Marketing Management, 15e (Kotler)

Chapter 3 Collecting Information and Forecasting Demand

1) As the manager of an organization that is attempting to build a Marketing Information System

(MIS), you have been informed that an MIS is built upon three fundamental information sources.
The sources are ________, marketing intelligence activities, and marketing research.
A) external records and documents
B) databases found on the Internet
C) consultant reports
D) internal company records
E) secondary data from government sources such as the Better Business Bureau
Answer: D
Diff: 1
LO: 3.1: What are the components of a modern marketing information system?
AACSB: Information technology

2) The company's marketing information system should be a mix of what managers think they
need, what managers really need, and ________.
A) what the marketing research department is able to do
B) what consumers are willing to consume
C) what the government policies allow
D) what is acceptable at the industry level
E) what is economically feasible
Answer: E
Diff: 2
LO: 3.1: What are the components of a modern marketing information system?
AACSB: Information technology

3) Marketers have little information about how consumption patterns vary across and within
countries.
Answer: FALSE
Diff: 1
LO: 3.1: What are the components of a modern marketing information system?
AACSB: Information technology

4) Companies with superior information enjoy a competitive advantage.

Answer: TRUE
Diff: 1
LO: 3.1: What are the components of a modern marketing information system?
AACSB: Information technology

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5) What is a marketing information system (MIS)? From what sources is the MIS developed?
Answer: A marketing information system (MIS) consists of people, equipment, and procedures
to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to
marketing decision makers. A marketing information system is developed from internal company
records, marketing intelligence activities, and marketing research.
Diff: 1
LO: 3.1: What are the components of a modern marketing information system?
AACSB: Information technology

6) What are the two basic advantages that a company's marketers have in identifying significant
changes in the market?
Answer: The two advantages are
1. They have disciplined methods for collecting information.
2. They spend more time interacting with customers and observing competition.
Diff: 1
LO: 3.1: What are the components of a modern marketing information system?
AACSB: Information technology

7) The heart of the internal records system is the ________ because customers favor firms that
can promise timely delivery.
A) sales information system
B) data mining system
C) order-to-payment cycle
D) information needs probe
E) data warehouse
Answer: C
Diff: 3
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

8) The ________ begins with sales representatives and dealers sending orders to the firms and is
followed by the sales department preparing invoices, and finally generating shipping and billing
documents which are then sent to various departments.
A) payroll system
B) market research process
C) human resources system
D) expense cycle
E) order-to-payment cycle
Answer: E
Diff: 2
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

2
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9) By equipping its sales force with handheld devices with barcode readers and Internet
connections to speed inventory assessment, TaylorMade allows sales executives to have
significantly more time to interact with their consumers. This is an example of the use of
technology in improving ________.
A) sales information systems
B) payroll systems
C) cookies
D) cohort segmentation
E) competitive intelligence gathering
Answer: A
Diff: 2
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

10) Companies can practice targeted marketing by using ________, which are records of Web
site usage stored on personal browsers.
A) plug-ins
B) black swans
C) cookies
D) trolls
E) honey-pots
Answer: C
Diff: 1
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

11) Because customers are not really concerned with timely delivery, customers are unlikely to
differentiate between firms based on their order-to-payment cycles.
Answer: FALSE
Diff: 1
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

12) Few consumers actually delete cookies frequently. When customers do not delete cookies,
they expect customized marketing appeals and deals.
Answer: TRUE
Diff: 2
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

13) Mailing of a new offer to a handful of selected customers instead of all customers reduces
the response rate to the offer.
Answer: FALSE
Diff: 2
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

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14) Why is it necessary for firms to execute the steps of the order-to-payment cycle quickly and
accurately?
Answer: It is necessary for the firms to execute the steps of the order-to-payment cycle quickly
and accurately because customers favor firms that can promise timely delivery.
Diff: 1
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

15) Describe the steps in the order-to-payment cycle.

Answer: Sales representatives, dealers, and customers send orders to the firm. The sales
department prepares invoices, transmits copies to various departments, and back-orders out-of-
stock items. Shipped items generate shipping and billing documents that go to various
departments.
Diff: 1
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

16) List three examples of how companies are using Big Data.
Answer: Student answers will vary. Examples from the text include: UK supermarket giant
Tesco collects 1.5 billion pieces of data every month to set prices and promotions; US
kitchenware retailer Williams-Sonoma uses its customer knowledge to customize versions of its
catalog. Amazon reports generating 30 percent of its sales through its recommendation engine
("You may also like"). Bank of America is tracking spending and demographic data and tailoring
promotions — for example, offering back-to-school deals to cardholders with children.
JPMorgan Chase has improved communications to new cardholders to gain more engagement.
On the production side, GE set up a team of developers in Silicon Valley to improve the
efficiency of the jet engines, generators, locomotives, and CT scanners it sells.
Diff: 2
LO: 3.2: What are useful internal records for a marketing information system?
AACSB: Information technology

17) The internal records system supplies results data, but the marketing intelligence system
supplies ________ data.
A) internal
B) revenue
C) thematic
D) happenings
E) process
Answer: D
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

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18) A ________ is a set of procedures and sources managers use to obtain everyday information
about developments in the marketing environment.
A) data warehousing system
B) viral marketing campaign
C) product management system
D) marketing intelligence system
E) sales information system
Answer: D
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

19) A company can take several steps to improve the quality of its marketing intelligence. Which
of the following best describes the practice used by McDonald's when it sent pseudo customers
to assess stores' internal speed standards?
A) training and motivating the sales force to spot and report new developments
B) motivating intermediaries to pass along important intelligence
C) networking externally
D) purchasing information from outside research firms and vendors
E) using the sales information system to get accurate sales reports
Answer: B
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Analytical thinking

20) A company can take several steps to improve the quality of its marketing intelligence. If the
company purchases competitive products for study, attends open houses and trade shows, and
reads competitors' published reports and stockholder information, the company is using
________ to improve the quality of its marketing intelligence.
A) sales-force surrogates
B) intermediaries
C) external networks
D) advisory panels
E) customer feedback systems
Answer: C
Diff: 3
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

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21) When gathering marketing intelligence, companies often use the US census, which provides
an in-depth look at the population swings, demographic groups, regional migrations, and
changing family structure of the more than 281 million people living in the United States. Which
of the following steps to improve the quality of a company marketing intelligence system would
be most closely associated with this illustration?
A) A company can purchase information from outside suppliers.
B) A company can take advantage of government data sources.
C) A company can use online customer feedback systems to collect data.
D) A company can network externally.
E) A company can use its sales force to collect and report data.
Answer: B
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

22) When a company acquires consumer-panel data from firms like A.C. Nielsen Company and
Information Resources Inc., which of the following steps to improve the quality of a company
marketing intelligence system is the company resorting to?
A) training and motivating the sales force to spot and report new developments
B) motivating distributors, retailers, and other intermediaries to pass along important intelligence
C) hiring external experts to collect intelligence
D) using external network
E) purchasing information from outside research firms and vendors
Answer: E
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Reflective thinking

23) Elance.com is a service provider that allows contractors to describe their level of satisfaction
with subcontractors. This is an example of a(n) ________.
A) independent customer goods and service review forum
B) public blog
C) customer complaint site
D) combo site offering customer reviews and expert opinions
E) distributor or sales agent feedback site
Answer: E
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

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24) When ConAgra learned that many mothers switched to time-saving meals and snacks when
school started, it launched its "Seasons of Mom" campaign to help grocers adjust to seasonal
shifts in household needs. Which of the eight possible actions to improve the quantity and quality
of its marketing intelligence yielded this insight?
A) Train and motivate the sales force to spot and report new developments.
B) Motivate distributors, retailers, and other intermediaries to pass along important intelligence.
C) Hire external experts to collect intelligence.
D) Network internally and externally.
E) Set up a customer advisory panel.
Answer: B
Diff: 3
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

25) Competitive intelligence gathering is inherently illegal and unethical.

Answer: FALSE
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

26) PlanetFeedback.com is an example of a government-related public resource, which is one of

the five main ways marketers can research competitors' product strengths and weaknesses online.
Answer: FALSE
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Application of knowledge

27) If a company were pursuing a policy of networking externally to gather marketing

intelligence, it might collect competitors' ads or look up news stories about competitors.
Answer: TRUE
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Application of knowledge

28) One of the ways to find relevant online information on competitors' strengths and
weaknesses might be to frequent distributor or sales agent feedback sites.
Answer: TRUE
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

29) The competitive intelligence function works best when it is closely coordinated with the
decision-making process.
Answer: TRUE
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology
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30) A fad is more predictable and durable than a trend.
Answer: FALSE
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Reflective thinking

31) What is a marketing intelligence system? How can marketing intelligence data be collected?
Answer: A marketing intelligence system is a set of procedures and sources that managers use to
obtain everyday information about developments in the marketing environment. The marketing
intelligence system supplies happenings data. Marketing managers collect marketing intelligence
in a variety of different ways, such as by reading books, newspapers, and trade publications;
talking to customers, suppliers, and distributors; monitoring social media on the Internet; and
meeting with other company managers.
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

32) What are the various steps a company can take to improve the quality of its marketing
intelligence function?
Answer: The steps are:
1. a company can train and motivate the sales force to spot and report new developments
2. a company can motivate distributors, retailers, and other intermediaries to pass along
important intelligence
3. a company can network externally
4. a company can set up a customer advisory panel
5. a company can take advantage of government data resources
6. a company can purchase information from outside suppliers
7. a company can use online customer feedback systems to collect competitive intelligence
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

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33) Briefly describe the five main ways in which marketers can find relevant online information
on competitors' strengths and weaknesses.
Answer: The five ways are:
1. independent customer goods and service review forums
2. distributor or sales agent feedback sites which are built by the distributors themselves to
describe their experience and level of satisfaction on products or services
3. combo sites offering customer reviews and expert opinions mainly on financial services and
high-tech products that require professional knowledge
4. customer complaint sites designed mainly for dissatisfied customers, which allows customers
to express their dissatisfaction in certain firms or products
5. public blogs offering personal opinions, reviews, ratings and recommendations on virtually
any topic
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

34) How do the distributors, retailers, and other intermediaries help a company to improve the
quantity and quality of its marketing intelligence?
Answer: Since marketing intermediaries are often closer to the customer, they can offer helpful
insights to the company to improve its marketing intelligence system.
Diff: 1
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Information technology

35) Suppose Canon and Nikon are the only players in the digital camera industry. What can
Canon do to acquire marketing intelligence?
Answer: Student answers will vary. Canon can network externally to find out more about its
competitor Nikon. It can purchase Nikon's products, attend open houses and trade shows, read
reports published by the rival firm, attend stockholders' meetings, talk to employees, collect
competitors' ads, consult with suppliers, and look up news stories about Nikon.
Diff: 2
LO: 3.3: What makes up a marketing intelligence system?
AACSB: Reflective thinking

36) A ________ is "unpredictable, short-lived, and without social, economic, and political
significance."
A) fad
B) fashion
C) trend
D) megatrend
E) style
Answer: A
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

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37) A ________ is a direction or sequence of events that has some momentum and durability; it
reveals the shape of the future and can provide strategic direction.
A) fad
B) fashion
C) trend
D) megatrend
E) style
Answer: C
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

38) A ________ is a "large social, economic, political, and technological change that is slow to
form, and once in place, influences us for some time — between seven and ten years, or longer."
A) fad
B) fashion
C) trend
D) megatrend
E) style
Answer: D
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

39) Which of the following is true about trends in worldwide population growth?
A) Birthrates are on the rise in developed countries.
B) Overall, the world population growth is declining.
C) Birthrates are on the rise in developing countries.
D) Death rates are rising in developing countries.
E) Population growth is highest in developing countries.
Answer: E
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

40) A growing population does not mean growing markets unless ________.
A) the people are under a democratic system of government
B) there is common ownership of all resources
C) people have sufficient purchasing power
D) there is adequate governmental intervention in the market
E) the government has a budget surplus
Answer: C
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

10
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41) In the United States, people born between the years ________ are called baby boomers.
A) 1978 and 2002
B) 1946 and 1964
C) 1925 and 1945
D) 1965 and 1985
E) 1920 and 1940
Answer: B
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

42) Firms find "reverse innovation" advantage by introducing a commodity in a ________.

A) developed country and then distributing it globally
B) developing country and then distributing it in other developing countries
C) developing country and then distributing it globally
D) developed country and then distributing it in developing countries
E) developed country and then distributing it in other developed countries
Answer: C
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

43) ________ refer to groups of individuals who are born during the same time period and travel
through life together.
A) Cohorts
B) Populations
C) Clans
D) Societies
E) Ethnic groups
Answer: A
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

44) In the first two-and-a-half years of the iPad's existence, Apple sold ________ million units
worldwide.
A) 97
B) 45
C) 63
D) 112
E) 91
Answer: A
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

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Copyright © 2016 Pearson Education, Inc.
45) Which of the following is NOT one of the reasons consumers are concerned about privacy?
A) Consumers worry that they will be robbed or cheated.
B) Consumers worry that their information will be used to customize their offers.
C) Consumers believe private information will be used against them.
D) Consumers believe they will be bombarded by solicitations.
E) Consumers believe that children will be targeted by ads.
Answer: B
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

46) Abby lives in a suburb of Atlanta with her three children. She is part of the biggest
household change this decade, which was ________.
A) a growing demand for larger apartments
B) a need for smaller-size food packages
C) the jump in households headed by women without husbands
D) the growth of the gay and lesbian population in the suburbs
E) the increase of empty nesters
Answer: C
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

47) The traditional household consists of ________.

A) a husband, wife, and children (and sometimes grandparents)
B) a group of related persons living together
C) two or more families living together
D) a man and a woman living together (whether married or not)
E) related or unrelated persons who share living arrangements
Answer: A
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

48) By 2010, only ________ percent of US households were traditional households.

A) 20
B) 25
C) 28
D) 31
E) 33
Answer: A
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

12
Copyright © 2016 Pearson Education, Inc.
49) Which of the following is likely to occur during economic downturns?
A) People tend to spend more on luxury goods.
B) Consumption of necessary goods decline.
C) Long-term credit is available at concessional rates of interest.
D) The purchasing power of the population declines.
E) The level of investment in the economy rises.
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

50) Which of the following economies provide limited opportunities to international marketers to
develop product sales?
A) capitalist economies
B) subsistence economies
C) raw-materials-exporting economies
D) industrializing economies
E) industrialized economies
Answer: B
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

51) Which of the following represents a raw-material-exporting economy?

A) Papua New Guinea
B) Democratic Republic of Congo
C) India
D) Egypt
E) Philippines
Answer: B
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

52) When its monitoring software spotted a Twitter post that went to 10,000 followers from an
upset consumer who couldn't redeem a prize from a MyCoke rewards program, Coke quickly
posted an apology on his Twitter profile and offered to help resolve the situation. This is an
example of which of the following?
A) mystery shopper actions
B) consumer panel data
C) purchasing outside information
D) acting on marketing intelligence
E) conducting a sentiment analysis
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge
13
Copyright © 2016 Pearson Education, Inc.
53) Which of the following elements of sociocultural environment can be associated with the
growing demand for "social surrogates" like social networking sites, television, etc.?
A) views of ourselves
B) views of organizations
C) views of others
D) views of nature
E) views of the universe
Answer: C
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

54) Today, corporations need to make sure that they are good corporate citizens and that their
consumer messages are honest in order to positively align themselves with consumers' views of
________.
A) others
B) organizations
C) themselves
D) the universe
E) society
Answer: B
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

55) People vary in their views of society and their consumption patterns often reflect their social
attitudes. ________ usually live more frugally, drive smaller cars, and wear simpler clothing.
A) Makers
B) Escapers
C) Seekers
D) Changers
E) Developers
Answer: D
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

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Copyright © 2016 Pearson Education, Inc.
56) People vary in their views of society and their consumption patterns often reflect their social
attitudes. ________ usually eat, dress, and live well.
A) Makers
B) Escapers
C) Seekers
D) Changers
E) Developers
Answer: A
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

57) People vary in their views of society and their consumption patterns often reflect their social
attitudes. ________ are a major market for movies, music, surfing, and camping.
A) Makers
B) Preservers
C) Escapers
D) Changers
E) Developers
Answer: C
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

58) ________ beliefs and values are passed from parents to children and reinforced by social
institutions — schools, churches, businesses, and governments; they are very difficult to change.
A) Transient
B) Secondary
C) Protected
D) Core
E) Variable
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

59) Which of the following would be the best illustration of a secondary belief or value?
A) belief in work
B) belief in giving to charity
C) belief in getting married
D) belief in getting married early
E) belief in being honest
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

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60) Each society contains ________, groups with shared values emerging from their special life
experiences or circumstances.
A) stakeholders
B) cliques
C) consumer bundles
D) subcultures
E) behavioral niches
Answer: D
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

61) Which of the following is the largest contributor to global warming, contributing almost a
quarter of the carbon dioxide in the environment?
A) transportation
B) industrial production facilities
C) electrical power plants
D) aerosol cans
E) rural cooking fires
Answer: C
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

62) Which of the following is the second largest contributor to global warming, accounting for
roughly a fifth of carbon emissions?
A) transportation
B) primary metal production facilities
C) electrical power plants
D) aerosol cans
E) rural cooking fires
Answer: A
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

63) Firms whose products require ________ resources — oil, coal, platinum, zinc, silver — face
substantial cost increases as depletion approaches.
A) infinite
B) near finite
C) finite renewable
D) finite nonrenewable
E) perishable
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking
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Copyright © 2016 Pearson Education, Inc.
64) Prestige LLC, a small company that manufactures specialty cereals and energy bars, wants to
launch a "green marketing" program in response to heightened consumer awareness about
environmental issues. What should the company do to maximize the program's chances of being
successful?
A) demonstrate that the products will benefit both customers and the society in the long term
B) emphasize benefits to the consumer rather than environmental benefits
C) focus on the efforts and costs incurred by the company to bring these "green" products to
consumers
D) engage in "greenwashing" to highlight the environmental benefits of the product
E) explain the rules and regulations laid out by governmental agencies to protect the environment
Answer: A
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

65) When a company is said to have engaged in "greenwashing," it means that the ________.
A) company has significantly changed its business processes to incorporate a greener, more
environmentally friendly philosophy
B) company has moved its production facilities to countries where environmental laws and
regulations are less rigorous
C) company has changed its "green" image in order to appeal to a different, usually older,
demographic
D) company's products are not nearly as green and environmentally beneficial as its marketing
might suggest
E) company has undertaken a campaign to lobby for tougher environmental regulations for the
industry
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

66) Of the following, which country received the highest score on the Greendex sustainable
consumption index, which suggests they minimize their environmental impact via decisions
made about transportation, household energy, resource use, and food/good consumption?
A) China
B) Brazil
C) India
D) United States
E) France
Answer: C
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

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Copyright © 2016 Pearson Education, Inc.
67) ________ Americans, the second-largest Asian population in the United States, is generally
affluent, well-educated, and attractive to marketers.
A) Korean
B) Japanese
C) Chinese
D) Filipino
E) Indian
Answer: E
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

68) Which of the following is true about the technology trends that marketers should monitor?
A) A growing portion of US R&D expenditures are going toward the research side as opposed to
the development side.
B) Today, the time between idea and implementation is expanding.
C) More single companies rather than consortiums are directing research efforts toward major
breakthroughs.
D) The pace of change is accelerating today.
E) The government has decreased regulation of technological change.
Answer: D
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

69) Mandatory recycling laws have boosted the recycling industry and launched dozens of new
companies making new products from recycled materials. Which of the following most closely
resembles this situation?
A) Government makes reforestation mandatory for lumbering firms leading to a rise in timber
production.
B) Government restricts industries from purchasing farmland thereby increasing agricultural
produce.
C) Government subsidizes export of beef to promote production of beef cattle.
D) Government pollution control norms increase the production of pollution control equipment.
E) Government restricts unfair trade practices to promote international trade.
Answer: D
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

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70) A possible unintended effect of business legislation is ________.
A) restricting fair competition in the market
B) encouraging unbridled business behavior
C) reducing the social cost of producing a particular commodity
D) exposing consumers to unfair trade practices
E) slowing economic growth
Answer: E
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

71) An important force affecting business is the ________ movement, a movement of citizens
and government organized to strengthen the rights and powers of buyers in relation to sellers.
A) human rights
B) consumerist
C) environmental
D) self-determination
E) materialistic
Answer: B
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

72) A new market opportunity generally guarantees success, if the new product is technically
feasible.
Answer: FALSE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

73) Demographic developments are often unpredictable.

Answer: FALSE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

74) Population growth is highest in countries and communities that can least afford it.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

75) There is a global trend toward an aging population.

Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking
19
Copyright © 2016 Pearson Education, Inc.
76) The basis of cohort segmentation is that the experiences of key defining moments during the
time when an individual becomes an adult can influence his or her values, preferences, and
buying behaviors for the rest of his or her life.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

77) Marketing strategies of firms should not consider the ethnic and racial diversity existing in
their markets.
Answer: FALSE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

78) Consumers belonging to the same ethnic group have identical tastes and preferences.
Answer: FALSE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

79) Of all illiterate adults in the world, two-thirds are women.

Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments

80) Households comprised of single, separated, widowed, and divorced individuals generally
demand larger apartments and expensive appliances, furniture, and furnishings.
Answer: FALSE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

81) The available purchasing power in an economy depends on current income, prices, savings,
debt, and credit availability.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

82) Industrial economies provide limited marketing opportunities for luxurious goods.
Answer: FALSE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Diverse and multicultural work environments
20
Copyright © 2016 Pearson Education, Inc.
83) Markets with a segment of very wealthy consumers, but high income disparity, present few
opportunities to marketers.
Answer: FALSE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

84) Business has responded to increased awareness of nature's fragility and finiteness by
producing wider varieties of camping, hiking, boating, and fishing gear such as boots, tents,
backpacks, and accessories.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

85) Secondary beliefs and values are passed on from parents to children and reinforced by major
social institutions, making them very difficult to change by marketers.
Answer: FALSE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

86) Environmental regulations enforced by the government adversely affect automobile and steel
manufacturing companies.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

87) Corporate environmentalism recognizes the need to integrate environmental issues into the
firm's strategic plans.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

88) Firms that can develop substitute materials for finite nonrenewable resources have an
excellent opportunity.
Answer: TRUE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

21
Copyright © 2016 Pearson Education, Inc.
89) The time between introduction of products and peak production is shrinking.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Information technology

90) A growing portion of US R&D expenditures goes to the development as opposed to the
research side.
Answer: TRUE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

91) Regulation of technological changes has been relaxed by the US government over recent
years.
Answer: FALSE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

92) Environmental laws imposed by the government may at times create new business
opportunities.
Answer: TRUE
Diff: 1
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

93) Crocs clogs, Elmo TMX doll, and Pokemon gifts and toys are examples of megatrends,
which are unpredictable, short-lived, and without social, economic, and political significance.
Answer: FALSE
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Application of knowledge

22
Copyright © 2016 Pearson Education, Inc.
94) What are the different income-distribution patterns? How does income distribution in the
economies affect the marketing decision of the firms?
Answer: Marketers often distinguish countries using five income-distribution patterns:
1. very low incomes
2. mostly low incomes
3. very low, very high incomes
4. low, medium, high incomes
5. mostly medium incomes
The market would be very small in countries with type 1 or 2 income patterns and will be
considerably large in the countries with income patterns 3 and 4. In countries which have a
marked inequality in income distribution, companies tend to produce goods which are consumed
by the mass as well as produce certain luxurious goods to cater to the richer section.
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Reflective thinking

95) Discuss the impact of tougher environmental regulations on businesses, citing examples
whenever possible. Also, point out opportunities, if any, presented by these regulations.
Answer: Environmental regulations adversely affect certain industries. They increase the cost of
production for a range of industries. For instance, steel manufacturing units and firms which
generate electricity are required to install pollution control equipment. Automobile companies
are required to develop and use cleaner technology in their vehicles. However, businesses can
also achieve significant savings in their energy and gas bills by moving to environmentally
friendly ways to heat or cool their offices and run their manufacturing facilities. A shift to
paperless communication can cut costs and pollution. Plus, new business opportunities are
opening up in the "green" sectors as is evident in the companies that manufacture and sell
emission-control equipment and sell services to help companies adopt environmentally friendly
practices.
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

96) The United States has one of the world's highest percentages of college-educated citizens.
What can be the possible implications of this observation to the marketing environment of a US
firm?
Answer: The high percentage of college-educated citizens in the United States suggests that
there would be high demand for quality books, magazines, and travel. It also implies that there
would be a high supply of skilled potential employees. Students can point out other implications.
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

23
Copyright © 2016 Pearson Education, Inc.
97) Suppose the people of Greenworld, an island in the southwest Pacific, are primarily involved
in the direct procurement of edible plants and animals from the wild, foraging and hunting
without significant recourse to the domestication of either. On the contrary people in Newland, a
country rich in petroleum resources, export petroleum to the industrial countries. Which of the
two countries mentioned above is likely to offer greater marketing opportunities for luxurious
goods and why?
Answer: Newland is likely to produce greater marketing opportunities for luxurious goods as
people in this country are likely to have greater affordability than the people in Greenworld.
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking; Application of knowledge

98) Why do companies need to search for practical means to harness renewable sources of
energy like wind and water?
Answer: Prolonged exploitation of the conventional sources of energy like oil has led to an acute
shortage of these resources resulting in their prices increasing over time. Firms face substantial
cost increase as these resources are depleted, hence they need to search for means to harness the
infinite renewable resources.
Diff: 2
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

99) Assume that you are a marketing manager for a youth clothing manufacturer that has just
read about the megatrend of the "rising Hispanic influence" in the United States. Explain this
megatrend and indicate why it might be important to your company.
Answer: The Hispanic population grew by 43 percent, from 35.3 million to 50.5 million, in the
last ten years. Hispanics are having a huge impact on the food US consumers eat and the
clothing, music, and cars they buy. Companies are refining their products and marketing to reach
this fastest-growing and most influential consumer group.
Diff: 3
LO: 3.4: What are some influential macroenvironment developments?
AACSB: Analytical thinking

100) Companies can prepare as many as ________ different types of demand estimates.
A) 6
B) 30
C) 60
D) 90
E) 150
Answer: D
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

24
Copyright © 2016 Pearson Education, Inc.
101) The demand estimates of an organization comprise five space levels: world, country,
region, territory, and ________.
A) zone
B) organization
C) customer
D) product
E) input
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

102) The ________ market is the set of consumers with an adequate interest, income, and access
to a particular offer.
A) potential
B) available
C) target
D) penetrated
E) reserve
Answer: B
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

103) The ________ market is the part of the qualified available market the company decides to
pursue.
A) potential
B) available
C) target
D) penetrated
E) reserve
Answer: C
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

104) The ________ market is the set of consumers who are buying the company's product.
A) potential
B) available
C) target
D) penetrated
E) reserve
Answer: D
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

25
Copyright © 2016 Pearson Education, Inc.
105) When the government of any country restricts the sale of a particular commodity to certain
groups — for example, restricting sales of alcohol to individuals of age 21 and over — the
eligible consumers who have income, interest, access, and qualification constitute the ________
market.
A) accessible
B) target
C) potential
D) qualified potential
E) qualified available
Answer: E
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

106) Jeanine would like to own a Mercedes but is unable to afford one at this time. Jeanine is
part of the ________ market for this product.
A) potential
B) available
C) target
D) projected
E) penetrated
Answer: A
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

107) ________ for a product is the total volume that would be bought by a defined customer
group in a defined geographical area in a defined time period in a defined marketing
environment under a defined marketing program.
A) Company demand
B) Area market potential
C) Market demand
D) Company sales potential
E) Total market potential
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

26
Copyright © 2016 Pearson Education, Inc.
108) With an increase in marketing expenditure, market demand ________.
A) continues to rise at an increasing rate
B) initially increases and then declines
C) increases first at an increasing rate, then at a decreasing rate
D) decreases first and then spikes
E) continues to increase at a decreasing rate
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

109) The base sales of an organization that takes place even without any demand-stimulating
expenditures is called ________.
A) primary demand
B) market potential
C) market minimum
D) optimum demand
E) market demand
Answer: C
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

110) The distance between the market minimum and the market potential shows the overall
________.
A) marketing sensitivity of demand
B) market share of the firm
C) market forecast of the firm
D) product-penetration percentage
E) sales quota
Answer: A
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

111) A low market-penetration index indicates ________.

A) it will be expensive for the firms to attract the few remaining prospects
B) substantial growth potential for all firms
C) the rival firms try to capture greater market share by lowering their product price
D) the profit margins of the firms decline
E) the firms cannot raise demand substantially by raising its market expenditure
Answer: B
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

27
Copyright © 2016 Pearson Education, Inc.
112) Only one level of industry marketing expenditure will actually occur. The market demand
corresponding to this level is called the ________.
A) market minimum
B) market share
C) market forecast
D) market potential
E) company demand
Answer: C
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

113) A company can expect to expand its market share to a large extent when ________.
A) it has a high market-penetration index
B) its share-penetration index is low
C) its share-penetration index is high
D) its product-penetration percentage is high
E) it has a low market potential
Answer: B
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

114) During a recession, the market demand curve, which is a function of marketing expenditure,
________.
A) shifts upward
B) becomes vertical
C) remains unaffected
D) shifts downward
E) slopes downward
Answer: D
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

115) The sales goal set for a product line, company division, or sales representative of an
organization is called ________.
A) sales budget
B) company sales forecast
C) sales quota
D) company sales potential
E) market potential
Answer: C
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

28
Copyright © 2016 Pearson Education, Inc.
116) A ________ is a conservative estimate of the expected volume of sales for a business,
primarily for making purchasing, production, and cash flow decisions.
A) sales budget
B) company sales forecast
C) sales quota
D) company sales potential
E) market potential
Answer: A
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

117) A ________ is the limit approached by market demand as industry marketing expenditures
approach infinity for a given marketing environment.
A) sales budget
B) company sales forecast
C) sales quota
D) company sales potential
E) market potential
Answer: E
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

118) A ________ is the company's estimated share of market demand at alternative levels of
company marketing effort in a given time period.
A) sales budget
B) market demand
C) company demand
D) company sales potential
E) market potential
Answer: C
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

119) A ________ is the sales limit approached by company demand as company marketing effort
increases relative to that of competitors.
A) sales budget
B) market demand
C) company demand
D) company sales potential
E) market potential
Answer: D
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?

29
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120) A company's sales potential would be equal to market potential if ________.
A) the marketing expenditure of the company is reduced to zero
B) industry marketing expenditures approach infinity for a given marketing environment
C) the market is non-expandable
D) market minimum is equal to market potential
E) the company gets 100 percent share of the market
Answer: E
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?

121) A ________ is the maximum sales available to all firms in an industry during a given
period, under a given level of industry marketing effort and environmental conditions.
A) company demand
B) market demand
C) company sales potential
D) sales quota
E) total market potential
Answer: E
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?

122) Suppose an individual buyer purchases three pairs of shoes each year at $50 each pair and
that there are 50 million such consumers in the economy. Compute the total market potential for
shoes.
A) $5,000 million
B) $6,500 million
C) $7,500 million
D) $10,000 million
E) $75 billion
Answer: C
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

123) The ________ method of determining area market potential calls for identifying all the
potential buyers in each market and estimating their potential purchases.
A) group-discussion
B) market-test
C) market-buildup
D) brand development index
E) multiple-factor index
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

30
Copyright © 2016 Pearson Education, Inc.
124) An efficient method of estimating area market potentials makes use of the ________,
developed by the US Bureau of the Census in conjunction with the Canadian and Mexican
governments. It classifies all manufacturing into 20 major industry sectors and further breaks
each sector into a six-digit, hierarchical structure.
A) Nielsen Media Research
B) Multiple-Factor Index Method
C) Brand Development Index
D) Market Buildup Method
E) North American Industry Classification System
Answer: E
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

125) Which of the following organizations is likely to use the multiple-factor index method to
estimate the market potential?
A) a firm that manufactures auto parts
B) a firm that provides facility management services to large offices
C) a company that provides Web site development services for small businesses
D) a company that manufactures diagnostic machines for hospitals
E) a firm that manufactures fashionable clothes for teenagers
Answer: E
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

126) Which of the following is true of the various elements of the multi-factor index method of
estimating area market potentials?
A) Zip+4 code centers generally have stable boundaries and a population of about 4000.
B) The weights in the buying-power index are somewhat arbitrary.
C) Normally, the lower the BDI, the less room there is to grow the brand.
D) Census tracts are a little larger than neighborhoods.
E) This method is primarily used by business marketers.
Answer: B
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

31
Copyright © 2016 Pearson Education, Inc.
127) Suppose Concrete Express, a cement manufacturing firm, finds that its sales have increased
by 3 percent this year, while industry sales have increased by 5 percent. This implies that
________.
A) Concrete Express has acquired additional market share in relation to the cement industry
B) Concrete Express is losing its relative standing in the cement industry
C) other players in the industry are losing market share
D) the absolute market share of Concrete Express has declined
E) Concrete Express's position in relation to the industry has remain unchanged
Answer: B
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

128) For which of the following categories of products will demand forecasting be easiest?
A) commodities which are in the initial stage of their product life cycles
B) products which have many close substitutes in the market
C) goods which are produced in an oligopoly market
D) products whose sales fluctuate widely
E) products whose consumers are highly sensitive to change in price
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

129) Novamalt Inc., a manufacturer of health drinks, plans to introduce its new range of health
drinks for women into the market. It involves a specialized marketing research firm to forecast
the sales of this product. The research firm analyzes past buying behavior of customers and uses
time-series analysis for making the sales forecasts. Which of the following information bases is
being used by the research firm in this scenario?
A) what people say
B) what people do
C) what people have done
D) what people will do
E) what people speculate
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

32
Copyright © 2016 Pearson Education, Inc.
130) Time-series analysis based on past sales breaks past time series into four components —
trend, cycle, seasonal, and ________.
A) regular
B) annual
C) erratic
D) recurring
E) periodic
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

131) ________ projects the next period's sales by combining an average of past sales and the
most recent sales, giving more weight to the latter.
A) Time-series analysis
B) Statistical demand analysis
C) Econometric analysis
D) Cost effectiveness analysis
E) Exponential smoothing
Answer: E
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

132) ________ measures the impact of a set of causal factors (such as income, marketing
expenditures, and price) on the sales level.
A) Time-series analysis
B) Statistical demand analysis
C) Econometric analysis
D) Cost effectiveness analysis
E) Exponential smoothing
Answer: B
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

133) The sales forecasting method of ________ builds sets of equations that describe a system
and statistically derives the different parameters that make up the equations statistically.
A) time-series analysis
B) statistical demand analysis
C) econometric analysis
D) cost effectiveness analysis
E) exponential smoothing
Answer: C
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking
33
Copyright © 2016 Pearson Education, Inc.
134) The available market is the set of consumers who have interest, income, and access to a
particular offer.
Answer: TRUE
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

135) The distance between the market minimum and the market potential shows the overall
product penetration percentage.
Answer: FALSE
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

136) The absolute limit of company demand is the market potential; the two would be equal if
the company captured 100 percent of the market.
Answer: TRUE
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

137) If a cheese factory was interested in estimating the market potential for a new light cheese
and estimated the potential by multiplying a base number (population) by several adjusting
percentages (e.g., personal discretionary income per capita, average percentage of discretionary
income spent on food, etc.), it would be using the chain-ratio method to estimate market
potential.
Answer: TRUE
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

138) Normally, the lower the market-penetration index, the higher the marketing opportunity in
that there is room to grow the brand.
Answer: FALSE
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

139) Demand estimates prepared by companies are based on four different time periods.
Answer: FALSE
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?

34
Copyright © 2016 Pearson Education, Inc.
140) The penetrated market is the set of consumers who have an interest in a market offer but do
not have the accessibility.
Answer: FALSE
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

141) Market demand for a product is the total volume that would be bought by a defined
customer group in a defined geographical area in a defined time period in a defined marketing
environment under a defined marketing program.
Answer: TRUE
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

142) The market forecast shows expected market demand, not maximum market demand.
Answer: TRUE
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

143) Companies assume that the lower the product-penetration percentage, the lower will be the
market potential.
Answer: FALSE
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

144) In order to estimate future demand, companies commonly prepare a company sales forecast
first, followed by an industry forecast, and finally a macroeconomic forecast.
Answer: FALSE
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

145) Forecasting is the art of anticipating what buyers are likely to do under a given set of
conditions.
Answer: TRUE
Diff: 1
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

35
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146) Sales reps might have better insight into developing trends than any other group, and
forecasting might give them greater confidence in their sales quotas and more incentive to
achieve them.
Answer: TRUE
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

147) What does total market potential mean? How can it be estimated?
Answer: Total market potential is the maximum sales available to all firms in an industry during
a given period, under a given level of industry marketing effort and environmental conditions.
A common way to estimate total market potential is to multiply the potential number of buyers
by the average quantity each purchases, times the price. A variation on this method is the chain-
ratio method, which multiplies a base number by several adjusting percentages.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

148) Suppose a cotton-textile company wants to estimate the area market potential for its high
quality fabrics in Houston. List the possible steps that the marketers will follow to compute the
area market potential.
Answer: The marketers may follow the following steps: Identify all the potential buyers of
textile in the area, primarily the firms manufacturing readymade garments in that area. In order
to do that, the company may compile a list from a directory of all manufacturing establishments
in the area. Then it can estimate the quantity of fabrics each firm might purchase to produce
garments worth $1 million. Compiling the quantity required by each of the firms, the marketers
can estimate the area market potential of the fabric produced by the textile company.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Application of knowledge

149) Briefly describe the methods of forecasting future demand on the basis of past sales.
Answer: The methods are:
1. Time-series analysis, that breaks past time series into four components (trend, cycle,
seasonal, and erratic) and projects them into the future
2. Exponential smoothing, that projects the next period's sales by combining an average of past
sales and the most recent sales, giving more weight to the latter
3. Statistical demand analysis, which measures the impact of a set of causal factors (such as
income, marketing expenditures, and price) on the sales level
4. Econometric analysis, which builds sets of equations that describe a system and statistically
derives the different parameters that make up the equations statistically.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

36
Copyright © 2016 Pearson Education, Inc.
150) Organix Internationals LLC is planning to introduce its new range of breakfast cereals. List
the different product levels that it considers while formulating the demand estimates for the new
product.
Answer: The six different product levels that Organix needs to consider to formulate the demand
estimates for its new range of cereals are all sales, industry sales, company sales, product line
sales, product from sales, and product item sales.
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Application of knowledge

151) Suppose the Belgian government prohibits sale of cigarettes to people below 20 years of
age. Who are likely to comprise the qualified available market for Dunhill, a manufacturer of
herbal cigarettes in Belgium?
Answer: Eligible adults (i.e., people above 20 years of age), who have interest and affordability
constitute the qualified available market for the cigarettes in Belgium.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

152) If the ratio between current and potential levels of market demand is close to one, what can
you infer about the industry's market-penetration index and the growth potential of the firms in
the industry?
Answer: The industry has a high market-penetration index and there is a negligible growth
potential for all the firms in the industry.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

153) How does the marketing environment determine the position of the market demand
function?
Answer: During economic prosperity the market demand function shifts up as every dollar spent
in stimulating demand leads to a greater market demand. Whereas during recession the market
demand function shifts downward as an equal increase in marketing expenditure leads to a
smaller increase in market demand.
Diff: 3
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Reflective thinking

154) Suppose 100 million people consume black tea every year, and an average consumer
consumes 8 kgs of tea at an average price of $3 per kg. Compute the total market potential for
tea.
Answer: $2,400 million
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

37
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155) Simpsons, a manufacturer of air conditioners, finds that its sales potential is less than its
market potential even when it spends a sufficient amount on advertisements and after sale
services. What is the basic reason behind such an observation by the marketers of Simpsons?
Answer: Company sales potential is less than the market potential, even when a company's
marketing expenditures increase considerably because each firm has a set of loyal consumers
unresponsive to other companies' efforts to woo them.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

156) Two major methods of computing area market potential are market build-up method and
multiple factor-index method. Which of these methods will Nexus Enterprises, a manufacturer of
auto parts implement to estimate its market potential?
Answer: Nexus Enterprise will implement market-build up method to estimate its area market
potential as this method is primarily used by business marketers such as Nexus.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

157) Suppose the brand development index of the detergent manufactured by Fasclean in Boston
is 90 and in Austin is 48. Compare the marketing opportunity of Fasclean detergent in the two
cities.
Answer: Fasclean has a greater marketing opportunity for its detergent in Austin than it has in
Boston.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

158) Suppose Redbus, a player in the small car market, is planning to launch its new range of
hybrid cars. It decides to estimate the future demand for its new car before launching it in the
market. If interviewing consumers is not practical, what alternative technique might it resort to?
Answer: When buyer interviewing is impractical, Redbus may ask its sales representatives to
estimate the future sales or use expert opinions.
Diff: 2
LO: 3.5: How can companies accurately measure and forecast demand?
AACSB: Analytical thinking

38
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