MCQs Part 1

1. ____________ is the amount of money charged for a product or service.

a. Price
b. Accountancy
c. Demand
d. Value

2. _____________ is the sum of the values that consumers exchange for the benefits of
having or using the product or service.
a. Price
b. Elasticity
c. Demand
d. Value estimate
3. A ____________ policy means that a firm sets one price for all buyers in a given product or service
line.
a. fixed-price
b. variable-price
c. dynamic-price
d. standard-price

4. Which of the following factors is spurring a new movement in pricing toward

dynamic pricing?
a. the federal government
b. strong retailers
c. the Internet
d. strong wholesalers

5. ____________ is the practice of charging different prices depending on individual

customers and situations.
a. Fixed-pricing
b. Standard-pricing
c. Barter-pricing
d. Dynamic pricing

6. All of the following are among the internal factors that affect pricing EXCEPT:
(Pick the LEAST LIKELY.)
a. globalization.
b. the companys marketing objectives.
c. marketing mix strategy.
d. the organization.

7. Before setting price, the company must decide on its strategy for:
a. distribution.
b. promotion.
c. the environment.
d. the product.
8. Companies set ______________ as their major objective if they are troubled by too
much capacity, heavy competition, or changing consumer wants.
a. current profit maximization
b. survival
c. market share leadership
d. product quality leadership

9. Pricing to cover variable costs and some fixed costs, as in the case of some automobile
distributorships that sell below total costs, is typical of which of the following pricing objectives?
a. current profit maximization
b. product quality leadership
c. market share leadership

10. Choosing a price based upon its short-term effect on current profit, cash flow, or return on
investment reflects which of the following pricing objectives?
a. current profit maximization
b. product quality leadership
c. market share leadership
d. survival

12. If a company believes that the company with the largest market share will enjoy the lowest costs and
highest long-run profits, that company will probably choose which of the following pricing objectives as
their primary course of action?
a. current profit maximization
b. product quality leadership
c. market share leadership
d. survival

13. When a company sets a price for a new product on the basis of what it thinks then product should
cost, then develops estimates on what each component should cost to meet the proposed price with an
acceptable profit margin, the company is practicing:
a. predatory pricing.
b. target costing.
c. strategic pricing.
d. low cost leadership.

14. ______________ set(s) the floor for the price that the company can charge for its product.
a. Supply
b. Demand
c. Costs

15. All of the following are considered to be forms of a cost-based approach to pricing EXCEPT:
a. cost-plus pricing.
b. break-even analysis.
c. going-rate pricing.
d. target profit pricing.

16. Adding a standard markup to the cost of the product refers to:
a. cost-plus pricing.
b. break-even analysis.
c. target profit pricing.
d. perceived-value pricing.

17. Markup pricing remains popular in the marketplace. Which of the following is a reason for this
popularity?
a. Cost-plus pricing favors the best price.
b. Standard markups make the most sense.
c. Cost-plus pricing is fairer to both buyers and sellers.
d. The method focuses on demand as its base.
18. Setting prices to break even on the costs of making and marketing a product or make the target
profit it is seeking is called:
a. cost-plus pricing.
b. perceived-value pricing.
c. break-even pricing.
d. Going-rate pricing.

19. When a coffee shop in an airport and a fine restaurant in a luxury hotel charge different prices for
the same meal to customers who find the atmosphere in the hotel worth the difference in price, we can
say that ____________ was being used.
a. value-based pricing
b. cost-plus pricing
c. break-even pricing
d. going-rate pricing

20. Which of the following pricing methods uses the idea that pricing begins with analyzing consumer
needs and value perceptions, and price is set to match consumers perceived value?
a. cost-based pricing
b. service-based pricing
c. psychology-based pricing
d. value-based pricing

21. _____________ is offering just the right combination of quality and good service at a fair price.
a. Value pricing
b. Cost pricing
c. Service pricing
d. Demand pricing

22. If the customers base their judgments of a products value on the prices that competitors charge for
similar products, then ___________________ is in place.
a. cost-plus pricing
b. value-based pricing
c. competition-based pricing
d. target profit pricing

23. Companies bringing out a new product face the challenge of setting prices for the first time. They
can choose between two broad strategies. What are these two broad strategies?
a. product mix strategies and pricing mix strategies
b. product line pricing and captive-product pricing
c. market-skimming pricing and market-penetration pricing
d. market-expansion pricing and market-harvesting pricing
24. The process of setting a high price for a new product to gain maximum revenues layer by layer from
the segments willing to pay the high price is called:
a. market-penetration pricing.
b. market-layer pricing.
c. market-skimming pricing.
d. market-saturation pricing.

25. When Intel develops a strategy whereby they develop and introduce a newer, higher margin
microprocessor chip every 12 months and send the older models down the industry food chain to feed
demand at lower price points (their new chips can sell for as much as a $1,000 apiece), they are using
which of the following pricing strategies?
a. market-layer pricing
b. market-segmentation pricing.
c. market-saturation pricing.
d. market-skimming pricing.

26. Market skimming makes sense only under certain conditions. Which of the following WOULD NOT
be a reason for using market skimming pricing?
a. The market must be highly price sensitive.
b. The products quality and image must support its higher price, and enough buyers must want the product at
that price.
c. The costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.
d. Competitors should not be able to enter the market easily and undercut the high price.

27. Setting a low initial price to attract a large number of buyers quickly and win a large market share
is called:
a. market-penetration pricing.
b. market-skimming pricing.
c. market-loss pricing.
d. market-competitive pricing.

28. Market-penetration pricing refers to the practice of:

a. setting a high initial price and then penetrating the market with successive prices for each price sensitive
layer.
b. setting a low initial price to penetrate the market quickly and attract a large number of buyers to win
a large market share.
c. pricing to attract low volume in many segments so as to gradually penetrate the market as a whole.
d. pricing products very high to penetrate deeply and quickly into large profits for the company.

29. When Dell Computer runs an advertisement that boosts Superior Quality, Superior Service, and
Unbelievable Price, they are most likely using which of the following new product pricing strategies?
a. market-penetration pricing
b. market-skimming pricing
c. market-loss pricing
d. market-competitive pricing

30. ________________ is setting the price steps between various products in a product line based on cost
differences between the products, customer evaluations of different features, and competitors prices.
a. optional-product pricing
b. captive-product pricing
c. product line pricing
d. by-product pricing
31. The use of price points for reference to different levels of quality for a companys related products is
typical of which product-mix pricing strategy?
a. optional-product pricing
b. captive-product pricing
c. by-product pricing
d. product line pricing
32. Using a low sticker price on automobiles to attract customers and then selling models with
additional accessory features to meet customer needs is a form of which of the following pricing
strategies?
a. optional-product pricing
b. captive-product pricing
c. by-product pricing
d. product line pricing

33. ______________ is setting a price for products that must be used along with a main product, such as
blades for a razor.
a. Optional-product pricing
b. Captive-product pricing
c. By-product pricing
d. Product line pricing
34. Captive-product pricing applies to services pricing. With respect to services, the captive-product
strategy is called:
a. demand pricing.
b. slack pricing.
c. two-part pricing.
d. referral pricing.
Answer: (c)
35. ________________ is setting a price for by-products in order to make the main products price more
competitive.
a. Optional-product pricing
b. Captive-product pricing
c. By-product pricing
d. Product line pricing

36. If a zoo sells ZOO-DOO to customers as a great natural fertilizer, it is practicing a form of:
a. product-bundle pricing.
b. optional-product pricing.
c. captive-product pricing.
d. by-product pricing.

37. Combining several products and offering them together at a reduced price is called:
a. product-bundle pricing.
b. optional-product pricing.
c. captive-product pricing.
d. by-product pricing.

38. All of the following are price-adjustment strategies EXCEPT:

a. segmented pricing.
b. market-penetration pricing.
c. psychological pricing.
d. promotional pricing.
39. A price reduction to buyers who buy in large volumes is called a:
a. quantity discount.
b. cash discount.
c. seasonal discount.
d. trade discount.

40. A(n) _________ is a straight reduction in price on purchases during a stated period of time.
a. allowance
b. discount
c. pricing segment
d. reference price

41. A(n) ________________ is a price reduction to buyers who pay their bills promptly.
a. quantity discount
b. functional discount
c. cash discount
d. allowance
42. In an attempt to keep production steady during an entire year, especially for products whose use is
for only part of the year, sellers often use which of the following?
a. cash discounts
b. quantity discounts
c. functional discounts
d. seasonal discounts

43. A functional discount is also called a _________ discount.

a. segmented
b. quantity
c. trade
d. service

44. Promotional money paid by manufacturers to retailers in return for an agreement to feature the
manufacturers products in some way is called a(n):
a. discount.
b. allowance.
c. rebate.
d. off-retail price.

45. If a state university charges different tuition rates to in-state and out-of-state students, then the
university is practicing a form of:
a. promotional pricing.
b. institutional pricing.
c. segmented pricing.
d. psychological pricing.

46. When different versions of a product are priced differently but not in accordance to differences in
their value, it is a form of:
a. customer-segment pricing.
b. product-form pricing.
c. location pricing.
d. time pricing.
47. When consumers pay $100 for a bottle of perfume that only contains $3 worth of ingredients, they
are participating in:
a. upscale pricing.
b. discriminatory pricing.
c. psychological pricing.
d. promotional pricing.

48. Prices that buyers carry in their minds and refer to when they look at a given product are called:
a. segmented prices.
b. reference prices.
c. relationship prices.
d. basing-point prices.

49. With respect to setting pricing amounts, the belief that individual digits in a products price have
symbolic and visual qualities that should be considered in setting price is linked to:
a. psychological pricing.
b. promotional pricing.
c. symbolic pricing.
d. psychographic pricing.

50. If a company pursues ________________, it often temporarily prices products below the list price,
and sometimes even below cost, to increase short-run sales.
a. psychological pricing
b. promotional pricing
c. symbolic pricing
d. psychographic pricing

51. The type of promotional pricing that uses a few products with very low prices to attract customers
into the store in the hope that they will then buy regularly priced items is called:
a. special-event pricing.
b. cash rebates.
c. loss leaders.
d. low-value pricing.

52. When the seller places products at no charge with a carrier and the title an responsibility pass to the
customer who pays the freight, it is which type of pricing strategy?
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing

53. __________________ is a geographical pricing strategy in which the company charges the same
price plus freight to all customers, regardless of their location.
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing

54. The pricing method that charges different prices to customers in different zones (but the same
prices to customers within a zone) is called:
a. FOB-origin pricing.
b. uniform-delivered pricing.
c. zone pricing.
d. basing-point pricing.

55. When a seller selects a given city as the source from which to charge all customers freight costs from
that location, they are practicing which of the following?
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing

56. A major factor in price increases is:

a. promotional expenditures.
b. government regulations.
c. cost inflation.
d. underdemand.

57. How does a company respond to a price change by a competitor. The text suggests four alternative
strategies. Which of the following WOULD NOT be among those four strategies?
a. reduce price
b. raise perceived quality
c. launch low-price fighting brand
d. increase price to force response

58. In response to a price reduction by a competitor, a company can introduce a fighting brand. A
good definition of a fighting brand would be one that:
a. raises a price to offer a high price alternative.
b. raises quality and increases price.
c. becomes a lower-priced brand or line to combat the competitors price reduction.
d. copies the competitors brand to confuse the buyer.

59. Which of the following strategies best describes the attempt on the part of sellers to sell below cost
with the intention of punishing a competitor or gaining higher long-run profits by putting competitors
out of business?
a. price-fixing strategy
b. deceptive pricing strategy
c. price discrimination strategy
d. predatory pricing strategy

MCQs Part 2

1) When consumers examine products, they often compare an observed price to an internal price they
remember. This is known as a(n) ________ price.
A) markup
B) reference
C) market-skimming
D) accumulated
E) target

2) ________ price refers to what the consumers feel the product should cost.
A) Fair
B) Typical
C) Usual discounted
D) List
E) Maximum retail

3) While shopping at the mall, Jane was asked by one of the sales representatives at the cosmetics
counter to try out a new lipstick that her company was test marketing. The company representative
asks her how much she would be willing to pay for the lipstick. After trying it out, Jane is of the opinion
that $5 is just the right price for it. What type of a reference price is Jane using?
A) usual discounted price
B) fair price
C) maximum retail price
D) last price paid
E) historical competitor price

4) The reservation price or the maximum that most consumers would pay for a given product is known
as the ________ price.
A) expected future
B) usual discounted
C) upper-bound
D) typical
E) historical competitor

5) A company decided to conduct a market survey for its new MP3 player which it had priced at $150.
However, in the survey, 95 percent of the participants said that the maximum they would pay for the
MP3 player is $100. This is an example of which of the following possible consumer reference prices?
A) historical competitor price
B) expected future price
C) usual discounted price
D) upper-bound price
E) last price paid

6) The minimum price that most consumers would pay for a given product is known as the ________
price.
A) everyday low
B) usual discounted
C) fair
D) typical
E) lower-bound

7) A company has developed the prototype of a mobile phone which it plans to launch in the next few
months. The phone comes equipped with the most advanced technological features. As part of its test
marketing efforts, it allows customers to examine and use the prototype and also gathers feedback
regarding product features and price. The results of this test marketing effort show that customers are
willing to pay at least $500, considering the phone's various features. As such, the company has found
out about the customers' ________.
A) last paid price
B) expected future price
C) lower-bound price
D) upper-bound price
E) typical price

8) Many consumers are willing to pay $100 for a perfume that contains $10 worth of scent because the
perfume is from a well-known brand. What kind of a pricing is the company depending on?
A) going-rate pricing
B) image pricing
C) market-skimming pricing
D) target pricing
E) markup pricing

9) Pricing cues such as sale signs and prices that end in 9 are more influential ________.
A) when customers have substantial knowledge about prices
B) when customers purchase the particular item regularly
C) when product quality is standardized
D) when product designs vary over time
E) when prices do not vary from time to time

10) Which of the following is the first step in setting a pricing policy?
A) selecting a pricing method
B) selecting the pricing objective
C) determining demand
D) estimating cost
E) analyzing competitors' costs, prices, and offers

11) After determining its pricing objectives, what is the next logical step a firm should take in setting its
pricing policy?
A) It should analyze its competitors' costs, prices, and offers.
B) It should select its pricing method.
C) It should select its final price.
D) It should determine the demand for its product.
E) It should estimate the cost of its product.

12) A firm that is plagued with overcapacity, intense competition, or changing wants would do better if
it pursues ________ as its major objective.
A) market skimming
B) product-quality leadership
C) survival
D) profit maximization
E) market penetration

13) After estimating the demand and costs associated with alternative prices, a company has chosen to
price its product in such a way that it gains the highest rate of return on its investment. The company is
looking to ________.
A) maximize its market share
B) skim the market
C) become a product-quality leader
D) survive in the market
E) maximize its current profit

14) Companies who believe that a higher sales volume leads to lower unit costs and higher long-run
profits are attempting to ________.
A) maximize their market share
B) skim the market
C) become a product-quality leader
D) merely survive in the market
E) maximize their current profits
15) A company that is looking to maximize its market share would do well to follow ________ pricing.
A) markup
B) market-penetration
C) market-skimming
D) survival
E) target-return

16) A market-penetration pricing strategy is most suitable when _______.

A) a low price slows down market growth
B) production and distribution costs fall with accumulated production experience
C) a high price dissuades potential competitors from entering the market
D) the market is characterized by inelastic demand
E) a low price encourages actual competition

17) When a company introduces a product at a very high price and then gradually drops the price over
time, it is pursuing a ________ strategy.
A) market-penetration pricing
B) market-skimming pricing
C) value-pricing
D) switching cost
E) loss-leader pricing

18) When Apple introduced its iPhone, it was priced at $599. This allowed Apple to earn the maximum
amount of revenue from the various segments of the market. Two months after the introduction, the
price has come down to $399. What kind of a pricing did Apple adopt?
A) loss-leader pricing
B) market-penetration pricing
C) market-skimming pricing
D) target-return pricing
E) value pricing

19) Market skimming pricing makes sense under all the following conditions, EXCEPT ________.
A) if a sufficient number of buyers have a high current demand
B) if the unit costs of producing a small volume are high enough to cancel the advantage of charging what the
traffic will bear
C) if the high initial price does not attract more competitors to the market
D) if consumers are likely to delay buying the product until its price drops
E) if the high price communicates the image of a superior product

20) Companies that aim to ________ strive to be affordable luxuries.

A) survive in the market
B) partially recover their costs
C) maximize their market share
D) pursue value pricing
E) be product-quality leaders

21) Starbucks, Aveda, and BMW have been able to position themselves within their categories by
combining quality, luxury, and premium prices with an intensely loyal customer base. These companies
are employing a ________ strategy.
A) market-skimming
B) market-penetration
C) survival
D) market share maximization
E) product-quality leadership

22) The first step in estimating demand is to ________.

A) analyze competitors' cost
B) select a pricing method
C) understand what affects price sensitivity
D) calculate fixed costs
E) decipher the experience curve

23) Consumers are less price sensitive ________.

A) to high cost items
B) when they frequently change their buying habits
C) when there are more substitutes
D) when there are more competitors
E) when they do not readily notice higher prices

24) Consumers are less price sensitive when ________.

A) price is only a small part of the total cost spent on the product over its lifetime
B) they perceive the higher prices to be unjustified
C) they change their buying habits regularly
D) there are many substitutes and competitors in the market
E) they are buying high-cost items

25) If demand hardly changes with a small change in price, the demand is said to be ________.
A) strained
B) marginal
C) inelastic
D) flexible
E) unit elastic

26) If demand changes considerably, with a small change in price, the demand is said to be ________.
A) unit elastic
B) elastic
C) inelastic
D) marginal
E) strained

27) If consumers were largely indifferent to a $0.5 increase in the price of a gallon of milk, the price rise
is said to fall within customers' ________.
A) price indifference band
B) experience curve
C) arm's-length price
D) learning curve
E) net price index

28) Which of the following is true regarding price elasticity?

A) The higher the elasticity, the lesser is the volume growth resulting from a 1 percent price reduction.
B) Within the price indifference band, price changes have little or no effect on demand.
C) If demand is elastic, sellers will consider increasing the price.
D) Price elasticity does not depend on magnitude and direction of the contemplated price change.
E) When demand is inelastic, sellers should lower prices in order to increase total revenue.
29) Costs that do not vary with production levels or sales revenue are known as ________.
A) overhead costs
B) variable costs
C) average costs
D) opportunity costs
E) total costs

30) A company must make payments each month for rent, heat, interest, and salaries. These are
________.
A) total costs
B) fixed costs
C) variable costs
D) opportunity costs
E) target costs

31) Costs that differ directly with the level of production are known as ________.
A) fixed costs
B) overhead costs
C) opportunity costs
D) target costs
E) variable costs

32) ________ consist of the sum of the fixed and variable costs for any given level of production.
A) Total costs
B) Average costs
C) Opportunity costs
D) Learning costs
E) Target costs

33) ________ is the cost per unit at that level of production.

A) Target cost
B) Average cost
C) Marginal cost
D) Opportunity cost
E) Fixed cost

34) The decline in the average cost of production with accumulated production experience is called the
________.
A) demand curve
B) supply chain
C) learning curve
D) value chain
E) indifference curve

35) Experience-curve pricing ________.

A) assumes competitors are weak followers
B) allows products to project a high quality image
C) is applicable only to manufacturing costs
D) focuses on reducing fixed costs
E) is generally risk-free
36) Deducting the desired profit margin from the price at which a product will sell, given its appeal and
competitors' prices, is known as ________.
A) overhead costing
B) target costing
C) activity based costing
D) benefit analysis
E) estimate costing

37) Competitors are most likely to react to a price change, when ________.
A) the firm has a weak value proposition
B) the firm enjoys a monopoly
C) there are few competing firms
D) the product is heterogeneous
E) buyers have limited information

38) Which of the following is the most elementary pricing method?

A) value pricing
B) going-rate pricing
C) markup pricing
D) target-return pricing
E) perceived-value pricing

39) Despite its weaknesses, markup pricing remains popular for which of the following reasons?
A) Sellers can determine demand much more easily than they can estimate costs.
B) By tying the price to cost, the pricing task becomes more sophisticated.
C) When all firms in the industry use markup pricing, price competition flourishes.
D) Sellers take advantage of buyers when the latter's demand becomes acute.
E) Many people feel that cost-plus pricing is fairer to both buyers and sellers.

40) A manufacturer has invested $750,000 in a new product and wants to set a price to earn a 15
percent ROI. The cost per unit is $18 and the company expects to sell 50,000 units in the first year.
Calculate the company's target-return price for this product.
A) $20.25
B) $18.23
C) $18.10
D) $20.70
E) $25.50

41) An umbrella manufacturing company's fixed costs are $275,000. The variable cost per unit is $5 and
each umbrella is sold at $10. How many units should the firm sell in order to break even?
A) 18000
B) 5500
C) 27500
D) 55000
E) 1819

42) ________ pricing takes into account a host of inputs, such as the buyer's image of the product
performance, the channel deliverables, the warranty quality, customer support, and attributes such as
the supplier's reputation, trustworthiness, and esteem.
A) Perceived-value
B) Value
C) Going-rate
D) Auction-type
E) Markup

43) The key to perceived-value pricing is to ________.

A) reengineer the company's operations
B) deliver more unique value than competitors
C) adopt subtle marketing tactics compared to competitors
D) deliver more value but at a lower cost
E) invest heavily in advertising in order to convey superior value

44) ________ pricing is a matter of reengineering the company's operations to become a low-cost
producer without sacrificing quality.
A) Value
B) Going-rate
C) Auction-type
D) Markup
E) Perceived-value

45) A retailer who holds on to a(n) ________ policy charges a constant low price with little or no price
promotions and special sales.
A) everyday low pricing
B) high-low pricing
C) low cost
D) going-rate pricing
E) auction-type pricing

46) Matt's retail store offers all its products at $2 lesser than its competitors throughout the year. The
store never runs any promotional campaigns or offers any additional special discounts. Matt's retail
store is following a(n) ________.
A) auction-type pricing policy
B) target-plus pricing policy
C) everyday low pricing policy
D) high-low pricing policy
E) going-rate pricing policy

47) Everyday low pricing is most suitable if ________.

A) consumers are willing to perform activities such as clip coupons to avail of discounts
B) consumers tend to associate price with quality
C) customers are insensitive to changes in price
D) the cost of conducting frequent sales and promotions is high
E) consumers have sufficient time to find the best prices

48) In ________, the firm bases its price largely on competitor's prices.
A) going-rate pricing
B) auction-type pricing
C) markup pricing
D) target-return pricing
E) perceived-value pricing

49) Which of the following auctions is characterized by one seller and many buyers?
A) Walrasian auctions
B) ascending bid auctions
C) closed auctions
D) sealed-bid auctions
E) reverse auctions

50) In which of the following auctions does the auctioneer first announce a high price for a product and
then slowly decreases the price until a bidder accepts?
A) a Dutch auction with one buyer and many sellers
B) an English auction with one seller and many buyers
C) an ascending bid auction
D) a sealed-bid auction
E) a Dutch auction with one seller and many buyers

51) In a(n) ________, the buyer announces something he or she wants to buy, and potential sellers
compete to offer the lowest price.
A) Dutch auction with one buyer and many sellers
B) English auction with one buyer and many sellers
C) English auction with one seller and many buyers
D) sealed-bid auction
E) ascending auction

52) ________ let would-be suppliers submit only one bid; they cannot know the other bids.
A) Descending bid auctions
B) Sealed-bid auctions
C) English auctions
D) Dutch auctions
E) Reverse auctions

53) In which of the following forms of countertrade do buyers and sellers directly exchange goods, with
no money and no third party is involved?
A) buyback arrangements
B) offsets
C) barter
D) sealed bids
E) compensation deals

54) A Japanese firm is ready to sell its recent technological innovation to the U.S. government. But it
has asked for 80 percent in cash and the rest in mica. The Japanese firm is looking to enter into a(n)
________ with the U.S. government.
A) functional discount
B) compensation deal
C) buyback arrangement
D) offset agreement
E) barter deal

55) Armac Ltd., is a sluice-box manufacturer based in China. A sluice-box is used for gold prospecting.
Armac is interested in selling a few of its machines to an American mining company, but it wants 95
percent of the machines' price in gold and the rest in ores recovered by using the machines. This is an
example of a ________.
A) buyback arrangement
B) functional discount
C) barter deal
D) compensation deal
E) sealed bid
56) ROC Engineering, a Chinese shipbuilding company, agrees to build a fleet of submarines for the Sri
Lankan navy, for which it will be paid in the local Sri Lankan currency. As per the agreement, ROC
must also spend a substantial amount of the money it generates through this deal within the country. In
accordance with the contract, ROC buys Sri Lankan tea at a reduced rate. This is an example of which
of the following forms of countertrade?
A) descending bid
B) offset
C) barter
D) compensation deal
E) buyback arrangement

57) ________ are offered by a manufacturer to trade-channel members if they will perform certain
functions, such as selling, storing, and record keeping.
A) Consumer promotions
B) Quantity discounts
C) Functional discounts
D) Seasonal discounts
E) Trade-in allowances

58) When hotels, motels, and airlines offer discounts in slow selling periods, they are said to be offering
________.
A) trade discounts
B) quantity discounts
C) functional discounts
D) seasonal discounts
E) trade-in allowances

59) A(n) ________ is an extra payment designed to gain reseller participation in special programs.
A) seasonal discount
B) allowance
C) discount
D) quantity discount
E) functional discount

60) ________ are granted for turning in old item when buying a new one.
A) Promotional allowances
B) Quantity discounts
C) Functional discounts
D) Seasonal discounts
E) Trade-in allowances

61) ________ reward dealers for participating in advertising and sales support programs.
A) Functional discounts
B) Trade discounts
C) Promotional allowances
D) Rebates
E) Quantity discounts

62) When supermarkets and department stores drop the price on well-known brands to stimulate store
traffic, they are said to be following ________.
A) value pricing
B) loss-leader pricing
C) special event pricing
D) high-low pricing
E) everyday low pricing

63) When Alan bought his car, the bank gave him 24 months to repay his car loan. But when Alan made
a request to increase the time frame to 36 months, the bank granted the extension. The bank was willing
to offer Alan a ________.
A) longer payment term
B) warranty contract
C) service contract
D) special customer price
E) special event price

64) In ________, the seller charges a separate price to each customer depending on the intensity of his
or her demand.
A) second-degree price discrimination
B) third-degree price discrimination
C) psychological discounting
D) special-customer pricing
E) first-degree price discrimination

65) In second-degree price discrimination, the seller charges ________.

A) less to buyers of larger volumes
B) different prices depending on the season, day, or hour
C) a separate price to each customer depending on the intensity of his or her demand
D) different prices for different versions of the same product
E) different prices for the same product depending on the channel through which it is sold

66) In ________, the seller charges different amounts to different classes of buyers.
A) perceived value pricing
B) third-degree price discrimination
C) first-degree price discrimination
D) second-degree price discrimination
E) psychological discounting

67) When museums charge a lower admission fee to students and senior citizens, then this form of price
discrimination is known as ________.
A) location pricing
B) channel pricing
C) customer-segment pricing
D) special-customer pricing
E) loss-leader pricing

68) Madame Tussaud's wax museum is a popular tourist attraction in London. The museum charges
higher entry rates for tourists compared to locals. This form of price discrimination is known as
________.
A) customer-segment pricing
B) image pricing
C) location pricing
D) special customer pricing
E) special event pricing
69) When Coca-Cola carries a different price depending on whether the consumer purchases it in a fine
restaurant, a fast-food restaurant, or a vending machine, then this form of price discrimination is
known as ________.
A) product-form pricing
B) loss-leader pricing
C) special event pricing
D) channel pricing
E) location pricing

70) The price of tickets to the opera vary depending on where the person would like to be seatedin the
gallery or in the stalls. This is an example of ________.
A) channel pricing
B) time pricing
C) image pricing
D) product-form pricing
E) location pricing

71) When hotels drop their rates on the weekends, then this form of price discrimination is known as
________.
A) channel pricing
B) image pricing
C) product-form pricing
D) time pricing
E) location pricing

72) The airline and hospitality industries use ________, by which they offer discounted but limited early
purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.
A) special-customer pricing
B) yield pricing
C) cash rebates
D) location pricing
E) customer-segment pricing

73) ________ refers to selling below cost with the intention of destroying competition.
A) Bid rigging
B) Loss-leader pricing
C) Predatory pricing
D) Price discrimination
E) Price penetration

74) For price discrimination to work ________.

A) the market must be segmentable and the segments must show similar intensities of demand
B) members in the lower-price segment must be able to resell the product to the higher-price segment
C) competitors must be able to undersell the firm in the higher-price segment
D) the practice must not breed customer resentment and ill will
E) the extra revenue derived from price discrimination must not exceed the cost of segmenting and policing
the market

75) A low price buys market share but not market loyalty. The same customers will shift to any lower-
priced product that may come along. This is called the ________.
A) low-price trap
B) relative-market-share trap
C) shallow-pockets trap
D) target-market-share trap
E) fragile-market-share trap

76) When higher-priced competitors match the lower prices but have longer staying power because of
deeper cash reserves, it leads to a(n) ________.
A) low-quality trap
B) fragile-market-share trap
C) price war trap
D) escalator trap
E) shallow-pockets trap

77) A company does not set a final price until the product is finished or delivered. This is known as
________.
A) delayed quotation pricing
B) an escalator clause
C) special-event pricing
D) time pricing
E) the shallow-pockets trap

78) When a company requires the customers to pay today's price and all or part of any inflation
increase that takes place before delivery, it is known as ________.
A) special-customer pricing
B) an escalator clause
C) delayed quotation pricing
D) unbundling
E) time pricing

79) When a company maintains its price but removes or prices separately one or more elements that
were part of the former offer, such as free delivery or installation, it is known as ________.
A) escalating
B) differentiation
C) unbundling
D) reverse discounting
E) delayed quotation pricing

80) In markets that are characterized by products that are highly homogeneous, how should a firm
react to a competitor's reduction in price?
A) shrink the amount of the product available
B) substitute expensive materials or ingredients
C) reduce product features
D) reduce product services
E) augment the product

MCQs Part 3

1) Which of the following is most closely related with the organic growth of an organization?
A) acquiring a product or service brand
B) entering new market places
C) increasing the operational profitability
D) increasing productivity of employees
E) developing new products from within
Answer: E
2) New-to-the-world products are ________.
A) low-cost products designed to obtain an edge in highly competitive markets
B) new product enhancements that supplement established products
C) new versions of an existing product that has been less successful
D) new products that create an entirely new market
E) existing products that are targeted to new geographical markets
Answer: D
3) Which of the following firms is most likely to seek radical innovation?
A) a traditional publishing company
B) a small scale FMCG company
C) a firm that procures and markets wheat
D) a high-tech firm in telecommunications
E) a firm that sells mineral water
Answer: D
4) Most new-product activities are devoted to ________.
A) changing the target markets
B) developing new-to-the-world products
C) introducing backward integration
D) improving existing products
E) changing the existing market dynamics
Answer: D
5) Which of the following is the best example of a new-to-the-world product?
A) Walmart, the retail giant, opens new stores in an underdeveloped African country.
B) Pestorica, a publishing company, decides to launch a new sports magazine.
C) Tata Motors, an Indian automobile company, acquires Jaguar to extend its business.
D) An Asian company licenses a U.S. apparel brand name though the brand is not familiar in Asia.
E) Kids-Med, a company that produces childcare products, launches a non-contact thermometer.
Answer: E
6) Most established companies focus on ________ innovation when they aim to enter new markets by tweaking
existing products, or they want to stay one step ahead in the market by using variations on a core product.
A) incremental
B) continuous
C) spontaneous
D) radical
E) competitive
Answer: A
7) It has been observed that most new products have shorter product life cycles. What is the reason for this?
A) Most new products do not use technology.
B) Most new products are not backed by a marketable idea.
C) New products do not get adequate management support.
D) Social and governmental constraints lead to this failure.
E) Rivals quickly copy products that are successful.
Answer: E
8) Which of the following strategies for new-product development incorporates the buyers' preferences in the
final design of the product?
A) customer-driven engineering
B) market leadership
C) cost leadership
D) incremental innovation
E) disruptive technology
Answer: A
9) Pager, a simple personal device for short messages, became famous in the 1990s. Troveron Communications
launched a pager in the early twenty-first century. Due to the introduction of mobile phones and text messaging,
the pager industry was on a decline. The company's innovations were not well received by the market and the
product became a failure. Which of the following is the most likely reason for the product's failure in this case?
A) poor launch timing of the product
B) a small and fragmented target market
C) high cost of development
D) social and economic constraints
E) hasty product development
Answer: A
10) After creating a product prototype, a company tests it within the firm to see how it performs in different
applications. The company refines the prototype to correct the mistakes found in in-house testing. What should
be the next step?
A) commercializing the product
B) performing concept testing
C) conducting beta testing with customers
D) creating a marketing strategy for the product
E) performing business analysis
Answer: C
11) Identify a shortcoming of giving the responsibility of new product development to the product managers of a
company.
A) They would not be familiar with the industry standards.
B) Product managers would not have an operational focus.
C) Product managers are often busy managing existing lines.
D) They will find it difficult to gain support from employees.
E) Product managers are less likely to use participative management.
Answer: C
12) ________ teams are cross-functional groups charged with developing a specific product or business.
A) Virtual
B) Venture
C) Fundamental
D) Elemental
E) Transitory
Answer: B
13) Intercom, Inc. together with its subsidiaries, primarily engages in the generation, transmission, and
distribution of electric power in the United States. The company observes that its growth has stagnated over a
period of two years. In an attempt to promote growth, it considers adding new features to the existing products
and introducing a few new products. The company forms a committee consisting of three top executives, one of
the production mangers, a few operational managers, and a representative of the HR department to generate
ideas. This team is called a(n) ________.
A) virtual team
B) venture team
C) fundamental team
D) elemental team
E) transitory team
Answer: B
14) A team formed at Intercom, Inc. to generate ideas for new products, conducts frequent meetings and engages
in activities such as mind mapping and brainstorming. Most of the meetings are conducted at informal locations
away from office. These workplaces are called ________.
A) skunkworks
B) idea funnels
C) research centers
D) stage gate systems
E) contextual bases
Answer: A
15) The ________ used by companies divides the innovation process into stages, with a checkpoint at the end of
each stage.
A) reverse assumption analysis technique
B) skunkworks system
C) stage-gate system
D) spiral development process
E) new-product department technique
Answer: C
16) ________ are informal workplaces, sometimes garages, where intrapreneurial teams attempt to develop new
products.
A) Stage-gate systems
B) Skunkworks
C) Funnels
D) Opportunity spaces
E) Research centers
Answer: B
17) Which of the following questions is answered during the business analysis of ideas?
A) Will this product meet our profit goals?
B) Have we got a technically and commercially sound product?
C) Can we find a cost-effective, affordable marketing strategy?
D) Can this product meet sales expectations?
E) Can we find a good concept consumers say they would try?
Answer: D
18) During which of the following stages in new product development decision making do managers analyze if
they can find a good thought consumers say they would try?
A) idea generation
B) idea screening
C) business analysis
D) concept development and testing
E) product development and testing
Answer: D
19) ________ process recognizes the value of returning to an earlier stage to make improvements before moving
forward.
A) Spiral development
B) Reactive development
C) Market testing
D) Proactive development
E) Concept testing
Answer: A
20) The ________ uses observational, anthropological, and ethnographic methods or
consumer self-reports to map consumer needs, wants, and even beyond.
A) business analysis
B) demand landscape
C) opportunity space
D) strategic blueprint
E) internal design analysis
Answer: B
21) To ensure success of new products, which market segment should be targeted initially?
A) Early majority. B)
Early adopters. C)
Laggards. D) Late
majority. E)
Innovators. Answer:
E
22) The type of newness (new to the company, new to the market) may be explained by which of the following?
A. A me-too product. B. A
radical new product with innovation. C. The
core product is familiar to the market. D.
Innovative me-too product, new to the market. E.
The core product is familiar with innovation. Answer:
B
23) When companies identify a small number of test sites and cities to conduct a full marketing campaign to
ascertain the response of the consumer to the new product, this process is referred to as:
A. simulated test marketing. B.
controlled test
marketing. C.nichetesting.
D. Standard test
marketing E. all of the above.
Answer: D
24) ________ means inviting the Internet community to help create content or software, often with prize money
or a moment of glory involved.
A) Stage-gating
B) Cocreation
C) Microstocking
D) Buzzing
E) Crowdsourcing
Answer: E
25) Surgeons and ER nurses would be considered ________ for surgical equipment.
A) venture agents
B) internal customers
C) buzz agents
D) lead users
E) connectors
Answer: D
26) Many believe that customer focus does not help to create better or new products. This belief rests on which
of the following ideas?
A) Such new product developments decrease the chances of success.
B) Customers do not consider the cost of design when suggesting.
C) Customers are at times unaware of what they really want.
D) It increases the cost of testing a product or service.
E) Having too much customer focus leads to a negative brand image.
Answer: C
27) The ________ technique for stimulating creativity lists all the characteristics of an object and then modifies
each to try to arrive at a new idea.
A) reverse assumption analysis
B) lateral marketing
C) attribute listing
D) forced relationship
E) morphological analysis
Answer: C
28) The ________ technique used for stimulating creativity identifies a problem and then considers the
dimension, the medium, and the power source.
A) attribute listing
B) reverse assumption analysis
C) mind mapping
D) lateral marketing
E) morphological analysis
Answer: E
29) In an attempt to improve the product, a company that manufactures screwdrivers discusses the modification
of each attribute, such as replacing the wooden handle with plastic, providing torque power, adding different
screw heads, and so on. This creativity technique is called ________.
A) attribute listing
B) mind mapping
C) morphological analysis
D) lateral analysis
E) reverse analysis
Answer: C
30) Electro Locomotors (EL), Inc. engages in the manufacture, distribution, and marketing of custom vehicles in
Brazil. Bono, a hybrid car brand that the company produces, is a market leader in the hybrid vehicles segment.
With the increased global focus on nature friendly vehicles and governmental subsidies for companies that
manufacture hybrid vehicles, competition has increased for flex-fuel cars like Bono. The heads of the R&D team
at EL is in a creative session to generate ideas for improvements to Bono. They consider each part of the car and
discuss the possibilities of improvements in each of them. Identify the creativity technique used here.
A) attribute listing
B) forced relationship analysis
C) morphological analysis
D) reverse assumption analysis
E) mind mapping
Answer: A
31) ________ works by listing all the normal assumptions about an entity and then turning them around.
A) Lateral marketing
B) Attribute listing
C) Reverse assumption analysis
D) Forced relationships
E) Morphological analysis
Answer: C
32) The ________ creativity technique begins in a thought that is written down, then proceeds to develop other
thoughts that are linked to the first thought, and finally materializes a new idea by associating all the thoughts.
A) mind mapping
B) contextual analysis
C) attribute listing
D) reverse assumption analysis
E) morphological analysis
Answer: A
33) Increasingly, new-product ideas arise from ________ that combines two product concepts or ideas to create a
new offering.
A) reverse assumption analysis
B) lateral marketing
C) attribute listing
D) forced relationships
E) morphological analysis
Answer: B
34) A group of college graduates decide to start a business. Though they are knowledgeable in various business
domains, they are unable to arrive at a valuable business idea. They
decide to search for ideas in a structured manner. They meet together and start discussing everyone's ideas. Each
idea is recorded and then the thoughts that come up in relation to the ideas are written down and discussed. This
process helps them to finalize a business plan. What technique is used here?
A) morphological analysis
B) forced relationship analysis
C) reverse assumption analysis
D) attribute listing
E) mind mapping
Answer: E
35) Morboro Energy, Inc. is a large chain of fuel stations in Europe. The company decided to expand its business
by incorporating restaurants and automobile service stations as a part of its fuel outlets. This is an example of
________.
A) lateral marketing
B) brand extension
C) market development
D) internal marketing
E) brand personification
Answer: A
36) A ________ error occurs when the company dismisses a good idea.
A) probability
B) performance
C) double counting
D) DROP
E) GO
Answer: D
37) A(n) ________ is a possible product the company might offer to the market.
A) test brand
B) alpha product
C) beta version product
D) product idea
E) product concept
Answer: D
38) A(n) ________ is an elaborated version of a product idea expressed in consumer terms.
A) test brand
B) alpha product
C) beta product
D) business schedule
E) product concept
Answer: E
39) ________ means presenting the product concept to target consumers, symbolically of
physically, and getting their reactions.
A) Perceptual mapping
B) Brand-positioning mapping
C) Brand attribute mapping
D) Concept development
E) Concept testing
Answer: E
40) Modern firms use the ________ concept testing tool to design products on a computer and then produce
rough models to show potential consumers for their reactions.
A) morphological analysis
B) rapid prototyping
C) concept testing
D) perceptual mapping
E) conjoint analysis
Answer: B
41) Brown & Smith, Inc. engages in the design, development, making, and retail of designer jewelry in North
America. Before approving a new design of jewelry the company draws it on a computer and then produces
models to show potential consumers for their reactions. This allows the company to analyze the possible
customer reaction. Identify the concept testing method used here.
A) conjoint analysis
B) perceptual mapping
C) virtual reality testing
D) rapid prototyping
E) digital fabrication
Answer: D
42) Consumer preferences for alternative product concepts can be measured through ________, a method for
deriving the utility values that consumers attach to varying levels of a product's attributes.
A) concept testing
B) perceptual mapping
C) gap level analysis
D) conjoint analysis
E) morphological analysis
Answer: D
43) With ________, respondents see different hypothetical offers formed by combining varying levels of the
attributes, then rank the various offers.
A) gap level analysis
B) conjoint analysis
C) perceptual mapping
D) concept testing
E) morphological analysis
Answer: B
44) Universal Services, Inc. provides communication services to residential and business customers in rural and
small urban communities primarily in northern England. The company offers services such as local and long
distance voice, data, and Internet and broadband product offerings. The company, in an attempt to increase the
attractiveness of its offerings, decides to provide special voice and data packages to its customers. The company
designs eight different packs that offer varying voice and data benefits to customers. The company then asks a
few of its customers to rank the packs in order to choose two best packs. Which of the following testing methods
is being used in the above scenario?
A) virtual reality testing
B) conjoint analysis
C) perceptual mapping
D) product fabrication
E) rapid prototyping
Answer: B
45) The trade-off approach may be easier to use when there are/is ________.
A) many variables
B) only a few alternatives
C) observers that are biased
D) possible offers that are limited
E) only one highly desirable solution
Answer: A
46) ________ is a "hybrid" data collection technique that combines self-explicated importance ratings with pair-
wise trade-off tasks.
A) Sales wave analysis
B) Simulative data testing
C) Adaptive conjoint analysis
D) Business analysis
E) Exponential data collection
Answer: C
47) ________ exhibit replacement cycles dictated by physical wear or obsolescence associated with changing
style, features, and performance.
A) Frequently purchased products
B) High-moving goods
C) Inexpensive products
D) Commodity products
E) Infrequently purchased products
Answer: E
48) To estimate replacement sales, management must research the product's ________, the number of units that
fail in year one, two, three, and so on.
A) survival-age distribution
B) lifecycle ratio
C) obsolescence rate
D) business turnover ratio
E) product-performance usage
Answer: A
49) For a frequently purchased new product, the seller estimates repeat sales as well as first-time sales. A high
rate of repeat purchasing means customers ________.
A) value price more than differentiation
B) do not support innovation on brands
C) value differentiation more than price
D) prefer personalized products rather than standard ones
E) are satisfied with the product
Answer: E
50) ________ contribution lists the changes in income to other company products caused by the introduction of a
new product.
A) Supplementary
B) Dragalong
C) Gross
D) Cumulative
E) Net
Answer: A
51) The highest loss a project can create is called ________.
A) rapid prototyping income
B) payback income
C) maximum investment exposure
D) incremental yearly exposure
E) cannibalized income
Answer: C
52) The job of translating target customer requirements into a working prototype is helped by a set of methods
referred to as ________.
A) quality function deployment
B) quality control processes
C) rapid prototyping
D) marketing control
E) control system formation
Answer: A
53) Which of the following methodologies takes the list of desired customer attributes (CAs) generated by
market research and turns them into a list of engineering attributes (EAs) that engineers can use?
A) quality control processes
B) quality function deployment
C) rapid prototyping
D) marketing control
E) control system formation
Answer: B
54) ________ is a customer test that involves placing the product within the firm to see how it performs in
different applications.
A) Beta testing
B) Research testing
C) Sales-wave testing
D) Alpha testing
E) Simulated testing
Answer: D
55) In consumer-goods market testing, the company seeks to estimate four variables. These four variables are:
trial, first repeat, adoption, and ________.
A) guaranteed response
B) price sensitivity
C) purchase frequency
D) usage convenience
E) preferential treatment
Answer: C
56) A large FMCG company decides to test market Kora, a new brand of face cleanser, to be launched soon. The
company initially distributes a few free samples to some prospective consumers. Later it offers the product to the
customers at a discounted price and observes that not only more than seventy percent of the customers are
purchasing it but the same number are also satisfied using it. The company keeps using this process 3-4 times to
obtain a correct count of the number of people purchasing the product repeatedly. Which of the following testing
methods is being used here?
A) simulated testing
B) controlled testing
C) full test marketing
D) parallel testing
E) sales-wave research
Answer: E
57) Which of the following is an advantage of sales-wave research?
A) It gives surprisingly accurate results on advertising effectiveness.
B) It allows the brand to gain favorable shelf position.
C) It guarantees immediate brand recognition and high sales volume.
D) It can be implemented quickly with a fair amount of security.
E) It easily creates a buzz in the minds of customers.
Answer: D
58) Which of the following is usually referred to as a full-blown test market?
A) an internal focus group
B) a discussion group
C) a country
D) a city or a few cities
E) a laboratory
Answer: D
59) Which of the following products is most likely to undergo alpha and beta testing?
A) food products
B) industrial goods
C) consumer products
D) commodities
E) FMCG products
Answer: B
60) During ________, the company's technical people observe how customers use the product, a practice that
often exposes unanticipated problems of safety and servicing and alerts the company to customer training and
servicing requirements.
A) beta testing
B) research testing
C) sales-wave testing
D) alpha testing
E) simulated testing
Answer: A
61) Poga International, a multinational beverage corporation identifies that one of its competitors is launching an
apple flavored drink. The company decides to launch an apple flavor brand along with its competitor. What
timing strategy is used here?
A) first entry
B) blunt entry
C) parallel entry
D) late entry
E) exchange entry
Answer: C
62) Some firms might delay the launch of their products until after the competitor has borne the cost of educating
the market. Such an entry is called ________ entry.
A) strategic pay off
B) parallel
C) balancing
D) late
E) compensating
Answer: D
63) A(n) ________ is any good, service, or idea that is perceived as new, no matter how long its history.
A) commodity
B) innovation
C) adoption
D) invention
E) novel product
Answer: B
64) Adopters of new products move through five stages. These stages begin with ________ and follow with
interest, evaluation, trial, and adoption.
A) awareness
B) investigation
C) trial
D) innovation
E) diffusion
Answer: A
65) Identify the stage in the consumer adoption process in which the customer is stimulated to seek information
about the innovation.
A) awareness
B) adoption
C) interest
D) evaluation
E) trial
Answer: C
66) Robert has heard about the latest cell phone from LG electronics that features Wi-Fi hotspot technology. Wi-
Fi hotspot is a technology that allows users to share mobile internet with other Wi-Fi enabled devices. Robert
visits the company's Web site to read more about the phone. Robert is in the ________ stage of consumer-
adoption process.
A) interest
B) awareness
C) evaluation
D) trial
E) adoption
Answer: A
67) Armordo is a famous vacuum cleaner brand in Africa. Clara has heard of Armordo and she knows that the
product is a success. She has started considering whether or not to buy the vacuum cleaner. What stage of the
consumer-adoption process is Clara in?
A) awareness
B) adoption
C) evaluation
D) trial
E) interest
Answer: C
68) Which of the following is the mental step in consumer-adoption process where the customer starts
considering whether to try the innovation?
A) adoption
B) trial
C) awareness
D) evaluation
E) interest
Answer: D
69) People who are technology enthusiasts, venturesome, and who enjoy tinkering with new products and
mastering their intricacies are called ________.
A) innovators
B) early adopters
C) early majority
D) investigators
E) experimenters
Answer: A
70) Troma Inc., is a famous manufacturer of cookware, that follows a traditional distributor-retailer system to
distribute its products. The company abstains from the use of automated supply chain management (SCM)
system mainly due to the fear of unknown. However, rapidly escalating operational costs and inefficiencies have
made it absolutely necessary for the company to implement an SCM system. The company goes for a big-bang
installation of SCM system to become more competitive and cost effective. Identify the adopter group to which
Troma belongs.
A) innovator
B) early adopter
C) early majority
D) laggard
E) late majority
Answer: D
71) Which of the following characteristics is closely associated with late majority adopter groups?
A) superior technological knowledge
B) low price sensitiveness
C) opinion leadership
D) deliberate pragmatism
E) high risk aversion
Answer: E
72) Joseph, a student of the Columbia University, finds many of his classmates have purchased the I-pad tablet
PC from Apple Computers. I-pad, launched a few months before
has been identified as a very useful product and many students in the U.S. have rated it highly. Considering all
these, Joseph also decides to purchase an I-pad. Which of the following is the adopter group to which Joseph
belongs?
A) early adopter
B) innovator
C) late majority
D) laggard
E) early majority
Answer: E
73) Five characteristics influence the rate of adoption of an innovation. One of these is ________.
A) marketing expertise
B) relative advantage
C) packaging attractiveness
D) government regulations
E) place of value exchange
Answer: B
74) ________ is the effect one person has on another's attitude or purchase probability.
A) Sharing power
B) Collaborative power
C) Market influence
D) Brand power
E) Personal influence
Answer: E
75) Relative advantage of an innovation refers to the degree to which ________.
A) it matches the values and experiences of the individuals
B) it is difficult to understand or use
C) it can be tried on a limited basis
D) it appears superior to existing products
E) the benefits of use are observable or describable to others
Answer: D
76) The degree to which the beneficial results of an innovation's use are observable or describable to others is
called ________.
A) divisibility
B) communicability
C) compatibility
D) relative advantage
E) plainness
Answer: B
77) Which of the following terms refers to the degree to which the innovation can be tried on
a limited basis?
A) compatibility
B) relative advantage
C) divisibility
D) communicability
E) complexity
Answer: C
Branding
78) The first step in the strategic brand management process is ________.
A) measuring consumer brand loyalty
B) identifying and establishing brand positioning
C) planning and implementing brand marketing
D) measuring and interpreting brand performance
E) growing and sustaining brand value
Answer: B
79) The American Marketing Association defines a ________ as "a name, term, sign, symbol, or design, or a
combination of them, intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors."
A) copyright
B) trademark
C) slogan
D) brand
E) logo
Answer: D
80) Branding is ________.
A) all about creating unanimity between products
B) the process of performing market research and selling products or services to customers
C) endowing products and services with the power of a brand
D) the process of comparing competing brands available in the market
E) use of online interactive media to promote products and brands
Answer: C
81) Brand ________ is the added value endowed to products and services.
A) loyalty
B) equity
C) preference
D) identity
E) licensing
Answer: B
82) ________ is the differential effect that brand knowledge has on consumer response to the
marketing of that brand.
A) Mission-driven brand equity
B) Customer-based brand equity
C) Product-driven brand equity
D) Service-driven brand equity
E) Function-based brand equity
Answer: B
83) Adam wants to buy a washing machine and is looking for something that is not too expensive. When he goes
to make the purchase, he finds there are two options that meet his requirements. One is an IFB Bosch product,
while the other is a newly imported South Korean brand. Adam is not very familiar with the latter and does not
hesitate in choosing Bosch. This example implies that ________.
A) the imported brand will not survive the competition from Bosch
B) Bosch has a positive customer brand equity
C) the South Korean company has a low advertising budget
D) the imported brand is unreliable
E) the Bosch washing machine has better features than the imported brand
Answer: B
84) When a consumer expresses thoughts, feelings, images, experiences, and beliefs associated with the brand,
the consumer is expressing ________.
A) brand knowledge
B) ethnocentric bias
C) self-serving bias
D) cognitive dissonance
E) brand identity
Answer: A
85) The challenge for marketers in building a strong brand is ________.
A) ensuring that customers have the right type of experiences with their products and marketing programs to
create the desired brand knowledge
B) pricing the product at a point that maximizes sales volume
C) minimizing the number of people to whom the product is targeted in order to provide consumers with a
personalized experience
D) minimizing the impact of customer brand equity
E) avoiding the usage of an established brand to introduce a new product in the market
Answer: A
86) Which of the following is a marketing advantage of strong brands?
A) no vulnerability to marketing crises
B) more elastic consumer response to price increases
C) guaranteed profits
D) additional brand extension opportunities
E) more inelastic consumer response to price decreases
Answer: D
87) When a marketer expresses his or her vision of what the brand must be and do for consumers, they are
expressing what is called ________.
A) a brand promise
B) a brand personality
C) a brand identity
D) a brand position
E) a brand revitalization
Answer: A
88) Identify the four pillars of brand equity, according to brand asset valuator model.
A) relevance, performance, bonding, and advantage
B) presence, performance, advantage, and bonding
C) energized differentiation, relevance, esteem, and knowledge
D) brand salience, brand feelings, brand imagery, and brand performance
E) energized differentiation, esteem, brand feelings, and brand salience
Answer: C
89) From a marketing management perspective, there are three main sets of brand equity drivers. Which of these
drivers was most applicable when McDonald's decided to use the "golden arches" and Ronald McDonald as
symbols of their brand?
A) the product and all accompanying marketing activities and supporting marketing programs
B) the service and all accompanying marketing activities and programs
C) the initial choices for the brand elements or identities making up the brand
D) associations indirectly transferred to the brand by linking it to some other entity
E) the profitability associated with brand development
Answer: C
90) Red Bull enlisted college students as "Red Bull student brand managers" to distribute samples, research
drinking trends, design on-campus product promotion activities, and write stories for student newspapers. From a
marketing management perspective, which of the following brand equity drivers is most applicable in the given
scenario?
A) the profitability associated with brand development
B) associations indirectly transferred to the brand by linking it to a person
C) the product and all accompanying marketing activities and supporting marketing programs
D) the initial choices for the brand elements or identities making up the brand
E) associations indirectly transferred to the brand by linking it to a place
Answer: C
91) ________ are devices that can be trademarked and serve to identify and differentiate the brand.
A) Brand elements
B) Brand value propositions
C) Brand perceptions
D) Brand images
E) Brand extensions
Answer: A
92) If a brand element can be used to introduce new products in the same or different categories, the brand
element is said to be ________.
A) memorable
B) meaningful
C) likeable
D) transferable
E) adaptable
Answer: D
93) If consumers can easily recall and recognize a brand element, the brand element is said to be ________.
A) meaningful
B) protectable
C) adaptable
D) transferable
E) memorable
Answer: E
94) Which of the following is a defensive criterion for choosing brand elements?
A) adaptable
B) memorable
C) meaningful
D) likeable
E) significance
Answer: A
95) With respect to powerful brand elements, ________ is an extremely efficient means to build brand equity.
This element functions as a useful "hook" or "handle" to help consumers grasp what the brand is and what makes
it special.
A) the tangibility of a product
B) a product's shape
C) a slogan
D) a patent
E) a copyright
Answer: C
96) A ________ can be defined as any information-bearing experience a customer or prospect has with the
brand, the product category, or the market that relates to the marketer's product or service.
A) brand value
B) brand personality
C) brand trait
D) brand character
E) brand contact
Answer: E
97) The traditional "marketing-mix" concept and the notion of the "four Ps" may not adequately describe modern
marketing programs. ________ is about mixing and matching marketing activities to maximize their individual
and collective effects.
A) Personalized marketing
B) Mass customization
C) Globalized marketing
D) Relationship marketing
E) Integrated marketing
Answer: E
98) Brand equity can be built by ________, which create(s) equity by linking the brand to other information in
memory that conveys meaning to customers.
A) internal marketing
B) brand transferability
C) secondary associations
D) customer alignment
E) brand auditing
Answer: C
99) Mark feels that Shell delivers on its promises to supply the best gasoline possible to the public. His
experiences with Shell have always been good resulting in positive brand contact. Mark is most likely
experiencing ________.
A) brand alliance
B) brand essence
C) brand harmonization
D) brand parity
E) brand bonding
Answer: E
100) ________ consists of activities and processes that help inform and inspire employees about brands.
A) Internal branding
B) Personal branding
C) Individual branding
D) External branding
E) Co-branding
Answer: A
101) AT&T's business campaign not only helped to change public perceptions of the company, it also signaled to
employees that AT&T was determined to be a leader in telecommunication services. Which principle of internal
branding does this example portray?
A) choosing the right moment to capture employees' attention and imagination
B) furnishing energizing and informative internal communication
C) bringing the brand alive for employees
D) linking internal and external marketing
E) understanding how brand communities work
Answer: D
102) A ________ is a specialized group of consumers and employees whose identification and activities focus
around the brand.
A) brand community
B) brand channel
C) brand association
D) brand personality
E) brand cluster
Answer: A
103) ________ is the job of estimating the total financial worth of the brand.
A) Brand tracking
B) Brand auditing
C) Brand equity
D) Brand valuation
E) Brand harmonization
Answer: D
104) Apple's ipod shuffle is an example of ________.
A) a sub-brand
B) a parent brand
C) family brand
D) a brand mix
E) an umbrella brand
Answer: A
105) When a firm uses an established brand to introduce a new product, it is called a ________.
A) brand harmonization
B) brand valuation
C) brand extension
D) brand positioning
E) brand parity
Answer: C
106) A parent brand that is associated with multiple products through brand extensions is also called
a(n)________.
A) category brand
B) subbrand
C) extension brand
D) family brand
E) line brand
Answer: D
107) The introduction of diet coke by the Coca Cola Company is an example of ________.
A) line extension
B) brand harmonization
C) category extension
D) brand dilution
E) co-branding
Answer: A
Packaging, Labeling
108) We define packaging as all the activities of designing and producing the container for a product. This
includes up to three levels of material: primary package, secondary package, and ________.
A) retailer package
B) design package
C) shipping package
D) consumer package
E) supplier package
Answer: C
109) Sales of luxury goods such as perfumes, colognes, and aftershaves depend heavily upon their initial
response by the consumer. A well-designed package can create convenience and promotional value. It has been
called the "silent salesman." Which of the three levels of packaging is this "silent salesman"?
A) retailer
B) consumer
C) shipping
D) secondary
E) primary
Answer: E
110) Which of the following factors is one of the contributors to the growing use of packaging as a marketing
tool?
A) consumption aid
B) consumer affluence
C) consumer influence
D) conformance qualities
E) brand identification
Answer: B
111) ________ are formal statements of expected product performance by the manufacturer.
A) Insurance
B) Warranties
C) Bonds
D) Invoices
E) Balance sheets
Answer: B
112) Many sellers offer either general or specific guarantees. Guarantees reduce the buyer's ________ risk.
A) actual
B) perceived
C) real
D) implied
E) stated
Answer: B
113) Guarantees are most effective in two situations. The first is when the company or products are not well
known and the second is when the product's quality is ________ to competition.
A) not known
B) different
C) inferior
D) equivalent
E) superior
Answer: E
114) A new product is advertised on the "infomercials" as being "the best cleaner money can buy" and "if not
completely satisfied, return the product for a full refund, including shipping." The strategy of using a strong
guarantee in this instance is sound because ________.
A) it is an example of a misleading or false advertising and is illegal
B) the product is so superior to competition that there will be no claims for refunds
C) it is just "advertising fluff" and the manufacturer has no intentions of refunding money
D) for a product that is not too well known, it is "good advertising" because the claims will be a small percentage
of sales
E) for a product that is not too well known it reduces the buyer's risk in purchasing
Answer: E
Product Life Cycle
115) ________ is the period of slow sales growth and nonexistent profits.
A) Growth
B) Decline
C) Maturity
D) Introduction
E) Stagnancy
Answer: D
116) Campbell Soups is a newly established company that specializes in preparing healthy but tasty food for
children under the age of 5. It is incurring huge productions costs, nonexistent profits, and slow sales growth.
The company is in the ________ phase of its life cycle.
A) stagnancy
B) introduction
C) maturity
D) decline
E) growth
Answer: B
117) ________ is a period of rapid market acceptance and substantial profit improvement.
A) Stagnancy
B) Introduction
C) Maturity
D) Decline
E) Growth
Answer: E
118) A dance school in the Bronx teaches professional hip-hop and salsa. It is experiencing an increase in student
admissions, which is leading to substantial improvement in profits. The school is going through the ________
phase of its life cycle.
A) decline
B) stagnancy
C) growth
D) introduction
E) maturity
Answer: C
119) ________ is a slowdown in sales growth because the product has achieved acceptance by most potential
buyers.
A) Obsolescence
B) Introduction
C) Growth
D) Decline
E) Maturity
Answer: E
120) A music school in Boyles Height, LA, specializes in teaching the guitar and the violin. After a spurt in
growth and a few successful years, the school is experiencing a slowdown in sales and stability in its profits due
to an increase in competition. The school is in the ________ stage of its life cycle.
A) introduction
B) growth
C) decline
D) maturity
E) obsolescence
Answer: D
121) During the ________ stage of a product's life cycle, sales show a downward drift and profits erode.
A) introduction
B) growth
C) decline
D) obsolescence
E) maturity
Answer: C
122) After a couple of years of successful business, an experimental theatre company based in Aurora is unable
to sell tickets for its theatre shows. They have been using profits from previous shows to run the business. The
company is in the ________ phase of its life cycle.
A) maturity
B) obsolescence
C) introduction
D) growth
E) decline
Answer: E
123) According to Peter Golder and Gerald Tellis, a(n) ________ is the first to develop a working model of the
product.
A) developer
B) creative pioneer
C) market pioneer
D) product pioneer
E) inventor
Answer: D
124) One of the ways to change the course of a brand is to modify the product. Under product modification,
________ adds size, weight, materials, supplements, and accessories that expand the product's performance,
versatility, safety, or convenience.
A) feature improvement
B) quality improvement
C) style improvement
D) size improvement
E) technological improvement
Answer: A
125) An alternate way to increase sales volume is to expand the number of users. This can be done by ________.
A) having consumers use the product on more occasions
B) having consumers use more of the product on each occasion
C) having consumers use the product in new ways
D) remaining in the current market segment
E) attracting competitors' customers
Answer: E
126) An alternate way to increase sales volume is to increase the usage rate among users. This can be done by
________.
A) converting nonusers
B) having consumers use less of the product on each occasion
C) having consumers use the product on more occasions
D) attracting competitors' customers
E) entering new market segments
Answer: C
127) ________ is a distribution strategy that can be effectively used during the growth stage of the product life
cycle.
A) Building product awareness
B) Phasing out unprofitable outlets
C) Building selective distribution
D) Building intensive distribution
E) Stressing on brand differences
Answer: D
128) Which of the following strategies should be adopted by marketers during a recession?
A) increase investment on marketing existing products
B) focus on expanding the customer base and not on the retention of existing customers
C) focus primarily on price reductions and discounts
D) concentrate on communicating the brand value and product quality to consumers
E) stick to the budget allocations adopted during the preceding years
Answer: D
129) Benz & Frendz Corp., a manufacturer of high end consumer durables, experienced a sluggish sales growth
in most of its product categories during three consecutive quarters of 2009. However, market analysis revealed
that its competitors' sales had also slackened during this period. Analysts pointed out that when all firms are
losing sales, it is extremely important to adopt strategies that are aimed at retaining customers. This led the firm
to reduce operation costs while maintaining product quality. They also revamped their marketing strategy to
focus on the values created by their products. Which of the following can be inferred from the strategies adopted
by the firm?
A) The company was trying to protect its market share and continue to operate as a market leader.
B) The company was focusing on geographical expansion.
C) The company was aiming to capture a new market segment.
D) The company was marketing its products amidst an economic downturn.
E) The company was focusing on market penetration.
Answer: D