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Marketing Exam 4

Rarely is the lowest-price product offering the dominant brand in a given market.
TRUE
Firm A has set very low prices for its products in an attempt to drive its competitor, Firm B, out of business. This is known as monopolistic pricing.
FALSE, This is the definition of predatory pricing.
Ferrari and Lamborghini are manufacturers of very expensive automobiles. Their limited edition cars often sell for $300,000 or more. For most consumers, these are prestige products, and demand is likely to be
price inelastic.
Naomi tells her sales representatives the goal is to generate at least a 20 percent return on investment for all of the industrial building supplies they sell. Naomi is using a _______________ pricing strategy.
target return
Joe’s Boathouse uses a profit-oriented company objective, but the ultimate goal is to generate a profit margin of at least 12% rather than maximizing profits. This involves
target return pricing.
Jack works for a firm in the Northwestern regionthat is clearly the market leader, and has determined he must implement a region-wide price reduction of all product lines in order to discourage new firms from entering the lucrative market. Which of the following company objectives is involved?
competitor-orientation
In the classic downward-sloping demand curve, as price increases, demand for the product or service
decreases.
With _____ products and services, a higher price might lead to a greater quantity sold, but only up to a certain point.
prestige
In the trucking industry, demand for fuel remains relatively stable even in times when the price of fuel increases, indicating that demand for fuel in this segment is
inelastic.
_____ reflects that the greater the availability of substitute products, the higher the price elasticity of demand for any given product will be.
The substitution effect
_____ indicates that the demand for related products can either be positively or negatively related.
Cross-price elasticity
In _____, one firm provides the product or service in a particular industry, and as such results in less price competition.
a monopoly
When a firm sets a very low price for one or more of its products with the intent to drive its competition out of business, it is considered to be
engaging in predatory pricing.
The most common form of competition is _____ where many firms compete for customers in a given market with differentiated products.
monopolistic competition
Jamal was interested in getting a new flat screen television. He went to his local electronics store to view the various models and discuss the features and benefits with the sales associate, but then bought the product online from another retailer for a lower price. Jamal was engaged in
showrooming.
Odd prices suggest low quality.
TRUE
Slotting allowances are used to get retailers to feature a manufacturer’s product in their advertising and promotional efforts.
FALSE, Slotting allowances are used to get retailers to feature a manufacturer’s products on store shelves.
The saying “leaving money on the table” is associated with
using a market penetration strategy when there is an opportunity for price skimming.
In determining the price for his company’s new personal computer photography printer, Raymond is assessing the total cost of owning his printer as compared to alternative products available in the market. Raymond is using __________ pricing.
cost of ownership
_____ pricing methods do not recognize the role that consumers or competitors’ prices play in the marketplace.
Cost-based
Some grocery retailers have invested in their own private brands, charging just slightly lower than national brands to signal the quality of the products is good, involving the use of
competitor-based pricing
When retailers use _____ pricing, it can create excitement and attract customers through the “get them while they last” atmosphere that occurs.
high/low
Retailers using a high/low pricing strategy often communicate this through the creative use of _____, which is the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process
a reference price
The objective of _____ is to build sales, market share, and profits quickly by providing an incentive to purchase the product immediately.
market penetration pricing
In addition to offering the potential to build sales, market share, and profits, _____ discourages competitors from entering the market because the profit margin is relatively low.
penetration pricing
_____ are expressed in the form of a percentage, such as “3/10, n/30,” or “3%, 10 days, net 30.”
Cash discounts
Criticized by small manufacturers of grocery products, _____ are fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products.
slotting allowances
_____ is a form of deceptive price advertising where sellers advertise items for a very low price without intending to sell any of them because they plan to pressure sales of higher-priced items.
Bait and switch
When a firm sets a very low price for one or more of its products with the intent to drive its competition out of business, it is using the illegal practice of
predatory pricing.
_____ occurs when parties at different levels of the same marketing channel (e.g., manufacturers and retailers) agree to control the prices passed on to consumers.
Vertical price fixing
Conflicts within a supply chain tend to be more pronounced when the members are part of a corporate vertical marketing system.
FALSE, Conflict is generally more pronounced when the channel members are independent entities. Marketing channels that are more closely aligned share common goals and are therefore less prone to conflict.
Retailers generally have no prior knowledge of the merchandise they will be receiving from suppliers in any particular shipment.
FALSE, An advanced shipping notice is an electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in the shipment.
In a corporate vertical marketing system,
participants—such as warehouses, transportation companies, and retail outlets—are typically owned by a parent company to ensure harmonious relations throughout the supply chain.
Each time a politician or celebrity writes a book, bookstores can expect at least some customers to want the book, but whether or not it will become a bestseller is less certain. The bookstore’s primary inventory management challenge is
having enough books to satisfy customer demands versus the cost of having the inventory.
As the number of transactions in the supply chain falls and transactions are eliminated, the channel and supply chain becomes _____, which impacts customers by making it _____ to purchase merchandise.
more efficient; less expensive
When Clarissa sells the jewelry she makes at craft fairs or on her personal website, she is utilizing a _____ marketing channel.
direct
In _____ marketing channels, one or more intermediaries work with manufacturers to provide goods and services to customers.
indirect
When there is disagreement among members at the same level of marketing channels such as when Best Buy and Sears engage in a price war on Maytag appliances, _____ channel conflict can occur.
horizontal
_____ power is when one channel member threatens to punish or punishes another channel member for not undertaking certain tasks, such as delaying payment for a late delivery.
Coercive
To create strong partnering relationships, supply chain members must develop mutual trust, openly communicate, have compatible goals, recognize the benefits of interdependence, and
be willing to invest in each other’s success.
Purchase data collected at the point of sale is stored in a data warehouse and can be accessed on three dimensions:
point in time, merchandise aggregation, and level of the company.
Frito Lay is an example of a company that partners with retailers by implementing a _____ system, involving taking on the responsibility of managing inventory levels at the retailers where its products are sold.
vendor-managed inventory
In _____ a manufacturer owns the merchandise in a retail store until it is sold by the retailer, at which time the retailer pays for the merchandise, thus reducing inventory levels and generating sales.
consignment selling
The _____ is the person who coordinates deliveries to the distribution center.
dispatcher
Radio frequency identification tags are
tiny computer chips that transmit information about the contents of containers.
Today, large retailers dictate to their suppliers what should be made.
TRUE
Dollar General and Family Dollar are examples of full-price discount retailers.
FALSE, Dollar General and Family Dollar are examples of extreme value retailers, which are small, full-line discount stores that offer a limited merchandise assortment at very low prices.
__________ are combating competitive pressures by offering fresh food and healthy fast food, tailoring assortments to local markets, opening locations closer to where consumers work and shop, and adding new services.
Convenience stores
Traditionally, retailers treated all their customers
the same way.
When developing strategies for working with retailers, manufacturers must consider whether they should sell in more than one outlet (e.g. store, catalog and Internet). Which of the following factors deals with this?
Determining whether or not to use a multichannel strategy.
When choosing retail partners, a high-end cosmetics manufacturer like Estée Lauder would most likely NOT choose to sell to CVS or Dollar General due to
customer expectations.
If Kleenex produced a new, eco-friendly personal-sized package of tissues, which it intended to get into as many retail outlets as possible, it should chose _____ distribution intensity.
an intensive
_____ are large retailers (100,000-150,000 square feet) that offer a limited and irregular assortment of food and general merchandise, little service, and low prices to the general public and small businesses.
Warehouse clubs
Which of the following falls into the category of being a general merchandise retailer?
Category specialist
Which of the following would qualify as being a service retailer?
A health spa
Retailers may modify product, price, and/or promotion to attempt to increase their _____, which is the percentage of the customer’s purchases made from that particular retailer.
share of wallet
Which of the following is considered the greatest advantage offered to consumers by brick-and-mortar stores compared to online shopping?
Being able to use all five of their senses
Offering live, online chat options to shoppers is a way of increasing the value of online shopping because it provides
personalized customer service.
Although the number of their physical stores is limited, L.L. Bean is widely known for offering unique, high-quality merchandise. Adding an Internet channel was particularly attractive because it allowed the company to _____ without having to build new stores.
expand its market presence
Both Walmart and JCPenney initially had separate organizations for their Internet channel but subsequently integrated them with stores and catalogs to address the _____ challenge of multichannel retailing.
supply chain
The key to successful pricing is to match the product with the consumer’s perception of value.
TRUE
At the break-even point, profits are maximized.
FALSE
Cindy went shopping for a new outfit. She bought a low-priced shirt at a discount store, and combined it with an expensive designer skirt. Which of the following terms best describes Cindy’s actions?
Cross-shopping
Jason rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20. His fixed costs are $100,000 and his target profit is $20,000. For Jason, to earn his target profit, he will need to rent out ________ rooms.
Sales volume = (fixed costs + target profit)/Contribution per unit = (100,000 + 20,000)/($100 – $20) = $120,000/$80 = 1,500
As the marketing vice president of her firm, Jana is considering implementing a companywide pricing policy that all products must achieve a target profit margin of 15% so the firm can achieve its overall growth objectives. What type of company objective is this?
profit-orientation
_____ measures how changes in price affect the quantity of the product demanded.
Price elasticity of demand
_____ involves determining the point at which the number of units sold generates just enough revenue to equal the total costs.
Break-even analysis
_____ employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer.
A gray market
The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers is referred to as
cross-shopping.
Because market and operating conditions are all very similar, marketers’ pricing strategies should be uniform.
FALSE, Market and operating conditions are very different from one target market to another, requiring different pricing strategies.
Cost-based pricing assumes costs will not vary much for different levels of production.
TRUE
Supermarkets often offer great deals on milk, beef, or eggs to get customers into their stores, knowing that many customers will also purchase items that have higher markups for the store. These supermarkets are using a __________ pricing tactic.
Leader
Cost-based pricing assumes costs
will not vary much for different levels of production.
Improvement value and cost of ownership are two approaches to which method of pricing?
Value-based pricing
Retailers using a high/low pricing strategy often communicate this through the creative use of _____, which is the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process.
a reference price
When using a market penetration strategy, as sales continue to grow, the costs continue to drop, allowing even further reductions in the price. This is due to
experience curve effects.
_____ is used to market products to innovators who are willing to pay the very highest prices to obtain brand-new examples of technology advances, with exciting product enhancements.
Price skimming
Supermarket chains often implement _____, a pricing tactic of selling leading brands of products below their own cost in order to build store traffic.
leader pricing
Marketing channel relationships evolve when the parties have complementary goals.
TRUE
Universal product codes (UPC) are used to describe products for inventory taxation purposes.
FALSE, A UPC tag is the black-and-white bar code found on most merchandise. It contains a 13-digit code that indicates the manufacturer of the item, a description of the item, information about special packaging, and special promotions. It records receipt of the merchandise as it arrives at a distribution center.
Leona is the logistics manager for the Barnes & Noble bookstore chain. She is weighing the many benefits of the company’s JIT system, but will need to consider that just-in-time inventory management systems increase
transportation costs.
Some retailers require their suppliers to ship merchandise ___________, thus eliminating the time and expense associated with ticketing and marking.
floor-ready
As the number of transactions in the supply chain falls and transactions are eliminated, the channel and supply chain becomes _____, which impacts customers by making it _____ to purchase merchandise.
more efficient; less expensive
A _____, which may be operated by retailers, manufacturers, or distribution specialists, is a facility for the receipt, storage, and redistribution of goods to company stores or customers.
distribution center
When the members of a marketing channel operate to satisfy their own objectives and maximize their own profits, often at the expense of the other members, the channel operates as
an independent marketing channel.
As the dominant member of the channel of distribution, Coca Cola holds a lot of power in the relationship with independent grocery stores, and as such, it performs the functions of restocking merchandise, setting up special displays and rotating merchandise. This is an example of
an administered vertical marketing system.
Firms that use a(n) _____ supply chain allocate merchandise to stores based on previous sales forecasts.
push
With a _____ marketing strategy, there is less likelihood of being overstocked or out of stock because the store orders merchandise as needed on the basis of consumer demand.
PULL
_____ is a practice in which merchandise cartons are prepackaged by the vendor for a specific store.
Cross-docking
Category specialists are also known as category killers.
TRUE
__________ distribution intensity helps a seller to maintain a particular image and control the flow of merchandise into an area.
Selective
Because many consumers choose stores based on proximity to their workplaces or homes, great locations are
a competitive advantage that few rivals can duplicate.
Luxury goods firms such as Coach use a(n) _____ distribution strategy to limit sales to a few select, higher-end retailers in each region, because selling its product in full-line discount stores or off-price retailers would weaken its image.
exclusive
Which of the following food retailers is a self-service retail food store offering groceries, meat, and produce with limited sales of nonfood items?
Conventional supermarket
Walmart, Target, and Kmart offer a broad variety of merchandise, limited service, and low prices, which would classify them as
Full-line discount stores.
Dollar General and Family Dollar Stores are small, full-line discount stores that offer a limited merchandise assortment at very low prices, so they would be classified as
extreme value retailers.
A brand that is developed by a national brand vendor, often in conjunction with a retailer, and is sold exclusively by the retailer is referred to as
an exclusive co-brand.
Salespeople can be particularly helpful when purchasing a(n) _____ product.
Complicated
When customers purchase merchandise in stores, the physical presence of the store _____ their perceived risk of buying and _____ their confidence that any problems with the merchandise will be corrected.
reduces; increases
Price is the cash expenditure plus taxes that consumers have to pay for a good or service.
FALSE, Price is the overall sacrifice a consumer is willing to make to acquire a specific product or service.
If a firm is engaged in monopolistic competition, it should seek a way to differentiate itself.
TRUE
Winston’s Ice Cream Shop has been in the same location for two decades. Last week, a new ice cream shop opened up just one block down the street. Winston’s decides to sell ice cream below cost in order to drive the new shop out of business. What kind of pricing is Winston’s using?
Predatory pricing
Gary is the marketing manager for an automobile dealership. His boss tells him the firm’s primary goal is to increase their local market share from 15 to 30 percent. Gary’s pricing strategy will focus on
increasing sales.
Everyone in town knows that Designer’s Edge coffee costs twice as much as the average cup of coffee, but it still attracts a large following of loyal customers looking for the best. Designer’s Edge uses
premium pricing.
Best Buy will match competitor prices for customers who bring in proof that a particular product is being sold at a lower price by a competitor, thus using
status quo pricing.
A(n) _____ orientation explicitly invokes the concept of value such as when a firm uses a “no-haggle” price structure to make the purchase process simpler and easier.
customer
Manufacturers like rebates because it provides them with information they can use in developing new products.
FALSE, Manufacturers like rebates in part because they are rarely redeemed. In addition, it provides them with information about the customers who do redeem them.
The methods used to develop pricing strategies are cost-based pricing, competitor-based pricing, and value-based pricing.
TRUE
With a __________ pricing strategy, marketers set a low initial price for the introduction of a new product or service.
market penetration
Using the _____ pricing method, consumers may be willing to pay more for a particular product because, over its entire lifetime, it will eventually be less expensive to own than a cheaper alternative.
cost of ownership
A _____ pricing strategy relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases.
high/low
Manufacturers like _____ because it allows them to offer price cuts to consumers directly, rolling them out and shutting them off quickly.
Rebates
Quick response systems allow retailers to maximize their inventory holdings.
FALSE, Quick response (also known as just-in-time) systems are inventory management systems designed to minimize inventory levels (and, thus, inventory carrying costs).
In an administered vertical marketing system,
there is no common ownership, and the dominant member has significant power to impose its ideas and objectives.
Today, when a customer orders merchandise from an online vendor, the vendor usually sends an immediate order confirmation message by e-mail. Usually within a day or two, a second message arrives stating that the order is in the mail. This second message is a type of
advanced shipping notice.
Supply chain management refers to a set of approaches and techniques firms employ to efficiently and effectively integrate their manufacturers, warehouses, transportation intermediaries, stores, and
suppliers.
All of the following are examples of the value provided by a supply chain in the production of kitchen stoves EXCEPT
the product design team develops initial drawings for a new product offering.
Off-price retailers specialize in having a consistent line of merchandise available at discount prices.
FALSE, Because off-price retailers purchase odd sizes, irregulars, and overstocks from manufacturers and other retailers, their merchandise assortment is inconsistent over time.
Retailers’ coupons, rebates, and online discounts are types of
pricing promotions.
If you were a marketer for a clothing manufacturer and you wanted to improve revenues from irregulars, production overruns, and returns, you would be attracted to using
off-price retailers.
The level of vertical integration of firms in a supply chain directly relates to _____, which is a major consideration for manufacturers when choosing retail partners.
channel structure
Generally, the _____ and _____ sophisticated the channel member, the less likely that it will use supply chain intermediaries.
larger; more
_____ distribution helps a seller maintain a particular image and control the flow of merchandise into an area which makes this approach attractive to many shopping goods manufacturers, such as most apparel items, home items like branded pots and pans or sheets and towels, branded hardware and tools, and consumer electronics.
Selective
The old cliché claiming the three most important things in retailing are “location, location, location” corresponds to which of the following components of the retail strategy?
Place
In U.S. markets, there are many substitute products for Fruit Loops cereal, suggesting the price elasticity of demand for Fruit Loops is high.
TRUE
A gray market employs irregular but not necessarily illegal methods of distributing products.
TRUE
Julia’s is an upscale women’s clothing store. Prices are based on customers’ beliefs about the value of the clothing. The store focuses on a limited target market and provides excellent customer service. Julia’s is using a ________________ pricing strategy.
customer-oriented
If firms price their products too low, it may
signal poor quality.
In the soft drink industry only a few firms dominate, which is characterized as
an oligopoly.
Standardized products such as grains and chemical products, where consumers perceive them as commodities are characteristic of
pure competition.
_____ employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer.
A gray market
When a retail store rarely sells deeply discounted or sale products, it is known as “everyday low pricing.”
TRUE
__________ occurs when members of the marketing channel collude to control the prices passed on to consumers.
Vertical price fixing
Firms using a(n) ____________ pricing method set their prices relative to what other firms are charging.
competitor-based
A _____ pricing strategy is attractive because it attracts two distinct market segments: those who are not price sensitive and more price-sensitive customers.
high/low
For _____ to work, the product or service must be perceived as breaking new ground in some way, offering consumers new benefits currently unavailable in alternative products.
price skimming
Savvy consumers often purchase automobiles from dealerships at the end of the quarter or at year-end since dealers who meet their quotas during a particular time period earn _____ in the form of rebates on all the cars they purchased from the manufacturer.
cumulative quantity discounts
Marketing channel management creates value by getting products to customers efficiently.
TRUE
Students of marketing often overlook or underestimate the importance of Place in the marketing mix simply because
it happens behind the scenes.
By reducing the number of transactions needed to move a product from the manufacturer to the consumer, wholesalers and retailers make a supply chain
more efficient.
As noted in your text, each participant in a successful marketing channel adds
value.
_____ is an electronic document sent by a supplier to a retailer prior to the shipment of a merchandise order.
An advanced shipping notice
EDI reduces _____, or the time between the decision to place an order and the receipt of merchandise.
the cycle time
Many retailers and some manufacturers are exploring the use of a multichannel strategy in which they sell in more than one channel, for example, the Internet and stores.
TRUE
Bertone’s Office Supplies has large stores resembling warehouse environments, with racks stocked from floor to ceiling with different types of office supplies. Its assortment of office supplies is the largest in town, and their prices are low. Bertone’s is a(n)
category specialist.
Aaron has designed innovative accessories for hard-core bicycling enthusiasts. He knows where and how he will make them, and he needs to turn his attention to the getting the products to the customers. As he chooses retail partners, which of the following is LEAST important in this process?
Encouraging new bicycling enthusiasts
Stores are limited by their _____, which is generally not an issue when shopping on the Internet.
Size
Which of the following multichannel challenges has Patagonia overcome by emphasizing function, not fashion, in the descriptions of its products in all of its channels?
Brand image
Brands that have developed loyal customers have a higher price elasticity of demand.
FALSE, Brands with loyal customers have lower price elasticity of demand; in other words, demand will decrease more slowly as price goes up.
Diana owns a boutique specializing in ball gowns. Sales are stable and Diana feels it is time she had a 20 percent increase in her salary. If Diana takes this increase in compensation, it will decrease the breakeven quantity of gowns she needs to sell on a monthly basis.
FALSE, The breakeven quantity would increase, not decrease, because Diana’s salary increase would raise fixed costs.
One of the limitations associated with break-even analysis is that
it assumes that there is only one price.
Everyone in town knows that Designer’s Edge coffee costs twice as much as the average cup of coffee, but it still attracts a large following of loyal customers looking for the best. Designer’s Edge uses
premium pricing.
ack works for a firm in the Northwestern regionthat is clearly the market leader, and has determined he must implement a region-wide price reduction of all product lines in order to discourage new firms from entering the lucrative market. Which of the following company objectives is involved?
competitor-orientation
Price lining is setting a price floor and a price ceiling for a line of products and then setting price points in between to represent differences in quality.
TRUE
Kristina sells sports equipment and wants to get customers into her store. She knows from past experience that sales generate customer traffic, particularly when she puts children’s baseball equipment on sale. She may consider a leader pricing strategy.
TRUE
A pricing strategy is
a long-term approach to setting prices in a companywide integrated effort.
A marketing channel and a supply chain are virtually the same.
TRUE
Yesterday, Lorinda overheard a surprisingly unpleasant encounter between the manager of the hardware store where she works and a sales rep who sells a well-known line of tools. The rep insisted that his tools should be more prominently displayed and that a better assortment would mean more sales. The manager had other plans and told him so, and the conversation turned into a loud argument. What Lorinda observed was an example of
channel conflict.
With a pull marketing strategy,
orders for merchandise are generated at the store level based on sales data captured at POS terminals.
The international fashion retailer Zara’s parent company, Inditex, owns the manufacturing plants, warehouse facilities, retail outlets, and design studios, which is an example of
a corporate vertical marketing system.
A(n) _____ involves the computer-to-computer transmission of sales data, purchase orders, invoices, and data about returned merchandise between a retailer and its vendors.
electronic data interchange
JIT inventory systems are associated with all of the following EXCEPT
more inventory to warehouse.
Choosing the right retailing partners and knowing where target customers expect to find products are key to a manufacturer’s success.
TRUE
Multichannel retailers are able to simply charge the same prices across all channels.
FALSE, Pricing represents a difficult decision for multichannel retailers, as the retailer is trying to compete effectively in all channels.
__________ are likely to target low-income consumers who demand national brands, but cannot afford to buy large-sized packages.
Extreme value retailers

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