Section A: Sixty (60) Independent Multiple-Choice Questions Answer All Questions in This Section

PB MARKETING AND SELLING IN FINANCIAL SERVICES MOCK EXAMINATION
SECTION A : SIXTY (60) INDEPENDENT MULTIPLE-CHOICE QUESTIONS

ANSWER ALL QUESTIONS IN THIS SECTION
1. Behavioural segmentation refers to:
A. past purchases and preference.

B. attitudes and desire.
C. climate and terrain.
D. gender and age.
2. During the product life cycle, the rate of sales growth slows down as the market
becomes saturated. Maximum profitability is reached, but starts to fall once supply
exceeds demand.
This stage of the life cycle is:
A. Introduction.
B. Shakeout.
C. Maturity.
D. Decline.
3. A financial services company is very concerned about each customer it loses. One of
the senior managers stresses to colleagues that the cost to the company of each
individual lost should be treated as the total profit that the company would have
earned from the customer's future purchases if they had remained with the company.
Which one of the following concepts is the manager referring to?
A. Market share.
B. Customer relationship management.
C. Customer satisfaction.
D. Customer lifetime value.
4. The new product development process begins with which of the following stages:
A. Idea generation.
B. Idea screening.
C. Need recognition.
D. Business analysis.
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5. Customer relationship management (CRM) focuses on the development of

relationships with customers which enable companies to improve their understanding
of customers' needs, wants and buying patterns.
What does CRM deliver to customers in return?
A. Cheaper products.
B. Superior customer value.
C. Higher quality products.
D. Greater variety of products.
6. Which of the following will increase a customer's lifetime value to a company

(assuming other factors remain unchanged)?
I. The costs of servicing the customers over the lifetime of their relationship with
the Company are reduced.
II. The propensity of customers to stay loyal to the company has reduced.
III. Opportunities for cross-selling more profitable products to existing customers
have increased.
A. I only.
B. I and II only.
C. I and III only.
D. II and III only.
7. Which of the following is NOT a form of direct marketing?
A. E-mail reminders.
B. Sponsorship.
C. SMS messaging.
D. Loyalty cards.
8. An insurance company charges an average annual premium of $500 for its household
insurance, and makes a profit of 20% on these products.
On average, customers retain their insurance policies with the company for 4 years,
and buy additional insurance policies which generate additional annual revenue of
$800 for the company over that period, with a profit margin of 22.5%.
What is the average lifetime value of a household insurance customer to the

company?
A. $280.
B. $580.
C. $1,120.
D. $1,200.
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9. Which of the following is primarily associated with transactional marketing rather than
relationship marketing?
A. Regular communication with customers.

B. Quality is regarded as a concern of the entire organisation.
C. High levels of customer commitment and service.
D. Focusing on product features rather than customer benefits.
10. A customer has a sum of money to invest for a short time. The customer wants to
invest her money in a low risk product, and one where she won't be charged any
penalties for withdrawing funds. She is hoping to buy a house soon, and plans to use
the money to provide a deposit for the house.
Which of the following types of product is MOST suitable for the customer?
A. Easy access savings account.

B. Certificate of deposit.
C. Fixed term savings account.
D. Mutual fund.
11. An Islamic customer, following the principles of Islamic finance, is buying a new car.
The customer does not have sufficient funds to pay for the car at the time of purchase,
and so has agreed with the vendor to defer the payment and to pay a higher price
later.
The type of contract involved here is:
A. Murabahah.
B. Musharakah.
C. Sukuk.
D. Mudarabah.
12. Which two of the following are part of the 3 Ps of the extended marketing mix?
I. People.
II. Place.
III. Product.
IV. Process.
A. I and III only.

B. I and IV only.
C. I and II only.
D. III and IV only.
13. Which of the following would be expected to have the longest time frame?
A. Credit cards.
B. Collateralised loan relating to the purchase of home furnishings.
C. Mortgage.
D. Collateralised loan relating to the purchase of a motor vehicle.
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14. The growth of social media in recent years, enabling consumers to comment on
products and services on websites or blogs represents a change to which element of
the marketing mix?
A. Product.
B. Price.
C. Process.
D. Promotion.
15. A financial services company is evaluating possible strategies to increase its profit.
Assuming other factors remain unchanged, which of the following should be expected
to increase the company's profit?
I. Reducing the cost of acquiring new customers.

II. Increasing the opportunities for cross-selling.
III. Customer retention rates.
A. I and II only.
B. I and III only.
C. I, II and III only.
D. II and III only.
16. A newly-married couple are hoping to buy a house, but will need a mortgage to fund
the purchase of the house.
However, they have not yet looked at any of the different products being offered by
different banks in order to assess which might be most suitable for them.
What is the next stage of the buying decision-making process which the couple need
to address in relation to their mortgage?
A. Purchase decision.
B. Need recognition.
C. Evaluation of alternatives.
D. Information search.
17. The decision about whether to sell directly to customers or whether to use
intermediaries relates primarily to which of the following element of the marketing
mix?
A. Product.
B. Price.
C. Place.
D. Promotion.
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18. One of the reasons why financial services need marketing strategies is that it is
difficult for consumers to assess which of the following, both during and after the
service?
A. Needs.
B. Profit.
C. Quality.
D. Service level.
19. A company has four different divisions, and recent technological changes have
prompted the management team to question the staffing model in one of the divisions.
The management team has queried whether some of the jobs undertaken by lower-
skilled staff could now be automated meaning that less staff would be required overall.
What level of strategy is being described here?
A. Corporate.
B. Business unit.
C. Emergent.
D. Functional.
20. An insurance company has identified that its fixed costs relating to a particular type of
business are $6 million per year.
The insurance company anticipates that the product will start becoming profitable if it
sells more than 133,333 policies per year.
Past performance shows that the company makes an operating profit margin of 10%
on this type of business, where operating profit is revenue minus variable costs.
What annual premium will the company charge for the product in order to break even?
A. $450.
B. $50.
C. $49.50.
D. $45.
21. Market research has indicated that if a company charges an annual fee of $60 for a
product, demand for that product will be 1.6 million units per year. The research also
suggested that if the fee was reduced to $55, demand would increase to 1.8 million
units per year.
What does this signify about the product?
A. Customers view it as a necessity.

B. It is relatively price elastic.
C. It has unitary price elasticity of demand.
D. It is relatively price inelastic.
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22. Public perception is that Company AAA's product and the service it offers its
customers are slightly better than Company BBB. This allows Company AAA to
charge slightly higher prices than Company BBB whilst still ensuring its customers
remain loyal to it, rather than switching to Company AAA. Conversely, Company BBB
has to ensure that its prices remain below those of Company AAA in order to retain its
own customers. Consequently, Company BBB adopts a strict policy of parity-based
pricing in relation to Company AAA.
Last year, Company AAA charged an annual premium of $448 for its product, and
Company BBB charged $430.
If Company AAA increases its annual premium to $470.4 (an increase of 5%) this
year, what will Company BBB be able to increase its premium to whilst still retaining
its customers?
A. $446.88.
B. $448.00.
C. $451.50.
D. $489.22.
23. Which of the following statements about price setting in financial services is NOT
true?
A. Because many financial services have various components included in their

charges, this makes it harder for customers to assess whether a price is fair
and competitive.
B. Because financial service businesses can easily identify the exact costs
associated with each product, this helps them price for profit.
C. Customers use differences in price as an indicator of differences in quality
between different financial services.
D. Financial services businesses are not in full control of their price setting due to
the influence of external economic factors such as interest rates.
24. A company has just increased the price of a service, which is viewed as being a
relative luxury rather than a necessity, from $24 to $27 per month.
Before the price increase, the company sold 16,000 units of the product per month.
Which of the following is most likely to be the number of units sold per month after the
price increase?
A. 0
B. 13,600
C. 14,000
D. 14,400
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25. Following widespread concern among the residents of a country that the prices
charged for insurance products are becoming prohibitively high for some segments of
the population, the government has called for tighter guidelines over the pricing
mechanism in the industry.
What type of pricing is likely to be introduced as a result of this?
A. Competition-based pricing.
B. Cost-based pricing.
C. Market-based pricing.
D. Regulation-based pricing.
26. A customer has recently arranged a mortgage with HHH Bank, via a broker.
The customer has also used a financial comparison website to compare available
insurance policies before booking a policy, underwritten by TTT Company, through the
comparison website.
Who act as intermediaries in this scenario?
A. The broker.
B. TTT company.
C. The financial comparison website.
D. The broker and the financial comparison website.
27. As part of its growth plan, a financial services company has decided to start selling its
products in new markets.
However, rather than selling its products directly, it plans to use agents to sell
products on its behalf.
Which one of the following will be a benefit to the company resulting from its decision
to use agents to sell the products?
A. The company's customer retention rates will be higher than if sold the products
itself.
B. The company will not need to recruit and train additional sales team.
C. The company will maximise its opportunities to establish relationships with new
customers.
D. The company will be able to ensure that service quality is maintained
consistently.
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28. A bank's strategy is to use only direct distribution systems when making its products
and services available to customers.
Which of the following distribution channels will the bank be willing to use?
I. Its company website.

II. Its own telephone banking service.
II. An impartial, financial comparison website.
A. I and II only.
B. I and III only.
C. II and III only.
D. I, II and III only.
29. A financial services company's fiduciary responsibility to its customers is:
A. To introduce new products and services as frequently as possible.

B. To make products and services available as cheaply as possible.
C. To offer favourable incentives to agents and brokers so that they sell the
company's product to its customers.
D. To act in a way that promotes the financial well-being of the customer.
30. XXY Co has decided to carry out a series of direct marketing promotions in order to
acquire new customers and enhance retention rates among existing ones.
Which one of the following media will XXY Co not use in its promotions?
A. Loyalty cards.
B. Telemarketing.
C. Television advertising.
D. E-mail messages.
31. BBB bank has recently been advertising a reduction in the interest rates it is charging
on its mortgage products, and the bank has placed adverts in a number of
newspapers.
However, several other banks have also made similar interest rates reductions, which
they have also been advertising.
As a result, only a relatively small proportion of newspaper readers have taken any
notice of BBB's adverts.
What aspect of the communications process has been affected by the number of
similar adverts in the papers?
A. Attention.
B. Information processing.
C. Cognitive exposure.
D. Environmental exposure.
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32. Gathering in-depth qualitative data about an individual's response to an advertisement

is best done via:
A. A questionnaire survey.
B. A focus group.
C. A pre-testing.
D. An in-depth interview.
33. Highlighting the attributes of a product which differentiate it from rival products on the
market is likely to be an important characteristic of successful advertising in which
stage of the consumer decision-making process?
A. Need recognition.
B. Information search.
C. Evaluation of alternatives.
D. Purchase decision.
34. An advert for a mortgage product highlights the anguish of a home-owner who is
struggling to cope with the rising costs of a variable interest rate mortgage, in contrast
to the stress-free experience of a similar home-owner who has taken out the fixed-
interest mortgage product being advertised.
Which aspect of Maslow's hierarchy of needs is the advert focusing on?
A. Physiological needs.
B. Safety needs.
C. Social needs.
D. Esteem needs.
35. An insurance company wants to measure how successful a recent advertising

campaign aimed at improving customer loyalty, has been.
The company's databases allow it to distinguish between customers who are taking
out new policies and existing customers who are renewing their policies.
Which of the following methods should the company use to measure the success of
the campaign?
A. Focus groups.
B. In-depth (personal) interviews.
C. Questionnaires.
D. Sales patterns.
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36. A bank has recently renegotiated its advertising deal with a football club.
Previously, the bank bought advertising space on two hoardings, one on either side of
the playing area. Now the bank has increased the number of the advertising hoardings
it has bought to four, two on either side of the playing area.
Which of the following is TRUE?
A. The new deal increases the reach of the bank's advertisements, but not their
frequency.
B. The new deal increases the frequency of the bank's advertisements, but not
their reach.
C. The new deal increases both the reach and the frequency of the bank's
advertisements.
D. The new deal will not alter either the reach or the frequency of the bank's
advertisements.
37. Test marketing involves which of the following:
I. Introducing different products for different sections of the market.

II. Launching a new product in sections of the market before making it available to
the whole market.
III. Using different mixes of communications media to identify which are most
effective.
A. I and II only.
B. I and III only.
C. II only.
D. II and III only.
38. A bank company is thinking about developing a new mutual fund, but is keen to find
out what aspects of a fund customers value most highly.
To do this, the bank has prepared a questionnaire listing a number of different

features which it asks respondents to rate from 1 – 5 where '1' is very important in
their purchasing decision and '5' is not important.
What method of research is the bank using to help development its new fund?
A. Observational analysis.
B. Cluster analysis.
C. Attribute rating.
D. Conjoint analysis.
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39. A bank is developing a current account product. The bank has currently restricted the
availability of the new product to customers in five selected branches so that the bank
can gauge their reaction to the new product before deciding whether or not to make the
product available to all its customers.
Which stage of the new product development process has the account reached?
A. Commercialisation.
B. Concept testing.
C. Product development.
D. Market testing.
40. Which of the following new products have been developed on the basis of core
attributes (rather than non-core attributes)?
I. A credit card company has introduced a new credit card which allows
customers to make payments to reduce their balance every two months rather
than every month.
II. A fund management company has recently introduced a mutual fund which
invests only in companies which are registered on an ethical index.
III. An insurance company has launched a new car insurance policy which is
administered wholly online, which results in its premiums being lower than
similar 'offline' policies.
A. I only.
B. I and II only.
C. I and III only.
D. II and III only.
41. Which of the following are deemed to be new products?
I. An existing product which is sold via a new distribution channel.

II. A single product is created by combining the features of two existing products.
III. An existing product which is re-named and sold at a different price.
A. I and II only.
B. I and III only.
C. II only.
D. I, II and III.
42. It is important for companies to develop new products to succeed products which have
reached the decline stage of their life cycles.
In the decline stage of the product life cycle:
A. Sales decline, but products remain stable.

B. Sales remain stable, but profits decline.
C. Profit margins decline although profit levels remain stable.
D. Profitability declines and sales decline.
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43. Which one of the following is a corporate level strategic opportunity for a bank?
A. To reduce staff costs by automating some back office processes.

B. To acquire a smaller, but profitable, bank in another country.
C. To reduce mortgage interest rates charged when a new competitor enters the
mortgage market.
D. To respond to new regulations on money laundering by introducing a new
training course for all the cashiers in its branches.
44. A bank is using a number of factors which it could use for the purposes of market
segmentation.
Which of the following would be valid bases for behavioural segmentation?
I. Frequency of account usage

II. Distance from customer’s house to nearest branch of the bank
III. Likeihood to buy a new product soon after launch
IV. Price sensitivity
A. I, II and III only.

B. I, II and IV only.
C. I, III and IV only.
D. II, III and IV only.
45. Which of the following is considered part of psychographic segmentation?
A. Credit ratings.
B. Gender.
C. Marital status.
D. Attitude to risk.
46. A bank which offers loans at preferential rates to university students has used which
basis to segment the loan market?
A. Behavioural factors.
B. Credit ratings.
C. Demographic factors.
D. Geographic factors.
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47. Which of the following would be a valid reason for a relatively newly created, domestic
company to segment a market?
I. The marketplace is dominated by a small number of large multinational

companies.
II. The company only sells a single product.
III. Demand for the company's product is greater than the company can supply.
A. I and II only.
B. I and III only.
D. II and II only.
48. A bank uses records and information gathered from customers' past transactions to
recommend additional products which the bank thinks will be of interest to the
customers.
By analysing the customers past transactions, the bank can target specific products to
specific customers when they log on to their online banking accounts.
Which basis of segmentation is the bank using to target its customers?
A. Behavioural.
B. Credit ratings.
C. Demographic.
D. Geographic.
49. The SERVQUAL model identifies 10 main criteria which are used to assess service
quality.
Which of the following are the criteria included in the model?
I. Competence.
II. Expectations.
III. Reliability.
IV. Understanding customer needs.

B. I, II, and IV only.
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50. Which of the following are components of the tangible elements of a customer’s
expectations of a service firm?
I. The physical appearance of the firm's staff.

II. Billing statements and other information produced by the firm.
III. The cleanliness of the firm's premises.
IV. The length of the queues waiting to see an advisor.
A. I and II only.
B. I, II and III only.
C. II and III only.
51. Which one of the following relates to relationship marketing rather than transactional
marketing?
A. Increased focus on customer retention.

B. Increased emphasis on individual sales.
C. Focus on product features.
D. Persuasive communication to potential customers.
52. A bank may feel that its customers value the number of auxiliary products (such as
free travel insurance) which accompany its 'Premier' current account, but the majority
of its customers already have insurance policies in place and would prefer the account
to be offered at a lower price and without many of the auxiliary products.
In this example, the bank is suffering from a gap between:
A. Service quality specifications and service delivery.

B. Service delivery and external communications.
C. Customer expectations and perceived service.
D. Customer expectations and management perceptions.
53. 'The company's staff are always very smart and well-presented' could be a customer's
comment in relation to which dimension of the SERVQUAL model?
A. Assurance.
B. Credibility.
C. Security.
D. Tangibles.
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54. In recent years, customer satisfaction levels with a bank's services have been falling,
and so the bank has introduced a training programme for its staff aimed at improving
customer satisfaction.
Which of the following will be benefits of improved customer satisfaction?
I. Improved customer retention rates.

II. Positive word of mouth recommendations.
III. Lower price sensitivity.
A. I and II only.
B. I and III only.
D. II and III only.
55. A bank has made considerable efforts recently to improve customer satisfaction.
Which of the following are likely to be benefits resulting from increased customer
satisfaction levels:
I. Customers are more sensitive to price.

II. The bank will have more opportunities to cross-sell additional products.
III. Customer lifetime value will be increased.
A. I and II only.
B. I and III only.
C. II only.
D. II and III only.
56. A company estimates that, on average, customers who take out insurance policies
with it retain them for five years. The company's management accountant has
calculated that the company generates a profit on the policies of about $120 per
customer per year.
A recent online advertising campaign has led to the acquisition of 2,180 new
customers. 980 were acquired through a television campaign for which the company
paid $400,000. The remainder were acquired via an online website, which the
company agreed to pay $75 for each new customer acquired.
What is the return on investment on the campaign?
A. –34.6%
B. –46.6%
C. 167.0%
D. 227.0%
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57. Which of the following is an EXAMPLE of a way a company can use the internet for
generating leads?
A. Offering discounts for customers who purchase insurance cover online.

B. Including a list of frequently asked questions on the landing page of a
company's website.
C. Emailing customers with details of additional products which may be of interest
to them, based on their purchase history.
D. Requesting customers to provide personal information when they visit the
company's website and express an interest in it.
58. Until recently, potential customers wanting information about a company's insurance
products were only able to obtain that information by phoning the company's call
centre or by searching on the company's own website. The company did not advertise
its products on any financial comparison websites.
However, the company has now decided to allow its products to be listed on a number
of financial comparison websites.
Which aspect of navigation will be MOST affected by this change?
A. Affiliation.
B. Localisation.
C. Reach.
D. Richness.
59. A financial services company which sponsors a leading football team has recently
added an advert across the top of the football club's website page, and the advert has
proved very successful in attracting new visitors to the financial services company's
own web page. When users click on the advert on the football club's website they are
transferred to the financial services company's home page.
What technique has the financial services company used to try to acquire new
customers?
A. Affiliate networks.
B. Viral marketing.
C. Search engine optimisation.
D. Banner advertising.
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60. Which of the following are the additional P’s which are added to the traditional
marketing mix (4 Ps) to form the service marketing mix (7 Ps)?
I. People.
II. Prediction.
III. Process.
IV. Physical evidence.

SECTION B : TWENTY (20) SHORT CASE BASED QUESTIONS

ANSWER ALL QUESTIONS IN THIS SECTION
QUESTIONS 61 – 65 ARE BASED ON THE FOLLOWING INFORMATION.
FGH Bank has recently made 1,500 staff redundant nationwide, now that more of its
customers are using technology and smartphones to manage their accounts.
The majority of the job losses will affect frontline roles such as cashiers and branch
managers. FGH insists that investing in new technology will enable the bank to improve the
services it offers its customers.
A spokesman for the bank said that the way in which customers are accessing banking
services is changing rapidly. People are increasingly choosing to use smartphones and
technology for everyday transactions, and are only using branches when they need access to
expertise.
Although opponents of the cuts have argued that customer service will suffer as a result of
them, FGH has said that the changes will enable it to improve customer service by offering
increased training to staff in the areas of expert advice which customers want.
61. Which of the following changes relate to the 'place' element of a bank's marketing
mix?
I. Increasing the number of ATMs available for customers to withdraw funds

from.
II. Selling products online as well as through bank branches.
III. Making the bank's product available through financial comparison websites as
well as through the bank's own website.
A. I and II only.
B. I and III only.
C. I, II and III.
D. II and III only.
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62. Despite FGH claiming that changes will improve customer service, there have been a
number of complaints from customers claiming they would rather deal face-to-face
with a cashier, rather than arrange transactions online.
What type of quality gap do these complaints suggest is most likely to arise for these
customers?
A. Gap between customer expectations and management perceptions.

B. Gap between management perceptions and service quality specification.
C. Gap between service quality specifications and service delivery.
D. Gap between service delivery and external communications.
63. The bank carried out various market research exercises before making the decision to
change the way its services are delivered. However, the bank's marketing director
believes that the answers people give when asked directly about their banking
preferences do not always accurately represent their preferred patterns of behaviour.
In the light of these concerns, which method of market research would the marketing
director place most reliance on?
A. Focus groups.
B. Sales patterns.
C. In-depth interviews.
D. Questionnaires.
64. A strategy to increase the proportion of the bank's business which is transacted online
rather than on a face-to-face basis is:
A. An operational level strategy.

B. A business-unit level strategy.
C. A corporate level strategy.
D. Both a business unit and corporate level strategy.
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65. In the light of the announcements about the job losses the bank has decided to
undertake an advertising campaign to reassure customers about its continued
commitment to them.
As part of this campaign, the bank has decided to advertise in the national press.
However, the bank hasn't decided whether it would be preferable to place an advert in
a daily newspaper or a weekly paper. For the price of one advert in a weekly paper,
the bank could place adverts for three days in the daily newspapers.
The circulation of the weekly newspaper is 750,000 people. The circulation of the daily
paper is 495,000; but virtually all of these people read a copy of the paper every day.
Which of the following statements is TRUE?
A. The advert in the weekly paper has a higher reach and a higher frequency
than the advert in the daily paper.
B. The advert in the weekly paper has a higher reach but a lower frequency than
the advert in the daily paper.
C. The advert in the daily paper has a higher reach but a lower frequency than
the advert in the weekly paper.
D. The advert in the daily paper has a higher reach and a higher frequency than
the advert in the weekly paper.
QUESTIONS 66 – 70 ARE BASED ON THE FOLLOWING INFORMATION
After reviewing the composition of the assets and liabilities on its balance sheet, the directors
of a bank have decided that it should try to increase the proportion of short term assets it
holds compared to longer term ones. As a result, the bank is preparing a marketing campaign
aimed at increasing sales of shorter term products.
The bank has currently also been considering launching a new product, and has recently held
a number of focus groups with customers at which the ideas behind the product were
discussed. However, the feedback from these sessions has not been very favourable; with
customers questioning why anyone would buy the new product since it is more expensive
than similar products already available and doesn't seem to offer them any additional value.
The bank was surprised to hear this feedback from the focus groups, because it felt the new
product offered a number of new features which were not available in the existing products.
The bank knew the product was relatively high end, but felt that this would confer recognition
and status on customers who bought it.
66. Given the bank's intention to increase its sales of short term products, which of the
following are MOST likely to be promoted in its marketing campaign?
A. Credit card accounts.

B. Certificates of deposit.
C. Collateralised loans.
D. Home equity loans.
Page 19 of 36
67. Which level of Maslow's hierarchy of needs does the bank appear to be targeting
through its specifications for the new product?
A. Self-actualisation.
B. Esteem needs.
C. Safety needs.
D. Social needs.
68. For a product which is seen as a luxury rather than a necessity, which of the following
statements is true?
A. Demand will be elastic, so total revenue can be increased by increasing price.

B. Demand will be inelastic, so total revenue can be increased by increasing
price.
C. Demand will be elastic, so total revenue can be increased by lowering price.
D. Demand will be inelastic, so total revenue can be increased by lowering price.
69. The bank used the focus group as part of which stage of the new product
development process?
A. Screening.
B. Market testing.
C. Idea generation.
D. Concept testing.
70. Which of the following indicate that the bank is using a transactional approach to
marketing rather than a relationship one?
I. The logic behind the proposed new product came from serving the longer term
needs of customers rather than immediate needs.
II. While designing the new product, the focused primarily on the features it had
that could differentiate it from other products available.
III. The decision to consult customers and potential customers via the focus
groups is typical of the bank's commitment for regular communication with its
customers.
A. I and II only.
B. I and III only.
C. II only.
D. II and III only.
Page 20 of 36
In the last four years, a bank's share of the loan market has fallen from 29% to 23% despite
the amount and value of loans a bank has made to customers increasing. Over the same
period, the bank's share of the mortgage market has increased slightly, despite the value of
the mortgages it has issued remaining almost unchanged, and despite its mortgage interest
rates being higher than many of its competitors.
The bank has also increased its share of the current account market slightly, but it is keen to
expand its share of the market further, because it believes there are considerable
opportunities to cross-sell additional products to customers once they have taken out a
current account.
The new current account typically costs $40 for the bank to recruit. Account holders pay a
regular monthly fee of $10, and they incur additional fees and interest, for example if they
exceed their agreed overdraft limit. On average, the bank generates $25per customer per
year in additional fees. The cost to the bank of maintaining an account is $70 per year. On
average, current account holders switch banks once every five years.
71. Based on the current profitability of the accounts, and ignoring the potential for cross-
selling, what is the average lifetime value to the bank of a current account customer?
A. $35
B. $65
C. $175
D. $335
72. Which stages of the life cycles do the markets for loans and mortgages appear to have
reached in the bank's country?
Loan Mortgages
A. Introduction Shakeout
B. Introduction Mature
C. Growh Shakeout
D. Growh Mature
Page 21 of 36
73. As part of its plan to increase current account business, the bank has been reviewing
its marketing mix for its current account, and has identified several changes it can
make to the 'place' aspect of the mix.
Which of the following are related to the ‘place’ aspect of the marketing mix?
I. Increasing the number of ATMs available for customers to use.

II. Using SMS messages (text messages) to alert customers to product offers.
III. Relocating some of the bank's branches.
IV. Increasing the range of transactions which can be handled online.

74. The bank is increasingly using e-marketing to help it attract and retain customers. In
particular, it has found that the internet can be a low cost method of collecting
marketing information about customer perceptions of its products and services, which
can then be used to help shape the bank's marketing strategy.
Which aspect of the organisation's marketing effectiveness is the internet improving in

this respect?
A. Integration.
B. Individualisation.
C. Intelligence.
D. Interactivity.
75. Which of the following are likely to be valid benefits of e-marketing for the bank in
relation to its mortgage products?
I. E-marketing can provide sophisticated market segmentation opportunities so

that marketing campaigns can be targeted more precisely.
II. Potential customers can find out information about the bank's mortgage
products even when its physical branches are closed.
III. E-marketing promotes transparent pricing.
A. I and II only.
B. I and III only.
C. II and III only.
D. I, II and III only.
Page 22 of 36
A recent survey into the factors which determine customers' satisfaction with their banks
identified that quality of service delivery was the most important factor, with convenience the
second most important factor.
The survey also suggested that consumers were less sensitive to price than had previously
been assumed. Many customers said that they would be willing to pay more for products or
services if doing so provided them with a genuine benefit.
In response to the survey's findings, QRS bank has been looking to see if there are any
potentials gaps in the market which it might be able to exploit – in particular in relation to high
quality products or services which could be offered for premium prices. One idea QRS is
considering is offering a personal banking service for wealthy individuals.
A rival bank had tried to launch a similar service a few years earlier, but with limited success.
However, industry analysts said that this relative failure was not due to any inherent
weakness in the service itself, but problems in the way it was marketed.
76. What type of research method is most likely to have been used in the survey into the
factors which determine customers' satisfaction with their banks?
A. Attribute rating.
B. Test marketing.
C. Conjoint analysis.
D. Cluster analysis.
77. A large part of the failure of the rival bank's personal banking service was attributed to
a very dull advertising campaign. As a result, although the bank advertised the service
in a number of media outlets, appropriate to its target market, very few potential
customers actually took notice of any of the information provided about the service.
Which stage of the communications process is most likely to have led to the failure of
the advertising campaign?
A. Exposure.
B. Reach.
C. Attention.
D. Comprehension.
Page 23 of 36
78. Some of the senior management at QRS are concerned that the move towards
providing a personal banking service does not fit with its current corporate mission,
which is based around a commitment to provide 'high quality service at prices which
are affordable to everyone'.
At which stage of the new product development process will this concern be MOST
important?
A. Concept testing.
B. Business analysis.
C. Market testing.
D. Product development.
79. As the personal banking service is new, QRS believes that its target market needs to
be people who are not only wealth but also innovators.
Which bases should QRS use for segmenting its market?
A. Demographic.
B. Psychographic.
C. Behavioural and psychographic.
D. Psychographic and demographic.
80. Another concern which has emerged at QRS is that customer surveys it has carried
out itself have indicated a fall in customer confidence that the bank's staff are acting in
the customers' best interests.
Which element of customer expectations does this suggest the bank is NOT fulfilling
adequately?
A. Reliability.
B. Credibility.
C. Competence.
D. Security.
- END OF QUESTION PAPER -
Page 24 of 36
PB MSFS Mock 1 Answers
1 A Behavioural segmentation refers to the way people use a product or service,

and the benefits they seek from buying it.
2 B In the shakeout stage, the rate of sales growth slows down as the market
becomes saturated. The shakeout stage precedes maturity, by which stage
the market is no longer growing at all.
3 D Customer lifetime value relates to the stream of profits which are generated
over the length of a customer's relationship with an organisation.
The concept of customer lifetime value highlights the importance of customer
relationship management and customer retention.
4 A The stages of the new product development process, in sequence, are: idea
generation; screening; concept testing; business analysis; product development;
marketing testing and commercialisation.
5 B CRM involves a company taking customers' needs into account and then
delivering them. In doing so, the company will provide greater value to its
customers than one which doesn't fulfil their needs so effectively.
Customer needs may lead to companies offering, variously, cheaper
products, higher quality products, or a greater variety of products but these
are not necessarily a consequence of CRM.
Remember that CRM requires organisations to become customer centric
rather than product centric.
6 C A reduction in the costs of servicing the customers will increase the
profitability of the company's relationship with the customer, which in turn will
increase their value to the company. Similarly being able to cross-sell more
profitable products to a customer increases the profitability of the relationship
with that customer.
However, a reduction in customers' propensity to stay loyal will mean they
remain customers for a shorter time which would be expected to reduce their
lifetime value to a company.
7 B Direct marketing develops a direct relationship with a customer. Whereas e-
mails, text messages (SMS messages) and loyalty cards are sent, or given, to
individual customers, sponsorship is a more ambient form of marketing.
8 C The household insurance products generate a profit of $100 per year, which
equates to $400 over the 4 year period.
The profit from the additional products sold equates to $180, meaning that the
average lifetime value for the customer is $580.
9 D Transactional marketing focuses primarily on product features, while
relationship marketing focuses on customer benefits.
Regular communication with customers; recognising that quality is the concern
of the entire organisation; and maintaining high levels of customer service are
all characteristics of relationship marketing.
Page 25 of 36
10 A Although the rate of interest paid on a fixed term savings account would be
higher than on an easy access account, the fixed term nature of the product
makes it less liquid. Liquidity appears to be a key factor in the investor's product
choice.
A certificate of deposit is also unlikely to be suitable because it is a long-term
account, while investing in mutual funds involves higher risk than investing in a
savings account.
11 A In effect, the transaction being carried out is a credit sale, although because it is
carried out in line with the principles of Islamic finance, there is no interest
charged.
In Murabaha, a pre-agreed mark-up is paid for an asset that is transferred
immediately, in recognition of the convenience of paying at a later date.
12 B People, process and physical evidence make up the extended marketing mix.
13 C Credit cards provide a short-term financial service. In effect, a user making a

credit card transaction borrows the money for their purchase and repays it the
following month when their credit card bill arrives.
The time frame for collateralised loans typically relates to the useful life of the
underlying product being financed. Both home furnishings and motor vehicles
would be expected to have useful lives of several years, although probably not
much in excess of 5 years.
By contrast, mortgages are typically long-term arrangements, with a time frame
which can extend up to 30 years.
14 D The 'promotion' element of the marketing mix relates to the way a company
communicates the other elements of its marketing mix to consumers.
Traditionally, this communication has been largely one way: companies
disseminating information about their products and services to consumers and
potential consumers.
However, social media have given consumers more opportunities to contribute
to the marketing message about products and services – for example, by
commenting on the actual quality of the service they have received rather than
the service a company claims to offer to consumers.
15 A If the revenue a company receives from a customer remains unchanged, then

reducing the cost of acquiring a customer will improve profitability.
Increased opportunities for cross-selling should enable the company to sell
additional products to its existing customers.
If retention rates are falling, this means that customers will be defecting from
the company and switching to buy products and services from a competitor.
16 C The couple have identified that they need a mortgage (need recognition) but
they haven't yet obtained any information about the possible different products
available. Therefore they need to start finding this information out.
17 C The decision about whether to sell directly or indirectly relates to the way a
product or service is made available (distributed) to customers. Decisions about
the distribution channels used for marketing and selling a product are a
fundamental aspect of the 'place' element of the marketing mix.
Page 26 of 36
18. C Unlike physical products, it is very difficult to assess the quality of a financial
services product even once it has been purchased. For example, until the point a
consumer needs to make a claim on their insurance policy, how can they know
how good the product is?By contrast, customers will be highly influenced by the
service levels they receive from a firm and its staff.Financial services companies
need to use marketing strategies to increase their profits, but the companies'
profits are primarily their own concern not those of the consumer.
19. D Functional (or operational) strategies relate to specific strategies being applied in
different parts of a business. In this case, the strategy being discussed is the
divisions' human resources strategy.
20. A If the insurance company sells 133,333 policies, then in order to break even it
needs to generate an operating profit of 6,000,000 / 133,333 on each policy: $45
per policy. Given that its operating profit margin is 10%, then the revenue per
policy needs to be: 45 / 0.1 = $450.
21. B At a price (fee) of $60, total revenue from the product will be $96 million per year.
However, if the price (fee) is reduced to $55, revenue will rise to $99 million per
year. This indicates that the increase in demand has been greater than
proportional to the fall in price, and signifies that the product's price elasticity of
demand is elastic. Goods which are price elastic tend to be luxuries rather than
necessities.
22. C Company BBB's price 430

----------------------------------- = ------ = 0.96
Company AAA's price 448
Company AAA's new price (+ 5%) = $470.4
So, the new price will be $470.4 ×0.96 = $451.58
23 B One of the difficulties when setting prices for financial services products is that it is
not always easy to establish the exact costs associated with each product. This
therefore represents a difficulty in setting prices for financial services; not
something which makes price-setting or pricing for profit easier.
24. C The fact that the service is considered to be a luxury rather than a necessity
suggests that demand for it will be relatively price elastic. Therefore the fall in
demand following the price rise will be greater than proportional to the increase in
price.
Price has increased 12.5% (from $24 to $27); therefore the fall in demand must
be greater than 12.5%. Option B represents a fall in demand of 15%.
The fall described by Option C is exactly 12.5%, not greater than 12.5%. The fall
described by Option D only represents a fall in demand of 10%.
Option A suggests a situation in which demand is perfectly elastic. That would

mean that the company can only sell its service at the price it has currently
selected, and any price increase above that leads to a complete less of demand
for the product. This is very unlikely in practice. Even price for the service is very
elastic, there are still likely to be some consumers who are prepared to pay the
higher price.
Page 27 of 36
25. D Financial services industries are heavily regulated in many countries, and
widespread concern about (high) prices is likely to prompt a regulator to review
price levels and impose price limits on the market.
26. D The customer has not dealt directly with either of the organisations who are
providing the mortgage or the insurance policy; instead both transactions have
been arranged through intermediaries.
Although the customer doesn't deal with an intermediate person when

arranging the insurance policy, the website performs the role of an
intermediary. The use of online comparison sites to compare different products
is sometimes referred to as re- intermediation.
27. B The company will rely on the agents to sell its products, and so can use the
agents' sales teams rather than having to recruit its own. It will be agents
rather than the company which establishes a relationship with the customer,
so this reduces the opportunities the company has for customer relationship
management.
Also, the company will be reliant on the quality of service provided by the
agent, and this will make it difficult for the company to ensure service quality is
maintained consistently. If the customer is not satisfied with the service
provided by the agent the customer is likely to switch to a different provider –
which in turn could damage customer retention rates.
28. A Direct distribution requires the bank to handle its relationships with customers
itself rather than using an intermediary. Although online transactions via the
banks website or telephone banking do not involve any direct physical
contact, the customer is still dealing directly with the bank rather than an
intermediary (such as a financial comparison website).
29. A Fiduciary responsibility (or duty of good faith) represents the company's
responsibility to champion the financial well-being of their customers.
Making new products available may not be in the customers' best interest if the
products themselves are not suitable or valuable to the customer. Equally,
making products available as cheaply as possible may not be in the
customers' best interests if the low price is reflected in a poor quality
product or poor quality advice. If agents and brokers are
recommending products on the basis of which earns them the most
favourable commission, rather than which serve the customers'
interests best, they are not fulfilling their fiduciary responsibility to their
customers.
30. C Direct marketing requires a direct relationship between XXY and its customers,
without the use of an intermediary. However, television advertising requires the
advert to be distributed by the television channels, meaning that it is not a
direct form of advertising.
31. C Although the advert exists in the customer's environment (i.e. it has been given
environmental exposure), it appears that few potential customers have actually
noticed it. Cognitive exposure is the term used to denote a customer noticing
an advert.
Page 28 of 36
32. D The nature of questionnaires surveys (ie tick box surveys) means they tend not
to be a good source of detailed information. By contrast, an interview will
enable the interviewer to probe the interviewee in order to obtain detailed
information about their response towards an advertisement. Whilst focus
groups can also be used as a source of in-depth information, the group
environment may lead to an individual's response being swayed by the
responses of other members of the group.
33. C By the time they reach the 'evaluation' stage, customers have identified what
their needs are, and they have identified what products are available to them.
They now have to evaluate the different products available to decide which
meet their needs most effectively. An advertising campaign which highlights a
product's unique features could help persuade potential customers of the
product's merits, compared to the alternative products available.
34. B Safety needs relate to the need for security, predictability, and freedom from
threats – all of which are needs the fixed interest rate mortgage satisfies
(compared to the unpredictability of the variable rate mortgage).
The fact that the subjects of the advert are home-owners suggests both have
already satisfied their basic physiological needs for food and shelter. Therefore
the focus of the advert is on social needs rather than physiological needs.
35. D A key measure of the success of the campaign will be the impact it has on
customer retention rates. The company's database will enable it to identify the
proportion of existing policy-holders who are renewing their policies.
Interviews and focus groups might help the company understand why
customers chose to renew (or not renew) their policies, but won't provide
quantitative information in the way that analysing sales patterns will.
36. B An advert's reach relates to the number of customers who will be exposed, at
least once, to it. In this case, the adverts will be seen by all the spectators
sitting on the opposite side of the pitch; but the number of people who see the
adverts will remain the same regardless of whether there are one or two
adverts on each side of the pitch.
An advert's frequency relates to the number of times that a potential customer

sees it. In this case, increasing the number of hoardings on each side of the
pitch (from one to two) will double the number of times spectators see the
advert.
37. C Test marketing involves using a sample (test) section of the market to assess
the interest and uptake for a new product before launching it across the entire
market. For example, a new product could be offered in a small number of a
bank's branches to see how popular it is before being rolled out across all the
branches.
Option I relates (loosely) to the idea of market segmentation, while the focus of
Option III is on communications strategies rather than new product
development. Test marketing is one of the stages in the new product
development process.
Page 29 of 36
38. C Attribute ratings are used to establish which attributes of a product or service
are important to a customer.
In this case, the bank is looking at the respective importance of individual

aspects (attributes) of the product in a consumers' buying choice. Therefore
attribute rating is the appropriate method to use rather than conjoint analysis –
which assesses the relative attractiveness of different combinations of
attributes to consumers.
39. D Offering the product to a section of the market in order to test its potential sales
(which is what the bank has done) constitutes market testing. Market testing
enables a company to assess the potential for a product before committing to it
fully. For example, if a product proves unpopular in its test market it can be
modified or withdrawn before any further marketing or operational costs are
committed to it.
40. C The decision to allow customers to make payments every two months rather
than every month affects both the 'input' and 'time frame' attributes of the credit
card.
The decision to offer the insurance policy online only has enabled premiums to
be lowered. Premiums represent the 'inputs' for an insurance policy, meaning
that they are a core attribute. The decision to offer the policy online (by itself)
doesn't relate to a core attribute, but the impact this has on premiums does
relate to a core attribute.
The decision to invest only in ethical companies doesn't directly determine the
price of the shares being bought, or the subsequent value (inputs and outputs).
There is also no indication that the volatility (risk) of ethical shares will
necessarily be different than for other shares. Ethical responsibility as such is
not linked to the four core attributes (inputs, outputs, time frame and risk).
41. D Some new products may be genuinely innovative, but for many 'newness' may
also mean being adapted, repackaged or introduced to a new market.
An 'old' product can be deemed to be a new product if a different marketing

approach is used, or if one or more of the marketing mix variables are
changed.Option II highlights that new products can be developed by merging
two existing services together.
42. D In the decline stage of a product's life cycle, both the sales and the profitability
of the product decline.
43. B Corporate level issues are ones which relate to the general direction of the
whole organisation. Making an acquisition allows the bank, as a whole, to
expand – and to expand internationally, since the bank being acquired is in
another country.
Reducing mortgage interest rates is a business level decision, because it only

affects the bank's mortgage business, rather than other aspects of its
business.
Reducing staff costs (and head count) is likely to be an operational/functional

level decision, as is running the training course on money laundering
regulations.
Page 30 of 36
44. C Segmenting a market according to location (eg proximity to a bank's branches)

uses a geo-demographic basis for segmentation.
The other factors all relate to elements of a customer's purchase behaviour.
45. D Gender and marital status are both demographic factors.
Credit ratings are sometimes consider as a basis of segmentation in their own

right, but they could also reflect demographic factors (eg wealth).
Psychographic segmentation is concerned with people's attitudes, beliefs and

aspirations; with attitude to risk being an important element of this.
Knowing customers' attitudes to risk could be useful for marketers when

targeting promotions for different investment products.
46. C The key criterion to be eligible for the account is being a student, and life-stage
factors are one of the main elements of demographic factors.
47. A If demand for the company's product is greater than it can supply, the company
is likely to be successful regardless of whether or not it segments the market.
If the market is dominated by a small number of large multinational companies,

this could make it difficult for a smaller company to establish itself in the
market. However, if the company segments the market effectively it might be
able to identify niche markets which are not being served by the large
companies and which it can serve instead.
If the company only sells a single product, it would be difficult for the company
to satisfy the needs of all the customers in the market. Therefore, segmenting
the market will allow the company to target its marketing mix towards the
segments of the market which are most likely to buy the product.
48. A The bank is using customers' previous purchasing behaviour and their
purchasing history as the basis for targeting future promotions.
Although in reality the bank may only target certain products to certain
customers according to their credit ratings, the scenario here does not mention
credit ratings, so Option B is not correct.
49. C The elements of the model (such as competence, reliability, responsiveness

and understanding customer needs) help to define customers' expectations of
the service they will receive, but 'expectations' themselves are not one of the
elements of the model.
50. B The tangible elements in customer expectations highlight that the physical
elements of the service must be consistent with the desired image. The quality
of the premises, the statements produced by the firm, and the appearance of
its staff all relate to physical aspects which will shape the customer's
impression of the firm.
The length of the queues relates to the 'access' element of customer

expectations; the ease and speed with which customers can get served.
Page 31 of 36
51. A Relationship marketing can be defined as the management of a firm's

relationships with its customers with a view to increasing customer retention.
As such, relationship marketing focuses on building relationships with
customers, rather than focusing on making single sales.
Relationship marketing focuses on the benefits a customer will receive from

using a product, rather than on the features of the product itself.
Persuasive communication is a characteristic of transactional marketing,

whereas regular communication is a characteristic of relationship marketing.
52. D The issue here is that the bank's product is not providing what the customers
want. This represents a gap between what customers want and what the bank
thinks they want (ie a gap between customer expectations and management
perceptions).
53. D The appearance of a company's staff, as well as its physical facilities, can have
an impact on a customer's perception of the quality of service they are
receiving. As such, the 'tangibles' element of the model includes the
appearance of personnel as well as physical facilities and published
information received from a company.
54. C An increase in customer satisfaction should lead to higher customer retention

rates. Satisfied customers can help market a company through word of mouth
recommendations, so keeping customers satisfied is an important pre-requisite
for ensuring word of mouth sales. Customers who are unhappy with a service
are more likely to be price sensitive than those who are happy. If a customer is
happy with the service they receive, they are more likely to remain loyal even
though the price increases.
55. D Customers who are satisfied with a service will be less price sensitive not more
sensitive (so Option I is incorrect).
Increasing customer satisfaction should also lead to an increase in levels of

customer retention, which will help increase customer lifetime value (Option III).
If customers feel satisfied with the quality of their existing products, this should
also make them more receptive to offers relating to additional products (cross-
selling; Option II).
56. C The gain from the investment is 2,180 × $120 × 5 = $1,308,000

(i.e 2,180 customers generating a profit of $120 per year for 5 years).
The cost of the campaign was: $400,000 + ($75 × 1,200) = 490,000

(Of the 2,180 new customers, 980 were acquired through the television
campaign, meaning 1,200 were acquired through the online website.
1, 308, 000 – 490, 000

ROI = -------------------------------- = 167%
490, 000
Page 32 of 36
57. D Lead generation involves gathering information about prospective customers

(eg name, and e-mail address) which can be added to a company's database
and then the people added to the distribution list for subsequent marketing
messages.
Option C is using information already gathered about existing customers for

the purposes of cross-selling, rather than gathering information about
prospective new customers.
The focus of Option A is to generate sales, rather than to generate leads.
58. C Reach' relates to the potential audience for an e-commerce site. One of the
main ways reach can be increased is by moving from a single site to
representation with a large number of intermediaries; which is what the
company is doing here by including its products on financial comparison
websites.
59. D The financial services company has placed a banner advert on the football
club's website. The fact that the advert is placed on a football company's
website rather than a financial comparison website suggests this is a banner
advert campaign rather than an affiliate networking campaign.
There is no indication that the advert has been designed to encourage people
to share it or forward it to other people (which would be required for viral
marketing).
60. C The 7 Ps of the extended marketing mix are: product, price, place, promotion,
people, process and physical evidence.
61. C The 'place' element of the marketing mix relates to the distribution channels
and processes which are used to deliver products and services to customers.
Increasing the number of ATMs available for customers to withdraw funds from
increases customers' access to their funds; so Option I is correct. Increasing
the amount of business done online rather than through bank branches also
changes the way products are delivered to customers; so Option II is correct.
Financial comparison websites are intermediaries, and so offering products
through them is an indirect distribution model; in contrast to making products
available through the bank's own website, which is a direct distribution model.
62. A FGH believes that the changes they have proposed will improve the service to
customers. However, the customers' comments suggest that they do not want
to deal with their transactions online, and that they would prefer to deal face-to-
face with cashiers in a branch. Therefore there is a disconnect between what
FGH thinks their customers want and what customers actually want – a gap
between management perceptions and customer expectations.
63. C Focus groups, in-depth interviews and questionnaires all involve respondents
being asked directly about their banking preferences, or being invited to
comment directly on them. However, sales patterns will give an indication of
customers' preferences without asking directly about them. For example, an
increase in the proportion of transactions being carried out online compared to
in-branch would support the idea that customers are increasingly comfortable
with the idea of online banking.
Page 33 of 36
64. C The decision to change the mix between the amount of the bank's business
which is conducted online compared to that which is carried out on a face-to-
face basis affects the general direction of the whole organisation – making it a
corporate level strategy. There is no indication that the change is restricted to
certain business units or departments only, which would be the case if it was a
business unit or operational level strategy.
65. B Reach relates to the number of potential customers who will see the advert at
least once; so the weekly newspaper has a higher reach than the daily
newspaper (due to its higher circulation figures). The fact that the daily
newspaper has a regular readership suggests that the total number of potential
customers reading it is likely to be close to its daily circulation figure of
495,000. Frequency relates to the number of times that the customer will be
exposed to the advert. In this case, the frequency of the advert in the daily
newspaper will be higher than that in the weekly one, because it could
potentially be viewed three times by potential customers rather than once.
66. A. Credit cards have a short-term time frame. Effectively they allow the user to
borrow money then repay it the following month when they receive their next
statement from the credit card company.
The time frame for certificates of deposit can vary from months to years, and
so is longer than the time frame for a credit card.
Loan products typically provide medium to long-term sources of finance; for

example, the time frame for a collateralised loan typically relates to the useful
life of the asset being purchased.
67. B The bank appears to be positioning the product as one which provides
recognition and status to the people who buy it. The need (or desire) for
recognition and status is characteristic of esteem needs in Maslow's hierarchy
of needs.
68. C Demand for luxury products tends to be elastic, while demand for basic
necessities tends to be inelastic. If a good is price elastic, the change in
demand following a price change will be greater than proportional to the
change in price. Therefore, a price increase will lead to a greater than
proportional fall in demand (and hence a fall in revenue). However, lowering
price will lead to a greater than proportional increase in demand and hence an
increase in revenue.
69. D At the concept testing stage of the new product development process, the
basic idea behind a product is shown to potential customers and their
comments are invited. In this scenario, the fact that the product was being
discussed by the focus group rather than being offered to a section of the
market on a test basis, indicates that the product is at the concept testing stage
rather than the market testing stage.
70. C Transaction marketing emphasises the importance of product features, while

relationship marketing emphasises the importance of customer benefits. (In
this case, one of the major problems with the new product was that potential
customers could not see what value or benefit the product would offer them).
So Option II is correct. Adopting a longer term time scale (Option I) and
encouraging regular communication with customers (Option III) are both
features of relationship marketing rather than transactional marketing.
Page 34 of 36
71. D
Component Comment Income/(Expense)
Recruitment cost One-off cost (40)

Monthly fee $10 per month, for 60 months (5 years) 600
Additional fees $25 per year, for 5 years 125
Maintenance costs $70 per year, for 5 years (350)
72. D The fact that the bank's share of the loan market has fallen despite it
increasing the number of loans it has made indicates that the overall market
must be growing. However, the fact that the bank only has a market share
suggests that there are already some significant competitors in the market (in
which case it is no longer in its 'Introduction' stage).
The fact that the bank's share of the mortgage market has increased slightly
even though its own sales have remained almost constant suggest the market
has stopped growing and has possibly even started to decline slightly.
Although the rate of sales growth begins to slow down in the 'shake out' stage,
sales may still be expected to grow in this stage, whereas by the time maturity
is reached the market is no longer growing.
73. C Using SMS messages to alert customers to product offers relates to the
'promotion' element of the marketing mix, rather than the place element.
The other three all relate to the ways customers can access the bank or their
money, and so relate to the 'place' element of the mix.
74. C The six 'I's of e-marketing summarise the ways in which the internet can
improve an organisation's marketing effectiveness. Intelligence relates to the
way a company can inform its marketing strategy with intelligence gleaned
from its interactions with customers, and from their perceptions about products
and services. Although integration relates to the information gathered about
customers or consumers, the key aspect of integration is how this information
is then used and shared within a business, rather than how it is used
specifically in a business' marketing strategy. Individualisation relates to the
way marketing communications can be tailored to the specific characteristics of
different recipients or groups of recipients. Interactivity relates to the way that
the internet enables customers to communicate with businesses.
75. A The fact that e-marketing can provide sophisticated market segmentation
opportunities and enables 24 hour marketing are both potentially
advantageous to the bank. However, because the bank's mortgage interest
rates are higher than many of its competitors, increased price transparency
could be disadvantageous to the bank. For example, potential customers who
compare mortgage products on a financial comparison website could be
expected to arrange their mortgages with one of the other lenders whose rates
are lower, rather than with the bank.
76. A The survey looked at which individual attributes are most important to the
customer in determining their satisfaction with their bank; meaning that
attribute ratings have been used. Conjoint analysis looks at which
combinations of factors or attributes are more desirable to a customer, rather
than looking at the importance of individual attributes.
Page 35 of 36
77. C The fact that the product was advertised widely, through media which were
appropriate to its target audience means that the 'exposure' stage of the
communications process was successfully handled. However, the fact that
customers failed to take note of the information in the advert indicates a failure
at the 'attention' stage. The attention stage is where customers allocate
processing capacity to an advert.
78. B The business analysis stage considers the degree to which a new product or
service will fit in with existing products and existing corporate strategies.
79. D The key elements which QRS should use to define its target market are: wealth
(a demographic factor); and attitude to innovation and risk (a psychographic
factors).
80. B The expectation of 'credibility' is that an organisation should be perceived as

honest, expert and trustworthy, and acting in the best interests of its
customers. Competence and reliability relate to the organisation's ability to
meet customers' needs efficiently and accurately, rather than the degree to
which it is seen to be acting in their best interests.
Page 36 of 36

Section A: Sixty (60) Independent Multiple-Choice Questions Answer All Questions in This Section

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Section A: Sixty (60) Independent Multiple-Choice Questions Answer All Questions in This Section

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PB MARKETING AND SELLING IN FINANCIAL SERVICES MOCK EXAMINATION

SECTION A : SIXTY (60) INDEPENDENT MULTIPLE-CHOICE QUESTIONS

1. Behavioural segmentation refers to:

A. past purchases and preference.

This stage of the life cycle is:

Which one of the following concepts is the manager referring to?

5. Customer relationship management (CRM) focuses on the development of

What does CRM deliver to customers in return?

6. Which of the following will increase a customer's lifetime value to a company

7. Which of the following is NOT a form of direct marketing?

What is the average lifetime value of a household insurance customer to the

A. Regular communication with customers.

A. Easy access savings account.

The type of contract involved here is:

A. I and III only.

I. Reducing the cost of acquiring new customers.

What level of strategy is being described here?

What does this signify about the product?

A. Customers view it as a necessity.

A. Because many financial services have various components included in their

What type of pricing is likely to be introduced as a result of this?

Who act as intermediaries in this scenario?

I. Its company website.

29. A financial services company's fiduciary responsibility to its customers is:

A. To introduce new products and services as frequently as possible.

32. Gathering in-depth qualitative data about an individual's response to an advertisement

Which aspect of Maslow's hierarchy of needs is the advert focusing on?

35. An insurance company wants to measure how successful a recent advertising

Which of the following is TRUE?

37. Test marketing involves which of the following:

I. Introducing different products for different sections of the market.

To do this, the bank has prepared a questionnaire listing a number of different

41. Which of the following are deemed to be new products?

I. An existing product which is sold via a new distribution channel.

In the decline stage of the product life cycle:

A. Sales decline, but products remain stable.

A. To reduce staff costs by automating some back office processes.

Which of the following would be valid bases for behavioural segmentation?

I. Frequency of account usage

A. I, II and III only.

45. Which of the following is considered part of psychographic segmentation?

I. The marketplace is dominated by a small number of large multinational

Which basis of segmentation is the bank using to target its customers?

Which of the following are the criteria included in the model?

A. I, II and III only.

I. The physical appearance of the firm's staff.

A. Increased focus on customer retention.

In this example, the bank is suffering from a gap between:

A. Service quality specifications and service delivery.

Which of the following will be benefits of improved customer satisfaction?

I. Improved customer retention rates.

I. Customers are more sensitive to price.

What is the return on investment on the campaign?

A. Offering discounts for customers who purchase insurance cover online.

Which aspect of navigation will be MOST affected by this change?

A. I, II and III only.

SECTION B : TWENTY (20) SHORT CASE BASED QUESTIONS

QUESTIONS 61 – 65 ARE BASED ON THE FOLLOWING INFORMATION.

I. Increasing the number of ATMs available for customers to withdraw funds

A. Gap between customer expectations and management perceptions.

A. An operational level strategy.

Which of the following statements is TRUE?

QUESTIONS 66 – 70 ARE BASED ON THE FOLLOWING INFORMATION