Chapter 12: Setting Product Strategy

Chapter 12: Setting Product Strategy

GENERAL CONCEPT QUESTIONS

Multiple Choice

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1. Marketing planning begins with the formulation of an offering to ________ target customers’ needs or wants. a. undermine b. meet c. capture d. compete with e. comprehend Answer: bPage: 318Difficulty: EasyAACSB: Reflective Thinking

2. The customer will judge the offering by three basis elements: ________, services mix and quality, and price. a. performance b. salespeople c. price d. product features and quality e. none of the above Answer: dPage: 318Difficulty: EasyAACSB: Analytic Skills

3.The five product levels constitute a ________. At each level more customer value is added. a. customer-augmented product b. customer consumption system c. customer value-hierarchy d. customer-perceived value e. customer hierarchy Answer: cPage: 318Difficulty: Medium

4. When companies search for new ways to satisfy customers and distinguish their offering from others, they look at the ________ product, which encompasses all the possible augmentations and transformations of the product. a. consumption system b. expected c. potential d. augmented e. basic Answer: cPage: 318Difficulty: HardAACSB: Analytic Skills

5. The way the user performs the tasks of getting and using products and related services is the user’s total ________. a. consumption system b. consumable system c. consistent use system d. augmented system e. none of the above Answer: aPage: 319Difficulty: Medium

6. Marketers have traditionally classified products on the basis of three characteristics: ________, tangibility, and use. a. customer value hierarchy b. expected c. augmented d. durability e. none of the above Answer: dPage: 319Difficulty: HardAACSB: Analytic Skills

7. ________ are tangible goods that normally survive many uses. a. Nondurable goods . Durable goods c. Services d. Consumption systems e. Potential products Answer: bPage: 319Difficulty: MediumAACSB: Analytic Skills

8. Because ________ are purchased frequently, marketers should make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. a. nondurable goods b. durable goods c. services d. consumption systems e. potential products Answer: aPage: 319Difficulty: Medium

9. The consumer usually purchases ________ frequently, immediately, and with a minimum of effort. a. specialty goods b. shopping goods c. “must haves” goods . personal goods e. convenience goods Answer: ePage: 320Difficulty: MediumAACSB: Analytic Skills

10. It was sunny when Jenny went to class, but by the time class was over it was raining heavily, so Jenny stopped by the student store to buy an umbrella before she walked back to her dorm. In this case, the umbrella is an example of a(n) ________. a. impulse good b. staple c. homogeneous shopping good d. emergency good e. heterogeneous shopping good Answer: dPage: 320Difficulty: MediumAACSB: Analytic Skills

11. ________ are similar in quality but different enough in price to justify shopping comparisons. . Emergency goods b. Homogeneous shopping goods c. Heterogeneous shopping goods d. Specialty goods e. Impulse goods Answer: bPage: 320Difficulty: MediumAACSB: Reflective Thinking

12. Products such as insurance, cemetery plots, and smoke detectors are examples of ________ that are products that the consumer does not know about or does not normally think of buying. a. specialty goods b. unsought goods c. heterogeneous shopping goods d. homogeneous shopping goods e. none of the above Answer: bPage: 320Difficulty: HardAACSB: Reflective Thinking

13.Industrial goods can be classified as ________, capital items, or suppliers and business services based on their costliness and how they enter the production process. a. service components b. subassemblies c. pieces and parts d. specialty goods e. materials and parts Answer: ePage: 320Difficulty: MediumAACSB: Analytic Skills

14. ________ are the major factors influencing the selection of suppliers for natural products. a. Price and delivery reliability b. Product features and customization c. Price and customization d. Delivery reliability and product features e. Customization and delivery reliability

Answer: aPage: 321Difficulty: Medium

15. Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and ________. a. natural products b. component materials c. operating supplies d. equipment e. none of the above Answer: dPage: 321Difficulty: EasyAACSB: Reflective Thinking

16. Supplies and business services are short-term goods and services that facilitate ________ or managing the finished product. a. inspecting b. developing c. building d. creating e. none of the above Answer: bPage: 321Difficulty: EasyAACSB: Reflective Thinking

17. Many products can be differentiated in terms of their ________,—size, shape, or physical structure. a. form b. performance quality c. conformance quality d. reliability e. design Answer: aPage: 321Difficulty: EasyAACSB: Analytic Skills

18. Most products can be offered with varying ________ that supplement its basic function. a. reliability b. conformance qualities c. features d. forms e. none of the above Answer: cPage: 322Difficulty: EasyAACSB: Reflective Thinking

19. ________ is the ability of a company to prepare on a mass basis individually designed products, services, programs, and communications. . Mass customization b. Feature fatigue c. Performance quality d. Conformance quality e. Repairability Answer: aPage: 322Difficulty: MediumAACSB: Analytic Skills

20. ________ is the level at which the product’s primary characteristics operate. a. Design b. Conformance quality c. Reparability d. Performance quality e. Durability Answer: dPage: 322Difficulty: Easy

21. Buyers expect products to have a high ________, which is the degree to which all the produced units are identical and meet the promised specifications. a. durability b. reliability c. conformance quality d. form e. performance quality Answer: cPage: 323Difficulty: MediumAACSB: Analytic Skills

22. ________ describes the product’s look and feel to the buyer; it has an advantage of creating distinctiveness that is difficult to copy. a. Design b. Style c. Durability d. Conformance e. None of the above Answer: bPage: 323Difficulty: EasyAACSB: Analytic Skills

23. Ideal ________ would exist if users could fix the product themselves with little cost in money or time. a. durability b. reliability c. style d. design e. repairability Answer: ePage: 323Difficulty: MediumAACSB: Reflective Thinking

24. In increasingly fast-paced markets, price and technology are not enough. _______ is the factor that will often give a company its competitive edge and is defined as the totality of features that affect how a product looks, feels, and functions in terms of customer requirements. a. Services b. Performance c. Reliability d. Style e. Design Answer: ePage: 325Difficulty: HardAACSB: Reflective Thinking

25. When the physical product cannot be easily differentiated, the key to competitive success may lie in adding valued services and improving their quality. The main service differentiators are ordering ease, delivery, installation, ________, customer consulting, maintenance, and repair. . customer limiting b. customer orders c. niche marketing d. customer training e. customer marketing Answer: dPage: 326Difficulty: HardAACSB: Analytic Skills

26. Delivery refers to how well the product or service is brought to the customer. It includes speed, ________, and care throughout the delivery process. a. length of time for delivery b. type of delivery services c. attributes d. completeness e. accuracy Answer: ePage: 326Difficulty: EasyAACSB: Analytic Skills

27. ________ refers to training the customer’s employees to use the vendor’s equipment properly and efficiently. a. Customer training . Internal marketing c. Client marketing d. Customer relationships e. Technical training Answer: aPage: 326Difficulty: Easy

28. ________ refers to data, information systems, and advice services that the seller offers to their buyers. a. Sales force relationships b. Customer relationships c. Internal marketing d. Customer training e. Customer consulting Answer: ePage: 326Difficulty: EasyAACSB: Analytic Skills

29. Differentiating on ________ is important for companies with complex products and becomes an especially good selling point when targeting technology novices. a. delivery b. ordering ease c. ase of installation d. customer consulting e. repairability Answer: cPage: 326Difficulty: HardAACSB: Reflective Thinking

30. ________ describes the service program for helping customers keep purchased products in good working order. a. Returns b. Ordering ease c. Installation d. Maintenance and repair e. Delivery Answer: dPage: 327Difficulty: MediumAACSB: Reflective Thinking

31. Improved handling or storage, better packaging, and improved transportation and forward logistics are methods for reducing ________. a. installation b. uncontrollable returns c. controllable returns d. product families e. ustomer consulting Answer: cPage: 328Difficulty: MediumAACSB: Reflective Thinking

32. A group of products within a product class that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels, or fall within given price ranges is known as a ________. a. product type b. product class c. need family d. product variant e. product line Answer: ePage: 328Difficulty: Medium

33. A(n) ________ is defined as a distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute. . stockkeeping unit b. UPC (uniform product code) c. stock unit d. product type e. none of the above Answer: aPage: 328Difficulty: HardAACSB: Analytic Skills

34. A ________ is the set of all products and items a particular seller offers for sale. a. product line b. product mix c. family of products d. product system e. product class Answer: bPage: 328Difficulty: EasyAACSB: Analytic Skills

35. The ________ of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. a. onsistency b. depth c. width d. length e. composition Answer: aPage: 329Difficulty: Hard

36. The ________ of the product mix refers to the total number of items in the mix. a. width b. length c. depth d. consistency e. height Answer: bPage: 329Difficulty: MediumAACSB: Analytic Skills

37. In offering a product line, companies normally develop a ________ and modules that can be added to meet different customer requirements. a. convenience item b. “best selling” item c. staple item d. product e. basic platform Answer: ePage: 329Difficulty: Medium AACSB: Reflective Thinking 8. The ________ of a product mix refers to how many variants are offered of each product in the line. a. width b. length c. depth d. consistency e. height Answer: cPage: 329Difficulty: MediumAACSB: Analytic Skills

39. A company can classify its products into four types that yield different gross margins, depending upon sales volume and promotional costs. The four classifications include all EXCEPT ________. a. core product b. shopping goods c. staples d. specialties e. convenience items Answer: bPage: 330Difficulty: MediumAACSB: Analytic Skills 40.

The main point in segmenting products into different classes is that companies should recognize that these items ________ in the potential for being priced higher or advertised more as ways to increase sales, margins, or both. a. differ b. are more elastic c. are less elastic d. respond to advertising differently e. none of the above Answer: aPage: 330Difficulty: EasyAACSB: Reflective Thinking 41. A benefit of product mapping is that it identifies ________. a. market matrices b. target markets c. market segments d. consumers e. none of the above Answer: cPage: 330Difficulty: HardAACSB: Reflective Thinking 2. Product-line analysis provides information for two key decision areas—product-line length and ________. a. product-length new items b. product-mix pricing c. product pricing d. popular pricing e. none of the above Answer: bPage: 331Difficulty: Hard

43. ________ occurs when a company lengthens its product line beyond its current range. a. Market reach b. Product reach c. Product adaptations d. Line shrinking e. Line stretching Answer: ePage: 331Difficulty: EasyAACSB: Analytic Skills 44. When a company positioned in the “middle” market introduces a lower-priced product line, this is an example of ________. . product-line length b. up-market stretch c. down-market stretch d. maintenance e. none of the above Answer: cPage: 331Difficulty: EasyAACSB: Analytic Skills 45. Moving ________ carries risks. The new brand can cannibalize core brand sales and lower the core brand’s quality image. a. up-market b. two ways c. one way d. down-market e. none of the above Answer: dPage: 333Difficulty: Medium 46. Companies may wish to implement a(n) ________ to achieve more growth, to realize higher margins, or simply to position themselves as full-line manufacturers. a. up-market stretch . down-market stretch c. service-market stretch d. consulting-model stretch e. obsolescence strategy Answer: aPage: 333Difficulty: MediumAACSB: Reflective Thinking

47. A product line can also be lengthened by adding more items within the present range. There are several motives for line filling: ________, trying to satisfy dealers who complain about lost sales because of missing items in the line, trying to utilize excess capacity, and others. a. responding to senior management wishes b. responding to consumer wishes c. reaching for incremental profits d. eaching for incremental capacity e. responding to sales-force demands Answer: cPage: 334Difficulty: Hard 48. If line filling is overdone, it could result in ________ and customer confusion. a. sales paralysis b. manufacturing inefficiencies c. self-cannibalization d. self-sacrifice e. none of the above Answer: cPage: 334Difficulty: EasyAACSB: Reflective Thinking 49. Price-setting logic must be modified when the product is part of a product mix. In that case, the firm searches for a set of prices that ________ profits on the total mix. a. are ineffective on total b. ave no effect on total c. maximize d. minimize e. capitalize upon Answer: cPage: 335Difficulty: EasyAACSB: Analytic Skills 50. Companies normally develop product lines rather than single products and require sellers to establish ________ quality differences between price steps within the line. a. imaginary b. actual c. perceived d. monetary e. none of the above Answer: cPage: 335Difficulty: MediumAACSB: Reflective Thinking

51. Some service firms often engage in ________, consisting of a fixed fee plus a variable usage fee. a. pure bundling b. pure pricing c. mixed pricing . captive pricing e. two-part pricing Answer: ePage: 336Difficulty: EasyAACSB: Analytic Skills 52. In ________, the seller offers goods both individually and in bundles and often charges less for the “bundle” than for the individual products. a. pirating pricing b. captive pricing c. two-part pricing d. pure bundling e. mixed bundling Answer: ePage: 336Difficulty: MediumAACSB: Analytic Skills 53. The main advantage of co-branding is that a product may be convincingly positioned by virtue of the ________ involved. a. branding synergy b. increased advertising dollars c. ultiple brands d. bundled package e. none of the above Answer: cPage: 337Difficulty: HardAACSB: Reflective Thinking

54. The potential disadvantages of ________ are the risks and lack of control from becoming aligned with another brand in the consumers mind. Consumer expectations about the level of involvement and commitment are likely to be high, so unsatisfactory performance could be very negative for the brands involved. a. co-branding b. primary service features c. values d. perceptions e. pricing Answer: aPage: 337Difficulty: MediumAACSB: Reflective Thinking 55. _______ is a special case of co-branding involving creating brand equity for materials, components, or parts that are necessarily contained within other branded products. a. Component branding b. Ingredient branding c. Advertising branding d. Sales branding e. None of the above Answer: bPage: 337Difficulty: HardAACSB: Analytic Skills 56. 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. one of the above Answer: cPage: 339Difficulty: MediumAACSB: Analytic Skills

57. Various factors have contributed to the growing use of packaging as a marketing tool and include all of the following EXCEPT ________. a. self-service b. consumer affluence c. consumer influence d. company and brand images e. innovation opportunities Answer: cPage: 339Difficulty: HardAACSB: Reflective Thinking 58. ________ are formal statements of expected product performance by the manufacturer. a. Insurance b. Warranties c. Guarantees d. Reputation e. Marketing statements Answer: bPage: 341Difficulty: MediumAACSB: Analytic Skills

9. 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: bPage: 342Difficulty: EasyAACSB: Reflective Thinking 60. 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: ePage: 342Difficulty: MediumAACSB: Reflective Thinking True/False 61. Product is the key element in the market offering.

Answer: TruePage: 317Difficulty: EasyAACSB: Reflective Thinking 62. A product is anything that can be offered to a market to satisfy a want or need. Answer: TruePage: 318Difficulty: MediumAACSB: Reflective Thinking 63. In planning its market offering, the marketer needs to address five product levels, each of which reduces customer value. Answer: FalsePage: 318Difficulty: MediumAACSB: Analytic Skills 64. The customer-value hierarchy consists of the basic product, core benefit, expected product, augmented product, and the consumption system. Answer: FalsePage: 318Difficulty: MediumAACSB: Analytic Skills 65.

Marketers have traditionally classified products on the basis of characteristics such as durability, tangibility, and use. Answer: TruePage: 319Difficulty: Medium 66. Durable products normally require more personal selling and service and more seller guarantees than nondurable goods. Answer: TruePages: 319–320Difficulty: MediumAACSB: Reflective Thinking 67. Because they are intangible, durable goods normally require more quality control, supplier credibility, and adaptability than either services or nondurable goods. Answer: FalsePage: 320Difficulty: Medium 68. Carlos always buys bread and milk when he goes grocery shopping.

In this case, bread and milk are examples o f impulse goods. Answer: FalsePage: 320Difficulty: MediumAACSB: Analytic Skills 69. A Maserati sports car is considered a specialty good because interested buyers will travel far to buy one. Answer: TruePage: 320Difficulty: MediumAACSB: Analytic Skills 70. The homogeneity of natural materials limits the amount of demand-creation activity that producers undertake. Answer: TruePage: 321Difficulty: Medium 71. Capital items are long-lasting goods that facilitate developing or managing the finished products. Answer: TruePage: 321Difficulty: MediumAACSB: Analytic Skills 72.

Supplies can be classified as two kinds: maintenance and repair items and operating supplies. Answer: TruePage: 321Difficulty: MediumAACSB: Analytic Skills 73. To be branded, physical products must be differentiated. Answer: TruePage: 321Difficulty: Easy 74. To avoid “feature fatigue,” companies must be careful to prioritize those features that are included and find unobtrusive ways to provide information about how consumers can use and benefit from the feature. Answer: TruePage: 322Difficulty: MediumAACSB: Reflective Thinking 75. Firms should design the highest performance level possible for their products.

Answer: FalsePage: 322Difficulty: MediumAACSB: Reflective Thinking 76. As a selling point, durability commands a particularly high pricing premium, especially for products that are subject to rapid technological obsolescence, as are personal computers and video cameras. Answer: FalsePage: 323Difficulty: HardAACSB: Reflective Thinking 77. Design can shift consumer perceptions to make brand experiences more rewarding. Answer: TruePage: 325Difficulty: Medium 78. If the physical product cannot be easily differentiated, the key to competitive advantage lies in the pricing of the related “services” provided by the manufacturer.

Answer: FalsePage: 326Difficulty: HardAACSB: Reflective Thinking 79. Customer training and customer consulting are two areas for service differentiation that manufacturers can use with their products. Answer: TruePage: 326Difficulty: MediumAACSB: Analytic Skills 80. The cost of processing a return can be significantly greater than that of an outbound shipment. Answer: TruePage: 327Difficulty: HardAACSB: Analytic Skills 81. The product hierarchy stretches from basic needs to particular items that satisfy those needs. Answer: TruePage: 328Difficulty: MediumAACSB: Reflective Thinking 82.

A product system is a group of diverse but related items that function in a compatible manner and includes the product mix and product assortment. Answer: FalsePage: 328Difficulty: MediumAACSB: Analytic Skills 83. The four product-mix dimensions (length, width, depth, consistency) permit the company to expand its business. Answer: TruePage: 329Difficulty: MediumAACSB: Analytic Skills 84. Factors that influence product-line length do NOT include company objectives or management aspirations. Answer: FalsePage: 331Difficulty: HardAACSB: Reflective Thinking 85.

Every company’s product line covers a certain part of the total possible range of products and consumer levels. Answer: TruePage: 331Difficulty: Hard 86. Companies in the “middle market” should never attempt to stretch their line in both directions. Answer: FalsePage: 333Difficulty: MediumAACSB: Reflective Thinking 87. Line filling, if overdone, may result in self-cannibalization and increased customer loyalty. Answer: FalsePage: 334Difficulty: MediumAACSB: Analytic Skills 88. In the rapidly changing market of today’s world, product lines must be continuously updated or modernized.

Answer: TruePage: 334Difficulty: MediumAACSB: Reflective Thinking 89. Price-setting logic must be modified when the product is part of a product mix. Answer: TruePage: 335Difficulty: EasyAACSB: Reflective Thinking 90. Companies normally develop product lines rather than a single product and introduce price steps such as a “low-,” “average-,” and “high-” priced computer system. Answer: TruePage: 335Difficulty: Medium 91. Manufacturers of systems such as razors and ink jet printers use a system of pricing called “two-part pricing”—one price for the disposable products and another for the “hardware. ” Answer: FalsePage: 336Difficulty: Hard 2. A pricing system in which there is a “fixed” fee and then a variable “usage” fee is called bundling. Answer: FalsePage: 336Difficulty: HardAACSB: Analytic Skills 93. Pure bundling occurs when a firm offers goods both individually and in bundles. Answer: FalsePage: 336Difficulty: MediumAACSB: Analytic Skills 94. Co-branding is when two or more well-known existing brands are combined into a joint product and/or marketed together in some fashion. Answer: TruePage: 337Difficulty: MediumAACSB: Analytic Skills 95. Ingredient branding can take on a form called “self-branding” in which the company advertises its own branded ingredients.

Answer: TruePage: 338Difficulty: MediumAACSB: Analytic Skills 96. Packaging is all the activities of designing and producing the container for a product. Answer: TruePage: 339Difficulty: EasyAACSB: Analytic Skills 97. Labels can identify the product and must contain legal statements that under various Federal laws cannot be misleading, false, or deceptive. Answer: TruePage: 341Difficulty: MediumAACSB: Reflective Thinking 98. Warranties are formal statements of expected product performance by the manufacturer. Answer: TruePage: 341Difficulty: EasyAACSB: Analytic Skills 99.

A guarantee’s greatest contribution to a product’s success is that it decreases the buyer’s perceived risk in the purchase of the product. Answer: TruePage: 342Difficulty: HardAACSB: Reflective Thinking 100. Guarantees are most effective when the product is well known and/or similar in performance to other brands in the market. Answer: FalsePage: 342Difficulty: HardAACSB: Reflective Thinking Essay 101. In planning its market offering, the marketer must address the five product levels of the customer-value hierarchy. Describe the “customer-value hierarchy” and identify the five levels of product contained ithin.

Suggested Answer: Each layer adds more customer value, and the five levels are: (1) the core benefit—the service or benefit the customer is really buying; (2) the basic product—the actual product that provides the core benefit; (3) expected product—a set of attributes and conditions buyers normally expect when they purchase the product; (4) the augmented product—the marketer exceeds customer expectations; and (5) the potential product—which encompasses all the possible augmentations and transformations the product or offering might undergo in the future.

These five elements constitute the buyers’ consumption system. Page: 318Difficulty: EasyAACSB: Analytic Skills 102. The vast array of products that consumers buy can be classified on the basis of shopping habits and are broken down into four main areas. List these four main classifications of consumer goods and explain what elements are included within.

Suggested Answer: The four main areas are: (1) Convenience goods are bought frequently, immediately, and with a minimum of effort; (2) shopping goods are goods that the consumer characteristically compares on such bases as suitability, quality, price, and style; (3) specialty goods have unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort; and (4) unsought goods are those goods that the consumer does not know about or does not normally think of buying.

Page: 320Difficulty: MediumAACSB: Analytic Skills 103. Industrial goods can be classified in terms of how they enter the production process and their relative costliness. Identify the three groups of industrial goods. Suggested Answer: The three groups of industrial goods include: (1) Materials and parts are goods that enter the manufacturer’s product completely. Raw materials (farm and natural products) and manufactured aterials and parts (component materials and component parts) compose this group; (2) Capital items are long-lasting goods that facilitate developing or managing the finished product, such as machinery (installations and equipment); and (3) Supplies and business services are short-term goods and services that facilitate developing or managing the finished product; maintenance and repair and operating supplies are included here. Business supplies include advisory services and other “services” necessary for the ongoing operation of the business.

Pages: 320–321Difficulty: Hard 104. When differentiated, products can then be branded. List the possible ways that physical products can be differentiated. Suggested Answer: Products can be differentiated according to form, features, customization, performance quality, conformance quality, durability, reliability, reparability, and style. Pages: 321–323Difficulty: EasyAACSB: Reflective Thinking 105. When a physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving quality.

Identify and discuss the six main service differentiators. Suggested Answer: The six main service differentiators are (1) ordering ease, (2) delivery, (3) installation, (4) customer training, (5) customer consulting, and (6) maintenance and repair. Pages: 326–327Difficulty: MediumAACSB: Analytic Skills 106. Explain the concepts of product-line width, length, depth, and consistency. Suggested Answer: The width of a product mix refers to how many different product lines the company carries.

The length of a product mix refers to the total number of items in the mix. The depth of a product mix refers to how many variants are offered of each product in the line and is determined by dividing the total number of items by the number of lines. The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. Page: 329Difficulty: HardAACSB: Analytic Skills 107. Explain the concept of line stretching and the three uses for it.

Suggested Answer: Line stretching occurs when a company lengthens its product line beyond its current range. It includes down-market stretch (introduce a lower-priced line), up-market stretch (introduce an upscale line), or two-way stretch (introduce both an upscale line and a down-scale line). Pages: 331–333Difficulty: HardAACSB: Analytic Skills 108. Product-mix pricing can involve a number of pricing strategies for the brand manager. List each of these strategies and briefly define each.

Suggested Answer: There are six situations involving product-mix pricing: (1) product-line pricing—low-, medium-, and high-priced products within the same line, such as different priced ties; (2) optional-feature pricing —charging for “extra” features, such as leather seats in a car; (3) captive-product pricing—when the “user” has no choice but to use the high-priced “disposable” products that make the entire product work (for example, ink cartridges for printers); (4) two-part pricing—consisting of a fixed fee and a variable usage fee (cell phone usage); (5) by-product pricing—the price of the by-products of goods being used for other purposes (oil refining for example); and (6) product-bundling pricing—pure bundling when the firm offers its products only as a bundle, or mixed bundling when the firm offers its products as a “bundle” and/or individually. Pages: 335–337Difficulty: Hard 109. Various factors have contributed to the increased importance of packaging as a marketing tool. List and briefly describe these events.

Suggested Answer: Self-service—an increasing number of products are being sold without any personal interaction, on a self-service basis. Consumer affluence —rising consumer affluence means consumers are willing to pay a little more for convenience, appearance, dependability, and prestige of better packages. Company and brand image—packages contribute to instant recognition of the company or brand. Innovation opportunity—innovative packaging can bring large benefits to consumers and profits to producers. Page: 339Difficulty: HardAACSB: Reflective Thinking 110. Sellers must label their products. Labels serve many purposes beyond just “naming” the product.

List the additional services provided by a product’s label. Suggested Answer: A label identifies the product; a label might also grade the product; a label might describe the product; and the label might promote the product. A label may contain information required by law. Page: 340Difficulty: MediumAACSB: Reflective Thinking APPLICATION QUESTIONS Multiple Choice 111. Marketers must see themselves as benefit providers. For example, when a shopper purchases new shoes, he/she expects the shoes to cover his/her feet and allow them to walk unobstructed. This is an example of what level in the consumer-value hierarchy? a. Pure tangible good b. Basic product c. Augmented product d. Potential product e.

Consumption system Answer: bPage: 318Difficulty: EasyAACSB: Analytic Skills 112. How a consumer shops for organic foods and how they use and dispose of the product is part of the consumers’ _________ that is important for marketers to consider. a. basic product system. b. customer value system c. potential system d. consumption system e. none of the above Answer: dPage: 319Difficulty: Medium 113. The sellers of ________ goods carry a wide assortment to satisfy individual tastes and must have well-trained salespeople to inform and advise customers. Examples include automobile dealers, furniture stores, and insurance services. a. unsought shopping goods . specialty shopping goods c. homogeneous shopping goods d. heterogeneous shopping goods e. none of the above Answer: dPage: 320Difficulty: MediumAACSB: Analytic Skills

114. ________ are major purchases and are usually bought directly from the producer with the typical sale preceded by long negotiation periods. a. Raw materials b. Materials and parts c. Business services d. Capital goods e. Installations Answer: ePage: 321Difficulty: MediumAACSB: Analytic Skills 115. Most products are established at one of four performance levels: low, average, high, or superior. For example, mountain bikes come in a variety of sizes and physical attributes.

When a consumer purchases a mountain bike costing $1,000, she/he expects the bike to perform to specifications and to have a high _________ meeting the promised specifications. a. features b. durability c. conformance quality d. performance quality e. reliability Answer: dPage: 322Difficulty: MediumAACSB: Reflective Thinking 116. If the Porsche 911 is designed to accelerate to 60 miles per hour within 10 seconds, and every Porsche 911 coming off the assembly line does this, the model is said to have high ________. a. reliability b. conformance quality c. durability d. repairability e. style Answer: bPage: 323Difficulty: MediumAACSB: Analytic Skills 117.

Realizing that although household products is a huge category, taking up an entire supermarket aisle or more, it is an incredibly boring one, the founders of Method Products designed a sleek, uncluttered dish soap container that also carried functional advantages. Method is competing in the crowded market for household products on the basis of superior ________. a. design b. durability c. conformance d. reliability e. performance quality Answer: aPage: 325Difficulty: MediumAACSB: Reflective Thinking 118. When Baxter Medical supplied their hospitals with computer terminals directly linked to Baxter’s ordering system, this was an example of a company differentiating itself versus competition in terms of ________. a. customer relationships b. customer training c. installation d. delivery ease e. ordering ease Answer: ePage: 326Difficulty: HardAACSB: Reflective Thinking 119.

Using the ________ level of the product hierarchy to market its soups, Campbell Soups feature the company name first, then the soup variety on their packaging. a. item b. product-type c. need-family d. product-family e. product-line Answer: ePage: 328Difficulty: Hard 120. A consumer products firm manufacturers and sells over 200 different sizes and varieties of jams and jellies. We can say that this manufacturer’s product mix has high ________. a. consistency b. depth c. height d. product assortment e. width Answer: bPage: 329Difficulty: MediumAACSB: Reflective Thinking 121. Happy Home Products produces detergents, toothpaste, bar soap, disposable diapers, and paper products. This company has a product ________ of five lines. a. depth b. ength c. consistency d. height e. width Answer: ePage: 329Difficulty: MediumAACSB: Analytic Skills 122. When Jack bought his new laptop, he also bought a laptop bag and a spare power cord through the same retailer. These items are considered to be ________. a. core products b. staples c. convenience items d. specialties e. emergency items Answer: cPage: 330Difficulty: MediumAACSB: Analytic Skills 123. A manufacturer of hiking boots looks at data that indicate that their subsegment of the market called “serious hiker” is declining and is predicted to decline into the future. The firm decides to enter the “low-price” segment with its new items.

This is an example of a firm’s ________ to reach a new market. a. down-market stretch b. up-market stretch c. two-way stretch d. marketing research e. capitalizing Answer: aPage: 331Difficulty: MediumAACSB: Reflective Thinking 124. Marriott Corporation now contains hotels and motels from the “budget” end of the consumer spectrum to the “premium” end with their JD Marriott flagship locations. This is an example of a firm that successfully performed a ________ to reach more consumers and ventures that are more profitable. a. marketing diversification b. two-way stretch c. up-market stretch d. down-market stretch e. cross-stretch Answer: bPage: 333Difficulty: MediumAACSB: Analytic Skills 125.

When shopping for tires for your automobile, you notice that the manufacturer you have selected has tires for your car priced low, average, and high, based upon performance and features. This is an example of what type of product-mix pricing? a. Captive-price pricing b. Product-line pricing c. By-product pricing d. Two-part pricing e. Optional-feature pricing Answer: bPage: 335Difficulty: MediumAACSB: Reflective Thinking 126. Purchasers of theatre tickets receive a 20% discount if they purchase and pay for the full season at one time. This is an example of what type of product-mix pricing? a. Mixed bundling b. Pure bundling c. Cross-promotion d. Captive pricing e. None of the above Answer: aPage: 336Difficulty: MediumAACSB: Analytic Skills 127.

McDonald’s restaurants inside Super Wal-Marts and Starbucks inside Super Targets are examples of ________, whose main advantages are that the products can or may be convincingly positioned by virtue of the associated brands. a. cooperative marketing b. co-branding c. retail co-branding d. ingredient branding e. none of the above Answer: cPage: 337Difficulty: MediumAACSB: Reflective Thinking 128. Betty Crocker cake mixes using Hershey syrup in its cake mixes and “Lunchables” lunch combinations with Taco Bell tacos are examples of what special type of branding? a. Mixed branding b. Ingredient co-branding c. Co-branding d. Self-branding e. None of the above Answer: bPages: 337–338Difficulty: MediumAACSB: Analytic Skills 129.

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: ePage: 339Difficulty: MediumAACSB: Reflective Thinking 130. 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. t 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: ePage: 342Difficulty: MediumAACSB: Reflective Thinking Short Answer 131. A manufacturer is contemplating introducing a product that is inferior to its competition in its performance, design, and functionality.

However, the manufacturer believes that “good brand marketing” can overcome these shortfalls. Why is this thinking incorrect? Suggested Answer: At the heart of a great brand is a great product, the product is a key element in the market offering. Customers will judge the product (offering) on three basic elements: product features and quality; services mix and quality, and price. Not having a competitive product cannot be overcome by marketing. Pages: 317–318Difficulty: HardAACSB: Reflective Thinking 132. Studying how consumers shop, how they use a particular product or service, and how they dispose of the product when consumed is important for marketers. This information forms the basis of product strategy.

First, define the consumption system and second, identify the two upcoming product strategies that are affected by this knowledge. Suggested Answer: This is called the user’s total consumption system, defined as the way the user performs the tasks of getting and using products and related services. This is important because it will contain information useful in the product-augmentation strategy and the potential product strategy. Page: 319Difficulty: Hard 133. You know that marketers have traditionally classified products based on characteristics of durability, tangibility, and use. You also know that each product type has an appropriate marketing-mix strategy attached.

In analyzing your company’s products, you decide to list each of these products and the appropriate marketing-mix strategy to understand where your products “fit. ” List these products and their appropriate marketing-mix strategies. Suggested Answer: (1) Nondurable goods—the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. (2) Durable goods—tangible goods that normally survive many uses. Durable products normally require more personal selling and service, command a higher margin, and require more seller guarantees. (3) Services—intangible, inseparable, variable, and perishable products. They require more quality control, supplier credibility, and adaptability.

Pages: 319–320Difficulty: HardAACSB: Reflective Thinking 134. Convenience goods, products purchased without much thought, can be classified as impulse goods and emergency goods, and this constitutes one of the four classifications of goods based on shopping habits. The purchase of a Mercedes automobile, life insurance, homogeneous shopping goods, and heterogeneous shopping goods are examples of the other classifications. Identify these “goods” classifications or segments. Suggested Answer: The vast array of goods purchased by consumers can be classified as convenience goods, shopping goods (homogeneous and heterogeneous), specialty goods, and unsought goods. Page: 320Difficulty: Easy 135.

Industrial-goods classifications based on terms of how the products enter the production process and their relative costs include such segments as materials and parts and capital items. Window cleaning services, consumable office supplies, personal computers, desks, paint, nails, and buckets are included in the classifications of industrial goods. List the other “classifications” including subclassifications for industrial goods. Suggested Answer: Industrial-goods classifications include material and parts, farm products, natural products, manufactured materials and parts, and component parts. Capital goods include installations and equipment.

Supplies and business services include maintenance and repair items, operating supplies, and business advisory services. Pages: 320–321Difficulty: HardAACSB: Analytic Skills 136. In your position as a marketing manager for a small industrial company, you have been asked by the president to help differentiate the company’s product from its competitors. In reviewing your marketing management notes, you note that the text stated that physical products could be differentiated in nine ways. These nine areas comprise the “meat” of the memo you are writing to the president of your firm. What are the nine ways that physical products can be differentiated?

Suggested Answer: The nine ways that physical products can be differentiated are form, features, customization, performance quality, conformance quality, durability, reliability, reparability, and style. Pages: 321–323Difficulty: MediumAACSB: Analytic Skills 137. You know that your small firm cannot compete with the “big boys” in terms of price and promotion. Instead, you have decided to “outdesign” them. What is necessary for this strategy of “outdesigning them” to succeed? Suggested Answer: Design offers a potent way to differentiate and position a company’s products and services. Design is the factor that will often give a company its competitive edge. Design is the totality of features that affect how a product looks and functions in terms of customer requirements.

The designer must figure out how much to invest in form, feature development, performance, conformance, durability, reliability, reparability, and style. To the company, a well-designed product is one that is easy to manufacture and distribute. To the consumer, a well-designed product is one that is pleasant to look at and easy to open, install, use, repair, and dispose of. Page: 325Difficulty: MediumAACSB: Reflective Thinking 138. As the marketing manager for a product often referred to as a “commodity,” you know that incremental sales and profits lies not in physical differentiation but in “service” differentiation. As you compose a memo to your boss regarding the concept of “service” differentiation, you note the six areas where service differentiation can make a difference.

List these six areas for service differentiation. Suggested Answer: The main service differentiators are: ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. Pages: 326–327Difficulty: EasyAACSB: Analytic Skills 139. You have been asked to create a product system for your company’s personal digital assistant. Before starting, you must define the term “product system” to the engineers to enable them to start design and production of the aligned items. Define the concept of a “product system. ” Suggested Answer: A product system is a group of diverse but related items that function in a compatible manner. Page: 328Difficulty: Easy 140.

You have been asked to prepare a product-line analysis for your company’s stable of products. Why is it important for product-line mangers to do a product-line analysis? Suggested Answer: Product-line managers need to know the sales and profits of each item in their line in order to determine which items to build, maintain, harvest, or divest. They also need to understand each product line’s market profile. Page: 329Difficulty: MediumAACSB: Analytic Skills 141. How do the four product-mix dimensions (width, length, depth, and consistency) affect a firm’s product and corporate strategies? Suggested Answer: These four product-mix dimensions permit the company to expand its business in four different ways.

First, it can add new product lines, thus widening its product mix. Second, it can lengthen each product line. It can add more product variants to each product line and deepen its product mix. Finally, a company can pursue more product-line consistency. Page: 329Difficulty: MediumAACSB: Reflective Thinking 142. As the newest member of the marketing department, your immediate boss asks you to comment on the company’s proposal to add two new shoes to the company’s middle-of-the-road pricing and product-line strategies. The first pair will retail for $ 40. 00 and has as its target market the “bargain” shopper. The second pair will retail for $ 200. 00 and is targeted at the “sophisticated shopper. In relation to product-line strategy, what is the company trying to accomplish with these two new items? Suggested Answer: This is an example of the company trying a “two-way stretch”—introducing products at both ends of the consumer market simultaneously. Page: 333Difficulty: MediumAACSB: Analytic Skills

143. During a meeting, you were asked by the vice-president of marketing, to comment on the company’s pricing strategy for its products. Recalling your marketing management course in college, your comments define the six situations involving product-mix pricing. List these six product-mix pricing strategies. Suggested Answer: Product-mix pricing includes product-line pricing, ptional-feature pricing, captive-product pricing, two-part pricing, by-product pricing, and product-bundling pricing. Pages: 335–336Difficulty: Medium 144. Your firm is contemplating a bundling strategy for its line of products. In a memo to your boss, you outline the three guidelines for correctly implementing a building strategy. Suggested Answer: Do not promote individual products in a package as frequently and cheaply as the bundle. Second, limit promotions to a single item in the mix if you still want to promote individual products. Third, if you decide to offer large rebates on individual products, it must be the absolute exception and done with discretion. Page: 337Difficulty: HardAACSB: Analytic Skills 145.

As the marketing manager for your firm, you have been approached by your key component manufacturer suggesting that your two firms “ingredient brand” a new item. What are some of the requirements for succeeding in ingredient branding? Suggested Answer: First, the consumer must perceive that the ingredient matters to the performance and success of the product. Secondly, consumers must be convinced that not all ingredient brands are the same and that the ingredient is superior. Third, a distinctive symbol or logo must clearly signal to consumers that the host product contains the ingredient. Fourth, a coordinated “pull” and “push” program must help consumers understand the importance and advantages of the branded ingredient.

Page: 339Difficulty: HardAACSB: Reflective Thinking 146. Your research shows that over 53% of all purchases are made on impulse. As you sit down with your packaging design team, you tell them that the package must communicate many of the sales tasks. List the sales tasks that packaging must now incorporate due to the increase in self-service sales. Suggested Answer: These tasks are: attract attention, describe the product’s features, create consumer confidence, and make a favorable overall impression. Page: 339Difficulty: MediumAACSB: Analytic Skills 147. In discussions with the packaging design team, you note that they do not have a firm design objective for the final package.

In an internal memo to your boss, you outline the objectives (both company and consumer orientated) that you wish to see implemented by the design team. List these objectives. Suggested Answer: The objectives of packaging are to identify of the brand; convey descriptive and persuasive information; facilitate product transportation and protection; assist at-home storage; and aid product consumption. Pages: 339–340Difficulty: HardAACSB: Analytic Skills 148. In discussions with the packaging design team, it seems that they are unclear as to what should be included on the final product (consumer package) packaging. You list these objectives in a memo. List these objectives here. Suggested Answer: Labels must first identify the product or brand; the label might also grade the product.

The label should describe the product and promote the product; and finally the label must contain all required government information. Pages: 340–341Difficulty: Medium 149. Your service firm is contemplating adding a “guarantee” component. Members of senior management are unclear as to the marketing advantages of a guarantee. How would you convince members of senior management that a guarantee can provide a marketing advantage? Suggested Answer: Guarantees reduce the buyer’s perceived risk. They suggest that the service/product is of high quality and that the company and its service performance are dependable. Page: 342Difficulty: EasyAACSB: Reflective Thinking 150. As you contemplate the introduction of your company’s newest services, ou think that the offering of a service guarantee would be a “marketing coup” and completely surprise your competition. You remember that your marketing management text stated that guarantees are most effective in two situations. What are these two situations? Suggested Answer: Guarantees are most effective when either the company or the product is not well known, so a “money-back” guarantee in that case would reduce the buyer’s perceived risk and provide them with confidence in purchasing the product. The second area is when the product/service is superior to competition in quality and performance. Page: 342Difficulty: MediumAACSB: Analytic Skills

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