Marketing management 13th edition kotler test bank

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Chapter 7: Analyzing Business Markets GENERAL CONCEPT QUESTIONS Multiple Choice 1. To create and capture value, sellers need to understand business organizations’ needs, resources, policies, and ________. a. demands b. protocols c. strategies d. buying procedures e. personnel policies Answer: d Page: 181 Difficulty: Easy 2. Webster and Wind define ________ as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers. a. marketing channels b. organizational buying c. demand-oriented buying d. purchasing e. inventory control Answer: b Page: 182 Difficulty: Medium AACSB: Analytic Skills 3. The ________ consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. a. business market b. consumer market c. e-commerce market d. global market e. supplier market Answer: a Page: 182 Difficulty: Medium AACSB: Analytic Skills 4. Business markets differ significantly consumer markets in that business markets possess all of the following characteristics EXCEPT ________. a. fewer, larger buyers b. close supplier–customer relationship c. professional purchasing d. inverted demand e. multiple sales calls Answer: d Pages: 182–185 Difficulty: Hard AACSB: Reflective Thinking

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Chapter 7: Analyzing Business Markets

5. All of the following would be among the major industries that make up the business market EXCEPT ________. a. agriculture, forestry, and fisheries b. manufacturing c. construction d. banking, finance, and insurance e. the Internet Answer: e Page: 182 Difficulty: Hard 6. The business marketer normally deals with ________ buyers than the consumer marketer does. a. more and larger b. more and smaller c. fewer and larger d. fewer and smaller e. the same number of Answer: c Page: 182 Difficulty: Medium AACSB: Analytic Skills 7. Trained purchasing agents, who must follow their organization’s ________, often purchase business goods. a. culture b. past purchasing history c. purchasing policies, constraints, and requirements d. needs e. financial budgets Answer: c Pages: 183–184 Difficulty: Medium 8. There are a series of guidelines for selling to small businesses. Which of the following should NOT be among those guidelines? a. Don’t waste their time. b. Do keep it simple. c. Do use the Internet. d. Don’t forget about direct contact. e. Do lump small and midsize businesses together for efficiency sake.

Answer: e Page: 184 Difficulty: Medium AACSB: Reflective Thinking 9. Ultimately, the amount of steel sold to General Motors depends on the consumer’s demand for GM cars and trucks. From the standpoint of the steel manufacturer, which of the following demand forms is most pertinent? a. Derived demand b. Inelastic demand c. Geographic demand d. Relational demand e. Static demand Answer: a Page: 185 Difficulty: Hard AACSB: Reflective Thinking

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10. The demand for business goods is ultimately derived from the demand for ________. a. raw materials b. consumer goods c. electronics d. business solutions e. e-commerce Answer: b Page: 185 Difficulty: Easy 11. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Economists refer to this as the ________. a. derived demand b. inelastic demand c. acceleration effect d. straight rebuy e. sales cycle Answer: c Page: 185 Difficulty: Medium AACSB: Analytic Skills 12. The total demand for many business goods and services is ________ —that is, not much affected by price changes. a. derived b. fluctuating c. accelerated d. multiple e. inelastic Answer: e Page: 185 Difficulty: Medium AACSB: Analytic Skills 13. The business buyer faces many decisions in making a purchase. The number of decisions depends on the buying situation. All of the following contribute to the number of decisions required EXCEPT the ________. a. complexity of the problem being solved b. newness of the buying requirement c. number of people involved d. applicability of situation to mission statement e. time required Answer: d Page: 185 Difficulty: Hard AACSB: Reflective Thinking 14. The purchasing department buys office supplies on a routine basis. This type of purchase is classified as a ________. a. straight rebuy b. modified rebuy c. new task d. secondary purchase e. preordained purchase Answer: a Page: 185 Difficulty: Easy AACSB: Analytic Skills

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15. Purchasing a new security system or renting a new office building is best characterized as a ________. a. modified rebuy b. regular buy c. straight rebuy d. new rebuy e. new task Answer: e Page: 185 Difficulty: Medium 16. In a ________ purchasing situation, the buyer wants to make some change to existing product specifications, prices, delivery requirements, or other terms. a. modified rebuy b. regular buy c. straight rebuy d. new rebuy e. new task Answer: a Page: 185 Difficulty: Medium AACSB: Analytic Skills 17. The business buyer makes the fewest decisions in the ________. a. modified rebuy b. regular buy c. straight rebuy d. new rebuy e. new task Answer: c Page: 186 Difficulty: Medium 18. Many business buyers prefer to buy a total solution to a problem from one seller. ________ is the correct term for this process. a. Channel consolidation b. Systems buying c. Vertical buying d. Horizontal buying e. Supply buying Answer: b Page: 186 Difficulty: Medium AACSB: Analytic Skills 19. In order to successfully develop customer reference stories, firms should ________. a. state the customer’s needs in compelling terms b. use very few direct customer quotes c. avoid referencing the barriers to satisfying customer needs d. describe the company’s solution in terms of products and services e. focus on qualitative results Answer: a Page: 187 Difficulty: Medium AACSB: Reflective Thinking

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20. Xerox offers a ________ approach to prospective clients when it offers a complete turnkey solution, including the operation and management of the client’s information and communication need. a. supply buying b. primary buying c. systems buying d. co-op buying system e. direct buying Answer: c Page: 187 Difficulty: Medium AACSB: Analytic Skills 21. If Ampex Support Systems is the single supplier for a local manufacturing company’s MRO (maintenance, repair, operating) supplies and needs, Ampex Support Systems is considered as providing ________ for the manufacturer. a. systems buying b. purchasing support c. turnkey logistics d. decision support e. systems contracting Answer: e Page: 187 Difficulty: Hard AACSB: Analytic Skills 22. ________ is a key industrial marketing strategy in bidding to build large-scale industrial products (e.g., dams, pipelines, et cetera). a. Systems contracting b. Systems buying c. Systems selling d. Solutions buying e. Turnkey logistics Answer: c Page: 187 Difficulty: Hard AACSB: Reflective Thinking 23. ________ is composed of all parties who participate in the purchasing decisionmaking process and share common goals and risks associated with their decisions. a. The buying center b. The marketing sales team c. Strategic management d. Engineering support e. The logistics center Answer: a Page: 188 Difficulty: Medium AACSB: Analytic Skills 24. In the purchasing decision process, the ________ are those who request that something be purchased. They may be users or others in the organization. a. users b. initiators c. influencers d. deciders e. approvers Answer: b Page: 188 Difficulty: Easy

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25. In the purchasing decision process, the ________ are those who have the power to prevent sellers or information from reaching members of the buying center. a. gatekeepers b. buyers c. initiators d. approvers e. deciders Answer: a Page: 188 Difficulty: Medium AACSB: Analytic Skills 26. In the purchasing decision process, the major role of ________ is in selecting vendors and negotiating. a. gatekeepers b. buyers c. initiators d. approvers e. deciders Answer: b Page: 188 Difficulty: Medium AACSB: Analytic Skills 27. The typical buying center has a minimum of ________ members. a. 2–3 b. 3–4 c. 4–5 d. 5–6 e. 10 Answer: d Page: 188 Difficulty: Hard 28. Webster cautions that ultimately, ________ make purchasing decisions. a. only senior managers b. individuals, not organizations, c. organizations, not individuals, d. third parties e. systems contractors Answer: b Page: 189 Difficulty: Medium AACSB: Reflective Thinking 29. Business buyers are ultimately purchasing solutions to two problems: the organization’s economic and strategic problem and ________. a. their own personal need for individual achievement and reward b. the community’s continued health and well-being c. the fulfillment of the company’s social impact goals d. to maximize overall firm performance e. none of the above Answer: a Page: 189 Difficulty: Medium AACSB: Reflective Thinking

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30. Small sellers should concentrate their marketing efforts on reaching ________. a. approvers b. initiators c. key buying influencers d. users e. the purchasing staff Answer: c Page: 190 Difficulty: Medium AACSB: Reflective Thinking 31. In principle, business buyers seek to ________ in relation a market offering’s costs. a. spread risks b. obtain the highest benefit package c. maintain everyday low prices d. outsource as much as is possible e. eliminate partners’ shares in profits as much as possible Answer: b Page: 191 Difficulty: Hard AACSB: Reflective Thinking 32. In the past, what position did purchasing departments hold in the management hierarchy of most organizations? a. A high level because of their role in managing the company’s costs b. A moderate level because of their spotty record on controlling costs c. A low level despite managing more than half of the company’s costs d. A secretive position e. There has been no determination of this position.

Answer: c Page: 191 Difficulty: Hard 33. The new, more strategically oriented purchasing departments have a mission. Which of the following most accurately describes that mission? a. Make the most profit possible and remain independent of entanglements. b. Approach every purchasing opportunity as means to create interdependency. c. Seek the best value from fewer and better suppliers. d. Outsource the supply function. e. Abandon all strategies except for systems selling and buying.

Answer: c Page: 191 Difficulty: Hard AACSB: Reflective Thinking 34. Most purchasing professionals describe their jobs as more ________, technical, team oriented, and involving more responsibility than ever before. a. risky b. strategic c. ethically difficult d. Web based e. human based Answer: b Page: 192 Difficulty: Hard

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35. Robinson and his associates have identified eight stages and called them buyphases.

This model is called the ________ framework. a. buygrid b. buying/selling c. seller-centered d. commercial e. buy-analysis Answer: a Page: 192 Difficulty: Medium AACSB: Analytic Skills 36. The first step (buyphase) in the straight rebuy buyclass is ________. a. problem recognition b. general need description c. product specification d. supplier search e. proposal solicitation Answer: c Page: 192 Difficulty: Hard AACSB: Analytic Skills 37. A new-task buyclass decision begins with which of the following buyphases? a. Problem recognition b. General need description c. Product specification d. Supplier search e. Proposal solicitation Answer: a Page: 192 Difficulty: Medium 38. Business marketers can stimulate problem recognition by ________. a. trade directories b. direct mail, telemarketing, and calling on prospects c. encouraging the Better Business Bureau to release statistics d. consumer advertising e. requesting testimonials from existing customers Answer: b Page: 193 Difficulty: Medium AACSB: Analytic Skills 39. With respect to e-procurement, Coca-Cola, Sara Lee, Kraft, PepsiCo, P&G, and several other companies joined forces to form a ________ called Transora to use their combined leverage to obtain lower prices for raw materials. a. manufacturer’s co-op b. supplier’s co-op c. middleman group d. buying alliance e. cabal Answer: d Page: 194 Difficulty: Medium

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40. Identifying good leads and converting them to sales requires the whole marketing and sales organization to work in a coordinated, multichannel approach in the role of ________ to prospective customers . a. product specification b. price de-escalation c. systems selling d. trusted advisor e. strategic alliance Answer: d Page: 194 Difficulty: Medium AACSB: Reflective Thinking 41. With respect to e-procurement, Web sites are organized around two types of e-hubs: ________. a. vertical and horizontal hubs b. vertical and functional hubs c. functional hubs and organizational hubs d. supplier and user hubs e. manufacturer and supplier hubs Answer: b Page: 194 Difficulty: Hard AACSB: Analytic Skills 42. Moving into e-procurement has many benefits. Which of the following would not be among those benefits? a. Aggregating purchasing across departments gains larger volume discounts. b. Aggregating purchasing gains centrally negotiated volume discounts. c. There is less buying of substandard goods from suppliers not on the approved list. d. A smaller purchasing staff is required. e. Purchasing gains a significant leverage with top management because of its management team.

Answer: e Page: 194 Difficulty: Hard AACSB: Reflective Thinking 43. In the proposal solicitation process, ________ should be marketing documents that describe value and benefits in customer terms. a. written proposals b. oral proposals c. e-proposals d. alliance proposals e. global proposals Answer: a Page: 194 Difficulty: Medium AACSB: Reflective Thinking 44. As an alternative to reducing price, sellers may handle price-oriented buyers by establishing any of the following purchasing conditions EXCEPT ________. a. limiting the quantity that can be purchased b. no refunds c. no adjustments d. no services e. no customer advertising Answer: e Page: 195 Difficulty: Medium AACSB: Reflective Thinking

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45. The ________ approach to consumer research asks customers to attach a monetary value to alternative levels of a given attribute. The value of a given configuration is determined by adding the average values of each of the given attributes. a. benchmarking b. compositional c. importance rating d. focus-group e. conjoint analysis Answer: b Page: 196 Difficulty: Hard AACSB: Analytic Skills 46. All of the following are methods of assessing customer value EXCEPT ________. a. direct survey questions b. exit interviewing c. focus-group value assessment d. conjoint analysis e. benchmarks Answer: b Page: 196 Difficulty: Medium AACSB: Analytic Skills 47. A supplier signs an agreement with a customer that states $350,000 in savings will be earned by the customer over the next 18 months in an exchange for a tenfold increase in the customer’s share of supplies ordered by the customer. This is an example of ________. a. solution selling b. consultative selling c. risk and gain sharing d. strategic alignment e. demand shifting Answer: c Page: 197 Difficulty: Medium 48. Using the ________ form of solution selling, W.W. Grainger employees work at large customer facilities to reduce materials-management costs. a. solutions to partnerships b. solutions to alter corporate culture c. solutions to enhance customer revenues d. solutions to decrease customer risks e. solutions to reduce customer costs Answer: e Page: 197 Difficulty: Medium AACSB: Analytic Skills 49. Which of the following would NOT be among those advantages gained through leasing heavy equipment such as machinery and trucks, rather than purchasing it? a. Higher-quality products b. Conserving capital c. Getting the latest products d. Receiving better service e. Some tax advantages Answer: a Page: 198 Difficulty: Hard AACSB: Reflective Thinking

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50. Several major companies regard ________ as a major responsibility of their purchasing managers. a. forming networks for future business b. assuring quality conformance c. being fair with all parties d. using a team approach in negotiations e. long-term supply planning Answer: e Page: 198 Difficulty: Hard AACSB: Reflective Thinking 51. Which of the following methods may be used by buyers to review the performance of chosen suppliers? a. The buyer may contact the end users and ask for their evaluations. b. The buyer may rate the supplier on several criteria using a weighted-score method. c. The buyer might aggregate the cost of poor performance to come up with adjusted costs of purchase, including price. d. All of the above e. None of the above Answer: d Page: 198 Difficulty: Medium AACSB: Analytic Skills 52. Which of the following reflects high trust between business sellers and buyers? a. Distorted and hidden information b. Incentive alignment for seller, not customer gains c. Limited or biased product comparisons and advice d. Minimal customer education and support e. Customers help design products individually and through committees Answer: e Page: 200 Difficulty: Medium AACSB: Reflective Thinking 53. Research has found that buyer–suppler relationships differed according to four factors. Which of the following would NOT be among those factors? a. Importance of supply b. Complexity of supply c. Availability of alternatives d. Supply market dynamism e. Demand market conservatism Answer: e Page: 201 Difficulty: Medium AACSB: Reflective Thinking 54. Which of the following relationships is characterized as being one that has much trust and commitment leading to a true partnership? a. Mutually adaptive b. Collaborative c. Basic buying and selling d. Customer supply e. Cooperative systems Answer: b Page: 201 Difficulty: Medium AACSB: Analytic Skills

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55. In the ________ category of buyer–supplier relationship, although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s needs without expecting much adaptation or change on the part of the customer in exchange. a. contractual transaction b. cooperative system c. collaborative d. mutually adaptive e. customer is king Answer: e Page: 201 Difficulty: Medium AACSB: Analytic Skills 56. In the ________ category of buyer–supplier relationships, competition rather than cooperation is the dominant form of governance. a. basic buying and selling b. bare bones c. contractual transaction d. customer supply e. collaborative Answer: d Page: 201 Difficulty: Medium AACSB: Analytic Skills 57. Vertical coordination may increase the risk to consumer’s and supplier’s ________ (e.g., those expenditures tailored to a particular company and value chain partner). a. logistics channel b. independent operations c. specific investments d. leverage ability e. liquidity situation Answer: c Page: 201 Difficulty: Hard AACSB: Reflective Thinking 58. When buyers cannot easily monitor supplier performance, the supplier might shirk or cheat and not deliver the expected value. ________ is “some form of cheating or undersupply relative to an implicit or explicit contract.” a. Institutional sale b. Opportunism c. Business buying d. Vertical integration e. Contractual transactionism Answer: b Page: 202 Difficulty: Medium 59. The ________ market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care. a. vertical b. nonprofit c. spot d. secondary business e. institutional Answer: e Page: 202 Difficulty: Medium AACSB: Analytic Skills

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60. In most countries, ________ are the major buyers of goods and services. a. consumer packaged-goods companies b. government organizations c. health services vendors d. educational institutions e. households Answer: b Page: 203 Difficulty: Medium

True/False 61. Webster and Wind define organizational buying as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

Answer: True Page: 182 Difficulty: Easy AACSB: Analytic Skills 62. More dollars and items change hands in sales to business buyers than to consumers.

Answer: True Page: 182 Difficulty: Medium 63. The business market is essentially the same thing as the consumer market.

Answer: False Page: 182 Difficulty: Easy AACSB: Reflective Thinking 64. Business buyers often select suppliers who also buy from them.

Answer: True Page: 183 Difficulty: Medium 65. Small business owners typically engage in long-range planning in order to effectively budget for purchases over the upcoming three to five years.

Answer: False Page: 184 Difficulty: Medium AACSB: Reflective Thinking 66. The best way to generate leads among small businesses is for business suppliers to cold call them.

Answer: False Page: 184 Difficulty: Medium AACSB: Reflective Thinking 67. Business buyers often buy directly from manufacturers rather than through intermediaries, especially items that are technically complex or expensive.

Answer: True Page: 185 Difficulty: Medium 68. The demand for business goods is ultimately derived from the demand for raw materials.

Answer: False Page: 185 Difficulty: Medium AACSB: Reflective Thinking 69. The total demand for many business goods and services is inelastic—that is, not much affected by price changes.

Answer: True Page: 185 Difficulty: Easy

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70. In the straight rebuy, “out-suppliers” try to get a small order and then enlarge their purchase share over time.

Answer: True Page: 185 Difficulty: Easy AACSB: Analytic Skills 71. Over time, new-buy situations become straight rebuys and routine purchase behavior.

Answer: True Page: 186 Difficulty: Medium AACSB: Reflective Thinking 72. Most business buyers, preferring to spread their risk, reject what is called systems buying from one seller.

Answer: False Page: 186 Difficulty: Medium AACSB: Reflective Thinking 73. Failure to quantify a customer’s results in customer references can be a detriment to the effectiveness of those references.

Answer: True Page: 187 Difficulty: Medium AACSB: Reflective Thinking 74. Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects such as dams or pipelines.

Answer: True Page: 187 Difficulty: Medium AACSB: Analytic Skills 75. Sellers benefit from systems contracting through lower operating costs as a result of steady demand and reduced paperwork.

Answer: True Page: 187 Difficulty: Medium AACSB: Reflective Thinking 76. The buying center is where consumers go to purchase their goods and services.

Answer: False Page: 188 Difficulty: Easy AACSB: Analytic Skills 77. Initiators are those who authorize the proposed action of deciders or buyers.

Answer: False Page: 188 Difficulty: Medium AACSB: Analytic Skills 78. Users perform all seven roles in the buying center because of their direct tie to the product and what it is supposed to do.

Answer: False Page: 188 Difficulty: Medium AACSB: Analytic Skills 79. Personal needs motivate the behavior of individuals, but organizational needs legitimate the buying-decision process and its outcomes.

Answer: True Page: 189 Difficulty: Medium AACSB: Reflective Thinking 80. In the business market, small sellers concentrate on reaching as many participants as possible because their chances of success are slim.

Answer: False Page: 190 Difficulty: Medium AACSB: Reflective Thinking 81. Minority suppliers are the fastest-growing segment of today’s business landscape, reflecting the importance of supplier diversity to business buyers.

Answer: True Page: 191 Difficulty: Hard AACSB: Reflective Thinking

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82. Today, purchasing departments occupy a relatively low position in the management hierarchy and answer primarily to the vice-president of marketing.

Answer: False Page: 191 Difficulty: Medium 83. According to the buygrid framework described in the text, a performance review completes the buygrid as a last step.

Answer: True Page: 192 Difficulty: Medium 84. The buying process begins when someone places an order with a sales representative.

Answer: False Page: 193 Difficulty: Easy AACSB: Analytic Skills 85. Product value analysis (PVA) attempts to reduce costs by studying components to see if they can be redesigned, standardized, or produced more cheaply.

Answer: True Page: 193 Difficulty: Medium AACSB: Analytic Skills 86. In barter markets, participants offer to trade goods or services.

Answer: True Page: 193 Difficulty: Medium AACSB: Analytic Skills 87. With respect to proposal solicitation in B2B, sellers begin the process by requesting permission to make a proposal rather than waiting for the buyer to request one.

Answer: False Page: 194 Difficulty: Medium AACSB: Analytic Skills 88. In general, buyers review the product and its price rather than any other considerations about the seller as a buying decision is made.

Answer: False Pages: 194–195 Difficulty: Easy AACSB: Reflective Thinking 89. With respect to assessing customer value, in conjoint analysis customers are asked to rank their preference for alternative market offerings or concepts.

Answer: True Page: 196 Difficulty: Medium AACSB: Analytic Skills 90. One of the forms of solution selling is to provide solutions to enhance customer revenues.

Answer: True Page: 197 Difficulty: Medium AACSB: Analytic Skills 91. Companies are increasingly reducing the number of suppliers they utilize, and there is a trend toward single sourcing.

Answer: True Page: 197 Difficulty: Medium 92. Most performance reviews are conducted by outside auditing agencies to avoid bias and internal discrepancies.

Answer: False Page: 198 Difficulty: Medium AACSB: Reflective Thinking 93. Corporate credibility depends on corporate expertise, corporate trustworthiness, and corporate likeability.

Answer: True Page: 200 Difficulty: Medium AACSB: Analytic Skills

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94. One of the problems facing B2B on the Web is that many firms often impose more stringent requirements on their online business partners than they do on non-online partners.

Answer: True Page: 200 Difficulty: Medium 95. One of the eight categories of buyer–seller relationships is the contractual transaction that generally shows low levels of trust, cooperation, and interaction; exchange is defined by formal contract.

Answer: True Page: 201 Difficulty: Hard AACSB: Reflective Thinking 96. In the “customer is king” category of buyer–seller relationship, the category is characterized as being one that it relatively simple where routine exchanges with moderately high levels of cooperation and information exchange occurs.

Answer: False Page: 201 Difficulty: Hard AACSB: Analytic Skills 97. Contracts are always sufficient to govern supplier transactions and prevent supplier opportunism.

Answer: False Page: 202 Difficulty: Medium AACSB: Reflective Thinking 98. A good illustration of a member of the institutional market would be Boeing because it is a member of the aviation institution structure.

Answer: False Page: 202 Difficulty: Medium AACSB: Analytic Skills 99. The U.S. government is the largest customer in the world.

Answer: True Page: 203 Difficulty: Easy 100. Today, all companies that sell to the U.S. government use a marketing orientation because of the special relationship required.

Answer: False Page: 204 Difficulty: Medium

Essay 101.

Business markets have several characteristics that contrast sharply with those of consumer markets. Name and briefly characterize five of those characteristics.

Suggested Answer: The characteristics are: (1) fewer, larger buyers, (2) close supplier–customer relationship, (3) professional purchasing, (4) multiple buying influences, (5) multiple sales calls, (6) derived demand, (7) inelastic demand, (8) fluctuating demand, (9) geographically concentrated buyers, and (10) direct purchasing. See chapter section for brief characterizations.

Pages: 182–185 Difficulty: Medium AACSB: Reflective Thinking

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102.

Illustrate the differences between a straight rebuy, modified rebuy, and a new-task purchase.

Suggested Answer: In a straight rebuy, the purchasing department reorders on a routine basis and choose from suppliers on an approved list. In a modified rebuy, the buyer wants to modify product specifications, prices, delivery requirements, or other terms. Lastly, in the new-task purchase, a purchaser buys a product or service for the first time. For additional differences, see chapter section.

Page: 185 Difficulty: Easy AACSB: Analytic Skills

103.

Describe the practices of systems buying and systems contracting.

Suggested Answer: Systems buying involves buying a total solution to a problem from one seller. Systems contracting is a variant of systems selling in which a single supplier provides the buyer with his entire requirement for maintenance, repair, and operating supplies. During the contract period, the supplier manages the customer’s inventory.

Pages: 186–187 Difficulty: Medium

104.

List and briefly describe the seven roles played by members of a buying center.

Suggested Answer: The roles are: (1) initiators, (2) users, (3) influencers, (4) deciders, (5) approvers, (6) buyers, and (7) gatekeepers. For descriptions, see chapter section.

Page: 188 Difficulty: Hard

105.

List the stages (buyphases) of the industrial buying process.

Suggested Answer: The major stages in the industrial buying process include: (1) problem recognition, (2) general need description, (3) product specification, (4) supplier search, (5) proposal solicitation, (6) supplier selection, (7) order-routine specification, and (8) performance review.

Page: 192 Difficulty: Medium AACSB: Analytic Skills

106.

Identify four types of contract restrictions that business suppliers can use to protect their margins when dealing with price-oriented buyers.

Suggested Answer: Some companies handle price-oriented buyers by setting a lower price but establishing restrictive conditions, such as: (1) limited quantities, (2) no refunds, (3) no adjustments, and (4) no services.

Page: 195 Difficulty: Easy AACSB: Analytic Skills

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107.

Explain the concept of solution selling. Give one example of this approach.

Suggested Answer: Solution selling approaches buyers from a solutions-toproblems approach rather than a product-purchase approach. Three forms include: (1) solutions to enhance customer revenues, (2) solutions to decrease customer risks, and (3) solutions to reduce customer costs. Students may expound on any of the above. For additional information, see chapter section.

Pages: 195–197 Difficulty: Medium AACSB: Reflective Thinking

108.

List and briefly characterize five methods of assessing customer value.

Suggested Answer: There are eight suggested methods for assessing customer value. The students may list and describe any five of the following: (1) internal engineering assessment, (2) field value-in-use assessment, (3) focus-group value assessment, (4) direct survey questions, (5) conjoint analysis, (6) benchmarks, (7) compositional approach, and (8) importance ratings. See chapter section for descriptions of each assessment method.

Page: 196 Difficulty: Hard AACSB: Analytic Skills

109.

Identify the five factors affecting partner interdependence and environmental uncertainty that influence the development of a relationship between business partners.

Suggested Answer: The five factors affecting partner interdependence and environmental uncertainty are: (1) one-sided market growth during the relationship formation stage; (2) information asymmetry between partners such that a partnership would generate more profits than if the partner attempted to invade the other firm’s area; (3) high barriers to entry for at least one partner that prevents the other partner from entering the business; (4) dependence asymmetry such that one partner is more able to control or influence the other’s conduct; and (5) one partner benefits from economies of scale related to the relationship.

Pages: 199–201 Difficulty: Hard AACSB: Reflective Thinking

110.

Researchers have found that buyer–supplier relationships differed according to four factors: availability of alternatives; importance of supply; complexity of supply; and supply market dynamism. Based on these four factors, they classified buyer–supplier relationships into eight different categories. What are those categories?

Suggested Answer: The categories are: (1) basic buying and selling, (2) bare bones, (3) contractual transaction, (4) customer supply, (5) cooperative systems, (6) collaborative, (7) mutually adaptive, and (8) customer is king. For additional information, see the specific chapter section.

Page: 201 Difficulty: Hard AACSB: Analytic Skills

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APPLICATION QUESTIONS Multiple Choice 111.

All of the following are considered to be guidelines for selling to small businesses EXCEPT ________. a. do not use the Internet b. do keep it simple c. don’t lump small and midsize businesses together d. don’t forget about direct contact e. do provide support after the sale Answer: a Page: 184 Difficulty: Medium AACSB: Analytic Skills 112.

Sometimes a rise of only 10% in consumer demand can cause as much as a 200% rise in business demand for products for the next period. This is an example of ________. a. inelastic demand b. direct purchasing c. fluctuating demand d. derived demand e. a straight rebuy Answer: c Page: 185 Difficulty: Medium 113.

Shoe manufacturers are not going to buy much more leather if the price of leather falls, nor will they buy much less leather if the price rises, unless they can find satisfactory substitutes. This is an example of ________. a. inelastic demand b. direct purchasing c. the acceleration effect d. derived demand e. a straight rebuy Answer: a Page: 185 Difficulty: Medium AACSB: Analytic Skills Jason Riggs’ company is considered to be an in-supplier for a lawn mower manufacturer. However, recently the lawn mower company has put out a memo to in- and out-suppliers indicating that it would like to modify product specifications and delivery schedules. Which of the following buying situations is most likely to be in operation given this data? a. Straight rebuy b. Elastic rebuy c. Fluctuating rebuy d. Flatten rebuy e. Modified rebuy Answer: e Page: 185 Difficulty: Medium AACSB: Analytic Skills 114.

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115.

Orica Ltd. competes in the market for commercial explosives and recently changed its business model to the management of an entire blast in a quarry, selling contracts for “broken rock,” rather than just selling explosives. This customer-solution-based approach to the sale of explosives is an example of ________. a. systems selling b. straight rebuying c. customer referencing d. derived demand e. channel consolidation Answer: a Pages: 186–187 Difficulty: Medium AACSB: Reflective Thinking 116.

If you decided to go into the systems contracting business, which of the following categories would constitute your main area of expertise, the service you provide for customers? a. Computer applications b. Database management c. Manufacturing d. Promotion management e. MRO (maintenance, repair, operating) supplies Answer: e Page: 187 Difficulty: Hard AACSB: Reflective Thinking 117.

Think about what you have learned about a buying center. If you performed the role of the ________, you would be the person that has the power to prevent sellers or information from reaching other members of the buying center. a. initiator b. influencer c. decider d. gatekeeper e. approver Answer: d Page: 188 Difficulty: Medium AACSB: Analytic Skills When purchasing disposable surgical gowns, Mercy Hospital’s vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns. If the findings favor disposable gowns, then the operating-room administrator compares various competitors’ products and prices and makes a choice. Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand. In this situation, the operating-room administrator performs the role of the ________. a. decider b. initiator c. user d. gatekeeper e. influencer Answer: a Page: 188 Difficulty: Hard AACSB: Reflective Thinking 118.

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When purchasing disposable surgical gowns, Mercy Hospital’s vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns. If the findings favor disposable gowns, then the operating-room administrator compares various competitors’ products and prices and makes a choice. Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand. In this situation, the surgeons perform the role of the ________. a. decider b. initiator c. user d. gatekeeper e. buyer Answer: c Page: 188 Difficulty: Hard AACSB: Reflective Thinking 119.

120.

According to Webster, with respect to buying center influences, senior managers should remember that people are ________. a. not buying products—they are buying solutions to problems b. buying products that they personally will not use c. buying surrogates that must appreciate that role d. are human shopping bots e. limited in their scope of overall business operations Answer: a Page: 189 Difficulty: Medium AACSB: Reflective Thinking 121.

Consider yourself as an upper-level marketing executive of a large seller of fleet trucks. Which of the following strategies would be most appropriate in reaching buying center targets? a. Concentrate on key buying influencers. b. Use multilevel in-depth selling. c. Use trade-based promotions. d. Begin all sales efforts with the secretarial support staff. e. Move all operations to the Net. Answer: b Page: 190 Difficulty: Hard AACSB: Analytic Skills 122.

The new, more strategically oriented purchasing departments have a mission to ________. a. always make a profit b. always take the lowest bid c. seek the best value from fewer and better suppliers d. continue to seek outsourcing as their primary strategy e. use consultants whenever possible Answer: c Page: 191 Difficulty: Medium AACSB: Analytic Skills

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123.

In reordering office supplies, the only buyphases that the buyer passes through are the product specification phase and the ________ phase. a. problem recognition b. general need description c. order-routine specification d. supplier search e. performance review Answer: e Page: 192 Difficulty: Hard AACSB: Analytic Skills 124.

Business buyers may get new ideas at a trade show, see an ad, or receive a call from a sales representative who offers a better product or a lower price compared to the current in-supplier. These situations spur the ________ buyphase. a. problem recognition b. general need description c. order-routine specification d. supplier search e. performance review Answer: a Page: 193 Difficulty: Hard AACSB: Analytic Skills 125.

The Tuxax Company has decided that handling price-oriented buyers can be profitable under certain conditions. Conditions that would make good sense for Tuxax Company would be all of the following EXCEPT ________. a. limiting the quantity that can be purchased b. no services c. no adjustments d. no refunds e. no packaging or crating Answer: e Page: 195 Difficulty: Easy AACSB: Reflective Thinking 126.

In the ________ method for assessing customer value, customers are asked how costs of using a new product compared to those of using an incumbent. a. direct survey b. importance ratings c. field value-in-use assessment d. benchmarking e. conjoint analysis Answer: c Page: 196 Difficulty: Medium 127.

Hendrix Voeders sales consultants help farmers deliver an incremental animal weight gain of 5% to 10% over competitors. This is an example of ________. a. solutions selling to enhance customer revenues b. solutions selling to reduce customer costs c. solutions selling to decrease customer risks d. solutions selling to simplify customer purchasing e. all of the above Answer: a Page: 197 Difficulty: Medium AACSB: Reflective Thinking

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128.

The relationship between an company and its office supplies vendor is probably best described as ________. a. basic buying and selling b. contractual transaction c. collaborative d. customer supply e. customer is king Answer: d Page: 201 Difficulty: Medium AACSB: Reflective Thinking 129.

Value Central gives certain suppliers access to its sophisticated and detailed daily, individual store-based sales data. In exchange, those suppliers are responsible for managing Value Central’s inventory of their products. This relationship is best described as ________. a. basic buying and selling b. contractual transaction c. collaborative d. customer supply e. customer is king Answer: c Page: 201 Difficulty: Hard 130.

The closest relationships between customers and suppliers arise when ________. a. supply is important to the customer b. procurement is simple c. there are many undifferentiated vendors in the marketplace d. the customer is highly price sensitive e. all of the above Answer: a Page: 201 Difficulty: Hard AACSB: Reflective Thinking

Short Answer 131.

The business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. List the major industries that make up the business market.

Suggested Answer: The major industries making up the business market are agriculture, forestry, and fisheries; mining; manufacturing; construction; transportation; communication; public utilities; banking, finance, and insurance; distribution; and services.

Page: 182 Difficulty: Medium AACSB: Analytic Skills

132.

Define organizational buying.

Suggested Answer: Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

Page: 182 Difficulty: Easy AACSB: Analytic Skills

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133.

Selling to small businesses presents a huge opportunity and huge challenges.

What are some of the challenges of selling to small businesses?

Suggested Answer: The small business market is large and fragmented by industry, size, and number of years of operation. Additionally, small business owners are notably averse to long-range planning and have an “I’ll buy it when I need it” decision-making style.

Page: 184 Difficulty: Medium

134.

Explain the concept of derived demand.

Suggested Answer: The demand for business goods is ultimately derived from the demand for consumer goods. Consumer demand for business’ end products drives their production. Production of those end products drives business demand for the inputs to those production processes.

Page: 185 Difficulty: Medium AACSB: Reflective Thinking

135.

Explain how fluctuating demand impacts business markets differently than consumer markets.

Suggested Answer: The demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce additional output. Economists refer to this as the acceleration effect.

Page: 185 Difficulty: Medium

136.

If you were a purchasing agent facing a modified rebuy situation, how would you describe that situation?

Suggested Answer: The buyer wants to modify product specifications, prices, delivery requirements, or other items. The modified rebuy usually involves additional participants on both sides.

Page: 185 Difficulty: Easy AACSB: Reflective Thinking

137.

In systems buying, the U.S. government often solicits bids from prime contractors. What do prime contractors do?

Suggested Answer: The government solicits bids from prime contractors who assemble the package or system. The contractor who was awarded the contract would be responsible for bidding out and assembling the system’s subcomponents from second-tier contractors. Thus, the prime contractor would provide a turnkey solution.

Pages: 186–187 Difficulty: Medium AACSB: Analytic Skills

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138.

Many firms depend on the opinions and experiences of others in evaluating a new business proposal from a new company. Identify five keys to successfully developing customer reference stories to respond to these demands.

Suggested Answer: Students may choose five of the following seven keys to successfully developing customer reference stories: (1) state the customer’s needs in compelling terms; (2) emphasize the barriers to satisfying customer needs; (3) describe your company’s solution in terms of value; (4) list quantified results, especially those that affect ROI; (5) differentiate your offering from those of competitors; (6) provide a brief comprehensive summary; and (7) include numerous customer quotes.

Page: 187 Difficulty: Hard AACSB: Communications

139.

Systems selling is a key industrial marketing strategy in bidding to build largescale industrial projects. Competition for these projects is fierce. What are the main areas of competition for these project engineering firms?

Suggested Answer: Primary competitive areas include: price, quality, reliability, and other attributes to win contracts.

Page: 187 Difficulty: Easy AACSB: Analytic Skills

140.

Webster and Wind call the decision-making unit of a buying organization the buying center. What is the composition of the buying center?

Suggested Answer: It is composed of “all those individuals and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions.” The buying center includes all members of the organization who play any of seven roles in the purchase decision process. Buying centers usually include several participants with differing interests, authority, status, and persuasiveness. Each member of the buying center is likely to give priority to very different decision criteria.

Page: 188 Difficulty: Medium AACSB: Analytic Skills

141.

Webster cautions that ultimately, individuals, not organizations, make purchasing decisions. What does this mean for business suppliers?

Suggested Answer: Individuals are motivated by their own needs and perceptions in attempting to maximize the rewards offered by the organization. Personal needs motivate the behavior of individuals, but organizational needs legitimate the buying-decision process and its outcomes. People are buying solutions to two problems: the organization’s economic and strategic problem and their own personal need for individual achievement.

Page: 189 Difficulty: Medium AACSB: Reflective Thinking

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142.

How do large and small sellers differ in their approaches to buying center targeting?

Suggested Answer: Small sellers concentrate on reaching the key buying influencers in order to make the most effective use of their small sales force.

Large sellers go for multilevel in-depth selling to reach as many participants as possible to increase sales volumes and strengthen relationships.

Page: 190 Difficulty: Medium AACSB: Reflective Thinking

143.

E-procurement Web sites are organized around two types of e-hubs. If you were in the advertising business and were seeking to take advantage of e-procurement, what type of e-hub should be constructed by your company?

Suggested Answer: The two types of hubs are vertical hubs (centered on industries such as plastics) and functional hubs (centered on functions such as advertising). Therefore, you would construct a functional hub.

Page: 194 Difficulty: Medium AACSB: Analytic Skills

144.

Assume that you have been given the task of assessing customer value at your organization. Further, you have been instructed to use the “compositional approach” to make this assessment. Describe what you would do if you used the compositional approach in assessing customer value.

Suggested Answer: In the compositional approach, customers are asked to attach a monetary value to alternative levels of a given attribute. This is repeated for other attributes. The values are then added together for any offer configuration.

Page: 196 Difficulty: Hard AACSB: Analytic Skills

145.

As part of the buyer selection process, buying centers must decide how many suppliers to use. What might motivate a buyer to use multiple sources?

Suggested Answer: Companies that use multiple sources often cite the threat of a labor strike as the biggest deterrent to single sourcing. Another reason companies may be reluctant to use a single source is that they fear they’ll become too comfortable with the relationship and lose their competitive edge.

Page: 197 Difficulty: Medium AACSB: Reflective Thinking

146.

In the buygrid framework model, where the major stages of the industrial buying process are listed and characterized, supplier selection is an important process.

What follows supplier selection and what occurs in this phase?

Suggested Answer: The step that follows supplier selection is order-routine specification. After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties, and so on.

Pages: 197–198 Difficulty: Medium AACSB: Analytic Skills

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147.

As a seller in the business market, you have promised your customers that you have corporate credibility as one of your corporate goals. What three factors will have some bearing on whether you will be able to meet your goal and promise?

Suggested Answer: The three factors are: (1) corporate expertise, (2) corporate trustworthiness, and (3) corporate likability. In other words, a credible firm is seen as being good at what it does, it keeps its customers’ best interests in mind, and it is enjoyable to work with.

Page: 200 Difficulty: Hard AACSB: Ethical Reasoning

148.

Researchers have found that buyer–supplier relationships could be classified into eight different categories. What category would be appropriate for a relationship where, although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s needs without expecting much adaptation or change on the part of the customer in exchange?

Suggested Answer: The appropriate category would be the “customer is king” category.

Page: 201 Difficulty: Hard AACSB: Reflective Thinking

149.

Vertical coordination can facilitate stronger customer–seller ties but at the same time may increase the risk to the customer’s and supplier’s specific investments.

What are specific investments and why are they risky?

Suggested Answer: Specific investments are those expenditures tailored to a particular company and value chain partner. These might include investments in company-specific training, equipment, and operating procedures or systems.

Because these investments are partially sunk, they lock the firm that makes them into a particular relationship. A buyer may be vulnerable to holdup because of switching costs; a supplier may be more vulnerable to holdup in future contracts because of dedicated assets and/or expropriation of technology/knowledge.

Pages: 201–202 Difficulty: Medium AACSB: Ethical Reasoning

150.

Your organization is considering selling its products to the institutional market.

What type of customers will you be making your appeals to? Give specific examples.

Suggested Answer: The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and services to people in their care.

Page: 202 Difficulty: Easy AACSB: Reflective Thinking

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