Adam Alter: Introduction to Marketing

Marketing, 10th Ed.

Kerin, Hartley, Rudelius
Applying Marketing Knowledge Questions
Sample Answers

CHAPTER 1
APPLYING MARKETING KNOWLEDGE
1. What consumer wants (or benefits) are met by the following products or services?
(a) Carnation Instant Breakfast, (b) Adidas running shoes, (c) Hertz Rent-A-Car,
and (d) television home shopping programs.
Answers: Consumer wants or benefits met by each of four products or services include:
a. Carnation Instant Breakfast. Time saving in preparing a breakfast; nutrition;
vitamins.
b. Adidas running shoes. Safety through having a running tread; cushioning for the foot;
status.
c. Hertz Rent-A-Car. Time saving for business or vacation travelers who may fly to a
destination and need local transportation without being able to use local buses or rail
transit.
d. Television home shopping programs. A variety of hard and soft goods; low prices;
convenience of shopping from home; delivery to any location.
2. Each of the four products, services, or programs in question 1 has substitutes.
Respective examples are (a) a ham and egg breakfast, (b) regular tennis shoes,
(c) taking a bus, and (d) a department store. What consumer benefits might these
substitutes have in each case that some consumers might value more highly than those
products mentioned in question 1?
Answers: Consumer wants or benefits that these four substitute products might provide
include:
a. Ham and egg breakfast. More filling; extra protein; a breakfast perceived to be more
likely to stay with you until the midday meal.
b. Regular tennis shoes. Low cost; possibility of the shoes being used for another sport.
c. Taking a bus. Low cost; avoiding the need to find parking for a car; avoiding
inconvenience of picking up and delivering the rental car and the accompanying
paperwork.

d. A department store. More help from sales clerks in making a purchase decision;
greater likelihood of accepting returns of unacceptable merchandise; servicing of the
product sold.
3. What are the characteristics (e.g., age, income, education) of the target market
customers for the following products or services? (a) National Geographic magazine,
(b) Wired magazine, (c) New York Giants football team, and (d) the U.S. Open tennis
tournament.
Answers: The demographic characteristics of the target market for each product or service
are:
a. National Geographic magazine. Older age group; high income; highly educated.
b. Wired magazine. Mainly under 30 years old; middle income; some knowledge about
computer and communication technologies.
c. New York Giants football team. New York City metropolitan area (includes northern
New Jersey and southwestern Connecticut); most age, income, and education groups.
d. U.S. Open tennis tournament. Most age groups; upper income groups; middle to
upper levels of education.
4. A college in a metropolitan area wishes to increase its evening-school offerings of
business-related courses such as marketing, accounting, finance, and management.
Who are the target market customers (students) for these courses?
Answer: Target market customers or students for business-related courses offered by a
metropolitan-area college at night include both those pursuing a degree and those not
pursuing a formal degree.
a. Students pursuing a degree might seek degree-related courses that could aid them in
acquiring or earning an Associates degree, a Bachelors degree, or an MBA degree.
b. In contrast, many prospective students in these courses may be more interested in
particular subject areas that can assist them in their job rather than in degree credits.
For example, engineering personnel might want introductory courses in marketing or
finance or accounting to familiarize them with principles from these courses that might
apply to their job. Owners of small businesses might seek work-related courses that
enable them to develop a business plan, design an accounting/record-keeping system, or
write more effective advertising copy. Often students not pursuing a degree may be
awarded a certificate for completing a specific sequence of courses.

5. What actions involving the four marketing mix elements might be used to reach the
target market in question 4?
Answers: Marketing mix actions to reach these target market customers include:
a. Product. The content of each degree program, certificate program, or course offered to
target market customers.
b. Price. The tuition or charge for taking the course.
c. Promotion. Course catalogs, direct mail informational brochures, posters, and ads run
in local newspapers or on local radio stations are examples of the kind of promotional
activities a college often undertakes.
d. Place. Includes the place and time at which the course is offered. Increasingly,
colleges and universities are taking their courses to the location of their students rather
than asking students to come to the campus itself.
6. What environmental forces (uncontrollable variables) must the college in
question 4 consider in designing its marketing program?
Answers: Environmental forces or uncontrollable variables for the college to consider are:
a. Social forces. Formal college degrees are required for an increasing number of jobs, so
colleges must recognize this in designing their courses. In addition, some employers
require a certain number of work-related course units every year to have their
employees maintain skills. Colleges often try to design curricula to reflect this.
b. Economic forces. These include the price of the course and its potential benefits to the
students, either in terms of leading to a degree or providing work-related benefits.
c. Technological forces. Many colleges are offering both credit and noncredit courses
online or through televisioneither on cable channels available to the public or
through programs transmitted directly to employees of specific companies. An
increasing number of courses take the form of computer-related work, which affects
curriculum design decisions.
d. Competitive forces. The college must recognize a number of ways for students to get
roughly equivalent courses: those offered by other colleges or universities in the area,
courses offered internally by large employers, and courses offered by correspondence
or online distance learning.
e. Regulatory forces. Degree courses must often meet standards imposed by outside
groups, such as those standards established by the Association to Advance Collegiate
Schools of Business for Bachelor and Masters degree programs in business.

7. Does a firm have the right to create wants and try to persuade consumers to buy
goods and services they didnt know about earlier? What are examples of good and
bad want creation? Who should decide what is good and bad?
Answers:
a. Does a firm have the right to create wants and try to persuade consumers to buy
goods and services they didnt know about earlier? Yes, a firm has the right to
create wants in an attempt to persuade consumers to buy products they didn't know
about in the past; new medicines to treat those having high blood pressure or heart
attacks are good examples.
b. What are examples of good and bad want creation? The conflict is over
good and bad want creation. In a free society where we value free choice by the
individual it is difficult to condemn bad candy bars and soft drinks over good
apples and orange juice if the individual's choice only affects him or her.
c. Who should decide what is good and bad? Our society says that what is good and
bad is up to the individual unless there are major costs to society as a whole in letting
the individual have free choice. Thus, in the case of products like firearms and drugs,
society determines what is good and bad and sets rules or laws controlling their
use.

CHAPTER 2
APPLYING MARKETING KNOWLEDGE
1. (a) Using Medtronic as an example, explain how a mission statement gives a strategic
direction. (b) Create a mission statement for your own career.
Answers:
a. Explain how a mission statement gives a strategic direction. A mission statement is
an expression of the organizations function in society, often identifying its customers,
markets, products, and technologies. Medtronics mission statement is to contribute to
human welfare by application of biomedical engineering in the research, design,
manufacture, and sale of instruments or appliances that alleviate pain, restore health,
and extend life. The rising mural in its headquarters powerfully communicates the
inspiration and focus of its mission to its stakeholders: employees, doctors, and patients
alike. Moreover, it appears on a medallion that is presented to each new employee.
Finally, each December five or six patients and their physicians describe to assembled
employees how Medtronic products have changed their lives. These activities send
clear messages to employees and other stakeholders about Medtronics strategic
direction.
b. Create a mission statement for your own career. An example of a mission statement
for a students career might be: To be recognized as an outstanding, ethically and
environmentally responsible, global marketing executive.
2. What competencies best describe (a) your college or university and (b) your favorite
restaurant?
Answers:
a. Your college or university. [NOTE: These vary along a continuum from community
colleges to research universities.] Flexible course scheduling to accommodate the
special needs of part-time and working students. A world-class research institution for
biotechnology; student-oriented faculty.
b. Your favorite restaurant. Genuine French cuisine. A family menu at a reasonable
price.
3. Why does a product often start as a question mark and then move counterclockwise
around BCGs growth-share matrix shown in Figure 24?
Answer: When a product is introduced, it is usually a question mark because it is new
and there is uncertainty about consumers acceptance of them. After a period of time,
depending on the product category, the not-so-new product could be classified as a star
if its growth rate is sizeable and has a significant share of the product category. If the
growth rate in the product category falls substantially and there is great competition from

competing brands, the product probably will fall in the cash cow category. If, however,
the product isnt supported with an effective marketing program, it could become a dog.
4. Select one strength, one weakness, one opportunity, and one threat from the SWOT
analysis for Ben & Jerrys shown in Figure 27. Suggest an action that a marketing
manager there might take to address each factor.
Answers:
a. Strength. Leverage its brand name by continuing to offer crazy new flavors, products
(ice cream, yogurt, sorbet, low-fat/carb, etc.). Promote its social mission in college
campus newspapers in cities where Ben & Jerrys is sold, either in its own outlets or in
grocery stores.
b. Weakness. Communicate the benefits of Ben & Jerrys social mission (number of
people employed, trained, etc.). Develop and implement a management trainee
program for those employees willing to make a long-term commitment to the firm.
c. Opportunity. Develop partnerships or franchise relationships with firms or individuals
in markets where Ben & Jerrys has not yet fully penetrated, such as South America,
Australia, etc. where ice cream consumption is moderate to strong. Also, develop ice
cream-based products, such as ice cream sandwiches, cookies, cakes, etc.
d. Threat. Offer low-carb products with Splenda or other sugar substitutes. Find lower
cost but socially responsible Fair Trade suppliers and manufacturers in overseas
markets where consumers are more price-sensitive due to less incomes to spend on
discretionary products like super premium ice cream.
5. What is the main result of each of the three phases of the strategic marketing process?
(a) planning, (b) implementation, and (c) evaluation.
Answers:
a. Planning phase. Results are formal marketing plans that identify specific objectives to
be achieved by a particular time and the specific actions to achieve those objectives.
b. Implementation phase. Results are formal measurements of the results achieved,
which can be compared with the plans established in the planning phase to determine if
any deviations from plans occurred.
c. Evaluation phase. Results are new actions taken to exploit opportunities where
deviations from plans are better than expected or to take corrective actions where
deviations from plans are worse than expected.

6. The goal-setting step in the planning phase of the strategic marketing process sets
quantified objectives for use in the evaluation phase. What does a manager do if
measured results are below objectives? Above objectives?
Answers:
If the marketing manager discovers a planning gap, which is a difference between the
projection of the path to reach a new goal and the projection of the path of the results of a
plan already in place for the marketing program, he or she can take the following actions:
a. Below objectives. Correct a negative deviation by making minor or major changes to
the existing marketing program of a product to better reflect future expectations in the
marketing environment.
b. Above objectives. Exploit a positive deviation by strengthening strategic partnerships,
engage in a market development or product development strategy, etc. to maintain or
enhance the firms position.

CHAPTER 3
APPLYING MARKETING KNOWLEDGE
1.For many years, Gerber has manufactured baby food in small, single-sized containers. In
conducting an environmental scan, identify three trends or factors that might
significantly affect this companys future business, and then propose how Gerber
might respond to these changes.
Answer: Three trends that may affect Gerber baby food are:
a. An aging population. Gerber may want to develop food for seniors who live alone
and would like single-sized servings. Because Gerber foods often require only
warming up, this market may be attracted to a product that is simple to prepare. Gerber
soft foods may also appeal to an older segment that has trouble chewing or digesting
more traditional food items.
b. Growing health concerns. Growing health concerns may require Gerber to
reformulate their foods to contain more or less of some ingredients, or the company
may want to promote the natural ingredients of their items.
c. Environmental consciousness. Environmental concerns may lead Gerber to tout the
recyclable value of their small glass containers.
2. Describe the new features you would add to an automobile designed for consumers in
the 55+ age group. In what magazines would you advertise to appeal to this target
market?
Answer: Environmental scanning reveals that this market appreciates improvements aimed
at safety, security, and convenience.
a. New features. Items such as hands-free cellular telephone communications, easy-toread displays, combination door locks, GPS locator and maps, twin heating and cooling
controls, light-sensitive mirrors, automatic headlights that come on at dusk and shut off
automatically after a delay, outside car lights that come on when the remote activator
button is pushed, multiple adjustment positions for car seats, special access provisions
for wheelchair or other medical devices, and special auto-locator beacons for owners to
find parked cars easily are some examples.
b. Magazines. Advertising in magazines such as Modern Maturity and AARP The
Magazine from The American Association of Retired People would appeal to both
sexes. General interest magazines, such as Good Housekeeping or Time, will also reach
the mature market in increasing numbers in the future.

3. The population shift from suburbs to exurbs and penturbia was discussed in this
chapter. What businesses and industries are likely to benefit from this trend?
How will retailers need to change to accommodate these consumers?
Answers:
a. What businesses benefit. Businesses involved in transportationboth mass and
individualand in product distribution are likely to see increased demand for their
products and services. Communication businesses, particularly the telephone, satellite
TV, cable, and Internet providers, will see increased demand. Many businesses may
find that they are able to move from high-cost urban sites to lower cost exurbian and
penturbian sites for some operations, and they may find that telecommuting of some
employees will lower their costs of infrastructure.
b. How will retailers change. Smaller cities and communities will experience a demand
for additional shopping; retailers may respond with either localized strip malls and
centers or larger regional centers located along transportation corridors. Demands on
distribution networks will increase; retailers may respond by greater reliance on
Internet commerce.
4. New technologies are continuously improving and replacing existing products.
Although technological change is often difficult to predict, suggest how the following
companies and products might be affected by the Internet and digital technologies:
(a) Kodak cameras and film, (b) American Airlines, and (c) the Metropolitan Museum
of Art.
Answer:
a. Kodak cameras and film. Demand for cameras and film has and will continue to
change as the demand by consumers for digital technology increases. As image quality
improves and the average price of digital cameras decline, more consumers will
purchase them. Since digital cameras do not require film, Kodak film sales should
decline as the penetration of digital cameras increases. However, other technologies,
such as memory sticks and docking stations that allow users to transfer images
directly from the camera to a personal computer, a printer, or photo developer, will be
required to use these cameras. Finally, some consumers will want to either send their
pictures directly to friends and family as email using the Internet.
b. American Airlines. New digital technology may allow American to automate its
planes to the extent that the number of pilots needed will be reduced and the safety
margins for most flights increased. Since fuel is a major component of cost, digital
technology should allow American both to create more efficient routes, altitudes,
schedules, and more efficient and quieter engines. Baggage handling and reservations
should also be positively impacted by new technologies. New and improved in-flight
services such as on-demand movies, cell-phone service, and high-speed internet
connections may also become available.

c. The Metropolitan Museum of Art. The Museum may become more accessible to
everyone through the digitization of its collections onto DVDs and through the Internet.
While nothing may substitute for the actual viewing of a masterpiece, scheduling of
hours, promotion of special showings, and memberships may all be positively impacted
by new technologies. In some cases, the Met may come to new audiences (such as
shut-ins) through the Internet and may, in fact, be able to offer collections from other
museums and institutes around the world through this medium. As the population ages,
the Met may offer mature citizens an opportunity to visit without leaving home through
the Internet and other media such as Netfixs DVD service or downloads via iTunes.
5. In recent years in the brewing industry, a couple of large firms that have historically
had most of the beer sales (Anheuser-Busch and Miller) have faced competition from
many small micro brands. In terms of the continuum of competition, how would
you explain this change?
Answer: In terms of the continuum of competition, the brewing industry was historically
oligopolistic. A few large producers accounted for the bulk of sales. In recent years, the
brewing industry has moved more to a position of monopolistic competition. There are a
large number of sellers where the unique aspect of each one may be their distinct taste.
6. The Johnson Company manufactures buttons and pins with slogans and designs.
These pins are inexpensive to produce and are sold in retail outlets such as discount
stores, hobby shops, and bookstores. Little equipment is needed for a new competitor
to enter the market. What strategies should Johnson consider to create effective
barriers to entry?
Answer: Since little capital investment is required, barriers to entry must be established
through advertising expenditures, retail outlets, product differentiation, or raising switching
costs. The company could heavily advertise the pins, but to help create a barrier, product
differentiation, such as brand name, would be necessary. The best approach may be
through the retail outlets by giving them attractive displays and making it very profitable to
carry the Johnson Company pin. This approach would reduce the incentive to carry
competing pin lines.
7. Why would Xerox be concerned about having its name becoming generic?
Answer: The problem for the Xerox Corporation would be serious. If the name Xerox is
increasingly referred to by consumers as the process by which photocopies are made rather
than the trademark of the company that invented and branded the technology, Xerox runs
the risk of having the term rendered generic. The result is that Xerox would then have to
identify itself by some other term in all its advertising and sales. A large amount of money
would need to be spent to get people to recognize the old company known as Xerox by
some other name.

8. Develop a Code of Business Practices for a new online vitamin store. Does your
code address advertising? Privacy? Use by children? Why is self-regulation
important?
Answer: The Better Business Bureau provides assistance to guide ethical business-toconsumer conduct in electronic commerce in its Code of Online Business Practices. The
code is intended to provide general standards for e-commerce and to serve as the basis for
the BBBOnline Reliability Program. The Code suggests the following principles
(see https://www.bbbonline.org/reliability/code/principle.asp):
a. Truthful and Accurate Communications. Online advertisers should not engage in
deceptive or misleading practices with regard to any aspect of electronic commerce,
including advertising and marketing, or in their use of technology.
b. Disclosure. Online merchants should disclose to their customers and prospective
customers information about the business, the goods or services available for purchase
online, and the transaction itself.
c. Information Practices and Security. Online advertisers should adopt information
practices that treat customers personal information with care. They should post and
adhere to a privacy policy based on fair information principles, take appropriate
measures to provide adequate security, and respect customers preferences regarding
unsolicited email.
d. Customer Satisfaction. Online merchants should seek to satisfy their customers by
honoring their representations, answering questions, and resolving customer complaints
and disputes in a timely and responsive manner.
e. Protecting children. If online advertisers target children under the age of 13, they
should take special care to protect them by recognizing childrens developing cognitive
abilities.
Of course, students may have other elements in their own Code. Specific practices they
may address include price comparisons; use of links to add or supplement information;
disclosure of warranty, legal, customer service, product availability, and shipping
information; use of encryption for personal and financial information; having and posting a
Do Not Contact policy; providing a dispute resolution mechanism; and requests for
parental permission for children.
Self-regulation is important because it is an alternative to legislation and represents an
industrys efforts to police itself.

CHAPTER 4
APPLYING MARKETING KNOWLEDGE
1.What concepts of moral philosophy and social responsibility are applicable to the
practices of Anheuser-Busch described in the introduction to this chapter? Why?
Answer: Anheuser-Busch would seem to be applying a utilitarian ethical philosophy
because it has apparently weighed the benefits of its advocacy to promote responsible
drinking and its programs to reduce litter and solid waste against its costs (decrease in sales
revenues). The company has applied the societal responsibility concept of social
responsibility, given its focus on the general public.
2. Five ethical situations were presented in this chapter: (a) a medical societys decision
to set fee schedules, (b) the use of a computer program by auto dealers to arrange
financing, (c) smoking in China, (d) downloading movies, and (e) the pricing of
Cerezyme for the treatment of a rare genetic illness. Where would each of these
situations fit in Figure 4-1?
Answers: These ethical/legal situations can be assigned in a quadrant of the ethical-legal
continuum framework shown in Figure 4-1:
a. A medical societys decision to set fee schedules. To curb rising costs, physicians in
the Maricopa County (AZ) Medical Society agreed to establish a maximum fee
schedule for health services. All physicians were required to adhere to this schedule as
a condition for membership in the society.
The U.S. Supreme Court ruled that this agreement to set prices violated the Sherman
Act and represented price fixing, which is illegal. This practice could also be viewed as
unethical since it required all physicians to adhere to it if they wanted to continue their
membership in the medical societysomething that most physicians need to foster
their practices.
b. The use of a computer program by auto dealers to arrange financing. A California
firm sells auto dealers a computer program that shows car buyers that they should
finance a purchase of a car rather than paying cash for it. The program omits the effect
of income taxes and misstates the interest earned over the loan period. The finance
option always provides a net benefit over the cash option. Company employees agree
that the program misleads buyers but say that the firm will provide car dealers what
they want if it doesnt violate the law.
This practice is unethical since it misleads customers and perhaps should be illegal.
However, given the facts presented, the computer program is legal.

c. Smoking in China. China is the worlds largest producing tobacco country. It has
300 million smokers and about 700,00 Chinese die annually from smoking-related
diseases. China restricts tobacco imports. U.S. trade negotiators want to allow U.S.
tobacco companies to market their products in China.
The practice of U.S. trade representatives negotiating a trade agreement with China is
legal because cigarettes are currently a legal product in both the U.S. and China. While
some may view the promotion of a product that causes substantial number of deaths
and illnesses as being grossly unethical, others may see it as ethical in a global
economy.
d. Downloading movies. A group of students recorded movies at a local theater and then
uploaded them to a website that could be downloaded and viewed by others on their
computers for free over the Internet through peer-to-peer networks.
Federal statutes prohibit the unauthorized recording, distribution, and/or exhibition of
copyrighted material such as motion pictures. Thus, this practice is both illegal and
unethical because it is against the law to violate an organizations copyrights.
e. The pricing of Cerezyme for the treatment of a rare genetic illness. Genzyme, the
maker of Cerezyme, adheres to the profit responsibility concept of social responsibility.
The view holds that managements principle duty is to maximize profits for their
shareholders within the rules of the game. As a result, the firm charges a very high
price for its drug in part to recover high manufacturing costs. However, it does give the
drug away free to patients without insurance.
The practice of charging a premium price to recover costs and earn a profit to maximize
shareholder profits is both legal and ethical the capitalist system of the U.S. The firm
does make a small concession to the profit responsibility concept it adheres to by giving
some patients the drug for free.
e. NOTE. There are very few instances where a marketing practice is both ethical and
illegal, unless one is describing a Robin Hood situation. However, in such instances,
it is best to change the laws through legislation to make an illegal but ethical practice
legal.

ETHICALITY

Smoking in China?
ETHICAL

UNETHICAL

Medical society to set

fee schedules

Cerezyme for treatment

of rare illness
Smoking in China?

Recording movies

Auto dealers financing

computer program

ILLEGAL

LEGAL

LEGALITY

3. The American Marketing Association Code of Ethics shown in Figure 4-3 details the
rights and duties of parties in the marketing exchange process. How do these rights
and duties compare with the Consumer Bill of Rights?
Answers: The Consumer Bill of Rights codified the ethics of exchange between buyers and
seller. The four rights advocated are the right to: (1) safety, (2) be informed, (3) choose,
and (4) be heard. The American Marketing Association (AMA) recently updated its Code
of Ethics. The comparisons between the two are presented below:
Consumer Bill of Rights

AMA Code of Ethics

The right to safety

Marketers must do no harm.

The right to be informed

We will represent our products in a clear

way in selling, advertising, and other
forms of communication; this includes the
avoidance of false, misleading, and
deceptive promotion.
We will explain significant product or
service risks, component substitutions or
other foreseeable eventualities that could
affect customers or their perceptions of
the purchase decision.
We will fully disclose list prices and
terms of financing as well as available
price deals and adjustments.

The right to choose

We will reject manipulations and sales

tactics that harm customer trust.
We will not engage in price fixing,
predatory pricing, price gouging, or
bait-and-switch tactics.

The right to be heard

We will listen to the needs of our

customers and make all reasonable efforts
to monitor and improve their satisfaction
on an ongoing basis.
We will accept constructive criticism
from our customers and other
stakeholders.

4. Compare and contrast moral idealism and utilitarianism as alternative personal

moral philosophies.
Answer: Moral idealism considers individual rights or duties as universal regardless of the
outcome. Utilitarianism focuses on the greatest good for the greatest number by
assessing the costs and benefits of the consequences of ethical behavior. It is important to
note that moral idealism does not consider costs, benefits, or consequences, as does

utilitarianism. However, utilitarianism does not consider rights or duties outside the
context of ethical behavior.
5. How would you evaluate Milton Friedmans view of the social responsibility of a
firm?
Answer: Friedman is a proponent of the profit responsibility concept of social
responsibility. As such, he believes that a firms simple duty is to maximize profits for its
owners or stockholders so long as it engages in open and free competition without
deception or fraud. This view is narrow because it focuses solely on the firm and not the
other constituencies of the firm. On the other hand, the ethical stance reflected in the
avoidance of deception or fraud does illustrate a broader view of the firms relationship
with its constituencies.
6. The text lists several unethical practices of consumers. Can you name others?
Why do you think consumers engage in unethical conduct?
Answers: There are numerous unethical practices of consumers. The list below is
suggestive of such behavior:
a. Opening and eating a snack item while shopping in a grocery store.
b. Seeing that a new, higher-priced sticker has been placed on a product, a consumer peels
off the new sticker and then pays the lower price.
c. Seeing that a billing error is made on a store account in his/her favor, a consumer does
not report this error to the store.
d. Standing in a long line, a sales clerk scans a product a consumer wants to purchase and
the computerized cash register doesnt have the product or its price in the database.
The clerk asks the consumer if he/she knows what the price is so the clerk doesnt have
to call a supervisor for a price check. The consumer tells the clerk it costs $1.50 when
he/she knows it actually costs $2.50.*
e. Having two consumers share free coffee refills or all-you-can-eat buffet meals when
only paying for one drink or meal.*
f. Failing to alert a store clerk when the clerk mistakenly rings up a charge of $5.99 on an
item priced at $6.99, and the consumer knows the correct price.
*

Source: A. M. Rogers, Consumer Ethics. Article on the Liberty Haven website

(see http://www.calculemus.org/lect/glob/comp-econ.html). Research by Robert E. Wilkes (Journal of
Marketing, October, 1978) indicates that consumers engage in unethical conduct for several reasons. One
view is that business deserves it; while other unethical acts arent criminal and dont really hurt
anyone.

7. Cause marketing programs have become popular. Describe two such programs with
which you are familiar.
Answer: Students are likely to provide a variety of answers to this question, many of which are
local or regional in nature. The most visible national cause programs are associated with the
(PRODUCT)RED global program to fight AIDS in Africa and the Susan G. Komen Breast Cancer
Foundations Race for the Cure.

CHAPTER 5
APPLYING MARKETING KNOWLEDGE
1.Review Figure 5-2, which shows the smart phone attributes identified by Consumer
Reports. Which attributes are important to you? What other attributes might you
consider? Which brand would you prefer?
Answers: Smart phone attributes that are considered important include:
Retail price
Display
Navigation

Voice quality
Battery life
Camera resolution (megapixels)

Based on the attributes shown in Figure 5-2, the Apple iPhone 3GS has the highest ratings
across three of the four major attributes and is tied with all the other smart phones on the
other.
2. Suppose research at Panasonic reveals that prospective buyers are anxious about
buying high-definition television sets. What strategies might you recommend to the
company to reduce consumer anxiety?
Answers: Strategies Panasonic might adopt in order to reduce uncertainty perceptions by
prospective buyers include:
a. Focus promotional activities on the benefits of better picture, higher quality, and greater
enjoyment from watching in the comfort of your own home.
b. Create ads showing ease of operation to produce a higher-quality picture.
c. Provide high customer service at point of purchase.
3. A Porsche salesperson was taking orders on new cars because he was unable to satisfy
the demand with the limited number of cars in the showroom and lot. Several
persons had backed out of the contract within two weeks of signing the order. What
explanation can you give for this behavior, and what remedies would you
recommend?
Answers:
a. Explanation of the behavior. The fact that several persons backed out of their
Porsche contracts within two weeks of signing suggests that they experienced a high
level of cognitive dissonance following their purchase decision.
b. Remedies to recommend. A salesperson might remedy this situation by phoning those
individuals who recently signed contracts and reinforcing their decisions.

4. Which social class would you associate with each of the following items or actions:
(a) tennis club membership, (b) an arrangement of plastic flowers in the kitchen,
(c) True Romance magazine, (d) Smithsonian magazine, (e) formally dressing for
dinner frequently, and (f) being a member of a bowling team.
Answers:
Item or Action
a. Tennis club membership

Social Class
Middle to upper

b. Plastic flowers arrangement in kitchen

Lower

c. True Romance magazine

Lower to middle

d. Smithsonian magazine

Upper

e. Formally dressing for dinner

Upper

f. Bowling team member

Lower to middle

5. Assign one or more levels of the hierarchy of needs and the motives described in
Figure 5-5 to the following products: (a) life insurance, (b) cosmetics, (c) The Wall
Street Journal, and (d) hamburgers.
Answers:
Item or Action
a. Life insurance

Need
Safety

b. Cosmetics

Social

c. Wall Street Journal

Personal

d. Hamburgers

Physiological

6. With which stage in the family life cycle would the purchase of the following products
and services be most closely identified: (a) bedroom furniture, (b) life insurance,
(c) a Caribbean cruise, (d) a house mortgage, and (e) childrens toys?
Answers:
Product or Service
a. Bedroom furniture

Stage in the Family Life Cycle

Young married without children

b. Life insurance

Young married with children

c. Caribbean cruise

Older married or older unmarried

d. House mortgage

Young married with or without children

e. Childrens toys

Young married with children;

older married/unmarried

7. The greater the perceived risk in a purchase situation, the more likely that cognitive
dissonance will result. Does this statement have any basis given the discussion in the
text? Why?
Answer: Perceived risk represents the anxieties felt because the consumer cannot anticipate
the outcomes of a purchase but believes that there may be negative consequences (cost,
safety, performance, or psychosocial). Typically, the greater the perceived risk, the more
extensive the external research phase is likely to be for consumers before a purchase is
made in an attempt to reduce the negative consequences that may result after the purchase.
Accordingly, this extensive external search will most likely produce a larger number of
attractive alternatives and therefore a greater propensity for cognitive dissonance to
develop once a purchase decision is made. However, when faced with two or more highly
attractive purchase alternatives, consumers, after purchasing one of them, may experience
cognitive dissonance, a feeling of post-purchase psychological tension or anxiety, or
wishing they had bought one of the other alternatives.

CHAPTER 6
APPLYING MARKETING KNOWLEDGE
1. Describe the major differences among industrial firms, resellers, and government
units in the United States.
Answers:
a. Industrial firms, which account for the majority of all organizational buyers, in some
way reprocess a product or service they buy before reselling it again to the next buyer.
b. Resellers, the second largest group of organizational buyers, consist of wholesalers and
retailers that buy physical products and resell them again without any reprocessing.
c. Government units, the smallest of the three groups, consist of federal, state, and local
agencies that buy goods and services for the constituents they serve.
2. Explain how the North American Industry Classification System (NAICS) might be
helpful in understanding industrial, reseller, and government markets, and discuss
the limitations inherent in this system.
Answers:
a. Advantages of the NAICS. The North American Industry Classification System
(NAICS) provides common industry definitions for Canada, Mexico, and the United
States, which makes easier the measurement of economic activity in the three member
countries of the North American Free Trade Agreement (NAFTA). It groups economic
activity to permit studies of market share, demand for goods and services, import
competition in domestic markets, and similar questions.
It then designates industries with a six-digit numerical code. The first two digits
designate a sector of the economy. The third digit designates a subsector while the
fourth digit represents an industry group. The fifth digit designates a specific industry
and is the most detailed level at which comparable data are available for the three
countries. The sixth digit designates individual country-level national industries.
b. Disadvantages of the NAICS. Such breakdowns allow one to identify firms within
categories and to monitor growth or decline with industries. The NAICS has two
important limitations: (1) large firms engaging in different activities or providing
different products or services are given only one NAICS code and (2) the five-digit
national industry codes are not available for all three countries because the respective
governments will not reveal data when too few organizations exist in a category.

3. List and discuss the key characteristics of organizational buying that make it different
from consumer buying.
Answers: Although the buying processes organizations go through when making a
purchase also apply to consumer buying, there are some key differences:
a. Organizations buy products and services to help them achieve organizational
objectives, namely, to increase profits through reducing costs or increasing revenues.
b. Demand for products and services from organizations is derived from the demand for
consumer products and services.
c. The size ($ or #) of organizational purchases is much larger than consumer purchases.
d. There are fewer organizational buyers than consumer buyers.
e. The buying criteria for organizational buyers generally focus on three critical factors:
(1) ability to meet quality standards, (2) ability to deliver the product on time, and
(3) past performance on previous contracts.
f. Several people, typically in a buying center, get involved in an organizational purchase.
g. The postpurchase evaluation is often more formalized.
4. What is a buying center? Describe the roles assumed by people in a buying center
and what useful questions should be raised to guide any analysis of the structure and
behavior of a buying center.
Answers:
a. Buying center. A buying center consists of a group of individuals within an
organization who participate in the buying process and share common goals, risks, and
knowledge important to purchase decisions.
b. Buying center roles. Individuals in a buying center perform one or more roles:

Users are people in the organization who actually use the product or service.
Influencers affect the buying decision, usually by helping define the specifications
for what is bought.
Buyers have formal authority and responsibility to select the supplier and negotiate
the terms of the contract.
Deciders have the formal or informal power to select or approve the supplier that
receives the contract.
Gatekeepers control the flow of information in the buying center.

c. Questions. Four questions guide an analysis of a buying center:

Which individuals are in the buying center for the product or service?
What is the relative influence of each member of the group?
What are the buying criteria of each member?
How does each member of the group perceive our firm, our products and services,
and our salespeople?

5. Effective marketing is of increasing importance in todays competitive environment.

How can firms more effectively market to organizations?
Answer: Firms can more effectively market to organizations by following four guidelines
when designing and implementing their marketing strategy: (1) understand the
organizations needs, (2) get on the right bidders list, (3) find the right people in the
buying center, and (4) provide value to organizational buyers.
6. A firm that is marketing multimillion-dollar wastewater treatment systems to cities
has been unable to sell a new type of system. This setback has occurred even though
the firms systems are cheaper than competitive systems and meet U.S.
Environmental Protection Agency (EPA) specifications. To date, the firms
marketing efforts have been directed to city purchasing departments and the various
state EPAs to get on approved bidders lists. Talks with city-employed personnel
have indicated that the new system is very different from current systems and
therefore city sanitary and sewer department engineers, directors of these two
departments, and city council members are unfamiliar with the workings of the
system. Consulting engineers, hired by cities to work on the engineering and design
features of these systems and paid on a percentage of system cost, are also reluctant to
favor the new system. (a) What roles do the various individuals play in the purchase
process for a wastewater treatment system? (b) How could the firm improve the
marketing effort behind the new system?
Answers:
a. Roles played. A number of different constituencies exist in the buying center for a
wastewater treatment system for cities, and each plays one or more roles:
Role
1. Users

Constituency
City sanitary and sewer department engineers

2. Influencers

City sanitary and sewer department engineers; EPA

3. Buyers

City council

4. Deciders

Directors of the city sanitary and sewer departments;

city council members

5. Gatekeepers

Consulting engineers and EPA

b. Marketing improvements. The firm could improve its marketing efforts by reaching
and educating the influencers and deciders (see above). Above all, the firm must
circumvent or satisfy the primary gatekeepersthe consulting engineers. These
individuals are most likely detractors because the systems lower cost results in smaller
compensation for them as consulting engineers.

CHAPTER 7
APPLYING MARKETING KNOWLEDGE
1. What is meant by this statement: Quotas are a hidden tax on consumers, whereas
tariffs are a more obvious one.?
Answer: Quotas represent a hidden tax on consumers because they limit supply of
products, which in turn increases prices. Tariffs are literally a government tax imposed on
imported goods.
2. Is the trade feedback effect described in the text a long-run or short-run view on
world trade flows? Explain your answer.
Answer: The trade feedback effect is a long-run view on world trade flows.
a. Trade feedback effect view on world trade flows: Long-run.
b. Explain your answer:
The trade feedback effect is a recursive phenomenon that results from the relative
economic activity among nations. If the economic activity of one nation rises (such as
in the U.S.), its consumers incomes will rise. As a result, they will not only spend
money on domestic goods and services but also some on those from other countries.
This means that the U.S. will import more goods and services from these countries,
which will marginally increase the incomes of their respective consumers. These
consumers, in turn, will spend a portion of their money on imports, some of which will
be for goods and services produced in the U.S. These U.S. exports will generate
marginal increases in U.S. consumer incomes, which in turn will cause additional
spending on imports, and so on.
Given the recursive nature of this phenomenon, world trade flows take time to occur as
the marginal increase in global consumer spending diffuses among the nations.
Moreover, the time it takes for the trade feedback effect to occur is influenced by:
(1) the current state of the world economy and (2) the degree to which each country
promotes or restricts free trade.
NOTE: Some students may answer short-run. Their rationale may be that the
Stimulus Check that the U.S. Congress passed in 2008, which gave U.S. taxpayers up
to $1,200 per household, may have generated a slight increase in world trade flows.
This marginal increase in U.S. consumers incomes led to an increase in U.S. imports,
which in turn stimulated a short-run trade feedback effect.

3. The United States is considered to be a global leader in the development and

marketing of pharmaceutical products, and Merck & Co. of New Jersey is a world
leader in prescription drug sales. What explanation can you give for this situation
based on the text discussion concerning the competitive advantage of nations?
Answer: [NOTE: At present, the U.S. government does not place onerous restrictions on
firms that develop and market pharmaceutical medications. A severe restriction may be a
significant tax on profits, a reduction in the expiration time frame of a patent for a branded
drug product, thus enabling other manufacturers to market generic versions, etc.]
Merck and other drug producers in the U.S. currently enjoy market success. This can be
partially explained within the context of Porter Comparative Advantage of Nations
Diamond model and its four key elements:
a. Factor conditions. Merck and other pharmaceutical makers benefit from the
educational system in the U.S. Medical, engineering, business, and other institutions of
higher learning provide Merck with a rich talent pool from which to hire top-notch
researchers, marketers, and salespeople that contribute to the successful
commercialization of its drug products.
b. Demand conditions. In general, the demand for many drugs in the U.S. (and perhaps
those in the developed countries of Europe, Japan, etc.) is derived: physicians prescribe
them to ultimate consumers within certain legal restrictions. For a few FDA-approved
(Food and Drug Administration) drugs, consumers can purchase them directly without
a prescription.
However, Merck and other drug makers do employ both a push and pull strategy to
reach U.S. consumers (see Chapter 19):

Push: Common marketing practices to reach doctors is to (1) conduct seminars to

educate them about new drug products and (2) provide free samples to them to
give to their patients.

Pull: Some drug marketers now engage in either pioneering product advertising to
inform consumers about new medications that may or may not need a doctors
prescription. The pull is to get consumers to (1) ask their doctors about the
product advertised if a prescription medication or (2) go to a pharmacy or other
retailer for an over-the-counter one where no prescription is required.

Both sets of marketing actions can lead to increased sales.

c. Related and supporting industries. The U.S. has the best healthcare delivery system
in the world. Its hospitals, medical clinics, physician offices, and pharmacies serve as
an efficient and effective distribution system for Mercks offerings.

d. Company strategy, structure, and rivalry. Obviously, Mercks marketing strategies

have been successful. However, part of its success is probably due to the consolidation
in the pharmaceutical industry. Because it takes millions, or even billions, of dollars to
develop and bring a new drug to market, fewer firms are able to generate this amount of
research and development and marketing funds. As a result, mergers and acquisitions
by firms like Merck have given it a competitive advantage over others in the market
due to its increasing economies of scale. For example, in 2009, Merck acquired
Schering-Plough Corp. for $41.1 billion.
4. How successful would a television commercial in Japan be if it featured a husband
surprising his wife in her dressing area on Valentines Day with a small box of
chocolates containing four candies? Why?
Answer: This commercial would be a failure. It violates a number of cultural norms in
Japan: (1) The Japanese consider it inappropriate for a husband to intrude on his wife;
(2) Japanese women give men chocolates on Valentine's Day; and (3) four is an unlucky
number in Japan.
5. As a novice in global marketing, which alternative global market-entry strategy
would you be likely start with? Why? What other alternatives do you have for a
global market entry?
Answer: The best alternative for a novice firm is indirect exportingselling its
domestically produced goods in a foreign country through an intermediary, such as a
distributor, that has the marketing know-how and the resources necessary for the effort to
succeed. This will allow consumers in the target country to try the firms products and to
begin to recognize its name. It also entails the lowest risk and investment from the firm.
Other alternatives in order of increasing level of risk and investment are:
a. Direct exporting. Selling the firms domestically produced goods in a foreign country
without intermediaries.
b. Licensing. Offering the right to a trademark, patent, trade secret, or other intellectual
property in return for a royalty or fee.
c. Joint venture. Occurs when a firm and local firm invest together in a foreign country
to create a local business.
d. Direct investment. Entails a domestic firm actually investing in and owning a foreign
subsidiary or division.

6. Coca-Cola is sold worldwide. In some countries, Coca-Cola owns the bottling

facilities; in others, it has signed contracts with licensees or relies on joint ventures.
When selecting a licensee in each country, what factors should Coca-Cola consider?
Answer:
Among the risks of licensing are the licensors losing control of its products and the
licensors creating its own competition by the licensees somehow modifying the product.
Before selecting a licensee, Coca-Cola should perform a cross-cultural analysis of the
target country, reviewing regulations and business customs in the country to be sure its
patents will be respected.
Selecting a licensee requires careful background checks into its values, past business
practices, and finances. The licensing agreement should set up a monitoring process over
the licensees production and over its marketing and distribution. All of these steps must
be taken with sensitivity in order to protect Coca-Colas brand without offending the
licensee and consumers in the country. The people at Coca-Cola that are monitoring
production, marketing, and distribution should be fluent in the language and customs of the
country and should be committed to developing a relationship over time with the licensee.

CHAPTER 8
APPLYING MARKETING KNOWLEDGE
1.Suppose your dean of admissions is considering surveying high school seniors about their
perceptions of your school to design better informational brochures for them. What
are the advantages and disadvantages of doing (a) telephone interviews and
(b) an Internet survey of seniors who have requested information about the school?
Answers: When choosing to use a telephone interview or Internet survey, the marketing
researcher must balance the cost against the expected quality of the information obtained,
which is affected by the time required to complete the survey, equipment required, previous
experiences, ability to probe the responses given, interview bias, anonymity of the
respondent, etc. Specific advantages and disadvantages are listed below.
a. Telephone interview.
1. Advantages.

Virtually everyone in the senior high school class has a land line/cell telephone.

A representative sample of high school seniors may be obtained.

The telephone interview permits answers to be probed easily to obtain extra

information from respondents.

It is moderately expensive, assuming a reasonable completion rate. To reduce

costs, some marketing researchers use automated/computerized-calling systems
instead of live human beings to complete the telephone interviews.

Some anonymity is given to respondents since there is not a fact-to-face

interview or a specific mailing address is not known to the market researcher.

2. Disadvantages.

The difficulty of getting students to respond to telephone questions and to

respond to scaled questions they can hear but not see in writing.

Including students in the sample who have no interest in the school.

Moderately expensive, assuming a reasonable completion rate.

Some interviewers can bias the results due to the inflection of their voices when
asking questions.

Respondents typically limit calls to 5 to 15 minutes in length. Any interview

that lasts longer will substantially increase noncooperationrespondents just
hang up.

Some potential respondents may have caller ID or other screening technology

that allows them to not answer calls from unapproved telephone numbers.

Past experiences of telemarketers using a marketing research telephone survey

as a guise for a sales call.

Very intrusivemarket researchers typically call during the dinner hour from
5:30 PM to 9:00 PM.

Many potential qualified respondents have unlisted telephone numbers and/or

placed themselves on the federal governments Do Not Call registry. This
eliminates them from the universe of qualified respondents, thereby introducing
bias into the results since the marketing researcher is not able to adequately
reach the desired target market.

Many potential qualified respondents use their mobile phones as the primary
telephone and therefore may not want to cooperate due to connect charges.

b. Internet surveys.
1. Advantages.

The sampled respondents have shown their interest in the university so the
response rate should be high.

Usually the least expensive method, assuming adequate completion rates. It is

relatively easy to design an Internet survey, post it to a Web site, and generate
e-mails requesting respondent cooperation using off-the-shelf software.

No opportunity to bias results since form is completed without an interviewer.

Some anonymity given to respondents since there is not a fact-to-face interview

or a specific mailing address is not known to the market researcher.

2. Disadvantages.

Getting new ideas from seniors not requesting information.

Little flexibility to probe responses or ask complex questions since the selfadministered online form must be short and simple to complete.

Potential qualified respondents need to have a computer, Internet connection,

and an e-mail address to send the survey to.

Some respondents have junk mail filters that prohibit unapproved e-mails.

Respondents may get spammed with other unwanted e-mail surveys or their
e-mail addresses are sold to other firms.

E-mail survey forms are visually different than mail or fax surveys and require
typing or selecting the desired responses with a keyboard or mouse.

2. Nielsen Media Research obtains ratings of local TV stations in small markets by

having households fill out diary questionnaires. These give information on (a) who is
watching TV and (b) what program. What are the limitations of this questionnaire
method?
Answer: Using diaries to record television viewing habits has problems because most
people dont keep a continuous record of the television programs they have watched but
instead wait until the end of several days or a week and then try to reconstruct their viewing
behavior. This usually results in serious errors. In addition, the adult who records the
family viewing may miss many of the programs watched by younger children or members
of the family who are watching TV when the adult is not present.
3. The format in which information is presented is often vital. (a) If you were a harried
marketing manager and queried your information system, would you rather see the
results in tables or charts and graphs? (b) What are one or two strengths and
weaknesses of each format?
Answers: Delivering the results in pictures (charts and graphs) and in a single page if
possible helps the marketing manager to see results more quickly.
a. Tables.
1. Strengths are allowing quantities of data to be summarized succinctly, provided that
good column heads and row stubs have been selected. Data can be presented in
detaile.g., to the nearest penny or percentage point.
2. Weaknesses are overwhelming the reader with large quantities of data, in which key
points can be lost. Even an experienced interpreter may need time to tease out the
critical information from a table of data.
b. Charts and graphs.
1. Strengths are allowing high and low points to be seen at a glance. A line or bar
graph or a pie chart will be the best choice in different circumstances. If data points
are too close together, more space can be assigned to sharpen the picture.
2. Weaknesses are lack of precision and backup detail.
Combining tables, charts, and graphs can overcome the weaknesses and benefit from the
strengths of each format. Whenever location is an issue, a map can be helpful in
pinpointing where to attack the problem and which people might be best able to take action
(e.g., which salespeople might call on specific accounts).

4. Wisk detergent decides to run a test market to see the effect of coupons and in-store
advertising on sales. The index of sales is as follows:

What are your conclusions and recommendations?

Answer: Although the coupon without the in-store ads provides a 44% sales increase
during the week of the coupon, it drops off significantly to a modest 8% during the week
following the coupon. The really sizable sales increase occurs by combining the coupon
with in-store ads to reinforce consumer awareness and interest in Wisk. Assuming the
revenues generated from increased sales of Wisk exceed the expense of the in-store ads, the
results suggest that Wisk run a coupon along with in-store ads to maximize its sales, since
they increased a whopping 168% during the week of the coupon, and only dropped 24% to
203% during the week following the coupon.
5. Suppose Fisher-Price wants to run a simple experiment to evaluate a proposed chatter
telephone design. It has two different groups of children on which to run its
experiment for one week each. The first group has the old toy telephone, whereas the
second group is exposed to the newly designed pull toy with wheels, a noisemaker, and
bobbing eyes. The dependent variable is the average number of minutes during the
two-hour play period that one of the children is playing with the toy, and the results
are as follows:

Should Fisher-Price introduce the new design? Why?

Answer: Assuming that the average number of minutes in the play period (the dependent
variable) that one of the children is playing with the toy is an adequate measure of
effectiveness of toy design (the independent variable), Fisher-Price should introduce the
new toy. The reason is that the playtime of 62 minutes with the new toy design far exceeds
the 13 minutes of playtime with the old toy design.

6. (a) Why might a marketing researcher prefer to use secondary data rather than
primary data in a study? (b) Why might the reverse be true?
Answers: Secondary data are facts and figures that have already been recorded before the
project at hand. Primary data are facts and figures that are newly collected for the project.
a. Advantages of secondary data relative to primary data.
1. There is a tremendous timesaving if the data are already collected and published.
2. The cost is typically low or even free.
3. There may be a greater level of detail, especially for U.S. Census data.
b. Disadvantages of secondary data relative to primary data.
1. The data may be out of date, especially for U.S. Census data.
2. The definitions or categories might not be quite right for the project.
3. Because the data were collected for another purpose, they may not be specific
enough for the project.
7. Which of the following variables would linear trend extrapolation be more accurate
for? (a) Annual population of the United States or (b) annual sales of cars produced
in the United States by Ford. Why?
Answer: Linear trend extrapolation would be more useful for projecting annual population
of the U.S. rather than annual sales of cars produced by Ford because past population
trends are more likely to continue into the future than are new car sales.

CHAPTER 9
APPLYING MARKETING KNOWLEDGE
1.What variables might be used to segment these consumer markets? (a) lawn mowers, (b)
frozen dinners, (c) dry breakfast cereals and (d) soft drinks?
Answers:
a. Lawn mowers. Type (nonpowered, powered; walking, sitting, robotic; gas, electric);
lawn (areasquare footage; kindyard, field); or location (city, suburban, rural).
b. Frozen dinners. Family size; ethnic type (American, Italian, Mexican, Chinese, etc.);
cooking (microwave, oven); price (budget, regular) health consciousness (low fat, low
carb, Atkins certified); or price (branded, generic).
c. Dry breakfast cereals. Age (child, teenager, adult); health consciousness (low carb,
vitamins, heart healthy); or price (branded, generic).
d. Soft drinks. Type/flavor (cola, noncola); health consciousness (sugar free, low carb,
fitness/vitamins); or price (branded, generic).
2. What variables might be used to segment these industrial markets? (a) industrial
sweepers, (b) photocopiers, (c) computerized production control systems, and
(d) car rental agencies?
Answers:
a. Industrial sweepers. Amount of floor area to sweep; kind of refuse to collect (dust,
paper, metal shavings); or environment (factory, shopping mall).
b. Photocopiers. Type (color, black & white); speed (pages per minute); average number
of copies per day; image clarity (resolution), or use (copy, reduction, enlargement).
c. Computerized production control systems. Kind of operation (job shop, mass
production); number of parts and amount of inventory; or amount of fabrication
performed.
d. Car rental agencies. Use of vehicle (business, vacation); price (daily, weekly,
monthly); location (at airport, off-site); usage (frequent, occasional); or size of renter
group (1 person, 2 people, etc.).
3. In Figure 9-8, the dormitory market segment includes students living in college-owned
residence halls, sororities, and fraternities. What market needs are common to these
students that justify combining them into a single segment in studying the market for
your Wendys restaurant?

Answer: Market needs common to students in college-owned residence halls, sororities,

and fraternities that may justify combining them are the presence of meal contracts and,
hence, their need for specific meals for the same times of the day or day of the week.

4. You may disagree with the estimates of market size given for the rows in the marketproduct grid in Figure 9-8. Estimate the market size, and give a brief justification for
these market segments: (a) dormitory students, (b) day commuters, and (c) people
who work in the area.
Answers:
a. Dormitory students. Probably have a meal contract for breakfast, lunch, and/or
dinner. Thus, other meals (between meal or after dinner snack) represent larger
potential for fast-food restaurants.
b. Day commuters. Will generally be gone by mid-afternoon, which reduces sales for
dinners and after-dinner snacks.
c. People who work in the area. Lunch may be the biggest market assuming they have a
lunch period they can take outside their building. Some may choose to eat or take out a
dinner meal on their way home.
5. Suppose you want to increase revenues for your fast-food restaurant even further.
Referring to Figure 9-9, what advertising actions might you take to increase revenues
from (a) dormitory students, (b) dinners, and (c) after-dinner snacks from night
commuters?
Answers:
a. Dormitory students. Coupons under dorm doors promoting 50 cents off meals at
restaurant or free shakes with regular dinner.
b. Dinners. Special price or meal promotions (value meals, daily special, etc.)
directed to night commuters and apartment residents.
c. After dinner snacks from night commuters. Price promotions or coupons on flyers
under the windshield wipers of cars parked in student parking lots after 5:30 PM.

6. Locate these drinks on the perceptual map in Figure 9-10: (a) cappuccino, (b) beer,
and (c) soy milk?
Answers:
a. Cappuccino. Cappuccino is a frothy blend of coffee and milk. Given that coffee is
positioned as an adult drink with relatively low nutrition and regular milk is positioned
as a childrens drink with high nutrition, cappuccino can be positioned as an adult drink
with modest nutrition since it is made with milk and children are unlikely to drink it
since it is made with coffee.
b. Beer. Beer is positioned as an adult drink since it is illegal for children to buy it.
Moreover, beer is not very nutritious.
c. Soy milk. Increasingly, both children and adults are drinking soy milk because of its
high nutrition and health benefits.

CHAPTER 10
APPLYING MARKETING KNOWLEDGE
1.Products can be classified as either consumer or business products. How would you
classify the following products? (a) Johnsons baby shampoo, (b) a Black & Decker
two-speed drill, and (c) an arc welder?
Answers:
a. Johnsons baby shampoo. A consumer product.
b. Black & Decker two-speed drill. A consumer product, if used by a do-it-yourselfer
for work around the house or in hobbies or a business product, if used by a construction
worker building a new home.
c. Arc welder. A business product.
2. Are Nature Valley Granola bars and Eddie Bauer hiking boots convenience,
shopping, specialty, or unsought products?
Answers:
a. Nature Valley Granola bars. Convenience product.
b. Eddie Bauer hiking boots. Shopping product.
3. Based on your answer to question 2, how would the marketing actions differ for each
product and the classification to which you assigned it?
Answers:
a. Nature Valley Granola bars. Since this item is likely to be available to consumers
wherever food and snack products are sold. Distribution of this product would include
grocery, convenience, and mass merchandise stores and probably vending machines,
since accessibility is important in the purchase of any convenience item.
b. Eddie Bauer hiking boots. Consumers who want this product will shop for hiking
boots, comparing the advantages and disadvantages of several brands. Since Eddie
Bauer will be compared against other brands, it is important to point out the differences
that make the Eddie Bauer hiking boot a good value for the consumer.

4. In terms of the behavioral effect on consumers, how would a PC, such as an Apple
iMac, be classified? In light of this classification, what actions would you suggest to
the manufacturers of these products to increase their sales in the market?
Answers:
a. Classifying personal computers. When first introduced, the personal computer was a
discontinuous innovation. Using a computer for recreation, taxes, recipes, and
education of children was not common. The consumer had to learn a totally new way
to interact with a machine in order to get the desired results from the software.
b. Actions of manufacturers. For the manufacturers of these products, education became
a major obstacle, and product trial was particularly important to overcome consumer
fears or hesitancies. Today, these desktop computers are a far more easier to do
personal computing, but they can be considered continuous innovations. Now Apples
and other PC marketers task is to sell prospective buyers on the competitive points of
difference of their respective laptops.
5. What methods would you suggest to assess the potential commercial success for the
following new products? (a) a new, improved ketchup, (b) a three-dimensional
television system that took the company 10 years to develop, and (c) a new childrens
toy on which the company holds a patent.
Answers:
a. New, improved ketchup. In the test marketing of a new ketchup, use of a purchase
laboratory might be the most advantageous method to assess the products likely
success. Competitive imitation of the product would be a real fear for the company,
since imitation would be quick to follow in a test market situation.
b. Three-dimensional television system. The three-dimensional television set might be a
product that would require field-testing. Assuming that the technology was sufficient
to produce a high-quality picture, actual consumer acceptance and purchase would be
important. Moreover, since the development of the technology took the company such
a long time, it would be unlikely that a competitor could quickly imitate the product.
c. New childrens toy. The company holds a patent for the childrens toy. In this
instance, field-testing is not a problem.

6. Concept testing is an important step in the new-product process. Outline the concept
tests for (a) an electrically powered car and (b) a new loan payment system for
automobiles that is based on a variable interest rate . What are the differences in
developing concept tests for products as opposed to services?
Answers:
a. Electrically powered car. The concept test for an electrically powered car would
describe the product in terms of similar autos but would highlight the differences from
existing gasoline-powered engines from the consumer's perspective.
b. New loan payment system for automobiles. A concept test for a variable rate interest
car loan would have to show how the monthly payment for the loan would change as
the interest rate index factor changes.
The major difference in concept tests between products and services is that services are
more difficult to concept test. It is harder to relate an intangible service to consumer
experience in order to explain a purpose or new concept (also intangible).

CHAPTER 11
APPLYING MARKETING KNOWLEDGE
APPLYING MARKETING KNOWLEDGE
1. Listed here are three different products in various stages of the product life cycle.
What marketing strategies would you suggest to these companies? (a) Canon digital
camerasgrowth stage, (b) Hewlett-Packard tablet computersintroductory stage,
and (c) handheld manual can openersdecline stage.
Answers:
a. Canon digital cameras (growth). Canon must try to generate selective demand in the
face of increasing competition that occurs during the growth stage of the product life
cycle. The company could offer new features, such as higher megapixel resolution or
add accessories, such as lens, for the same price as preceding models.
b. Hewlett-Packard tablet computers (introductory). HP must generate awareness by
running ads or generating publicity for its tablet PCs at venues such as the annual
Consumer Electronics trade show. The company must stimulate primary demand.
c. Handheld manual can openers (decline). Handheld can opener firms may choose to
market their can openers in developing countries where electricity is not widely
available in households or where electric can openers are viewed as a discretionary
item.
2. It has often been suggested that products are intentionally made to break down or
wear out. Is this strategy a planned product modification approach?
Answer: Sellers rarely make products deliberately intended to break down or wear out but
they often reduce the products life expectancy (engineered obsolescence) and quality to
lower the price and make it more affordable to consumers. These consumers may then
replace the worn out product with a newer, upgraded onewhich in this case is a planned
product modification approach.
3. The product manager of GE is reviewing the penetration of trash compactors in
American homes. After more than two decades in existence, this product is in
relatively few homes. What problems can account for this poor acceptance?
What is the shape of the trash compactor life cycle?
Answers:
a. Poor acceptance. The trash compactor is a high-learning product. The problems for
poor acceptance include convincing consumers there is a benefit to compacting trash.
There is also a fear among consumers about having a household appliance that has such
force. Also, safety is a persistent worry.

b. Life cycle shape. The trash compactors product life cycle would seem to be in an
extended introduction stage; its shape depicts a gradual rise in total product sales over
two decades.
4. For years, Ferrari has been known as the manufacturer of expensive luxury
automobiles. The company plans to attract the major segment of the car-buying
market who purchase medium-priced automobiles. As Ferrari considers this tradingdown strategy, what branding strategy would you recommend? What are the tradeoffs to consider with your strategy?
Answers:
a. Branding strategy recommendation. Due to the brand equity in the Ferrari name, a
multibranding strategy should be employed since the medium-priced car is targeted at a
significantly different market segment. Car makers such as Toyota (Lexus), Nissan
(Infinity), Honda (Acura), and General Motors (Cadillac), etc. employ this strategy.
b. Branding strategy trade-offs. Trading down for Ferrari is very risky. The firm may
lose the profitable, luxury market that purchases its expensive cars. If Ferrari develops
a new car, it should choose a different Italian-sounding brand name. The company
might promote its heritage as designed by the makers of Ferrari. This different name
might minimize the impact on their loyal buyers. Obviously, this approach means the
company must spend more money promoting the name of this new car.
5. The nature of product warranties has changed as the federal court system reassesses
the meaning of warranties. How does the regulatory trend toward warranties affect
product development?
Answer: The strict liability rules will make manufacturers more cautious about the products
that they bring to market. Companies will have to spend more time in the development
process to ensure there are no defects or complications that will make them liable for
repairs or replacement of faulty products.

CHAPTER 13
APPLYING MARKETING KNOWLEDGE
1. How would the price equation apply to the purchase price of (a) gasoline,
(b) an airline ticket, and (c) a checking account?
Answers:
ITEM
PURCHASED

a.

Gasoline

FINAL LIST PRICE

DISCOUNTS AND
ALLOWANCES ()

EXTRA FEES (+)

Final price

= Pump price

Cash discount
Seasonal,
frequent flyer,

and off-peak
discounts

Premium for fist

+ class, peak hours
flight

Discount for
checking balance
over set amount

b.

Airline ticket

Final fare

Standard
=
coach fare

c.

Checking
account

Service
charge

Standard
= service
charge

Per check charge

based on activity

2. What would be your response be to the statement, Profit maximization is the only
legitimate pricing objective for the firm?
Answer: Profit maximization is not the only legitimate pricing objective for a firm. Often,
a firm sets a target return or a long-run profit objective. Nonprofit goals, such as unit sales,
market share, as well as social responsibility objectives are also legitimate pricing goals.
3. How is a downward-sloping demand curve related to total revenue and marginal
revenue?
Answer: A total revenue curve is developed by multiplying the unit price times the quantity
for each point on the demand curve. As price is reduced, total revenue increases and
marginal revenue decreases, but is positive. Below the point on the demand curve where
marginal revenue equals zero, total revenue decreases and marginal revenue becomes
negative.
4. A marketing executive once said, If the price elasticity of demand for your product is
inelastic, then your price is probably too low. What is this executive saying in terms
of the economic principles discussed in this chapter?
Answer: If the price elasticity of demand for a given product is inelastic, then a price
increase will also increase total revenue. Therefore, the executive is saying that a price
increase will increase total revenue.

5. A marketing manager reduced the price on a brand of cereal by 10 percent and

observed a 25 percent increase in quantity sold. The manager then thought that if the
price were reduced by another 20 percent, a 50 percent increase in quantity sold
would occur. What would be your response to the marketing managers reasoning?
Answer: The marketing manager is reasoning that if s/he doubles the price cut on the brand
of cereal, then quantity sold will also double. This would imply that the actual demand
curve for this particular product is a straight line and that price elasticity of demand is the
same over all possible prices of the product. However, in actuality, demand curves are
generally convex, and price elasticities vary at different prices along the demand curve.
6. A student theater group at a university has developed a demand schedule that shows
the relationship between ticket prices and demand based on a student survey, as
follows:

(a) Graph the demand curve and the total revenue curve based on these data.
What ticket price might be set based on this analysis?

Answers: Based on this analysis, the ticket price should be set at $3. At this price, total
revenue is highest at $600. The total revenue is the same at $4 but costs are lower at $3.

(b) What other factors should be considered before the final price is set?
Answer: Other factors that should be considered include the total costs of the theater
production, the seating capacity of the theater, and the responsibility of the theater to
charge a price that all students can afford.
7. Touch Toiletries, Inc., has developed an addition to its Lizardman Cologne line
tentatively branded Ode dToade Cologne. Unit variable costs are 45 cents for a
three-ounce bottle, and heavy advertising expenditures in the first year would result
in total fixed costs of $900,000. Ode dToade Cologne is priced at $7.50 for a threeounce bottle. How many bottles of Ode dToade must be sold to break even?
Answer:
BEP =

BEP =

Fixed Cost
Unit Price Unit Variable Cost
$900,000
$7.50 $0.45

BEP = 127,660 units

8. Suppose that marketing executives for Touch Toiletries reduced the price to $6.50
for a three-ounce bottle of Ode dToade and the fixed costs were $1,100,000. Suppose
further that the unit variable cost remained at 45 cents for a three-ounce bottle.
(a) How many bottles must be sold to break even? (b) What dollar profit level would
Ode dToade achieve if 200,000 bottles were sold?
Answers:
a. The number of bottles that needed to be sold to break even is:
BEP =

BEP =

Fixed Cost
Unit Price Unit Variable Cost
$1,100,000
$6.50 $0.45

BEP = 181,818 units

b. The profit received if 200,000 bottles were sold is:

Profit

= Total Revenue Total Cost

= (Unit Price Quantity Sold) Total Cost
= (P Q) [FC + (UVC Q)]
= ($6.50 200,000) [$1,100,000 + ($0.45 200,000)]
= $1,300,000 [$1,100,000 + $90,000]

Profit

= $110,000

9. Executives of Random Recordings, Inc., produced an album entitled

Sunshine/Moonshine by the Starshine Sisters Band. (a) Using the price and cost
information in the table, prepare a chart like that in Figure 13-10 showing total cost,
fixed cost, and total revenue for album quantity sold levels starting at 10,000 CDs
through 100,000 CDs at 10,000 CD intervals, that is, 10,000; 20,000; 30,000; and so on.
(b) What is the break-even point for the CD?

Answers:
a. The chart, based on Figure 13-10, is:
Quantity
Sold
(Q)

Price
per CD
(P)

10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000

$9
$9
$9
$9
$9
$9
$9
$9
$9
$9

Total
Revenue
(TR)
$90,000
$180,000
$270,000
$360,000
$450,000
$540,000
$630,000
$720,000
$810,000
$900,000

Unit
Variable
Cost
(UVC)
$3
$3
$3
$3
$3
$3
$3
$3
$3
$3

Total
Variable
Cost
(VC =
UVC x Q)
$30,000
$60,000
$90,000
$120,000
$150,000
$180,000
$210,000
$240,000
$270,000
$300,000

Fixed
Cost
(FC)
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000

Total
Cost
(TC =
FC + VC)

Profit
(TR TC)

$130,000
$160,000
$190,000
$220,000
$250,000
$280,000
$310,000
$340,000
$370,000
$400,000

($40,000)
$20,000
$80,000
$140,000
$200,000
$260,000
$320,000
$380,000
$440,000
$500,000

b. The break-even point for the CD is:

BEP =

BEP =

Fixed Cost
Unit Price Unit Variable Cost
$100,000
$9.00 ($1.00 + $0.30 + $0.70 + $1.00)

BEP = 16,667 units

CHAPTER 14
APPLYING MARKETING KNOWLEDGE
1.Under what conditions would a digital camera manufacturer adopt a skimming price
approach for a new product? A penetration approach?
Answers:
a. Skimming pricing approach. A digital camera manufacturer might adopt a skimming
price approach if the new product is unique and already has a significant prospective
customer base. Some type of protection from competitive products such as a patent
would also enhance the effectiveness of a skimming strategy.
b. Penetration pricing approach. A penetration price approach might be adopted if the
new products unit production and marketing costs fall dramatically as production
volume increases and if many of its market segments are price sensitive. Such a
product would most likely appeal to a broad segment of the population and be
positioned as a me-too product.
2. What are some similarities and differences between skimming pricing, prestige
pricing, and above-market pricing?
Answers:
a. Similarities. Skimming, prestige, and above-market pricing all involve setting a
premium price for a product, hoping consumers will associate high quality with high
price. Generally, these three pricing strategies are most effective when product demand
is inelastic.
b. Differences. Frequently, a skimming price approach is used when there are no
competitively positioned products, and therefore prices, to use as a benchmark. An
above-market price strategy requires a competitive reference point or price. Prestige
pricing typically requires a greater subjective component than the other two methods.

3. A producer of microwave ovens has adopted an experience curve pricing approach

for its new model. The firm believes it can reduce the cost of producing the model by
20 percent each time volume doubles. The cost to produce the first unit was $1,000.
What would be the approximate cost of the 4,096th unit?
Answer: Based on the calculations identified in the table below, the approximate cost of the
4,096th unit produced is $69.

4. The Hesper Corporation is a leading manufacturer of high-quality upholstered sofas.

Current plans call for an increase of $600,000 in the advertising budget. If the firm
sells its sofas for an average price of $850 and the unit variable costs are $550, then
what dollar sales increase will be necessary to cover the additional advertising?
Answer: To calculate the incremental sales increase needed to cover the additional
advertising expense of $600,000 (the incremental increase in fixed cost), one must first
calculate the number of incremental units that need to be sold, which is then multiplied by
the average price of $850.

BEP =

BEP =

Incremental Fixed Cost

Unit Price Unit Variable Cost
$600,000
$850 $550

BEP = 2,000 units

The incremental sales needed to cover the additional advertising expense of $600,000 is:
2,000 units $850 = $1,700,000.

5. Suppose executives estimate that the unit variable cost for their VCR is $100, the fixed
cost related to the product is $10 million annually, and the target volume for next year
is 100,000 recorders. What sales price will be necessary to achieve a target profit of
$1 million?
Answer: The sales price under a target profit pricing strategy is calculated as follows:
a. Profit equation assumptions. Recall the profit equation from Chapter 13.
Profit Equation = Total Revenue (TR) Total Cost (TC)
TR = Price (P) Quantity (Q)
TC = Fixed Cost (FC) + Variable Costs (VC)
VC = Unit Variable Cost (UVC) (Q)
Profit = (P Q) [FC + (UVC Q)]
b. Sales price calculation.
Profit
$1,000,000
$1,000,000
$21,000,000
P

=
=
=
=
=

(P Q) [FC = (UVC Q)]

(P 100,000) [$10,000,000 + ($100 100,000)]
100,000P $20,000,000
100,000P
$210

The sales price needed to achieve a target profit of $1 million is $210.

6. A manufacturer of motor oil has a trade discount policy whereby the manufacturers
suggested retail price is $30 per case with the terms of 40/20/10. The manufacturer
sells its products through jobbers, who sell to wholesalers, who sell to gasoline
stations. What will the manufacturers sales price be?
Answer:
a. Trade discount assumptions. The motor oil manufacturers trade discount policy of
40/20/10 means that 40% of the manufacturers suggested retail price (MSRP) of $30
goes to the retailer, 20% goes to wholesalers, and 10% goes to jobbers.

b. Manufacturers sales price calculation. Using Figure 14-7, the structure of the trade
discounts for each channel member is calculated as follows:

The manufacturers realized sales price is $12.96.

7. Suppose a manufacturer of exercise equipment sets a suggested price to the consumer

of $395 for a particular piece of equipment to be competitive with similar equipment.
The manufacturer sells its equipment to a sporting goods wholesaler who receives 25
percent and a retailer who receives 50 percent of the selling price. What demandbased pricing method is being used, and at what price will the manufacturer sell the
equipment to the wholesaler?
Answers:
a. Demand-oriented pricing approach used. The manufacturer is using a target pricing
strategy.
b. Sales price calculation.

The sales price the manufacturer will sell the equipment to the wholesaler is $148.13.

8. Is there any truth in the statement, Geographical pricing schemes will always be
unfair to some buyers? Why or why not?
Answer: Unless a geographical pricing scheme individually figures transportation charges
for each wholesaler and retailer in the distribution channel, some buyers will be priced
unfairly owing to uniform pricing schemes.

CHAPTER 15
APPLYING MARKETING KNOWLEDGE
1. A distributor for Celanese Chemical Company stores large quantities of chemicals,
blends these chemicals to satisfy requests of customers, and delivers the blends to a
customers warehouse within 24 hours of receiving an order. What utilities does this
distributor provide?
Answer: The distributor for Celanese Chemical Company provides time utility because it
delivers blends to a customers warehouse within 24 hours of receiving an order. Each
time a product is delivered to a customers warehouse, the distributor provides possession
utility. Finally, the distributor provides form utility each time it blends chemicals to meet a
customers specifications.
2. (a) Suppose the president of a carpet manufacturing firm has asked you to look into
the possibility of bypassing the firms wholesalers (who sell to carpet, department,
and furniture stores) and selling directly to these stores. (b) What caution would you
voice on this matter, and what type of information would you gather before making
this decision?
Answer: Before making a decision to bypass the firms distributors, a firm should consider
all the functions the distributors perform. Information on the costs incurred by distributors
should be gathered and compared with a system where the distributor is bypassed. Also,
functions performed by distributors, such as maintaining sensitive relationships with
customers, are difficult to put a monetary value on. Therefore, qualitative factors must
enter into the decision as well.
3. What type of channel conflict is likely to be caused by dual distribution, and what
type of conflict can be reduced by direct distribution? Why?
Answer: A dual distribution system is most likely to cause horizontal conflict between
intermediaries. On the other hand, direct distribution is most likely to reduce vertical
conflict.
4. How does the channel captain idea differ among corporate, administered, and
contractual vertical marketing systems with particular reference to the use of the
different forms of influence available to firms?
Answer: Corporate, administered, and contractual systems achieve influence largely
through size resulting from combining firms or stages. Channel captains, on the other hand,
generate influence from their financial position, expertise in a given area, identification
with a particular channel member, or from a legitimate right resulting from a contractual
agreement.

5. Comment on this statement: The only distinction among merchant wholesalers and
agents and brokers is that merchant wholesalers take title to the products they sell.
Answer: Agents and brokers provide a limited number of channel functions, whereas many
full-line merchant wholesalers perform all channel functions. Additionally, agents and
brokers make their profit from commissions or fees paid for their services, whereas
merchant wholesalers make their profit from the sale of the merchandise they own.
6. How do specialty, shopping, and convenience goods generally relate to intensive,
selective, and exclusive distribution? Give a brand name that is an example of each
goods-distribution match up.
Answers:
DISTRIBUTION DENSITY

PRODUCT TYPE

BRAND

Exclusive distribution

Specialty goods

Rolls Royce

Selective distribution

Shopping goods

Panasonic HDTV

Intensive distribution

Convenience goods

Orbit chewing gum

7. How would you respond to the statement: Marketing channels with the highest sales
always produce the highest profit.
Answer: The truth of this statement depends on whether a marketing channel is performing
its channel functions (transactional, logistical, and facilitating) in an optimal (efficient and
effective) manner, if there is minimal channel conflict, and if channel margins and costs are
balanced among channel members.

CHAPTER 17
APPLYING MARKETING KNOWLEDGE
1. Discuss the impact of the growing number of dual-income households on (a) nonstore
retailing and (b) the retailing mix.
Answers:
a. Nonstore retailing. Nonstore retailing alternatives such as online retailing are growing
as a convenient way for two-income households to shop. Television home shopping,
direct mail, and catalogs also provide convenient retailing alternatives to these
households.
b. The retailing mix. Retailers will have to adjust their mix in terms of store hours and
locations. Working couples may need to shop at less traditional times and in locations
convenient from their work location. Also, credit cards and online ordering may
become more important because of the time pressure on these types of households.
2. How does value added affect a stores competitive position?
Answer: Value added affects a stores position by focusing on the mix elements other than
product line. Elements such as location, reliability, and prestige are key aspects of the
value added component.
3. In retail pricing, retailers often have a maintained markup. Explain how this
maintained markup differs from original markup and why it is so important.
Answer: Maintained markup differs from original markup in an important way.
Maintained markup is the final selling price less retailers cost. Original markup is the
initial selling price less the retailers cost. Initial markup is what the retailer hopes to get
for the product; maintained markup is what the retailer can actually sell an item for to
consumers. It must cover costs for a retailer to show a profit.
4. What are the similarities and differences between the product and retail life cycles?
Answers:
a. Similarities. The retail and product life cycles are similar in that they consist of four
stages over which market share and profit (from sales) are matched. In the first stage of
each life cycle, new retail forms or products enter the market. Competition emerges in
the second stage, and by the maturity stage, the major fighting between competitors has
occurred. In decline stage, both curves show falls in market share and profit).
b. Differences. Differences relate to nomenclature. The first stage of the product life
cycle is introduction as opposed to the retail life cycles early growth. The second
stage of the PLC is growth versus the retail life cycles accelerated development.

5. How would you classify Walmart in terms of its position on the wheel of retailing
versus that of an off-price retailer?
Answer: Walmart is moving up the wheel of retailing. Walmart has added services.
Off-price retailers represent todays low-price, low-margin, low-status new entrant.
6. Develop a chart to highlight the role of each of the four main elements of the retailing
mix across the four stages of the retail life cycle.
Answer:
RETAIL LIFE CYCLE
RETAIL MIX

EARLY
GROWTH

ACCELARATED
DEVELOPMENT

Offer breadth or
depth

PRICING

COMMUNICATIONS

GOODS AND
SERVICES

PHYSICAL
DISTRIBUTION

MATURITY

DECLINE

Expand line on
breadth or depth

Maintain

Shrink to
profitable items

Skimming
pricing

Penetration
pricing

Price
discounting
Flexible-pricing

Bundle pricing
Loss-leader
pricing

Focus on
awareness

Highlight
competitive
advantages

Focus on
specials to keep
customers

Limited

Few locations

Expand number
of outlets

Maintain

Shrink number
of outlets

7. In Figure 17-8, Payless ShoeSource was placed on the retail positioning matrix. What
strategies should Payless ShoeSource follow to move itself into the same position as
Tiffany?
Answer: To move into the same position as Tiffany, Payless ShoeSource must increase its
value added. Value added could be enhanced with more service to the consumer.
In addition, modifying its visual presentation or creating a more exciting atmosphere might
change Payless ShoeSources position on the value added dimension.

8. Breadth and depth are two important components in distinguishing among types of
retailers. Discuss the breadth and depth implications of the following retailers
discussed in this chapter: (a) Levi Strauss, (b) Walmart, (c) L.L. Bean, and
(d) Best Buy.
Answers:
a. Levi Strauss. Provides great depth and little breadth by manufacturing and selling
hundreds of styles and sizes of jeans.
b. Walmart. Provides great breadth by offering a huge variety of products. However, its
line has little depth.
c. L.L. Bean. As a catalog retailer, it has relatively little depth and moderate breadth.
d. Best Buy. Is a category killer or a specialty discount outlet that has great depth but
little breadth.
9. According to the wheel of retailing and the retail life cycle, what will happen to
factory outlet stores?
Answer: Factory outlet retailers will begin to add services, raise their status, and
subsequently their margins. This retailing form should hit maturity earlier than previous
retailing forms.
10. The text discusses the development of online retailing in the United States. How does
the development of this retailing form agree with the implications of the retail life
cycle?
Answer: Online retailing really is only a decade old. It began in earnest during the mid1990s when higher Internet speeds became wide spread, transactions became secure, and
consumers became more comfortable browsing and shopping for products. However, the
number of online retailers has recently declined. This may be due in part to the dot-com
failures during the latter 1990s and early 2000s when many online retailers, such as
Pets.com and Webvan, spent huge sums on advertising, primarily the Super Bowl and little
else on the other elements of the promotional mix.
The balance that retailers now have struck between bricks and clicks may signal that
online retailing has entered the maturity stage of the retail life cycle after a very short
period of time in the early growth and accelerated development stages. Perhaps the
maturity stage, with this newfound equilibrium, will last an extended length of time.

CHAPTER 18
APPLYING MARKETING KNOWLEDGE
1.After listening to a recent sales presentation, Mary Smith signed up for membership at
the local health club. On arriving at the facility, she learned there was an additional
fee for racquetball court rentals. I dont remember that in the sales talk; I thought
they said all facilities were included with the membership fee, complained Mary.
Describe the problem in terms of the communication process.
Answer: The problem is miscommunication between the sender (the health club
representative) and the receiver (Mary Smith) as a result of improper encoding or decoding
of the message (the sales presentation). There may have been noise in the channel that
prevented proper decoding of the message.
2. Develop a matrix to compare the five elements of the promotional mix on three
criteriato whom you deliver the message, what you say, and when you say it.
Answer:
PROMOTIONAL ELEMENT
ADVERTISING

PERSONAL
SELLING

PUBLIC
RELATIONS

SALES
PROMOTION

DIRECT
MARKETING

Whom

Some control
based on
where ad is
placed

Great control:
depends who
salesperson
contacts

No control
over who
sees it

Some control
over where
sent, used,
displayed, etc.

Great control
with data
base selection
of recipients

What

Great control:
company
develops
message

Some control:
salesperson
can vary
presentation

Little control
over what
media
transmits

Great control
over type of
promotion and
message

Great control:
company
develops
message

When

Great control:
space may not
be available

Great control
based on
salespersons
timing of call

Little control
except for
timing of
when it occurs

Some control
over duration

Great control
of timing

3. Explain how the promotional tools used by an airline would differ if the target
audience were (a) consumers who travel for pleasure and (b) corporate travel
departments that select the airlines to be used by company employees.
Answers:
a. Consumers. When promoting to pleasure travelers, mass advertising would be used
because of the large number of potential customers and their wide geographical
dispersion.

b. Corporate travel departments. An airline selling to corporate travel departments may

rely more on a personal sales calls, since the number of potential customers is relatively
small who require complex information that could not be addressed in advertising.
4. Suppose you introduced a new consumer food product and invested heavily both in
national advertising (pull strategy) and in training and motivating your field
salesforce to sell the product to food stores (push strategy). What kinds of feedback
would you receive from both the advertising and your salesforce? How could you
increase both the quality and quantity of each?
Answers: In general, you should expect little feedback from your national advertising
campaign and better feedback from your salesforce. In either case, if you want to get
high quality, representative feedback, you as the sender must take some proactive steps.
Advertising feedback. For the national advertising campaign, you can get some estimate
of response by including a web site address for prospective consumers to visit, or a coupon
in any print ads that you run. To get more detailed feedback, marketers often use
marketing research to measure how many people were exposed to the ad, how they felt
about the ad, what they remember about the message, and how likely they are to buy and
use the product. This information can be obtained through various survey techniques.
Salesforce feedback. To obtain feedback from the salesforce, the marketer again must
spend time and effort. Call reports can be analyzed to see how much time the salesforce is
giving to selling the new product. Invoices can be examined to see how many retailers are
accepting the product. The salesforce can also be surveyed to get its reaction to selling this
product in terms of both problems and successes.
5. Fisher-Price Company, long known as a manufacturer of childrens toys, has
introduced a line of clothing for children. Outline a promotional plan to get this
product introduced in the marketplace.
Answer: Fisher-Price should begin to generate publicity targeted at wholesalers and
retailers (push strategy) as well as ultimate consumers (pull strategy) regarding this
extension of their product line. Moreover, when the product is offered, mass advertising on
television and in magazines (such as Parents and Good Housekeeping) may be valuable.
Sales promotion should be used in the form of coupons placed in boxes of Fisher-Price toys
for purchases of clothing. The salesforce should begin to work aggressively to get retailers
to stock the line, and a trade allowance might be offered to these intermediaries.

6. Many insurance companies sell health insurance plans to companies. In these

companies, the employees pick the plan, but the set of offered plans is determined by
the company. Recently Blue Cross-Blue Shield, a health insurance company, ran a
television ad stating, If your employer doesnt offer you Blue Cross-Blue Shield
coverage, ask why. Explain the promotional strategy behind the advertisement.
Answer: The promotional strategy used is a pull strategy. The channel might be viewed as:
BLUE CROSS - BLUE SHIELD

4. BC - BS offers plan to employer

3. Employer requests plan

1. TV ad

EMPLOYER

5. Employer offers plan to employees

2. Employees request plan

EMPLOYEE

If the employer does not offer the Blue Cross-Blue Shield plan, the employee cannot
choose it. Getting employees to ask why the plan is not offered may pull the plan into the
companys offering.
7. Identify the sales promotion tools that might be useful for (a) Tastee Yogurt, a new
brand introduction, (b) 3M self-sticking Post-It Notes, and (c) Wrigleys Spearmint
Gum.
Answers:
a. Tastee Yogurt. The Tastee Yogurt product is in the introductory stage of the product
life cycle. As a result, coupons and in-store free samples may help the introduction.
b. 3M self-sticking Post-It Notes. 3M Post-It Notes are in the mature stage of the
product life cycle. As a result, point-of-purchase displays will serve as reminders of a
consumers need for the product.
c. Wrigleys Spearmint Gum. Wrigleys Spearmint Gum is a mature, well-known
brand. A premium, which ties this brand into another product or product line, may
encourage additional purchases. Additionally, a point-of-purchase display at the
counter will encourage impulse purchases.

8. Design an integrated marketing communications programusing each of the five

promotional elementsfor Rhapsody, the online music service.
Answers:
a. Advertising. Ads placed in Billboard, Rolling Stone, Wired, and PC Magazine.
b. Personal selling. Sales calls by a salesperson to record companies to get tracks online.
c. Public relations. Video news releases and press conferences.
d. Sales promotion. Online contest to win free downloads or discounts for first-time
users or coupons shrink-wrapped in CD cases.
e. Direct marketing. E-mails to potential customers who have opted-in for such
contact.
The tagline, Think It. Hear It. would be part of all advertising, promotions, direct mail
pieces, brochures, and packaging. Customers can: hear song clips; view cover art and
photos; read bios, interviews and reviews; and order CDs and DVD music videos, if
desired.
9. BMW recently introduced its first sport-utility vehicle, the X6, to compete with other
crossover vehicles such as the Mercedes-Benz R-class and Buicks Enclave. Design
a direct marketing program to generate (a) leads, (b) traffic in dealerships, and
(c) direct orders.
Answers: Students should consider the many forms of direct marketing including direct
mail and catalogs, television, telemarketing, direct selling, direct response advertising and
interactive online marketing. Instructors can remind students of the discussion of nonstore
retailing in Chapter 17 and alert them to the online discussion in Chapter 21.
a. Leads. Lead generation discussions should focus on creating interest and generating
requests for additional information. Direct mail and advertising that encourages
consumers to visit a web page for additional information are effective.
b. Traffic in dealerships. Building traffic in dealerships could include sweepstakes and
events promotions that require a visit to a dealership or a test drive to enter the
sweepstakes or participate in the event. Be sure geographical directions, locations, and
contact numbers are included.
c. Direct Orders. Direct order generation should be built around calls to action and
reinforcement promotions. In general, an integrated approach based on the students
statement of objectives and tasks for the program would be an acceptable solution.

This is a good opportunity for the instructor to incorporate the necessity for good planning
and a way to impress students with the need for the objective and task approach.
10. Develop a privacy policy for database managers that provide a balance of consumer
and seller perspectives. How would you encourage voluntary compliance with your
policy? What methods of enforcement would you recommend?
Answer: Students answers will vary. To begin the discussion, ask students to consider the
guidelines provided in the European Union Data Protection Directive. The directive
suggests that consumers have the right (1) to be informed of any data processing when they
are the data subject, (2) of access to data about them, and (3) to access to the logic on
which automated decisions are based. Students should be encouraged to discuss the value
of self-regulation versus enforcement by outside bodies in terms of penalties and breadth of
items covered. Methods of enforcement discussions should bring out the difficulties and
advantages of enforcement in a voluntary membership group. A good strategy would be to
compare and contrast well-known examples and to bring the discussion to current topics,
such as the regulation of the Internet and e-mail advertising.

CHAPTER 19
APPLYING MARKETING KNOWLEDGE
1.How does competitive product advertising differ from competitive institutional
advertising?
Answer: Competitive product advertising promotes a brands specific features and benefits.
Competitive institutional advertising is used at the product class, rather than brand level.
For example, a competitive product ad might emphasize the benefits of Perdue chickens
versus other brands. A competitive institutional ad would emphasize the advantage of
eating chicken rather than beef.
2. Suppose you are the advertising manager for a new line of childrens fragrances.
Which form of media would you use for this new product?
Answer: The answer to this question depends on whether you are focusing on the child who
might use the product or the parent who might be the primary purchaser of the product.
If the target is children, television is probably the best medium to reach this audience.
With parents, however, you have more latitude in your choice. Magazines are probably the
best choice because they can provide efficient reach to this segment of the population.
3. You have recently been promoted to be director of advertising for the Timkin Tool
Company. In your first meeting with Mr. Timkin, he says, Advertising is a waste!
Weve been advertising for six months now and sales havent increased. Tell me why
we should continue. Give your answer to Mr. Timkin.
Answer: It is important to tell Mr. Timkin that it is difficult to measure the effects of
advertising on sales. First, many factors (competitors, the environment, distribution) can
affect sales. Second, the impact of advertising on sales may take more than six months to
become apparentit is possible that people who have seen the ads have not yet purchased
the product. Third, Mr. Timkin may be correctthe advertising may be wasted
coveragethe message either is not be decoded properly (see Chapter 15) or is not
reaching the intended target audience. If so, the message and/or media alternatives used
need to be analyzed and adjusted before additional expenditures are made.
4. A large life insurance company has decided to switch from using a strong fear appeal
to a humorous approach. What are the strengths and weaknesses of such a change in
message strategy?
Answer: This change involves a somewhat difficult tradeoff. Strong fear appeals are
effective in getting the audiences attention, but they may tune out the message because
people dont like to be reminded that they are mortal. Humorous appeals also can get
attention, in part because they are not used very frequently in this industry. However, they
may not provide enough motivation for the consumer to take action. Some people might
also argue that it is inappropriate to make fun of the very serious subject of death. The

Prudential Insurance Company did use humorous appeals in their advertising for life
insurance for a number of years with some success.
5. Which medium has the lowest cost per thousand?

Answer: The lowest cost is the TV show with a CPM of $200, as shown below:

6. Some national advertisers have found that they can have more impact with their
advertising by running a large number of ads for a period and then running no ads at
all for a period. Why might such a flighting schedule be more effective than a
continuous schedule?
Answer: Flighting can be especially effective when seasonal demands exist for the product,
such as for lawn and garden equipment. Also, such periods of advertising can complement
periods of heavy sales promotion such as a special event or contest. Another benefit of
flighting is that by running a large block of advertising at one time, the marketer can
sometimes achieve both greater reach and greater frequency in a short period of time.
The advertiser then relies on the effects of the campaign during the period of no
advertising.

7. Each year managers at Bausch & Lomb evaluate the many advertising media
alternatives available to them as they develop their advertising program for contact
lenses. What advantages and disadvantages of each alternative should they consider?
Which media would you recommend to them?
Answers:
a. The advantages and disadvantages of advertising media (excluding outdoor) for Bausch
& Lomb managers include the following:
MEDIUM

Television

ADVANTAGES
Reaches large audience of
potential contact lens users
Picture illustrates lens
Can target contact users

High cost
Difficult to convey
complex info about lens

Low Cost

No visual image of lens or

sight component to
message
Difficult to convey
complex info about lens

Ads convey complex info

Ads last a long time and
can be saved
Can select audience
High-quality color for
colored contact lens line

High cost
Long time needed to place
ads

Coverage of local markets

Ads can be saved
Can convey complex info

Ads compete with other

ads and feature articles
Short life span
Poor color

Ads can be interactive and

link to Web site
Can use animation to
explain how to use lens

Banner ads and pop-up ads

can provide little
information. Depends on
click-through
Effectiveness of medium
unknown

Target specific consumers

Can convey complex info
High-quality graphics

High cost per contact; low

response rates
Image of being junk mail

Radio

Magazines

Newspapers

Internet

Direct Mail

DISADVANTAGES

b. Since contact lens buyers require detailed information about the product and a
relatively long purchase period, magazines are the best advertising medium.
8. What are two advantages and two disadvantages of the advertising posttests
described in the chapter?
Answers: The main advantages and disadvantages for each are listed below:
POSTTEST
METHOD

ADVANTAGES

DISADVANTAGES

Measures specific exposure

behaviors
Easy to conduct
Inexpensive to conduct

Does not measure the

effects of advertising
Subject to the limitations
of peoples memory
May encourage guessing
Respondents may provide
what they believe are the
expected answers

Unaided
Recall

Also measures previous

exposure to advertising
A more difficult test for the
respondent
Helps to avoid some of the
guessing and yes saying

May miss even more of the

actual exposure due to
people forgetting what they
saw, heard, or read

Attitude
Tests

Better measure of
advertising effectiveness
than recall tests
Easy to conduct
Fairly inexpensive

Attitudes are complex and

difficult to express
Favorable attitude does not
mean ultimate purchase

Inquiry
Tests

Measure the direct

response of the consumer
Easy to conduct
Allow for tests of different
variables that motivate the
consumer

Can only be used for ads

that can logically make use
of an offer to elicit
inquiries
Can be time consuming

Directly measure
marketplace response

Difficult to tell how

important advertising is in
generating the sale
Difficult to tell the delayed
effects of advertising
Can be costly and time
consuming

Aided Recall

Sales Tests

 Better used to test entire

campaigns rather than
individual ads
9. Federated Banks is interested in consumer-oriented sales promotions that would
encourage senior citizens to direct deposit their Social Security checks with the bank.
Evaluate the sales promotion options, and recommend two of them to the bank.
Answers: Sales promotion alternatives such as coupons, contests, sweepstakes, samples,
rebates, and product placement are better suited to consumer goods than to this service.
Continuity programs are expensive and would require setting a minimum bank balance that
might exclude too many in the target audience. The two sales promotion options most
promising to reach senior citizens are deals and premiums.
a. Deals. A possible deal might be to offer free checking accounts to all customers
already using or signing up for direct deposit in the next 60 days; all other basic
checking accounts would have a minimum charge per month. It would be illegal to
apply age restrictions to this deal. To communicate the deal to senior citizens, bank
marketers need to consider advertising in the local newspaper and free tabloids and
radio advertising at appropriate times. The bank could also create a brochure about the
deal with a small point-of-purchase display to be placed in all branches of the bank and
in housing and community centers serving senior citizens. The brochure could also be
mailed out to all Federated Banks customers with their monthly statements.
b. Premiums. A possible premium might be a selection of items available free to any
customers signing up for direct deposit over the next 60 days. Items might include
mugs, canvas bags, and baseball caps with the Federated Banks logo. Cost quotations
for these items need to be obtained using quantities based on the promotion objectives
(How many customers are likely to accept the offer?). Again, this offer needs to be
communicated to potential new customers by advertising and direct mail. A costbenefit analysis of both options can help in making the decision about which to use.
10. How can public relations be used by Firestone and Ford following investigations into
complaints about tire failures?
Answer: Although public relations personnel usually focus on communicating positive
aspects of the business, they may also be called on to minimize the negative impact of a
problem or crisis. Debates between Firestone and Ford about the cause of tire failures
created a difficult situation for both public relations departments. Genuine concern and
desire to prevent future accidents was demonstrated by the recall of the tires, and by
investigations into the problem.
The main message for each company to communicate is (1) its regret that anyone should
have died, (2) its determination to track down the cause(s) of the accidents, and (3) its
commitment to making all vehicles/tires as safe as possible. This three-part message can
be communicated in news releases as parts of the investigation are completed and as any

newly developed safety measures are announced. News conferences can be held for the
announcement of major investigative findings and major new developments. An
opportunity may arise to use a high-visibility individual to emphasize product safety.
11.

Describe a self-regulation guideline you believe would improve the value of

(a) an existing form of promotion and (b) a new promotional practice.
Answer: Answers will vary.
a. Existing promotion. Students may suggest guidelines for self-regulation for familiar
forms of promotion such as email advertising and spam, online advertising (such as
pop-up ads), or contests and sweepstakes targeted at college students. Their guidelines
may be based on the AMA Code of Ethics (presented in Chapter 4) and could include
elements such as: (1) marketing communications about goods and services must not be
intentionally deceptive or misleading, (2) promotional activities should strive to build
relationships and foster trust in the marketing system, and (3) marketing activities
should embrace and respect the values of consumer.
b. New promotion. Students may discuss new forms of promotion related to cell phones
(e.g. text message and voice message advertising), credit cards (e.g. trial offers), beer
and alcoholic beverages (e.g. contests), travel, music, clothing, and other categories
important to them.