Deck 11: Developing and Managing Goods and Services

Question 1

How do providers of time-sensitive services smooth the fluctuations in demand from times of peak demand to times of off-peak demand?

Answer 1

Providers of time-sensitive services often use demand-based pricing to manage the problem of balancing supply and demand. They charge top prices during peak demand and lower prices during off-peak demand to encourage more customers to use the service.

Question 2

In what ways do perishability and intangibility affect the pricing of services?

Answer 2

Services should be priced with consumer price sensitivity, the nature of the transaction, and its costs in mind. Prices for services can be established on several different bases. Some services use demand-based pricing. When demand for a service is high, the price is also high; when demand for a service is low, so is the price. The perishability of services means that when demand is low, the unused capacity cannot be stored and is therefore lost forever. Some services are very time- sensitive because a significant number of customers desire the service at a particular time. This point in time is called peak demand. A provider of time-sensitive services brings in most of its revenue during peak demand. Providers of time-sensitive services often use demand-based pricing to manage the problem of balancing supply and demand. Because of the intangible nature of services, customers rely heavily at times on price as an indicator of quality. If customers perceive the available services in a service category as being similar in quality, and if the quality of such services is difficult to judge even after these services are purchased, customers may seek out the lowest-priced provider.

Question 3

Explain the concept of product deletion. List and explain the ways in which a product can be deleted.

Answer 3

Product deletion is the process of eliminating a product from the product mix, usually because it no longer satisfies a sufficient number of customers. A declining product reduces an organization's profitability and drains resources that could be used to modify other products or develop new ones. A marginal product may require shorter production runs, which can increase per-unit production costs. Finally, when a dying product completely loses favor with customers, the negative feelings may transfer to some of the company's other products.
There are three basic ways to delete a product: phase it out, run it out, or drop it immediately. A phase-out allows the product to decline without a change in the marketing strategy; no attempt is made to give the product new life. A run-out exploits any strengths left in the product. The third alternative, an immediate drop of an unprofitable product, is the best strategy when losses are too great to prolong the product's life.

Question 4

List and discuss the seven phases of the new-product development process.

Question 5

Why is it often difficult for organizations to delete products?

Question 6

Services are vulnerable to heterogeneity. Explain this issue, and discuss different ways in which heterogeneity can occur in service delivery.

Question 7

Identify and describe the three major ways to modify existing products, and give an example of each.

Question 8

Why do brands require repositioning? What are the ways in which repositioning can be accomplished?

Question 9

Discuss the advantages of test marketing. Also, state the risks associated with it.

Question 10

List and explain the six distinguishing characteristics of services.

Question 11

Compare and contrast a line extension and a product modification.

Question 12

Identify and explain the dimensions of product quality.

Question 13

Describe product positioning. List and explain the bases for positioning.

Question 14

Explain how the characteristics of services affect the development of marketing mixes.

Question 15

Explain the roles of "promises" and "trust" in successful marketing of a service.

Question 16

Discuss the three approaches that marketers use to differentiate their products from their competitors' products.

Question 17

How does high degree of customer contact affect service performance?

Question 18

Explain the concept testing phase of the new-product development process, and state its importance.

Question 19

How do marketers promote services?

Question 20

Explain the business analysis phase of the new-product development process.

Question 21

Conair, a manufacturer of appliances and personal care products, adds an electrical component to its curling iron that automatically switches off the curling iron when it has been idle for more than an hour. This improvement would best be classified as a(n):

A) product line extension.
B) quality modification.
C) aesthetic modification.
D) brand extension.
E) functional modification.

Question 22

In product modification, three conditions must be met to improve a firm's product mix: the product must be modifiable, customers must be able to perceive that a modification has been made, and:

A) the modification should make the product more consistent with customers' desires.
B) competing companies should not be aware of planned product modifications.
C) management must avoid functional modifications in the product to evade any risk associated with the safety element of the modified product.
D) management must essentially enhance the modified product's quality and lower its price to increase its customer base.
E) resources needed for product modification should be limited in order to lower production costs.

Question 23

The major drawback of using aesthetic modifications in products is:

A) that the cost of the modifications is very high.
B) that the value of the modification is determined subjectively.
C) the need for redesign of the product.
D) its dependency on quality and functional modifications.
E) that there is no differentiation for the product in the market.

Question 24

Outback Steakhouse, a restaurant chain, wants to expand its range of dishes on its menu. The restaurant managers conduct surveys on customers to determine the dishes that would appeal to the customers. Outback is currently in the phase of the new-product development process.

A) business analysis
B) product development
C) test marketing
D) screening
E) idea generation

Question 25

Bauman Flooring found a supplier of very inexpensive fibers that could be used to produce low-grade carpeting at a very low cost. Because Bauman had been facing stiff competition in the medium-grade carpet industry, it started using the new material in all of its carpeting and also reduced its prices. This is an example of a(n):

A) aesthetic modification.
B) line extension.
C) brand extension.
D) functional modification.
E) quality modification.

Question 26

Line extensions are more common than new products because line extensions:

A) only focus on increasing sales within the existing market segment.
B) are guaranteed to succeed in the marketplace.
C) are a less expensive and lower-risk alternative for increasing sales.
D) require no market research.
E) do not keep the original product in the line after extension.

Question 27

Which of the following is a primary distinction between a line extension and a product modification?

A) A product modification results in a completely new product, while a line extension is simply changing an old product.
B) Both line extension and product modification involve alteration of an existing product, but the alteration is more dramatic with a product modification than it is with a line extension.
C) A line extension is designed to aptly meet the needs of an existing market segment, while a product modification targets entirely new market segments.
D) With a product modification, the original product is replaced in the product line, while with a line extension, the original product remains intact in the product line.
E) A line extension consists of strictly aesthetic changes to an existing product, whereas a product modification consists of changes in quality and functionality.

Question 28

When marketers at Nabisco met with groups of young adults to identify the types of snacks that youths prefer, they were engaging in the phase of the new-product development process.

A) idea generation
B) business analysis
C) test marketing
D) commercialization
E) product development

Question 29

If the manufacturer of Cool Whip were to introduce a chocolate-flavored whipped cream and still continue to produce its existing flavors of whipped cream, this would be an example of a:

A) brand extension.
B) line extension.
C) functional modification.
D) quality modification.
E) product bundling.

Question 30

Morgan is interested in upgrading to a new sofa for her apartment. She browses the Internet to check new models of her favorite sofa brand and gets information on the style and color of couches. However, she can't actually sit on a new model of sofa to determine its comfort level. Morgan is able to evaluate the modifications to the sofa, but not the modifications.

A) quality; functional
B) quality; aesthetic
C) aesthetic; functional
D) functional; quality
E) functional; aesthetic

Question 31

Which of the following best illustrates functional modification?

A) Campbell's adds large chunks of higher-grade chicken in its classic chicken noodle soup.
B) A smoke detector is upgraded to be more sensitive to smoke at farther distances.
C) Motorola uses long-lasting batteries for its cell phones to facilitate quicker charging.
D) A manufacturer of primer and sealer introduces an odorless variety.
E) Friskies changes the ingredients in its cat food to a taste that is preferred by most cats.

Question 32

Compare and contrast a product manager and a brand manager.

Question 33

When Chrysler produces new model vehicles, it discontinues production of previous year's model. However, when Apple brings out a new iPhone, it continues to produce the previous version for at least some period of time. Chrysler's new­product strategy is an example of a(n) , while Apple's strategy is an example of a(n) .

A) functional modification; quality modification
B) product modification; line extension
C) product lining; product bundling
D) product extension; brand extension
E) brand extension; product bundling

Question 34

If Stonefield School Furniture Company provides standard primary school chairs in new colors to match the interiors of schools, this modification is most likely to be viewed as a(n) modification.

A) aesthetic
B) functional
C) quality
D) operational
E) feature

Question 35

is the development of a product that is closely related to one or more products in a firm's existing product line but is designed specifically to meet somewhat different customer needs.

A) Brand extension
B) Line extension
C) Brand stretching
D) Product bundling
E) Product churning

Question 36

Discuss the factors that affect the delivery of services. How can service marketers use these factors to their advantage?

Question 37

All of the following are major steps in developing new products except:

A) test marketing.
B) competitor analysis.
C) screening.
D) commercialization.
E) idea generation.

Question 38

Coca-Cola has expanded to Diet Coke, Cherry Coke, and Caffeine-free Coca-Cola, to name a few. These are examples of:

A) product modification.
B) brand extension.
C) product bundling.
D) line extension.
E) brand equity.

Question 39

Changes that affect the sensory appeal of a product by altering its taste, texture, sound, smell, or visual characteristics are called modifications.

A) aesthetic
B) functional
C) operational
D) quality
E) feature

Question 40

Sony's design of its new large-screen television set with smoked-glass control panel cover and other visual changes would be classified as a(n) modification; changes to make the TV's remote easier to use would be classified as a(n) modification.

A) functional; aesthetic
B) aesthetic; functional
C) functional; quality
D) quality; aesthetic
E) quality; functional

Question 41

Karla tells Jeff that she likes his team's idea about new shock-resistance running shoes but wants him to consider some figures regarding anticipated sales, costs, and resulting profits. To which of the following stages of the new- product development process is she asking Jeff to proceed?

A) Idea generation
B) Business analysis
C) Commercialization
D) Test marketing
E) Screening

Question 42

A group of managers has been assigned the task of developing a new product. The group is now in the process of assessing several ideas to determine whether they are consistent with the firm's overall objectives and resources. The managers are at the stage of the new-product development process.

A) business analysis
B) product testing
C) idea generation
D) commercialization
E) screening

Question 43

"Is the demand strong enough to justify entering the market?" is a question that marketers ask during the phase of the new-product development process.

A) screening
B) idea generation
C) business analysis
D) commercialization
E) cannibalization

Question 44

Compared with other phases of the new-product development process, the largest number of new product ideas is rejected during the phase.

A) idea generation
B) concept testing
C) business analysis
D) screening
E) test marketing

Question 45

Which of the following phases of new-product development is likely the most cost-effective procedure?

A) Commercialization
B) Concept testing
C) Business analysis
D) Product development
E) Test marketing

Question 46

Marketers at Starbucks generated several ideas for new food products. Management assessed these ideas to determine whether or not they were consistent with Starbucks' objectives and resources. Several product ideas were dropped after this analysis. The next stage of development for the remaining product ideas is:

A) product development.
B) idea screening.
C) concept testing.
D) business analysis.
E) test marketing.

Question 47

Concerns about cannibalization of current product sales must be addressed in the phase of the new-product development process.

A) screening
B) concept testing
C) business analysis
D) product development
E) test marketing

Question 48

Which of the following is a phase of the new-product development process that involves determining whether a product idea is compatible with company objectives, needs, and resources on a general level?

A) Product development
B) Evaluation of competitor's efforts
C) Screening
D) Idea generation
E) Business analysis

Question 49

Clive is an engineer involved in the product development of a new plastic laminate that would be sold to manufacturers of kitchen counter tops. Currently, Clive and his colleagues are considering the potential for profitability of the new product. They are likely in the phase of the new-product development process.

A) idea generation
B) market testing
C) business analysis
D) concept testing
E) compatibility research

Question 50

The phase of the new-product development process in which a small sample of potential buyers is presented with a product idea through a written or oral description in order to determine their attitudes and initial buying intentions regarding a product is called:

A) concept testing.
B) customer response testing.
C) idea analysis.
D) test marketing.
E) screening.

Question 51

As Justin works on the prototype of a new action-oriented computer game, he is engaging in the phase of the new-product development process.

A) idea generation
B) commercialization
C) test marketing
D) screening
E) product development

Question 52

After building a prototype of his new device, Brad is asked to conduct rigorous functional testing to examine whether the device meets performance and safety qualifications. This is part of the phase of the new- product development process.

A) product design
B) screening
C) product development
D) concept testing
E) test marketing

Question 53

Breakeven analysis is a tool that marketers are most likely to employ during the stage of the new-product development process.

A) screening
B) concept testing
C) business analysis
D) product development
E) test marketing

Question 54

The phase of the new-product development process when an organization determines the technical feasibility of producing a product at a cost that results in a reasonable selling price is:

A) test marketing.
B) commercialization.
C) concept testing.
D) product development.
E) business analysis.

Question 55

Kara is a member of the product development team at a company that manufactures sports equipment. During a recent meeting, one of the team members asked, "What level of quality are we building into the camping gear?" In this case, Kara and her team are most likely in the phase of the new-product development process.

A) commercialization
B) concept testing
C) business analysis
D) product development
E) test marketing

Question 56

Which of the following is a stage of the new-product development process where customers are exposed to a new product idea for the first time?

A) Screening
B) Concept testing
C) Business analysis
D) Product development
E) Test marketing

Question 57

Marketers begin to make decisions about labeling, packaging, branding, pricing, and promotion during the phase of the new-product development process.

A) commercialization
B) screening
C) concept testing
D) product development
E) test marketing

Question 58

Ideally, test marketing should follow the stage in the new-product development process.

A) commercialization
B) business analysis
C) screening
D) idea generation
E) product development

Question 59

Marcellis is a product manager for a major electronics company. His current project deals with the development and introduction of a new smartphone. Since there are a number of smartphones currently out on the market, Marcellis is concerned about product failure. Currently, Marcellis and his team are in the screening phase of the new product development process. Has his team already passed the phase which is best able to measure the product failure concern?

A) Yes, the best phase is the idea generation phase.
B) Yes, the best phase is the concept testing phase.
C) No, the best phase is the concept testing phase.
D) Yes, the best phase is the test marketing phase.
E) No, the best phase is the test marketing phase.

Question 60

Patrick is a member of a consumer market research panel and has been introduced to a company's new idea for energy drinks. Some of the questions he has been asked are, "How often would you buy this product?" and "Which features are of little or no interest to you?" Patrick is most likely participating in the phase of the new- product development process.

A) concept testing
B) business analysis
C) idea screening
D) idea generation
E) test marketing

Question 61

Victor thinks that a Lexus coupe is a quality vehicle. Yet compared to a Mercedes Benz, he feels the quality of a Lexus is not as high. This demonstrates that the dimension of is relative or difficult to describe without a basis of comparison.

A) consistency of quality
B) level of quality
C) product differentiation
D) quality rollout
E) product positioning

Question 62

Which of the following best defines product features?

A) The sensory appeal of a product
B) Mechanical efforts or activities a company provides that add value to a product
C) Specific design characteristics that allow a product to perform certain tasks
D) How a product is conceived, planned, and produced with the necessary functions
E) The physical appearance of a product

Question 63

The Home Depot differentiates its product offerings from its competition with stores like Sam's, by offering delivery and installation, warranties, and repairs. The Home Depot is differentiating through:

A) product ancillaries.
B) company quality.
C) customer services.
D) company features.
E) product features.

Question 64

Schwinn has developed a new bicycle that has the strongest and lightest-weight frame of any bicycle outside of those made for racing. Furthermore, Schwinn has added several new features to its bike that are attractive to individuals who work as "bike messengers" in large, urban cities. Since no other company makes a bike that has these specific attributes, Schwinn is creating a:

A) commercialization.
B) brand extension.
C) product line.
D) product position.
E) product differentiation.

Question 65

The ability of a product to provide the same level of quality over time is called:

A) consistency.
B) longevity.
C) variability.
D) functionality.
E) accuracy.

Question 66

During the commercialization phase of the new-product development process, a new product is launched in stages, starting in one geographic area and gradually expanding into adjacent areas. This gradual introduction of the product is known as:

A) market development.
B) concept testing.
C) rollout.
D) market extension.
E) jamming.

Question 67

Which of the following is a disadvantage of gradually introducing a new product to a market?

A) It increases the risk of introducing a new product.
B) It makes a firm more susceptible to losses.
C) It prohibits fine-tuning of the marketing mix often leading to customer dissatisfaction.
D) It allows competitors to monitor the results of the new product.
E) It prevents product differentiation based on geographical differences.

Question 68

The test marketing phase of the new-product development process:

A) is an extension of the product development phase.
B) should be conducted immediately after business analysis.
C) eliminates the risk of product failure.
D) is a sample launching of the entire marketing mix.
E) prevents competitors from copying the product.

Question 69

A suggested approach to deleting products, in which each product is evaluated periodically to determine its impact on the overall effectiveness of a firm's product mix, is called a(n):

A) evaluation study.
B) formal evaluation.
C) product inspection.
D) systematic review.
E) reassessment examination.

Question 70

Which of the following statements is true of the test marketing stage of the new-product development process?

A) Test marketing is simply an extension of the screening and development stages.
B) All the products that undergo test marketing must be launched.
C) Test marketing allows marketers to expose a product in a natural marketing environment to measure its sales performance.
D) In test marketing, a small sample of potential buyers is presented with a product idea to determine their attitudes regarding the product.
E) Test marketing enables companies to eliminate the risk of product failure.

Question 71

One disadvantage of test marketing a new product is that:

A) the product is distributed on a regional basis.
B) competitors may copy the product and rush to introduce a similar product.
C) the results give little indication of the product's future success.
D) price, advertising, and packaging cannot be varied from market to market.
E) it does not allow marketers to measure the extent of repeat purchases.

Question 72

The overall characteristics of a product that allow it to perform as expected in satisfying customer needs is called:

A) quality.
B) longevity.
C) variability.
D) functionality.
E) design.

Question 73

Stacey and Evan are preparing budgets for a new product as well as finalizing plans for the full-scale manufacturing and marketing of the new Genie-Vac. They are in the phase of the new-product development process.

A) test marketing
B) business analysis
C) concept testing
D) product development
E) commercialization

Question 74

The management team at Tablerock Foods believes that it has come up with a delicious low-calorie dessert, but it is uncertain about the type of promotional and pricing campaigns to be used that can ensure better receptivity by consumers. In this instance, the management team should probably proceed to the stage of the new-product development process.

A) idea generation
B) commercialization
C) screening
D) test marketing
E) product development

Question 75

When Natalie and Chris analyze the results from a recently completed test market to determine if any changes in the marketing mix of the product are needed, they are in the phase of the new-product development process.

A) idea generation
B) commercialization
C) concept testing
D) business analysis
E) screening

Question 76

PepsiCo has developed a new flavor of soft drink that it wants to test to determine reactions of probable buyers. Which of the following test-market characteristics would be least useful to PepsiCo when testing the new soft drink?

A) There are research and audit services available in the test area.
B) Retailers in the test area would be cooperative.
C) Testing efforts would not be easily jammed by competitors.
D) Tourism is a major industry in the test area.
E) The test area has stable year-round sale of soft drinks.

Question 77

Seth recently purchased a new Brunswick Billiards table for his recreation room. The next day after delivery, Seth noticed a fault with one of the table pockets. Since it was a weekend, he didn't expect that it could be repaired immediately. However, when he called a Brunswick store to leave a message, the call was answered by a repair representative who assured Seth that he would come over to Seth's house for the repair service within an hour. Brunswick Billiards is most likely differentiating itself through:

A) product styling.
B) product support services.
C) product positioning.
D) product features.
E) customer requests.

Question 78

Top managers at Cincinnati Microwave believe that they have a successful working prototype of their new radar detector and plan to advance directly to regional commercialization of the new product. In this instance, they are contemplating skipping the phase of the new-product development process.

A) screening
B) test marketing
C) product development
D) business analysis
E) idea generation

Question 79

Frito Lay introduces a new variety of Doritos initially in Ft. Worth, Texas; Columbia, South Carolina; Peoria, Illinois; and Spokane, Washington. After its initial success, Frito Lay markets the Doritos in the whole of the selected states, then in the adjacent states, and finally in the entire country. Frito-Lay is using a for its new variety of Doritos.

A) multi-stage introduction
B) rollout approach
C) test-market expansion
D) mass commercialization
E) trickle-down approach

Question 80

TerraCycle is a company that takes waste and "upcycles" it into new products. Currently, TerraCycle markets a bicycle rack made of recycled plastic to schools, parks, and cities. This rack does not scratch or damage the bikes as concrete and steel racks do, and is eco-friendly since it is made of waste material. TerraCycle is differentiating its product based on:

A) intended use.
B) support services.
C) durability.
D) product features.
E) aesthetic modification.