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Chapter 1 Marketing in Today's Economy

1. Among the fundamental changes to marketing and business practice in today’s economy is the dramatic increase in the
availability of information. This increase in information has created a shift in the balance of power in the supply chain.
Who now holds most of the power in today’s economy?
  a. retailers b. wholesalers
  c. customers d. manufacturers
  e. market research
firms
ANSWER:  c

2. __________ is the curse of mature markets whereby products lack any real means of differentiation and customers see
competing products as offering roughly the same benefits.
  a. Specialization b. Commoditization
  c. Maturation d. Price devaluation
  e. Market
homogeneity
ANSWER:  b

3. Which of the following changes occurring in today’s economy has NOT been caused by the growth of the Internet?
  a. increase in product selection b. shifting demand patterns
  c. privacy and security concerns d. rising prices for most products
  e. audience and media
fragmentation
ANSWER:  d

4. Although mass media audiences are becoming increasingly fragmented, media fragmentation does have a major
advantage. What is this advantage?
  a. It now costs less to reach a mass audience.
  b. It is much easier to measure feedback from mass media audiences.
  c. It is now easier to reach small, highly targeted audiences.
  d. Consumers are now much more receptive to television advertising.
  e. Consumers are now highly susceptible to online advertising.
ANSWER:  c

5. Changing value propositions in today’s economy—such as changes caused by the growth in e-commerce—have forced
marketers to learn a tough lesson about customers. What is that lesson?
  a. Customers will always seek the best value regardless of quality.
  b. Customers will always turn to the most recognized brand.
  c. Customers would rather perform service for themselves to save money.
  d. Customers will turn to the most convenient, least expensive alternative in situations where they see goods and
services as commodities.
  e. Customers will always seek the best quality regardless of price.
ANSWER:  d

6. One of the major difficulties of conducting business in today’s economy concerns the unclear legal jurisdiction
surrounding many business transactions. The issue is especially keen for marketers who do business in:
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Chapter 1 Marketing in Today's Economy

  a. international markets. b. domestic, interstate markets.
  c. business-to-business d. metamarkets.
markets.
  e. peer-to-peer transactions.
ANSWER:  a

7. In 2005, the American Marketing Association changed the definition of marketing that had stood for 20 years. The
major changes in the definition included a shift from delivering the 4 Ps (product, price, place, promotion) to delivering
__________ and a shift from creating exchanges to creating __________.
  a. satisfaction; customer b. value; customer relationships
relationships
  c. quality; transactions d. value; satisfaction
  e. quality; value
ANSWER:  b

8. A cluster of closely related goods and services that center around a specific consumption activity is referred to as a:
  a. marketspace. b. market.
  c. metamediary. d. marketing channel.
  e. metamarket.
ANSWER:  e

9. Edmunds.com provides a collection of online services and information pertaining to the automotive market. Edmunds
offers reviews, free pricing reports, discussion boards, and links to a variety of car manufacturers, dealers, insurance
companies, and finance companies. What role does Edmunds.com play in today’s economy?
  a. distributor b. marketspace
  c. metamediary d. metamarket
  e. electronic broker
ANSWER:  c

10. Which of the following IS NOT one of the five conditions of exchange in marketing?
  a. There must be at least two parties to the exchange.
  b. Each party has something of value to offer the other party.
  c. Each party must be free to accept or reject the exchange.
  d. Each party must be capable of immediate delivery.
  e. Each party believes that it is desirable to exchange with the other party.
ANSWER:  d

11. A customer’s decision to purchase one product or group of products over another is primarily a function of:
  a. the convenience of acquiring the product or group of products.
  b. how well that choice will fulfill that person’s needs and satisfy his or her
wants.
  c. the product’s features relative to competing products.
  d. the product’s price.
  e. the availability of the product or group of products.
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ANSWER:  b

12. A product that provides the utmost in convenience is said to offer exceptional:
  a. time and place utility. b. place and possession utility.
  c. time and possession d. form and time utility.
utility.
  e. form and place utility.
ANSWER:  a

13. Furniture Mart offers services such as financing and home delivery to its customers. What type of utility is Furniture
Mart trying to increase?
  a. time utility b. place utility
  c. possession utility d. form utility
  e. psychological utility
ANSWER:  c

14. What type of planning deals with specific markets or market segments and the development of marketing programs
that will fulfill the needs of customers in those markets?
  a. market planning b. strategic planning
  c. local planning d. lower-level planning
  e. tactical
planning
ANSWER:  e

15. __________ involves the analysis of economic, political, legal, technological, and cultural events and trends that may
affect the future of the organization and its marketing efforts.
  a. Competitive b. Environmental scanning
intelligence
  c. Tactical planning d. Marketing research
  e. External analysis
ANSWER:  b

16. Many firms attempt to distinguish or differentiate their product offerings through the use of __________ strategies.
This involves establishing a mental image of the product offering relative to competing offerings in the minds of target
buyers.
  a. product positioning b. branding
  c. perceptual d. image marketing
marketing
  e. comparative
ANSWER:  a

17. Which of the following statements about pricing decisions in the marketing program is TRUE?
  a. Price is one of two elements of the marketing mix that leads to revenue.
  b. Price has a direct connection with customer demand.
  c. Pricing is the least manipulated element of the marketing mix.
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  d. Pricing is the most difficult element of the marketing mix to change.
  e. Customers will always equate higher prices with higher quality products.
ANSWER:  b

18. In the traditional transactional marketing approach, the ultimate goal of marketing is to:
  a. serve customers’ needs and wants.
  b. develop long-term customer relationships.
  c. create value in the buyer-seller relationship.
  d. acquire new customers and complete a large number of exchanges.
  e. All of the above are goals of transactional marketing
ANSWER:  d

19. All of the following are reasons for the general decline in customer satisfaction over the past 20 years EXCEPT:
  a. Customers are much less brand loyal than in the past.
  b. Today’s customers are very price sensitive.
  c. Today’s customers are exceptionally demanding.
  d. Product quality is much lower now than at any time in the past.
  e. Customers are more cynical, have more information, and have more attitude than ever
before.
ANSWER:  d

20. In the airline industry, companies like American, Delta, and US Air have a difficult time competing because their
industry has become commoditized. What does this mean for firms in the airline industry?
  a. Airline firms compete in a declining industry.
  b. Airline customers have become increasingly demanding.
  c. There is very little differentiation among product offerings in the industry.
  d. The industry experiences very little change over time.
  e. Airlines have been forced to develop partnerships to remain competitive.
ANSWER:  c

21. The text discusses seven challenges and opportunities associated with marketing in today’s economy. Identify these
issues and discuss how they are related. What is the common thread that ties all seven issues together?
ANSWER:  The seven issues are:
1.   Power Shift to Customers
2.   Massive Increase in Product Selection
3.   Audience and Media Fragmentation
4.   Changing Value Propositions
5.   Shifting Demand Patterns
6.   Privacy, Security, and Ethical Concerns
7.   Unclear Legal Jurisdiction
The common thread that ties these issues together is the increase in information and choices made available by
the Internet.

22. Discuss the different views or interpretations of marketing as a function of business, including the AMA’s 2007
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change in the definition of marketing. Why do you think the AMA changed the definition?
ANSWER:  Many people, especially those not employed in marketing, see marketing as a function of business. As a
business function, the goal of marketing is to connect the organization to its customers. Other individuals,
particularly those working in marketing jobs, tend to see marketing as a process of managing the flow of
products from the point of conception to the point of consumption. A final way to think about marketing
relates to meeting human and social needs. This broad view links marketing with our standard of living, not
only in terms of enhanced consumption and prosperity but also in terms of society’s well-being.

The AMA changed the definition of marketing to better reflect the realities of competing in today’s
marketplace. The new definition stresses two critical success factors in marketing today: value and customer
relationships. Whereas the former definition of marketing had a decidedly transactional focus, the new
definition emphasizes long-term relationships that provide value for both customers and the firm.

23. Briefly explain and discuss the five types of utility. Which type(s) of utility is(are) the most important and why?
ANSWER:  The five types of utility are:
1.   Form Utility—Products high in form utility have attributes or features that set them apart from the
competition.
2.   Time Utility—Products high in time utility are available when customers want them.
3.   Place Utility—Products high in place utility are available where customers want them, which is typically
wherever the customer happens to be at that moment or where the product needs to be at that moment.
4.   Possession Utility—Possession utility deals with the transfer of ownership or title from marketer to
customer. Products higher in possession utility are more satisfying because marketers make them easier to
acquire.
5.   Psychological Utility—Products high in psychological utility deliver positive experiential or psychological
attributes that customers find satisfying. Conversely, a product might offer exceptional psychological utility
because it lacks negative experiential or psychological attributes.
One type of utility is not necessarily more important than the others. In reality, all five types are
complementary and overlap to a great degree. One could argue that form utility is the most important,
however, because customers tend to choose products that offer certain features. For routinely purchased
products (gasoline, bread), time and place utility are likely to be more important. For unique types of products
(vacations, luxury goods), psychological utility might be relatively more important.

24. With respect to the strategic planning process, why has social responsibility and marketing ethics become important
today? Is it really necessary to consider these issues in strategic planning? How can a firm plan to be socially responsible?
ANSWER:  Our society still reverberates from the effects of corporate scandals at Enron, WorldCom, and ImClone,
among others. Although these scandals make for interesting reading, many innocent individuals have suffered
the consequences from these companies’ unethical behavior. Social responsibility refers to an organization’s
obligation to maximize its positive impact on society while minimizing its negative impact. In terms of
marketing strategy, social responsibility addresses the total effect of an organization’s marketing activities on
society. A major part of this responsibility is marketing ethics, or the principles and standards that define
acceptable conduct in marketing activities. Ethical marketing can build trust and commitment and is a crucial
ingredient in building long-term relationships with all stakeholders. Another major component of any firm’s
impact on society is the degree to which it engages in philanthropic activities. Many firms now make
philanthropy a key strategic activity.
Because efforts to be socially responsible involve the allocation of human and financial resources, these
activities must be planned just like traditional marketing activities.

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25. Discuss the challenges and opportunities associated with planning and developing marketing strategy in today’s
economy. Why is marketing strategy both exciting and challenging?
ANSWER:  One of the greatest frustrations and opportunities in marketing is change—customers change, competitors
change, and even the marketing organization changes. Strategies that are highly successful today will not work
tomorrow. Customers will buy products today that they will have no interest in tomorrow. These are truisms in
marketing. Although frustrating, challenges like these also make marketing extremely interesting and
rewarding. Another fact about marketing strategy is that it is inherently people driven. Marketing strategy is
about people (inside an organization) trying to find ways to deliver exceptional value by fulfilling the needs
and wants of other people (customers, shareholders, business partners, society at large), as well as the needs of
the organization itself.

The combination of continual change and the people-driven nature of marketing makes developing and
implementing marketing strategy a challenging task. A perfect strategy that is executed perfectly can still fail.
This happens because there are very few rules for how to do marketing in specific situations. In other words, it
is impossible to say that given “this customer need” and these “competitors” and this “level of government
regulation” that Product A, Price B, Promotion C, and Distribution D should be used. Marketing simply
doesn’t work that way. The lack of rules and the ever-changing economic, sociocultural, competitive,
technological, and political/legal landscapes make marketing strategy a terribly fascinating subject.

26. A church sermon preached to a congregation is an example of a product.

  a. True
  b. False
ANSWER:  True

27. Which of the following outlines the organization’s game plan for success?
  a. market scanning
  b. planning
  c. strategy
  d. utility
  e. competitive intelligence
ANSWER:  c

28. The term ______ is used to describe the ability of a product to satisfy a customer’s desires.
  a. utility
  b. exchange 
  c. strategy
  d. market scanning
  e. competitive intelligence
ANSWER:  a

29. Which of the following type of planning focuses on specific markets or market segments and the development of
marketing programs that will fulfill the needs of customers in those markets?
  a. strategic planning
  b. customer analysis
  c. environmental planning

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  d. tactical planning
  e. marketing plan
ANSWER:  d

30. Environmental scanning refers to the overall process of collecting and interpreting internal, competitive, and
environmental information.
  a. True
  b. False
ANSWER:  False

31. A marketer at General Mills in charge of international expansion wants to determine Kellogg's market share in
Mexico. What type of marketing activity should she apply? 
  a. Tactical planning
  b. Internal analysis
  c. Competitive intelligence
  d. Environmental scanning
  e. Situation analysis
ANSWER:  c

32. Competitive advantages are critical because they set the tone of the entire marketing program. 
  a. True
  b. False
ANSWER:  True

33. List the elements that make up a marketing program.

  a. product and target market
  b. target market and marketing mix
  c. market segment and market plan
  d. price, promotion, place, and product
  e. marketing mix, price, and promotion
ANSWER:  b

34. From the customer's perspective, which part of the marketing mix takes place largely behind the scenes? 
  a. Market segmentations
  b. Product
  c. Price
  d. Promotion
  e. Distribution
ANSWER:  e

35. The "how" of marketing planning is known as marketing implementation.

  a. True
  b. False

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ANSWER:  True

36. Marketing strategy is inherently product-driven.

  a. True
  b. False
ANSWER:  False

37. The Internet has shifted more power to the marketer.

  a. True
  b. False
ANSWER:  False

38. The four Ps of the marketing mix consist of product, positioning, pricing, and promotion.
  a. True
  b. False
ANSWER:  False

39. The term marketspace describes electronic marketplaces unbound by time or space.

  a. True
  b. False
ANSWER:  True

40. Market segmentation divides the market into homogenous groups or segments.

  a. True
  b. False
ANSWER:  True

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