CH-3 Gathering Information and Scanning the Environment – Marketing Management : Exam Guide

Chapter 3 1. As the manager of an organization that is attempting to build a Marketing Information System (MIS), you have been informed that a MIS is built upon three fundamental information sources. The sources are ________, marketing intelligence activities, and marketing research. A) external records and documents B) databases found on the Internet C) consultant reports D) internal company records E) secondary data from government sources such as the Better Business Bureau Answer: D Rationale: Internal company records serve as one of the fundamental information sources for a Marketing Information System (MIS). These records include data collected and stored within the organization, such as sales data, customer information, and inventory levels. 2. The company's marketing information system should be a mix of what managers think they need, what managers really need, and ________. A) what the marketing research department is able to do B) what consumers are willing to consume C) what the government policies allow D) what is acceptable at the industry level E) what is economically feasible Answer: E Rationale: The company's marketing information system should be a blend of various factors, including managers' perceptions of their needs, actual managerial needs, and what is economically feasible for the organization to implement and maintain. 3. The heart of the internal records system is the ________. A) pay-roll system B) purchase order cycle C) order-to-payment cycle D) expense cycle E) human resources system Answer: C Rationale: The order-to-payment cycle is the central component of the internal records system. It encompasses the process from receiving orders to generating invoices, shipping documents, and billing documents, providing crucial transactional data for the organization. 4. The ________ begins with sales representatives and dealers sending orders to the firms and is followed by the sales department preparing invoices, and finally generating shipping and billing documents which are then sent to various departments. A) payroll system B) market research process C) human resources system D) expense cycle E) order-to-payment cycle Answer: E Rationale: The order-to-payment cycle involves the process of receiving orders from sales representatives and dealers, preparing invoices by the sales department, and generating shipping and billing documents, which are then distributed to various departments within the organization. 5. By equipping its sales force with handheld devices with bar-code readers and Internet connections to speed inventory assessment, TaylorMade allows sales executives to have significantly more time to interact with their consumers. This is an example of the use of technology in improving ________. A) sales information systems B) payroll systems C) cookies D) cohort segmentation E) competitive intelligence gathering Answer: A Rationale: Equipping the sales force with handheld devices for inventory assessment demonstrates the use of technology to enhance sales information systems. These devices improve efficiency in tracking inventory levels, allowing sales executives to allocate more time to customer interaction and sales activities. 6. Companies can practice targeted marketing by using ________–records of Web site usage stored on personal browsers. A) plug-ins B) black swans C) cookies D) trolls E) honey-pots Answer: C Rationale: Cookies are records of website usage stored on personal browsers. Companies utilize cookies to gather information about user behavior and preferences, enabling targeted marketing efforts based on users' browsing activities. 7. The internal records system supplies results data, but the marketing intelligence system supplies ________ data. A) internal B) revenue C) thematic D) happenings E) process Answer: D Rationale: While the internal records system provides results data from past transactions and operations within the organization, the marketing intelligence system supplies "happenings" data, which includes current information about developments in the marketing environment, competitors' actions, and market trends. 8. A ________ is a set of procedures and sources managers use to obtain everyday information about developments in the marketing environment. A) data warehousing system B) viral marketing campaign C) product management system D) marketing intelligence system E) sales information system Answer: D Rationale: A marketing intelligence system is a set of procedures and sources that managers use to obtain everyday information about developments in the marketing environment. It helps organizations gather and analyze data to make informed decisions and respond effectively to changes in the marketplace. 9. A company can take several steps to improve the quality of its marketing intelligence. Which of the following best describes the practice used by McDonald's when it sent pseudo customers to assess stores' internal speed standards? A) training and motivating the sales force to spot and report new developments B) motivating intermediaries to pass along important intelligence C) networking externally D) purchasing information from outside research firms and vendors E) using the sales information system to get accurate sales reports Answer: B Rationale: Motivating intermediaries to pass along important intelligence, such as sending pseudo customers to assess store speed standards, is a strategy used to improve the quality of marketing intelligence. It involves leveraging relationships with intermediaries, such as franchisees, to gather valuable insights about customer experiences and operational performance. 10. A company can take several steps to improve the quality of its marketing intelligence. If the company purchases competitive products for study, attends open houses and trade shows, and reads competitors' published reports and stockholder information, the company is using ________ to improve the quality of its marketing intelligence. A) sales-force surrogates B) intermediaries C) external networks D) advisory panels E) customer feedback systems Answer: C Rationale: By purchasing competitive products, attending industry events, and accessing publicly available information about competitors, the company is utilizing external networks to gather market intelligence. These activities allow the company to stay informed about competitors 11. When gathering marketing intelligence, companies often use the 2000 U.S. census, which provides an in-depth look at the population swings, demographic groups, regional migrations, and changing family structure of 281+ million people. Which of the following steps to improve the quality of a company marketing intelligence system would be most closely associated with this illustration? A) A company can purchase information from outside suppliers. B) A company can take advantage of government data sources. C) A company can use online customer feedback systems to collect data. D) A company can network externally. E) A company can use its sales force to collect and report data. Answer: B Rationale: Taking advantage of government data sources, such as the 2000 U.S. census, aligns with utilizing external sources of information to improve the quality of a company's marketing intelligence system. Government data sources provide valuable insights into demographic shifts, regional trends, and other macroeconomic factors that can impact marketing strategies. 12. When a company acquires consumer-panel data from firms like A.C. Nielsen Company and Information Resources Inc., which of the following steps to improve the quality of a company marketing intelligence system is the company resorting to? A) training and motivating the sales force to spot and report new developments B) motivating distributors, retailers, and other intermediaries to pass along important intelligence C) hiring external experts to collect intelligence D) using external network E) purchasing information from outside research firms and vendors Answer: E Rationale: Acquiring consumer-panel data from firms like A.C. Nielsen Company and Information Resources Inc. involves purchasing information from outside research firms and vendors. This step improves the quality of the company's marketing intelligence system by leveraging third-party data sources to gain insights into consumer behavior, market trends, and competitive dynamics. 13. Elance.com is a service provider that allows contractors to describe their level of satisfaction with subcontractors. This is an example of a(n) ________. A) independent customer goods and service review forum B) public blog C) customer complaint site D) combo site offering customer reviews and expert opinions E) distributor or sales agent feedback site Answer: E Rationale: Elance.com, which allows contractors to describe their level of satisfaction with subcontractors, serves as a distributor or sales agent feedback site. It provides a platform for individuals to share their experiences and opinions regarding service providers, contributing to the feedback loop between contractors and subcontractors. 14. The sites which offer positive or negative product or service reviews and are built by the retailers of a particular product or service are called ________. A) combo sites B) distributor or sales agent feedback sites C) public blogs D) independent service review forums E) customer complaint sites Answer: B Rationale: Sites that offer positive or negative product or service reviews and are built by the retailers of a particular product or service are known as distributor or sales agent feedback sites. These sites allow retailers to collect feedback directly from customers and incorporate it into their marketing strategies and product offerings. 15. A ________ is "unpredictable, short-lived, and without social, economic, and political significance." A) fad B) fashion C) trend D) megatrend E) style Answer: A Rationale: A fad is characterized by being unpredictable, short-lived, and lacking social, economic, and political significance. Fads often emerge suddenly, gain popularity quickly, and fade away just as rapidly, without leaving a lasting impact on society or consumer behavior. 16. A ________ is a direction or sequence of events that has some momentum and durability; it reveals the shape of the future and can provide strategic direction. A) fad B) fashion C) trend D) megatrend E) style Answer: C Rationale: A trend is a direction or sequence of events that exhibits some momentum and durability. Trends provide insights into future developments and can offer strategic direction to organizations by highlighting emerging patterns in consumer behavior, technology adoption, or societal changes. 17. A ________ is a "large social, economic, political, and technological change that is slow to form, and once in place, influences us for some time—between seven and ten years, or longer." A) fad B) fashion C) trend D) megatrend E) style Answer: D Rationale: A megatrend is a significant and long-lasting social, economic, political, or technological change that shapes the future for an extended period, typically seven to ten years or longer. Megatrends have profound implications for society, industries, and consumer behavior. 18. Which of the following is true about trends in worldwide population growth? A) Birthrates are on the rise in developed countries. B) Overall, the world population growth is declining. C) Birthrates are on the rise in developing countries. D) Death rates are rising in developing countries. E) Population growth is highest in developing countries. Answer: E Rationale: Population growth is highest in developing countries, where birth rates tend to be higher compared to developed countries. Developing nations often experience rapid population growth due to factors such as higher fertility rates, improved healthcare leading to lower infant mortality rates, and limited access to contraception. 19. A growing population does not mean growing markets unless ________. A) the people are under a democratic system of government B) there is common ownership of all resources C) people have sufficient purchasing power D) there is adequate governmental intervention in the market E) the government has a budget surplus Answer: C Rationale: A growing population does not necessarily translate to growing markets unless people have sufficient purchasing power to buy goods and services. Purchasing power is crucial for stimulating demand and driving market growth, regardless of population size or demographic changes. 20. In the U.S., people born between the years ________ are called boomers. A) 1978 and 2002 B) 1946 and 1964 C) 1925 and 1945 D) 1965 and 1985 E) 1920 and 1940 Answer: B Rationale: In the U.S., people born between the years 1946 and 1964 are referred to as baby boomers. This generation experienced a significant increase in birth rates following World War II, leading to a demographic bulge that has had a profound impact on various aspects of society, including consumer behavior, healthcare, and retirement trends. 21. Firms find "reverse innovation" advantage by ________. A) introducing a commodity in a developed country and then distributing it globally B) introducing a commodity in a developing country and then distributing it in other developing countries C) introducing a commodity in a developing country and then distributing it globally D) introducing a commodity in a developed country and then distributing it in developing countries E) introducing a commodity in a developed country and then distributing it in other developed countries Answer: C Rationale: "Reverse innovation" refers to the process of innovating in developing countries and then distributing these innovations globally. This approach allows firms to tap into emerging markets and address the unique needs of consumers in those regions, often leading to costeffective solutions that can be scaled and adapted for use in other markets worldwide. 22. ________ refer to groups of individuals who are born during the same time period and travel through life together. A) Cohorts B) Populations C) Clans D) Societies E) Ethnic groups Answer: A Rationale: Cohorts are groups of individuals who are born during the same time period and share common experiences as they age. These cohorts often exhibit similar consumer behaviors and preferences due to their shared life experiences. 23. According to the 2000 Census, which of the following is the largest group in the United States? A) Whites B) Hispanics C) African Americans D) Chinese Americans E) Asian Indians Answer: A Rationale: According to the 2000 Census, Whites are the largest ethnic group in the United States. 24. The three largest subgroups of the Hispanics in the U.S. are ________, ________, and ________. A) Puerto Rican; Mexican; Chilean B) Salvadoran; Cuban; Dominican C) Mexican; Puerto Rican; Cuban D) Brazilian; Mexican; Cuban E) Salvadoran; Dominican; Columbian Answer: C Rationale: The three largest subgroups of Hispanics in the U.S. are Mexican, Puerto Rican, and Cuban. 25. Which of the following is true about the growth of the Hispanic population in the U.S.? A) Hispanics made up 11 percent of all new workers in the past decade. B) The disposable income of Hispanics has not grown as fast as that of the rest of the population. C) Hispanics now outnumber African Americans in the U.S. D) Family incomes of Hispanics have grown at a rate double that of the rest of the population. E) Hispanics are the fastest growing consumer group in the U.S. Answer: E Rationale: Hispanics are the fastest-growing consumer group in the U.S., representing a significant portion of the population growth in recent years. 26. The traditional household consists of ________. A) a husband, wife, and children (and sometimes grandparents) B) a group of related persons living together C) two or more families living together D) a man and a woman living together (whether married or not) E) related or unrelated persons who share living arrangements Answer: A Rationale: The traditional household typically consists of a husband, wife, and children, and sometimes grandparents, living together in a family unit. 27. By 2010, projections indicate that the largest category of households will be composed of ________. A) childless married couples and empty nesters B) single-parent families C) single live-alones D) singles living with nonrelatives E) married couples with children Answer: A Rationale: Projections indicate that by 2010, the largest category of households will be composed of childless married couples and empty nesters. This demographic trend reflects changing family structures and lifestyles. 28. Which of the following is likely to occur during economic downturns? A) People tend to spend more on luxury goods B) Consumption of necessary goods decline C) Long-term credit is available at concessional rates of interest D) The purchasing power of the people declines E) The level of investment in the economy rises Answer: D Rationale: During economic downturns, the purchasing power of the people typically declines due to factors such as reduced income, increased unemployment, and decreased consumer confidence. 29. Which of the following economies provide limited opportunities to international marketers to develop product sales? A) capitalist economies B) subsistence economies C) raw-materials-exporting economies D) industrializing economies E) industrialized economies Answer: B Rationale: Subsistence economies provide limited opportunities to international marketers to develop product sales because these economies are characterized by low levels of income and consumption, with most resources allocated for basic survival needs. 30. In response to the U.S. income distribution trend toward ________, Levi-Strauss introduced the premium Levi's Capital E line to upscale retailers and the economy Levi Strauss Signature line to mass-market retailers. A) very low incomes B) mostly low incomes C) mostly high incomes D) mostly medium incomes E) low and high incomes Answer: E Rationale: In response to the U.S. income distribution trend toward both low and high incomes, LeviStrauss introduced the premium Levi's Capital E line to upscale retailers and the economy Levi Strauss Signature line to mass-market retailers, catering to different segments of the income distribution spectrum. 31. In the U.S., consumer expenditures on homes and big-ticket items tend to slacken during recessions because ________. A) the consumers generally have a low debt-to-income ratio B) of a steady supply of loanable funds in the economy during a recession C) the consumers have a high debt-to-income ratio D) consumer borrowing increases during a recession E) of stringent credit policies adopted by the Fed before the onset of a recession Answer: C Rationale: During recessions, consumers tend to have a higher debt-to-income ratio, which leads to decreased spending on big-ticket items like homes and cars as consumers focus on reducing debt and increasing savings. 32. Which of the following elements of the sociocultural environment can be associated with the growing demand for "social surrogates" like social networking sites, television, etc? A) views of ourselves B) views of organizations C) views of others D) views of nature E) views of the universe Answer: C Rationale: The growing demand for "social surrogates" like social networking sites and television can be associated with people's views of others, as these platforms provide opportunities for social interaction and connection with others. 33. Today, corporations need to make sure that they are good corporate citizens and that their consumer messages are honest in order to positively align themselves with consumers' ________. A) views of others B) views of organizations C) views of themselves D) views of the universe E) views of society Answer: B Rationale: Corporations need to ensure that they are good corporate citizens and that their consumer messages are honest to positively align themselves with consumers' views of organizations. This helps build trust and credibility with consumers. 34. People vary in their views of society, and their consumption patterns often reflect their social attitudes. ________ usually live more frugally, drive smaller cars, and wear simpler clothing. A) Makers B) Escapers C) Seekers D) Changers E) Developers Answer: D Rationale: "Changers" usually live more frugally, drive smaller cars, and wear simpler clothing, reflecting their social attitudes and consumption patterns. 35. People vary in their views of society, and their consumption patterns often reflect their social attitudes. ________ usually eat, dress, and live well. A) Makers B) Escapers C) Seekers D) Changers E) Developers Answer: A Rationale: "Makers" usually eat, dress, and live well, reflecting their social attitudes and consumption patterns. 36. People vary in their views of society, and their consumption patterns often reflect their social attitudes. ________ are a major market for movies, music, surfing, and camping. A) Makers B) Preservers C) Escapers D) Changers E) Developers Answer: C Rationale: "Escapers" are a major market for movies, music, surfing, and camping, reflecting their social attitudes and consumption patterns. 37. ________ beliefs and values are passed from parents to children and reinforced by social institutions—schools, churches, businesses, and governments; they are very difficult to change. A) Transient B) Secondary C) Protected D) Core E) Variable Answer: D Rationale: Core beliefs and values are deeply ingrained and passed from generation to generation, making them very difficult to change. 38. Which of the following would be the best illustration of a secondary belief or value? A) belief in work B) belief in giving to charity C) belief in getting married D) belief in getting married early E) belief in being honest Answer: D Rationale: The belief in getting married early would be the best illustration of a secondary belief or value, as it represents a specific aspect of a broader value (marriage) that may vary among individuals or cultures. 39. Each society contains ________, groups with shared values emerging from their special life experiences or circumstances. A) stakeholders B) cliques C) consumer bundles D) subcultures E) behavioral niches Answer: D Rationale: Subcultures are groups within a society that share values emerging from their special life experiences or circumstances, such as ethnicity, religion, or geographic location. 40. Which of the following is the largest contributor to global warming, contributing almost a quarter of the carbon dioxide in the environment? A) transportation B) industrial production facilities C) electrical power plants D) aerosol cans E) rural cooking fires Answer: C Rationale: Electrical power plants are the largest contributor to global warming, contributing almost a quarter of the carbon dioxide in the environment through the burning of fossil fuels for electricity generation. 41. Which of the following is the second largest contributor to global warming, accounting for roughly a fifth of carbon emissions? A) transportation B) primary metal production facilities C) electrical power plants D) aerosol cans E) rural cooking fires Answer: A Rationale: Transportation is the second largest contributor to global warming, accounting for roughly a fifth of carbon emissions through the burning of fossil fuels in vehicles. 42. Firms whose products require ________ resources—oil, coal, platinum, zinc, silver—face substantial cost increases as depletion approaches. A) infinite B) near finite C) finite renewable D) finite nonrenewable E) perishable Answer: D Rationale: Firms whose products require finite nonrenewable resources such as oil, coal, platinum, zinc, and silver face substantial cost increases as depletion approaches due to limited availability and increasing demand. 43. Prestige LLC, a small company that manufactures specialty cereals and energy bars, wants to launch a "green marketing" program in response to heightened consumer awareness about environmental issues. What should the company do to maximize the program's chances of being successful? A) demonstrate that the products will benefit both customers and society in the long-term B) emphasize benefits to the consumer rather than environmental benefits C) focus on the efforts and costs incurred by the company to bring these "green" products to consumers D) engage in "greenwashing" to highlight the environmental benefits of the product E) explain the rules and regulations laid out by governmental agencies to protect the environment Answer: A Rationale: To maximize the success of a "green marketing" program, Prestige LLC should demonstrate that the products will benefit both customers and society in the long-term, emphasizing longterm environmental and societal benefits. 44. When a company is said to have engaged in "greenwashing," it means that ________. A) the company has significantly changed its business processes to incorporate a greener, more environmentally friendly philosophy B) the company has moved its production facilities to countries where environmental laws and regulations are less rigorous C) the company has changed its "green" image to appeal to a different, usually older, demographic D) the company's products are not nearly as green and environmentally beneficial as its marketing might suggest E) the company has undertaken a campaign to lobby for tougher environmental regulations for the industry Answer: D Rationale: When a company engages in "greenwashing," it means that the company's products are not nearly as green and environmentally beneficial as its marketing might suggest, often misleading consumers about the true environmental impact of the products. 45. Which of the following consumer environmental segments cares a great deal about the environment but doesn't seem to have the knowledge or resources to take action? A) not me greens B) business first greens C) mean greens D) go-with-the-flow greens E) dream greens Answer: E Rationale: "Dream greens" care a great deal about the environment but may lack the knowledge or resources to take significant action to address environmental issues. 46. The consumer environmental segment termed ________ holds the view that the environment is not a huge concern and that business and industry are doing their part to help. This may explain why they don't feel the need to take action themselves—even as they cite lots of barriers to doing so. They are also the largest consumer environmental segment. A) not me greens B) business first greens C) mean greens D) go-with-the-flow greens E) dream greens Answer: B Rationale: "Business first greens" hold the view that the environment is not a major concern, and they believe that business and industry are doing their part to help. They may not feel the need to take action themselves and often cite barriers to doing so. 47. The consumer environmental segment termed ________ claims to be knowledgeable about environmental issues but does not express pro-green attitudes or behaviors. Indeed, it is practically hostile toward pro-environmental ideas. This segment has chosen to reject prevailing notions about environmental protection and may even be viewed as a potential threat to green initiatives. A) not me greens B) business first greens C) mean greens D) go-with-the-flow greens E) dream greens Answer: C Rationale: "Mean greens" claim to be knowledgeable about environmental issues but do not express progreen attitudes or behaviors. They may even be hostile toward pro-environmental ideas and reject prevailing notions about environmental protection. 48. Which of the following is true about the technology trends that marketers should monitor? A) A growing portion of U.S. R&D expenditures are going toward the research side as opposed to the development side. B) Today, the time between idea and implementation is expanding. C) More single companies rather than consortiums are directing research efforts toward major breakthroughs. D) The pace of change is accelerating today. E) The government has decreased regulation of technological change. Answer: D Rationale: The pace of change is accelerating today in terms of technology trends, making it crucial for marketers to monitor and adapt to these changes quickly to remain competitive. 49. Mandatory recycling laws have boosted the recycling industry and launched dozens of new companies making new products from recycled materials. Which of the following most closely resembles the situation discussed above? A) Government makes reforestation mandatory for lumbering firms leading to a rise in timber production. B) Government restricts industries from purchasing farmland thereby increasing agricultural produce. C) Government subsidizes export of beef to promote production of beef cattle. D) Government pollution control norms increase the production of pollution control equipment. E) Government restricts unfair trade practices to promote international trade. Answer: D Rationale: Government pollution control norms increasing the production of pollution control equipment most closely resembles the situation discussed above, as it involves government regulations boosting an industry and leading to increased production of related products. 50. An unintended effect of business legislation is ________. A) restricting fair competition in the market B) encouraging unbridled business behavior C) reducing the social cost of producing a particular commodity D) exposing consumers to unfair trade practices E) slowing economic growth Answer: E Rationale: An unintended effect of business legislation can be slowing economic growth, as overly restrictive or burdensome regulations may hinder business activities and investment, leading to slower economic growth. 51. An important force affecting business is the ________ movement, a movement of citizens and government organized to strengthen the rights and powers of buyers in relation to sellers. A) human rights B) consumerist C) environmental D) self-determination E) materialistic Answer: B Rationale: The consumerist movement is specifically focused on empowering buyers and enhancing their rights in interactions with sellers. This movement emphasizes consumer protection, fair practices, and the enhancement of consumer influence in markets. 52. Companies can prepare as many as ________ different types of demand estimates. A) 6 B) 30 C) 60 D) 90 E) 150 Answer: D Rationale: Companies can prepare various types of demand estimates, considering different market segments, product variations, geographical locations, and time frames. The complexity of modern markets necessitates a comprehensive approach to demand estimation, which can result in a considerable number of different estimates. 53. The demand estimates of an organization comprise of five space levels. They are world, country, region, territory, and ________. A) zone B) organization C) customer D) product E) input Answer: C Rationale: The demand estimates of an organization typically include various spatial levels, ranging from global (world) to individual customers. These levels help in understanding and forecasting demand patterns across different geographic areas and customer segments. 54. The ________ market is the set of consumers with an adequate interest, income, and access to a particular offer. A) potential B) available C) target D) penetrated E) reserve Answer: B Rationale: The available market consists of consumers who have the necessary interest, purchasing power, and accessibility to a particular product or service. These consumers are capable of buying the product if they choose to do so. 55. The ________ market is the part of the qualified available market the company decides to pursue. A) potential B) available C) target D) penetrated E) reserve Answer: C Rationale: The target market is a subset of the available market that the company chooses to focus its marketing efforts on. It represents the segment of consumers that the company believes is most likely to respond positively to its marketing strategies. 56. The ________ market is the set of consumers who are buying the company's product. A) potential B) available C) target D) penetrated E) reserve Answer: D Rationale: The penetrated market comprises consumers who are already purchasing the company's product. These consumers have been successfully reached and convinced by the company's marketing efforts. 57. When the government of any country restricts the sale of a particular commodity to certain groups—for example, restricting sales of alcohol to individuals above the age of 21— the eligible consumers who have income, interest, access and qualification constitute the ________. A) accessible market B) target market C) potential market D) qualified potential market E) qualified available market Answer: E Rationale: The qualified available market consists of eligible consumers who meet specific criteria set by regulations or other qualifying factors. In this case, those consumers who meet the age requirement set by the government to purchase alcohol constitute the qualified available market. 58. Jeanine would like to own a Mercedes but is unable to afford one at this time. Jeanine is part of the ________ for this product. A) potential market B) available market C) target market D) projected market E) penetrated market Answer: A Rationale: Jeanine, despite her desire for a Mercedes, lacks the financial means to purchase one currently. Therefore, she belongs to the potential market for this product, as she possesses the interest but not the immediate purchasing power. 59. ________ for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. A) Company demand B) Area market potential C) Market demand D) Company sales potential E) Total market potential Answer: C Rationale: Market demand refers to the total volume of a product or service that consumers within a specific market segment are willing to purchase within a defined time period and under certain marketing conditions. It considers the overall demand from all potential buyers within the market. 60. With an increase in marketing expenditure, market demand ________. A) continues to increase at an increasing rate B) initially increases and then declines C) increases first at an increasing rate, then at a decreasing rate D) decreases first and then spikes E) continues to increase at a decreasing rate. Answer: C Rationale: Initially, an increase in marketing expenditure tends to result in a proportional increase in market demand, as the marketing efforts reach more potential customers. However, as saturation points are reached and additional spending yields diminishing returns, the rate of increase in market demand slows down, eventually plateauing or even declining in some cases. This pattern reflects the typical response curve observed with increased marketing expenditure. 61. The base sales of an organization that takes place even without any demand-stimulating expenditures is called ________. A) primary demand B) market potential C) market minimum D) optimum demand E) market demand Answer: C Rationale: Market minimum represents the baseline level of sales that occur without any additional marketing efforts to stimulate demand. It indicates the minimum level of demand that exists naturally in the market. 62. The distance between the market minimum and the market potential shows the overall ________. A) marketing sensitivity of demand B) market share of the firm C) market forecast of the firm D) product-penetration percentage E) sales quota Answer: A Rationale: The difference between the market minimum and the market potential reflects the overall responsiveness or sensitivity of demand to marketing efforts. A larger distance indicates that the market is more responsive to marketing initiatives. 63. A low market-penetration index indicates ________. A) it will be expensive for the firms to attract the few remaining prospects B) substantial growth potential for all firms C) the rival firms try to capture greater market share by lowering their product price D) the profit margins of the firms decline E) the firms cannot raise demand substantially by raising its market expenditure Answer: B Rationale: A low market-penetration index suggests that there is substantial room for growth in the market for all firms. It indicates that the market has not been fully penetrated, presenting opportunities for expansion and increased market share for all competitors. 64. Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the ________. A) market minimum B) market share C) market forecast D) market potential E) company demand Answer: C Rationale: The market demand corresponding to the level of industry marketing expenditure that actually occurs is referred to as the market forecast. This represents the anticipated level of demand based on the actual marketing efforts implemented in the market. 65. A company can expect to expand its market share to a large extent when ________. A) it has a high market-penetration index B) its share-penetration index is low C) its share-penetration index is high D) its product-penetration percentage is high E) it has a low market potential Answer: B Rationale: When a company has a low share-penetration index, it indicates that there is significant room for growth in its market share. Therefore, the company can expect to expand its market share substantially by capturing more of the available market. 66. During recession, the market demand curve which is a function of marketing expenditure ________. A) shifts upward B) becomes vertical C) remains unaffected D) shifts downward E) slopes downward Answer: D Rationale: During a recession, consumer spending typically decreases, leading to a decrease in market demand. As a result, the market demand curve, which is influenced by marketing expenditure among other factors, shifts downward due to the overall decrease in demand. 67. The sales goal set for a product line, company division, or sales representative of an organization is called ________. A) sales budget B) company sales forecast C) sales quota D) company sales potential E) market potential Answer: C Rationale: A sales quota represents the specific sales target assigned to a product line, company division, or individual sales representative. It serves as a benchmark for performance evaluation and goal setting. 68. A ________ is a conservative estimate of the expected volume of sales, primarily for making current purchasing, production, and cash flow decisions. A) sales budget B) company sales forecast C) sales quota D) company sales potential E) market potential Answer: A Rationale: A sales budget provides a conservative estimate of the expected volume of sales within a specified time period. It is used primarily for making current operational decisions related to purchasing, production, and cash flow management. 69. ________ is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. A) Sales budget B) Company sales forecast C) Sales quota D) Company sales potential E) Market potential Answer: E Rationale: Market potential represents the theoretical upper limit of market demand under a given set of marketing conditions. It is the maximum level of demand that could be achieved if marketing expenditures were unlimited and all other factors remained constant. 70. ________ is the company's estimated share of market demand at alternative levels of company marketing effort in a given time period. A) Sales budget B) Market demand C) Company demand D) Company sales potential E) Market potential Answer: C Rationale: Company demand refers to the company's estimated share of market demand at various levels of marketing effort within a specific time period. It represents the portion of market demand that the company expects to capture based on its marketing strategies and activities. 71. ________ is the sales limit approached by company demand as company marketing effort increases relative to that of competitors. A) Sales budget B) Market demand C) Company demand D) Company sales potential E) Market potential Answer: D Rationale: Company sales potential represents the maximum sales that a company can achieve as its marketing efforts increase relative to those of its competitors. It reflects the upper limit of sales achievable by the company within its market environment. 72. A company's sales potential would be equal to market potential if ________. A) the marketing expenditure of the company is reduced to zero B) industry marketing expenditures approach infinity for a given marketing environment C) the market is non-expandable D) market minimum is equal to market potential E) the company gets 100 percent share of the market Answer: E Rationale: The sales potential of a company would equal the market potential when the company captures 100 percent of the available market demand. This scenario implies that the company has maximized its market share within the given market conditions. 73. ________ is the maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. A) Company demand B) Market demand C) Company sales potential D) Sales quota E) Total market potential Answer: E Rationale: Total market potential represents the maximum sales achievable by all firms within an industry during a specific period, considering the industry's marketing efforts and environmental factors. It provides an overall estimation of the market's capacity. 74. Suppose an individual buyer purchases three pairs of shoes each year at $50 each pair and that there are 50 million such consumers in the economy. Compute the total market potential for shoes. A) $6,500 million B) $5,000 million C) $75 billion D) $7,500 million E) $10,000 million Answer: D Rationale: Total market potential can be calculated by multiplying the number of consumers by the average purchase amount per consumer. In this case, multiplying 50 million consumers by $150 (3 pairs * $50) yields $7,500 million. 75. The ________ method of determining area market potential calls for identifying all the potential buyers in each market and estimating their potential purchases. A) group-discussion B) market-test C) market-buildup D) brand development index E) multiple-factor index Answer: C Rationale: The market buildup method involves identifying potential buyers in each market and estimating their potential purchases. This method relies on aggregating individual potential purchases to determine area market potential. 76. An efficient method of estimating area market potentials makes use of the ________, developed by the U.S. Bureau of the Census in conjunction with the Canadian and Mexican governments. It classifies all manufacturing into 20 major industry sectors and further breaks each sector into a six-digit, hierarchical structure. A) Thomson Reuters Business Classification B) Global Industrial Classification Standard C) North American Product Classification System D) Industry Classification Benchmark E) North American Industry Classification System Answer: E Rationale: The North American Industry Classification System (NAICS) is a standard classification system developed by the U.S. Bureau of the Census, Canadian government, and Mexican government. It provides a hierarchical structure for classifying industries, facilitating efficient estimation of area market potentials. 77. Which of the following organizations is likely to use the multiple-factor index method to estimate the market potential? A) a firm that manufactures auto parts B) a firm that provides facility management services to large offices C) a company that provides Web site development services for small businesses D) a company that manufactures diagnostic machines for hospitals E) a firm that manufactures fashionable clothes for teenagers Answer: E Rationale: The multiple-factor index method is often used to estimate market potential for consumer products, especially those with diverse customer segments such as fashionable clothes for teenagers. 78. Which of the following is true of the various elements of the multi-factor index method of estimating area market potentials? A) Zip+4 code centers generally have stable boundaries and a population of about 4000. B) The weights in the buying-power index are somewhat arbitrary. C) Normally, the lower the BDI, the less room there is to grow the brand. D) Census tracts are a little larger than neighborhoods. E) This method is primarily used by business marketers. Answer: B Rationale: The weights assigned in the multi-factor index method, such as the buying-power index (BPI), may be somewhat arbitrary and subject to interpretation. This characteristic can affect the accuracy and reliability of the estimates produced by this method. 79. Suppose Concrete Express, a cement manufacturing firm, finds that its sales have increased by 3 percent this year, while industry sales have increased by 5 percent. This implies that ________. A) Concrete Express has acquired additional market share in relation to the cement industry B) Concrete Express is losing its relative standing in the cement industry C) other players in the industry are losing market share D) the absolute market share of Concrete Express has declined E) Concrete Express's position in relation to the industry has remain unchanged Answer: B Rationale: Concrete Express's sales increasing at a lower rate than the industry average indicates that it is losing relative standing within the cement industry. Its market share may be shrinking compared to competitors who are experiencing higher sales growth. 80. For which of the following categories of products will demand forecasting be easiest? A) commodities which are in the initial stage of their product life cycles B) products which have many close substitutes in the market C) goods which are produced in an oligopoly market D) products whose sales fluctuate widely E) products whose consumers are highly sensitive to change in price Answer: C Rationale: Demand forecasting is typically easiest for products produced in an oligopoly market because there are fewer competitors and greater market stability, making it easier to predict consumer demand patterns. 81. Novamalt Inc., a manufacturer of health drinks, plans to introduce its new range of woman health drinks into the market. It involves a specialized marketing research firm to forecast the sales of this product. The research firm analyzes past buying behavior of customers and uses time-series analysis for making the sales forecasts. Which of the following information bases is being used by the research firm in this scenario? A) what people say B) what people do C) what people have done D) what people will do E) what people speculate Answer: C Rationale: The research firm is using past buying behavior of customers, which falls under the category of "what people have done," to forecast sales. Time-series analysis relies on historical data to identify patterns and trends for future predictions. 82. Timeseries analysis method of forecasting sales breaks past time series into four components- trend, cycle, seasonal, and ________. A) regular B) annual C) erratic D) recurring E) periodic Answer: C Rationale: The missing component is "erratic." In time-series analysis, the erratic component represents irregular fluctuations in the data that cannot be attributed to trend, cycle, or seasonal factors. 83. ________ projects the next period's sales by combining an average of past sales and the most recent sales, giving more weight to the latter. A) Timeseries analysis B) Statistical demand analysis C) Econometric analysis D) Cost effectiveness analysis E) Exponential smoothing Answer: E Rationale: Exponential smoothing projects future sales by combining an average of past sales with the most recent sales, giving more weight to the latter. This method is particularly useful for forecasting when there is no clear trend or seasonality in the data. 84. ________ measures the impact of a set of causal factors (such as income, marketing expenditures, and price) on the sales level. A) Timeseries analysis B) Statistical demand analysis C) Econometric analysis D) Cost effectiveness analysis E) Exponential smoothing Answer: B Rationale: Statistical demand analysis measures the impact of causal factors on sales levels by analyzing historical data and identifying relationships between sales and various influencing factors such as income, marketing expenditures, and price. 85. The sales forecasting method of ________ builds sets of equations that describe a system and statistically derives the different parameters that make up the equations statistically. A) timeseries analysis B) statistical demand analysis C) econometric analysis D) cost effectiveness analysis E) exponential smoothing Answer: C Rationale: Econometric analysis involves building sets of equations that describe a system and statistically deriving the parameters of these equations. It is used to forecast sales by modeling the relationships between various economic variables and sales levels. 86. Marketers have little information about how consumption patterns vary across and within countries. Answer: False Rationale: Marketers often have access to a wealth of information regarding consumption patterns both across different countries and within individual countries. This information includes market research data, consumer behavior studies, and demographic analysis, which help marketers understand and adapt to varying consumption patterns. 87. Companies with superior information enjoy a competitive advantage. Answer: True Rationale: Having superior information allows companies to make more informed decisions, anticipate market trends, understand consumer needs better, and react more quickly to changes in the marketplace. This competitive advantage can lead to increased market share, profitability, and overall success. 88. Many firms use the Internet and extranets to improve the speed, accuracy, and efficiency of the order-to-payment cycle. Answer: True Rationale: The Internet and extranets provide platforms for streamlining various business processes, including the order-to-payment cycle. By leveraging these technologies, firms can enhance the speed, accuracy, and efficiency of transactions, leading to improved customer satisfaction and operational performance. 89. Few consumers actually delete cookies frequently. When customers do not delete cookies, they expect customized marketing appeals and deals. Answer: True Rationale: Cookies are often used by websites to track user behavior and preferences, allowing for personalized marketing appeals and targeted offers. Many consumers do not frequently delete cookies because they appreciate the convenience of receiving customized content and deals tailored to their interests. 90. Mailing of a new offer to a handful of selected customers instead of all customers reduces the response rate to the offer. Answer: False Rationale: Targeted marketing strategies, such as mailing offers to a specific segment of customers who are more likely to be interested in the offer, often result in higher response rates compared to mass marketing approaches. By focusing on a smaller, more relevant audience, companies can increase the effectiveness of their marketing efforts. 91. Competitive intelligence gathering is inherently illegal and unethical. Answer: False Rationale: Competitive intelligence gathering involves the ethical and legal collection of information about competitors, industry trends, and market dynamics to inform strategic decision-making. While unethical or illegal practices such as industrial espionage are not condoned, legitimate competitive intelligence activities are an essential part of business strategy. 92. If a company were pursuing a policy of networking externally to gather marketing intelligence, it might collect competitors' ads or look up news stories about competitors. Answer: True Rationale: Networking externally to gather marketing intelligence involves leveraging external sources such as competitors' advertisements, news stories, industry publications, and online forums to gather information about competitors' strategies, strengths, and weaknesses. This approach can provide valuable insights for competitive analysis and strategic planning. 93. One of the ways to find relevant online information on competitors' strengths and weaknesses might be to frequent distributor or sales agent feedback sites. Answer: True Rationale: Distributor or sales agent feedback sites can provide valuable insights into competitors' strengths and weaknesses, as distributors and sales agents often have direct experience interacting with competitors' products, services, and sales strategies. Monitoring such feedback sites can help companies identify areas for improvement and competitive advantages. 94. The competitive intelligence function works best when it is closely coordinated with the decision-making process. Answer: True Rationale: The effectiveness of competitive intelligence depends on its integration with the decisionmaking process within an organization. By closely coordinating competitive intelligence activities with strategic planning and decision-making processes, companies can ensure that insights gleaned from competitive analysis are used to inform and support key business decisions. 95. A fad is more predictable and durable than a trend. Answer: False Rationale: Trends typically have more predictability and durability compared to fads. Trends reflect long-term shifts or patterns in consumer behavior, preferences, and market dynamics, often evolving gradually over time. In contrast, fads are characterized by their short-lived nature and unpredictable rise and fall in popularity. 96. A new market opportunity generally guarantees success, if the new product is technically feasible. Answer: False Rationale: While technical feasibility is an important aspect of introducing a new product, it does not guarantee success in the market. Success depends on various factors including market demand, competition, pricing, marketing strategy, consumer preferences, and more. 97. Demographic developments are often unpredictable. Answer: False Rationale: Demographic developments, such as changes in population size, age structure, and distribution, are often subject to analysis and prediction based on historical trends, birth rates, mortality rates, migration patterns, and other factors. While not entirely predictable, demographic changes can be forecasted with reasonable accuracy. 98. Population growth is highest in countries and communities that can least afford it. Answer: True Rationale: Population growth tends to be highest in developing countries and communities with limited resources and infrastructure to support growing populations. This can lead to challenges related to poverty, food security, healthcare, education, and environmental sustainability. 99. There is a global trend toward an aging population. Answer: True Rationale: Many countries around the world are experiencing a demographic shift toward an aging population due to factors such as declining birth rates and increased life expectancy. This trend presents various challenges and opportunities for businesses, healthcare systems, and policymakers. 100. The basis of cohort segmentation is that the experiences of key defining moments during the time when an individual becomes an adult can influence his or her values, preferences, and buying behaviors for the rest of his or her life. Answer: True Rationale: Cohort segmentation involves grouping individuals based on shared experiences and characteristics, particularly those that occur during key life stages such as adolescence, young adulthood, middle age, and retirement. These experiences can shape values, preferences, and buying behaviors over the long term. 101. Marketing strategies of firms should not consider the ethnic and racial diversity existing in their markets. Answer: False Rationale: Ethnic and racial diversity is an important consideration for firms when developing marketing strategies. Understanding the cultural nuances, preferences, and needs of diverse consumer groups can help companies tailor their products, messaging, and advertising to effectively reach and engage target audiences. 102. Consumers belonging to the same ethnic group have identical tastes and preferences. Answer: False Rationale: While consumers belonging to the same ethnic group may share certain cultural traits and values, individual tastes and preferences can still vary significantly based on factors such as age, gender, socioeconomic status, education, and personal experiences. 103. Of all illiterate adults in the world, two-thirds are women. Answer: True Rationale: Globally, women are disproportionately affected by illiteracy compared to men. According to UNESCO, approximately two-thirds of illiterate adults worldwide are women. This disparity is influenced by various factors including gender inequality, cultural norms, and limited access to education for girls and women in many regions. 104. Households comprising of single, separated, widowed, and divorced individuals generally demand larger apartments, and expensive appliances, furniture, and furnishings. Answer: False Rationale: Households comprising single, separated, widowed, or divorced individuals may have different housing and consumption preferences compared to traditional family households. While some individuals in such households may prefer larger apartments and upscale furnishings, others may prioritize affordability, convenience, or other factors. 105. The available purchasing power in an economy depends on current income, prices, savings, debt, and credit availability. Answer: True Rationale: Purchasing power is influenced by various economic factors including individuals' current income levels, the cost of goods and services (prices), savings rates, levels of debt, and access to credit. These factors collectively determine the ability of consumers to buy goods and services in the market. 106. Industrial economies provide limited marketing opportunities for luxurious goods. Answer: False Rationale: Industrial economies often have a significant segment of affluent consumers who have disposable income to spend on luxurious goods and services. Therefore, industrial economies can indeed offer substantial marketing opportunities for luxurious products. 107. Markets with a segment of very wealthy consumers, but high income disparity, present few opportunities to marketers. Answer: False Rationale: Markets with high income disparity can still present opportunities to marketers, particularly if there is a segment of very wealthy consumers within the population. Even in such markets, there may be niches of affluent consumers with purchasing power for high-end products and services. 108. Business has responded to increased awareness of nature's fragility and finiteness by producing wider varieties of camping, hiking, boating, and fishing gear such as boots, tents, backpacks, and accessories. Answer: True Rationale: Increased awareness of environmental issues has led to the growth of markets for outdoor recreational activities. As a result, businesses have expanded their offerings of camping, hiking, boating, and fishing gear to cater to consumers interested in outdoor pursuits while also emphasizing sustainability and eco-friendliness. 109. Secondary beliefs and values are passed on from parents to children and reinforced by major social institutions, making them very difficult to change by marketers. Answer: False Rationale: While secondary beliefs and values may be influenced by family upbringing and social institutions, they are not necessarily immutable. Marketers often target these beliefs and values through advertising, branding, and other promotional strategies to influence consumer behavior and perceptions. 110. Environmental regulations enforced by the government adversely affect automobile and steel manufacturing companies. Answer: True Rationale: Environmental regulations imposed by governments can indeed have adverse effects on industries such as automobile and steel manufacturing, as they may require costly modifications to production processes, compliance with emission standards, and investments in environmentally friendly technologies. 111. Corporate environmentalism recognizes the need to integrate environmental issues into the firm's strategic plans. Answer: True Rationale: Corporate environmentalism involves businesses acknowledging their environmental responsibilities and integrating environmental considerations into their strategic planning processes. This may include initiatives to reduce carbon emissions, conserve resources, minimize waste, and adopt sustainable practices. 112. Firms that can develop substitute materials for finite nonrenewable resources have an excellent opportunity. Answer: True Rationale: Firms that develop substitute materials for finite nonrenewable resources can capitalize on growing demand for sustainable alternatives and potentially gain a competitive advantage in the market. This presents an opportunity for innovation and market leadership in industries facing resource scarcity. 113. The time between introduction of products and peak production is shrinking. Answer: True Rationale: Advances in technology, globalized supply chains, and efficient manufacturing processes have contributed to the acceleration of product development cycles. As a result, the time from product introduction to reaching peak production levels has indeed shortened in many industries. 114. A growing portion of U.S. R&D expenditures goes to the development as opposed to the research side. Answer: True Rationale: In recent years, there has been a shift in R&D spending in the United States towards development activities rather than pure research. This trend reflects an emphasis on product commercialization, innovation, and bringing new technologies to market. 115. Regulation of technological changes has been relaxed by the U.S. government over recent years. Answer: False Rationale: Regulation of technological changes by the U.S. government has not necessarily been relaxed over recent years. While there may be efforts to streamline regulatory processes and promote innovation, regulatory oversight remains important, particularly in areas such as consumer safety, privacy, and environmental protection. 116. Environmental laws imposed by the government may at times create new business opportunities. Answer: True Rationale: Environmental laws and regulations often lead to the development of new markets and industries focused on sustainability, renewable energy, pollution control, waste management, and eco-friendly products and services. Compliance with environmental regulations can also spur innovation and investment in green technologies. 117. Demand estimates prepared by companies are based on four different time periods. Answer: False Rationale: Demand estimates prepared by companies typically cover one specific time period, such as a month, quarter, or year. These estimates project the expected demand for a product or service during that particular timeframe, considering factors such as market trends, consumer behavior, and marketing initiatives. 118. The penetrated market is the set of consumers who have an interest in a market offer but do not have the accessibility. Answer: False Rationale: The penetrated market refers to the set of consumers who are currently purchasing or using a company's product or service. These consumers have both the interest and accessibility to the market offer. The term you're looking for is more aligned with the "qualified potential market." 119. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Answer: True Rationale: Market demand represents the total quantity of a product or service that consumers within a specific market area are willing and able to purchase during a particular time period under given marketing conditions. It encompasses all potential buyers within the defined market segment. 120. An expansible market is unlikely to be affected by the level of industry marketing expenditures. Answer: False Rationale: An expansible market refers to a market with the potential for growth through increased marketing efforts. The level of industry marketing expenditures can indeed impact an expansible market by influencing consumer awareness, demand generation, and market expansion efforts. 121. The market forecast shows expected market demand, not maximum market demand. Answer: True Rationale: The market forecast provides an estimate of the expected demand for a product or service within a specific market during a defined time period. It reflects the anticipated level of demand based on various factors such as consumer preferences, economic conditions, and competitive dynamics, rather than the maximum theoretical demand. 122. Companies assume that the lower the product-penetration percentage, the lower will be the market potential. Answer: False Rationale: A lower product-penetration percentage may indicate that there is still untapped potential within the market, suggesting that the market potential could be higher. Companies often seek to increase their product penetration to capture a larger share of the market and realize greater market potential. 123. In order to estimate future demand, companies commonly prepare a company sales forecast first, followed by an industry forecast, and finally a macroeconomic forecast. Answer: False Rationale: Companies typically start with a macroeconomic forecast to understand the broader economic conditions that may influence demand. Then, they may develop an industry forecast to assess market trends and competitive dynamics. Finally, they prepare a company sales forecast based on internal factors such as marketing strategies, production capacity, and sales projections. 124. Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. Answer: True Rationale: Forecasting involves predicting future demand, sales, or market trends based on historical data, market analysis, and other relevant factors. It aims to anticipate buyer behavior and market dynamics under various scenarios to inform decision-making and planning. 125. Sales reps might have better insight into developing trends than any other group, and forecasting might give them greater confidence in their sales quotas and more incentive to achieve them. Answer: True Rationale: Sales representatives often have firsthand knowledge of customer preferences, competitor activities, and emerging market trends due to their direct interactions with clients. Involving sales reps in the forecasting process can provide valuable insights and increase their confidence in meeting sales quotas, thus motivating them to achieve their targets. 126. What is a marketing information system (MIS)? From what sources is the MIS developed? Answer: A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. A marketing information system is developed from internal company records, marketing intelligence activities, and marketing research. 127. What is a marketing intelligence system? How can marketing intelligence data be collected? Answer: A marketing intelligence system is a set of procedures and sources that managers use to obtain everyday information about developments in the marketing environment. The marketing intelligence system supplies happenings data. Marketing managers collect marketing intelligence in a variety of different ways, such as by reading books, newspapers, and trade publications; talking to customers, suppliers, and distributors; monitoring social media on the Internet; and meeting with other company managers. 128. What are the various steps a company can take to improve the quality of its marketing intelligence function? Answer: The steps are: (1) a company can train and motivate the sales force to spot and report new developments; (2) a company can motivate distributors, retailers, and other intermediaries to pass along important intelligence; (3) a company can network externally; (4) a company can set up a customer advisory panel; (5) a company can take advantage of government data resources; (6) a company can purchase information from outside suppliers; and (7) a company can use online customer feedback systems to collect competitive intelligence. 129. List and briefly describe the five main ways in which marketers can find relevant online information on competitors' strengths and weaknesses. Answer: The five ways are: (1) independent customer goods and service review forums; (2) distributor or sales agent feedback sites which are built by the distributors themselves to describe their experience and level of satisfaction on products or services; (3) combo sites offering customer reviews and expert opinions mainly on financial services and high-tech products that require professional knowledge; (4) customer complaint sites designed mainly for dissatisfied customers, which allows customers to express their dissatisfaction in certain firms or products; and (5) public blogs offering personal opinions, reviews, ratings and recommendations on virtually any topic. 130. How are household patterns anticipated to change over the next few years? What will be the impact of such changes on the demand for different goods? Answer: By 2010, only one in five U.S. households will consist of married couples with children under the age of 18, the "traditional household." More people are divorcing or separating, choosing not to marry, marrying later, or marrying without the intention to have children. By 2010, childless married couples and empty nesters will constitute the largest household group, followed by single live-alones. Nontraditional households are currently growing more rapidly than traditional ones. Demand for smaller apartments; inexpensive and smaller appliances, furniture and furnishings; and smaller-size food packages are likely to increase. 131. What are the different income-distribution patterns? How does income distribution in the economies affect the marketing decision of the firms? Answer: Marketers often distinguish countries using five income-distribution patterns: (1) very low incomes; (2) mostly low incomes; (3) very low, very high incomes; (4) low, medium, high incomes; and (5) mostly medium incomes. The market would be very small in countries with type 1 or 2 income patterns and will be considerably large in the countries with income patterns 3 and 4. Countries which have a marked inequality in income distribution the companies tend to produce goods which are consumed by the mass as well as produce certain luxurious goods to cater to the richer section. 132. Discuss the impact of tougher environmental regulations on businesses, citing examples whenever possible. Also, point out opportunities, if any, presented by these regulations. Answer: Environmental regulations adversely affect certain industries. They increase the cost of production for a range of industries. For instance, steel manufacturing units and firms which generate electricity are required to install pollution control equipments. Automobile companies are required to develop and use cleaner technology in their vehicles. However, businesses can also achieve significant savings in their energy and gas bills by moving to environmentally friendly ways to heat or cool their offices and run their manufacturing facilities. A shift to paper-less communication can cut costs and pollution. Plus, new business opportunities are opening up in the "green" sectors as is evident in the companies that manufacture and sell emission-control equipment and sell services to help companies adopt environmentally-friendly practices. 133. What does total market potential mean? How can it be estimated? Answer: Total market potential is the maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. A common way to estimate total market potential is to multiply the potential number of buyers by the average quantity each purchases, times the price. A variation on this method is the chain-ratio method, which multiplies a base number by several adjusting percentages. 134. Suppose a cotton-textile company wants to estimate the area market potential for its high quality fabrics in Houston. List the possible steps that the marketers will follow to compute the area market potential. Answer: The marketers may follow the following steps: Identify all the potential buyers of textile in the area, primarily the firms manufacturing ready made garments in that area. In order to do that, the company may compile a list from a directory of all manufacturing establishments in the area. Then it can estimate the quantity of fabrics each firm might purchase to produce garments worth $1 million. Compiling the quantity required by each of the firms, the marketers can estimate the area market potential of the fabric produced by the textile company. 135. Briefly describe the methods of forecasting future demand on the basis of past sales. Answer: The methods are: 1. Timeseries analysis, that breaks past time series into four components (trend, cycle, seasonal, and erratic) and projects them into the future. 2. Exponential smoothing, that projects the next period's sales by combining an average of past sales and the most recent sales, giving more weight to the latter. 3. Statistical demand analysis, which measures the impact of a set of causal factors (such as income, marketing expenditures, and price) on the sales level. 4. Econometric analysis, builds sets of equations that describe a system and statistically derives the different parameters that make up the equations statistically. 136. What are the two basic advantages that a company's marketers have in identifying significant changes in the market? Answer: The two advantages are: (1) They have disciplined methods for collecting information; and (2) they spend more time interacting with customers and observing competition. 137. Why is it necessary for firms to execute the steps of the order-to-payment cycle quickly and accurately? Answer: It is necessary for the firms to execute the steps of the order-to-payment cycle quickly and accurately because customers favor firms that can promise timely delivery. 138. Skyline Motors, an automobile manufacturing firm, is planning to introduce its new range of sports cars. It decides to offer a zero percent financing to the buyers. Skyline can save its mailing expenses by sending the offer only to its high-scoring customers instead of sending it to every customer in its database. Mention the factors according to which it may rank the customers in its database. Answer: A company may rank its customers according to factors such as purchase recency, frequency, and monetary value RFM. 139. List some of the ways in which data mining assists the decision makers of the company. Answer: Data mining enables the analysts to garner fresh insights into neglected customer segments, recent customer trends, and other useful information. Managers can cross-tabulate customer information with product and salesperson information to yield still-deeper insights. 140. How do the distributors, retailers and other intermediaries help a company to improve the quantity and quality of its marketing intelligence? Answer: Since marketing intermediaries are often closer to the customer, they can offer helpful insights to the company to improve its marketing intelligence system. 141. Suppose Ornate Inc. and Oracle are the only players in digital camera industry. What can Ornate do to acquire marketing intelligence? Answer: Student answers may vary. Ornate Inc. can network externally to find out more about its competitor Oracle. It can purchase Oracle's products, attend open houses and trade shows, read reports published by the rival firm, attend stockholders' meetings, talk to employees, collect competitors' ads, consult with suppliers, and look up news stories about Oracle. 142. The United States has one of the world's highest percentages of college-educated citizens. What can be the possible implications of this observation to the marketing environment of a U.S. firm? Answer: The high percentage of college-educated citizens in the United States suggests that there would be high demand for quality books, magazines, and travel. It also implies that there would be a high supply of skilled potential employees. Students can point out other implications. 143. Suppose the people of Greenworld, an island on the southwest Pacific are primarily involved in the direct procurement of edible plants and animals from the wild, foraging and hunting without significant recourse to the domestication of either. On the contrary people in Newland, a country rich in petroleum resources export petroleum to the industrial countries. Which of the two countries mentioned above is likely to offer greater marketing opportunities for luxurious goods and why? Answer: Newland is likely to produce greater marketing opportunities for luxurious goods as people in this country are likely to have greater affordability than the people in Greenworld. 144. Why do the companies need to search for practical means to harness renewable sources of energy like wind and water? Answer: Prolonged exploitation of the conventional sources of energy like oil has led to an acute shortage of these resources resulting their prices to increase over time. Firms face substantial cost increase as these resources are depleted, hence they need to search for means to harness the infinite renewable resources. 145. Philips Lighting's first shot at marketing a standalone compact fluorescent light (CFL) bulb was Earth Light, at $15 each versus 75 cents for incandescent bulbs. The product had difficulty climbing out of its deep green niche, as such marketing efforts of Philips suffered from the "green marketing myopia". Identify the three ways of avoiding this. Answer: The three keys to avoiding green marketing myopia is the tendency to overly focus on a product's greenness. It can be avoided by (1) appropriately positioning the consumer value; (2) calibrating consumer knowledge; and (3) reinforcing the credibility of product claims. 146. Organix Internationals LLC is planning to introduce its new range of breakfast cereals. List the different product levels that it considers while formulating the demand estimates for the new product. Answer: The six different product levels that Organix needs to consider to formulate the demand estimates for its new range of cereals are all sales, industry sales, company sales, product line sales, product from sales, and product item sales. 147. Suppose, the Belgian government prohibits sale of cigarettes to people below 20 years of age. Who are likely to comprise the qualified available market for Dunhill, a manufacturer of herbal cigarettes in Belgium? Answer: Eligible adults (i.e. people above 20 years of age), who have interest and affordability constitute the qualified available market for the cigarettes in Belgium. 148. If the ratio between current and potential levels of market demand is close to unity, what can you infer about the industry's market-penetration index and the growth potential of the firms in the industry? Answer: The industry has a high market-penetration index and there is a negligible growth potential for all the firms in the industry. 149. How does the marketing environment determine the position of the market demand function? Answer: During economic prosperity the market demand function shifts up as every dollar spent in stimulating demand leads to a greater market demand. Whereas during recession the market demand function shifts downward as an equal increase in marketing expenditure leads to a smaller increase in market demand. 150. Suppose 100 million people consume black tea every year, and an average consumer consumes 8 kgs of tea at an average price of $3 per kg. Compute the total market potential for tea. Answer: $2,400 million 151. Simpsons, a manufacturer of air conditioners, finds that its sales potential is less than its market potential even when it spends a sufficient amount on advertisements and after sale services. What is the basic reason behind such an observation by the marketers of Simpsons? Answer: Company sales potential is less than the market potential, even when a company's marketing expenditures increase considerably because each firm has a set of loyal consumers unresponsive to other companies' efforts to woo them. 152. Two major methods of computing area market potential are market build-up method and multiple factor-index method. Which of these methods will Nexus Enterprises, a manufacturer of auto parts implement to estimate its market potential? Answer: Nexus Enterprise will implement market-build up method to estimate its area market potential as this method is primarily used by business marketers such as Nexus. 153. Suppose the brand development index of the detergent manufactured by Fasclean in Boston is 90 and that in Austin is 48. Compare the marketing opportunity of Fasclean detergent in the two cities. Answer: Fasclean has a greater marketing opportunity for its detergent in Austin than it has in Boston. 154. Suppose Redbus, a player in the small car market is planning to launch its new range of hybrid cars. It decides to estimate the future demand for its new car before launching it in the market. If interviewing consumers is not practical, what alternative technique might it resort to? Answer: When buyer interviewing is impractical, Redbus may ask its sales representatives to estimate the future sales or use expert opinions. 155. Assume that you are a marketing manager for a youth clothing manufacturer that has just read about the megatrend of the "rising Hispanic influence" in the United States. Explain this megatrend and indicate why it might be important to your company. Answer: Although Hispanic households represented only 11% of U.S. households in 2000, they made up half of all new workers in the past decade. Hispanic disposable income has risen twice as fast as that of the rest of the population. By some estimates, this is the fastest growing and most influential consumer group. Thus, the company must divert its production to the form of clothing demanded by the Hispanics. Test Bank for Marketing Management Philip T Kotler, Kevin Lane Keller 9780132102926, 9780273753360, 9781292092621, 9780133856460, 9789332587403, 9780136009986