Marketing Strategy Text and Cases 6th Edition by O. C. Ferrell -Test Bank A+

Description

1. __ refers to the strategic combination of the four basic marketing mix elements.

a.	The marketing plan	d.	The strategic mix
b.	The marketing program	e.	Implementation
c.	Strategic control

ANS: B PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Strategy

TOP: A-Head: Introduction KEY: Bloom’s: Knowledge

1. Most firms today compete in mature markets characterized by commoditization. In these cases, the __________ typically becomes incapable of differentiating the product offering from those of the competition.

a.	extended product	d.	experiential products
b.	core product	e.	tangible products
c.	supplemental products

ANS: B PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Strategy

TOP: A-Head: Introduction KEY: Bloom’s: Knowledge

1. Although the product is at the heart of the marketing program, it is important to remember that product offerings in and of themselves have little value to customers. An offering’s real value comes from:

a.	its superiority to competing products.
b.	its ability to further the image of the organization.
c.	its value (good quality at a low price).
d.	its ability to deliver benefits that solve a customer’s problems.
e.	its easy of use and convenience.

ANS: D PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Analysis

1. Mallory is an avid collector of antiques. In fact, she spends practically every weekend traveling to small towns and antique shops in search of unique antique treasures. For Mallory, antiques are a perfect example of a:

a.	convenience product.	d.	influential product.
b.	shopping product.	e.	specialty product.
c.	supplemental product.

ANS: E PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Application

1. Which of the following is the best example of an unsought product?

a.	gasoline	d.	luxury products
b.	clothing	e.	insurance
c.	antiques

ANS: E PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Knowledge

1. For laptop computers, processor chips, memory chips, and hard drives are examples of __________ because they are finished items that become a part of the computer after assembly.

a.	raw materials	d.	component parts
b.	process materials	e.	specialty products
c.	installations

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Comprehension

1. Firestone carefully watches the automotive market to ascertain the demand for cars, SUVs, and trucks. Firestone does this because the demand for its products is dependent on the demand for automobiles. This situation describes __________.

a.	synergistic demand	d.	product line demand
b.	shopping demand	e.	price elasticity
c.	derived demand

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Application

1. Why would a firm offer a deep assortment of products in its product portfolio?

a.	To attract a wide range of customers and market segments.
b.	To capitalize on the firm’s reputation.
c.	To diversify its risk.
d.	To maximize differentiation across its product lines.
e.	None of the above.

ANS: A PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Comprehension

1. Why would a firm offer a wide variety of products in its product portfolio?

a.	To attract a wide range of customers and market segments.
b.	To capitalize on the firm’s reputation.
c.	To diversify its risk.
d.	To maximize differentiation across its product lines.
e.	None of the above.

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Comprehension

1. Why is the demand for most services—such as popular restaurants—extremely time-and-place dependent?

a.	Because popular services typically lack sufficient capacity.
b.	Because services cannot be stored for future use.
c.	Because customers must be present for service to be delivered.
d.	Because service customers are typically unsure of their needs.
e.	Because competing services force customers to make tradeoffs between quality and time.

ANS: C PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Strategy

TOP: A-Head: Product Strategy KEY: Bloom’s: Comprehension

1. Which of the following IS NOT an important benefit of offering a large product portfolio?

a.	package differentiation	d.	standardization
b.	economies of scale	e.	equivalent quality beliefs
c.	sales and distribution efficiency

ANS: A PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Strategy

TOP: A-Head: Product Strategy KEY: Bloom’s: Analysis

1. Unlike tangible goods, virtually all services are susceptible to inconsistency and variations in quality. Why is this so?

a.	Because services depend on people for their delivery.
b.	Because services cannot be managed due to their intangibility.
c.	Because services are extremely time-and-place dependent.
d.	Because service marketers cut corners to reduce expenses.
e.	Because service marketers make unrealistic promises to customers.

ANS: A PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Comprehension

1. The phrase “Unused service capacity is lost forever” refers to which major challenge associated with the marketing of services?

a.	client-based relationships
b.	limited standardization
c.	simultaneous production and consumption
d.	perishability
e.	heterogeneity

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Evaluation

1. To compete in the fast-growing hybrid segment, Honda introduced the Civic Hybrid with unique styling and great fuel economy. The Civic Hybrid was based on the traditional Honda Civic. Which product development strategy has Honda implemented?

a.	repositioning	d.	product improvement
b.	new product line	e.	product line extension
c.	product innovation

ANS: E PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Product

TOP: A-Head: Product Strategy KEY: Bloom’s: Application

1. Assume Kia has developed a new product idea to launch a midsize pickup. Currently, Kia is developing a prototype and working on projected costs, revenues, and profit potential. Kia is currently at what stage of the new product development process?

a.	idea generation	d.	test marketing
b.	development	e.	commercialization
c.	screening and evaluation

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Strategy

TOP: A-Head: Product Strategy KEY: Bloom’s: Application

1. Why are firms so obsessed with the pricing element of the marketing mix?

a.	Because pricing is the most difficult element of the marketing mix to change.
b.	Because the firm’s pricing has a direct bearing on its ability to increase revenue.
c.	Because pricing is the only marketing element that matters to customers.
d.	Because pricing is the best part of the marketing mix in which to make an educated guess about the most appropriate strategy.
e.	Because pricing is directly responsible for demand.

ANS: B PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Evaluation

1. Although break-even analysis and cost-plus pricing are important tools in setting prices based on the firm’s cost structure, they should never be the driving force behind pricing strategy. Why?

a.	Because firms want to make a profit, not just break even.
b.	Because customer expectations are far more important in setting prices.
c.	Because prices should be based on demand, not costs.
d.	Because different firms have different cost structures.
e.	Because competitor’s prices are far more important in setting prices.

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Evaluation

1. __________ is defined as a customer’s subjective evaluation of benefits relative to costs to determine the worth of a firm’s product offering relative to other product offerings.

a.	Quality	d.	Breakeven cost
b.	Value	e.	Opportunity cost
c.	Price

ANS: B PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Knowledge

1. Which of the following statements is TRUE with respect to the relationship between price and revenue?

a.	When business is good, a price increase will increase revenue.
b.	When business is bad, a price increase will increase revenue.
c.	Price cuts must be offset by an increase in sales volume to keep the same level of revenue.
d.	In highly differentiated markets, price cuts will capture greater market share.
e.	In highly commoditized markets, price cuts will increase revenue.

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Comprehension

1. Which pricing objective is associated with the phrase “charging what the market will bear”?

a.	volume-oriented	d.	market demand
b.	profit-oriented	e.	status quo
c.	cash flow

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Comprehension

1. Price elasticity is defined as:

a.	a situation where prices routinely move up and down in a short period of time.
b.	customers’ responsiveness or sensitivity to changes in price.
c.	the impact on a product’s demand when customers are in unique buying situations.
d.	the relative ease with which prices can be changed.
e.	price flexibility—a pricing strategy used by startup firms.

ANS: B PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Knowledge

1. Which of the following IS NOT a situation that can cause customers to be less sensitive to price increases?

a.	When customers have few product choices.
b.	When products are highly differentiated.
c.	When the product is a real or a perceived necessity.
d.	When the total expenditure is high.
e.	When the product is considered to be “worth it”.

ANS: D PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Analysis

1. The inherent goal of product differentiation is to make the demand curve for a product more inelastic. This happens because increased differentiation:

a.	reduces the number of perceived substitutes for a product.
b.	makes the product more expensive than its competitors.
c.	increases the quality of the product making it worth the expense.
d.	reduces the time and effort required to obtain the product.
e.	increases the just noticeable differences among competing products.

ANS: A PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Evaluation

1. Because service capacity is perishable and service demand is highly time dependent, service firms employ yield management strategies in an effort to:

a.	control costs.
b.	control demand through effective advertising strategies.
c.	establish fair guidelines for overbooking capacity.
d.	shift customer demand to other firms that can handle the excess business.
e.	balance price and revenue considerations with their need to fill unused capacity.

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Analysis

1. The goal of __________ is to maximize sales, gain widespread market acceptance, and capture a large market share quickly by setting a relatively low initial price.

a.	price skimming	d.	first-mover pricing
b.	odd pricing	e.	market acceptance pricing
c.	penetration pricing

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Knowledge

1. The Fairmont Hotel is widely known for its exceptional quality and impeccable customer service. Not surprisingly, the Fairmont sets prices at the top end of all competing hotels. Which pricing strategy is the Fairmont using?

a.	exclusive pricing	d.	prestige pricing
b.	image pricing	e.	service-based pricing
c.	psychological pricing

ANS: D PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Application

1. Firms such as IKEA and The Home Depot are known for their use of __________ because they set reasonably low prices but still offer high-quality products and adequate customer services.

a.	penetration pricing	d.	relational pricing
b.	market equity pricing	e.	value-based pricing
c.	prestige pricing

ANS: E PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Knowledge

1. The Club is a local hair salon and day spa that caters to an upper-middle class clientele. Although price competition in the local area has been increasing, the owners of The Club have decided to focus their marketing efforts on quality, service, and value, and to resist the temptation to compete on price. In pursuing this non-price strategy, managers of The Club are ascribing to which of the following assumptions?

a.	Customers see all salons as being about the same.
b.	The market for salon services is very price sensitive.
c.	Customers of The Club are so loyal that price competition is not necessary.
d.	It is difficult for competitors to copy The Club’s differentiating characteristics.
e.	The managers are ascribing to all of these assumptions.

ANS: D PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Evaluation

1. Retailers use __________ extensively. This occurs when the retailer compares sale prices to regular prices, such as when Best Buy promotes a DVD player as “Regularly $99, Now $49.”

a.	reference pricing	d.	value-based pricing
b.	EDLP	e.	sale pricing
c.	odd pricing

ANS: A PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Application

1. In business markets, __________ is used to quote prices in terms of reductions or increases based on transportation costs or the actual physical distance between the buyer and the seller.

a.	transfer pricing	d.	logistics pricing
b.	countertrade	e.	GPS pricing
c.	geographic pricing

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Pricing

TOP: A-Head: Pricing Strategy KEY: Bloom’s: Knowledge

1. A __________ is an organized system of marketing institutions through which products, resources, information, funds and/or product ownership flow from the point of production to the final user.

a.	marketing network	d.	marketing channel
b.	distribution hub	e.	product network
c.	supply chain

ANS: D PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Knowledge

1. Ensuring the availability of products in the right place in the right quantities at the right time in a cost efficient manner is the main focus of:

a.	physical distribution.	d.	channel management.
b.	marketing networks.	e.	network management.
c.	supply chain management.

ANS: A PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. The creation of an extended enterprise in the supply chain depends heavily on the ability of channel members to integrate their operations. Which of the following IS NOT a key factor in successful supply chain integration?

a.	trust	d.	mutual benefit
b.	interdependence	e.	coercive power
c.	cooperation

ANS: E PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Knowledge

1. The most basic benefit of marketing channels is __________ where channels reduce the number of contacts necessary to exchange products.

a.	contraction	d.	contact creation
b.	time efficiency	e.	accumulation
c.	contact efficiency

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. In terms of marketing channel functions, which of the following statements describes the concept of discrepancy of quantity?

a.	Manufacturers make one or a few product(s)—customers need variety and assortment.
b.	Channels must make products available in convenient locations.
c.	Channels add value to products by standardizing the exchange process.
d.	Channels must provide for the storage of products for future purchase and use.
e.	Manufacturers produce large quantities; customers usually want only one item.

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. Which member of the marketing channel has the primary responsibility of fulfilling the channel’s main functions?

a.	manufacturers	d.	customers
b.	wholesalers	e.	It does not matter.
c.	retailers

ANS: E PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. In the Mercedes dealer network, individual dealers are given the sole right to sell Mercedes vehicles within a defined geographic area. What type of distribution does Mercedes employ?

a.	exclusive distribution	d.	limited distribution
b.	intensive distribution	e.	prestige-based distribution
c.	selective distribution

ANS: A PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Application

1. What is the most appropriate type of distribution to use when customers need the opportunity to comparison shop, or when after-sale services are important?

a.	exclusive distribution	d.	comparative distribution
b.	service-based distribution	e.	selective distribution
c.	intensive distribution

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. Many products, such as candy, soft drinks, and gum are sold via intensive distribution. However, this strategy has a major drawback. What is it?

a.	It maximizes profit margin rather than sales volume.
b.	It encourages customers to shop around for the lowest price.
c.	It promotes a very high degree of brand switching.
d.	The manufacturer must give up a good degree of control over pricing and product display.
e.	It gives customers fewer opportunities to find the product.

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. Because the company was angered by the actions of its resellers, Acme Manufacturing decided to slow down deliveries and postpone product availability to these resellers. What type of power is Acme wielding in the channel?

a.	legitimate power	d.	reward power
b.	coercive power	e.	logistical power
c.	referent power

ANS: B PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Application

1. Which of the following statements best describes the term “slotting allowances”?

a.	The amount of shelf space that a retailer grants to a specific brand or product.
b.	The amount of product from a specific manufacturer that a wholesaler agrees to carry.
c.	A fee, paid by manufacturers to retailers, to get a product placed on retail shelves.
d.	A fee, paid by retailers to wholesalers, to get them to carry the retailer’s private label brand.
e.	The amount of product from a specific manufacturer that a retailer agrees to carry.

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. In most marketing channels for consumer products, the balance of power has shifted to __________ due to their size and buying power.

a.	consumers	d.	brokers and distributors
b.	mass merchandise retailers	e.	manufacturers
c.	wholesalers

ANS: B PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. Today, though cutting expenses is still a main factor, the desire of many firms to focus on core competencies is a driving force behind the increase in:

a.	category management.	d.	product differentiation.
b.	channel integration.	e.	outsourcing.
c.	referent power.

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. Hallmark is a good example of a company that uses __________ distribution as a means of offering two or more lines of the same merchandise through two or more channels

a.	direct	d.	dual
b.	secondary	e.	complementary
c.	split

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Comprehension

1. Overall, the trends occurring in marketing channels today (growth in e-commerce, outsourcing, growth of nontraditional channels) have one major theme in common. What is that theme?

a.	Enhancing the reputation of the supply chain.
b.	Reducing the risk of legal action in the supply chain.
c.	Increasing channel efficiency by reducing waste, overhead, and other costs.
d.	Securing more power and control for manufacturers.
e.	All of the above are common themes.

ANS: C PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Distribution

TOP: A-Head: Supply Chain Strategy KEY: Bloom’s: Synthesis

1. Which of the following statements about integrated marketing communications (IMC) is FALSE?

a.	IMC refers to the strategic, coordinated use of promotion to create one consistent message.
b.	IMC takes a 360-degree view of the customer.
c.	The role of mass television advertising is growing more important to IMC strategy.
d.	IMC reduces costs and increases efficiency because it can reduce or eliminate redundancies and waste.
e.	The key to IMC is consistency and uniformity of message across all elements of promotion.

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Comprehension

1. To be successful, firms must move potential customers beyond mere interest in the product. Good promotion will stimulate __________ by convincing potential customers of the product’s superiority and its ability to satisfy specific needs.

a.	dedication	d.	action
b.	investigation	e.	desire
c.	attention

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Comprehension

1. In terms of the AIDA model, mass communication elements such as advertising and public relations tend to be very effective at:

a.	stimulating awareness of and interest in a product.
b.	explaining highly complex and technical products.
c.	stimulating immediate purchase of a product.
d.	marketing high priced products.
e.	closing the sale.

ANS: A PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Analysis

1. When firms use a(n) __________ strategy, they focus their promotional efforts toward stimulating demand among final customers, who then exert pressure on the supply chain to carry the product.

a.	pressurization	d.	guerilla
b.	IMC	e.	push
c.	pull

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Knowledge

1. In launching its new line of power tools, Black and Decker spent a considerable amount of time and resources to educate, motivate, and compensate members of its supply chain. By investing heavily in these types of promotions, Black and Decker hopes its __________ strategy will lead to a more effective product launch.

a.	pull	d.	push
b.	AIDA	e.	placement
c.	institutional

ANS: D PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Application

1. Which of the following is perhaps the main advantage associated with the use of advertising?

a.	It takes little time to develop an advertising campaign.
b.	The total dollar layout in advertising is usually low.
c.	It is an extremely cost efficient way to reach a large number of people.
d.	It can quickly convey a large amount of technical information.
e.	It can be quite memorable.

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Evaluation

1. In the context of IMC strategy, what is the difference between public relations and publicity?

a.	Public relations deals with positive information; publicity deals with controlling negative information.
b.	Publicity deals with many stakeholders; public relations deals only with customers.
c.	Publicity is normally done via an in-house staff; public relations is typically outsourced to a specialist.
d.	Publicity is more narrowly defined and focused on gaining media attention.
e.	There is no difference between public relations and publicity.

ANS: D PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Analysis

1. Overall, what is the major disadvantage associated with the use of public relations and publicity?

a.	It is normally very expensive.
b.	The amount of negative publicity always outweighs the good.
c.	Few, if any, customers pay attention to public relations messages.
d.	Most people find it to be less credible than advertising.
e.	The firm has limited control over how the message will be delivered or interpreted.

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Comprehension

1. __________ is paid personal communication that attempts to inform customers about products and persuade them to purchase those products.

a.	Personal selling	d.	Public relations
b.	Sales promotion	e.	Advertising
c.	Publicity

ANS: A PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Knowledge

1. In today’s economy, personal selling has evolved to take on elements of customer service and marketing research. Why is this the case?

a.	It is less expensive to deliver service and conduct research with the sales staff.
b.	It is more time efficient because salespeople are already interacting with customers.
c.	Personal selling focuses more on developing customer relationships than on generating transactions.
d.	It allows salespeople to earn higher commissions for doing more work.
e.	None of the above is correct.

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Evaluation

1. Which sales force compensation system is best suited to situations where salespeople are responsible for pre- and post-sale service and sales managers want maximum control over selling expenses?

a.	straight commission	d.	geographic allocation
b.	a combination approach	e.	straight salary
c.	direct compensation

ANS: E PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Comprehension

1. Despite conventional thinking, __________ accounts for the bulk of promotional spending in many firms. This is especially true for firms selling consumer products in grocery stores and mass-merchandise retailers.

a.	personal selling	d.	sales promotion
b.	advertising	e.	publicity
c.	public relations

ANS: D PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Knowledge

1. Which of the following statements best represents the universal goal of all sales promotion activities?

a.	To increase sales volume in the long term.
b.	To stimulate customer interest and attention.
c.	To induce product trial and purchase.
d.	To enhance the image of the firm.
e.	To gain the attention of members of the supply chain.

ANS: C PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Knowledge

1. Which of the following sales promotion methods would you recommend to a packaged goods marketer who wants to stimulate trial of a new product?

a.	a contest or sweepstake	d.	a rebate
b.	a coupon	e.	a point-of-purchase display
c.	a free sample of the product

ANS: C PTS: 1 DIF: Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Evaluation

1. A price reduction offered to channel intermediaries for purchasing specified quantities of a product at a single time is called a:

a.	merchandise credit.	d.	push money allowance.
b.	buying allowance.	e.	cooperative incentive.
c.	selling incentive.

ANS: B PTS: 1 DIF: Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Promotion

TOP: A-Head: Integrated Marketing Communications KEY: Bloom’s: Knowledge

ESSAY

1. Discuss the four types of consumer products and explain how marketing strategy changes across these product types. Be sure to use examples.

ANS:

The four types of consumer products are:

• Convenience Products—Inexpensive, routinely purchases products that consumers spend little time and effort acquiring. Examples include soft drinks, candy, and gasoline.
• Shopping Products—Products that consumers will spend time and effort to obtain. Consumers shop different options to compare prices, features and service. Examples include appliances, furniture, and clothing.
• Specialty Products—Unique, one-of-a-kind products that consumers will spend considerable time, effort, and money to acquire. Examples include sports memorabilia, antiques, and luxury products.
• Unsought Products—Products that consumers are unaware of or a product that consumers do not consider purchasing until a need arises. Examples include repair services, emergency medicine, and insurance.

Although the distinction among these four categories may seem simplistic, it is important in a strategic sense because the type of product in question can influence its pricing, distribution, or promotion. For example, marketing strategy for consumer convenience products must maximize availability and ease of purchase—both important distribution considerations. The strategy associated with consumer shopping products often focuses more on differentiation through image and symbolic attributes—both important branding and promotion issues. Strategy for specialty products deals more with outstanding service and customer awareness that the product or provider exists—important service and IMC issues. Finally, strategy for unsought products must clearly educate customers on why they need the product and the best way of obtaining it—important advertising and personal selling issues.

PTS: 1 DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Pricing TOP: A-Head: Pricing Strategy

KEY: Bloom’s: Analysis

1. Discuss the benefits associated with offering a large portfolio of products. What are some of the key issues involved in managing the product portfolio?

ANS:

Although offering a large portfolio of products can make the coordination of marketing activities more challenging and expensive, it also creates a number of important benefits:

• Economies of Scale—Offering many different product lines can create economies of scale in production, bulk buying, and promotion. Many firms advertise using an umbrella theme for all products in the line. Nike’s “Just Do It” and Maxwell House’s “Good to the Last Drop” are examples of this. The single theme covering the entire product line saves considerably on promotional expenses.
• Package Uniformity—When all packages in a product line have the same look and feel, customers can locate the firm’s products more quickly. It also becomes easier for the firm to coordinate and integrate promotion and distribution. For example, Duracell batteries all have the same copper look with black and copper packaging.
• Standardization—Product lines often use the same component parts. For example, Toyota’s Camry and Highlander use many of the same chassis and engine components. This greatly reduces Toyota’s manufacturing and inventory handling costs.
• Sales and Distribution Efficiency—When a firm offers many different product lines, sales personnel can offer a full range of choices and options to customers. For the same reason, channel intermediaries are more accepting of a product line than they are of individual products.
• Equivalent Quality Beliefs—Customers typically expect and believe that all products in a product line are about equal in terms of quality and performance. This is a major advantage for a firm that offers a well-known and respected line of products. For example, Crest’s portfolio of oral care products all enjoys the same reputation for high quality.

A firm’s product portfolio must be carefully managed to reflect changes in customers’ preferences and the introduction of competitive products. Product offerings may be modified to change one or more characteristics that enhance quality and/or style, or lower the product’s price. Firms may introduce product line extensions that allow it to compete more broadly in an industry. Sometimes, a firm may decide that a product or product line has become obsolete or is just not competitive against other products. When this happens, the firm can decide to contract the product line.

PTS: 1 DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Pricing TOP: A-Head: Pricing Strategy

KEY: Bloom’s: Comprehension

1. Identify the unique characteristics of services (relative to tangible goods) and list the marketing challenges created by each characteristic.

ANS:

1. Intangibility

• It is difficult for customers to evaluate quality, especially before purchase and consumption.
• It is difficult to convey service characteristics and benefits in promotion. As a result, the firm is forced to sell a promise.
• Many services have few standardized units of measurement. Therefore, service prices are difficult to set and justify.
• Customers cannot take possession of a service.

1. Simultaneous Production and Consumption

• Customers or their possessions must be present during service delivery.
• Other customers can affect service outcomes including service quality and customer satisfaction.
• Service employees are critical because they must interact with customers to deliver service.
• Converting high-contact services to low-contact services will lower costs but may reduce service quality.
• Services are often difficult to distribute.

1. Perishability

• Services cannot be inventoried for later use. Therefore, unused service capacity is lost forever.
• Service demand is very time-and-place sensitive. As a result, it is difficult to balance supply and demand, especially during periods of peak demand.
• Service facilities and equipment sit idle during periods of off-peak demand.

1. Heterogeneity

• Service quality varies across people, time, and place, making it very difficult to deliver good service consistently.
• There are limited opportunities to standardize service delivery.
• Many services are customizable by nature. However, customization can dramatically increase the costs of providing the service.

1. Client-based Relationships

• Most services live or die by maintaining a satisfied clientele over the long term.
• Generating repeat business is crucial for the service firm’s success.

PTS: 1 DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Pricing TOP: A-Head: Pricing Strategy

KEY: Bloom’s: Comprehension

1. Identify and discuss reasons why firms become so infatuated with pricing.

ANS:

There is no other component of the marketing program that firms become more infatuated with than pricing. There are at least four reasons for the attention given to pricing. First, the revenue equation is pretty simple: Revenue equals the price times quantity sold. There are only two ways for a firm to grow revenue: increase prices or increase the volume of product sold. Rarely can a firm do both simultaneously. Although there are literally hundreds of ways to increase profit by controlling costs and operating expenses, the revenue side has only two variables—one being price and the other being heavily influenced by price.

A second reason that firms become enamored with pricing is that it is the easiest of all marketing variables to change. Although changing the product and its distribution or promotion can take months or even years, changes in pricing can be executed immediately in real time. Likewise, product, distribution, or promotion changes can also be quite expensive, especially if research and development (R&D) or production must be rescheduled. Conversely, changing prices is a very low-cost option.

The third reason for the importance of pricing is that firms take considerable pains to discover and anticipate the pricing strategies and tactics of other firms. Salespeople learn to read a competitor’s price sheet upside down at a buyer’s desk. Retailers send “secret shoppers” into competitors’ stores to learn what they charge for the same merchandise. In this age of e-commerce, tracking what competitors charge for their goods and services has become so daunting that an entire price-tracking industry has emerged.

Finally, pricing is given a great deal of attention because it is considered to be one of the few ways to differentiate a product in commoditized and mature markets. When customers see all competing products as offering the same features and benefits, their buying decisions are primarily driven by price.

PTS: 1 DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Pricing TOP: A-Head: Pricing Strategy

KEY: Bloom’s: Synthesis

1. In many (if not most) circumstances, cutting prices to increase sales volume is not a good idea. Explain why this is so. What are some alternatives that are preferable to cutting prices?

ANS:

All marketers understand the relationship between price and revenue. However, firms cannot charge high prices without good reason. In fact, virtually all firms face intense price competition from their rivals, which tends to hold prices down. In the face of this competition, it is natural for firms to see price cutting as a viable means of increasing sales. Price cutting can also move excess inventory and generate short-term cash flow. However, all price cuts affect the firm’s bottom line. When setting prices, many firms hold fast to these two general pricing myths:

Myth 1: When business is good, a price cut will capture greater market share.

Myth 2: When business is bad, a price cut will stimulate sales.

Unfortunately, the relationship between price and revenue challenges these assumptions and makes them a risky proposition for most firms. The reality is that any price cut must be offset by an increase in sales volume just to maintain the same level of revenue. Let’s look at an example. Assume that a consumer electronics manufacturer sells 1,000 high-end stereo receivers per month at $1,000 per system. The firm’s total cost is $500 per system, which leaves a gross margin of $500. When the sales of this high-end system decline, the firm decides to cut the price to increase sales. The firm’s strategy is to offer a $100 rebate to anyone who buys a system over the next three months. The rebate is consistent with a 10 percent price cut, but it is in reality a 20 percent reduction in gross margin (from $500 to $400). To compensate for the loss in gross margin, the firm must increase the volume of receivers sold. The question is by how much. We can find the answer using this formula:

Percent Change in Unit Volume

=

Gross Margin % Gross Margin % ± Price Change %

– 1

0.25

=

0.50 0.50 – 0.10

– 1

As the calculation indicates, the firm would have to increase sales volume by 25 percent to 1,250 units sold in order to maintain the same level of total gross margin. How likely is it that a $100 rebate will increase sales volume by 25 percent? This question is critical to the success of the firm’s rebate strategy. In many instances, the needed increase in sales volume is too high. Consequently, the firm’s gross margin may actually be lower after the price cut.

Rather than blindly use price cutting to stimulate sales and revenue, it is often better for a firm to find ways to build value into the product and justify the current price, or even a higher price, rather than cutting the product’s price in search of higher sales volume. In the case of the stereo manufacturer, giving customers $100 worth of music or movies for each purchase is a much better option than a $100 rebate. The cost of giving customers these free add-ons is low because the marketer buys them in bulk quantities. This added expense is almost always less costly than a price cut. And the increase in value may allow the marketer to charge higher prices for the product bundle.

PTS: 1 DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Pricing TOP: A-Head: Pricing Strategy

KEY: Bloom’s: Synthesis

1. Discuss the challenges associated with pricing services. How do service firms use yield management systems to balance price with revenue and maximize capacity utilization?

ANS:

When it comes to buying services, customers have a difficult time determining quality prior to purchase. Consequently, service pricing is critical because it may be the only quality cue that is available in advance of the purchase experience. If the service provider sets prices too low, customers will have inaccurate perceptions and expectations about quality. If prices are too high, customers may not give the firm a chance. In general, services pricing becomes more important—and more difficult—when:

Ÿ Service quality is hard to detect prior to purchase.

Ÿ The costs associated with providing the service are difficult to determine.

Ÿ Customers are unfamiliar with the service process.

Ÿ Brand names are not well established.

Ÿ The customer can perform the service themselves.

Ÿ Advertising within a service category is limited.

Ÿ The total price of the service experience is difficult to state beforehand.

Most services suffer from the challenges associated with determining costs because intangible expenses such as labor, insurance, and overhead must be taken into account. When the firm offers services that customers can do for themselves—such as lawn maintenance, oil changes, or house painting—it must be especially mindful of setting the correct price. In these instances, the firm is competing with the customer’s evaluation of his or her time and ability, in addition to other competing service providers.

Setting prices for professional services (lawyers, accountants, consultants, doctors, and mechanics) is especially difficult because they suffer from a number of the conditions in the list above. Customers often balk at the high prices of these service providers because they have a limited ability to evaluate the quality or total cost until the service process has been completed. The heterogeneous nature of these services limits standardization; therefore, customer knowledge about pricing is limited. Heterogeneity also limits price comparison among competing providers. The key for these firms is to be up-front about the expected quality and costs of the service. This is often done through the use of binding estimates and contractual guarantees of quality.

Due to the limited capacity associated with most services, service pricing is also a key issue with respect to balancing supply and demand during peak and off-peak demand times. In these situations, many service firms use yield management systems to balance pricing and revenue considerations with their need to fill unfilled capacity. Yield management allows the service firm to simultaneously control capacity and demand in order to maximize revenue and capacity utilization. This is accomplished in two ways. First, the service firm controls capacity by limiting the available capacity at certain price points. Second, the service firm controls demand through price changes over time and by overbooking capacity. These activities ensure that service demand will be consistent and that any unused capacity will be minimized. These practices are common in services characterized by high fixed costs and low variable costs, such as airlines, hotels, rental cars, cruises, transportation firms, and hospitals. Because variable costs in these services are quite low, the profit for these firms directly relates to sales and capacity utilization. Consequently, these firms will sell some capacity at reduced prices in order to maximize utilization.

PTS: 1 DIF: Difficulty: Challenging NAT: BUSPROG: Analytic

STA: DISC: Pricing TOP: A-Head: Pricing Strategy

KEY: Bloom’s: Synthesis

1. Explain why distribution and supply chain management are critical to achieving a sustainable competitive advantage and true differentiation in the marketplace. How are these issues related to other elements of the marketing program in determining competitive advantage?

ANS:

Distribution and supply chain relationships are among the most important strategic decisions for many marketers. Throughout most of the twentieth century, distribution was the forgotten element of marketing strategy. Distribution and supply chain management have remained essentially invisible to customers because the process occurs behind the scenes. Customers rarely appreciate how manufacturers connect to their supply lines, how goods move from manufacturers to retailers, or how the retailers’ shelves become filled. Customers take this and other supply chain issues for granted and only notice when supply lines are interrupted. Although the nature of today’s economy has forced customers to notice and appreciate distribution to a much greater extent, most remain naive about distribution activities and the complex nature of supply chain relationships.

The picture of distribution is drastically different from the firm’s perspective. Beginning in the late 1980s and into today, firms have learned the extreme importance of distribution and supply chain management. These concerns now rank at the top of the list for achieving a sustainable advantage and true differentiation in the marketplace. Prices can be copied easily, even if only for the short term. Products can become obsolete almost overnight. Good promotion and advertising in September can easily be passé when the prime selling season in November and December comes around. The lesson is clear: Distribution is vital to the success and survival of every firm.

Although costly in both money and time to construct, a solid distribution system will generate profits for years or decades. With great distribution, a firm can overcome some weaknesses in pricing, products, and promotion. However, a poor distribution strategy will certainly kill a firm’s efforts to market a superior product, at a good price, using effective marketing communication. Top managers of North American manufacturing firms realize the importance of this; they nearly unanimously rank supply chain management as critical or very important to their firms’ successes.

PTS: 1 DIF: Difficulty: Challenging NAT: BUSPROG: Analytic

STA: DISC: Distribution TOP: A-Head: Supply Chain Strategy

KEY: Bloom’s: Evaluation

1. Identify and discuss the three major structural options for distribution. In your answer, identify the major advantages and disadvantages of each option.

ANS:

There are three basic structural options for distribution in terms of the amount of market coverage and level of exclusivity between vendor and retailer: exclusive distribution, selective distribution, and intensive distribution.

• Exclusive Distribution—Exclusive distribution is the most restrictive type of market coverage. Firms using this strategy give one merchant or outlet the sole right to sell a product within a defined geographic region. This channel structure is most commonly associated with prestige products, major industrial equipment, or with firms that attempt to give their products an exclusive or prestige image. Companies sometimes use exclusive distribution for specialty products and can be occasionally seen in shopping goods like furniture or clothing. Firms that pursue exclusive distribution usually target a single, well-defined market segment. Buyers in this segment must be willing and able to search or travel to buy the product, and will typically do so given the prestige or exclusivity of the product or brand. Exclusive distribution is a necessity in cases where the manufacturer demands a significant amount of input regarding the presentation of their products to buyers. This added control also allows the firm to influence pricing to a much greater degree than the other distribution options.
• Selective Distribution—Firms using selective distribution give several merchants or outlets the right to sell a product in a defined geographic region. Selective distribution is desirable when customers need the opportunity to comparison shop, and after-sale services are important. This broad distribution coverage allows shoppers to collect information on competitive products, compare prices, shop at their favorite store, use a variety of means of payment, and get the product they want, even when one location is out of stock. Companies widely use selective distribution across many product categories, including clothing (Tommy Hilfiger), cosmetics (Clinique), electronics (Bose), and premium pet food (Science Diet). In each case, selective distribution allows the manufacturer to have more control over prices, product display, and selling techniques. Companies carefully screen the image and selling practices of merchants and outlets to ensure that they match those of the manufacturer and its products.
• Intensive Distribution—Intensive distribution makes a product available at the maximum number of merchants or outlets in each area to gain as much exposure and as many sales opportunities as possible. This distribution strategy is the option of choice for most consumer convenience goods, such as candy, soft drinks, over-the-counter drugs, or cigarettes; and with business office supplies like paper and toner cartridges. To gain this visibility and sales volume, the manufacturer must give up a good degree of control over pricing and product display. Given the sheer number of intensively distributed products, manufacturers often have difficulty convincing channel members, particularly retailers, to handle and stock another product that is distributed in the same manner. Firms that employ a mass marketing approach to segmentation often opt for an intensive distribution strategy. If customers cannot find one firm’s products in a given location, they will simply substitute another brand to fill the need. As products age over the life cycle, they often move toward more intensive distribution.

PTS: 1 DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Distribution TOP: A-Head: Supply Chain Strategy

KEY: Bloom’s: Analysis

1. Compare and contrast the traditional use of power in a marketing channel versus today’s notion of integrated and collaborative supply chains. Do the five traditional power bases still play a role in today’s era of collaboration? Explain.

ANS:

Power can be defined as the influence that one channel member has over others in the supply chain. Powerful channel members have the ability to get other firms to do things that they otherwise would not do. Depending on how the channel member uses its influence, power can create considerable conflict, or it can make the entire supply chain operate more smoothly and effectively. There are five basic sources of power in a supply chain:

• Legitimate Power—This power source has to do with the firm’s position in the supply chain.
• Reward Power—The ability to help other parties reach their goals and objectives is the crux of reward power.
• Coercive Power—In contrast to reward power, coercive power is the ability to take positive outcomes away from other channel members or the ability to inflict punishment on other channel members.
• Information Power—Having and sharing knowledge is the root of information power. Such knowledge makes channel members more effective and efficient.
• Referent Power—Referent power has its basis in personal relationships and the fact that one party likes another party.

The sources of power or influence change as a supply chain moves toward integration and collaboration. Traditional marketing channels have made heavy use of legitimate, reward, and coercive power sources. The use of these types of power is consistent with the high level of conflict that exists in such channels. Firms want to sell a product for as much as possible, provide as few additional services as it can get away with, obtain payment in advance, and deliver the product at its own convenience. By contrast, buyers want to purchase a product for as little as possible, get a large number of additional services both now and in the future, pay months or even years later with no interest, and get immediate delivery. Collaborative supply chains focus on win–win outcomes and work to get past these natural sources of confrontation. Here, reward and referent power become used most frequently, with the most important source of influence being information. Successfully confronting the problems that naturally materialize in a supply chain depends on the effective development, communication, and utilization of information.

PTS: 1 DIF: Difficulty: Challenging NAT: BUSPROG: Analytic

STA: DISC: Distribution TOP: A-Head: Supply Chain Strategy

KEY: Bloom’s: Analysis

1. Discuss the issues associated with the increasing fragmentation of mass media audiences. How are advertisers and media companies coping with the issue?

ANS:

The increasing fragmentation of consumer audiences has forever changed the way both media and advertisers do business. The problem is that consumers’ attention is being spread across an increasing array of media and entertainment choices, including the Internet, targeted cable programming, video-on-demand, DVR, iPods/iPads, video games, movies, and mobile devices such as smartphones. Today, mass audiences are dwindling fast as consumers spend less time with traditional media such as television, magazines, and newspapers. Consumers now expect to use media whenever and wherever they want, and on any device. They are no longer wed to full-length television programming or to leisurely reading the newspaper. For advertisers, the trend is alarming because their traditional bread-and-butter demographic is fragmenting the most. For example, the number of 18- to 34-year-old men who watch primetime television has declined steadily since 2000. Those who do watch television increasingly use DVR devices to skip advertising. Today, DVR usage accounts for 8 percent of all U.S. TV viewing time, which is higher than both video games and DVDs.

These changes are forcing marketers to adapt by finding newer, more effective ways to reach their target audiences. One way marketers are countering the trend is by linking sales promotion to target markets through strategic integration into related media programming. Company sponsorship of programming or events can allow a close connection between brand and target market. For example, Bravo’s Top Chef has successfully partnered with Toyota, Clorox, Food & Wine Magazine, Campbell Soup, Diet Dr Pepper, and Quaker. Sponsorship opportunities like these work better than traditional advertising, especially with respect to brand recall. Bank of America, for example, achieves an astounding 39 percent average recall when it sponsors a sporting event. Nike (21 percent), Buick (14 percent), American Express (13 percent), and FedEx (11 percent) have reported similar successes with sports sponsorships.

In addition to outright sponsorship of popular programs, marketers also make deals with television and cable networks, as well as movie studios, to place their products into actual programs and films. In-program product placements have been successful in reaching consumers as they are being entertained, rather than during the competitive commercial breaks. Reality programming in particular has been a natural fit for product placement because of the close interchange between the participants and the products (e.g. Coca Cola and American Idol; Sears and Extreme Makeover: Home Edition). Furthermore, sixteen brands were prominently featured in the recent hit movie, The Avengers. Acura, in particular, signed a multi-picture deal with Marvel to showcase its cars in upcoming films.

Media companies themselves have also been forced to adapt, most notably by fragmenting their content and business models to match their fragmented audiences. One way that companies have addressed the problem is by making their content available on multiple platforms. CBS, for example, first experimented with its broadcast of the 2008 NCAA Basketball Tournament by broadcasting live action on the Internet. The service, called March Madness on Demand, attracted roughly 5 million different online viewers and over $30 million in advertising revenue during the tournament. More recently, CBS switched to a paid model with March Madness Live. For $3.99, fans could watch high quality streams on their Apple and Android devices. The games were still available for free on CBSSports.com. As these and other examples illustrate, the key to meeting the demands of fragmented audiences is to disaggregate content and make it available a la carte style. Consumers prefer to access content (songs, movies, TV shows, news) when, where, and how they want it without having to purchase entire albums, programs, or networks.

Despite the challenges of reaching fragmented audiences, the trend actually has a big side benefit. The science behind traditional broadcast television ratings and audience measurement has always been uncertain. With on-demand services, advertisers are able to precisely measure audience characteristics whether the content is delivered via the Internet, cable, or wireless devices. This one-two punch of profits and precise measurement may mark the death of the traditional 30-second primetime television spot.

PTS: 1 DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Promotion TOP: A-Head: Integrated Marketing Communications

KEY: Bloom’s: Evaluation

1. Discuss the steps involved in the AIDA model of outlining promotional goals. How does IMC strategy shift from one step to the next in the model? How does the important of various promotional elements vary across the steps?

ANS:

Ultimately, the goals and objectives of any promotional campaign culminate in the purchase of goods or services by the target market. The classic model for outlining promotional goals and achieving this ultimate outcome is the AIDA model—attention, interest, desire, and action:

• Attention—Firms cannot sell products if the members of the target market do not know they exist. As a result, the first major goal of any promotional campaign is to attract the attention of potential customers.
• Interest—Attracting attention seldom sells products. Therefore, the firm must spark interest in the product by demonstrating its features, uses, and benefits.
• Desire—To be successful, firms must move potential customers beyond mere interest in the product. Good promotion will stimulate desire by convincing potential customers of the product’s superiority and its ability to satisfy specific needs.
• Action—After convincing potential customers to buy the product, promotion must then push them toward the actual purchase.

The role and importance of specific promotional elements varies across the steps in the AIDA model. Mass-communication elements, such as advertising and public relations, tend to be used more heavily to stimulate awareness and interest due to their efficiency in reaching large numbers of potential customers. Along with advertising, sales promotion activities, such as product samples or demonstrations, are vital to stimulating interest in the product. The enhanced communication effectiveness of personal selling makes it ideally suited to moving potential customers through internal desire and into action. Other sales promotion activities, such as product displays, coupons, and trial-size packaging, are well suited to pushing customers toward the final act of making a purchase.

PTS: 1 DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Promotion TOP: A-Head: Integrated Marketing Communications

KEY: Bloom’s: Evaluation

1. Discuss the role of sales promotion in consumer markets. In your answer, identify several types of consumer sales promotion activities and how they might be used in an overall IMC program.

ANS:

Any member of the supply chain can initiate consumer sales promotions, but manufacturers and retailers typically offer them. For manufacturers, sales promotion activities represent an effective way to introduce new products or promote established brands. Coupons and product sampling are frequently used during new product launches to stimulate interest and trial. Retailers typically offer sales promotions to stimulate customer traffic or increase sales at specific locations. Coupons and free products are common examples, as are in-store product demonstrations. Many retailers are known for their sales promotions such as the free toys that come with kid’s meals at McDonald’s, Burger King, and other fast food establishments.

A potentially limitless variety of sales promotion methods can be used in consumer markets. Truthfully, developing and using these methods is limited only by the creativity of the firm offering the promotion. However, firms will typically offer one or more of the following types of sales promotions to consumers:

• Coupons—Coupons reduce the price of a product and encourage customers to try new or established brands. Coupons can be used to increase sales volume quickly, to attract repeat purchasers, or even to introduce new product sizes or models. While coupon cutting (cutting coupons from newspapers or direct mail) was once quite common, the practice declined over the years. This mentality changed with the latest economic recession as many consumers returned to using coupons, especially new mobile coupons.
• Rebates—Rebates are very similar to coupons except that they require more effort on the consumer’s part to obtain the price reduction. Although consumers prefer coupons because of the ease of use, most firms prefer rebates for several reasons. First, firms have more control over rebates because they can be launched and ended very quickly. Second, a rebate program allows the firm to collect important consumer information that can be used to build customer databases. The best reason is that most consumers never bother to redeem rebate offers. This allows a firm to entice customers to purchase a product with only a minimal loss of profit.
• Samples—Free samples are one of the most widely used consumer sales promotion methods. Samples stimulate trial of a product, increase volume in the early stages of the product’s life cycle, and encourage consumers to actively search for a product. Samples can be distributed through the mail, attached to other products, and given out through personal selling efforts or in-store displays. Samples can also be distributed via less direct methods. For example, free samples of soap, shampoo, coffee, or sunscreen might be placed in hotel rooms to create consumer awareness of new products.
• Loyalty Programs—Loyalty programs, or frequent-buyer programs, reward loyal customers who engage in repeat purchases. These programs are popular in many industries due to their potential to dramatically increase profits over the long term. We are all familiar with the frequent-flier programs offered by major airlines. Other companies, such as hotels, auto rental agencies, and credit card companies, offer free goods or services for repeat purchases. For instance, the Discover Card provides a one percent cash-back bonus to each cardholder at the end of the year, and Hallmark rewards loyal customers with the Hallmark Gold Crown Card, which allows frequent buyers to accrue points that are redeemable for merchandise and discounts.
• Point-of-Purchase Promotion—Point-of-purchase (POP) promotion includes displays, in-store demonstrations, counter pieces, display racks, or self-service cartons that are designed to build traffic, advertise a product, or induce impulse purchases. POP promotions are highly effective because they are used in a store where consumers make roughly 70 to 80 percent of all purchase decisions.
• Premiums—Premiums are items offered free or at a minimum cost as a bonus for purchasing a product. Examples of premiums include a free car wash with a gasoline fill-up, a free toothbrush with a purchase of a tube of toothpaste, and the toys offered inside a McDonald’s Happy Meal. Premiums are good at increasing consumption and persuading consumers to switch brands.
• Contests and Sweepstakes—Consumer contests, games, and sweepstakes encourage potential consumers to compete for prizes or try their luck by submitting their names in a drawing for prizes. In addition to being valuable information collection tools, contests and sweepstakes are good at attracting a large number of participants and generating widespread interest in a product. Because they require no skill to enter, sweepstakes are an effective way to increase sales or market share in the short term.
• Direct Mail—Direct mail, which includes catalog marketing and other printed material mailed to individual consumers, is a unique category because it incorporates elements of advertising, sales promotion, and distribution into a coordinated effort to induce customers to buy. The use of direct mail has grown tremendously in recent years due to consumer time constraints, relatively low cost, and the advent of sophisticated database management tools.

Firms can use any one or all of these consumer promotion methods in their overall IMC program. However, the choice of one or more methods must be made in consideration of the firm’s IMC objectives. Furthermore, the choice must also consider the use of sales promotions by competitors and whether a particular method involves ethical or legal dimensions. Consumer sweepstakes, in particular, have specific legal requirements to ensure that each entrant has an equally likely chance of winning.

PTS: 1 DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Promotion TOP: A-Head: Integrated Marketing Communications

KEY: Bloom’s: Evaluation

Chapter 7 Branding and Positioning

MULTIPLE CHOICE

1. Which of the following is the best example of a brand mark?

a.	Honda	d.	BMW
b.	Nike’s swoosh	e.	7-Eleven
c.	WD-40

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Introduction

KEY: Bloom’s: Evaluation

1. Branding strategy involves much more than developing a clever brand name or brand mark. To be truly effective, a brand should succinctly capture the total offering in a way that:

a.	clearly distinguishes it from competiting offerings.
b.	utilizes at least 5 brand attributes.
c.	answers a question in the customer’s mind.
d.	clearly ties the brand name together with the brand mark.
e.	associates the brand with a customer emotion such as happiness or love.

ANS: C DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Introduction

KEY: Bloom’s: Comprehension

1. What is the overall goal of effective corporate branding?

a.	To clearly tie the brand name and brand mark with the organization.
b.	To associate the organization with one or more philanthropic causes.
c.	To sell more product to members of the supply chain.
d.	To position the product relative to competing products.
e.	To build and enhance the organization’s reputation.

ANS: E DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Comprehension

1. Walmart offers many different private-label brands including Sam’s Choice, Equate, and Ol’ Roy. Overall, what is the primary reason that Walmart would offer these and other private-label brands?

a.	increased profit margin	d.	lower inventory costs
b.	reduced marketing costs	e.	enhances Walmart’s image
c.	lowers the risk of a product failure

ANS: A DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. Best Buy offers many different manufacturer (name) brands including HP, Panasonic, Sony, and Canon. Which of the following is a primary reason that Best Buy would offer these and other manufacturer brands?

a.	increased profit margin	d.	total control over marketing
b.	reduced marketing costs	e.	increased loyalty to Best Buy
c.	less competition

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. Procter & Gamble is well known for its use of __________ branding because every product in P&G’s portfolio has a different brand name.

a.	differentiated	d.	segmented
b.	individual	e.	family
c.	corporate

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. If you purchase a notebook computer from Dell, you will note several brand insignias on the outside, such as Dell, Intel, and Microsoft Windows. What type of branding strategy does this example represent?

a.	co-branding	d.	brand affinity
b.	brand licensing	e.	brand collaboration
c.	co-marketing

ANS: A DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. Rovio recently launched a new version of its popular Angry Birds game called “Angry Birds: Star Wars.” What type of brand alliance does this represent?

a.	family branding	d.	brand affinity
b.	brand licensing	e.	brand collaboration
c.	co-marketing

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. When Meghan went to buy groceries, she found everything on her list except Pampers diapers. While the store had other competing brands in stock, Meghan left and drove five miles to the next store where she found the Pampers. It appears that Meghan exhibits a high degree of __________ for Pampers diapers.

a.	brand recognition	d.	brand equity
b.	brand preference	e.	brand insistence
c.	brand insanity

ANS: E DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. While Madison was shopping for coffee makers at Target, she recognized many of the brands that were available. Although she was looking for a machine made by Mr. Coffee, she bought a coffee maker by Hamilton Beach because Target was out of all Mr. Coffee machines. What type of brand loyalty is Madison exhibiting?

a.	brand recognition	d.	brand equity
b.	brand preference	e.	brand insistence
c.	brand insanity

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Application

1. One way of looking at __________ is to consider the marketing and financial value associated with a brand’s position in the marketplace.

a.	brand equity	d.	brand value
b.	brand identity	e.	brand capitalization
c.	brand equality

ANS: A DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Comprehension

1. Which of the following IS NOT a function or potential function of packaging?

a.	protection	d.	integration
b.	storage	e.	co-branding
c.	convenience

ANS: D DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Analysis

1. Overall, what is the difference between differentiation and positioning?

a.	Differentiation is about the product whereas positioning is about the brand.
b.	Differentiation is based on real differences between products, while positioning is completely perceptual.
c.	Differentiation is about creating differences among competing products, while positioning is about creating a mental image in consumers’ minds.
d.	Differentiation is used in tangible goods, while positioning is used in services.
e.	There is no difference between differentiation and positioning.

ANS: C DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Differentiation and Positioning

KEY: Bloom’s: Analysis

1. As a tool of positioning strategy, perceptual maps illustrate two basic issues. First, they indicate products/brands that are similar in terms of relative mental position. Second, they illustrate:

a.	which brands occupy the same relative space.
b.	how competing brands imitate one another.
c.	voids in the current mindscape for a product category.
d.	how long a brand has held its relative mental image.
e.	how much longer a brand is likely to hold its relative mental image.

ANS: C DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Differentiation and Positioning

KEY: Bloom’s: Comprehension

1. Without a doubt, the most important tool of differentiation is:

a.	the product’s image.	d.	perceptual mapping.
b.	the brand.	e.	the product’s price.
c.	the product’s features.

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Differentiation and Positioning

KEY: Bloom’s: Comprehension

1. With respect to product descriptors, the product’s __________ communicate(s) how the product behaves, hopefully in a fashion that is distinctive and appealing to customers.

a.	features	d.	position
b.	benefits	e.	advantages
c.	image

ANS: E DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Differentiation and Positioning

KEY: Bloom’s: Comprehension

1. One of the most common marketing goals during the introduction stage of the product life cycle is to:

a.	conduct test marketing studies.
b.	maintain market share.
c.	find new uses for the product.
d.	engage in customer education activities.
e.	spread misleading information about competing products.

ANS: D DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Managing Brands over Time

KEY: Bloom’s: Comprehension

1. Which stage of the product life cycle has (1) establishing a strong, defensible market position, and (2) achieving financial objectives that repay investment as its main priorities?

a.	Introduction	d.	Development
b.	Growth	e.	Decline
c.	Maturity

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Managing Brands over Time

KEY: Bloom’s: Knowledge

1. During the maturity stage of the product life cycle, a firm has four general goals that can be pursued. Which of the following IS NOT one of these options?

a.	divest the product	d.	hold market share
b.	generate cash flow	e.	increase share of customer
c.	steal market share

ANS: A DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Managing Brands over Time

KEY: Bloom’s: Analysis

1. Firms using the __________ approach during the decline stage of the product life cycle will gradually reduce marketing expenditures and use a less resource-intensive marketing mix.

a.	divesting	d.	life extending
b.	harvesting	e.	balanced
c.	repositioning

ANS: B DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Managing Brands over Time

KEY: Bloom’s: Knowledge

ESSAY

1. The text argues that a brand is only truly effective when it succinctly captures the total offering in a way that answers a question in the customer’s mind. Explain what this means with respect to branding strategy. Also, how is answering a question for customers related to the potential brand attributes outlined in the text?

ANS:

Student answers to this question will vary a great deal. However, a good answer will cover the points outlined below. Astute students will draw a parallel between this concept and the evoked set discussed in Chapter 5.

While the technical aspects of branding are important (brand names and brand marks), branding strategy involves much more than developing a clever brand name or unique brand mark. To be truly effective, a brand should succinctly capture the total offering in a way that answers a question in the customer’s mind. Good brands are those that immediately come to mind when a customer has a problem to be solved or a need to be fulfilled. Consider these questions that might be asked by a customer:

• Where can I find information quickly?
• Where can I get a quick meal and make my kids happy?
• Where can I buy everything I need, all at decent prices?
• Where can I get the best deal on car insurance?
• How do I find a value-priced hotel in midtown Manhattan?

Many customers will give the following answers: Google, McDonald’s, Walmart, GEICO, and Expedia. To successfully develop a brand, the firm should position the offering (which includes all tangible, intangible, and symbolic elements arising from the marketing program) as the answer to questions like these. Customers tend to buy offerings whose combination of attributes is the best solution to their problems.

Brands can have many different combinations of attributes based on factors such as ingredients, alliances, employees, endorsers, country of origin, or causes (to name a few). For example, the iPhone possesses many different attributes that make up customers’ overall knowledge about the brand: alliances (AT&T, Verizon, Sprint, Twitter), company (Apple), extensions (iTunes, accessories), employees (Tim Cook, Steve Jobs), endorsers (celebrities such as Samuel L. Jackson and Zooey Deschanel), events (Macworld Expo, Apple keynote speeches), and channels (the Apple Store). Other brands are enhanced via strong country-of-origin (Guinness, IKEA), branded ingredients (Dell computers use Microsoft and Intel components), causes (Ben and Jerry’s), and endorser (Nike) effects.

All of a brand’s attributes combine to effectively answer customer’s questions.

DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Introduction

KEY: Bloom’s: Synthesis

1. Explain the importance of corporate branding. How is it tied to product-related branding? Give examples of how a firm’s corporate brand is tied to its reputation and its success in the marketplace.

ANS:

Most firms consider their corporate brands to be equally as important as individual product-related brands. In fact, product-related brands and corporate brands are clearly intertwined. Ben & Jerry’s Ice Cream, for example, is an ardent participant in many social causes such as global warming and social injustice. In this case, the company’s corporate brand clearly plays a role in branding and positioning its ice cream products. In some companies, the corporate brand dominates. For example, IBM advertises that it provides infrastructure and solutions for e-business. Although the company offers a wide array of products for e-business, many of IBM’s advertisements do not name these products or explain how their infrastructure and solutions actually work. Instead, the purpose of the advertisements is to give potential customers the impression that IBM is a company that understands e-business and that has the ability to solve problems.

Corporate branding activities are typically aimed at a variety of stakeholders, including customers, shareholders, advocacy groups, government regulators, and the public at large. These activities are designed to build and enhance the firm’s reputation among these groups, and to rebuild the firm’s reputation when unexpected and unfavorable events occur. Corporate branding and reputation are critical to effective product-related branding and positioning as they create trust between the firm and its stakeholders. Exhibit 7.2 lists U.S. firms having some of the strongest and weakest public reputations. Note that firms with lower reputation scores, such as BP and Goldman Sachs, have experienced a number of scandals and legal problems in recent years. Many major financial corporations currently have weak reputations because of the financial scandals that recently plagued the industry. Faith in the financial sector is at an all-time low, and it may take years for these companies to rebuild their reputations.

The range of scores in Exhibit 7.2 is quite telling of the effects that positive and negative reputations can have on a firm. Apple’s reputation score, the highest in the history of the poll, is closely tied to its quality products, financial performance, social responsibility, and executive leadership. This reputation is clearly intertwined with the brand cache of the iPad and iPhone. Contrast this to AIG, which has been at the bottom of the ratings for many years. Not only was AIG implicated in financial scandals and required government bailout money, but AIG rewarded top executives with bonuses and hosted conferences in luxurious resorts after receiving the money. AIG’s actions clearly worsened its reputation and made it harder to compete in the competitive financial services industry. It is not surprising that AIG’s stock price has declined over 98 percent in the last five years. These examples demonstrate the important connections between corporate branding and reputation and the activities that companies use to successfully brand and position their product offerings.

DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Synthesis

1. Compare and contrast brand loyalty and brand equity, as well as how these concepts are related. Must a brand possess high brand loyalty in order to possess high brand equity? Explain.

ANS:

Brand loyalty is a positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category. There are three degrees of brand loyalty: brand recognition, brand preference, and brand insistence. Brand recognition exists when a customer knows about the brand and is considering it as one of several alternatives in the evoked set. This is the lowest form of brand loyalty and exists mainly due to the awareness of the brand rather than a strong desire to buy the brand. Brand preference is a stronger degree of brand loyalty where a customer prefers one brand to competitive brands and will usually purchase this brand if it is available. Brand insistence, the strongest degree of brand loyalty, occurs when customers will go out of their way to find the brand and will accept no substitute. Customers who are brand insistent will expend a great deal of time and effort to locate and purchase their favorite brand.

The value of a brand is often referred to as brand equity. Another way of looking at brand equity is the marketing and financial value associated with a brand’s position in the marketplace. Brand equity stems from four elements: brand awareness, brand loyalty, brand quality, and brand attributes. Brand awareness and brand loyalty increase customer familiarity with a brand. Customers familiar or comfortable with a specific brand are more likely to consider the brand when making a purchase. When this familiarity is combined with a high degree of brand quality, the inherent risk in purchasing the brand decreases dramatically. Brand associations include the brand’s image, attributes, or benefits that either directly or indirectly give the brand a certain personality.

Although brand loyalty is only one part of brand equity, it is hard to imagine that a brand could have high equity without high brand loyalty. This is especially true with respect to brands that enjoy high brand insistence. These brands are so vital to customers that they will expend great time and effort to acquire them. As a result, the marketing and financial value associated with these brands is likely to be very high—resulting in high brand equity.

DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Strategic Issues in Branding

KEY: Bloom’s: Synthesis

1. Explain the key differences between product differentiation and product positioning. Other than branding, what are other factors on which product differentiation can be based?

ANS:

People sometimes confuse differentiation and positioning with market segmentation and target marketing. Product differentiation involves creating differences in the firm’s product offering that set it apart from competing offerings. Differentiation typically has its basis in distinct product features, additional services, or other characteristics. Positioning refers to creating a mental image of the product offering and its differentiating features in the minds of the target market. This mental image can be based on real or perceived differences among competing offerings. Whereas differentiation is about the product itself, positioning is about customers’ perceptions of the real or imaginary benefits that the product possesses. Although differentiation and positioning can be based on actual product features or characteristics, the principal task for the firm is to develop and maintain a relative position for the product in the minds of the target market. The concept of relative position is typically addressed using a tool called perceptual mapping.

Customer perceptions are of utmost importance in product differentiation because differences among competing products can be based on real qualities (e.g., product characteristics, features, or style) or psychological qualities (e.g., perception and image). Generally, the most important tool of product differentiation is the brand. However, there are other important bases for differentiation, including product descriptors and customer support services.

• Product Descriptors—Firms generally provide information about their products in one of three contexts. The first context is product features, which are factual descriptors of the product and its characteristics. However, features—although they tell something about the nature of the product—are not generally the pieces of information that lead customers to buy. Features must be translated into the second context, advantages. Advantages are performance characteristics that communicate how the features make the product behave, hopefully in a fashion that is distinctive and appealing to customers. However, the real reason customers buy products is to gain benefits—the positive outcomes or need satisfaction they acquire from purchased products.
• Customer Support Services—A firm may have difficulty differentiating its products when all products in a market have essentially the same quality, features, or benefits. In such cases, providing good customer support services—both before and after the sale—may be the only way to differentiate the firm’s products and move them away from a price-driven commodity status. Support services include anything that the firm can provide in addition to the main product that adds value to that product for the customer. The importance of having the proper mix of support services has increased in recent years, causing many firms to design their customer services as carefully as they design their products.

DIF: Difficulty: Easy NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Differentiation and Positioning

KEY: Bloom’s: Synthesis

1. Why is the product life cycle an important consideration in selecting and developing a marketing strategy? What are the core differences among the PLC stages that force marketers to alter their marketing programs over time?

ANS:

Managing the entire portfolio of products and brands over time is a major strategic issue. To address this issue, we use the traditional product life cycle to discuss product strategy from a product’s conception, through its growth and maturity, and to its ultimate death. It is important for product managers to consider the stage of their market’s life cycle with respect to planning in the current period as well as planning for the future. Using the product life cycle as a framework has the distinct advantage of forcing managers to consider the future of their industry and their brand.

• Development Stage—A firm has no sales revenue during the product development stage. In fact, the firm experiences a net cash outflow due to the expenses involved in product innovation and development. The development stage usually begins with a product concept, which has several components: (1) an understanding of the specific uses and benefits that target customers seek in a new product; (2) a description of the product, including its potential uses and benefits; (3) the potential for creating a complete product line that can create synergy in sales, distribution, and promotion; and (4) an analysis of the feasibility of the product concept including such issues as anticipated sales, required return on investment, time of market introduction, and length of time to recoup the investment.
• Introduction Stage—The introduction stage begins when development is complete and ends when sales indicate that target customers widely accept the product. Marketing strategy goals common to the introduction stage include (1) attracting customers, (2) inducing customers to try and buy the product, (3) engaging in customer education activities, (4) strengthening or expanding channel and supply chain relationships, (5) building on the availability and visibility of the product through trade promotion activities, and (6) setting pricing objectives that will balance the firm’s need to recoup investment with the competitive realities of the market.
• Growth Stage—The firm should be ready for the growth stage because sustained sales increases may begin quickly. The product’s upward sales curve may be steep, and profits should rapidly increase, then decline, toward the end of the growth stage. Regardless of the length of the growth stage, the firm has two main priorities: (1) establishing a strong, defensible market position and (2) achieving financial objectives that repay investment and earn enough profit to justify a long-term commitment to the product. During the growth stage, the overall strategy shifts from acquisition to retention, from stimulating product trial to generating repeat purchases and building brand loyalty.
• Maturity Stage—After the shakeout occurs at the end of the growth stage, the strategic window of opportunity will all but close for the market, and it will enter the maturity stage. No more firms will enter the market unless they have found some product innovation significant enough to attract large numbers of customers. The window of opportunity often remains open, however, for new product features and variations. These variations can be important as firms attempt to gain market share. In the face of limited or no growth within the market, one of the few ways for a firm to gain market share is to steal it from a competitor. Such theft often comes only with significant promotional investments or cuts in gross margin because of the lowering of prices. The stakes in this chess match are often very high. Typically, a firm has four general goals that can be pursued during the maturity stage: (1) generate cash flow, (2) hold market share, (3) steal market share, and (4) increase share of customer.
• Decline Stage—A product’s sales plateau will not last forever, and eventually a persistent decline in revenue begins. A firm has two basic options during the decline stage: (1) attempt to postpone the decline or (2) accept its inevitability. Should the firm attempt to postpone the decline, the product’s demand must be renewed through repositioning, developing new uses or features for the product, or applying new technology. Many firms, however, do not have the resources or opportunity to renew a product’s demand and must accept the inevitability of decline. In such instances, the firm can either harvest profits from the product while demand declines or divest the product, taking steps to abandon it or sell it to another firm.

Throughout the product life cycle, it is imperative that the firm stays focused on changes in the market, not on the firm’s products. Products have life cycles only because markets and customers change. By focusing on changing markets, the firm can attempt to create new and better quality products to match customers’ needs. Only in this way can a firm grow, prosper, remain competitive, and continue to be seen as a source of solutions by the target market.

DIF: Difficulty: Moderate NAT: BUSPROG: Analytic

STA: DISC: Strategy TOP: A-Head: Managing Brands over Time

KEY: Bloom’s: Knowledge