BUS389 Pricing & Financial
Management
Quiz
True/False
(2 pts each)
1)
Measures of market performance, such as sales and market share, are
backward-looking measures of success or failure.
2)
The marketing cost of retaining customers is much higher than the cost of
replacing them.
3)
Captive customers are a drain on a business’s profits because the cost of
acquiring them can never be recovered.
4)
A marketing return on investment of 150 percent means that for every dollar
invested in marketing and sales expenses, the company is realizing $1.50 in
marketing profits.
5)
Customer performance metrics include measures of customer satisfaction,
customer retention, and customer lifetime value.
6)
The NMC of any proposed strategy must be lower than the current NMC in order to
increase a business’s net profit.
7)
The more similar one market is to another, the less likely the possibility that
consumers will substitute products
8)
At any point in time, a business has an existing pool of current and
prospective customers who make up current market demand and a potential pool of
prospective customers who provide the opportunity to grow market demand.
9)
The ratio of total sales to current market demand is known as the share development
index (SDI).
10)
Reverse innovation begins by identifying new product benefits.
11)
The main difference between crowdsourcing and mass collaboration is the level
of multidirectional interaction.
12)
For products that project a “brand personality,” there is an
opportunity to create customer value through the delivery of emotional
benefits.
13)
Both consumers and businesses have market needs, and the factors influencing
their needs are essentially the same.
14)
For a segment marketing mix strategy to be successful, the strategy needs to
include only certain elements of the marketing mix.
15)
In order to implement a mass-personalization strategy, a business’s database
marketing system must be able to track individual customers and their buying
history.
16)
Businesses with a marketing advantage typically have prices much lower than
average prices.
17)
Every business must manage its costs, but not every business can have a cost
advantage.
18)
An oblique strategy requires superior knowledge of both competitors and
customers.
19)
Benchmark mapping is a technique used to capture customer perceptions of
competing products or services.
20)
The more competitors an industry has, the lower will be the differentiation
among those competitors, and low differentiation increases competitive rivalry.
21)
The extent that a market share grows is directly dependent on the strength of a
business’s product positioning and marketing effort.
22)
The total cost of purchase excludes the customer’s ownership costs.
23)
The purpose of line extensions under an umbrella brand is to leverage the
awareness and image of the umbrella brand.
24)
Market-based pricing is not possible without extensive customer and competitor
intelligence.
25)
A plus-one market-based pricing strategy means a business sets its price 1%
higher than the competitors’ price.
Multiple
Choice (3 points each)
26)
Which of the following events occur when there is minimal focus on customers?
A)
high customer loyalty
B)
reduction in customer turnover
C)
below-average profits
D)
long-run strategies to improve sales
E)
low cost of marketing and sales
27)
Which of the following is an example of a company’s external metrics?
A)
return on sales
B)
employee turnovers
C)
manufacturing defects
D)
late deliveries
E)
retaining customers
28)
What type of customers are most likely known as “customer
terrorists”?
A)
customers who use their bargaining powers to purchase products at a cheaper
price
B)
customers who engage in shoplifting
C)
customers who verbally communicate their bad experiences to others
D)
customers who show a false sense of loyalty to a particular brand
E)
customers who only buy the product if it is offered at an attractive price or
with a promotional incentive
29)
In general, it costs ________ times more to replace a customer than it costs to
keep a customer.
A)
two
B)
three
C)
four
D)
five
E)
six
30)
Customers for whom the offerings of the current business do not fit their needs
are called ________.
A)
misfits
B)
spinners
C)
captive customers
D)
customer terrorists
E)
underachievers
31)
Which of the following metrics does a company apply during an operating period
rather than at the end of the operating period?
A)
sales revenues
B)
market share
C)
inventory turnover
D)
customer retention
E)
return on assets
32)
Which of the following is an internal forward-looking metric for a company?
A)
sales revenues
B)
late payments
C)
percent gross profit
D)
return on assets
E)
net profit before tax
33)
Expenses that change on a per-unit basis when production volume increases or
decreases are known as ________.
A)
variable costs
B)
manufacturing overhead costs
C)
marketing and sales expenses
D)
indirect costs
E)
operating costs
34)
Which of the following expenses would be included under the manufacturing
overhead of a firm?
A)
advertising expenses
B)
fixed expenses for a building’s facilities
C)
cost of office supplies
D)
income taxes
E)
cost of materials for production
35)
What is the marketing return on sales (marketing ROS) for a product line that
generates $40 million in sales revenues with a net marketing contribution of
$32 million ?
A)
75%
B)
80%
C)
100%
D)
125%
E)
150%
36)
New customers will be hard to find, once a market reaches ________.
A)
the rapid growth stage
B)
the early growth stage
C)
its lowest market potential
D)
its tipping point
E)
saturation
37)
The market development index is equal to the ________.
A)
product of current market demand and market potential
B)
ratio of market potential and market growth
C)
ratio of the current market demand to net marketing expenditure
D)
ratio of current market demand to market potential
E)
product of market potential and market growth
38)
Which of the following is true about lead customers?
A)
They are more price sensitive.
B)
They are benefit driven.
C)
They possess less market knowledge.
D)
They are more dependent on what others do or think than most people.
E)
They do not purchase products that the mainstream market does not buy.
39)
________ customers are quality conscious, fairly well informed, and somewhat
price sensitive.
A)
Early majority
B)
Early adopters
C)
Innovators
D)
Laggards
E)
Late majority
40)
Which of the following is a customer adoption force?
A)
felt need
B)
affordability
C)
easy of use
D)
preferred availability
E)
desired performance
41)
Which of the following statements is true about reverse innovation?
A)
It involves learning what customers want but cannot get from existing products.
B)
It refers to a new product that fails to address customers’ needs.
C)
It refers to gradual product improvements that come from technological
developments.
D)
It starts by encouraging intrapreneurs.
E)
It refers to innovative ideas generated by employees within an organization.
42)
Market-based businesses differ from product-focused businesses in that
market-based businesses ________.
A)
focus on products and services
B)
are providers of solutions
C)
have a narrow view of customers’ underlying problems
D)
lack a strong customer focus
E)
lack knowledge of customer usage
43)
Which of the following refers to using collective intelligence to solve
specific problems or solicit ideas—often as part of a competition or for a
reward?
A)
onboarding
B)
crowdsourcing
C)
benchmarking
D)
mass collaboration
E)
outsourcing
44)
Consumers can purchase inkjet printers for as little as $30. However, the price
of replacement ink cartridges can be as much or more than the purchase price of
the printer. This is part of the ________ of an inkjet printer.
A)
disposal costs
B)
acquisition costs
C)
usage costs
D)
repair costs
E)
ownership costs
45)
Which of the following addresses emotional benefits tied to the customer’s
personal psychological needs?
A)
cost of purchase
B)
maintenance cost
C)
product availability
D)
brand personality
E)
disposal cost
46)
Which of the following is a part of a company’s culture?
A)
number of employees
B)
years in business
C)
innovativeness
D)
number of locations
E)
sales volume
47)
Which of the following is a characteristic of cost-focused sustainers?
A)
They have a high level of formal education at the leadership level.
B)
They look for new ways to invest and grow their business.
C)
They have a very high revenue per customer.
D)
They are willing to buy value-added solutions.
E)
They have a limited or no financial plan.
48)
Which of the following market segments is most likely to be considered
attractive by a firm?
A)
a market segment with many substitute products
B)
a market segment with limited product differentiation
C)
a market segment with low barriers to competitor entry
D)
a market segment with high price competition
E)
a market segment with cost-effective access to customers
49)
________ are tools that marketing managers use to assess the merits of a proposed
marketing communication and the strategy behind it.
A)
Touch points
B)
Value propositions
C)
Storyboards
D)
Strategy functions
E)
Remote segments
50)
Niche-segment strategies differ from mass-market strategy in that niche-market
strategies ________.
A)
address one set of core customer needs of a large market segment
B)
have no segment focus
C)
are used when demographics are not distinctive
D)
are used when the company markets to a closely related attractive segment first
E)
involve highly refined marketing effort directed at an overlooked, small group
of customers
51)
A scope effect refers to ________.
A)
lowering the per-unit manufacturing cost of a product by increasing the volume
of production
B)
improving the efficiency by learning new methods of management and production
C)
lowering the average unit cost of all products through extension of the product
line
D)
increasing revenue by increasing the scope of marketing initiatives
E)
lowering the marketing costs through increasing the advertising cost efficiency
of a brand extension strategy
52)
Which of the following is true of variable cost advantage?
A)
Scale effect occurs for a manufacturer who doubles production capacity.
B)
Businesses with a substantial market share advantage generally achieve a higher
unit cost.
C)
As volume increases, the cost per unit generally increases.
D)
A larger unit volume allows for production that lowers the per-unit
manufacturing cost, thereby creating a scope effect.
E)
As a business builds more of the same product, there is a greater opportunity
for scale effects.
53)
Brand reputation advantage is a type of ________ advantage.
A)
variable cost
B)
differentiation
C)
channel
D)
operating cost
E)
marketing cost
54)
Which of the following is true of product line advantage?
A)
A business with a broad line of products has to be more focused in order to be
cost effective in its marketing efforts.
B)
It is important to expand a business’s product line during the emerging stage
of the product life cycle.
C)
Businesses with narrow product lines are more profitable during the emerging
and growing stages of a product life cycle.
D)
A narrow line of products creates more selling opportunities for the sales
force and channel partners.
E)
It is a source of competitive advantage that is independent of differentiation
advantage.
55)
Which of the following is true regarding a reactive strategy?
A)
It is based on extensive customer and competitive knowledge.
B)
It seeks to gain a competitive advantage without direct confrontation.
C)
It refers to making competitive moves from an internal perspective with no real
market knowledge.
D)
It leverages a knowledge advantage with respect to customers and competitors.
E)
It is an overreaction to competitor moves due to limited competitor knowledge.
56)
Which of the following is a product position factor influencing a business’s
market share?
A)
sales force
B)
service quality
C)
retailing and merchandising
D)
physical distribution
E)
media advertising
57)
When automakers include air bags, cruise control, satellite radio, and GPS
systems in their consumer products, these features are considered to be quality
________.
A)
killers
B)
drivers
C)
enhancers
D)
aesthetics
E)
determinants
58)
Microsoft Office 2010 allows buyers and users to quickly identify the Microsoft
product and its newness to older versions of the same brand. This is an example
of using a ________ branding strategy.
A)
company name
B)
company and brand name
C)
brand and subbrand name
D)
company, brand, and product name
E)
company and brand name, and number
59)
In the context of brand name development, ________ names are either built from
root words and morphemes or are poetic constructions based on the rhythm or
experience of saying them.
A)
evocative
B)
experiential
C)
functional
D)
invented
E)
realistic
60)
Brand equity is equal to ________.
A)
total brand assets minus total brand liabilities
B)
total brand assets divided by total brand liabilities
C)
total company assets minus total company liabilities
D)
total company assets divided by total company liabilities
E)
total company liabilities minus total brand liabilities
61)
Which of the following is most likely to be considered when using a cost-based
pricing strategy?
A)
price sensitivity in the market
B)
company product-price positioning
C)
competitors’ product-price positioning
D)
customer performance needs
E)
desired profit margin
62)
In ________ pricing, the price is set on the basis of the value that customers
realize when they compare the price and benefits of the company’s product with
those of a key competitor’s product.
A)
life-cycle value
B)
customerization
C)
perceived-value
D)
value-in-use
E)
cost-based
63)
Which of the following is true of skim pricing?
A)
Skim pricing is most profitably used in the decline stage of the product
life-cycle.
B)
Skim pricing is most useful to a business when there are many competitors in
the market offering equivalent products.
C)
Skim pricing is most effective when product differentiation is diminishing,
potential customers are price sensitive, and many competitors or substitutes
exist.
D)
In skim pricing, a company tries to keep its costs as low as possible and to
offer a low price that no competitor can beat.
E)
Skim pricing is viable when a business has a sustainable differentiation
advantage in a quality-sensitive market with few competitors.
64)
Which of the following is a favorable condition for implementing penetration
pricing?
A)
quality-sensitive customers
B)
less competitors
C)
less substitutes
D)
high sustainable advantage
E)
easy competitor entry
65)
Reduce-focus pricing is most likely to occur in the ________ stage of the
product life cycle.
A)
early
B)
growth
C)
mature
D)
extinction
E)
decline
Essay
(20 points each)
66)
Explain the classification of customer loyalties and the contrasts in their
range of behaviors.
67)
Discuss three customer adoption forces and three product adoption forces
affecting new product-market penetration.
68)
Name and discuss the six sources of economic benefit and value creation.
69)
Compare and contrast the three types of customer relationship marketing
strategies.
