MKTG 351 Chapter 8 Test Bank

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

Ultimate consumers are generally more rational than business customers.

False

Wholesalers sell primarily to ultimate consumers.

False

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.

All three NAFTA countries will convert to the NAICS over the next few years.

True

Business purchasing agents may indirectly contribute to the satisfaction of their own personal needs by helping their firms achieve organizational objectives.

True

Government markets, although complicated in their requirements, can be very lucrative.

True

In some cases, the types of services offered by a supplier may constitute a primary advantage over suppliers of similar products.

True

Industrial demand derives from consumer demand.

True

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

Raw materials are especially affected by joint demand.

True

Sometimes initial demand for a business product will drop following a price cut if buyers believe that further price reductions are forthcoming.

True

The demand for many business products is inelastic at the industry level.

True

The increase in government purchases has resulted partly from the increase in the number of services provided by the government.

True

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

Value analysis focuses primarily on the examination of the cost of products relative to design, quality, and materials used.

True

Churches, charitable organizations, and private colleges are considered _____ buyers.

institutional

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

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

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.

The third stage in the business buying decision process is to

search for products and suppliers.

Price is of concern to a business marketer primarily because of its psychological impact on purchasing agents.

False

Reciprocal dealing is widespread because it is one of the few avenues not regulated by the FTC, and it facilitates optimal purchases.

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

When purchasing products, business customers are especially concerned about quality, service, price, and supplier relationships.

True

When the major component of an item experiences a price increase, the demand for the item may become more elastic.

True

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

The fourth stage in the business buying decision process is that of searching for products and suppliers.

False

The old Standard Industrial Classification system is more comprehensive than NAICS.

False

The term business markets refers only to producer markets.

False

There is little or no difference between wholesalers' customers and retailers' customers.

False

A new-task purchase is one in which the business makes an initial purchase of a new item.

True

An example of a business market would be farmers.

True

Business customers generally seek to obtain detailed information about a product before purchasing it.

True

Problem recognition can be stimulated by external sources, such as trade shows or sales representatives.

True

Reseller markets consist of intermediaries that buy finished goods and resell them for profit.

True

About what percentage of the annual U.S. gross domestic product is government spending?

20 percent

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

In the long run, business demand becomes totally unrelated to consumer demand.

False

Institutional markets include state prisons.

False

Interpersonal dynamics are easy to observe and simple for the marketer to assess.

False

Specific details regarding terms, credit arrangements, and technical assistance are worked out during the product specification stage of the buying decision process.

False

The factors that influence business buying behavior are the same as those that influence consumer buying behavior.

False

The five-stage business buying decision process is used primarily for routine, straight rebuy purchases.

False

The four categories of consumer markets are producer, reseller, government, and institutional.

False

Inelastic demand simply means that

a price increase or decrease will not significantly change the demand for an item.

It is customary for contracts for raw materials and components to be negotiated semiannually.

False

NAICS provides less information about service industries and high-tech products than did the SIC system.

False

Of the three types of business purchases, the straight rebuy purchase usually requires the most information.

False

One very important consideration for business purchases is the type of packaging used.

False

Which of the following products is most likely to be purchased on the basis of contract negotiation?

A custom-made bulldozer

Orders placed by business customers are usually smaller and more numerous than consumer sales.

False

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

What is a primary difference between business and consumer buyers?

Business buyers generally make larger orders than consumer buyers.

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.

Given the type of business market in which Precision Brake is currently operating, which group would it be least likely to sell to?

Consumers

Demand for business products is characterized as derived. From what is the demand derived?

Demand for consumer products

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

There are many factors that would influence Samsung's business buying decisions. Which one of the following would not?

Demographic

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

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 most likely to be used when the products being purchased are standardized based on certain characteristics?

Description

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?

What are the four major categories of factors that influence business buying decisions?

Environmental, organizational, interpersonal, and individual

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

After finding out which industries purchase the major portion of an industry's output, the next step is to begin production.

False

All companies, no matter what their size or market position, maintain only one buying center.

False

Business customers are forced to satisfy personal goals in pursuits that lie outside their jobs.

False

Buyers in producer markets purchase either raw materials or semifinished products.

False

Grocery stores and supermarkets are a part of producer markets.

False

Input-output analysis is most likely to yield what type of information?

Industries that purchase the major portion of an industry's output

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

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 quasi- assembly pods, and has begun negotiations with their sales representatives. What type of business purchase is Samsung undertaking?

New-task

Which of the following statements about business buying is false?

Orders in business markets tend to be smaller than those placed in consumer markets.

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

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

Retailers like Target and Kmart are considered to be members of which business 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

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.

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

Which method of business buying is necessary when products are highly homogeneous and examination of each item is not feasible?

Sampling

_________ is(are) a major threat to the sales success of jointly demanded products.

Shortages

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.

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

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.

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

___________ 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

______ buy products from manufacturers and then resell the products to other firms in the distribution system.

Wholesalers

Administrative assistants that control the flow of information to other people in the organization often play the _____ role in the buying center.

gatekeeper

In a buying center, purchasing agents or purchasing managers are also known as

buyers.

Compared with the SIC system, the North American Industry Classification System (NAICS) will

contain the most up-to-date information for the NAFTA partners.

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

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.

The second stage in the business buying decision process is to

develop product specifications.

All of the following describe the demand for business products except

elastic.

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

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

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

The recently created Department of Homeland Defense is a member of the _____ market.

government

Compared with consumer goods, marketers aiming at business customers

have an enormous amount of information available concerning potential customers.

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

Demand for a business product is _____ when two or more items are used in combination to produce a product.

joint

A disadvantage of reciprocity is that it can lead to

less-than-optimal purchases for the buyer.

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

All of the following are important concerns of business customers except

obtaining products that exceed specifications to ensure the best possible product performance.

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

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 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

A practice in which two businesses agree to buy from each other is

reciprocity.

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.

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.

An organization that decides to buy all of a certain part from the same company is using

sole sourcing.

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.

When a business routinely purchases the same product with similar terms of sale, the purchase is called a

straight rebuy.

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

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

Which type of business market tends to have the most complex buying procedures?

Government

Which of the following groups should Samsung not include in its buying center for the new equipment?

Potential future Samsung customers

After deciding to order replacement parts for aging machinery, the buyer for a construction company examines catalogs and trade publications looking for these parts. The buyer is at which stage in the business buying decision process?

Product-supplier search and evaluation

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?

Specification development

Which of the following would be considered an institutional buyer?

The United Way

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

Question 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.

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.

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.

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.

If a business product exceeds specifications, so much the better; the customer can then be assured of obtaining a minimum level of acceptability.

False

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

A major source of input-output data is the Survey of Current Business.

True

In the buying decision process, one of the activities included in the search for products and suppliers is examining catalogs and trade publications.

True

Industrial classification systems allow marketers to divide business customers into groups based mainly on the types of goods and services provided.

True

Retailers purchase products and resell them to final consumers.

True

The North American Industry Classification System includes all three NAFTA partners.

True

Most business buying decisions are made by

a firm's buying center.

Demand for business products is also known as ______ demand.

industrial

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

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

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

When the requirements associated with a new-task purchase are changed the second or third time, this is called a ___________ purchase.

modified rebuy

Most business purchases can be classified as belonging to one of three types:

modified rebuy, new-task, or straight rebuy.

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

Institutional markets are

organizations that seek nonbusiness goals.

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.

Many suppliers and their customers invest time and resources to build and maintain mutually beneficial relationships which are often called

partnerships.

Individual influencing factors refer to

personal characteristics of individuals in the buying center.

Product specifications are

physical characteristics and level of quality.

Inelastic demand in business markets refers to a situation where

price increases or decreases will not significantly change demand for a given product.

Business markets are typically divided into four categories. These categories are

producer, reseller, government, and institutional.

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

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.

The group of people within a business who are involved in making business buying decisions is referred to as

the buying center.

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.

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

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.

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

Reseller markets consist mainly of

wholesalers and retailers.