Download Marketing Management Exam I Answers and suggestions: 51. Given

Marketing Management Exam I
Answers and suggestions:
51. Given that demand is elastic, if the price increases, total revenue will:
If demand is elastic, a change in price will result in a greater proportional change in demand. If that change of
demand per unit is greater than the price increase per unit, revenues will decrease. That is highly likely as elasticity
increases.
52. What is “de-marketing?” Give an example.
De-marketing is a method of controlling demand. It typically occurs when there is an upper limit to the number of
customers that can be accommodated… i.e., a ski slope or a movie theater. If customers are turned away, it creates
“ill will.” It can also be used to stabilize demand… i.e., making sure a flight is full. All 4-Ps can be used to achieve
this.
53. Define each of the 4-Ps as thought of in the value model of marketing.
Price: the value of a transaction
Product: the thing(s) that is (are) exchanged to increase the value to an exchanger
Promotion: communication process of the exchange that can add value
Distribution; (self-explanatory)
54. Under what conditions are the “80/20 rule” violated?
Typically under three conditions:
1. The product is something that is almost universally utilized (toilet paper).
2. The product is one that is habitual (drugs).
3. A product that is in general use but highly segmented (perhaps tattoos).
55. Why is the supply-demand curve not linear?
There could be a number of reasons given. For example, since changes in prices and supply are not perceptually or
objectively equal, the relationship can’t be linear across a wide spectrum of change. Consider buying new cars.
What would happen to the demand for cars if the prices were raised by $2,000? If car A cost $10,000, the change in
demand is not the same as for a car that would sell for $60,000. Supply is not linear as well. For example, you
can’t extract the same amount of oil from an oil field forever even if the demand is there. Other modules may have
offered you even more examples.
56. Give an example of a new product that is “dynamically continuous.”
By definition: The development of new products that are different from previously available products but that do not
strikingly change buying or usage patterns. Thus the company remains in the same product and markets but
continues to improve the products. This needs to be done dynamically (to save time and increase effectiveness), as
well as continuously, because of the effect of the product life cycle. Compare discontinuous innovation.
57. If Acme LTD manufactured pharmaceuticals for milk cows, what product would be considered for them
to be an horizontal extension?
This one is almost self-evident.
58. Compare and contrast “monopolistic competition” with a “monopoly.”
Monopolistically competitive markets are ones in which there are many producers and many consumers in the
market, and no business has total control over the market price. Typically, customers perceive that there are nonprice differences among the competitors' products. There are also few barriers for entry into the market, and
companies feel that they have a degree of control over price. We all know what a monopoly is.
59. Outline at least four problems with being in a market with pure price competition.
The best way for anyone to answer this question is to think of the airline industry. Think about the problems they
and their customers’ experience.
60. Price is one of the 4-Ps, how does it support the other three?
So many possible answers that no answer is needed here.
61. Draw a supply/demand curve that would support prestige pricing.
Everyone got this one correct.
62. Use Freud’s idea of the how the mind develops to explain why his theory is important to marketing.
Freud’s ideas are important to marketing in a number of ways:
1. People are influenced by symbols and subconscious perceived stimuli.
2. Since the id “never forgets and never forgoes” but remains subconscious in adults, a customer may never
be fully and consciously aware of their true motivations.
3. What makes no sense in analyzing actual consumer behavior, may make very good sense if seen from a
more holistic psychological perspective.
63. How does Thorndike’s Law of Effect affect marketing strategy?
His law is simplicity itself. The consequence of behavior determines the probability that the behavior will be
repeated. Go to a new restaurant… find the food rewarding… more likely to return. Go to a new restaurant… have a
bad experience (doesn’t matter why)… less likely to go back.
64. How do marketers utilize cognitive dissonance before a purchase to advance relationship marketing
goals?
There are many correct answers to this question. Before a purchase, the positive valence for purchase begins to
decrease primary because of reaction to a perceived threat to freedom or choice. If I buy this house… I’m stuck with
it… what if there is something wrong with it? Marketers can short circuit this natural response by completing the
sale as quickly as possible, but that may or may not be a good example of relationship marketing. If a trusting
communication can be established, the marketers can overcome the perception of a loss of freedom in a number of
ways including trust, more options, methods of getting out of the deal if something goes wrong, etc.
65. Hamilton maintains that segmentation can be done on any number of different variables, but he
recommends using value. What is his overarching argument for this?
I don’t want to answer this question for a number of reasons…. most important of which is my desire to have you
listen to the Great Course lecture.