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Chapter 05 - Measuring Market Opportunities: Forecasting and Market Knowledge

Chapter 05Measuring Market Opportunities: Forecasting and Market Knowledge Multiple Choice Questions 1. In a _____ approach, a central person or persons take the responsibility for forecasting and prepare an overall sales forecast.A. top-downB. linearC. nonlinearD. bottom-upAnswer: aLevel of Difficulty: EasyPage: 117

2. Which of the following approaches is used to prepare a sales forecast in decentralized firms?A. A top-down approachB. A linear approachC. A non-linear approachD. A bottom-up approachAnswer: dLevel of Difficulty: EasyPage: 117

3. Which of the following is true of a statistical forecasting method?A. It directly observes what real consumers do in the product-market.B. It is a good technique to forecast sales for new products.C. It generally assumes that the future will look very much like the past. D. It surveys suppliers and consumers to estimate market potential.Answer: cLevel of Difficulty: MediumPage: 118 4. RobustTires is an established tire manufacturer in Topeka. Every major brand of car uses its tires. It plans to open a branch in Buffalo City for which it intends to use time series analysis to forecast sales and the market potential. Which of the following methods is exemplified by RobustTires?A. Analogy methodB. Statistical methodC. Observation methodD. Survey methodAnswer: bLevel of Difficulty: MediumPage: 118

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5. Which of the following is true of surveys?A. A survey of buyer’s intention helps in forecasting sales of a prototype.B. A survey of salesforce opinion is conducted for buyers to forecast sales.C. A survey method is superior to a statistical or observational method.D. A survey has the limitation that whoever is surveyed is knowledgeable.Answer: aLevel of Difficulty: MediumPage: 119

6. HoneyDew, a well-known confectionery, plans to introduce a walnut fudge candy. It asks some of its regular customers to sample the candy and offer their opinions. This way the management hopes to estimate the likely number of buyers for the product, if introduced in its store. Which of the following techniques did HoneyDew use to forecast sales? A. ObservationB. Statistical techniqueC. SurveyD. AnalogyAnswer: cLevel of Difficulty: MediumPage: 119 7. Which of the following methods is best suited to forecast sales of new products?A. Statistical methodB. SurveyC. ObservationD. AnalogyAnswer: dLevel of Difficulty: EasyPage: 120

8. When major television manufacturers introduced high-definition televisions, they had to account for characteristics like picture quality, the levels of which were unprecedented. They used data collected from the introduction of color television when only black and white television was prevalent. Which of the following methods of forecasting was used here? A. SurveyB. AnalogyC. ObservationD. JudgmentAnswer: bLevel of Difficulty: MediumPage: 120

9. Which of the following is true of an analogy forecasting method? A. It is a useful approach for entrepreneurs to forecast sales of a new business.B. It is best suited to forecast sales of established products than that of new products.




C. It is purely based on observations on what people actually do.D. It conducts surveys to estimate market potential or forecast sales.Answer: aLevel of Difficulty: MediumPage: 120–121

10. Which of the following is true of a live test market? A. It does not protect a firm from competitors who use marketing tactics that mislead the company conducting the tests. B. It is the cheapest method to forecast sales.C. It is more prevalent than experimental test markets.D. It does not let a firm’s competitors to buy the checkout scanner data without bearing test marketing expenses.Answer: dLevel of Difficulty: HardPage: 121 11. _____ is an example of a mathematically-driven approach to forecast sales.A. ObservationB. Conjoint analysisC. JudgmentD. Focus groupAnswer: bLevel of Difficulty: EasyPage: 122

12. Which of the following statements is true of an adoption process? A. Social media hardly influences the speed of the adoption process.B. Legitimacy of the new product is irrelevant to the adoption process.C. The speed of the adoption process depends on the relative simplicity of a new product.D. The adoption process always resembles an inverted V-curve when plotted on a cumulative basis.Answer: cLevel of Difficulty: MediumPage: 123–124

13. Which of the following adopters forms the smallest group in the diffusion of innovation curve? A. InnovatorsB. LaggardsC. Early adoptersD. Late majorityAnswer: aLevel of Difficulty: EasyPage: 124-125




14. Which of the following characteristics is true of adopter groups?A. Innovators are not receptive to new ideas and tend to adopt a product late.B. Laggards are more venturesome than later adopters. C. Late majority adopt a new product for either economic or social reasons.D. Early adopters want to be sure that a new product will prove successful before adoption.Answer: cLevel of Difficulty: MediumPage: 125

15. Which of the following statements is true of forecasting?A. Forecasts are not immune to anchoring biases. B. Capacity constraints can never be misinterpreted as forecasts.C. A good forecasting technique encourages implicit assumptions.D. The technique of sandbagging aids in effective forecasting.Answer: aLevel of Difficulty: MediumPage: 126–127

16. BizWear Inc. is a retail chain specializing in business wear for women. A detailed report on the fastest-selling and the slowest-moving items of the previous week is prepared by every BizWear outlet. It includes sales information about garments sold in terms of style, color, store, location and region, and various time periods. This helps BizWear to keep pace with daily developments. Which of the following market knowledge systems is employed by the retail chain?A. Marketing databasesB. Competitive intelligence systemsC. Internal records systemsD. Client contact systemsAnswer: cLevel of Difficulty: HardPage: 130 17. Which of the following ways of collecting information best illustrates a marketing database? A. "Cookies" or electronic signatures placed at a customer's personal computerB. Detailed sales and inventory about the fastest-selling items in a particular storeC. Companies' annual and financial reports and government documentsD. Customer information captured from salespersonsAnswer: aLevel of Difficulty: MediumPage: 132

18. A(n) _____ refers to the margins that a buyer generates over a lifetime less the cost of serving the customer.




A. product lifetime value B. inventory indexC. customer lifetime valueD. chain ratioAnswer: cLevel of Difficulty: EasyPage: 134

19. Which of the following is true of competitive intelligence systems?A. It is an outlawed approach of analyzing information about competitors’ activities.B. It involves analyzing the inventory and detailed sales reports of stores. C. It uses online databases and government documents as its source of information.D. It allows the effective capture of customer intelligence from salespeople.Answer: cLevel of Difficulty: MediumPage: 135 20. The design, collection, analysis, and reporting of study intended to gather data pertinent to a particular marketing challenge or situation is referred to as _____. A. benchmarkingB. marketing researchC. marketing myopiaD. marketing mixAnswer: bLevel of Difficulty: EasyPage: 135 21. What is the first step in the marketing research process? A. Reporting results to the decision makerB. Identifying managerial problem and establishing research objectives C. Collecting and analyzing dataD. Determining data sources, types of data, and research approaches requiredAnswer: bLevel of Difficulty: MediumPage: 136 Essay Questions

22. Discuss the limitations of statistical methods, observations, and surveys.Answer: The most important limitation of statistical methods is that they generally assume that the future will look very much like the past. Sometimes this is not the case. If product or market characteristics change, statistical models used without adequate judgment may not keep pace.For new-to-the-world products, however, observation is typically not possible, and secondary data are not available, since the product often does not yet exist, except in concept form.




Surveys and focus groups possess important limitations, however. For one, what people say is not always what people do. Consumer surveys of buyer intention are always heavily discounted to allow for this fact. Second, the persons who are surveyed may not be knowledgeable, but if asked for their opinion, they will probably provide it. Third, what people imagine about a product concept in a survey may not be what is actually delivered once the product is launched.Level of Difficulty: MediumPage: 118–120

23. Briefly explain the adoption process and the rate of adoption.Answer: The adoption process involves the attitudinal changes experienced by individuals from the time they first hear about a new product, service, or idea until they adopt it. Not all individuals respond alike; some tend to adopt early, some late, and some never. The time dimension is a function of the rate at which people in the target group move through the five stages in the adoption process. Generally, the speed of the adoption process depends heavily on the following factors: (1) the risk (cost of product failure or dissatisfaction), (2) the relative advantage over other products, (3) the relative simplicity of the new product, (4) its compatibility with previously adopted ideas, and behavior, (5) the extent to which its trial can be accomplished on a small-scale basis, and (6) the ease with which the central idea of the new product can be communicated. Other factors, while less important, are also at work, particularly at the individual level, including the growing influence of social media. Thought should also be given to the legitimacy of the new product in the eyes of its stakeholders. Legitimacy may come from associations with established firms, the success of historical product launches or hiring a well-known name in the field. The rate at which an innovative new product category passes through the adoption process is also a function of the actions taken by the product’s marketers. Thus, the diffusion process may be faster when there is strong competition among competitors, when they have favorable reputations, and when they allocate substantial sums to R&D (to improve performance) and marketing (to build awareness).Level of Difficulty: MediumPage: 123–124




24. What are the major issues to be considered while designing marketing databases?Answer: Designing marketing databases that take effective advantage of customer data that companies are in a position to collect requires that several major issues be considered: the cost of collecting the data, the economic benefits of using the data, the ability of the company to keep the data current in today’s mobile society, and the rapid advances in technology that permit the data to be used to maximum advantage.Collecting information, then storing and maintaining it, always costs money. If a company wants to know more about the demographics and lifestyles of its best customers, in addition to their purchasing histories, it must obtain demographic and lifestyle data about them. Doing so is more difficult than it sounds; many people are unwilling to spend much time filling out forms that ask nosy questions about education, income, whether they play tennis, and what kind of car they drive. The cost of collecting such information must be weighed against its value.Level of Difficulty: MediumPage: 132



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