AICE Business - Chapter 16-19 Short Answer and M/C

State the formula for price elasticity of demand.

Percentage change in quantity demand divided by percentage change in price.

Distinguish between primary and secondary market research data.

Primary research data - collection of first hand data that is directly related to a firm's needs Secondary research data - the collection of data from secondhand sources.

Outline two factors that could lead to a business experiencing declining market share in a growing market.

Product does not meet the needs of the market due to poor product development, increased level of competition sees consumers swap to substitute products, the creation of newer, more relevant and popular products that make one firm's obsolete.

What do you understand by 'psychological pricing'?

Psychological pricing refers to the use of market research to avoid setting prices that consumers consider to be inappropriate for the style and quality of the product.

Explain the difference between a quota and a stratified sample.

Quota - population has been stratified and the interviewer selects an appropriate number of respondents from each stratum. Stratified Sample - draws from a specified sub-group or segment of the population and uses random sampling to select an appropriate number from each stratum.

Explain why sample size influences the reliability of research results.

Smaller sample sizes run the risk of chance variation, or pure chance, easily occurring which distorts results. Smaller sample sizes don't display large enough portions to justify certain decision grounds.

Explain what is meant by the 4Cs.

The 4Cs are an alternate view of the key elements of successful marketing - customer solution, cost to consumer, communication with customer, and convenience to customer - and they're important to putting customers first in marketing decisions.

Why is it important to measure the impact on sales following an advertising campaign?

To analyze the campaign's effectiveness and use it to fine-tune future promotional activities and calculate promotional elasticity of demand.

A firm has fixed costs of $20k per year and unit variable costs of $6. Production is currently 4k units per year. Assuming that the firm uses full-cost pricing and adds a profit margin of 200%, what is the selling price? a. $33 b. $22 c. $18 d. $15

a. $33

A small independent retailer of DVDs estimates that it faces the following demand schedule. If the retailer reduces its price from $20 to $15, the PED will be: a. -0.8 b. 0.8 c. -1.25 d. 1.25

a. -0.8

'The USA accounts for 50% of the sports footwear market. Nike has the lion's share, taking 36% of the $8.9 billion US sports-shoe market in 2003.' In 2003, Nike's sales of sports footwear in the USA were: a. 3.2 billion b. 320 million c. 6.7 billion d. 2 billion euros

a. 3.2 billion

Which of the following statements correctly describes the normal relationship between quantity demanded and price? a. There is an inverse relationship between price and quantity demanded. b. There is a direct relationship between price and quantity demanded. c. An increase in price leads to a rightward shift in the demand curve. d. A decrease in price leads to a rightward shift in the demand curve.

a. There is an inverse relationship between price and quantity demanded.

Price elasticity of demand measures: a. the responsiveness of price to a change in quantity demanded b. the responsiveness of quantity demanded to a change in price c. the price of a product as a proportion of consumer income d. the relationship between the demand for two separate products

b. the responsiveness of quantity demanded to a change in price

A retailer currently charging $10 for its Kangaroo soft toy has a monthly revenue of $30,000 from its sales. If price elasticity of demand is -2, what will be the revenue from Kangaroo sales if price is reduced by 10%? a. $36k b. $27k c. $32.4k d. $34.6k

c. $32.4k

'The USA accounts for 50% of the sports footwear market. Nike has the lion's share, taking 36% of the $8.9 billion US sports-shoe market in 2003.' The global market for sports footwear was worth in 2003 approximately: a. 10 billion b. 13.35 billion c. 17.8 billion d. 26.7 billion

c. 17.8 billion

Which of the following is not generally considered to be a benefit of branding? a. It reduces price elasticity of demand b. It provides product differentiation c. It reduces costs d. It can provide a firm's product with a strong identity

c. It reduces costs

Which of the following is the most likely disadvantage of direct selling? a. The intermediary takes a profit mark-up b. The producer loses control over the marketing mix c. Storage and stock costs have to be paid for by the producer d. The producer has delivery costs to the retailer

c. Storage and stock costs have to be paid for by the producer

Which of the following is an example of above-the-line promotion? a. sales promotion b. direct mailing c. advertising in a magazine d. sponsorship

c. advertising in a magazine

A bank conducting primary research into consumer opinions about different types of banking charges decides to send a researcher into a shopping mall. She is instructed to conduct a questionnaire survey with whoever happens to be passing. This is an example of what type of sampling method? a. simple random b. quota c. convenience d. systematic

c. convenience

Which of the following is not generally considered to be an advantage of primary research relative to secondary research? a. it is typically more up-to-date b. it is collected for a purpose that addresses the questions the business wants to answer c. it is cheaper to collect d. no other business has access to these data

c. it is cheaper to collect

Which of the following forms of data collection is an example of a business conducting primary research? a. collating information from the population census and the Family Expenditure Survey b. using sales data from within the business's own records c. observation d. using a market intelligence report

c. observation

A firm estimates that the demand for its product is price elastic; it decides to reduce the price of its product. Assuming that the firm is correct in its estimate of price elasticity of demand, which of the following outcomes will apply to the firm as a consequence of the price reduction? (i) There will be a reduction in revenue (ii) There will be an increase in revenue (iii) There will be an increase in profit (iv) There will be a reduction in profit a. (i) and (iv) b. only (i) c. only (ii) d. (ii) and (iii)

c. only (ii)

In a particular country it was observed that sales of jeans rose from 24 million pairs at an average price of $32 to 26 million pairs at an average price of $36. Which of the following statements about the market is (are) true: (i) The increase in sales volume is 7.69% (ii) The increase in sales volume is 2 million units (iii) The increase in sales value is $168 million. a. only statement (i) b. only statement (ii) c. only statements (ii) and (iii) d. all of them

c. only statements (ii) and (iii)

When calculating the market share of a supermarket, it would be best to use sales data based on: a. sales volume b. unit sales c. sales value d. none of the above

c. sales value

Market growth is defined as: a. the percentage increase in sales of a particular firm over time b. the change in the number of firms competing in a market c. the percentage change in sales in the total market d. the rate of change of market share

c. the percentage change in sales in the total market

The following extract refers to the market of soft drinks in 2004 in the USA: 'Coca-cola, the industry leader, saw its market share drop by 0.9% to 43.1%. PepsiCo saw a drop of 0.1% to 31.7%.' From this we can infer: a. Market sales of soft drinks in the USA were declining b. Market sales of PepsiCo have fallen c. Both a and b are true d. None of the above.

d. None of the above.

A large firm selling industrial goods is least likely to use which of the following forms of promotion? a. trade fairs b. advertising in specialty magazines c. personal selling d. TV commercials

d. TV commercials

An MP3 manufacturer recently launched a promotional campaign costing $3 million. Its marketing objective was to increase sales by at least 30% during the campaign. Sales actually increased from $20 million to $29 million. It can be concluded that: a. The marketing objective was not met b. The marketing objective was met and profits were increased c. The marketing objective was met, but that profits decreased. d. The marketing objective was met, but that the impact on profits cannot be determined.

d. The marketing objective was met, but that the impact on profits cannot be determined.

Consider the following factors: (i) changes in tastes and fashions (ii) the standard of living (iii) social and demographic changes (iv) the nature of the product Which of the above factors might influence growth in a market? a. only (i) b. factors (i) and (iii) c. none of the factors listed d. all of the factors listed

d. all of the factors listed

Which of the following factors will act as a restraint on promotion? (i) the promotion decisions of competitiors (ii) the size of the firm (iii) the law (iv) other aspects of the marketing mix a. (ii), (iii), and (iv) b. (ii) and (iii) c. (ii) and (iv) d. all of them

d. all of them

The diagram below shows the supply and demand curves for computers. Which of the following could have led to the movement from point x to point y? a. an increase in VAT levied on computers b. an increase in interest rates c. a reduction in the costs of production d. an increase in consumer incomes

d. an increase in consumer incomes

The 4Cs is one view of the key elements of successful marketing. Which of the following is not one of the 4Cs? a. customer solution b. cost to the customer c. communication with the customer d. customer loyalty

d. customer loyalty

Which of the following is a psychographic factor used in segmenting a market? a. age b. gender c. ethnicity d. lifestyle

d. lifestyle

The product life cycle is illustrated - If a product is at point x, what stage of its life cycle has it reached? a. decline b. growth c. introduction d. maturity

d. maturity

Which of the following is not an example of a sales promotion? a. money-off coupons b. BOGOF c. point-of-sale display d. personal selling

d. personal selling

Qualitative research is best defined as: a. primary research b. secondary research c. research that leads to numerical results d. research into the underlying motivation behind consumer buying behavior

d. research into the underlying motivation behind consumer buying behavior

Marketing is best defined as: a. the process of advertising products and services to a target market. b. researching the market and setting objectives. c. the management process of controlling the 4Ps. d. the management process responsible for identifying, anticipating and satisfying customer needs profitably.

d. the management process responsible for identifying, anticipating and satisfying customer needs profitably.

Explain the links between the 4Ps and the 4Cs.

"Product" is linked to "customer solution", where firms strive to create the right product to meet the customers needs and wants. "Price" is linked to "cost to consumers" as both deal with setting the right total costs to products for consumers. "Promotion" is linked to "communication with customer" as both deal with providing accessible, effective communication with the customer to tell them about the product and work with gained market research data. "Place" is linked to "convenience to customer" determining the best distribution and buying location for the customers.

Explain three features of effective questionnaire design.

-Focusing questions on clear, established objectives -Include some questions that will allow a classification of results by gender, area lived in, and occupation to organize strata data -Avoid questions that seem to point to one particular answer that create bias

Outline two functions performed by wholesalers in a traditional channel of communication.

-Wholesalers buy goods from the producer, holding goods and buying in bulk. -Wholesalers sell in smaller quantities to retailers.

State three reasons why a business might advertise an existing product.

1. To keep consumer interest raise and reduce the risk of obsolescence. 2. To incorporate more people into a new or pre-established target market. 3. To correct misleading reports about a product or start a new offer.

What is the modal income of households within the survey?

10k to less than 20k

What was the total market growth?

15.1%

What is the approximate median household income?

24k

What was the increase in Nokia's market sales over the period?

25%

What is the mean income of households within the survey?

26k

What were the total sales of mobile phones in the third quarter of 2007?

288.935 Million

What was Nokia's market share in the third quarter of 2007?

38.1%

Explain the differences between advertising and sales promotion.

Advertising is paid-for communication with consumers to inform and persuade, or above-the-line promotion; whereas, sales promotion, or below-the-line promotion, consists of incentives such as special offers or deals directed at consumers or retailers to achieve short-term sales increases and repeat purchases by consumers.

State three methods, other than an increase in sales, that a business might use to assess the effectiveness of a promotional campaign.

1. Can use consumer awareness data to test recall of advertisements. 2. Can use consumer panels to receive qualitative feedback. 3. Can check response rates by websites recording hits and videos recording views.

How can promotion be used to extend a product's life cycle?

By maintaining high relevance via high consumer awareness and by possibly detailing new product incentives or deals to encourage a still-active sales market and thus lengthen the product's life cycle.

Explain two benefits to a business of using mass marketing.

Can target a larger market so increased sales reduce costs per unit as larger market is spread over more consumers, creation of economies of scale. Run fewer risks because they're more stable and less challenged by small changes in numbers of consumers or their buying habits.

List three factors that could lead to an overall decline in the size of a market.

Changes in taste, increase in substitute products, decline in consumer incomes, development of new markets.

What do you understand by customer relationship marketing?

Customer relationship marketing uses marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained. It is used to keep existing customers.

Outline the advantages and disadvantages of using a small sample.

Disadvantages: - Can be too small to boast confident results, as chance variations can occur. - Don't often provide useful results, especially if the questions are being focused on particular age or income groups. Advantages: - Much cheaper - More timely and efficient

Why is packaging an important aspect of promotion for many consumer products?

It is the first major influence in a consumer's buying decision. It supports the established image of the product, can form a promotional theme, and even revolutionize your product within its market.

Why should pricing decisions not be taken in isolation from other marketing-mix decisions?

It must reflect costs of development, packaging, promotion, and distribution at a cost that doesn't harm consumer demand levels. If it's incorrect then much hard work in market research and product development can be put at risk.

Why is sampling so frequently used in consumer surveys?

It's impossible or too expensive to survey all potential members of a target market.

Which company saw the greatest relative increase in its sales?

LG

Using examples, differentiate between market orientation and product orientation.

Market Orientation is an outward-looking approach basing product decisions on consumer demand, as established by market research, when a company creates many cars, for example, that go along with current consumer trends or market fashions. Product Orientation is an inward-looking approach that focuses on making products that can be made - or have been made for a long time - and try to sell them, for example, with the WAP mobile phone, driven more by technical innovation than by consumer needs.

It is often stated that the decline of the British motorcycle industry was largely a consequence of British firms adopting a product-oriented approach. This approach is characterized by: a. an inward-looking focus on making products that can be made and then trying to sell them b. an outward-looking approach basing product decisions on what the market demands. c. consideration not only of the demands of consumers, but also of the effects of products on all members of society. d. an outward-looking approach basing product decisions on competitor strategies.

a. an inward-looking focus on making products that can be made and then trying to sell them

In the marketing mix, place is concerned with: a. channels of distribution b. location of manufacturing activity c. niche marketing d. mass marketing

a. channels of distribution

Promotion may be defined as: a. communication with actual or potential customers b. the application of advertising to increase sales c. the attempt to develop the public image of the business d. the method of getting goods to market

a. communication with actual or potential customers

Which of the following is an advantage of probability sampling relative to non-probability sampling? a. confidence levels can be calculated b. it is typically cheaper c. the results are 100% reliable d. it avoids questionnaire bias

a. confidence levels can be calculated

Which of the following is not one of the traditional 4Ps? a. packaging b. product c. place d. promotion

a. packaging

Market share is defined as: a. the proportion of the total market that a particular firm has achieved b. the percentage change in sales over time in a particular market c. the percentage change in sales of a particular firm over time d. the breaking down of a large market into subgroups, that are likely to respond to products in different ways

a. the proportion of the total market that a particular firm has achieved

Viral marketing includes: a. the use of sms text messages b. direct selling to the consumer c. sponsorship d. the use of intermediaries to transfer the good to a wider audience

a. the use of sms text messages

When setting price, a baker uses marginal-cost pricing with the aim that each unit of sales provides a contribution of $0.20. The baker faces the following costs for producing a particular type of bread: variable ingredient costs per patch - $1.00 energy cost per batch - $0.20 other variable costs per unit - $0.05 The bread is baked in batches of ten loaves at a time. The bakery has fixed costs of $1k per month and at full capacity is able to produce 10k loaves of bread. What will the selling price be? a. $1.45 b. $0.37 c. $0.47 d. $1.55

b. $0.37

A manufacturer of chocolate sells its product for $3.00. The cost of milk, cocoa and sugar is $1.50; packaging costs $0.25 and labour costs are $0.05. What is the value added by the manufacturer? a. $1.50 b. $1.25 c. $1.20 d. $3.00

b. $1.25

A firm decides to set its promotional budget using objective-based budgeting. What does this mean? a. It will be set as a percentage of sales revenue b. It will be set at a level required to achieve a sales target c. It will be set in relation to last year's budget d. It will reflect what the business can afford

b. It will be set at a level required to achieve a sales target

A firm that wishes to conduct qualitative research should use which of the following research methods? a. analyzing internal company records b. focus groups c. questionnaires d. none of the above

b. focus groups

In 2004, it was reported that, in the global market for chocolate, Cadbury plc and Mars had market shares, measured in US dollars, of 7.8% and 15.2% respectively. From this it can be concluded that: a. the $ value of chocolate sales made by Mars was 7.4% higher than Cadbury plc. b. the $ value of chocolate sales made by Mars was approximately double that of Cadbury plc. c. Mars is the market leader. d. Cadbury plc is a smaller company than Mars.

b. the $ value of chocolate sales made by Mars was approximately double that of Cadbury plc.