Final Review

Price elasticity of demand is percent change in price divided by percent change in demand.

False

Skimming or prestige pricing entails giving most of the value to the customer and keeping a small margin.

False

The best way to defend your brand against the incursion of private labels is to lower the price.

False

To retain market share, it is best to reduce price.

False

A business that assists in the performance of distribution tasks other than buying, selling, and transferring title is best described by which of the following?

facilitating agent

As customer knowledge increases, all of the following are evolving trends except:

increased need for personalized services

The objective of which of the following types of advertising is to persuade the target audience that the brand being advertised satisfies their needs better than the competition?

informational

Which of the following best describes "push" activities of promotion?

off-invoice allowances

If the threat of new entrants is high, which of the following pricing should a marketing manager implement for a product?

penetration pricing

For companies marketing business-to-business products and services, the largest part of the marketing budget is usually __________

personal selling

All of the following describe the core product of a car except:

price

Which of the following types of trade promotion allow the channel member return unsold merchandise for a full or partial refund, thus reducing the risk of carrying the product?

product-based promotion

Which of the following best describes the pricing objective typically used by regulated utilities such as gas and electricity?

return on investment pricing

Which of the following pricing objectives is useful only when the product has a monopoly or near monopoly position so that the market will produce the needed sales volume at the price set?

return on investment pricing

Which of the following best describes the characteristics of relationship customers?

sees the benefit of sharing the business among a number of suppliers

The opposite of the penetration pricing objective is which of the following?

skimming

Which of the following is the most appropriate pricing objective when costs are not related to volume and managers are less concerned about building significant market share?

skimming

Which of the following is the first stage of the advertising decision-making process?

target audience selection

One method of implementing price discrimination is to do which of the following?

target delivery of coupons or other discount mechanisms by direct mail

The basic idea behind a CRM program is to assess the value to the firm of each customer.

true

According to the text, all of the following are examples of successful Internet communities except:

Chicago's Lake Shore

According to the text, some examples of successful communities are all of the following except:

Edsel's owners' club

It is always advantageous for the marketing manager to set the price below customers' perceived value.

True

Monies companies spend to help channel members sell their products are called market development funding.

True

Which of the following best describes CPM?

a measure of the efficiency of a media type

List and briefly describe the factors that justify why loyal customers are profitable.

a. Acquisition cost-the incremental cost of getting a new customer. b. Base profit-the profit margin a company earns from an average customer. c. Revenue growth-retained customers have been found to increase their purchase quantities over time. d. Operating costs-existing customers cost less to serve than new customers. e. Referrals-good customers talk to their friends and neighbors about your company. f. Price premium-loyal customers are often more price insensitive than customers who need a price inducement to switch or to become a new customer. g. The total effect-if you can collect hard information on all these components of the lifetime value of a customer, you can develop a picture of how valuable customer satisfaction and loyalty are to your business.

List and briefly describe the three categories of sales promotions.

a. Consumer promotions - used heavily by the packaged goods industry. b. Trade promotions - incentives offered to members of the channel system. c. Retail promotions - retailers often provide direct incentive to customers to buy.

List and briefly describe the four methods of implementing differential pricing.

a. Direct price discrimination - maximizes products' profits by charging each market segment the price that maximizes profits from that segment because of different price elasticities of demand. b. Second-market discounting - with this policy, you sell the extra production at a discount to a market separate from the main market. c. Periodic discounting - price varies over time. It is appropriate when some customers are willing to pay a higher price to have the product or service during a particular time period. d. Flat-rate versus variable-rate pricing - allows customers to choose the option that best suits their level of usage.

List and briefly describe the five major pricing objectives described in the text.

a. Penetration pricing - entails giving most of the value to the customer and keeping a small margin. The objective is to gain as much market share as possible. b. Skimming - gives more of the cost-value gap to you than to the customer. c. Return on sales or investment pricing - implies that you can set a price that delivers the rate of return demanded by senior management. d. Pricing for stability - sometimes customers for industrial products are as concerned about price stability as they are about actual price levels. e. Competitive pricing - describes a situation in which you try to price at the market average or match a particular brand's price.

List and briefly describe the situations in which channel members are likely to have significant bargaining power over the marketing manager.

a. The channel's sales volume is large relative to the product's total sales volume; in this case, channel members with high sales volumes are going to be more effective in extracting terms such as delivery and push promotions. b. The product is not well differentiated from competitors; if the product is perceived to be a commodity by customers, then channel members can play your product against others; that is, they can appear to be (or actually be) indifferent to keeping your brand on the shelf. c. The channel has low switching costs (i.e., it is easy to find an alternative to replace your product). d. The channel poses a credible threat of backward integration or competing with you. e. The channel has better information than you about market conditions.

The money a company spends to help the channel members sell their products is called:

display allowances

According to the text, intermediaries have remained successful by engaging in all of the following activities except:

downsizing

Which of the following best describes a situation when penetration pricing should not be used?

when the product has a strong competitive advantage