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ANS:
Traditional selling:
ANS:
1. Generating sales leads
2. Qualifying sales leads
3. Doing a needs assessment
4. Developing and proposing solutions
5. Handling objections
6. Closing the sale
7. Following up
11. The first step in the personal selling process is sales lead generation. Define lead generation and
explain why referral is a superior method for generating leads.
ANS:
Lead generation, or prospecting, is the identification of those firms and people most likely to buy the
seller's offerings. These firms or people become "sales leads" or "prospects."
Referrals are recommendations from customers or business associates. The advantages of referrals
over other forms of prospecting include highly qualified leads, higher closing rates, larger initial
transactions, and shorter sales cycles.
ANS:
Lead qualification involves determining whether the prospect has three things:
RECOGNIZE A NEED. First, the salesperson must determine if the prospect has a need that is not
being satisfied. Preliminary interviews and questioning may help in this process.
WILLINGNESS TO SEE A SALESPERSON. The prospect must be willing to see the salesperson and
be accessible to the salesperson.
DETERMINE BUYING POWER. To avoid wasting time and money, the salesperson should identify
the buying authority before making a presentation and determine that the prospect has the funds to pay
for the product. An organization chart can qualify the prospect. Additionally, information on a firm's
credit standing can be obtained from credit and financial reporting services. Telemarketing may help
as well.
13. Tremaine Hughes is a salesperson for Allied Pets, a company that sells veterinarian supplies. He is
working on a needs assessment for East Athens Veterinary Clinic. What information will he need to
find out about East Athens?
ANS:
A consultative salesperson must know everything there is to know about:
ANS:
15. You are the sales manager for Cone Machinery, a manufacturer of custom-made sawmill machinery.
You are responsible for designing the training program for its new salespeople. List four major areas in
which you would like your salespeople to receive instruction.
ANS:
· Company policies and practices
· Selling techniques
· Product knowledge
· Industry and customer characteristics
· Nonselling duties
TRUE/FALSE
1. Price is defined as the perceived value of a good or service that is exchanged for a certain dollar
amount.
Price is not necessarily measured in terms of money. In bartering, other items of value may be
exchanged.
2. Profit is equal to the price charged to customers multiplied by the number of units sold.
3. Today's firms must develop specific, measurable, and attainable pricing objectives if they hope to
survive in highly competitive markets.
4. A marketer using a profit maximization strategy will charge the highest prices the market will bear.
Profit maximization means setting prices so that total revenue is as large as possible relative to costs.
5. Target return on investment (ROI) is the most common profit objective used by firms.
6. Sales-oriented pricing objectives are either based on market share or dollar or unit sales.
Maximization of cash should never be a long-run objective because cash maximization may mean little
or no profitability. Without profits, a company cannot survive.
8. Status quo pricing objectives suggest that the firm should try to keep its price consistent regardless of
what competition does with its prices.
Status quo pricing seeks to maintain existing prices or to meet the competition’s prices.
9. When pricing goals are mainly sales oriented, cost considerations usually dominate.
When pricing goals are mainly sales oriented, demand considerations usually dominate.
10. Profit maximization is the price at which supply and demand are equal, and there is no inclination for
prices to rise or fall.
Price equilibrium is the price at which supply and demand are equal, and there is no inclination for
prices to rise or fall.
11. If demand for milk is inelastic, consumers will not change their purchasing habits greatly when the
price of milk changes.
12. If the formula for elasticity results in a measure of elasticity (E) greater than 1, demand is said to be
inelastic.
13. If the formula for elasticity results in a measure of elasticity (E) equal to 1, the increase in sales exactly
offsets the decrease in price so that total revenue remains the same.
15. Yield management systems (YMS) were first used by Internet service providers.
Yield management systems (YMS) were first developed in the airline industry.
As the popularity of yield management systems increases, their use is spreading to manufacturing (in
terms of production capacity).
17. Firms that price their products solely on the basis of costs are adhering to the marketing concept.
Firms pricing their products solely on the basis of costs are not following the marketing concept.
18. Variable costs vary with changes in the level of output, whereas marginal costs do not vary as output
changes.
Marginal costs are the changes in total costs associated with a one-unit change in output.
19. Costs that do not change as output is increased or decreased are called stable costs.
These are called fixed costs.
20. Markup pricing, adding an amount to cost to cover expenses and profit, is one of the most common
pricing methods used by intermediaries to establish a selling price.
21. A firm has maximized its profits when its marginal revenue exceeds its marginal cost.
A firm has maximized its profits when its marginal revenue equals its marginal cost.
22. Break-even analysis determines what sales volume must be reached for a product before the company's
total revenue equals total costs.
23. As products enter the growth stage of the product life cycle, prices generally begin to stabilize.
24. The manufacturers that remain in the market toward the end of the maturity stage typically offer
similar prices.
25. Prices may actually rise for a product in the decline stage of the product life cycle.
When only one firm is left in the market, prices begin to stabilize, but they may eventually rise
dramatically if the product survives and moves into the specialty goods category, as horse-drawn
carriages and vinyl records have.
26. Adequate distribution for a new product is often obtained by reducing the size of the profit margin for
its resellers.
Adequate distribution for a new product is often obtained by offering a larger-than-usual profit margin
to its distributors.
PTS: 1 REF: 647 OBJ: 19-6 TYPE: Comp
TOP: AACSB Reflective Thinking | TB&E Model Pricing
28. When a retailer offers a price-matching guarantee, it is signaling to the target market that it is
positioned as a low-price dealer.
29. High purchase prices may create feelings of pleasure and excitement in consumers.
30. Research has shown that products that are perceived to be of high quality tend to benefit less from
price promotions than products perceived to be of lower quality.
They tend to benefit more from price promotions that products perceived to be of lower quality.
MULTIPLE CHOICE
According to the textbook price is that which is given up in exchange to acquire a good or service.
2. At Wal-Mart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which
were sold together, retailed at $28.50, but were marked down to $19.99. The $19.99 is the:
a. revenue
b. price
c. profit
d. liquidity value
e. amortized value
Price is that which is given in exchange to acquire a product.
Price means one thing to the consumer and something else to the seller. To the consumer, it is the cost
of something. To the seller, price is revenue, the primary source of profits.
Price can relate to anything with perceived value, not just money. The price paid is based on the
satisfaction consumers expect to receive from a product, not necessarily what they actually receive.
5. Revenue:
a. equals quantity sold times profit margin
b. equals price minus costs
c. equals return on investment
d. is synonymous with profit
e. equals price of goods times quantity sold
Revenue is the price charged to customers multiplied by the number of units sold.
7. Money that is left over after paying for company activities is called:
a. return on investment
b. a contribution margin
c. profit
d. net worth
e. a current asset
8. At Wal-Mart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which
were sold together, retailed at $28.50, but were marked down to $19.99. The retailer sold one at the
$28.50 price and five at the $19.99. The retailer's revenue is:
a. $8.51
b. $19. 99
c. $28.50
d. $128.45
e. $171.00
9. Why are marketing managers finding it more difficult to set prices in today's environment?
a. Inflationary and recessionary periods have made customers less price-sensitive.
b. Fewer dealer and generic brands are available because the competition has been
eliminated.
c. The high rate of new-product introductions has led to careful reevaluation by consumers.
d. Marketing managers are finding it difficult to compare prices between suppliers.
e. Buyers are less informed and are less price-sensitive.
With constant new-product introductions, consumers have many alternative goods to choose from, and
selecting the right price becomes a very complicated task for the marketing manager.
10. For convenience, pricing objectives can be divided into three categories. They are:
a. refundable, competitive, and attainable
b. perceived, actual, and unique-situational
c. differentiated, niche, and undifferentiated
d. profit oriented, sales oriented, and status quo
e. monopolistic, fixed, and variable
Profit-oriented objectives include profit maximization, satisfactory profits, and target return on
investment. Sales-oriented pricing objectives are based either on market share or on dollar or unit
sales. Status quo pricing seeks to maintain existing prices or to meet the competition’s prices.
11. An organization is using _____ when it sets its prices so that total revenue is as large as possible
relative to total costs.
a. profit maximization
b. market share pricing
c. demand-oriented pricing
d. sales maximization
e. status quo pricing
Profit maximization is a type of profit-oriented pricing objective and means setting prices so that total
revenue is as large as possible relative to total costs.
12. When Apple Inc. originally introduced its iPhone it was priced at what many believed to be about as
high as the market would allow. Within weeks Apple lowered the price of the iPhone. It appears that
Apple Inc. entered the market with a _____ approach to pricing the iPhone.
a. market share pricing
b. profit maximization
c. demand-oriented
d. sales maximization
e. status quo pricing
Profit maximization means setting prices so that total revenue is as large as possible relative to total
costs.
13. When Insight Research Associates quotes a marketing research project management will first estimate
the cost to conduct the research and produce and deliver the final client report. The next step in
determining the price is to add 30% to that cost estimate. This becomes the price estimate given to the
potential research client. This suggests that Insight Research Associates uses a(n) _____ pricing
objective.
a. profit-oriented
b. market share maximization
c. status quo
d. sales maximization
e. supply-demand equalization
Targeted ROI is one of the most common types of profit-oriented pricing objectives used.
14. Thompson Pool is known for quality pool installations, excellent customer service, and reasonable
prices. If you want to have a Thompson pool you will have to wait about six months due to demand for
their product. While Thompson could probably price their product higher, given the demand, they
don’t. Instead, they set price so that they earn a reasonable level of profits. This company seems to
base its pricing policy on:
a. profit maximization
b. earning satisfactory profits
c. creating retained earnings
d. making the most money as possible
e. decreasing consumer demand
The objective of satisfactory profits is characterized by seeking a level of profits that is satisfactory to
management and owner(s).
15. _____ is equal to net profit after taxes divided by total assets.
a. Return on investment
b. Economic order quantity
c. Target-on-sales
d. Retained earnings
e. Efficiency maximization
16. Pierre’s Ice Cream Company produces ultra-rich ice cream, which it sells in the Cleveland, Ohio area.
Last year, it managed to exceed its target ROI for the current fiscal year. The following results were
found on its financial statements:
What was the actual return on investment (ROI) for Parrish Farms?
a. 6.67 percent
b. 10 percent
c. 22 percent
d. 28 percent
e. 100
ROI is net profits after taxes divided by total assets: $50,000 ¸ 500,000 = 10 percent.
Sales-oriented pricing objectives are based on either market share or dollar or unit sales.
18. At a price of $1,192,057, the Bugatti Veyron may be the most expensive street legal car currently on
the market today. Obviously, Bugatti is NOT using a _____ pricing objective in setting the price for
this car.
a. inelastic or supply-oriented
b. market share or sales maximization
c. profit maximization or target return on investment
d. status quo or satisfactory profits
e. demand-oriented or supply-oriented
A lower price allows a company to maximize sales and build market share.
19. A company using market share pricing has a _____ pricing objective.
a. profit-oriented
b. sales-oriented
c. demand-oriented
d. supply-oriented
e. status quo
Sales-oriented pricing objectives are based either on market share or on dollar or unit sales.
20. _____ is a company’s product sales as a percentage of total sales for that industry.
a. Return on investment
b. Profit share
c. Revenue share
d. Market share
e. Contribution
This is the definition of market share, and sales can be reported in dollars or in units of product.
Sales maximization ignores profit and competition for the purpose of raising cash.
22. Dixie Furniture Company has recently moved to a new, larger location. At this new location, it has
been unable to attract sufficient customers. Its owner does not have the cash to pay the current loan
installment due on the building and inventory so he decided to reduce all merchandise prices by at
least 50 percent for a weekend sale to earn enough to make his loan payment. His pricing objective can
be classified as:
a. market share maximization
b. satisfactory profits
c. asset maximization
d. sales maximization
e. target ROI
The strategy described will maximize sales dollars, but will not maximize or improve any of the other
objectives in the long term.
23. As a short-term pricing objective, _____ can be effectively used on a temporary basis to sell off
excessive inventory.
a. profit maximization
b. profit-oriented pricing
c. status quo pricing
d. sales maximization
e. market share pricing
24. If a company's pricing objective is to meet the competition or to maintain existing prices, it is using
_____ pricing.
a. head-on
b. target return on investment
c. status quo
d. market share
e. demand-oriented
This is the definition of status quo pricing.
25. When Delta Airlines raises or lowers its prices on its Atlanta to Chicago route other airlines tend to
make the same changes in their pricing. This is an example of _____ pricing.
a. status quo
b. target return
c. market share
d. predatory
e. cost-plus
26. Which of the following statements describes an advantage of status quo pricing?
a. Status quo pricing is derived from actual costs of manufacturing.
b. Status quo pricing maintains the organization's differential advantage.
c. Status quo pricing is active, not reactive.
d. Status quo pricing causes price wars.
e. Status quo pricing requires little planning.
Status quo pricing requires little planning because it involves just copying the competitions' pricing
policies.
27. Although many factors can influence price, the primary determinants are:
a. costs of manufacturing and distribution
b. the demand for the good and the cost to the seller
c. demand by the consumer and perceived quality
d. distribution and promotion strategies
e. stage of the product life cycle and costs to the consumer
The price managers set for each product depends mostly on two factors: the demand for the good or
service and the cost to the seller for that good or service.
28. The quantity of a product that will be sold at various prices for a specified period is called:
a. market share
b. demand
c. supply
d. value
e. revenue
This is the definition of demand.
29. The price of the good or service is a key decision for a marketer because it most significantly and
directly affects the product's:
a. distribution
b. costs
c. demand
d. promotion
e. quality
The quantity of a product that people will buy depends on its price.
31. The manager of a souvenir shop in Florida graphed the demand per week for fresh orange juice. The
graph indicates a demand schedule that slopes downward and to the right. This graph indicates that the
quantity of juice demanded increases as:
a. cost increases
b. supply decreases
c. price increases
d. price decreases
e. supply increases
The lower the price, the more goods or services will be demanded.
32. Khimaira Farms sells handcrafted cookie cutters. When graphed, the demand schedule for Khimaira
Farms brand cookie cutters forms a straight line. If at $3 per cutter, 500 cookie cutters are demanded,
and at $4 per cutter, 450 cookie cutters are ordered, how many will be ordered at a price of $6 per
cutter?
a. 350
b. 450
c. 400
d. 333
e. 375
With a linear demand curve, the slope of the line will remain constant. In this example, for every $1
that price increases, sales will decrease by 50 cookie cutters.
33. Personal Touch produces and markets beaded purses. When graphed, the demand schedule for its
purses is a straight line. If one purse costs $20, 5,000 beaded purses are sold. At $25, 4,500 purses are
sold. How many beaded purses will be sold if the price per purse is increased to $30?
a. 5,500
b. 4,250
c. 4,000
d. 3,750
e. 3,500
With a linear demand curve, the slope of the line will remain constant. In this example, for every $5
increase in price, sales will decrease by 500 beaded purses.
34. The _____ is the quantity of a product that will be sold in the market at various prices for a specified
time period, and _____ is the quantity of a product that will be offered to the market by suppliers at
various prices for a specified period.
a. demand; equity
b. demand; supply
c. supply; demand
d. inventory; demand
e. inventory; supply
PTS: 1 REF: 634-635 OBJ: 19-3 TYPE: Def
TOP: AACSB Reflective Thinking | TB&E Model Pricing
35. _____ is the quantity of a product that will be offered to the market at various prices for a specified
period.
a. Distribution
b. Supply
c. Price
d. Equilibrium
e. Elasticity
36. When the price of a product is set at a level where demand and supply are the same, _____ has been
achieved.
a. equilibrium
b. stability
c. leverage
d. symmetry
e. status quo
Price equilibrium is the price at which demand and supply are equal.
37. At a price of $654,400 the SSC Ultimate Aero has been ranked as the third most expensive car in the
world. The company is only planning to build twenty-five of the current model. If that matches the
demand for the Ultimate Aero, then a state of _____has been achieved.
a. symmetry
b. marketing balance
c. unitary economics
d. commerce stability
e. price equilibrium
38. Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they
get off the plane in Hawaii. When a tourist shop began selling Pure Hawaiian Air, it charged $5 per
bottle and could not keep up with the demand. It has since raised the price to $7. Now the shop is still
selling all the bottles of Pure Hawaiian Air it carries, but the owner is not forced to reorder on a daily
basis. The $7 price is probably a(n):
a. supply schedule
b. symmetrical price
c. price equilibrium
d. inventory equalizer
e. inelastic price
When demand and supply are approximately equal, price equilibrium is reached.
41. While the sales of the Apple iPhone have been great from the beginning, when Apple released its
iPhone 3G cut the price of the iPhone for $399 to $199 sales exploded with one million iPhones sold
the first weekend. Demand for the iPhone appears to be _____.
a. unitary
b. predictable
c. synergistic
d. inelastic
e. elastic
If demand is elastic, price increases will decrease demand by a larger amount, reducing total revenue.
If demand is elastic, price increases will decrease demand by a larger amount, reducing total revenue.
43. Procter & Gamble dropped the price of Pringles Potato Chips in the Southeast due to price competition
and consumer demand. As a result of the price reduction, Procter & Gamble increased unit sales and
earnings by 10 percent due to:
a. reduction in supply
b. increases in both supply and demand
c. demand being elastic
d. demand being inelastic
e. market share fluctuations
When Procter & Gamble reduced prices, sales and revenues increase. This shows that the demand for
chips is elastic.
PTS: 1 REF: 636 OBJ: 19-3 TYPE: App
TOP: AACSB Reflective Thinking | TB&E Model Pricing
44. _____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains
exactly the same.
a. Inelastic demand
b. Functional elasticity of demand
c. Unitary elasticity
d. Highly elastic demand
e. Fixed elasticity
Unitary elasticity is a situation in which total revenue remains the same when prices change.
45. When price decreases and total revenue falls, demand is:
a. elastic
b. inelastic
c. absolute
d. unitary
e. stable
This is characteristic of inelastic demand, which means that an increase or decrease in price will not
significantly affect the demand for the product.
47. When Nesco brand food hydrators sold for $59.99, Nesco sold 90 dehydrators. When the company
dropped the price of its dehydrators to $44.95, it sold 145 dehydrators. Demand for the food
dehydrators appears to be:
a. elastic
b. inelastic
c. unitary
d. symmetrical
e. asymmetrical
The first price is $59.99 with total revenue of $5,399.10; the second price is $44.95 with total revenue
of $6,517.75. Therefore, price dropped, and total revenue went up.
48. Critics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and
have a strong need for convenience.
a. elasticity of demand
b. inelastic demand schedule
c. unitary supply and demand
d. ROI characteristics
e. supply characteristics