the hopes that they will do so again. 24. Order processing is a personal selling task used when a company seeks to promote itself and its products rather than simply to close a sale. Answer: False Explanation: A salesperson may use missionary selling to promote a company and its products rather than to merely close a sale. 25. In addition to physical goods, point-of-sale pedestals also provide services, namely information for consumers. Answer: True Explanation: Point-of-sale pedestals are useful channels of information about the products for consumers. 26. The Men's Store offers sweatshirts at three prices: $28, $42, and $60; this illustrates price lining. Answer: True Explanation: Price lining includes offering all items in certain categories at a limited number of prices; these three price levels are referred to as price points. 27. Intermediaries can expedite the delivery of products but otherwise add no additional value to a distributional system. Answer: False Explanation: Intermediaries do provide added value in a number ways; intermediaries, in part, function to save consumers time and money. 28. Effective, knowledgeable sales personnel can often be found in the sales force of specialty stores. Answer: True Explanation: Specialty stores are small, serve specific market segments with full product lines in narrow product fields, and often feature knowledgeable sales personnel. 29. Among the bargain retail operations, convenience stores in general provide the most substantial price reductions to the products. Answer: False Explanation: Convenience stores in general charge slightly higher prices. 30. Which of the following terms refers to the monetary amount added to a product's cost to the seller in order to sell it at a target profit? A) profit margin B) breakeven cost C) revenue D) revenue margin E) markup Answer: E Explanation: E) Products are marked up from the cost to produce the product in order that they may be sold at a profit. 31. Which of the following costs refers specifically to those that change with the quantity of a product sold or produced? A) annual costs B) variable costs C) fixed costs D) marginal costs E) market-adjusted costs Answer: B Explanation: B) Variable costs are adjusted with regard to how much of a product is produced or how much is projected to be sold, so that a certain profit can be obtained. 32. Which of the following costs refers specifically to those that are unaffected by the quantity of a product sold or produced? A) annual costs B) variable costs C) fixed costs D) marginal costs E) market-adjusted costs Answer: C Explanation: C) Fixed costs are those that it cost to produce the product in the first place. 33. Odd-even pricing falls under the category of which of the following? A) price fixing B) psychological pricing C) market pricing D) price lining E) price skimming Answer: B Explanation: B) Odd-even pricing posits that consumers generally don't like to pay an even amount of dollars for their products. It also takes advantage of those consumers who don't understand the concept of "rounding up." 34. Which of the following pricing strategies has stimulation of sales as a higher priority than maximization of profits? A) price fixing B) price discounting C) price skimming D) price pointing E) price lining Answer: B Explanation: B) This is a strategy often used to introduce a product in an already very populated market. 35. Which of the following refers to the combination of channels that a firm selects to get a product to end users? A) distribution mix B) transportation strategy C) merchandising system D) marketing plan E) retail system Answer: A Explanation: A) The distribution mix is the total use of distribution to optimally get a product into the hands of consumers. 36. Rachel has set up a firm that buys circuit boards from overseas producers and sells them to a local computer manufacturing company. Which title best describes her role in the computer manufacturing distribution mix? A) marketer B) sales agent C) broker D) retailer E) wholesaler Answer: E Explanation: E) A wholesaler buys products from a producer in bulk and sells them to a retailer or other producer. 37. An online comic book store is an example of which type of intermediary? A) marketer B) sales agent C) broker D) wholesaler E) retailer Answer: E Explanation: E) Retailers are those intermediaries who sell the product directly to the consumer. 38. A farmers' market is an example of which type of distribution channel? A) direct distribution B) retail distribution C) wholesale distribution D) distribution by brokers E) distribution by sales agents Answer: A Explanation: A) Since the product is channeled directly from producer to consumer, this is direct distribution. 39. Phillip is an independent intermediary who deals in the local produce market of northeast Ohio. Over the years, he has formed long-term relationships and come to represent several farmers in the area in the sale of their produce to local grocery stores. Which of the following titles best describes Phillip's role in the distribution mix of northeast Ohio produce? A) wholesaler B) retailer C) sales agent D) broker E) direct marketer Answer: C Explanation: C) A sales agent sells products from producers directly to consumers or retailers. 40. Which of the following intermediaries matches numerous sellers and buyers as needed, often without knowing in advance who they will be? A) producer representative B) retailer C) syndicated seller D) sales agent E) broker Answer: E Explanation: E) A broker is an agent that matches sellers and buyers in the market. 41. Which of the following denotes small retail stores carrying only one product line or category of related products? A) department stores B) bargain retailers C) supermarkets D) convenience stores E) specialty stores Answer: E Explanation: E) Specialty stores carry only one type of product for a certain type of consumer. 42. In which of the following bargain retailers do the customers view display samples, place orders, and wait briefly while clerks retrieve orders from attached warehouses? A) off-price store B) catalog showroom C) factory outlet D) wholesale club E) discount house Answer: B Explanation: B) Catalog showrooms display samples of items available to order by catalog. 43. Which of the following best describes department stores? A) A department store is a large product line retailer organized into smaller, convenience-focused components. B) A department store is a large product line retailer organized into smaller, bargain-focused components. C) A department store is a large product line retailer organized into smaller, producer-focused components. D) A department store is a large product line retailer organized into smaller, product-focused components. E) A department store is a large product line retailer organized into smaller specialty stores. Answer: D Explanation: D) Department stores are characterized by organization by the types of products. 44. Which of the following terms refers specifically to the activities needed to move products efficiently from manufacturer to consumer? A) physical distribution B) the distribution mix C) product distribution D) transportation modes E) product placement Answer: A Explanation: A) Physical distribution is the moving of products from the producer of the product to the eventual consumer who buys the product. 45. Within which of the following storage facilities would one expect to see the widest variety of products stored? A) private warehouse B) public warehouse C) food storage facility D) department store distribution center E) specialty store stockroom Answer: B Explanation: B) Given that public warehouses are utilized by anyone willing to pay the rental fee, this will necessarily have the widest variety of products within it. 46. Which of the following concerns finding the most effective techniques for communicating information about and selling a product? A) market share B) advertising C) promotion D) profit management E) customer relations Answer: C Explanation: C) Promotion is the communication of attributes about a product to the consumer. 47. Which of the following describes two of the primary objectives of promotion? A) positioning and communicating information B) positioning and developing new uses for products C) developing new uses for products and communicating information D) adding value to a product and eliminating competition E) controlling sales volume and eliminating competition Answer: A Explanation: A) These are two of the main four objectives, the others being "adding value" and "controlling sales volume." 48. Which of the following best characterizes the difference between the roles of advertising and personal selling in the promotional mix of a firm? A) Advertising is, at its worst, very expensive with little return, whereas personal selling is also very expensive, at its worst, but with better returns. B) Advertising, at its best, targets a specific audience about a product, whereas personal selling, at its best, is always dependent on the clients that a seller has. C) Advertising involves public relations with the overall population of consumers, whereas personal selling involves personalized relationships with select individuals. D) Advertising is a relatively new method of promotion, whereas personal selling is the oldest method of promotion. E) Advertising is nonpersonal in its communication about a product, whereas personal selling is highly individualized. Answer: E Explanation: E) The blanketing efforts of advertising versus the individualized care of personal selling best characterizes the different roles that these two methods play. 49. A firm that wanted to conduct a short-term activity in order to boost consumer buying would use which of the following strategies? A) sales promotions B) special offers C) trade shows D) point-of-sale displays E) missionary selling Answer: A Explanation: A) These would include coupons or premiums. 50. Which of the following is NOT a type of sales promotion? A) warranties B) coupons C) point-of-sale displays D) trade show displays E) free samples Answer: A Explanation: A) This is not a sales promotion type—it is concerned with the product after it has been bought. 51. Companies that price their product low enough to attract a large number of buyers are most likely pursuing which of the following goals? A) stable market pricing B) high profits C) stable market activity D) low market volatility E) high market share Answer: E Explanation: E) Because marketers are willing to accept minimal profits, even losses, to get buyers to try products, they are likely pursuing a goal of high market share. A goal of high market share indicates that the marketer is aiming to eventually supply a larger portion of the market. 52. The sales price of a product is given as the product's cost to the seller plus which of the following quantities? A) breakeven price B) revenue price C) variable price D) fixed price E) markup price Answer: E Explanation: E) Markup is the amount added to an item's cost to sell it at a profit. 53. Which of the following gives the correct formula for calculating markup percentage? A) sales price/markup B) sales price/fixed costs C) fixed costs/variable costs D) markup/sales price E) sales price/variable costs Answer: D Explanation: D) For example, a reasonable sales price of $15 with a markup of $7 yields a markup percentage of 46.7 percent: $7/$15 = 46.7 percent. 54. From the choices below, pick the best definition of the term fixed costs. A) costs that are needed to acquire a fixed market share B) costs that are needed to acquire fixed profits C) costs that are unaffected by the number of goods sold by the firm D) costs that remain the same from year to year E) costs that remain the same across all products Answer: C Explanation: C) Fixed costs are costs that must be paid to produce the product at all, regardless of the number of goods sold by the firm. 55. Which of the following strategies is involved with price skimming? A) setting an initial low price to establish a new product in the market B) setting an initial low price to cover new product costs and still generate a profit C) setting a limited number of prices for certain categories or products D) setting an initial high price to establish a new product in the market E) setting an initial high price to cover new product costs and still generate a profit Answer: E Explanation: E) The revenue is often needed to cover development and production costs. Skimming works only if marketers can convince consumers that a new product is truly different from existing products. 56. Which of the following strategies is involved with penetration pricing? A) setting an initial low price to establish a new product in the market B) setting an initial low price to cover new product costs and still generate a profit C) setting a limited number of prices for certain categories or products D) setting an initial high price to establish a new product in the market E) setting an initial high price to cover new product costs and still generate a profit Answer: A Explanation: A) Penetration pricing is used to create consumer interest and stimulate trial purchases among consumers. 57. Which of the following pricing strategies is used by many e-tailers in order to provide flexibility between buyers and sellers in setting a price? A) penetration pricing B) psychological pricing C) breakeven pricing D) fixed pricing E) dynamic pricing Answer: E Explanation: E) Dynamic pricing is a highly variable pricing system. 58. Which of the following pricing strategies best describes price lining? A) setting an initial low price to establish a new product in the market B) setting an initial high price to cover new product costs and generate a profit C) setting individually negotiated prices for certain categories of products D) setting a limited number of prices for certain categories of products E) setting individually negotiated prices for all categories of products Answer: D Explanation: D) Price lining is illustrated when a retailer offers sweatshirts at three amounts: $25, $35, and $50. The ranges in price likely indicate varying quality levels. 59. Which distribution channel is used by Valley Farm Dairy to distribute its products to consumers without intermediaries? A) direct distribution B) retail distribution C) wholesale distribution D) distribution by agents E) distribution by brokers Answer: A Explanation: A) That is, the product travels from the producer directly to the consumer. 60. Which distribution channel is used by companies which distribute their goods through their own system of outlets? A) direct distribution B) retail distribution C) wholesale distribution D) distribution by agents E) distribution by brokers Answer: B Explanation: B) This illustrates retail distribution; producers distribute products through retailers. Goodyear maintains its own system of retail stores; Levi's has its own outlets but also produces jeans for other retailers such as Gap. 61. Convenience stores utilize which kind of distribution? A) direct distribution B) retail distribution C) wholesale distribution D) distribution by agents E) distribution by brokers Answer: C Explanation: C) Wholesalers play a large role in the storage function; faced with rising costs of storage space, many retailers have found that they cannot afford both retail and storage space. 62. Which component of the distribution mix do agents and brokers represent in receiving commissions? A) producers B) consumers C) retailers D) industrial users E) other intermediaries Answer: A Explanation: A) Agents and brokers represent producers and sell to consumers, industrial users, or wholesalers. 63. In which type of store would you most likely find shoes, furniture, a women's section, and a men's section? A) a supermarket B) a discount house C) a department store D) a convenience store E) a specialty store Answer: C Explanation: C) Department stores are organized into specialized departments; these stores usually handle a wide array of goods and offer a variety of services. 64. Which of the following gives examples of bargain retailers? A) bakery outlet, athletic shoe store B) local bakery, discount shoe chain C) bakery thrift shop, athletic shoe store D) bakery thrift shop, shoe factory outlet E) local bakery, shoe factory outlet Answer: D Explanation: D) Bargain retailers, such as these, carry wide ranges of products and come in many forms. 65. Which of the following bargain retailers generate large sales volume by offering a wide variety of new products at substantial price reductions? A) discount houses B) catalog showrooms C) second-hand stores D) factory outlets E) direct-response bargain marketing Answer: A Explanation: A) Discount houses began by selling large numbers of items at large discounts on a cash-only basis. As these retailers began to establish themselves, they eventually evolved into moving to better locations, improving décor, selling better-quality merchandise, and offering department store services. 66. In which of the following retail outlets is there a most direct communication line between producer and consumer? A) e-retailing B) specialty store retailing C) catalog showroom retailing D) mail-order retailing E) brokered retailing Answer: D Explanation: D) Mail order is an example of direct-response retailing, in which the producer is directly communicating to the consumers, usually via mail catalogs. 67. What are the three major classifications of retail outlets in the United States? A) large-sized outlets, medium-sized specialty shops, small-sized convenience stores B) product-based retailers, discount-based retailers, convenience-based retailers C) quality-based retailers, quantity-based retailers, specialty-based retailers D) producer-owned retailers, franchised retailers, independently owned retailers E) brick-and-mortar retailers, e-retailers, hybrid retailers Answer: B Explanation: B) The three major classifications relate to the overall goal of service to the customer. 68. Which of the following describes the function of search engines that act as collections of business Web sites representing diverse products? A) Internet service providers B) electronic storefronts C) cybermalls D) e-catalogs E) interactive retailing Answer: C Explanation: C) After entering a cybermall, consumers can navigate by choosing from a list of stores, product listings, or departments. 69. Home Shopping Club and QVC are examples of which of the following retail sales outlet? A) direct selling B) video marketing C) electronic shopping D) virtual selling E) telemarketing Answer: B Explanation: B) Video marketing, a long-established form of interactive marketing, lets viewers shop at home from TV screens by phoning in or e-mailing orders. 70. J.C. Penney owns and maintains its own warehouses. What is this type of warehouse called? A) public warehouse B) relay warehouse C) distribution center D) private warehouse E) storage warehouse Answer: D Explanation: D) A private warehouse is owned by a single manufacturer, wholesaler, or retailer. 71. Which of the following will a large firm utilize when it needs temporary storage space for a large amount of products in immediate demand? A) public warehouses B) distribution centers C) relay warehouses D) private warehouses E) storage warehouses Answer: A Explanation: A) Public warehouses are independently owned and operated; because companies rent only the space they need, these facilities are popular with firms needing storage only during peak periods. 72. Which of the following is the fastest and most expensive transportation mode? A) railroads B) airplanes C) pipelines D) water carriers E) trucks Answer: B Explanation: B) Air is the fastest and most expensive form of transportation. 73. Which of the following is the slowest and the cheapest mode of transportation? A) railroads B) planes C) pipelines D) water carriers E) trucks Answer: D Explanation: D) Networks of waterways allow water carriers to reach many areas throughout the world; this mode is the slowest and the cheapest. 74. Which of the following is involved in the final stage in the buyer decision process? A) After the buyer has purchased the product, the marketer asks for feedback on the quality of the product. B) After the buyer has purchased the product, the marketer promotes more advanced versions of the product. C) After the buyer has purchased the product, the marketer provides customer assistance for use of the product. D) After the buyer has purchased the product, the marketer reminds the buyer that he or she made a wise purchase. E) After the buyer has purchased the product, the marketer promotes related products by the same company. Answer: D Explanation: D) During the final stage, advertising and personal selling can remind customers that they made wise purchases. 75. Which of the following is crucial for high-priced consumer products such as homes and cars? A) creative selling B) interactive marketing C) missionary selling D) order processing E) trade shows Answer: A Explanation: A) Creative selling can help persuade customers to purchase a high-priced item. 76. Which of the following are examples of premiums? A) contests that reward winners with free samples of the product B) free items given out at trade shows C) coupons for reduced prices on certain products D) reduced-price items available upon purchase of a product E) reduced-price items available during a sales promotion Answer: D Explanation: D) Premiums are free or reduced-priced items given to consumers in return for buying a specified product. 77. Which of the following best describes the purpose of point-of-sale displays? A) to inform customers about the benefits of the products B) to entice customers to buy additional products C) to make it easier for customers to find products D) to promote the reputation of the company offering certain products E) to target specific messages about the product to customers Answer: C Explanation: C) POS displays make it easier for customers to find products and easier for sellers to eliminate competitors. 78. Which of the following describes best what distinguishes publicity among all other forms of promotion? A) Publicity is less directed than other forms of promotion. B) Publicity is less effective than other forms of promotion. C) Publicity is more impersonal than other forms of promotion. D) Publicity is cheaper than other forms of promotion. E) Publicity is more direct than other forms of promotion Answer: D Explanation: D) Given that publicity is free, it is indeed cheaper than any other form of promotion. 79. A well-established Internet provider is facing stiff competition from several new companies. Which of the following techniques would it use in order to demonstrate to consumers that its product is superior to that of its competitors? A) order processing B) sales promotions C) direct marketing D) creative selling E) missionary selling Answer: D Explanation: D) With creative selling, salespeople persuade buyers to purchase their product by providing information about its benefits. 80. A highly successful bakery specializes in making cherry tarts. Which of the following costs at the bakery is NOT variable? A) cost of cherries B) cost of flour C) cost of wax paper liners D) cost of the oven E) cost of heating the oven Answer: D Explanation: D) The oven is the only cost listed here that is not directly dependent on the number of tarts made—its cost will remain constant no matter how many tarts are made and sold. 81. Betty's Breads is trying to calculate its breakeven point. Monthly fixed costs are $5,255. The cost of making one loaf of bread, considering labor and materials, is $3.50. Betty's sells the bread at $6 per loaf. How many loaves does Betty's need to sell each month in order to break even? A) 251 B) 626 C) 1502 D) 2102 E) 2200 Answer: D Explanation: D) Breakeven point (in units) = fixed costs/(price - variable cost per unit). In this scenario, breakeven point = $5255/($6 - $3.50) = 2102 loaves of bread. 82. Which of the following assumptions is the strategy of pricing above the market based on? A) Higher price implies higher quality. B) Higher price means higher customer support. C) Higher prices means higher customer satisfaction. D) Higher price creates higher demand. E) Higher price means easier distribution. Answer: A Explanation: A) Godiva Chocolates and Patek Philippe watches price high by promoting prestige and quality images, for example. 83. Which of the following scenarios would allow a firm to price below prevailing market price and still succeed? A) The public does not learn that the firm's product is indeed inferior. B) The firm can offer a product of acceptable quality. C) The firm can offer an entirely new product. D) The firm has effective promotional tactics and marketing strategies. E) The firm can effectively criticize its competitors' products. Answer: B Explanation: B) Budget and Dollar car rental companies following this strategy, for example. 84. Which of the following options best describes an example of price lining? A) having the price of each individual song on an online music store be determined by length of song B) having the price of each individual song on an online music store be determined by popularity of the band C) having the price of each individual song on an online music store be determined by user auction D) having the price of each individual song on an online music store be determined by reverse auction E) having the price of each individual song on an online music store be determined by which of several categories the song falls into Answer: E Explanation: E) With price lining, a retailer predetermines three or four price points at which a particular product will be sold. 85. Which of the following is most directly related to differences in transportation cost from mode to mode? A) packing necessary for the product B) fuel efficiency of the carrier C) regularity of use of a given carrier D) discount agreements with the carriers E) delivery speed Answer: E Explanation: E) Differences in transportation cost from mode to mode are most directly related to delivery speed. 86. Marshall is a route salesperson for a beverage company. Which of the following would most likely occupy his work time? A) trade show demonstrations B) sales promotions C) missionary selling D) direct mail advertising E) order processing Answer: E Explanation: E) Since route salespeople have a set of regular customers, their main task is processing orders for inventory. 87. A new Internet provider has entered a very crowded market. Which of the following methods would it most likely use in order to make consumers aware of its services? A) creative selling B) direct marketing C) interactive marketing D) missionary selling E) personal selling Answer: D Explanation: D) This technique is most concerned with promoting the reputation of the company rather than increasing sales. 88. Differentiate between fixed costs and variable costs. Answer: Fixed costs remain constant with varying levels of production or sales. Variable costs change with the quantity of a product produced or sold. Explanation: Examples of fixed costs include rent, insurance, and utilities, whereas examples of variable costs include those for raw materials, sales commissions, and shipping. 89. Explain direct-response retailing. Answer: Firms contact customers directly to inform them about products and to receive sales orders. Explanation: Among the types of direct-response retailing are mail order (or catalog marketing), telemarketing, and direct selling door-to-door or through home-selling parties. 90. Why would one expect a product sold at a specialty store to cost more than the same product at a department store? Answer: Department stores provide a variety of products, divided by type into various departments, whereas specialty stores will specialize on one particular product. As a result, consumers would expect better service and more knowledgeable staff at the specialty store than at the department store. This attention to consumer needs would entail a higher price on the same product at the specialty store than at the department store. Explanation: Department stores are usually large and handle a wide range of goods, whereas specialty stores are small and serve specific market segments with full product lines in narrow product fields. 91. Explain the difference between an electronic storefront and a cybermall. Answer: An electronic storefront is a seller's Web site from which consumers collect information about products and buying opportunities, place orders, and pay for purchases. Search engines serve as cybermalls and are a collection of virtual storefronts representing diverse products and offering speed, convenience, 24-hour access, and efficient searching. Explanation: After entering a cybermall, shoppers can navigate to electronic storefronts by choosing from a list of stores, product listings, or departments. 92. List one advantage of using trucks for transportation and one disadvantage. Answer: The advantages of trucks include flexibility for any-distance distribution, fast service, and dependability. A disadvantage is increasing truck traffic raising safety and courtesy concerns. Explanation: With more than 3 million drivers, trucks haul more than two-thirds of all tonnage carried by all modes of U.S. freight transportation. 93. Why is water the least expensive mode of transportation? Answer: Networks of waterways, oceans, rivers, and lakes let water carriers reach many areas throughout the world. Boats and barges are used mostly for moving bulky products. Unfortunately, water is one of the slowest modes of transportation. Explanation: Speed of delivery is a major factor when considering the cost of transporting physical goods—air is the fastest and most expensive, whereas water is the slowest and least expensive. 94. What limits the economical use of railroads for transportation? Answer: Railroads can economically transport high-volume, heavy, bulky items, such as cars, steel, and coal. However, their delivery routes are limited by fixed, immovable rail tracks. Explanation: Railroads are operated efficiently in coordination with other transportation modes, such as trucks and water carriers. 95. What is the difference between coupons and premiums? Answer: Coupons use certificates entitling buyers to discounts in order to encourage customers to try new products, lure them away from competitors, or induce them to buy more of a product. Premiums are free or reduced-price items, such as pencils, coffee mugs, and six-month low-interest credit cards, given to consumers in return for buying a specified product. Explanation: Coupons and premiums are types of sales promotions, short-term promotional activities designed to encourage consumer buying, industrial sales, or cooperation from distributors. They can increase the likelihood that buyers will try products, enhance product recognition, and increase purchase size and sales revenues. 96. Explain how trade shows work. Answer: For B2B promotions, industries sponsor trade shows where companies rent booths to display and demonstrate products to customers who have a special interest or who are ready to buy. Explanation: Trade shows provide promotional opportunities that can often directly lead to sales. 97. What is cost-oriented pricing? Answer: Cost-oriented pricing considers the firm's desire to make a profit and takes into account the need to cover production costs. Explanation: In its simplest formulation, cost-oriented pricing would determine the selling price by adding together seller's cost and profit. 98. Why might retailer Best Buy price a television at $299.99 rather than $300.00? Answer: Over the years, marketers have determined that consumers find $299.99 far more attractive than $300.00. Marketers still use this form of psychological pricing, often called odd-even pricing. Explanation: Psychological pricing techniques such as odd-even pricing take advantage of the fact that customers are not completely rational when making buying decisions. Rational consumers would realize that the one penny difference in the price of the Best Buy televisions is a trivial amount. 99. Describe a situation in which a company might adopt a pricing objective other than profit maximization. Answer: Sometimes a firm may value establishing market share over making immediate profits. Companies may set an initially lower price to get buyers to try products. In such a case, the firm would defer profits to a later time. In addition, companies are also influenced by the need to compete in the marketplace, by social and ethical concerns, and by corporate image. Explanation: Pricing objectives are the goals that sellers hope to achieve in pricing products for sale. Some companies have profit-maximizing pricing objectives, while others have market share pricing objectives. 100. Why would a firm want to set its price above competitors' prices? Answer: Firms set prices above the market price to create the impression that the product with the higher price is of far greater quality. Explanation: Two examples are Godiva chocolates and Patek Philippe watches, which are priced high to promote images of prestige and quality. 101. Explain the primary difference between a retailer and a wholesaler. Answer: The primary difference is to whom the intermediary sells the product. A retailer sells the product to the consumer, i.e., the person or company that will actually use the product as it was created to be used, whereas the wholesaler sells the product to another seller, i.e., a person or company that wants to buy the product only to resell it. Explanation: Wholesalers are intermediaries helping to distribute goods, either by moving them or by providing information that stimulates their movement from sellers, such as retailers, to customers. 102. While the ultimate objective of any promotion is to increase sales, marketers may have other objectives. In particular, why would adding value to a product be seen as an important objective for a promotion team? Answer: By adding perceived value to a given product, promotion can distinguish that product in a positive light from a very large set of competitors, thus increasing reputation and consumer regard for both the product and the firm. Explanation: Promotional mixes are often designed to communicate a product's value-added benefits to distinguish it from the competition. Mercedes automobiles and Ritz-Carlton Hotels, for example, promote their products as upscale goods and services featuring high quality, style, and performance, all at a higher price. 103. List and describe the three personal selling tasks. Answer: The three personal selling tasks are order processing, creative selling, and missionary selling. In order processing, a salesperson receives an order and sees to its handling and delivery. Creative selling can help to persuade buyers when the benefits of a product are not entirely clear. A company may use missionary selling when its purpose is to promote itself and its products rather than simply to close a sale. Explanation: Personal selling is the oldest and most expensive form of sales. A salesperson communicates one-on-one with potential customers to identify their needs and align them with the product. Salespeople gain credibility by investing a lot of time getting acquainted with potential customers and answering their questions. 104. Explain the primary difference between a wholesaler and a sales agent. Answer: The primary difference is the role that each intermediary plays within the distribution mix. The wholesaler's role is generally to distribute the product to any retailers that will buy it and resell it. In particular, wholesalers are only indirectly concerned with who the consumers of the product actually are. Sales agents, on the other hand, seek out the consumers for the product directly and negotiate the sales of the product as part of their commission. Thus, they have a more active role in finding and securing consumers for the product. Explanation: Wholesale distribution and distribution by agents or brokers are two of the four popular distribution channels, along with direct distribution and retail distribution. Bill and Farrah have been recently hired by Superior Stereo Systems, a cutting-edge manufacturer of stereo speakers. They have been assigned to work on a product team for the Superior V, an existing product, and the Superior VI, a brand new speaker technology. The team is reviewing the pricing strategy used to this point. Bill, a recent graduate with a degree in economics, insists that they should price the speakers to maximize profits. He explains, "It is basic economics—companies price their products to maximize profits. There's no question, this is the strategy that we should take." Farrah, remembering what she learned in her marketing courses, isn't so sure that Bill is on the right track. The technical specifications of the Superior VI speakers have been worked out, but the team is struggling with pricing. Some members of the group think that the new speakers should be priced higher than the Superior V, while others are arguing for a lower price. 105. In the past, the price for the Superior V has been slightly higher than similar products offered by competitors. Why would a company use this strategy? Answer: Firms generally set prices above the market price to create the impression that the product with the higher price is of far greater quality. Superior Stereo Systems may be trying to convey a high-quality image for its products. Explanation: The other two options a firm has for pricing existing products are pricing below market prices while offering a product of comparable quality to higher-priced competitors, and pricing at or near market prices. 106. Farrah explains why Superior Stereo Systems might not want to set prices for the Superior V at a level which maximizes profits. What do you expect that Farrah will tell Bill? Answer: Farrah will likely explain that a firm may value establishing market share over making immediate profits. Companies may set an initially lower price to get buyers to try the product and gain market share. In such a case, the firm would defer profits to a later time. Pricing for market share also addresses practical concerns. Retailers are unlikely to stock an item with a very low share of the market. In addition, companies are also influenced by the need to compete in the marketplace, by social and ethical concerns, and by corporate image. Explanation: Costs, selling price, and the number of units sold determine how many units a company must sell before all costs, both variable and fixed, are covered, and it begins to make a profit. 107. What would the argument for pricing the Superior VI lower than the Superior V be? Answer: Given that any new speaker system will be entering a well-populated market with a great deal of competition, it is incumbent for Superior Stereo Systems to penetrate the market with the Superior VI as quickly as possible. The best way of doing this is to sell it (at least, initially) at a lower price than the market demands. However, lowering the price of the older model correspondingly could possibly give the impression that this well-established product is of inferior quality than the rest of the speaker systems on the market. So, its price should remain higher than that of the newer Superior VI. Explanation: Penetration pricing—setting an initial low price to establish a new product in the market—seeks to create customer interest and stimulate trial purchases. This is the best strategy when introducing a product that has or expects to have competitors very quickly. 108. In the past, Superior has sold all speakers directly to retailers. The firm was recently approached by a wholesaler who would like to carry its line of products. Why might Superior wish to use a wholesaler rather than selling directly to retailers? Answer: Superior will want to consider using a wholesaler because of the services it could provide. Wholesalers provide storage, delivery, credit, and product information while accumulating an assortment of products from a number of manufacturers. Explanation: Wholesalers can also relieve space problems by storing merchandise and restocking store displays frequently. 109. How could the use of wholesalers affect the pricing for the Superior V and Superior VI speaker systems? Answer: Using wholesalers would relieve Superior of a great deal of storage and display costs as well as costs involved with maintaining a system of retail stores. However, adding another layer to the distribution channel from producer to consumer would obviously increase the price of each system for the consumer. Explanation: Wholesalers and other intermediaries can provide added value by providing time-saving information and making the right quantities of products available where and when consumers need them. 110. How might Superior benefit from using e-catalogs? Answer: E-catalogs use the Internet to display products for both retail and business customers. Millions of users have instant access to product information; Superior could avoid mail-distribution and printing costs. Explanation: Once an online catalog is in place, there is little cost in maintaining and accessing it. About 90 percent of all catalogers are now on the Internet, with sales via Web sites accounting for nearly 50 percent of all catalog sales. 111. When putting together the promotion campaign for Superior, what purposes of promotion should managers at Superior keep in mind? Answer: Promotion is primarily used to increase sales. In addition, marketers may use promotion to communicate information, position products, add value, and control sales volume. Explanation: Promotion refers to techniques for communicating information about products and is part of the communication mix–the total message any company sends to customers about its product. Promotional techniques, especially advertising, must communicate the uses, features, and benefits of products, and marketers use an array of tools for this purpose. 112. Discussion turns to promotion of the new Superior VI speakers. What are Superior's options in promotion? Answer: Superior will want to consider all of its promotional options. The four elements of the promotional mix are advertising, sales promotions, personal selling, and publicity and public relations. Because the plan is to sell products either through wholesalers or directly to retailers, personal selling is not appropriate. It is likely that the company will wish to employ a mix of advertising, sales promotion, and publicity and public relations. Explanation: The best combination of these tools—the best promotional mix—depends on many factors, the most important of which is the target audience. 113. A review of the Superior VI that is very negative regarding the quality of the new speaker system has been published in an influential magazine. How can Superior counter this negativity? Answer: Marketers usually have little control over publicity; in this case, Superior can react with its own public relations campaign in order to offset the bad publicity. Superior can spread public relations information that seeks to deal with the unfavorable event. Superior may work to rebuild any lost customer goodwill by publicizing its focus on quality and on any increased efforts toward building quality into its products. Explanation: In contrast to publicity, public relations is company-influenced information that seeks either to build good relations with the public—by publicizing the company's charitable contributions, for example—or to deal with unfavorable events. Personal Devices Inc., based out of Portland, Oregon, is a manufacturer of premium cell phones. Most of the company's handsets are equipped with high-end features such as large internal memory, sophisticated texting, camera and music functionalities, and data transfer capabilities. The company is planning to enter the Indian market. One of the senior managers argues that a stripped-down, low-priced model without any extras could be the starting point. The company can sell additional features added to the base model at higher price points. 114. Which of the following, if true, would most strengthen the senior manager's argument? A) Research suggests that consumers are looking for more variety in this product category. B) The majority of India's consumer market is located at the bottom of the pyramid. C) Few competitors in the market offer basic cell phones because of increasing customer sophistication. D) The company will face charges of dumping if it sells the phones at a price lower than what it offers in the home country. E) Different companies already cater to the requirements of different market segments in India. Answer: B Explanation: B) Personal Devices offers high-end phones now, but that approach may not work for the company as it enters the Indian market. Low-end phones make more sense if most of the Indian consumers are located at the bottom of the pyramid, as Choice B indicates. They will demand less in the way of advanced features, and they will be more price-conscious. Choice A weakens the argument by suggesting that product innovation is the way to go. Choice C suggests that customers want more advanced phones. Choice D doesn't matter because Personal Devices isn't selling the same phones at home and in India. Choice E doesn't tell us what the requirements of the different segments are or how to satisfy them. 115. Which of the following, if true, would weaken the senior manager's argument? A) Producing a stripped-down model would alter high-end domestic customers' view of the Personal Devices brand. B) A premium auto manufacturer who came out with economy cars suffered in the market. C) India recently blocked low-priced Chinese phones that did not have the International Mobile Equipment Identification number. D) Research suggests that the premium market segment is saturated. E) Even high-end customers typically do not use the advanced functionality in Personal Devices cell phones. Answer: A Explanation: A) Making new products for a new market sounds like a good idea, but if the new phones would injure the company's image in its core market (Choice A), then making low-end phones sounds like a bad idea. Choice B is about cars, not phones, and we don't know why the company suffered. Choice C, if anything, suggests an opportunity for companies that can come up with low-priced base models. Choice D strengthens the argument by suggesting that Personal Devices should look outside the high-end market. Choice E, if anything, strengthens the claim that low-end is the way to go. 116. Extensive analysis reveals that if Personal Devices offered Indian customers products at a number of different price points, the company would initially earn more profits but damage the brand in the long term. Which of the following, if true, would support the argument that Personal Devices should offer products at multiple price points? A) One of the core values of Personal Devices is to offer only the most advanced technology. B) Major stockholders of Personal Devices are primarily motivated by short-term profits. C) Competitors have adapted their products considerably for the Indian market. D) Indian customers are increasingly becoming selective about the brands they purchase. E) The huge Indian middle class is rapidly reaching a level where they can afford premium products. Answer: B Explanation: B) What is more important—short-term profits or the lasting value of the brand? If Choice B is true, then what happens right away is what really matters. Since the strategy of multiple price points makes sense in the short term, Choice B supports the argument. Choice A suggests that the long-term effect is most important, which undermines the argument for multiple price points. Choice C is about other competitors, not Personal Devices. Choices D and E suggest that a valuable high-end brand is the way to go. 117. Extensive analysis reveals that if Personal Devices offered Indian customers products at multiple price points, the company would initially earn more profits but damage the brand in the long term. Which of the following, if true, would weaken the argument that Personal Devices should offer products at multiple price points? A) The Indian market is sufficiently large to support offerings at multiple price points. B) Taiwanese manufacturers have focused on the low to medium end when selling to their domestic markets. C) Brand image is the sum total of customer perceptions about a company. D) Research shows that the average domestic consumer tends to associate price with quality. E) Niche companies that try to be everything to everyone usually lose their edge in their core business. Answer: E Explanation: E) Choice E points out another potential disadvantage of offering products at many price points: A company can lose its competitive advantage in its core business. That would be a reason to stick to one thing. Choice A supports targeting multiple markets. Choice B is irrelevant, because the issue at hand is India, not Taiwan. Choice C is a definition of brand image but doesn't affect the argument here. Choice D talks about domestic customers, but the issue at hand is what to do in India. ValueNet Corporation sells electronic learning devices, consumer electronics products, and collectibles directly to American consumers using a team of telemarketers. The aggressive cold calling tactics recently boomeranged when the company became the target of irritated consumers and consumer activist groups who flooded ValueNet's phone system with return calls and messages. Management is planning to reduce the reliance on outbound calling and use other approaches like direct-response television (infomercials). 118. Which of the following, if true, would strengthen the argument for shifting to direct-response television marketing? A) Many mainstream companies such as P&G, Dell, Disney, and Bose have begun using infomercials to sell their wares. B) ValueNet could slightly modify its telemarketing techniques and receive a much better customer response. C) TV media production costs are expected to increase substantially as the economy moves toward recovery. D) The majority of Americans have registered their telephone numbers with the National Do Not Call Registry, and the number of registered numbers continues to grow. E) Despite objections and angry responses to cold calls, total sales from telephone marketing have been steady over the years. Answer: D Explanation: D) Why would ValueNet want to move from using outbound telemarketing? If it's no longer an effective way to reach the target market. Choice D indicates that a substantial portion of ValueNet's market has registered with the Do Not Call Registry, meaning that ValueNet cannot legally make unsolicited outbound calls to those individuals. With its market access shrinking, ValueNet needs to come up with a new plan. Choice A describes the actions of other companies, but doesn't indicate whether a similar strategy would be effective for ValueNet and its products. Choice B, if anything, weakens the argument for moving away from an established telemarketing system. Choice C makes the proposition unattractive, indicating that ValueNet would have to make a substantial investment in creating infomercial spots. Choice E calls for using the current strategy despite its drawbacks. 119. Which of the following, if true, would weaken the argument for shifting to direct-response television marketing? A) Most customers perceive infomercial sales tactics to be loud, aggressive, and questionable. B) Some companies have found it difficult to adopt a direct-response television strategy. C) Consumer behavior is highly dependent on the state of the economy. D) New forms of direct marketing channels such as podcasting and iTV are experiencing exciting growth. E) ValueNet's products could successfully be sold using multiple direct marketing methods. Answer: A Explanation: A) ValueNet is unlikely to shift to direct-response television marketing if the tactic is ineffective. Choice A suggests that consumers have a negative opinion of infomercials, which certainly decreases the attractiveness of shifting to direct-response television for ValueNet. Choice B tells us about some companies but doesn't say anything about how ValueNet specifically would adapt. Choice C points to an issue that doesn't depend on the marketing tool ValueNet uses. Consumer behavior will be affected by the economy whether ValueNet uses telemarketing or infomercials. Choice D tells us that new technologies are coming up, but this does not necessarily mean that direct-response television is an unattractive option. Choice E points to implementing a multipronged strategy rather than relying exclusively on outbound telemarketing or infomercials. West Coast Unlimited is a wholesaler who carries close to 20,000 products. The company has close to 3,000 suppliers and sells its products mostly to business and institutional customers. The company markets its products by relying mainly on sales promotion and advertising. Faced with increasing costs, the company is looking at various ways to reduce expenses. West Coast Unlimited's vice president feels that the company should shift one of its major distribution centers to a low-rent, low-tax area. 120. Which of the following, if true, would weaken the vice president's argument? A) The low-rent, low-tax area is located farther from delivery sites. B) West Coast Unlimited's competitors often place their distribution centers in relatively expensive locations. C) Better use of technology could reduce distribution costs more than a relocation could. D) Final customers are almost always unaware of the location of the wholesaler. E) Delayed shipments from suppliers are already creating problems for West Coast Unlimited's distribution network. Answer: A Explanation: A) Low rent and low taxes sound good, but if the distribution center is located farther away, Choice A, then shipping costs would probably be higher and might offset any other benefits. Choice B: What the competitors do doesn't tell us what West Coast Unlimited should do. All things being equal, the cheaper approach sounds better. Choice C sounds good, but why not try to save money both ways? Choice D tells us that customers don't know about these things, but that's no reason to pay more if you don't need to. Choice E suggests a problem with the current approach, which could only strengthen the argument. 121. Which of the following, if true, would strengthen the vice president's argument? A) West Coast Unlimited recently signed a long-term lease for the distribution center's current location. B) The percentage decrease in taxes is higher than the percentage decrease in rent. C) West Coast Unlimited's competitors are also capable of moving to the low-rent, low-tax area. D) The political environment in the new area is stable, with no expected changes in tax policy. E) Changes in the macroeconomic environment may reduce costs associated with the current location. Answer: D Explanation: D) Taxes are lower in the new place, but for all we know taxes could go up. However, if Choice D is true, then taxes will remain about the same, which makes it sound as if the move will save money. Choice A weakens the argument by suggesting that getting out of the old location won't be easy. Choice B: It doesn't matter which percentage is higher. The point is that the company could save money for both reasons. Choice C suggests that the move would not give West Coast Unlimited a permanent advantage, so it does not strengthen the vice president's argument. Choice E weakens the argument by making the current situation sound better. 122. A critic claimed that a business that neither manufactures nor sells directly is doomed because it is forced to compete exclusively on price. Which of the following is the best criticism of this argument? A) It ignores the fact that improvements in wholesaler efficiency are relatively easy to duplicate. B) It fails to demonstrate that traditional retailing businesses are also in jeopardy. C) It fails to recognize the possibility that wholesalers can add value to different partners in the supply chain. D) It does not specify how wholesalers can reduce costs most effectively. E) It does not account for the fact that wholesalers need to be large in order to take advantage of economies of scale. Answer: C Explanation: C) Wholesalers can provide more than efficient transportation. For example, they can provide market insights, they can bear risk, and they can help with financing. But the critic ignores all of these, as Choice C indicates. Choice A would point out a strength of the critic's claim, not a weakness. Choices B and D are things that the critic does not do, but neither is important to the critic's point. Choice E also suggests a weakness of wholesalers, which would not be a criticism here. AudiO Corporation is a manufacturer of high-end audio recording devices and car stereo players. Its products are known for excellent craftsmanship and sound quality. The primary target market for the company is executives in the age group of 30 to 40. The company is in the process of reworking its media mix. It had traditionally relied on television to spread its message. However, with the advent of video-on-demand and DVR systems, ad-skipping has become common. Some managers in the decision-making team feel that the bulk of the advertising budget should be allocated to Internet advertising. 123. Which of the following, if true, would strengthen the argument for using television as the medium for the next campaign? A) A study shows that the bulk of television audiences are teenagers and people over 65. B) More than 43 percent of U.S. advertising dollars are spent on national and local television commercials versus 8 percent on Internet advertising. C) The number of video-on-demand viewers is expected to quadruple during the next five years. D) Increasingly, consumers are choosing not to watch ads. E) Effective television ads are still capable of holding the audience's attention. Answer: E Explanation: E) Television sounds like a bad choice, as viewers can now skip ads. But if good ads can still be effective, as Choice E indicates, then maybe television could be a good choice after all. Choices A, C, and D all weaken the argument. Choice B says that television is still used as a medium, but we don't know if it makes sense for AudiO. 124. A problem associated with Internet advertising is that the audience controls the exposure, so viewers are able to avoid unwanted ads. Which of the following is the best response to this criticism? A) Internet advertising allows target audiences to learn more about products that interest them. B) Exposure control is a problem associated with all media types. C) The ability to avoid unwanted ads is an important aspect of privacy. D) Audiences can be forced to watch the entire message using technology. E) Internet advertising is too new to evaluate its effectiveness. Answer: A Explanation: A) Giving people the chance to avoid your ad sounds like a bad thing, but audience control can also allow interested people to interact with your message in a deeper way. Choice A, therefore, is a good response to the concern about audience control. Choice B is not a defense of Internet advertising, and it fails to respond to the issue of audience control. Choice C is a good argument for not forcing people to watch ads, but it isn't a defense of the power of Internet advertising. Choice D would introduce a greater problem, as consumers would avoid a Web site or technology that tries to control them. Choice E makes Internet advertising sound even worse. 125. Which of the following, if true, would most seriously weaken the argument for using the Internet as the medium of advertising? A) Countries with restrictive regimes are yet to free this medium from controls over political content. B) Consumers are extremely frustrated with annoying pop-up ads that affect the quality of browsing. C) Studies show that customers tend not to notice Internet ads that are not intrusive in nature. D) The interactive capabilities of Internet ads are rarely being used in a creative manner. E) People who are online are also known to engage in media multi-tasking. Answer: C Explanation: C) If Choice C is true, then Internet advertisers are in a real dilemma: Internet ads can be nonintrusive but ignored, or they can be effective but annoying and intrusive. Both sides are bad for Internet advertising, and so Choice C would weaken the case for using the Internet as an advertising medium. Choice A would be a problem for some, but not for AudiO, which doesn't produce political content. Choice B would be a reason not to have pop-up ads but not a reason to abandon Internet advertising completely. Choice D suggests that Internet advertising has untapped power, which would strengthen the argument. Choice E, if anything, suggests that customers could view Internet ads while doing other things. Riverdale Inc. is a multiplatform retailer based in the United States. It primarily does business through direct mail marketing. The company sells approximately 400 products including statues, die-cast vehicles, T-shirts, posters and lithographs, plush toys, and household decorative items. Riverdale management is exploring ways of improving its direct marketing mechanism. 126. Which of the following, if true, would most strengthen the argument for continuing direct mail marketing? A) The consumers that direct mail marketing reaches are much better prospects compared to those reached by advertising. B) Direct mail marketing accounts for 34 percent of all U.S. direct marketing spending. C) Direct mail marketing has proven to be successful for promoting certain product types, such as cosmetics and designer apparel. D) The growth of direct mail marketing has been explosive, with customers being flooded with such material. E) Telephone marketing, another form of direct marketing, is becoming easier to use due to auto-dialers. Answer: A Explanation: A) Riverdale will continue with direct mail marketing if it is a successful marketing tool and is likely to continue to succeed. Choice A tells us that direct mail reaches better prospects than advertising does, which at the very least recommends direct mail over traditional advertising for Riverdale. Choice B provides a national statistic but doesn't specifically address the effectiveness of direct mail marketing for Riverdale. Choice C doesn't help because we don't know if direct mail has proven to be successful for the types of products marketed by Riverdale. Choice D weakens the argument, suggesting that customers are so overwhelmed with direct mail that they are less likely to pay attention to it. Choice E does not say much about the issue at hand—whether to continue direct mail marketing—but if anything it slightly weakens the case for direct mail by suggesting a better alternative. 127. Which of the following, if true, would most weaken the argument for continuing direct mail marketing? A) Riverdale will have to use highly selective mailing lists to ensure that its messages reach the target audience. B) Some analysts predict a decline in the use of traditional forms of direct mail in coming years. C) Competitors are using more aggressive and often more intrusive direct marketing techniques. D) Results of the program will have to be evaluated and monitored continuously in order to reduce costs. E) Direct mail marketing costs much more per thousand people reached than mass media outlets such as television or magazines. Answer: E Explanation: E) Only Choice E tells us something negative about direct mail marketing, by suggesting that it is not as cost-effective as other types of marketing. Choice A just describes a good business practice when it comes to direct mail marketing, one that Riverdale could presumably use with success. Choice B is a prediction (which may or may not be accurate) about a general trend, and as such shouldn't have much impact on what Riverdale does in the immediate future. Choice C doesn't say whether those techniques are effective, something Riverdale would certainly want to know before switching to those techniques. Choice D describes an activity that Riverdale would want to do with any marketing strategy. 128. Which of the following, if true, would most weaken an argument for using e-mail for direct mail marketing? A) Growth in the use of e-mail for direct marketing is uncertain. B) Studies show that a large percentage of such e-mails go directly to customers' spam folders. C) Riverdale has traditionally used catalogs for its direct marketing efforts. D) Not everyone who has used this medium for direct marketing has been successful. E) Only interested customers will go through such messages in great detail. Answer: B Explanation: B) Using e-mail marketing makes sense only if consumers are likely to look at the marketing message. If Choice B is true and most marketing e-mails go directly to spam folders, then the consumers never even see the message. Choice A, pointing to uncertainty about the effectiveness of e-mail marketing, is too vague to be useful in decision making. Choice C only tells us what the company has done in the past, not what the best option is for the future. Choice D is not relevant, as the failure of any one company in a marketing medium does not mean the medium itself is a failure. We don't have enough information on Choice E—it would strengthen the argument for direct mail marketing if the percentage of "interested customers" is high enough. 129. One manager argues that Riverdale's corporate image will suffer if customers receive too many e-mails about its different services and offerings. Which of the following, if true, is the most effective counterargument? A) Customers can report the e-mails as spam and ensure that they do not receive these service mails in their inboxes in the future. B) Research shows that customers who opt to receive marketing e-mails rarely complain, even if they are not happy about them. C) This is a problem that affects all e-mail marketers, not Riverdale alone. D) Customers can use a ready menu of e-mail selections to opt in and receive only the marketing product information they are interested in. E) The cost of e-mail marketing is lower than public service advertising. Answer: D Explanation: D) The manager's point is that customers will receive so many e-mails about Riverdale's diverse product lines that the company's image will suffer. Choice D offers a solution to the problem—let customers choose which e-mails they want to receive. This gives consumers control, and gives Riverdale better information about its customers. Choice A sounds like an argument against using e-mail at all. Choice B supports the original argument that Riverdale's image will suffer if customers receive too many marketing e-mails. Choice C tends to strengthen the argument, if anything, by saying that the concern is industry-wide. Choice E focuses on factors—cost and an alternative promotional method—that are not relevant. Test Bank for Business Essentials US Edition Ronald J. Ebert, Ricky W. Griffin 9780133034028, 9780273766599, 9780136070764
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