TEST BANK

Principles of Marketing

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Principles of Marketing

Chapter 2
Test Bank Questions
Strategic Planning in Marketing

Multiple Choice Questions

1. Businesses encourage customers to strategically develop new products. Frito-Lay used this
tactic in its “Turn Up the Flavor” potato chip contest. This practice is known as _______.
A. lobbying

B. selling a product in a competitive market

C. crowdsourcing*

D. SMART goal development

Solution: C. The company crowdsourced its new flavors through a contest called “Do Us a
Flavor,” in which it asked customers to submit ideas for flavors they’d like Lay’s to develop.
Section 2.1 LO1 Easy 1-2
2. The three levels of a business’s strategy include corporate-level, business-level, and
_______ strategy.
A. functional*
B. mission
C. portfolio-level
D. threat-level
Solution: A. There is the corporate-level strategy, business-level strategy, and functional
strategy.
Section 2.1 LO1 Easy 1-2
3. What is the first step in the strategic planning process?
A. Perform a gap analysis
B. Establish objectives and goals
C. Define the vision statement*
D. Monitor progress
Solution: C. The vision statement is forward-thinking and intended to create a mental image
of what the organization wants to achieve in the longer term.
Section 2.1 LO2 Easy 1-2 minutes

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4. There are two purposes for the mission statement. The first is to provide guideposts for the
business. The second is to _______.
A. encourage employees to increase their productivity*
B. force shareholders to invest more in the business
C. prompt investors to reconsider their values
D. show a customer how much they need the firm’s products
Solution: A. A well-written mission statement helps employees remain focused on the aims of
the business. It also encourages them to discover ways of moving toward increasing their
productivity to achieve company goals.
Section 2.1 LO2 Moderate 3-4 minutes
5. Expressing company values is part of which step in the strategic planning process?
A. Vision statement
B. Mission statement*
C. Gap analysis
D. Establishing objectives and goals
Solution: B. A customer-oriented mission statement defines the business in terms of its values
and how those dovetail with solutions to customer needs.
Section 2.1 LO3 Moderate 3-4 minutes
6. The gap analysis is an important step in the strategic planning process because it uncovers
the gap between reality and _______.
A. the ability of the company to be profitable
B. the company’s ability to meet its goals*
C. the mission of the company
D. the dreams the company desires to achieve
Solution: B. A gap analysis as part of the strategic planning process is a way to determine where
the “soft spots” are and where adjustments need to be made before setting a course of action.
Section 2.1 LO4 Difficult 4-5 minutes
7. SMART objectives help marketers be more specific, realistic, and time-bound. Equally
important is the ability to _______ results.
A. analyze
B. record
C. rationalize
D. measure*
Solution: D. Quantifying goals makes it easier to track progress and see when goals are
achieved. The bottom line is, researchers can’t see results without knowing what they look like,
and if they’re not measuring anything, how will they know when and if they’ve accomplished
something?
Section 2.1 LO5 Moderate 3-4 minutes

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8. Samir is writing SMART goals. He is trying to be as detailed and precise as possible in

communicating these goals as part of the strategic plan. Samir’s efforts here represent
which characteristic of a SMART goal?
A. Goals should be specific.*
B. Goals should be tactical.
C. Goals should be registered or recorded.
D. Goals should reasonable.
Solution: A. First, effective goals should be specific—that’s the “S” in SMART goals. They should
be clear and easy to understand.
Section 2.1 LO6 Easy 1-3 minutes
9. Marketers are critical to the strategic planning process. Not only do marketers keep an eye
on the marketing philosophy, but they also utilize research to identify _______ in the
environment.
A. competitors’ secrets
B. email issues
C. social media ads
D. trends*
Solution: D. Marketers are responsible for the identification of trends in the marketing
environment and for assessing the potential impact of those trends.
Section 2.2 LO1 Easy 1-2 minutes
10. A business portfolio is the total group of product lines, services, and business units that the
company possesses. Why is this portfolio important in strategic planning?
A. It is external.
B. It shows how each business unit contributes to business success.*
C. It answers questions for stockholders.
D. It illustrates which distribution channel members perform well.
Solution: B. Business revenues are important considerations as the strategic plan builds upon
profitable SBUs and deals with those that consistently perform, those that enjoy market
share and are still growing, those that are questionable, and those that consume too many
resources.
Section 2.2 LO2 Difficult 3-4 minutes
11. The Boston Consulting Group developed a grid that shows how an SBU performs in market
share as well as _______.
A. market growth*
B. product position
C. farm animals
D. competing products in the marketplace
Solution: A. The BCG matrix considers both market share and market growth rate.

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Section 2.2 LO3 Moderate 2-3 minutes

12. Analytics are useful in informing strategy. Business-level strategies usually begin with plans
to sell more products to current customers. But the next step in growth is often to develop
new products for current customers. This can be an expensive strategy because firms must
promote new products. It’s also expensive because _______.
A. old products will require discounted prices
B. competitors may have more shelf space
C. finding new outlets to sell the new products costs more
D. research and development require additional costs*
Solution: D. Product development generally requires significant investment in R&D activities.
Section 2.2 LO4 Difficult 4-5 minutes
13. The marketing plan will set forth the specific actions that marketing team members need to
take to reach target customers, build brand awareness, and, of course, generate increased
revenue. Besides the marketing team, who else will be eager and authorized to read the
plan?
A. Regulatory agencies
B. Customers
C. Auditors
D. Investors and bankers*
Solution: D. If a new business is seeking funding, the bank will want to see and understand the
marketing plan before parting with funds. If you have an existing business that you want to
grow, investors will likely go over your marketing plan with a fine-tooth comb to understand
how additional funding will generate a positive return.
Section 2.3 LO1 Easy 1-2 minutes
14. What do marketers monitor in their marketing plans?
A. Members of distribution channels
B. Teams of intermediaries
C. New investors
D. Metrics*
Solution: D. Metrics are monitored during the time period of the marketing plan to see where
things may have fallen outside the desired range. At that time, marketers will want to dig into
the details, perform an analysis of the root cause of the problem(s), and make adjustments to
get back on track.
Section 2.3 LO2 Moderate 3-4 minutes

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15. Why are key performance indicators (KPIs) important in the strategic planning process?
A. They measure progress toward business objectives.*
B. KPIs are a cool way to look at data.
C. Dashboards help sift through data.
D. KPIs reflect only fiscal progress, not customer satisfaction.
Solution: A. Metrics tell us what is happening at any point in time without context as to why it is
happening. The way a marketer gets to the marketing metrics that yield the information
that’s needed is by identifying and maintaining a focus on KPIs.
Section 2.4, LO1 Easy 1-2 minutes
16. What is the major reason gross margin as a percentage of sales is one of the most closely
watched KPIs at most organizations?
A. Higher gross margins mean greater efficiency, and fewer sales are required to break
even.
B. It is a measure of a company’s ability to convert sales revenue into profit.*
C. It indicates whether organizational officers will receive bonuses.
D. It is important for tax reasons.
Solution: B. Gross margin is the percentage of sales revenue a company can convert into gross
profit, and it’s generally a good measure of how efficiently the company generates gross
profit from sales of products or services.
Section 2.4, LO4 Difficult 3-4 minutes
17. Tasha’s dishwasher quit in mid-cycle. She read through the manual online and followed the
manufacturer’s tips to restart the machine. Tasha finally reached out to customer care via
email. Her complaint was taken seriously, and within 24 hours Tasha received an email in
response to her complaint with links to troubleshooting sites, how to make an email
appointment with a technician, how to follow up on appliances no longer under warranty,
and other useful advice. This response showed the appliance manufacturer valued Tasha’s
satisfaction and intended to _______ her issue.
A. pass off
B. resolve*
C. blame the retail store for
D. deflect
Solution: B. Customer support is an important issue for businesses, especially because
customers are more satisfied when their complaints are acknowledged and resolved in a
timely way. This can lead to increased customer lifetime value.
Section 2.4 LO5 Moderate 3-4 minutes

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18. Economists have just predicted a long period of high inflation. Zeke realizes that high
inflation is linked to consumer confidence in spending, so he needs to analyze pricing and
perhaps adjust his brand’s product line pricing strategy. What is one KPI tool that would be
especially useful for Zeke to begin his examination of the problem?
A. Data management
B. Total sales/revenue and profitability*
C. CRM database
D. Price history
Solution: B. Select KPIs, including total sales/revenue, profitability, customer retention rates,
customer satisfaction scores, and customer lifetime value, can help marketers watch daily
measures, but they also examine trends that may further impact pricing decisions.
Section 2.4 LO6 Moderate 3-4 minutes
19. Ethical marketing practices can lead to many benefits for companies, including customer
loyalty, improved credibility, and _______.
A. lower prices
B. higher prices
C. brand enhancement*
D. sales awards
Solution: C. Consumers, competitors, investors, and other parties have begun to look beyond
product features and pursue brands that consider the three Ps of sustainability—people,
planet, and profits.
Section 2.5 LO1 Moderate 3-4 minutes
20. Ethical marketers not only need to think about their own products, they also must consider
the well-being of their customers. These days, a top consideration of marketers and
organizational leaders is giving back to their communities through _______ initiatives.
A. Generation Z-focused
B. mass market
C. corporate social responsibility*
D. strategic planning
Solution: C. Corporate social responsibility (CSR) is the concept that a company should integrate
social and environmental concerns into its business operations and practices.
Section 2.5 LO2 Moderate 3-4 minutes

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21. Starbucks uses a system called C.A.F.E., or Coffee and Farmer Equity Practices, to enhance
sustainable sourcing. Through this system, Starbucks generates billions of dollars in revenue
annually and still maintains _______ leadership.
A. environmental*
B. campaign
C. consumer
D. competition
Solution: A. Setting and living by sustainability standards is important in following the principles
of ethical marketing.
Section 2.5 LO3 Moderate 3-4 minutes

Short Answer Questions

Note: Responses to open-ended questions will vary. The sample answers provide some
elements or themes that a student might consider.
1. How do SBUs penned up in the cash cow quadrant of the BCG matrix help in strategic
planning growth initiatives?
[Solution: A cash cow is an SBU or product that has high market share in a low-growth
market. They’re valuable to a business because they generate significant revenue that can
fund other strategic initiatives or emerging opportunities.]
Section 2.2 LO3 Easy 1-3 minutes
2. Lisa and Lorenz are business majors working on a BCG matrix for their college. They are
assessing the value of each major as an SBU and trying to capitalize on cash cows to help
fund prospective majors in sustainability and cybersecurity. What are the two pieces of
information Lisa and Lorenz must gather to build this matrix?
[Solution: They must gather information on which majors comprise the college’s largest
number of majors as well as the growth of those majors in college enrollments.]
Section 2.2 LO3 Moderate 4-5 minutes
3. You’re eager to buy the new Stephen King horror novel even though you have plenty of
homework and exam prep to tackle. You check out Amazon and see that the new novel is
available as a printed book, a large-print book, an e-book, and an audiobook. King’s
publisher, Simon & Schuster, is practicing growth through which form of diversification?
[Solution: Concentric diversification is a tool companies use to improve profitability and
increase sales of new products. Of the three diversification strategies, Simon & Schuster is
following concentric diversification because the new book is made up of the same words, and
it’s being sold to the same market. Only the format diverges from the original printed book.]
Section 2.2 LO4 Difficult 7-9 minutes

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4. Tesla CEO Elon Musk says he expects Tesla vehicle production to grow by 50 percent per
year, thus surpassing sales by GM ($36 billion per quarter) and Ford ($34.5 billion per
quarter) before 2025. Currently, Tesla’s quarterly sales are $16.9 billion. What KPI
dashboards is Elon Musk monitoring each day as Tesla’s growth strategy plays out?
[Solution: Dashboards for Tesla will likely show business-level KPIs (total sales/revenue,
profitability, and new/incremental sales revenue), market share, market share in category
(electric vehicles), customer satisfaction scores, Tesla share price, and battery production at
gigafactories (necessary for ongoing vehicle production).]
Section 2.5 LO4 & 5 Difficult 7-9 minutes

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