PRICING STRATEGY PRELIM QUIZ
6. ____________ is the practice of charging
1. ____________ is the amount of money
charged for a product or service.
a. Price
b. Accountancy
c. Demand
d. Value
Answer: (a) Difficulty: (1) Page: 353
2. _____________ is the sum of the values that
consumers exchange for the benefits of having
or using the product or service.
a. Price
b. Elasticity
c. Demand
d. Value estimate
Answer: (a) Difficulty: (2) Page: 353
3. Throughout most of history, prices were set
by ____________.
a. fixed-price policies constructed by sellers
b. negotiation between buyers and sellers c.
governments and regulatory agencies
d. ruling monarchs
Answer: (b) Difficulty: (1) Page: 353
4. A ____________ policy means that a firm
sets one price for all buyers in a given product
or service line
a. fixed-price
b. variable-price
c. dynamic-price
d. standard-price
Answer: (a) Difficulty: (1) Page: 353
5. Which of the following factors is spurring a
new movement in pricing toward dynamic
pricing?
a. the federal government
b. strong retailers
c. the Internet
d. strong wholesalers
Answer: (b) Difficulty: (2) Page: 354
different prices depending on individual
customers and situations.
a. Fixed-pricing
b. Standard-pricing
c. Barter-pricing
d. Dynamic pricing
Answer: (d) Difficulty: (2) Page: 354
7. _______ is the only element of the
marketing mix that produces revenue.
a. Product
b. Price
c. Place (distribution)
d. Promotion
Answer: (b) Difficulty: (1) Page: 354
8. All of the following are among the internal
factors that affect pricing EXCEPT: (Pick the
LEAST LIKELY.)
a. globalization.
b. the company’s marketing objectives.
c. marketing mix strategy.
d. the organization.
Answer: (a) Difficulty: (2) Page: 354, Figure 10-
9. Before setting price, the company must
decide on its strategy for:
a. distribution.
b. promotion.
c. the environment.
d. the product.
Answer: (d) Difficulty: (2) Page: 354
10. Companies set ______________ as their
major objective if they are troubled by too
much capacity, heavy competition, or changing
consumer wants.
a. current profit maximization
b. survival
c. market share leadership
d. product quality leadership
Answer: (b) Difficulty: (2) Page: 356, 357
 d. survival
11. Pricing to cover variable costs and some Answer: (c) Difficulty: (2) Page: 357
fixed costs, as in the case of some automobile
distributorships that sell below total costs, is 15. When a company sets a price for a new
typical of which of the following pricing product on the basis of what it thinks the
objectives? product should cost, then develops estimates
a. current profit maximization on what each component should cost to meet
b. product quality leadership the proposed price with an acceptable profit
c. market share leadership margin, the company is practicing:
d. survival a. predatory pricing.
Answer: (d) Difficulty: (3) Page: 356, 357 b. target costing.
c. strategic pricing.
12. Choosing a price based upon its short-term d. low cost leadership.
effect on current profit, cash flow, or return on Answer: (b) Difficulty: (3) Page: 358
investment reflects which of the following
pricing objectives? 16. ______________ set(s) the floor for the
a. current profit maximization price that the company can charge for its
b. product quality leadership product.
c. market share leadership a. Supply
d. survival Answer: (a) Difficulty: (3) Page: 357 b. Demand
c. Costs
13. If a company believes that the company d. Nonprofit factors
with the largest market share will enjoy the Answer: (c) Difficulty: (2) Page: 359
lowest costs and highest long-run profits, that
company will probably choose which of the 17. Companies with ___________ can set lower
following pricing objectives as their primary prices that result in greater sales and profits.
course of action? a. lower market share percentages
a. current profit maximization b. higher costs
b. product quality leadership c. lower costs
c. market share leadership d. larger supply ratios
d. survival Answer: (c) Difficulty: (1) Page: 359
Answer: (c) Difficulty: (3) Page: 357
18. Costs that do not vary with production or
14. The Samuels Company, a company that sales levels are called:
makes performance racecars for dirt tracks, a. fixed costs.
charges high prices to cover higher b. variable costs.
performance quality and the high cost of R&D c. standard costs.
necessary to stay on top of the performance d. independent costs.
racing field. Which of the following pricing Answer: (a) Difficulty: (1) Page: 359
objectives would the Samuels Company most
likely be following as a course of action? 19. Another term for fixed costs is:
a. current profit maximization a. standard costs.
b. product quality leadership b. overhead.
c. market share leadership c. independent costs.
d. “the bottom line.”
Answer: (b) Difficulty: (1) Page: 359
20. Costs that vary directly with the level of
production are called:
a. fixed costs.
b. variable costs.
c. standard costs.
d. independent costs.
Answer: (b) Difficulty: (1) Page: 359
21. In industries such as aerospace, steel,
railroads, and oil, companies often have a
_____________ to set the prices or to help
others in setting them.
a. Vice-President of Pricing
b. Pricing Board
c. Pricing Department
d. PFO (Pricing and Financial Officer)
Answer: (c) Difficulty: (2) Page: 360
22. The type of market that consists of many
buyers and sellers trading in a uniform
commodity such as wheat or copper is called:
a. pure competition.
b. monopolistic competition.
c. oligopolistic competition.
d. pure monopoly.
Answer: (a) Difficulty: (1) Page: 360
23. The type of market in which no single buyer
or seller has much effect on determining the
going market price is called:
a. pure competition.
b. monopolistic competition.
c. oligopolistic competition.
d. pure monopoly.
Answer: (a) Difficulty: (2) Page: 360
24. The type of market that consists of many
buyers and sellers who trade over a range of
prices rather than a single market price is
called:
a. pure competition.
b. monopolistic competition.
c. oligopolistic competition.
d. pure monopoly.
Answer: (b) Difficulty: (1) Page: 360
25. The type of market in which sellers try to
develop differentiated offers for different
customer segments is called:
a. pure competition.
b. monopolistic competition.
c. oligopolistic competition.
d. pure monopoly.
Answer: (b) Difficulty: (2) Page: 360
26. The type of market that consists of a few
sellers who are highly sensitive to each other’s
pricing and marketing strategies is called:
a. pure competition.
b. monopolistic competition.
c. oligopolistic competition.
d. pure monopoly.
Answer: (c) Difficulty: (1) Page: 360
27. The type of market that consists of one
seller is called:
a. pure competition.
b. monopolistic competition.
c. oligopolistic competition.
d. pure monopoly.
Answer: (d) Difficulty: (1) Page: 361
28. Nonregulated monopolies are free to price
at what the market will bear. However, they do
not always charge the full price for a number of
reasons. One of those reasons is the:
a. desire to skim profits is usually low.
b. desire to penetrate the market faster with a
low price.
c. fear of global cultural reaction.
d. damage that high pricing does to corporate
culture.
Answer: (b) Difficulty: (2) Page: 361 22
29. The _____________ is a curve that shows
the number of units the market will buy in a Answer: (a) Difficulty: (2) Page: 363 223
given time period, at different prices that might
be charged.
34. All of the following are considered to be
a. price curve
forms of a cost-based approach to pricing
b. cost curve
EXCEPT:
c. supply curve
a. cost-plus pricing.
d. demand curve
b. break-even analysis.
Answer: (d) Difficulty: (2) Page: 362
c. going-rate pricing.
d. target profit pricing.
30. With respect to the demand curve (in the
Answer: (c) Difficulty: (3) Page: 364
normal case), demand and price are:
a. directly related.
35. Adding a standard markup to the cost of the
b. parallel.
product refers to:
c. inversely related.
a. cost-plus pricing.
d. related only through “the invisible hand” of
b. break-even analysis.
the market place.
c. target profit pricing.
Answer: (c) Difficulty: (2) Page: 362
d. perceived-value pricing.
Answer: (a) Difficulty: (2) Difficulty: 365
31. ____________ is a measure of the
sensitivity of demand to changes in price. 36. Markup pricing remains popular in the
a. Price sensitivity marketplace. Which of the following is a reason
b. Price comparability for this popularity?
c. Price elasticity a. Cost-plus pricing favors the best price.
d. Price response b. Standard markups make the most sense.
Answer: (c) Difficulty: (1) Page: 363 c. Cost-plus pricing is fairer to both buyers and
sellers.
32. If the demand hardly changes with a small d. The method focuses on demand as its base.
change in price, we can say that the demand is Answer: (c) Difficulty: (3) Page: 365
classified as being:
a. neutral. 37. Setting prices to break even on the costs of
b. elastic. making and marketing a product or make the
c. kinked. target profit it is seeking is called:
d. inelastic. a. cost-plus pricing.
Answer: (d) Difficulty: (2) Page: 363 b. perceived-value pricing.
c. break-even pricing.
d. Going-rate pricing.
33. If demand is elastic rather than inelastic,
Answer: (c) Difficulty: (2) Page: 365
sellers will consider:
a. lowering their price.
38. Which of the following would be considered
b. raising their price.
to be one of the major faults of break-even
c. acquiring competitors as a means of avoiding
analysis and target profit pricing?
price competition.
a. They do not take into account the price-
d. maintaining the status quo.
demand relationship.
b. They are very complicated to calculate.
c. There are serious time lags in the
calculations.
d. Most managers do not have confidence in
the methods.
Answer: (a) Difficulty: (3) Page: 366 224
39. The pricing method that uses the buyer’s
point of view regarding the worth of a product,
not the seller’s cost, is called:
a. cost-plus pricing.
b. value-based pricing.
c. break-even pricing.
d. going-rate pricing.
Answer: (b) Difficulty: (2) Page: 366
40. When a coffee shop in an airport and a fine
restaurant in a luxury hotel charge different
prices for the same meal to customers who find
the atmosphere in the hotel worth the
difference in price, we can say that
____________ was being used.
a. value-based pricing
b. cost-plus pricing
c. break-even pricing
d. going-rate pricing
Answer: (a) Difficulty: (2) Page: 366
41. Which of the following pricing methods
uses the idea that pricing begins with analyzing
consumer needs and value perceptions, and
price is set to match consumer’s perceived
value?
a. cost-based pricing
b. service-based pricing
c. psychology-based pricing
d. value-based pricing
Answer: (d) Difficulty: (2) Page: 367
42. _____________ is offering just the right
combination of quality and good service at a fair
price.
a. Value pricing
b. Cost pricing
c. Service pricing
d. Demand pricing
Answer: (a) Difficulty: (1) Page: 367
43. ____________ pricing involves charging
higher prices on an everyday basis but running
frequent promotions to lower prices
temporarily on selected items below the EDLP
level.
a. Fair
b. Low-high
c. High-low
d. Promotional
Answer: (c) Difficulty: (2) Page: 369
44. If the customers base their judgments of a
product’s value on the prices that competitors
charge for similar products, then
___________________ is in place.
a. cost-plus pricing
b. value-based pricing
c. competition-based pricing
d. target profit pricing
Answer: (c) Difficulty: (1) Page: 370
45. When demand elasticity is hard to measure,
and firms tend to price according to the
“collective wisdom” of the industry, the pricing
method most likely to be used is called:
a. cost-plus pricing.
b. break-even pricing.
c. sealed-bid pricing.
d. going-rate pricing.
Answer: (d) Difficulty: (3) Page: 371
46. Companies bringing out a new product face
the challenge of setting prices for the first time.
They can choose between two broad strategies.
What are these two broad strategies?
a. product mix strategies and pricing mix
strategies
b. product line pricing and captive-product
pricing
c. market-skimming pricing and market-
penetration pricing
d. market-expansion pricing and market-
harvesting pricing
Answer: (c) Difficulty: (3) Page: 371
47. The process of setting a high price for a new
product to gain maximum revenues layer by
layer from the segments willing to pay the high
price is called:
a. market-penetration pricing.
b. market-layer pricing.
c. market-skimming pricing.
d. market-saturation pricing.
Answer: (c) Difficulty: (2) Page: 371 226
48. When Intel develops a strategy whereby
they develop and introduce a newer, higher
margin microprocessor chip every 12 months
and send the older models down the industry
food chain to feed demand at lower price points
(their new chips can sell for as much as a $1,000
apiece), they are using which of the following
pricing strategies?
a. market-layer pricing
b. market-segmentation pricing.
c. market-saturation pricing.
d. market-skimming pricing.
Answer: (d) Difficulty: (3) Page: 371
49. Market skimming makes sense only under
certain conditions. Which of the following
WOULD NOT be a reason for using market
skimming pricing?
a. The market must be highly price sensitive.
b. The product’s quality and image must
support its higher price, and enough buyers
must want the product at that price.
c. The costs of producing a smaller volume
cannot be so high that they cancel the
advantage of charging more.
d. Competitors should not be able to enter the
market easily and undercut the high price.
Answer: (a) Difficulty: (2) Page: 371, 372
50. Setting a low initial price to attract a large
number of buyers quickly and win a large
market share is called:
a. market-penetration pricing.
b. market-skimming pricing.
c. market-loss pricing.
d. market-competitive pricing.
Answer: (a) Difficulty: (2) Page: 372
51. Market-penetration pricing refers to the
practice of:
a. setting a high initial price and then
penetrating the market with successive prices
for each price sensitive layer.
b. setting a low initial price to penetrate the
market quickly and attract a large number of
buyers to win a large market share.
c. pricing to attract low volume in many
segments so as to gradually penetrate the
market as a whole.
d. pricing products very high to penetrate
deeply and quickly into large profits for the
company.
Answer: (b) Difficulty: (3) Page: 372 227
52. When Dell Computer runs an advertisement
that boosts “Superior Quality, Superior Service,
and Unbelievable Price,” they are most likely
using which of the following new product
pricing strategies?
a. market-penetration pricing
b. market-skimming pricing
c. market-loss pricing
d. market-competitive pricing
Answer: (a) Difficulty: (2) Page: 372
53. ________________ is setting the price
steps between various products in a product
line based on cost differences between the
products, customer evaluations of different
features, and competitors’ prices.
a. optional-product pricing
b. captive-product pricing
c. product line pricing
d. by-product pricing
Answer: (c) Difficulty: (2) Page: 373
54. The use of price points for reference to
different levels of quality for a company’s
related products is typical of which product-mix
pricing strategy?
a. optional-product pricing
b. captive-product pricing
c. by-product pricing
d. product line pricing
Answer: (d) Difficulty: (2) Page: 373
55. Using a low sticker price on automobiles to
attract customers and then selling models with
additional accessory features to meet customer
needs is a form of which of the following pricing
strategies?
a. optional-product pricing
b. captive-product pricing
c. by-product pricing
d. product line pricing
Answer: (a) Difficulty: (3) Page: 373
58. ________________ is setting a price for by-
products in order to make the main product’s
price more competitive.
a. Optional-product pricing
b. Captive-product pricing
c. By-product pricing
d. Product line pricing
Answer: (c) Difficulty: (1) Page: 374, 375
59. If a zoo sells ZOO-DOO to customers as a
great natural fertilizer, it is practicing a form of:
a. product-bundle pricing.
b. optional-product pricing.
c. captive-product pricing.
d. by-product pricing.
Answer: (d) Difficulty: (2) Page: 375
60. Combining several products and offering
them together at a reduced price is called:
a. product-bundle pricing.
b. optional-product pricing.
c. captive-product pricing.
d. by-product pricing.
Answer: (a) Difficulty: (1) Page: 375

56. ______________ is setting a price for

61. All of the following are price-adjustment
products that must be used along with a main
strategies EXCEPT:
product, such as blades for a razor.
a. segmented pricing.
a. Optional-product pricing
b. market-penetration pricing.
b. Captive-product pricing
c. psychological pricing.
c. By-product pricing
d. promotional pricing.
d. Product line pricing 228
Answer: (b) Difficulty: (2) Page: 375 229
Answer: (b) Difficulty: (2) Page: 373, 374

62. A price reduction to buyers who buy in large

57. Captive-product pricing applies to services
volumes is called a:
pricing. With respect to services, the captive-
a. quantity discount.
product strategy is called:
b. cash discount.
a. demand pricing.
c. seasonal discount.
b. slack pricing.
d. trade discount.
c. two-part pricing.
Answer: (a) Difficulty: (1) Page: 375
d. referral pricing.
Answer: (c) Difficulty: (3) Page: 374
63. A(n) _________ is a straight reduction in
price on purchases during a stated period of
time.
a. allowance 68. If a state university charges different tuition
b. discount rates to in-state and out-of-state students, then
C. pricing segment the university is practicing a form of:
d. reference price a. promotional pricing.
Answer: (b) Difficulty: (1) Page: 375 b. institutional pricing.
c. segmented pricing.
d. psychological pricing.
64. A(n) ________________ is a price reduction
Answer: (c) Difficulty: (2) Page: 376
to buyers who pay their bills promptly.
a. quantity discount 69. When different versions of a product are
b. functional discount priced differently but not in accordance to
c. cash discount differences in their value, it is a form of:
d. allowance a. customer-segment pricing.
Answer: (c) Difficulty: (1) Page: 375 b. product-form pricing.
c. location pricing.
65. In an attempt to keep production steady d. time pricing.
during an entire year, especially for products Answer: (b) Difficulty: (2) Page: 376
whose use is for only part of the year, sellers
often use which of the following? 70. When consumers pay $100 for a bottle of
a. cash discounts perfume that only contains $3 worth of
b. quantity discounts ingredients, they are participating in:
c. functional discounts a. upscale pricing.
d. seasonal discounts b. discriminatory pricing.
Answer: (d) Difficulty: (1) Page: 376 c. psychological pricing.
d. promotional pricing.
Answer: (c) Difficulty: (2) Page: 378
66. A functional discount is also called a
_________ discount. 71. Prices that buyers carry in their minds and
a. segmented refer to when they look at a given product are
b. quantity called:
c. trade a. segmented prices.
d. service b. reference prices.
Answer: (c) Difficulty: (2) Page: 376 230 c. relationship prices.
d. basing-point prices.
67. Promotional money paid by manufacturers Answer: (b) Difficulty: (1) Page: 379 231
to retailers in return for an agreement to
feature the manufacturer’s products in some 72. With respect to setting pricing amounts, the
way is called a(n): belief that individual digits in a product’s price
a. discount. have symbolic and visual qualities that should
b. allowance. be considered in setting price is linked to:
c. rebate. a. psychological pricing.
d. off-retail price. b. promotional pricing.
Answer: (b) Difficulty: (2) Page: 376 c. symbolic pricing.
d. psychographic pricing.
Answer: (a) Difficulty: (2) Page: 379
73. If a company pursues ________________, it
often temporarily prices products below the list
price, and sometimes even below cost, to
increase short-run sales.
a. psychological pricing
b. promotional pricing
c. symbolic pricing
d. psychographic pricing
Answer: (b) Difficulty: (2) Page: 380
74. The type of promotional pricing that uses a
few products with very low prices to attract
customers into the store in the hope that they
will then buy regularly priced items is called:
a. special-event pricing.
b. cash rebates.
c. loss leaders.
d. low-value pricing.
Answer: (c) Difficulty: (2) Page: 380
75. When the seller places products at no
charge with a carrier and the title and
responsibility pass to the customer who pays
the freight, it is which type of pricing strategy?
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing
Answer: (a) Difficulty: (3) Page: 381
76. __________________ is a geographical
pricing strategy in which the company charges
the same price plus freight to all customers,
regardless of their location.
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing
Answer: (b) Difficulty: (2) Page: 381
77. The pricing method that charges different
prices to customers in different zones (but the
same prices to customers within a zone) is
called:
a. FOB-origin pricing.
b. uniform-delivered pricing.
c. zone pricing.
d. basing-point pricing.
Answer: (c) Difficulty: (1) Page: 381
78. When a seller selects a given city as the
source from which to charge all customers
freight costs from that location, they are
practicing which of the following?
a. FOB-origin pricing
b. uniform-delivered pricing
c. zone pricing
d. basing-point pricing
Answer: (d) Difficulty: (2) Page: 381
79. A major factor in price increases is:
a. promotional expenditures.
b. government regulations.
c. cost inflation.
d. underdemand.
Answer: (c) Difficulty: (2) Page: 383
80. How does a company respond to a price
change by a competitor. The text suggests four
alternative strategies. Which of the following
WOULD NOT be among those four strategies?
a. reduce price
b. raise perceived quality
c. launch low-price “fighting brand”
d. increase price to force response
Answer: (d) Difficulty: (2) Page: 386, Figure 10-
81. In response to a price reduction by a
competitor, a company can introduce a
“fighting brand.” A good definition of a “fighting
brand” would be one that:
a. raises a price to offer a high price alternative.
b. raises quality and increases price.
c. becomes a lower-priced brand or line to
combat the competitor’s price reduction.
d. copies the competitor’s brand to confuse the
buyer.
Answer: (c) Difficulty: (2) Page: 386 233
 TRUE/FALSE QUESTIONS
82. Which of the following statements MOST 86. In the narrowest sense, price is the amount
ACCURATELY reflects the Federal government’s of money charged for a product or service.
position on price fixing? Answer: (True)
a. Price-fixing is illegal per se--no excuses are
accepted.
87. Throughout history, the most common
b. Price-fixing is controlled by state mandates.
pricing approach was to install a fixed- price
c. Price-fixing is alright in natural monopolies.
policy (setting one price for all buyers).
d. Price-fixing is alright if judged to be in the
Answer: (False)
national interest.
Answer: (a) Difficulty: (2) Page: 387
88. The factor that promises to reverse the
trend to fixed pricing and return businesses to a
83. Which of the following strategies best
policy of dynamic pricing is advertising.
describes the attempt on the part of sellers to
Answer: (False)
sell below cost with the intention of punishing a
competitor or gaining higher long-run profits by
89. Price is the only element of the marketing
putting competitors out of business?
mix that produces revenue.
a. price-fixing strategy
Answer: (True)
b. deceptive pricing strategy
c. price discrimination strategy
90. One of the most common mistakes made by
d. predatory pricing strategy
companies with respect to pricing is that their
Answer: (d) Difficulty: (2) Page: 387
pricing is too cost-oriented.
Answer: (True)
84. The ____________ Act seeks to prevent
unfair price discrimination by ensuring that
91. According to a Marketing at Work article
sellers offer the same price to customers at a
that discusses dynamic pricing on the Web, the
given level of trade.
Internet is changing the rules for sellers in that
a. Sherman-Antitrust
sellers can change prices on the fly according to
b. Robinson-Patman
changes in demand or costs.
c. Federal Trade Commission
Answer: (True)
d. Wheeler-Lea
Answer: (b) Difficulty: (3) Page: 389
92. An example of a common pricing objective
is survival.
85. What is the Federal government’s view on
Answer: (True)
retail price maintenance as a competitive
policy?
93. Many companies want to obtain market
a. It has no views on the subject.
share leadership. To become the market share
b. It is prohibited.
leader, these firms must set prices as high as
c. It can be used as long as it is not viewed to be
possible so they can earn the greatest profits.
deceptive.
Answer: (False)
d. It has turned over jurisdiction to the
individual states which each have their own
94. According to information found in the text,
laws and regulations.
the original Swatch watch provides a good
Answer: (b) Difficulty: (3)
example of target costing.
Answer: (True) Answer: (True)

95. Supply sets the floor for the price that the 105. Sealed-bid pricing is a form of
company can charge for its product. psychological pricing.
Answer: (False) Answer: (False)

96. In pure competition, if price and profits rise

106. Market-skimming pricing means setting a
new sellers can easily enter the market.
high initial price and taking revenues layer by
Answer: (True)
layer from each price-sensitive segment of the
market.
97. In monopolistic competition, each firm is
Answer: (True)
less affected by competitor’s marketing
strategies than in oligopolistic markets.
107. Conditions that favor a market-skimming
Answer: (True)
strategy are an elastic demand curve, many
producers, and low barriers to market entry.
98. The revenue curve is a curve that shows the
Answer: (False)
number of units the market will buy in a given
time period, at different prices that might be
charged. 108. In product-line pricing, management must
Answer: (False) decide on the price steps to set between the
various products in the line.
99. If demand changes greatly as price is Answer: (True)
changed, demand is said to be elastic.
Answer: (True)
109. Good examples of captive-product pricing
are razor blades and camera film.
100. A good example of a cost-based pricing
Answer: (True)
approach would be sealed-bid pricing.
Answer: (False)
110. By-product pricing is pricing bundles of
products sold together.
101. The simplest pricing method is target profit
Answer: (False)
pricing.
Answer: (False)
111. When theaters and sports teams sell
season tickets at less than the cost of single
102. Value-based pricing uses buyers’
tickets, they are using a pricing method called
perceptions of value, not the seller’s cost, as the
product bundle pricing.
key to pricing.
Answer: (True)
Answer: (True)

112. “2/10, net 30” is a typical example of

103. The king of EDLP (everyday low pricing) is
quantity discount.
Macy’s Department Stores.
Answer: (False)
Answer: (False)

113. When a store lowers the price of a stereo

104. Another name for competition-based
to $299.95 (from $300), it is using psychological
pricing is going-rate pricing.
pricing to attract buyers.

Answer: (True)

114. Using promotionally priced linens every

January to attract weary Christmas shoppers
back into stores would be an example of special
event pricing.
Answer: (True)

115. FOB-origin pricing occurs when the

company charges the same price plus freight to
all customers, regardless of their location.
Answer: (False)

116. Zone-pricing is the opposite of FOB pricing.

Answer: (False)

117. A good reason behind a seller initiating a

price increase is overdemand.
Answer: (True)

118. One of the ways to respond to a

competitor that changes its price would be to
improve quality and increase price.
Answer: (True)

119. Predatory pricing is a policy of selling

below cost with the intention of destroying
competition.
Answer: (True)

120. Retail price maintenance is not illegal as

long as it is initiated by the manufacturer.
Answer: (False)
PRODUCT MANAGEMENT PRELIM REVIEWER
FALSE 1. The new products process essentially
turns a profit flow into an opportunity.
FALSE 2. In the project evaluation phase of the
new products process, a full screen uses a
scoring model of some type and results in a
decision to undertake development, but never
to quit.
FALSE 3. The development and launch phase of
the new products process comprise what is
popularly called the "fuzzy front end".
FALSE 4. A batch concept is generated during
the concept evaluation phase of the new
products process.
TRUE 5. A fully screened product passes the test
of fit with a company's situation
TRUE 6. One of the benefits of accelerating
time to market is that the product will be on the
market for a longer period of time before
becoming obsolete
TRUE 7. Firms that strive for mindshare think
not about the speed of an individual product‘s
development and launch, but rather about
creating a dominant position in the mind of the
customer.
FALSE 8. A recommended way to cope when
facing a high-turbulence environment is to
encourage inflexibility by freezing a product
concept until the last possible moment.
FALSE 9. Using the cash-to-cash metric to
complement speed-to-market helps a firm
manage just the moment of launch, not the
whole launch phase.
FALSE 10. As opposed to goods, services are
mass produced.
TRUE 11. Firms that launch new-to-the-world
products into the market incur a significantly
lower long term survival rate than those that
enter the market later.
TRUE 12. Discovery-driven planning requires
that managers make assumptions about the
future in order to build their forecasts and
targets, recognizing that these assumptions
may be quite wrong.
FALSE 13. Discovery-driven planning is typically
seen in less-uncertain markets, where past
results cannot be used to build predictable
forecasts of the future.
FALSE 14. In order to move promising radical
innovation projects forward, senior
management at some firms establishes a self-
directed management team charged with
moving an R&D innovation project to business
operating status.
TRUE 15. Technology-driven innovation doesn't
really solve a customer problem, and therefore
there is no application that can be brought to
market.
D 16. Which of the following phases of the new
products process involves selecting a high
potential opportunity and beginning customer
involvement?
A. Product launch
B. Product development
C. Concept evaluation
D. Concept generation
D 17. Designing and validating the production
process for the best prototype takes place
during the _____ phase of the new products
process.
A. launch
B. concept generation
C. project evaluation
D. development
B 18. In the context of the new products
process, which of the following best defines a
full screen?
A. It refers to unsolicited ideas for concept
generation that pour in through spam mails.
B. It refers to the formal type of evaluation
where all views are evaluated using a scoring
model.
C. It refers to a set of ideation tools that can be
used to generate new concepts.
D. It refers to a comprehensive business
analysis that is conducted before idea
generation.
C 19. Brew & More, a popular beverage
manufacturer, produces and sells a popular
mint flavored drink called Mintz. A new
competitor enters the market and offers a
similar mint-based drink that's suited for
consumers on diet. This company offers its
products at a much lower price. Brew & More
calls for a line extension to meet the
encroachment of its new competitor in its
annual marketing plan. Identify the stream of
activity that feeds strategic planning for new
products in this scenario.
A. Special opportunity analysis
B. Ongoing corporate planning
C. Ongoing marketing planning
D. Distribution channel planning
D 20. Acron Co.'s new products team is
engaged in the new products process. The
members of the team select a high potential
opportunity and begin creating new product
ideas by identifying problems businesses or
people have and suggesting solutions to them.
Which of the following phases of the new
products process will the team enter next?
A. The product development phase
B. The product launch phase
C. The concept generation phase
D. The concept or project evaluation phase
B 21. In the context of opportunity
identification and selection, DuPont's discovery
of Surlyn, a material with hundreds of potential
uses, would fall under which of the following
categories?
A. An underutilized resource
B. A new resource
C. An external mandate
D. An internal mandate
A 22. An example of an internal mandate is the
____, which tends to increase the discrepancy
between a firm‘s current sales and the target
sales established during long-range planning.
A. product innovation gap
B. quality gap
C. assessment gap
D. performance gap
C 23. George, the marketing manager of Axil
Bicycles, discovers that the company's current
market is becoming stagnant and the product
life cycle is far past the dynamic growth stage.
George also learns that Axil's competitor,
Kinetixyles, is developing an innovative new
bicycle with novel features. George thus
proposes that Axil Bicycles should also come up
with a new product, equipped with superior
features. Which of the following types of
opportunities is identified here?
A. An underutilized resource
B. A new resource
C. An external mandate
D. An internal mandate
C 24. The _____ comes into play once an
opportunity is approved, and managers turn to
various techniques to guide new product
people in exploiting it.
A. Concept Novelty Copyright (CNC)
B. Product Development Mandate (PMC)
C. Product Innovation Charter (PIC)
D. Concept Ideation Rule (CIR)
B 25. In the _____ phase of the new products
process, opportunities are carefully and
thoroughly described, then analyzed to confirm
that a sales potential does, indeed, exist.
A. concept generation
B. opportunity identification and selection
C. concept or project evaluation
D. development
B 26. In which of the following phases of the
new products process is the first formal type of
assessment done on new product concepts with
regard to financial, technical, and marketing
criteria?
A. Concept or project evaluation phase
B. Product development phase
C. Product launch phase
D. Concept generation phase
C 27. When evaluating a new product proposal,
a(n) _____ is used to see what potential
consumers think about the idea.
A. utility test
B. feasibility analysis
C. concept test
D. construct validity
A 28. In the new products process, after
evaluating an idea, various views on the idea
are combined together in what is often called
the:
A. full screen.
B. decision window.
C. product protocol.
D. product prototype
B 29. Project evaluation involves preparing a
statement of what is wanted from the new
product, and this statement is called the:
A. product concept.
B. product protocol.
C. product prototype.
D. product innovation charter.
D 30. In which of the following phases of the
new products process are prototypes typically
created?
A. The concept generation phase
B. The concept or project evaluation phase
C. The opportunity identification and selection
phase
D. The development phase
B 31. Identify the phase in the new product
development process during which the item
first acquires finite form.
A. The concept generation phase
B. The development phase
C. The launch phase
D. The concept or project evaluation phase
B 32. The development phase of the new
product process involves the development of:
A. new product suggestions.
B. the marketing plan.
C. the product innovation charter.
D. the product financing plan.
A 33. The _____ test is a critical step which for
the first time tests the feasibility and success of
the marketing program and the product
together.
A. market
B. benefits
C. concept
D. utility
C 34. In which of the following phases of the
new products process does market testing take
place?
A. The opportunity identification and selection
phase
B. The concept generation phase
C. The launch phase
D. The concept or project evaluation phase
D 35. The concept evaluation phase of the new
product process involves:
A. collecting and generating new product
concepts that fit an opportunity.
B. preparing strategy, tactics, and launch details
for the marketing plan.
C. specifying the entire development process
and its deliverables.
D. assessing new product concepts on technical,
marketing, and financial criteria
A. company skill or resource, or a customer
problem.
B. form or a technology, plus a clear statement
of benefit.
C. tentative physical product or system
procedure, including features and benefits.
D. product definition that includes the intended
market user, the problem perceived, and the
benefits that the new product would have to
have.

D 36. Which of the following is an evaluation C 40. Which of the following is associated with
task in the concept generation phase of the new the concept or project evaluation phase of the
products process? new products process?
A. Deciding which direction to take A. Idea concept
B. Preparing progress reports B. Prototype concept
C. Reviewing market testing C. Fully screened concept
D. Conducting an initial review D. Stated concept

C 37. In the context of the concept or project

A 41. In the context of the development phase
evaluation phase of the new products process, a
of the new products process, a _____ is best
_____ is a product definition that includes the
described as a tentative physical product or
intended market user, the problem perceived,
system procedure.
the benefits the new product would have to
A. prototype concept
have, plus any mandatory features.
B. tested concept
A. screening concept
C. fully screened concept
B. process concept
D. stated concept
C. protocol concept
D. pilot concept
C 42. Both market value and clarity are lowest
D 38. Which of the following is associated with for a(n):
the concept generation phase of the new A. protocol concept.
products process? B. idea concept.
A. Protocol concept C. opportunity concept.
B. Batch concept D. stated concept.
C. Fully screened concept
D. Stated concept In the concept generation
D 43. In which of the following phases of the
phase of the new products process, a stated
new products process is the first full test-of-fit
concept refers to a form or a technology, plus a
with manufacturing made?
clear statement of benefit.
A. The launch phase
B. The opportunity identification phase
C 39. With regard to the concept or project C. The concept generation phase
evaluation phase of the new product process, a D. The development phase
prototype concept is best described as a:
A 44. Which of the following is true of the B 48. Early, non-functional versions of proposed
batch concept? new products, called ____, are often provided
A. It is the first full test-of-fit with to allow consumers to try and comment on
manufacturing. innovative offerings.
B. It is a form or a technology, plus a clear A. product props
statement of benefit. B. focused prototypes
C. It is a tentative physical product. C. product models
D. It is a concept that passes the test of fit with D. batch concepts
a company‘s situation.

A 49. Identify the new products process where,

B 45. In the new products process, a cross-
through interaction with customers, designers
functional team:
are inspired to probe, experiment, and
A. only includes members of the top
improvise, and as a result, may come up with a
management.
successful new-to-the-world product.
B. seeks to eliminate "over-the-wall" product
A. Probe-and-learn
development.
B. Consumer analysis
C. discounts parallel processing.
C. Mind sharing
D. starts working on the project only in the later
D. Concept redefining
phases of the process.

C 50. Identify the term used to describe the

D 46. Digicon Inc. is a firm with mindshare in the
iterative process where the developing team
category of digital cameras. With reference to
develops prototypes from dozens of different
this information, which of the following
new product ideas, eventually settling on a
statements is true regarding the firm?
prototype that customers like.
A. The digital cameras manufactured by the firm
A. Focused prototype method
are the cheapest in the market.
B. Prototype analysis
B. The firm offers the widest range of digital
C. Lickety-stick
cameras.
D. Concept improvisation
C. The marketing plan employed by the firm is
the best in the industry.
D. The digital cameras manufactured by the
firm are seen as the standard for competitors to
match.

B 47. Services and goods are often arrayed on a

scale which ranges from pure service to pure
good. Where does an insurance policy stand on
this scale?
A. Pure service
B. Primarily service and partly a good
C. Primarily a good and partly service
D. Pure good
SERVICE MARKETING PRELIM REVIEWER D. Judgments
E. Wants
C 1. The central focus of the gaps model of
service quality is the:
E 6. dere a source of customer expectations?
A. Constant need to provide value for dollars
A. Word-of-mouth communication
spent
B. Advertising
B. Four dimensions of service
C. Pricing
C. Difference between customer expectations
D. Sales promises E. Target market
and perceptions
D. Temptation to handle services as if they were
A 7. Provider _____ is the difference between
tangibles
customer expectations of service and company
E. Customer-employee-supplier triumvirate
understanding of those expectations.
A. Gap 1
D 2. The sources of customer expectations are
B. Gap 2
market-controlled factors such as:
C. Gap 3
A. The individual's innate needs
D. Gap 4
B. The individual's previous experiences
C. Word-of-mouth communication
B 8. Which of the following factors is NOT a
D. Sales promises E. What the competition is
factor leading to provider gap 1?
offering
A. Inadequate marketing research orientation
B. Over-promising
D 3. To close the customer gap, the gaps model C. Lack of upward communication
of service quality suggests that the _______ D. Insufficient relationship focus
gaps need to be closed. E. Inadequate service recovery
A. Services marketing
B. Service dimensions C 9. Which of the following would result in a
C. 4 Ps broadening of provider gap 1?
D. Provider A.The service intermediary for a cruise line
E. Value wants to only sell those cruises on which it
would receive the highest commissions
A 4. The _____ gap is the difference between B. The ski resort has an over-reliance on price to
customer expectations and perceptions. smooth demand for its resort facilities
A. Customer C.The marketing research done by the motel
B. Service chain includes insufficient research about what
C. Value its target market wants
D. Quality D.The ads for the language program over-
E. Delivery promise how quickly the average person will be
able to learn a foreign language
B 5. Customer _____ are the standards for E. All of the above would result in a broadening
performance against which service experiences of provider gap 1
are compared.
A. Perceptions A 10. Enterprise Rent-A-Car closely ties
B. Expectations customer service to employee success. With a
C. Attitudes tracking system called the Enterprise Service
Quality Index (ESQi), the company routinely
follows up with customers by phone to
determine their level of satisfaction with the
company. Only completely satisfied customers
count toward an employee ESQi score, which is
used to measure employee's potential for
promotion. Enterprise closes provider _____ by
using marketing research.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
A 11. The Oaks at Ojai is an award-winning
destination spa in California. Two thirds of The
Oaks' guests are repeat visitors who return to
the spa for a fun and relaxing service experience
unsurpassed by other spas. Just before heading
home, each guest is asked to complete a
questionnaire and provide feedback about his
or her experience. Questions are specific and
management meets weekly to review and
discuss the improvements suggested by guests.
Each guest who completed a questionnaire
receives a letter of thanks with a promise to
follow up on any issues mentioned. By
conducting research and focusing on customer
relationships, The Oaks is closing provider
_________ of the gaps model of service quality.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
A 12. When IKEA, the world's largest furniture
retailer, wanted to open a store in Chicago, the
company asked groups of customers to dream
up their ideal shopping experience and draw a
design for a store that would satisfy their needs.
IKEA subsequently incorporated the customers'
ideas into the service design for the store.
Instead of simply conducting surveys to
determine customer expectations, IKEA put
customers in a "wish mode" and successfully
used an innovative approach to close provider
_________ of the gaps model of service quality.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
D 13. Telepizza S.A. is a Spanish pizza restaurant
chain that offers children membership in its
magic club. The magic club gives its members
small prizes, usually simple magic tricks, with
each order their parents place. Telepizza has 65
percent of the Spanish market as a result of
using _____ marketing.
A. Transactional
B. Developmental
C. Proactive
D. Relationship E. Acquisition
A 14. Telepizza S.A. is a Spanish pizza restaurant
chain that offers children membership in its
magic club. The magic club gives its members
small prizes, usually simple magic tricks, with
each order their parents place. Telepizza's use
of a frequency marketing program has allowed
it to narrow provider _____ of the gaps model
of service quality.
A. Gap 1 B.
Gap 2
C. Gap 3
D. Gap 4
A 15. Companies that emphasize acquiring new
customers rather than retaining current
customers are using _____ marketing.
A. Transactional
B. Developmental
C. Proactive
D. Relationship
E. Acquisition
A 16. Service providers like insurance
companies that emphasize acquiring new
customers rather than retaining current
customers are broadening provider _____ of
the gaps model of service quality.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
A 17. Hertz Car Rental has a customer loyalty
program called Gold Plus Rewards that rewards
members with one point per dollar spent on
qualifying rentals. Free weekend rentals can be
earned for as few as 500 points. By having a
customer loyalty program, Hertz is using
__________ marketing.
A. Transactional
B. Developmental
C. Proactive
D. Relationship
E. Acquisition
A 18. The 25 th Hour Inc. is a business that runs
errands for people. Its employees have been
called in to care for a toddler when her mother
went into labor, to buy groceries for a mother
who wanted to attend her child's soccer game
and to decorate for parties. If any customer is
not completely happy with the service The 25 th
Hour provides, its employees are told to
immediately refund the customer's money (less
any expenses) as soon as the complaint is made
known. This sort of service recovery policy helps
to narrow provider _____ of the gaps model of
service quality.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
A 19. Frequent travelers on airlines know one of
the costs of traveling is damaged baggage, but
they also know that each airline will either
repair or replace any luggage damaged by its
baggage handlers. The ability to count on this
service in the event a handle is torn off or the
side of a bag is gashed helps the airlines narrow
provider _____ of the gaps model of service
quality.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
A 20. The Ritz-Carlton Hotel trains each
employee to note the likes and dislikes of
regular customers and record this information
into a computerized guest history profile that
provides information on the preferences of
240,000 repeat Ritz-Carlton customers. Through
the use of this customer database, the Ritz-
Carlton is able to provide more personalized
service to its guests. If, for example, a guest
prefers a feather pillow or always orders a glass
of sherry before retiring, this information can
be entered in the database and these needs can
be anticipated and met. By providing more
personalized service, the RitzCarlton is
narrowing provider _____ of the gaps model of
service quality.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
B 21. Provider ______ is the difference between
company understanding of customer
expectations and the development of customer-
driven service designs and standards.
A. Gap 1
B. Gap 2
C. Gap 3
D. Gap 4
D 22. _____ standards are operations standards
set by a service firm to correspond to customer
expectations.
A. Company-driven
B. Competitor-driven
C. Contact employee-driven
D. Customer-driven
E. Management-defined
A 23. Which of the following factors leads to
provider gap 2?
A. Inappropriate physical evidence and
servicescape
B. Inadequate marketing research
C. Lack of integrated services marketing
communications
D. Failure to match supply and demand
E. Inadequate horizontal communications
D 24. Service companies can close provider gap
2 by doing all of the following EXCEPT:
A. Using a systematic new-service development
process
B. Developing customer-defined service
standards
C. Designing and using an appropriate
servicescape
D. Improving communication between the
marketing and operations departments
E. Creating formal process for setting service
quality standards
B 25. FedEx developed a 12-item statistical
Service Quality Indicator to measure customer
satisfaction and service quality. The index is
comprised of customer-defined performance
standards such as number of missed pick-ups,
number of lost packages and number of late
deliveries. Each of the performance standards is
weighted based on the relative importance of
each standard to customers. By developing a
Service Quality Indicator that incorporates
customer-defined performance standards,
FedEx is closing provider _____ of the gaps
model of service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
B 26. Historically, the Japanese have had poor
dental care. As part of their beauty regimen, the
Japanese do have a habit of lightening and
whitening their skin. Teethart has developed
"tooth manicure" salons, which allow Japanese
to match their teeth coloration to their skin.
Each treatment takes place in a private booth,
which contains an ergonomically-designed
chair, muted lights and new age-style music.
The walls are painted calming shade of blues
and greens. By using physical evidence to
reduce anxiety, Teethart is narrowing provider
_____ of the gaps model of service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
E 27. The romantic mountain getaway seemed
like the perfect Valentine's Day gift. The
pictures in the brochure showed couples
enjoying the amenities in their cabins. When
the couple arrived, they found a cold, uninviting
cabin with a shortage of creature comforts--no
down-filled blankets, no wood for the fireplace,
paper plates and cups and a broken chair. In
this service example, the _____ was not what
the customers expected.
A. Internal marketing
B. Management-driven service
C. Interactive communication
D. Relationship marketing
E. Servicescape
B 28. The Oaks at Ojai is an award-winning
destination spa in California. Two thirds of The
Oaks' guests are repeat visitors who return to
the spa for a fun and relaxing service experience
unsurpassed by other spas. The owner and staff
of The Oaks are committed to delivering the
best service possible. Each employee is carefully
selected and trained, every event happens with
precision, guest questionnaires are thoroughly
reviewed, and improvements suggested by
guests are implemented. By having service
standards that reflect what customers expect,
The Oaks at Ojai is closing provider _________
of the gaps model of service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
B 29. Home Design is a reasonably priced source
for home decorating items like bronze
bookends and silver candlesticks. Until its
recent remodeling, customers who happened
into the store were often disappointed because
they expected the store to be a discount store.
The front of the store had some masonry
damage. Its parking lot needed repaving. Its
store windows were stained and one was
cracked. Now customers who enter the store
expect to find unique decorating items because
the outside of the store is so tastefully done.
This change in servicescape was a way to
narrow provider _____ of the gaps model of
service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
B 30. When the toddler's ball rolled under the
motel bed, his mother was surprised to find a
dirty sock and used crumbled tissues under the
bed also. This physical evidence of service was
not what the mother expected to find in this
luxury hotel and served to broaden the provider
_____ of the gaps model of service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
C 31. Provider _____ is the discrepancy
between the development of customer-driven
service standards and actual service
performance by company employees. A. Gap 1
B. Gap 2 C. Gap 3 D. Gap 4
C 32. Which of the following factors does NOT
cause provider gap 3?
A. Ineffective employee recruitment
B. Failure to match supply and demand
C. Efficient marketing research systems
D. Channel conflict over objectives and
performance
E. Lack of employee empowerment, perceived
control and teamwork
B 33. Provider gap 3 of the gaps model of
service quality is caused by:
A. Failure to match supply and demand
B. Advertising that over-promised
C. Failure to connect service design to service
positioning
D. Inadequate maintenance of servicescape
E. A tendency to view each external
communication as independent
E 34. Service companies can close provider gap
3 by doing any of the following EXCEPT:
A. Teaching customers to perform their roles
appropriately
B. Synchronizing supply and demand
C. Motivating intermediaries to meet company
service goals
D. Empowering employees
E. Developing customer-defined service
standards
C 35. The owner of a small but growing
business, Terry Franklin was becoming
overwhelmed with requests from his outside
customer service representatives for decisions
about solutions to customer problems. Noting
the mountain of his own work that was piling
up, he instituted a policy change and informed
the representatives. "Keep the customers
happy", he said. "If it's a problem that takes less
than $100.00 to fix, there's no need to call me.
Use your judgment and go ahead and fix it".
Terry Franklin is using empowerment to narrow
provider __________ of the gaps model of
service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
C 36. In India weddings are timed to occur when
Venus is in the ascendant and Jupiter is strong.
This day is deemed lucky. In 2005, almost
15,000 couples in New Delhi had their wedding
on December 25, the day astrologers
announced would be the best day for a
wedding. It is very likely that wedding planners
in New Delhi have difficulty narrowing provider
______ of the gaps model of service quality due
to their inability to match supply and demand.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
C 37. Jiffy Lube, a franchiser of 10-minute oil
and lubrication services, has been plagued by a
lack of consistency across franchise outlets. The
lack of consistency has resulted from Jiffy Lube's
failure to require franchisees to adhere to
common service standards as it rapidly
expanded its franchise business across the U.S.
Jiffy Lube's failure to require franchisees to
adhere to common service standards has led to
provider _____ of the gaps model of service
quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
C 38. The New York Palace, an upscale hotel in
New York City, synchronizes demand and hotel
capacity by offering an attractively priced
weekend package during the fall when demand
for its rooms slows down. In addition to having
a luxury-filled weekend at the New York Palace
for $219 per night, guests enjoy very select
privileges from Saks Fifth Avenue. Its weekend
package provides a personal shopping
coordinator, complimentary gift wrap and
package delivery to the hotel, individual beauty
consultation and a 10 percent Saks discount.
The New York Palace's weekend package closes
provider ____ of the gaps model of service
quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
D 39. Olivia and Ian were due to be wed last
March when a tornado blew down the church
where the wedding was to be held. Even though
the wedding was postponed and they risked
losing over one thousand dollars in deposits,
they were not worried because they had
purchased wedding insurance. The salesperson
had guaranteed they would have a perfect
wedding no matter what happened. When Ian
called the insurance agent, he learned that the
policy did not provide coverage if the wedding
was postponed due to an act of nature such as a
tornado. In this case, provider _____ of the gaps
model of service quality was apparent as their
"perfect wedding" did not happen as promised.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
D 40. Provider _____ is the difference between
service delivery and the service provider's
external communications.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
E 41. Which of the following factors does NOT
lead to provider gap 4?
A. Absence of strong internal marketing
program
B. Over-promising in advertising
C. Insufficient communication between
advertising and operations
D. Differences in policies and procedures across
company branches
E. Creating clear standards
A 42. Service companies can close provider gap
4 by:
A. Improving communications between sales
and operations departments
B. Using a systematic new-service development
process
C. Eliminating employee role ambiguity and role
conflict
D. Creating customer-defined standards
E. Making sure customers understand their
roles and responsibilities
D 43. In order to get an accurate cholesterol
reading, an individual must fast for at least eight
hours before the test. When you schedule a
cholesterol test at your doctor's office, you will
receive a brochure that will explain the fasting
and why it is so very necessary. Providing this
sort of educational literature to patients is one
way doctors try to narrow provider _____ of the
gaps model of service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
D 44. Marriott had an advertising campaign with
the following theme: "You can't be late for
business appointments and neither can we. At
Marriott, if your breakfast doesn't show up on
time, it won't show up on your bill. That's
because we take our business just as seriously
as you take yours. And our business is service.
The commitment is what makes Marriott the
business traveler's first choice". If a business
traveler, who saw this advertisement, stayed at
a Marriott hotel and did not receive breakfast
on time and was charged for that breakfast,
provider _____ of the gaps model of service
quality would have occurred.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
B 45. Service companies can close provider gap
4 by doing all of the following EXCEPT:
A. Avoiding over-promising in advertising
B. Conducting market research
C. Adequately educating customers to use
service appropriately
D. Viewing all of its external communications as
interdependent
E. Including interactive marketing in
communications plans
D 46. Extron Electronics sells coaxial cables for
connecting computers to all types of peripheral
devices like printers, modems and fax
machines. For the benefit of its customers,
Extron provides a laminated card with pictures
of all the possible cable connections that a
customer could need. With this card, a
customer can order from one to any number of
connectors with as many feet of cable as is
needed. Orders can be placed by calling a toll-
free number, sending an email, or using the
company's website. Company reps are also
available 24-hours a day in case the customer is
not sure which drawing on the card matches his
or her needs. By integrating its services
marketing communications, Extron is closing
provider _____ of the gaps model of service
quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
D 47. American Airlines pilots and crews are
trained to inform customers immediately when
flight delays occur and to keep customers
advised at regular intervals about the changes
in a flight's schedule. By keeping customers
informed during a flight, American Airlines is
closing provider _____ of the gaps model of
service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
D 48. The ads for a weight loss program that
promised the program would change an
individual's eating habits through hypnosis is
probably overstating its usefulness because
there are some people in the world that cannot
be hypnotized. This sort of misleading
advertising broadens provider _____ of the
gaps model of service quality.
A. Gap 1 B. Gap 2 C. Gap 3 D. Gap 4
C 49. The marketing that goes on between an
insurance agent and a current customer that is
buying car insurance for a new teenage driver is
an example of _____ marketing.
A. Formal
B. External
C. Interactive
D. Controlled
TRUE 50. The central focus of the gaps model of
service quality is to close the gap between
customer expectations and perceptions. True
False
FALSE 51. The sources of customer expectations
are all controlled by the service provider. True
False
TRUE 52. Services marketing bridges the gap
between what customers expect to get and
what they perceive they actually got. True False
FALSE 53. Provider gap 1 is widened when the
service provider promises delivery on Monday
when in fact there is no way the service
provider can deliver until the following
Thursday. True False
TRUE 54. Improved upward communication can
be used to narrow provider gap 1. True False
FALSE 55. The use of transactional marketing
will tend to narrow provider gap 1. True False
FALSE 56. Provider gap 2 exists in service
companies because of a failure of horizontal
communication. True False
TRUE 57. Inappropriate physical evidence can
result in provider gap 2. True False
TRUE 58. The absence of customer-defined
standards will broaden provider gap 2. True
False
TRUE 59. Provider gap 2 is the difference
between development of customer-driven
service standards and actual service
performance by company employees. True
False
TRUE 60. Deficiencies in human resources
management policies will broaden provider gap
3. True False
FALSE 61. The synchronizing of supply and
demand will narrow provider gap 4. True False
TRUE 62. One of the major difficulties
associated with provider gap 4 is that
communications to consumers typically involve
issues that cross organizational boundaries.
True False
TRUE 63. Ad puffery such as "The Best Pizza in
the State" could lead to provider gap 4. True
False
FALSE 64. Inadequate vertical communications
will broaden provider gap 4
65. What is the central focus of the gaps model
of service quality? The customer gap.
66. List three sources of customer expectations
that are market-controlled factors. Pricing,
advertising, sales promises.
67. List two examples of sources of customer
expectations over which the marketer has
limited control. Innate personal needs, word-
of-mouth communication, competitive
offerings.
68. Give a brief generalized definition of a
customer's perception of service. A subjective
assessment of an actual service experience
69. Briefly define customer expectations for a
service. Standards or reference points against
which service experiences are compared.
70. Which provider gap is a company trying to
narrow when it concentrates on developing a
service recovery strategy? Provider gap 1.
71. On which of the provider gaps does an
inappropriate servicescape have the greatest
impact? Provider gap 2.
72. What is provider gap 3 of the gaps model of
service quality? the actions of retailers,
franchisees, agents and brokers have the
greatest impact? The difference between the
development of customer-driven service
standards and actual service performance by
company employees.
73. On which of the provider gaps are
deficiencies in human resources management
policies most likely to have the greatest impact?
Provider gap 3
74. On which of the provider gaps do the
actions of retailers, franchisees, agents and
brokers have the greatest impact? Provider gap
3
75. What is provider gap 4 of the gaps model of
service quality? The difference between service
delivery and the service provider's external
communications
76. What is the key to closing the customer
gap? Close provider gaps 1 through 4 and keep
them closed
77. Briefly describe the four provider gaps that
are the underlying causes behind the customer
gap The central focus of the gaps model is the
customer gap--the difference between
customer expectations and perceptions. Firms
need to close this gap in order to satisfy their
customers and build long-term relationships
with them. To close the customer gap, the
model suggests the following provider gaps
need to be closed. (1) Provider gap 1: Not
knowing what customers expect. (2) Provider
gap 2: Not selecting the right service designs
and standards. (3) Provider gap 3: Not
delivering to service standards. (4) Provider
gap 4: Not matching performance to promises.
78. Byron Wheatley recently began teaching his
tenth 2-hour wine-tasting seminar in the
banquet hall of a restaurant that has a large and
varied wine cellar. His class participants are
complaining the class he is teaching is not what
they expected. Some are leaving after the first
hour without a word to Wheatley. No
participant has ever taken another one of
Wheatley's classes even though each class
studies a different variety of wine. Which
provider gap is causing Wheatley the most
difficulty? List some possible strategies
Wheatley can use to close or possibly eliminate
this provider gap. The question describes
provider gap 1--not knowing what customers
expect. Student answers will vary, but the
following are some suggested answers.
Wheatley has an inadequate marketing
research orientation. He needs to do some
marketing research to match his offering to
customer expectations. He could survey the
patrons of the restaurant. Once the research is
complete, he must use it even if it does not
agree with his image of the class. There is a
lack of upward communications. Wheatley
must make it easier for his class participants to
give him feedback early in the class, so that he
can modify it as needed. There is no indication
that Wheatley has targeted any particular
market segment--this might make it easier for
him to match expectations and perceptions.
Also, he doesn't seem to do anything about
lost customers. He should focus on creating a
service that attracts repeat customers. Finally,
he needs to do some sort of service recovery
strategy. Bad word-of-mouth from customers
can kill any possibility of success unless he
starts trying to make right what customers
found so wrong. Students should have several
possible strategies for this, such as refunds,
apologies or a coupon good at the restaurant.
79. A national cleaning service sent several
crews to Florida after the hurricanes of 2004.
The crews were trained to deal with mud,
mildew and all the problems of making a
flooded home or building inhabitable again. The
print and media ads that the cleaning service
ran stated that the company had a patented
system that would remove all unpleasant odors
from flooded structures and leave a clean smell.
Its sales reps who contacted owners of
apartment complexes and shopping centers
promised that the crews could come into an
average size of apartment complex and have it
looking and smelling like new in two weeks.
Several people who rent apartments in the
complexes that the service cleaned have
commented unfavorably on the sweet smelling
air freshener the company used to mask the
smell and noted the moldy odor was still
perceptible. Also, the time required to clean a
complex was more like four weeks instead of
the two as promised. Which provider gap does
this example describe? List various strategies
that can be used to narrow and possibly
eliminate this provider gap. This is an example
of provider gap 4 - there is a discrepancy
between what is promised and what is
delivered. In this example, there seems to
have been ineffective management of
customer expectations--the company
promised two weeks on average. The two-
week time frame apparently is correct when
there is only one complex to clean, not several
structures. The cleaning service should have
made it clear that two weeks was not enough
time given the situation. Also, it should have
had examples of what it defined as a "clean
smell". Customers should have been
adequately educated. Furthermore, the
company over-promised, which widened this
gap. From the ads and the personal selling, the
tenants expected their apartments to smell
like they did before the flood--that didn't
happen. Students may note that the gap could
have been the sole result of inadequate
horizontal communications. The marketing and
sales department believed they were
communicating what would happen and
received no communications from the cleaning
crews telling them differently.
80. Discuss the two major ways that technology
has influenced the customer gap. First, the
nature of services themselves has changed.
Many services are now delivered by
technology rather than in person by
employees. The proliferation of self-service
technologies has changed customers' lives. An
example of this is the digital revolution in the
personal photography industry. Individuals can
now use digital cameras to take as many
photographs as they like and they can print,
manage, and share their photos online. The
whole process is much easier and much less
time consuming than it used to be. Second,
technology has changed the way customers
learn about service. The ability to search the
Web and view photos of service locations,
compare prices, and even experience services
virtually has changed the amount and type of
information customers have prior to
purchasing services. This availability of
information has influenced customer
expectations and improved customers' ability
to compare and judge services.
ECOMMERCE PRELIM REVIEWER
1.To the__________, physical location does not and mailers) directly to you based on your
matter because the Internet allows anyone to established shopping patterns, a form of one-
link to any Web site no matter where in the to-one, __________ marketing.
world that site might be. a.spam-based
a.bricks-and-clicks retailer b.mass
b.e-tailer c.modified
c.bricks-and-mortar retailer d.e-commerce
d.B-to-G business e.relationship
e.location alwaysmatters

6.Purchasing new computers or technologies

2.What is true regarding competitive
generally leads to a competitive advantage for a
advantage.
company.
a.companies must have it to survive|
a.true b.false
b.a “high tech” approach is necessary to derive
it
7.Web sites use __________ to compile
c.information systems tokey to its development
personal information on their visitors and then
d.it is difficult to sustain
use the information to create customer profiles.
e.none of the above
a.cookies
3.Perhaps a potential customer’s most common b.transition pages
path to a previously unknown website is c.registration forms
through a(n) __________ d.a and c
.a.search engine e.b and c
b.online advertisement
c.personal contact
8.Digital products, such as software, music,
d.print advertisement
digitized images, and electronic games are a
e.none of the above
greatfit for consumerfocused (B2C) e-commerce
because __________.
4.A competitive advantage derived from a.they are always free
__________ is generally considered the best b.electronic distribution is more efficient than
approach for a company. alternative distribution channels for digital
a.productplacement products
b.price c.digital products are not a good fit for B2C e-
c.marketing commerce
d.improved value chain and/or supply chain d.they cannot be easily monitored
efficiency e.none of the above
e.none of the above
9.When measuring the effectiveness on an
5.When the supermarket scans your “premier online advertisement, the __________ is the
customer” card it links you to your purchases percentage of visitors to a page who click on an
and then uses that information to establish a advertisement.
personal shopping pattern for you. a.click ratio
Subsequently, the supermarket uses that b.click rate
information to target advertising (like coupons c.nielsen rating
d.hit ratio e.process maximization
e.click-through rate

15.Islands of automation do not allow for

10.__________ is/are used to pay for productivity of individual functional groups.
microtransactions. a.true b. false
a.e-cash
16.A __________is an existing, often relatively
b.digital cash
inefficient application developed for an old
c.bank accounts
platform.
d.either A or B
a.web application
e.none of the above
b.functional application
c.resistant application
11.__________ are used by consumers to locate d.mission critical
the best price for a desired product e.legacy application
a.shopping bots
b.search engines
17.On a(n) __________architecture,the server
c.middleware routines
does most of the work.
d.worms
a.fat client
e.spam
b.island of automation
c.Richard Simmons client
12.The development of __________ has been d.thin client
more evolutionary than revolutionary. e.web application
a.consumer focusede-commerce
18.__________is the act ferreting out
b.B2Ce-commerce
previously unknown patterns and relationships
c.the dot-coms
from a set of data.
d.intra-business e-commerce
a.database management
e.consumer focused start-ups
b.data mining
c.enterprise resource planning
13.Early business application programs focused
d.data searchinge.data surfing
on __________.
a.individual processes
19.A(n) __________is a private corporate
b.automating selected manual tasks
network that uses standard Internet protocols
c.neither A nor B
and interfaces.
d.both A and B
a.ethernet
b.extranet
14.Viewing a system (such as an organization) c.local area network
as a set of individual processes leads to d.TCP/IP network
__________. e.intranet
a.sub-optimization
b.optimization
20.A __________ applicationis one that the
c.standardization
company depends upon for its well-being.
d.isolation
a.dynamic
b.static
c.urgent need integration efforts intended to increase
d.web based customer satisfaction and loyalty.
e.mission critical a.supply chain management
b.e-procurement
21.For a company to obtain competitive c.dynamic servicing
advantage it must use a technology/process d.human services
that is: e.CRM
a.non-substitutable
b.“high tech” 26.The general premise of __________ is to
c.not easily copied effectively manage the flow of product,
d.a and c information, and finances between all trading
e.b and c partners.
a.supply chain management
22.Intra-organizational e-commerce is b.value chain management
__________ focused. B2B focuses on improving c.logistics management
information exchanges throughout the d.e-procurement
__________. e.e-tailing
a.supply chain/value chain
b.customer/supply chain 27.__________ is the electronic transmission of
c.value chain/supply chain business transaction documents directly
d.customer/value chain between the computers of trading partners in a
standard message format.
23.In an effort to increase inter-organizational a.ERP
information flow, many companies expand b.encapsulation
access to corporate intranets to include c.B2B
selected trading partners and customers by d.transaction processing
creating a(n) __________. e.none of the above -EDI
a.EDI exchange
b.Extranet 28.Which of the following is likely to have the
c.VPN lowest cost of entry?
d.RAND a.an e-retailer
e.VAN b.a bricks-and-mortar presence
c.a bricks-and-clicks presence
24.__________ is the process of planning, d.a traditional storefront
implementing, and controlling the flow of goods e.all are about equal
and services from point of origin to point of
consumption.
29.Before the dot-com bubble burst, a
a.CRM
proposed B2C venture that could legitimately
b.surplus management
claim __________ had relatively little trouble
c.transportation
getting startup funding.
d.logistics
a.competitive prices
e.none of the above
b.good marketing strategies
c.convenience
25.__________ includes software and
d.first mover status
e.all of the above. a.business
b.information/data
c.presentation
30.The ultimate objective of a company’s
d.all of the above
website is to add enough value to achieve
e.none of the above
__________, a state in which the customer has
a vested interest to stay with the company
because switching to a competitor entails 35.We can directly connect information systems
significant switching costs. with increased firm performance.
a.loyalty a.true b. false
b.integration
c.interconnection
36.A __________ is operated by a trusted third
d.lock-in
party that offers bandwidth and other value
e.a dependency relationship
added services to facilitate interconnectivity
among multiple organizations.
31.Consumer interaction, the essence of a.virtual private network (VPN)
consumer focused (B2C) e-commerce, is the b.value added network (VAN)
front end to __________. c.both A and B
a.the value chain (intra-business e-commerce) d.neither A nor B
b.the supply chain (B2B e-commerce)
c.neither
37.What is the primary responsibility of the
d.both
Chief Information Officer?
a.manage programmers
32.__________, the act of modifying a product
b.avoid failed systems
or service to fit a given user’s requirements, is a
c.set and guide the information systems
possible e-commerce source of sustainable
strategy
competitive advantage.
d.provide technical expertise
a.specialization
e.know the technical status organizational
b.customization
competitors
c.targeting
d.tuning
38.A(n) __________ is a pseudo private data
e.none of the above
network that uses public bandwidth in
combination with a tunneling protocol and
33.Intra-business e-commerce is sometimes security procedures.
called __________ e-commerce. a.value added network (VAN)
a.B2C b.intranet
b.B2B c.virtual private network (VPN)
c.C2C d.leased line
d.B2G e.virtual applied network
e.none of the above–B2E
39.Which of the following forms of connectivity
is the least scalable?
34.In a client/server application, the
a.VAN
__________ logic provides the user interface.
b.VPN
c.public bandwidth B. B2C
d.private leased network C. B2B
e.the Internet D. C2C

4) ………. is the electronic transmission of

40.A VPN relies on a special protocol
business transaction documents directly
understood only by the VPN software to
between the computers of trading partners in a
transmit packets, a technique called
standard message format.
__________.
A. Encapsulation
a.encryption
B. EDI
b.packet switching
C. ERP
c.tunneling
D. Transaction processing
d.packet hiding
e.packet mining 5) The E-commerce domain that involves
business activity initiated by the consumer and
targeted to business is known as
Bonus (1 pt): What is the nameof TCU’s football
A. Business to Business (B2B)
team?
B. Consumer to Consumer (C2C)
a.Rebels
C. Consumer to Business (C2B)
b.Gauchos
D. Business to Consumer (B2C)
c.UC Santa Cruz Banana Slugs
d.Gators
e.Horned Frogs (hint pick this one) 6) What is the name for direct computer to
computer transfer of transaction information
1) Digital products, such as software, music, contained in standard business documents?
digitized images, and electronic games are great A. Internet commerce
fit for consumer focused (B2C) e-commerce B. E-commerce
because …… C. Transaction information transfer
A. they are always free D. Electronic Data Interchange
B. electronic distribution is more efficient than
7) A ……….. is a B2B trading network that links a
alternative distribution channels for digital
particular seller with its own trading partners.
products
A. Web community
C. digital products are not a good fit for B2C e-
B. Bit stream
commerce
C. Private Trading Network
D. they cannot be easily monitored
D. Virtual Network
2) The dimension of E-Commerce that enables 8) The world Wide Web was developed in the
commerce across national boundaries is called A. 1960s
A. Interactivity B. 1970s
B. Global reach C. 1980s
C. Richness D. 1990s
D. Ubiquity
9) What is the name of the combination of
3) In which one of the following type of E- Education and Entertainment online?
Commerce, consumer sells consumer directly? A. Gateway
A. C2B B. Edutainment
C. Advertisement 16) ………. includes software and integration
D. Entertainment efforts intended to increase customer
satisfaction and loyalty.
10) What is the percentage of customers who
A. E-procurement
visit a web site and actually buy something
B. Dynamic servicing
called?
C. Human services
A. Affiliate program
D. CRM
B. Click-through
C. Conversion rate 17) All of the following provide intranet security
D. Spam except.
A. data encryption
11) Secure Sockets Layers does which of the B. user authentication
following? C. firewall
A. Creates a secure, private connection to a web D. data compression
server
18) Amazon.com comes under the following
B. Encrypts information
model
C. Sends information over the internet safely
A. B2B
D. All of the above
B. B2C
12) All of the following are major B2C business C. C2C
models except D. C2B
A. Content Provider
19) E-commerce is not suitable for
B. Industry Consortium
A. Sale/purchase of expensive jewellery and
C. Transaction Broker
antiques
D. Service Provider
B. Sale/Purchase of mobile phones
13) An example of C2C is … C. Sale/Purchase of branded clothes
A. eBay D. Online job searching
B. Microsoft.com
20) Group of people recruited from different
C. Amazon.com
functional areas to accomplish a web project
D. Facebook.com
A. Web Team
14) Perhaps a potential customer’s most B. Web Hosting
common path to a previously unknown website C. Web Casting
is through a(n) … D. Webonomics
A. Search Engine
B. Online Advertisement
C. Personal Contact
D. Print Advertisement

15) What is the type of virus that spreads itself,

not just from file to file, but from computer to
computer via email and other Internet traffic?
A. Computer virus
B. Worm
C. Denial of service attack
D. None of the above