Eastern Michigan University

MKT 510A

Chapter 10-Setting Product Strategy

True/FalseQuestions

1)A famous marketer once said his company was selling hope, not make-up. If this is true, hope would be considered the core benefit of the product category make-up.

2. A radon gas detection system for homes would be considered a specialty good in the consumer-goods classification scheme.

3. The depth of a product mix refers to how many variants of each product are offered.

4. In the industrial-goods classification scheme, raw materials are long-lasting goods that facilitate developing or managing the finished product.

5. All sellers are legally responsible for fulfilling the buyer’s normal or reasonable expectations.

6. An existing product that has been repositioned can be considered a new product.

7. The new product development process starts with profitability analysis of the ideas.

8. Many of the best ideas for new industrial products originate with customer ideas.

9. A product-positioning map uses selected criteria to show where a product stands in relationship to comparable products.

10. Concept testing is the most expensive part of the new product development process.

11. Alpha testing means testing a product within the firm, while beta testing means enlisting customers to use the product and provide feedback.

12. Simulated test marketing and test marketing are the same thing.

13. In spite of the benefits of test marketing, many firms today question its value.

14. Personal influence is most important in the awareness stage of the adoption process. False

15. The stage of the product life cycle characterized by low sales, heavy promotion, low or negative profits, and minimal competition is the introduction stage.

16. Typically, the longest stage in the product life cycle is the maturity stage.

17. Increasing usage, frequency of use, or variety of use are all acceptable product modification strategies for a product in the maturity stage of the life cycle.

18. The appropriate decline strategy for a company depends on the industry’s relative attractiveness and the company’s competitive strength.

19. The basic strategy for managing the growth stage of the PLC is product expansion.

20. One criticism of the Product Life-Cycle concept is that it is not always clear what stage a product is in—it may appear to be mature when in fact it is in a plateau and has further potential.

Multiple Choice Questions

21. Which of the following is NOT a reason that Steinway pianos command a premium price in the marketplace?

1. They manufacture more affordable brands, such as Boston and Essex.
2. The pianos take nine months to build.
3. To build the piano requires 12,000 parts.
4. The piano is the most popular among composers and musicians.
5. Steinway can only produce only a few thousand concert pianos per year.

22. All of the following could be considered products, EXCEPT:

1. physical goods.
2. distribution channels.
3. events.
4. persons.
5. ideas.

23. Marketers plan their market offerings at five levels. What is the correct order of the levels, going from the most fundamental level to the level with the most benefits?

1. basic—expected—augmented—core—potential
2. expected—potential—basic—augmented—core
3. core—basic—expected—augmented—potential
4. potential—augmented—expected—core—basic
5. basic—core—augmented—potential—expected

24. Mazda’s Miata convertible originally drew the most interest from women between the ages of 35–55. In order to interest more potential customers in the roadster, Mazda beefed up the model with heavier shocks and a faster engine, then emphasized performance in its advertising. This is an example of creating a new product by

¬¬¬¬                              .

1. repositioning
2. the development of a new product line
3. a market diversification strategy
4. a product development strategy
5. a new-to-the-world product

25. What is NOT listed in the text as a reason products fail?

1. Too much demand.
2. Ignoring or misinterpreting marketing research.
3. Ineffective advertising.
4. Overestimating market size.
5. Poor design.

26. In terms of new-product development, Spam Meat Product’s annual Great Ideas for Spam! Contest brings together Spam cooking ideas from all over the world. Each contestant hopes his or her idea for a new recipe will win the grand prize. For the makers of Spam, the contest serves as an avenue for      .

1. idea screening
2. idea generation
3. concept development
4. prototype development
5. business analysis

27. A product idea can be turned into several elaborated versions by asking questions such as: Who will use the product? What primary benefit will it provide? When will people use or consume it? The elaborated versions of the product idea are called

                           .

1. product positions
2. brand concepts
3. product concepts
4. brand positions
5. marketing audits

28. The marketing strategy plan is comprised of three parts. The first part consists of describing the     .

1. product’s features, advantages, and benefits
2. target market size, structure, and the behavior of its target market
3. planned price, distribution strategy, and marketing budget
4. long-run sales, profit goals, and marketing mix strategy
5. target market composition, its long-run sales goals, and the product’s planned pricing strategy

29. Neelim is trying to decide how many people will buy her new scrapbooking software and the accompanying printer accessories only once, how many will buy it more than once, but only infrequently, and how many will become frequent purchasers of her scrapbooking product line. She is engaged in                       .

1. estimating costs and profits
2. marketing strategy development
3. estimating total sales
4. risk analysis
5. sales-wave research

30. EA, a gaming software products company has developed a role-playing game (RPG) incorporating ideas supplied by some of the most famous game writers in the world. The company asked about one hundred people to download the company’s RPG, play it extensively, and give feedback on it. EA is using _                testing.

1. beta
2. concept
3. market
4. alpha
5. simulated

31. What is the first thing entrepreneurs should know when moving to the product development stage of the New Product Development Decision Process described in the text?

1. This is the stage where risk analysis is performed to see if it is worth it to proceed.
2. In this stage, alpha testing is carried out with actual consumers.
3. This stage involves a jump in investment that dwarfs the costs incurred in the earlier stages.
4. The communication between engineering and marketing is likely to be natural and effective by the time you have made it to this stage.
5. Making it to this stage guarantees eventual success of the product.

32. A Chinese beverage company briefly marketed a juice brand called in medium-sized cities like Zhongshan in China The product had a sweet flavor and contained fruit pulps. It was never introduced nationally. The company was probably engaging in                                                                                                                 .

1. full-blown test marketing
2. controlled test marketing
3. simulated test marketing
4. sales-wave research
5. alpha testing

33. Suppose a marketing research firm that manages a panel of retail stores agrees (for a fee) to study a company’s new candy bar-based granola product. The research firm provides sales results and evaluates the impact of promotion. This is an example of

                           .

1. simulated test marketing
2. controlled test marketing
3. test markets
4. conjoint market analysis
5. sales-wave research

34. Which of the following is the most expensive part of the new product development process?

1. Concept testing.
2. Business analysis.
3. Product development.
4. Commercialization.
5. Idea generation.

35. Market testing is beneficial when creating business products, but the process may vary somewhat from that of testing consumer products because                                                                                                       .

1. there is no good way of alpha testing business products
2. there is no good way of beta testing business products
3. conjoint analysis has limited value for testing industrial customers’ product affinity
4. business product market tests are always more expensive than consumer products market tests
5. trade shows and distributor display rooms are crucial for assessing customer acceptance

36. McDonald’s is preparing (yet another time) to roll out a new version of its McRib product. McDonald’s is currently deciding if its new product should enter the market at the same time it knows a new KFC’s barbeque product is coming out. The firm is devising its  for new-product commercialization.

1. geographic strategy
2. introductory market strategy
3. market-penetration plan
4. market pricing plan
5. timing

37. If a firm learns that a major competitor is nearing the end of its product development work, it may choose a number of approaches. Which of the following correctly describes a market timing approach?

1. First entry—includes locking up important distributors and gaining reputation early.
2. First entry—which guarantees early dominance and ongoing market leadership.
3. Parallel entry—means launching the exact same product simultaneously to the competitor’s launch.
4. Late-entry—has the disadvantage of bearing the financial brunt of educating the consumer about the new category.
5. Secondary entry—involves purposely coming into the marketplace the week after the primary entrant and seeking the niche customers only.

38. During commercialization, a company must develop an action plan for the rollout. The action plan answers the commercialization question of                                                                                          .

1. What?
2. Where?
3. How?
4. To whom?
5. Who?

39. During the implementation of the introductory marketing strategy, a marketer could use                               to show the simultaneous and sequential activities that must take place to launch the new product.

1. a Gantt chart

2. a PERT table
3. a position map
4. critical path scheduling
5. a rollout plan

40. Guadalupe is thinking about buying an iPod Nano music player. The market is constantly changing, so she has consulted information on the Internet, talked to several salespeople, and avidly watched for sales. Guadalupe has also checked her bank account to see if she can afford the personal music and video player. She is in the                                                                                                                                                stage of the consumer adoption process.

1. awareness
2. interest
3. adoption
4. evaluation
5. trial

41. Personal influence is most important in the                                                                                             stage of the adoption process.

1. awareness
2. interest
3. evaluation
4. trial
5. adoption

42. Pre-made Rice Krispy treats were a huge success because they were perceived as much easier than making the recipe yourself—which required consumers to melt marshmallows, use large mixing bowls, and stir for just the right amount of time. Pre- packaged Rice Krispy treats had a high level of          when compared to the

former way of obtaining this tasty dessert.

1. relative advantage
2. divisibility
3. communicability
4. complexity
5. comparability

43. Birth control pills didn’t diffuse as quickly in predominately Roman Catholic countries as they did in the United States. This is an example of problems with the new product’s     .

1. relative advantage
2. compatibility
3. communicability
4. complexity
5. divisibility

44. When a new product innovation is relatively difficult to understand or use, the characteristic of    slows the adoption rate of the new product.

1. relative advantage
2. divisibility
3. communicability
4. complexity
5. compatibility

45. Which of the following is NOT an underlying assumption of the product life cycle?

1. Products have a limited life.
2. Products pass through distinct stages with different challenges to the marketer.
3. Services do not pass through life-cycle stages like products do.
4. Profits rise and fall at different stages.
5. Products require different marketing and other business strategies in each stage.

46. Which of the following is NOT generally of the product life cycle?

1. Profits are negative in the introduction stage.
2. Profits decline in the decline stage.
3. Profits reach their highest point during the maturity stage.
4. As the product passes through different stages, marketing adjustments are required.
5. Sales peak in the maturity stage.

47. The stage of the life cycle characterized by low sales, heavy promotion, low profit, and minimal competition is the          stage.

1. introduction
2. growth
3. repositioning
4. maturity
5. decline

48. Which of the following is NOT one of the factors Tellis and Golder say underpin long-term market leadership?

1. Niche market dominance.
2. Relentless innovation.
3. Asset leverage.
4. Vision of a mass market.
5. Persistence.

49. Most products are in the                               stage of the product life cycle.

1. introduction
2. growth
3. pre-maturity
4. maturity
5. decline

50. The stage in the product life cycle in which the marketing objective is to maximize profit while defending market share is the                                                                 stage.

1. introduction
2. growth
3. rejuvenation
4. maturity
5. decline

51. Volkswagen continued to sell its sedan (Beetle) in Brazil and Mexico for nearly 20 years after it withdrew the product from the United States. The company reduced R&D costs for the car to virtually nothing during that time, and did no advertising. In product life cycle terms, VW was         with the Beetle.

1. divesting
2. harvesting
3. maintaining
4. reducing overcapacity
5. engaging in product improvements

52. Which is NOT a possible characteristic of harvesting a product in a declining industry?

1. Reducing market participation.
2. Reducing product quality.
3. Reducing sales force size.
4. Reducing advertising expenditures.
5. Reducing investment in R&D.

53. Pricing changes are necessary across the product life cycle. Which of the following represents a correct match of PLC stage to price strategy?

1. Cutting prices in the introduction stage.
2. Pricing to penetrate the market in the growth stage.
3. Matching competitors’ pricing in the decline stage.
4. Charging cost-plus pricing in the decline stage.
5. Pricing to best competitors in the introduction stage.

54. Distribution changes are necessary across the product life cycle. Which of the following represents a correct match of PLC stage to distribution strategy?

1. Phasing out unprofitable outlets in the growth stage.
2. Phasing out unprofitable outlets in the introduction stage.
3. Building more intensive distribution in the maturity stage.
4. Being selective about distribution in the growth stage.
5. Building selective distribution in the decline stage.

Essay Questions

55. Marketers plan their market offering at five levels, each adding customer value. Consider Apple’s iPod—what might be included in each of the product’s levels?

The five levels are depicted in the concentric circles model in Figure 10.2.

Core Benefit—The fundamental service or benefit that the iPod buyer is really buying. This could be an ability to listen to music while “on the go,” or the opportunity to store lots of music in one place. The core benefit for some users might be considered as fashion.

Basic Product—The way the core benefit it turned into a product. This is the physical product, the white or black plastic, or brushed metal colors, the control “wheel,” the headphones, the hard drive inside, etc.

Expected Product—Buyers normally expect a certain set of attributes and conditions when they purchase an iPod. For example, the iPod needs to work, store reserve power for hours of listening, find songs you want to hear, deliver a certain amount of audio quality, etc.

Augmented Product—These are the pluses iPod tries to deliver, if Apple is “too good” at it, these may become expectations. Ease is a big plus for iPod, once users get the hang of the machine, they come to take for granted how easy it is to create playlists, add and delete music, etc. Apple could easily add value by sending users a free download every once in awhile, which would add unexpected but real value to users without much cost to the company.

Potential Product—All the possible augmentations and transformations possible. iPod could add a phone or PDA function, allow text or email transmission, or be available in truly tiny sizes in the future. There are many, many potential possibilities.

56. Maurer has developed a hermetic system for smoking meat that uses 50 percent less energy than industrial-sized smokers currently on the market even though it will smoke the same amount of meat uniformly. It also has an added advantage in that it is easy to clean because the hermetic system reduces tar and ash residue. In a short essay, discuss how Maurer would conduct a business-goods marketing test.

Maurer would use alpha testing within the company and beta testing with outside customers. During beta testing, its vendor’s technical people will observe how test customers use the product, a practice that might expose unanticipated problems of safety and servicing and alert Maurer to the needs for customer training and servicing requirements. The vendor can also observe how much value the equipment adds to the customer’s operation as a clue to subsequent pricing. The vendor will ask the customers to express their purchase intention and other reactions after the test. A second common test method Maurer could use would be to introduce the new smoker at trade shows.

Trade shows draw a large number of potential buyers. The vendor can observe how much interest buyers show in the new smoker. The smoker could also be tested in distributors’

and dealers’ display rooms where they may stand next to the Maurer’s other products and possibly competitors’ products. Maurer would come closest to using full test marketing if it gives a limited supply of the product to the sales force to sell in a limited number of areas that receive promotional support.

57. In a short essay, explain the five stages that adopters of new products and services move through. Then consider the following scenario: Burke comes back to his dorm room from a night out drinking and entertainment and is excited about a new local band he heard—the R & K. He thinks their retro surf-influenced style sounds interesting. His roommate Bridgett tells Burke the band will play again at another local nightspot on Friday. A friend that has dropped by mentions that she has listened to nothing else since watching the R & K’s performance, and she loves their T-shirt! The chairman of Student Union, Tony, from the apartment next door, once heard the band play at a music club and says he can’t stand the band since hearing them—too noisy for him and he hates the drummer, “Molotova,” because his morality is questionable. Now indicate which stage of the adoption process each of the above participants is in.

The consumer adoption process focuses on the mental processes through which an individual passes from first hearing about an innovation to final adoption. 1) Awareness. The consumer becomes aware of the innovation but lacks information about it. 2) Interest. The consumer is stimulated to seek information about the innovation. 3) Evaluation. The consumer considers whether to try the innovation. 4) Trial. The consumer tries the innovation to improve his or her estimate of its value. 5) Adoption. In the case of the R & K, the consumer decides to make full and regular use of the innovation. Burke is in the interest stage. Bridgett is in the evaluation stage. The fraternity pledge reached the trial stage and stopped. The “friend” is in the adoption stage.

58. The decline stage of the product life cycle (PLC) has its own special challenges for marketers. In a short essay, define the five strategies that a marketer can use for dealing with a product in the decline stage. What factors determine the strategy that should be implemented?

1) Increase the firm’s investment so as to either dominate the market or strengthen its competitive position. 2) Maintain the firm’s investment level until the uncertainties about the industry are resolved. 3) Decrease the firm’s investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches. 4) Harvest the firm’s investment to recover cash quickly. 5) Divest the business quickly by disposing of its assets as advantageously as possible. The appropriate decline strategy depends on the industry’s relative attractiveness and the company’s competitive strength in that industry.