Chapter 7 - Business Markets and Buying Behavior 1. What are the four major types of business markets? Define each type. Answer: The four categories of business markets are producer, reseller, government, and institutional markets. Individuals and business organizations that purchase products for the purpose of making a profit by using them to produce other products or using them in their operations are classified as producer markets. Reseller markets consist of intermediaries, such as wholesalers and retailers, which buy finished goods and resell them for a profit. Aside from making minor alterations, resellers do not change the physical characteristics of the products they handle. Federal, state, county, and local governments make up government markets. These markets spend billions of dollars annually for a wide range of goods and services, ranging from office supplies and health-care services to vehicles, heavy equipment, and weapons, to support their internal operations and provide citizens with such products as highways, education, energy, and national defense. Organizations with charitable, educational, community, or other nonbusiness goals constitute institutional markets. Members of institutional markets include churches, some hospitals, fraternities and sororities, charitable organizations, and private colleges. 2. Discuss the differences between business and consumer transactions. Answer: Transactions that involve business customers differ from consumer transactions in several ways. Business transactions tend to be larger and negotiations occur less frequently, though they are often lengthy. They may involve more than one person or department in the purchasing organization. They may also involve reciprocity, an arrangement in which two organizations agree to buy from each other. Business customers are usually better informed than ultimate consumers and are more likely to seek information about a product’s features and technical specifications. 3. Compare and contrast the three major types of purchases made by business customers. Answer: Most business purchases are one of three types: new-task, straight rebuy, or modified rebuy. Each type is subject to different influences and thus requires business marketers to modify their selling approaches accordingly. For a new-task purchase, an organization makes an initial purchase of an item to be used to perform a new job or solve a new problem. A new-task purchase may require development of product and vendor specifications and procedures for future product purchases. A straight rebuy purchase occurs when buyers purchase the same products routinely under approximately the same terms of sale. Buyers require little information for routine purchase decisions and tend to use familiar suppliers that have provided satisfactory service and products in the past. For a modified rebuy purchase, a new-task purchase is altered after two or three orders, or requirements associated with a straight rebuy purchase are modified. A business buyer might seek faster delivery, lower prices, or a different quality level of product specifications. 4. What is derived demand? Bloom’s: Knowledge Answer: Business customers, especially producers, buy products for direct or indirect use in the production of goods and services to satisfy consumers’ needs. The demand for business products derives from the demand for consumer products; it is therefore called derived demand. The derived nature of demand is usually multilevel in that business marketers at different levels are affected by a change in consumer demand for a product. 5. Explain how purchase decisions for business products may be influenced by persons in a buying center. Answer: Purchase decisions are made by a single person. Often they are made through a buying center. The buying center is the group of people within the organization who make business purchase decisions. They include users, influencers, buyers, deciders, and gatekeepers. One person may perform several roles within the buying center and participants share goals and risks associated with their decisions. Users are the organizational members who will actually use the product. They frequently initiate the purchase process and/or generate purchase specifications. Influencers are often technical personnel, such as engineers, who help develop product specifications and evaluate alternatives. Buyers select suppliers and negotiate terms of purchase. They may also be involved in developing specifications. Finally, gatekeepers, such as secretaries and technical personnel, control the flow of information to and among the different roles in the buying center. 6. Describe the various stages of the business buying decision process. Answer: In the first stage of the business buying decision process, one or more individuals recognize that a problem or need exists. The second stage of the process, development of product specifications, requires that buying center participants assess the problem or need and determine what is necessary to resolve or satisfy it. During this stage, users and influencers, such as engineers, provide information and advice for developing product specifications. Searching for and evaluating potential products and suppliers is the third stage in the decision process. The results of deliberations and assessments in the third stage are used during the fourth stage of the process to select the product to be purchased and the supplier. In some cases, the buyer selects and uses several suppliers, a process known as multiple sourcing. During the fifth stage, the product’s performance is evaluated by comparing it with specifications. Sometimes the product meets the specifications, but its performance fails to adequately solve the problem or satisfy the need recognized in the first stage. 7. List the environmental factors that affect the business buying decision process. Answer: Environmental factors include competitive and economic factors, political forces, legal and regulatory forces, technological changes, and sociocultural issues. These factors can generate considerable uncertainty for an organization, including in buying decisions. Changes in one or more environmental forces, such as new government regulations or increased competition, can create opportunities and threats that affect purchasing decisions. 8. List the various organizational factors that affect the business buying decision process. Answer: Organizational factors that influence the buying decision process include the company’s objectives, purchasing policies, resources, and the size and composition of its buying center. An organization may also have certain buying policies to which buying center participants must conform that limit buying decisions. For instance, a firm’s policies may mandate contract lengths that are undesirable to many sellers. An organization’s financial resources might require special credit arrangements, also affecting purchase decisions. 9. Discuss how interpersonal factors influence the business buying decision process. Answer: Interpersonal factors are the relationships among people in the buying center. Trust is crucial in collaborative partnerships. This is especially true when customized products are involved—the buyer may not see the product until it is finished and must trust that the producer is creating it to specifications. Trust and clear communication ensure that all parties are satisfied with the outcome, however interpersonal dynamics and varying communication abilities within the buying center may complicate processes. 10. How do individual factors affect the business buying decision process? Answer: Individual factors are the personal characteristics of participants in the buying center, such as age, education level, personality, and tenure and position in the organization. Let us consider a 55-year-old manager who has been in the organization for 25 years. This manager is likely to have a greater influence and power over buying center decisions than a 30-year-old employed at the firm for only two years. The influence of various factors, such as age and tenure, on the buying decision process depends on the buying situation, the type of product, and the type of purchase (newtask, modified rebuy, or straight rebuy). Employee’s negotiating styles will vary as well. To be effective, marketers must know customers well enough to be aware of these individual factors and their potential effects on purchase decisions. 11. In what ways can an industrial classification system be used by business marketers to analyze target markets? Answer: Business marketers have a considerable amount of information available for use in planning marketing strategies. Much of this information is based on an industrial classification system, which categorizes businesses into major industry groups, industry subgroups, and detailed industry categories. The North American Industry Classification System (NAICS) replaced the earlier Standard Industrial Classification (SIC) system and is used by the United States, Canada, and Mexico. It provides marketers with information needed to identify business customer groups. Marketers can best utilize this data in conjunction with other information. After identifying target industries, a marketer can obtain the names and locations of potential customers by using government and commercial data sources. 12. What are the major advantages of the North American Industry Classification System (NAICS) compared to the Standard Industrial Classification (SIC) system? Answer: The NAICS classification is based on production activities. NAICS is similar to the International Standard Industrial Classification (ISIC) system used in Europe and many other parts of the world. Whereas the older SIC system is divided industrial activity into 10 divisions, NAICS divides it into 20 sectors. NAICS contains 1,170 industry classifications, compared with 1,004 in the SIC system. NAICS is more comprehensive and up-to-date, and it provides considerably more information about service industries and high-tech products. 13. The three purposes for which individuals, organizations, or groups can use products in order for it to be considered a business market are: A. use in daily operations, end consumption, and resale. B. direct use in producing other products, company travel, and end consumption. C. resale, use in daily operations, and direct use in producing other products. D. governmental and institutional purposes, and for analyzing target markets. E. making other products, selling directly to consumers, making component parts. Answer: C 14. Areo Ceiling Fans buys electrical wire for use in producing its ceiling fans. Which of the following types of markets does Areo fall in? A. Resale B. Wholesale C. Customer D. Consumer E. Business Answer: E 15. Business markets are typically divided into four categories. These categories are: A. retailer, wholesaler, service, and nonprofit firm. B. producer, manufacturer, reseller, and government. C. producer, reseller, government, and institutional. D. manufacturer, wholesaler, retailer, and services. E. reseller, end users, government, and institutional. Answer: C 16. Individuals and business organizations that purchase products for the purpose of making a profit either by using the products to manufacture other products or by using them in their operations are classified as ________ markets. A. consumer B. institutional C. producer D. government E. reseller Answer: C 17. Jason Puentes is an accountant who purchases software for maintaining clients’ books for a fee. Jason is an example of a buyer in a ________ market. A. consumer B. producer C. reseller D. government E. institutional Answer: B 18. Individuals and business organizations that buy finished goods and trade them to make a profit without changing the physical characteristics of the product are classified as ________ markets. A. consumer B. institutional C. producer D. government E. reseller Answer: E 19. ________ buy products from manufacturers and then resell the products to other firms in the distribution system. A. Retailers B. Producers C. Distributors D. Warehouses E. Wholesalers Answer: E 20. Mike’s Roadside Market buys produce from farmers, marks the merchandise at a price that includes some profit, and then sells the fruit and vegetables to the people in and around Centerville. Mike’s would be classified as part of a ________ market. A. consumer B. producer C. government D. reseller E. wholesaler Answer: D 21. Fast Tools Inc. purchases hammers, bolts, and other hardware items from a variety of manufacturers and sells them to hardware stores at a price that includes a profit for Fast Tools Inc. The company would be part of a ________ market. A. reseller B. producer C. consumer D. government E. supply Answer: A 22. Tech Silicon buys silicon which is used in its chip-making process. Tech Silicon produces microchips for use within a wide variety of products for other firms. Tech Silicon is a buyer in a(n) ________ market. A. producer B. government C. reseller D. construction E. institutional Answer: A 23. Retailers like Costco and Walmart are considered to be members of the ________ market. A. reseller B. customer C. producer D. institutional E. services Answer: A 24. Which of the following statements about reseller markets is false? A. Resellers are concerned with the level of demand for the product. B. Resellers are least concerned with the amount of space a product takes up as long as the product has a minimal customer base. C. Resellers want producers to be able to supply adequate quantities of a product. D. Resellers are concerned with the availability of technical assistance and training programs from the producer. E. Resellers are concerned with the markup percentage they can get on the product. Answer: B 25. Which of the following types of business market tends to have the most complex buying procedures? A. Reseller B. Institutional C. Retailer D. Government E. Producer Answer: D 26. The state of Montana is preparing to buy a large quantity of frozen orange juice for providing it in a large school district. Citrus Fill Inc. is in the citrus juice business but has never sold its products to the government market. To have a chance at getting this contract, Citrus Fill’s first step must be to: A. make a presentation appointment with the state. B. quote prices to the purchasing department. C. advertise in the capital city. D. negotiate with the state. E. secure a slot on the list of qualified bidders. Answer: E 27. The government decides to purchase a new fleet of fighter jets for the U.S. Air Force. Which of the following types of buying procedure is the government most likely to use? A. The government will request bids from all companies on its qualified bidder list. B. It will contact whatever company made the last jets and have them develop the new ones. C. Ads will be placed in the top five circulated U.S. newspapers for a company to produce the jets. D. The government will select a few firms and enter into negotiations with them until the contract is awarded. E. The contract will go to the first company that submits a reasonable bid for the desired jets. Answer: D 28. Pi Delta Mu is a sorority that purchases food in bulk for its members living in the house. Hence, Pi Delta Mu is a part of a(n) ________ market. A. producer B. consumer C. reseller D. institutional E. government Answer: D 29. When charitable organizations such as the American Cancer Society, Second Harvest Foodbank, and the Red Cross make purchases for goods and services to use in their daily operations, they would be considered to be ________ buyers. A. corporate B. government C. institutional D. producer E. nonprofit Answer: C 30. Institutional markets are: A. intermediaries who resell goods to make a profit. B. federal and state government units. C. state or local government units. D. consumers who buy products for their own use. E. organizations that seek nonbusiness goals. Answer: E 31. Which of the following would be considered an institutional buyer? A. Aramark B. City of Greenville C. Apple Computers D. The University of Illinois E. The Environmental Protection Agency Answer: A 32. The two ways governments make purchases are: A. cash or credit. B. contracting previous suppliers and bids. C. bids and negotiated contracts. D. lottery system and contract negotiations. E. request for new purchases and recurring orders. Answer: C 33. Which of the following is a primary difference between business and consumer buyers? A. Consumer buyers require more product information than business buyers. B. Business purchases are made by one individual, whereas families make consumer purchases together. C. Repeat sales are more common with consumer buyers than with business buyers. D. Consumers primarily buy inexpensive items; businesses only buy expensive items. E. Business buyers generally make larger orders than consumer buyers. Answer: E 34. Bob Denton of Denton Pest Control buys equipment from Allied Tools because Allied Tools employs him for pest control services in its warehouses periodically. This practice is an example of: A. cost-benefit trading. B. cooperative selling. C. reciprocity. D. supplier agreement. E. modified rebuy purchase. Answer: C 35. A disadvantage of reciprocity is that it can lead to: A. a price war. B. higher promotional costs. C. more competitive firms entering the industry. D. less-than-optimal purchases. E. longer periods of negotiation. Answer: D 36. Jason owns a small landscaping business called Green Scopes. When buying a new pickup truck for his landscaping business, Jason negotiated with Michael Keith, a dealer, with the agreement that Green Scopes would be the service company Michael Keith uses for all of its landscaping needs. This is an example of: A. a new task purchase. B. a straight rebuy. C. a modified rebuy. D. reciprocity. E. a straight purchase. Answer: D 37. Which of the following statements about business buying is false? A. Business marketers prefer not to sell to customers who place small orders. B. Business marketers must often sell their products in large quantities to make profits. C. Most business purchasing decisions are made by committee. D. Business purchases are usually made on the basis of contracts. E. Reciprocity influences purchasing agents to deal with all suppliers of a product. Answer: E 38. Many suppliers and their customers invest time and resources to build and maintain mutually beneficial relationships which are known as: A. partnerships. B. co-ops. C. monopolies. D. reciprocities. E. resellers. Answer: A 39. Raython Hardware and Thames Industrial Supplier have worked closely for many years and have a mutually beneficial relationship in which Raython provides all of Thames’s hardware needs in a timely manner. Raython and Thames’s relationship could be best characterized as a(n): A. buying center. B. partnership. C. intra-organizational group. D. reselling. E. tying arrangement. Answer: B 40. Which of the following is true with respect to buyers in business markets? A. Business buyers give little value to services. B. Business customers tend to be less informed about the products they purchase than consumer buyers. C. Business customers demand detailed information about a product’s quality, features, or technical specifications. D. Business customers are no different than buyers in consumer markets. E. Business customers tend to buy products from their friends and contacts with business suppliers. Answer: C 41. Most businesses try to control the level of quality in the parts they buy from suppliers. Most firms develop standards for ________ in order to achieve their quality goals. A. how many different suppliers they use B. the number of inelastic demands made C. controlling when shipments will arrive D. the percentage of defects allowed E. how long the parts should last Answer: D 42. All of the following are important concerns of business customers except: A. achieving a specific level of quality in the products offered to target markets. B. striking a balance between quality and price when making purchasing decisions. C. obtaining products that exceed specifications to ensure the best possible product performance. D. obtaining products for which the quality level is consistent. E. supporting customers with services they expect. Answer: C 43. Luxus Auto, an automobile manufacturer, purchases upholstery for the interiors of its vehicles from various suppliers. This upholstery must have technical standards expressed by Luxus Auto. This set of characteristics is known as ________. A. descriptions B. product features C. criterion D. purchase requests E. specifications Answer: E 44. The management of ReadyFresh Dry Cleaners is concerned about maintaining a high level of service for its customers. How should the firm monitor the level of service these customers receive? A. It should develop a code of service. B. It should set service quality standards based only on accounting systems. C. It should formally survey customers. D. It should specify service uniformity. E. It should stress the importance of truthfulness to its employees. Answer: C 45. A mill in Utah buys grains from cultivators in the western region. Which of the following is a buying method that should be used by the purchasing agent of the mill? A. Description B. Inspection C. Sampling D. Negotiation E. Selection Answer: C 46. Collin Roberts, Purchasing Manager of Roberts Constructions, is planning to buy a used excavator. Collin should make his purchasing decision based on the ________. A. equipment’s description B. equipment’s inspection C. samples provided by the seller D. specifications mentioned by the seller E. reputation of the seller Answer: B 47. Under one of the methods of business buying, products are standardized and graded according to characteristics such as size, shape, weight, and color, and a business buyer purchases these products simply by specifying their attributes such as quantity and grade. This describes the method of business buying known as ________. A. reciprocation B. inspection C. description D. sampling E. negotiation Answer: C 48. Evaluating a portion of the product on the assumption that its characteristics represent the entire lot is known as: A. heterogeneous selection. B. description. C. trust. D. negotiated inspection. E. sampling. Answer: E 49. Which of the following is a method of business buying that is necessary when products are highly homogeneous and examination of each item is not feasible? A. Negotiation B. Sampling C. Description D. Inspection E. Reciprocation Answer: B 50. St. Jude’s Hospital decides to redo its kitchen with new flooring, cabinets, counters, and appliances. The hospital compiles a description of the project and then asks sellers to submit bids. After determining the most attractive bids, the hospital will then work with two or three companies to determine who will get the contract. This is an example of using ________ for a purchase decision. A. sampling B. negotiation C. inspection D. elimination E. description Answer: B 51. Most business purchases can be classified as belonging to one of three types: A. delinquent, repetitive, or delivered. B. repetitive, new-task, or modified rebuy. C. new-task, straight rebuy, or modified rebuy. D. delinquent, new-task, or reciprocal. E. rebuy, reciprocal, or delayed. Answer: C 52. The United States Navy purchases uniforms from a single supplier. For the last five years, the trousers purchased from this supplier have not changed and have been bought in seven different sizes every six months under approximately the same terms of sale. This is an example of ________. A. new-product purchase B. demand purchase C. straight rebuy purchase D. modified rebuy purchase E. standard order purchase Answer: C 53. When a business is making its initial purchase of an item to be used to perform a fresh job, it is known as a ________ purchase. A. straight rebuy B. reciprocal C. delayed D. new-task E. modified rebuy Answer: D 54. Perry Supply & Co. experiences an increase in its sales, and accordingly, its sales force has continued to expand. Now, the firm plans to add a fleet of company vans as part of its sales expansion. For Perry Supply & Co., these vehicles would represent a ________ purchase. A. modified rebuy B. straight rebuy C. new-task D. reevaluated E. repetitive Answer: C 55. Anderson Distribution Company has purchased 15 forklifts over the past two years. As it plans to place its next order for five more machines, the management adds additional features in order to handle changes in the product lines it carries. For Anderson, these modified forklifts represent a ________ purchase. A. new-task B. reciprocal task C. straight rebuy D. repetitive order E. modified rebuy Answer: E 56. A representative from Coca-Cola stops by at a local megastore once a month to inquire the amount of soft drink that the store will need. The restaurant’s orders are an example of ________ purchase. A. new-task B. modified rebuy C. straight rebuy D. bid E. negotiated Answer: C 57. Supermart, a megastore, recently placed an order with the Kahn Corporation for hotdogs. Their usual weekly order is for 10 cases. However, since the upcoming weekend includes a holiday, this time Supermart places an order for 100 cases of hotdogs. Which of the following types of purchase does this particular holiday week’s purchase represent? A. New-task buying B. Repetitive buying C. Institutional buying D. Straight rebuy E. Modified rebuy Answer: E 58. The Eagle Pawn Company is a regional business that owns seven pawn stores in the Houston area. The company had acquired a new software system designed to track their inventory better. Now that they have had the system for a couple of months, they have decided to upgrade to a newer version. The original purchase is an example of a ________ purchase, while the current purchase will be a modified rebuy purchase. A. new-task B. reevaluated C. contract D. straight rebuy E. negotiated Answer: A 59. Demand for business products is also known as ________ demand. A. derived B. corporate C. business buying D. manufacturing E. industrial Answer: E 60. The fact that business customers purchase products to be used directly or indirectly in the production of goods and services to satisfy customers’ needs means that demand for business products is: A. joint. B. economically instable. C. derived. D. inelastic. E. more fluctuating. Answer: C 61. Everglide is a manufacturer and marketer of tires for new passenger cars. In recent years, the company’s business has declined because of the overall decrease in consumer demand for new cars. In this case, the demand for Everglide’s tire products is said to be ________, since it depends on the demand for new cars. A. inelastic B. fluctuating C. derived D. elastic E. non-derived Answer: C 62. Which of the following is a major threat to the sales success of jointly demanded products? A. Price changes B. Shortages C. Economic instability D. Inventory buildup E. Proliferation of brands Answer: B 63. Inelastic demand simply means that: A. buyers will not make a modified rebuy purchase for an item. B. demand depends on how many items are purchased. C. a price increase or decrease will not significantly change the demand for an item. D. when the price of an item goes up, demand for that item goes down. E. when the supply of an item is reduced, the price of the item will increase. Answer: C 64. Inelastic demand in business markets refers to a situation where: A. supply for a given product fluctuates very little over time. B. price increases or decreases will not significantly change demand for a given product. C. demand for a given product fluctuates significantly over time. D. demand for one product depends heavily on the demand for another product. E. supply for a given product cannot keep pace with the demand for it. Answer: B 65. Christoff’s Lawn & Lot is a small business that provides landscaping and grass cutting services during spring and summer. Christoff’s usually sign contracts with customers on an annual basis, with the terms set out at the beginning of the season. This year, the area experienced a significant amount of rain, causing the grass to grow more quickly. Christoff’s was required to cut the grass every time it grew 2 inches, and no matter how many times it needed cutting, the customer paid the same monthly amount based on the original contract. The price of gas has now increased by 35% causing Christoff’s to pay more for their supplies. The demand for gas despite its price represents ________ demand for Christoff’s Lawn & Lot. A. elastic B. inelastic C. derived D. joint E. separate Answer: B 66. In placing an order with the tire manufacturing company Cratus, South Side Industrial Supply finds that the price for the truck tires it is ordering has increased by $37.50, since its last order. South Side places the order with the confident that it can pass on the price increase to its future customers. This is an example of business products having a(n) ________ demand. A. derived B. inelastic C. joint D. fluctuating E. higher Answer: B 67. Demand for a business product is ________ when two or more items are used in combination to produce a product. A. inelastic B. joint C. fluctuating D. derived E. partnered Answer: B 68. Apollo Auto Supply sells car and truck parts, as well as tire replacement and balancing services. As Apollo Auto Supply places its order for truck tires with the tire manufacturing company Cratus, it must also place an order for valve stems and balancing weights for the tires. Such business products are characterized as having a(n) ________ demand. A. derived B. inelastic C. joint D. fluctuating E. higher Answer: C 69. When certain consumer products are in high demand, producers might buy extra materials and equipment and when demand subsides, producers will cut back on their material purchases. This describes a(n) ________ demand. A. joint B. inelastic C. consumer D. fluctuating E. derived Answer: D 70. In a buying center, purchasing agents or purchasing managers are also known as the: A. gatekeepers. B. purchase deciders. C. buyers. D. users. E. influencers. Answer: C 71. The group of people within a business who are involved in making business purchasing decisions is referred to as the: A. new-task team. B. negotiators. C. purchasing agents. D. assessment group. E. buying center. Answer: E 72. A university decides to purchase new computers for the computer labs on campus. Usually, the purchasing agent negotiates with manufacturers and makes the decision on what to buy. However, for this purchase he has asked the university’s IT technicians to give input on the purchase decision. In this instance, the IT technicians would be acting as influencers, while the purchasing agent is a(n) ________. A. buyer B. litigator C. user D. decider E. gatekeeper Answer: D 73. Barry Gluckman of WP International, a major marketer of word-processing software, calls the secretary of Renee Dorchette, director of purchasing for MMK Inc to fix an appointment. The secretary sets up the appointment to discuss the upcoming purchase of software from WP International. The secretary plays the role of a ________ in this purchase decision. A. gatekeeper B. buyer C. decider D. litigator E. negotiator Answer: A 74. As the new sales representative for Livsafe Healthcare, Sophie is responsible for calling hospital management and selling medical equipment, such as blood pressure monitors, scales, and heart rate monitors. Sophie knows that she needs to communicate effectively with the administrative assistants in the management offices in order to make sure that Livsafe Healthcare’s information brochures and new product diagrams reach the management staff. In this situation, the administrative assistants are the ________ in the buying decision process. A. gatekeepers B. users C. influencers D. buyers E. deviators Answer: A 75. The stages of the business buying decision process, in order, are: A. recognizing the problem, establishing product specifications, searching for products and evaluating possible suppliers, selecting suppliers and products, and evaluating performance. B. recognizing the problem, searching for products and evaluating possible suppliers, selecting suppliers and products, establishing product specifications, and evaluating performance. C. recognizing the problem, selecting suppliers and products, evaluating performance, establishing product specifications, and searching for substitute products. D. establishing product specifications, recognizing the problem, searching for products, evaluating possible products and suppliers, selecting suppliers and products, and evaluating performance. E. establishing product specifications, searching for products, selecting suppliers and products, evaluating performance, recognizing the problem, and evaluating possible products and suppliers. Answer: A 76. While planning a purchase of business desktop computers, Albertson Inc. asked potential suppliers to provide information only on units with 8GB memory. As the firm's management evaluates this purchase, it finds that 8GB is inadequate for the software programs used at the firm. In this instance, which of the following aspects of the buying decision process does the firm needs to modify? A. Searching B. Specification development C. Alternative evaluation D. Selection E. Performance evaluation Answer: B 77. After deciding to order replacement parts for their aging machinery, a buyer from a construction company examines catalogs and trade publications looking for these parts. The buyer is in the ________ stage of the business buying decision process. A. problem recognition B. product specification C. product-supplier search and evaluation D. product-supplier selection E. product-supplier post-evaluation Answer: C 78. Christy Bridgman is planning to buy a new fax machine for her real estate office. She is considering to buy a machine that does not have as many functions but is available at a considerably lower price than her current machine. She is engaging in ________ analysis. A. vendor B. demand C. straight rebuy D. value E. profit Answer: D 79. During the search for products and evaluating possible suppliers stage of the business buying decision process, marketers sometimes use ________ analysis to examine the quality, design, materials, and possibly item reduction in order to acquire the product in the most cost-effective way. A. cost B. value C. profit D. demand E. SWOT Answer: B 80. ________ analysis is a systematic evaluation of current and potential suppliers that focuses on many dimensions including price, product quality, delivery service, product dependability, and overall reliability. A. Value B. Vendor C. Buying center D. Strategic E. Cost Answer: B 81. An organization that decides to buy all parts of an item from the same company is using: A. single-supplier purchasing. B. multiple sourcing. C. same vendor analyzing. D. straight rebuying. E. sole sourcing. Answer: E 82. Individual influencing factors refer to: A. personalities of an organization’s vendors. B. uncontrollable environmental forces. C. reputation of the organization. D. personal characteristics of individuals in the buying center. E. activities of suppliers. Answer: D 83. A buyer who purchases handbags from Macy’s Department Stores orders them from a particular supplier because this supplier allows the buyer to maintain Macy’s company policy of 30day advance purchase notice. This is an example of ________ influence on the business buying decision process. A. environmental B. organizational C. interpersonal D. individual E. demographic Answer: B 84. Compared with the SIC system, the North American Industry Classification System (NAICS): A. deals with many industries at one time. B. is a single industry classification system used throughout the world. C. contains more up-to-date information for the NAFTA partners. D. provides less information about service industries. E. generates statistics that are not useful in comparing countries. Answer: C 85. Ben Davideau is assigned by his sales manager to come up with the names and addresses of twenty firms in his territory that have potential for using sizable quantities of his firm’s products. Which of the following should Ben approach if he wants his search to be efficient? A. Sales & Marketing Management B. An SIC listing C. The Census of Business D. The Census of Manufacturers E. Standard & Poor’s Register Answer: E Scenario 7.1 Use the following scenario to answer the questions. FreezeAll is an upcoming manufacturer in the home appliance market. It plans to enter the market with a model called French Door Refrigerator. While designing the production facility, FreezeAll discovered that they need various pieces of equipment that includes the perpetual assembly belt-drive, assembly pods, and finishing stations. The purchasing agent for the Appliance Division inquires about the people who will be needed for input on the purchasing decision. FreezeAll has already contacted several producers of quasi-assembly pods, and has begun negotiations with their sales representatives. 86. Refer to Scenario 7.1. What type of business purchase is FreezeAll undertaking? A. Modified rebuy B. Straight rebuy C. New-task D. Straight purchase E. New rebuy Answer: C 87. Refer to Scenario 7.1. Which of the following groups should FreezeAll not include in its buying center for the new equipment? A. Purchasing agents at FreezeAll B. Eventual users within FreezeAll C. Potential future FreezeAll customers D. Gatekeepers within FreezeAll E. Senior managers at FreezeAll Answer: C 88. Refer to Scenario 7.1. What was the first step of the buying decision process that FreezeAll went through when looking for the assembly pods? A. Searching for products and suppliers B. Selecting and ordering the most appropriate product C. Recognizing the problem or need D. Establishing product specifications E. Evaluating the product relative to specifications Answer: C Scenario 7.2 Use the following scenario to answer the questions. Accura Brake Company is a supplier of brake components to the manufacturers of lawn tractors and 4-wheel ATVs. It also sells its products to independent repair centers, dealers, and other wholesalers in the northeast and southern states of the USA. Accura Brake has done research on the demand for lawn tractors and found that most manufacturers are in the states of Kentucky, Tennessee, and Alabama. Research also shows that most of the dealers who sell directly to individual consumers are in the Midwestern states, while dealers who sell to small business landscaping companies tend to be located in the northeastern states. Thus, the board of directors of Accura Brake Company is considering expansion of its distribution to markets in the Midwest. 89. Refer to Scenario 7.2. Which of the following market types does Accura Brake fall under when selling their products to individual dealers? A. Producer B. Reseller C. Government D. Institutional E. Covert Answer: B 90. Refer to Scenario 7.2. When Accura Brake’s sales team calls on tractor manufacturing companies, the meetings typically include the engineers who design the tractors. In this situation, the engineers would most likely be considered to be ________ as a part of the buying center. A. gatekeepers B. influencers C. users D. buyers E. controllers Answer: B 91. Refer to Scenario 7.2. Last year, Accura Brake’s sales to the manufacturers of lawn tractors declined partially due to the fact that more consumers were hiring small landscaping businesses to maintain their gardens. This decline in sales for Accura Brake is an example of: A. product scarcity. B. joint demand. C. derived demand. D. reciprocity demand. E. inelastic demand. Answer: C 92. Buyers in producer markets purchase raw materials and semifinished products. A. True B. False Answer: True 93. The four categories of consumer markets are producer, reseller, government, and institutional. A. True B. False Answer: False 94. The owner of a trucking business, who buys gasoline from the nearby service station for his company’s trucks, is a part of a business market. A. True B. False Answer: True 95. The term business markets refers only to producer markets. A. True B. False Answer: False 96. Farmers are a part of business markets. A. True B. False Answer: True 97. Grocery stores and supermarkets are a part of producer markets. A. True B. False Answer: True 98. Reseller markets consist of intermediaries that buy finished goods and resell them for profit. A. True B. False Answer: True 99. Wholesalers sell primarily to ultimate consumers. A. True B. False Answer: False 100. There is little or no difference between wholesalers’ customers and retailers’ customers. A. True B. False Answer: False 101. Retailers purchase products and resell them to final consumers. A. True B. False Answer: True 102. Institutional markets include senior living centers. A. True B. False Answer: True 103. Orders placed by business customers are usually smaller and more numerous than consumer sales. A. True B. False Answer: False 104. Reciprocal dealing is widespread because it is one of the few avenues not regulated by the FTC, and it facilitates optimal purchases. A. True B. False Answer: False 105. Business customers generally seek to obtain detailed information about a product before purchasing it. A. True B. False Answer: True 106. Business customers are forced to satisfy personal goals in pursuits that lie outside their jobs. A. True B. False Answer: False 107. Business purchasing agents may indirectly contribute to the satisfaction of their own personal needs by helping their firms achieve organizational objectives. A. True B. False Answer: True 108. When purchasing products, business customers are especially concerned about quality, service, price, and supplier relationships. A. True B. False Answer: True 109. In some cases, the types of services offered by a supplier may constitute a primary advantage over suppliers of similar products. A. True B. False Answer: True 110. On-time delivery is crucial to a business customer, since a late delivery may hold up a production line or cause the firm to lose sales. A. True B. False Answer: True 111. A new-task purchase is one in which the business makes an initial purchase of a new item. A. True B. False Answer: True 112. Of the three types of business purchases, the straight rebuy purchase usually requires the most information. A. True B. False Answer: False 113. Industrial demand derives from consumer demand. A. True B. False Answer: True 114. In the long run, business demand becomes totally unrelated to consumer demand. A. True B. False Answer: False 115. The demand for many business products is inelastic at the industry level. A. True B. False Answer: True 116. For business products, the concept of inelasticity of demand applies equally to industry demand for the product and to demand for an individual supplier. A. True B. False Answer: False 117. Raw materials are especially affected by joint demand. A. True B. False Answer: True 118. In industries in which price changes occur frequently, demand fluctuations have practically been eliminated since buyers have become used to these changes and have learned to ignore them. A. True B. False Answer: False 119. A fall in consumer demand for a product is likely to result in increased buying from suppliers as consumer goods producers replenish depleted inventories and gear up for the next surge in consumer demand. A. True B. False Answer: False 120. The factors that influence business buying behavior are the same as those that influence consumer buying behavior. A. True B. False Answer: False 121. All companies, no matter what their size or market position, maintain only one buying center. A. True B. False Answer: False 122. In the buying decision process, one of the activities included in the search for products and suppliers is examining catalogs and trade publications. A. True B. False Answer: True 123. Specific details regarding terms, credit arrangements, and technical assistance are worked out during the product specification stage of the buying decision process. A. True B. False Answer: False 124. During the value analysis stage of the buying decision process, the focus is primarily on the examination of the cost of products relative to design, quality, and materials used. A. True B. False Answer: True 125. Vendor analysis is a formal, systematic evaluation of current and potential vendors that focuses on a variety of dimensions including price, product quality, delivery service, product availability, and overall company reliability. A. True B. False Answer: True 126. The fourth stage in the business buying decision process is that of searching for products and suppliers. A. True B. False Answer: False 127. Feedback acquired during the fifth stage of the business buying decision process is kept on file but not used as a reference for future business purchase decisions. A. True B. False Answer: False 128. The five-stage business buying decision process is used primarily for routine, straight rebuy purchases. A. True B. False Answer: False 129. The North American Industry Classification System includes all three NAFTA partners. A. True B. False Answer: True 130. The old Standard Industrial Classification system is more comprehensive than NAICS. A. True B. False Answer: False 131. NAICS provides less information about service industries and high-tech products than did the SIC system. A. True B. False Answer: False 132. To obtain the names of specific potential customers, the business marketer is well advised to employ the services of a commercial data company, since this is both cheaper and faster than any other method. A. True B. False Answer: False 133. Industrial classification systems allow marketers to divide business customers into groups based mainly on the types of logos and packaging provided. A. True B. False Answer: False 134. When trying to estimate the purchases of a potential business customer, it is reasonable to suppose that there is a relationship between the size of the potential customer’s purchases and a variable such as the number of personnel employed by the customer. A. True B. False Answer: True Test Bank for Foundations of Marketing William M. Pride, O. C. Ferrell 9781285429779, 9781439039441
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