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MKTG 351: Test 2 Review – Chapter 8

The three purposes for which individuals or groups can use products in order for it to be considered a business market are
resale, use in daily operations, and direct use in producing other products.
In business markets, individuals or groups purchase products for one of three purposes. These purposes are
resale, direct use in producing other products, and use in general daily operations.
When Hunter Ceiling Fans buys electrical wire for use in producing its ceiling fans, Hunter is part of what type of market for electrical wire?
Business
Business markets are typically divided into four categories. These categories are
producer, reseller, government, and institutional.
Individuals and business organizations that purchase products for the purpose of making a profit either by using the products to produce other products or by using them in their operations are classified as ___________ markets.
producer
An accountant who purchases software for maintaining clients’ books is an example of a buyer in a(n) ___________ market.
producer
Individuals and business organizations that buy finished goods and resell them to make a profit without changing the physical characteristics of the product are classified as ___________ markets.
reseller
______ buy products from manufacturers and then resell the products to other firms in the
distribution system.
Wholesalers
Mike’s Roadside Market buys produce from area farmers, marks the merchandise at a price that includes some profit, and then sells the fruit and vegetables to the people in and around Centerville. Mike’s would be classified as part of a ___________ market.
reseller
Snappy Tools, Inc., purchases hammers, bolts, and other hardware items from a variety of manufacturers and sells them to hardware stores at a price that includes a profit for Snappy Tools, Inc. The company would be part of what type of business market?
Reseller
Reseller markets consist mainly of
wholesalers and retailers.
Retailers like Target and Kmart are considered to be members of which business market?
Reseller
Kroger Grocery Store is an example of a reseller. Which of the following factors concerning reseller purchase decisions is false?
Resellers are not concerned with how much space the product takes up as long as it has a high price.
Because retailers have to be concerned with product selection, price, and space, they often evaluate products on the basis of
sales per square foot of selling area.
Which type of business market tends to have the most complex buying procedures?
Government
The recently created Department of Homeland Defense is a member of the _____ market.
government
The state of Montana is preparing to buy a large quantity of frozen orange juice for use in a large school district. Citrus Sweet, Inc. is in the citrus juice business but has never sold to the government market. To have a chance at getting this order, Citrus Sweet’s first step must be to get her firm to
secure a slot on the list of qualified bidders.
About what percentage of the annual U.S. gross domestic product is government spending?
20%
A friend of yours starts his own business. He would like to expand his client base to include the government, but he believes his small business would be ignored. Based on your knowledge from the text, you tell him
the government buys products from all sizes of business, but there is some red tape.
The government decides to purchase a new fleet of fighter jets for the U.S. Air Force. What type of buying procedure is the government most likely to use?
The government will select a few firms and enter into negotiations with them
until the contract is awarded.
Pi Delta Mu sorority purchases food in bulk to feed its members living in the house. This means it is part of a(n) ___________ market.
institutional
Churches, charitable organizations, and private colleges are considered _____ buyers.
institutional
Institutional markets are
organizations that seek nonbusiness goals.
Which of the following would be considered an institutional buyer?
The United Way
Abbott’s Office Supplies buys furniture and filing cabinets from Craine Furniture. Craine buys paper, pens, and folders from Abbott’s. The two firms are engaged in
reciprocity.
What is a primary difference between business and consumer buyers?
Business buyers generally make larger orders than consumer buyers.
Bob Denton of Denton Pest Control buys equipment from a supplier because that supplier hires him to spray the warehouse for insects periodically. This practice is known as
reciprocity.
A disadvantage of reciprocity is that it can lead to
less-than-optimal purchases for the buyer.
A practice in which two businesses agree to buy from each other is
reciprocity.
Which of the following statements about business buying is false?
Orders in business markets tend to be smaller than those placed in consumer
markets.
Many suppliers and their customers invest time and resources to build and maintain mutually beneficial relationships which are often called
partnerships.
Raython Hardware and Thames Industrial Supplier have worked closely for many years and have a mutually beneficial relationship in which Raython provides all of Thames’s hardware needs in a timely manner. Raython and Thames’s relationship could be best characterized as a(n)
partnership.
Which of the following is true with respect to buyers in business markets?
Business customers demand detailed information about a product’s quality,
features, or technical specifications.
When buying materials, the purchasing agent for Alco Pillow Manufacturing Company considers a variety of factors. Which one of the following is least likely to concern this buyer?
Does the supplier also sell to my competitors?
Product specifications are
physical characteristics and level of quality.
Most businesses try to control the level of quality in the parts they buy from suppliers. Most firms develop standards for _____ in order to achieve their quality goals.
the percentage of defects allowed
All of the following are important concerns of business customers except
obtaining products that exceed specifications to ensure the best possible product performance.
Volkswagen purchases upholstery for the interiors of its vehicles from various suppliers. This upholstery must have a set of characteristics that is expressed by Volkswagen. This set is called
specifications.
Management at Readyfresh Dry Cleaners is concerned that it maintains a high level of service for its business accounts. How should the firm monitor the level of service these customers receive?
Formally survey customers.
Johnson’s Industrial Pest Control Service wants to meet its customers’ expectations with regard to the quality of service it provides. How should Johnson’s identify these
expectations?
Conduct market research.
A Pillsbury mill in Utah buys grain from growers in the western region. The purchasing agent for Pillsbury will most likely use which buying method?
Sampling
Collin Roberts of Roberts Construction is planning to buy a piece of used earth-moving equipment. He would most likely base his purchase decision on ___________ of the alternative machines.
inspections
Which method of business buying is most likely to be used when the products being purchased are standardized based on certain characteristics?
Description
If a business owner buys parts by specifying the quantity, grade, and other attributes, which buying method is he or she using?
Description
Which method of business buying is necessary when products are highly homogeneous and examination of each item is not feasible?
Sampling
St. Jude’s Hospital decides to redo its kitchen with new flooring, cabinets, counters, and appliances. The hospital compiles a description of the project and then asks sellers to submit bids. After determining the most attractive bids, the hospital will then work with two or three companies to determine who will get the contract. This is an example of using ______ for a
purchase decision.
negotiation
Which of the following products is most likely to be purchased on the basis of contract negotiation?
A custom-made bulldozer
Most business purchases can be classified as belonging to one of three types:
modified rebuy, new-task, or straight rebuy.
When a business routinely purchases the same product with similar terms of sale, the purchase is called a
straight rebuy.
When a business is making its initial purchase of an item to be used to perform a new job, it is known as a _________ purchase.
new-task
Perry Supply’s sales and sales force have continued to expand. Now, the firm plans to add a fleet of company cars as part of its sales compensation package. For Perry Supply, these vehicles would represent a ____________ purchase.
new-task
Anderson Distribution Company has purchased 15 forklifts over the past two years. As it plans to place its next order for another five machines, management wonders if additional features may be needed in order to handle changes in the product lines it carries. For
Anderson, these new forklifts represent a ___________ purchase.
modified rebuy
A representative from Coca-Cola stops by at a local fast-food restaurant once a month to inquire how much soft drink syrup the store will need. The restaurant’s orders are an example of which type of business purchase?
Straight rebuy
Safeway Supermarkets recently placed an order with the Kahn Corporation. Safeway has ordered these same products before under the same terms of sale. What type of purchase does this situation represent?
Straight rebuy
When the requirements associated with a new-task purchase are changed the second or third time, this is called a ___________ purchase.
modified rebuy
Demand for business products is also known as ______ demand.
industrial
The fact that business customers purchase products to be used directly or indirectly in the production of goods and services to satisfy customers’ needs means that demand for business products is
derived.
Goodyear is a manufacturer and marketer of tires for new passenger cars. In recent years, the company’s business has declined because of the overall decrease in consumer demand for new cars. In this case, the demand for Goodyear’s tire products is said to be
_______since it depends on the demand for new cars.
derived
Demand for business products is characterized as derived. From what is the demand derived?
Demand for consumer products
All of the following describe the demand for business products except
elastic.
_________ is(are) a major threat to the sales success of jointly demanded products.
Shortages
Inelastic demand simply means that
a price increase or decrease will not significantly change the demand for an item.
Inelastic demand in business markets refers to a situation where
price increases or decreases will not significantly change demand for a given product.
Demand for a business product is ___________ if a price increase or decrease will not significantly affect that demand.
inelastic
In placing a tire order with Michelin, South Side Industrial Supply finds that the truck tires it is
ordering have increased $37.50 in price since the last order. South Side proceeds with the order, confident that it can pass on the price increase to future customers. This is an example of business products having ___________ demand.
inelastic
Demand for a business product is _____ when two or more items are used in combination to produce a product.
joint
As it places its order for truck tires with Michelin, South Side Industrial Supply realizes that it must also place an order for valve stems and balancing weights for the truck tires. Such business products are characterized as having ____________ demand.
joint
When certain consumer products are in high demand, producers might buy extra materials and equipment and when demand subsides, producers will cut back on their material purchases. This describes _____ demand.
fluctuating
Most business buying decisions are made by
a firm’s buying center.
In a buying center, purchasing agents or purchasing managers are also known as
buyers.
The group of people within a business who are involved in making business buying decisions is referred to as
the buying center.
Administrative assistants that control the flow of information to other people in the organization often play the _____ role in the buying center.
gatekeeper
Barry Gluckman of WP International, a major marketer of word-processing software, calls the secretary of Renee Dorchette, director of purchasing for MMK, Inc. He sets up an appointment to discuss an upcoming purchase of software. The secretary plays the role of
___________ in this purchase decision.
gatekeeper
Administrative assistants that control the flow of information to other people in the organization often play the _____ role in the buying center.
gatekeeper
The stages of the business buying decision process, in order, are
recognizing the problem, establishing product specifications, searching for products and evaluating possible suppliers, selecting suppliers and products,
and evaluating performance.
The second stage in the business buying decision process is to
develop product specifications.
In its purchase of desktop business computers, Albertson’s asked that potential suppliers provide information only on units with 2.0 gigabytes of memory. As Albertson’s management evaluates this purchase, it finds that 2.0 gigabytes are inadequate for many of the software programs used at Albertson’s. In this instance, the firm would need to modify which aspect of the purchase process?
Product-supplier search and evaluation
The third stage in the business buying decision process is to
search for products and suppliers.
Christy Bridgman is considering the purchase of a new fax machine for her real estate office. She is considering a machine that doesn’t have as many functions but is available at a considerably lower price than her current machine. She is engaged in ___________
analysis.
value
During the search for products and evaluating possible suppliers stage of the business buying decision process, marketers sometimes use _________ analysis to examine the quality, design, materials, and possibly item reduction in order to acquire the product in the
most cost-effective way.
value
___________ analysis is a systematic evaluation of current and potential suppliers that focuses on many dimensions including price, product quality, delivery service, product dependability, and overall company reliability.
Vendor
An organization that decides to buy all of a certain part from the same company is using
sole sourcing.
What are the four major categories of factors that influence business buying decisions?
Environmental, organizational, interpersonal, and individual
Individual influencing factors refer to
personal characteristics of individuals in the buying center.
A buyer for Macy’s Department Stores orders handbags from a supplier because that supplier allows the buyer to maintain Macy’s company policy of 30-day advance purchase notice. This is an example of ___________ influence on the business buying decision process.
organizational
Compared with consumer goods, marketers aiming at business customers
have an enormous amount of information available concerning potential
customers.
Compared with the SIC system, the North American Industry Classification System (NAICS) will
contain the most up-to-date information for the NAFTA partners.
Which one of the following countries will not be included in the data presented in the new industry classification system that is replacing the SIC?
Japan
Analysis of business input-output data by the federal government allows the government to have a better understanding of the
types of industries that purchase particular products.
Input-output analysis is most likely to yield what type of information?
Industries that purchase the major portion of an industry’s output
Ben Davideau is assigned by his sales manager to come up with the names and addresses of twenty firms in his territory that have some potential for using sizable quantities of his firm’s products. Wanting to be as efficient as possible, Ben looks in
Standard & Poor’s Register.
Samsung is entering the home appliance market with its new French Door Refrigerator. In designing the production facility, it has a need for various pieces of equipment, including the perpetual assembly belt-drive, quasi-assembly pods, and finishing stations. The purchasing agent for the appliance division is inquiring about who will be needed for input on the purchasing decision. Samsung has already contacted several producers of the quasiassembly pods, and has begun negotiations with their sales representatives. What type of business purchase is Samsung undertaking?
New-task
Samsung is entering the home appliance market with its new French Door Refrigerator. In designing the production facility, it has a need for various pieces of equipment, including the perpetual assembly belt-drive, quasi-assembly pods, and finishing stations. The purchasing agent for the appliance division is inquiring about who will be needed for input on the purchasing decision. Samsung has already contacted several producers of the quasiassembly pods, and has begun negotiations with their sales representatives. Which of the following groups should Samsung not include in its buying center for the new equipment?
Potential future Samsung customers
Samsung is entering the home appliance market with its new French Door Refrigerator. In designing the production facility, it has a need for various pieces of equipment, including the perpetual assembly belt-drive, quasi-assembly pods, and finishing stations. The purchasing agent for the appliance division is inquiring about who will be needed for input on the
purchasing decision. Samsung has already contacted several producers of the quasiassembly pods, and has begun negotiations with their sales representatives.
What was the first step of the buying decision process that Samsung went through when looking for the quasi-assembly pods?
Recognizing the problem or need
Samsung is entering the home appliance market with its new French Door Refrigerator. In designing the production facility, it has a need for various pieces of equipment, including the perpetual assembly belt-drive, quasi-assembly pods, and finishing stations. The purchasing agent for the appliance division is inquiring about who will be needed for input on the purchasing decision. Samsung has already contacted several producers of the quasiassembly pods, and has begun negotiations with their sales representatives. There are many factors that would influence Samsung’s business buying decisions. Which one of the following would not?
Demographic
Precision Brake Company is a supplier of brake components to the manufacturers of lawn tractors and 4-wheel ATV’s. It also sells its products to independent repair centers, dealers, and other wholesalers in the northeast and southern states. Precision Brake has done research on the demand for lawn tractors and found that most manufacturers are in the states of Kentucky, Tennessee, and Alabama. Research also shows that most of the dealers who sell directly to individual consumers are in the midwestern states, while dealers who sell to small business landscaping companies tend to be located in the northeastern states. Company executives are considering expansion of its distribution to markets in the midwest. When Precision Brake sells to the individual dealers, they would be considered which of the following business types?
Reseller
Precision Brake Company is a supplier of brake components to the manufacturers of lawn tractors and 4-wheel ATV’s. It also sells its products to independent repair centers, dealers, and other wholesalers in the northeast and southern states. Precision Brake has done research on the demand for lawn tractors and found that most manufacturers are in the states of Kentucky, Tennessee, and Alabama. Research also shows that most of the dealers who sell directly to individual consumers are in the midwestern states, while dealers who sell to small business landscaping companies tend to be located in the northeastern states. Company executives are considering expansion of its distribution to markets in the midwest. Given the type of business market in which Precision Brake is currently operating, which group would it be least likely to sell to?
Consumers
Precision Brake Company is a supplier of brake components to the manufacturers of lawn tractors and 4-wheel ATV’s. It also sells its products to independent repair centers, dealers, and other wholesalers in the northeast and southern states. Precision Brake has done research on the demand for lawn tractors and found that most manufacturers are in the states of Kentucky, Tennessee, and Alabama. Research also shows that most of the dealers who sell directly to individual consumers are in the midwestern states, while dealers who sell to small business landscaping companies tend to be located in the northeastern states. Company executives are considering expansion of its distribution to markets in the midwest. When Precision Brake’s sales team calls on tractor manufacturing companies, the first person they usually talk to is the receptionist. In this example, the receptionists would be considered to be ________, part of the buying center.
gatekeepers
Precision Brake Company is a supplier of brake components to the manufacturers of lawn tractors and 4-wheel ATV’s. It also sells its products to independent repair centers, dealers, and other wholesalers in the northeast and southern states. Precision Brake has done research on the demand for lawn tractors and found that most manufacturers are in the states of Kentucky, Tennessee, and Alabama. Research also shows that most of the dealers who sell directly to individual consumers are in the midwestern states, while dealers who sell to small business landscaping companies tend to be located in the northeastern states. Company executives are considering expansion of its distribution to markets in the midwest. Last year, Precision Brake’s sales to the manufacturers of lawn tractors declined, partially due to the fact that more consumers were hiring small landscaping businesses to cut their grass. This decline in sales for Precision Brake is an example of
Derived demand
True/False: Buyers in producer markets purchase either raw materials or semifinished products.
False
True/False: The four categories of consumer markets are producer, reseller, government, and institutional.
False
True/False: The owner of a trucking business, who buys gasoline from the nearby service station for the company trucks, is a part of a business market.
True
True/False: The term business markets refers only to producer markets.
False
True/False: An example of a business market would be farmers.
True
True/False: Grocery stores and supermarkets are a part of producer markets.
False
True/False: Reseller markets consist of intermediaries that buy finished goods and resell them for profit.
True
True/False: Wholesalers sell primarily to ultimate consumers.
False
True/False: There is little or no difference between wholesalers’ customers and retailers’ customers.
False
True/False: Retailers purchase products and resell them to final consumers.
True
True/False: The increase in government purchases has resulted partly from the increase in the number of services provided by the government.
True
True/False: Government markets, although complicated in their requirements, can be very lucrative.
True
True/False: Institutional markets include state prisons.
False
True/False: Orders placed by business customers are usually smaller and more numerous than consumer sales.
False
True/False: It is customary for contracts for raw materials and components to be negotiated
semiannually.
False
True/False: Reciprocal dealing is widespread because it is one of the few avenues not regulated by the FTC, and it facilitates optimal purchases.
False
True/False: Ultimate consumers are generally more rational than business customers.
False
True/False: Business customers generally seek to obtain detailed information about a product before
purchasing it.
True
True/False: Business customers are forced to satisfy personal goals in pursuits that lie outside their jobs.
False
True/False: Business purchasing agents may indirectly contribute to the satisfaction of their own personal
needs by helping their firms achieve organizational objectives.
True
True/False: When purchasing products, business customers are especially concerned about quality,
service, price, and supplier relationships.
True
True/False: One very important consideration for business purchases is the type of packaging used.
False
True/False: Price is of concern to a business marketer primarily because of its psychological impact on
purchasing agents.
False
True/False: If a business product exceeds specifications, so much the better; the customer can then be assured of obtaining a minimum level of acceptability.
False
True/False: In some cases, the types of services offered by a supplier may constitute a primary advantage over suppliers of similar products.
True
True/False: On-time delivery is crucial to a business customer, since a late delivery may hold up a production line or cause the firm to lose sales.
True
True/False: Inspection refers to a purchasing method in which a representative unit is taken from a lot and evaluated, and the buying decision is based on the conclusions.
False
True/False: A new-task purchase is one in which the business makes an initial purchase of a new item.
True
True/False: Of the three types of business purchases, the straight rebuy purchase usually requires the most information.
False
True/False: Industrial demand derives from consumer demand.
True
True/False: In the long run, business demand becomes totally unrelated to consumer demand.
False
True/False: The demand for many business products is inelastic at the industry level.
True
True/False: For business products, the concept of inelasticity of demand applies equally to industry
demand for the product and to demand for an individual supplier.
False
True/False: Raw materials are especially affected by joint demand.
True
True/False: When the major component of an item experiences a price increase, the demand for the item
may become more elastic.
True
True/False: Sometimes initial demand for a business product will drop following a price cut if buyers believe that further price reductions are forthcoming.
True
True/False: In industries in which price changes occur frequently, demand fluctuations have practically been eliminated since buyers have become used to these changes and have learned to ignore them.
False
True/False: A fall in consumer demand for a product is likely to result in increased buying from suppliers as consumer goods producers replenish depleted inventories and gear up for the next surge in consumer demand.
False
True/False: The factors that influence business buying behavior are the same as those that influence consumer buying behavior.
False
True/False: All companies, no matter what their size or market position, maintain only one buying center.
False
True/False: Problem recognition can be stimulated by external sources, such as trade shows or sales
representatives.
True
True/False: In the buying decision process, one of the activities included in the search for products and
suppliers is examining catalogs and trade publications.
True
True/False: Specific details regarding terms, credit arrangements, and technical assistance are worked out during the product specification stage of the buying decision process.
False
True/False: Value analysis focuses primarily on the examination of the cost of products relative to design,
quality, and materials used.
True
True/False: Vendor analysis is a formal, systematic evaluation of current and potential vendors that focuses on a variety of dimensions including price, product quality, delivery service, product availability, and overall company reliability.
True
True/False: The fourth stage in the business buying decision process is that of searching for products and suppliers.
False
True/False: Feedback acquired during the fifth stage of the business buying decision process is kept on file but not used as a reference for future business purchase decisions.
False
True/False: The five-stage business buying decision process is used primarily for routine, straight rebuy
purchases.
False
True/False: Interpersonal dynamics are easy to observe and simple for the marketer to assess.
False
True/False: The North American Industry Classification System includes all three NAFTA partners.
True
True/False: The old Standard Industrial Classification system is more comprehensive than NAICS.
False
True/False: All three NAFTA countries will convert to the NAICS over the next few years.
True/False: NAICS provides less information about service industries and high-tech products than did the
SIC system.
False
True/False: After finding out which industries purchase the major portion of an industry’s output, the next
step is to begin production.
False
True/False: To obtain the names of specific potential customers, the business marketer is well advised to
employ the services of a commercial data company, since this is both cheaper and faster than any other method.
False
True/False: Industrial classification systems allow marketers to divide business customers into groups
based mainly on the types of goods and services provided.
True
True/False: A major source of input-output data is the Survey of Current Business.
True
True/False: When trying to estimate the purchases of a potential business customer, it is reasonable to suppose that there is a relationship between the size of the potential customer’s purchases and a variable such as the number of personnel employed by the customer.
True

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